100. When A1=99, MIN(a1,100) == 99, and MAX(0,a1-100) == 0. When A1=100, MIN(a1,100) == 100, and MAX(0,a1-100) == 0. When A1=101, MIN(a1,100) == 100, and MAX(0,a1-100) == 1. Of course, if the 100th item should be $14, then change the 100s to 99s.","\"There is no formula that can be applied to most variations of the problem you pose. The reason is that there is no simple, fixed relationship between the two time periods involved: the time interval for successive payments, and the time period for successive interest compounding. Suppose you have daily compounding and you want to make weekly payments (A case that can be handled). Say the quoted rate is 4.2% per year, compounded daily Then the rate per day is 4.2/365, or 0.0115068 % So, in one week, a debt would grow through seven compoundings. A debt of $1 would grow to 1 * (1+.000225068)^7, or 1.000805754 So, the equivalent interest rate for weekly compounding is 0.0805754% Now you have weekly compounding, and weekly payments, so the standard annuity formulas apply. The problem lies in that number \"\"7\"\", the number of days in a week. But if you were trying to handle daily / monthly, or weekly / quarterly, what value would you use? In such cases, the most practical method is to convert any compounding rate to a daily compounding rate, and use a spreadsheet to handle the irregularly spaced payments.\"","If you use Google Finance, you will get incorrect results because Google Finance does not show the dividend history. Since your requirement is that dividends are re-invested, you should use Yahoo Finance instead, downloading the historical 'adjusted' price.","Perhaps there is no single formula that accounts for all the time intervals, but there is a method to get formulas for each compound interest period. You deposit money monthly but there is interest applied weekly. Let's assume the month has 4 weeks. So you added x in the end of the first month, when the new month starts, you have x money in your account. After one week, you have x + bx money. After the second week, you have x + b(x + bx) and so on. Always taking the previous ammount of money and multiplying it by the interest (b) you have. This gives you for the end of the second month: This looks complicated, but it's easy for computers. Call it f(0), that is: It is a function that gives you the ammount of money you would obtain by the end of the second month. Do you see that the future money inputs are given with relation to the previous ones? Then we can do the following, for n>1 (notice the x is the end of the formula, it's the deposit of money in the end of the month, I'm assuming it'll pass through the compound interest only in the first week of the next month): And then write: There is something in mathematics called recurrence relation in which we can use these two formulas to produce a simplified one for arbitrary b and n. Doing it by hand would be a bit complicated, but fortunately CASes are able to do it easily. I used Wolfram Mathematica commands: And it gave me the following formula: All the work you actually have to do is to figure out what will be f(0) and then write the f(n) for n>0 in terms of f(n-1). Notice that I used the command FullSimplify in my code, Mathematica comes with algorithms for simplyfing formulas so if it didn't find something simpler, you probably won't find it by yourself! If the code looks ugly, it's because of Mathematica clipboard formatting, in the software, it looks like this: Notice that I wrote the entire formula for f(0), but as it's also a recurrence relation, it can be written as: That is: f(0)=g(4). This should give you much simpler formulas to apply in this method.","> Does it make sense to calculate the IRR based on the outstanding value of the project, or just use the cash flows paid out? What is the outstanding value of the project based on? I'm guessing it is the PV of net cash flow? The timing of each cash outflow (i.e. investment) is crucial to calculating a proper IRR because of time value of money. Putting in $x each year for 49 years will give you a different figure from putting in $49x in the first year and zero for the next 48 years because a larger figure is tied up for a longer time period.","\"The answer to almost all questions of this type is to draw a diagram. This will show you in graphical fashion the timing of all payments out and payments received. Then, if all these payments are brought to the same date and set equal to each other (using the desired rate of return), the equation to be solved is generated. In this case, taking the start of the bond's life as the point of reference, the various amounts are: Pay out = X Received = a series of 15 annual payments of $70, the first coming in 1 year. This can be brought to the reference date using the formula for the present value of an ordinary annuity. PLUS Received = A single payment of $1000, made 15 years in the future. This can be brought to the reference date using the simple interest formula. Set the pay-out equal to the present value of the payments received and solve for X I am unaware of the difference, if any, between \"\"current rate\"\" and \"\"rate to maturity\"\" Finding the rate for such a series of payments would start out the same as above, but solving the resulting equation for the interest rate would be a daunting task...\"","Treat each transaction as separate, with its own principal, its own gain, and its own number of days. Then the total annualized return is just a weighted average of each annualized return, with the weighting related to the number of shares in that transaction.","You're contributing 98.2% of your contributed amount (deducting 1.8%) each month and at the end of the year, deducting a flat 15 pounds. The easiest way to do this is to use a spreadsheet. But you're missing some key information. What is your expected growth rate and what is your expected inflation rate? Is this a taxable account where you deduct (for example, 35%) of the growth annually for taxes or is this a non-taxable account?","The Finance functions in spreadsheet software will calculate this for you. The basic functions are for Rate, Payment, PV (present value), FV (Future value), and NPER, the number of periods. The single calculation faces a couple issues, dealing with inflation, and with a changing deposit. If you plan to save for 30 years, and today are saving $500/mo, for example, in ten years I hope the deposits have risen as well. I suggest you use a spreadsheet, a full sheet, to let you adjust for this. Last, there's a strange effect that happens. Precision without accuracy. See the results for 30-40 years of compounding today's deposit given a return of 6%, 7%, up to 10% or so. Your forecast will be as weak as the variable with the greatest range. And there's more than one, return, inflation, percent you'll increase deposits, all unknown, and really unknowable. The best advice I can offer is to save till it hurts, plan for the return to be at the lower end of the range, and every so often, re-evaluate where you stand. Better to turn 40, and see you are on track to retire early, than to plan on too high a return, and at 60 realize you missed it, badly. As far as the spreadsheet goes, this is for the Google Sheets - Type this into a cell =nper(0.01,-100,0,1000,0) It represents 1% interest per month, a payment (deposit) of $100, a starting value of $0, a goal of $1000, and interest added at month end. For whatever reason, a starting balance must be entered as a negative number, for example - =nper(0.01,-100,-500,1000,0) Will return 4.675, the number of months to get you from $500 to $1000 with a $100/mo deposit and 1%/mo return. Someone smarter than I (Chris Degnen comes to mind) can explain why the starting balance needs to be entered this way. But it does show the correct result. As confirmed by my TI BA-35 financial calculator, which doesn't need $500 to be negative.","\"Total Return is the percent change in value (including andy dividends) of an instrument. The \"\"trailing 12-month\"\" means that your starting point is the value 12 months ago. So the formula is: where V is the value of the instrument on the reference date, V0 is the value of the instrument 12 months prior to the reference date, and D is the amount of dividends paid between the two dates.\"","\"Month to date For the month to date (MTD), the price on Feb 28th is $4.58 and the price on March 16th is $4.61 so the return is which can be written more simply as The position is 1000 shares valued at $4580 on Feb 28th, so the profit on the month to date is Calendar year to date For the calendar year to date (YTD), the price on Dec 31st is $4.60 and the price on Feb 28th is $4.58 so the return to Feb 28th is The return from Feb 28th to March 16th is 0.655022 % so the year to date return is or more directly So the 2011 YTD profit on 1000 shares valued at $4600 on Dec 31st is Year to date starting Dec 10th For the year to date starting Dec 10th, the starting value is and the value on Dec 31st is 1000 * $4.60 = $4600 so the return is $4600 / $4510 - 1 = 0.0199557 = 1.99557 % The year to date profit is therefore Note - YTD is often understood to mean calendar year to date. To cover all the bases state both, ie \"\"calendar YTD (2011)\"\" and \"\"YTD starting Dec 10th 2010\"\". Edit further to comment For the calendar year to date, with 200 shares sold on Jan 10th with the share price at $4.58, the return from Dec 31st to Jan 10th is The return from Jan 10th to Feb 28th is The return from Feb 28th to March 16th is The profit on 1000 shares from Dec 31st to Jan 10th is $4600 * -0.00434783 = -$20 The profit on 800 shares from Jan 10th to Feb 28th is zero. The profit on 800 shares from Feb 28th to March 16th is So the year to date profit is $4.\"","It is a good enough approximation. With a single event you can do it your way and get a better result, but imagine that the $300 are spread over a certain period with $10 contribution each time? Then recalculating and compounding will be a lot of work to do. The original ROI formula is averaging the ROI by definition, so why bother with precise calculations of averages that are imprecise by definition, when you can just adjust the average without losing the level of precision? 11.4 and 11.3 aren't significantly different, its immaterial.","You need to solve the money-weighted return equation. It cannot be expressed as a formula for the interest, but it can be solved numerically as shown here. Using the OP's figures, with monthly withdrawals of $100,000. The summation for the withdrawals can be replaced with the standard annuity formula. The resulting monthly return is converted to a nominal annual return compounded monthly. Money-weighted return equation with start and end balances s0 and s1 The interest is 2.63282 % per annum, nominal compounded monthly. Selectable equation","Check your calculation of A**. I was able to duplicate their calculations using excel. Make you sure have accounted for all the terms, it can be easy to be one off. They are making a guess at the interest rate which will be wrong, then they are adjusting it to see how wrong it is, then making another adjustment. They will repeat until they see no movement in the guesses.","Line one shows your 1M, a return with a given rate, and year end withdrawal starting at 25,000. So Line 2 starts with that balance, applies the rate again, and shows the higher withdrawal, by 3%/yr. In Column one, I show the cumulative effect of the 3% inflation, and the last number in this column is the final balance (903K) but divided by the cumulative inflation. To summarize - if you simply get the return of inflation, and start by spending just that amount, you'll find that after 20 years, you have half your real value. The 1.029 is a trial and error method, as I don't know how a finance calculator would handle such a payment flow. I can load the sheet somewhere if you'd like. Note: This is not exactly what the OP was looking for. If the concept is useful, I'll let it stand. If not, downvotes are welcome and I'll delete.","This calculation arrives at the correct answer. However, it uses the formula for an annuity due. This means the payments are made at the beginning of the month and the last month of the 10 year period has interest accrued. See the section, Calculating the Future Value of an Annuity Due. The rate is given as an effective rate. with In Excel, =FV((1+0.12)^(1/12)-1,120,3500,0,1)","\"Something I found helpful when I learned this, is to just use Excel to expand the series. So start with A1 as \"\"175\"\", then in A2 put \"\"=175+(A1*1.004308)\"\" and paste that same formula down for a few hundred rows. You'll find your answer on A216. Most non-math-centric people don't have an intuitive grasp of how exponents (aka \"\"compounding\"\"... and never mind the natural logarithms this is all derived from) behave; but you can play with the numbers \"\"unrolled\"\" in Excel to get a better idea of how they work. That formula is just applying 0.4308% interest every period (row), and adding in a fresh $175.\"","These are the steps I'd follow: $200 today times (1.04)^10 = Cost in year 10. The 6 deposits of $20 will be one time value calculation with a resulting year 7 final value. You then must apply 10% for 3 years (1.1)^3 to get the 10th year result. You now have the shortfall. Divide that by the same (1.1)^3 to shift the present value to start of year 7. (this step might confuse you?) You are left with a problem needing 3 same deposits, a known rate, and desired FV. Solve from there. (Also, welcome from quant.SE. This site doesn't support LATEX, so I edited the image above.)","Spreadsheets need not be static, they can pull data from the web. This article describes the method you seek.","The Investopedia article you linked to is a good start. Its key takeaway is that you should always consider risk-adjusted return when evaluating your portfolio. In general, investors seeking a higher level of return must face a higher likelihood of taking a loss (risk). Different types of stocks (large vs small; international vs US; different industry sectors) have different levels of historical risk and return. Not to mention stocks vs bonds or other financial instruments... So, it's key to make an apples-to-apples comparison against an appropriate benchmark. A benchmark will tell you how your portfolio is doing versus a comparable portfolio. An index, such as the S&P 500, is often used, because it tells you how your portfolio is doing compared against simply passively investing in a diversified basket of securities. First, I would start with analyzing your portfolio to understand its asset allocation. You can use a tool like the Morningstar X-Ray to do this. You may be happy with the asset allocation, or this tool may inform you to adjust your portfolio to meet your long-term goals. The next step will be to choose a benchmark. Given that you are investing primarily in non-US securities, you may want to pick a globally diversified index such as the Dow Jones Global Index. Depending on the region and stock characteristics you are investing in, you may want to pick a more specialized index, such as the ones listed here in this WSJ list. With your benchmark set, you can then see how your portfolio's returns compare to the index over time. IRR and ROI are helpful metrics in general, especially for corporate finance, but the comparison-based approach gives you a better picture of your portfolio's performance. You can still calculate your personal IRR, and make sure to include factors such as tax treatment and investment expenses that may not be fully reflected by just looking at benchmarks. Also, you can calculate the metrics listed in the Investopedia article, such as the Sharpe ratio, to give you another view on the risk-adjusted return.","Fairly straightforward to match the result from the calculator soup link. There is a formula to calculate n from the future value s (using natural logs) In Excel This was derived as shown To calculate n from the inflation-adjusted future value si requires using a solver since an algebraic formula cannot be formulated. As demonstrated Calculations done using Mathematica 7.","I found one such tool here: Point-to-Point Returns tool","In general spreadsheets can do all of what you ask. Have a try of some online training like these to get started.","This is more a question for /r/personalfinance, but I'll answer it anyways. Just use the RATE formula in excel. =RATE(numperiods,monthly payment,amount financed)*12 Just make sure the number of periods is in months, the payment is negative, and to multiply the whole thing by 12 to get the annual interest rate.","This link does it ok: http://investexcel.net/1979/calculate-historical-volatility-excel/ Basically, you calculate percentage return by doing stock price now / stock price before. You're not calculating the rate of return hence no subtraction of 100%. The standard is to do this on a daily basis: stock price today / stock price yesterday. The most important and most misunderstood part is that you now have to analyze the data geometrically not arithmetically. To easily do this, convert all percentage returns with the natural log, ln(). Next, you take the standard deviation of all of those results, and apply exp(). This answers the title of your question. For convenience's sake, it's best to annualize since volatility (implied or statistical) is now almost always quoted annualized. There are ~240 trading days each year. You multiply your stdev() result by (240 / # of trading days per return) ^ 0.5, so if you're doing this for daily returns, multiply the stdev() result by 240^0.5; if you were doing it weekly, you'd want to multiply by (240 / ~5)^0.5; etc. This is your number for sigma. This answers the intent of your question. For black-scholes, you do not convert anything back with exp(); BS is already set up for geometric analysis, so you need to stay there. The reason why analysis is done geometrically is because the distribution of stock returns is assumed to be lognormal (even though it's really more like logLaplace).","IRR is the acronym for internal rate of return. And it appears that you do understand how it works. It's not the phrase most investors use for their own returns. I'd typically talk about my own return last year, or over the last decade, etc, as well as what the S&P did during that time, and might even use the term CAGR, compound annual growth rate, although I wouldn't pronounce it 'kegger' or anything like that. Aside from discussing company investments in some MBA class, the only time I'd use IRR is in an excel spreadsheet to calculate the return over time of a series of my own investments. The nothing magic about this, it's a function of an initial dollar investment, time passing, and the final value. All else is addition complexity based on multiple deposits/withdrawals, etc. If I deposit $100 and get back $200 in a year, it's a 100% IRR. Disclosure - I am no fan of Investopedia or re-explaining its wording on these topics. I've caught multiple errors in their articles, and unlike the times I've emailed my friends at the IRS who quickly fix typos and mistakes I've caught, Investopedia authors are no better than bloggers (which I am) who take offense at any criticism (which I do not).","If you didn't have deposits, then the growth rate is simply ((p1/p0)^(1/t))-1, where p0 is the initial balance, p1 is the current balance, and t is the number of periods. For example, suppose you started the account with $100,000 in 2000. It's now 2015 -- 15 years later -- and the balance is $240,000. So the growth is: If you're making regular deposits, especially if you're making deposits of unequal amounts, the problem becomes much more complex. The easiest thing to do is probably to create a spreadsheet. Make a column for principle, a column for deposit amount, and a column for percent growth that period. Assuming A is principle and B is deposit, then the formula for growth C is =((A2-A1-B1)/A1-1)*100. Copy this formula down the column and Excel should automatically adjust the row numbers. Assuming you put one row for each month you can see the growth (or loss) month by month. You can get a general idea of what your overall growth rate has been by taking the average of the monthly amounts, but this would not be a truly accurate measure of your total growth because presumably (hopefully) you have more money in the later months than the earlier months. But it would be a good measure of how your investments are doing.","You're looking for the amortization calculation. This calculation is essentially solving for the series of cash flows that will yield a zero balance after the specified term, at the given rate for a loan amount. Once you have solved for the payment amount, you can add additional principal amount to each payment period and see the interest payments and time to zero balance drop.","\"the \"\"how\"\" all depends on your level of computer savvy. Are you an Excel spreadsheet user or can you write in programming languages such as python? Either approach have math functions that make the calculation of ROI and Volatility trivial. If you're a python coder, then look up \"\"pandas\"\" (http://pandas.pydata.org/) - it handles a lot of the book-keeping and downloading of end of day equities data. With a dozen lines of code, you can compute ROI and volatility.\"","How do I calculate the adjusted real rate of return of an investment (such as mutual fund) after inflation and fees? I have always thought that you do this: (1 + nominal return - fees)/(1 + inflation) - 1, but I have been told that this is the wrong way to do it. Additionally, what is the difference between real interest rate and inflation-adjusted return?","IRR is not subjective, this is a response to @Laythesmack, to his remark that IRR is subjective. Not that I feel a need to defend my position, but rather, I'm going to explain his. My company offered stock at a 15% discount. We would have money withheld from pay, and twice per year buy at that discount. Coworkers said it was a 15% gain. I offered some math. I started by saying that 100/85 was 17.6%, and that was in fact, the gain. But, the funds were held by the company for an average of 3 months, not 6, so that gain occurred in 3 months and I did the math 1.176^4 and resulted in 91.5% annual return. This is IRR. It's not that it's subjective, but it assumes the funds continue to be invested fully during the time. In our case the 91.5% was real in one sense, yet no one doubled their money in just over a year. Was the 91% useless? Not quite. It simply meant to me that coworkers who didn't participate were overlooking the fact that if they borrowed money at a reasonable rate, they'd exceed that rate, especially for the fact that credit lines are charged day to day. Even if they borrowed that money on a credit card, they'd come out ahead. IRR is a metric. It has no emotion, no personality, no goals. It's a number we can calculate. It's up to you to use it correctly.","The idea is correct; the details are a little off. You need to apply it to the actual cash flow the bond would create. The best advice I can give you is to draw a time-line diagram. Then you would see that you receive £35 in 6 months, £35 in 12 months, £35 in 18 months, and £1035 in 24 months. Use the method you've presented in your question and the interest rate you've calculated, 3% per 6 months, to discount each payment the specified amount, and you're done. PS: If there were more coupons, say a 20 year quarterly bond, it would speed things up to use the Present Value of an Annuity formula to discount all the coupons in one step...","\"My answer is Microsoft Excel. Google \"\"VBA for dummies\"\" (seriously) and find out if your brokerage offers an 'API'. With a brief understanding of coding you can get a spreadsheet that is live connected to your brokers data stream. Say you have a spreadsheet with the 1990 value of each in the first two columns (cells a1 and b1). Maybe this formula could be the third column, it'll tell you how much to buy or sell to rebalance them. then to iterate the rebalance, set both a2 and b2 to =C1 and drag the formula through row 25, one row for each year. It'll probably be a little more work than that, but you get the idea.\"","It is. The outstanding value is the net cash flow, but it will always be higher than cash outflow due to a constant growth rate/expected return. I was slightly confused when my manager told me to find the IRR before and after cash inflows (the whole life of the investment). Especially as IRR after cash inflows is higher than the former.","The total number of shares on April 1st is 100 + 180 + 275 = 555. The price on April 1st is required. The current price is stated as $2, but $2 * 555 = $1110 and the current fund values is stated as $1500. Opting to take the current value as $1500, the price on April 1st can be calculated as $1500/555 = $2.7027. The amounts invested as number of shares x share price are: (Note these investment amounts do not match the example scenario's investment amounts, presumably because the example numbers are just made up.) The monthly returns can be calculated: The current values for each investor as invested amount x returns are: Checking the total:","\"It can be pretty hard to compute the right number. What you need to know for your actual return is called the dollar-weighted return. This is the Internal Rate of Return (IRR) http://en.wikipedia.org/wiki/Internal_rate_of_return computed for your actual cash flows. So if you add $100 per month or whatever, that has to be factored in. If you have a separate account then hopefully your investment manager is computing this. If you just have mutual funds at a brokerage or fund company, computing it may be a bunch of manual labor, unless the brokerage does it for you. A site like Morningstar will show a couple of return numbers on say an S&P500 index fund. The first is \"\"time weighted\"\" and is just the raw return if you invested all money at time A and took it all out at time B. They also show \"\"investor return\"\" which is the average dollar-weighted return for everyone who invested in the fund; so if people sold the fund during a market crash, that would lower the investor return. This investor return shows actual returns for the average person, which makes it more relevant in one way (these were returns people actually received) but less relevant in another (the return is often lower because people are on average doing dumb stuff, such as selling at market bottoms). You could compare yourself to the time-weighted return to see how you did vs. if you'd bought and held with a big lump sum. And you can compare yourself to the investor return to see how you did vs. actual irrational people. .02, it isn't clear that either comparison matters so much; after all, the idea is to make adequate returns to meet your goals with minimum risk of not meeting your goals. You can't spend \"\"beating the market\"\" (or \"\"matching the market\"\" or anything else benchmarked to the market) in retirement, you can only spend cash. So beating a terrible market return won't make you feel better, and beating a great market return isn't necessary. I think it's bad that many investment books and advisors frame things in terms of a market benchmark. (Market benchmarks have their uses, such as exposing index-hugging active managers that aren't earning their fees, but to me it's easy to get mixed up and think the market benchmark is \"\"the point\"\" - I feel \"\"the point\"\" is to achieve your financial goals.)\"","Okay, I think I managed to find the precise answer to this problem! It involves solving a non-linear exponential equation, but I also found a good approximate solution using the truncated Taylor series. See below for a spreadsheet you can use. Let's start by defining the growth factors per period, for money in the bank and money invested: Now, let S be the amount ready to be invested after n+1 periods; so the first of that money has earned interest for n periods. That is, The key step to solve the problem was to fix the total number of periods considered. So let's introduce a new variable: t = the total number of time periods elapsed So if money is ready to invest every n+1 periods, there will be t/(n+1) separate investments, and the future value of the investments will be: This formula is exact in the case of integer t and n, and a good approximation when t and n are not integers. Substituting S, we get the version of the formula which explicitly depends on n: Fortunately, only a couple of terms in FV depend on n, so we can find the derivative after some effort: Equating the derivative to zero, we can remove the denominator, and assuming t is greater than zero, we can divide by the constant ( 1-G t ): To simplify the equation, we can define some extra constants: Then, we can define a function f(n) and write the equation as: Note that α, β, γ, G, and R are all constant. From here there are two options: Use Newton's method or another numerical method for finding the positive root of f(n). This can be done in a number of software packages like MATLAB, Octave, etc, or by using a graphics calculator. Solve approximately using a truncated Taylor series polynomial. I will use this method here. The Taylor series of f(n), centred around n=0, is: Truncating the series to the first three terms, we get a quadratic polynomial (with constant coefficients): Using R, G, α, β and γ defined above, let c0, c1 and c2 be the coefficients of the truncated Taylor series for f(n): Then, n should be rounded to the nearest whole number. To be certain, check the values above and below n using the formula for FV. Using the example from the question: For example, I might put aside $100 every week to invest into a stock with an expected growth of 9% p.a., but brokerage fees are $10/trade. For how many weeks should I accumulate the $100 before investing, if I can put it in my high-interest bank account at 4% p.a. until then? Using Newton's method to find roots of f(n) above, we get n = 14.004. Using the closed-form approximate solution, we get n = 14.082. Checking this against the FV with t = 1680 (evenly divisible by each n + 1 tested): Therefore, you should wait for n = 14 periods, keeping that money in the bank, investing it together with the money in the next period (so you will make an investment every 14 + 1 = 15 weeks.) Here's one way to implement the above solution with a spreadsheet. StackExchange doesn't allow tables in their syntax at this time, so I'll show a screenshot of the formulae and columns you can copy and paste: Formulae: Copy and paste column A: Copy and paste column B: Results: Remember, n is the number of periods to accumulate money in the bank. So you will want to invest every n+1 weeks; in this case, every 15 weeks.","I thought it was such a useful suggestion that I went ahead and created them. I'm sure you're not the only one who could derive some benefit from them, I know I will. http://www.investy.com/tools When I have some additional time, I will add the option for grace-periods, but for now I wanted to get them up so you could use the calculations as-is from the article. Enjoy. (Disclosure: I'm the founder of the site they are hosted on and I wrote the code for the calculators)","If it's number of years and the interest is per-annum the formula is the same as the normal one. this should work on most hand-held calculators.","There may be differences in different contexts, but here's my general understanding: Rate of Return (or Return on Investment) is the total gain or loss of an investment divided by the initial investment amount. e.g. if you buy stock for $100 and later sell it for $120 you have a 20% Rate of Return. You would have a 20% ROR regardless of if you sell it tomorrow or in a year. Internal Rate of Return is effectively annualized. It is the annual rate at which each of a series of cashflows is discounted that would give you a net present value of 0. Meaning if you spent $100 today and in exactly one year you received $120 back, you would have an IRR of 20%. If you received the $120 back in 6 months, your IRR would be roughly 40%. An IRR calculation can include multiple cashflows at various times, while ROR is (in my mind) the total net gain or loss relative to the investment (irrespective of the time of the cash flows). IRR is more effective when comparing investments that have different time horizons. Spending $100 to get $120 tomorrow is much better (from an IRR perspective) than getting $120 two years from now, since you could take that $20 gain and invest it for the rest of the two years.","In this case the market interest rate is the discount rate that sets equal the market price (current value) of the bond to its present value. To find the market interest rate which is also referred to as promised yield YTM you would have solve for the interest rate in the bond price formula A market price of bond is the sum of discounted coupons and the terminal value of the bond. Most spreadsheet programs and calculators have a RATE function that makes possible finding this market interest rate. First see this for finding a coupon paying bond price The coupon payments are discounted so is the par value of the bond and sum of such discounts is the market price of the bond. The TVM functions in Excel and calculators make this possible using the following equation Let us take your data, 9% $100,000 coupon with 5 years remaining to maturity with market interest rate of 10%. Bonds issued in the US mostly pay two coupons per year. Thus we are finding the present value of 10 coupons each worth $4500 and par value of $100,000. The semi-annual market interest rate is 10%/2 or 5% The negative sign indicate money going out of hand Now solving for RATE is only possible using numerical methods and the RATE function is programmed using Newton-Raphson method to find one of the roots of the bond price equation. This rate will be the periodic rate in this case semi-annual rate which you have to multiply by 2 to get the annual rate. Do remember there is a difference between annual nominal rate and an annualized effective rate. To find the market interest rate If you don't have Excel or a financial calculator then you may opt to use my version of these financial functions in this JavaScript library tadJS","I was typing up a long response and lost it to a backspace.. so, I apologize but I don't intend on rewriting it all. You'll have to use a method called bootstrapping to get the forward rates. Essentially you're looking at the spot rate today, and the forward rates, then filling in what must be the rate to make them equal out in the end. Sorry I'm not more help!"],"string":"[\n \"Set your xirr formula to a very tall column, leaving lots of empty rows for future additions. In column C, instead of hardcoding the value, use a formula that tests if it's the current bottom entry, like this: =IF(ISBLANK(A7),-C6, C6) If the next row has no date entered (yet), then this is the latest value, and make it negative. Now, to digress a bit, there are several ways to measure returns. I feel XIRR is good for individual positions, like holding a stock, maybe buying more via DRIP, etc. For the whole portfolio it stinks. XIRR is greatly affected by timing of cash flows. Steady deposits and no withdrawals dramatically skew the return lower. And the opposite is true for steady withdrawals. I prefer to use TWRR (aka TWIRR). Time Weighted Rate of Return. The word 'time' is confusing, because it's the opposite. TWRR is agnostic to timing of cashflows. I have a sample Excel spreadsheet that you're welcome to steal from: http://moosiefinance.com/static/models/spreadsheets.html (it's the top entry in the list). Some people prefer XIRR. TWRR allows an apples-to-apples comparison with indexes and funds. Imagine twin brothers. They both invest in the exact same ideas, but the amount of cash deployed into these ideas is different, solely because one brother gets his salary bonus annually, in January, and the other brother gets no bonus, but has a higher bi-weekly salary to compensate. With TWRR, their percent returns will be identical. With XIRR they will be very different. TWRR separates out investing acumen from the happenstance timing of when you get your money to deposit, and when you retire, when you choose to take withdrawals. Something to think about, if you like. You might find this website interesting, too: http://www.dailyvest.com/\",\n \"\\\"I could not figure out a good way to make XIRR work since it does not support arrays. However, I think the following should work for you: Insert a column at D and call it \\\"\\\"ratio\\\"\\\" (to be used to calculate your answer in column E). Use the following equation for D3: =1+(C3-B3-C2)/C2 Drag that down to fill in the column. Set E3 to: =(PRODUCT(D$3:D3)-1)*365/(A3-A$2) Drag that down to fill in the column. Column E is now your annual rate of return.\\\"\",\n \"You could create your own spreadsheet of Cash Flows and use the XIRR function in Excel: The formula is:\",\n \"Use TWIRR (aka TWRR). Time Weighted rate of return. It's sort of the opposite of XIRR. XIRR results change dramatically depending on the timing of the cashflows. It might be useful to also model returns that are unaffected by the timing. This is how funds report returns, and this number allows you to compare to funds and indices. During periods of steady deposits, XIRR will continually understate performance. And in retirement, when you have steady withdrawals, XIRR will overstate. TWRR is talked about here: http://www.dailyvest.com/PRR/prr_calcmethods.aspx#twrr I've made a simple spreadsheet that you can use as a starting point, if you like: http://moosiefinance.com/static/models/spreadsheets.html (top entry in the list)\",\n \"\\\"Treat each position or partial position as a separate LOT. Each time you open a position, a new lot of shares is created. If you sell the whole position, then the lot is closed. Done. But if you sell a partial quantity, you need to create a new lot. Split the original lot into two. The quantities in each are the amount sold, and the amount remaining. If you were to then buy a few more shares, create a third lot. If you then sell the entire position, you'll be closing out all the remaining lots. This allows you to track each buy/sell pairing. For each lot, simply calculate return based on cost and proceeds. You can't derive an annualized number for ALL the lots as a group, because there's no common timeframe that they share. If you wish to calculate your return over time on the whole series of trades, consider using TWIRR. It treats these positions, plus the cash they represent, as a whole portfolio. See my post in this thread: How can I calculate a \\\"\\\"running\\\"\\\" return using XIRR in a spreadsheet?\\\"\",\n \"\\\"You can calculate the \\\"\\\"return on investment\\\"\\\" using libreoffice, for example. Look at the xirr function. You would have 2 columns, one a list of dates (ie the dates of the deposits or dividends or whatever that you want to track, the last entry would be today's date and the value of the investment today. The xirr function calculates the internal rate of return for you. If you add money to the account, and the current value includes the original investment and the added funds, it will be difficult to calculate the ROI. If you add money by purchasing additional shares (or redepositing dividends by buying additional shares), and you only want to track the ROI of the initial investment (ignoring future investments), you would have to calculate the current value of all of the added shares (that you don't want to include in the ROI) and subtract that value from the current total value of the account. But, if you include the dates and values of these additional share purchases in the spreadsheet, xirr will calculate the overall IRR for you.\\\"\",\n \"I use the following method. For each stock I hold long term, I have an individual table which records dates, purchases, sales, returns of cash, dividends, and way at the bottom, current value of the holding. Since I am not taking the income, and reinvesting across the portfolio, and XIRR won't take that into account, I build an additional column where I 'gross up' the future value up to today() of that dividend by the portfolio average yield at the date the dividend is received. The grossing up formula is divi*(1+portfolio average return%)^((today-dividend date-suitable delay to reinvest)/365.25) This is equivalent to a complex XMIRR computation but much simpler, and produces very accurate views of return. The 'weighted combined' XIRR calculated across all holdings then agrees very nearly with the overall portfolio XIRR. I have done this for very along time. TR1933 Yes, 1933 is my year of birth and still re investing divis!\",\n \"It's not compound interest. It is internal rate of return. If you have access to Excel look up the XIRR built-in function.\",\n \"\\\"Re. question 2 If I buy 20 shares every year, how do I get proper IRR? ... (I would have multiple purchase dates) Use the money-weighted return calculation: http://en.wikipedia.org/wiki/Rate_of_return#Internal_rate_of_return where t is the fraction of the time period and Ct is the cash flow at that time period. For the treatment of dividends, if they are reinvested then there should not be an external cash flow for the dividend. They are included in the final value and the return is termed \\\"\\\"total return\\\"\\\". If the dividends are taken in cash, the return based on the final value is \\\"\\\"net return\\\"\\\". The money-weighted return for question 2, with reinvested dividends, can be found by solving for r, the rate for the whole 431 day period, in the NPV summation. Now annualising And in Excel\\\"\",\n \"The number you are trying to calculate is called the Internal Rate of Return (IRR). Google Spreadsheets (and excel) both have an XIRR function that can do this for you fairly simply. Setup a spreadsheet with 1 column for dates, 1 column for investment. Mark your investments as negative numbers (payment to invest). All investments will be negative. Mark your last row with today's date and today's valuation (positive). All withdrawals will be positive, so you are pretending to withdrawal your entire account for the purpose of calculation. Do not record dividends or other interim returns unless you are actually withdrawing money. The XIRR function will calculate your internal rate of return with irregularly timed investments. Links: Article explaining XIRR function (sample spreadsheet in google docs to modify)\",\n \"Here's a few demo steps, first calculating the year to date return, then calculating the Q4 quarterly return based on the cumulative returns for Q3 and Q4. It's fine to use closing price to closing price as return periods.\",\n \"If annualized rate of return is what you are looking for, using a tool would make it a lot easier. In the post I've also explained how to use the spreadsheet. Hope this helps.\",\n \"Yes, if your IRR is 5% per annum after three years then the total return (I prefer total rather than your use of actual) over those three years is 15.76%. Note that if you have other cashflows in and out, it gets a bit more complicated (e.g. using the XIRR function in Excel), but the idea is to find an effective annual percentage return that you're getting for your money.\",\n \"\\\"The best way to do this is to use IRR. It's a complicated calculation, but will take into account multiple in/out cash flows over time along with \\\"\\\"idle periods\\\"\\\" where your money may not have been doing anything. Excel can calculate it for you using the XIRR function\\\"\",\n \"Does it make sense to calculate the IRR based on the outstanding value of the project, or just use the cash flows paid out? Let's assume I invest x amount every year for 49 years, and the investment grows at a constant rate, but I do not get dividends before (which will be constant) 50 years later. I assume that the value of the investment will decline as it pays dividend, and will be worth 0 when the dividends stop. Do I calculate the IRR as the negative streams of outflows for the first 49 years and then positive cash inflows from 50 year in the future? If I apply this method, the IRR will be very low, almost equal to the annual expected return. Or based on the current value of the project for each year combined with cash outflows for the first 49 years and dividends from year 50? If I apply this method, the IRR will be a lot higher than the first method.\",\n \"If I understand you right, what you need is the minimum amount in the account until your next deposit. So for example, if today is the 10th and you get paid on the 15th, how much do I need to have in the account, so I know how much I can spend? That amount should be all of the bills that will be paid between today and the 15th. An alternative would just to keep a running balance and see what the minimum value is. My personal finance software does that for me, but it's possible, although a little more complicated, in Excel. You'd have to find the date of the next deposit, and do a SUMIF looking for dates between today and that date. That's about as far as I can get without getting off-topic.\",\n \"The short answer is that you would want to use the net inflow or net outflow, aka profit or loss. In my experience, you've got a couple different uses for IRR and that may be driving the confusion. Pretty much the same formula, but just coming at it from different angles. Thinking about a stock or mutual fund investment, you could project a scenario with an up-front investment (net outflow) in the first period and then positive returns (dividends, then final sale proceeds, each a net inflow) in subsequent periods. This is a model that more closely follows some of the logic you laid out. Thinking about a business project or investment, you tend to see more complicated and less smooth cashflows. For example, you may have a large up-front capital expenditure in the first period, then have net profit (revenue less ongoing maintenance expense), then another large capital outlay, and so on. In both cases you would want to base your analysis on the net inflow or net outflow in each period. It just depends on the complexity of the cashflows trend as to whether you see a straightforward example (initial payment, then ongoing net inflows), or a less straightforward example with both inflows and outflows. One other thing to note - you would only want to include those costs that are applicable to the project. So you would not want to include the cost of overhead that would exist even if you did not undertake the project.\",\n \"TWRR = (2012Q4 x 2013Q1 x 2013Q2) ^ (1/3) = ?? (1.1 * .809 * 1.29) ^ (1/3) = 1.047 or 4.7% return. No imaginary numbers needed. But. Your second line there is wrong $15,750 - $15,000 - $4,000 ? The $15K already contains the $4k, why did you subtract it again? This a homework problem?\",\n \"You probably want the Internal Rate of Return (IRR), see http://en.wikipedia.org/wiki/Internal_rate_of_return which is the compound interest rate that would produce your return. You can compute it in a spreadsheet with XIRR(), I made an example: https://spreadsheets.google.com/ccc?key=0AvuTW2HtDQfYdEsxVlM0RFdrRk1QS1hoNURxZkVFN3c&hl=en You can also use a financial calculator, or there are probably lots of web-based calculators such as the ones people have mentioned.\",\n \"R has really good package that lets you calculate the return of rebalanced portfolios. The package is called: PerformanceAnalytics (see: http://www.inside-r.org/packages/cran/PerformanceAnalytics/docs/Return.portfolio). I quickly wrote a small script for you that lets you do exactly what you want. Code: By default the portfolio is rebalanced to an equally weighted portfolio. It is also possible to rebalance your portfolio using custom weights. See the documentation on how to do this. In order for this code to work you need to have your data already in return terms. You can do this easily in Excel. Make sure your data in excel looks like this: Than export your data to a CSV file. Note: before you run the code make sure you have installed the package PerformanceAnalytics. You can do this as follows: Let me know if you have any questions regarding the above.\",\n \"Yes, assuming that your cash flow is constantly of size 5 and initial investment is 100, the following applies: IRR of 5% over 3 years: Value of CashFlows: 4.7619 + 4.5351 + 4.3192 = 13.6162 NPV: 100 - 13.6162 = 86.3838 Continuous compounding: 86.3838 * (1.05^3) = 100\",\n \"Given the following variables Where b[n + 1] = b[n] (1 + r) - w and b[0] = s then b[n] = ((1 + r)^n (r s - w) + w)/r For example, illustrating with some figures. The balances in the first four quarters (n = 1, 2, 3, 4) are Check As per the Excel formula provided by OneTruDragonGirl £670.27\",\n \"Since you have the balance at equal periods and the cash flows at the period ends, the best return calculation in this case is the true time-weighted return. See http://en.wikipedia.org/wiki/Time-weighted_return#Formulae So, notwithstanding some ambiguity about your figures, here is a calculation using the first three periods from your second table. Giving a total return over the three periods of -23.88% If the periods are months, multiply by four to annualise.\",\n \"The MWRR that you showed in your post is calculated incorrectly. The formula that you use... ($15,750 - $15,000 - $4,000) / ($15,000 + 0.5 x $4,000) Translates into a form of the DIETZ formula of (EMV-BMV-C)/(BMV + .5 x C) The BMV is the STARTING balance. And as a matter of fact, the starting balance was NOT 15,000. It was IN FACT 11,000. See, the starting value for a month MUST BE the ending value of the prior month. So the BMV of 11,000 would give you the correct answer. Because if you added 4,000 at the start of the month (on day 1), it would have to have been ADDED to the 11,000 of the PRIOR month's ENDING value. Make sense? That would also mean that the addition of 4000 to the 11000 would imply that you started day 1 with 11,000. Make sense? Summary: When doing the calculations, you may use the ending value on the last day of the month to get your EMV. BUT YOU MAY NOT take the ending value on day 1 to get the BMV. That simply can not make sense since you already added a bunch of money during the day. Think about it. Davie\",\n \"\\\"The definition you cite is correct, but obscure. I prefer a forward looking definition. Consider the real investment. You make an original investment at some point in time. You make a series of further deposits and withdrawals at specified times. At some point after the last deposit/withdrawal, (the \\\"\\\"end\\\"\\\") the cash value of the investment is determined. Now, find a bank account that pays interest compounded daily. Possibly it should allow overdrafts where it charges the same interest rate. Make deposits and withdrawals to/from this account that match the investment payments in amount and date. At the \\\"\\\"end\\\"\\\" the value in this bank account is the same as the investment. The bank interest rate that makes this happen is the IRR for the investment...\\\"\",\n \"Happy to help. I always recommend you try and solve these types of problems by hand over financial calculators so that you can get a feel for how terms in the equation relate to one another. That's important while you're studying/learning. But for work--by all means you should use the fastest method, which is probably excel.\",\n \"There are many ways to calculate the return, and every way will give you a different results in terms of a percentage-value. One way to always get something meaningful - count the cash. You had 977 (+ 31) and in the end you have 1.370, which means you have earned 363 dollars. But what is your return in terms of percentage? One way to look at it, is by pretending that it is a fund in which you invest 1 dollar. What is the fund worth in the beginning and in the end? The tricky part in your example is, you injected new capital into the equation. Initially you invested 977 dollars which later, in the second period became worth 1.473. You then sold off 200 shares for 950 dollars. Remember your portfolio is still worth 1.473, split between 950 in cash and 523 in Shares. So far so good - still easy to calculate return (1.473 / 977 -1 = 50.8% return). Now you buy share for 981 dollars, but you only had 950 in cash? We now need to consider 2 scenarios. Either you (or someone else) injected 31 dollars into the fund - or you actually had the 31 dollars in the fund to begin with. If you already had the cash in the fund to begin with, your initial investment is 1.008 and not 977 (977 in shares and 31 in cash). In the end the value of the fund is 1.370, which means your return is 1.370 / 1.007 = 36%. Consider if the 31 dollars was paid in to the fund by someone other than you. You will then need to recalculate how much you each own of the fund. Just before the injection, the fund was worth 950 in cash and 387 in stock (310 - 200 = 110 x 3.54) = 1.339 dollars - then 31 dollars are injected, bringing the value of the fund up to 1.370. The ownership of the fund is split with 1.339 / 1.370 = 97.8% of the value for the old capital and 2.2% for the new capital. If the value of the fund was to change from here, you could calculate the return for each investor individually by applying their share of the funds value respective to their investment. Because the value of the fund has not changed since the last period (bullet 3), the return on the original investment is (977 / 1.339 - 1 = 37.2%) and the return on the new capital is (31 / 31 = 0%). If you (and not someone else) injected the 31 dollar into the fund, you will need to calculate the weight of each share of capital in each period and get the average return for each period to get to a total return. In this specific case you will still get 37.2% return - but it gets even more comlex for each time you inject new capital.\",\n \"You are looking for the Internal Rate of Return. If you have a spreadsheet like Microsoft Excel you can simply put in a list of the transactions (every time money went in or out) and their dates, and the spreadsheet's XIRR function will calculate a percentage rate of return. Here's a simple example. Investment 1 was 100,000 which is now worth 104,930 so it's made about 5% per year. Investment 2 is much more complicated, money was going in and out, but the internal rate of return was 7% so money in that investment, on average, grew faster than money in the first investment.\",\n \"\\\"Yes if and only if you properly use P/Y and C/Y. For your familiarity, I recommend also trying it with I = 7.56% / 12, and P/Y and C/Y = 1. I like to think of P/Y and C/Y as \\\"\\\"per period\\\"\\\" and prefer to divide the interest rate by the number of periods per year, but so long as you keep everything coherent in the solver, you will get the correct answer with both approaches.\\\"\",\n \"Not sure why this is being downvoted, SSRS, CR, or really any of the major reporting scenarios are designed for these types of calculations. Not only that but using them would enable one to just update the data/change the parameters to match the right date range and not have to spend hours doing repetitive calculations. Edit: yeah Access is basically GUI-SQL but depending on who will see this data (i.e OP's boss) you'll want it all prettied up.\",\n \"Is there a way in bloomberg to calculate the total return if one purchased $100 worth of 10 Year US Notes at time X and perpetually rolled the principal once the bond matured until the present? I've been able to historically use the COMP function to compare equity and ETF total returns, but curious if this function can be expanded to measure returns against commodities, treasuries, and other debt products. Unfortunately im having trouble pulling in the appropriate continuous commodity and treasury tickers.\",\n \"Both are correct depending on what you are really trying to evaluate. If you only want to understand how that particular investment you were taking money in and out of did by itself than you would ignore the cash. You might use this if you were thinking of replacing that particular investment with another but keeping the in/out strategy. If you want to understand how the whole investment strategy worked (both the in/out motion and the choice of investment) than you would definitely want to include the cash component as that is necessary for the strategy and would be your final return if you implemented that strategy. As a side note, neither IRR or CAGR are not great ways to judge investment strategies as they have some odd timing issues and they don't take into account risk.\",\n \"\\\"The author is using an approximation to what you have exactly, which is called a \\\"\\\"true\\\"\\\" time-weighted rate of return. You have expressed the total time-weighted return for the period in question. In order to express this as an annual rate, you may annualize it by adding one, raising to the 1/y power, and subtracting one again, for a period of y years. The alternative to a time-weighted return is a money-weighted return, which is actually another name for the internal rate of return.\\\"\",\n \"The MIRR formula uses the finance rate to discount negative cash flows, but since the only negative cash flow in the example in in the current period, there's nothing to discount. It's meant to solve problems with IRR like when there are both positive and negative cash flows, which can result in multiple answers for IRR. The example they give isn't a good one for MIRR because it's a simple spend now, earn later scenario, which IRR is perfectly fine for. If you add a negative cashflow somewhere after the first one you'll see the answer change with difference financing rates.\",\n \"\\\"So, there is no truly \\\"\\\"correct\\\"\\\" way to calculate return. Professionals will often calculate many different rates of return depending on what they wish to understand about their portfolio. However, the two most common ways of calculating multi-period return though are time-weighted return and money-weighted return. I'll leave the details to this good Investopeadia article, but the big picture is time-weighted returns help you understand how the stock performed during the period in question independent of how you invested it it. Whereas money-weighted return helps you understand how you performed investing in the stock in question. From your question, it appears both methods would be useful in combination to help you evaluate your portfolio. Both methods should be fairly easy to calculate yourself in a spread sheet, but if you are interested there are plenty of examples of both in google docs on the web.\\\"\",\n \"I have answered your question in detail here https://stackoverflow.com/questions/12396422/apr-calculation-formula The annuity formula in FDIC document is at first finding PVIFAD present value annuity due factor and multiplying it with annuity payment and then dividing it by an interest factor of (1+i) to reduce the annuity to an ordinary annuity with end of period payments They could have simply used PVIFA and multiplying it with annuity payment to find the present value of an ordinary annuity In any case, you should not follow the directions in FDIC document to find interest rate at which the present value of annuity equals the loan amount. The method they are employing is commonly used by Finance Professors to teach their students how to find internal rate of return. The method is prone to lengthy trial and error attempts without having any way of knowing what rate to use as an initial guess to kick off the interest rate calculations So this is what I would suggest if you are not short on time and would like to get yourself familiar with numerical methods or iterative techniques to find internal rate of return There are way too many methods at disposal when it comes to finding interest rates some of which include All of the above methods use a seed value as a guess rate to start the iterative calculations and if results from successive calculations tend to converge within a certain absolute Error bound, we assume that one of the rates have been found as there may be as many rates as the order of the polynomial in this case 36 There are however some other methods that help find all rates by making use of Eigenvalues, but for this you would need a lengthy discourse of Linear Algebra One of the methods that I have come across which was published in the US in 1969 (the year I was born :) ) is called the Jenkins Traub method named after the two individuals who worked jointly on finding a solution to all roots of a polynomial discarding any previous work on the same subject I been trying to go over the Jenkins Traub algorithm but am having difficulty understanding the complex nature of the calculations required to find all roots of the polynomial In summary you would be better of reading up on this site about the Newton Raphson method to find IRR\",\n \"\\\"It appears the interest is not compounded daily. Each period of interest has the loan amount calculated on the \\\"\\\"capital\\\"\\\" remaining on the start of period, for each day in the period. The Excel finance functions don't handle irregular periods that well, but I can reconstruct the interest calculations:\\\"\",\n \"For this, the internal rate of return is preferred. In short, all cash flows need to be discounted to the present and set equal to 0 so that an implied rate of return can be calculated. You could try to work this out by hand, but it's practically hopeless because of solving for roots of the implied rate of return which are most likely complex. It's better to use a spreadsheet with this capability such as OpenOffice's Calc. The average return on equity is 9%, so anything higher than that is a rational choice. Example Using this simple tool, the formula variables can easily be input. For instance, the first year has a presumed cash inflow of $2,460 because the insurance has a 30% discount from $8,200 that is assumed to be otherwise paid, a cash inflow of $40,000 to finance the sprinklers, a cash outflow of $40,000 to fund the sprinklers, a $400 outflow for inspection, and an outflow in the amount of the first year's interest on the loan. This should be repeated for each year. They can be input undiscounted, as they are, for each year, and the calculator will do the rest.\",\n \"Thanks to this youtube video I think I understood the required calculation. Based on following notation: then the formula to find x is: I found afterwards an example on IB site (click on the link 'How to Determine the Last Stock Price Before We Begin to Liquidate the Position') that corroborate the formula above.\",\n \"I think you might benefit from adopting a zero-sum budget, in which you plan where each dollar will be spent ahead of time, rather than simply track spending or worry about the next expense. Here's a pretty good article on the subject: How and Why to Use a Zero-Sum Budget. This is the philosophy behind a popular budgeting tool You Need a Budget, I am not advocating the tool, but I am a fan of the idea that a budget is less about tracking spending and more about planning spending. That said, to answer your specific question, one method for tracking your min-needed for upcoming expenses would be to record the date, expense, amount due, and amount paid as shown here: Then the formula to calculate the min-needed (entered in E1 and copied down) would be: As you populate amounts paid, the MinNeeded is adjusted for all subsequent rows. You could get fancier and only populate the MinNeeded field on dates where an expense is due using IF().\",\n \"The point of a total return index is that it already has accounted for the capital gains + coupon income. If you want to calculate it yourself you'll have to find the on-the-run 10y bond for each distinct period then string them together to calc your total return. Check XLTP if they have anything\",\n \"Your example isn't consistent: Q1 end market value (EMV) is $15,750, then you take out $2,000 and say your Q2 BMV is $11,750? For the following demo calculations I'll assume you mean your Q2 BMV is $13,750, with quarterly returns as stated: 10%, 5%, 10%. The Q2 EMV is therefore $15,125. True time-weighted return :- http://en.wikipedia.org/wiki/True_time-weighted_rate_of_return The following methods have the advantage of not requiring interim valuations. Money-weighted return :- http://en.wikipedia.org/wiki/Rate_of_return#Internal_rate_of_return Logarithmic return :- http://en.wikipedia.org/wiki/Rate_of_return#Logarithmic_or_continuously_compounded_return Modified Dietz return :- http://en.wikipedia.org/wiki/Modified_Dietz_method Backcalculating the final value (v3) using the calculated returns show the advantage of the money-weighted return over the true time-weighted return.\",\n \"If you mean the internal rate of return, then the quarterly rate of return which would make the net present value of these cash flows to be zero is 8.0535% (found by goal seek in Excel), or an equivalent compound annual rate of 36.3186% p.a. The net present value of the cash flows is: 10,000 + 4,000/(1+r) - 2,000/(1+r)^2 - 15,125/(1+r)^3, where r is the quarterly rate. If instead you mean Modified Dietz return, then the net gain over the period is: End value - start value - net flow = 15,125 - 10,000 - (4,000 - 2,000) = 3,125 The weighted average capital invested over the period is: 1 x 10,000 + 2/3 x 4,000 - 1/3 x 2,000 = 12,000 so the Modified Dietz return is 3,125 / 12,000 = 26.0417%, or 1.260417^(1/3)-1 = 8.0201% per quarter, or an equivalent compound annual rate of 1.260417^(4/3)-1 = 36.1504%. You are using an inappropriate formula, because we know for a fact that the flows take place at the beginning/end of the period. Instead, you should be combining the returns for the quarters (which have in fact been provided in the question). To calculate this, first calculate the growth factor over each quarter, then link them geometrically to get the overall growth factor. Subtracting 1 gives you the overall return for the 3-quarter period. Then convert the result to a quarterly rate of return. Growth factor in 2012 Q4 is 11,000/10,000 = 1.1 Growth factor in 2013 Q1 is 15,750/15,000 = 1.05 Growth factor in 2013 Q2 is 15,125/13,750 = 1.1 Overall growth factor is 1.1 x 1.05 x 1.1 = 1.2705 Return for the whole period is 27.05% Quarterly rate of return is 1.2705^(1/3)-1 = 8.3074% Equivalent annual rate of return is 1.2705^(4/3)-1 = 37.6046% ========= I'd recommend you to refer to Wikipedia.\",\n \"\\\"To calculate the balance (not just principal) remaining, type into your favorite spreadsheet program: It is important that the periods for \\\"\\\"Periods\\\"\\\" and \\\"\\\"Rate\\\"\\\" match up. If you use your annual rate with quarterly periods, you will get a horribly wrong answer. So, if you invest $1000 today, expect 6% interest per year (0.5% interest per month), withdraw $10 at the end of each month, and want to know what your investment balance will be 2 years (24 months) from now, you would type: And you would get a result of $872.84. Or, to compute it manually, use the formula found here by poster uart: This is often taught in high-school here as a application of geomentric series. The derivation goes like this. Using the notation : r = 1 + interest_rate_per_term_as_decimal p = present value a = payment per term eot1 denotes the FV at end of term 1 etc. eot1: rp + a eot2: r(rp + a) + a = r^2p + ra + a eot3: r(r^2p + ra + a) + a = r^3p + r^2a + ra + a ... eotn: r^np + (r^(n-1) + r^(n-2) + ... 1)a = p r^n + a (r^n - 1)/(r-1) That is, FV = p r^n + a (r^n - 1)/(r-1). This is precisely what exel [sic] computes for the case of payments made at the end of each term (payment type = 0). It's easy enough to repeat the calculations as above for the case of payments made at the beginning of each term. This won't work for changing interest rates or changing withdrawal amounts. For something like that, it would be better for you (if you don't want online calculators) to set up a table in a spreadsheet so you can adjust different periods manually.\\\"\",\n \"The formula for determining the number of payments (months) you'll need to make on your loan is: where i=monthly interest rate (annual rate / 12), A=loan amount (principal), and P=monthly payment. To determine the total interest that you will pay, you can use the following formula: where P=monthly payment, N=number of payments (from above formula), and A=loan amount (principal). A quick example: using the numbers in the screenshot above ($10,000 loan, $500 monthly payment, 10% APR), the number of payments ends up to be 21.97 (which means that payment number 22 is slightly less than the rest). In the second formula, you take that number times your $500 payment and determine that you have paid $10,984.81 over the course of the entire loan period. Subtracting the principal, you have paid $984.81 in total interest. On your spreadsheet, the function you are looking for is NPER: NPER(rate, payment_amount, present_value, [future_value, end_or_beginning]) rate - The interest rate. (This should be the monthly rate, or the annual rate divided by 12.) payment_amount - The amount of each payment made. (For a loan payment, this should be a negative number.) present_value - The current value of the annuity. (The initial principal of the loan) future_value - [ OPTIONAL ] - The future value remaining after the final payment has been made. (This should be 0, the default if omitted.) end_or_beginning - [ OPTIONAL - 0 by default ] - Whether payments are due at the end (0) or beginning (1) of each period.\",\n \"The solution is x = 8.92. This assumes that Chuck's six years of deposits start from today, so that the first deposit accumulates 10 years of gain, i.e. 20*(1 + 0.1)^10. The second deposit gains nine years' interest: 20*(1 + 0.1)^9 and so on ... If you want to do this calculation using the formula for an annuity due, i.e. http://www.financeformulas.net/Future-Value-of-Annuity-Due.html where (formula by induction) you have to bear in mind this is for the whole time span (k = 1 to n), so for just the first six years you need to calculate for all ten years then subtract another annuity calculation for the last four years. So the full calculation is: As you can see it's not very neat, because the standard formula is for a whole time span. You could make it a little tidier by using a formula for k = m to n instead, i.e. So the calculation becomes which can be done with simple arithmetic (and doesn't actually need a solver).\",\n \"There are at least a couple of ways you could view this to my mind: Make an Excel spreadsheet and use the IRR function to compute the rate of return you are having based on money being added. Re-invested distributions in a mutual fund aren't really an additional investment as the Net Asset Value of the fund will drop by the amount of the distribution aside from market fluctuation. This is presuming you want a raw percentage that could be tricky to compare to other funds without doing more than a bit of work in a way. Look at what is the fund's returns compared to both the category and the index it is tracking. The tracking error is likely worth noting as some index funds could lag the index by a sizable margin and thus may not be that great. At the same time there may exist cases where an index fund isn't quite measuring up that well. The Small-Growth Indexing Anomaly would be the William Bernstein article from 2001 that has some facts and figures for this that may be useful.\",\n \"\\\"When you're calculating the cash flows used to compute an IRR, with regard to the expenses used to calculate those cash flows: Do you assume that expenses are going to be higher than they would be today, by using an assumed inflation rate? Or is everything (all cash flows) assumed to be in today's dollars, and you account for inflation's effect on your actual returns at \\\"\\\"the end\\\"\\\" by subtracting off the inflation rate from the IRR?\\\"\",\n \"**Using your Time Value of Money functions on your calculator** N = 3x2 = 6 PV = -914 PMT = (.16 x 1000)/2 = 80 FV = 1000 Compute I/Y Or **Step by step calculations** 1) Compute the PV of **(FV of Bond)**1000 in **(3x2)**6 periods at **(16%/2)**8% with no payments 2) Compute the PV of an Annuity of **(.16/2x1000)**$80 payments over **(3x2)**6 periods with an interest rate of **(16%/2)**8% and 0 Future Value 3) Combine the values from Steps 1 and 2\",\n \"Average rates of return usually assume compounding, so your formula would be for annual compounding ,or for continuous compounding.\",\n \"The author is using the simple Dietz method, (alternatively the modified Dietz), with the assumption that the net cash-flow occurs halfway through the time period. Let's say the time period is one year for illustration, so the cash-flow would be at the end of the second quarter. The money-weighted method gives a more accurate return, but has to be solved by trial-and-error or using a computer. The money-weighted return is 11.2718 % and the simple or modified Dietz return is 11.2676 %. When the sums are done backwards to check, the Dietz is half a dollar out with a final value of $11,999.50 while the money-weighted return recalculates exactly $12,000. It is worth pointing out that the return changes if the cash-flow is not in the middle of the time period. A case with the cash-flow at the end of Q3 is added to illustrate.\",\n \"I was emailing back and forth with a manager in a different department on how real returns are being calculated, and he said that the industry standard is 1 + real returns*(1+inflation) - fees, and to not use my formula because it can double count inflation, making fees lower. However, real returns are not observable in the future, and I do not why he uses that formula. The returns were used in an Excel spreadsheet. What are your thoughts about this?\",\n \"A couple ideas: Use excel - it has an IRR (internal rate of return) that can handle a table of inputs as you describe, along with dates deposited to give you a precise number. Go simple - track total deposits over the year, assume half of that was present in January. So, for example, your account started the year with $10k, ended with $15k, but you deposited $4k over the year. It should be clear the return (gain) is $1k, right? But it's not 10%, as you added during the year. I'd divide $1k/$12k for an 8.3% return. Not knowing how your deposits were structured, the true number lies between the 10% and 6.7% as extremes. You'll find as you get older and have a higher balance, this fast method gaining accuracy, as your deposits are a tinier fraction of your account and likely spread out pretty smoothly over the year anyway.\",\n \"\\\"The \\\\^ symbol means exponentiation. You're multiplying by 216 instead. So rephrasing that in Excel functions (without just using \\\"\\\"=FV(0.004308,216,-175)\\\"\\\"), you'd have \\\"\\\"=((POWER(1.004308,216)-1)/0.004308)*175\\\"\\\". Note that I originally mentioned the difference between .004308 and 0.0517/12 because it makes roughly a $2.56 difference in the answer.\\\"\",\n \"Thanks for showing me that. I can see it now. I have always used my formula, and even a senior at another company confirmed the way I calculated the returns. Luckily, I do not work with that manager, and he has his own model, and so do I. But he was pretty cool about it when I asked about his calculations.\",\n \"> 1)What is the formula to turn the annualized rate into a monthly rate? What do you *think* it is? > 2)What is the formula to find out the NPV of monthly cash flows? Same one as usual. Remember, value can only be summed if it's *at the same point in time.* > For example, if I get $1000, $2000, and $3000 in months 1, 2, and 3, how do I calculate how much each of those are equal to as a present value if the annual discount rate is 8%? Think it through.\",\n \"\\\"Google Docs spreadsheets have a function for filling in stock and fund prices. You can use that data to graph (fund1 / fund2) over some time period. Syntax: =GoogleFinance(\\\"\\\"symbol\\\"\\\", \\\"\\\"attribute\\\"\\\", \\\"\\\"start_date\\\"\\\", \\\"\\\"num_days|end_date\\\"\\\", \\\"\\\"interval\\\"\\\") where: This analysis won’t include dividends or distributions. Yahoo provides adjusted data, if you want to include that.\\\"\",\n \"So for quarters So, if Q1's value was 10 and Q2's value was 25 For closing or opening prices, I would use closing prices. For instance, some used Adjusted Close or Close on Yahoo Finance (see this example of AAPL). Added Note: In your example, for your example, you'll want to take the absolute value of the denominator (aka: divisor), so an Excel formula might look like the below example ... ... where the new and old are cells.\",\n \"Assuming cell A1 contains the number of trades: will price up to A1=100 at 17 each, and the rest at 14 each. The key is the MAX and MIN. They keep an item from being counted twice. If X would end up negative, MAX(0,x) clamps it to 0. By extension, if X-100 would be negative, MAX(0, X-100) would be 0 -- ie: that number doesn't increase til X>100. When A1=99, MIN(a1,100) == 99, and MAX(0,a1-100) == 0. When A1=100, MIN(a1,100) == 100, and MAX(0,a1-100) == 0. When A1=101, MIN(a1,100) == 100, and MAX(0,a1-100) == 1. Of course, if the 100th item should be $14, then change the 100s to 99s.\",\n \"\\\"There is no formula that can be applied to most variations of the problem you pose. The reason is that there is no simple, fixed relationship between the two time periods involved: the time interval for successive payments, and the time period for successive interest compounding. Suppose you have daily compounding and you want to make weekly payments (A case that can be handled). Say the quoted rate is 4.2% per year, compounded daily Then the rate per day is 4.2/365, or 0.0115068 % So, in one week, a debt would grow through seven compoundings. A debt of $1 would grow to 1 * (1+.000225068)^7, or 1.000805754 So, the equivalent interest rate for weekly compounding is 0.0805754% Now you have weekly compounding, and weekly payments, so the standard annuity formulas apply. The problem lies in that number \\\"\\\"7\\\"\\\", the number of days in a week. But if you were trying to handle daily / monthly, or weekly / quarterly, what value would you use? In such cases, the most practical method is to convert any compounding rate to a daily compounding rate, and use a spreadsheet to handle the irregularly spaced payments.\\\"\",\n \"If you use Google Finance, you will get incorrect results because Google Finance does not show the dividend history. Since your requirement is that dividends are re-invested, you should use Yahoo Finance instead, downloading the historical 'adjusted' price.\",\n \"Perhaps there is no single formula that accounts for all the time intervals, but there is a method to get formulas for each compound interest period. You deposit money monthly but there is interest applied weekly. Let's assume the month has 4 weeks. So you added x in the end of the first month, when the new month starts, you have x money in your account. After one week, you have x + bx money. After the second week, you have x + b(x + bx) and so on. Always taking the previous ammount of money and multiplying it by the interest (b) you have. This gives you for the end of the second month: This looks complicated, but it's easy for computers. Call it f(0), that is: It is a function that gives you the ammount of money you would obtain by the end of the second month. Do you see that the future money inputs are given with relation to the previous ones? Then we can do the following, for n>1 (notice the x is the end of the formula, it's the deposit of money in the end of the month, I'm assuming it'll pass through the compound interest only in the first week of the next month): And then write: There is something in mathematics called recurrence relation in which we can use these two formulas to produce a simplified one for arbitrary b and n. Doing it by hand would be a bit complicated, but fortunately CASes are able to do it easily. I used Wolfram Mathematica commands: And it gave me the following formula: All the work you actually have to do is to figure out what will be f(0) and then write the f(n) for n>0 in terms of f(n-1). Notice that I used the command FullSimplify in my code, Mathematica comes with algorithms for simplyfing formulas so if it didn't find something simpler, you probably won't find it by yourself! If the code looks ugly, it's because of Mathematica clipboard formatting, in the software, it looks like this: Notice that I wrote the entire formula for f(0), but as it's also a recurrence relation, it can be written as: That is: f(0)=g(4). This should give you much simpler formulas to apply in this method.\",\n \"> Does it make sense to calculate the IRR based on the outstanding value of the project, or just use the cash flows paid out? What is the outstanding value of the project based on? I'm guessing it is the PV of net cash flow? The timing of each cash outflow (i.e. investment) is crucial to calculating a proper IRR because of time value of money. Putting in $x each year for 49 years will give you a different figure from putting in $49x in the first year and zero for the next 48 years because a larger figure is tied up for a longer time period.\",\n \"\\\"The answer to almost all questions of this type is to draw a diagram. This will show you in graphical fashion the timing of all payments out and payments received. Then, if all these payments are brought to the same date and set equal to each other (using the desired rate of return), the equation to be solved is generated. In this case, taking the start of the bond's life as the point of reference, the various amounts are: Pay out = X Received = a series of 15 annual payments of $70, the first coming in 1 year. This can be brought to the reference date using the formula for the present value of an ordinary annuity. PLUS Received = A single payment of $1000, made 15 years in the future. This can be brought to the reference date using the simple interest formula. Set the pay-out equal to the present value of the payments received and solve for X I am unaware of the difference, if any, between \\\"\\\"current rate\\\"\\\" and \\\"\\\"rate to maturity\\\"\\\" Finding the rate for such a series of payments would start out the same as above, but solving the resulting equation for the interest rate would be a daunting task...\\\"\",\n \"Treat each transaction as separate, with its own principal, its own gain, and its own number of days. Then the total annualized return is just a weighted average of each annualized return, with the weighting related to the number of shares in that transaction.\",\n \"You're contributing 98.2% of your contributed amount (deducting 1.8%) each month and at the end of the year, deducting a flat 15 pounds. The easiest way to do this is to use a spreadsheet. But you're missing some key information. What is your expected growth rate and what is your expected inflation rate? Is this a taxable account where you deduct (for example, 35%) of the growth annually for taxes or is this a non-taxable account?\",\n \"The Finance functions in spreadsheet software will calculate this for you. The basic functions are for Rate, Payment, PV (present value), FV (Future value), and NPER, the number of periods. The single calculation faces a couple issues, dealing with inflation, and with a changing deposit. If you plan to save for 30 years, and today are saving $500/mo, for example, in ten years I hope the deposits have risen as well. I suggest you use a spreadsheet, a full sheet, to let you adjust for this. Last, there's a strange effect that happens. Precision without accuracy. See the results for 30-40 years of compounding today's deposit given a return of 6%, 7%, up to 10% or so. Your forecast will be as weak as the variable with the greatest range. And there's more than one, return, inflation, percent you'll increase deposits, all unknown, and really unknowable. The best advice I can offer is to save till it hurts, plan for the return to be at the lower end of the range, and every so often, re-evaluate where you stand. Better to turn 40, and see you are on track to retire early, than to plan on too high a return, and at 60 realize you missed it, badly. As far as the spreadsheet goes, this is for the Google Sheets - Type this into a cell =nper(0.01,-100,0,1000,0) It represents 1% interest per month, a payment (deposit) of $100, a starting value of $0, a goal of $1000, and interest added at month end. For whatever reason, a starting balance must be entered as a negative number, for example - =nper(0.01,-100,-500,1000,0) Will return 4.675, the number of months to get you from $500 to $1000 with a $100/mo deposit and 1%/mo return. Someone smarter than I (Chris Degnen comes to mind) can explain why the starting balance needs to be entered this way. But it does show the correct result. As confirmed by my TI BA-35 financial calculator, which doesn't need $500 to be negative.\",\n \"\\\"Total Return is the percent change in value (including andy dividends) of an instrument. The \\\"\\\"trailing 12-month\\\"\\\" means that your starting point is the value 12 months ago. So the formula is: where V is the value of the instrument on the reference date, V0 is the value of the instrument 12 months prior to the reference date, and D is the amount of dividends paid between the two dates.\\\"\",\n \"\\\"Month to date For the month to date (MTD), the price on Feb 28th is $4.58 and the price on March 16th is $4.61 so the return is which can be written more simply as The position is 1000 shares valued at $4580 on Feb 28th, so the profit on the month to date is Calendar year to date For the calendar year to date (YTD), the price on Dec 31st is $4.60 and the price on Feb 28th is $4.58 so the return to Feb 28th is The return from Feb 28th to March 16th is 0.655022 % so the year to date return is or more directly So the 2011 YTD profit on 1000 shares valued at $4600 on Dec 31st is Year to date starting Dec 10th For the year to date starting Dec 10th, the starting value is and the value on Dec 31st is 1000 * $4.60 = $4600 so the return is $4600 / $4510 - 1 = 0.0199557 = 1.99557 % The year to date profit is therefore Note - YTD is often understood to mean calendar year to date. To cover all the bases state both, ie \\\"\\\"calendar YTD (2011)\\\"\\\" and \\\"\\\"YTD starting Dec 10th 2010\\\"\\\". Edit further to comment For the calendar year to date, with 200 shares sold on Jan 10th with the share price at $4.58, the return from Dec 31st to Jan 10th is The return from Jan 10th to Feb 28th is The return from Feb 28th to March 16th is The profit on 1000 shares from Dec 31st to Jan 10th is $4600 * -0.00434783 = -$20 The profit on 800 shares from Jan 10th to Feb 28th is zero. The profit on 800 shares from Feb 28th to March 16th is So the year to date profit is $4.\\\"\",\n \"It is a good enough approximation. With a single event you can do it your way and get a better result, but imagine that the $300 are spread over a certain period with $10 contribution each time? Then recalculating and compounding will be a lot of work to do. The original ROI formula is averaging the ROI by definition, so why bother with precise calculations of averages that are imprecise by definition, when you can just adjust the average without losing the level of precision? 11.4 and 11.3 aren't significantly different, its immaterial.\",\n \"You need to solve the money-weighted return equation. It cannot be expressed as a formula for the interest, but it can be solved numerically as shown here. Using the OP's figures, with monthly withdrawals of $100,000. The summation for the withdrawals can be replaced with the standard annuity formula. The resulting monthly return is converted to a nominal annual return compounded monthly. Money-weighted return equation with start and end balances s0 and s1 The interest is 2.63282 % per annum, nominal compounded monthly. Selectable equation\",\n \"Check your calculation of A**. I was able to duplicate their calculations using excel. Make you sure have accounted for all the terms, it can be easy to be one off. They are making a guess at the interest rate which will be wrong, then they are adjusting it to see how wrong it is, then making another adjustment. They will repeat until they see no movement in the guesses.\",\n \"Line one shows your 1M, a return with a given rate, and year end withdrawal starting at 25,000. So Line 2 starts with that balance, applies the rate again, and shows the higher withdrawal, by 3%/yr. In Column one, I show the cumulative effect of the 3% inflation, and the last number in this column is the final balance (903K) but divided by the cumulative inflation. To summarize - if you simply get the return of inflation, and start by spending just that amount, you'll find that after 20 years, you have half your real value. The 1.029 is a trial and error method, as I don't know how a finance calculator would handle such a payment flow. I can load the sheet somewhere if you'd like. Note: This is not exactly what the OP was looking for. If the concept is useful, I'll let it stand. If not, downvotes are welcome and I'll delete.\",\n \"This calculation arrives at the correct answer. However, it uses the formula for an annuity due. This means the payments are made at the beginning of the month and the last month of the 10 year period has interest accrued. See the section, Calculating the Future Value of an Annuity Due. The rate is given as an effective rate. with In Excel, =FV((1+0.12)^(1/12)-1,120,3500,0,1)\",\n \"\\\"Something I found helpful when I learned this, is to just use Excel to expand the series. So start with A1 as \\\"\\\"175\\\"\\\", then in A2 put \\\"\\\"=175+(A1*1.004308)\\\"\\\" and paste that same formula down for a few hundred rows. You'll find your answer on A216. Most non-math-centric people don't have an intuitive grasp of how exponents (aka \\\"\\\"compounding\\\"\\\"... and never mind the natural logarithms this is all derived from) behave; but you can play with the numbers \\\"\\\"unrolled\\\"\\\" in Excel to get a better idea of how they work. That formula is just applying 0.4308% interest every period (row), and adding in a fresh $175.\\\"\",\n \"These are the steps I'd follow: $200 today times (1.04)^10 = Cost in year 10. The 6 deposits of $20 will be one time value calculation with a resulting year 7 final value. You then must apply 10% for 3 years (1.1)^3 to get the 10th year result. You now have the shortfall. Divide that by the same (1.1)^3 to shift the present value to start of year 7. (this step might confuse you?) You are left with a problem needing 3 same deposits, a known rate, and desired FV. Solve from there. (Also, welcome from quant.SE. This site doesn't support LATEX, so I edited the image above.)\",\n \"Spreadsheets need not be static, they can pull data from the web. This article describes the method you seek.\",\n \"The Investopedia article you linked to is a good start. Its key takeaway is that you should always consider risk-adjusted return when evaluating your portfolio. In general, investors seeking a higher level of return must face a higher likelihood of taking a loss (risk). Different types of stocks (large vs small; international vs US; different industry sectors) have different levels of historical risk and return. Not to mention stocks vs bonds or other financial instruments... So, it's key to make an apples-to-apples comparison against an appropriate benchmark. A benchmark will tell you how your portfolio is doing versus a comparable portfolio. An index, such as the S&P 500, is often used, because it tells you how your portfolio is doing compared against simply passively investing in a diversified basket of securities. First, I would start with analyzing your portfolio to understand its asset allocation. You can use a tool like the Morningstar X-Ray to do this. You may be happy with the asset allocation, or this tool may inform you to adjust your portfolio to meet your long-term goals. The next step will be to choose a benchmark. Given that you are investing primarily in non-US securities, you may want to pick a globally diversified index such as the Dow Jones Global Index. Depending on the region and stock characteristics you are investing in, you may want to pick a more specialized index, such as the ones listed here in this WSJ list. With your benchmark set, you can then see how your portfolio's returns compare to the index over time. IRR and ROI are helpful metrics in general, especially for corporate finance, but the comparison-based approach gives you a better picture of your portfolio's performance. You can still calculate your personal IRR, and make sure to include factors such as tax treatment and investment expenses that may not be fully reflected by just looking at benchmarks. Also, you can calculate the metrics listed in the Investopedia article, such as the Sharpe ratio, to give you another view on the risk-adjusted return.\",\n \"Fairly straightforward to match the result from the calculator soup link. There is a formula to calculate n from the future value s (using natural logs) In Excel This was derived as shown To calculate n from the inflation-adjusted future value si requires using a solver since an algebraic formula cannot be formulated. As demonstrated Calculations done using Mathematica 7.\",\n \"I found one such tool here: Point-to-Point Returns tool\",\n \"In general spreadsheets can do all of what you ask. Have a try of some online training like these to get started.\",\n \"This is more a question for /r/personalfinance, but I'll answer it anyways. Just use the RATE formula in excel. =RATE(numperiods,monthly payment,amount financed)*12 Just make sure the number of periods is in months, the payment is negative, and to multiply the whole thing by 12 to get the annual interest rate.\",\n \"This link does it ok: http://investexcel.net/1979/calculate-historical-volatility-excel/ Basically, you calculate percentage return by doing stock price now / stock price before. You're not calculating the rate of return hence no subtraction of 100%. The standard is to do this on a daily basis: stock price today / stock price yesterday. The most important and most misunderstood part is that you now have to analyze the data geometrically not arithmetically. To easily do this, convert all percentage returns with the natural log, ln(). Next, you take the standard deviation of all of those results, and apply exp(). This answers the title of your question. For convenience's sake, it's best to annualize since volatility (implied or statistical) is now almost always quoted annualized. There are ~240 trading days each year. You multiply your stdev() result by (240 / # of trading days per return) ^ 0.5, so if you're doing this for daily returns, multiply the stdev() result by 240^0.5; if you were doing it weekly, you'd want to multiply by (240 / ~5)^0.5; etc. This is your number for sigma. This answers the intent of your question. For black-scholes, you do not convert anything back with exp(); BS is already set up for geometric analysis, so you need to stay there. The reason why analysis is done geometrically is because the distribution of stock returns is assumed to be lognormal (even though it's really more like logLaplace).\",\n \"IRR is the acronym for internal rate of return. And it appears that you do understand how it works. It's not the phrase most investors use for their own returns. I'd typically talk about my own return last year, or over the last decade, etc, as well as what the S&P did during that time, and might even use the term CAGR, compound annual growth rate, although I wouldn't pronounce it 'kegger' or anything like that. Aside from discussing company investments in some MBA class, the only time I'd use IRR is in an excel spreadsheet to calculate the return over time of a series of my own investments. The nothing magic about this, it's a function of an initial dollar investment, time passing, and the final value. All else is addition complexity based on multiple deposits/withdrawals, etc. If I deposit $100 and get back $200 in a year, it's a 100% IRR. Disclosure - I am no fan of Investopedia or re-explaining its wording on these topics. I've caught multiple errors in their articles, and unlike the times I've emailed my friends at the IRS who quickly fix typos and mistakes I've caught, Investopedia authors are no better than bloggers (which I am) who take offense at any criticism (which I do not).\",\n \"If you didn't have deposits, then the growth rate is simply ((p1/p0)^(1/t))-1, where p0 is the initial balance, p1 is the current balance, and t is the number of periods. For example, suppose you started the account with $100,000 in 2000. It's now 2015 -- 15 years later -- and the balance is $240,000. So the growth is: If you're making regular deposits, especially if you're making deposits of unequal amounts, the problem becomes much more complex. The easiest thing to do is probably to create a spreadsheet. Make a column for principle, a column for deposit amount, and a column for percent growth that period. Assuming A is principle and B is deposit, then the formula for growth C is =((A2-A1-B1)/A1-1)*100. Copy this formula down the column and Excel should automatically adjust the row numbers. Assuming you put one row for each month you can see the growth (or loss) month by month. You can get a general idea of what your overall growth rate has been by taking the average of the monthly amounts, but this would not be a truly accurate measure of your total growth because presumably (hopefully) you have more money in the later months than the earlier months. But it would be a good measure of how your investments are doing.\",\n \"You're looking for the amortization calculation. This calculation is essentially solving for the series of cash flows that will yield a zero balance after the specified term, at the given rate for a loan amount. Once you have solved for the payment amount, you can add additional principal amount to each payment period and see the interest payments and time to zero balance drop.\",\n \"\\\"the \\\"\\\"how\\\"\\\" all depends on your level of computer savvy. Are you an Excel spreadsheet user or can you write in programming languages such as python? Either approach have math functions that make the calculation of ROI and Volatility trivial. If you're a python coder, then look up \\\"\\\"pandas\\\"\\\" (http://pandas.pydata.org/) - it handles a lot of the book-keeping and downloading of end of day equities data. With a dozen lines of code, you can compute ROI and volatility.\\\"\",\n \"How do I calculate the adjusted real rate of return of an investment (such as mutual fund) after inflation and fees? I have always thought that you do this: (1 + nominal return - fees)/(1 + inflation) - 1, but I have been told that this is the wrong way to do it. Additionally, what is the difference between real interest rate and inflation-adjusted return?\",\n \"IRR is not subjective, this is a response to @Laythesmack, to his remark that IRR is subjective. Not that I feel a need to defend my position, but rather, I'm going to explain his. My company offered stock at a 15% discount. We would have money withheld from pay, and twice per year buy at that discount. Coworkers said it was a 15% gain. I offered some math. I started by saying that 100/85 was 17.6%, and that was in fact, the gain. But, the funds were held by the company for an average of 3 months, not 6, so that gain occurred in 3 months and I did the math 1.176^4 and resulted in 91.5% annual return. This is IRR. It's not that it's subjective, but it assumes the funds continue to be invested fully during the time. In our case the 91.5% was real in one sense, yet no one doubled their money in just over a year. Was the 91% useless? Not quite. It simply meant to me that coworkers who didn't participate were overlooking the fact that if they borrowed money at a reasonable rate, they'd exceed that rate, especially for the fact that credit lines are charged day to day. Even if they borrowed that money on a credit card, they'd come out ahead. IRR is a metric. It has no emotion, no personality, no goals. It's a number we can calculate. It's up to you to use it correctly.\",\n \"The idea is correct; the details are a little off. You need to apply it to the actual cash flow the bond would create. The best advice I can give you is to draw a time-line diagram. Then you would see that you receive £35 in 6 months, £35 in 12 months, £35 in 18 months, and £1035 in 24 months. Use the method you've presented in your question and the interest rate you've calculated, 3% per 6 months, to discount each payment the specified amount, and you're done. PS: If there were more coupons, say a 20 year quarterly bond, it would speed things up to use the Present Value of an Annuity formula to discount all the coupons in one step...\",\n \"\\\"My answer is Microsoft Excel. Google \\\"\\\"VBA for dummies\\\"\\\" (seriously) and find out if your brokerage offers an 'API'. With a brief understanding of coding you can get a spreadsheet that is live connected to your brokers data stream. Say you have a spreadsheet with the 1990 value of each in the first two columns (cells a1 and b1). Maybe this formula could be the third column, it'll tell you how much to buy or sell to rebalance them. then to iterate the rebalance, set both a2 and b2 to =C1 and drag the formula through row 25, one row for each year. It'll probably be a little more work than that, but you get the idea.\\\"\",\n \"It is. The outstanding value is the net cash flow, but it will always be higher than cash outflow due to a constant growth rate/expected return. I was slightly confused when my manager told me to find the IRR before and after cash inflows (the whole life of the investment). Especially as IRR after cash inflows is higher than the former.\",\n \"The total number of shares on April 1st is 100 + 180 + 275 = 555. The price on April 1st is required. The current price is stated as $2, but $2 * 555 = $1110 and the current fund values is stated as $1500. Opting to take the current value as $1500, the price on April 1st can be calculated as $1500/555 = $2.7027. The amounts invested as number of shares x share price are: (Note these investment amounts do not match the example scenario's investment amounts, presumably because the example numbers are just made up.) The monthly returns can be calculated: The current values for each investor as invested amount x returns are: Checking the total:\",\n \"\\\"It can be pretty hard to compute the right number. What you need to know for your actual return is called the dollar-weighted return. This is the Internal Rate of Return (IRR) http://en.wikipedia.org/wiki/Internal_rate_of_return computed for your actual cash flows. So if you add $100 per month or whatever, that has to be factored in. If you have a separate account then hopefully your investment manager is computing this. If you just have mutual funds at a brokerage or fund company, computing it may be a bunch of manual labor, unless the brokerage does it for you. A site like Morningstar will show a couple of return numbers on say an S&P500 index fund. The first is \\\"\\\"time weighted\\\"\\\" and is just the raw return if you invested all money at time A and took it all out at time B. They also show \\\"\\\"investor return\\\"\\\" which is the average dollar-weighted return for everyone who invested in the fund; so if people sold the fund during a market crash, that would lower the investor return. This investor return shows actual returns for the average person, which makes it more relevant in one way (these were returns people actually received) but less relevant in another (the return is often lower because people are on average doing dumb stuff, such as selling at market bottoms). You could compare yourself to the time-weighted return to see how you did vs. if you'd bought and held with a big lump sum. And you can compare yourself to the investor return to see how you did vs. actual irrational people. .02, it isn't clear that either comparison matters so much; after all, the idea is to make adequate returns to meet your goals with minimum risk of not meeting your goals. You can't spend \\\"\\\"beating the market\\\"\\\" (or \\\"\\\"matching the market\\\"\\\" or anything else benchmarked to the market) in retirement, you can only spend cash. So beating a terrible market return won't make you feel better, and beating a great market return isn't necessary. I think it's bad that many investment books and advisors frame things in terms of a market benchmark. (Market benchmarks have their uses, such as exposing index-hugging active managers that aren't earning their fees, but to me it's easy to get mixed up and think the market benchmark is \\\"\\\"the point\\\"\\\" - I feel \\\"\\\"the point\\\"\\\" is to achieve your financial goals.)\\\"\",\n \"Okay, I think I managed to find the precise answer to this problem! It involves solving a non-linear exponential equation, but I also found a good approximate solution using the truncated Taylor series. See below for a spreadsheet you can use. Let's start by defining the growth factors per period, for money in the bank and money invested: Now, let S be the amount ready to be invested after n+1 periods; so the first of that money has earned interest for n periods. That is, The key step to solve the problem was to fix the total number of periods considered. So let's introduce a new variable: t = the total number of time periods elapsed So if money is ready to invest every n+1 periods, there will be t/(n+1) separate investments, and the future value of the investments will be: This formula is exact in the case of integer t and n, and a good approximation when t and n are not integers. Substituting S, we get the version of the formula which explicitly depends on n: Fortunately, only a couple of terms in FV depend on n, so we can find the derivative after some effort: Equating the derivative to zero, we can remove the denominator, and assuming t is greater than zero, we can divide by the constant ( 1-G t ): To simplify the equation, we can define some extra constants: Then, we can define a function f(n) and write the equation as: Note that α, β, γ, G, and R are all constant. From here there are two options: Use Newton's method or another numerical method for finding the positive root of f(n). This can be done in a number of software packages like MATLAB, Octave, etc, or by using a graphics calculator. Solve approximately using a truncated Taylor series polynomial. I will use this method here. The Taylor series of f(n), centred around n=0, is: Truncating the series to the first three terms, we get a quadratic polynomial (with constant coefficients): Using R, G, α, β and γ defined above, let c0, c1 and c2 be the coefficients of the truncated Taylor series for f(n): Then, n should be rounded to the nearest whole number. To be certain, check the values above and below n using the formula for FV. Using the example from the question: For example, I might put aside $100 every week to invest into a stock with an expected growth of 9% p.a., but brokerage fees are $10/trade. For how many weeks should I accumulate the $100 before investing, if I can put it in my high-interest bank account at 4% p.a. until then? Using Newton's method to find roots of f(n) above, we get n = 14.004. Using the closed-form approximate solution, we get n = 14.082. Checking this against the FV with t = 1680 (evenly divisible by each n + 1 tested): Therefore, you should wait for n = 14 periods, keeping that money in the bank, investing it together with the money in the next period (so you will make an investment every 14 + 1 = 15 weeks.) Here's one way to implement the above solution with a spreadsheet. StackExchange doesn't allow tables in their syntax at this time, so I'll show a screenshot of the formulae and columns you can copy and paste: Formulae: Copy and paste column A: Copy and paste column B: Results: Remember, n is the number of periods to accumulate money in the bank. So you will want to invest every n+1 weeks; in this case, every 15 weeks.\",\n \"I thought it was such a useful suggestion that I went ahead and created them. I'm sure you're not the only one who could derive some benefit from them, I know I will. http://www.investy.com/tools When I have some additional time, I will add the option for grace-periods, but for now I wanted to get them up so you could use the calculations as-is from the article. Enjoy. (Disclosure: I'm the founder of the site they are hosted on and I wrote the code for the calculators)\",\n \"If it's number of years and the interest is per-annum the formula is the same as the normal one. this should work on most hand-held calculators.\",\n \"There may be differences in different contexts, but here's my general understanding: Rate of Return (or Return on Investment) is the total gain or loss of an investment divided by the initial investment amount. e.g. if you buy stock for $100 and later sell it for $120 you have a 20% Rate of Return. You would have a 20% ROR regardless of if you sell it tomorrow or in a year. Internal Rate of Return is effectively annualized. It is the annual rate at which each of a series of cashflows is discounted that would give you a net present value of 0. Meaning if you spent $100 today and in exactly one year you received $120 back, you would have an IRR of 20%. If you received the $120 back in 6 months, your IRR would be roughly 40%. An IRR calculation can include multiple cashflows at various times, while ROR is (in my mind) the total net gain or loss relative to the investment (irrespective of the time of the cash flows). IRR is more effective when comparing investments that have different time horizons. Spending $100 to get $120 tomorrow is much better (from an IRR perspective) than getting $120 two years from now, since you could take that $20 gain and invest it for the rest of the two years.\",\n \"In this case the market interest rate is the discount rate that sets equal the market price (current value) of the bond to its present value. To find the market interest rate which is also referred to as promised yield YTM you would have solve for the interest rate in the bond price formula A market price of bond is the sum of discounted coupons and the terminal value of the bond. Most spreadsheet programs and calculators have a RATE function that makes possible finding this market interest rate. First see this for finding a coupon paying bond price The coupon payments are discounted so is the par value of the bond and sum of such discounts is the market price of the bond. The TVM functions in Excel and calculators make this possible using the following equation Let us take your data, 9% $100,000 coupon with 5 years remaining to maturity with market interest rate of 10%. Bonds issued in the US mostly pay two coupons per year. Thus we are finding the present value of 10 coupons each worth $4500 and par value of $100,000. The semi-annual market interest rate is 10%/2 or 5% The negative sign indicate money going out of hand Now solving for RATE is only possible using numerical methods and the RATE function is programmed using Newton-Raphson method to find one of the roots of the bond price equation. This rate will be the periodic rate in this case semi-annual rate which you have to multiply by 2 to get the annual rate. Do remember there is a difference between annual nominal rate and an annualized effective rate. To find the market interest rate If you don't have Excel or a financial calculator then you may opt to use my version of these financial functions in this JavaScript library tadJS\",\n \"I was typing up a long response and lost it to a backspace.. so, I apologize but I don't intend on rewriting it all. You'll have to use a method called bootstrapping to get the forward rates. Essentially you're looking at the spot rate today, and the forward rates, then filling in what must be the rate to make them equal out in the end. Sorry I'm not more help!\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["Set your xirr formula to a very tall column, leaving lots of empty rows for future additions. In column C, instead of hardcoding the value, use a formula that tests if it's the current bottom entry, like this: =IF(ISBLANK(A7),-C6, C6) If the next row has no date entered (yet), then this is the latest value, and make it negative. Now, to digress a bit, there are several ways to measure returns. I feel XIRR is good for individual positions, like holding a stock, maybe buying more via DRIP, etc. For the whole portfolio it stinks. XIRR is greatly affected by timing of cash flows. Steady deposits and no withdrawals dramatically skew the return lower. And the opposite is true for steady withdrawals. I prefer to use TWRR (aka TWIRR). Time Weighted Rate of Return. The word 'time' is confusing, because it's the opposite. TWRR is agnostic to timing of cashflows. I have a sample Excel spreadsheet that you're welcome to steal from: http://moosiefinance.com/static/models/spreadsheets.html (it's the top entry in the list). Some people prefer XIRR. TWRR allows an apples-to-apples comparison with indexes and funds. Imagine twin brothers. They both invest in the exact same ideas, but the amount of cash deployed into these ideas is different, solely because one brother gets his salary bonus annually, in January, and the other brother gets no bonus, but has a higher bi-weekly salary to compensate. With TWRR, their percent returns will be identical. With XIRR they will be very different. TWRR separates out investing acumen from the happenstance timing of when you get your money to deposit, and when you retire, when you choose to take withdrawals. Something to think about, if you like. You might find this website interesting, too: http://www.dailyvest.com/","\"I could not figure out a good way to make XIRR work since it does not support arrays. However, I think the following should work for you: Insert a column at D and call it \"\"ratio\"\" (to be used to calculate your answer in column E). Use the following equation for D3: =1+(C3-B3-C2)/C2 Drag that down to fill in the column. Set E3 to: =(PRODUCT(D$3:D3)-1)*365/(A3-A$2) Drag that down to fill in the column. Column E is now your annual rate of return.\""],"string":"[\n \"Set your xirr formula to a very tall column, leaving lots of empty rows for future additions. In column C, instead of hardcoding the value, use a formula that tests if it's the current bottom entry, like this: =IF(ISBLANK(A7),-C6, C6) If the next row has no date entered (yet), then this is the latest value, and make it negative. Now, to digress a bit, there are several ways to measure returns. I feel XIRR is good for individual positions, like holding a stock, maybe buying more via DRIP, etc. For the whole portfolio it stinks. XIRR is greatly affected by timing of cash flows. Steady deposits and no withdrawals dramatically skew the return lower. And the opposite is true for steady withdrawals. I prefer to use TWRR (aka TWIRR). Time Weighted Rate of Return. The word 'time' is confusing, because it's the opposite. TWRR is agnostic to timing of cashflows. I have a sample Excel spreadsheet that you're welcome to steal from: http://moosiefinance.com/static/models/spreadsheets.html (it's the top entry in the list). Some people prefer XIRR. TWRR allows an apples-to-apples comparison with indexes and funds. Imagine twin brothers. They both invest in the exact same ideas, but the amount of cash deployed into these ideas is different, solely because one brother gets his salary bonus annually, in January, and the other brother gets no bonus, but has a higher bi-weekly salary to compensate. With TWRR, their percent returns will be identical. With XIRR they will be very different. TWRR separates out investing acumen from the happenstance timing of when you get your money to deposit, and when you retire, when you choose to take withdrawals. Something to think about, if you like. You might find this website interesting, too: http://www.dailyvest.com/\",\n \"\\\"I could not figure out a good way to make XIRR work since it does not support arrays. However, I think the following should work for you: Insert a column at D and call it \\\"\\\"ratio\\\"\\\" (to be used to calculate your answer in column E). Use the following equation for D3: =1+(C3-B3-C2)/C2 Drag that down to fill in the column. Set E3 to: =(PRODUCT(D$3:D3)-1)*365/(A3-A$2) Drag that down to fill in the column. Column E is now your annual rate of return.\\\"\"\n]","isConversational":false}}},{"rowIdx":55,"cells":{"_id":{"kind":"string","value":"7484"},"query":{"kind":"string","value":"Why sometimes payable date is BEFORE the ex-dividend date?"},"gt_ids":{"kind":"list like","value":["444562"],"string":"[\n \"444562\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1],"string":"[\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["444562","77016","586759","527636","76285","51205","456470","49966","485538","512947","81101","99803","269061","263751","352415","135363","301636","559436","511385","549528","176699","384120","71511","467936","41675","13631","231295","20116","193398","193648","501931","121240","305983","115553","583080","484649","151871","206442","194605","191060","195977","196939","99200","188232","333339","503780","513827","9286","458029","234623","490077","45523","163290","269129","1198","355662","24688","477637","137877","499874","533549","484778","22169","433210","23446","288604","186643","185020","304304","410259","126479","379357","73286","461425","298284","307505","266767","233544","44530","311214","226264","1034","315748","553856","93971","507117","188839","259904","9876","529996","368848","487329","566205","232932","137235","295082","317651","352700","244650","594047"],"string":"[\n \"444562\",\n \"77016\",\n \"586759\",\n \"527636\",\n \"76285\",\n \"51205\",\n \"456470\",\n \"49966\",\n \"485538\",\n \"512947\",\n \"81101\",\n \"99803\",\n \"269061\",\n \"263751\",\n \"352415\",\n \"135363\",\n \"301636\",\n \"559436\",\n \"511385\",\n \"549528\",\n \"176699\",\n \"384120\",\n \"71511\",\n \"467936\",\n \"41675\",\n \"13631\",\n \"231295\",\n \"20116\",\n \"193398\",\n \"193648\",\n \"501931\",\n \"121240\",\n \"305983\",\n \"115553\",\n \"583080\",\n \"484649\",\n \"151871\",\n \"206442\",\n \"194605\",\n \"191060\",\n \"195977\",\n \"196939\",\n \"99200\",\n \"188232\",\n \"333339\",\n \"503780\",\n \"513827\",\n \"9286\",\n \"458029\",\n \"234623\",\n \"490077\",\n \"45523\",\n \"163290\",\n \"269129\",\n \"1198\",\n \"355662\",\n \"24688\",\n \"477637\",\n \"137877\",\n \"499874\",\n \"533549\",\n \"484778\",\n \"22169\",\n \"433210\",\n \"23446\",\n \"288604\",\n \"186643\",\n \"185020\",\n \"304304\",\n \"410259\",\n \"126479\",\n \"379357\",\n \"73286\",\n \"461425\",\n \"298284\",\n \"307505\",\n \"266767\",\n \"233544\",\n \"44530\",\n \"311214\",\n \"226264\",\n \"1034\",\n \"315748\",\n \"553856\",\n \"93971\",\n \"507117\",\n \"188839\",\n \"259904\",\n \"9876\",\n \"529996\",\n \"368848\",\n \"487329\",\n \"566205\",\n \"232932\",\n \"137235\",\n \"295082\",\n \"317651\",\n \"352700\",\n \"244650\",\n \"594047\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["Do you realise that the examples you have given are for stock splits not for dividends, that is why the date payable is before the ex-date for the split. The payments for the split occur on 30th June and the first day the stock trades with the new split is on the next trading day, being the ex-date, 1st July.","Here is the definition of Ex-dividend date from the SEC: Once the company sets the record date, the stock exchanges or the National Association of Securities Dealers, Inc. fix the ex-dividend date. The ex-dividend date is normally set for stocks two business days before the record date. If you purchase a stock on its ex-dividend date or after, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend. The linked document discusses weekend, and holidays involved in the calculation. The difference between the record date and the ex-dividend is to allow for the three days of settlement.","Your understanding is incorrect. The date of record is when you have to own the stock by. The ex-dividend date is calculated so that transaction before that date settles in time to get you listed as owner by the date of record. If you buy the stock before the ex-dividend date, you get the dividend. If you buy it on or after the ex-dividend date, the seller gets the dividend.","You only have to hold the shares at the opening of the ex-dividend date to get the dividends. So you can actually sell the shares on ex-dividend date and still get the dividends. Ex-dividend date occurs before the record date and payment date, so you will get the dividend even if you sold before the record date.","You will need to buy a stock before the ex-dividend date to receive the dividends. You can sell a stock on the ex-dividend date or after and you will receive the dividends. So if the ex-dividend date is the 5th August, you need to buy before the 5th and you can sell on the 5th or after, to receive the dividends. Definitions from the ASX: Record date The Record Date is 5.00pm on the date a company closes its share register to determine which shareholders are entitled to receive the current dividend. It is the date where all changes to registration details must be finalised. Ex dividend date The ex dividend date occurs two business days before the company's Record Date. To be entitled to a dividend a shareholder must have purchased the shares before the ex dividend date. If you purchase shares on or after that date, the previous owner of the shares (and not you) is entitled to the dividend. A company's share price may move up as the ex dividend date approaches and then fall after the ex dividend date.","Here's what Investopedia says about payouts for ex-dividend stocks: A stock trades ex-dividend on or after the ex-dividend date (ex-date). At this point, the person who owns the security on the ex-dividend date will be awarded the payment, regardless of who currently holds the stock. After the ex-date has been declared, the stock will usually drop in price by the amount of the expected dividend. Read more: Ex-Dividend Definition | Investopedia http://www.investopedia.com/terms/e/ex-dividend.asp#ixzz4Nl4J3s4k I hope this helps. Good luck!","What is a dividend? Essentially, for every share of a dividend stock that you own, you are paid a portion of the company’s earnings. You get paid simply for owning the stock! For example, let’s say Company X pays an annualized dividend of 20 cents per share. Most companies pay dividends quarterly (four times a year), meaning at the end of every business quarter, the company will send a check for 1/4 of 20 cents (or 5 cents) for each share you own. This may not seem like a lot, but when you have built your portfolio up to thousands of shares, and use those dividends to buy more stock in the company, you can make a lot of money over the years. The key is to reinvest those dividends! Source: http://www.dividend.com/dividend-investing-101/what-are-dividend-stocks/ What is an ex dividend date Once the company sets the record date, the ex-dividend date is set based on stock exchange rules. The ex-dividend date is usually set for stocks two business days before the record date. If you purchase a stock on its ex-dividend date or after, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend. Source: https://www.sec.gov/answers/dividen.htm That said, as long as you purchased the stock before 6/4/17 you are entitled to the next dividend. If not, you'll get the following one after that.","The exchanges artificially push the price of the stock down on the ex-div date. Often the impact of paying the dividend is absorbed by the ebb and flow of trading in the stock later in the day by the market. I think this was noticable with Nokia because the company is in poor shape and the stock has plunged recently. Dividends are a great way for companies to return value to shareholders. The trend for many companies, particularly growth stocks is to reinvest profits to grow the company. Former growth stocks like Microsoft like to just sit on billions of dollars and do nothing with it.","Suppose the price didn't drop on the ex-dividend date. Then people wanting to make a quick return on their money would buy shares the day before, collect the dividend, and then sell them on the ex-dividend date. But all those people trying to buy on the day before would push the price up, and they would push the price down trying to sell on the date.","Ex-Date is a function of the exchange, as well as the dividend. Consider Deutsche Bank AG, DB on the NYSE, DKR on Xetra. For a given dividend, each exchange sets the ex-date for trades on that exchange. (See http://www.sec.gov/answers/dividen.htm for a description of how it works in the US; other exchanges/countries are similar.) This ex-date is normally based on the dividends record date, which is when you must be on the company's books as a shareholder to receive the dividend, and based on when trades for an exchange are settled. The ex-date is the first date for which trades on that date will not settle until after the record date. This means that the ex-date can be different for different exchanges. If you sell your shares on an exchange before the ex-date for that exchange, you will not get the dividend. If you sell your shares on or after the ex-date for the exchange, you do not get the dividend. So it depends on the time zone of the exchange. Most stock exchanges trade T+3, but this can still come into play if there are bank holidays in different countries at different times.","So from Investopedia - Who actually declares a dividend states that the Board of Directors of a company sets the 4 key dates: As these dates are chosen by the Board of Directors, either by internal corporate convention or special situation. Conceivably a Board may choose a Payable Date greater than 2 weeks which may make sense if their accounting partners are unavailable, i.e. extended national holiday. I assume that any period of time longer that what may seem reasonable and customary will be a topic at the next shareholder meeting.","Why does it take two weeks (from ex-date) for dividends to pay out? For logistical and accounting purposes. This article says on the payment date: This date is generally a week or more after the date of record so that the company has sufficient time to ensure that it accurately pays all those who are entitled. It is for the same reasons that there is a often a two-week period between the time an employee submits her time sheet and the employee's pay date. The company needs time to set and send the payment while minimizing accounting errors.","The ex-dividend date is the first date on which you may sell without losing your dividend. In this case that date is August 5th (thanks, Victor). The price opens on the ex-dividend date lower than it closed on the previous day (by the amount of the dividend). Therefore you may sell any time on August 5th (including during pre-market trading) and still get the dividend. You must be the owner of the stock as of the end of after-hours trading on the 4th (and therefore overnight) in order to get the dividend. Intel's Dividend Dates The record date isn't important to your trading decision.","I guess the answer lies in your tax jurisdiction (different countries tax capital gains and income differently) and your particular tax situation. If the price of the stock goes up or down between when you buy and sell then this counts for tax purposes as a capital gain or loss. If you receive a dividend then this counts as income. So, for instance, if you pay tax on income but not on capital gains (or perhaps at a lower rate on capital gains) then it would pay you to sell immediately before the stock goes ex-dividend and buy back immediately after thereby making a capital gain instead of receiving income.","\"Not minutes, but hours. The \"\"ex-dividend\"\" date is the deadline for acquiring a stock to receive a dividend. If you hold a stock at the beginning of this day, you will receive the dividend. So you could buy a stock right at the end of the day on the day before the ex-dividend date, and sell it the next day (on the ex-dividend date), and you would get your dividend. See this page from the SEC for more information. The problem with this strategy, however, is that the value of the stock typically drops by the same amount as the dividend on that day. If you take a look at the historical price of the stock you are interested in, you'll see this. Of course, it makes sense why: a seller knows that selling before the date results in a loss of the dividend, so they want a higher price to compensate. Likewise, a buyer on or after the date knows that the dividend is already gone, so they want to pay a lower price.\"","Investopedia states: While early exercise is generally not advisable, because the time value inherent in the option premium is lost upon doing so, there are certain circumstances under which early exercise may be advantageous. For example, an investor may choose to exercise a call option that is deeply in-the-money (such an option will have negligible time value) just before the ex-dividend date of the underlying stock. This will enable the investor to capture the dividend paid by the underlying stock, which should more than offset the marginal time value lost due to early exercise. So the question is how well do you see the time value factor here?","There are two 'dates' relevant to your question: Ex-Dividend and Record. To find out these dates for a specific security visit Dividend.Com. You have to purchase the security prior to the Ex-Dividend date, hold it at least until the Record Date. After the Record Date you can sell the security and still receive the dividend for that quarter. ---- edit - - - - I was wrong. If you sell the security after the Ex-div date but before the date of record you still get the dividend. http://www.investopedia.com/articles/02/110802.asp","The ex-dividend date, prevents this, but people are still able to do this and this is an investment strategy. There are some illiquid and immature markets where prices don't adjust. In the options market people are able to find mispriced deep in the money calls to take advantage of the ex-dividend date. It is called dividend capture using covered calls.","Your ETF will return the interest as dividends. If you hold the ETF on the day before the Ex-Dividend date, you will get the dividend. If you sell before that, you will not. Note that at least one other answer to this question is wrong. You do NOT need to hold on the Record date. There is usually 2 days (or so) between the ex-date and the record date, which corresponds to the number of days it takes for your trade to settle. See the rules as published by the SEC: http://www.sec.gov/answers/dividen.htm","\"Dividends are declared by the board of directors of a corporation on date A, to stock holders of record on date B (a later date). These stockholders then receive the declared dividend on date C, the so-called payment date. All of these dates are announced on the first (declaration) date. If there is no announcement, no dividend will be paid. The stock typically goes down in price by approximately the amount of the dividend on the date it \"\"goes ex,\"\" but then moves in price to reflect other developments, including the possibility of another declaration/payment, three months hence. Dividends are important to some investors, especially those who live on the income. They are less important to investors who are out for capital gains (and who may prefer that the company reinvest its money to seek such gains instead of paying dividends). In actual fact, dividends are one component of \"\"total\"\" or overall return. The other component is capital gains, and the sum of the two represents your return.\"","Yes, the stock price drops on official listing. But what gonna happen on first trade after the dividend date, is up to the market. The market is the market, the rules are the rules. I saw prices going up more than once just after the dividend date, exactly because people think will be cheaper. Market doesn't always follow rules.","Yes you can do that and it it wise to do so. However, you should make sure that the general trend of the stock is upwards and you buy during a trought in the uptrend. So basically if the stock is making higher highs and higher lows on the daily or weekly charts, then you would want to buy around one of the higher lows before the ex-dividend date. If the stock is making lower lows and lower highs, then it is in a downtrend, so never buy in this instance. It is better to miss out on a dividend of $1 rather than to buy just for this $1 dividend and lose $5 or more when the price continues to drop further.","\"You have to be the owner of record before the ex-dividend date, which is not the same day as the date the dividend is paid. This also implies that if you sell on or after the ex-dividend date, you'll still get the dividend, even if you no longer own the stock. Keep in mind, also, that the quoted price of the stock (and on any open orders that are not specifically marked as \"\"do not reduce\"\") on its ex-dividend date is dropped by the amount of the dividend, first thing in the morning before trading starts. If you happen to be the first order of the day, before market forces cause the price to move, you'll end up with zero gain, since the dividend is built into the price, and you got the same value out of it -- the dividend in cash, and the remaining value in stock. As pointed out in the comments (Thanks @Brick), you'll still get a market price for your trade, but the price reduction will have had some impact on the first trade of the day. Source: NYSE Rule 118.30 Also, remember that the dividend yield is expressed in annualized terms. So a 3% yield can only be fully realized by receiving all of the dividend payments made by the company for the year. You can, of course, forget about individual companies and just look for dividends to create your own effective yield over time. But, see the final point... Finally, if you keep buying and selling just to play games with the dividends, you're going to pay far more in transaction fees than you will earn in dividends. And, depending on your individual circumstances, you may end up paying more in capital gains taxes.\"","For the case of spinoffs it reflects the market as activities as the specific steps that have to be followed take place. For example the spinoff of Leidos from SAIC in 2013. (I picked this one becasue I knew some of the details) On September 9, 2013, the Board of Directors of SAIC, Inc.(Ticker Symbol (NYSE):SAI) approved the following: The separation of its technical, engineering and enterprise information technology services business through the distribution of shares of SAIC Gemini, Inc. to stockholders. Each stockholder of record of SAIC, Inc. as of September 19, 2013 (Record Date) will receive one (1) share of SAIC Gemini, Inc. common stock for every seven (7) shares of SAIC, Inc. common stock held by such stockholder as of the Record Date. This distribution will be effective after market close on September 27, 2013 (Distribution Date). After the Distribution Date, SAIC Gemini, Inc. will be renamed Science Applications International Corporation (New SAIC). A one (1) for four (4) reverse stock split of the SAIC, Inc. common stock effective as of Distribution Date. After the Distribution Date, SAIC, Inc. will be renamed Leidos Holdings, Inc. (Leidos). Q 11: What are the different trading markets that may occur between Record Date and Distribution Date? A: Beginning two days prior to the Record Date of September 19, 2013 through the Distribution Date on September 27, 2013, there may be three different trading markets available with respect to SAIC, Inc. and the separation. Stock Ticker – SAI (Regular Way Trading with Due Bills): Shares of SAI common stock that trade on the regular-way market will trade with an entitlement to shares of the New SAIC common stock distributed on the Distribution Date. Purchasers in this market are purchasing both the shares of Leidos and New SAIC common stock. Form of Stock Ticker –SAIC (When Issued Trading): Shares of New SAIC common stock may be traded on a “when-issued” basis. These transactions are made conditionally because the security has been authorized, but not yet issued. Purchasers in this market are only purchasing the shares of New SAIC common stock distributed on the Distribution Date. Form of Stock Ticker – LDOS (Ex-Distribution Trading): Shares that trade on the ex-distribution market will trade without an entitlement to shares of New SAIC common stock distributed on the Distribution Date. Purchasers in this market are only purchasing the shares of Leidos common stock. So the stock price for New SAIC starts a few days before the record date of 19 September 2013, while LDOS (new name for the old SAIC) goes back much earlier. But the company didn't split until after the close of business on 27 September 2013. http://investors.saic.com/sites/saic.investorhq.businesswire.com/files/doc_library/file/GeneralStockholder-QuestionsandAnswers.pdf","The Paragraph talks about dividends given by Mutual Funds. Say a fund has NAV of $ 10, as the value of the underlying security grows, the value of the fund would also grow, lets say it becomes $ 12 in 2 months. Now if the Mutual Fund decides to pay out a dividend of $ 1 to all unit holder, then post the distribution of dividend, the value of the Fund would become to $ 11. Thus if you are say investing on 1-April and know that dividends of $1 would be paid on 5-April [the divided distribution date is published typically weeks in advance], if you are hoping to make $1 in 5 days, that is not going to happen. On 6-April you would get $1, but the value of the fund would now be $11 from the earlier $12. This may not be wise as in some countries you would ending up paying tax on $1. Even in shares, the concept is similar, however the price may get corrected immediately and one may not actually see it going down by $1 due to market dynamics.","The answer provide by @mbhunter is correct, however there are contexts, shorting in spot market and carrying the position over settlement usually does not entail payment of dividend to the broker, one of the reason being post ex-date the price of the share downward adjusts to the extent of the dividend, so practically if you have shorted at 100 and post ex-date (assuming a dividend of 2 and no movement of the stock price), the price would slide to 98, the party who longed the stock @ 100 now is sitting on a price of 98 and received a dividend of 2 which equates to 100. The above is also contextual to the law of the country governing the exchange and the security exchange board regulations.","The stock tends to drop by the amount of the dividend -- or if you prefer to think of it this way, the stock price has been pushed up by the amount of the dividend before it was paid out. Really, all this shift does is factor out the impending dividend's effect on the real purchase cost of the stock. As such it's pretty much irrelevant except that, of course, the dividend is short-term gain that you have to pay taxes on almost immediately. Which also tends to get figured into the price folks are willing to pay for the stock. Conclusion: no, there's no real opportunity here. There's a slight tax reason to avoid buying right before dividends are paid, but that's about it. Basic principle: If it's simple and obvious,the market has already accounted for it.","You only have to own it for a day (or rather for some amount of time before the close of trading the day before the ex-dividend date). This is governed by exchange rules based on the date of record and payable date set by the company. You might want to look at this article or this one for more details. It should be difficult to make money from changes due to the dividend distribution since it is well known and expected. The exchanges have established rules for handling the various details that can come up, and traders account for the change where appropriate (as in option pricing). Also, note that the favorable U.S. tax treatment of dividends requires a 60-day ownership period for the stock.","I know that in the case of cash dividends I will get the dividend as long as I bought the stock before the ex-date but what happens in the case of an stock dividend? This is same as cash dividends. You would receive the additional stock.","It may be true for a bond fund. But it is not true for bond etf. Bond etf will drop by the same amount when it distribute dividend on ex-dividend date.","I believe this depends on the broker's policies. For example, here is Vanguard's policy (from https://personal.vanguard.com/us/whatweoffer/stocksbondscds/brokeragedividendprogram): Does selling shares affect a distribution? If you sell the entire position two days or more before the dividend-payable date, your distribution will be paid in cash. If, however, you sell an entire position within the two day time frame of the security's payable date, the dividend will be reinvested, resulting in additional shares. Selling these subsequent shares will require another sell order, which will incur additional commission charges. Dividends which would have been reinvested into less than one whole share will be automatically liquidated into cash. If you want to guarantee you receive no fractional shares, I'd call your broker and ask whether selling stock ABC on a particular date will result in the dividend being paid in shares.","The rest of the market knows when the dividends are paid out, and that will be reflected naturally in the share price. That's why there is no way to consistently beat the market. Because the market is other human beings, who's sum of knowledge is greater than any individual. Everything in the stock market boils down to this in one way or another.","According to Active Equity Management by Zhou and Jain: When a stock pays dividend, the adjusted price in Yahoo makes the following adjustment: Let T be the ex-dividend date (the first date that the buyers of a stock will not receive the dividend) and T-1 be the last trading day before T. All prices before T are adjusted by a multiplier (C_{T-1} - d_T)/C_{T-1}, where C_{T-1} is the close price at T-1 and d_T is the dividend per share. This, of course means that the price before T decreases.","No, the dividends can't be exploited like that. Dividends settlement are tied to an ex-dividend date. The ex-dividend, is the day that allows you to get a dividend if you own the stock. Since a buyer of the stock after this date won't get the dividend, the price usually drop by the amount of the dividend. In your case the price of a share would lose $2.65 and you will be credited by $2.65 in cash such that your portfolio won't change in value due to the dividend. Also, you can't exploit the drop in price by short-selling, as you would be owing the dividend to the person lending you the stock for the short sale. Finally, the price of the stock at the ex-dividend will also be affected by the supply and demand, such that you can't be precisely sure of the drop in price of the security.","As yet another explanation of why it does not really matter, you can look at this from the valuation point of view. Stock price is the present value of its future cash flows (be it free cash flow of the firm or dividends, depending on the model). Let's have a look at the dividends case. Imagine, the price of the stock is based on only three dividends streams $5 dollars each: dividend to be paid today, in year 1, and in year 2. Each should be discounted back to today (say, at 10%), except today's dividend, since today is now. Once that dividend is paid, it is no longer in the stream of cash flows. So if we just delete that first $5 from the formula, the price will adjust itself down by the amount of the dividend to $8.68. NOTE that this is a very simple example, since in reality cash flows streams are arguably infinite and because there are many other factors affecting stock price. But simply for your understanding, this example should provide you with the reason simply from the valuation perspective.","The stock price is what people think a company is worth, this is made up of When a company pays out a dividend the money in the company’s bank account reduces, therefore the value of the company reduces. When a company says they are going to pay a larger dividend than expected, we start to expect they are going to make more profit next year as well. So stock price tends to go up when a company says it is increasing the dividend, but down on the day then money leaves the companies bank account. There is normally many months between the two events.","\"Their is no arbitrage opportunity with \"\"buying dividends.\"\" You're buying a taxable event. This is a largely misunderstood topic. The stock always drops by the amount if the dividend on the ex date. The stock opens that day trading \"\"ex\"\" (excluding) the dividend. It then pays out later based in the shareholders on record. There is a lot of talk about price movement and value here. That can happen but it's from trading not from the dividend per se. Yes sometimes you do see a stock pop the day prior to ex date because people are buying the stock for the dividend but the trading aspect of a stock is determined by supply and demand from people trading the stock. The dividends are paid out from the owners equity section of the balance sheet. This is a return of equity to shareholders. The idea is to give owners of the company some of their investment back (from when they bought the stock) without having the owners sell the shares of the company. After all if it's a good company you want to keep holding it so it will appreciate. Another similar way to think of it is like a bonds interest payment. People sometimes forget when trading that these are actual companies meant to be invested in. Your buying an ownership in the company with your cash. It really makes no difference to buy the dividend or not, all other things constant. Though market activity can add or lose value from trading as normal.\"","\"It is important to remember that the stock price in principle reflects the value of the company, so the market cap should drop upon issuance of the the dividend. However, the above reasoning neglects to consider taxes, which make the question a bit more interesting. The key fact is that different investors are going to get taxed on the dividend to varying degrees, ranging from 20% for qualified dividends in the USA for a high-income individual in a taxable account (and even worse for non-qualified dividends) to 0% for tax-exempt nonprofits, retirement accounts, and low-income individuals. The high-tax investors are going to be a bit averse to paying tax on that dividend, whereas the tax-free investors are not. Hence in a tax-rational market the tax-free investors are going to be the ones buying right before a dividend and the tax-paying investors will be buying right afterwards. Tax-exempt investors could in principle make some amount of money buying dividends to keep them off the tax-paying investors' books. (Of course, the strategy could backfire if too many people did it all at once.) That said, the tax-payers have the tax disincentive to prevent them from fully exploiting the opposite strategy of selling just before a dividend. In particular, they are subject to capital gains tax when they sell at a profit (unless they have enough compensating capital losses), and it is to their after-tax profit to defer taxation by not trading. That said, the stock market has well-known irrationality when it comes to considering tax consequences, so logic based on assumed rationality of the market does not always apply to the extent one would expect. The foremost example of tax-irrationality is the so-called \"\"dividend paradox\"\", which basically states that corporations should favor stock buybacks (or perhaps loan repayment) to the complete exclusion of dividends because capital gains are taxed less harshly than dividends in a variety of ways, some of which are subtle: 1) Historically (although not currently in the USA for qualified dividends) the tax rate was higher for dividends. (In Canada, for example, dividends are taxed at twice the rate of capital gains.) 2) If you die holding appreciated stock then you (meaning your heirs) completely escape US the capital gains tax on the accrual during your lifetime. 3) Capital gains tax can be deferred by simply not selling. In comparison to dividends, this is roughly equivalent to getting a tax-free loan from the government which is invested for profit and paid at a later date after inflation has eaten away at the real value of the loan. For example, if all your stock investments increase by 10%/year but you sell every year, in a high-tax bracket situation you're total after-tax return will be only 8% per year. In contrast, if you hold the same investments for many many years and then sell, your total return will be nearly 10% per year, because you only pay 20% once (at the end). 4) A capital gain can often be neutralized by a capital loss in another stock, so that no tax results. If you loose money on a stock that is paying dividends, you're still going to have to pay tax on that dividend. There are companies that borrow money to pay out that taxable-dividend each quarter, which seems like gross tax malpractice on the part of the CFO. (If the dividend paradox doesn't make sense, first consider the case that you owned ALL the shares of a company. It wouldn't matter to you at all on a pre-tax basis whether you got a $1000 company buyback or a $1000 dividend, because after the buyback/dividend you'd still own the entire company and $1000. The number of shares would be reduced, but objecting that you owned fewer shares after the buyback would be like saying you have become shorter if your height is measured in inches rather than centimeters.) [Of course, in the case of many shareholders you can get burned by failing to sell into the buyback when the share price is too high, but that is another matter.]\"","There are a few situations in which it may be advantageous to exercise early. Wikipedia actually has a good explanation: Option Style, Difference in value To account for the American's higher value there must be some situations in which it is optimal to exercise the American option before the expiration date. This can arise in several ways, such as: An in the money (ITM) call option on a stock is often exercised just before the stock pays a dividend that would lower its value by more than the option's remaining time value. A put option will usually be exercised early if the underlying asset files for bankruptcy.[3] A deep ITM currency option (FX option) where the strike currency has a lower interest rate than the currency to be received will often be exercised early because the time value sacrificed is less valuable than the expected depreciation of the received currency against the strike. An American bond option on the dirty price of a bond (such as some convertible bonds) may be exercised immediately if ITM and a coupon is due. A put option on gold will be exercised early when deep ITM, because gold tends to hold its value whereas the currency used as the strike is often expected to lose value through inflation if the holder waits until final maturity to exercise the option (they will almost certainly exercise a contract deep ITM, minimizing its time value).[citation needed]","\"I would suggest the following rationale : This appears to be a most unsatisfactory state of affairs, however, you can bet that this is how things are handled. As to who receives the dividend you have payed, this will be whoever the counter-party (or counter-parties) are that were assigned the exercise. EDIT Looking at the Dec16 SPY options, we see that the expiry date is 23 Dec. Therefore, your options have been exercised prior to expiry. The 3AM time stamp is probably due to the \"\"overnight batch processing\"\" of your brokers computer system. The party exercising the options will have chosen to exercise on the day prior to ex-dividend in order to receive the dividends.\"","Dividends are supposed to be paid from company profits (in the current or previous financial years), there are nuances around what profits mean from country to country, but the link is the UK definition from the HMRC. Profits from previous financial years are commonly called retained earnings. There are a few items around this","In an ideal world Say on 24th July the share price of Apple was $600. Everyone knows that they will get the $ 2.65 on 16th August. There is not other news that is affecting the price. You want to go in and buy the shares on 16th Morning at $600 and then sell it on 17th August at $600. Now in this process you have earned sure shot $2.65/- Or in an ideal world when the announcement is made on 24th July, why would I sell it at $600, when I know if I wait for few more days I will get $2.65/- so i will be more inclined to sell it at $602.65 /- ... so on 16th Aug after the dividend is paid out, the share price will be back to $600/- In a real world, dividend or no dividend the share price would be moving up or down ... Notice that the dividend amount is less than 1% of the stock price ... stock prices change more than this percentage ... so if you are trying to do what is described in paragraph one, then you may be disappointed as the share price may go down as well by more than $2.65 you have made","I am relative newbie in the financial market trading and as I understand it, the response from Victor is accurate in respect of trading CFD contracts. However, there is also the option to 'trade' through a financial spread betting platform which as its name suggests is purely a bet based upon the price of the underlying stock/asset. As such, I believe that your theory to short a stock just prior to its ex-dividend date may be worth investigating further... Apart from that, it's worthwhile mentioning that financial spread betting is officially recognised by HMRC as gambling and therefore not currently [2015/16] subject to capital gains tax. This info is given in good faith and must not be relied upon when making any investment and/or trading decision(s). I hope this helps you make a fortune - if it does; then please remember me!","\"Isn't it true that on the ex-dividend date, the price of the stock goes down roughly the amount of the dividend? That is, what you gain in dividend, you lose in price drop. Yes and No. It Depends! Generally stocks move up and down during the market, and become more volatile on some news. So One can't truly measure if the stock has gone down by the extent of dividend as one cannot isolate other factors for what is a normal share movement. There are time when the prices infact moves up. Now would it have moved more if there was no dividend is speculative. Secondly the dividends are very small percentage compared to the shares trading price. Generally even if 100% dividend are announced, they are on the share capital. On share prices dividends would be less than 1%. Hence it becomes more difficult to measure the movement of stock. Note if the dividend is greater than a said percentage, there are rules that give guidelines to factor this in options and other area etc. Lets not mix these exceptions. Why is everyone making a big deal out of the amount that companies pay in dividends then? Why do some people call themselves \"\"dividend investors\"\"? It doesn't seem to make much sense. There are some set of investors who are passive. i.e. they want to invest in good stock, but don't want to sell it; i.e. more like keep it for long time. At the same time they want some cash potentially to spend; similar to interest received on Bank Deposits. This class of share holders, it makes sense to invest into companies that give dividends, as year on year they keep receiving some money. If they on the other hand has invested into a company that does not give dividends, they would have to sell some units to get the same money back. This is the catch. They have to sell in whole units, there is brokerage, fees, etc, there are tax events. Some countries have taxes that are more friendly to dividends than capital gains. Thus its an individual choice whether to invest into companies that give good dividends or into companies that don't give dividends. Giving or not giving dividends does not make a company good or bad.\"","\"4) Finally, do all companies reduce their stock price when they pay a dividend? Are they required to? There seems to be confusion behind this question. A company does not set the price for their stock, so they can't \"\"reduce\"\" it either. In fact, nobody sets \"\"the price\"\" for a stock. The price you see reported is simply the last price that the stock was traded at. That trade was just one particular trade in a whole sequence of trades. The price used for the trade is simply the price which the particular buyer and particular seller agreed to for that particular trade. (No agreement, well then, no trade.) There's no authority for the price other than the collection of all buyers and sellers. So what happens when Nokia declares a 55 cent dividend? When they declare there is to be a dividend, they state the record date, which is the date which determines who will get the dividend: the owners of the shares on that date are the people who get the dividend payment. The stock exchanges need to account for the payment so that investors know who gets it and who doesn't, so they set the ex dividend date, which is the date on which trades of the stock will first trade without the right to receive the dividend payment. (Ex-dividend is usually about 2 days before record date.) These dates are established well before they occur so all market participants can know exactly when this change in value will occur. When trading on ex dividend day begins, there is no authority to set a \"\"different\"\" price than the previous day's closing price. What happens is that all (knowledgeable) market participants know that today Nokia is trading without the payment 55 cents that buyers the previous day get. So what do they do? They take that into consideration when they make an offer to buy stock, and probably end up offering a price that is about 55 cents less than they would have otherwise. Similarly, sellers know they will be getting that 55 cents, so when they choose a price to offer their stock at, it will likely be about that much less than they would have asked for otherwise.\"","\"Dividend rate is \"\"dividend per share\"\" over a specified time period, usually a year. So in the first example, if the company paid a $1/share dividend over the year before the stock dividend the shareholder would receive $100, while if it paid the $1/share the year after the stock dividend the shareholder would receive $105. The company could have achieved the same thing by paying total dividends of $1.05/share, which is what the last phrase of the last quoted paragraph is saying. Here's an Investopedia page on dividend rate. Also, what you're calling \"\"payout ratio\"\" is really \"\"dividend yield\"\". \"\"Payout ratio\"\" is how much of the company's net earnings are paid out in dividends. That's all in the US, I could see the terms being used differently outside the US.\"","As the record date is 7th August, you need to hold stocks on the 7th August closing. You need not hold it till 2nd Sept. The list as taken on 7th August would be processed and instructions given to Bank and the dividends credited by 1st Sept. Edit: To Clarify Victor's comment Typically from the time one sells the stocks to the time it actually gets transferred has a clearing cycle. Most stock exchanges have 2 or 3 days cycles. i.e. if I sell the stock today, it is still in my name. The money is still with the buyer. On Day 1, the positions are arrived at. On Day 2 the stock gets credited to the buyer and the funds gets credit to seller. As the question was specific whether to hold the stock till 7th or 22nd Sept, my initial answer was simple. The illustration by Victor is more accurate.","Yes, the stock price drops on the ex-dividend date by roughly the amount of the dividend. There is even academic research testing this and confirming that the popular rule of thumb works well.","When you want the transaction to be concluded in the current year vs an expiration in the next year.","The answer, for me, has to do with compounding. That drop in price post-ex-div is not compounded. But if you reinvest your dividends back into the stock then you buy on those post-ex-div dips in price and your money is compounded because those shares you just bought will, themselves, yeald dividends next quarter. Also, with my broker, I reinvest the dividend incurring no commission. My broker has a feature to reinvest dividends automatically and he charges no commission on those buys. Edit:I forgot to mention that you do not incurr the loss from a drop in price until you sell the security. If you do not sell post-ex-div then you have no loss. As long as the dividend remains the same (or increases) then the theoretical ROI on that security goes up. The drop in price is actually to your benefit because you are able to acquire more shares with the money you just received in the dividend So the price coming down post-ex-div is a good thing (if you buy and hold).","Different stakeholders receive cash flows at different times. The easiest way for me to remember is if you're a debt holder vs equity owner on an income statement. Interest payments are made before net income, so debt holders are repaid before any residual cash flows go to equity owners.","Most bond ETFs have switched to monthly dividends paid on the first of each month, in an attempt to standardize across the market. For ETFs (but perhaps not bond mutual funds, as suggested in the above answer) interest does accrue in the NAV, so the price of the fund does drop on ex-date by an amount equal to the dividend paid. A great example of this dynamic can be seen in FLOT, a bond ETF holding floating rate corporate bonds. As you can see in this screenshot, the NAV has followed a sharp up and down pattern, almost like the teeth of a saw. This is explained by interest accruing in the NAV over the course of each month, until it is paid out in a dividend, dropping the NAV sharply in one day. The effect has been particularly pronounced recently because the floating coupon payments have increased significantly (benchmark interest rates are higher) and mark-to-market changes in credit spreads of the constituent bonds have been very muted.","The dividend goes to he who owns the stock when it goes ex-div. A buyer (the call buyer who exercises) will not exercise unless the stock plus dividend are in the money. Otherwise they'd be buying the stock at a premium. I like the scenario your friend doesn't. If I can find a high dividend stock and sell the call for a decent price, I may get a great return on a stock that's gone down 5% over a year's time. If it goes up and called away, that's fine too, it means a profit.","Unless you suffer from the illusion that you can time the market, it honestly doesn't matter much; the difference is lost in the noise. That may be true even if you do suffer from that illusion. Also, as discussed here previously, the drop in a stock's price right after the dividend has been paid just reflects the fact that you aren't about to get an immediate refund in the form of a dividend. If you look at the real cost per share, it's meaningless and can/should be ignored. Buying after the dividend is paid may save you a tiny fraction of a cent of short-term income tax, but that's meaningless in real terms.","Yes, as long as you own the shares before the ex-dividend date you will get the dividends. Depending on your instructions to your broker, you can receive cash dividends or you can have the dividends reinvested in more shares of the company. There are specific Dividend ReInvestment Plans (or DRIPs) if you are after stock growth rather than income from dividend payments.","There are many reasons for buying stock for dividends. You are right in the sense that in theory a stock's price will go down in value by the amount of the dividend. As the amount of dividend was adding to the value of the company, but now has been paid out to shareholder, so now the company is worth less by the value of the dividend. However, in real life this may or may not happen. Sometimes the price will drop by less than the value of the dividend. Sometimes the price will drop by more than the dividend. And other times the price will go up even though the stock has gone ex-dividend. We can say that if the price has dropped by exactly the amount of the dividend then there has been no change in the stockholders value, if the price has dropped by more than the value of the dividend then there has been a drop to the stockholder's value, and if the price has gone up or dropped by less than the value of the dividend then there has been a increase to the stockholder's value. Benefits of Buying Stocks with Good Dividends: What you shouldn't do however, is buy stocks solely due to the dividend. Be aware that if a company starts reducing its dividends, it could be an early warning sign that the company may be heading into financial troubles. That is why holding a stock that is dropping in price purely for its dividend can be a very dangerous practice.","Regarding: 1) What's the point of paying a dividend if the stock price automatically decreases? Don't the shareholders just break even? As dividends distribution dates and amounts are announced in advance, probably the stock price will rise of the same amount of the divident before the day of distribution. If I know that stock share A's value is y and the dividend announced is x, I would be willing to buy shares of A for anything > y and < than x+y before the distribution.So, arbitrageurs probably would take the price to x+y before the dividend distribution, and then after the dividend distribution the price will fall back to y.","Various types of corporate actions will precipitate a price adjustment. In the case of dividends, the cash that will be paid out as a dividend to share holders forms part of a company's equity. Once the company pays a dividend, that cash is no longer part of the company's equity and the share price is adjusted accordingly. For example, if Apple is trading at $101 per share at the close of business on the day prior to going ex-dividend, and a dividend of $1 per share has been declared, then the closing price will be adjusted by $1 to give a closing quote of $100. Although the dividend is not paid out until the dividend pay date, the share price is adjusted at the close of business on the day prior to the ex-dividend date since any new purchases on or after the ex-dividend date are not entitled to receive the dividend distribution, so in effect new purchases are buying on the basis of a reduced equity. It will be the exchange providing the quote that performs the price adjustment, not Google or Yahoo. The exchange will perform the adjustment at the close prior to each ex-dividend date, so when you are looking at historical data you are looking at price data that includes each adjustment.","So My question is if I purchased the shares on 03-08-15 then will I get the dividend? Yes if you purchase on 3-Aug, the shares will actually get credited to your account on 5-Aug and hence you will hold the shares on 6-Aug, the record date.","In the equity world, if a stock trades at 110 and is going to pay a dividend of 10 in a few days, an option expiring after the ex date would take the dividend into account and would trade as if the stock were trading at 100. (Negative) interest rates may also lead to a similar effect. In the commodity world the cost of carry needs to be taken into account.","There is a basis for that if you consider the power of compounding. So, the sooner you re-invest the dividends the sooner the time will give you results (through compounding). There is also the case of the commissions, if they are paid with a percentage of the amount invested they automatically gain more from you. Just my 2cents, though the other answers are probably more complete.","\"There are a few reason why the stock price decreases after a dividend is paid: What's the point of paying a dividend if the stock price automatically decreases? Don't the shareholders just break even? Companies have to do something with their profits. They beholden to their shareholders to make them money either by increasing the share value or paying dividends. So they have the choice between reinvesting their profits into the company to grow the business or just handing the profits directly to the owners of the business (the shareholders). Some companies are as big as they want to be and investing their profits into more capital offers them diminishing returns. These companies are more likely to pay dividends to their shareholders. I assume the price of the stock \"\"naturally\"\" increases over the year to reflect the amount of the dividend payment. This is kind of a vague question but then doesn't it make it difficult to evaluate the fluctuations in stock price (in the way that you would a company that doesn't pay a dividend)? It depends on the company. The price may recover the dividend drop... could take a few days to a week. And that dependings on the company's performance and the overall market performance. With respect to options, I assume nothing special happens? So say I bought $9 call options yesterday that were in the money, all of a sudden they're just not? Is this typically priced into the option price? Is there anything else I need to know about buying options in companies that pay dividends? What if I had an in-the-money option, and all of a sudden out of nowhere a company decides to pay a dividend for the first time. Am I just screwed? One key is that dividends are announced in advance (typically at least, if not always; not sure if it's required by law but I wouldn't be surprised). This is one reason people will sometimes exercise a call option early, because they want to get the actual stock in order to earn the dividend. For \"\"out of the ordinary\"\" large cash dividends (over 10% is the guideline), stock splits, or other situations an option can be adjusted: http://www.888options.com/help/faq/splits.jsp#3 If you have an options account, they probably sent you a \"\"Characteristics and Risks of Standardized Options\"\" booklet. It has a section discussing this topic and the details of what kinds of situations trigger an adjustment. A regular pre-announced <10% dividend does not, while a special large dividend would, is what I roughly get from it. That \"\"Characteristics and Risks of Standardized Options\"\" is worth reading by the way; it's long and complicated, but well, options are complicated. Finally, do all companies reduce their stock price when they pay a dividend? Are they required to? I'm just shocked I've never heard of this before. The company doesn't directly control the stock price, but I do believe this is automatic. I think the market does this automatically because if they didn't, there would be enough people trying to do dividend capture arbitrage that it would ultimately drive down the price.\"","In India, the amount of dividend you get is based on the face value of the stock. If the stock's face value is Rs. 10 and the company announced a dividend of 20%, you will receive Rs.2 per share.To see whether you qualify to receive a dividend, see the ex-dividend date of the company. If you purchased shares before that date, you will receive the dividend, else you will not","\"EPS is often earnings/diluted shares. That is counting shares as if all convertible securities (employee stock options for example) were converted. Looking at page 3 of Q4 2015 Reissued Earnings Press Release we find both basic ($1.13) and diluted EPS ($1.11). Dividends are not paid on diluted shares, but only actual shares. If we pull put this chart @ Yahoo finance, and hovering our mouse over the blue diamond with a \"\"D\"\", we find that Pfizer paid dividends of $0.28, $0.28, $0.28, $0.30 in 2015. Or $1.14 per share. Very close to the $1.13, non-diluted EPS. A wrinkle is that one can think of the dividend payment as being from last quarter, so the first one in 2015 is from 2014. Leaving us with $0.28, $0.28, $0.30, and unknown. Returning to page three of Q4 2015 Reissued Earnings Press Release, Pfizer last $0.03 per share. So they paid more in dividends that quarter than they made. And from the other view, the $0.30 cents they paid came from the prior quarter, then if they pay Q1 2016 from Q4 2015, then they are paying more in that view also.\"","Ex-Dividend Price Behavior of Common Stocks would be a study from the Federal Reserve Bank of Minneapolis and University of Minnesota if you want a source for some data. Abstract This study examines common stock prices around ex-dividend dates. Such price data usually contain a mixture of observations - some with and some without arbitrageurs and/or dividend capturers active. Our theory predicts such mixing will result in a nonlinear relation between percentage price drop and dividend yield - not the commonly assumed linear relation. This prediction and another important prediction of theory are supported empirically. In a variety of tests, marginal price drop is not significantly different from the dividend amount. Thus, over the last several decades, one-for-one marginal price drop have been an excellent (average) rule of thumb.","Should be noted that pacoverflow's answer is wrong. Yahoo back-adjusts all the previous (not current or future) values based on a cumulative adjustment factor. So if there's a dividend ex-date on December 19, Yahoo adjusts all the PREVIOUS (December 18 and prior) prices with a factor which is: 1 - dividend / Dec18Close","In most cases , preferential sharesholders are paid dividends first before common shareholders are paid . In the event of a company bankruptcy , preferential shareholders have the right to be paid first before common shareholders. In exchange for these benefits , preferential shareholders do not have any voting rights. The issuing of preferential shares has no impact on share prices or issuing of bonuses , it is a mere coincidence that the stock price went up","\"Dividends are paid based on who owns the security on a designated day. If a particular security pays once per year, you hold 364 days and sell on the day before the \"\"critical\"\" day, you get no dividend. This is not special to 401(k) or to DRIP. It's just how the system works. The \"\"critical\"\" day is the day before the posted ex-dividend date for the security. If you own at the end of that day, you get the dividend. If you sell on that day or before, you do not. Your company changing providers is not in itself relevant. The important factor is whether you can still hold your same investments in the new plan. If not, you will not get the dividend on anything that you currently hold but \"\"sell\"\" due to the change in providers. If you can, then you potentially get the dividend so long as there's no glitch in the transition. Incidentally, it works the other way too. You might end up getting a dividend through the new plan for something that you did not hold the full year.\"","The trades after that date were Ex-DIV, meaning after 5 pm Dec 12, new trades did not include the shares that were to be spun out. The process is very orderly, no one pays $60 without getting the spinoff, and no one pays $30 but still gets it. The real question is why there's that long delay nearly three weeks to make the spinoff shares available. I don't know. By the way, the stock options are adjusted as well. Someone owning a $50 put isn't suddenly in the money on 12/13. Edit - (I am not a hoarder. I started a fire last night and realized I had a few Barron's in the paper pile) This is how the ABT quote appeared in the 12/24 issue of Barron's. Both the original quote, and the WI (when issued) for the stock less the spin off company.","What about in the case of a company with unexpectedly low cash (and therefore an inability to easily pay out dividends) but with a surplus of inventory? Obviously the investors should receive some premium for that, because I think anyone would prefer cash, but there are certainly extreme circumstances where it might be appropriate.","\"Preferred dividends and common dividends are completely separate transactions. There's not a single \"\"dividend\"\" payment that is split between preferred and common shares. Dividends on preferred shares are generally MUCH higher than common dividends, and are generally required by the terms of the preferred shares, again unlike common dividends, which are discretionary.\"","No, not screwed. This is just an artifact of the tax code and year end dividends. You paid a tax, and in return, got a higher basis. When you sell, you will have less profit, therefore less tax to pay than the guy who bought right after the dividend. You can call the fund company if you want to buy later this year. Once you understand the process, it might not bother you at all.","Share prices fall when dividends are paid out because the paid dividend (cash out) actually reduces the value of the company. Usually the share price falls by the amount of the dividend payment.","It might be clearer to think of it as price going up when a dividend is expected, since that's money you'll get right back. As the delay before the next dividend payment increases, that becomes less of a factor,","When you short a stock and the stock goes ex-div. you have to pay out an amount equal to the dividend. So in your example, GG would short the stock at $10.00, buy back at $9.00 and be charged $1.00 for the dividend. Net effect $0.00.","The moment the dividend is announced, especially from a company that doesn't normally pay dividends, the dividend is factored into everybody's analysis. In the absence of any other news the price of apple would be expected to drop once the dividend in locked in. Why would I buy shares from you at full price one day after the dividend is paid, if I will have to wait for the next dividend? Also keep in mind the dividend was announced on July 24th, and is given to shareholders of record on August 13th. You are way behind the curve.","Yes, there is a delay between when you buy a stock and when you actually take ownership of it. This is called the settlement period. The settlement period for US equities is T+2 (other markets have different settlement periods), meaning you don't actually become a shareholder of record until 2 business days after you buy. Conversely, you don't stop being a shareholder of record until 2 business days after you sell. Presumably at some point in the (far) future all public markets will move to same-day changes of ownership, at which point companies will stop making announcements of the form all shareholders of record as of September 22nd and will switch to announcements of the form all shareholders of record as of September 22nd at 13:00 UTC","There is a reason - your credit score. If you ever take out a mortgage, you might pay dearly for your behavior. The bank where you have the credit card reports the amount on the bill to the credit rating agencies. If you pay before the bill date, they will always report zero. You should wait at least till the day after the billing cycle ends, and then pay off (you don't need to have the paper bill in your hands - you can see online when the cycle closed). Depending on your other financial behavior, this will have between zero and significant effect, on the percentages you get offered for car loans, mortgages, etc.","Yes, and there's a good reason they might. (I'm gonna use equity options for the example; FX options are my thing, but they typically trade European style). The catch is dividends. Imagine you're long a deep-ITM call on a stock that's about to pay a dividend. If that dividend is larger than the time value remaining on the option, you'd prefer to exercise early - giving you the stock and the dividend payment - rather than hanging on to the time value of the option. You can get a similar situation in FX options when you're long a deep-ITM American call on a positive-carry currency (say AUDJPY); you might find yourself so deep in the money, with so little time value left on the option, that you'd rather exercise the option and give up the remaining time value in return for the additional carry from getting the spot position early.","To follow up on Quid's comment, the share classes themselves will define what level of dividends are expected. Note that the terms 'common shares' and 'preferred shares' are generally understood terms, but are not as precise as you might believe. There are dozens/hundreds of different characteristics that could be written into share classes in the company's articles of incorporation [as long as those characteristics are legal in corporate law in the company's jurisdiction]. So in answering your question there's a bit of an assumption that things are working 'as usual'. Note that private companies often have odd quirks to their share classes, things like weird small classes of shares that have most of the voting rights, or shares with 'shotgun buyback clauses'. As long as they are legal clauses, they can be used to help control how the business is run between various shareholders with competing interests. Things like parents anticipating future family infighting and trying to prevent familial struggle. You are unlikely to see such weird quirks in public companies, where the company will have additional regulatory requirements and where the public won't want any shock at unexpected share clauses. In your case, you suggested having a non-cumulative preferred share [with no voting rights, but that doesn't impact dividend payment]: There are two salient points left related to payout that the articles of incorporation will need to define for the share classes: (1) What is the redemption value for the shares? [This is usually equal to the cost of subscribing for the shares in the first place; it represents how much the business will need to pay the shareholder in the event of redemption / recall] (2) What is the stated dividend amount? This is usually defined at a rate that's at or a little above a reasonable interest rate at the time the shares are created, but defined as $ / share. For example, the shares could have $1 / share dividend payment, where the shares originally cost $50 each to subscribe [this would reflect a rate of payment of about 2%]. Typically by corporate law, dividends must be paid to preferred shares, to the extent required based on the characteristics of the share class [some preferred shares may not have any required dividends at all], before any dividends can be paid to common shares. So if $10k in dividends is to be paid, and total preferred shares require $15k of non-cumulative dividends each year, then $0 will be paid to the common shares. The following year, $15k of dividends will once again need to be paid to the preferred shares, before any can be paid to the common shares.","CHN is a Closed-End Fund. CHN actually pays out three types of distributions: In the case of CHN, they appear to be paying yearly. The most recent dividend, with exdate of 18 Dec 2014, consisted of $3.4669 of Long-term capital gains and $0.2982 cash dividend. Prior to that, the dividend with exdate of 19 Dec 2013 consisted of $2.8753 long-term capital gains and $0.4387 cash dividend. For a standard dividend yield you typically would not expect short-term and long-term capital events to be included in a yield calculation, as these events really only occur in relation to a fund rebalancing (changing its investments) and are not really due to the actual performance of the fund in any way. Most free sites that provide dividend information do not make a distinction on the dividend type. Data source: Premium Data Full Disclosure: I am a co-owner of Premium Data/Norgate.","\"What you are describing is a very specific case of the more general principle of how dividend payments work. Broadly speaking, if you own common shares in a corporation, you are a part owner of that corporation; you have the right to a % of all of that corporation's assets. The value in having that right is ultimately because the corporation will pay you dividends while it operates, and perhaps a final dividend when it liquidates at the end of its life. This is why your shares have value - because they give you ownership of the business itself. Now, assume you own 1k shares in a company with 100M shares, worth a total of $5B. You own 0.001% of the company, and each of your shares is worth $50; the total value of all your shares is $50k. Assume further that the value of the company includes $1B in cash. If the company pays out a dividend of $1B, it will now be only worth $4B. Your shares have just gone down in value by 20%! But, you have a right to 0.001% of the dividend, which equals a $10k cash payment to you. Your personal holdings are now $40k worth of shares, plus $10k in cash. Except for taxes, financial theory states that whether a corporation pays a dividend or not should not impact the value to the individual shareholder. The difference between a regular corporation and a mutual fund, is that the mutual fund is actually a pool of various investments, and it reports a breakdown of that pool to you in a different way. If you own shares directly in a corporation, the dividends you receive are called 'dividends', even if you bought them 1 minute before the ex-dividend date. But a payment from a mutual fund can be divided between, for example, a flow through of dividends, interest, or a return of capital. If you 'looked inside' your mutual fund you when you bought it, you would see that 40% of its value comes from stock A, 20% comes from stock B, etc etc., including maybe 1% of the value coming from a pile of cash the fund owns at the time you bought your units. In theory the mutual fund could set aside the cash it holds for current owners only, but then it would need to track everyone's cash-ownership on an individual basis, and there would be thousands of different 'unit classes' based on timing. For simplicity, the mutual fund just says \"\"yes, when you bought $50k in units, we were 1/3 of the year towards paying out a $10k dividend. So of that $10k dividend, $3,333k of it is assumed to have been cash at the time you bought your shares. Instead of being an actual 'dividend', it is simply a return of capital.\"\" By doing this, the mutual fund is able to pay you your owed dividend [otherwise you would still have the same number of units but no cash, meaning you would lose overall value], without forcing you to be taxed on that payment. If the mutual fund didn't do this separate reporting, you would have paid $50k to buy $46,667k of shares and $3,333k of cash, and then you would have paid tax on that cash when it was returned to you. Note that this does not \"\"falsely exaggerate the investment return\"\", because a return of capital is not earnings; that's why it is reported separately. Note that a 'close-ended fund' is not a mutual fund, it is actually a single corporation. You own units in a mutual fund, giving you the rights to a proportion of all the fund's various investments. You own shares in a close-ended fund, just as you would own shares in any other corporation. The mutual fund passes along the interest, dividends, etc. from its investments on to you; the close-ended fund may pay dividends directly to its shareholders, based on its own internal dividend policy.\"","When dividend is announced the stock and option price may react to that news, but the actual payout of the dividend on the ex-dividend date is what you probably are referring to. The dividend payout affects the stock price on the ex-dividend date as the stock price will drop by the amount of paid out dividend (not taking into account other factors). This in turn drives the prices of all options. The amount of change in the option price for this event is not only dependent the dividend payout, but also on how far these are in our out of the money and what there time to expiration is. The price of a call option that is far out of the money would react less than the price of a put that would be far in the money. Therefore I would argue that these two will not necessarily offset each other.","Some investors (pension funds or insurance companies) need to pay out a certain amount of money to their clients. They need cash on a periodical basis, and thus prefer dividend paying stock more.","For all stocks, expected Dividends are a part of the price it is traded for - consider that originally, the whole idea of stocks was to participate in the earnings of the company = get dividends. The day the dividend is paid, that expectation is of course removed, and thereby the stock value reduced by just the amount of dividend paid. You will see that behavior for all stocks, everywhere. The dividend in your example is just uncommonly high relative to the stock price; but that is a company decision - they can decide whatever amount they want as a dividend. In other words, the day before dividend payments, investors value the stock at ~14 $, plus an expected dividend payment of 12 $, which adds to 26 $. The day after the dividend payment, investors still value the stock at ~14 $, plus no more dividend payment = 0 $. Nothing changed really in the valuation.","with the semi-strong form of the Efficient Market Hypothesis expected dividends are priced into the options and security already. If you are able to locate such an arbitrage opportunity then you should take it, but I suspect it will be more more difficult than you think. Remember that many dividends require you to have been a shareholder by a certain date prior to the dividend occurring.","\"The stock should fall by approximately the amount of the dividend as that is what is paid out. If you have a stock trading at $10/share and it pays a $1/share dividend, the price should drop to $9 as what was trading before the dividend was paid would be both the dividend and the stock itself. If the person bought just for the dividend then it would likely be neutral as there isn't anything extra to be gained. Consider if this wasn't the case. Wouldn't one be able to buy a stock a few days before the dividend and sell just after for a nice profit? That doesn't make sense and is the reason for the drop in price. Similarly, if a stock has a split or spin-off there may be changes in the price to reflect that adjustment in value of the company. If I give you 2 nickels for a dime, the overall value is still 10 cents though this would be 2 coins instead of one. Some charts may show a \"\"Dividend adjusted\"\" price to factor out these transactions so be careful of what prices are quoted.\"","If you are looking to re-invest it in the same company, there is really no difference. Please be aware that when a company announces dividend, you are not the only person receiving the dividend. The millions of share holders receive the same amount that you did as dividend, and of course, that money is not falling from the sky. The company pays it from their profits. So the day a dividend is announced, it is adjusted in the price of the share. The only reason why you look for dividend in a company is when you need liquidity. If a company does not pay you dividend, it means that they are usually using the profits to re-invest it in the business which you are anyway going to do with the dividend that you receive. (Unless its some shady company which is only established on paper. Then they might use it to feed their dog:p). To make it simpler lets assume you have Rs.500 and you want to start a company which requires Rs 1000 in capital : - 1.) You issue 5 shares worth Rs 100 each to the public and take Rs 100 for each share. Now you have Rs 1000 to start your company. 2.) You make a profit of Rs 200. 3.) Since you own majority of the shares you get to make the call whether to pay Rs.200 in dividend, or re-invest it in the business. Case 1:- You had issued 10 shares and your profit is Rs 200. You pay Rs. 20 each to every share holder. Since you owned 5 shares, you get 5*20 that is Rs.100 and you distribute the remaining to your 5 shareholders and expect to make the same or higher profit next year. Your share price remains at Rs.100 and you have your profits in cash. Case 2:- You think that this business is awesome and you should put more money into it to make more. You decide not to pay any dividend and invest the entire profit into the business. That way your shareholders do not receive anything from you but they get to share profit in the amazing business that you are doing. In this case your share price is Rs. 120 ((1000+200)/10) and all your profits are re-invested in the business. Now put yourself in the shareholders shoes and see which case suits you more. That is the company you should invest in. Please note: - It is very important to understand the business model of the company before you buy anything! Cheers,","One reason a company might choose to pay a dividend is because of the desire of influential stockholders to receive the dividend. In the case of Ford, for example, there are 70 million shares of Class B stock which receive the same dividend per share as do the common stock holders. Even though there are 3.8 billion shares of common stock, the Class B owners (which are Ford family) hold 40% of the voting power and so their desires are given much weight. The Class B owners prefer regular dividends because if enough were to sell their Class B shares, all Class B shares (as a block) would have their voting power drop from 40% to 30%, and with further sales all special voting would be lost and each Class B share would be equivalent to a common share in voting power. Hence the Class B owners, both for themselves and for all of the family members holding Class B, avoid selling shares and prefer receiving dividends.","This is a great question for understanding how futures work, first let's start with your assumptions The most interesting thing here is that neither of these things really matters for the price of the futures. This may seem odd as a futures contract sounds like you are betting on the future price of the index, but remember that the current price already includes the expectations of future earnings as well! There is actually a fairly simple formula for the price of a futures contract (note the link is for forward contracts which are very similar but slightly more simple to understand). Note, that if you are given the current price of the underlying the futures price depends essentially only on the interest rate and the dividends paid during the length of the futures contract. In this case the dividend rate for the S&P500 is higher than the prevailing interest rate so the futures price is lower than the current price. It is slightly more complicated than this as you can see from the formula, but that is essentially how it works. Note, this is why people use futures contracts to mimic other exposures. As the price of the future moves (pretty much) in lockstep with the underlying and sometimes using futures to hedge exposures can be cheaper than buying etfs or using swaps. Edit: Example of the effect of dividends on futures prices For simplicity, let's imagine we are looking at a futures position on a stock that has only one dividend (D) in the near term and that this dividend happens to be scheduled for the day before the futures' delivery date. To make it even more simple lets say the price of the stock is fairly constant around a price P and interest rates are near zero. After the dividend, we would expect the price of the stock to be P' ~ P - D as if you buy the stock after the dividend you wouldn't get that dividend but you still expect to get the rest of the value from additional future cash flows of the company. However, if we buy the futures contract we will eventually own the stock but only after the dividend happens. Since we don't get that dividend cash that the owners of the stock will get we certainly wouldn't want to pay as much as we would pay for the stock (P). We should instead pay about P' the (expected) value of owning the stock after that date. So, in the end, we expect the stock price in the future (P') to be the futures' price today (P') and that should make us feel a lot more comfortable about what we our buying. Neither owning the stock or future is really necessarily favorable in the end you are just buying slightly different future expected cash flows and should expect to pay slightly different prices.","What you're referring to is the yield. The issue with these sorts of calculations is that the dividend isn't guaranteed until it's declared. It may have paid the quarterly dividend like clockwork for the last decade, that does not guarantee it will pay this quarter. Regarding question number 2. Yield is generally an after the fact calculation. Dividends are paid out of current or retained earnings. If the company becomes hot and the stock price doubles, but earnings are relatively similar, the dividend will not be doubled to maintain the prior yield; the yield will instead be halved because the dividend per share was made more expensive to attain due to the increased share price. As for the calculation, obviously your yield will likely vary from the yield published on services like Google and Yahoo finance. The variation is strictly based on the price you paid for the share. Dividend per share is a declared amount. Assuming a $10 share paying a quarterly dividend of $0.25 your yield is: Now figure that you paid $8.75 for the share. Now the way dividends are allocated to shareholders depends on dates published when the dividend is declared. The day you purchase the share, the day your transaction clears etc are all vital to being paid a particular dividend. Here's a link to the SEC with related information: https://www.sec.gov/answers/dividen.htm I suppose it goes without saying but, historical dividend payments should not be your sole evaluation criteria. Personally, I would be extremely wary of a company paying a 40% dividend ($1 quarterly dividend on a $10 stock), it's very possible that in your example bar corp is a more sound investment. Additionally, this has really nothing to do with P/E (price/earnings) ratios.","Well, if the short seller has to pay the dividend out of their pocket, what happens to the dividend the company paid out ?? Sounds like there are 2 divdends floating around, the short's, and the company's, but only 1 share of stock.","\"I'm not a financial expert, but saying that paying a $1 dividend will reduce the value of the stock by $1 sounds like awfully simple-minded reasoning to me. It appears to be based on the assumption that the price of a stock is equal to the value of the assets of a company divided by the total number of shares. But that simply isn't true. You don't even need to do any in-depth analysis to prove it. Just look at share prices over a few days. You should easily be able to find stocks whose price varied wildly. If, say, a company becomes the target of a federal investigation, the share price will plummet the day the announcement is made. Did the company's assets really disappear that day? No. What's happened is that the company's long term prospects are now in doubt. Or a company announces a promising new product. The share price shoots up. They may not have sold a single unit of the new product yet, they haven't made a dollar. But their future prospects now look improved. Many factors go into determining a stock price. Sure, total assets is a factor. But more important is anticipated future earning. I think a very simple case could be made that if a stock never paid any dividends, and if everyone knew it would never pay any dividends, that stock is worthless. The stock will never produce any profit to the owner. So why should you be willing to pay anything for it? One could say, The value could go up and you could sell at a profit. But on what basis would the value go up? Why would investors be willing to pay larger and larger amounts of money for an asset that produces zero income? Update I think I understand the source of the confusion now, so let me add to my answer. Suppose that a company's stock is selling for, say, $10. And to simplify the discussion let's suppose that there is absolutely nothing affecting the value of that stock except an expected dividend. The company plans to pay a dividend on a specific date of $1 per share. This dividend is announced well in advance. Everyone knows that it will be paid, and everyone is extremely confidant that in fact the company really will pay it -- they won't run out of money or any such. Then in a pure market, we would expect that as the date of that dividend approaches, the price of the stock would rise until the day before the dividend is paid, it is $11. Then the day after the dividend is paid the price would fall back to $10. Why? Because the person who owns the stock on the \"\"dividend day\"\" will get that $1. So if you bought the stock the day before the dividend, the next day you would immediately receive $1. If without the dividend the stock is worth $10, then the day before the dividend the stock is worth $11 because you know that the next day you will get a $1 \"\"refund\"\". If you buy the stock the day after the dividend is paid, you will not get the $1 -- it will go to the person who had the stock yesterday -- so the value of the stock falls back to the \"\"normal\"\" $10. So if you look at the value of a stock immediately after a dividend is paid, yes, it will be less than it was the day before by an amount equal to the dividend. (Plus or minus all the other things that affect the value of a stock, which in many cases would totally mask this effect.) But this does not mean that the dividend is worthless. Just the opposite. The reason the stock price fell was precisely because the dividend has value. BUT IT ONLY HAS VALUE TO THE PERSON WHO GETS IT. It does me no good that YOU get a $1 dividend. I want ME to get the money. So if I buy the stock after the dividend was paid, I missed my chance. So sure, in the very short term, a stock loses value after paying a dividend. But this does not mean that dividends in general reduce the value of a stock. Just the opposite. The price fell because it had gone up in anticipation of the dividend and is now returning to the \"\"normal\"\" level. Without the dividend, the price would never have gone up in the first place. Imagine you had a company with negligible assets. For example, an accounting firm that rents office space so it doesn't own a building, its only tangible assets are some office supplies and the like. So if the company liquidates, it would be worth pretty much zero. Everybody knows that if liquidated, the company would be worth zero. Further suppose that everyone somehow knows that this company will never, ever again pay a dividend. (Maybe federal regulators are shutting the company down because it's products were declared unacceptably hazardous, or the company was built around one genius who just died, etc.) What is the stock worth? Zero. It is an investment that you KNOW has a zero return. Why would anyone be willing to pay anything for it? It's no answer to say that you might buy the stock in the hope that the price of the stock will go up and you can sell at a profit even with no dividends. Why would anyone else pay anything for this stock? Well, unless their stock certificates are pretty and people like to collect them or something like that. Otherwise you're supposing that people would knowingly buy into a pyramid scheme. (Of course in real life there are usually uncertainties. If a company is dying, some people may believe, rightly or wrongly, that there is still hope of reviving it. Etc.) Don't confuse the value of the assets of a company with the value of its stock. They are related, of course -- all else being equal, a company with a billion dollars in assets will have a higher market capitalization than a company with ten dollars in assets. But you can't calculate the price of a company's stock by adding up the value of all its assets, subtracting liabilities, and dividing by the number of shares. That's just not how it works. Long term, the value of any stock is not the value of the assets but the net present value of the total future expected dividends. Subject to all sorts of complexities in real life.\"","\"In the case of mutual funds, Net Asset Value (NAV) is the price used to buy and sell shares. NAV is just the value of the underlying assets (which are in turn valued by their underlying holdings and future earnings). So if a fund hands out a billion dollars, it stands to reason their NAV*shares (market cap?) is a billion dollars less. Shareholder's net worth is equal in either scenario, but after the dividend is paid they are more liquid. For people who need investment income to live on, dividends are a cheap way to hold stocks and get regular payments, versus having to sell part of your portfolio every month. But for people who want to hold their investment in the market for a long long time, dividends only increase the rate at which you have to buy. For mutual funds this isn't a problem: you buy the funds and tell them to reinvest for free. So because of that, it's a prohibited practice to \"\"sell\"\" dividends to clients.\"","> Say profits are 100mil, and a dividend is payed. Say 50 mil worth is payed out as dividend and 30 mil is kept as retained earnings for future investment. This does not equate. Out of net income, it is only possible to either reinvest (retained earning) or payout (repurchase or dividend). You can't have a $20m gap there. > Can the remaining 20 mil be distributed to shareholders A and B, so that they both get 10mil each? What makes them entitled to a separate, special dividend over the other shareholders? > Can certain shareholders be favored and get a bigger cut of profits than the dividends pay out is my question basically. It kinda sounds like you're describing preferred equity, but doing it in a rather round-about way.","Dividends indicate that a business is making more profit than it can effectively invest into expansion or needs to regulate cash-flow. This generally indicates that the business is well established and has stabilized in a dominant market position. This can be contrasted against businesses that: Dividends are also given preferential tax treatment. Specifically, if I buy a stock and sell it 30 days later, I will be taxed on the capital gains at the regular income rate (typically 25-33%), but the dividends would be taxed at the lower long-term capital gains rate (typically 15%).","When setting these up for my own bill payment, I was surprised, after the fact, to see that a couple I thought would be a mailed check were actually instant transfers, and for others, vice versa. On line banking typically asks you for the due date and they handle from there. If you need this detail before the payment, I'd ask the bank. Else, it's easy to see after the fact for a given payee.","It depends how deep in the money it is, compared to the dividend. Even an in the money call has some time premium. As the call holder, if I exercise instead of selling the call, I am trading the potential for a dividend, which I won't receive, for getting that time premium back by selling. Given the above, you'll notice a slight distortion in options pricing as a dividend date approaches, as the option will reflect not just the time premium, but the fact that exercising with grab the dividend. Edit to address your comment - $10 stock, $9 strike, 50 cent div. If the option price is high, say $2, because there's a year till expiration, exercising makes no sense. If it's just $1.10, I gain 40 cents by exercising and selling after the dividend.","Some credit card rewards programs will not give you rewards for balances paid off early. I have a Capitol One Platinum card, and once paid off the full balance; both the full amount due for the recently ended billing period, and the amount that had accrued for the current billing period. I never received any reward points for the additional amount. Though this sounds like it's paying even earlier than you're talking about.","Yes, one such strategy is dividend arbitrage using stock and in the money options. You have to find out which option is the most mispriced before the ex-dividend date."],"string":"[\n \"Do you realise that the examples you have given are for stock splits not for dividends, that is why the date payable is before the ex-date for the split. The payments for the split occur on 30th June and the first day the stock trades with the new split is on the next trading day, being the ex-date, 1st July.\",\n \"Here is the definition of Ex-dividend date from the SEC: Once the company sets the record date, the stock exchanges or the National Association of Securities Dealers, Inc. fix the ex-dividend date. The ex-dividend date is normally set for stocks two business days before the record date. If you purchase a stock on its ex-dividend date or after, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend. The linked document discusses weekend, and holidays involved in the calculation. The difference between the record date and the ex-dividend is to allow for the three days of settlement.\",\n \"Your understanding is incorrect. The date of record is when you have to own the stock by. The ex-dividend date is calculated so that transaction before that date settles in time to get you listed as owner by the date of record. If you buy the stock before the ex-dividend date, you get the dividend. If you buy it on or after the ex-dividend date, the seller gets the dividend.\",\n \"You only have to hold the shares at the opening of the ex-dividend date to get the dividends. So you can actually sell the shares on ex-dividend date and still get the dividends. Ex-dividend date occurs before the record date and payment date, so you will get the dividend even if you sold before the record date.\",\n \"You will need to buy a stock before the ex-dividend date to receive the dividends. You can sell a stock on the ex-dividend date or after and you will receive the dividends. So if the ex-dividend date is the 5th August, you need to buy before the 5th and you can sell on the 5th or after, to receive the dividends. Definitions from the ASX: Record date The Record Date is 5.00pm on the date a company closes its share register to determine which shareholders are entitled to receive the current dividend. It is the date where all changes to registration details must be finalised. Ex dividend date The ex dividend date occurs two business days before the company's Record Date. To be entitled to a dividend a shareholder must have purchased the shares before the ex dividend date. If you purchase shares on or after that date, the previous owner of the shares (and not you) is entitled to the dividend. A company's share price may move up as the ex dividend date approaches and then fall after the ex dividend date.\",\n \"Here's what Investopedia says about payouts for ex-dividend stocks: A stock trades ex-dividend on or after the ex-dividend date (ex-date). At this point, the person who owns the security on the ex-dividend date will be awarded the payment, regardless of who currently holds the stock. After the ex-date has been declared, the stock will usually drop in price by the amount of the expected dividend. Read more: Ex-Dividend Definition | Investopedia http://www.investopedia.com/terms/e/ex-dividend.asp#ixzz4Nl4J3s4k I hope this helps. Good luck!\",\n \"What is a dividend? Essentially, for every share of a dividend stock that you own, you are paid a portion of the company’s earnings. You get paid simply for owning the stock! For example, let’s say Company X pays an annualized dividend of 20 cents per share. Most companies pay dividends quarterly (four times a year), meaning at the end of every business quarter, the company will send a check for 1/4 of 20 cents (or 5 cents) for each share you own. This may not seem like a lot, but when you have built your portfolio up to thousands of shares, and use those dividends to buy more stock in the company, you can make a lot of money over the years. The key is to reinvest those dividends! Source: http://www.dividend.com/dividend-investing-101/what-are-dividend-stocks/ What is an ex dividend date Once the company sets the record date, the ex-dividend date is set based on stock exchange rules. The ex-dividend date is usually set for stocks two business days before the record date. If you purchase a stock on its ex-dividend date or after, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend. Source: https://www.sec.gov/answers/dividen.htm That said, as long as you purchased the stock before 6/4/17 you are entitled to the next dividend. If not, you'll get the following one after that.\",\n \"The exchanges artificially push the price of the stock down on the ex-div date. Often the impact of paying the dividend is absorbed by the ebb and flow of trading in the stock later in the day by the market. I think this was noticable with Nokia because the company is in poor shape and the stock has plunged recently. Dividends are a great way for companies to return value to shareholders. The trend for many companies, particularly growth stocks is to reinvest profits to grow the company. Former growth stocks like Microsoft like to just sit on billions of dollars and do nothing with it.\",\n \"Suppose the price didn't drop on the ex-dividend date. Then people wanting to make a quick return on their money would buy shares the day before, collect the dividend, and then sell them on the ex-dividend date. But all those people trying to buy on the day before would push the price up, and they would push the price down trying to sell on the date.\",\n \"Ex-Date is a function of the exchange, as well as the dividend. Consider Deutsche Bank AG, DB on the NYSE, DKR on Xetra. For a given dividend, each exchange sets the ex-date for trades on that exchange. (See http://www.sec.gov/answers/dividen.htm for a description of how it works in the US; other exchanges/countries are similar.) This ex-date is normally based on the dividends record date, which is when you must be on the company's books as a shareholder to receive the dividend, and based on when trades for an exchange are settled. The ex-date is the first date for which trades on that date will not settle until after the record date. This means that the ex-date can be different for different exchanges. If you sell your shares on an exchange before the ex-date for that exchange, you will not get the dividend. If you sell your shares on or after the ex-date for the exchange, you do not get the dividend. So it depends on the time zone of the exchange. Most stock exchanges trade T+3, but this can still come into play if there are bank holidays in different countries at different times.\",\n \"So from Investopedia - Who actually declares a dividend states that the Board of Directors of a company sets the 4 key dates: As these dates are chosen by the Board of Directors, either by internal corporate convention or special situation. Conceivably a Board may choose a Payable Date greater than 2 weeks which may make sense if their accounting partners are unavailable, i.e. extended national holiday. I assume that any period of time longer that what may seem reasonable and customary will be a topic at the next shareholder meeting.\",\n \"Why does it take two weeks (from ex-date) for dividends to pay out? For logistical and accounting purposes. This article says on the payment date: This date is generally a week or more after the date of record so that the company has sufficient time to ensure that it accurately pays all those who are entitled. It is for the same reasons that there is a often a two-week period between the time an employee submits her time sheet and the employee's pay date. The company needs time to set and send the payment while minimizing accounting errors.\",\n \"The ex-dividend date is the first date on which you may sell without losing your dividend. In this case that date is August 5th (thanks, Victor). The price opens on the ex-dividend date lower than it closed on the previous day (by the amount of the dividend). Therefore you may sell any time on August 5th (including during pre-market trading) and still get the dividend. You must be the owner of the stock as of the end of after-hours trading on the 4th (and therefore overnight) in order to get the dividend. Intel's Dividend Dates The record date isn't important to your trading decision.\",\n \"I guess the answer lies in your tax jurisdiction (different countries tax capital gains and income differently) and your particular tax situation. If the price of the stock goes up or down between when you buy and sell then this counts for tax purposes as a capital gain or loss. If you receive a dividend then this counts as income. So, for instance, if you pay tax on income but not on capital gains (or perhaps at a lower rate on capital gains) then it would pay you to sell immediately before the stock goes ex-dividend and buy back immediately after thereby making a capital gain instead of receiving income.\",\n \"\\\"Not minutes, but hours. The \\\"\\\"ex-dividend\\\"\\\" date is the deadline for acquiring a stock to receive a dividend. If you hold a stock at the beginning of this day, you will receive the dividend. So you could buy a stock right at the end of the day on the day before the ex-dividend date, and sell it the next day (on the ex-dividend date), and you would get your dividend. See this page from the SEC for more information. The problem with this strategy, however, is that the value of the stock typically drops by the same amount as the dividend on that day. If you take a look at the historical price of the stock you are interested in, you'll see this. Of course, it makes sense why: a seller knows that selling before the date results in a loss of the dividend, so they want a higher price to compensate. Likewise, a buyer on or after the date knows that the dividend is already gone, so they want to pay a lower price.\\\"\",\n \"Investopedia states: While early exercise is generally not advisable, because the time value inherent in the option premium is lost upon doing so, there are certain circumstances under which early exercise may be advantageous. For example, an investor may choose to exercise a call option that is deeply in-the-money (such an option will have negligible time value) just before the ex-dividend date of the underlying stock. This will enable the investor to capture the dividend paid by the underlying stock, which should more than offset the marginal time value lost due to early exercise. So the question is how well do you see the time value factor here?\",\n \"There are two 'dates' relevant to your question: Ex-Dividend and Record. To find out these dates for a specific security visit Dividend.Com. You have to purchase the security prior to the Ex-Dividend date, hold it at least until the Record Date. After the Record Date you can sell the security and still receive the dividend for that quarter. ---- edit - - - - I was wrong. If you sell the security after the Ex-div date but before the date of record you still get the dividend. http://www.investopedia.com/articles/02/110802.asp\",\n \"The ex-dividend date, prevents this, but people are still able to do this and this is an investment strategy. There are some illiquid and immature markets where prices don't adjust. In the options market people are able to find mispriced deep in the money calls to take advantage of the ex-dividend date. It is called dividend capture using covered calls.\",\n \"Your ETF will return the interest as dividends. If you hold the ETF on the day before the Ex-Dividend date, you will get the dividend. If you sell before that, you will not. Note that at least one other answer to this question is wrong. You do NOT need to hold on the Record date. There is usually 2 days (or so) between the ex-date and the record date, which corresponds to the number of days it takes for your trade to settle. See the rules as published by the SEC: http://www.sec.gov/answers/dividen.htm\",\n \"\\\"Dividends are declared by the board of directors of a corporation on date A, to stock holders of record on date B (a later date). These stockholders then receive the declared dividend on date C, the so-called payment date. All of these dates are announced on the first (declaration) date. If there is no announcement, no dividend will be paid. The stock typically goes down in price by approximately the amount of the dividend on the date it \\\"\\\"goes ex,\\\"\\\" but then moves in price to reflect other developments, including the possibility of another declaration/payment, three months hence. Dividends are important to some investors, especially those who live on the income. They are less important to investors who are out for capital gains (and who may prefer that the company reinvest its money to seek such gains instead of paying dividends). In actual fact, dividends are one component of \\\"\\\"total\\\"\\\" or overall return. The other component is capital gains, and the sum of the two represents your return.\\\"\",\n \"Yes, the stock price drops on official listing. But what gonna happen on first trade after the dividend date, is up to the market. The market is the market, the rules are the rules. I saw prices going up more than once just after the dividend date, exactly because people think will be cheaper. Market doesn't always follow rules.\",\n \"Yes you can do that and it it wise to do so. However, you should make sure that the general trend of the stock is upwards and you buy during a trought in the uptrend. So basically if the stock is making higher highs and higher lows on the daily or weekly charts, then you would want to buy around one of the higher lows before the ex-dividend date. If the stock is making lower lows and lower highs, then it is in a downtrend, so never buy in this instance. It is better to miss out on a dividend of $1 rather than to buy just for this $1 dividend and lose $5 or more when the price continues to drop further.\",\n \"\\\"You have to be the owner of record before the ex-dividend date, which is not the same day as the date the dividend is paid. This also implies that if you sell on or after the ex-dividend date, you'll still get the dividend, even if you no longer own the stock. Keep in mind, also, that the quoted price of the stock (and on any open orders that are not specifically marked as \\\"\\\"do not reduce\\\"\\\") on its ex-dividend date is dropped by the amount of the dividend, first thing in the morning before trading starts. If you happen to be the first order of the day, before market forces cause the price to move, you'll end up with zero gain, since the dividend is built into the price, and you got the same value out of it -- the dividend in cash, and the remaining value in stock. As pointed out in the comments (Thanks @Brick), you'll still get a market price for your trade, but the price reduction will have had some impact on the first trade of the day. Source: NYSE Rule 118.30 Also, remember that the dividend yield is expressed in annualized terms. So a 3% yield can only be fully realized by receiving all of the dividend payments made by the company for the year. You can, of course, forget about individual companies and just look for dividends to create your own effective yield over time. But, see the final point... Finally, if you keep buying and selling just to play games with the dividends, you're going to pay far more in transaction fees than you will earn in dividends. And, depending on your individual circumstances, you may end up paying more in capital gains taxes.\\\"\",\n \"For the case of spinoffs it reflects the market as activities as the specific steps that have to be followed take place. For example the spinoff of Leidos from SAIC in 2013. (I picked this one becasue I knew some of the details) On September 9, 2013, the Board of Directors of SAIC, Inc.(Ticker Symbol (NYSE):SAI) approved the following: The separation of its technical, engineering and enterprise information technology services business through the distribution of shares of SAIC Gemini, Inc. to stockholders. Each stockholder of record of SAIC, Inc. as of September 19, 2013 (Record Date) will receive one (1) share of SAIC Gemini, Inc. common stock for every seven (7) shares of SAIC, Inc. common stock held by such stockholder as of the Record Date. This distribution will be effective after market close on September 27, 2013 (Distribution Date). After the Distribution Date, SAIC Gemini, Inc. will be renamed Science Applications International Corporation (New SAIC). A one (1) for four (4) reverse stock split of the SAIC, Inc. common stock effective as of Distribution Date. After the Distribution Date, SAIC, Inc. will be renamed Leidos Holdings, Inc. (Leidos). Q 11: What are the different trading markets that may occur between Record Date and Distribution Date? A: Beginning two days prior to the Record Date of September 19, 2013 through the Distribution Date on September 27, 2013, there may be three different trading markets available with respect to SAIC, Inc. and the separation. Stock Ticker – SAI (Regular Way Trading with Due Bills): Shares of SAI common stock that trade on the regular-way market will trade with an entitlement to shares of the New SAIC common stock distributed on the Distribution Date. Purchasers in this market are purchasing both the shares of Leidos and New SAIC common stock. Form of Stock Ticker –SAIC (When Issued Trading): Shares of New SAIC common stock may be traded on a “when-issued” basis. These transactions are made conditionally because the security has been authorized, but not yet issued. Purchasers in this market are only purchasing the shares of New SAIC common stock distributed on the Distribution Date. Form of Stock Ticker – LDOS (Ex-Distribution Trading): Shares that trade on the ex-distribution market will trade without an entitlement to shares of New SAIC common stock distributed on the Distribution Date. Purchasers in this market are only purchasing the shares of Leidos common stock. So the stock price for New SAIC starts a few days before the record date of 19 September 2013, while LDOS (new name for the old SAIC) goes back much earlier. But the company didn't split until after the close of business on 27 September 2013. http://investors.saic.com/sites/saic.investorhq.businesswire.com/files/doc_library/file/GeneralStockholder-QuestionsandAnswers.pdf\",\n \"The Paragraph talks about dividends given by Mutual Funds. Say a fund has NAV of $ 10, as the value of the underlying security grows, the value of the fund would also grow, lets say it becomes $ 12 in 2 months. Now if the Mutual Fund decides to pay out a dividend of $ 1 to all unit holder, then post the distribution of dividend, the value of the Fund would become to $ 11. Thus if you are say investing on 1-April and know that dividends of $1 would be paid on 5-April [the divided distribution date is published typically weeks in advance], if you are hoping to make $1 in 5 days, that is not going to happen. On 6-April you would get $1, but the value of the fund would now be $11 from the earlier $12. This may not be wise as in some countries you would ending up paying tax on $1. Even in shares, the concept is similar, however the price may get corrected immediately and one may not actually see it going down by $1 due to market dynamics.\",\n \"The answer provide by @mbhunter is correct, however there are contexts, shorting in spot market and carrying the position over settlement usually does not entail payment of dividend to the broker, one of the reason being post ex-date the price of the share downward adjusts to the extent of the dividend, so practically if you have shorted at 100 and post ex-date (assuming a dividend of 2 and no movement of the stock price), the price would slide to 98, the party who longed the stock @ 100 now is sitting on a price of 98 and received a dividend of 2 which equates to 100. The above is also contextual to the law of the country governing the exchange and the security exchange board regulations.\",\n \"The stock tends to drop by the amount of the dividend -- or if you prefer to think of it this way, the stock price has been pushed up by the amount of the dividend before it was paid out. Really, all this shift does is factor out the impending dividend's effect on the real purchase cost of the stock. As such it's pretty much irrelevant except that, of course, the dividend is short-term gain that you have to pay taxes on almost immediately. Which also tends to get figured into the price folks are willing to pay for the stock. Conclusion: no, there's no real opportunity here. There's a slight tax reason to avoid buying right before dividends are paid, but that's about it. Basic principle: If it's simple and obvious,the market has already accounted for it.\",\n \"You only have to own it for a day (or rather for some amount of time before the close of trading the day before the ex-dividend date). This is governed by exchange rules based on the date of record and payable date set by the company. You might want to look at this article or this one for more details. It should be difficult to make money from changes due to the dividend distribution since it is well known and expected. The exchanges have established rules for handling the various details that can come up, and traders account for the change where appropriate (as in option pricing). Also, note that the favorable U.S. tax treatment of dividends requires a 60-day ownership period for the stock.\",\n \"I know that in the case of cash dividends I will get the dividend as long as I bought the stock before the ex-date but what happens in the case of an stock dividend? This is same as cash dividends. You would receive the additional stock.\",\n \"It may be true for a bond fund. But it is not true for bond etf. Bond etf will drop by the same amount when it distribute dividend on ex-dividend date.\",\n \"I believe this depends on the broker's policies. For example, here is Vanguard's policy (from https://personal.vanguard.com/us/whatweoffer/stocksbondscds/brokeragedividendprogram): Does selling shares affect a distribution? If you sell the entire position two days or more before the dividend-payable date, your distribution will be paid in cash. If, however, you sell an entire position within the two day time frame of the security's payable date, the dividend will be reinvested, resulting in additional shares. Selling these subsequent shares will require another sell order, which will incur additional commission charges. Dividends which would have been reinvested into less than one whole share will be automatically liquidated into cash. If you want to guarantee you receive no fractional shares, I'd call your broker and ask whether selling stock ABC on a particular date will result in the dividend being paid in shares.\",\n \"The rest of the market knows when the dividends are paid out, and that will be reflected naturally in the share price. That's why there is no way to consistently beat the market. Because the market is other human beings, who's sum of knowledge is greater than any individual. Everything in the stock market boils down to this in one way or another.\",\n \"According to Active Equity Management by Zhou and Jain: When a stock pays dividend, the adjusted price in Yahoo makes the following adjustment: Let T be the ex-dividend date (the first date that the buyers of a stock will not receive the dividend) and T-1 be the last trading day before T. All prices before T are adjusted by a multiplier (C_{T-1} - d_T)/C_{T-1}, where C_{T-1} is the close price at T-1 and d_T is the dividend per share. This, of course means that the price before T decreases.\",\n \"No, the dividends can't be exploited like that. Dividends settlement are tied to an ex-dividend date. The ex-dividend, is the day that allows you to get a dividend if you own the stock. Since a buyer of the stock after this date won't get the dividend, the price usually drop by the amount of the dividend. In your case the price of a share would lose $2.65 and you will be credited by $2.65 in cash such that your portfolio won't change in value due to the dividend. Also, you can't exploit the drop in price by short-selling, as you would be owing the dividend to the person lending you the stock for the short sale. Finally, the price of the stock at the ex-dividend will also be affected by the supply and demand, such that you can't be precisely sure of the drop in price of the security.\",\n \"As yet another explanation of why it does not really matter, you can look at this from the valuation point of view. Stock price is the present value of its future cash flows (be it free cash flow of the firm or dividends, depending on the model). Let's have a look at the dividends case. Imagine, the price of the stock is based on only three dividends streams $5 dollars each: dividend to be paid today, in year 1, and in year 2. Each should be discounted back to today (say, at 10%), except today's dividend, since today is now. Once that dividend is paid, it is no longer in the stream of cash flows. So if we just delete that first $5 from the formula, the price will adjust itself down by the amount of the dividend to $8.68. NOTE that this is a very simple example, since in reality cash flows streams are arguably infinite and because there are many other factors affecting stock price. But simply for your understanding, this example should provide you with the reason simply from the valuation perspective.\",\n \"The stock price is what people think a company is worth, this is made up of When a company pays out a dividend the money in the company’s bank account reduces, therefore the value of the company reduces. When a company says they are going to pay a larger dividend than expected, we start to expect they are going to make more profit next year as well. So stock price tends to go up when a company says it is increasing the dividend, but down on the day then money leaves the companies bank account. There is normally many months between the two events.\",\n \"\\\"Their is no arbitrage opportunity with \\\"\\\"buying dividends.\\\"\\\" You're buying a taxable event. This is a largely misunderstood topic. The stock always drops by the amount if the dividend on the ex date. The stock opens that day trading \\\"\\\"ex\\\"\\\" (excluding) the dividend. It then pays out later based in the shareholders on record. There is a lot of talk about price movement and value here. That can happen but it's from trading not from the dividend per se. Yes sometimes you do see a stock pop the day prior to ex date because people are buying the stock for the dividend but the trading aspect of a stock is determined by supply and demand from people trading the stock. The dividends are paid out from the owners equity section of the balance sheet. This is a return of equity to shareholders. The idea is to give owners of the company some of their investment back (from when they bought the stock) without having the owners sell the shares of the company. After all if it's a good company you want to keep holding it so it will appreciate. Another similar way to think of it is like a bonds interest payment. People sometimes forget when trading that these are actual companies meant to be invested in. Your buying an ownership in the company with your cash. It really makes no difference to buy the dividend or not, all other things constant. Though market activity can add or lose value from trading as normal.\\\"\",\n \"\\\"It is important to remember that the stock price in principle reflects the value of the company, so the market cap should drop upon issuance of the the dividend. However, the above reasoning neglects to consider taxes, which make the question a bit more interesting. The key fact is that different investors are going to get taxed on the dividend to varying degrees, ranging from 20% for qualified dividends in the USA for a high-income individual in a taxable account (and even worse for non-qualified dividends) to 0% for tax-exempt nonprofits, retirement accounts, and low-income individuals. The high-tax investors are going to be a bit averse to paying tax on that dividend, whereas the tax-free investors are not. Hence in a tax-rational market the tax-free investors are going to be the ones buying right before a dividend and the tax-paying investors will be buying right afterwards. Tax-exempt investors could in principle make some amount of money buying dividends to keep them off the tax-paying investors' books. (Of course, the strategy could backfire if too many people did it all at once.) That said, the tax-payers have the tax disincentive to prevent them from fully exploiting the opposite strategy of selling just before a dividend. In particular, they are subject to capital gains tax when they sell at a profit (unless they have enough compensating capital losses), and it is to their after-tax profit to defer taxation by not trading. That said, the stock market has well-known irrationality when it comes to considering tax consequences, so logic based on assumed rationality of the market does not always apply to the extent one would expect. The foremost example of tax-irrationality is the so-called \\\"\\\"dividend paradox\\\"\\\", which basically states that corporations should favor stock buybacks (or perhaps loan repayment) to the complete exclusion of dividends because capital gains are taxed less harshly than dividends in a variety of ways, some of which are subtle: 1) Historically (although not currently in the USA for qualified dividends) the tax rate was higher for dividends. (In Canada, for example, dividends are taxed at twice the rate of capital gains.) 2) If you die holding appreciated stock then you (meaning your heirs) completely escape US the capital gains tax on the accrual during your lifetime. 3) Capital gains tax can be deferred by simply not selling. In comparison to dividends, this is roughly equivalent to getting a tax-free loan from the government which is invested for profit and paid at a later date after inflation has eaten away at the real value of the loan. For example, if all your stock investments increase by 10%/year but you sell every year, in a high-tax bracket situation you're total after-tax return will be only 8% per year. In contrast, if you hold the same investments for many many years and then sell, your total return will be nearly 10% per year, because you only pay 20% once (at the end). 4) A capital gain can often be neutralized by a capital loss in another stock, so that no tax results. If you loose money on a stock that is paying dividends, you're still going to have to pay tax on that dividend. There are companies that borrow money to pay out that taxable-dividend each quarter, which seems like gross tax malpractice on the part of the CFO. (If the dividend paradox doesn't make sense, first consider the case that you owned ALL the shares of a company. It wouldn't matter to you at all on a pre-tax basis whether you got a $1000 company buyback or a $1000 dividend, because after the buyback/dividend you'd still own the entire company and $1000. The number of shares would be reduced, but objecting that you owned fewer shares after the buyback would be like saying you have become shorter if your height is measured in inches rather than centimeters.) [Of course, in the case of many shareholders you can get burned by failing to sell into the buyback when the share price is too high, but that is another matter.]\\\"\",\n \"There are a few situations in which it may be advantageous to exercise early. Wikipedia actually has a good explanation: Option Style, Difference in value To account for the American's higher value there must be some situations in which it is optimal to exercise the American option before the expiration date. This can arise in several ways, such as: An in the money (ITM) call option on a stock is often exercised just before the stock pays a dividend that would lower its value by more than the option's remaining time value. A put option will usually be exercised early if the underlying asset files for bankruptcy.[3] A deep ITM currency option (FX option) where the strike currency has a lower interest rate than the currency to be received will often be exercised early because the time value sacrificed is less valuable than the expected depreciation of the received currency against the strike. An American bond option on the dirty price of a bond (such as some convertible bonds) may be exercised immediately if ITM and a coupon is due. A put option on gold will be exercised early when deep ITM, because gold tends to hold its value whereas the currency used as the strike is often expected to lose value through inflation if the holder waits until final maturity to exercise the option (they will almost certainly exercise a contract deep ITM, minimizing its time value).[citation needed]\",\n \"\\\"I would suggest the following rationale : This appears to be a most unsatisfactory state of affairs, however, you can bet that this is how things are handled. As to who receives the dividend you have payed, this will be whoever the counter-party (or counter-parties) are that were assigned the exercise. EDIT Looking at the Dec16 SPY options, we see that the expiry date is 23 Dec. Therefore, your options have been exercised prior to expiry. The 3AM time stamp is probably due to the \\\"\\\"overnight batch processing\\\"\\\" of your brokers computer system. The party exercising the options will have chosen to exercise on the day prior to ex-dividend in order to receive the dividends.\\\"\",\n \"Dividends are supposed to be paid from company profits (in the current or previous financial years), there are nuances around what profits mean from country to country, but the link is the UK definition from the HMRC. Profits from previous financial years are commonly called retained earnings. There are a few items around this\",\n \"In an ideal world Say on 24th July the share price of Apple was $600. Everyone knows that they will get the $ 2.65 on 16th August. There is not other news that is affecting the price. You want to go in and buy the shares on 16th Morning at $600 and then sell it on 17th August at $600. Now in this process you have earned sure shot $2.65/- Or in an ideal world when the announcement is made on 24th July, why would I sell it at $600, when I know if I wait for few more days I will get $2.65/- so i will be more inclined to sell it at $602.65 /- ... so on 16th Aug after the dividend is paid out, the share price will be back to $600/- In a real world, dividend or no dividend the share price would be moving up or down ... Notice that the dividend amount is less than 1% of the stock price ... stock prices change more than this percentage ... so if you are trying to do what is described in paragraph one, then you may be disappointed as the share price may go down as well by more than $2.65 you have made\",\n \"I am relative newbie in the financial market trading and as I understand it, the response from Victor is accurate in respect of trading CFD contracts. However, there is also the option to 'trade' through a financial spread betting platform which as its name suggests is purely a bet based upon the price of the underlying stock/asset. As such, I believe that your theory to short a stock just prior to its ex-dividend date may be worth investigating further... Apart from that, it's worthwhile mentioning that financial spread betting is officially recognised by HMRC as gambling and therefore not currently [2015/16] subject to capital gains tax. This info is given in good faith and must not be relied upon when making any investment and/or trading decision(s). I hope this helps you make a fortune - if it does; then please remember me!\",\n \"\\\"Isn't it true that on the ex-dividend date, the price of the stock goes down roughly the amount of the dividend? That is, what you gain in dividend, you lose in price drop. Yes and No. It Depends! Generally stocks move up and down during the market, and become more volatile on some news. So One can't truly measure if the stock has gone down by the extent of dividend as one cannot isolate other factors for what is a normal share movement. There are time when the prices infact moves up. Now would it have moved more if there was no dividend is speculative. Secondly the dividends are very small percentage compared to the shares trading price. Generally even if 100% dividend are announced, they are on the share capital. On share prices dividends would be less than 1%. Hence it becomes more difficult to measure the movement of stock. Note if the dividend is greater than a said percentage, there are rules that give guidelines to factor this in options and other area etc. Lets not mix these exceptions. Why is everyone making a big deal out of the amount that companies pay in dividends then? Why do some people call themselves \\\"\\\"dividend investors\\\"\\\"? It doesn't seem to make much sense. There are some set of investors who are passive. i.e. they want to invest in good stock, but don't want to sell it; i.e. more like keep it for long time. At the same time they want some cash potentially to spend; similar to interest received on Bank Deposits. This class of share holders, it makes sense to invest into companies that give dividends, as year on year they keep receiving some money. If they on the other hand has invested into a company that does not give dividends, they would have to sell some units to get the same money back. This is the catch. They have to sell in whole units, there is brokerage, fees, etc, there are tax events. Some countries have taxes that are more friendly to dividends than capital gains. Thus its an individual choice whether to invest into companies that give good dividends or into companies that don't give dividends. Giving or not giving dividends does not make a company good or bad.\\\"\",\n \"\\\"4) Finally, do all companies reduce their stock price when they pay a dividend? Are they required to? There seems to be confusion behind this question. A company does not set the price for their stock, so they can't \\\"\\\"reduce\\\"\\\" it either. In fact, nobody sets \\\"\\\"the price\\\"\\\" for a stock. The price you see reported is simply the last price that the stock was traded at. That trade was just one particular trade in a whole sequence of trades. The price used for the trade is simply the price which the particular buyer and particular seller agreed to for that particular trade. (No agreement, well then, no trade.) There's no authority for the price other than the collection of all buyers and sellers. So what happens when Nokia declares a 55 cent dividend? When they declare there is to be a dividend, they state the record date, which is the date which determines who will get the dividend: the owners of the shares on that date are the people who get the dividend payment. The stock exchanges need to account for the payment so that investors know who gets it and who doesn't, so they set the ex dividend date, which is the date on which trades of the stock will first trade without the right to receive the dividend payment. (Ex-dividend is usually about 2 days before record date.) These dates are established well before they occur so all market participants can know exactly when this change in value will occur. When trading on ex dividend day begins, there is no authority to set a \\\"\\\"different\\\"\\\" price than the previous day's closing price. What happens is that all (knowledgeable) market participants know that today Nokia is trading without the payment 55 cents that buyers the previous day get. So what do they do? They take that into consideration when they make an offer to buy stock, and probably end up offering a price that is about 55 cents less than they would have otherwise. Similarly, sellers know they will be getting that 55 cents, so when they choose a price to offer their stock at, it will likely be about that much less than they would have asked for otherwise.\\\"\",\n \"\\\"Dividend rate is \\\"\\\"dividend per share\\\"\\\" over a specified time period, usually a year. So in the first example, if the company paid a $1/share dividend over the year before the stock dividend the shareholder would receive $100, while if it paid the $1/share the year after the stock dividend the shareholder would receive $105. The company could have achieved the same thing by paying total dividends of $1.05/share, which is what the last phrase of the last quoted paragraph is saying. Here's an Investopedia page on dividend rate. Also, what you're calling \\\"\\\"payout ratio\\\"\\\" is really \\\"\\\"dividend yield\\\"\\\". \\\"\\\"Payout ratio\\\"\\\" is how much of the company's net earnings are paid out in dividends. That's all in the US, I could see the terms being used differently outside the US.\\\"\",\n \"As the record date is 7th August, you need to hold stocks on the 7th August closing. You need not hold it till 2nd Sept. The list as taken on 7th August would be processed and instructions given to Bank and the dividends credited by 1st Sept. Edit: To Clarify Victor's comment Typically from the time one sells the stocks to the time it actually gets transferred has a clearing cycle. Most stock exchanges have 2 or 3 days cycles. i.e. if I sell the stock today, it is still in my name. The money is still with the buyer. On Day 1, the positions are arrived at. On Day 2 the stock gets credited to the buyer and the funds gets credit to seller. As the question was specific whether to hold the stock till 7th or 22nd Sept, my initial answer was simple. The illustration by Victor is more accurate.\",\n \"Yes, the stock price drops on the ex-dividend date by roughly the amount of the dividend. There is even academic research testing this and confirming that the popular rule of thumb works well.\",\n \"When you want the transaction to be concluded in the current year vs an expiration in the next year.\",\n \"The answer, for me, has to do with compounding. That drop in price post-ex-div is not compounded. But if you reinvest your dividends back into the stock then you buy on those post-ex-div dips in price and your money is compounded because those shares you just bought will, themselves, yeald dividends next quarter. Also, with my broker, I reinvest the dividend incurring no commission. My broker has a feature to reinvest dividends automatically and he charges no commission on those buys. Edit:I forgot to mention that you do not incurr the loss from a drop in price until you sell the security. If you do not sell post-ex-div then you have no loss. As long as the dividend remains the same (or increases) then the theoretical ROI on that security goes up. The drop in price is actually to your benefit because you are able to acquire more shares with the money you just received in the dividend So the price coming down post-ex-div is a good thing (if you buy and hold).\",\n \"Different stakeholders receive cash flows at different times. The easiest way for me to remember is if you're a debt holder vs equity owner on an income statement. Interest payments are made before net income, so debt holders are repaid before any residual cash flows go to equity owners.\",\n \"Most bond ETFs have switched to monthly dividends paid on the first of each month, in an attempt to standardize across the market. For ETFs (but perhaps not bond mutual funds, as suggested in the above answer) interest does accrue in the NAV, so the price of the fund does drop on ex-date by an amount equal to the dividend paid. A great example of this dynamic can be seen in FLOT, a bond ETF holding floating rate corporate bonds. As you can see in this screenshot, the NAV has followed a sharp up and down pattern, almost like the teeth of a saw. This is explained by interest accruing in the NAV over the course of each month, until it is paid out in a dividend, dropping the NAV sharply in one day. The effect has been particularly pronounced recently because the floating coupon payments have increased significantly (benchmark interest rates are higher) and mark-to-market changes in credit spreads of the constituent bonds have been very muted.\",\n \"The dividend goes to he who owns the stock when it goes ex-div. A buyer (the call buyer who exercises) will not exercise unless the stock plus dividend are in the money. Otherwise they'd be buying the stock at a premium. I like the scenario your friend doesn't. If I can find a high dividend stock and sell the call for a decent price, I may get a great return on a stock that's gone down 5% over a year's time. If it goes up and called away, that's fine too, it means a profit.\",\n \"Unless you suffer from the illusion that you can time the market, it honestly doesn't matter much; the difference is lost in the noise. That may be true even if you do suffer from that illusion. Also, as discussed here previously, the drop in a stock's price right after the dividend has been paid just reflects the fact that you aren't about to get an immediate refund in the form of a dividend. If you look at the real cost per share, it's meaningless and can/should be ignored. Buying after the dividend is paid may save you a tiny fraction of a cent of short-term income tax, but that's meaningless in real terms.\",\n \"Yes, as long as you own the shares before the ex-dividend date you will get the dividends. Depending on your instructions to your broker, you can receive cash dividends or you can have the dividends reinvested in more shares of the company. There are specific Dividend ReInvestment Plans (or DRIPs) if you are after stock growth rather than income from dividend payments.\",\n \"There are many reasons for buying stock for dividends. You are right in the sense that in theory a stock's price will go down in value by the amount of the dividend. As the amount of dividend was adding to the value of the company, but now has been paid out to shareholder, so now the company is worth less by the value of the dividend. However, in real life this may or may not happen. Sometimes the price will drop by less than the value of the dividend. Sometimes the price will drop by more than the dividend. And other times the price will go up even though the stock has gone ex-dividend. We can say that if the price has dropped by exactly the amount of the dividend then there has been no change in the stockholders value, if the price has dropped by more than the value of the dividend then there has been a drop to the stockholder's value, and if the price has gone up or dropped by less than the value of the dividend then there has been a increase to the stockholder's value. Benefits of Buying Stocks with Good Dividends: What you shouldn't do however, is buy stocks solely due to the dividend. Be aware that if a company starts reducing its dividends, it could be an early warning sign that the company may be heading into financial troubles. That is why holding a stock that is dropping in price purely for its dividend can be a very dangerous practice.\",\n \"Regarding: 1) What's the point of paying a dividend if the stock price automatically decreases? Don't the shareholders just break even? As dividends distribution dates and amounts are announced in advance, probably the stock price will rise of the same amount of the divident before the day of distribution. If I know that stock share A's value is y and the dividend announced is x, I would be willing to buy shares of A for anything > y and < than x+y before the distribution.So, arbitrageurs probably would take the price to x+y before the dividend distribution, and then after the dividend distribution the price will fall back to y.\",\n \"Various types of corporate actions will precipitate a price adjustment. In the case of dividends, the cash that will be paid out as a dividend to share holders forms part of a company's equity. Once the company pays a dividend, that cash is no longer part of the company's equity and the share price is adjusted accordingly. For example, if Apple is trading at $101 per share at the close of business on the day prior to going ex-dividend, and a dividend of $1 per share has been declared, then the closing price will be adjusted by $1 to give a closing quote of $100. Although the dividend is not paid out until the dividend pay date, the share price is adjusted at the close of business on the day prior to the ex-dividend date since any new purchases on or after the ex-dividend date are not entitled to receive the dividend distribution, so in effect new purchases are buying on the basis of a reduced equity. It will be the exchange providing the quote that performs the price adjustment, not Google or Yahoo. The exchange will perform the adjustment at the close prior to each ex-dividend date, so when you are looking at historical data you are looking at price data that includes each adjustment.\",\n \"So My question is if I purchased the shares on 03-08-15 then will I get the dividend? Yes if you purchase on 3-Aug, the shares will actually get credited to your account on 5-Aug and hence you will hold the shares on 6-Aug, the record date.\",\n \"In the equity world, if a stock trades at 110 and is going to pay a dividend of 10 in a few days, an option expiring after the ex date would take the dividend into account and would trade as if the stock were trading at 100. (Negative) interest rates may also lead to a similar effect. In the commodity world the cost of carry needs to be taken into account.\",\n \"There is a basis for that if you consider the power of compounding. So, the sooner you re-invest the dividends the sooner the time will give you results (through compounding). There is also the case of the commissions, if they are paid with a percentage of the amount invested they automatically gain more from you. Just my 2cents, though the other answers are probably more complete.\",\n \"\\\"There are a few reason why the stock price decreases after a dividend is paid: What's the point of paying a dividend if the stock price automatically decreases? Don't the shareholders just break even? Companies have to do something with their profits. They beholden to their shareholders to make them money either by increasing the share value or paying dividends. So they have the choice between reinvesting their profits into the company to grow the business or just handing the profits directly to the owners of the business (the shareholders). Some companies are as big as they want to be and investing their profits into more capital offers them diminishing returns. These companies are more likely to pay dividends to their shareholders. I assume the price of the stock \\\"\\\"naturally\\\"\\\" increases over the year to reflect the amount of the dividend payment. This is kind of a vague question but then doesn't it make it difficult to evaluate the fluctuations in stock price (in the way that you would a company that doesn't pay a dividend)? It depends on the company. The price may recover the dividend drop... could take a few days to a week. And that dependings on the company's performance and the overall market performance. With respect to options, I assume nothing special happens? So say I bought $9 call options yesterday that were in the money, all of a sudden they're just not? Is this typically priced into the option price? Is there anything else I need to know about buying options in companies that pay dividends? What if I had an in-the-money option, and all of a sudden out of nowhere a company decides to pay a dividend for the first time. Am I just screwed? One key is that dividends are announced in advance (typically at least, if not always; not sure if it's required by law but I wouldn't be surprised). This is one reason people will sometimes exercise a call option early, because they want to get the actual stock in order to earn the dividend. For \\\"\\\"out of the ordinary\\\"\\\" large cash dividends (over 10% is the guideline), stock splits, or other situations an option can be adjusted: http://www.888options.com/help/faq/splits.jsp#3 If you have an options account, they probably sent you a \\\"\\\"Characteristics and Risks of Standardized Options\\\"\\\" booklet. It has a section discussing this topic and the details of what kinds of situations trigger an adjustment. A regular pre-announced <10% dividend does not, while a special large dividend would, is what I roughly get from it. That \\\"\\\"Characteristics and Risks of Standardized Options\\\"\\\" is worth reading by the way; it's long and complicated, but well, options are complicated. Finally, do all companies reduce their stock price when they pay a dividend? Are they required to? I'm just shocked I've never heard of this before. The company doesn't directly control the stock price, but I do believe this is automatic. I think the market does this automatically because if they didn't, there would be enough people trying to do dividend capture arbitrage that it would ultimately drive down the price.\\\"\",\n \"In India, the amount of dividend you get is based on the face value of the stock. If the stock's face value is Rs. 10 and the company announced a dividend of 20%, you will receive Rs.2 per share.To see whether you qualify to receive a dividend, see the ex-dividend date of the company. If you purchased shares before that date, you will receive the dividend, else you will not\",\n \"\\\"EPS is often earnings/diluted shares. That is counting shares as if all convertible securities (employee stock options for example) were converted. Looking at page 3 of Q4 2015 Reissued Earnings Press Release we find both basic ($1.13) and diluted EPS ($1.11). Dividends are not paid on diluted shares, but only actual shares. If we pull put this chart @ Yahoo finance, and hovering our mouse over the blue diamond with a \\\"\\\"D\\\"\\\", we find that Pfizer paid dividends of $0.28, $0.28, $0.28, $0.30 in 2015. Or $1.14 per share. Very close to the $1.13, non-diluted EPS. A wrinkle is that one can think of the dividend payment as being from last quarter, so the first one in 2015 is from 2014. Leaving us with $0.28, $0.28, $0.30, and unknown. Returning to page three of Q4 2015 Reissued Earnings Press Release, Pfizer last $0.03 per share. So they paid more in dividends that quarter than they made. And from the other view, the $0.30 cents they paid came from the prior quarter, then if they pay Q1 2016 from Q4 2015, then they are paying more in that view also.\\\"\",\n \"Ex-Dividend Price Behavior of Common Stocks would be a study from the Federal Reserve Bank of Minneapolis and University of Minnesota if you want a source for some data. Abstract This study examines common stock prices around ex-dividend dates. Such price data usually contain a mixture of observations - some with and some without arbitrageurs and/or dividend capturers active. Our theory predicts such mixing will result in a nonlinear relation between percentage price drop and dividend yield - not the commonly assumed linear relation. This prediction and another important prediction of theory are supported empirically. In a variety of tests, marginal price drop is not significantly different from the dividend amount. Thus, over the last several decades, one-for-one marginal price drop have been an excellent (average) rule of thumb.\",\n \"Should be noted that pacoverflow's answer is wrong. Yahoo back-adjusts all the previous (not current or future) values based on a cumulative adjustment factor. So if there's a dividend ex-date on December 19, Yahoo adjusts all the PREVIOUS (December 18 and prior) prices with a factor which is: 1 - dividend / Dec18Close\",\n \"In most cases , preferential sharesholders are paid dividends first before common shareholders are paid . In the event of a company bankruptcy , preferential shareholders have the right to be paid first before common shareholders. In exchange for these benefits , preferential shareholders do not have any voting rights. The issuing of preferential shares has no impact on share prices or issuing of bonuses , it is a mere coincidence that the stock price went up\",\n \"\\\"Dividends are paid based on who owns the security on a designated day. If a particular security pays once per year, you hold 364 days and sell on the day before the \\\"\\\"critical\\\"\\\" day, you get no dividend. This is not special to 401(k) or to DRIP. It's just how the system works. The \\\"\\\"critical\\\"\\\" day is the day before the posted ex-dividend date for the security. If you own at the end of that day, you get the dividend. If you sell on that day or before, you do not. Your company changing providers is not in itself relevant. The important factor is whether you can still hold your same investments in the new plan. If not, you will not get the dividend on anything that you currently hold but \\\"\\\"sell\\\"\\\" due to the change in providers. If you can, then you potentially get the dividend so long as there's no glitch in the transition. Incidentally, it works the other way too. You might end up getting a dividend through the new plan for something that you did not hold the full year.\\\"\",\n \"The trades after that date were Ex-DIV, meaning after 5 pm Dec 12, new trades did not include the shares that were to be spun out. The process is very orderly, no one pays $60 without getting the spinoff, and no one pays $30 but still gets it. The real question is why there's that long delay nearly three weeks to make the spinoff shares available. I don't know. By the way, the stock options are adjusted as well. Someone owning a $50 put isn't suddenly in the money on 12/13. Edit - (I am not a hoarder. I started a fire last night and realized I had a few Barron's in the paper pile) This is how the ABT quote appeared in the 12/24 issue of Barron's. Both the original quote, and the WI (when issued) for the stock less the spin off company.\",\n \"What about in the case of a company with unexpectedly low cash (and therefore an inability to easily pay out dividends) but with a surplus of inventory? Obviously the investors should receive some premium for that, because I think anyone would prefer cash, but there are certainly extreme circumstances where it might be appropriate.\",\n \"\\\"Preferred dividends and common dividends are completely separate transactions. There's not a single \\\"\\\"dividend\\\"\\\" payment that is split between preferred and common shares. Dividends on preferred shares are generally MUCH higher than common dividends, and are generally required by the terms of the preferred shares, again unlike common dividends, which are discretionary.\\\"\",\n \"No, not screwed. This is just an artifact of the tax code and year end dividends. You paid a tax, and in return, got a higher basis. When you sell, you will have less profit, therefore less tax to pay than the guy who bought right after the dividend. You can call the fund company if you want to buy later this year. Once you understand the process, it might not bother you at all.\",\n \"Share prices fall when dividends are paid out because the paid dividend (cash out) actually reduces the value of the company. Usually the share price falls by the amount of the dividend payment.\",\n \"It might be clearer to think of it as price going up when a dividend is expected, since that's money you'll get right back. As the delay before the next dividend payment increases, that becomes less of a factor,\",\n \"When you short a stock and the stock goes ex-div. you have to pay out an amount equal to the dividend. So in your example, GG would short the stock at $10.00, buy back at $9.00 and be charged $1.00 for the dividend. Net effect $0.00.\",\n \"The moment the dividend is announced, especially from a company that doesn't normally pay dividends, the dividend is factored into everybody's analysis. In the absence of any other news the price of apple would be expected to drop once the dividend in locked in. Why would I buy shares from you at full price one day after the dividend is paid, if I will have to wait for the next dividend? Also keep in mind the dividend was announced on July 24th, and is given to shareholders of record on August 13th. You are way behind the curve.\",\n \"Yes, there is a delay between when you buy a stock and when you actually take ownership of it. This is called the settlement period. The settlement period for US equities is T+2 (other markets have different settlement periods), meaning you don't actually become a shareholder of record until 2 business days after you buy. Conversely, you don't stop being a shareholder of record until 2 business days after you sell. Presumably at some point in the (far) future all public markets will move to same-day changes of ownership, at which point companies will stop making announcements of the form all shareholders of record as of September 22nd and will switch to announcements of the form all shareholders of record as of September 22nd at 13:00 UTC\",\n \"There is a reason - your credit score. If you ever take out a mortgage, you might pay dearly for your behavior. The bank where you have the credit card reports the amount on the bill to the credit rating agencies. If you pay before the bill date, they will always report zero. You should wait at least till the day after the billing cycle ends, and then pay off (you don't need to have the paper bill in your hands - you can see online when the cycle closed). Depending on your other financial behavior, this will have between zero and significant effect, on the percentages you get offered for car loans, mortgages, etc.\",\n \"Yes, and there's a good reason they might. (I'm gonna use equity options for the example; FX options are my thing, but they typically trade European style). The catch is dividends. Imagine you're long a deep-ITM call on a stock that's about to pay a dividend. If that dividend is larger than the time value remaining on the option, you'd prefer to exercise early - giving you the stock and the dividend payment - rather than hanging on to the time value of the option. You can get a similar situation in FX options when you're long a deep-ITM American call on a positive-carry currency (say AUDJPY); you might find yourself so deep in the money, with so little time value left on the option, that you'd rather exercise the option and give up the remaining time value in return for the additional carry from getting the spot position early.\",\n \"To follow up on Quid's comment, the share classes themselves will define what level of dividends are expected. Note that the terms 'common shares' and 'preferred shares' are generally understood terms, but are not as precise as you might believe. There are dozens/hundreds of different characteristics that could be written into share classes in the company's articles of incorporation [as long as those characteristics are legal in corporate law in the company's jurisdiction]. So in answering your question there's a bit of an assumption that things are working 'as usual'. Note that private companies often have odd quirks to their share classes, things like weird small classes of shares that have most of the voting rights, or shares with 'shotgun buyback clauses'. As long as they are legal clauses, they can be used to help control how the business is run between various shareholders with competing interests. Things like parents anticipating future family infighting and trying to prevent familial struggle. You are unlikely to see such weird quirks in public companies, where the company will have additional regulatory requirements and where the public won't want any shock at unexpected share clauses. In your case, you suggested having a non-cumulative preferred share [with no voting rights, but that doesn't impact dividend payment]: There are two salient points left related to payout that the articles of incorporation will need to define for the share classes: (1) What is the redemption value for the shares? [This is usually equal to the cost of subscribing for the shares in the first place; it represents how much the business will need to pay the shareholder in the event of redemption / recall] (2) What is the stated dividend amount? This is usually defined at a rate that's at or a little above a reasonable interest rate at the time the shares are created, but defined as $ / share. For example, the shares could have $1 / share dividend payment, where the shares originally cost $50 each to subscribe [this would reflect a rate of payment of about 2%]. Typically by corporate law, dividends must be paid to preferred shares, to the extent required based on the characteristics of the share class [some preferred shares may not have any required dividends at all], before any dividends can be paid to common shares. So if $10k in dividends is to be paid, and total preferred shares require $15k of non-cumulative dividends each year, then $0 will be paid to the common shares. The following year, $15k of dividends will once again need to be paid to the preferred shares, before any can be paid to the common shares.\",\n \"CHN is a Closed-End Fund. CHN actually pays out three types of distributions: In the case of CHN, they appear to be paying yearly. The most recent dividend, with exdate of 18 Dec 2014, consisted of $3.4669 of Long-term capital gains and $0.2982 cash dividend. Prior to that, the dividend with exdate of 19 Dec 2013 consisted of $2.8753 long-term capital gains and $0.4387 cash dividend. For a standard dividend yield you typically would not expect short-term and long-term capital events to be included in a yield calculation, as these events really only occur in relation to a fund rebalancing (changing its investments) and are not really due to the actual performance of the fund in any way. Most free sites that provide dividend information do not make a distinction on the dividend type. Data source: Premium Data Full Disclosure: I am a co-owner of Premium Data/Norgate.\",\n \"\\\"What you are describing is a very specific case of the more general principle of how dividend payments work. Broadly speaking, if you own common shares in a corporation, you are a part owner of that corporation; you have the right to a % of all of that corporation's assets. The value in having that right is ultimately because the corporation will pay you dividends while it operates, and perhaps a final dividend when it liquidates at the end of its life. This is why your shares have value - because they give you ownership of the business itself. Now, assume you own 1k shares in a company with 100M shares, worth a total of $5B. You own 0.001% of the company, and each of your shares is worth $50; the total value of all your shares is $50k. Assume further that the value of the company includes $1B in cash. If the company pays out a dividend of $1B, it will now be only worth $4B. Your shares have just gone down in value by 20%! But, you have a right to 0.001% of the dividend, which equals a $10k cash payment to you. Your personal holdings are now $40k worth of shares, plus $10k in cash. Except for taxes, financial theory states that whether a corporation pays a dividend or not should not impact the value to the individual shareholder. The difference between a regular corporation and a mutual fund, is that the mutual fund is actually a pool of various investments, and it reports a breakdown of that pool to you in a different way. If you own shares directly in a corporation, the dividends you receive are called 'dividends', even if you bought them 1 minute before the ex-dividend date. But a payment from a mutual fund can be divided between, for example, a flow through of dividends, interest, or a return of capital. If you 'looked inside' your mutual fund you when you bought it, you would see that 40% of its value comes from stock A, 20% comes from stock B, etc etc., including maybe 1% of the value coming from a pile of cash the fund owns at the time you bought your units. In theory the mutual fund could set aside the cash it holds for current owners only, but then it would need to track everyone's cash-ownership on an individual basis, and there would be thousands of different 'unit classes' based on timing. For simplicity, the mutual fund just says \\\"\\\"yes, when you bought $50k in units, we were 1/3 of the year towards paying out a $10k dividend. So of that $10k dividend, $3,333k of it is assumed to have been cash at the time you bought your shares. Instead of being an actual 'dividend', it is simply a return of capital.\\\"\\\" By doing this, the mutual fund is able to pay you your owed dividend [otherwise you would still have the same number of units but no cash, meaning you would lose overall value], without forcing you to be taxed on that payment. If the mutual fund didn't do this separate reporting, you would have paid $50k to buy $46,667k of shares and $3,333k of cash, and then you would have paid tax on that cash when it was returned to you. Note that this does not \\\"\\\"falsely exaggerate the investment return\\\"\\\", because a return of capital is not earnings; that's why it is reported separately. Note that a 'close-ended fund' is not a mutual fund, it is actually a single corporation. You own units in a mutual fund, giving you the rights to a proportion of all the fund's various investments. You own shares in a close-ended fund, just as you would own shares in any other corporation. The mutual fund passes along the interest, dividends, etc. from its investments on to you; the close-ended fund may pay dividends directly to its shareholders, based on its own internal dividend policy.\\\"\",\n \"When dividend is announced the stock and option price may react to that news, but the actual payout of the dividend on the ex-dividend date is what you probably are referring to. The dividend payout affects the stock price on the ex-dividend date as the stock price will drop by the amount of paid out dividend (not taking into account other factors). This in turn drives the prices of all options. The amount of change in the option price for this event is not only dependent the dividend payout, but also on how far these are in our out of the money and what there time to expiration is. The price of a call option that is far out of the money would react less than the price of a put that would be far in the money. Therefore I would argue that these two will not necessarily offset each other.\",\n \"Some investors (pension funds or insurance companies) need to pay out a certain amount of money to their clients. They need cash on a periodical basis, and thus prefer dividend paying stock more.\",\n \"For all stocks, expected Dividends are a part of the price it is traded for - consider that originally, the whole idea of stocks was to participate in the earnings of the company = get dividends. The day the dividend is paid, that expectation is of course removed, and thereby the stock value reduced by just the amount of dividend paid. You will see that behavior for all stocks, everywhere. The dividend in your example is just uncommonly high relative to the stock price; but that is a company decision - they can decide whatever amount they want as a dividend. In other words, the day before dividend payments, investors value the stock at ~14 $, plus an expected dividend payment of 12 $, which adds to 26 $. The day after the dividend payment, investors still value the stock at ~14 $, plus no more dividend payment = 0 $. Nothing changed really in the valuation.\",\n \"with the semi-strong form of the Efficient Market Hypothesis expected dividends are priced into the options and security already. If you are able to locate such an arbitrage opportunity then you should take it, but I suspect it will be more more difficult than you think. Remember that many dividends require you to have been a shareholder by a certain date prior to the dividend occurring.\",\n \"\\\"The stock should fall by approximately the amount of the dividend as that is what is paid out. If you have a stock trading at $10/share and it pays a $1/share dividend, the price should drop to $9 as what was trading before the dividend was paid would be both the dividend and the stock itself. If the person bought just for the dividend then it would likely be neutral as there isn't anything extra to be gained. Consider if this wasn't the case. Wouldn't one be able to buy a stock a few days before the dividend and sell just after for a nice profit? That doesn't make sense and is the reason for the drop in price. Similarly, if a stock has a split or spin-off there may be changes in the price to reflect that adjustment in value of the company. If I give you 2 nickels for a dime, the overall value is still 10 cents though this would be 2 coins instead of one. Some charts may show a \\\"\\\"Dividend adjusted\\\"\\\" price to factor out these transactions so be careful of what prices are quoted.\\\"\",\n \"If you are looking to re-invest it in the same company, there is really no difference. Please be aware that when a company announces dividend, you are not the only person receiving the dividend. The millions of share holders receive the same amount that you did as dividend, and of course, that money is not falling from the sky. The company pays it from their profits. So the day a dividend is announced, it is adjusted in the price of the share. The only reason why you look for dividend in a company is when you need liquidity. If a company does not pay you dividend, it means that they are usually using the profits to re-invest it in the business which you are anyway going to do with the dividend that you receive. (Unless its some shady company which is only established on paper. Then they might use it to feed their dog:p). To make it simpler lets assume you have Rs.500 and you want to start a company which requires Rs 1000 in capital : - 1.) You issue 5 shares worth Rs 100 each to the public and take Rs 100 for each share. Now you have Rs 1000 to start your company. 2.) You make a profit of Rs 200. 3.) Since you own majority of the shares you get to make the call whether to pay Rs.200 in dividend, or re-invest it in the business. Case 1:- You had issued 10 shares and your profit is Rs 200. You pay Rs. 20 each to every share holder. Since you owned 5 shares, you get 5*20 that is Rs.100 and you distribute the remaining to your 5 shareholders and expect to make the same or higher profit next year. Your share price remains at Rs.100 and you have your profits in cash. Case 2:- You think that this business is awesome and you should put more money into it to make more. You decide not to pay any dividend and invest the entire profit into the business. That way your shareholders do not receive anything from you but they get to share profit in the amazing business that you are doing. In this case your share price is Rs. 120 ((1000+200)/10) and all your profits are re-invested in the business. Now put yourself in the shareholders shoes and see which case suits you more. That is the company you should invest in. Please note: - It is very important to understand the business model of the company before you buy anything! Cheers,\",\n \"One reason a company might choose to pay a dividend is because of the desire of influential stockholders to receive the dividend. In the case of Ford, for example, there are 70 million shares of Class B stock which receive the same dividend per share as do the common stock holders. Even though there are 3.8 billion shares of common stock, the Class B owners (which are Ford family) hold 40% of the voting power and so their desires are given much weight. The Class B owners prefer regular dividends because if enough were to sell their Class B shares, all Class B shares (as a block) would have their voting power drop from 40% to 30%, and with further sales all special voting would be lost and each Class B share would be equivalent to a common share in voting power. Hence the Class B owners, both for themselves and for all of the family members holding Class B, avoid selling shares and prefer receiving dividends.\",\n \"This is a great question for understanding how futures work, first let's start with your assumptions The most interesting thing here is that neither of these things really matters for the price of the futures. This may seem odd as a futures contract sounds like you are betting on the future price of the index, but remember that the current price already includes the expectations of future earnings as well! There is actually a fairly simple formula for the price of a futures contract (note the link is for forward contracts which are very similar but slightly more simple to understand). Note, that if you are given the current price of the underlying the futures price depends essentially only on the interest rate and the dividends paid during the length of the futures contract. In this case the dividend rate for the S&P500 is higher than the prevailing interest rate so the futures price is lower than the current price. It is slightly more complicated than this as you can see from the formula, but that is essentially how it works. Note, this is why people use futures contracts to mimic other exposures. As the price of the future moves (pretty much) in lockstep with the underlying and sometimes using futures to hedge exposures can be cheaper than buying etfs or using swaps. Edit: Example of the effect of dividends on futures prices For simplicity, let's imagine we are looking at a futures position on a stock that has only one dividend (D) in the near term and that this dividend happens to be scheduled for the day before the futures' delivery date. To make it even more simple lets say the price of the stock is fairly constant around a price P and interest rates are near zero. After the dividend, we would expect the price of the stock to be P' ~ P - D as if you buy the stock after the dividend you wouldn't get that dividend but you still expect to get the rest of the value from additional future cash flows of the company. However, if we buy the futures contract we will eventually own the stock but only after the dividend happens. Since we don't get that dividend cash that the owners of the stock will get we certainly wouldn't want to pay as much as we would pay for the stock (P). We should instead pay about P' the (expected) value of owning the stock after that date. So, in the end, we expect the stock price in the future (P') to be the futures' price today (P') and that should make us feel a lot more comfortable about what we our buying. Neither owning the stock or future is really necessarily favorable in the end you are just buying slightly different future expected cash flows and should expect to pay slightly different prices.\",\n \"What you're referring to is the yield. The issue with these sorts of calculations is that the dividend isn't guaranteed until it's declared. It may have paid the quarterly dividend like clockwork for the last decade, that does not guarantee it will pay this quarter. Regarding question number 2. Yield is generally an after the fact calculation. Dividends are paid out of current or retained earnings. If the company becomes hot and the stock price doubles, but earnings are relatively similar, the dividend will not be doubled to maintain the prior yield; the yield will instead be halved because the dividend per share was made more expensive to attain due to the increased share price. As for the calculation, obviously your yield will likely vary from the yield published on services like Google and Yahoo finance. The variation is strictly based on the price you paid for the share. Dividend per share is a declared amount. Assuming a $10 share paying a quarterly dividend of $0.25 your yield is: Now figure that you paid $8.75 for the share. Now the way dividends are allocated to shareholders depends on dates published when the dividend is declared. The day you purchase the share, the day your transaction clears etc are all vital to being paid a particular dividend. Here's a link to the SEC with related information: https://www.sec.gov/answers/dividen.htm I suppose it goes without saying but, historical dividend payments should not be your sole evaluation criteria. Personally, I would be extremely wary of a company paying a 40% dividend ($1 quarterly dividend on a $10 stock), it's very possible that in your example bar corp is a more sound investment. Additionally, this has really nothing to do with P/E (price/earnings) ratios.\",\n \"Well, if the short seller has to pay the dividend out of their pocket, what happens to the dividend the company paid out ?? Sounds like there are 2 divdends floating around, the short's, and the company's, but only 1 share of stock.\",\n \"\\\"I'm not a financial expert, but saying that paying a $1 dividend will reduce the value of the stock by $1 sounds like awfully simple-minded reasoning to me. It appears to be based on the assumption that the price of a stock is equal to the value of the assets of a company divided by the total number of shares. But that simply isn't true. You don't even need to do any in-depth analysis to prove it. Just look at share prices over a few days. You should easily be able to find stocks whose price varied wildly. If, say, a company becomes the target of a federal investigation, the share price will plummet the day the announcement is made. Did the company's assets really disappear that day? No. What's happened is that the company's long term prospects are now in doubt. Or a company announces a promising new product. The share price shoots up. They may not have sold a single unit of the new product yet, they haven't made a dollar. But their future prospects now look improved. Many factors go into determining a stock price. Sure, total assets is a factor. But more important is anticipated future earning. I think a very simple case could be made that if a stock never paid any dividends, and if everyone knew it would never pay any dividends, that stock is worthless. The stock will never produce any profit to the owner. So why should you be willing to pay anything for it? One could say, The value could go up and you could sell at a profit. But on what basis would the value go up? Why would investors be willing to pay larger and larger amounts of money for an asset that produces zero income? Update I think I understand the source of the confusion now, so let me add to my answer. Suppose that a company's stock is selling for, say, $10. And to simplify the discussion let's suppose that there is absolutely nothing affecting the value of that stock except an expected dividend. The company plans to pay a dividend on a specific date of $1 per share. This dividend is announced well in advance. Everyone knows that it will be paid, and everyone is extremely confidant that in fact the company really will pay it -- they won't run out of money or any such. Then in a pure market, we would expect that as the date of that dividend approaches, the price of the stock would rise until the day before the dividend is paid, it is $11. Then the day after the dividend is paid the price would fall back to $10. Why? Because the person who owns the stock on the \\\"\\\"dividend day\\\"\\\" will get that $1. So if you bought the stock the day before the dividend, the next day you would immediately receive $1. If without the dividend the stock is worth $10, then the day before the dividend the stock is worth $11 because you know that the next day you will get a $1 \\\"\\\"refund\\\"\\\". If you buy the stock the day after the dividend is paid, you will not get the $1 -- it will go to the person who had the stock yesterday -- so the value of the stock falls back to the \\\"\\\"normal\\\"\\\" $10. So if you look at the value of a stock immediately after a dividend is paid, yes, it will be less than it was the day before by an amount equal to the dividend. (Plus or minus all the other things that affect the value of a stock, which in many cases would totally mask this effect.) But this does not mean that the dividend is worthless. Just the opposite. The reason the stock price fell was precisely because the dividend has value. BUT IT ONLY HAS VALUE TO THE PERSON WHO GETS IT. It does me no good that YOU get a $1 dividend. I want ME to get the money. So if I buy the stock after the dividend was paid, I missed my chance. So sure, in the very short term, a stock loses value after paying a dividend. But this does not mean that dividends in general reduce the value of a stock. Just the opposite. The price fell because it had gone up in anticipation of the dividend and is now returning to the \\\"\\\"normal\\\"\\\" level. Without the dividend, the price would never have gone up in the first place. Imagine you had a company with negligible assets. For example, an accounting firm that rents office space so it doesn't own a building, its only tangible assets are some office supplies and the like. So if the company liquidates, it would be worth pretty much zero. Everybody knows that if liquidated, the company would be worth zero. Further suppose that everyone somehow knows that this company will never, ever again pay a dividend. (Maybe federal regulators are shutting the company down because it's products were declared unacceptably hazardous, or the company was built around one genius who just died, etc.) What is the stock worth? Zero. It is an investment that you KNOW has a zero return. Why would anyone be willing to pay anything for it? It's no answer to say that you might buy the stock in the hope that the price of the stock will go up and you can sell at a profit even with no dividends. Why would anyone else pay anything for this stock? Well, unless their stock certificates are pretty and people like to collect them or something like that. Otherwise you're supposing that people would knowingly buy into a pyramid scheme. (Of course in real life there are usually uncertainties. If a company is dying, some people may believe, rightly or wrongly, that there is still hope of reviving it. Etc.) Don't confuse the value of the assets of a company with the value of its stock. They are related, of course -- all else being equal, a company with a billion dollars in assets will have a higher market capitalization than a company with ten dollars in assets. But you can't calculate the price of a company's stock by adding up the value of all its assets, subtracting liabilities, and dividing by the number of shares. That's just not how it works. Long term, the value of any stock is not the value of the assets but the net present value of the total future expected dividends. Subject to all sorts of complexities in real life.\\\"\",\n \"\\\"In the case of mutual funds, Net Asset Value (NAV) is the price used to buy and sell shares. NAV is just the value of the underlying assets (which are in turn valued by their underlying holdings and future earnings). So if a fund hands out a billion dollars, it stands to reason their NAV*shares (market cap?) is a billion dollars less. Shareholder's net worth is equal in either scenario, but after the dividend is paid they are more liquid. For people who need investment income to live on, dividends are a cheap way to hold stocks and get regular payments, versus having to sell part of your portfolio every month. But for people who want to hold their investment in the market for a long long time, dividends only increase the rate at which you have to buy. For mutual funds this isn't a problem: you buy the funds and tell them to reinvest for free. So because of that, it's a prohibited practice to \\\"\\\"sell\\\"\\\" dividends to clients.\\\"\",\n \"> Say profits are 100mil, and a dividend is payed. Say 50 mil worth is payed out as dividend and 30 mil is kept as retained earnings for future investment. This does not equate. Out of net income, it is only possible to either reinvest (retained earning) or payout (repurchase or dividend). You can't have a $20m gap there. > Can the remaining 20 mil be distributed to shareholders A and B, so that they both get 10mil each? What makes them entitled to a separate, special dividend over the other shareholders? > Can certain shareholders be favored and get a bigger cut of profits than the dividends pay out is my question basically. It kinda sounds like you're describing preferred equity, but doing it in a rather round-about way.\",\n \"Dividends indicate that a business is making more profit than it can effectively invest into expansion or needs to regulate cash-flow. This generally indicates that the business is well established and has stabilized in a dominant market position. This can be contrasted against businesses that: Dividends are also given preferential tax treatment. Specifically, if I buy a stock and sell it 30 days later, I will be taxed on the capital gains at the regular income rate (typically 25-33%), but the dividends would be taxed at the lower long-term capital gains rate (typically 15%).\",\n \"When setting these up for my own bill payment, I was surprised, after the fact, to see that a couple I thought would be a mailed check were actually instant transfers, and for others, vice versa. On line banking typically asks you for the due date and they handle from there. If you need this detail before the payment, I'd ask the bank. Else, it's easy to see after the fact for a given payee.\",\n \"It depends how deep in the money it is, compared to the dividend. Even an in the money call has some time premium. As the call holder, if I exercise instead of selling the call, I am trading the potential for a dividend, which I won't receive, for getting that time premium back by selling. Given the above, you'll notice a slight distortion in options pricing as a dividend date approaches, as the option will reflect not just the time premium, but the fact that exercising with grab the dividend. Edit to address your comment - $10 stock, $9 strike, 50 cent div. If the option price is high, say $2, because there's a year till expiration, exercising makes no sense. If it's just $1.10, I gain 40 cents by exercising and selling after the dividend.\",\n \"Some credit card rewards programs will not give you rewards for balances paid off early. I have a Capitol One Platinum card, and once paid off the full balance; both the full amount due for the recently ended billing period, and the amount that had accrued for the current billing period. I never received any reward points for the additional amount. Though this sounds like it's paying even earlier than you're talking about.\",\n \"Yes, one such strategy is dividend arbitrage using stock and in the money options. You have to find out which option is the most mispriced before the ex-dividend date.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["Do you realise that the examples you have given are for stock splits not for dividends, that is why the date payable is before the ex-date for the split. The payments for the split occur on 30th June and the first day the stock trades with the new split is on the next trading day, being the ex-date, 1st July."],"string":"[\n \"Do you realise that the examples you have given are for stock splits not for dividends, that is why the date payable is before the ex-date for the split. The payments for the split occur on 30th June and the first day the stock trades with the new split is on the next trading day, being the ex-date, 1st July.\"\n]","isConversational":false}}},{"rowIdx":56,"cells":{"_id":{"kind":"string","value":"3875"},"query":{"kind":"string","value":"Does freedom to provide services allow me contracting in Germany without paying taxes there (but in my home EU country)?"},"gt_ids":{"kind":"list like","value":["136315","249859"],"string":"[\n \"136315\",\n \"249859\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1],"string":"[\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["249859","136315","77488","52882","440730","207531","57406","387186","378060","324921","576384","52622","68190","343477","264068","110061","423639","357820","195571","73876","342694","360629","347723","553133","279870","381830","349424","4331","394059","588211","449816","375423","274359","113451","162286","442391","358175","535822","541682","19245","299752","383172","237262","120036","185999","193367","277370","593197","442853","322906","161962","315516","484352","172745","498589","398806","386941","420295","592926","355369","427849","483664","419953","332626","266516","281500","183477","151763","396792","523431","599336","480400","26508","93744","593694","194090","245753","229061","273563","179359","319836","303287","11021","490386","202645","284086","510599","29817","114102","310190","404056","59686","385320","115333","454208","123047","249487","73666","92462","414737"],"string":"[\n \"249859\",\n \"136315\",\n \"77488\",\n \"52882\",\n \"440730\",\n \"207531\",\n \"57406\",\n \"387186\",\n \"378060\",\n \"324921\",\n \"576384\",\n \"52622\",\n \"68190\",\n \"343477\",\n \"264068\",\n \"110061\",\n \"423639\",\n \"357820\",\n \"195571\",\n \"73876\",\n \"342694\",\n \"360629\",\n \"347723\",\n \"553133\",\n \"279870\",\n \"381830\",\n \"349424\",\n \"4331\",\n \"394059\",\n \"588211\",\n \"449816\",\n \"375423\",\n \"274359\",\n \"113451\",\n \"162286\",\n \"442391\",\n \"358175\",\n \"535822\",\n \"541682\",\n \"19245\",\n \"299752\",\n \"383172\",\n \"237262\",\n \"120036\",\n \"185999\",\n \"193367\",\n \"277370\",\n \"593197\",\n \"442853\",\n \"322906\",\n \"161962\",\n \"315516\",\n \"484352\",\n \"172745\",\n \"498589\",\n \"398806\",\n \"386941\",\n \"420295\",\n \"592926\",\n \"355369\",\n \"427849\",\n \"483664\",\n \"419953\",\n \"332626\",\n \"266516\",\n \"281500\",\n \"183477\",\n \"151763\",\n \"396792\",\n \"523431\",\n \"599336\",\n \"480400\",\n \"26508\",\n \"93744\",\n \"593694\",\n \"194090\",\n \"245753\",\n \"229061\",\n \"273563\",\n \"179359\",\n \"319836\",\n \"303287\",\n \"11021\",\n \"490386\",\n \"202645\",\n \"284086\",\n \"510599\",\n \"29817\",\n \"114102\",\n \"310190\",\n \"404056\",\n \"59686\",\n \"385320\",\n \"115333\",\n \"454208\",\n \"123047\",\n \"249487\",\n \"73666\",\n \"92462\",\n \"414737\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["You're free to provide services, but if you stay in one country for more than half a year - you're generally considered to be its resident for tax purposes. Germany is no exception to the rule, in fact - this is true to almost any country in the world. If you provide the services from Poland, and never set foot in Germany - they won't say a word.","\"Also within Germany the tax offices usually determine which tax office is responsible for you by asking where you were more than 180 days of the year (if e.g. you have a second flat where you work). That's a default value, though: in my experience you can ask to be handled by another tax office. E.g. I hand my tax declaration to my \"\"home\"\" tax office (where also my freelancing adress is), even though my day-job is 300 km away. So if you work mostly from Poland and just visit the German customer a few times, you are fine anyways. Difficulties start if you move to Germany to do the work at your customer's place. I'm going to assume that this is the situation as otherwise I don't think the question would have come up. Close by the link you provided is a kind of FAQ on this EU regulation About the question of permanent vs. temporary they say: The temporary nature of the service is assessed on a case-by-case basis. Here's my German-Italian experience with this. Background: I had a work contract plus contracts for services and I moved for a while to Italy. Taxes and social insurance on the Italian contracts had to be paid to Italy. Including tax on the contract for services. Due to the German-Italian tax treaty, there is no double taxation. Same for Poland: this is part of EU contracts. By the way: The temporary time frame for Italy seemed to be 3 months, then I had to provide an Italian residence etc. and was registered in the Italian health care etc. system. Due to the German-Italian tax treaty, there is no double taxation. Same for Poland: this is part of EU contracts. Besides that, the German tax office nevertheless decided that my \"\"primary center of life\"\" stayed in Germany. So everything but the stuff related to the Italian contracts (which would probably have counted as normal work contracts in Germany, though they is no exact equivalent to those contract types) was handled by the German tax office. I think this is the relevant part for your question (or: argumentation with the German tax office) of temporary vs. permanent residence. Here are some points they asked: There is one point you absolutely need to know about the German social insurance law: Scheinselbständigkeit (pretended self-employment). Scheinselbständigkeit means contracts that claim to be service contracts with a self-employed provider who is doing the work in a way that is typical for employees. This law closes a loophole so employer + employee cannot avoid paying income tax and social insurance fees (pension contributions and unemployment insurance on both sides - health insurance would have to be paid in full by the self-employed instead of partially by the employer. Employer also avoids accident insurance, and several regulations from labour law are avoided as well). Legally, this is a form of black labour which means that the employer commits a criminal offense and is liable basically for all those fees. There is a list of criteria that count towards Scheinselbständigkeit. Particularly relevant for you could be\"","If the firm treats you as an employee then they are treated as having a place of business in the UK and therefore are obliged to operate PAYE on your behalf - this rule has applied to EU States since 2010 and the non-EU EEA members, including Switzerland, since 2012. If you are not an employee then your main options are: An umbrella company would basically bill the client on your behalf and pay you net of taxes and NI. You potentially take home a bit less than you would being 100% independent but it's a lot less hassle and potentially makes sense for a small contract.","\"Finally, I got response from finance center: \"\"It doesn't matter where do you study, what does matter is where you live. So, once you live in Germany, you pay taxes in Germany. And it doesn't matter who you work for.\"\" So, there are two options to pay taxes: it's paid by an employer or an employee: If I would work for Swiss company, I need to show how much money I make every month (or year) to Finance Center.\"","If you are still a UK resident, then yes. Also, as I understand it, if the contract is only for a year, then unless it happens to exactly match the payroll year, you will have to remain a UK resident and hence, yes you will have to pay tax. See here for more info (from HMRC FAQ questions)","There are just too many variables here... Will you legally be considered a permanent resident from the moment you move? Will you work from home as a contractor or as an employee? Those are not questions you can answer yourself, they really depend on your circumstances and how the tax authorities will look at them. I strongly encourage you to speak to an advisor. Very generally spoken, at your place of residence you pay taxes for your worldwide income, at the place of your work base (which is not clear if this really would be Turkey) you pay taxes on the income generated there. If it's one and the same country, it's simple. If not, then theoretically you pay twice. However, most countries have double taxation treaties to avoid just that. This usually works so that the taxes paid abroad (in Turkey) would be deducted from your tax debt at your place of residence. But you might want to read the treaty to be sure how this would be in your specific case (all treaties are publicly available), and you should really consider speaking to a professional.","I took littleadv's advice and talked to an accountant today. Regardless of method of payment, my US LLC does not have to withhold taxes or report the payment as payments to contractors (1099/1042(S)) to the IRS; it is simply a business expense. He said this gets more complicated if the recipient is working in the US (regardless of nationality), but that is not my case","Usually, your situation is a generalized form of import/export, with you as the net exporter of goods/services and the individual consuming your goods/service as net importer. Import export laws vary from country to country but following are the general tariffs/taxes applicable: Export tax/duty: From your sovereign jurisdiction (read country/region/EU region), there could be export restriction or tariffs applicable to your exported goods/services on the other hand there may not be any, check with EU export law on this and then your country specific law. If there is any tax/tariff payable, you shall have to pay the same on the transactions. Import tax/duty: This is more related to your customer who is purchasing the goods/services from you, however, you should know this. Your customer will be liable to pay any import tax/duty as applicable for importing of your goods/services in that country/region, if it is applicable. Shipping Insurance: If it is a physical goods, there would be shipping and with shipping comes insurance and indemnity (if applicable). So there is a cost to it, you need to be aware of this. Sales Tax: There is no Govt. on earth or history which does not or did not charge sales tax in some form or the other. EU/country will also have sales tax, you should be aware of this as per transaction you may have to pay sales tax to the Govt. This would add to the cost. Credit of Foreign Currency Payments: Some countries have tax/tariffs attached to foreign currency credits/transfers or bank charges attached to the same, you may have to open specific type of bank A/C to receive the credits. These laws are specific to country/region, you should be aware of the same. The above are generic considerations and not specific to EU and to a greater/lesser extent applicable to all countries/regions. Best would be to search the net on the above points for EU region and get answers or approach a chartered accountant who will give you all the information.","Your answer will need loads of information and clarification, so I will ask you to visit the VAT and have a peruse. 1) Obligation is for you to find out the correct rate of VAT, charge and pay tax accordingly. You can call up the HMRC VAT helpline for help, which they will be happy to oblige. Normally everybody pays VAT every 3 months or you can pay once in a year. 2) Depends on your annual turnover, including VAT. Less than £150000 you join the Flat rate scheme. There are schemes for cultural activities. Might be good to check here on GOV.UK. 3) If you pay VAT in EU countries, you can reclaim VAT in UK. You need to reclaim VAT while filing in your VAT returns. But be careful about your receipts, which can be checked to verify you are not defrauding HMRC. The basic rule is that B2B services are, as the name suggests, supplies from one business to another. And, subject to some exceptions, are treated as made where the customer belongs. No VAT is chargeable on B2B supplies to an overseas customer. But where you make a B2C supply, VAT depends on where your customer is located: 1) if they are outside the EU, you don’t need to charge VAT 2) if they are located in an EU country, then you must charge VAT. Source All in all keep all records of VAT charged and paid to satisfy the taxman. If the rules get complicated, get an accountant to help you out. Don' take chances of interpreting the law yourself, the fines you might pay for wrong interpretation might be a deal breaker.","Tax Deducted at source is applicable to Employee / Employer [contract employee] relations ... it was also made applicable for cases where an Indian company pays for software products [like MS Word etc] as the product is not sold, but is licensed and is treated as Royalty [unlike sale of a consumer product, that you have, say car] ... Hence it depends on how your contract is worded with your India clients, best is have it as a service agreement. Although services are also taxed, however your contract should clearly specify that any tax in India would be borne by your Indian Client ... Cross Country taxation is an advanced area, you will not find good advice free :)","I am a freelancer based in Europe and I want to tell you: - if you are a freelancer, then you INVOICE your Swizzerland based client The word salary is improper. - So your client will DEDUCE the invoice from its taxes, and NOT pay income tax on top of that invoice. Because invoice = expense. So, ONLY YOU pay income tax in India. Your client pays no tax at all, not in India, not in Swizzerland. As you are a freelancer and not employee, the company has no obligation to pay employer taxes for you. A company has financial benefits from working with a freelancer.","\"I also don't know the specific details for Finland and/or Belgium, however many countries have tax treaties, which generally prevent double taxation (i.e., paying tax in both countries on the same base income). Being that both Finland and Belgium are EU member states, I'm quite certain there's a provision that covers this, and the same would apply: You pay taxes on what you earn while in Finland to Finland, and to Belgium what you earn while in Belgium. All of this is similar to what you presented, however there's also a section where you'd declare how much taxes were paid in other countries. One other thing to note, which will be the determining factor in the above, is whether EU law requires you to change residence to BE for the time you're there. If not then you'll be paying taxes in Finland the entire time on the entire amount. This comes from an Irish governmental site: \"\"By working in another member state and by transferring your residence there, you are likely to become \"\"resident for tax purposes\"\" there. The definition of fiscal residence varies from one member state to another. You must comply with the laws of the country where you have established your residence. The laws on personal taxation vary considerably from one member state to another and you may be liable for taxation in more than one country. In general, you are subject to income tax in the country where you are living but this may not be the case if you are a “posted worker” – see below. In general, property is taxed in the country in which it is situated but, again, there are variations. Tax agreements have been concluded between most of the member states of the EU, which are intended to avoid double taxation, if you derive income from different countries. In general, national fiscal rules must respect the fundamental principle of non-discrimination against nationals of another EU country.\"\"\"","In cases like this you should be aware that tax treaties may exist and that countries are generally willing to enter into them. Their purpose is to help prevent double taxation. Tax treaties often times give you a better tax rate than even being a resident of the countries in question! (For instance, the Italy to US tax rate is lower than simply doing business in many United States) This should guide your google search, here is something I found for Germany/Spain http://tmagazine.ey.com/wp-content/uploads/2011/03/2011G_CM2300_Spain-Germany-sign-new-tax-treaty.pdf It appears that the dividend tax rate under that treaty is 5% , to my understanding, the income tax rates are often multiples higher! I read that spain's income tax rate is 18% So what I would do is see if there is the possibility of deferring taxes in the lower tax jurisidiction and then doing a large one time dividend when conveninet. But Germany isn't really known for its low taxes, being a Federal Republic, the taxes are levied by both the states and the federal government. Look to see if your business structure can avoid being taxed as the entity level: ie. your business' earnings are always distributed to the owners - which are not germany citizens or residents - as dividends. So this way you avoid Germany's 15% federal corporate tax, and you avoid Spain's 18% income tax, and instead get Spanish dividends at 5% tax. Anyway, contact a tax attorney to help interpret the use of the regulations, but this is the frame of mind you should be thinking in. Because it looks like spain is willing to do a tax credit if you pay taxes in germany, several options here to lower your tax footprint.","I will not pay any taxes in the Us, since I am not working for an US company What you will or will not pay is up to you of course, but you definitely should pay taxes in the US, as you're working in the US. Since you mentioned being from Japan, I'll also suggest checking whether you're allowed to perform any work in the US under the conditions of your visa. If you're a F1/J1 student - you'll be breaking the immigration law and may be deported. You might be liable for taxes in Germany, as well, and also in Japan. I'll have to edit this to allow people who downvoted the answer without knowing the legal requirements to change their vote. F1 student cannot be a contractor without a valid EAD. Period. There's no doubt about it and legal requirements are pretty clear. Anyone who claims that you wouldn't be breaking the terms of your visa is wrong. Note, I'm neither a lawyer nor a tax professional, for definite advice talk to a professional.","\"If a person is not a U.S. citizen and they live and work outside the U.S., then any income they make from a U.S. company or person for services provided does not qualify as \"\"U.S. Source income\"\" according to the IRS. Therefore you wouldn't need to worry about withholding or providing tax forms for them for U.S. taxes. See the IRS Publication 519 U.S. Tax Guide for Aliens.\"","It depends and I would not just jump into conclusion as I have seen cases where offering some services are not U.S. sourced income. I'll advise you speak with a knowledgeable tax professional.","In Germany you can register a Einzelunternehmen and receive payments into your personal bank account with a German bank. Apple will certainly be able to transfer to accounts in Germany as payments go via the European SEPA standard. Tax wise if you are living in Germany you will need to pay tax in Germany, so this is really the easiest way of doing it.","As far as taxes are concerned, if your income is €10 to €20 a month, the Finanzamt doesn't even want to hear from you. To be on the safe side, give them a call and you will probably be told that there is a minimum amount, and if your revenue is below that you don't have to do anything. As far as VAT (MwSt) is concerned: You can only deduct it from VAT that you would have to pay to the government. If you are supposed to pay €100 VAT to the government, you can deduct up to €100 VAT paid to suppliers. If you don't pay VAT, you can't deduct it.","You will almost certainly be paying taxes in Czech Republic, short of being American of Eritrean, citizenship has little to no bearing on tax. If you are working from home, you will probably be a contractor. In Romania you would work through either an SRL or you would set up a PFA. Essentially a limited company or a sole trader. You will need to find the Czech equivalents. I would advise finding a small business accountant. They will be able to advise what is the most cost effective solution, in some countries (like my one) you can save considerable amounts of tax by working through a company. There is a link with some information.","Tax is due in India as you offered services from India. So whether the International Client pays via Credit Card, Bank Transfer, Paypal or any other means is not relevant. Even if the International Client pays you in a account outside India; it is still taxable in India.","After a bit of rooting around the HMRC sites, I found this page which says this: One key difference is that digitised products are classed as electronically-supplied services for VAT and customs duties. These services are: For VAT purposes, the place of supply of these services is the country in which the customer lives. If you supply electronic services to a business customer in another European Union (EU) country, the customer accounts for any VAT due in that country. You should not charge UK VAT. If you supply electronic services to a consumer, charity or government body in another EU country, you have to account for UK VAT. If you supply electronic services to anyone in a country outside the EU, you don't pay any VAT. If, as a UK business, you buy electronic services from a company outside the UK, you have to account for VAT. If I read this correctly, I as the supplier of the website need to account for VAT only if the sponsor is a consumer, charity or government body in another EU country. It is not covered in this site, but I assume I must also account for VAT for a customer based in the UK. So in answer to the original question, a customer from Canada (which is currently outside the EU) would account for the VAT themselves, and I would simply charge the gross amount.","\"Do I need to pay taxes in India in this scenario? For India tax purposes, you would still qualify as \"\"Resident Indian\"\". As a resident Indian you have to pay taxes on Global income. It is not relevant whether you transfer the money back to India to keep in US. The income is generated and taxable. Depending on your contract, presumably you are working as a free lance; certain expenses are allowed to be deducted from your income, for example if you purchase equipment to help carry out the work, stay / entertainment costs, etc. Consult a professional CA who should be able to guide you on what is eligible and what is not. The balance along with your other income will be taxed as per tax brackets. There is exemption for certain category of workers, mostly in entertainment industry where such income is not taxable. This does not apply to your case.\"","\"I don't see why you would need an \"\"international tax specialist\"\". You need a tax specialist to give you a consultation and training on your situation, but it doesn't seem too complicated to me. You invoice your client and get paid - you're a 1099 contractor. They should issue you a 1099 at the end of the year on everything they paid you. Once you become full-time employee - you become a W2 employee and will get a W2 at the end of the year on the amounts paid as such. From your perspective there's nothing international here, regular business. You have to pay your own taxes on the 1099 income (including SE taxes), they have to withhold taxes from your W2 income (including FICA). Since they're foreign employers, they might not do that latter part, and you'll have to deal with that on your tax return, any decent EA/CPA will be able to accommodate you with that. For the employer there's an issue of international taxation. They might have to register as a foreign business in your state, they might be liable for some payroll taxes and State taxes, etc etc. They might not be aware of all that. They might also be liable (or exempt) for Federal taxes, depending on the treaty provisions. But that's their problem. Your only concern is whether they're going to issue you a proper W2 and do all the withholdings or not when the time comes.\"","\"A couple of thoughts and experiences (Germany/Italy): First of all, I recommend talking to the Belgian bank (and possibly to a Dutch bank of your choice). I have similar conditions for my German bank accounts. But even though they talk about it as salary account (\"\"Gehaltskonto\"\") all they really ask for is a monthly inflow of more than xxxx € - which can be satisfied with an automatic direct transfer (I have some money automatically circulating for this reason which \"\"earns\"\" about 4% p.a. by saving fees). In that case it may be a feasible way to have a Belgian and a Dutch bank account and set up some money circulation. Experiences working in Italy (some years ago, SEPA payments were kind of new and the debits weren't implemented then): My guess with your service providers is that they are allowed to offer you contracts that are bound to rather arbitrary payment conditions. After all, you probably can also get a prepaid phone or a contract with a bill that you can then pay by wire transfer - however, AFAIK they are allowed to offer discounts/ask fees for different payment methods. Just like there is no law that forces the store around your corner to accept credit cards or even large EUR denominations as long as they tell you so beforehand. AFAIK, there is EU regulation saying your bank isn't allowed to charge you more for wire transger to foreign country within the SEPA zone than a national wire transfer.\"","I believe that the form you will need to fill out for the company is the IRS' W-8ECI form. My US-based Fortune 50 company pays my rent in Germany, and had my landlord fill one out so that they would not need to do any withholding for the payments. From this IRS site on withholding income for payments to Foreign Individuals: Withholding exemption. In most cases, you do not need to withhold tax on income if you receive a Form W-8ECI on which a foreign payee represents that: The foreign payee is the beneficial owner of the income, The income is effectively connected with the conduct of a trade or business in the United States, and The income is includible in the payee's gross income. Good luck!","The VAT number should be equivalent from the point of view of your client. The fact that you are a sole trader and not a limited liability doesn't matter when it comes down to pay VAT. They should pay the VAT to you and you will pay it to the government. I'll guess that their issue is with tax breaks, it is a bit more tricky to receive a tax break on paid taxes if you buy something abroad (at least it is here in Finland). If they won't pay you because of that, you could open a LTD or contract the services of a 'management company' which will do the job of invoicing, receiving the money and passing it back to you, for a fee.","\"As you are earning an income by working in India, you are required to pay tax in India. If you contract is of freelance, then the income earned by you has to be self declared and taxes paid accordingly. There are some expenses one can claim, a CA should be able to guide you. Not sure why the Swiss comapny is paying taxes?. Are they depositing this with Income Tax, India, do they have a TAN Number. If yes, then you don't need to pay tax. But you need to get a statement from your company showing the tax paid on behalf of you. You can also verify the tax paid on your behalf via \"\"http://incometaxindia.gov.in/26ASTaxCreditStatement.asp\"\" you cna register. Alternatively if you have a Bank Account in India with a PAN card on their records, most Banks provide a link to directly see\"","Typically tax treaties will cover double taxation (taxes paid in one jurisdiction are deducted in the other jurisdiction so there is no double tax). You'll need an accountant and attorney with experience in international business setups to confirm and determine which jurisdiction gets first priority of tax payment. In short, this is the wrong place to get a good answer. Talk to (and pay for) professionals to get you properly set up.","\"You'll need to read carefully the German laws on tax residency, in many European (and other) tax laws the loss of residency due to absence is conditioned on acquiring residency elsewhere. But in general, it is possible to use treaties and statuses so that you end up not being resident anywhere, but it doesn't mean that the income is no longer taxed. Generally every country taxes income sourced to it unless an exclusion applies, so if you can no longer apply the treaty due to not being a resident - you'll need to look for general exclusions in the tax law. I don't know how Germany taxes scholarships under the general rules, you'll have to check it. It is possible that they're not taxed. Many people try to raise the argument of \"\"I'm not a resident\"\" to avoid income taxes altogether on earnings on their work - this would not work. But with a special kind of income like scholarship, which may be exempt under the law, it may. Keep in mind, that the treaty has \"\"who is or was immediately before visiting a Contracting State a resident of the other Contracting State\"\" language in some relevant cases, so you may still apply it in the US even if no longer resident in Germany.\"","\"(Selling apps is AFAIK business, not freelancing - unless the type of app you produce is considered a freelancing subject. The tax office will give you a questionnaire and then decide). As Einzelunternehmer, you can receive the payments for the apps to the same account where your wages go. However, there are lots of online accounts that do not cost fees, so consider to receive them on a separate account so you have the business and private kind of separate (for small Einzelunternehmer, there is no legal separation between business and private money - you have full liability with your private money for the business). The local chamber of commerce can tell you everything about setting up such a business, ask them (you'll probably have to become a member there anyways). They have information as well on VAT (Umsatzsteuer, USt) which you need to declare unless you get an exemption (probably possible), and about Gewerbesteuer (the income tax of the business) etc. For the tax, you have \"\"subforms\"\" for the income tax e.g. for wages and for business income, so you just submit both with the main form. You'll get an appropriate tax number when registering the business. Social security/insurance: as long as the app selling is only a side business, the social insurance payments for your main job completely cover the side job as well. You need to make sure that your employment contract is compatible with the app business, though. A quick search indicates that there is a tax treaty between Germany and the Ukraine, Wikipedia says there are no contracts about social insurance in effect (yet).\"","Yes, you do. Depending on your country's laws and regulations, since you're not an employee but a self employed, you're likely to be required to file some kind of a tax return with your country's tax authority, and pay the income taxes on the money you earn. You'll have to tell us more about the situation, at least let us know what country you're in, for more information.","\"Even though you will meet the physical presence test, you cannot claim the FEIE because your tax home will remain the US. From the IRS: Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. Your tax home is the place where you are permanently or indefinitely engaged to work as an employee or self-employed individual. Having a \"\"tax home\"\" in a given location does not necessarily mean that the given location is your residence or domicile for tax purposes. ... You are not considered to have a tax home in a foreign country for any period in which your abode is in the United States. However, your abode is not necessarily in the United States while you are temporarily in the United States. Your abode is also not necessarily in the United States merely because you maintain a dwelling in the United States, whether or not your spouse or dependents use the dwelling. ... The location of your tax home often depends on whether your assignment is temporary or indefinite. If you are temporarily absent from your tax home in the United States on business, you may be able to deduct your away from home expenses (for travel, meals, and lodging) but you would not qualify for the foreign earned income exclusion. If your new work assignment is for an indefinite period, your new place of employment becomes your tax home, and you would not be able to deduct any of the related expenses that you have in the general area of this new work assignment. If your new tax home is in a foreign country and you meet the other requirements, your earnings may qualify for the foreign earned income exclusion. If you expect your employment away from home in a single location to last, and it does last, for 1 year or less, it is temporary unless facts and circumstances indicate otherwise. If you expect it to last for more than 1 year, it is indefinite. If you expect your employment to last for 1 year or less, but at some later date you expect it to last longer than 1 year, it is temporary (in the absence of facts and circumstances indicating otherwise) until your expectation changes. For guidance on how to determine your tax home refer to Revenue Ruling 93-86. Your main place of business is in the US and this will not change, because your business isn't relocating. If you are intending to work remotely while you are abroad, you should get educated on the relevant laws on where you are going. Most countries don't take kindly to unauthorized work being performed by foreign visitors. And yes, even though you aren't generating income or involving anyone in their country, the authorities still well may disapprove of your working. My answer to a very similar question on Expatriates.\"","The data provided in your question is irrelevant. The data that you provided in the comments (that you're physically present in the US while doing the work) is the only relevant information needed to answer your question. You will need to pay taxes in the US for the earnings. The company invoicing the US client will also need to pay taxes in the US for its earnings from these invoices. You can transfer between bank accounts and deposit whatever you want anywhere you want, no-one cares (with respect to the US taxes, check with Indian tax accountant about Indian requirements).","If you're not a NY (tax) resident, then as long as you're not physically present in New York - you do not owe NY taxes on compensation for your services. But that is if you're a 1099 contractor/employee. If you're a partner/shareholder in a partnership/LLC/S-Corp registered or conducting business in New York, and that company pays you money - you do owe NY taxes. See this page of the NY revenue agency for more details.","\"By living in Sweden and having a Swedish personal identification number (personnummer), you are required to declare your entire worldwide income for tax purposes with the Swedish tax authorities, Skatteverket. It would seem to not make any difference if some of that income is kept outside of Sweden. A company that has no permanent base of operations within Sweden should not deduct any preliminary taxes for an employee that lives in Sweden. Rather, the employee should apply for \"\"special A tax\"\" (\"\"SA\"\" tax status), and pay the taxes that, had the company had a permanent base of operations in Sweden, the company would have paid. The information available on the tax authority's web site in English seems limited, but the relevant page in Swedish in your situation is very likely Lön från utländska arbetsgivare utan fast driftställe i Sverige. There is a summary at Paying taxes – for individuals. Particularly do note the summary section: When staying for at least six months, you are considered as resident in Sweden for tax purposes, and are liable for taxation in Sweden on all of your worldwide income. You must also file a Swedish income tax return. Your tax return must be filed no later than May 2nd of the year after the fiscal year. as well as that: If you stay in Sweden for a continuous period of at least six months you are considered to be resident in Sweden. /.../ As a resident you are liable for taxation in Sweden on all of your worldwide income. In some cases a tax treaty with with your ordinary country of residence may limit the Swedish taxation. /.../ For a more detailed answer, including which exact forms you need to fill out and what data is needed, I strongly recommend that you either contact Skatteverket (they are usually quite nice to deal with, and they tend to realize that everyone benefits from getting the tax paperwork and payments right from the beginning), or find an attorney specializing in Swedish tax law. They even point out themselves that (my emphasis): the practical applications of these rules are relatively complicated and for more information you can contact the Tax Information (“Skatteupplysningen”) at 0771 567 567.\"","I cannot speak for the specific jurisdictions but you will generally pay income tax in each jurisdiction and be required to declare your foreign income in both. Your annual assessment takes into account both domestic and foreign income so sadly, there is no tax windfall to you. I would imagine that Finland and Belgium have tax treaties so you will not have to pay tax twice. You need an accountant in both countries to sort this for you.","There is no requirement to open a company. You can work as freelancer. You need to report income and file returns. If your income is more than exempt limit, pay taxes. Apply for a PAN number if you don't have one yet.","The Federal Central Tax Office says you may not have to pay taxes in germany for capital gains. You may have to apply for a tax relief to prevent the tax from being collected. You very likely will have to pay whatever taxes there are in Hong Kong on capital gains. Since you use an US broker withholding tax may apply to you but this is a different question that has nothing to do with Germany or german stocks. To be sure you should contact a local expert on this topic. EDIT: I missed some informations that I found on the english site of the german Federal Central Tax Office homepage.","If you are paid by foreigners then it is quite possible they don't file anything with the IRS. All of this income you are required to report as business income on schedule C. There are opportunities on schedule C to deduct expenses like your health insurance, travel, telephone calls, capital expenses like a new computer, etc... You will be charged both the employees and employers share of social security/medicare, around ~17% or so, and that will be added onto your 1040. You may still need a local business license to do the work locally, and may require a home business permit in some cities. In some places, cities subscribe to data services based on your IRS tax return.... and will find out a year or two later that someone is running an unlicensed business. This could result in a fine, or perhaps just a nice letter from the city attorneys office that it would be a good time to get the right licenses. Generally, tax treaties exist to avoid or limit double taxation. For instance, if you travel to Norway to give a report and are paid during this time, the treaty would explain whether that is taxable in Norway. You can usually get a credit for taxes paid to foreign countries against your US taxes, which helps avoid paying double taxes in the USA. If you were to go live in Norway for more than a year, the first $80,000/year or so is completely wiped off your US income. This does NOT apply if you live in the USA and are paid from Norway. If you have a bank account overseas with more than $10,000 of value in it at any time during the year, you owe the US Government a FinCEN Form 114 (FBAR). This is pretty important, there are some large fines for not doing it. It could occur if you needed an account to get paid in Norway and then send the money here... If the Norwegian company wires the money to you from their account or sends a check in US$, and you don't have a foreign bank account, then this would not apply.","You're not subject to the US tax laws, and since the income is not US-sourced, it is not subject to withholding. Your employer doesn't need any form, but if they insist - you can provide them a W8-BEN to certify your non-resident status. Keep in mind that if you do come to the US, the money you earn while in the US is US-sourced and subject to the US taxes and withholding, even if you're non-resident.","\"Yes. You do have to pay taxes in the UK as well but it depends on how much you have already been taxed in the US. http://taxaid.org.uk/situations/migrant-workernew-to-the-uk/income-from-abroad-arising-basis-vs-remittance-basis Say, you have to pay 20% tax in the UK for your earnings here. You ARE required to pay the same percentage on your foreign income as well. Now, if your \"\"home\"\" country already taxed you at 10% (for the sake of example), then you only need to pay the \"\"remaining\"\" 10% in the UK. However, the tax law in the UK does allow you to choose between \"\"arising\"\" basis and \"\"remittance\"\" basis on your income from the country you are domiciled in. What I have explained above is based on when income \"\"arises.\"\" But the laws are complicated, and you are almost always better off by paying it on \"\"arising\"\" basis.\"","From tax perspective, any income you earn for services performed while you're in the US is US-sourced. The location of the person paying you is of no consequence. From immigration law perspective, you cannot work for anyone other than your employer as listed on your I-20. So freelancing would be in violation of your visa, again - location of the customer is of no consequence.","With something this complicated you are going to want to consult professionals. Either a professional with international experience, who will tell you the best tax arrangement overall but might come expensive, or one professional in each country who will optimize for that country. You will have to pay US taxes, and depending on your residency probably some in Spain. Double tax agreements should kick in to prevent you paying tax on the same money twice. You do not have to pay separate 'European' taxes. If you do substantial business in another country you might have to pay there, but one of your professionals should sort it out.","No you won't. Germany taxes income, not bank accounts. Note that this changes immediately when your bank account makes interest - you will owe taxes on this interest. However, chances are you won't get a bank account. Without residency or income, typically the banks wouldn't give you an account. Feel free to try, though.","You're not physically present in the US, you're not a US citizen, you're not a green card holder, and you don't have a business that is registered in the US - US laws do not apply to you. You're not in any way under the US jurisdiction. Effectively connected income is income effectively connected to your business in the US. You're not in the US, so there's nothing to effectively connect your income to. Quote from the link: You usually are considered to be engaged in a U.S. trade or business when you perform personal services in the United States. You ask: If I form an LLC or C corp am I liable for this withholding tax? If you form a legal entity in a US jurisdiction - then that entity becomes subjected to that jurisdiction. If you're physically present in the US - then ECI may become an issue, and you also may become a resident based on the length of your stay.","\"Be careful here: If ACME were in California, I would pay taxes on USD 17,000 because I had revenue of 20,000 and expenses of 3,000. To CALIFORNIA. And California taxes S-Corps. And, in addition, you'd pay $800 for the right of doing business in the State. All that in addition to the regular Federal and State taxes to the State where you're resident. Suppose that ACME is in Britain (or anywhere else for that matter). My revenue and expenses are the same, but now my money has been earned and my expenses incurred in a foreign country. Same thing exactly. Except that you'll have to pay taxes to the UK. There may be some provision in the tax treaty to help you though, so you may end up paying less taxes when working in the UK than in California. Check with a licensed tax adviser (EA/CPA licensed in your State) who won't run away from you after you say the words \"\"Tax Treaty\"\". Does it even make sense to use my S-Corporation to do business in a foreign country? That should be a business decision, don't let the tax considerations drive your business.\"","Having freelanced myself in South America I could give you a sound advice BUT you would first need to answer some questions. 1) How long do you plan on being in South America? At the end of 2017 will you be back in Ireland or still being in South America? In other words was is your country of residence for tax purposes on Dec. 31 2017 ? That is the key element to consider. Link 2) In latin America you can freelance with a legal working permit BUT in all these countries more than 50% of the economy is under the table. In all these countries expatriate work under the table. The question you need to answer is then: Who will be your employer, a company or the owner of this company? Working undeclared in Latin America is very common, what are the risks? The legal risks depend on the country and their laws. In which country will you travel? How long will you stay there? You will have a tourist visa or a working visa? 3) An important detail, your health. Check how long you can be out of Ireland without loosing your social health benefits in Ireland? In my country, if I am abroad for more than 180 days, I loose my national health coverage. Evaluate the amount of days you will be out of Ireland and where you want to be on Dec. 31th. That could change a lot of things in your life.","\"Can the companies from USA give job to me (I am from New Zealand)? Job as being employee - may be tricky. This depends on the labor laws in New Zealand, but most likely will trigger \"\"nexus\"\" clause and will force the employer to register in the country, which most won't want to do. Instead you can be hired as a contractor (i.e.: being self-employed, from NZ legal perspective). If so, what are the legal documents i have to provide to the USA for any taxes? If you're employed as a contractor, you'll need to provide form W8-BEN to your US employer on which you'll have to certify your tax status. Unless you're a US citizen/green card holder, you're probably a non-US person for tax purposes, and as such will not be paying any tax in the US as long as you work in New Zealand. If you travel to the US for work, things may become tricky, and tax treaties may be needed. Will I have to pay tax to New Zealand Government? Most likely, as a self-employed. Check how this works locally. As for recommendations, since these are highly subjective opinions that may change over time, they're considered off-topic here. Check on Yelp, Google, or any local NZ professional review site.\"","\"As I understand it the usual rule is that the country you are \"\"resident\"\" in taxes you on your worldwide income but gives you credit for foreign tax paid. The country you are not normally resident in taxes you only on income from that one country. Note that residence for tax purposes can have different rules from residence for immigration purposes. At least in the UK being resident in the country for more than half the tax year normally makes you tax resident and there are some other cases too. I expect other countries are similar but the details of the rules and the start/end of the tax years may vary. I don't know the exact rules for finland and belgium but I expect your Belgian taxes will be based on your Belgian income only and your Finnish taxes will be based on your worldwide income but with a credit for your Belgian taxes. Engaging accountants from both countries to confirm the exact rules and what exactly you should put on the forms is almost certainly a good idea.\"","Yes. You must register for GST as well, if you will be making over the threshold (currently $60,000). That's probably a bonus for you, as your home office expenses will mostly include GST, but your income will most likely be zero-rated. Check with an accountant or with the IRD directly. Just be certain to put aside enough money from each payment to cover income tax, GST and ACC. You will get a very large bill in your second year of business.","I think if you transfer money from your account in Germany to your account in Canada you don't have to pay any taxes. However if you get any interest on your deposits, you probably have to pay tax (and probably in Canada) regardless where the account is.","Been digging through all the EU VAT directives and have called HMRC as well.. There does not seem to be any lower threshhold for charging VAT into the EU. If you sell £10 of goods/services you have to charge VAT and file a VAT return. Your options are: 1) Register for MOSS and file a single VAT return in your home country for all countries. In the UK this means that you also have to be VAT registered and have to charge VAT locally as well - even if you are below the UK threshold. 2) Register and file a VAT return in every EU country you sell into. You also have to apply the correct VAT rate for each country (typically 15% to 27%), and you have to keep at least two pieces of evidence for the customer location. eg. billing address, IP address, etc.","\"11 / 111 / 11111 looks like the (old) tax number: it is used by the tax office to know who you are, it isn't good at all for the spanish company. It would even change when you move inside Germany. VAT IDs are not exclusive to GmbHs (but a GmbH always has one). As freelancers you can get at VAT ID but you don't always have to. The tax office offers a \"\"small business\"\" treatment (§ 19 UStG) for freelancers, kind of an opt-out for the VAT ID. As you do not have a VAT ID, this is probably your case. It means So what to do? If I were you, I'd write them that according to §19 UStG and the European Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, TITLE XII CHAPTER 1 \"\"Special scheme for small enterprises\"\" you were not assigned a VAT ID, and VAT is not applicable to your bill. The fact that VAT is not applicable in this case does not mean that they are allowed to refuse payment. I heard a rumour (but don't really know) that a number similar to the VAT ID is planned also for freelancers (Wirtschafts-IDNr.). You could go to your tax office and ask them about. Maybe that yields a number that satisfies spanish burocracy. AFAIK, you can go to your tax office and ask them to give you a real VAT number. But careful: that has the serious drawback that you have to do do an advance VAT estimate and pay that to the tax office at least quarterly (for bigger business monthly). And (AFAIK) you are not allowed to change back to the small business treatment for several years.\"","\"Re the business license - in California business licenses are given by the municipal/county governments, so you'll have to check that with your city hall or county office. Re taxes - yes, you'll have to pay taxes, as with any income. Services are considered \"\"imputed income\"\", and generally you'd recognize income to the extent they would be paying had they been paying the full price (or the actual cost of services provided, if more). Since this is a hobby and not a for-profit enterprise, your deductions may be limited by the actual income and the 2% AGI threshold. See more here.\"","\"Am I eligible for declaring my earnings to the IRS? You're always eligible. You're probably asking whether you're required. In the US it doesn't matter where you deposit the money, it matters where you earn it. Money is earned where the services are provided. This is called \"\"sourcing\"\". So if you are working in a foreign country - you're only subject to the US laws to the extent you're a US citizen/permanent resident or qualify for the substantial presence test.\"","I have some more inputs to investigate: India has dual tax avoidance treaty signed with european countries so that NRIs dont pay tax in both countries. Please check if India has some agreement with Swiss Also for freelance job that is delivered from India, u need to make sure where you have to pay taxes as you are still in India so the term NRI will not hold good here. Also, if Swiss company is paying tax there, and you are a freelancer from India(resident in india) how to tax filing /rate etc has to be investigated. Also, can you apply for tax back from swiss( a portion of tax paid can be refunded eg: in Germany) but I dont know if this is true for Freelancers and also for people out side SWISS. Bip","To answer my own question, at least to the extent of my understanding. Here the IRS says that all income for a foreign person from a US-based company is taxable with 30%. Here the IRS says that this tax should be withhold at source by whomever pays you. In case there is a tax treaty with the country, the tax can even be waived in the US. Of course, if you don't declare it in your home country, the US bank could probably give information requested by the home country authorities. For the other two cases (when there's no US party involved) I can't find anything on the IRS website, which kind of make sense. If I am using an account in the US just to receive and send money shouldn't imply any tax. Thanks to @litteadv for pointing me into the right direction.","\"I would look into the possibility that the promise \"\"that no taxes will be withheld\"\" is all about your status as a 'consultant'. They may be meaning you to be treated like a business they buy services from. In Canada the distinction is very watery and I presume the same in India. If you agree to become a business, then you must look into how that business income will be taxed.\"","You will have to pay your taxes in the UK not USA. For tax purposes it is the company's tax residency not where the server is located. You are just hiring a server in USA. Take for example a CDN being used for your same service then would you pay taxes in 300 different countries if you use Akamai? Does not work that way.","It means you must pay federal (and possibly state) tax on any income you produce in America -- including Internet and mail-order sales. Tax treaties may keep you from having to pay tax on it again in your own country, or may not.","There is no strict need to do that, you can consider yourself to be consulting, a 10% of your payment will be withheld and paid as tax by the company, you can deduct up to 60% of your income as expenses and pay tax on the rest (factoring the tax deducted at source). In another approach, you could register for service tax and charge service tax on your invoice and pay to the service tax department, the tax calculations are similar to above. It will be good if you speak to a chartered accountant and get more clarity. As for business card, you could print it with your name and qualification, there are no restrictions on that.","\"After reviewing the tax treaty between New Zealand and Australia, I think the issue is whether or not you have an interest in a \"\"permanent establishment\"\" in Australia where you do business. The bank is not relevant as it is merely the vehicle by which you collect payment and would only come into the picture if you had an income bearing account (which you have indicated you do not). Even if you work out of the offices of the Australian company, you do not have a financial interest in their offices and as such, would pay taxes on the income in New Zealand (see documentation below). https://www.ato.gov.au/business/international-tax-for-business/foreign-residents-doing-business-in-australia/tax-on-income-and-capital-gains/#permanentestablishment\"","If you are going to be trying clever stuff with taxes in different place, you probably need a professional. Different countries definitely have different laws on the subject. For example (several years ago) the UK considered you absent from the UK for tax purposes from the day you left, provided you were gone for a year, whereas Canada didn't charge you tax as long as you were not in the country for six months in the year. A carefully timed move enabled me to not pay tax at all for six months because I wasn't resident anywhere. Also it was irrelevant whether I intended to stay or not.","\"The IRS taxes worldwide income of its citizens and green card holders. Generally, for those Americans genuinely living/working overseas the IRS takes the somewhat reasonable position of being in \"\"2nd place\"\" tax-wise. That is, you are expected to pay taxes in the country you are living in, and these taxes can reduce the tax you would have owed in the USA. Unfortunately, all of this has to be documented and tax returns are still required every year. Your European friends may find this quite surprising as I've heard, for instance, that France will not tax you if you go live and work in Germany. A foreign company operating in a foreign country under foreign law is not typically required to give you a W-2, 1099, or any of the forms you are used to. Indeed, you should be paying taxes in the place where you live and work, which is probably somewhat different than the USA. Keep all these records as they may be useful for your USA taxes as well. You are required to total up what you were paid in Euros and convert them to US$. This will go on the income section of a 1040. You should be paying taxes in the EU country where you live. You can also total those up and convert to US$. This may be useful for a foreign tax credit. If you are living in the EU long term, like over 330 days/year or you have your home and family there, then you might qualify for a very large exemption from your income for US tax purposes, called the Foreign Earned Income Exclusion. This is explained in IRS Publication 54. The purpose of this is primarily to avoid double taxation. FBAR is a serious thing. In past years, the FBAR form went to a Financial Crimes unit in Detroit, not the regular IRS address. Also, getting an extension to file taxes does not extend the deadline for the FBAR. Some rich people have paid multi-million dollar fines over FBAR and not paying taxes on foreign accounts. I've heard you can get a $10,000 FBAR penalty for inadvertent, non-willful violations so be sure to send those in and it goes up from there to $250k or half the value of the account, whichever is more. You also need to know about whether you need to do FATCA reporting with your 1040. There are indeed, a lot of obnoxious things you need to know about that came into existence over the years and are still on the law books -- because of the perpetual 'arms race' between the government and would be cheaters, non-payers and their advisors. http://www.irs.gov/publications/p54/ http://americansabroad.org/\"","Every country has its own tax code. Consult a professional in each country regarding income earned in that country. Anything else is speculation.","The tax is depended upon state where you are registered and the salary paid. More here If you employ contract you need not pay tax.","\"I would suggest to get an authoritative response from a CPA. In any case it would be for your own benefit to have at least the first couple of years of tax returns prepared by a professional. However, from my own personal experience, in your situation the income should not be regarded as \"\"US income\"\" but rather income in your home country. Thus it should not appear on the US tax forms because you were not resident when you had it, it was given to you by your employer (which is X(Europe), not X(USA)), and you should have paid local taxes in your home country on it.\"","Let's take your argument to its logical conclusion. Let's say there is a company that uses infrastructure of UK, Germany, France, US, Japan, Italy and Spain (because it's a global multinational). Corporate taxes in these countries are 19%, 29.65%, 33% (for large companies), 35%, 32.1%, 27.9% and 25%. Now according to your logic, each of these countries should tax the company's profits. Such a company in your world would pay more in taxes than it makes in profits (tax rate > 100%).","\"Paypal linked with my bank account. 1.Can I use my Saving bank account to receive payments from my clients? Or is it necessary to open a current account? Yes you can get funds into your savings account. However it is advisable to keep a seperate account as it would help with your IT Returns. 2.I will be paying a certain % as commission on every sales to a couple of sales guys (who are not my employees but only working on commission). Can I show this as an expense in my IT returns? As you are earning as freelancer, you are eligible for certain deductions like Phone calls, Laptop, other hardware, payments to partners. It is important that you maintain a book of records. An accountant for a small fee of Rs 5 K should be able to help you. In the Returns you have to show Net income after all these deductions, there is no place to enter expenses. 3.Since I will be receiving all the payments in Euros so am I falling under a category of \"\"Exporter of services\"\"? The work you are doing can be Free Lancing. 4.Do I need an Import Export Code (IEC) for smoothly running this small business? You can run this without one as Free lancing. IEC would be when you grow big and are looking for various benefits under tax and pay different taxes and are incorporated as a company.\"","\"If you're a US citizen, money earned while in the US is sourced to the US. So you can't apply FTC/FEIE to the amounts attributable to the periods of your work while in the US even if it is a short business trip. Tax treaties may affect this. Most tax treaties have explicit provisions to exclude short trips from the sourcing rules, however due to the \"\"saving clause\"\" these would probably not apply to you if you're a US citizen - you'll need to read the relevant treaty. Your home country should allow credit for the US taxes paid on the US-sourced income, and the double-taxation avoidance provision should apply in this case. The technicalities depend on your specific country. You would probably not just remove it from the taxable income, there probably is a form similar to the US form 1116 to calculate the available credit.\"","Generally for tax questions you should talk to a tax adviser. Don't consider anything I write here as a tax advice, and the answer was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. Does IRS like one payment method over other or they simply don't care as long as she can show the receipts? They don't care as long as she withholds the taxes (30%, unless specific arrangements are made for otherwise). She should withhold 30% of the payment and send it to the IRS. The recipient should claim refund, if the actual tax liability is lower. It's only consulting work at the moment, so most of the communication is done over phone. Should they start engaging in written communication to keep records of the work done? Yes, if she wants it to be a business expense. Is it okay to pay in one go to save money-transferring fees? Can she pay in advance? Again, she can do whatever she wants, but if she wants to account for it on her tax returns she should do it the same way she would pay any other vendor in her business. She cannot use different accounting methods for different vendors. Basically, she has not outsourced work in previous years, and she wants to avoid any red flags. Then she should start by calling on her tax adviser, and not an anonymous Internet forum.","\"I'll assume that you would work as a regular (part-time) employee. In this case, you are technically a Grenzgänger. You will need a specific kind of Swiss permit (\"\"Grenzgängerbewilligung\"\") allowing you to work in Switzerland. Your employer typically takes care of this - they have more experience than you. You being non-EU might make matters a bit more complicated. Your employer will withhold 4.5% of your gross income as source taxes (\"\"Quellensteuer\"\"). When you do your tax declaration, your entire income will be taxed in Germany, since this is where you live. This will happen after your first year of work. Be prepared for a large tax bill (or think of this as an interest-free loan from Germany to you). However, due to the Doppelbesteuerungsabkommen (DBA), the 4.5% you already paid to Switzerland will be deducted from the taxes you are due in Germany. Judging from my experience, the tax authorities in Germany are not fluent in the DBA - particularly in areas far away from the Swiss border. I had to gently remind them to deduct the source taxes, explicitly referring to the DBA. The bill was revised without problems, but I strongly recommend making sure that your source taxes are correctly deducted from your German tax liability. Once your local German tax office understands your situation, you will be asked to make quarterly prepayments, which will be calculated in a way to minimize your later overall tax liability. Budget for these. You didn't ask, but I'll tell you anyway: social security will normally be handled by Switzerland as the country of employment - not the country of residence. Your employer will automatically deduct old age, unemployment and accident insurance and contribute to a pension plan, all in Switzerland. However... ... if you do a lot of your work in Germany (>25%), which certainly applies if you plan on mostly working remotely, your social security will be handled by your country of residence. This is a major pain for your employer, because now your Swiss employer needs to understand the German social security system, how much and to whom to co-pay and so forth. This is a major area of study, and your employer may not want to spend all this effort. My employer has looked at this and requires anyone living outside of Switzerland to limit working from home to less than 25%, because by extension, they would some day also need to do the same for employees living in France, Italy, Austria... or even the UK. They don't want to dig through half the EU states' social security regulations. Therefore, you would not be able to work remotely from Germany for my employer. This is actually a fairly recent development that only entered in force at the beginning of 2015 (before that, this was all a bit of a gray area). Your prospective employer may not be aware of all details. So you will need to think about whether you actively want to point them at this (possibly ruining your plans of working remotely), or not (and possibly getting major problems and post-payments years later). Finally, I think you can choose whether you want to have your health insurance in Switzerland or in Germany (unless your Swiss obligation to be insured is waived because of your part-time status). Some Swiss health insurers offer plans where they cooperate with German health insurers, so you can go to German doctors just like a German resident. Source: I have been a Grenzgänger from Germany into Switzerland off and on for over ten years now. I can't say anything about whether your German visa restricts you from working in Switzerland. You may want to ask about this at Expatriates.SE, but I'd much rather ask your local German authorities than random strangers on the internet.\"","Because you actually reside in New Zealand, your income taxes will be paid in New Zealand. However, as a non-resident of Australia you will have tax withholding on all of the interest you earn in an Australian bank account. Obviously, because that tax is paid to Australia, that will not be counted against your New Zealand income taxes due to the taxation agreement between those countries. You should still discuss this with an accountant in New Zealand and consider acting as a sole trader. Since you are doing freelance work, that seems like the most logical setup anyway.","Yes you do. You're under the jurisdiction of at least one country where you're resident, or where you're citizen. You may be under jurisdiction of more than one country. Each country has its own laws about what and how should be taxed and countries have treaties between them to resolve jurisdiction issues and double taxation situations, so you should talk to a tax accountant licensed to provide you with an advice.","\"1. What forms do I need to file to receive money from Europe None. Your client can pay you via wire transfer. They need to know your name, address, account number, and the name of your bank, its SWIFT number and its associated address. The addresses and names are required to make sure there are no typos in the numbers. 2. What forms do I need to file to pay people in Latin America (or any country outside the US) None. 1099s only need to be filled out when the contractor has a US tax ID. Make sure they are contractors. If they work for you for more than 2 years, that can create a problem unless they incorporate because they might look like \"\"employees\"\" to the IRS in which case you need to be reporting their identitites to the IRS via a W-8BEN form. Generally speaking any foreign contractor you have for more than 2 years should incorporate in their own country and you bill that corporation to prevent employee status from occurring. 3. Can I deduct payments I made to contractors from other countries as company expense Of course.\"","You can find a lot of information at the HRMC website at http://hmrc.gov.uk. If you don't want to work as an employee, you can register as self-employed (basically a one-man band), which is quite simple, you can start your own company, which is more work but can have tax advantages, or you can find umbrella companies which will officially employ you while in reality you are a freelancer and only do your billing through them. Umbrella companies can be anywhere from totally legal to extremely dodgy. If they promise you that you pay only five percent tax on your income through ingenious tricks, that's only until the tax office finds out and they will make you pay. Between self-employed and your own company, the big difference is whether you are actually working independently or not. If you work like an employee (take someone else's orders) and claim you are a company, the tax office doesn't like that. And if you pay very little taxes, they don't like that either. So self-employed is the safer choice but you will pay more taxes, close to what a normal employee would pay. Obviously you will have to pay tax on your income and NHS insurance. Obviously you are required to tell the government (actually HMRC) about your income. Not doing so would be tax evasion and get you into deep trouble when you are caught. I don't think you have to tell them the source of your income, but not telling them might look very suspicious and might get your accounts checked carefully. And unless you design a website for the mafia, why wouldn't you tell them? The bill payer will try to deduct your bill from their profits anyway, so it's no secret. Most important to remember: When you send out a bill and receive payment, you'll have to pay tax on it. When self employed, as a rule of thumb put one third away into a savings account for your tax bill. Don't spend it all or you will find yourself in deep trouble when your taxes need paying. Plus put some more away for times when you can't find work.","Yes, You will have to pay the taxes at least initially but you'll most probably get a refund when you will file returns depending upon the amount and tax brackets in the UK.","> If a business operates in the US, makes money here, has physical infrastructure and employees here, and utilizes our infrastructure I don't see how you can say that the US doesn't deserve any of that. For fuck's sake, this isn't rocket science. Taxes made on profits from goods and services sold in the U.S. are ALREADY taxed in the U.S. We are talking about profits from GE making engines in Germany and selling to the EU.","KPMG's website has: For the purposes of taxation, how is an individual defined as a resident of Sweden? An individual is considered a resident in Sweden for tax purposes if one of the following three conditions is met: The individual has his/her real home and dwelling in Sweden. The individual stays in Sweden during a lengthy period of time (a permanent sojourn) and with only occasional interruptions. There is no legal definition of permanent sojourn, but a stay of six months or more will in general constitute residency. So, given your I am presently resident in Sweden and this from the above website: There is no legal definition of permanent sojourn, but a stay of six months or more will in general constitute residency. I believe you are liable for Swedish income tax. I am not an accountant. This is just speculation based on a Google search. Get paid advice! :-)","\"It seems that you think you are freelancing, and they think you are an employee. What's bad for you, the tax office will also think you are an employee if they withhold tax for you. Alternatively, they think you are stupid, and they keep the money, but are actually not paying it to the tax office at all, in which case you will have a bad surprise when you do your tax returns. First, I'd ask them for proof that they are indeed paying these taxes into some account related to you. I'd then ask a tax adviser for some serious advice. If they are acting out of incompetence and not out of malice, then you should be mostly fine, but your work there will count as employment. Heaven knows why they treat you as an employee. Check your contract with them; whether it is between you and them or your company and them. It maybe that they never hired a contractor and believe that they have to pay employment tax. They don't. If your company sends them a bill, then they need to pay that bill, 100% of it, and that's it. Taxes are fully your business and your responsibility. As \"\"quid\"\" said, if they say they are withholding tax, then at the very least there must be a paystub that proves they have actually been paying these taxes. If they withhold taxes, and there is no paystub, then this looks like a criminal attempt to cheat you. If they have actually paid taxes properly into your account, then they are merely creating a mess that can hopefully be fixed. But it is probably complicated enough that you need a tax advisor, even if you had none before, since instead of paying to your company, they paid some money to the company, and some to you personally.\"","Three points for you to keep in mind. 1. In the very first year, you should have 182 days outside India. So that in the year when you start your consultancy, you will not have any liability to pay tax on earning abroad. 2. Although you may be starting a consultancy abroad, if you do any services in India, there will be withholding tax depending on the country in which you have started the consultancy business. 3. Whatever money you repatriate is not taxable in India. However, if you you repatriate the money as gift to anyone who is not a relative, will be taxed in his/her hand.","Where you earn your money makes no difference to the IRS. Citizen/permanent resident means you pay income tax. To make matters worse given your situation it's virtually certain you have unreported foreign bank accounts--something that's also an important issue.","You need to register as self-employed with HMRC (it is perfectly fine to be self-employed and employed by an employer at the same time, in exactly your kind of situation). Then, when the income arrives you will need to declare it on your yearly tax return. HMRC information about registering for self-employment and declaring the income is here: https://www.gov.uk/working-for-yourself/overview There's a few extra hoops if your clients are outside the UK; the detail depends on whether they are in the EU or not. More details about this are here: https://www.gov.uk/online-and-distance-selling-for-businesses/selling-overseas .","\"Anything is negotiable. Clearly in the current draft of the contract the company isn't going to calculate or withhold taxes on your behalf - that is your responsibility. But if you want to calculate taxes yourself, and break out the fees you are receiving into several \"\"buckets\"\" on the invoice, the company might agree (they might have to run it past their legal department first). I don't see how that helps anything - it just divides the single fee into two pieces with the same overall total. As @mhoran_psprep points out, it appears that the company expects you to cover your expenses from within your charges. Thus, it's up to you to decide the appropriate fees to charge, and you are assuming the risk that you have estimated your expenses incorrectly. If you want the company to pay you a fee, plus reimburse your expenses, you will need to craft that into the contract. It's not clear what kind of expenses you need to be covered, and sometimes companies will not agree to them. For specific tax rule questions applicable to your locale, you should consult your tax adviser.\"","For stocks, bonds, ETF funds and so on - Taxed only on realised gain and losses are deductible from the gain and not from company's income. Corporate tax is calculated only after all expenses have been deducted. Not the other way around. Real estate expenses can be deducted because of repairs and maintenance. In general all expenses related to the operation of the business can be deducted. But you cannot use expenses as willy nilly, as you assume. You cannot deduct your subscription to Playboy as an expense. Doing it is illegal and if caught, the tours to church will increase exponentially. VAT is only paid if you claim VAT on your invoices. Your situation seems quite complicated. I would suggest, get an accountant pronto. There are nuances in your situation, which an accountant only can understand and help.","Eeeeeeh... No, you don't. In Canada, and pretty much any country with common sense they will rarely charge you for income made outside its borders. In the worst case scenario you're taxed on income deemed resulting from investment (stocks, bonds, etc.), but the general rule is... You don't pay taxes on income made abroad.","A) a tax treaty probably covers this for the avoidance of double taxation. Tax treaties can be very cryptic and have little precedence clarifying them http://www.irs.gov/businesses/international/article/0,,id=169552,00.html B) I'm going to say NO since the source of your income is going to be US based. But the UK tax laws might also have specific verbage for resident source income. sorry it is an inconclusive answer, but should be some factors to consider and point you in the right direction.","\"You may be considered a resident for tax purposes. To meet the substantial presence test, you must have been physically present in the United States on at least: 31 days during the current year, and 183 days during the 3 year period that includes the current year and the 2 years immediately before. To satisfy the 183 days requirement, count: All of the days you were present in the current year, and One-third of the days you were present in the first year before the current year, and One-sixth of the days you were present in the second year before the current year. If you are exempt, I'd check that ending your residence in Germany doesn't violate terms of the visa, in which case you'd lose your exempt status. If you are certain that you can maintain your exempt status, then the income would definitively not be taxed by the US as it is not effectively connected income: You are considered to be engaged in a trade or business in the United States if you are temporarily present in the United States as a nonimmigrant on an \"\"F,\"\" \"\"J,\"\" \"\"M,\"\" or \"\"Q\"\" visa. The taxable part of any U.S. source scholarship or fellowship grant received by a nonimmigrant in \"\"F,\"\" \"\"J,\"\" \"\"M,\"\" or \"\"Q\"\" status is treated as effectively connected with a trade or business in the United States. and your scholarship is sourced from outside the US: Generally, the source of scholarships, fellowship grants, grants, prizes, and awards is the residence of the payer regardless of who actually disburses the funds. I would look into this from a German perspective. If they have a rule similiar to the US for scholarships, then you will still be counted as a resident there.\"","You can do that, you aren't missing anything. It is supposed to be punishment, but as you are moving to a European country your non-penalized income would likely be taxed higher as is. I don't have info on whether you will be taxed a second time by the European country.","If treaties are involved for something other than exempting student wages on campus, you shouldn't do it yourself but talk to a licensed US tax adviser (EA/CPA licensed in your state) who's well-versed in the specific treaty. Double taxation provisions generally mean that you can credit the foreign tax paid to your US tax liability, but in the US you can do that regardless of treaties (some countries don't allow that). Also, if you're a US tax resident (or even worse - a US citizen), the royalties related treaty provision might not even apply to you at all (see the savings clause). FICA taxes are generally not part of the income tax treaties but totalization agreements (social security-related taxes, not income taxes). Most countries who have income tax treaties with the US - don't have social security totalization agreements. Bottom line - talk to a licensed professional.","Here is the solution: any money made inside the United States will be taxed under US tax law. You want to do business here, open up a US headquarters that handles all the sales tracking and reporting. No tax dollars, no operations inside the US. The united states carries such bulk buying power that companies will be forced to abide by its rules.","You're doing business in the US and derive income from the US, so I'd say that yes, you should file a non-resident tax return in the US. And in Connecticut, as well, since that's where you're conducting business (via your domestic LLC registered there). Since you paid more than $600 to your contractor, you're probably also supposed to send a 1099 to him on that account on behalf of your LLC (which is you, essentially, if you're the only member).","I do NOT know the full answer but I know here are some important factors that you need to consider : Do you have a physical location in the United States? Are you working directly from Canada? With a office/business location in the United States your tax obligation to the US is much higher. Most likely you will owe some to the state in which your business is located in Payroll Tax : your employer will likely want to look into Payroll tax, because in most states the payroll tax threshold is very low, they will need to file payroll tax on their full-time, part-time employees, as well as contractor soon as the total amount in a fiscal year exceeds the threshold Related to No.1 do you have a social security number and are you legally entitled to working in the States as an individual. You will be receiving the appropriate forms and tax withholding info Related to No.3 if you don't have that already, you may want to look into how to obtain permissions to conduct business within the United States. Technically, you are a one person consulting service provider. You may need to register with a particular state to obtain the permit. The agency will also be able to provide you with ample tax documentations. Chances are you will really need to piece together multiple information from various sources to resolve this one as the situation is specific. To start, look into consulting service / contractor work permit and tax info for the state your client is located in. Work from state level up to kick start your research then research federal level, which can be more complex as it is technically international business service for Canada-US","With the W8-Ben filed, tax will be withheld at a lower rate. (I would expect 10%). Tax treaty treatment will mean that this witholding will reduce your UK tax even if this payment is not taxable there. This is only effective if you actually pay tax. This is how it works for lotteries and dividends as well.","You can't currently avoid it. The reason the legislation was introduced was to prevent the big-name developers from setting up shop in a low-VAT country and selling apps to citizens of EU countries that would normally be paying a much higher VAT. You need to register for VAT and file quarterly nil-returns so that you get that money back. It's a hassle, but probably worth it just to recoup those funds. From an article in Kotaku from late 2014: You see, in the UK we have a rather sensible exemption on VAT for businesses that earn under £81,000 a year. This allows people to run small businesses - like making and selling games in your spare time, for instance - without the administrative nightmare of registering as a business and paying VAT on sales. Unfortunately, none of the other EU member states had an exemption like this, so when the new legislation was being put together, there was no exemption factored in. That means that if someone makes even £1 from selling something digital to another person in another EU country, they now have to be VAT registered in the UK AND they have to pay tax on that sale at whatever rate the buyer’s country of residence has set. That could be 25% in Sweden, 21% in the Netherlands, and so on. [...] There’s one piece of good news: even though anyone who sells digital stuff now has to be VAT-registered in the UK, they don’t actually have to pay VAT on sales to people in the UK if they earn less than £81,000 from it. (This concession was achieved earlier this month after extensive lobbying.) But they’ll still have to submit what’s called a “nil-return”, which is essentially a tax return with nothing on it, every quarter in order to use the VAT MOSS service. That’s a lot of paperwork. Obviously Brexit may have a significant impact on all this, so the rules might change. This is the official Google Link to how they've implemented this and for which countries it affects: https://support.google.com/googleplay/android-developer/answer/138000?hl=en Due to VAT laws in the European Union (EU), Google is responsible for determining, charging, and remitting VAT for all Google Play Store digital content purchases by EU customers. Google will send VAT for EU customers' digital content purchases to the appropriate authority. You don't need to calculate and send VAT separately for EU customers. Even if you're not located in the EU, this change in VAT laws will still apply.","I would not expect any problems. Your interest will have tax deducted at 20% which I don't think you would be entitled to reclaim because you don't get a personal allowance if you aren't resident in the UK, and unless you have a huge amount of UK earnings you would not be legally liable to any higher rates of tax so there would be no issues there. If you were liable to more tax you would be obliged to inform the Inland Revenue.","Np shit dipshit. But if you think you won't pay taxes, then you have your head up your ass. As long as you live here, work here, earn an income here... you are paying taxes here. Hey, but I hear there are no taxes in Somalia... Enjoy!","\"I'm working on similar problem space. There seems to be some working ambiguity in this space - most focus seems to be on more complex cases of income like Dividends and Capital Gains. The US seems to take a position of \"\"where the work was performed\"\" not \"\"where the work was paid\"\" for purposes of the FEIE. See this link. The Foreign Tax Credit(FTC) is applied (regardless of FEIE) based on taxes paid in the other Country. In the event you take the FEIE, you need to exclude that from the income possible to claim on the FTC. i.e. (TOTAL WAGES(X) - Excluded Income) There is a weird caveat on TOTAL WAGES(X) that says you can only apply the FTC to foreign-sourced income which means that potentially we are liable for the on-US-soil income at crazy rates. See this link.. Upon which... there is probably not a good answer short of writing your congressperson.\"","Are there banks where you can open a bank account without being a citizen of that country without having to visit the bank in person? I've done it the other way around, opened a bank account in the UK so I have a way to store GBP. Given that Britain is still in the EU you can basically open an account anywhere. German online banks for instance allow you to administrate anything online, should there be cards issued you would need an address in the country. And for opening an account a passport is sufficient, you can identify yourself in a video chat. Now what's the downside? French banks' online services are in French, German banks' services are in German. If that doesn't put you off, I would name such banks in the comments if asked. Are there any online services for investing money that aren't tied to any particular country? Can you clarify that? You should at least be able to buy into any European or American stock through your broker. That should give you an ease of mind being FCA-regulated. However, those are usually GDRs (global depository receipts) and denominated in GBp (pence) so you'd be visually exposed to currency rates, by which I mean that if the stock goes up 1% but the GBP goes up 1% in the same period then your GDR would show a 0% profit on that day; also, and more annoyingly, dividends are distributed in the foreign currency, then exchanged by the issuer of the GDR on that day and booked into your account, so if you want to be in full control of the cashflows you should get a trading account denominated in the currency (and maybe situated in the country) you're planning to invest in. If you're really serious about it, some brokers/banks offer multi-currency trading accounts (again I will name them if asked) where you can trade a wide range of instruments natively (i.e. on the primary exchanges) and you get to manage everything in one interface. Those accounts typically include access to the foreign exchange markets so you can move cash between your accounts freely (well for a surcharge). Also, typically each subaccount is issued its own IBAN.","\"You do not need to inform your employer of your additional activity, but it is your responsibility not to work for more than 48 hours per week as long as you are an employee. So if you are working 38 hours for your employer, you may not work for yourself for more than 10 hours. It is, however, not so easy in practice to draw the line between work and a hobby, as long as you are not being paid by the hour. The main reason to present your employer with an addition to your work contract is to make it legally very clear that he holds no intentions to claim copyright to your work. He may attempt to do something funky like claim your home computer is, in fact, a work computer because you used it once a month to work from home, and your work contract may contain a paragraph that all work performed on a work computer results in copyright ownership for your employer. I have no idea how likely this is in practice, but this is the reason I know is commonly given as legal advice to have a contract. So the normal contract you present your employer with says: In order to earn user contribution money from a website, you need to register as a sole proprietor (Gewerbeanmeldung) and pay trade tax (Gewerbesteuer) and sales tax (Umsatzsteuer, alternatively you claim small trade exception, Kleingewerbe), which also makes a tax return mandatory. I would guess, however, (and this is not legal advice in any way, just my guess), that a couple of contributions towards server cost in a strictly non-profit endeavor is not commercial (\"\"gewerblich\"\") at all but private, in the same way that you may write an invoice to someone you sold your old bike to, or a kid may get paid to mow someone's lawn. Based on that guess, my non-legal-advice recommendation is to take the contributions and do nothing else, as long as the amount is nowhere near breaking even if you count your work input.\""],"string":"[\n \"You're free to provide services, but if you stay in one country for more than half a year - you're generally considered to be its resident for tax purposes. Germany is no exception to the rule, in fact - this is true to almost any country in the world. If you provide the services from Poland, and never set foot in Germany - they won't say a word.\",\n \"\\\"Also within Germany the tax offices usually determine which tax office is responsible for you by asking where you were more than 180 days of the year (if e.g. you have a second flat where you work). That's a default value, though: in my experience you can ask to be handled by another tax office. E.g. I hand my tax declaration to my \\\"\\\"home\\\"\\\" tax office (where also my freelancing adress is), even though my day-job is 300 km away. So if you work mostly from Poland and just visit the German customer a few times, you are fine anyways. Difficulties start if you move to Germany to do the work at your customer's place. I'm going to assume that this is the situation as otherwise I don't think the question would have come up. Close by the link you provided is a kind of FAQ on this EU regulation About the question of permanent vs. temporary they say: The temporary nature of the service is assessed on a case-by-case basis. Here's my German-Italian experience with this. Background: I had a work contract plus contracts for services and I moved for a while to Italy. Taxes and social insurance on the Italian contracts had to be paid to Italy. Including tax on the contract for services. Due to the German-Italian tax treaty, there is no double taxation. Same for Poland: this is part of EU contracts. By the way: The temporary time frame for Italy seemed to be 3 months, then I had to provide an Italian residence etc. and was registered in the Italian health care etc. system. Due to the German-Italian tax treaty, there is no double taxation. Same for Poland: this is part of EU contracts. Besides that, the German tax office nevertheless decided that my \\\"\\\"primary center of life\\\"\\\" stayed in Germany. So everything but the stuff related to the Italian contracts (which would probably have counted as normal work contracts in Germany, though they is no exact equivalent to those contract types) was handled by the German tax office. I think this is the relevant part for your question (or: argumentation with the German tax office) of temporary vs. permanent residence. Here are some points they asked: There is one point you absolutely need to know about the German social insurance law: Scheinselbständigkeit (pretended self-employment). Scheinselbständigkeit means contracts that claim to be service contracts with a self-employed provider who is doing the work in a way that is typical for employees. This law closes a loophole so employer + employee cannot avoid paying income tax and social insurance fees (pension contributions and unemployment insurance on both sides - health insurance would have to be paid in full by the self-employed instead of partially by the employer. Employer also avoids accident insurance, and several regulations from labour law are avoided as well). Legally, this is a form of black labour which means that the employer commits a criminal offense and is liable basically for all those fees. There is a list of criteria that count towards Scheinselbständigkeit. Particularly relevant for you could be\\\"\",\n \"If the firm treats you as an employee then they are treated as having a place of business in the UK and therefore are obliged to operate PAYE on your behalf - this rule has applied to EU States since 2010 and the non-EU EEA members, including Switzerland, since 2012. If you are not an employee then your main options are: An umbrella company would basically bill the client on your behalf and pay you net of taxes and NI. You potentially take home a bit less than you would being 100% independent but it's a lot less hassle and potentially makes sense for a small contract.\",\n \"\\\"Finally, I got response from finance center: \\\"\\\"It doesn't matter where do you study, what does matter is where you live. So, once you live in Germany, you pay taxes in Germany. And it doesn't matter who you work for.\\\"\\\" So, there are two options to pay taxes: it's paid by an employer or an employee: If I would work for Swiss company, I need to show how much money I make every month (or year) to Finance Center.\\\"\",\n \"If you are still a UK resident, then yes. Also, as I understand it, if the contract is only for a year, then unless it happens to exactly match the payroll year, you will have to remain a UK resident and hence, yes you will have to pay tax. See here for more info (from HMRC FAQ questions)\",\n \"There are just too many variables here... Will you legally be considered a permanent resident from the moment you move? Will you work from home as a contractor or as an employee? Those are not questions you can answer yourself, they really depend on your circumstances and how the tax authorities will look at them. I strongly encourage you to speak to an advisor. Very generally spoken, at your place of residence you pay taxes for your worldwide income, at the place of your work base (which is not clear if this really would be Turkey) you pay taxes on the income generated there. If it's one and the same country, it's simple. If not, then theoretically you pay twice. However, most countries have double taxation treaties to avoid just that. This usually works so that the taxes paid abroad (in Turkey) would be deducted from your tax debt at your place of residence. But you might want to read the treaty to be sure how this would be in your specific case (all treaties are publicly available), and you should really consider speaking to a professional.\",\n \"I took littleadv's advice and talked to an accountant today. Regardless of method of payment, my US LLC does not have to withhold taxes or report the payment as payments to contractors (1099/1042(S)) to the IRS; it is simply a business expense. He said this gets more complicated if the recipient is working in the US (regardless of nationality), but that is not my case\",\n \"Usually, your situation is a generalized form of import/export, with you as the net exporter of goods/services and the individual consuming your goods/service as net importer. Import export laws vary from country to country but following are the general tariffs/taxes applicable: Export tax/duty: From your sovereign jurisdiction (read country/region/EU region), there could be export restriction or tariffs applicable to your exported goods/services on the other hand there may not be any, check with EU export law on this and then your country specific law. If there is any tax/tariff payable, you shall have to pay the same on the transactions. Import tax/duty: This is more related to your customer who is purchasing the goods/services from you, however, you should know this. Your customer will be liable to pay any import tax/duty as applicable for importing of your goods/services in that country/region, if it is applicable. Shipping Insurance: If it is a physical goods, there would be shipping and with shipping comes insurance and indemnity (if applicable). So there is a cost to it, you need to be aware of this. Sales Tax: There is no Govt. on earth or history which does not or did not charge sales tax in some form or the other. EU/country will also have sales tax, you should be aware of this as per transaction you may have to pay sales tax to the Govt. This would add to the cost. Credit of Foreign Currency Payments: Some countries have tax/tariffs attached to foreign currency credits/transfers or bank charges attached to the same, you may have to open specific type of bank A/C to receive the credits. These laws are specific to country/region, you should be aware of the same. The above are generic considerations and not specific to EU and to a greater/lesser extent applicable to all countries/regions. Best would be to search the net on the above points for EU region and get answers or approach a chartered accountant who will give you all the information.\",\n \"Your answer will need loads of information and clarification, so I will ask you to visit the VAT and have a peruse. 1) Obligation is for you to find out the correct rate of VAT, charge and pay tax accordingly. You can call up the HMRC VAT helpline for help, which they will be happy to oblige. Normally everybody pays VAT every 3 months or you can pay once in a year. 2) Depends on your annual turnover, including VAT. Less than £150000 you join the Flat rate scheme. There are schemes for cultural activities. Might be good to check here on GOV.UK. 3) If you pay VAT in EU countries, you can reclaim VAT in UK. You need to reclaim VAT while filing in your VAT returns. But be careful about your receipts, which can be checked to verify you are not defrauding HMRC. The basic rule is that B2B services are, as the name suggests, supplies from one business to another. And, subject to some exceptions, are treated as made where the customer belongs. No VAT is chargeable on B2B supplies to an overseas customer. But where you make a B2C supply, VAT depends on where your customer is located: 1) if they are outside the EU, you don’t need to charge VAT 2) if they are located in an EU country, then you must charge VAT. Source All in all keep all records of VAT charged and paid to satisfy the taxman. If the rules get complicated, get an accountant to help you out. Don' take chances of interpreting the law yourself, the fines you might pay for wrong interpretation might be a deal breaker.\",\n \"Tax Deducted at source is applicable to Employee / Employer [contract employee] relations ... it was also made applicable for cases where an Indian company pays for software products [like MS Word etc] as the product is not sold, but is licensed and is treated as Royalty [unlike sale of a consumer product, that you have, say car] ... Hence it depends on how your contract is worded with your India clients, best is have it as a service agreement. Although services are also taxed, however your contract should clearly specify that any tax in India would be borne by your Indian Client ... Cross Country taxation is an advanced area, you will not find good advice free :)\",\n \"I am a freelancer based in Europe and I want to tell you: - if you are a freelancer, then you INVOICE your Swizzerland based client The word salary is improper. - So your client will DEDUCE the invoice from its taxes, and NOT pay income tax on top of that invoice. Because invoice = expense. So, ONLY YOU pay income tax in India. Your client pays no tax at all, not in India, not in Swizzerland. As you are a freelancer and not employee, the company has no obligation to pay employer taxes for you. A company has financial benefits from working with a freelancer.\",\n \"\\\"I also don't know the specific details for Finland and/or Belgium, however many countries have tax treaties, which generally prevent double taxation (i.e., paying tax in both countries on the same base income). Being that both Finland and Belgium are EU member states, I'm quite certain there's a provision that covers this, and the same would apply: You pay taxes on what you earn while in Finland to Finland, and to Belgium what you earn while in Belgium. All of this is similar to what you presented, however there's also a section where you'd declare how much taxes were paid in other countries. One other thing to note, which will be the determining factor in the above, is whether EU law requires you to change residence to BE for the time you're there. If not then you'll be paying taxes in Finland the entire time on the entire amount. This comes from an Irish governmental site: \\\"\\\"By working in another member state and by transferring your residence there, you are likely to become \\\"\\\"resident for tax purposes\\\"\\\" there. The definition of fiscal residence varies from one member state to another. You must comply with the laws of the country where you have established your residence. The laws on personal taxation vary considerably from one member state to another and you may be liable for taxation in more than one country. In general, you are subject to income tax in the country where you are living but this may not be the case if you are a “posted worker” – see below. In general, property is taxed in the country in which it is situated but, again, there are variations. Tax agreements have been concluded between most of the member states of the EU, which are intended to avoid double taxation, if you derive income from different countries. In general, national fiscal rules must respect the fundamental principle of non-discrimination against nationals of another EU country.\\\"\\\"\\\"\",\n \"In cases like this you should be aware that tax treaties may exist and that countries are generally willing to enter into them. Their purpose is to help prevent double taxation. Tax treaties often times give you a better tax rate than even being a resident of the countries in question! (For instance, the Italy to US tax rate is lower than simply doing business in many United States) This should guide your google search, here is something I found for Germany/Spain http://tmagazine.ey.com/wp-content/uploads/2011/03/2011G_CM2300_Spain-Germany-sign-new-tax-treaty.pdf It appears that the dividend tax rate under that treaty is 5% , to my understanding, the income tax rates are often multiples higher! I read that spain's income tax rate is 18% So what I would do is see if there is the possibility of deferring taxes in the lower tax jurisidiction and then doing a large one time dividend when conveninet. But Germany isn't really known for its low taxes, being a Federal Republic, the taxes are levied by both the states and the federal government. Look to see if your business structure can avoid being taxed as the entity level: ie. your business' earnings are always distributed to the owners - which are not germany citizens or residents - as dividends. So this way you avoid Germany's 15% federal corporate tax, and you avoid Spain's 18% income tax, and instead get Spanish dividends at 5% tax. Anyway, contact a tax attorney to help interpret the use of the regulations, but this is the frame of mind you should be thinking in. Because it looks like spain is willing to do a tax credit if you pay taxes in germany, several options here to lower your tax footprint.\",\n \"I will not pay any taxes in the Us, since I am not working for an US company What you will or will not pay is up to you of course, but you definitely should pay taxes in the US, as you're working in the US. Since you mentioned being from Japan, I'll also suggest checking whether you're allowed to perform any work in the US under the conditions of your visa. If you're a F1/J1 student - you'll be breaking the immigration law and may be deported. You might be liable for taxes in Germany, as well, and also in Japan. I'll have to edit this to allow people who downvoted the answer without knowing the legal requirements to change their vote. F1 student cannot be a contractor without a valid EAD. Period. There's no doubt about it and legal requirements are pretty clear. Anyone who claims that you wouldn't be breaking the terms of your visa is wrong. Note, I'm neither a lawyer nor a tax professional, for definite advice talk to a professional.\",\n \"\\\"If a person is not a U.S. citizen and they live and work outside the U.S., then any income they make from a U.S. company or person for services provided does not qualify as \\\"\\\"U.S. Source income\\\"\\\" according to the IRS. Therefore you wouldn't need to worry about withholding or providing tax forms for them for U.S. taxes. See the IRS Publication 519 U.S. Tax Guide for Aliens.\\\"\",\n \"It depends and I would not just jump into conclusion as I have seen cases where offering some services are not U.S. sourced income. I'll advise you speak with a knowledgeable tax professional.\",\n \"In Germany you can register a Einzelunternehmen and receive payments into your personal bank account with a German bank. Apple will certainly be able to transfer to accounts in Germany as payments go via the European SEPA standard. Tax wise if you are living in Germany you will need to pay tax in Germany, so this is really the easiest way of doing it.\",\n \"As far as taxes are concerned, if your income is €10 to €20 a month, the Finanzamt doesn't even want to hear from you. To be on the safe side, give them a call and you will probably be told that there is a minimum amount, and if your revenue is below that you don't have to do anything. As far as VAT (MwSt) is concerned: You can only deduct it from VAT that you would have to pay to the government. If you are supposed to pay €100 VAT to the government, you can deduct up to €100 VAT paid to suppliers. If you don't pay VAT, you can't deduct it.\",\n \"You will almost certainly be paying taxes in Czech Republic, short of being American of Eritrean, citizenship has little to no bearing on tax. If you are working from home, you will probably be a contractor. In Romania you would work through either an SRL or you would set up a PFA. Essentially a limited company or a sole trader. You will need to find the Czech equivalents. I would advise finding a small business accountant. They will be able to advise what is the most cost effective solution, in some countries (like my one) you can save considerable amounts of tax by working through a company. There is a link with some information.\",\n \"Tax is due in India as you offered services from India. So whether the International Client pays via Credit Card, Bank Transfer, Paypal or any other means is not relevant. Even if the International Client pays you in a account outside India; it is still taxable in India.\",\n \"After a bit of rooting around the HMRC sites, I found this page which says this: One key difference is that digitised products are classed as electronically-supplied services for VAT and customs duties. These services are: For VAT purposes, the place of supply of these services is the country in which the customer lives. If you supply electronic services to a business customer in another European Union (EU) country, the customer accounts for any VAT due in that country. You should not charge UK VAT. If you supply electronic services to a consumer, charity or government body in another EU country, you have to account for UK VAT. If you supply electronic services to anyone in a country outside the EU, you don't pay any VAT. If, as a UK business, you buy electronic services from a company outside the UK, you have to account for VAT. If I read this correctly, I as the supplier of the website need to account for VAT only if the sponsor is a consumer, charity or government body in another EU country. It is not covered in this site, but I assume I must also account for VAT for a customer based in the UK. So in answer to the original question, a customer from Canada (which is currently outside the EU) would account for the VAT themselves, and I would simply charge the gross amount.\",\n \"\\\"Do I need to pay taxes in India in this scenario? For India tax purposes, you would still qualify as \\\"\\\"Resident Indian\\\"\\\". As a resident Indian you have to pay taxes on Global income. It is not relevant whether you transfer the money back to India to keep in US. The income is generated and taxable. Depending on your contract, presumably you are working as a free lance; certain expenses are allowed to be deducted from your income, for example if you purchase equipment to help carry out the work, stay / entertainment costs, etc. Consult a professional CA who should be able to guide you on what is eligible and what is not. The balance along with your other income will be taxed as per tax brackets. There is exemption for certain category of workers, mostly in entertainment industry where such income is not taxable. This does not apply to your case.\\\"\",\n \"\\\"I don't see why you would need an \\\"\\\"international tax specialist\\\"\\\". You need a tax specialist to give you a consultation and training on your situation, but it doesn't seem too complicated to me. You invoice your client and get paid - you're a 1099 contractor. They should issue you a 1099 at the end of the year on everything they paid you. Once you become full-time employee - you become a W2 employee and will get a W2 at the end of the year on the amounts paid as such. From your perspective there's nothing international here, regular business. You have to pay your own taxes on the 1099 income (including SE taxes), they have to withhold taxes from your W2 income (including FICA). Since they're foreign employers, they might not do that latter part, and you'll have to deal with that on your tax return, any decent EA/CPA will be able to accommodate you with that. For the employer there's an issue of international taxation. They might have to register as a foreign business in your state, they might be liable for some payroll taxes and State taxes, etc etc. They might not be aware of all that. They might also be liable (or exempt) for Federal taxes, depending on the treaty provisions. But that's their problem. Your only concern is whether they're going to issue you a proper W2 and do all the withholdings or not when the time comes.\\\"\",\n \"\\\"A couple of thoughts and experiences (Germany/Italy): First of all, I recommend talking to the Belgian bank (and possibly to a Dutch bank of your choice). I have similar conditions for my German bank accounts. But even though they talk about it as salary account (\\\"\\\"Gehaltskonto\\\"\\\") all they really ask for is a monthly inflow of more than xxxx € - which can be satisfied with an automatic direct transfer (I have some money automatically circulating for this reason which \\\"\\\"earns\\\"\\\" about 4% p.a. by saving fees). In that case it may be a feasible way to have a Belgian and a Dutch bank account and set up some money circulation. Experiences working in Italy (some years ago, SEPA payments were kind of new and the debits weren't implemented then): My guess with your service providers is that they are allowed to offer you contracts that are bound to rather arbitrary payment conditions. After all, you probably can also get a prepaid phone or a contract with a bill that you can then pay by wire transfer - however, AFAIK they are allowed to offer discounts/ask fees for different payment methods. Just like there is no law that forces the store around your corner to accept credit cards or even large EUR denominations as long as they tell you so beforehand. AFAIK, there is EU regulation saying your bank isn't allowed to charge you more for wire transger to foreign country within the SEPA zone than a national wire transfer.\\\"\",\n \"I believe that the form you will need to fill out for the company is the IRS' W-8ECI form. My US-based Fortune 50 company pays my rent in Germany, and had my landlord fill one out so that they would not need to do any withholding for the payments. From this IRS site on withholding income for payments to Foreign Individuals: Withholding exemption. In most cases, you do not need to withhold tax on income if you receive a Form W-8ECI on which a foreign payee represents that: The foreign payee is the beneficial owner of the income, The income is effectively connected with the conduct of a trade or business in the United States, and The income is includible in the payee's gross income. Good luck!\",\n \"The VAT number should be equivalent from the point of view of your client. The fact that you are a sole trader and not a limited liability doesn't matter when it comes down to pay VAT. They should pay the VAT to you and you will pay it to the government. I'll guess that their issue is with tax breaks, it is a bit more tricky to receive a tax break on paid taxes if you buy something abroad (at least it is here in Finland). If they won't pay you because of that, you could open a LTD or contract the services of a 'management company' which will do the job of invoicing, receiving the money and passing it back to you, for a fee.\",\n \"\\\"As you are earning an income by working in India, you are required to pay tax in India. If you contract is of freelance, then the income earned by you has to be self declared and taxes paid accordingly. There are some expenses one can claim, a CA should be able to guide you. Not sure why the Swiss comapny is paying taxes?. Are they depositing this with Income Tax, India, do they have a TAN Number. If yes, then you don't need to pay tax. But you need to get a statement from your company showing the tax paid on behalf of you. You can also verify the tax paid on your behalf via \\\"\\\"http://incometaxindia.gov.in/26ASTaxCreditStatement.asp\\\"\\\" you cna register. Alternatively if you have a Bank Account in India with a PAN card on their records, most Banks provide a link to directly see\\\"\",\n \"Typically tax treaties will cover double taxation (taxes paid in one jurisdiction are deducted in the other jurisdiction so there is no double tax). You'll need an accountant and attorney with experience in international business setups to confirm and determine which jurisdiction gets first priority of tax payment. In short, this is the wrong place to get a good answer. Talk to (and pay for) professionals to get you properly set up.\",\n \"\\\"You'll need to read carefully the German laws on tax residency, in many European (and other) tax laws the loss of residency due to absence is conditioned on acquiring residency elsewhere. But in general, it is possible to use treaties and statuses so that you end up not being resident anywhere, but it doesn't mean that the income is no longer taxed. Generally every country taxes income sourced to it unless an exclusion applies, so if you can no longer apply the treaty due to not being a resident - you'll need to look for general exclusions in the tax law. I don't know how Germany taxes scholarships under the general rules, you'll have to check it. It is possible that they're not taxed. Many people try to raise the argument of \\\"\\\"I'm not a resident\\\"\\\" to avoid income taxes altogether on earnings on their work - this would not work. But with a special kind of income like scholarship, which may be exempt under the law, it may. Keep in mind, that the treaty has \\\"\\\"who is or was immediately before visiting a Contracting State a resident of the other Contracting State\\\"\\\" language in some relevant cases, so you may still apply it in the US even if no longer resident in Germany.\\\"\",\n \"\\\"(Selling apps is AFAIK business, not freelancing - unless the type of app you produce is considered a freelancing subject. The tax office will give you a questionnaire and then decide). As Einzelunternehmer, you can receive the payments for the apps to the same account where your wages go. However, there are lots of online accounts that do not cost fees, so consider to receive them on a separate account so you have the business and private kind of separate (for small Einzelunternehmer, there is no legal separation between business and private money - you have full liability with your private money for the business). The local chamber of commerce can tell you everything about setting up such a business, ask them (you'll probably have to become a member there anyways). They have information as well on VAT (Umsatzsteuer, USt) which you need to declare unless you get an exemption (probably possible), and about Gewerbesteuer (the income tax of the business) etc. For the tax, you have \\\"\\\"subforms\\\"\\\" for the income tax e.g. for wages and for business income, so you just submit both with the main form. You'll get an appropriate tax number when registering the business. Social security/insurance: as long as the app selling is only a side business, the social insurance payments for your main job completely cover the side job as well. You need to make sure that your employment contract is compatible with the app business, though. A quick search indicates that there is a tax treaty between Germany and the Ukraine, Wikipedia says there are no contracts about social insurance in effect (yet).\\\"\",\n \"Yes, you do. Depending on your country's laws and regulations, since you're not an employee but a self employed, you're likely to be required to file some kind of a tax return with your country's tax authority, and pay the income taxes on the money you earn. You'll have to tell us more about the situation, at least let us know what country you're in, for more information.\",\n \"\\\"Even though you will meet the physical presence test, you cannot claim the FEIE because your tax home will remain the US. From the IRS: Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. Your tax home is the place where you are permanently or indefinitely engaged to work as an employee or self-employed individual. Having a \\\"\\\"tax home\\\"\\\" in a given location does not necessarily mean that the given location is your residence or domicile for tax purposes. ... You are not considered to have a tax home in a foreign country for any period in which your abode is in the United States. However, your abode is not necessarily in the United States while you are temporarily in the United States. Your abode is also not necessarily in the United States merely because you maintain a dwelling in the United States, whether or not your spouse or dependents use the dwelling. ... The location of your tax home often depends on whether your assignment is temporary or indefinite. If you are temporarily absent from your tax home in the United States on business, you may be able to deduct your away from home expenses (for travel, meals, and lodging) but you would not qualify for the foreign earned income exclusion. If your new work assignment is for an indefinite period, your new place of employment becomes your tax home, and you would not be able to deduct any of the related expenses that you have in the general area of this new work assignment. If your new tax home is in a foreign country and you meet the other requirements, your earnings may qualify for the foreign earned income exclusion. If you expect your employment away from home in a single location to last, and it does last, for 1 year or less, it is temporary unless facts and circumstances indicate otherwise. If you expect it to last for more than 1 year, it is indefinite. If you expect your employment to last for 1 year or less, but at some later date you expect it to last longer than 1 year, it is temporary (in the absence of facts and circumstances indicating otherwise) until your expectation changes. For guidance on how to determine your tax home refer to Revenue Ruling 93-86. Your main place of business is in the US and this will not change, because your business isn't relocating. If you are intending to work remotely while you are abroad, you should get educated on the relevant laws on where you are going. Most countries don't take kindly to unauthorized work being performed by foreign visitors. And yes, even though you aren't generating income or involving anyone in their country, the authorities still well may disapprove of your working. My answer to a very similar question on Expatriates.\\\"\",\n \"The data provided in your question is irrelevant. The data that you provided in the comments (that you're physically present in the US while doing the work) is the only relevant information needed to answer your question. You will need to pay taxes in the US for the earnings. The company invoicing the US client will also need to pay taxes in the US for its earnings from these invoices. You can transfer between bank accounts and deposit whatever you want anywhere you want, no-one cares (with respect to the US taxes, check with Indian tax accountant about Indian requirements).\",\n \"If you're not a NY (tax) resident, then as long as you're not physically present in New York - you do not owe NY taxes on compensation for your services. But that is if you're a 1099 contractor/employee. If you're a partner/shareholder in a partnership/LLC/S-Corp registered or conducting business in New York, and that company pays you money - you do owe NY taxes. See this page of the NY revenue agency for more details.\",\n \"\\\"By living in Sweden and having a Swedish personal identification number (personnummer), you are required to declare your entire worldwide income for tax purposes with the Swedish tax authorities, Skatteverket. It would seem to not make any difference if some of that income is kept outside of Sweden. A company that has no permanent base of operations within Sweden should not deduct any preliminary taxes for an employee that lives in Sweden. Rather, the employee should apply for \\\"\\\"special A tax\\\"\\\" (\\\"\\\"SA\\\"\\\" tax status), and pay the taxes that, had the company had a permanent base of operations in Sweden, the company would have paid. The information available on the tax authority's web site in English seems limited, but the relevant page in Swedish in your situation is very likely Lön från utländska arbetsgivare utan fast driftställe i Sverige. There is a summary at Paying taxes – for individuals. Particularly do note the summary section: When staying for at least six months, you are considered as resident in Sweden for tax purposes, and are liable for taxation in Sweden on all of your worldwide income. You must also file a Swedish income tax return. Your tax return must be filed no later than May 2nd of the year after the fiscal year. as well as that: If you stay in Sweden for a continuous period of at least six months you are considered to be resident in Sweden. /.../ As a resident you are liable for taxation in Sweden on all of your worldwide income. In some cases a tax treaty with with your ordinary country of residence may limit the Swedish taxation. /.../ For a more detailed answer, including which exact forms you need to fill out and what data is needed, I strongly recommend that you either contact Skatteverket (they are usually quite nice to deal with, and they tend to realize that everyone benefits from getting the tax paperwork and payments right from the beginning), or find an attorney specializing in Swedish tax law. They even point out themselves that (my emphasis): the practical applications of these rules are relatively complicated and for more information you can contact the Tax Information (“Skatteupplysningen”) at 0771 567 567.\\\"\",\n \"I cannot speak for the specific jurisdictions but you will generally pay income tax in each jurisdiction and be required to declare your foreign income in both. Your annual assessment takes into account both domestic and foreign income so sadly, there is no tax windfall to you. I would imagine that Finland and Belgium have tax treaties so you will not have to pay tax twice. You need an accountant in both countries to sort this for you.\",\n \"There is no requirement to open a company. You can work as freelancer. You need to report income and file returns. If your income is more than exempt limit, pay taxes. Apply for a PAN number if you don't have one yet.\",\n \"The Federal Central Tax Office says you may not have to pay taxes in germany for capital gains. You may have to apply for a tax relief to prevent the tax from being collected. You very likely will have to pay whatever taxes there are in Hong Kong on capital gains. Since you use an US broker withholding tax may apply to you but this is a different question that has nothing to do with Germany or german stocks. To be sure you should contact a local expert on this topic. EDIT: I missed some informations that I found on the english site of the german Federal Central Tax Office homepage.\",\n \"If you are paid by foreigners then it is quite possible they don't file anything with the IRS. All of this income you are required to report as business income on schedule C. There are opportunities on schedule C to deduct expenses like your health insurance, travel, telephone calls, capital expenses like a new computer, etc... You will be charged both the employees and employers share of social security/medicare, around ~17% or so, and that will be added onto your 1040. You may still need a local business license to do the work locally, and may require a home business permit in some cities. In some places, cities subscribe to data services based on your IRS tax return.... and will find out a year or two later that someone is running an unlicensed business. This could result in a fine, or perhaps just a nice letter from the city attorneys office that it would be a good time to get the right licenses. Generally, tax treaties exist to avoid or limit double taxation. For instance, if you travel to Norway to give a report and are paid during this time, the treaty would explain whether that is taxable in Norway. You can usually get a credit for taxes paid to foreign countries against your US taxes, which helps avoid paying double taxes in the USA. If you were to go live in Norway for more than a year, the first $80,000/year or so is completely wiped off your US income. This does NOT apply if you live in the USA and are paid from Norway. If you have a bank account overseas with more than $10,000 of value in it at any time during the year, you owe the US Government a FinCEN Form 114 (FBAR). This is pretty important, there are some large fines for not doing it. It could occur if you needed an account to get paid in Norway and then send the money here... If the Norwegian company wires the money to you from their account or sends a check in US$, and you don't have a foreign bank account, then this would not apply.\",\n \"You're not subject to the US tax laws, and since the income is not US-sourced, it is not subject to withholding. Your employer doesn't need any form, but if they insist - you can provide them a W8-BEN to certify your non-resident status. Keep in mind that if you do come to the US, the money you earn while in the US is US-sourced and subject to the US taxes and withholding, even if you're non-resident.\",\n \"\\\"Yes. You do have to pay taxes in the UK as well but it depends on how much you have already been taxed in the US. http://taxaid.org.uk/situations/migrant-workernew-to-the-uk/income-from-abroad-arising-basis-vs-remittance-basis Say, you have to pay 20% tax in the UK for your earnings here. You ARE required to pay the same percentage on your foreign income as well. Now, if your \\\"\\\"home\\\"\\\" country already taxed you at 10% (for the sake of example), then you only need to pay the \\\"\\\"remaining\\\"\\\" 10% in the UK. However, the tax law in the UK does allow you to choose between \\\"\\\"arising\\\"\\\" basis and \\\"\\\"remittance\\\"\\\" basis on your income from the country you are domiciled in. What I have explained above is based on when income \\\"\\\"arises.\\\"\\\" But the laws are complicated, and you are almost always better off by paying it on \\\"\\\"arising\\\"\\\" basis.\\\"\",\n \"From tax perspective, any income you earn for services performed while you're in the US is US-sourced. The location of the person paying you is of no consequence. From immigration law perspective, you cannot work for anyone other than your employer as listed on your I-20. So freelancing would be in violation of your visa, again - location of the customer is of no consequence.\",\n \"With something this complicated you are going to want to consult professionals. Either a professional with international experience, who will tell you the best tax arrangement overall but might come expensive, or one professional in each country who will optimize for that country. You will have to pay US taxes, and depending on your residency probably some in Spain. Double tax agreements should kick in to prevent you paying tax on the same money twice. You do not have to pay separate 'European' taxes. If you do substantial business in another country you might have to pay there, but one of your professionals should sort it out.\",\n \"No you won't. Germany taxes income, not bank accounts. Note that this changes immediately when your bank account makes interest - you will owe taxes on this interest. However, chances are you won't get a bank account. Without residency or income, typically the banks wouldn't give you an account. Feel free to try, though.\",\n \"You're not physically present in the US, you're not a US citizen, you're not a green card holder, and you don't have a business that is registered in the US - US laws do not apply to you. You're not in any way under the US jurisdiction. Effectively connected income is income effectively connected to your business in the US. You're not in the US, so there's nothing to effectively connect your income to. Quote from the link: You usually are considered to be engaged in a U.S. trade or business when you perform personal services in the United States. You ask: If I form an LLC or C corp am I liable for this withholding tax? If you form a legal entity in a US jurisdiction - then that entity becomes subjected to that jurisdiction. If you're physically present in the US - then ECI may become an issue, and you also may become a resident based on the length of your stay.\",\n \"\\\"Be careful here: If ACME were in California, I would pay taxes on USD 17,000 because I had revenue of 20,000 and expenses of 3,000. To CALIFORNIA. And California taxes S-Corps. And, in addition, you'd pay $800 for the right of doing business in the State. All that in addition to the regular Federal and State taxes to the State where you're resident. Suppose that ACME is in Britain (or anywhere else for that matter). My revenue and expenses are the same, but now my money has been earned and my expenses incurred in a foreign country. Same thing exactly. Except that you'll have to pay taxes to the UK. There may be some provision in the tax treaty to help you though, so you may end up paying less taxes when working in the UK than in California. Check with a licensed tax adviser (EA/CPA licensed in your State) who won't run away from you after you say the words \\\"\\\"Tax Treaty\\\"\\\". Does it even make sense to use my S-Corporation to do business in a foreign country? That should be a business decision, don't let the tax considerations drive your business.\\\"\",\n \"Having freelanced myself in South America I could give you a sound advice BUT you would first need to answer some questions. 1) How long do you plan on being in South America? At the end of 2017 will you be back in Ireland or still being in South America? In other words was is your country of residence for tax purposes on Dec. 31 2017 ? That is the key element to consider. Link 2) In latin America you can freelance with a legal working permit BUT in all these countries more than 50% of the economy is under the table. In all these countries expatriate work under the table. The question you need to answer is then: Who will be your employer, a company or the owner of this company? Working undeclared in Latin America is very common, what are the risks? The legal risks depend on the country and their laws. In which country will you travel? How long will you stay there? You will have a tourist visa or a working visa? 3) An important detail, your health. Check how long you can be out of Ireland without loosing your social health benefits in Ireland? In my country, if I am abroad for more than 180 days, I loose my national health coverage. Evaluate the amount of days you will be out of Ireland and where you want to be on Dec. 31th. That could change a lot of things in your life.\",\n \"\\\"Can the companies from USA give job to me (I am from New Zealand)? Job as being employee - may be tricky. This depends on the labor laws in New Zealand, but most likely will trigger \\\"\\\"nexus\\\"\\\" clause and will force the employer to register in the country, which most won't want to do. Instead you can be hired as a contractor (i.e.: being self-employed, from NZ legal perspective). If so, what are the legal documents i have to provide to the USA for any taxes? If you're employed as a contractor, you'll need to provide form W8-BEN to your US employer on which you'll have to certify your tax status. Unless you're a US citizen/green card holder, you're probably a non-US person for tax purposes, and as such will not be paying any tax in the US as long as you work in New Zealand. If you travel to the US for work, things may become tricky, and tax treaties may be needed. Will I have to pay tax to New Zealand Government? Most likely, as a self-employed. Check how this works locally. As for recommendations, since these are highly subjective opinions that may change over time, they're considered off-topic here. Check on Yelp, Google, or any local NZ professional review site.\\\"\",\n \"\\\"As I understand it the usual rule is that the country you are \\\"\\\"resident\\\"\\\" in taxes you on your worldwide income but gives you credit for foreign tax paid. The country you are not normally resident in taxes you only on income from that one country. Note that residence for tax purposes can have different rules from residence for immigration purposes. At least in the UK being resident in the country for more than half the tax year normally makes you tax resident and there are some other cases too. I expect other countries are similar but the details of the rules and the start/end of the tax years may vary. I don't know the exact rules for finland and belgium but I expect your Belgian taxes will be based on your Belgian income only and your Finnish taxes will be based on your worldwide income but with a credit for your Belgian taxes. Engaging accountants from both countries to confirm the exact rules and what exactly you should put on the forms is almost certainly a good idea.\\\"\",\n \"Yes. You must register for GST as well, if you will be making over the threshold (currently $60,000). That's probably a bonus for you, as your home office expenses will mostly include GST, but your income will most likely be zero-rated. Check with an accountant or with the IRD directly. Just be certain to put aside enough money from each payment to cover income tax, GST and ACC. You will get a very large bill in your second year of business.\",\n \"I think if you transfer money from your account in Germany to your account in Canada you don't have to pay any taxes. However if you get any interest on your deposits, you probably have to pay tax (and probably in Canada) regardless where the account is.\",\n \"Been digging through all the EU VAT directives and have called HMRC as well.. There does not seem to be any lower threshhold for charging VAT into the EU. If you sell £10 of goods/services you have to charge VAT and file a VAT return. Your options are: 1) Register for MOSS and file a single VAT return in your home country for all countries. In the UK this means that you also have to be VAT registered and have to charge VAT locally as well - even if you are below the UK threshold. 2) Register and file a VAT return in every EU country you sell into. You also have to apply the correct VAT rate for each country (typically 15% to 27%), and you have to keep at least two pieces of evidence for the customer location. eg. billing address, IP address, etc.\",\n \"\\\"11 / 111 / 11111 looks like the (old) tax number: it is used by the tax office to know who you are, it isn't good at all for the spanish company. It would even change when you move inside Germany. VAT IDs are not exclusive to GmbHs (but a GmbH always has one). As freelancers you can get at VAT ID but you don't always have to. The tax office offers a \\\"\\\"small business\\\"\\\" treatment (§ 19 UStG) for freelancers, kind of an opt-out for the VAT ID. As you do not have a VAT ID, this is probably your case. It means So what to do? If I were you, I'd write them that according to §19 UStG and the European Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, TITLE XII CHAPTER 1 \\\"\\\"Special scheme for small enterprises\\\"\\\" you were not assigned a VAT ID, and VAT is not applicable to your bill. The fact that VAT is not applicable in this case does not mean that they are allowed to refuse payment. I heard a rumour (but don't really know) that a number similar to the VAT ID is planned also for freelancers (Wirtschafts-IDNr.). You could go to your tax office and ask them about. Maybe that yields a number that satisfies spanish burocracy. AFAIK, you can go to your tax office and ask them to give you a real VAT number. But careful: that has the serious drawback that you have to do do an advance VAT estimate and pay that to the tax office at least quarterly (for bigger business monthly). And (AFAIK) you are not allowed to change back to the small business treatment for several years.\\\"\",\n \"\\\"Re the business license - in California business licenses are given by the municipal/county governments, so you'll have to check that with your city hall or county office. Re taxes - yes, you'll have to pay taxes, as with any income. Services are considered \\\"\\\"imputed income\\\"\\\", and generally you'd recognize income to the extent they would be paying had they been paying the full price (or the actual cost of services provided, if more). Since this is a hobby and not a for-profit enterprise, your deductions may be limited by the actual income and the 2% AGI threshold. See more here.\\\"\",\n \"\\\"Am I eligible for declaring my earnings to the IRS? You're always eligible. You're probably asking whether you're required. In the US it doesn't matter where you deposit the money, it matters where you earn it. Money is earned where the services are provided. This is called \\\"\\\"sourcing\\\"\\\". So if you are working in a foreign country - you're only subject to the US laws to the extent you're a US citizen/permanent resident or qualify for the substantial presence test.\\\"\",\n \"I have some more inputs to investigate: India has dual tax avoidance treaty signed with european countries so that NRIs dont pay tax in both countries. Please check if India has some agreement with Swiss Also for freelance job that is delivered from India, u need to make sure where you have to pay taxes as you are still in India so the term NRI will not hold good here. Also, if Swiss company is paying tax there, and you are a freelancer from India(resident in india) how to tax filing /rate etc has to be investigated. Also, can you apply for tax back from swiss( a portion of tax paid can be refunded eg: in Germany) but I dont know if this is true for Freelancers and also for people out side SWISS. Bip\",\n \"To answer my own question, at least to the extent of my understanding. Here the IRS says that all income for a foreign person from a US-based company is taxable with 30%. Here the IRS says that this tax should be withhold at source by whomever pays you. In case there is a tax treaty with the country, the tax can even be waived in the US. Of course, if you don't declare it in your home country, the US bank could probably give information requested by the home country authorities. For the other two cases (when there's no US party involved) I can't find anything on the IRS website, which kind of make sense. If I am using an account in the US just to receive and send money shouldn't imply any tax. Thanks to @litteadv for pointing me into the right direction.\",\n \"\\\"I would look into the possibility that the promise \\\"\\\"that no taxes will be withheld\\\"\\\" is all about your status as a 'consultant'. They may be meaning you to be treated like a business they buy services from. In Canada the distinction is very watery and I presume the same in India. If you agree to become a business, then you must look into how that business income will be taxed.\\\"\",\n \"You will have to pay your taxes in the UK not USA. For tax purposes it is the company's tax residency not where the server is located. You are just hiring a server in USA. Take for example a CDN being used for your same service then would you pay taxes in 300 different countries if you use Akamai? Does not work that way.\",\n \"It means you must pay federal (and possibly state) tax on any income you produce in America -- including Internet and mail-order sales. Tax treaties may keep you from having to pay tax on it again in your own country, or may not.\",\n \"There is no strict need to do that, you can consider yourself to be consulting, a 10% of your payment will be withheld and paid as tax by the company, you can deduct up to 60% of your income as expenses and pay tax on the rest (factoring the tax deducted at source). In another approach, you could register for service tax and charge service tax on your invoice and pay to the service tax department, the tax calculations are similar to above. It will be good if you speak to a chartered accountant and get more clarity. As for business card, you could print it with your name and qualification, there are no restrictions on that.\",\n \"\\\"After reviewing the tax treaty between New Zealand and Australia, I think the issue is whether or not you have an interest in a \\\"\\\"permanent establishment\\\"\\\" in Australia where you do business. The bank is not relevant as it is merely the vehicle by which you collect payment and would only come into the picture if you had an income bearing account (which you have indicated you do not). Even if you work out of the offices of the Australian company, you do not have a financial interest in their offices and as such, would pay taxes on the income in New Zealand (see documentation below). https://www.ato.gov.au/business/international-tax-for-business/foreign-residents-doing-business-in-australia/tax-on-income-and-capital-gains/#permanentestablishment\\\"\",\n \"If you are going to be trying clever stuff with taxes in different place, you probably need a professional. Different countries definitely have different laws on the subject. For example (several years ago) the UK considered you absent from the UK for tax purposes from the day you left, provided you were gone for a year, whereas Canada didn't charge you tax as long as you were not in the country for six months in the year. A carefully timed move enabled me to not pay tax at all for six months because I wasn't resident anywhere. Also it was irrelevant whether I intended to stay or not.\",\n \"\\\"The IRS taxes worldwide income of its citizens and green card holders. Generally, for those Americans genuinely living/working overseas the IRS takes the somewhat reasonable position of being in \\\"\\\"2nd place\\\"\\\" tax-wise. That is, you are expected to pay taxes in the country you are living in, and these taxes can reduce the tax you would have owed in the USA. Unfortunately, all of this has to be documented and tax returns are still required every year. Your European friends may find this quite surprising as I've heard, for instance, that France will not tax you if you go live and work in Germany. A foreign company operating in a foreign country under foreign law is not typically required to give you a W-2, 1099, or any of the forms you are used to. Indeed, you should be paying taxes in the place where you live and work, which is probably somewhat different than the USA. Keep all these records as they may be useful for your USA taxes as well. You are required to total up what you were paid in Euros and convert them to US$. This will go on the income section of a 1040. You should be paying taxes in the EU country where you live. You can also total those up and convert to US$. This may be useful for a foreign tax credit. If you are living in the EU long term, like over 330 days/year or you have your home and family there, then you might qualify for a very large exemption from your income for US tax purposes, called the Foreign Earned Income Exclusion. This is explained in IRS Publication 54. The purpose of this is primarily to avoid double taxation. FBAR is a serious thing. In past years, the FBAR form went to a Financial Crimes unit in Detroit, not the regular IRS address. Also, getting an extension to file taxes does not extend the deadline for the FBAR. Some rich people have paid multi-million dollar fines over FBAR and not paying taxes on foreign accounts. I've heard you can get a $10,000 FBAR penalty for inadvertent, non-willful violations so be sure to send those in and it goes up from there to $250k or half the value of the account, whichever is more. You also need to know about whether you need to do FATCA reporting with your 1040. There are indeed, a lot of obnoxious things you need to know about that came into existence over the years and are still on the law books -- because of the perpetual 'arms race' between the government and would be cheaters, non-payers and their advisors. http://www.irs.gov/publications/p54/ http://americansabroad.org/\\\"\",\n \"Every country has its own tax code. Consult a professional in each country regarding income earned in that country. Anything else is speculation.\",\n \"The tax is depended upon state where you are registered and the salary paid. More here If you employ contract you need not pay tax.\",\n \"\\\"I would suggest to get an authoritative response from a CPA. In any case it would be for your own benefit to have at least the first couple of years of tax returns prepared by a professional. However, from my own personal experience, in your situation the income should not be regarded as \\\"\\\"US income\\\"\\\" but rather income in your home country. Thus it should not appear on the US tax forms because you were not resident when you had it, it was given to you by your employer (which is X(Europe), not X(USA)), and you should have paid local taxes in your home country on it.\\\"\",\n \"Let's take your argument to its logical conclusion. Let's say there is a company that uses infrastructure of UK, Germany, France, US, Japan, Italy and Spain (because it's a global multinational). Corporate taxes in these countries are 19%, 29.65%, 33% (for large companies), 35%, 32.1%, 27.9% and 25%. Now according to your logic, each of these countries should tax the company's profits. Such a company in your world would pay more in taxes than it makes in profits (tax rate > 100%).\",\n \"\\\"Paypal linked with my bank account. 1.Can I use my Saving bank account to receive payments from my clients? Or is it necessary to open a current account? Yes you can get funds into your savings account. However it is advisable to keep a seperate account as it would help with your IT Returns. 2.I will be paying a certain % as commission on every sales to a couple of sales guys (who are not my employees but only working on commission). Can I show this as an expense in my IT returns? As you are earning as freelancer, you are eligible for certain deductions like Phone calls, Laptop, other hardware, payments to partners. It is important that you maintain a book of records. An accountant for a small fee of Rs 5 K should be able to help you. In the Returns you have to show Net income after all these deductions, there is no place to enter expenses. 3.Since I will be receiving all the payments in Euros so am I falling under a category of \\\"\\\"Exporter of services\\\"\\\"? The work you are doing can be Free Lancing. 4.Do I need an Import Export Code (IEC) for smoothly running this small business? You can run this without one as Free lancing. IEC would be when you grow big and are looking for various benefits under tax and pay different taxes and are incorporated as a company.\\\"\",\n \"\\\"If you're a US citizen, money earned while in the US is sourced to the US. So you can't apply FTC/FEIE to the amounts attributable to the periods of your work while in the US even if it is a short business trip. Tax treaties may affect this. Most tax treaties have explicit provisions to exclude short trips from the sourcing rules, however due to the \\\"\\\"saving clause\\\"\\\" these would probably not apply to you if you're a US citizen - you'll need to read the relevant treaty. Your home country should allow credit for the US taxes paid on the US-sourced income, and the double-taxation avoidance provision should apply in this case. The technicalities depend on your specific country. You would probably not just remove it from the taxable income, there probably is a form similar to the US form 1116 to calculate the available credit.\\\"\",\n \"Generally for tax questions you should talk to a tax adviser. Don't consider anything I write here as a tax advice, and the answer was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. Does IRS like one payment method over other or they simply don't care as long as she can show the receipts? They don't care as long as she withholds the taxes (30%, unless specific arrangements are made for otherwise). She should withhold 30% of the payment and send it to the IRS. The recipient should claim refund, if the actual tax liability is lower. It's only consulting work at the moment, so most of the communication is done over phone. Should they start engaging in written communication to keep records of the work done? Yes, if she wants it to be a business expense. Is it okay to pay in one go to save money-transferring fees? Can she pay in advance? Again, she can do whatever she wants, but if she wants to account for it on her tax returns she should do it the same way she would pay any other vendor in her business. She cannot use different accounting methods for different vendors. Basically, she has not outsourced work in previous years, and she wants to avoid any red flags. Then she should start by calling on her tax adviser, and not an anonymous Internet forum.\",\n \"\\\"I'll assume that you would work as a regular (part-time) employee. In this case, you are technically a Grenzgänger. You will need a specific kind of Swiss permit (\\\"\\\"Grenzgängerbewilligung\\\"\\\") allowing you to work in Switzerland. Your employer typically takes care of this - they have more experience than you. You being non-EU might make matters a bit more complicated. Your employer will withhold 4.5% of your gross income as source taxes (\\\"\\\"Quellensteuer\\\"\\\"). When you do your tax declaration, your entire income will be taxed in Germany, since this is where you live. This will happen after your first year of work. Be prepared for a large tax bill (or think of this as an interest-free loan from Germany to you). However, due to the Doppelbesteuerungsabkommen (DBA), the 4.5% you already paid to Switzerland will be deducted from the taxes you are due in Germany. Judging from my experience, the tax authorities in Germany are not fluent in the DBA - particularly in areas far away from the Swiss border. I had to gently remind them to deduct the source taxes, explicitly referring to the DBA. The bill was revised without problems, but I strongly recommend making sure that your source taxes are correctly deducted from your German tax liability. Once your local German tax office understands your situation, you will be asked to make quarterly prepayments, which will be calculated in a way to minimize your later overall tax liability. Budget for these. You didn't ask, but I'll tell you anyway: social security will normally be handled by Switzerland as the country of employment - not the country of residence. Your employer will automatically deduct old age, unemployment and accident insurance and contribute to a pension plan, all in Switzerland. However... ... if you do a lot of your work in Germany (>25%), which certainly applies if you plan on mostly working remotely, your social security will be handled by your country of residence. This is a major pain for your employer, because now your Swiss employer needs to understand the German social security system, how much and to whom to co-pay and so forth. This is a major area of study, and your employer may not want to spend all this effort. My employer has looked at this and requires anyone living outside of Switzerland to limit working from home to less than 25%, because by extension, they would some day also need to do the same for employees living in France, Italy, Austria... or even the UK. They don't want to dig through half the EU states' social security regulations. Therefore, you would not be able to work remotely from Germany for my employer. This is actually a fairly recent development that only entered in force at the beginning of 2015 (before that, this was all a bit of a gray area). Your prospective employer may not be aware of all details. So you will need to think about whether you actively want to point them at this (possibly ruining your plans of working remotely), or not (and possibly getting major problems and post-payments years later). Finally, I think you can choose whether you want to have your health insurance in Switzerland or in Germany (unless your Swiss obligation to be insured is waived because of your part-time status). Some Swiss health insurers offer plans where they cooperate with German health insurers, so you can go to German doctors just like a German resident. Source: I have been a Grenzgänger from Germany into Switzerland off and on for over ten years now. I can't say anything about whether your German visa restricts you from working in Switzerland. You may want to ask about this at Expatriates.SE, but I'd much rather ask your local German authorities than random strangers on the internet.\\\"\",\n \"Because you actually reside in New Zealand, your income taxes will be paid in New Zealand. However, as a non-resident of Australia you will have tax withholding on all of the interest you earn in an Australian bank account. Obviously, because that tax is paid to Australia, that will not be counted against your New Zealand income taxes due to the taxation agreement between those countries. You should still discuss this with an accountant in New Zealand and consider acting as a sole trader. Since you are doing freelance work, that seems like the most logical setup anyway.\",\n \"Yes you do. You're under the jurisdiction of at least one country where you're resident, or where you're citizen. You may be under jurisdiction of more than one country. Each country has its own laws about what and how should be taxed and countries have treaties between them to resolve jurisdiction issues and double taxation situations, so you should talk to a tax accountant licensed to provide you with an advice.\",\n \"\\\"1. What forms do I need to file to receive money from Europe None. Your client can pay you via wire transfer. They need to know your name, address, account number, and the name of your bank, its SWIFT number and its associated address. The addresses and names are required to make sure there are no typos in the numbers. 2. What forms do I need to file to pay people in Latin America (or any country outside the US) None. 1099s only need to be filled out when the contractor has a US tax ID. Make sure they are contractors. If they work for you for more than 2 years, that can create a problem unless they incorporate because they might look like \\\"\\\"employees\\\"\\\" to the IRS in which case you need to be reporting their identitites to the IRS via a W-8BEN form. Generally speaking any foreign contractor you have for more than 2 years should incorporate in their own country and you bill that corporation to prevent employee status from occurring. 3. Can I deduct payments I made to contractors from other countries as company expense Of course.\\\"\",\n \"You can find a lot of information at the HRMC website at http://hmrc.gov.uk. If you don't want to work as an employee, you can register as self-employed (basically a one-man band), which is quite simple, you can start your own company, which is more work but can have tax advantages, or you can find umbrella companies which will officially employ you while in reality you are a freelancer and only do your billing through them. Umbrella companies can be anywhere from totally legal to extremely dodgy. If they promise you that you pay only five percent tax on your income through ingenious tricks, that's only until the tax office finds out and they will make you pay. Between self-employed and your own company, the big difference is whether you are actually working independently or not. If you work like an employee (take someone else's orders) and claim you are a company, the tax office doesn't like that. And if you pay very little taxes, they don't like that either. So self-employed is the safer choice but you will pay more taxes, close to what a normal employee would pay. Obviously you will have to pay tax on your income and NHS insurance. Obviously you are required to tell the government (actually HMRC) about your income. Not doing so would be tax evasion and get you into deep trouble when you are caught. I don't think you have to tell them the source of your income, but not telling them might look very suspicious and might get your accounts checked carefully. And unless you design a website for the mafia, why wouldn't you tell them? The bill payer will try to deduct your bill from their profits anyway, so it's no secret. Most important to remember: When you send out a bill and receive payment, you'll have to pay tax on it. When self employed, as a rule of thumb put one third away into a savings account for your tax bill. Don't spend it all or you will find yourself in deep trouble when your taxes need paying. Plus put some more away for times when you can't find work.\",\n \"Yes, You will have to pay the taxes at least initially but you'll most probably get a refund when you will file returns depending upon the amount and tax brackets in the UK.\",\n \"> If a business operates in the US, makes money here, has physical infrastructure and employees here, and utilizes our infrastructure I don't see how you can say that the US doesn't deserve any of that. For fuck's sake, this isn't rocket science. Taxes made on profits from goods and services sold in the U.S. are ALREADY taxed in the U.S. We are talking about profits from GE making engines in Germany and selling to the EU.\",\n \"KPMG's website has: For the purposes of taxation, how is an individual defined as a resident of Sweden? An individual is considered a resident in Sweden for tax purposes if one of the following three conditions is met: The individual has his/her real home and dwelling in Sweden. The individual stays in Sweden during a lengthy period of time (a permanent sojourn) and with only occasional interruptions. There is no legal definition of permanent sojourn, but a stay of six months or more will in general constitute residency. So, given your I am presently resident in Sweden and this from the above website: There is no legal definition of permanent sojourn, but a stay of six months or more will in general constitute residency. I believe you are liable for Swedish income tax. I am not an accountant. This is just speculation based on a Google search. Get paid advice! :-)\",\n \"\\\"It seems that you think you are freelancing, and they think you are an employee. What's bad for you, the tax office will also think you are an employee if they withhold tax for you. Alternatively, they think you are stupid, and they keep the money, but are actually not paying it to the tax office at all, in which case you will have a bad surprise when you do your tax returns. First, I'd ask them for proof that they are indeed paying these taxes into some account related to you. I'd then ask a tax adviser for some serious advice. If they are acting out of incompetence and not out of malice, then you should be mostly fine, but your work there will count as employment. Heaven knows why they treat you as an employee. Check your contract with them; whether it is between you and them or your company and them. It maybe that they never hired a contractor and believe that they have to pay employment tax. They don't. If your company sends them a bill, then they need to pay that bill, 100% of it, and that's it. Taxes are fully your business and your responsibility. As \\\"\\\"quid\\\"\\\" said, if they say they are withholding tax, then at the very least there must be a paystub that proves they have actually been paying these taxes. If they withhold taxes, and there is no paystub, then this looks like a criminal attempt to cheat you. If they have actually paid taxes properly into your account, then they are merely creating a mess that can hopefully be fixed. But it is probably complicated enough that you need a tax advisor, even if you had none before, since instead of paying to your company, they paid some money to the company, and some to you personally.\\\"\",\n \"Three points for you to keep in mind. 1. In the very first year, you should have 182 days outside India. So that in the year when you start your consultancy, you will not have any liability to pay tax on earning abroad. 2. Although you may be starting a consultancy abroad, if you do any services in India, there will be withholding tax depending on the country in which you have started the consultancy business. 3. Whatever money you repatriate is not taxable in India. However, if you you repatriate the money as gift to anyone who is not a relative, will be taxed in his/her hand.\",\n \"Where you earn your money makes no difference to the IRS. Citizen/permanent resident means you pay income tax. To make matters worse given your situation it's virtually certain you have unreported foreign bank accounts--something that's also an important issue.\",\n \"You need to register as self-employed with HMRC (it is perfectly fine to be self-employed and employed by an employer at the same time, in exactly your kind of situation). Then, when the income arrives you will need to declare it on your yearly tax return. HMRC information about registering for self-employment and declaring the income is here: https://www.gov.uk/working-for-yourself/overview There's a few extra hoops if your clients are outside the UK; the detail depends on whether they are in the EU or not. More details about this are here: https://www.gov.uk/online-and-distance-selling-for-businesses/selling-overseas .\",\n \"\\\"Anything is negotiable. Clearly in the current draft of the contract the company isn't going to calculate or withhold taxes on your behalf - that is your responsibility. But if you want to calculate taxes yourself, and break out the fees you are receiving into several \\\"\\\"buckets\\\"\\\" on the invoice, the company might agree (they might have to run it past their legal department first). I don't see how that helps anything - it just divides the single fee into two pieces with the same overall total. As @mhoran_psprep points out, it appears that the company expects you to cover your expenses from within your charges. Thus, it's up to you to decide the appropriate fees to charge, and you are assuming the risk that you have estimated your expenses incorrectly. If you want the company to pay you a fee, plus reimburse your expenses, you will need to craft that into the contract. It's not clear what kind of expenses you need to be covered, and sometimes companies will not agree to them. For specific tax rule questions applicable to your locale, you should consult your tax adviser.\\\"\",\n \"For stocks, bonds, ETF funds and so on - Taxed only on realised gain and losses are deductible from the gain and not from company's income. Corporate tax is calculated only after all expenses have been deducted. Not the other way around. Real estate expenses can be deducted because of repairs and maintenance. In general all expenses related to the operation of the business can be deducted. But you cannot use expenses as willy nilly, as you assume. You cannot deduct your subscription to Playboy as an expense. Doing it is illegal and if caught, the tours to church will increase exponentially. VAT is only paid if you claim VAT on your invoices. Your situation seems quite complicated. I would suggest, get an accountant pronto. There are nuances in your situation, which an accountant only can understand and help.\",\n \"Eeeeeeh... No, you don't. In Canada, and pretty much any country with common sense they will rarely charge you for income made outside its borders. In the worst case scenario you're taxed on income deemed resulting from investment (stocks, bonds, etc.), but the general rule is... You don't pay taxes on income made abroad.\",\n \"A) a tax treaty probably covers this for the avoidance of double taxation. Tax treaties can be very cryptic and have little precedence clarifying them http://www.irs.gov/businesses/international/article/0,,id=169552,00.html B) I'm going to say NO since the source of your income is going to be US based. But the UK tax laws might also have specific verbage for resident source income. sorry it is an inconclusive answer, but should be some factors to consider and point you in the right direction.\",\n \"\\\"You may be considered a resident for tax purposes. To meet the substantial presence test, you must have been physically present in the United States on at least: 31 days during the current year, and 183 days during the 3 year period that includes the current year and the 2 years immediately before. To satisfy the 183 days requirement, count: All of the days you were present in the current year, and One-third of the days you were present in the first year before the current year, and One-sixth of the days you were present in the second year before the current year. If you are exempt, I'd check that ending your residence in Germany doesn't violate terms of the visa, in which case you'd lose your exempt status. If you are certain that you can maintain your exempt status, then the income would definitively not be taxed by the US as it is not effectively connected income: You are considered to be engaged in a trade or business in the United States if you are temporarily present in the United States as a nonimmigrant on an \\\"\\\"F,\\\"\\\" \\\"\\\"J,\\\"\\\" \\\"\\\"M,\\\"\\\" or \\\"\\\"Q\\\"\\\" visa. The taxable part of any U.S. source scholarship or fellowship grant received by a nonimmigrant in \\\"\\\"F,\\\"\\\" \\\"\\\"J,\\\"\\\" \\\"\\\"M,\\\"\\\" or \\\"\\\"Q\\\"\\\" status is treated as effectively connected with a trade or business in the United States. and your scholarship is sourced from outside the US: Generally, the source of scholarships, fellowship grants, grants, prizes, and awards is the residence of the payer regardless of who actually disburses the funds. I would look into this from a German perspective. If they have a rule similiar to the US for scholarships, then you will still be counted as a resident there.\\\"\",\n \"You can do that, you aren't missing anything. It is supposed to be punishment, but as you are moving to a European country your non-penalized income would likely be taxed higher as is. I don't have info on whether you will be taxed a second time by the European country.\",\n \"If treaties are involved for something other than exempting student wages on campus, you shouldn't do it yourself but talk to a licensed US tax adviser (EA/CPA licensed in your state) who's well-versed in the specific treaty. Double taxation provisions generally mean that you can credit the foreign tax paid to your US tax liability, but in the US you can do that regardless of treaties (some countries don't allow that). Also, if you're a US tax resident (or even worse - a US citizen), the royalties related treaty provision might not even apply to you at all (see the savings clause). FICA taxes are generally not part of the income tax treaties but totalization agreements (social security-related taxes, not income taxes). Most countries who have income tax treaties with the US - don't have social security totalization agreements. Bottom line - talk to a licensed professional.\",\n \"Here is the solution: any money made inside the United States will be taxed under US tax law. You want to do business here, open up a US headquarters that handles all the sales tracking and reporting. No tax dollars, no operations inside the US. The united states carries such bulk buying power that companies will be forced to abide by its rules.\",\n \"You're doing business in the US and derive income from the US, so I'd say that yes, you should file a non-resident tax return in the US. And in Connecticut, as well, since that's where you're conducting business (via your domestic LLC registered there). Since you paid more than $600 to your contractor, you're probably also supposed to send a 1099 to him on that account on behalf of your LLC (which is you, essentially, if you're the only member).\",\n \"I do NOT know the full answer but I know here are some important factors that you need to consider : Do you have a physical location in the United States? Are you working directly from Canada? With a office/business location in the United States your tax obligation to the US is much higher. Most likely you will owe some to the state in which your business is located in Payroll Tax : your employer will likely want to look into Payroll tax, because in most states the payroll tax threshold is very low, they will need to file payroll tax on their full-time, part-time employees, as well as contractor soon as the total amount in a fiscal year exceeds the threshold Related to No.1 do you have a social security number and are you legally entitled to working in the States as an individual. You will be receiving the appropriate forms and tax withholding info Related to No.3 if you don't have that already, you may want to look into how to obtain permissions to conduct business within the United States. Technically, you are a one person consulting service provider. You may need to register with a particular state to obtain the permit. The agency will also be able to provide you with ample tax documentations. Chances are you will really need to piece together multiple information from various sources to resolve this one as the situation is specific. To start, look into consulting service / contractor work permit and tax info for the state your client is located in. Work from state level up to kick start your research then research federal level, which can be more complex as it is technically international business service for Canada-US\",\n \"With the W8-Ben filed, tax will be withheld at a lower rate. (I would expect 10%). Tax treaty treatment will mean that this witholding will reduce your UK tax even if this payment is not taxable there. This is only effective if you actually pay tax. This is how it works for lotteries and dividends as well.\",\n \"You can't currently avoid it. The reason the legislation was introduced was to prevent the big-name developers from setting up shop in a low-VAT country and selling apps to citizens of EU countries that would normally be paying a much higher VAT. You need to register for VAT and file quarterly nil-returns so that you get that money back. It's a hassle, but probably worth it just to recoup those funds. From an article in Kotaku from late 2014: You see, in the UK we have a rather sensible exemption on VAT for businesses that earn under £81,000 a year. This allows people to run small businesses - like making and selling games in your spare time, for instance - without the administrative nightmare of registering as a business and paying VAT on sales. Unfortunately, none of the other EU member states had an exemption like this, so when the new legislation was being put together, there was no exemption factored in. That means that if someone makes even £1 from selling something digital to another person in another EU country, they now have to be VAT registered in the UK AND they have to pay tax on that sale at whatever rate the buyer’s country of residence has set. That could be 25% in Sweden, 21% in the Netherlands, and so on. [...] There’s one piece of good news: even though anyone who sells digital stuff now has to be VAT-registered in the UK, they don’t actually have to pay VAT on sales to people in the UK if they earn less than £81,000 from it. (This concession was achieved earlier this month after extensive lobbying.) But they’ll still have to submit what’s called a “nil-return”, which is essentially a tax return with nothing on it, every quarter in order to use the VAT MOSS service. That’s a lot of paperwork. Obviously Brexit may have a significant impact on all this, so the rules might change. This is the official Google Link to how they've implemented this and for which countries it affects: https://support.google.com/googleplay/android-developer/answer/138000?hl=en Due to VAT laws in the European Union (EU), Google is responsible for determining, charging, and remitting VAT for all Google Play Store digital content purchases by EU customers. Google will send VAT for EU customers' digital content purchases to the appropriate authority. You don't need to calculate and send VAT separately for EU customers. Even if you're not located in the EU, this change in VAT laws will still apply.\",\n \"I would not expect any problems. Your interest will have tax deducted at 20% which I don't think you would be entitled to reclaim because you don't get a personal allowance if you aren't resident in the UK, and unless you have a huge amount of UK earnings you would not be legally liable to any higher rates of tax so there would be no issues there. If you were liable to more tax you would be obliged to inform the Inland Revenue.\",\n \"Np shit dipshit. But if you think you won't pay taxes, then you have your head up your ass. As long as you live here, work here, earn an income here... you are paying taxes here. Hey, but I hear there are no taxes in Somalia... Enjoy!\",\n \"\\\"I'm working on similar problem space. There seems to be some working ambiguity in this space - most focus seems to be on more complex cases of income like Dividends and Capital Gains. The US seems to take a position of \\\"\\\"where the work was performed\\\"\\\" not \\\"\\\"where the work was paid\\\"\\\" for purposes of the FEIE. See this link. The Foreign Tax Credit(FTC) is applied (regardless of FEIE) based on taxes paid in the other Country. In the event you take the FEIE, you need to exclude that from the income possible to claim on the FTC. i.e. (TOTAL WAGES(X) - Excluded Income) There is a weird caveat on TOTAL WAGES(X) that says you can only apply the FTC to foreign-sourced income which means that potentially we are liable for the on-US-soil income at crazy rates. See this link.. Upon which... there is probably not a good answer short of writing your congressperson.\\\"\",\n \"Are there banks where you can open a bank account without being a citizen of that country without having to visit the bank in person? I've done it the other way around, opened a bank account in the UK so I have a way to store GBP. Given that Britain is still in the EU you can basically open an account anywhere. German online banks for instance allow you to administrate anything online, should there be cards issued you would need an address in the country. And for opening an account a passport is sufficient, you can identify yourself in a video chat. Now what's the downside? French banks' online services are in French, German banks' services are in German. If that doesn't put you off, I would name such banks in the comments if asked. Are there any online services for investing money that aren't tied to any particular country? Can you clarify that? You should at least be able to buy into any European or American stock through your broker. That should give you an ease of mind being FCA-regulated. However, those are usually GDRs (global depository receipts) and denominated in GBp (pence) so you'd be visually exposed to currency rates, by which I mean that if the stock goes up 1% but the GBP goes up 1% in the same period then your GDR would show a 0% profit on that day; also, and more annoyingly, dividends are distributed in the foreign currency, then exchanged by the issuer of the GDR on that day and booked into your account, so if you want to be in full control of the cashflows you should get a trading account denominated in the currency (and maybe situated in the country) you're planning to invest in. If you're really serious about it, some brokers/banks offer multi-currency trading accounts (again I will name them if asked) where you can trade a wide range of instruments natively (i.e. on the primary exchanges) and you get to manage everything in one interface. Those accounts typically include access to the foreign exchange markets so you can move cash between your accounts freely (well for a surcharge). Also, typically each subaccount is issued its own IBAN.\",\n \"\\\"You do not need to inform your employer of your additional activity, but it is your responsibility not to work for more than 48 hours per week as long as you are an employee. So if you are working 38 hours for your employer, you may not work for yourself for more than 10 hours. It is, however, not so easy in practice to draw the line between work and a hobby, as long as you are not being paid by the hour. The main reason to present your employer with an addition to your work contract is to make it legally very clear that he holds no intentions to claim copyright to your work. He may attempt to do something funky like claim your home computer is, in fact, a work computer because you used it once a month to work from home, and your work contract may contain a paragraph that all work performed on a work computer results in copyright ownership for your employer. I have no idea how likely this is in practice, but this is the reason I know is commonly given as legal advice to have a contract. So the normal contract you present your employer with says: In order to earn user contribution money from a website, you need to register as a sole proprietor (Gewerbeanmeldung) and pay trade tax (Gewerbesteuer) and sales tax (Umsatzsteuer, alternatively you claim small trade exception, Kleingewerbe), which also makes a tax return mandatory. I would guess, however, (and this is not legal advice in any way, just my guess), that a couple of contributions towards server cost in a strictly non-profit endeavor is not commercial (\\\"\\\"gewerblich\\\"\\\") at all but private, in the same way that you may write an invoice to someone you sold your old bike to, or a kid may get paid to mow someone's lawn. Based on that guess, my non-legal-advice recommendation is to take the contributions and do nothing else, as long as the amount is nowhere near breaking even if you count your work input.\\\"\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["\"Also within Germany the tax offices usually determine which tax office is responsible for you by asking where you were more than 180 days of the year (if e.g. you have a second flat where you work). That's a default value, though: in my experience you can ask to be handled by another tax office. E.g. I hand my tax declaration to my \"\"home\"\" tax office (where also my freelancing adress is), even though my day-job is 300 km away. So if you work mostly from Poland and just visit the German customer a few times, you are fine anyways. Difficulties start if you move to Germany to do the work at your customer's place. I'm going to assume that this is the situation as otherwise I don't think the question would have come up. Close by the link you provided is a kind of FAQ on this EU regulation About the question of permanent vs. temporary they say: The temporary nature of the service is assessed on a case-by-case basis. Here's my German-Italian experience with this. Background: I had a work contract plus contracts for services and I moved for a while to Italy. Taxes and social insurance on the Italian contracts had to be paid to Italy. Including tax on the contract for services. Due to the German-Italian tax treaty, there is no double taxation. Same for Poland: this is part of EU contracts. By the way: The temporary time frame for Italy seemed to be 3 months, then I had to provide an Italian residence etc. and was registered in the Italian health care etc. system. Due to the German-Italian tax treaty, there is no double taxation. Same for Poland: this is part of EU contracts. Besides that, the German tax office nevertheless decided that my \"\"primary center of life\"\" stayed in Germany. So everything but the stuff related to the Italian contracts (which would probably have counted as normal work contracts in Germany, though they is no exact equivalent to those contract types) was handled by the German tax office. I think this is the relevant part for your question (or: argumentation with the German tax office) of temporary vs. permanent residence. Here are some points they asked: There is one point you absolutely need to know about the German social insurance law: Scheinselbständigkeit (pretended self-employment). Scheinselbständigkeit means contracts that claim to be service contracts with a self-employed provider who is doing the work in a way that is typical for employees. This law closes a loophole so employer + employee cannot avoid paying income tax and social insurance fees (pension contributions and unemployment insurance on both sides - health insurance would have to be paid in full by the self-employed instead of partially by the employer. Employer also avoids accident insurance, and several regulations from labour law are avoided as well). Legally, this is a form of black labour which means that the employer commits a criminal offense and is liable basically for all those fees. There is a list of criteria that count towards Scheinselbständigkeit. Particularly relevant for you could be\"","You're free to provide services, but if you stay in one country for more than half a year - you're generally considered to be its resident for tax purposes. Germany is no exception to the rule, in fact - this is true to almost any country in the world. If you provide the services from Poland, and never set foot in Germany - they won't say a word."],"string":"[\n \"\\\"Also within Germany the tax offices usually determine which tax office is responsible for you by asking where you were more than 180 days of the year (if e.g. you have a second flat where you work). That's a default value, though: in my experience you can ask to be handled by another tax office. E.g. I hand my tax declaration to my \\\"\\\"home\\\"\\\" tax office (where also my freelancing adress is), even though my day-job is 300 km away. So if you work mostly from Poland and just visit the German customer a few times, you are fine anyways. Difficulties start if you move to Germany to do the work at your customer's place. I'm going to assume that this is the situation as otherwise I don't think the question would have come up. Close by the link you provided is a kind of FAQ on this EU regulation About the question of permanent vs. temporary they say: The temporary nature of the service is assessed on a case-by-case basis. Here's my German-Italian experience with this. Background: I had a work contract plus contracts for services and I moved for a while to Italy. Taxes and social insurance on the Italian contracts had to be paid to Italy. Including tax on the contract for services. Due to the German-Italian tax treaty, there is no double taxation. Same for Poland: this is part of EU contracts. By the way: The temporary time frame for Italy seemed to be 3 months, then I had to provide an Italian residence etc. and was registered in the Italian health care etc. system. Due to the German-Italian tax treaty, there is no double taxation. Same for Poland: this is part of EU contracts. Besides that, the German tax office nevertheless decided that my \\\"\\\"primary center of life\\\"\\\" stayed in Germany. So everything but the stuff related to the Italian contracts (which would probably have counted as normal work contracts in Germany, though they is no exact equivalent to those contract types) was handled by the German tax office. I think this is the relevant part for your question (or: argumentation with the German tax office) of temporary vs. permanent residence. Here are some points they asked: There is one point you absolutely need to know about the German social insurance law: Scheinselbständigkeit (pretended self-employment). Scheinselbständigkeit means contracts that claim to be service contracts with a self-employed provider who is doing the work in a way that is typical for employees. This law closes a loophole so employer + employee cannot avoid paying income tax and social insurance fees (pension contributions and unemployment insurance on both sides - health insurance would have to be paid in full by the self-employed instead of partially by the employer. Employer also avoids accident insurance, and several regulations from labour law are avoided as well). Legally, this is a form of black labour which means that the employer commits a criminal offense and is liable basically for all those fees. There is a list of criteria that count towards Scheinselbständigkeit. Particularly relevant for you could be\\\"\",\n \"You're free to provide services, but if you stay in one country for more than half a year - you're generally considered to be its resident for tax purposes. Germany is no exception to the rule, in fact - this is true to almost any country in the world. If you provide the services from Poland, and never set foot in Germany - they won't say a word.\"\n]","isConversational":false}}},{"rowIdx":57,"cells":{"_id":{"kind":"string","value":"1451"},"query":{"kind":"string","value":"How do you find an ethical, honest independent insurance broker in Canada?"},"gt_ids":{"kind":"list like","value":["538005"],"string":"[\n \"538005\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1],"string":"[\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["22143","538005","580963","59723","381386","457702","108461","133586","233561","248368","341455","112259","562798","181678","359303","19622","286461","69680","2235","490650","279106","535427","260060","229727","269233","412114","114908","431682","320953","562325","355371","565762","162873","425527","272862","341256","516675","124687","559846","262885","526847","23121","391655","447576","347404","295906","245484","53945","495791","102362","293620","119699","589085","145614","205665","440910","396208","207710","254152","458529","175693","138478","309250","98112","286525","304641","282814","480181","32573","119210","104988","559166","308964","133218","491629","378412","442053","189289","431389","200468","101265","386799","513980","114182","90153","424318","457513","327673","443676","518378","174619","152607","24179","329674","204176","184852","194167","123418","120133","472031"],"string":"[\n \"22143\",\n \"538005\",\n \"580963\",\n \"59723\",\n \"381386\",\n \"457702\",\n \"108461\",\n \"133586\",\n \"233561\",\n \"248368\",\n \"341455\",\n \"112259\",\n \"562798\",\n \"181678\",\n \"359303\",\n \"19622\",\n \"286461\",\n \"69680\",\n \"2235\",\n \"490650\",\n \"279106\",\n \"535427\",\n \"260060\",\n \"229727\",\n \"269233\",\n \"412114\",\n \"114908\",\n \"431682\",\n \"320953\",\n \"562325\",\n \"355371\",\n \"565762\",\n \"162873\",\n \"425527\",\n \"272862\",\n \"341256\",\n \"516675\",\n \"124687\",\n \"559846\",\n \"262885\",\n \"526847\",\n \"23121\",\n \"391655\",\n \"447576\",\n \"347404\",\n \"295906\",\n \"245484\",\n \"53945\",\n \"495791\",\n \"102362\",\n \"293620\",\n \"119699\",\n \"589085\",\n \"145614\",\n \"205665\",\n \"440910\",\n \"396208\",\n \"207710\",\n \"254152\",\n \"458529\",\n \"175693\",\n \"138478\",\n \"309250\",\n \"98112\",\n \"286525\",\n \"304641\",\n \"282814\",\n \"480181\",\n \"32573\",\n \"119210\",\n \"104988\",\n \"559166\",\n \"308964\",\n \"133218\",\n \"491629\",\n \"378412\",\n \"442053\",\n \"189289\",\n \"431389\",\n \"200468\",\n \"101265\",\n \"386799\",\n \"513980\",\n \"114182\",\n \"90153\",\n \"424318\",\n \"457513\",\n \"327673\",\n \"443676\",\n \"518378\",\n \"174619\",\n \"152607\",\n \"24179\",\n \"329674\",\n \"204176\",\n \"184852\",\n \"194167\",\n \"123418\",\n \"120133\",\n \"472031\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["NAPFA claims to have members in Canada. They are an organization of fee-only financial planners--they work for hourly fees, not commissions, so they have no conflicts of interest when giving advice.","How do you find an ethical, honest practitioner of any business? One: Make a small transaction with them and see how they treat you. If they cheat you on something small, don't give them a chance with something big. Two: Ask family and friends for recommendations. Three: Get information from public sources, like web sites where people post reviews of businesses, consumer advocacy organizations, groups like the Better Business Bureau, etc. Personally I consider all these of questionable value as you're asking one stranger to advise you on the reliability of another stranger, but better than nothing.","\"I think the other answers raise good points. But to your question, \"\"How do I find an honest financial adviser\"\" ask your friends and family. See who they talk to and confide in. Go meet that person, understand what they do and how they view things and if you gel, great. Honesty and strong ethics exist in individuals regardless of laws. What is it you're trying to accomplish? You just have some money you want to put aside? You want to save for something? You want to start a budget or savings plan? Your first step may be talking to a tax person, not an investment adviser. Sometimes the most significant returns are generated when you simply retain more of your earnings and tax people know how to accomplish that. You're just graduating university, you're just going to get your first job. You don't need to hunt for the right heavy hitter 30% gains generating financial adviser. You need to establish your financial foundation. Crawl, walk, then run. There are some basics (that transcend international borders). If you don't know much about investing, most (if not all) retirement and individual brokerage type accounts will give you access to some kind of market index fund. You don't need to multinationally diversify in to high fee funds because \"\"emerging markets are screaming right now.\"\" Typically, over a few years the fees you pay in the more exotic asset classes will eat up the gains you've made compared to a very low fee market index fund. You can open free accounts at a number of financial institutions. These free accounts at these banks all have a list of zero commission zero load funds, all have something resembling an index fund. You can open your account for free, deposit your money for free, and buy shares in an index fund for free.\"","Most of the organizations that financial advisors belong to have a function to find their members. The major ones are listed below: Advocis seems to be the largest organization, with CFPs (Certified Financial Planners) and some Insurance designations. The Advocis advisor search feature can be found here. FPSC is another organization that has a search for CFPs. Many of the same CFPs are in the Advocis database, but some aren't. The FPSC advisor search feature can be found here. IAFP is an organization of Registered Financial Planners (RFP). The database is smaller but the designation comes with prestige and is meant to be a mark of quality. The IAFP advisor search feature can be found here. Finally, there is a site — full disclosure, I am affiliated with it — called wealthprep.ca that has a large listing of advisors in Canada. You can filter by profession, specialties, and compensation type and there are ratings and reviews. Here is the page specifically for Toronto Financial Advisors.","Usually your best bet for this sort of thing is to look for referrals from people you trust. If you have a lawyer or other trusted advisor, ask them.","\"The Financial Consumer Agency of Canada (FCAC) has a page specifically about working with a financial planner or advisor. It's a good starting point if you are thinking about getting a financial professional to help you plan and manage your investments. In the \"\"Where To Look\"\" section on that page, FCAC refers to a handful of industry associations. I'll specifically highlight the Financial Planning Standards Council's \"\"Find a planner\"\" page, which can help you locate a Certified Financial Planner (CFP). Choose financial advice carefully. Prefer certified professionals who charge a set fee for service over advisors who work on commission to push investment products. Commission-based advice is seldom unbiased. MoneySense magazine published a listing last year for where to find a fee-only financial planner, calling it \"\"The most comprehensive listing of Canadian fee-only financial planners on the web\"\" — but do note the caveat (near the bottom of the page) that the individuals & firms have not been screened. Do your own due diligence and check references.\"","Your best bet would be to find an independent Property and Casualty Insurance agent and buy through him/her. Insurance agents make a commission, yes - BUT - the cost to consumer is THE SAME whether you buy through an agent or through directly through the company. Any P&C agent would be happy to run your numbers for you and tell you what the cheapest deal is. Just make sure you find someone who writes for several different large insurers. Obviously, some P&C Insurance agents are slick salesy types, which can get annoying, but if you find someone nice, he or she can help you out at no cost to you (they are paid by the insurance company they place the business with). If you are straightforward with the agent about exactly what your needs, they can get you quotes quickly and save you a lot of time and hassle.","I was in your situation a few years ago and I discovered something that worked perfectly for me - a local health insurance broker. I met with her, discussed my needs, reviewed the options with her, then acted. She received a commission from the insurer, so it cost me nothing. I would certainly follow a similar approach again.","Look for people who have done business with them. If you don't know anyone who has used their services, look for a company that at least has a brick and mortar branch in your area. Being able to deal with them face to face is a must. Have you checked with your local bank?","I'd advise you to look for an advisor who is a NAPFA-Registered Financial Advisor. If you visit the National Association of Personal Financial Advisors (NAPFA) website (http://www.napfa.org) and understand why they are different, I think you'll agree that the NAPFA-Registered Financial Advisor is the highest standard of excellence you will find in a financial planner.","The other answers are good, but not UK-specific. You need to look for an Independent Financial Advisor (IFA). These are regulated by the FCA and you pay them a time-based fee for their services, they do not take commission on the products they recommend to you. The Government Money Advice Service page (hat tip to @AndyT in the comments on the question for the link) tells you how to go about finding one of these and what sort of questions to ask. Contrary to the note in the answer by @Harper, in the UK many IFAs do have perfectly nice offices, this is not a sign that should put you off. Personal recommendations for IFAs are usually the best way to go but failing that there are directories of them and many will have an initial conversation with you for free to ensure you are aligned with each other.","If someone recommends a particular investment rather than a class of investments, assume they are getting a commission and walk away. If someone recommends whole life insurance as an investment vehicle, walk away. Find someone whose fiduciary responsibility is explicitly to you as their client. That legally obligated them to consider your best interests first. It doesn't guarantee they are good, but it's done protection against their being actively evil.","Check your local better business bureau. They can tell you who is in business, who's bonded, and who has had a lot of complaints levied against them for shoddy practices.","I think the OP is getting lost in designations. Sounds to me that what he wants is a 'financial advisor' not an 'investment advisor'. Does he even have investments? Does he want to be told which securities to buy? Or is he wanting advice on overall savings, insurance, tax-shelters, retirement planning, mortgages, etc. Which is a different set of skills - the financial advisor skill set. Accountants don't have that skill set. They know operating business reporting, taxes and generally how to keep it healthy and growing. They can do personal tax returns (as a favour to only the owners of the business they keep track of usually). IMO they can deal with the reporting but not the planning or optimization. But IMO the OP should just read up and learn this stuff for himself. Accreditation mean nothing. Eg. the major 'planner' brand teaches factually wrong stuff about RRSPs - which are the backbone of Canadian's finances.","The nature of this question (finding a financial adviser) can make it a conundrum. Those who have little financial experience are often in the greatest need of a financial adviser and at the same time are the least qualified to select one. I'm not putting you or anyone in particular in this category. And of course it's a sliding scale: In general the more capable you are of running your own finances the more prepared you are to answer this question. With that said, I would recommend backing up half a step. Consider advisers other than strictly fee-only advisers. Perhaps you have already considered this decision. But perhaps others reading this have not. My (Ameriprise) adviser charges a monthly (~$50) fee, but also gets percentage-based portions of certain investments. Based on a $150/hr rate that amounts to four hours per year. Does he spend four hours per year on my account? Well so far he does (~2 yrs). But that is determined primarily by how much interaction I choose to have with him. (I suppose I could spend more time asking him questions and less time on this forum. :P) I have never fully understood the gravitation towards fee-based advisers on principle. I guess the theory is they are not making biased decisions about your investments because they don't have as much of a stake in how well your investments to do. I don't necessarily see that as an advantage. It seems they would have less of an incentive to ensure the growth of your investments. Although if you're nearing retirement then growth isn't your biggest concern. Perhaps a fee-based adviser makes more sense in that scenario. Whatever pay structure your adviser uses, it would seem to make sense to consider a successful adviser with a good client base. This implies that the adviser knows what he/she is doing. (But it could also just be a sign that they are good at marketing themselves.) If your adviser has a good base of wealthy clients then choosing a strictly-fee based adviser would mitigate the risk of your adviser having less incentive to consider your portfolio vs that of more wealthy clients. To more directly answer your question I suggest asking several of your adviser candidates for advice on choosing an adviser. I suspect you will get some good advice as well as good insight on the integrity and honesty of the adviser.","Call them back and insist on speaking only with a supervisor and politely ask for their License Number and NAIC Number. When asked why reply that you are going to contact your state's insurance division and find out what recourse, if any, you might have. Merely asking for the numbers will let them know that you intend to escalate this matter; chances are that yet another supervisor will be required to rectify this situation. Companies DO NOT empower the initial representatives to resolve serious issues. It can be a tortuous path to a resolution but you must persevere. It is difficult to remove yourself and be objective but your anger will defeat you. Your agent should be on your side.","Yes, there is a profession that does exactly what you're looking for. It's called a fee-only financial advisor. These are professionals who (in the United States) enter into a fiduciary relationship with a client, meaning they are legally required to put your financial interests above all other considerations (such as any behind-the-scenes incentives to promote certain products). Between that requirement and the fact that they are paid for their time (and not on commission), they have zero incentive to try to sell you anything that you do not need. Their only job is to help you with your financial situation. (Of course, some of them may be better than others.) See the profession's website here to find such an advisor near you. (Credit to Marketplace Money, the old name for Marketplace Weekend, for mentioning fee-only advisors at least 87 times per show.)","Can't tell you where to go for a good policy, but I can tell you that most brokers make a hefty commission out of your payments for at least a year before you even start funding the tax sheltered investment account that you're trying to buy under the umbrella of life insurance. You'll have to do a lot of homework to hunt down a reputable discount broker or a direct policy purchase from the insurance company. Life insurance requires insurable need. The description is vague enough, that you can probably still get the account despite being a single male with no apparent heirs to benefit, but it raises the question of why you are buying the insurance. Whole life policies require you to maintain a certain ratio of investment to premium payment and you will likely never be able access all of the money in the account for your own personal usage. Compare several policies from several brokers and companies. Read all the critical sources you can about the pitfalls and dangers of commissions, fees and taxes eating the benefits of your account. Verify that the insurance company you buy the policy from is financially stable after the market crash. You are paying a commission to pool your money into their investment fund, and if your insurer goes under, you'll have to get a portion of your money (possibly only the principle) back from the state insurance commissioner. Some companies sold pretty generous policies during the bubble and have cut their offerings way down without fixing their marketing literature and rosy promises. Finally, let us know what you find. It never hurts to see hard numbers and to run multiple eyes over the legalese in these contracts.","Given what you state you should shop around for an advisor. Think of the time required to pursue your strategies that you list? They already have studied much of what you seek to learn about. Any good investor should understand the basics. This is Canadian based but many of the concepts are universal. Hope you find it helpful. http://www.getsmarteraboutmoney.ca/Pages/default.aspx","\"First paragraph is very true. But you also have to take into consideration that the adviser and the company are 2 different \"\"things\"\" to look into. For the adviser, quickest and easiest way is to do a Facebook search. The point of this is to see how transparent they are with their personal life. Even companies are now relying on Facebook to see how they \"\"really\"\" are. I wouldn't care if the person has lots of photos with booze and girls, but I would be concerned if they are using FB for spamming purposes, have pictures with drugs, or hints that they don't like their job and want to move on to something else. Second paragraph is spot on as well. But I would rather want to know if the company cold calls or not... which leads in to your last statement. For one adviser, more than 100 clients is a red flag. This could mean that they push savings plans left and right, they don't contact their current clients, and/or they may not have the ability to assist clients should they get many queries. A few good questions to ask: 1. How do you make your salary? 2. Besides this plan you are selling me, what other types of products do you work with and show me several examples? 3. How many other advisers are in your firm? 4. How many clients does your colleagues and boss have? 5. How often do you cold call? 6. Who else cold calls in your office? 7. How does your company get new clients OTHER than referrals? Go interrogation style and ask the above questions several times using different phrases.\"","I strongly suggest personal referral. Ask all of your friends/family/neighbors/co-workers/dog-sitter what they think of their brokers until you find someone who loves his broker. As for transferring assets, I've found it to be quite easy. It's in the new broker's best interest to get those assets, so he should be more than willing to help.","The answers you've received already are very good. I truly sympathize with your situation. In general, it makes sense to try to build off of existing relationships. Here are a few ideas: I don't know if you work for a small or large company, or local/state government. But if there is any kind of retirement planning through your workplace, make sure to investigate that. Those people are usually already paid something for their services by your employer, so they should have less of an interest in making money off you directly. One more thought: A no-fee brokerage company e.g. Charles Schwab. They offer a free one hour phone call with an investment adviser if you invest at least $25K. I personally had very good experiences with them. This answer may be too anecdotal and not specifically address the annuity dilemma you mentioned. That annunity dilemma is why you need to find someone you can trust, who is competent (see the credentials for financial advisers mentioned in the other answers), and will work the numbers out with you.","Dave Ramsey has a list of ELPs (Endorsed Local Providers) of which I've only heard good things. You can request an investment ELP here.","It is important that a cleaning business should avail of an insurance policy from a reputed broker. Polished Insurance has been providing insurance coverage for cleaners since 2001. Throughout the years, they are recognised as amongst the UK’s top brokers in the cleaning industry. If your cleaning business needs insurance, then you should get one from them. Visit their website at www.polished-insurance.co.uk for more details.","\"The risk is that the \"\"free\"\" service may be supporting itself by steering customers to products which part a sales commission, or that are products of the company/bank that employees then, rather than those which are actually best for the customer. If you go in with a skeptical outlook, watching for this sort of conflict of interest, it's possible they might be useful. But that's not exactly a glowing recommendation... If they try to tell you that insurance is an investment, or if they recommend anything other than low-fee index funds without an extremely good reason, run.\"","Usually, a financial advisor makes his money by selling financial investments. Thus, almost anyone you talk to is going to try to get you to be investment products, which is not what you need to be doing at this point. You should be focusing on paying off all your debt first, before doing any investment. The interest you are paying on credit cards is most likely much more than the money you could get from any type of investment. However, once you have your consumer debt paid off, I recommend talking to any friends, co-workers, or other professional advisors you have (such as attorneys or accountants). When you ask such people for the referrals, find out how much debt they have, how much they are investing. Pay closer attention to those with a higher net worth. Otherwise, you may be getting advice from someone fooled by the same sort of financial advisor you are trying to avoid.","There are many good brokers available in the market and many spammers too. Personally I have been associated with FXCM since 2001 and have never faced any problem. But everyone has their own personal choice and I recommend you to make your own. But the question is how to find out which broker is a good broker and would provide you with a timely and reliable service? Online google check? Not really. There is so much competition between brokerage firms that they keep writing rubbish about each other on blogs and websites. Best thing is to is check with regulator's website. For US: NFA is a regulator for all forex firms. Information about any regulated forex firm could be found here. http://www.nfa.futures.org/basicnet/welcome.aspx For UK: Its FSA. Information on all regulated Uk based firm could be found here. http://www.fsa.gov.uk/register/firmSearchForm.do Remember in many countries its not compulsory for a forex firm to be regulated but being regulated ensure that the govt. has a watch on the operations of the firm. Also most of the firms out there provide accounts for large as well as small traders so there is nothing much to look for even if you are a small trader. Do keep in mind that if you are a US Citizen you are restricted by the US Govt. to trade only with a broker within US. You are not allowed to trade with any brokerage firm that is based outside the country. Forex Trading involves a significant amount of risk make sure you study the markets well and get yourself educated properly before risking your money. While I have made a lot of money trading forex I have seen a lot of people loosing everything. Please understand the risk and please make sure you only trade with the money which you can afford to loose.","One can never be too cautious when when choosing a financial adviser. For example, has the company your adviser claims to represent ever been sanctioned by the local financial authorities? Does your adviser reside in the country in which he purports to operate? Have you thoroughly researched his background? It is also important to bear in mind what venues a company uses for advertising - if the company resorts to advertising by spamming, then their overall business practices are likely unethical and this could lead to trouble down the line. Finally, one should also research how the company's clientele has been built up. Was it through word of mouth or was the client data acquired by other means?","Make sure you shop around and ask a lot of places for a good faith estimate. Last I knew, the good faith document is the same everywhere and long form that makes it easy enough to compare the hard numbers from place to place. I have gotten several estimates for various scenarios and I have had them hand written and printed. (I discounted the hand written ones because that broker seemed pretty disorganized in general) Learn the terms online, and start comparing. Use the good faiths as a negotiation tool to get lower rates or lower costs from other brokers. See how accurate the person is at listening to you and filling out the paperwork. See how responsive they are to you when you call with questions and want some changes. Check with at least four places. The more places you shop, the better idea you will have of what fees are high and what interest rates are low. I might pay a higher fee to get a lower interest rate, so there are lots of trade offs to consider.","Large and well-known companies are typically a good starting point. That doesn't mean that they are the best or even above average good, but at least they don't cheat you and run with your money. A core point is someone you pay, not the company whose investment he sell you. Although the latter seems cheaper on first glance, it isn't - if you pay him, his interest is to do good work for you; if they pay him, his interest is to sell you the product with the highest payment for him. That does not imply that they are all that way; it's just a risk. There are many good advisers that live from commissions, and still don't recommend you bad investments. Depending on the amounts, you could also read up a bit and open an account with a online investment company. It is discussable, but I think the cost for an adviser only starts to become worth it if you are deep into 5 digits of money.","Never met any myself, but I know some manufacturers use them and are happy with their services. There is definitely a legitimate need for it, just a lot of swamp that gets dragged in. I would call around the midwest and ask. All the business folks I've met there seem to be very nice and happy to help. Try casting, extruding, or large welding shops and see if they have any recommendations. I know this isn't the best way... but it is a way of finding someone who is probably reputable.","It might be worth talking to a mortgage broker, even if you don't actually end up doing business with them. Upfront Mortgage Brokers explained Finding an upfront broker near you In a nutshell, upfront brokers disclose what they are paid for their services openly and transparently. Many brokers don't, and you can't be too careful. But a consultation should be free. An experienced broker can help you to navigate the pros and cons mentioned by the other responders. Personally, I would never do business with a broker who can't/won't show me a rate sheet on the day of the lock. That's my personal acid test. You might be surprised by what the broker has to say regarding your situation. That was my experience, anyway.","\"In addition to the advice of @karancan, If you wish to stay strictly with GICs, there are better ways to find good GIC rates, than looking at advertising from institutions you are already dealing with. This site, http://www.globeinvestor.com/servlet/Page/document/v5/data/rates?order=d&pageType=gic_long&sort=IR1&page=1&tax_indicator=N (among others) display impartial GIC rates for many institutions and terms of investment, in sortable form. Many of these institutions allow on-line purchases and transfers, requiring only a \"\"regular\"\" bank account as a source/destination for on-line transfers...\"","\"Related to this question: I came across a post at The Financial Planning Exchange* titled \"\"The Top 10 Ways To Tell If You're Working With A Really Good Financial Planner.\"\" Here are a few tips I particularly liked: (* site is no longer available) 4. Make sure the planner is going to work with you on a Fiduciary basis. This means that they are going to recommend only what is in your best interest. A planner who tries to sell you a product is generally a red flag that they aren't looking out for your best interests. [...] 8. Interview the prospective planner that you are about to hire. Understand how they think, what their speciality is, and most importantly how they are going to get paid for their services. Be very very careful with a planner who is going to provide you with a free financial plan as that person more often than not has a motivation to sell you something. [..] 10. Last but not least, go to a person who works hand in hand with financial planners like an accountant or estate planning attorney for a referral. Accountants and estate planning/tax attorneys know the difference between a good and bad planner. Chances are they are a client of the person they'll refer you to.\"","It depends greatly from place to place, but nothing beats the Internet reviews' research. If you can't find anything digging slightly deeper than the impressive home page, then you probably should be worried. As it seems that you are. Specifically, I do these: @JohnFX mentions a valid point: check for physical presence. Check that the office address is a real office and not a PO box or residential; call the number and see who answers it (if you call several times during different hours and the same person answers - that's probably a one-man operation). But that doesn't always help because short-term renting an office is not all that hard and getting a call-centre outsourced to a third-world country doesn't cost all that much. It definitely helps if you're dealing with someone local, but if you're in Sweden and checking out a suspicious operation in Cyprus - this is definitely not enough.","Again, you are asking people to trust you with their life savings so you can take your 1% and the best you can do is google? You don't have a lawyer or anything? Plenty of advisory shops allow you to set up your own business within their infrastructure.","\"Well this is a bit of a shameless plug... but you could always check out the TaxQueries website. The site is \"\"similar\"\" to this one but geared more towards accountants and tax preparers. Looks around for someone who seems to know what they're talking about and check their bio. If you're REALLY having a problem finding a good accountant, email me directly. I have over 700 of them connected to my Linked-In profile. ;-) Andrew Smith andrew@taxqueries.com http://www.taxqueries.com\"","I would stay away form these. I have had clients gave real problems when it comes to withdrawing the money...not only do you not have control of the investments themselves, but you also do not have a lot of control when it comes time to withdraw the money. I have also heard from one client that the fees can be outrageous. There was a securities commission investigation a few years back because a number of salespeople were over-promising. My suggestion would be to find someone independent, with access to a number of different products, who can advise you.","I've been looking through annual reports of some Canadian insurance companies. Having serious trouble with their reporting; it varies widely. I've been trying to create a historic look at the combined ratios, and have been comparing income statements. Maybe that's the wrong place to look.","\"What you are looking for is a Money Coach or a Personal Finance Coach. From mymoneycoach.com: \"\"Money Coach: Everyone uses money, but few people fully understand how to use it wisely. To be debt free and enjoy a comfortable lifestyle takes special skills. Money coaches provide solutions for household budgeting, investing, using credit wisely, and saving for retirement. With the principles offered by a money coach, you can live the life you want to live.\"\" Usually money coaches or personal finance coaches will not tell you \"\"you should put your money here or there\"\" but instead they will work with you to identify and correct bad money behaviours that affect more than just your investments, and they will not sell you anything. Maybe you could take a look at some coaches in your area, but a lot of them work via the internet too. Good luck!\"","I had this problem when I finished my job in Canada in Sept 2013. You'll likely have to open the account in person in Canada, at least if you don't already have a relationship with a broker there. DO NOT go to Virtual Brokers. They told me that my US citizenship was no problem, but right before I left Canada to double check. It wasn't until I asked specifically which US states they were licensed in that they realized they were licensed in NO US STATES. They told me that they'd freeze my account when I left. I then moved my (former) pension to a locked-in RRSP at BMO. As of September 2010 BMO could handle residents of most US states, but it took some tooth pulling to get the list out of them. However, after I flew to the USA, BMO called to demand more ID. My account was frozen until I flew back to Canada in person just to show ID. Annoyed, I closed the BMO account and moved it to TD Waterhouse. TD waterhouse can handle accounts for residents of all the US states EXCEPT Virginia, Louisiana, and Nebraska. (I only got the complete list of exceptions when I made my first trade, since the guys at the trading desk are much more knowledgeable about such things than the guys in the branch.) TD was extremely friendly about my USA citizenship/residence. (Many Canadian brokers simply won't accept US residents, at least as of the end of 2013.) Whichever broker you choose, BRING LOTS MORE ID than they require. Insist that they zerox it all. Make sure to include your social security card. You don't want them to demand more ID after you've left the country, like BMO did. They may even make such a move simply to get rid of US customers, because the FATCA is a pain for foreign banks.","\"In Canada, for example, they are expected or required to find out. They call it, The “Know Your Client” rule, part of which is knowing your \"\"Investment knowledge and experience\"\". They say it is, \"\"to ensure their advice is suitable for you\"\". I have always been given that kind of form to fill in, when opening an account.\"","How you check if a broker is legitimate: 1) Are they a registered broker dealer? Broker dealers have to be registered with FINRA and the SEC , which have their own databases for you to look up individuals and companies. here is FINRA's http://www.finra.org/Investors/ToolsCalculators/BrokerCheck/ FINRA is a self-regulatory agency, the SEC is a federal government agency. All things considered, they pretty much have similar legislative authority over the industry. But thats a different story. If the broker isn't able to produce information that would confirm their registration status, or if you can't readily find it in the regulators database, then that is a major red flag. The biggest red flag of them all. 2) If brokers are also acting as a consumer bank, such as how Merrill Lynch is now part of Bank of America and the accounts can be linked pretty easily, then they should will also be regulated by the FDIC. This means that you will be able to find the capital ratio that the company has, letting you know how stable it is as an institution. Physical locations, the name, and duration of existence, or their rating on BBB have nothing to do with it.","\"Traditional insurance agent guy here. There is no right answer in my opinion because your individual needs cannot be generalized. There are a variety of factors that influence the price charged to you including but not limited to your past claims history, geographic location, credit profile, and the carrier's book of business itself. This is just a small sampling, in reality their pricing calculations may be far more complicated. The point is there is no one-size-fits all carrier. My agency works with 15 different carriers. Sometimes we can offer the best combination of coverage and cost to a prospective client that beats their existing coverage; other times we are nowhere close to being competitive. The most important thing you can do is find a person/site/company you can trust and one that does not take advantage of you. Insurance policies are complex and \"\"getting the best deal\"\" may oftentimes mean lessening coverage without realizing it. So I would recommend using whatever service channel (online, phone, local agent) that's most convenient and consultative for you. And otherwise, shop around once every year or two to make sure you're still getting the most for your money.\"","And who do you trust to sell you a quality product? Someone so enamored with a company they will take a pay cut just to work with it, and only it? Or someone working for respectable living, just like you, who has several alternative choices in stock.","\"Probably not, though there are a few things to be said for understanding what you are doing here. Primerica acts as an independent financial services firm and thus has various partners that specialize in various financial instruments and thus there may exist other firms that Primerica doesn't use that could offer better products. Now, how much do you want to value your time as it could take more than a few months to go through every possible insurance firm and broker to see what rate you could get for the specific insurance you want. There is also the question of what constitutes best here. Is it paying the minimal premiums before getting a payout? That would be my interpretation though this requires some amazing guesswork to know when to start paying a policy to pay out so quickly that the insurance company takes a major loss on the policy. Similarly, there are thousands of mutual funds out there and it is incredibly difficult to determine which ones would be best for your situation. How much risk do you want to take? How often do you plan to add to it? What kind of accounts are you using for these investments, e.g. IRAs or just regular taxable accounts? Do tax implications of the investments matter? Thus, I'd likely want to suggest you consider this question: How much trust do you have that this company will work well for you in handling the duty of managing your investments and insurance needs? If you trust them, then buy what they suggest. If you don't, then buy somewhere else but be careful about what kind of price are you prepared to pay to find the mythical \"\"best\"\" as those usually only become clear in hindsight. When it comes to trusting a company in case, there are more than a few factors I'd likely use: Questions - How well do they answer your questions or concerns from your perspective? Do you feel that these are being treated with respect or do you get the feeling they want to say, \"\"What the heck are you thinking for asking that?\"\" in a kind of conceited perspective. Structure of meeting - Do you like to have an agenda and things all planned out or are you more of the spontaneous, \"\"We'll figure it out\"\" kind of person? This is about how well do they know you and set things up to suit you well. Tone of talk - Do you feel valued in having these conversations and working through various exercises with the representative? This is kind of like 1 though it would include requests they have for you. Employee turnover - How long has this person been with Primerica? Do they generally lose people frequently? Are you OK with your file being passed around like a hot potato? Not that it necessarily will but just consider the possibility here. Reputation can be a factor though I'd not really use it much as some people can find those bad apples that aren't there anymore and so it isn't an issue now. In some ways you are interviewing them as much as they are interviewing you. There are more than a few companies that want to get a piece of what you'll invest, buy, and use when it comes to financial products so it may be a good idea to shop around a little.\"","I've not gotten an answer so far. Since I've started my search for a new financial planner here are the criteria I am using:","Read about Upfront Mortgage Brokers. That site has a bunch of information on mortgages and brokers, including mistakes to avoid when shopping for a mortgage. You can also find lenders with upfront pricing. I've used it for shopping and you will find very competitive rates. I'm wary of brokers. When we sold our house, the buyers (young first time buyers) got screwed by an unscrupulous broker and didn't actually have a loan lined up. Delayed closing by 2 days while they scrambled to find a legit lender who could put together funding. The one time we used a broker (our first time), we got a deal that wasn't really as good as it should have been. (Hindsight.)","No, they certainly are not compensated the same way. Some are paid by commission that they earn from the products they sell (ie, certain mutual funds, insurance, etc.) Others are paid for their advice based on an hourly fee, or a percentage of the portfolio you have to invest. This is a great question, because too many of us just assume that if someone is in the business, they will give trustworthy advice. This may certainly be the case, but think about it, the financial planner at your bank (who also is a mutual fund specialist - just flip that handy business card over) is employed by Bank X. Bank X sells mutual funds, GIC's, insurance, all kinds of great products. That Bank X employee is not likely to tell you about products from Bank Z down the street that might be a better fit for you. Find a fee based planner, someone you can pay by the hour for advice, and let them help you review products across the industry. It's like asking your bank for mortgage advice...they will discuss the options THEY offer, but may not tell you about a deal down the street. Using a mortgage broker helps you find the best deal across the board. I believe the current issue of Moneysense magazine has an insert discussing planners. Their magazine and website (www.moneysense.ca) are good sources of reliable, Canadian financial advice.","People to ask: Granted I live in a small town, but when the same guy's name comes up more than once that's who you should hire...","You're on the right track with buying clunkers, but letting your current cars get repossessed is a bad idea for the reasons you specified. First, find an insurance broker instead of an insurance agent. A broker works with dozens of companies, many of which you may not have heard of. He is in a better position to find you the best deal than you are because he is familiar with more insurance company products than you are. He doesn't charge you extra for this service. Second, ask your insurance broker if he can find any insurers offering discounts for persons who have passed a driver training course. Find an accredited course and determine pricing. If the savings exceed the cost of the course, take the course. Third, if you have outstanding loans on your vehicles, pay them off and sell the cars. Replace them with vehicles you can purchase outright with cash. Make sure you have enough money to replace them again should another accident happen. Once you have vehicles that are lein-free there is no longer a requirement by the lender for you to have insurance for the replacement value of the vehicle, which is what's killing your rates right now. Find out what the minimum legal requirement for auto insurance is in your state. In Canada, the minimum requirement is $100,000 liability. Anything else is either a sales job or a lender requirement. Getting your wife to insure her own vehicle may help, getting your insurance under her name may also be something to look into. Since you seem to have issues with people bumping into you and there have been no medical issues, $100,000 liability may be all you need. Note: Tactic #3 is not without risk. If you are in an at-fault accident, you will have to pay for any damages exceeding your insured limit out of your own pocket. Any damages to your own vehicle whether at-fault or not will have to be paid out of your own pocket. If you are sued for medical expenses incurred by other parties, you'll have to pay anything over and above your insured limit out of your own pocket. If there is anything you are unclear about on your insurance policy, ask your agent/broker to explain until you do understand. Buying auto insurance without fully understanding what you are paying for is another risk.","In addition to a fee-only advisor, brought up by dg99, you could consider asking your questions on message boards such as Bogleheads.org. I have found the advice amazing, obviously conflict-free, and free.","non-conventional tip. reach out to another firm's risk manager and offer to buy them lunch in exchange for general tips. maybe even give them a call and introduce yourself. I did this when i landed myself in alternative investments - came from mutual funds world which is highly automated to ai world which has a lot of room for growth.","\"Life Insurance can be a difficult decision. We have to first assess the \"\"want\"\" for it vs. the \"\"need\"\" for it, and that differs from person to person. Any Life licensed agent should be happy to do this calculation for you at no cost and no obligation. Just be sure you are well educated in the subject to make sure they are looking after YOUR needs and not their wallets. For the majority of clients, when looking at \"\"needs\"\" we will be sure to look at income coverage (less what the household needs with one less body) as well as debt coverage, education costs etc. More importantly make sure you are buying the RIGHT insurance, as much as the right amount.\"","\"Don't do this if haven't talked about investments and don't learn quickly. Don't do this if you don't like cold calling. Don't do this if they want you to pump and dump. Don't do this if you don't think you can convince gamblers to invest with you. Don't do this if you have a better opportunity. I checked their website. Maybe double check with FINRA and SIPC to see that they're really members if you're really skeptical and you're still interested. Just dial and keep asking until you get a better answer than \"\"If they say so then yes.\"\" Oh, and don't do this if they're giving you a shitty deal on commissions. Ask for a tour of the premises too.\"","http://springhillgroupcounselling.com/general-counselling/ What should I expect from therapy? You should expect one or a series of confidential appointments of up to an hour in length in a suitable professional setting. The process should also provide you with the opportunity to: make sense of your individual circumstances have contact with a therapist who will help identify the choices for change feel supported during the process of change reach a point where you are better equipped to cope with the future Is counselling and psychotherapy confidential? Everything you discuss is confidential between you and the counsellor or psychotherapist. There can be certain legal exceptions and the practitioner should clarify this with you prior to the establishment of any agreed contract for working. You may have specific queries about confidentiality depending on the format of the therapy. For example, with online counselling, you may wish to ask the following questions to your therapist: Are the notes from therapy protected by passwords and encrypted? Are printouts held in a secure cabinet? What happens when there are technical problems? Should my therapist carry liability insurance? Professional liability insurance is not currently a legal requirement. However, a number of professional associations, strongly recommend that therapists take out appropriate insurance coverage. Examples of insurance policies which a therapist might have are professional indemnity, public and products liability, libel and slander to name a few. It is suggested that you check your therapist has appropriate and adequate insurance in place before engaging their services. If you are unsure then you should consult an insurance professional or a legal expert for further guidance. The insurance is not only intended to protect the therapist but offer peace of mind that if something should go wrong, there are funds in place to compensate you in such an event. For further information you may find the British Insurance Brokers’ Association website useful. Author: Towergate Professional Risks","To evaluate any advice, this lists some of the things to consider: There are good advisors out there. There are also Bernie Madoffs who give the entire industry a black eye. In the end, the best path is to educate yourself, read as much as you can before you invest. Better to lose a bit by staying out of the market than to lose it all by getting scammed.","If you use a financial planner not only should they be a fiduciary but you should just pay them an hourly rate once a year instead of a percentage unless the percentage is cheaper at this time. To find a good one, go to the National Association of Personal Financial Advisers website, NAPFA.org. Another good resource is Garrett Planning Network: GarrettPlanningNetwork.com.","First of all, think of anyone you know in your circle locally who may have gotten a mortgage recently. Ask him, her, or them for a recommendation on what brokers they found helpful and most of all priced competitively. Second of all, you may consider asking a real estate agent. Note that this is generally discouraged because agents sometimes (and sometimes justifiably) get a bad reputation for doing anything to get themselves the highest commission possible, and so folks want to keep the lender from knowing the agent. Yet if you have a reputable, trustworthy agent, he or she can point you to a reputable, trustworthy broker who has been quoting your agent's other clients great rates. Third of all, make sure to check out the rates at places you might not expect - for example, any credit unions you or your spouse might have access to. Credit unions often offer very competitive rates and fees. After you have 2-3 brokers lined up, visit them all within a short amount of time (edit courtesy of the below comments, which show that 2 weeks has been quoted but that it may be less). The reason to visit them close together is that in the pre-approval process you will be getting your credit hard pulled, which means that your score will be dinged a bit. Visiting them all close together tells the bureaus to count all the hits as one new potential credit line instead of a couple or several, and so your score gets dinged less. Ask about rates, fees (they are required by law to give you what is called a Good Faith Estimate of their final fees), if pre-payment of the loan is allowed (required to re-finance or for paying off early), alternative schedules (such as bi-weekly or what a 20 year mortgage rate might be), the amortization schedule for your preferred loan, and ask for references from past clients. Pick a broker not only who has the best rates but also who appears able to be responsive if you need something quickly in order to close on a great deal.","\"Though @mehassee mentioned it in a comment, I would like to emphasize the point that the financial planner (CFP) you talked to said that he was a fiduciary. A fiduciary has an obligation to act in your best interests. According to uslegal.com, \"\"When one person does agree to act for another in a fiduciary relationship, the law forbids the fiduciary from acting in any manner adverse or contrary to the interests of the client, or from acting for his own benefit in relation to the subject matter\"\". So, any of these Stack Exchange community members may or may not have your best interest at heart, but the financial advisor you talked to is obligated to. You have to decide for yourself, is it worth 1% of your investment to have someone legally obligated to have your best financial interest in mind, versus, for example, someone who might steer you to an overpriced insurance product in the guise of an investment, just so they can make a buck off of you? Or versus wandering the internet trying to make sense of conflicting advice? In my opinion, a fiduciary (registered CFP) is probably the best person to answer your questions.\"","It seems like you are asking two different questions, one is, how do I know if I can afford a house? The other is, how do I know what type of mortage to get? The first question is fairly simple to answer, there's plenty of calculators out there that will tell you what you can afford, but rule of thumb is 30% of income can goto housing. Now what type of mortgage to get can be much more confusing, because the mortgage industry makes money off of these confusing products. The best thing to do in my opionion in situations like this is to keep it simple. You need to be careful buying a house. So much money is changing hands and there are so many parasites involved in the transaction I would be extremely wary of anybody who is going to tell you what mortgage to get. I've never heard of a fee only independent mortgage broker, and if I found one that claimed to be I wouldn't believe him. I would just ignore all the exotic non-conforming products and just answer one simple question. Are you the type of person that buys an insurance policy or that likes to self insure? If you like insurance, get a 30 year fixed mortgage. If you like to self insure, get a 7 year ARM. The average lenghth someone owns a house is 7 years, plus in 7 years time, it might not adjust up, and even if it does, you can just accelerate your payments and pay it off quickly (this is the self insurance part of it). If you're like me, I'm willing to pay an extra .5% for the 30 year so that my payment never changes and I'm never forced to move (which is admitedly extremely unlikely, but I like the safety). I don't like 15 year term loans because rates are so low, you can get way better returns in the stock market right now, so why pay off sooner then you need to. Heck, if I had a paid off house right now I'd refi into a 30 year and invest the money. In summary, pick 30 year or ARM, then just shop around to find the lowest rate (which is extremely easy).","In Canada a good site is: redflagdeals.com","\"This shows that in each market (US and Canada) the company is registered with the appropriate regulatory organization. OANDA is registered in the US with the National Futures Association which is a \"\"self-regulatory organization for the U.S. derivatives industry\"\". OANDA Canada is registered in Canada with IIROC which is the \"\"Investment Industry Regulatory Organization of Canada\"\". The company does business in both the US and in Canada so the US arm is registered with the US regulatory organization and the Canadian arm is registered with the Canadian regulatory organization.\"","\"Like most forms of insurance, health insurance is regulated at the state level. So what is available to you will depend greatly upon which state you live in. You can probably find a list of insurance companies from your state's official website. Many states now provide \"\"insurance of last resort\"\" for individuals who can't get insurance through private insurance companies. You can try looking into professional and trade associations. Some offer group insurance plans comparable with COBRA coverage, meaning you'd get a group discount and benefits but without the benefit of an employer paying 30-80% of your premiums. As a software developer you may qualify for membership in the IEEE or ACM, which both offer several forms of insurance to members. The ASP also offers insurance, though they don't provide much information about it on the public portions of their website. These organization offer other benefits besides insurance so you may want to take that in to consideration. The National Federation of Independent Business also offers insurance to members. You may find other associations in your specific area. Credit Unions, Coops and the local chamber of commerce are all possible avenues of finding lower cost insurance options. If you are religious there are even some faith based non-insurance organizations that provide medical cost sharing services. They depend upon the generosity and sense of fairness and obligation of their members to share the burden of medical expenses so their definitely not for everyone.\"","There is a LOT of shuffling going on in the financial services industry. I would not immediately say your advisor is acting in bad faith. The DOL fiduciary changes are quite significant for some brokers. Investment Advisors who are fee-based have less of an impact since they are already fiduciaries. That being said, your issue is still the same. How can you get a low-cost solution to your problem? You might want to consider Vanguard, Fidelity, or another mutual fund company that can keep your costs low. However, you should understand that if you are using mutual funds, the fees are paid one way or another. 12b1 fees, commissions, and expenses are all deducted from the fund's gross returns. You have to choose between low cost and paid advice. you cannot get high-quality low-cost advice. Fortunately, there are a lot of new solutions out there, robo-advisors, indexing, asset allocation mutual funds, ETFs, and more. Do a bit of homework and you should be able to come up with a reasonable solution. I hope you found this helpful. Kirk","\"Fred is correct ... MOST financial advisors (but not all) are paid either for managing your assets or for selling you financial products. But success at anything, especially building wealth, is all about PROCESS, not products. I applaud your desire to find a financial advisor to help you because this is not something that most people have the education, experience or capacity to do themselves (it is impossible to get the perspective you need to make the best choices). Start with a CERTIFIED FINANCIAL PLANNER professional - they have an ethical duty to do what is in your best interests ahead of their own (the \"\"fiduciary standard\"\"). You might interview two or three. Work with the one who is transparent about how they are paid and whose process is focused on helping you achieve your goals ... not following any rule of thumb or standard boilerplate. Your goals are different. Your financial life is different. Find someone who can help YOU follow YOUR agenda ... not their own.\"","Answer their questions as honestly as you can, they should know that you aren't going to have the answer off hand to everything and that is ok. One way that you can cover yourself is to take photographs of everything that way if anything catastrophic does happen you will have something to show exactly how it was when the adjuster comes to do their estimates. Hopefully you never need to use that but better to err on the side of caution. The insurance company isn't all that important, read reviews as mentioned in another answer. You can also look into multiple policy discounts. If your insurance provider for your auto insurance also offers homeowners policies they might also offer you a discount on one or both policies for grouping them. Feel free to shop around and look for the best coverage at the best price. Overall the most important thing is going to be a company that is easy to deal with. It is not worth saving a couple dollars a year to have insurance through somewhere that is going to make it a nightmare to make a claim. In addition to answering all of their questions make sure that you have all of your own questions answered. Depending on location you might want to ask if they cover hurricanes, flooding, tornadoes, other natural events, etc. If you have any special items like collectibles, jewelry, expensive electronics, firearms, etc you might want to ask if that is covered of if you need a separate rider for those items.","\"Note: this answer was provided when the question was only about Life Insurance, therefore it does not address any other \"\"benefits\"\" Term Life Insurance is very easy to evaluate, once you have determined how much you need and for how long. For significant amounts of coverage they may require a physical to be performed. The price quotes will be for two levels of health, so you can compare costs from many companies quite easily. You have several sources in no particular order: employer, independent company, 3rd party like AARP, AAA, or via you bank or credit union. Note that the 3rd party will be getting a cut of the premium. Also some choices offered from the employer or 3rd party may be limited in size or duration. The independent companies will be able to have terms that extend for 10 years or more. So view the insurance offered by AARP as just another option that has to be compared to all your other options.\"","You don't even know why licenses you need? And you're asking Reddit? You will be doing a disservice to any client who has the misfortune of having you as an investment advisor. Go work for an established shop for a bit and learn the ropes. How could you dream of asking someone to trust you with their money when you know as little as you do?","Consult your local Small Business Administration office - they may have resources that can help you find what you're looking for.","Yes, maybe for themselves, but for you that depends on quite a number of things. But not all advisors are scum, but accept the fact that you are their cash cow and you are there for their takings. Some advisors are true to their professions and advise ethically, trying to get the best for their clients. So search for a good advisor rather than a cheap one. And regarding the mortgage you are talking about, the mortgage provider and the mortgage taker don't deal directly, but use their solicitors. Every party wants the least of legal hassles for their transactions and get the best legal help. The financial advisor maybe both rolled into one or he has legal practitioners in his firm who would do the legal job after he takes care of the financial matters. Seems a cost effective workshop.","If you buy a CD through a brokerage, the trade confirmation will indicate whether the CDs is FDIC insured. Unless you have authorized the broker (in writing) to exercise discretion in your account, meaning they can act in your account without contacting you first, they must contact you and discuss the specific investment with you before buying it. If they have misled you and the CD is not actually FDIC insured, you have a right to ask them to reverse the transaction. Keep in mind that brokerages are also required to insure the assets in your account which they hold on their balance sheets (cash, bonds, stocks, mutual funds, but not commodities). This is provided by SIPC, the equivalent of FDIC in the brokerage world. Most large brokerages also insure you beyond the SIPC minimum. Keep in mind, unlike FDIC, you're not insured against market risk, only against a bankruptcy of the brokerage. Also, SIPC is funded by the securities industry, not by the US Government.","\"I think you're right that these sites look so unprofessional that they aren't likely to be legitimate. However, even a very legitimate-looking site might be a fake designed to separate you from your money. There is an entire underground industry devoted to this kind of fakery and some of them are adept at what they do. So how can you tell? One place that you can consult is FINRA's BrokerCheck online service. This might be the first of many checks you should undertake. Who is FINRA, you might ask? \"\"The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for all securities firms doing business in the United States.\"\" See here. My unprofessional guess is, even if a firm's line of business is to broker deals in private company shares, that if they're located in the U.S. or else dealing in U.S. securities then they'd still need to be registered with FINRA – note the \"\"all securities firms\"\" above. I was able to search BrokerCheck and find SecondMarket (the firm @duffbeer703 mentioned) listed as \"\"Active\"\" in the FINRA database. The entry also provides some information about the firm. For instance, SecondMarket appears to also be registered with the S.E.C.. You should also note that SecondMarket links back to these authorities (refer to the footer of their site): \"\"Member FINRA | MSRB | SIPC. Registered with the SEC as an alternative trading system for trading in private company shares. SEC 606 Info [...]\"\" Any legitimate broker would want you to look them up with the authorities if you're unsure about their legitimacy. However, to undertake any such kind of deal, I'd still suggest more due diligence. An accredited investor with serious money to invest ought to, if they are not already experts themselves on these things, hire a professional who is expert to provide counsel, help navigate the system, and avoid the frauds.\"","Yes. It is. It, like all business, takes a bit of luck, but honesty can be an asset. I knew a used car salesman who was absolutely honest and had a great eye for product. He bought cars at auctions out of state, and many of them were sold or reserved before they even arrived at his lot.","\"Others have mentioned the term fiduciary but haven't really gone in to what that is. Despite the name \"\"financial advisor\"\" there is no legal (In the US) mandate as to what that means. Often times a financial advisor is little more than a sales rep whose job it is to sell particular financial instruments. These people will give you good generic advice such as \"\"make sure you have a nest egg\"\" and \"\"don't spend more than you make\"\". However when the rubber hits the road in terms of how to save they will often recommend/insist/pressure a particular asset/security which doesn't necessarily meet your risk/reward preference/tolerance. Often times the assets they pitch have high fees. These people won't charge you for their time because their time is a loss leader for the commissions they make on selling their products. In contrast a fiduciary's job responsibility is to look out for your interests. They shouldn't receive any kind of payment based on what assets you buy. This means that you have to pay them for their time. The NAPFA website seems to have good ideas on choosing an advisor. http://www.napfa.org/HowtoFindAnAdvisor.asp\"","\"This is very true. I just don't know how much longer I can go because in order to promote at enterprise your \"\"insurance\"\" sales have to be a certain number for a three month average and I am pretty well below because I don't believe in the products. It feels impossible to sell something a person truly doesn't need.\"","I've been at it for 17 years and, in that time, seen thousands of companies skyrocket ahead of me. Are those founders smarter? No. But nor are they necessarily dishonest. In that same time I've seen tens of thousands of companies fail. One thing I know is that being transparent and honest with my clients and employees has led to more personal satisfaction in my life: I'm a very happy person. My friends, employees, and peers respect me. I can look in the mirror and feel good about the path I've chosen. Yeah, maybe I don't get a private jet or that sweet piece of real estate I wanted. But at the end of the day, my happiness is worth more than any trinket. Sounds like you understand that too.","It seems ideal to have the employment be all about both income and ethics, but the problem is that for most people in the industry more often at one point or another they will have to choose between their income or their ethics. Ethics should always hold supremacy over personal gain. Because ethics maintain the relationships (formal and informal) between entities involved in the markets. Without those long term relationships, there is no room for trust and therefore no reason to be willingness for entities to exchange with one another **fairly**. If you don't have a overall fair financial markets, on the long term it will hurt the overall economy, why? Because people will have no trust in buying equity prices, there will be no trust in prospects. People will save most of their money in cash and outright avoid anything or everything about investing. If there are less clients, there is less capital for the entire industry. The trust of the aggregate non-active investing clients with the capital range between 100k-500 million matters. And to make it common knowledge to hold personal gain above them is not a good way to have them keep their money in the markets.","Question One: Question Two: Your best reference for this would be a brokerage account with data privileges in the markets you wish to trade. Failing that, I would reference the Chicago Mercantile Exchange Group (CME Group) website. Question Three: Considering future tuition costs and being Canadian, you are eligible to open a Registered Education Savings Plan (RESP). While contributions to this plan are not tax deductible, any taxes on income earned through investments within the fund are deferred until the beneficiary withdraws the funds. Since the beneficiary will likely be in a lower tax bracket at such a time, the sum will likely be taxed at a lower rate, assuming that the beneficiary enrolls in a qualifying post secondary institution. The Canadian government also offers the Canada Education Savings Grant (CESG) in which the federal government will match 20% of the first $2500 of your annual RESP contribution up to a maximum of $500.","\"CFP stands for \"\"Certified Financial Planner\"\", and is a certification administered by the CFP board (a non-government non-profit entity). This has nothing to do with insurance, and CFP are not insurance agents. Many States require insurance agents to be explicitly licensed by the State as such, and only licensed insurance agents can advise on insurance products. When you're looking for an insurance policy as an investment vehicle, a financial adviser (CFP, or whatever else acronym on the business card - doesn't matter) may be helpful. But in any case, when dealing with insurance - talk to a licensed insurance agent. If your financial adviser is not a licensed tax adviser (EA/CPA licensed in your State) - talk to a licensed tax adviser about your options before making any decisions.\"","We provide business insurance at competitive business insurance service rates to customers across the country. We can offer an assortment of answers for address their budgetary needs or business needs. We are reliable for the best insurance policy, you can trust at the Oxford Risk LLC. We have cheapest policy for business. As you know, business insurance policy is supportable for us such as U.S. property/casualty insurer for business insurance Fairlawn Ohio capital strength should enable them to withstand near-term volatility related to hurricane events, but a major catastrophic hurricane could change that, according to a new report.We know getting insurance for your business is not always the easiest thing to do. With so many terms of any business and always coverage. Business owner's insurance policy is often the most convenient way of protecting your business's physical and financial assets.","No matter you want to rent, sell or buy the property, it’s very essential to find a reliable and professional broker who can ease the entire process for you. These are middle-men and are a great link between sellers and buyers of a specific property.","If you are trying to weed out companies that are fronts for scams, one way is to look for a physical address that checks out with the phone book and a phone number posted on the site that connects you to an actual person. By itself this isn't a guarantee that the company is legit, but it will weed out a large number of fraudulent companies hiding behind PO boxes. That is, companies that defraud a lot of people don't usually make it very easy to track them down or contact them to complain or sue them.","Answer all of their questions honestly and as accurately as you can, but don't stress too much about it. If you don't know the answer to something, ask the insurance agent what it means; that's what they're there for. (If you're doing this online, email the support, or the 'live chat' feature many of them have. Or, don't do it online, if you feel better having an agent in person; nowadays, most of the major insurers are similar on price so it's not a massive savings to skip the agent.) As far as whether it's important to pick a specific insurer - that's really your call. Read reviews, understanding that folks with bad experiences are more likely to write reviews than the 90% of folks who get no benefit from homeowner's insurance. You need to make the decision as to how important reputation and ease of claims process is versus price. That's why there are multiple insurers, after all - you can decide how important it is to you. It sounds like you would prefer a simpler claims process, so perhaps you should go with someone who is known for an easier claims process (understanding that no insurer is always going to agree with every claimant 100%).","\"You want a fee-only advisor. He charges like an architect or plumber: by the hour or some other \"\"flat fee\"\". That is his only compensation. He is not paid on commission at all. He is not affiliated with any financial services company of any kind. His office is Starbucks. He does not have a well lit office like the commission broker down the street. He does not want you to hand him your money - it stays in the brokerage account of your choice (within reason - some brokerage accounts are terrible and he'll tell you to get out of those). He never asks for the password to your brokerage account. Edit: The UK recently outlawed commission brokers. These guys were competitive \"\"sales types\"\" who thrive on commissions, and probably went into other sales jobs. So right now, everyone is clamoring for the few proper financial advisors available. High demand is making them expensive. It may not be cost-effective to hire an advisor; you may need to learn it yourself. It's not that hard. Ever hear of a plumber who works totally for free, and makes his money selling you wildly overpriced pipe? That's what regular \"\"financial advisors\"\" are. They sell products that are deliberately made unnecessarily complex. The purpose is first, to conceal sales commissions and high internal fees; and second to confuse you, so the financial world feels so daunting that you feel like you need their help just to navigate it. They're trying to fry your brain so you'l just give up and trust them. Products like whole life and variable annuities are only the poster children for how awful all of their financial products are. These products exist to fleece the consumer without quite breaking the law. Of course, everyone goes to see them because they have well lit offices in every town, and they're free and easy to deal with. Don't feel like you need to know everything about finance to invest. You don't need to understand every complex financial product that the brokerage houses bave dreamed up: they are designed to conceal and confuse, as I discuss above, and you don't want them. The core of it is fairly simple, and that's all you really need to know. Look at any smaller university and how they manage their endowments. If whole life, annuities and those complex financial \"\"products\"\" actually worked, university endowments would be full of them. But they're not! Endowments are generally made of investments you can understand. Partly because university boards are made of investment bankers who invented those products, and know what a ripoff they are. Some people refuse to learn anything. They are done with college and refuse to learn anything more. I hope that's not you. Because you should learn the workings of everything you're investing in. If you don't understand it, don't buy itl And a fee-only financial advisor won't ask you to. 1000 well-heeled, well-advised university endowments seek the most successful products on the market... And end up choosing products you can understand. That's good news for you.\"","Like all other trading brokers in the industry, they both have been acknowledged with mixed reviews. Before signing up, it’s important to know whether they are running a legitimate operation or not. You can see BinaryOptionsTrading-Review.com, judgebinaryoptions.com etc. to inquiries about these sites. They conduct in-depth research to identify the legitimacy of each brokers present in the market. Hope it will help you in making the right decision.","So, there's no way to do both? I look out for my family, but I also try to be honest, live up to my word, and admit my mistakes rather than trying to find a villain or excuse for them. Looking out for myself and my family includes being careful with my money, especially large sums that I don't want to lose.","Does anyone know anything about FCAC - Canada's financial bank regulator? If so, a recent article by CBC came out stating that our financial regulator is being lobbied often by the very same banks they are supposed to be watching. My question would be when private banks are meeting with our financial watchdogs in Canada; what would they be lobbying towards; specifically in the case of Canada, and their finance law?","Unless u borrow for a house but just get a financial advisor - i highly recommend the co. I work for. Pm me if u want details though it sounds like u may go the diy route which is fine but 9 out if 10 times it takes nonprofessionals longer. I deal with clients and advisors who do this all the time.","At MyBusinessOnlinePortal.com, Andrew Barnes sets out in a short and succinct introduction his no-nonsense ethos for professional, ethical home business. Followed by a sentence or two on his select choice of top opportunities, the page is framed with all his networking and contact info. His tagline is - Ready to share 8+ years experience to help all succeed. you would do much worse than to take him up on his offer.","Toronto is small relative to the states. Have you considered moving to NYC or even Chicago? Everyone seems to be wanting in right now. I know of a guy with a master's from the london school of economics, CFA level III who's just started as an unpaid intern(not me). You might be better off working a job wherein you actually produce something good for people to make money rather than just siphoning funds from others. Then you'll have funds to start your own trading unit with talented people you respect and trust.","Yes you can get them from your broker. Two main advantages I can see are:","> integrity and honesty is the lifeblood of any company who wants to stay in business for longer than a short period But this is not what we have seen in the real world. Plenty of successful, prominent companies have abused their power, taken advantage of customers, or done things that harm the public. People have imperfect information and often don't know much about any given company.","$600 a month is high, but may be the best you can do. When I moved from UK to Canada my first insurance quote was $3000 a year, but that was 20 years ago and I was older than 27. The rates go down substantially after you have had a local license for a few years. Best tips for minimising this:","A Certified Financial Planner has passed a licensing exam and will advise you and help you reach your financial goals. A good CFP can help you a lot, especially if you are unsure how to set up your insurance, investment, savings, and financial plans on your own. You do not need a CFP to get a life insurance policy. If you do get a CFP, he or she should help you above and beyond life insurance -- i.e. retirement planning, investment advice, education planning, etc. It's advantageous to you to pay a fixed price for services instead of a percentage or commission. Negotiate fees up front. For life insurance, in most cases a term policy will fit your needs. Whole life, universal life, etc., combine investments and life insurance into a single product and are big commission makers for the salesman. They make it sound like the best thing ever, so be aware. One of my rules of thumb is that, generally speaking, the larger the commission is for the salesperson, the worse the product is for the consumer. Welcome to life insurance pitches. Term life is far less expensive and provides a death benefit and nothing else. If you just had a baby and need to protect your family, for example, term life is often a good solution, easy to buy, and inexpensive. As you stated, any of the major providers will do just fine.","The first place to look for an accountant is the American Institute of Certified Public Accountants which has a directory of CPAs, accounting companies, and local accounting societies. I was also looking for one for my own small firm. It really helps.","\"If wire transfer through your bank does not work then perhaps one of the more popular money transfer services may be what you are looking for such as MoneyGram or Western Union. Now these rely on a trusted \"\"registered\"\" third party to do the money transfer so you need to make sure that you are working with a legitimate broker. Each money transfer service has a site that allows you to perform the search on registered parties around your area. There are certain fees that are sometimes applied due to the amount being transferred. All of these you will want to do some detailed research on before you make the transfer so that you do not get scammed. I would suggest doing a lot of research and asking people that you trust to recommend a trusted broker. I have not personally used the services, but doing a quick search brought many options with different competitive conversion rates as well as fees. Good luck.\"","\"(I answered a similar question before.) Essentially, you shouldn't trust a site you find on the Internet merely because it looks professional and real. Before signing up with any new service provider you found online, you should verify the authenticity of both the organization itself and their web site address. Even if the name displayed by a web site represents a legitimate brokerage firm, any site you happen to come across on the Internet could be an elaborate spoof of a real company, intended to capture your personal details (or worse). First, to check if a brokerage firm is in fact registered to trade securities – in the United States – you can consult FINRA's BrokerCheck online service. This might be the first of many checks you should undertake ... after you convince yourself that FINRA is legitimate. A meta-problem ;-) Then, if you want to know if the web site address is authentic, one way is to contact that broker offline using the contact information found from a trusted source, such as the FINRA BrokerCheck details. Unfortunately, those details do not currently appear to contain the broker's web site URL. (Else, that could be useful.) Another thing to look at is the site's login or sign-up page, for a valid SSL certificate that is both issued to the correct legal name of the brokerage firm as well as has been signed by a well-known certificate authority (e.g. VeriSign). For a financial services firm of any kind, you should look for and expect to see an Extended Validation Certificate. Any other kind of certificate might only assert that the certificate was issued to the domain-name owner, and not necessarily to an organization with the registered legal name. (Yes, anybody can register a domain with a similar name and then acquire a basic SSL certificate for that domain.) FWIW, Scottrade and ShareBuilder are both legitimate brokers (I was aware already of each, but I also just checked in the FINRA tool), and the URLs currently linked to by the question are legitimate web site addresses for each. Also, you can see their EV certificates in action on secured pages here and here. As to whether your investments with those brokers would be \"\"safe\"\" in the event of the broker failing (e.g. goes bankrupt), you'll want to know that they are members of the Securities Investor Protection Corporation (Wikipedia). (Of course, this kind of protection doesn't protect you if your investments simply go down in value.) But do your own due diligence – always.\"","I quite like the Canadian Couch Potato which provides useful information targeted at investors in Canada. They specifically provide some model portfolios. Canadian Couch Potato generally suggests investing in indexed ETFs or mutual funds made up of four components. One ETF or mutual fund tracking Canadian bonds, another tracking Canadian stocks, a third tracking US stocks, and a fourth tracking international stocks. I personally add a REIT ETF (BMO Equal Weight REITs Index ETF, ZRE), but that may complicate things too much for your liking. Canadian Couch Potato specifically recommends the Tangerine Streetwise Portfolio if you are looking for something particularly easy, though the Management Expense Ratio is rather high for my liking. Anyway, the website provides specific suggestions, whether you are looking for a single mutual fund, multiple mutual funds, or prefer ETFs. From personal experience, Tangerine's offerings are very, very simple and far cheaper than the 2.5% you are quoting. I currently use TD's e-series funds and spend only a few minutes a year rebalancing. There are a number of good ETFs available if you want to lower your overhead further, though Canadians don't get quite the deals available in the U.S. Still, you shouldn't be paying anything remotely close to 2.5%. Also, beware of tax implications; the website has several articles that cover these in detail.","Accidents and tickets more than 3 years old generally won't affect you. I use an insurance broker who shops a bunch of different companies and buys me the best policy. (He gets a cut as a middle-man, but saves me more than going direct and gives great advice when I have a question.) Since you haven't been only your own policy lately, it will cost you more than someone with a 3 year history with a perfect record, but if you shop around, you will find something at a fair price. Also, your credit score often factors into the price you pay for car insurance also."],"string":"[\n \"NAPFA claims to have members in Canada. They are an organization of fee-only financial planners--they work for hourly fees, not commissions, so they have no conflicts of interest when giving advice.\",\n \"How do you find an ethical, honest practitioner of any business? One: Make a small transaction with them and see how they treat you. If they cheat you on something small, don't give them a chance with something big. Two: Ask family and friends for recommendations. Three: Get information from public sources, like web sites where people post reviews of businesses, consumer advocacy organizations, groups like the Better Business Bureau, etc. Personally I consider all these of questionable value as you're asking one stranger to advise you on the reliability of another stranger, but better than nothing.\",\n \"\\\"I think the other answers raise good points. But to your question, \\\"\\\"How do I find an honest financial adviser\\\"\\\" ask your friends and family. See who they talk to and confide in. Go meet that person, understand what they do and how they view things and if you gel, great. Honesty and strong ethics exist in individuals regardless of laws. What is it you're trying to accomplish? You just have some money you want to put aside? You want to save for something? You want to start a budget or savings plan? Your first step may be talking to a tax person, not an investment adviser. Sometimes the most significant returns are generated when you simply retain more of your earnings and tax people know how to accomplish that. You're just graduating university, you're just going to get your first job. You don't need to hunt for the right heavy hitter 30% gains generating financial adviser. You need to establish your financial foundation. Crawl, walk, then run. There are some basics (that transcend international borders). If you don't know much about investing, most (if not all) retirement and individual brokerage type accounts will give you access to some kind of market index fund. You don't need to multinationally diversify in to high fee funds because \\\"\\\"emerging markets are screaming right now.\\\"\\\" Typically, over a few years the fees you pay in the more exotic asset classes will eat up the gains you've made compared to a very low fee market index fund. You can open free accounts at a number of financial institutions. These free accounts at these banks all have a list of zero commission zero load funds, all have something resembling an index fund. You can open your account for free, deposit your money for free, and buy shares in an index fund for free.\\\"\",\n \"Most of the organizations that financial advisors belong to have a function to find their members. The major ones are listed below: Advocis seems to be the largest organization, with CFPs (Certified Financial Planners) and some Insurance designations. The Advocis advisor search feature can be found here. FPSC is another organization that has a search for CFPs. Many of the same CFPs are in the Advocis database, but some aren't. The FPSC advisor search feature can be found here. IAFP is an organization of Registered Financial Planners (RFP). The database is smaller but the designation comes with prestige and is meant to be a mark of quality. The IAFP advisor search feature can be found here. Finally, there is a site — full disclosure, I am affiliated with it — called wealthprep.ca that has a large listing of advisors in Canada. You can filter by profession, specialties, and compensation type and there are ratings and reviews. Here is the page specifically for Toronto Financial Advisors.\",\n \"Usually your best bet for this sort of thing is to look for referrals from people you trust. If you have a lawyer or other trusted advisor, ask them.\",\n \"\\\"The Financial Consumer Agency of Canada (FCAC) has a page specifically about working with a financial planner or advisor. It's a good starting point if you are thinking about getting a financial professional to help you plan and manage your investments. In the \\\"\\\"Where To Look\\\"\\\" section on that page, FCAC refers to a handful of industry associations. I'll specifically highlight the Financial Planning Standards Council's \\\"\\\"Find a planner\\\"\\\" page, which can help you locate a Certified Financial Planner (CFP). Choose financial advice carefully. Prefer certified professionals who charge a set fee for service over advisors who work on commission to push investment products. Commission-based advice is seldom unbiased. MoneySense magazine published a listing last year for where to find a fee-only financial planner, calling it \\\"\\\"The most comprehensive listing of Canadian fee-only financial planners on the web\\\"\\\" — but do note the caveat (near the bottom of the page) that the individuals & firms have not been screened. Do your own due diligence and check references.\\\"\",\n \"Your best bet would be to find an independent Property and Casualty Insurance agent and buy through him/her. Insurance agents make a commission, yes - BUT - the cost to consumer is THE SAME whether you buy through an agent or through directly through the company. Any P&C agent would be happy to run your numbers for you and tell you what the cheapest deal is. Just make sure you find someone who writes for several different large insurers. Obviously, some P&C Insurance agents are slick salesy types, which can get annoying, but if you find someone nice, he or she can help you out at no cost to you (they are paid by the insurance company they place the business with). If you are straightforward with the agent about exactly what your needs, they can get you quotes quickly and save you a lot of time and hassle.\",\n \"I was in your situation a few years ago and I discovered something that worked perfectly for me - a local health insurance broker. I met with her, discussed my needs, reviewed the options with her, then acted. She received a commission from the insurer, so it cost me nothing. I would certainly follow a similar approach again.\",\n \"Look for people who have done business with them. If you don't know anyone who has used their services, look for a company that at least has a brick and mortar branch in your area. Being able to deal with them face to face is a must. Have you checked with your local bank?\",\n \"I'd advise you to look for an advisor who is a NAPFA-Registered Financial Advisor. If you visit the National Association of Personal Financial Advisors (NAPFA) website (http://www.napfa.org) and understand why they are different, I think you'll agree that the NAPFA-Registered Financial Advisor is the highest standard of excellence you will find in a financial planner.\",\n \"The other answers are good, but not UK-specific. You need to look for an Independent Financial Advisor (IFA). These are regulated by the FCA and you pay them a time-based fee for their services, they do not take commission on the products they recommend to you. The Government Money Advice Service page (hat tip to @AndyT in the comments on the question for the link) tells you how to go about finding one of these and what sort of questions to ask. Contrary to the note in the answer by @Harper, in the UK many IFAs do have perfectly nice offices, this is not a sign that should put you off. Personal recommendations for IFAs are usually the best way to go but failing that there are directories of them and many will have an initial conversation with you for free to ensure you are aligned with each other.\",\n \"If someone recommends a particular investment rather than a class of investments, assume they are getting a commission and walk away. If someone recommends whole life insurance as an investment vehicle, walk away. Find someone whose fiduciary responsibility is explicitly to you as their client. That legally obligated them to consider your best interests first. It doesn't guarantee they are good, but it's done protection against their being actively evil.\",\n \"Check your local better business bureau. They can tell you who is in business, who's bonded, and who has had a lot of complaints levied against them for shoddy practices.\",\n \"I think the OP is getting lost in designations. Sounds to me that what he wants is a 'financial advisor' not an 'investment advisor'. Does he even have investments? Does he want to be told which securities to buy? Or is he wanting advice on overall savings, insurance, tax-shelters, retirement planning, mortgages, etc. Which is a different set of skills - the financial advisor skill set. Accountants don't have that skill set. They know operating business reporting, taxes and generally how to keep it healthy and growing. They can do personal tax returns (as a favour to only the owners of the business they keep track of usually). IMO they can deal with the reporting but not the planning or optimization. But IMO the OP should just read up and learn this stuff for himself. Accreditation mean nothing. Eg. the major 'planner' brand teaches factually wrong stuff about RRSPs - which are the backbone of Canadian's finances.\",\n \"The nature of this question (finding a financial adviser) can make it a conundrum. Those who have little financial experience are often in the greatest need of a financial adviser and at the same time are the least qualified to select one. I'm not putting you or anyone in particular in this category. And of course it's a sliding scale: In general the more capable you are of running your own finances the more prepared you are to answer this question. With that said, I would recommend backing up half a step. Consider advisers other than strictly fee-only advisers. Perhaps you have already considered this decision. But perhaps others reading this have not. My (Ameriprise) adviser charges a monthly (~$50) fee, but also gets percentage-based portions of certain investments. Based on a $150/hr rate that amounts to four hours per year. Does he spend four hours per year on my account? Well so far he does (~2 yrs). But that is determined primarily by how much interaction I choose to have with him. (I suppose I could spend more time asking him questions and less time on this forum. :P) I have never fully understood the gravitation towards fee-based advisers on principle. I guess the theory is they are not making biased decisions about your investments because they don't have as much of a stake in how well your investments to do. I don't necessarily see that as an advantage. It seems they would have less of an incentive to ensure the growth of your investments. Although if you're nearing retirement then growth isn't your biggest concern. Perhaps a fee-based adviser makes more sense in that scenario. Whatever pay structure your adviser uses, it would seem to make sense to consider a successful adviser with a good client base. This implies that the adviser knows what he/she is doing. (But it could also just be a sign that they are good at marketing themselves.) If your adviser has a good base of wealthy clients then choosing a strictly-fee based adviser would mitigate the risk of your adviser having less incentive to consider your portfolio vs that of more wealthy clients. To more directly answer your question I suggest asking several of your adviser candidates for advice on choosing an adviser. I suspect you will get some good advice as well as good insight on the integrity and honesty of the adviser.\",\n \"Call them back and insist on speaking only with a supervisor and politely ask for their License Number and NAIC Number. When asked why reply that you are going to contact your state's insurance division and find out what recourse, if any, you might have. Merely asking for the numbers will let them know that you intend to escalate this matter; chances are that yet another supervisor will be required to rectify this situation. Companies DO NOT empower the initial representatives to resolve serious issues. It can be a tortuous path to a resolution but you must persevere. It is difficult to remove yourself and be objective but your anger will defeat you. Your agent should be on your side.\",\n \"Yes, there is a profession that does exactly what you're looking for. It's called a fee-only financial advisor. These are professionals who (in the United States) enter into a fiduciary relationship with a client, meaning they are legally required to put your financial interests above all other considerations (such as any behind-the-scenes incentives to promote certain products). Between that requirement and the fact that they are paid for their time (and not on commission), they have zero incentive to try to sell you anything that you do not need. Their only job is to help you with your financial situation. (Of course, some of them may be better than others.) See the profession's website here to find such an advisor near you. (Credit to Marketplace Money, the old name for Marketplace Weekend, for mentioning fee-only advisors at least 87 times per show.)\",\n \"Can't tell you where to go for a good policy, but I can tell you that most brokers make a hefty commission out of your payments for at least a year before you even start funding the tax sheltered investment account that you're trying to buy under the umbrella of life insurance. You'll have to do a lot of homework to hunt down a reputable discount broker or a direct policy purchase from the insurance company. Life insurance requires insurable need. The description is vague enough, that you can probably still get the account despite being a single male with no apparent heirs to benefit, but it raises the question of why you are buying the insurance. Whole life policies require you to maintain a certain ratio of investment to premium payment and you will likely never be able access all of the money in the account for your own personal usage. Compare several policies from several brokers and companies. Read all the critical sources you can about the pitfalls and dangers of commissions, fees and taxes eating the benefits of your account. Verify that the insurance company you buy the policy from is financially stable after the market crash. You are paying a commission to pool your money into their investment fund, and if your insurer goes under, you'll have to get a portion of your money (possibly only the principle) back from the state insurance commissioner. Some companies sold pretty generous policies during the bubble and have cut their offerings way down without fixing their marketing literature and rosy promises. Finally, let us know what you find. It never hurts to see hard numbers and to run multiple eyes over the legalese in these contracts.\",\n \"Given what you state you should shop around for an advisor. Think of the time required to pursue your strategies that you list? They already have studied much of what you seek to learn about. Any good investor should understand the basics. This is Canadian based but many of the concepts are universal. Hope you find it helpful. http://www.getsmarteraboutmoney.ca/Pages/default.aspx\",\n \"\\\"First paragraph is very true. But you also have to take into consideration that the adviser and the company are 2 different \\\"\\\"things\\\"\\\" to look into. For the adviser, quickest and easiest way is to do a Facebook search. The point of this is to see how transparent they are with their personal life. Even companies are now relying on Facebook to see how they \\\"\\\"really\\\"\\\" are. I wouldn't care if the person has lots of photos with booze and girls, but I would be concerned if they are using FB for spamming purposes, have pictures with drugs, or hints that they don't like their job and want to move on to something else. Second paragraph is spot on as well. But I would rather want to know if the company cold calls or not... which leads in to your last statement. For one adviser, more than 100 clients is a red flag. This could mean that they push savings plans left and right, they don't contact their current clients, and/or they may not have the ability to assist clients should they get many queries. A few good questions to ask: 1. How do you make your salary? 2. Besides this plan you are selling me, what other types of products do you work with and show me several examples? 3. How many other advisers are in your firm? 4. How many clients does your colleagues and boss have? 5. How often do you cold call? 6. Who else cold calls in your office? 7. How does your company get new clients OTHER than referrals? Go interrogation style and ask the above questions several times using different phrases.\\\"\",\n \"I strongly suggest personal referral. Ask all of your friends/family/neighbors/co-workers/dog-sitter what they think of their brokers until you find someone who loves his broker. As for transferring assets, I've found it to be quite easy. It's in the new broker's best interest to get those assets, so he should be more than willing to help.\",\n \"The answers you've received already are very good. I truly sympathize with your situation. In general, it makes sense to try to build off of existing relationships. Here are a few ideas: I don't know if you work for a small or large company, or local/state government. But if there is any kind of retirement planning through your workplace, make sure to investigate that. Those people are usually already paid something for their services by your employer, so they should have less of an interest in making money off you directly. One more thought: A no-fee brokerage company e.g. Charles Schwab. They offer a free one hour phone call with an investment adviser if you invest at least $25K. I personally had very good experiences with them. This answer may be too anecdotal and not specifically address the annuity dilemma you mentioned. That annunity dilemma is why you need to find someone you can trust, who is competent (see the credentials for financial advisers mentioned in the other answers), and will work the numbers out with you.\",\n \"Dave Ramsey has a list of ELPs (Endorsed Local Providers) of which I've only heard good things. You can request an investment ELP here.\",\n \"It is important that a cleaning business should avail of an insurance policy from a reputed broker. Polished Insurance has been providing insurance coverage for cleaners since 2001. Throughout the years, they are recognised as amongst the UK’s top brokers in the cleaning industry. If your cleaning business needs insurance, then you should get one from them. Visit their website at www.polished-insurance.co.uk for more details.\",\n \"\\\"The risk is that the \\\"\\\"free\\\"\\\" service may be supporting itself by steering customers to products which part a sales commission, or that are products of the company/bank that employees then, rather than those which are actually best for the customer. If you go in with a skeptical outlook, watching for this sort of conflict of interest, it's possible they might be useful. But that's not exactly a glowing recommendation... If they try to tell you that insurance is an investment, or if they recommend anything other than low-fee index funds without an extremely good reason, run.\\\"\",\n \"Usually, a financial advisor makes his money by selling financial investments. Thus, almost anyone you talk to is going to try to get you to be investment products, which is not what you need to be doing at this point. You should be focusing on paying off all your debt first, before doing any investment. The interest you are paying on credit cards is most likely much more than the money you could get from any type of investment. However, once you have your consumer debt paid off, I recommend talking to any friends, co-workers, or other professional advisors you have (such as attorneys or accountants). When you ask such people for the referrals, find out how much debt they have, how much they are investing. Pay closer attention to those with a higher net worth. Otherwise, you may be getting advice from someone fooled by the same sort of financial advisor you are trying to avoid.\",\n \"There are many good brokers available in the market and many spammers too. Personally I have been associated with FXCM since 2001 and have never faced any problem. But everyone has their own personal choice and I recommend you to make your own. But the question is how to find out which broker is a good broker and would provide you with a timely and reliable service? Online google check? Not really. There is so much competition between brokerage firms that they keep writing rubbish about each other on blogs and websites. Best thing is to is check with regulator's website. For US: NFA is a regulator for all forex firms. Information about any regulated forex firm could be found here. http://www.nfa.futures.org/basicnet/welcome.aspx For UK: Its FSA. Information on all regulated Uk based firm could be found here. http://www.fsa.gov.uk/register/firmSearchForm.do Remember in many countries its not compulsory for a forex firm to be regulated but being regulated ensure that the govt. has a watch on the operations of the firm. Also most of the firms out there provide accounts for large as well as small traders so there is nothing much to look for even if you are a small trader. Do keep in mind that if you are a US Citizen you are restricted by the US Govt. to trade only with a broker within US. You are not allowed to trade with any brokerage firm that is based outside the country. Forex Trading involves a significant amount of risk make sure you study the markets well and get yourself educated properly before risking your money. While I have made a lot of money trading forex I have seen a lot of people loosing everything. Please understand the risk and please make sure you only trade with the money which you can afford to loose.\",\n \"One can never be too cautious when when choosing a financial adviser. For example, has the company your adviser claims to represent ever been sanctioned by the local financial authorities? Does your adviser reside in the country in which he purports to operate? Have you thoroughly researched his background? It is also important to bear in mind what venues a company uses for advertising - if the company resorts to advertising by spamming, then their overall business practices are likely unethical and this could lead to trouble down the line. Finally, one should also research how the company's clientele has been built up. Was it through word of mouth or was the client data acquired by other means?\",\n \"Make sure you shop around and ask a lot of places for a good faith estimate. Last I knew, the good faith document is the same everywhere and long form that makes it easy enough to compare the hard numbers from place to place. I have gotten several estimates for various scenarios and I have had them hand written and printed. (I discounted the hand written ones because that broker seemed pretty disorganized in general) Learn the terms online, and start comparing. Use the good faiths as a negotiation tool to get lower rates or lower costs from other brokers. See how accurate the person is at listening to you and filling out the paperwork. See how responsive they are to you when you call with questions and want some changes. Check with at least four places. The more places you shop, the better idea you will have of what fees are high and what interest rates are low. I might pay a higher fee to get a lower interest rate, so there are lots of trade offs to consider.\",\n \"Large and well-known companies are typically a good starting point. That doesn't mean that they are the best or even above average good, but at least they don't cheat you and run with your money. A core point is someone you pay, not the company whose investment he sell you. Although the latter seems cheaper on first glance, it isn't - if you pay him, his interest is to do good work for you; if they pay him, his interest is to sell you the product with the highest payment for him. That does not imply that they are all that way; it's just a risk. There are many good advisers that live from commissions, and still don't recommend you bad investments. Depending on the amounts, you could also read up a bit and open an account with a online investment company. It is discussable, but I think the cost for an adviser only starts to become worth it if you are deep into 5 digits of money.\",\n \"Never met any myself, but I know some manufacturers use them and are happy with their services. There is definitely a legitimate need for it, just a lot of swamp that gets dragged in. I would call around the midwest and ask. All the business folks I've met there seem to be very nice and happy to help. Try casting, extruding, or large welding shops and see if they have any recommendations. I know this isn't the best way... but it is a way of finding someone who is probably reputable.\",\n \"It might be worth talking to a mortgage broker, even if you don't actually end up doing business with them. Upfront Mortgage Brokers explained Finding an upfront broker near you In a nutshell, upfront brokers disclose what they are paid for their services openly and transparently. Many brokers don't, and you can't be too careful. But a consultation should be free. An experienced broker can help you to navigate the pros and cons mentioned by the other responders. Personally, I would never do business with a broker who can't/won't show me a rate sheet on the day of the lock. That's my personal acid test. You might be surprised by what the broker has to say regarding your situation. That was my experience, anyway.\",\n \"\\\"In addition to the advice of @karancan, If you wish to stay strictly with GICs, there are better ways to find good GIC rates, than looking at advertising from institutions you are already dealing with. This site, http://www.globeinvestor.com/servlet/Page/document/v5/data/rates?order=d&pageType=gic_long&sort=IR1&page=1&tax_indicator=N (among others) display impartial GIC rates for many institutions and terms of investment, in sortable form. Many of these institutions allow on-line purchases and transfers, requiring only a \\\"\\\"regular\\\"\\\" bank account as a source/destination for on-line transfers...\\\"\",\n \"\\\"Related to this question: I came across a post at The Financial Planning Exchange* titled \\\"\\\"The Top 10 Ways To Tell If You're Working With A Really Good Financial Planner.\\\"\\\" Here are a few tips I particularly liked: (* site is no longer available) 4. Make sure the planner is going to work with you on a Fiduciary basis. This means that they are going to recommend only what is in your best interest. A planner who tries to sell you a product is generally a red flag that they aren't looking out for your best interests. [...] 8. Interview the prospective planner that you are about to hire. Understand how they think, what their speciality is, and most importantly how they are going to get paid for their services. Be very very careful with a planner who is going to provide you with a free financial plan as that person more often than not has a motivation to sell you something. [..] 10. Last but not least, go to a person who works hand in hand with financial planners like an accountant or estate planning attorney for a referral. Accountants and estate planning/tax attorneys know the difference between a good and bad planner. Chances are they are a client of the person they'll refer you to.\\\"\",\n \"It depends greatly from place to place, but nothing beats the Internet reviews' research. If you can't find anything digging slightly deeper than the impressive home page, then you probably should be worried. As it seems that you are. Specifically, I do these: @JohnFX mentions a valid point: check for physical presence. Check that the office address is a real office and not a PO box or residential; call the number and see who answers it (if you call several times during different hours and the same person answers - that's probably a one-man operation). But that doesn't always help because short-term renting an office is not all that hard and getting a call-centre outsourced to a third-world country doesn't cost all that much. It definitely helps if you're dealing with someone local, but if you're in Sweden and checking out a suspicious operation in Cyprus - this is definitely not enough.\",\n \"Again, you are asking people to trust you with their life savings so you can take your 1% and the best you can do is google? You don't have a lawyer or anything? Plenty of advisory shops allow you to set up your own business within their infrastructure.\",\n \"\\\"Well this is a bit of a shameless plug... but you could always check out the TaxQueries website. The site is \\\"\\\"similar\\\"\\\" to this one but geared more towards accountants and tax preparers. Looks around for someone who seems to know what they're talking about and check their bio. If you're REALLY having a problem finding a good accountant, email me directly. I have over 700 of them connected to my Linked-In profile. ;-) Andrew Smith andrew@taxqueries.com http://www.taxqueries.com\\\"\",\n \"I would stay away form these. I have had clients gave real problems when it comes to withdrawing the money...not only do you not have control of the investments themselves, but you also do not have a lot of control when it comes time to withdraw the money. I have also heard from one client that the fees can be outrageous. There was a securities commission investigation a few years back because a number of salespeople were over-promising. My suggestion would be to find someone independent, with access to a number of different products, who can advise you.\",\n \"I've been looking through annual reports of some Canadian insurance companies. Having serious trouble with their reporting; it varies widely. I've been trying to create a historic look at the combined ratios, and have been comparing income statements. Maybe that's the wrong place to look.\",\n \"\\\"What you are looking for is a Money Coach or a Personal Finance Coach. From mymoneycoach.com: \\\"\\\"Money Coach: Everyone uses money, but few people fully understand how to use it wisely. To be debt free and enjoy a comfortable lifestyle takes special skills. Money coaches provide solutions for household budgeting, investing, using credit wisely, and saving for retirement. With the principles offered by a money coach, you can live the life you want to live.\\\"\\\" Usually money coaches or personal finance coaches will not tell you \\\"\\\"you should put your money here or there\\\"\\\" but instead they will work with you to identify and correct bad money behaviours that affect more than just your investments, and they will not sell you anything. Maybe you could take a look at some coaches in your area, but a lot of them work via the internet too. Good luck!\\\"\",\n \"I had this problem when I finished my job in Canada in Sept 2013. You'll likely have to open the account in person in Canada, at least if you don't already have a relationship with a broker there. DO NOT go to Virtual Brokers. They told me that my US citizenship was no problem, but right before I left Canada to double check. It wasn't until I asked specifically which US states they were licensed in that they realized they were licensed in NO US STATES. They told me that they'd freeze my account when I left. I then moved my (former) pension to a locked-in RRSP at BMO. As of September 2010 BMO could handle residents of most US states, but it took some tooth pulling to get the list out of them. However, after I flew to the USA, BMO called to demand more ID. My account was frozen until I flew back to Canada in person just to show ID. Annoyed, I closed the BMO account and moved it to TD Waterhouse. TD waterhouse can handle accounts for residents of all the US states EXCEPT Virginia, Louisiana, and Nebraska. (I only got the complete list of exceptions when I made my first trade, since the guys at the trading desk are much more knowledgeable about such things than the guys in the branch.) TD was extremely friendly about my USA citizenship/residence. (Many Canadian brokers simply won't accept US residents, at least as of the end of 2013.) Whichever broker you choose, BRING LOTS MORE ID than they require. Insist that they zerox it all. Make sure to include your social security card. You don't want them to demand more ID after you've left the country, like BMO did. They may even make such a move simply to get rid of US customers, because the FATCA is a pain for foreign banks.\",\n \"\\\"In Canada, for example, they are expected or required to find out. They call it, The “Know Your Client” rule, part of which is knowing your \\\"\\\"Investment knowledge and experience\\\"\\\". They say it is, \\\"\\\"to ensure their advice is suitable for you\\\"\\\". I have always been given that kind of form to fill in, when opening an account.\\\"\",\n \"How you check if a broker is legitimate: 1) Are they a registered broker dealer? Broker dealers have to be registered with FINRA and the SEC , which have their own databases for you to look up individuals and companies. here is FINRA's http://www.finra.org/Investors/ToolsCalculators/BrokerCheck/ FINRA is a self-regulatory agency, the SEC is a federal government agency. All things considered, they pretty much have similar legislative authority over the industry. But thats a different story. If the broker isn't able to produce information that would confirm their registration status, or if you can't readily find it in the regulators database, then that is a major red flag. The biggest red flag of them all. 2) If brokers are also acting as a consumer bank, such as how Merrill Lynch is now part of Bank of America and the accounts can be linked pretty easily, then they should will also be regulated by the FDIC. This means that you will be able to find the capital ratio that the company has, letting you know how stable it is as an institution. Physical locations, the name, and duration of existence, or their rating on BBB have nothing to do with it.\",\n \"\\\"Traditional insurance agent guy here. There is no right answer in my opinion because your individual needs cannot be generalized. There are a variety of factors that influence the price charged to you including but not limited to your past claims history, geographic location, credit profile, and the carrier's book of business itself. This is just a small sampling, in reality their pricing calculations may be far more complicated. The point is there is no one-size-fits all carrier. My agency works with 15 different carriers. Sometimes we can offer the best combination of coverage and cost to a prospective client that beats their existing coverage; other times we are nowhere close to being competitive. The most important thing you can do is find a person/site/company you can trust and one that does not take advantage of you. Insurance policies are complex and \\\"\\\"getting the best deal\\\"\\\" may oftentimes mean lessening coverage without realizing it. So I would recommend using whatever service channel (online, phone, local agent) that's most convenient and consultative for you. And otherwise, shop around once every year or two to make sure you're still getting the most for your money.\\\"\",\n \"And who do you trust to sell you a quality product? Someone so enamored with a company they will take a pay cut just to work with it, and only it? Or someone working for respectable living, just like you, who has several alternative choices in stock.\",\n \"\\\"Probably not, though there are a few things to be said for understanding what you are doing here. Primerica acts as an independent financial services firm and thus has various partners that specialize in various financial instruments and thus there may exist other firms that Primerica doesn't use that could offer better products. Now, how much do you want to value your time as it could take more than a few months to go through every possible insurance firm and broker to see what rate you could get for the specific insurance you want. There is also the question of what constitutes best here. Is it paying the minimal premiums before getting a payout? That would be my interpretation though this requires some amazing guesswork to know when to start paying a policy to pay out so quickly that the insurance company takes a major loss on the policy. Similarly, there are thousands of mutual funds out there and it is incredibly difficult to determine which ones would be best for your situation. How much risk do you want to take? How often do you plan to add to it? What kind of accounts are you using for these investments, e.g. IRAs or just regular taxable accounts? Do tax implications of the investments matter? Thus, I'd likely want to suggest you consider this question: How much trust do you have that this company will work well for you in handling the duty of managing your investments and insurance needs? If you trust them, then buy what they suggest. If you don't, then buy somewhere else but be careful about what kind of price are you prepared to pay to find the mythical \\\"\\\"best\\\"\\\" as those usually only become clear in hindsight. When it comes to trusting a company in case, there are more than a few factors I'd likely use: Questions - How well do they answer your questions or concerns from your perspective? Do you feel that these are being treated with respect or do you get the feeling they want to say, \\\"\\\"What the heck are you thinking for asking that?\\\"\\\" in a kind of conceited perspective. Structure of meeting - Do you like to have an agenda and things all planned out or are you more of the spontaneous, \\\"\\\"We'll figure it out\\\"\\\" kind of person? This is about how well do they know you and set things up to suit you well. Tone of talk - Do you feel valued in having these conversations and working through various exercises with the representative? This is kind of like 1 though it would include requests they have for you. Employee turnover - How long has this person been with Primerica? Do they generally lose people frequently? Are you OK with your file being passed around like a hot potato? Not that it necessarily will but just consider the possibility here. Reputation can be a factor though I'd not really use it much as some people can find those bad apples that aren't there anymore and so it isn't an issue now. In some ways you are interviewing them as much as they are interviewing you. There are more than a few companies that want to get a piece of what you'll invest, buy, and use when it comes to financial products so it may be a good idea to shop around a little.\\\"\",\n \"I've not gotten an answer so far. Since I've started my search for a new financial planner here are the criteria I am using:\",\n \"Read about Upfront Mortgage Brokers. That site has a bunch of information on mortgages and brokers, including mistakes to avoid when shopping for a mortgage. You can also find lenders with upfront pricing. I've used it for shopping and you will find very competitive rates. I'm wary of brokers. When we sold our house, the buyers (young first time buyers) got screwed by an unscrupulous broker and didn't actually have a loan lined up. Delayed closing by 2 days while they scrambled to find a legit lender who could put together funding. The one time we used a broker (our first time), we got a deal that wasn't really as good as it should have been. (Hindsight.)\",\n \"No, they certainly are not compensated the same way. Some are paid by commission that they earn from the products they sell (ie, certain mutual funds, insurance, etc.) Others are paid for their advice based on an hourly fee, or a percentage of the portfolio you have to invest. This is a great question, because too many of us just assume that if someone is in the business, they will give trustworthy advice. This may certainly be the case, but think about it, the financial planner at your bank (who also is a mutual fund specialist - just flip that handy business card over) is employed by Bank X. Bank X sells mutual funds, GIC's, insurance, all kinds of great products. That Bank X employee is not likely to tell you about products from Bank Z down the street that might be a better fit for you. Find a fee based planner, someone you can pay by the hour for advice, and let them help you review products across the industry. It's like asking your bank for mortgage advice...they will discuss the options THEY offer, but may not tell you about a deal down the street. Using a mortgage broker helps you find the best deal across the board. I believe the current issue of Moneysense magazine has an insert discussing planners. Their magazine and website (www.moneysense.ca) are good sources of reliable, Canadian financial advice.\",\n \"People to ask: Granted I live in a small town, but when the same guy's name comes up more than once that's who you should hire...\",\n \"You're on the right track with buying clunkers, but letting your current cars get repossessed is a bad idea for the reasons you specified. First, find an insurance broker instead of an insurance agent. A broker works with dozens of companies, many of which you may not have heard of. He is in a better position to find you the best deal than you are because he is familiar with more insurance company products than you are. He doesn't charge you extra for this service. Second, ask your insurance broker if he can find any insurers offering discounts for persons who have passed a driver training course. Find an accredited course and determine pricing. If the savings exceed the cost of the course, take the course. Third, if you have outstanding loans on your vehicles, pay them off and sell the cars. Replace them with vehicles you can purchase outright with cash. Make sure you have enough money to replace them again should another accident happen. Once you have vehicles that are lein-free there is no longer a requirement by the lender for you to have insurance for the replacement value of the vehicle, which is what's killing your rates right now. Find out what the minimum legal requirement for auto insurance is in your state. In Canada, the minimum requirement is $100,000 liability. Anything else is either a sales job or a lender requirement. Getting your wife to insure her own vehicle may help, getting your insurance under her name may also be something to look into. Since you seem to have issues with people bumping into you and there have been no medical issues, $100,000 liability may be all you need. Note: Tactic #3 is not without risk. If you are in an at-fault accident, you will have to pay for any damages exceeding your insured limit out of your own pocket. Any damages to your own vehicle whether at-fault or not will have to be paid out of your own pocket. If you are sued for medical expenses incurred by other parties, you'll have to pay anything over and above your insured limit out of your own pocket. If there is anything you are unclear about on your insurance policy, ask your agent/broker to explain until you do understand. Buying auto insurance without fully understanding what you are paying for is another risk.\",\n \"In addition to a fee-only advisor, brought up by dg99, you could consider asking your questions on message boards such as Bogleheads.org. I have found the advice amazing, obviously conflict-free, and free.\",\n \"non-conventional tip. reach out to another firm's risk manager and offer to buy them lunch in exchange for general tips. maybe even give them a call and introduce yourself. I did this when i landed myself in alternative investments - came from mutual funds world which is highly automated to ai world which has a lot of room for growth.\",\n \"\\\"Life Insurance can be a difficult decision. We have to first assess the \\\"\\\"want\\\"\\\" for it vs. the \\\"\\\"need\\\"\\\" for it, and that differs from person to person. Any Life licensed agent should be happy to do this calculation for you at no cost and no obligation. Just be sure you are well educated in the subject to make sure they are looking after YOUR needs and not their wallets. For the majority of clients, when looking at \\\"\\\"needs\\\"\\\" we will be sure to look at income coverage (less what the household needs with one less body) as well as debt coverage, education costs etc. More importantly make sure you are buying the RIGHT insurance, as much as the right amount.\\\"\",\n \"\\\"Don't do this if haven't talked about investments and don't learn quickly. Don't do this if you don't like cold calling. Don't do this if they want you to pump and dump. Don't do this if you don't think you can convince gamblers to invest with you. Don't do this if you have a better opportunity. I checked their website. Maybe double check with FINRA and SIPC to see that they're really members if you're really skeptical and you're still interested. Just dial and keep asking until you get a better answer than \\\"\\\"If they say so then yes.\\\"\\\" Oh, and don't do this if they're giving you a shitty deal on commissions. Ask for a tour of the premises too.\\\"\",\n \"http://springhillgroupcounselling.com/general-counselling/ What should I expect from therapy? You should expect one or a series of confidential appointments of up to an hour in length in a suitable professional setting. The process should also provide you with the opportunity to: make sense of your individual circumstances have contact with a therapist who will help identify the choices for change feel supported during the process of change reach a point where you are better equipped to cope with the future Is counselling and psychotherapy confidential? Everything you discuss is confidential between you and the counsellor or psychotherapist. There can be certain legal exceptions and the practitioner should clarify this with you prior to the establishment of any agreed contract for working. You may have specific queries about confidentiality depending on the format of the therapy. For example, with online counselling, you may wish to ask the following questions to your therapist: Are the notes from therapy protected by passwords and encrypted? Are printouts held in a secure cabinet? What happens when there are technical problems? Should my therapist carry liability insurance? Professional liability insurance is not currently a legal requirement. However, a number of professional associations, strongly recommend that therapists take out appropriate insurance coverage. Examples of insurance policies which a therapist might have are professional indemnity, public and products liability, libel and slander to name a few. It is suggested that you check your therapist has appropriate and adequate insurance in place before engaging their services. If you are unsure then you should consult an insurance professional or a legal expert for further guidance. The insurance is not only intended to protect the therapist but offer peace of mind that if something should go wrong, there are funds in place to compensate you in such an event. For further information you may find the British Insurance Brokers’ Association website useful. Author: Towergate Professional Risks\",\n \"To evaluate any advice, this lists some of the things to consider: There are good advisors out there. There are also Bernie Madoffs who give the entire industry a black eye. In the end, the best path is to educate yourself, read as much as you can before you invest. Better to lose a bit by staying out of the market than to lose it all by getting scammed.\",\n \"If you use a financial planner not only should they be a fiduciary but you should just pay them an hourly rate once a year instead of a percentage unless the percentage is cheaper at this time. To find a good one, go to the National Association of Personal Financial Advisers website, NAPFA.org. Another good resource is Garrett Planning Network: GarrettPlanningNetwork.com.\",\n \"First of all, think of anyone you know in your circle locally who may have gotten a mortgage recently. Ask him, her, or them for a recommendation on what brokers they found helpful and most of all priced competitively. Second of all, you may consider asking a real estate agent. Note that this is generally discouraged because agents sometimes (and sometimes justifiably) get a bad reputation for doing anything to get themselves the highest commission possible, and so folks want to keep the lender from knowing the agent. Yet if you have a reputable, trustworthy agent, he or she can point you to a reputable, trustworthy broker who has been quoting your agent's other clients great rates. Third of all, make sure to check out the rates at places you might not expect - for example, any credit unions you or your spouse might have access to. Credit unions often offer very competitive rates and fees. After you have 2-3 brokers lined up, visit them all within a short amount of time (edit courtesy of the below comments, which show that 2 weeks has been quoted but that it may be less). The reason to visit them close together is that in the pre-approval process you will be getting your credit hard pulled, which means that your score will be dinged a bit. Visiting them all close together tells the bureaus to count all the hits as one new potential credit line instead of a couple or several, and so your score gets dinged less. Ask about rates, fees (they are required by law to give you what is called a Good Faith Estimate of their final fees), if pre-payment of the loan is allowed (required to re-finance or for paying off early), alternative schedules (such as bi-weekly or what a 20 year mortgage rate might be), the amortization schedule for your preferred loan, and ask for references from past clients. Pick a broker not only who has the best rates but also who appears able to be responsive if you need something quickly in order to close on a great deal.\",\n \"\\\"Though @mehassee mentioned it in a comment, I would like to emphasize the point that the financial planner (CFP) you talked to said that he was a fiduciary. A fiduciary has an obligation to act in your best interests. According to uslegal.com, \\\"\\\"When one person does agree to act for another in a fiduciary relationship, the law forbids the fiduciary from acting in any manner adverse or contrary to the interests of the client, or from acting for his own benefit in relation to the subject matter\\\"\\\". So, any of these Stack Exchange community members may or may not have your best interest at heart, but the financial advisor you talked to is obligated to. You have to decide for yourself, is it worth 1% of your investment to have someone legally obligated to have your best financial interest in mind, versus, for example, someone who might steer you to an overpriced insurance product in the guise of an investment, just so they can make a buck off of you? Or versus wandering the internet trying to make sense of conflicting advice? In my opinion, a fiduciary (registered CFP) is probably the best person to answer your questions.\\\"\",\n \"It seems like you are asking two different questions, one is, how do I know if I can afford a house? The other is, how do I know what type of mortage to get? The first question is fairly simple to answer, there's plenty of calculators out there that will tell you what you can afford, but rule of thumb is 30% of income can goto housing. Now what type of mortgage to get can be much more confusing, because the mortgage industry makes money off of these confusing products. The best thing to do in my opionion in situations like this is to keep it simple. You need to be careful buying a house. So much money is changing hands and there are so many parasites involved in the transaction I would be extremely wary of anybody who is going to tell you what mortgage to get. I've never heard of a fee only independent mortgage broker, and if I found one that claimed to be I wouldn't believe him. I would just ignore all the exotic non-conforming products and just answer one simple question. Are you the type of person that buys an insurance policy or that likes to self insure? If you like insurance, get a 30 year fixed mortgage. If you like to self insure, get a 7 year ARM. The average lenghth someone owns a house is 7 years, plus in 7 years time, it might not adjust up, and even if it does, you can just accelerate your payments and pay it off quickly (this is the self insurance part of it). If you're like me, I'm willing to pay an extra .5% for the 30 year so that my payment never changes and I'm never forced to move (which is admitedly extremely unlikely, but I like the safety). I don't like 15 year term loans because rates are so low, you can get way better returns in the stock market right now, so why pay off sooner then you need to. Heck, if I had a paid off house right now I'd refi into a 30 year and invest the money. In summary, pick 30 year or ARM, then just shop around to find the lowest rate (which is extremely easy).\",\n \"In Canada a good site is: redflagdeals.com\",\n \"\\\"This shows that in each market (US and Canada) the company is registered with the appropriate regulatory organization. OANDA is registered in the US with the National Futures Association which is a \\\"\\\"self-regulatory organization for the U.S. derivatives industry\\\"\\\". OANDA Canada is registered in Canada with IIROC which is the \\\"\\\"Investment Industry Regulatory Organization of Canada\\\"\\\". The company does business in both the US and in Canada so the US arm is registered with the US regulatory organization and the Canadian arm is registered with the Canadian regulatory organization.\\\"\",\n \"\\\"Like most forms of insurance, health insurance is regulated at the state level. So what is available to you will depend greatly upon which state you live in. You can probably find a list of insurance companies from your state's official website. Many states now provide \\\"\\\"insurance of last resort\\\"\\\" for individuals who can't get insurance through private insurance companies. You can try looking into professional and trade associations. Some offer group insurance plans comparable with COBRA coverage, meaning you'd get a group discount and benefits but without the benefit of an employer paying 30-80% of your premiums. As a software developer you may qualify for membership in the IEEE or ACM, which both offer several forms of insurance to members. The ASP also offers insurance, though they don't provide much information about it on the public portions of their website. These organization offer other benefits besides insurance so you may want to take that in to consideration. The National Federation of Independent Business also offers insurance to members. You may find other associations in your specific area. Credit Unions, Coops and the local chamber of commerce are all possible avenues of finding lower cost insurance options. If you are religious there are even some faith based non-insurance organizations that provide medical cost sharing services. They depend upon the generosity and sense of fairness and obligation of their members to share the burden of medical expenses so their definitely not for everyone.\\\"\",\n \"There is a LOT of shuffling going on in the financial services industry. I would not immediately say your advisor is acting in bad faith. The DOL fiduciary changes are quite significant for some brokers. Investment Advisors who are fee-based have less of an impact since they are already fiduciaries. That being said, your issue is still the same. How can you get a low-cost solution to your problem? You might want to consider Vanguard, Fidelity, or another mutual fund company that can keep your costs low. However, you should understand that if you are using mutual funds, the fees are paid one way or another. 12b1 fees, commissions, and expenses are all deducted from the fund's gross returns. You have to choose between low cost and paid advice. you cannot get high-quality low-cost advice. Fortunately, there are a lot of new solutions out there, robo-advisors, indexing, asset allocation mutual funds, ETFs, and more. Do a bit of homework and you should be able to come up with a reasonable solution. I hope you found this helpful. Kirk\",\n \"\\\"Fred is correct ... MOST financial advisors (but not all) are paid either for managing your assets or for selling you financial products. But success at anything, especially building wealth, is all about PROCESS, not products. I applaud your desire to find a financial advisor to help you because this is not something that most people have the education, experience or capacity to do themselves (it is impossible to get the perspective you need to make the best choices). Start with a CERTIFIED FINANCIAL PLANNER professional - they have an ethical duty to do what is in your best interests ahead of their own (the \\\"\\\"fiduciary standard\\\"\\\"). You might interview two or three. Work with the one who is transparent about how they are paid and whose process is focused on helping you achieve your goals ... not following any rule of thumb or standard boilerplate. Your goals are different. Your financial life is different. Find someone who can help YOU follow YOUR agenda ... not their own.\\\"\",\n \"Answer their questions as honestly as you can, they should know that you aren't going to have the answer off hand to everything and that is ok. One way that you can cover yourself is to take photographs of everything that way if anything catastrophic does happen you will have something to show exactly how it was when the adjuster comes to do their estimates. Hopefully you never need to use that but better to err on the side of caution. The insurance company isn't all that important, read reviews as mentioned in another answer. You can also look into multiple policy discounts. If your insurance provider for your auto insurance also offers homeowners policies they might also offer you a discount on one or both policies for grouping them. Feel free to shop around and look for the best coverage at the best price. Overall the most important thing is going to be a company that is easy to deal with. It is not worth saving a couple dollars a year to have insurance through somewhere that is going to make it a nightmare to make a claim. In addition to answering all of their questions make sure that you have all of your own questions answered. Depending on location you might want to ask if they cover hurricanes, flooding, tornadoes, other natural events, etc. If you have any special items like collectibles, jewelry, expensive electronics, firearms, etc you might want to ask if that is covered of if you need a separate rider for those items.\",\n \"\\\"Note: this answer was provided when the question was only about Life Insurance, therefore it does not address any other \\\"\\\"benefits\\\"\\\" Term Life Insurance is very easy to evaluate, once you have determined how much you need and for how long. For significant amounts of coverage they may require a physical to be performed. The price quotes will be for two levels of health, so you can compare costs from many companies quite easily. You have several sources in no particular order: employer, independent company, 3rd party like AARP, AAA, or via you bank or credit union. Note that the 3rd party will be getting a cut of the premium. Also some choices offered from the employer or 3rd party may be limited in size or duration. The independent companies will be able to have terms that extend for 10 years or more. So view the insurance offered by AARP as just another option that has to be compared to all your other options.\\\"\",\n \"You don't even know why licenses you need? And you're asking Reddit? You will be doing a disservice to any client who has the misfortune of having you as an investment advisor. Go work for an established shop for a bit and learn the ropes. How could you dream of asking someone to trust you with their money when you know as little as you do?\",\n \"Consult your local Small Business Administration office - they may have resources that can help you find what you're looking for.\",\n \"Yes, maybe for themselves, but for you that depends on quite a number of things. But not all advisors are scum, but accept the fact that you are their cash cow and you are there for their takings. Some advisors are true to their professions and advise ethically, trying to get the best for their clients. So search for a good advisor rather than a cheap one. And regarding the mortgage you are talking about, the mortgage provider and the mortgage taker don't deal directly, but use their solicitors. Every party wants the least of legal hassles for their transactions and get the best legal help. The financial advisor maybe both rolled into one or he has legal practitioners in his firm who would do the legal job after he takes care of the financial matters. Seems a cost effective workshop.\",\n \"If you buy a CD through a brokerage, the trade confirmation will indicate whether the CDs is FDIC insured. Unless you have authorized the broker (in writing) to exercise discretion in your account, meaning they can act in your account without contacting you first, they must contact you and discuss the specific investment with you before buying it. If they have misled you and the CD is not actually FDIC insured, you have a right to ask them to reverse the transaction. Keep in mind that brokerages are also required to insure the assets in your account which they hold on their balance sheets (cash, bonds, stocks, mutual funds, but not commodities). This is provided by SIPC, the equivalent of FDIC in the brokerage world. Most large brokerages also insure you beyond the SIPC minimum. Keep in mind, unlike FDIC, you're not insured against market risk, only against a bankruptcy of the brokerage. Also, SIPC is funded by the securities industry, not by the US Government.\",\n \"\\\"I think you're right that these sites look so unprofessional that they aren't likely to be legitimate. However, even a very legitimate-looking site might be a fake designed to separate you from your money. There is an entire underground industry devoted to this kind of fakery and some of them are adept at what they do. So how can you tell? One place that you can consult is FINRA's BrokerCheck online service. This might be the first of many checks you should undertake. Who is FINRA, you might ask? \\\"\\\"The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for all securities firms doing business in the United States.\\\"\\\" See here. My unprofessional guess is, even if a firm's line of business is to broker deals in private company shares, that if they're located in the U.S. or else dealing in U.S. securities then they'd still need to be registered with FINRA – note the \\\"\\\"all securities firms\\\"\\\" above. I was able to search BrokerCheck and find SecondMarket (the firm @duffbeer703 mentioned) listed as \\\"\\\"Active\\\"\\\" in the FINRA database. The entry also provides some information about the firm. For instance, SecondMarket appears to also be registered with the S.E.C.. You should also note that SecondMarket links back to these authorities (refer to the footer of their site): \\\"\\\"Member FINRA | MSRB | SIPC. Registered with the SEC as an alternative trading system for trading in private company shares. SEC 606 Info [...]\\\"\\\" Any legitimate broker would want you to look them up with the authorities if you're unsure about their legitimacy. However, to undertake any such kind of deal, I'd still suggest more due diligence. An accredited investor with serious money to invest ought to, if they are not already experts themselves on these things, hire a professional who is expert to provide counsel, help navigate the system, and avoid the frauds.\\\"\",\n \"Yes. It is. It, like all business, takes a bit of luck, but honesty can be an asset. I knew a used car salesman who was absolutely honest and had a great eye for product. He bought cars at auctions out of state, and many of them were sold or reserved before they even arrived at his lot.\",\n \"\\\"Others have mentioned the term fiduciary but haven't really gone in to what that is. Despite the name \\\"\\\"financial advisor\\\"\\\" there is no legal (In the US) mandate as to what that means. Often times a financial advisor is little more than a sales rep whose job it is to sell particular financial instruments. These people will give you good generic advice such as \\\"\\\"make sure you have a nest egg\\\"\\\" and \\\"\\\"don't spend more than you make\\\"\\\". However when the rubber hits the road in terms of how to save they will often recommend/insist/pressure a particular asset/security which doesn't necessarily meet your risk/reward preference/tolerance. Often times the assets they pitch have high fees. These people won't charge you for their time because their time is a loss leader for the commissions they make on selling their products. In contrast a fiduciary's job responsibility is to look out for your interests. They shouldn't receive any kind of payment based on what assets you buy. This means that you have to pay them for their time. The NAPFA website seems to have good ideas on choosing an advisor. http://www.napfa.org/HowtoFindAnAdvisor.asp\\\"\",\n \"\\\"This is very true. I just don't know how much longer I can go because in order to promote at enterprise your \\\"\\\"insurance\\\"\\\" sales have to be a certain number for a three month average and I am pretty well below because I don't believe in the products. It feels impossible to sell something a person truly doesn't need.\\\"\",\n \"I've been at it for 17 years and, in that time, seen thousands of companies skyrocket ahead of me. Are those founders smarter? No. But nor are they necessarily dishonest. In that same time I've seen tens of thousands of companies fail. One thing I know is that being transparent and honest with my clients and employees has led to more personal satisfaction in my life: I'm a very happy person. My friends, employees, and peers respect me. I can look in the mirror and feel good about the path I've chosen. Yeah, maybe I don't get a private jet or that sweet piece of real estate I wanted. But at the end of the day, my happiness is worth more than any trinket. Sounds like you understand that too.\",\n \"It seems ideal to have the employment be all about both income and ethics, but the problem is that for most people in the industry more often at one point or another they will have to choose between their income or their ethics. Ethics should always hold supremacy over personal gain. Because ethics maintain the relationships (formal and informal) between entities involved in the markets. Without those long term relationships, there is no room for trust and therefore no reason to be willingness for entities to exchange with one another **fairly**. If you don't have a overall fair financial markets, on the long term it will hurt the overall economy, why? Because people will have no trust in buying equity prices, there will be no trust in prospects. People will save most of their money in cash and outright avoid anything or everything about investing. If there are less clients, there is less capital for the entire industry. The trust of the aggregate non-active investing clients with the capital range between 100k-500 million matters. And to make it common knowledge to hold personal gain above them is not a good way to have them keep their money in the markets.\",\n \"Question One: Question Two: Your best reference for this would be a brokerage account with data privileges in the markets you wish to trade. Failing that, I would reference the Chicago Mercantile Exchange Group (CME Group) website. Question Three: Considering future tuition costs and being Canadian, you are eligible to open a Registered Education Savings Plan (RESP). While contributions to this plan are not tax deductible, any taxes on income earned through investments within the fund are deferred until the beneficiary withdraws the funds. Since the beneficiary will likely be in a lower tax bracket at such a time, the sum will likely be taxed at a lower rate, assuming that the beneficiary enrolls in a qualifying post secondary institution. The Canadian government also offers the Canada Education Savings Grant (CESG) in which the federal government will match 20% of the first $2500 of your annual RESP contribution up to a maximum of $500.\",\n \"\\\"CFP stands for \\\"\\\"Certified Financial Planner\\\"\\\", and is a certification administered by the CFP board (a non-government non-profit entity). This has nothing to do with insurance, and CFP are not insurance agents. Many States require insurance agents to be explicitly licensed by the State as such, and only licensed insurance agents can advise on insurance products. When you're looking for an insurance policy as an investment vehicle, a financial adviser (CFP, or whatever else acronym on the business card - doesn't matter) may be helpful. But in any case, when dealing with insurance - talk to a licensed insurance agent. If your financial adviser is not a licensed tax adviser (EA/CPA licensed in your State) - talk to a licensed tax adviser about your options before making any decisions.\\\"\",\n \"We provide business insurance at competitive business insurance service rates to customers across the country. We can offer an assortment of answers for address their budgetary needs or business needs. We are reliable for the best insurance policy, you can trust at the Oxford Risk LLC. We have cheapest policy for business. As you know, business insurance policy is supportable for us such as U.S. property/casualty insurer for business insurance Fairlawn Ohio capital strength should enable them to withstand near-term volatility related to hurricane events, but a major catastrophic hurricane could change that, according to a new report.We know getting insurance for your business is not always the easiest thing to do. With so many terms of any business and always coverage. Business owner's insurance policy is often the most convenient way of protecting your business's physical and financial assets.\",\n \"No matter you want to rent, sell or buy the property, it’s very essential to find a reliable and professional broker who can ease the entire process for you. These are middle-men and are a great link between sellers and buyers of a specific property.\",\n \"If you are trying to weed out companies that are fronts for scams, one way is to look for a physical address that checks out with the phone book and a phone number posted on the site that connects you to an actual person. By itself this isn't a guarantee that the company is legit, but it will weed out a large number of fraudulent companies hiding behind PO boxes. That is, companies that defraud a lot of people don't usually make it very easy to track them down or contact them to complain or sue them.\",\n \"Answer all of their questions honestly and as accurately as you can, but don't stress too much about it. If you don't know the answer to something, ask the insurance agent what it means; that's what they're there for. (If you're doing this online, email the support, or the 'live chat' feature many of them have. Or, don't do it online, if you feel better having an agent in person; nowadays, most of the major insurers are similar on price so it's not a massive savings to skip the agent.) As far as whether it's important to pick a specific insurer - that's really your call. Read reviews, understanding that folks with bad experiences are more likely to write reviews than the 90% of folks who get no benefit from homeowner's insurance. You need to make the decision as to how important reputation and ease of claims process is versus price. That's why there are multiple insurers, after all - you can decide how important it is to you. It sounds like you would prefer a simpler claims process, so perhaps you should go with someone who is known for an easier claims process (understanding that no insurer is always going to agree with every claimant 100%).\",\n \"\\\"You want a fee-only advisor. He charges like an architect or plumber: by the hour or some other \\\"\\\"flat fee\\\"\\\". That is his only compensation. He is not paid on commission at all. He is not affiliated with any financial services company of any kind. His office is Starbucks. He does not have a well lit office like the commission broker down the street. He does not want you to hand him your money - it stays in the brokerage account of your choice (within reason - some brokerage accounts are terrible and he'll tell you to get out of those). He never asks for the password to your brokerage account. Edit: The UK recently outlawed commission brokers. These guys were competitive \\\"\\\"sales types\\\"\\\" who thrive on commissions, and probably went into other sales jobs. So right now, everyone is clamoring for the few proper financial advisors available. High demand is making them expensive. It may not be cost-effective to hire an advisor; you may need to learn it yourself. It's not that hard. Ever hear of a plumber who works totally for free, and makes his money selling you wildly overpriced pipe? That's what regular \\\"\\\"financial advisors\\\"\\\" are. They sell products that are deliberately made unnecessarily complex. The purpose is first, to conceal sales commissions and high internal fees; and second to confuse you, so the financial world feels so daunting that you feel like you need their help just to navigate it. They're trying to fry your brain so you'l just give up and trust them. Products like whole life and variable annuities are only the poster children for how awful all of their financial products are. These products exist to fleece the consumer without quite breaking the law. Of course, everyone goes to see them because they have well lit offices in every town, and they're free and easy to deal with. Don't feel like you need to know everything about finance to invest. You don't need to understand every complex financial product that the brokerage houses bave dreamed up: they are designed to conceal and confuse, as I discuss above, and you don't want them. The core of it is fairly simple, and that's all you really need to know. Look at any smaller university and how they manage their endowments. If whole life, annuities and those complex financial \\\"\\\"products\\\"\\\" actually worked, university endowments would be full of them. But they're not! Endowments are generally made of investments you can understand. Partly because university boards are made of investment bankers who invented those products, and know what a ripoff they are. Some people refuse to learn anything. They are done with college and refuse to learn anything more. I hope that's not you. Because you should learn the workings of everything you're investing in. If you don't understand it, don't buy itl And a fee-only financial advisor won't ask you to. 1000 well-heeled, well-advised university endowments seek the most successful products on the market... And end up choosing products you can understand. That's good news for you.\\\"\",\n \"Like all other trading brokers in the industry, they both have been acknowledged with mixed reviews. Before signing up, it’s important to know whether they are running a legitimate operation or not. You can see BinaryOptionsTrading-Review.com, judgebinaryoptions.com etc. to inquiries about these sites. They conduct in-depth research to identify the legitimacy of each brokers present in the market. Hope it will help you in making the right decision.\",\n \"So, there's no way to do both? I look out for my family, but I also try to be honest, live up to my word, and admit my mistakes rather than trying to find a villain or excuse for them. Looking out for myself and my family includes being careful with my money, especially large sums that I don't want to lose.\",\n \"Does anyone know anything about FCAC - Canada's financial bank regulator? If so, a recent article by CBC came out stating that our financial regulator is being lobbied often by the very same banks they are supposed to be watching. My question would be when private banks are meeting with our financial watchdogs in Canada; what would they be lobbying towards; specifically in the case of Canada, and their finance law?\",\n \"Unless u borrow for a house but just get a financial advisor - i highly recommend the co. I work for. Pm me if u want details though it sounds like u may go the diy route which is fine but 9 out if 10 times it takes nonprofessionals longer. I deal with clients and advisors who do this all the time.\",\n \"At MyBusinessOnlinePortal.com, Andrew Barnes sets out in a short and succinct introduction his no-nonsense ethos for professional, ethical home business. Followed by a sentence or two on his select choice of top opportunities, the page is framed with all his networking and contact info. His tagline is - Ready to share 8+ years experience to help all succeed. you would do much worse than to take him up on his offer.\",\n \"Toronto is small relative to the states. Have you considered moving to NYC or even Chicago? Everyone seems to be wanting in right now. I know of a guy with a master's from the london school of economics, CFA level III who's just started as an unpaid intern(not me). You might be better off working a job wherein you actually produce something good for people to make money rather than just siphoning funds from others. Then you'll have funds to start your own trading unit with talented people you respect and trust.\",\n \"Yes you can get them from your broker. Two main advantages I can see are:\",\n \"> integrity and honesty is the lifeblood of any company who wants to stay in business for longer than a short period But this is not what we have seen in the real world. Plenty of successful, prominent companies have abused their power, taken advantage of customers, or done things that harm the public. People have imperfect information and often don't know much about any given company.\",\n \"$600 a month is high, but may be the best you can do. When I moved from UK to Canada my first insurance quote was $3000 a year, but that was 20 years ago and I was older than 27. The rates go down substantially after you have had a local license for a few years. Best tips for minimising this:\",\n \"A Certified Financial Planner has passed a licensing exam and will advise you and help you reach your financial goals. A good CFP can help you a lot, especially if you are unsure how to set up your insurance, investment, savings, and financial plans on your own. You do not need a CFP to get a life insurance policy. If you do get a CFP, he or she should help you above and beyond life insurance -- i.e. retirement planning, investment advice, education planning, etc. It's advantageous to you to pay a fixed price for services instead of a percentage or commission. Negotiate fees up front. For life insurance, in most cases a term policy will fit your needs. Whole life, universal life, etc., combine investments and life insurance into a single product and are big commission makers for the salesman. They make it sound like the best thing ever, so be aware. One of my rules of thumb is that, generally speaking, the larger the commission is for the salesperson, the worse the product is for the consumer. Welcome to life insurance pitches. Term life is far less expensive and provides a death benefit and nothing else. If you just had a baby and need to protect your family, for example, term life is often a good solution, easy to buy, and inexpensive. As you stated, any of the major providers will do just fine.\",\n \"The first place to look for an accountant is the American Institute of Certified Public Accountants which has a directory of CPAs, accounting companies, and local accounting societies. I was also looking for one for my own small firm. It really helps.\",\n \"\\\"If wire transfer through your bank does not work then perhaps one of the more popular money transfer services may be what you are looking for such as MoneyGram or Western Union. Now these rely on a trusted \\\"\\\"registered\\\"\\\" third party to do the money transfer so you need to make sure that you are working with a legitimate broker. Each money transfer service has a site that allows you to perform the search on registered parties around your area. There are certain fees that are sometimes applied due to the amount being transferred. All of these you will want to do some detailed research on before you make the transfer so that you do not get scammed. I would suggest doing a lot of research and asking people that you trust to recommend a trusted broker. I have not personally used the services, but doing a quick search brought many options with different competitive conversion rates as well as fees. Good luck.\\\"\",\n \"\\\"(I answered a similar question before.) Essentially, you shouldn't trust a site you find on the Internet merely because it looks professional and real. Before signing up with any new service provider you found online, you should verify the authenticity of both the organization itself and their web site address. Even if the name displayed by a web site represents a legitimate brokerage firm, any site you happen to come across on the Internet could be an elaborate spoof of a real company, intended to capture your personal details (or worse). First, to check if a brokerage firm is in fact registered to trade securities – in the United States – you can consult FINRA's BrokerCheck online service. This might be the first of many checks you should undertake ... after you convince yourself that FINRA is legitimate. A meta-problem ;-) Then, if you want to know if the web site address is authentic, one way is to contact that broker offline using the contact information found from a trusted source, such as the FINRA BrokerCheck details. Unfortunately, those details do not currently appear to contain the broker's web site URL. (Else, that could be useful.) Another thing to look at is the site's login or sign-up page, for a valid SSL certificate that is both issued to the correct legal name of the brokerage firm as well as has been signed by a well-known certificate authority (e.g. VeriSign). For a financial services firm of any kind, you should look for and expect to see an Extended Validation Certificate. Any other kind of certificate might only assert that the certificate was issued to the domain-name owner, and not necessarily to an organization with the registered legal name. (Yes, anybody can register a domain with a similar name and then acquire a basic SSL certificate for that domain.) FWIW, Scottrade and ShareBuilder are both legitimate brokers (I was aware already of each, but I also just checked in the FINRA tool), and the URLs currently linked to by the question are legitimate web site addresses for each. Also, you can see their EV certificates in action on secured pages here and here. As to whether your investments with those brokers would be \\\"\\\"safe\\\"\\\" in the event of the broker failing (e.g. goes bankrupt), you'll want to know that they are members of the Securities Investor Protection Corporation (Wikipedia). (Of course, this kind of protection doesn't protect you if your investments simply go down in value.) But do your own due diligence – always.\\\"\",\n \"I quite like the Canadian Couch Potato which provides useful information targeted at investors in Canada. They specifically provide some model portfolios. Canadian Couch Potato generally suggests investing in indexed ETFs or mutual funds made up of four components. One ETF or mutual fund tracking Canadian bonds, another tracking Canadian stocks, a third tracking US stocks, and a fourth tracking international stocks. I personally add a REIT ETF (BMO Equal Weight REITs Index ETF, ZRE), but that may complicate things too much for your liking. Canadian Couch Potato specifically recommends the Tangerine Streetwise Portfolio if you are looking for something particularly easy, though the Management Expense Ratio is rather high for my liking. Anyway, the website provides specific suggestions, whether you are looking for a single mutual fund, multiple mutual funds, or prefer ETFs. From personal experience, Tangerine's offerings are very, very simple and far cheaper than the 2.5% you are quoting. I currently use TD's e-series funds and spend only a few minutes a year rebalancing. There are a number of good ETFs available if you want to lower your overhead further, though Canadians don't get quite the deals available in the U.S. Still, you shouldn't be paying anything remotely close to 2.5%. Also, beware of tax implications; the website has several articles that cover these in detail.\",\n \"Accidents and tickets more than 3 years old generally won't affect you. I use an insurance broker who shops a bunch of different companies and buys me the best policy. (He gets a cut as a middle-man, but saves me more than going direct and gives great advice when I have a question.) Since you haven't been only your own policy lately, it will cost you more than someone with a 3 year history with a perfect record, but if you shop around, you will find something at a fair price. Also, your credit score often factors into the price you pay for car insurance also.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["How do you find an ethical, honest practitioner of any business? One: Make a small transaction with them and see how they treat you. If they cheat you on something small, don't give them a chance with something big. Two: Ask family and friends for recommendations. Three: Get information from public sources, like web sites where people post reviews of businesses, consumer advocacy organizations, groups like the Better Business Bureau, etc. Personally I consider all these of questionable value as you're asking one stranger to advise you on the reliability of another stranger, but better than nothing."],"string":"[\n \"How do you find an ethical, honest practitioner of any business? One: Make a small transaction with them and see how they treat you. If they cheat you on something small, don't give them a chance with something big. Two: Ask family and friends for recommendations. Three: Get information from public sources, like web sites where people post reviews of businesses, consumer advocacy organizations, groups like the Better Business Bureau, etc. Personally I consider all these of questionable value as you're asking one stranger to advise you on the reliability of another stranger, but better than nothing.\"\n]","isConversational":false}}},{"rowIdx":58,"cells":{"_id":{"kind":"string","value":"2880"},"query":{"kind":"string","value":"Can I transfer my investment property into a SMSF?"},"gt_ids":{"kind":"list like","value":["533791"],"string":"[\n \"533791\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1],"string":"[\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["533791","207285","127697","338943","118594","151145","458063","221747","48718","213339","169886","465787","515690","97083","16187","108433","93828","9403","265167","171054","353415","57646","578014","196295","479558","144109","125168","441227","30935","181961","416787","428671","256010","334154","163566","83996","169173","3481","587539","333616","109292","458952","305721","314279","322535","212960","562007","190325","89202","387876","180390","536703","444266","277810","133572","283692","143622","361639","169598","484201","434694","122455","393090","266173","587192","456526","267825","297975","43974","139644","237907","599790","32811","438149","51533","443062","279488","290857","371560","125454","36341","385251","274901","134343","577839","545623","332605","19837","348927","294097","526516","71601","308208","275581","345366","255367","217661","318741","6543","263591"],"string":"[\n \"533791\",\n \"207285\",\n \"127697\",\n \"338943\",\n \"118594\",\n \"151145\",\n \"458063\",\n \"221747\",\n \"48718\",\n \"213339\",\n \"169886\",\n \"465787\",\n \"515690\",\n \"97083\",\n \"16187\",\n \"108433\",\n \"93828\",\n \"9403\",\n \"265167\",\n \"171054\",\n \"353415\",\n \"57646\",\n \"578014\",\n \"196295\",\n \"479558\",\n \"144109\",\n \"125168\",\n \"441227\",\n \"30935\",\n \"181961\",\n \"416787\",\n \"428671\",\n \"256010\",\n \"334154\",\n \"163566\",\n \"83996\",\n \"169173\",\n \"3481\",\n \"587539\",\n \"333616\",\n \"109292\",\n \"458952\",\n \"305721\",\n \"314279\",\n \"322535\",\n \"212960\",\n \"562007\",\n \"190325\",\n \"89202\",\n \"387876\",\n \"180390\",\n \"536703\",\n \"444266\",\n \"277810\",\n \"133572\",\n \"283692\",\n \"143622\",\n \"361639\",\n \"169598\",\n \"484201\",\n \"434694\",\n \"122455\",\n \"393090\",\n \"266173\",\n \"587192\",\n \"456526\",\n \"267825\",\n \"297975\",\n \"43974\",\n \"139644\",\n \"237907\",\n \"599790\",\n \"32811\",\n \"438149\",\n \"51533\",\n \"443062\",\n \"279488\",\n \"290857\",\n \"371560\",\n \"125454\",\n \"36341\",\n \"385251\",\n \"274901\",\n \"134343\",\n \"577839\",\n \"545623\",\n \"332605\",\n \"19837\",\n \"348927\",\n \"294097\",\n \"526516\",\n \"71601\",\n \"308208\",\n \"275581\",\n \"345366\",\n \"255367\",\n \"217661\",\n \"318741\",\n \"6543\",\n \"263591\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["Regarding transferring a residential investment property into your SMSF, no you cannot do it. You cannot transfer residential property into your SMSF from a related party. You can only transfer Business Real Property (that is commercial or industrial property) into a SMSF from a related party. You can buy new residential property inside your SMSF, and you can also borrow within the fund (using a non-recourse loan) to help you buy it, or you could buy it as tenants-in-common with your SMSF (that is you own say 50% in your own name and 50% under the SMSF). Regarding self-managing the investment properties held in your SMSF, yes you can, but you should make sure all your paperwork is in order (all your t's crossed and your i's dotted). You can even charge your SMSF for managing the properties, but this should be at market rates (not more).","You can set up a Self Managed Super Fund (SMSF) and use it to buy residential investment property, and as Justin has mentioned even borrow to acquire the investment property through the SMSF. However, you cannot hold your home in the SMSF, as this would be classed as an in-house asset, and you are only allowed to hold a maximum of 5% of the total market value of SMSF as in-house assets. Furthermore, as you already own your house, you are not allowed to transfer residential property into a SMSF from a related party, even if done at current market value (you are allowed to transfer business real property from a related party at current market value). Regarding loans, you are not allowed to lend money from your SMSF to a related party as well.","SMSFs are generally prohibited from acquiring assets from related parties (whether it is purchased by the SMSF or contributed into the fund). There are some exceptions to the above rule for acquiring related party assets, including: • Listed securities (ie shares, units or bonds listed on an approved stock exchange, such as the ASX) acquired at market value. • Business real property (ie freehold or leasehold interests in real property used exclusively in one or more businesses) acquired at market value. • An in-house asset where the acquisition would not result in the level of the fund’s in-house assets exceeding 5%. • Units in a widely held unit trust, such as a retail ,managed fund. In-house asset rules An ‘in-house asset’ is generally defined as: • An investment by an SMSF in a related company or trust (ie a fund owns shares in a related company or units in a related trust). • An asset of an SMSF that is leased to a related party. • A loan made by an SMSF to a related company or trust. An investment, lease or loan that is an in-house asset is not prohibited, but is limited to 5% of the market value of the fund’s assets. The Answer: If your pre-owned Western Australian Rock Lobster fishery quota units are not included in the exceptions then you cannot transfer them into your SMSF.","Yes you can't simply withdraw your super until you are aged 60 (and that may go up slightly on Budget night 13/05/14). But you can roll it over into a SMSF where you decide where you invest your super funds. However, I would advise against you starting a SMSF at this early age with a very small super fund account. The Admin. and audit fees would eat your super account up in one year. It is recommended that you have at least $300,000 to $400,000 in super fund assets before starting a SMSF to make the fees competitive and efficient. Now if you are with a partner and start a SMSF together, then it is your combined funds that need to be over the $300K mark (a SMSF can have between 1 to 4 members). The cheapest fund I could find was First State Super. The fees are $52 + 0.64% per year (for the High Growth option). So for a balance of $1000 you would pay $58.40 or 5.84% per year. The High Growth Investment Option has returned 18.4% over the last year, 12.7% pa over the last 5 years, and 8.2% pa over the last 10 years (which includes the period covering the GFC). So even with a small balance of $1000 your super investment will still continue to grow. If you could slowly grow your super account to $2000 your fees would be $64.80 or 3.24%, and at $3000 balance your fees would be $71.20 or 2.37%. The great thing about super is the tax advantages. You may be complaining now about fees on a small balance, and yes you should try to minimise these fees, not only when you have a small balance but also when your balance is larger, but the tax advantages available through superannuation will really come into play when you are on a high income paying the tax at or near the highest marginal tax rate. Compare the top marginal tax rate (plus Medicare Levy) at 46.5% compared to the tax rate of 15% on super contributions and investment returns. And it gets better, when you retire and take a pension or lump sum from your super after age 60 you pay zero tax on the income stream or lump sum. and you also pay zero tax on any ongoing investment returns in your super. The benefits of superannuation are numerous, and the best way to reduce your fees for now is to find a fund with lowest fees, try to increase your balance so your percentage fees go down, and try to consolidate all your super funds into the one with the lowest fees, if you have more than one super fund.","No. Disclaimer - As a US educated fellow, I needed to search a bit. I found an article 7 Common SMSF Pension Errors. It implied that there are minimum payments required each year as with our US retirement accounts. These minimums are unrelated to the assets within the account, just based on the total value. The way I read that, there would be a point where you'd have to sell a property or partial interest to be sure you have the cash to distribute each year. I also learned that unlike US rules, which permit a distribution of stock as part of a required minimum distribution, in Australia, the distribution must be in cash (or a deposited check, of course.)","You can't do what you would like to do, unless your business has another, unrelated investor or is willing to invest an equal amount of funds + .01 into a corporation which will employ you. You will then need to set up a self-directed IRA. Additionally, you will need a trustee to account for all the disbursements from your IRA.","\"No, you cannot. ISO are given to you in your capacity as an employee (that's why it is \"\"qualified\"\"), while your IRA is not an employee. You cannot transfer property to the IRA, so you cannot transfer them to the IRA once you paid for them as well. This is different from non-qualified stock options (discussed in this question), which I believe technically can be granted to IRA. But as Joe suggests in his answer there - there may be self-dealing issues and you better talk to a licensed tax adviser (EA/CPA licensed in your State) if this is something you're considering to do.\"","One can have a self-directed IRA. This is not like a Schwab, eTrade, etc IRA. It has a special type of custodian that knows how to manage it. I became aware of such an account as a way to purchase a rental property. There were two issues. The type of property I looked at wasn't anything a bank was willing to finance. And the rules regarding self dealing added a potential layer of expense as I technically could not perform the simplest of things for the property. For you, the obstacle looks like self-dealing. Any IRA can only be funded with cash or transfer/conversion from another IRA/401(k). I don't know how you would get the intelligent property into the IRA in the first place. Once you own a patent, or anything else, you can't sell it into the IRA. It's at times like this that member littleadv would suggest this is the time to talk to a pro before you do anything hazardous to your wealth.","\"You can hold a wide variety of investments in your TFSA account, including stocks such as SLF. But if the stocks are being purchased via a company stock purchase plan, they are typically deposited in a regular margin account with a brokerage firm (a few companies may issue physical stock certificates but that is very rare these days). That account would not be a TFSA but you can perform what's called an \"\"in-kind\"\" transfer to move them into a TFSA that you open with either the same brokerage firm, or a different one. There will be a fee for the transfer - check with the brokerage that currently holds the stock to find out how costly that will be. Assuming the stock gained in value while you held it outside the TFSA, this transfer will result in capital gains tax that you'll have to pay when you file your taxes for the year in which the transfer occurs. The tax would be calculated by taking the value at time of transfer, minus the purchase price (or the market value at time of purchase, if your plan allowed you to buy it at a discounted price; the discounted amount will be automatically taxed by your employer). 50% of the capital gain is added to your annual income when calculating taxes owed. Normally when you sell a stock that has lost value, you can actually get a \"\"capital loss\"\" deduction that is used to offset gains that you made in other stocks, or redeemed against capital gains tax paid in previous years, or carried forward to apply against gains in future years. However, if the stock decreased in value and you transfer it, you are not eligible to claim a capital loss. I'm not sure why you said \"\"TFSA for a family member\"\", as you cannot directly contribute to someone else's TFSA account. You can give them a gift of money or stocks, which they can deposit in their TFSA account, but that involves that extra step of gifting, and the money/stocks become their property to do with as they please. Now that I've (hopefully) answered all your questions, let me offer you some advice, as someone who also participates in an employee stock purchase plan. Holding stock in the company that you work for is a bad idea. The reason is simple: if something terrible happens to the company, their stock will plummet and at the same time they may be forced to lay off many employees. So just at the time when you lose your job and might want to sell your stock, suddenly the value of your stocks has gone way down! So you really should sell your company shares at least once a year, and then use that money to invest in your TFSA account. You also don't want to put all your eggs in one basket - you should be spreading your investment among many companies, or better yet, buy index mutual funds or ETFs which hold all the companies in a certain index. There's lots of good info about index investing available at Canadian Couch Potato. The types of investments recommended there are all possible to purchase inside a TFSA account, to shelter the growth from being taxed. EDIT: Here is an article from MoneySense that talks about transferring stocks into a TFSA. It also mentions the importance of having a diversified portfolio!\"","Of course you can transfer it, and it will be legal. There's no taxes on transferring your own money. There's income tax on gains you realized by selling the property, but that is money you already owe, it doesn't matter where the proceeds are. It also doesn't matter how you acquired the property (except for figuring out your basis). What matters is that you had gains, and these gains are taxable in the US. You need to figure out the value of the property when your father bought it, and that is your basis. The difference between what you sold it for and that basis is your taxable gain, and you already owe taxes on that gain.","No, IRA contributions can only be made in the form of cash (rollovers and conversions are different). You'd have to sell the investments in your taxable account, incurring capital gains or losses, then transfer the proceeds to your IRA in cash. Note that the amount you can transfer is subject to the limits on how much one can contribute to the IRA each year. You could look into Vanguard Target Retirement funds, which have a lower $1,000 minimum investment, or Vanguard ETFs.","Read the Forbes article titled IRA Adventures. While it's not the detailed regulations you certainly need, the article gives some great detail and caution. You may be able to do what you wish, but it must be structured to adhere to specific rules to avoid self dealing. Those rules would be known by the custodians who would help you set up the right structure, it's well buried within IRS regs, I'm sure. Last, in general, using IRA funds to invest in the non-traditional assets adds that other layer of risk, that the investment will be deemed non-allowed and/or self-dealing. So, even if you have the best business idea going, be sure you get proper council on this.","I don't quite understand your thought process here. First, in a tax-advantaged retirement account you are NOT allowed to engage in a transaction with yourself. If you just want to run a business and be able to write off expenses, how is using the self-directed IRA relevant? You can either buy the condo using your tax-advantaged account and rent it out to regular tenants. Or you buy the condo yourself using your own money and then operate your business so you can deduct business expenses from doing so. 401k's allow you to take a loan out of it, so you can look into that as well.","\"especially considering it has a mortgage on it (technically a home equity loan on my primary residence). I'm not following. Does it have a mortgage on it, or your primary residence (a different property) was used as a security for the loan? If it is HELOC from a different property - then it is really your business what to do with it. You can spend it all on casinos in Vegas for all that the bank cares. Is this a complicated transaction? Any gotchas I should be aware of before embarking on it? Obviously you should talk to an attorney and a tax adviser. But here's my two cents: Don't fall for the \"\"incorporate in Nevada/Delaware/Wyoming/Some other lie\"\" trap. You must register in the State where you live, and in the State where the property is. Incorporating in any other State will just add complexity and costs, and will not save you anything whatsoever. 2.1 State Taxes - some States tax LLCs. For example, in California you'll pay at least $800 a year just for the right of doing business. If you live in California or the property is in California - you will pay this if you decide to set up an LLC. 2.2 Income taxes - make sure to not elect to tax your LLC as a corporation. The default for LLC is \"\"disregarded\"\" status and it will be taxed for income tax purposes as your person. I.e.: IRS doesn't care and doesn't know about it (and most States, as well). If you actively select to tax it as a corporation (there's such an option) - it will cost you very dearly. So don't, and if someone suggest such a thing to you - run away from that person as fast as you can. Mortgages - it is very hard to get a mortgage when the property is under the LLC. If you already have a mortgage on that property (the property is the one securing the loan) - it may get called once you transfer it into LLC, since from bank's perspective that would be transferring ownership. Local taxes - transferring into LLC may trigger a new tax assessment. If you just bought the property - that will probably not matter much. If it appreciated - you may get hit with higher property taxes. There are also many little things - once you're a LLC and not individual you'll have to open a business bank account, will probably need a new insurance policy, etc etc. These don't add much to costs and are more of an occasional nuisance.\"","The business and investment would be shown on separate parts of the tax return. (An exception to this is where an investment is related and part of your business, such as futures trading on business products) On the business side of it, you would show the transfer to the stocks as a draw from the business, the amount transferred would then be the cost base of the investment. For taxes, you only have to report gains or losses on investments.","While it may not be your preferred outcome, and doesn't eliminate the income, in the event you find yourself in the path described here you have a way to defer gains to the future. but I would then want to buy another house as a rental If you sell this house and buy another investment property (within strict time windows: 45 days to written contract and closed in 180 days), you can transfer your basis and defer your gains via what is called a 1031 like-kind exchange","You can make a start to learn how to make better investing decisions by learning and understanding what your current super funds are invested in. Does the super fund give you choices of where you can invest your funds, and how often does it allow you to change your investment choices each year? If you are interested in one area of investing over others, eg property or shares, then you should learn more on this subject, as you can also start investing outside of superannuation. Your funds in superannuation are taxed less but you are unable to touch them for another 30 to 35 years. You also need to consider investing outside super to help meet your more medium term goals and grow your wealth outside of super as well. If you are interested in shares then I believe you should learn about both fundamental and technical analysis, they can help you to make wiser decisions about what to invest in and when to invest. Above is a chart of the ASX200 over the last 20 years until January 2015. It shows the Rate Of Change (ROC) indicator below the chart. This can be used to make medium to long term decisions in the stock market by investing when the ROC is above zero and getting out of the market when the ROC is below zero. Regarding your aggressiveness in your investments, most would say that yes because you are still young you should be aggressive because you have time on your side, so if there is a downturn in your investments then you still have plenty of time for them to recover. I have a different view, and I will use the stock market as an example. Refer back to the chart above, I would be more aggressive when the ROC is above zero and less aggressive when the ROC is below zero. How can you relate this to your super fund? If it does provide you to change your investment choices, then I would be invested in more aggressive investments like shares when the ROC crosses above zero, and then when the ROC moves below zero take a less aggressive approach by moving your investments in the super fund to a more balanced or capital guaranteed strategy where less of your funds are invested in shares and more are invested in bonds and cash. You can also have a similar approach with property. Learn about the property cycles (remember super funds usually invest in commercial and industrial property rather than houses, so you would need to learn about the commercial and industrial property cycles which would be different to the residential property cycle). Regarding your question about SMSFs, if you can increase your knowledge and skills in investing, then yes switching to a SMSF will give you more control and possibly better returns. However, I would avoid switching your funds to a SMSF right now. Two reasons, firstly you would want to increase your knowledge as mentioned above, and secondly you would want to have at least $300,000 in funds before switching to a SMSF or else the setup and compliance costs would be too high as a percentage of your funds at the moment ($70,000). You do have time on your side, so whilst you are increasing your funds you can use that time to educate yourself in your areas of interest. And remember a SMSF is not only an investment vehicle whilst you are building your funds during your working life, but it is also an investment vehicle when you are retired and it becomes totally tax free during this phase, where any investment returns are tax free and any income you take out is also tax free.","\"I am a CPA. Yes you can do what you are contemplating. Be careful that they do not take any taxes out of the money when you go to do the \"\"rollover\"\". If they do you will have to dip into your own pocket to put that back into the IRA.\"","I don't believe you can do that. From the IRS: Finally, certain types of property are specifically excluded from Section 1031 treatment. Section 1031 does not apply to exchanges of: I highlighted the relevant items for emphasis.","\"Self directed IRAs have rules to prevent self-dealing of this sort called \"\"prohibited transactions\"\". You can't buy or sell or lease assets or obtain services from anyone closely linked to you or any beneficiaries of the IRA. You can't loan yourself money from the IRA, and you can't deliberately take the proceeds that should be going to your self directed IRA and give them to another account that you own.\"","\"Another option you might consider is rolling over some of that 401K balance into a self-directed IRA or Solo 401K, specifically one with \"\"checkbook privileges\"\". That would permit you to invest directly in a property via your IRA/401K money without it being a loan, and preserving the tax benefits. (You may not be able to roll over from your current employer's 401K while still employed.) That said, regarding your argument that your loan is \"\"paying interest to yourself\"\", while that is technically true, that neglects the opportunity cost -- that money could potentially be earning a much higher (and tax-free) return if it remains in the 401K account than if you take it out and slowly repay it at a modest interest rate. Real Estate can be a great way to diversify, build wealth, and generate income, but a company match and tax-free growth via an employee sponsored retirement account can be a pretty sweet deal too (I actually recently wrote about comparing returns from having a tenant pay your mortgage on a rental property vs. saving in a retirement account on my blog -- in short, tax-free stock-market level returns are pretty compelling, even when someone else is paying your mortage). Before taking rather big steps like borrowing from a 401K or buying a rental property, you might also explore other ways to gain some experience with real estate investing, such as the new crop of REITs open to all investors under SEC Reg A+, some with minimums of $500 or less. In my own experience, there are two main camps of real estate investors: (1) those that love the diversification and income, but have zero interest in active management, and (2) those that really enjoy real estate as a lifestyle and avocation, happy to deal with tenant screening and contractors, etc. You'll want to be careful to be sure which camp you're in before signing on to active investment in a specific property.\"","You can't actually transfer shares directly unless they were obtained as part of an employee share scheme - see the answers to questions 19 and 20 on this page: http://www.hmrc.gov.uk/isa/faqs.htm#19 Q. Can I put shares from my employee share scheme into my ISA? A. You can transfer any shares you get from into a stocks and shares component of an ISA without having to pay Capital Gains Tax - provided your ISA manager agrees to take them. The value of the shares at the date of transfer counts towards the annual limit. This means you can transfer up to £11,520 worth of shares in the tax year 2013-14 (assuming that you make no other subscriptions to ISAs, in those years). You must transfer the shares within 90 days from the day they cease to be subject to the Plan, or (for approved SAYE share option schemes) 90 days of the exercise of option date. Your employer should be able to tell you more. Q. Can I put windfall or inherited shares in my ISA? A. No. You can only transfer shares you own into an ISA if they have come from an employee share scheme. Otherwise, the ISA manager must purchase shares on the open market. The situation is the same if you have shares that you have inherited. You are not able to transfer them into an ISA.","I just received a transfer offer - Seems to me, they don't care what I do with the proceeds. Options 1 & 2 make that clear.","When you live in your own rental property, it no longer counts as your 'rental property'. It becomes your own living property and legally you cannot get tax benefits.","If it is a separate unit from the rest of the property, you can use that portion as an investment property. the part, or unit, you are living in is your primary residence. The remainder is your investment. You are eligible to not pay capital gains on the portion you live in After two years. As always consult a tax accountant For advice... Also, if this is less then 4 unit, you may he able to finance the sale of the home with an FHA loan.","\"Yes, it can be done. See \"\"Scenario 4\"\" at Isolating 401(k) basis - Fairmark.com. Though that article is primarily about getting after-tax 401(k) money into a Roth IRA, Scenario 4 applies to the scenario you are asking about. At a high level you do exactly what you say -- transfer the pre-tax money from your trad IRAs to a 401(k) (btw, a solo 401(k) will work for this also -- doesn't have to be your employer's -- but then you need to be eligible to set up a solo 401(k)). This is allowed because qualified plans can't accept after after-tax traditional IRA money, so the transfer overrides the usual pro rata rules and \"\"strains\"\" the basis out and leaves it in the trad IRA. However, there's a mismatch between the intent of Congress (as indicated by the Joint Committee on Taxation report on the law) and the actual text of the law as detailed in the Fairmark article which while it doesn't stop you from doing this adds a couple of hoops to jump through if you want to be in total compliance with the law.\"","If you have the cash on hand to pay the tax on the amount you are transferring I recommend moving to a Roth IRA An IRA is tax-deferred. You put in pretax contributions in to an IRA, and you are taxed on that money (your contributions and interest earned) when you withdraw it at retirement, age 59 1/2. The idea being that you will be taking less out per year in your retirement years, putting you into a lower tax bracket. The major problem is most people draw out as much or more a year in their retirement years than when they were working. A Roth IRA grows tax free You put after tax contributions into a Roth IRA, you have paid taxes on the contributions, and you are never taxed on the growth. When you draw the money out at retirement you don't pay any income taxes on that money. Let me give you an example: For this example we will use the following information for both scenario: We will invest $400 per month for a total of $4800. The current maximum is $5000 if you are under 50 years old $400 dollars after taxes is $300 Invest $300 a month, at age 65 you have 3,529,432 You owe no taxes on this money, it doesn't matter how much you take out a year. $400 dollars a month is taken pretax out of your paycheck. Invest $400 per month, at age 65 you have $4,705,909 You owe taxes of 25% as you draw that out for at total tax of 1,176,477 4,705,909 - 1,176,477 = 3,529,432 cash in your pocket The problem is if you draw out more than $82,400 (current 2010 filing single) per year you will be pushed to a higher tax bracket and take more of your money away. If you decide to buy a vacation home and you take out $250,000 to pay for it, that's counted as income for that year any you will be in the 33% tax bracket. Even if you can keep yourself to a low income the government forces your hand and makes you draw out more money at age 70, based on their tables, forcing you into a higher tax bracket","Most likely no. Just make sure to read the fine print. I'm in exactly the same boat, I have a house with an FHA loan and will be refinancing to conventional then using it as an investment. To refinance, you usually have to own 25% of your property before you can refinance, or buy another property with FHA financing. If you are planning on refinancing with FHA, then things might not work. The only way around this is if you move like you said you might. Take a look at this article section (A) for Relocations, good stuff: http://portal.hud.gov/FHAFAQ/controllerServlet?method=showPopup&faqId=1-6KT-879","\"No, I do not. The advice is to take advice :-) but it is not required. Several \"\"low cost\"\" SIPPs allow an \"\"Execution Only\"\" transfer from some pensions (generally not occupational or defined benefits schemes [where transfers are generally a bad idea anyway] but FAVCs such as mine are ok). Best Invest is one such, and the fees are indeed relatively low. As far as anyone knows, the government's plans for changes to rules on using pension funds would still apply even once I've transferred my pension pot and begun to withdraw funds (provided I don't commit myself to an annuity or other irrevocable investment). I am not a financial adviser, nor employed or otherwise connected with Best Invest, and I'm not endorsing their SIPP schemes, just giving them as an example of what can be done. [Added after I carried out my plan] I found the process very straightforward; I needed to apply for a pension fund with my new provider and fill in a transfer form, which set up the scheme and transferred the funds with no expense required. Once the money arrived in my pension account I filled in another form to take the lump sum and set up regular withdrawals from the fund. I had my lump sum within a couple of months of initiating the transfer. I'm very happy I did not take independent advice because it would have been very poor value for money. During my researches I was approached eagerly by one firm promising to get me my money quick and claiming to be an independent financial advisor. Luckily I mistrusted the service they offered.\"","If you withdraw all (or most) of your pension 25% is tax free but the rest is treated as income upon which you will pay income tax at the usual UK rates. Withdrawing a lump sum to buy property is therefore unlikely to be 10% per annum as you'll spend years making up lost ground on the initial capital investment. If your pension is a self invested personal pension (a SIPP) you could buy property within the pension wrapper itself which would avoid the income tax hit. if you don't have a SIPP you may be able to convert your pension to a SIPP but you would be wise to seek professional advice about that. The UK government is also introducing an additional 3% stamp duty on properties which are not your first home so this may further impact your returns. This would apply whether you withdraw your pension as cash or buy the property within a SIPP. One other alternative to an annuity in the UK is called drawdown where you keep the money invested in your pension as it is now and withdraw an annual income. This means your tax bill is reduced as you get to use your annual allowance each year and will also pay less higher rate tax. The government provides more details on its website.","What you are looking for is a 1031 exchange. https://www.irs.gov/uac/like-kind-exchanges-under-irc-code-section-1031 Whenever you sell business or investment property and you have a gain, you generally have to pay tax on the gain at the time of sale. IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free. You may also sell your house for bitcoin and record the sales price on the deed with an equal or lesser amount that you bought it for.","\"Your question asks \"\"how\"\" but \"\"if\"\" may be your issue. Most companies will not permit an external transfer while still employed, or under a certain age, 55 or so. If yours is one of the rare companies that permits a transfer, you simply open an IRA with the broker of your choice. Schwab, Fidelity, eTrade, or a dozen others. That broker will give you the paperwork you need to fill out, and they initiate the transfer. I assume you want an IRA in which you can invest in stocks or funds of your choosing. A traditional IRA. The term \"\"self-directed\"\" has another meaning, often associated with the account that permits real estate purchases inside the account. The brokers I listed do not handle that, those custodians have a different business model and are typically smaller firms with fewer offices, not country-wide.\"","Don't let the tax tail wag the investment dog. There is risk in exchanging this (known) property for another (unknown) property. That risk may be more than $9000 worth of risk. Tax considerations are important, but most important is that your investments make money. If you intend to continue as a landlord, you had better be sure you are finding a better deal elsewhere if you are going to trade this property up. I should also mention that you have a 5 year window in which you need to have lived in the home for 2 years. You have time and might be able to sell for a higher price if you wait a little longer.","If you are using the money to invest in a property (even abroad) then you can claim tax exemption. while some people will tell you that the reinvestment should be in India only, it have been ruled that the property can be purchased abroad too..","\"You have a Solo 401(k). You can fund it with cash, or I believe, with shares of your own company. You can't pull in other assets such as the ISOs from another employer. I see why that's desirable, but it's not allowed. You wrote \"\"this will mitigate all tax complications with employee stock options.\"\" But - you can't transfer the ISOs from your job into your Solo 401(k). As littleadv notes, it's self dealing. Once the ISO is exercised there's no hiding the gain into that 401(k).\"","3 Yes, a big yes, it cannot go into the account it came from. Then both accounts >can't be touched for a year. 3) Actually it looks like you can reinvest it in the same IRA account. Based on IRS publication 590 http://www.irs.gov/publications/p590/ch01.html You can withdraw, tax free, all or part of the assets from one traditional IRA if you reinvest them within 60 days in the same or another traditional IRA. Because this is a rollover, you cannot deduct the amount that you reinvest in an IRA.","You've mostly got it figured out, but there are a couple of more points to consider: You'll be permanently losing a corresponding amount of your RRSP contribution room allowance, because the re-deposit of your funds into the new RRSP would count as a new contribution, the way you're proposing to things. For a small amount, it might not matter much, and if you're like a lot of people, you may have more accumulated RRSP room than you can reasonably use up. There may be complications if spousal contributions were made into your account during the previous three years.","\"Yes it's entirely possible; see below. If you can't find anything on transfers out (partial or otherwise) on anyone's site it's because they don't want to give anyone ideas. I have successfully done exactly what you're proposing earlier this year, transferring most of the value from my employer's group personal pension scheme - also Aviva! - to a much lower-cost SIPP. The lack of any sign of movement by Aviva to post-RDR \"\"clean priced\"\" charge-levels on funds was the final straw for me. My only regret is that I didn't do it sooner! Transfer paperwork was initiated from the SIPP end but I was careful to make clear to HR people and Aviva's rep (or whatever group-scheme/employee benefits middleman organization he was from) that I was not exiting the company scheme and expected my employee and matching employer contributions to continue unchanged (and that I'd not be happy if some admin mess up led to me missing a month's contributions). There's a bit more on the affair in a thread here. Aviva's rep did seem to need a bit of a prod to finally get it to happen. With hindsight my original hope of an in-specie transfer does seem naive, but the out-of-the-market time was shorter and less scary than anticipated. Just in case you're unaware of it, Monevator's online broker list is an excellent resource to help decide who you might use for a SIPP; cheapest choice depends on level of funds and what you're likely to hold in it and how often you'll trade.\"","\"The fair price of a stock is the present value of its future payments. That means the stock you have described would have a \"\"fair\"\" value that is quite high and you wouldn't be able to put much of it in your 401(k) or IRA. The IRS requires that \"\"fair value\"\" be used for calculating the value of IRA and 401(k) assets. Of course, if the stock is not publicly traded, then there's not an obvious price for it. I'm sure in the past people have said they spent a small amount of money for assets that are actually worth much more in order to get around IRS limits. This is illegal. The IRS can and sometimes will prosecute people for this. In order to address abuses of the system by inclusion of hard to value assets in retirement accounts, the IRS has additional reporting requirements for these assets (nonpublic stock, partnerships, real estate, unusual options, etc.) and those reporting requirements became more stringent in 2015. In other words, they are trying to clamp down on it. There are also likely problems with prohibitions against \"\"self-dealing\"\" involved here, depending on the specifics of the situation you are describing.\"","You can make a capital contribution, not a loan. It's not a taxable event, no interest, and you can take a distribution later when the business has the money to pay you back. So yes, transfer the money. If you use software like Quickbooks, make use of unique accounts for tracking the contribution","\"I agree that you should CONSIDER a shares based dividend income SIPP, however unless you've done self executed trading before, enough to understand and be comfortable with it and know what you're getting into, I would strongly suggest that as you are now near retirement, you have to appreciate that as well as the usual risks associated with markets and their constituent stocks and shares going down as well as up, there is an additional risk that you will achieve sub optimal performance because you are new to the game. I took up self executed trading in 2008 (oh yes, what a great time to learn) and whilst I might have chosen a better time to get into it, and despite being quite successful over all, I have to say it's the hardest thing I've ever done! The biggest reason it'll be hard is emotionally, because this pension pot is all the money you've got to live off until you die right? So, even though you may choose safe quality stocks, when the world economy goes wrong it goes wrong, and your pension pot will still plummet, somewhat at least. Unless you \"\"beat the market\"\", something you should not expect to do if you haven't done it before, taking the rather abysmal FTSE100 as a benchmark (all quality stocks, right? LOL) from last Aprils highs to this months lows, and projecting that performance forwards to the end of March, assuming you get reasonable dividends and draw out £1000 per month, your pot could be worth £164K after one year. Where as with normal / stable / long term market performance (i.e. no horrible devaluation of the market) it could be worth £198K! Going forwards from those 2 hypothetical positions, assuming total market stability for the rest of your life and the same reasonable dividend payouts, this one year of devaluation at the start of your pensions life is enough to reduce the time your pension pot can afford to pay out £1000 per month from 36 years to 24 years. Even if every year after that devaluation is an extra 1% higher return it could still only improve to 30 years. Normally of course, any stocks and shares investment is a long term investment and long term the income should be good, but pensions usually diversify into less and less risky investments as they get close to maturity, holding a certain amount of cash and bonds as well, so in my view a SIPP with stocks and shares should be AT MOST just a part of your strategy, and if you can't watch your pension pot payout term shrink from 26 years to 24 years hold your nerve, then maybe a SIPP with stocks and shares should be a smaller part! When you're dependent on your SIPP for income a market crash could cause you to make bad decisions and lose even more income. All that said now, even with all the new taxes and loss of tax deductible costs, etc, I think your property idea might not be a bad one. It's just diversification at the end of the day, and that's rarely a bad thing. I really DON'T think you should consider it to be a magic bullet though, it's not impossible to get a 10% yield from a property, but usually you won't. I assume you've never done buy to let before, so I would encourage you to set up a spread sheet and model it carefully. If you are realistic then you should find that you have to find really REALLY exceptional properties to get that sort of return, and you won't find them all the time. When you do your spread sheet, make sure you take into account all the one off buying costs, build a ledger effectively, so that you can plot all your costs, income and on going balance, and then see what payouts your model can afford over a reasonable number of years (say 10). Take the sum of those payouts and compare them against the sum you put in to find the whole thing. You must include budget for periodic minor and less frequent larger renovations (your tenants WON'T respect your property like you would, I promise you), land lord insurance (don't omit it unless you maintain capability to access a decent reserve (at least 10-20K say, I mean it, it's happened to me, it cost me 10K once to fix up a place after the damage and negligence of a tenant, and it definitely could have been worse) but I don't really recommend you insuring yourself like this, and taking on the inherent risk), budget for plumber and electrician call out, or for appropriate schemes which include boiler maintenance, etc (basically more insurance). Also consider estate agent fees, which will be either finders fees and/or 10% management fees if you don't manage them yourself. If you manage it yourself, fine, but consider the possibility that at some point someone might have to do that for you... either temporarily or permanently. Budget for a couple of months of vacancy every couple of years is probably prudent. Don't forget you have to pay utilities and council tax when its vacant. For leaseholds don't forget ground rent. You can get a better return on investment by taking out a mortgage (because you make money out of the underlying ROI and the mortgage APR) (this is usually the only way you can approach 10% yield) but don't forget to include the cost of mortgage fees, valuation fees, legal fees, etc, every 2 years (or however long)... and repeat your model to make sure it is viable when interest rates go up a few percent.\"","It would be bad tax-wise, because gains in the investment outside the 401k are taxed; whereas gains in the investment inside the 401k are not taxed.","You may be able to, depending on what state you're in, but it is going to be 10x more complicated than just forming a new LLC. I don't see an advantage to this approach - if you're imagining it will be cheaper, you are imagining wrong.","You're creating more liabilities for yourself in the future, although yes this could definitely be a profitable move for you. However, some small mistakes you made, from what I can see using the tools at Hargreaves Lansdown. The first, is that the government relief would only be 20%, not 60%. The second is that the tax relief goes directly into the SIPP, it's not something you get given back to you in cash. In order for this to be worthwhile, you need to be sure that you can make a post-tax gain of more than 3.4% on this money per year - which should be very feasible. It sounds like you have enough security that you could afford to take this risk.","Transfer from Savings account into NRE is not possible. Transfer into NRO may be possible in certain cases and would require some paperwork. Please consult the Bank where you hold the account to advise you the details.","Technically, no. Only if used for improvement or expansion to the original property.","Transfers of money to the UK for any purpose are not generally taxed, so you can just transfer it here and invest. Once the money is here, you'll be taxed on the business activity like anyone else - the company will have to pay corporation tax, and depending on your own residency you might have to pay income tax on any distributions from the company.","\"To answer your first two questions: according to IRS pub 696 \"\"Contributions to an HSA\"\" section: Rollovers A rollover contribution is not included in your income, is not deductible, and does not reduce your contribution limit. Archer MSAs and other HSAs. You can roll over amounts from Archer MSAs and other HSAs into an HSA. You do not have to be an eligible individual to make a rollover contribution from your existing HSA to a new HSA. Rollover contributions do not need to be in cash. Rollovers are not subject to the annual contribution limits. You must roll over the amount within 60 days after the date of receipt. You can make only one rollover contribution to an HSA during a 1-year period. Note. If you instruct the trustee of your HSA to transfer funds directly to the trustee of another HSA, the transfer is not considered a rollover. There is no limit on the number of these transfers. Do not include the amount transferred in income, deduct it as a contribution, or include it as a distribution on Form 8889, line 14a. (italics mine) So if you transfer the money yourself, you can only do it once per year, but there are no limits to when or how many times you can instruct the old HSA trustee to transfer funds directly to the new trustee.\"","For this rollover, there are no restrictions of age/income/etc. You need to know - the transfer must be direct, i.e. if you get a physical check, it should be payable not to you, but to the new custodian (broker) for your benefit. Direct is preferable and faster. The assets may not be transferable 'in kind.' This phrase simply means that you may move the value, but if the assets are not shares that are held by the public, but special 401(k) class shares, they must be liquidated before moving, and moved as cash. This is a risk people with large accounts take should the market move dramatically during the time they are liquidated, and why, for them, I suggest doing it piecemeal.","You need to check with your employer. It is called an in-service rollover and it is up to your employer on whether or not it is allowed. There are a lot of articles on it but I would still talk to a professional before making the decision. And there are some new laws in place that put at least some responsibility on your employer to provide a 401k with reasonable options and fees. http://www.latimes.com/business/la-fi-court-edison-401k-fees-20150519-story.html We'll see if it has legs.","You're not crazy, but the banks are. Here's the problem: You're taking 100% LTV on property A - you won't be able to get a second mortgage for more than 80% total (including the current mortgage) LTV. That's actually something I just recently learned from my own experience. If the market is bad, the banks might even lower the LTV limit further. So essentially, at least 20% of your equity in A will remain on the paper. Banks don't like seeing the down-payment coming from anywhere other than your savings. Putting the downpayment from loan proceeds, even if not secured by the property which you're refinancing, will probably scare banks off. How to solve this? Suggest to deal with it as a business, putting both properties under a company/LLC, if possible. It might be hard to change the titles while you have loans on your properties, but even without it - deal with it as if it is a business. Approach your bank for a business loan - either secured by A or unsecured, and another investment loan for B. Describe your strategy to the banker (preferably a small community bank in the area where the properties are), and how you're going to fund the properties. You won't get rates as low as you have on A (3.25% on investment loan? Not a chance, that one is a keeper), but you might be able to get rid of the balloon/variable APR problem.","Transfers can be made from U.S. pension plans to Canadian RRSPs, if the following conditions are met: Way more details here: http://www.howlandtax.com/answers/05Sept21.htm And googling 'transfer 401k to rrsp' yields much fruit.","There is no way you can directly defer that capital gains tax. If you sell a property that is not your principal residence, it will be taxed in the year in which it was sold. It doesn't matter what you do with the proceeds - that tax will get paid. Now, if you had adequate RRSP contribution room you could certainly put some money there, and would get a deduction on your tax return that would offset this capital gains tax. For example, if you sold a property for $300K that was originally purchased for $200K, then you would incur capital gains tax of $50K (assuming you were not claiming CCA deductions). If you took $50K of your proceeds and put it in an RRSP, it would offset the tax you pay now, and essentially defer the tax on that $50K of income until you withdraw - hopefully at a lower marginal tax rate. A spousal RRSP would work the same, except it would be taxed at your spouse's marginal tax rate when withdrawn. Either way, you need to have sufficient contribution room in the RRSP for this to work. Check your Notice of Assessment to see how much room you have available.","A self-directed IRA could be a good solution for you and all IRAs are qualified IRAs the administrator must allow for alternative assets. However, if you're looking to do the ROBS (Roll Over Business Start-up) system, there are not very many administrators that can facilitate that. There is also a checkbook IRA (aka single member LLC) that more administrators are able to work with, but the rules are different from a ROBS plan. Check with your financial adviser, CPA, tax guru and ask which method would work best for what you're looking to accomplish.","If you have a rental property, take the income from that property and then invest it in a dividend fund, or sell the property and invest those proceeds. Borrowing against a house or other property is just not a great idea. Rule 1: Don't borrow against a house. Rule 2: For any substantial advice, go to a financial advisor, not reddit. Rule 3: Don't borrow against a house.","You have three options. If you follow the procedures outlined by the IRA trustee there should not be any problems. There will not be any taxes involved, unless as part of the process you change non-Roth funds to Roth funds, or you don't follow the procedures. In my experience the IRA companies know how to handle the transfer. In some cases the check must be sent to you, and then you send it to the IRA company, but they will tell you exactly how the check is to be made out to. I would start by talking to the IRA trustee they are likely to have seen it all, and can guide you through the process.","I have a CPA. They said that it isn't possible. However, I've seen on message boards that it indeed IS possible, multiple times. I'll likely reach out to another CPA. However, I am interested to hear from somebody who has done this before, so that I at least have a name or defined process for what I'm attempting to do.","Nice idea. When I started my IRAs, I considered this as well, and the answer from the broker was that this was not permitted. And, aside from transfers from other IRAs or retirement accounts, you can't 'deposit' shares to the IRA, only cash.","Best consult a CA as you may anyway need his/her service. I am NRI, availed secured loan (Against house property) in India and now I want to get that money transferred to Finland. Loans by NRI taken in India cannot be transferred outside of India. Refer FOREIGN EXCHANGE MANAGEMENT (BORROWING AND LENDING IN RUPEES) REGULATIONS Loans in Rupees to non-residents 1[***]. 7. Subject to the directions issued by the Reserve Bank from time to time in this regard, an authorised dealer in India may grant loan to a non-resident Indian, (B) against the security of immovable property (other than agricultural or plantation property or farm house), held by him in accordance with the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000 : ...... Provided that- (d) the loan amount shall not be remitted outside India; Alternative: Sell the property in India, transfer the proceeds to NRO account. Repatriate the funds outside India as per Liberalized Remittance Scheme. Form 15CA/CB with CA certificate will be required.","Your brokerage might be cautious about allowing you to loan your IRA money in a Peer-to-Peer lending deal because it might result in a prohibited transaction (e.g. the other Peer is your son-in-law; for the purposes of IRAs, the spouse of a lineal descendant is treated the same as you, and the transaction will be treated as if you have borrowed money from your IRA). If you want to put the money into a lending club, then there might be issues of how the club is structured, e.g. who makes the decisions as to whom the money is loaned to. Such issues don't arise if you are putting the money into a money-market mutual fund, for example, but with new-fangled institutions such as lending clubs, your brokerage might just being cautious. If you want to open an IRA account directly with a lending club, check if the club offers IRA accounts at all. For this, they will likely need to have a custodian company that will handle all the IRA paperwork. For example, the custodian of IRA accounts in Vanguard mutual funds is not the fund or even Vanguard itself but a separate company named Vanguard Fiduciary Trust Company. I am sure other large firms have similar set-ups. Whether your pet Peer-to-Peer lending club has something similar set up already is something you should look into. This part of the answer applies to an earlier version of the question in which the OP said that he wanted to invest in precious metals. Be careful in what you invest in when you say you want to invest in precious metals; in refusing to buy precious metals for you in your IRA, your brokerage (as your fiduciary) might be refusing to engage in a prohibited transaction on your behalf. Investments in what are called collectibles are deemed to have been distributed to you by the IRA, and if this is an early distribution, then penalties also apply in addition to the income tax. Publication 590 says Collectibles. These include: Exception. Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U.S. gold coins, or one-ounce silver coins minted by the Treasury Department. It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion. So, make sure that your new IRA custodian does allow you to buy (say) titanium or Krugerrands in your IRA if that is your pleasure.","Probably. It sounds like you're looking for a 1031-exchange for stocks and bonds. From the wikipedia page for 1031-exchanges: To qualify for Section 1031 of the Internal Revenue Code, the properties exchanged must be held for productive use in a trade or business or for investment. Stocks, bonds, and other properties are listed as expressly excluded by Section 1031 of the Internal Revenue Code, though securitized properties are not excluded. 1031-exchanges usually are applicable in real estate.","Sorry, you cannot transfer EPF into PPF. The investments in PPF are limited to 150,000 per year. Withdrawal is in 7th year, i.e. After completion of 6 financial years. 50% of the Balance of 4th year can be withdrawn. 2.Withdraw the money and find a new form of investment. This is definitely possible. A lump sum investment into NPS [New Pension Scheme] or various Retirement schemes, or equity / real estate etc Is there any other 3rd solution for this situation? Keep the money AS-IS as the money will still continue to grow. The interest is stop getting accrued after 3 years of NO contribution. Within 36 months if an account will not get any deposit then it will be considered as dormant/inactive account. So you can wait for sometime before you decide to withdraw.","would buying the stock of a REIT qualify as a 'Like-Kind' exchange? Short answer, no. Long answer, a 1031 (Starker) exchange only applies to real estate. From the Wikipedia page on the topic: To qualify for Section 1031 of the Internal Revenue Code, the properties exchanged must be held for productive use in a trade or business, or for investment. Stocks, bonds, and other properties are listed as expressly excluded by Section 1031 of the Internal Revenue Code, although securitized properties are not excluded. A REIT, being stock in a real estate company, is excluded from Section 1031.","You can take the old 401k and convert it to an IRA just about anywhere. No accountant required. Borrowing against the IRA/401k is a very stopgap measure, be sure you know what you are getting into. A distribution from it is a 10% penalty before age 59.5.","If you're under age 55 and in good health generally you cannot withdraw your funds from super and your super fund cannot provide you with any financial assistance eg lend you money. However, for a very small percentage of people with unrestricted non preserved superannuation components ( check your statement most people's superannuation is 'preserved'which means they cannot access it until they meet a 'condition of release')they may withdraw their super benefits upto the unrestricted non preserved amount. For healthy (& able) persons aged 55 and over they may access their super under the following conditions: I can understand your frustration of having your money compulsory tied up in superannuation especially given the poor investment returns of the past 5 years. However, superannuation may be more flexible than you realize, I am an adviser at Grant Thornton and I am constantly telling clients that superannuation is not an invest but it the most tax effective long term savings vehicle available to Australians for their investment savings eg max 15% tax on income and capital gains if held for a year are taxed at 10%. If you're not happy with your investment returns you may like to seek some advice or,set up your own super fund - a self managed super fund where you can invest a wide variety of assets; shares, managed funds,cash, term deposits, property( your super fund can even borrow to help acquire the property) I hope this helps","\"You're confusing between \"\"individual\"\" 401k (they're called \"\"Solo-401k\"\" and are intended for self-employed), and Individual Retirement Account (IRA). You can't open a solo-401k without being self employed. You can open an IRA and roll over money from your old 401k to it. You cannot get a loan from IRA. You can ask the 401k plan manager to reissue the checks to the new trust, shouldn't be a problem. Make sure the checks are issued to the trust, not to you, to avoid withholding and tax complications. This is what is called a \"\"direct\"\" rollover. You might be able to roll the money over to the 401k of your new employer, it is not always allowed and you should check. You can probably then take a loan from that 401k. However, it diminishes the value of your retirement savings and you should only do it if you have no other choice (being evicted from your home, your children are starving, can't pay for your chemo, etc... this kind of disasters). Otherwise, I'd suggest rolling over to IRA, investing in funds with significantly lower fees (Vanguard target retirements funds for example, or index funds/ETF's), and reassessing your spending and budgeting habits so that you won't need loans from your 401k. Re companies - ETrade is nice, consider also Scottrade, TDAmeriTrade, Vanguard, Fidelity, Sharebuilder, and may be others. These are all discount brokers with relatively low fees, but each has its own set of \"\"no-fee\"\" funds.\"","If you're current employer who is running the 401k says no you can't. You may be able to get a loan against those assets, that's more common. However, this post will be down voted to oblivion because you want r/personalfinance . This isn't the sub for this question.","I don't know anything about Australian tax law, the Australian real estate market, or your parents' ability to repay the loan. However, no matter what the answers to those questions are, I do not recommend that you go through with this. The reason is the risk. Usually, with an investment, you are risking the money that you invest. However, with this investment, you are not only risking the money; you are also risking both you and your fiancé's relationship with your parents. If your parents have trouble paying back this money in a few years when you need it for your house, how will that affect how you feel about your parents? How will that affect how your fiancé feels about them? It will make family gatherings very awkward for everyone at least. Don't put family harmony at risk for the sake of an extra 2.8% return. There are other ways to invest that risk only money.","Have you considered a self-directed IRA to invest, rather than the stock market or publicly traded assets? Your IRA can actually own direct title to real estate, loan money via secured or unsecured promissory notes much like a hard money loan or invest into shares of an entity that invests in real estate. The only nuance is that the IRA holder is responsible for finding and deciding upon the investment vehicle. Just an option outside of the normal parameters, if you have an existing IRA or old 401(k) or other qualified plan, this might be an option for you.","Also you would need to consider any taxation issues. As he will be paying you rent you will need to include this as income, plus any capital gains tax on the re-sale of the property may need to be paid.","\"I don't look to Super or Pension, I am working on self funding. My method is work in Sydney and buy a house in Sydney (I bought 6 years ago). Let my property rise on this stupidly insane Sydney growth (my place has risen by 76% in the last 6 years and thats in a \"\"bad\"\" economic climate). Each time the equity hits a certain point get an investment property on an interest only home loan and rent it out. Build this portfolio up as much and as quickly as you can. Repeat over and over until I decide to retire. Sell up investment properties and buy NOT IN SYDNEY where it is much cheaper and move there, keep the main house I always lived in as by this time I will own it outright, rent it out for an income that will more than sustain me in my retirement. Although there is also merit in the idea of sell the one you lived in and use the money to pay of one of the investments, this way you avoid capital gains tax. This idea came to me last night :)\"","I doubt that there is an arrangement with any country that would allow you to transfer money out of a 401(k) and roll it over to another country that isn't governed by US Tax Laws without taking a distribution. The US government won't let you pull out like that without taking its cut. There may be, but I'd be surprised. Check around in the appropriate venues. If you're making a distribution that incurs penalties, then that's what you're doing. If you can do so without incurring penalties, then great for you, just deposit into the vehicle of your choice in your country.","\"No. A deposit to an IRA must be in cash. A conversion from traditional IRA to Roth can be \"\"in kind\"\" i.e. As a stock transfer. Last, any withdrawals can also be in stock or funds. IRS Publication 590, so important, it's now in 2 sections Part A and Part B, addresses IRA issues such as this as well as most others. By the way - now on page 7 - \"\"Contributions, except for rollover contributions, must be in cash.\"\"\"","Will I have to pay Income Tax/Capital Gain Tax in India for the full amount or 50% of the amount. Assuming you were the owner of the plot, you have to pay capital gains tax on the full amount. Current at 10% without indexation and 20% with indexation. Rest of amount will be used to purchase property in India. If you are re-investing the money into capital assets, you are not liable to pay Capital Gains for the amount invested. This is applicable only for first 2 houses. Consult a CA. What is the procedure to transferring the money to him. What declaration in have to give to the Bank (any Forms to fill) Under the liberalized remittance scheme you can transfer upto USD 1 Million per year. A CA certificate is required declaring the purpose and giving certificate that taxes are paid. Please contact your Bank or CA to guide further.","No, it is not a taxable event. You will not have to pay tax on the $500 in this scenario. See the IRS publication 590-A: To recharacterize a contribution, you generally must have the contribution transferred from the first IRA (the one to which it was made) to the second IRA in a trustee-to-trustee transfer. If the transfer is made by the due date (including extensions) for your tax return for the tax year during which the contribution was made, you can elect to treat the contribution as having been originally made to the second IRA instead of to the first IRA. If you recharacterize your contribution, you must do all three of the following. Include in the transfer any net income allocable to the contribution. If there was a loss, the net income you must transfer may be a negative amount. Report the recharacterization on your tax return for the year during which the contribution was made. Treat the contribution as having been made to the second IRA on the date that it was actually made to the first IRA.","Each S-corp is bound by its own plan documents, which typically do not limit or dictate where the investments are held. Your brokerage account has no tie to the company from which the funds come, however, you are still subject to maximum SIMPLE contribution rules and cannot exceed the $12,500 (if under age 50) COMBINED contribution for any and all companies. Be careful about co-mingling from both companies as there are penalties for early withdrawals made within 2-years of participating in the plan. If you started them both at the same time it's not an issue.","To start, I hope you are aware that the properties' basis gets stepped up to market value on inheritance. The new basis is the start for the depreciation that must be applied each year after being placed in service as rental units. This is not optional. Upon selling the units, depreciation is recaptured whether it's taken each year or not. There is no rule of thumb for such matters. Some owners would simply collect the rent, keep a reserve for expenses or empty units, and pocket the difference. Others would refinance to take cash out and leverage to buy more property. The banker is not your friend, by the way. He is a salesman looking to get his cut. The market has had a good recent run, doubling from its lows. Right now, I'm not rushing to prepay my 3.5% mortgage sooner than it's due, nor am I looking to pull out $500K to throw into the market. Your proposal may very well work if the market sees a return higher than the mortgage rate. On the flip side I'm compelled to ask - if the market drops 40% right after you buy in, will you lose sleep? And a fellow poster (@littleadv) is whispering to me - ask a pro if the tax on a rental mortgage is still deductible when used for other purposes, e.g. a stock purchase unrelated to the properties. Last, there are those who suggest that if you want to keep investing in real estate, leverage is fine as long as the numbers work. From the scenario you described, you plan to leverage into an already pretty high (in terms of PE10) and simply magnifying your risk.","\"Just addressing the sending side: you should be able to make the transfer out of the UK tax-free, if you transfer to a \"\"Recognised Overseas Pension Scheme\"\" (ROPS). These were formerly called QROPS (\"\"Qualifying...\"\") and a lot of online resources will talk about those. The basic idea is that as long as the overseas pension scheme guarantees to follow broadly similar rules to the UK system - e.g. not allowing you to withdraw your money before retirement age - then you can transfer to it. There's a list of these schemes on the HMRC website, but in theory you still have to check for yourself that they actually follow the relevant rules. I'm not sure how to do that in practice. There are only two USA providers listed, which suggests that transferring there isn't actually very common. The Wikipedia page suggests that in practice most people transfer to a scheme in a low-tax place like Gibraltar, rather than where they actually move to. I suspect that any move will be quite expensive in fees, and from your own answer it seems the USA won't recognise it as a transfer in anyway.\"","and I need to upgrade my current home to a larger, longer-term property Would selling your current home give you (at least) a 20% DP on the new home? Take additional cash out of the refinance of the first home to accelerate saving Dittoing D Stanley, that makes no sense. Purchase and move to a second property of greater cost and value to first You'll need to find the new house at the same time you're selling the existing home, and write the new-home purchase contract in such a way that you can back out in case the purchaser of your home backs out.","They may be able to transfer the land to a charitable remainder trust, which then enters into the transaction and pays them an income stream over their lifetime -- but definitely hire a professional before you attempt to do this.","The purpose of the transfer determines the taxability. If this is happening to frequent, it is advisable to keep proper records of the transaction so that if there is an enquiry from Tax authorities you can explain. Unless you explain the why the transfer is being made, I have put out some broad categories.","I would not recommend borrowing your 401(k) money to buy a house for two reasons: When you borrow money from your 401(k), it is no longer invested. Yes, you pay yourself interest, but you miss out on the investment gains for the life of the loan. If you leave your job, the loan is due in full shortly thereafter. If you do not pay it back, you are hit with taxes and penalties. If I were you, I would roll it over into an IRA for the reasons you mentioned.","Sit down with professional with knowledge about eldercare issues. Know how your options regarding the property ownership can impact the services they qualify for. Even making a change in ownership can impact their eligibility for certain programs. Some of which can reach back to events in the recent past. Also if you own it but she will get some of the profits when you sell, she could still be considered an owner, which can impact eligibility for programs. This is in addition to the issues with the lender, the IRS, and your estate.","If so how to do it. Ask CIBC to open the new RRSP account, and ask CIBC to contact GWL to tell GWL to move your money from the GWL account into the CIBC account.","You can do a direct transfer from one fund to another within Fidelity very easily. You will have to see if the two funds have any sales or redemption fees. If you want to leave Fidelity, they should be able to transfer the funds directly to the other IRA custodian. You don't want the money to go to you, instead you want to send them send the money directly to the other firm. The new custodian will be more than happy to help facilitate the transfer. The only fee for doing so should be if the funds you are investing in have fees for buying or selling shares. There are many options that don't have these transaction costs, both with Fidelity and with other companies.","Consider looking into real estate investment trusts (REITs). Assuming that they are available for the area that you are considering they simplify the process of investing in this sector. Your money pooled with other investors and then invested in a broad range of properties. If you go this route make sure to only by REITs that are traded in the open market (liquidity and an honest current valuation). Even better I would consider a index fund of REITs for more diversification. Personally I do use a US based REIT index as a small part of my portfolio so as to get better diversification.","Yes, that's exactly what you can/should do. The only question is whether the 401(k) has good investment choices and low fees, if so, go for it.","There are tax strategies you could take advantage of if you own the property. Find local real estate investors that like 'buy and hold'. Additional strategy is to buy a property and sell it with owner financing (you use a Residential Mortgage Loan Officer to facilitate.) What is great is you can get a great % real return on your money without being a landlord.","The main advantage and disadvantage I can see in a scenario like this are - how savvy and good an investor are you? It's a good way to create below-market average returns if you're not that good at investing and returns way above market average if you are...","If it is your primary residence and you lived there continuously and for more than 2 years out of the last 5 - then you can exclude the gain under the IRC Sec. 121. In this case, you'll pay no taxes on your gain. If the property has been a rental or you haven't lived there long enough, the rules become more complicated but you may still be able to exclude some portion of the gain, even all of it, depends on the situation. So it doesn't look like 1031 exchange is good for you here, you don't want to carry excluded gain - you want to recognize it and get the tax benefit. However, refinancing after purchase with cash-out money affects the deductability of the loan interest. You can only deduct interest on money used to buy, not cash-out portion. I believe there's a period (60 days IIRC) during which you can do the cash-out refinance and still count it as purchase money, but check with a licensed tax advier (EA/CPA licensed in your State).","I'm pretty sure you can't do what you are asking, for exactly the reason you say - you would get a double tax deduction. The only way to get money out of an RRSP is to withdraw it and take the tax hit, whatever the reason for the withdrawl.","\"And my CPA is saying no way, it will cost me many thousands in taxes and doesn't make any sense. I'd think so too. It looks like it converts from capitol gains at 14% to something else at about 35% Can be, if your gain under the Sec.1231 rules is classified as depreciation recapture. But, perhaps the buyers will be saving this way? Not your problem even if they were, which they aren't. I would not do something my CPA says \"\"no-way\"\" about. I sometimes prefer not doing some things my CPA says \"\"it may fly\"\" because I'm defensive when it comes to taxes, but if your CPA is not willing to sign something off - don't do it. Ever.\"","So your accountant certainly knows much more than I do about Israeli tax law and its interactions with US tax law, which is zero. I'm going to look at this problem from the investment perspective which I hope to convince you is the most important place to start. Then you can adjust for interactions between the Isreali and US tax codes. Even if the tax breaks are exceptional, it would be hard to recommend buying real estate as an investment in the 7-10 year time frame. Especially if this real estate is in the US. Open/Closing fees, mortgage fees, risk of property devaluation, bad-renters, acts of god, insurance costs and tax complications make short to medium term investments in real estate a particularly risky way to invest. Buying a local apartment and renting is somewhat more reasonable as you don't have to worry about the currency conversion and you can do a lot more research in your local environment and keep a closer eye on the property, it is still this a pretty concentrated risk. Saving and investing using tax-advantaged accounts is generally considered a great way to build toward a down payment in the medium term. A mixture of mostly local bonds with some local and foreign stocks and more and more cash as it gets close to purchase time is generally what is recommended when saving for a home. This mixture is relatively safe and will tend to grow steadily without the concentrated risk of a real estate investment. PFIC rules are complicated and certainly worth taking some time to understand, but owning real estate especially in a foreign country seems much more complicated and certainly riskier. There may be some rule that makes investing in REITs much better than normal stocks in these particular accounts though I would be surprised if that were the case. It is generally not true for people under just he US tax code. So while option (1) may not be the absolute best from a tax perspective it would certainly be my guess as the most likely to succeed.","TL; DR version: What you propose to do might not save you taxes, and may well be illegal. Since you mention your wife, I assume that the Inherited IRA has been inherited from someone other than your spouse; your mother, maybe, who passed away in Fall 2015 as mentioned in your other question (cf. the comment by Ben Miller above)? If so, you must take (at least) the Required Minimum Distribution (RMD) from the Inherited IRA each year and pay taxes on the distribution. What the RMD is depends on how old the Owner of the IRA was when the Owner passed away, but in most cases, it works out to be the RMD for you, the Beneficiary, considered to be a Single Person (see Publication 590b, available on the IRS web site for details). So, Have you taken the (at least) the RMD amount for 2016 from this Inherited IRA? If not, you will owe a 50% penalty of the difference between the amount withdrawn and the RMD amount. No, it is not a typo; the penalty (it is called an excise tax) is indeed 50%. Assuming that the total amount that you have taken as a Distribution from the Inherited IRA during 2016 is the RMD for 2016 plus possibly some extra amount $X, then that amount is included in your taxable income for that year. You cannot rollover any part of the total amount distributed into your own IRA and thereby avoid taxation on the money. Note that it does not matter whether you will be rolling over the money into an existing IRA in your name or will be establishing a new rollover IRA account in your name with the money: the prohibition applies to both ways of handling the matter. If you wish, you can roll over up to $X (the amount over and above the RMD) into a new Inherited IRA account titled exactly the same as the existing Inherited IRA account with a different custodian. If you choose to do so, then the amount that you roll over into the new Inherited IRA account will not included in your taxable income for 2016. To my mind, there is no point to doing such a rollover unless you are unhappy with the current custodian of your Inherited IRA, but the option is included for completeness. Note that the RMD amount cannot be rolled over in this fashion; only the excess over the RMD. If you don't really need to spend the money distributed from your Inherited IRA for your household expenses (your opening statement that your income for 2016 is low might make this unlikely), and (i) you and/or your spouse received compensation (earned income such as wages, salary, self-employment income, commissions for sales, nontaxable combat pay for US Military Personnel, etc) in 2016, and (ii) you were not 70.5 years of age by December 2016, then you and your wife can make contributions to existing IRAs in your names or establish new IRAs in your names. The amount that can be contributed for each IRA is limited to the smaller of $5500 ($6500 for people over 50) and that person's compensation for 2016, but if a joint tax return is filed for 2016, then both can make contributions to their IRAs as long as the sum of the amounts contributed to the IRAs does not exceed the total compensation reported on the joint return. The deadline for making such IRA contributions is the due date for your 2016 Federal income tax return. Since your income for 2016 is less than $98K, you can deduct the entire IRA contribution even if you or your wife are covered by an employer plan such as a 401(k) plan. Thus, your taxable income will be reduced by the IRA contributions (up to a maximum of $11K (or $12 K or $13K depending on ages)) and this can offset the increase in taxable income due to the distribution from the Inherited IRA. Since money is fungible, isn't this last bullet point achieving the same result as rolling over the entire $9.6K (including the RMD) into an IRA in your name, the very thing that the first bullet point above says cannot be done? The answer is that it really isn't the same result and differs from what you wanted to do in several different ways. First, the $9.6K is being put into IRAs for two different people (you and your wife) and not just you alone. Should there, God forbid, be an end to the marriage, that part of your inheritance is gone. Second, you might not even be entitled to make contributions to IRAs (no compensation, or over 70.5 years old in 2016) which would make the whole thing moot. Third, the amount that can be contributed to an IRA is limited to $5500/$6500 for each person. While this does not affect the present case, if the distribution had been $15K instead of $9.6K, not all of that money could be contributed to IRAs for you and your wife. Finally, the contribution to a Traditional IRA might be non-deductible for income tax purposes because the Adjusted Gross Income is too high; once again, not an issue for you for 2016 but something to keep in mind for future years. In contrast, rollovers from one IRA into another IRA (both titled the same) can be in any amount, and they can be done at any time regardless of whether there is compensation for that year or not or what the Adjusted Gross Income is or whether there is coverage by a 401(k) plan. There are no tax consequences to rollovers unless the rollover is from a Traditional IRA to a Roth IRA in which case, the distribution is included in taxable income for that year. What is prohibited is taking the entire amount of the $9.6K distribution from an Inherited IRA and rolling it over into your existing IRA (or establishing a Rollover IRA in your name with that $9.6K); ditto for some money going into your IRA and some into your wife's IRA. I expect that any IRA custodian will likely refuse to allow you to carry out such a rollover transaction but will be glad to accept 2016 contributions (in amounts of up to $5500/$6500) from you into existing IRAs or open a new IRA for you. The custodian will not ask whether you have compensation for 2016 or not (but will check your age!); it is your responsibility to ensure that you do not contribute more than the compensation etc. Incidentally, subject to the $5500/6500 maximum limit, you can (if you choose to do so) contribute the entire amount of your compensation to an IRA, not just the take-home pay amount (which will be smaller than your compensation because of withholding for Social Security and Medicare tax, State and Federal income tax, etc).","To make matters worse, if you pay the property tax your mother in law can't take the deduction either. You may be better off paying rent and having her handle the property correctly, as a rental.","Is this RRSP through your company? If not, then you should be able to transfer the assets from GWL to CIBC using an RRSP transfer authorization form initiated through CIBC. Once your SD RSP account is set up at CIBC, use their transfer form. There is also a universal form T2033 if CIBC doesn't have one themselves. Beware of transfer out fees at GWL.","No that is not a rollover. Many employees have experienced a change of management companies. Sometimes these switches are due to a merger, an acquisition, or just to save money. It is understandable that the old employer would like to see you transfer your funds to either your new employer, or roll them over into a IRA/Roth IRA. So it is not unexpected that they will take this opportunity to nudge you. The thing that congress was trying to prevent were serial rollovers of IRAs. These people would use the 60 day window to have in essence a loan. Some would do this multiple times a year; always making sure they replaced the money in time. The IRA One-Rollover-Per-Year Rule Beginning in 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own (Announcement 2014-15 and Announcement 2014-32). The limit will apply by aggregating all of an individual’s IRAs, including SEP and SIMPLE IRAs as well as traditional and Roth IRAs, effectively treating them as one IRA for purposes of the limit. Direct transfers of IRA money are not limited This change won’t affect your ability to transfer funds from one IRA trustee directly to another, because this type of transfer isn’t a rollover (Revenue Ruling 78-406, 1978-2 C.B. 157). The one-rollover-per-year rule of Internal Revenue Code Section 408(d)(3)(B) applies only to rollovers. Note that the law doesn't mention 401K/403B or the federal TSP. When the 401K changes management companies that is not a rollover.","\"Yes, you're correct and yes they will. Note that it will be considered as \"\"sale\"\" with gains being taxable income to you.\"","Simply transferring money you own from overseas to Canada will not mean you need to pay tax on it. However if you sell property at a profit - I.e. sell it for more than you paid for it - you may have to pay tax on any gains. This is true whether or not you transfer the money to Canada. Calculating the amount is quite complicated. You might consider getting a tax expert.","Yes, your realtor is a moron. (I am a realtor, and sorry you have such a bad one) Every industry has its good and bad. You really should find a new realtor, a good one. You know the 1031 exchange is for rental property only. And that saving $2000 isn't worth staying in the house to complete the two years required occupancy."],"string":"[\n \"Regarding transferring a residential investment property into your SMSF, no you cannot do it. You cannot transfer residential property into your SMSF from a related party. You can only transfer Business Real Property (that is commercial or industrial property) into a SMSF from a related party. You can buy new residential property inside your SMSF, and you can also borrow within the fund (using a non-recourse loan) to help you buy it, or you could buy it as tenants-in-common with your SMSF (that is you own say 50% in your own name and 50% under the SMSF). Regarding self-managing the investment properties held in your SMSF, yes you can, but you should make sure all your paperwork is in order (all your t's crossed and your i's dotted). You can even charge your SMSF for managing the properties, but this should be at market rates (not more).\",\n \"You can set up a Self Managed Super Fund (SMSF) and use it to buy residential investment property, and as Justin has mentioned even borrow to acquire the investment property through the SMSF. However, you cannot hold your home in the SMSF, as this would be classed as an in-house asset, and you are only allowed to hold a maximum of 5% of the total market value of SMSF as in-house assets. Furthermore, as you already own your house, you are not allowed to transfer residential property into a SMSF from a related party, even if done at current market value (you are allowed to transfer business real property from a related party at current market value). Regarding loans, you are not allowed to lend money from your SMSF to a related party as well.\",\n \"SMSFs are generally prohibited from acquiring assets from related parties (whether it is purchased by the SMSF or contributed into the fund). There are some exceptions to the above rule for acquiring related party assets, including: • Listed securities (ie shares, units or bonds listed on an approved stock exchange, such as the ASX) acquired at market value. • Business real property (ie freehold or leasehold interests in real property used exclusively in one or more businesses) acquired at market value. • An in-house asset where the acquisition would not result in the level of the fund’s in-house assets exceeding 5%. • Units in a widely held unit trust, such as a retail ,managed fund. In-house asset rules An ‘in-house asset’ is generally defined as: • An investment by an SMSF in a related company or trust (ie a fund owns shares in a related company or units in a related trust). • An asset of an SMSF that is leased to a related party. • A loan made by an SMSF to a related company or trust. An investment, lease or loan that is an in-house asset is not prohibited, but is limited to 5% of the market value of the fund’s assets. The Answer: If your pre-owned Western Australian Rock Lobster fishery quota units are not included in the exceptions then you cannot transfer them into your SMSF.\",\n \"Yes you can't simply withdraw your super until you are aged 60 (and that may go up slightly on Budget night 13/05/14). But you can roll it over into a SMSF where you decide where you invest your super funds. However, I would advise against you starting a SMSF at this early age with a very small super fund account. The Admin. and audit fees would eat your super account up in one year. It is recommended that you have at least $300,000 to $400,000 in super fund assets before starting a SMSF to make the fees competitive and efficient. Now if you are with a partner and start a SMSF together, then it is your combined funds that need to be over the $300K mark (a SMSF can have between 1 to 4 members). The cheapest fund I could find was First State Super. The fees are $52 + 0.64% per year (for the High Growth option). So for a balance of $1000 you would pay $58.40 or 5.84% per year. The High Growth Investment Option has returned 18.4% over the last year, 12.7% pa over the last 5 years, and 8.2% pa over the last 10 years (which includes the period covering the GFC). So even with a small balance of $1000 your super investment will still continue to grow. If you could slowly grow your super account to $2000 your fees would be $64.80 or 3.24%, and at $3000 balance your fees would be $71.20 or 2.37%. The great thing about super is the tax advantages. You may be complaining now about fees on a small balance, and yes you should try to minimise these fees, not only when you have a small balance but also when your balance is larger, but the tax advantages available through superannuation will really come into play when you are on a high income paying the tax at or near the highest marginal tax rate. Compare the top marginal tax rate (plus Medicare Levy) at 46.5% compared to the tax rate of 15% on super contributions and investment returns. And it gets better, when you retire and take a pension or lump sum from your super after age 60 you pay zero tax on the income stream or lump sum. and you also pay zero tax on any ongoing investment returns in your super. The benefits of superannuation are numerous, and the best way to reduce your fees for now is to find a fund with lowest fees, try to increase your balance so your percentage fees go down, and try to consolidate all your super funds into the one with the lowest fees, if you have more than one super fund.\",\n \"No. Disclaimer - As a US educated fellow, I needed to search a bit. I found an article 7 Common SMSF Pension Errors. It implied that there are minimum payments required each year as with our US retirement accounts. These minimums are unrelated to the assets within the account, just based on the total value. The way I read that, there would be a point where you'd have to sell a property or partial interest to be sure you have the cash to distribute each year. I also learned that unlike US rules, which permit a distribution of stock as part of a required minimum distribution, in Australia, the distribution must be in cash (or a deposited check, of course.)\",\n \"You can't do what you would like to do, unless your business has another, unrelated investor or is willing to invest an equal amount of funds + .01 into a corporation which will employ you. You will then need to set up a self-directed IRA. Additionally, you will need a trustee to account for all the disbursements from your IRA.\",\n \"\\\"No, you cannot. ISO are given to you in your capacity as an employee (that's why it is \\\"\\\"qualified\\\"\\\"), while your IRA is not an employee. You cannot transfer property to the IRA, so you cannot transfer them to the IRA once you paid for them as well. This is different from non-qualified stock options (discussed in this question), which I believe technically can be granted to IRA. But as Joe suggests in his answer there - there may be self-dealing issues and you better talk to a licensed tax adviser (EA/CPA licensed in your State) if this is something you're considering to do.\\\"\",\n \"One can have a self-directed IRA. This is not like a Schwab, eTrade, etc IRA. It has a special type of custodian that knows how to manage it. I became aware of such an account as a way to purchase a rental property. There were two issues. The type of property I looked at wasn't anything a bank was willing to finance. And the rules regarding self dealing added a potential layer of expense as I technically could not perform the simplest of things for the property. For you, the obstacle looks like self-dealing. Any IRA can only be funded with cash or transfer/conversion from another IRA/401(k). I don't know how you would get the intelligent property into the IRA in the first place. Once you own a patent, or anything else, you can't sell it into the IRA. It's at times like this that member littleadv would suggest this is the time to talk to a pro before you do anything hazardous to your wealth.\",\n \"\\\"You can hold a wide variety of investments in your TFSA account, including stocks such as SLF. But if the stocks are being purchased via a company stock purchase plan, they are typically deposited in a regular margin account with a brokerage firm (a few companies may issue physical stock certificates but that is very rare these days). That account would not be a TFSA but you can perform what's called an \\\"\\\"in-kind\\\"\\\" transfer to move them into a TFSA that you open with either the same brokerage firm, or a different one. There will be a fee for the transfer - check with the brokerage that currently holds the stock to find out how costly that will be. Assuming the stock gained in value while you held it outside the TFSA, this transfer will result in capital gains tax that you'll have to pay when you file your taxes for the year in which the transfer occurs. The tax would be calculated by taking the value at time of transfer, minus the purchase price (or the market value at time of purchase, if your plan allowed you to buy it at a discounted price; the discounted amount will be automatically taxed by your employer). 50% of the capital gain is added to your annual income when calculating taxes owed. Normally when you sell a stock that has lost value, you can actually get a \\\"\\\"capital loss\\\"\\\" deduction that is used to offset gains that you made in other stocks, or redeemed against capital gains tax paid in previous years, or carried forward to apply against gains in future years. However, if the stock decreased in value and you transfer it, you are not eligible to claim a capital loss. I'm not sure why you said \\\"\\\"TFSA for a family member\\\"\\\", as you cannot directly contribute to someone else's TFSA account. You can give them a gift of money or stocks, which they can deposit in their TFSA account, but that involves that extra step of gifting, and the money/stocks become their property to do with as they please. Now that I've (hopefully) answered all your questions, let me offer you some advice, as someone who also participates in an employee stock purchase plan. Holding stock in the company that you work for is a bad idea. The reason is simple: if something terrible happens to the company, their stock will plummet and at the same time they may be forced to lay off many employees. So just at the time when you lose your job and might want to sell your stock, suddenly the value of your stocks has gone way down! So you really should sell your company shares at least once a year, and then use that money to invest in your TFSA account. You also don't want to put all your eggs in one basket - you should be spreading your investment among many companies, or better yet, buy index mutual funds or ETFs which hold all the companies in a certain index. There's lots of good info about index investing available at Canadian Couch Potato. The types of investments recommended there are all possible to purchase inside a TFSA account, to shelter the growth from being taxed. EDIT: Here is an article from MoneySense that talks about transferring stocks into a TFSA. It also mentions the importance of having a diversified portfolio!\\\"\",\n \"Of course you can transfer it, and it will be legal. There's no taxes on transferring your own money. There's income tax on gains you realized by selling the property, but that is money you already owe, it doesn't matter where the proceeds are. It also doesn't matter how you acquired the property (except for figuring out your basis). What matters is that you had gains, and these gains are taxable in the US. You need to figure out the value of the property when your father bought it, and that is your basis. The difference between what you sold it for and that basis is your taxable gain, and you already owe taxes on that gain.\",\n \"No, IRA contributions can only be made in the form of cash (rollovers and conversions are different). You'd have to sell the investments in your taxable account, incurring capital gains or losses, then transfer the proceeds to your IRA in cash. Note that the amount you can transfer is subject to the limits on how much one can contribute to the IRA each year. You could look into Vanguard Target Retirement funds, which have a lower $1,000 minimum investment, or Vanguard ETFs.\",\n \"Read the Forbes article titled IRA Adventures. While it's not the detailed regulations you certainly need, the article gives some great detail and caution. You may be able to do what you wish, but it must be structured to adhere to specific rules to avoid self dealing. Those rules would be known by the custodians who would help you set up the right structure, it's well buried within IRS regs, I'm sure. Last, in general, using IRA funds to invest in the non-traditional assets adds that other layer of risk, that the investment will be deemed non-allowed and/or self-dealing. So, even if you have the best business idea going, be sure you get proper council on this.\",\n \"I don't quite understand your thought process here. First, in a tax-advantaged retirement account you are NOT allowed to engage in a transaction with yourself. If you just want to run a business and be able to write off expenses, how is using the self-directed IRA relevant? You can either buy the condo using your tax-advantaged account and rent it out to regular tenants. Or you buy the condo yourself using your own money and then operate your business so you can deduct business expenses from doing so. 401k's allow you to take a loan out of it, so you can look into that as well.\",\n \"\\\"especially considering it has a mortgage on it (technically a home equity loan on my primary residence). I'm not following. Does it have a mortgage on it, or your primary residence (a different property) was used as a security for the loan? If it is HELOC from a different property - then it is really your business what to do with it. You can spend it all on casinos in Vegas for all that the bank cares. Is this a complicated transaction? Any gotchas I should be aware of before embarking on it? Obviously you should talk to an attorney and a tax adviser. But here's my two cents: Don't fall for the \\\"\\\"incorporate in Nevada/Delaware/Wyoming/Some other lie\\\"\\\" trap. You must register in the State where you live, and in the State where the property is. Incorporating in any other State will just add complexity and costs, and will not save you anything whatsoever. 2.1 State Taxes - some States tax LLCs. For example, in California you'll pay at least $800 a year just for the right of doing business. If you live in California or the property is in California - you will pay this if you decide to set up an LLC. 2.2 Income taxes - make sure to not elect to tax your LLC as a corporation. The default for LLC is \\\"\\\"disregarded\\\"\\\" status and it will be taxed for income tax purposes as your person. I.e.: IRS doesn't care and doesn't know about it (and most States, as well). If you actively select to tax it as a corporation (there's such an option) - it will cost you very dearly. So don't, and if someone suggest such a thing to you - run away from that person as fast as you can. Mortgages - it is very hard to get a mortgage when the property is under the LLC. If you already have a mortgage on that property (the property is the one securing the loan) - it may get called once you transfer it into LLC, since from bank's perspective that would be transferring ownership. Local taxes - transferring into LLC may trigger a new tax assessment. If you just bought the property - that will probably not matter much. If it appreciated - you may get hit with higher property taxes. There are also many little things - once you're a LLC and not individual you'll have to open a business bank account, will probably need a new insurance policy, etc etc. These don't add much to costs and are more of an occasional nuisance.\\\"\",\n \"The business and investment would be shown on separate parts of the tax return. (An exception to this is where an investment is related and part of your business, such as futures trading on business products) On the business side of it, you would show the transfer to the stocks as a draw from the business, the amount transferred would then be the cost base of the investment. For taxes, you only have to report gains or losses on investments.\",\n \"While it may not be your preferred outcome, and doesn't eliminate the income, in the event you find yourself in the path described here you have a way to defer gains to the future. but I would then want to buy another house as a rental If you sell this house and buy another investment property (within strict time windows: 45 days to written contract and closed in 180 days), you can transfer your basis and defer your gains via what is called a 1031 like-kind exchange\",\n \"You can make a start to learn how to make better investing decisions by learning and understanding what your current super funds are invested in. Does the super fund give you choices of where you can invest your funds, and how often does it allow you to change your investment choices each year? If you are interested in one area of investing over others, eg property or shares, then you should learn more on this subject, as you can also start investing outside of superannuation. Your funds in superannuation are taxed less but you are unable to touch them for another 30 to 35 years. You also need to consider investing outside super to help meet your more medium term goals and grow your wealth outside of super as well. If you are interested in shares then I believe you should learn about both fundamental and technical analysis, they can help you to make wiser decisions about what to invest in and when to invest. Above is a chart of the ASX200 over the last 20 years until January 2015. It shows the Rate Of Change (ROC) indicator below the chart. This can be used to make medium to long term decisions in the stock market by investing when the ROC is above zero and getting out of the market when the ROC is below zero. Regarding your aggressiveness in your investments, most would say that yes because you are still young you should be aggressive because you have time on your side, so if there is a downturn in your investments then you still have plenty of time for them to recover. I have a different view, and I will use the stock market as an example. Refer back to the chart above, I would be more aggressive when the ROC is above zero and less aggressive when the ROC is below zero. How can you relate this to your super fund? If it does provide you to change your investment choices, then I would be invested in more aggressive investments like shares when the ROC crosses above zero, and then when the ROC moves below zero take a less aggressive approach by moving your investments in the super fund to a more balanced or capital guaranteed strategy where less of your funds are invested in shares and more are invested in bonds and cash. You can also have a similar approach with property. Learn about the property cycles (remember super funds usually invest in commercial and industrial property rather than houses, so you would need to learn about the commercial and industrial property cycles which would be different to the residential property cycle). Regarding your question about SMSFs, if you can increase your knowledge and skills in investing, then yes switching to a SMSF will give you more control and possibly better returns. However, I would avoid switching your funds to a SMSF right now. Two reasons, firstly you would want to increase your knowledge as mentioned above, and secondly you would want to have at least $300,000 in funds before switching to a SMSF or else the setup and compliance costs would be too high as a percentage of your funds at the moment ($70,000). You do have time on your side, so whilst you are increasing your funds you can use that time to educate yourself in your areas of interest. And remember a SMSF is not only an investment vehicle whilst you are building your funds during your working life, but it is also an investment vehicle when you are retired and it becomes totally tax free during this phase, where any investment returns are tax free and any income you take out is also tax free.\",\n \"\\\"I am a CPA. Yes you can do what you are contemplating. Be careful that they do not take any taxes out of the money when you go to do the \\\"\\\"rollover\\\"\\\". If they do you will have to dip into your own pocket to put that back into the IRA.\\\"\",\n \"I don't believe you can do that. From the IRS: Finally, certain types of property are specifically excluded from Section 1031 treatment. Section 1031 does not apply to exchanges of: I highlighted the relevant items for emphasis.\",\n \"\\\"Self directed IRAs have rules to prevent self-dealing of this sort called \\\"\\\"prohibited transactions\\\"\\\". You can't buy or sell or lease assets or obtain services from anyone closely linked to you or any beneficiaries of the IRA. You can't loan yourself money from the IRA, and you can't deliberately take the proceeds that should be going to your self directed IRA and give them to another account that you own.\\\"\",\n \"\\\"Another option you might consider is rolling over some of that 401K balance into a self-directed IRA or Solo 401K, specifically one with \\\"\\\"checkbook privileges\\\"\\\". That would permit you to invest directly in a property via your IRA/401K money without it being a loan, and preserving the tax benefits. (You may not be able to roll over from your current employer's 401K while still employed.) That said, regarding your argument that your loan is \\\"\\\"paying interest to yourself\\\"\\\", while that is technically true, that neglects the opportunity cost -- that money could potentially be earning a much higher (and tax-free) return if it remains in the 401K account than if you take it out and slowly repay it at a modest interest rate. Real Estate can be a great way to diversify, build wealth, and generate income, but a company match and tax-free growth via an employee sponsored retirement account can be a pretty sweet deal too (I actually recently wrote about comparing returns from having a tenant pay your mortgage on a rental property vs. saving in a retirement account on my blog -- in short, tax-free stock-market level returns are pretty compelling, even when someone else is paying your mortage). Before taking rather big steps like borrowing from a 401K or buying a rental property, you might also explore other ways to gain some experience with real estate investing, such as the new crop of REITs open to all investors under SEC Reg A+, some with minimums of $500 or less. In my own experience, there are two main camps of real estate investors: (1) those that love the diversification and income, but have zero interest in active management, and (2) those that really enjoy real estate as a lifestyle and avocation, happy to deal with tenant screening and contractors, etc. You'll want to be careful to be sure which camp you're in before signing on to active investment in a specific property.\\\"\",\n \"You can't actually transfer shares directly unless they were obtained as part of an employee share scheme - see the answers to questions 19 and 20 on this page: http://www.hmrc.gov.uk/isa/faqs.htm#19 Q. Can I put shares from my employee share scheme into my ISA? A. You can transfer any shares you get from into a stocks and shares component of an ISA without having to pay Capital Gains Tax - provided your ISA manager agrees to take them. The value of the shares at the date of transfer counts towards the annual limit. This means you can transfer up to £11,520 worth of shares in the tax year 2013-14 (assuming that you make no other subscriptions to ISAs, in those years). You must transfer the shares within 90 days from the day they cease to be subject to the Plan, or (for approved SAYE share option schemes) 90 days of the exercise of option date. Your employer should be able to tell you more. Q. Can I put windfall or inherited shares in my ISA? A. No. You can only transfer shares you own into an ISA if they have come from an employee share scheme. Otherwise, the ISA manager must purchase shares on the open market. The situation is the same if you have shares that you have inherited. You are not able to transfer them into an ISA.\",\n \"I just received a transfer offer - Seems to me, they don't care what I do with the proceeds. Options 1 & 2 make that clear.\",\n \"When you live in your own rental property, it no longer counts as your 'rental property'. It becomes your own living property and legally you cannot get tax benefits.\",\n \"If it is a separate unit from the rest of the property, you can use that portion as an investment property. the part, or unit, you are living in is your primary residence. The remainder is your investment. You are eligible to not pay capital gains on the portion you live in After two years. As always consult a tax accountant For advice... Also, if this is less then 4 unit, you may he able to finance the sale of the home with an FHA loan.\",\n \"\\\"Yes, it can be done. See \\\"\\\"Scenario 4\\\"\\\" at Isolating 401(k) basis - Fairmark.com. Though that article is primarily about getting after-tax 401(k) money into a Roth IRA, Scenario 4 applies to the scenario you are asking about. At a high level you do exactly what you say -- transfer the pre-tax money from your trad IRAs to a 401(k) (btw, a solo 401(k) will work for this also -- doesn't have to be your employer's -- but then you need to be eligible to set up a solo 401(k)). This is allowed because qualified plans can't accept after after-tax traditional IRA money, so the transfer overrides the usual pro rata rules and \\\"\\\"strains\\\"\\\" the basis out and leaves it in the trad IRA. However, there's a mismatch between the intent of Congress (as indicated by the Joint Committee on Taxation report on the law) and the actual text of the law as detailed in the Fairmark article which while it doesn't stop you from doing this adds a couple of hoops to jump through if you want to be in total compliance with the law.\\\"\",\n \"If you have the cash on hand to pay the tax on the amount you are transferring I recommend moving to a Roth IRA An IRA is tax-deferred. You put in pretax contributions in to an IRA, and you are taxed on that money (your contributions and interest earned) when you withdraw it at retirement, age 59 1/2. The idea being that you will be taking less out per year in your retirement years, putting you into a lower tax bracket. The major problem is most people draw out as much or more a year in their retirement years than when they were working. A Roth IRA grows tax free You put after tax contributions into a Roth IRA, you have paid taxes on the contributions, and you are never taxed on the growth. When you draw the money out at retirement you don't pay any income taxes on that money. Let me give you an example: For this example we will use the following information for both scenario: We will invest $400 per month for a total of $4800. The current maximum is $5000 if you are under 50 years old $400 dollars after taxes is $300 Invest $300 a month, at age 65 you have 3,529,432 You owe no taxes on this money, it doesn't matter how much you take out a year. $400 dollars a month is taken pretax out of your paycheck. Invest $400 per month, at age 65 you have $4,705,909 You owe taxes of 25% as you draw that out for at total tax of 1,176,477 4,705,909 - 1,176,477 = 3,529,432 cash in your pocket The problem is if you draw out more than $82,400 (current 2010 filing single) per year you will be pushed to a higher tax bracket and take more of your money away. If you decide to buy a vacation home and you take out $250,000 to pay for it, that's counted as income for that year any you will be in the 33% tax bracket. Even if you can keep yourself to a low income the government forces your hand and makes you draw out more money at age 70, based on their tables, forcing you into a higher tax bracket\",\n \"Most likely no. Just make sure to read the fine print. I'm in exactly the same boat, I have a house with an FHA loan and will be refinancing to conventional then using it as an investment. To refinance, you usually have to own 25% of your property before you can refinance, or buy another property with FHA financing. If you are planning on refinancing with FHA, then things might not work. The only way around this is if you move like you said you might. Take a look at this article section (A) for Relocations, good stuff: http://portal.hud.gov/FHAFAQ/controllerServlet?method=showPopup&faqId=1-6KT-879\",\n \"\\\"No, I do not. The advice is to take advice :-) but it is not required. Several \\\"\\\"low cost\\\"\\\" SIPPs allow an \\\"\\\"Execution Only\\\"\\\" transfer from some pensions (generally not occupational or defined benefits schemes [where transfers are generally a bad idea anyway] but FAVCs such as mine are ok). Best Invest is one such, and the fees are indeed relatively low. As far as anyone knows, the government's plans for changes to rules on using pension funds would still apply even once I've transferred my pension pot and begun to withdraw funds (provided I don't commit myself to an annuity or other irrevocable investment). I am not a financial adviser, nor employed or otherwise connected with Best Invest, and I'm not endorsing their SIPP schemes, just giving them as an example of what can be done. [Added after I carried out my plan] I found the process very straightforward; I needed to apply for a pension fund with my new provider and fill in a transfer form, which set up the scheme and transferred the funds with no expense required. Once the money arrived in my pension account I filled in another form to take the lump sum and set up regular withdrawals from the fund. I had my lump sum within a couple of months of initiating the transfer. I'm very happy I did not take independent advice because it would have been very poor value for money. During my researches I was approached eagerly by one firm promising to get me my money quick and claiming to be an independent financial advisor. Luckily I mistrusted the service they offered.\\\"\",\n \"If you withdraw all (or most) of your pension 25% is tax free but the rest is treated as income upon which you will pay income tax at the usual UK rates. Withdrawing a lump sum to buy property is therefore unlikely to be 10% per annum as you'll spend years making up lost ground on the initial capital investment. If your pension is a self invested personal pension (a SIPP) you could buy property within the pension wrapper itself which would avoid the income tax hit. if you don't have a SIPP you may be able to convert your pension to a SIPP but you would be wise to seek professional advice about that. The UK government is also introducing an additional 3% stamp duty on properties which are not your first home so this may further impact your returns. This would apply whether you withdraw your pension as cash or buy the property within a SIPP. One other alternative to an annuity in the UK is called drawdown where you keep the money invested in your pension as it is now and withdraw an annual income. This means your tax bill is reduced as you get to use your annual allowance each year and will also pay less higher rate tax. The government provides more details on its website.\",\n \"What you are looking for is a 1031 exchange. https://www.irs.gov/uac/like-kind-exchanges-under-irc-code-section-1031 Whenever you sell business or investment property and you have a gain, you generally have to pay tax on the gain at the time of sale. IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free. You may also sell your house for bitcoin and record the sales price on the deed with an equal or lesser amount that you bought it for.\",\n \"\\\"Your question asks \\\"\\\"how\\\"\\\" but \\\"\\\"if\\\"\\\" may be your issue. Most companies will not permit an external transfer while still employed, or under a certain age, 55 or so. If yours is one of the rare companies that permits a transfer, you simply open an IRA with the broker of your choice. Schwab, Fidelity, eTrade, or a dozen others. That broker will give you the paperwork you need to fill out, and they initiate the transfer. I assume you want an IRA in which you can invest in stocks or funds of your choosing. A traditional IRA. The term \\\"\\\"self-directed\\\"\\\" has another meaning, often associated with the account that permits real estate purchases inside the account. The brokers I listed do not handle that, those custodians have a different business model and are typically smaller firms with fewer offices, not country-wide.\\\"\",\n \"Don't let the tax tail wag the investment dog. There is risk in exchanging this (known) property for another (unknown) property. That risk may be more than $9000 worth of risk. Tax considerations are important, but most important is that your investments make money. If you intend to continue as a landlord, you had better be sure you are finding a better deal elsewhere if you are going to trade this property up. I should also mention that you have a 5 year window in which you need to have lived in the home for 2 years. You have time and might be able to sell for a higher price if you wait a little longer.\",\n \"If you are using the money to invest in a property (even abroad) then you can claim tax exemption. while some people will tell you that the reinvestment should be in India only, it have been ruled that the property can be purchased abroad too..\",\n \"\\\"You have a Solo 401(k). You can fund it with cash, or I believe, with shares of your own company. You can't pull in other assets such as the ISOs from another employer. I see why that's desirable, but it's not allowed. You wrote \\\"\\\"this will mitigate all tax complications with employee stock options.\\\"\\\" But - you can't transfer the ISOs from your job into your Solo 401(k). As littleadv notes, it's self dealing. Once the ISO is exercised there's no hiding the gain into that 401(k).\\\"\",\n \"3 Yes, a big yes, it cannot go into the account it came from. Then both accounts >can't be touched for a year. 3) Actually it looks like you can reinvest it in the same IRA account. Based on IRS publication 590 http://www.irs.gov/publications/p590/ch01.html You can withdraw, tax free, all or part of the assets from one traditional IRA if you reinvest them within 60 days in the same or another traditional IRA. Because this is a rollover, you cannot deduct the amount that you reinvest in an IRA.\",\n \"You've mostly got it figured out, but there are a couple of more points to consider: You'll be permanently losing a corresponding amount of your RRSP contribution room allowance, because the re-deposit of your funds into the new RRSP would count as a new contribution, the way you're proposing to things. For a small amount, it might not matter much, and if you're like a lot of people, you may have more accumulated RRSP room than you can reasonably use up. There may be complications if spousal contributions were made into your account during the previous three years.\",\n \"\\\"Yes it's entirely possible; see below. If you can't find anything on transfers out (partial or otherwise) on anyone's site it's because they don't want to give anyone ideas. I have successfully done exactly what you're proposing earlier this year, transferring most of the value from my employer's group personal pension scheme - also Aviva! - to a much lower-cost SIPP. The lack of any sign of movement by Aviva to post-RDR \\\"\\\"clean priced\\\"\\\" charge-levels on funds was the final straw for me. My only regret is that I didn't do it sooner! Transfer paperwork was initiated from the SIPP end but I was careful to make clear to HR people and Aviva's rep (or whatever group-scheme/employee benefits middleman organization he was from) that I was not exiting the company scheme and expected my employee and matching employer contributions to continue unchanged (and that I'd not be happy if some admin mess up led to me missing a month's contributions). There's a bit more on the affair in a thread here. Aviva's rep did seem to need a bit of a prod to finally get it to happen. With hindsight my original hope of an in-specie transfer does seem naive, but the out-of-the-market time was shorter and less scary than anticipated. Just in case you're unaware of it, Monevator's online broker list is an excellent resource to help decide who you might use for a SIPP; cheapest choice depends on level of funds and what you're likely to hold in it and how often you'll trade.\\\"\",\n \"\\\"The fair price of a stock is the present value of its future payments. That means the stock you have described would have a \\\"\\\"fair\\\"\\\" value that is quite high and you wouldn't be able to put much of it in your 401(k) or IRA. The IRS requires that \\\"\\\"fair value\\\"\\\" be used for calculating the value of IRA and 401(k) assets. Of course, if the stock is not publicly traded, then there's not an obvious price for it. I'm sure in the past people have said they spent a small amount of money for assets that are actually worth much more in order to get around IRS limits. This is illegal. The IRS can and sometimes will prosecute people for this. In order to address abuses of the system by inclusion of hard to value assets in retirement accounts, the IRS has additional reporting requirements for these assets (nonpublic stock, partnerships, real estate, unusual options, etc.) and those reporting requirements became more stringent in 2015. In other words, they are trying to clamp down on it. There are also likely problems with prohibitions against \\\"\\\"self-dealing\\\"\\\" involved here, depending on the specifics of the situation you are describing.\\\"\",\n \"You can make a capital contribution, not a loan. It's not a taxable event, no interest, and you can take a distribution later when the business has the money to pay you back. So yes, transfer the money. If you use software like Quickbooks, make use of unique accounts for tracking the contribution\",\n \"\\\"I agree that you should CONSIDER a shares based dividend income SIPP, however unless you've done self executed trading before, enough to understand and be comfortable with it and know what you're getting into, I would strongly suggest that as you are now near retirement, you have to appreciate that as well as the usual risks associated with markets and their constituent stocks and shares going down as well as up, there is an additional risk that you will achieve sub optimal performance because you are new to the game. I took up self executed trading in 2008 (oh yes, what a great time to learn) and whilst I might have chosen a better time to get into it, and despite being quite successful over all, I have to say it's the hardest thing I've ever done! The biggest reason it'll be hard is emotionally, because this pension pot is all the money you've got to live off until you die right? So, even though you may choose safe quality stocks, when the world economy goes wrong it goes wrong, and your pension pot will still plummet, somewhat at least. Unless you \\\"\\\"beat the market\\\"\\\", something you should not expect to do if you haven't done it before, taking the rather abysmal FTSE100 as a benchmark (all quality stocks, right? LOL) from last Aprils highs to this months lows, and projecting that performance forwards to the end of March, assuming you get reasonable dividends and draw out £1000 per month, your pot could be worth £164K after one year. Where as with normal / stable / long term market performance (i.e. no horrible devaluation of the market) it could be worth £198K! Going forwards from those 2 hypothetical positions, assuming total market stability for the rest of your life and the same reasonable dividend payouts, this one year of devaluation at the start of your pensions life is enough to reduce the time your pension pot can afford to pay out £1000 per month from 36 years to 24 years. Even if every year after that devaluation is an extra 1% higher return it could still only improve to 30 years. Normally of course, any stocks and shares investment is a long term investment and long term the income should be good, but pensions usually diversify into less and less risky investments as they get close to maturity, holding a certain amount of cash and bonds as well, so in my view a SIPP with stocks and shares should be AT MOST just a part of your strategy, and if you can't watch your pension pot payout term shrink from 26 years to 24 years hold your nerve, then maybe a SIPP with stocks and shares should be a smaller part! When you're dependent on your SIPP for income a market crash could cause you to make bad decisions and lose even more income. All that said now, even with all the new taxes and loss of tax deductible costs, etc, I think your property idea might not be a bad one. It's just diversification at the end of the day, and that's rarely a bad thing. I really DON'T think you should consider it to be a magic bullet though, it's not impossible to get a 10% yield from a property, but usually you won't. I assume you've never done buy to let before, so I would encourage you to set up a spread sheet and model it carefully. If you are realistic then you should find that you have to find really REALLY exceptional properties to get that sort of return, and you won't find them all the time. When you do your spread sheet, make sure you take into account all the one off buying costs, build a ledger effectively, so that you can plot all your costs, income and on going balance, and then see what payouts your model can afford over a reasonable number of years (say 10). Take the sum of those payouts and compare them against the sum you put in to find the whole thing. You must include budget for periodic minor and less frequent larger renovations (your tenants WON'T respect your property like you would, I promise you), land lord insurance (don't omit it unless you maintain capability to access a decent reserve (at least 10-20K say, I mean it, it's happened to me, it cost me 10K once to fix up a place after the damage and negligence of a tenant, and it definitely could have been worse) but I don't really recommend you insuring yourself like this, and taking on the inherent risk), budget for plumber and electrician call out, or for appropriate schemes which include boiler maintenance, etc (basically more insurance). Also consider estate agent fees, which will be either finders fees and/or 10% management fees if you don't manage them yourself. If you manage it yourself, fine, but consider the possibility that at some point someone might have to do that for you... either temporarily or permanently. Budget for a couple of months of vacancy every couple of years is probably prudent. Don't forget you have to pay utilities and council tax when its vacant. For leaseholds don't forget ground rent. You can get a better return on investment by taking out a mortgage (because you make money out of the underlying ROI and the mortgage APR) (this is usually the only way you can approach 10% yield) but don't forget to include the cost of mortgage fees, valuation fees, legal fees, etc, every 2 years (or however long)... and repeat your model to make sure it is viable when interest rates go up a few percent.\\\"\",\n \"It would be bad tax-wise, because gains in the investment outside the 401k are taxed; whereas gains in the investment inside the 401k are not taxed.\",\n \"You may be able to, depending on what state you're in, but it is going to be 10x more complicated than just forming a new LLC. I don't see an advantage to this approach - if you're imagining it will be cheaper, you are imagining wrong.\",\n \"You're creating more liabilities for yourself in the future, although yes this could definitely be a profitable move for you. However, some small mistakes you made, from what I can see using the tools at Hargreaves Lansdown. The first, is that the government relief would only be 20%, not 60%. The second is that the tax relief goes directly into the SIPP, it's not something you get given back to you in cash. In order for this to be worthwhile, you need to be sure that you can make a post-tax gain of more than 3.4% on this money per year - which should be very feasible. It sounds like you have enough security that you could afford to take this risk.\",\n \"Transfer from Savings account into NRE is not possible. Transfer into NRO may be possible in certain cases and would require some paperwork. Please consult the Bank where you hold the account to advise you the details.\",\n \"Technically, no. Only if used for improvement or expansion to the original property.\",\n \"Transfers of money to the UK for any purpose are not generally taxed, so you can just transfer it here and invest. Once the money is here, you'll be taxed on the business activity like anyone else - the company will have to pay corporation tax, and depending on your own residency you might have to pay income tax on any distributions from the company.\",\n \"\\\"To answer your first two questions: according to IRS pub 696 \\\"\\\"Contributions to an HSA\\\"\\\" section: Rollovers A rollover contribution is not included in your income, is not deductible, and does not reduce your contribution limit. Archer MSAs and other HSAs. You can roll over amounts from Archer MSAs and other HSAs into an HSA. You do not have to be an eligible individual to make a rollover contribution from your existing HSA to a new HSA. Rollover contributions do not need to be in cash. Rollovers are not subject to the annual contribution limits. You must roll over the amount within 60 days after the date of receipt. You can make only one rollover contribution to an HSA during a 1-year period. Note. If you instruct the trustee of your HSA to transfer funds directly to the trustee of another HSA, the transfer is not considered a rollover. There is no limit on the number of these transfers. Do not include the amount transferred in income, deduct it as a contribution, or include it as a distribution on Form 8889, line 14a. (italics mine) So if you transfer the money yourself, you can only do it once per year, but there are no limits to when or how many times you can instruct the old HSA trustee to transfer funds directly to the new trustee.\\\"\",\n \"For this rollover, there are no restrictions of age/income/etc. You need to know - the transfer must be direct, i.e. if you get a physical check, it should be payable not to you, but to the new custodian (broker) for your benefit. Direct is preferable and faster. The assets may not be transferable 'in kind.' This phrase simply means that you may move the value, but if the assets are not shares that are held by the public, but special 401(k) class shares, they must be liquidated before moving, and moved as cash. This is a risk people with large accounts take should the market move dramatically during the time they are liquidated, and why, for them, I suggest doing it piecemeal.\",\n \"You need to check with your employer. It is called an in-service rollover and it is up to your employer on whether or not it is allowed. There are a lot of articles on it but I would still talk to a professional before making the decision. And there are some new laws in place that put at least some responsibility on your employer to provide a 401k with reasonable options and fees. http://www.latimes.com/business/la-fi-court-edison-401k-fees-20150519-story.html We'll see if it has legs.\",\n \"You're not crazy, but the banks are. Here's the problem: You're taking 100% LTV on property A - you won't be able to get a second mortgage for more than 80% total (including the current mortgage) LTV. That's actually something I just recently learned from my own experience. If the market is bad, the banks might even lower the LTV limit further. So essentially, at least 20% of your equity in A will remain on the paper. Banks don't like seeing the down-payment coming from anywhere other than your savings. Putting the downpayment from loan proceeds, even if not secured by the property which you're refinancing, will probably scare banks off. How to solve this? Suggest to deal with it as a business, putting both properties under a company/LLC, if possible. It might be hard to change the titles while you have loans on your properties, but even without it - deal with it as if it is a business. Approach your bank for a business loan - either secured by A or unsecured, and another investment loan for B. Describe your strategy to the banker (preferably a small community bank in the area where the properties are), and how you're going to fund the properties. You won't get rates as low as you have on A (3.25% on investment loan? Not a chance, that one is a keeper), but you might be able to get rid of the balloon/variable APR problem.\",\n \"Transfers can be made from U.S. pension plans to Canadian RRSPs, if the following conditions are met: Way more details here: http://www.howlandtax.com/answers/05Sept21.htm And googling 'transfer 401k to rrsp' yields much fruit.\",\n \"There is no way you can directly defer that capital gains tax. If you sell a property that is not your principal residence, it will be taxed in the year in which it was sold. It doesn't matter what you do with the proceeds - that tax will get paid. Now, if you had adequate RRSP contribution room you could certainly put some money there, and would get a deduction on your tax return that would offset this capital gains tax. For example, if you sold a property for $300K that was originally purchased for $200K, then you would incur capital gains tax of $50K (assuming you were not claiming CCA deductions). If you took $50K of your proceeds and put it in an RRSP, it would offset the tax you pay now, and essentially defer the tax on that $50K of income until you withdraw - hopefully at a lower marginal tax rate. A spousal RRSP would work the same, except it would be taxed at your spouse's marginal tax rate when withdrawn. Either way, you need to have sufficient contribution room in the RRSP for this to work. Check your Notice of Assessment to see how much room you have available.\",\n \"A self-directed IRA could be a good solution for you and all IRAs are qualified IRAs the administrator must allow for alternative assets. However, if you're looking to do the ROBS (Roll Over Business Start-up) system, there are not very many administrators that can facilitate that. There is also a checkbook IRA (aka single member LLC) that more administrators are able to work with, but the rules are different from a ROBS plan. Check with your financial adviser, CPA, tax guru and ask which method would work best for what you're looking to accomplish.\",\n \"If you have a rental property, take the income from that property and then invest it in a dividend fund, or sell the property and invest those proceeds. Borrowing against a house or other property is just not a great idea. Rule 1: Don't borrow against a house. Rule 2: For any substantial advice, go to a financial advisor, not reddit. Rule 3: Don't borrow against a house.\",\n \"You have three options. If you follow the procedures outlined by the IRA trustee there should not be any problems. There will not be any taxes involved, unless as part of the process you change non-Roth funds to Roth funds, or you don't follow the procedures. In my experience the IRA companies know how to handle the transfer. In some cases the check must be sent to you, and then you send it to the IRA company, but they will tell you exactly how the check is to be made out to. I would start by talking to the IRA trustee they are likely to have seen it all, and can guide you through the process.\",\n \"I have a CPA. They said that it isn't possible. However, I've seen on message boards that it indeed IS possible, multiple times. I'll likely reach out to another CPA. However, I am interested to hear from somebody who has done this before, so that I at least have a name or defined process for what I'm attempting to do.\",\n \"Nice idea. When I started my IRAs, I considered this as well, and the answer from the broker was that this was not permitted. And, aside from transfers from other IRAs or retirement accounts, you can't 'deposit' shares to the IRA, only cash.\",\n \"Best consult a CA as you may anyway need his/her service. I am NRI, availed secured loan (Against house property) in India and now I want to get that money transferred to Finland. Loans by NRI taken in India cannot be transferred outside of India. Refer FOREIGN EXCHANGE MANAGEMENT (BORROWING AND LENDING IN RUPEES) REGULATIONS Loans in Rupees to non-residents 1[***]. 7. Subject to the directions issued by the Reserve Bank from time to time in this regard, an authorised dealer in India may grant loan to a non-resident Indian, (B) against the security of immovable property (other than agricultural or plantation property or farm house), held by him in accordance with the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000 : ...... Provided that- (d) the loan amount shall not be remitted outside India; Alternative: Sell the property in India, transfer the proceeds to NRO account. Repatriate the funds outside India as per Liberalized Remittance Scheme. Form 15CA/CB with CA certificate will be required.\",\n \"Your brokerage might be cautious about allowing you to loan your IRA money in a Peer-to-Peer lending deal because it might result in a prohibited transaction (e.g. the other Peer is your son-in-law; for the purposes of IRAs, the spouse of a lineal descendant is treated the same as you, and the transaction will be treated as if you have borrowed money from your IRA). If you want to put the money into a lending club, then there might be issues of how the club is structured, e.g. who makes the decisions as to whom the money is loaned to. Such issues don't arise if you are putting the money into a money-market mutual fund, for example, but with new-fangled institutions such as lending clubs, your brokerage might just being cautious. If you want to open an IRA account directly with a lending club, check if the club offers IRA accounts at all. For this, they will likely need to have a custodian company that will handle all the IRA paperwork. For example, the custodian of IRA accounts in Vanguard mutual funds is not the fund or even Vanguard itself but a separate company named Vanguard Fiduciary Trust Company. I am sure other large firms have similar set-ups. Whether your pet Peer-to-Peer lending club has something similar set up already is something you should look into. This part of the answer applies to an earlier version of the question in which the OP said that he wanted to invest in precious metals. Be careful in what you invest in when you say you want to invest in precious metals; in refusing to buy precious metals for you in your IRA, your brokerage (as your fiduciary) might be refusing to engage in a prohibited transaction on your behalf. Investments in what are called collectibles are deemed to have been distributed to you by the IRA, and if this is an early distribution, then penalties also apply in addition to the income tax. Publication 590 says Collectibles. These include: Exception. Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U.S. gold coins, or one-ounce silver coins minted by the Treasury Department. It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion. So, make sure that your new IRA custodian does allow you to buy (say) titanium or Krugerrands in your IRA if that is your pleasure.\",\n \"Probably. It sounds like you're looking for a 1031-exchange for stocks and bonds. From the wikipedia page for 1031-exchanges: To qualify for Section 1031 of the Internal Revenue Code, the properties exchanged must be held for productive use in a trade or business or for investment. Stocks, bonds, and other properties are listed as expressly excluded by Section 1031 of the Internal Revenue Code, though securitized properties are not excluded. 1031-exchanges usually are applicable in real estate.\",\n \"Sorry, you cannot transfer EPF into PPF. The investments in PPF are limited to 150,000 per year. Withdrawal is in 7th year, i.e. After completion of 6 financial years. 50% of the Balance of 4th year can be withdrawn. 2.Withdraw the money and find a new form of investment. This is definitely possible. A lump sum investment into NPS [New Pension Scheme] or various Retirement schemes, or equity / real estate etc Is there any other 3rd solution for this situation? Keep the money AS-IS as the money will still continue to grow. The interest is stop getting accrued after 3 years of NO contribution. Within 36 months if an account will not get any deposit then it will be considered as dormant/inactive account. So you can wait for sometime before you decide to withdraw.\",\n \"would buying the stock of a REIT qualify as a 'Like-Kind' exchange? Short answer, no. Long answer, a 1031 (Starker) exchange only applies to real estate. From the Wikipedia page on the topic: To qualify for Section 1031 of the Internal Revenue Code, the properties exchanged must be held for productive use in a trade or business, or for investment. Stocks, bonds, and other properties are listed as expressly excluded by Section 1031 of the Internal Revenue Code, although securitized properties are not excluded. A REIT, being stock in a real estate company, is excluded from Section 1031.\",\n \"You can take the old 401k and convert it to an IRA just about anywhere. No accountant required. Borrowing against the IRA/401k is a very stopgap measure, be sure you know what you are getting into. A distribution from it is a 10% penalty before age 59.5.\",\n \"If you're under age 55 and in good health generally you cannot withdraw your funds from super and your super fund cannot provide you with any financial assistance eg lend you money. However, for a very small percentage of people with unrestricted non preserved superannuation components ( check your statement most people's superannuation is 'preserved'which means they cannot access it until they meet a 'condition of release')they may withdraw their super benefits upto the unrestricted non preserved amount. For healthy (& able) persons aged 55 and over they may access their super under the following conditions: I can understand your frustration of having your money compulsory tied up in superannuation especially given the poor investment returns of the past 5 years. However, superannuation may be more flexible than you realize, I am an adviser at Grant Thornton and I am constantly telling clients that superannuation is not an invest but it the most tax effective long term savings vehicle available to Australians for their investment savings eg max 15% tax on income and capital gains if held for a year are taxed at 10%. If you're not happy with your investment returns you may like to seek some advice or,set up your own super fund - a self managed super fund where you can invest a wide variety of assets; shares, managed funds,cash, term deposits, property( your super fund can even borrow to help acquire the property) I hope this helps\",\n \"\\\"You're confusing between \\\"\\\"individual\\\"\\\" 401k (they're called \\\"\\\"Solo-401k\\\"\\\" and are intended for self-employed), and Individual Retirement Account (IRA). You can't open a solo-401k without being self employed. You can open an IRA and roll over money from your old 401k to it. You cannot get a loan from IRA. You can ask the 401k plan manager to reissue the checks to the new trust, shouldn't be a problem. Make sure the checks are issued to the trust, not to you, to avoid withholding and tax complications. This is what is called a \\\"\\\"direct\\\"\\\" rollover. You might be able to roll the money over to the 401k of your new employer, it is not always allowed and you should check. You can probably then take a loan from that 401k. However, it diminishes the value of your retirement savings and you should only do it if you have no other choice (being evicted from your home, your children are starving, can't pay for your chemo, etc... this kind of disasters). Otherwise, I'd suggest rolling over to IRA, investing in funds with significantly lower fees (Vanguard target retirements funds for example, or index funds/ETF's), and reassessing your spending and budgeting habits so that you won't need loans from your 401k. Re companies - ETrade is nice, consider also Scottrade, TDAmeriTrade, Vanguard, Fidelity, Sharebuilder, and may be others. These are all discount brokers with relatively low fees, but each has its own set of \\\"\\\"no-fee\\\"\\\" funds.\\\"\",\n \"If you're current employer who is running the 401k says no you can't. You may be able to get a loan against those assets, that's more common. However, this post will be down voted to oblivion because you want r/personalfinance . This isn't the sub for this question.\",\n \"I don't know anything about Australian tax law, the Australian real estate market, or your parents' ability to repay the loan. However, no matter what the answers to those questions are, I do not recommend that you go through with this. The reason is the risk. Usually, with an investment, you are risking the money that you invest. However, with this investment, you are not only risking the money; you are also risking both you and your fiancé's relationship with your parents. If your parents have trouble paying back this money in a few years when you need it for your house, how will that affect how you feel about your parents? How will that affect how your fiancé feels about them? It will make family gatherings very awkward for everyone at least. Don't put family harmony at risk for the sake of an extra 2.8% return. There are other ways to invest that risk only money.\",\n \"Have you considered a self-directed IRA to invest, rather than the stock market or publicly traded assets? Your IRA can actually own direct title to real estate, loan money via secured or unsecured promissory notes much like a hard money loan or invest into shares of an entity that invests in real estate. The only nuance is that the IRA holder is responsible for finding and deciding upon the investment vehicle. Just an option outside of the normal parameters, if you have an existing IRA or old 401(k) or other qualified plan, this might be an option for you.\",\n \"Also you would need to consider any taxation issues. As he will be paying you rent you will need to include this as income, plus any capital gains tax on the re-sale of the property may need to be paid.\",\n \"\\\"I don't look to Super or Pension, I am working on self funding. My method is work in Sydney and buy a house in Sydney (I bought 6 years ago). Let my property rise on this stupidly insane Sydney growth (my place has risen by 76% in the last 6 years and thats in a \\\"\\\"bad\\\"\\\" economic climate). Each time the equity hits a certain point get an investment property on an interest only home loan and rent it out. Build this portfolio up as much and as quickly as you can. Repeat over and over until I decide to retire. Sell up investment properties and buy NOT IN SYDNEY where it is much cheaper and move there, keep the main house I always lived in as by this time I will own it outright, rent it out for an income that will more than sustain me in my retirement. Although there is also merit in the idea of sell the one you lived in and use the money to pay of one of the investments, this way you avoid capital gains tax. This idea came to me last night :)\\\"\",\n \"I doubt that there is an arrangement with any country that would allow you to transfer money out of a 401(k) and roll it over to another country that isn't governed by US Tax Laws without taking a distribution. The US government won't let you pull out like that without taking its cut. There may be, but I'd be surprised. Check around in the appropriate venues. If you're making a distribution that incurs penalties, then that's what you're doing. If you can do so without incurring penalties, then great for you, just deposit into the vehicle of your choice in your country.\",\n \"\\\"No. A deposit to an IRA must be in cash. A conversion from traditional IRA to Roth can be \\\"\\\"in kind\\\"\\\" i.e. As a stock transfer. Last, any withdrawals can also be in stock or funds. IRS Publication 590, so important, it's now in 2 sections Part A and Part B, addresses IRA issues such as this as well as most others. By the way - now on page 7 - \\\"\\\"Contributions, except for rollover contributions, must be in cash.\\\"\\\"\\\"\",\n \"Will I have to pay Income Tax/Capital Gain Tax in India for the full amount or 50% of the amount. Assuming you were the owner of the plot, you have to pay capital gains tax on the full amount. Current at 10% without indexation and 20% with indexation. Rest of amount will be used to purchase property in India. If you are re-investing the money into capital assets, you are not liable to pay Capital Gains for the amount invested. This is applicable only for first 2 houses. Consult a CA. What is the procedure to transferring the money to him. What declaration in have to give to the Bank (any Forms to fill) Under the liberalized remittance scheme you can transfer upto USD 1 Million per year. A CA certificate is required declaring the purpose and giving certificate that taxes are paid. Please contact your Bank or CA to guide further.\",\n \"No, it is not a taxable event. You will not have to pay tax on the $500 in this scenario. See the IRS publication 590-A: To recharacterize a contribution, you generally must have the contribution transferred from the first IRA (the one to which it was made) to the second IRA in a trustee-to-trustee transfer. If the transfer is made by the due date (including extensions) for your tax return for the tax year during which the contribution was made, you can elect to treat the contribution as having been originally made to the second IRA instead of to the first IRA. If you recharacterize your contribution, you must do all three of the following. Include in the transfer any net income allocable to the contribution. If there was a loss, the net income you must transfer may be a negative amount. Report the recharacterization on your tax return for the year during which the contribution was made. Treat the contribution as having been made to the second IRA on the date that it was actually made to the first IRA.\",\n \"Each S-corp is bound by its own plan documents, which typically do not limit or dictate where the investments are held. Your brokerage account has no tie to the company from which the funds come, however, you are still subject to maximum SIMPLE contribution rules and cannot exceed the $12,500 (if under age 50) COMBINED contribution for any and all companies. Be careful about co-mingling from both companies as there are penalties for early withdrawals made within 2-years of participating in the plan. If you started them both at the same time it's not an issue.\",\n \"To start, I hope you are aware that the properties' basis gets stepped up to market value on inheritance. The new basis is the start for the depreciation that must be applied each year after being placed in service as rental units. This is not optional. Upon selling the units, depreciation is recaptured whether it's taken each year or not. There is no rule of thumb for such matters. Some owners would simply collect the rent, keep a reserve for expenses or empty units, and pocket the difference. Others would refinance to take cash out and leverage to buy more property. The banker is not your friend, by the way. He is a salesman looking to get his cut. The market has had a good recent run, doubling from its lows. Right now, I'm not rushing to prepay my 3.5% mortgage sooner than it's due, nor am I looking to pull out $500K to throw into the market. Your proposal may very well work if the market sees a return higher than the mortgage rate. On the flip side I'm compelled to ask - if the market drops 40% right after you buy in, will you lose sleep? And a fellow poster (@littleadv) is whispering to me - ask a pro if the tax on a rental mortgage is still deductible when used for other purposes, e.g. a stock purchase unrelated to the properties. Last, there are those who suggest that if you want to keep investing in real estate, leverage is fine as long as the numbers work. From the scenario you described, you plan to leverage into an already pretty high (in terms of PE10) and simply magnifying your risk.\",\n \"\\\"Just addressing the sending side: you should be able to make the transfer out of the UK tax-free, if you transfer to a \\\"\\\"Recognised Overseas Pension Scheme\\\"\\\" (ROPS). These were formerly called QROPS (\\\"\\\"Qualifying...\\\"\\\") and a lot of online resources will talk about those. The basic idea is that as long as the overseas pension scheme guarantees to follow broadly similar rules to the UK system - e.g. not allowing you to withdraw your money before retirement age - then you can transfer to it. There's a list of these schemes on the HMRC website, but in theory you still have to check for yourself that they actually follow the relevant rules. I'm not sure how to do that in practice. There are only two USA providers listed, which suggests that transferring there isn't actually very common. The Wikipedia page suggests that in practice most people transfer to a scheme in a low-tax place like Gibraltar, rather than where they actually move to. I suspect that any move will be quite expensive in fees, and from your own answer it seems the USA won't recognise it as a transfer in anyway.\\\"\",\n \"and I need to upgrade my current home to a larger, longer-term property Would selling your current home give you (at least) a 20% DP on the new home? Take additional cash out of the refinance of the first home to accelerate saving Dittoing D Stanley, that makes no sense. Purchase and move to a second property of greater cost and value to first You'll need to find the new house at the same time you're selling the existing home, and write the new-home purchase contract in such a way that you can back out in case the purchaser of your home backs out.\",\n \"They may be able to transfer the land to a charitable remainder trust, which then enters into the transaction and pays them an income stream over their lifetime -- but definitely hire a professional before you attempt to do this.\",\n \"The purpose of the transfer determines the taxability. If this is happening to frequent, it is advisable to keep proper records of the transaction so that if there is an enquiry from Tax authorities you can explain. Unless you explain the why the transfer is being made, I have put out some broad categories.\",\n \"I would not recommend borrowing your 401(k) money to buy a house for two reasons: When you borrow money from your 401(k), it is no longer invested. Yes, you pay yourself interest, but you miss out on the investment gains for the life of the loan. If you leave your job, the loan is due in full shortly thereafter. If you do not pay it back, you are hit with taxes and penalties. If I were you, I would roll it over into an IRA for the reasons you mentioned.\",\n \"Sit down with professional with knowledge about eldercare issues. Know how your options regarding the property ownership can impact the services they qualify for. Even making a change in ownership can impact their eligibility for certain programs. Some of which can reach back to events in the recent past. Also if you own it but she will get some of the profits when you sell, she could still be considered an owner, which can impact eligibility for programs. This is in addition to the issues with the lender, the IRS, and your estate.\",\n \"If so how to do it. Ask CIBC to open the new RRSP account, and ask CIBC to contact GWL to tell GWL to move your money from the GWL account into the CIBC account.\",\n \"You can do a direct transfer from one fund to another within Fidelity very easily. You will have to see if the two funds have any sales or redemption fees. If you want to leave Fidelity, they should be able to transfer the funds directly to the other IRA custodian. You don't want the money to go to you, instead you want to send them send the money directly to the other firm. The new custodian will be more than happy to help facilitate the transfer. The only fee for doing so should be if the funds you are investing in have fees for buying or selling shares. There are many options that don't have these transaction costs, both with Fidelity and with other companies.\",\n \"Consider looking into real estate investment trusts (REITs). Assuming that they are available for the area that you are considering they simplify the process of investing in this sector. Your money pooled with other investors and then invested in a broad range of properties. If you go this route make sure to only by REITs that are traded in the open market (liquidity and an honest current valuation). Even better I would consider a index fund of REITs for more diversification. Personally I do use a US based REIT index as a small part of my portfolio so as to get better diversification.\",\n \"Yes, that's exactly what you can/should do. The only question is whether the 401(k) has good investment choices and low fees, if so, go for it.\",\n \"There are tax strategies you could take advantage of if you own the property. Find local real estate investors that like 'buy and hold'. Additional strategy is to buy a property and sell it with owner financing (you use a Residential Mortgage Loan Officer to facilitate.) What is great is you can get a great % real return on your money without being a landlord.\",\n \"The main advantage and disadvantage I can see in a scenario like this are - how savvy and good an investor are you? It's a good way to create below-market average returns if you're not that good at investing and returns way above market average if you are...\",\n \"If it is your primary residence and you lived there continuously and for more than 2 years out of the last 5 - then you can exclude the gain under the IRC Sec. 121. In this case, you'll pay no taxes on your gain. If the property has been a rental or you haven't lived there long enough, the rules become more complicated but you may still be able to exclude some portion of the gain, even all of it, depends on the situation. So it doesn't look like 1031 exchange is good for you here, you don't want to carry excluded gain - you want to recognize it and get the tax benefit. However, refinancing after purchase with cash-out money affects the deductability of the loan interest. You can only deduct interest on money used to buy, not cash-out portion. I believe there's a period (60 days IIRC) during which you can do the cash-out refinance and still count it as purchase money, but check with a licensed tax advier (EA/CPA licensed in your State).\",\n \"I'm pretty sure you can't do what you are asking, for exactly the reason you say - you would get a double tax deduction. The only way to get money out of an RRSP is to withdraw it and take the tax hit, whatever the reason for the withdrawl.\",\n \"\\\"And my CPA is saying no way, it will cost me many thousands in taxes and doesn't make any sense. I'd think so too. It looks like it converts from capitol gains at 14% to something else at about 35% Can be, if your gain under the Sec.1231 rules is classified as depreciation recapture. But, perhaps the buyers will be saving this way? Not your problem even if they were, which they aren't. I would not do something my CPA says \\\"\\\"no-way\\\"\\\" about. I sometimes prefer not doing some things my CPA says \\\"\\\"it may fly\\\"\\\" because I'm defensive when it comes to taxes, but if your CPA is not willing to sign something off - don't do it. Ever.\\\"\",\n \"So your accountant certainly knows much more than I do about Israeli tax law and its interactions with US tax law, which is zero. I'm going to look at this problem from the investment perspective which I hope to convince you is the most important place to start. Then you can adjust for interactions between the Isreali and US tax codes. Even if the tax breaks are exceptional, it would be hard to recommend buying real estate as an investment in the 7-10 year time frame. Especially if this real estate is in the US. Open/Closing fees, mortgage fees, risk of property devaluation, bad-renters, acts of god, insurance costs and tax complications make short to medium term investments in real estate a particularly risky way to invest. Buying a local apartment and renting is somewhat more reasonable as you don't have to worry about the currency conversion and you can do a lot more research in your local environment and keep a closer eye on the property, it is still this a pretty concentrated risk. Saving and investing using tax-advantaged accounts is generally considered a great way to build toward a down payment in the medium term. A mixture of mostly local bonds with some local and foreign stocks and more and more cash as it gets close to purchase time is generally what is recommended when saving for a home. This mixture is relatively safe and will tend to grow steadily without the concentrated risk of a real estate investment. PFIC rules are complicated and certainly worth taking some time to understand, but owning real estate especially in a foreign country seems much more complicated and certainly riskier. There may be some rule that makes investing in REITs much better than normal stocks in these particular accounts though I would be surprised if that were the case. It is generally not true for people under just he US tax code. So while option (1) may not be the absolute best from a tax perspective it would certainly be my guess as the most likely to succeed.\",\n \"TL; DR version: What you propose to do might not save you taxes, and may well be illegal. Since you mention your wife, I assume that the Inherited IRA has been inherited from someone other than your spouse; your mother, maybe, who passed away in Fall 2015 as mentioned in your other question (cf. the comment by Ben Miller above)? If so, you must take (at least) the Required Minimum Distribution (RMD) from the Inherited IRA each year and pay taxes on the distribution. What the RMD is depends on how old the Owner of the IRA was when the Owner passed away, but in most cases, it works out to be the RMD for you, the Beneficiary, considered to be a Single Person (see Publication 590b, available on the IRS web site for details). So, Have you taken the (at least) the RMD amount for 2016 from this Inherited IRA? If not, you will owe a 50% penalty of the difference between the amount withdrawn and the RMD amount. No, it is not a typo; the penalty (it is called an excise tax) is indeed 50%. Assuming that the total amount that you have taken as a Distribution from the Inherited IRA during 2016 is the RMD for 2016 plus possibly some extra amount $X, then that amount is included in your taxable income for that year. You cannot rollover any part of the total amount distributed into your own IRA and thereby avoid taxation on the money. Note that it does not matter whether you will be rolling over the money into an existing IRA in your name or will be establishing a new rollover IRA account in your name with the money: the prohibition applies to both ways of handling the matter. If you wish, you can roll over up to $X (the amount over and above the RMD) into a new Inherited IRA account titled exactly the same as the existing Inherited IRA account with a different custodian. If you choose to do so, then the amount that you roll over into the new Inherited IRA account will not included in your taxable income for 2016. To my mind, there is no point to doing such a rollover unless you are unhappy with the current custodian of your Inherited IRA, but the option is included for completeness. Note that the RMD amount cannot be rolled over in this fashion; only the excess over the RMD. If you don't really need to spend the money distributed from your Inherited IRA for your household expenses (your opening statement that your income for 2016 is low might make this unlikely), and (i) you and/or your spouse received compensation (earned income such as wages, salary, self-employment income, commissions for sales, nontaxable combat pay for US Military Personnel, etc) in 2016, and (ii) you were not 70.5 years of age by December 2016, then you and your wife can make contributions to existing IRAs in your names or establish new IRAs in your names. The amount that can be contributed for each IRA is limited to the smaller of $5500 ($6500 for people over 50) and that person's compensation for 2016, but if a joint tax return is filed for 2016, then both can make contributions to their IRAs as long as the sum of the amounts contributed to the IRAs does not exceed the total compensation reported on the joint return. The deadline for making such IRA contributions is the due date for your 2016 Federal income tax return. Since your income for 2016 is less than $98K, you can deduct the entire IRA contribution even if you or your wife are covered by an employer plan such as a 401(k) plan. Thus, your taxable income will be reduced by the IRA contributions (up to a maximum of $11K (or $12 K or $13K depending on ages)) and this can offset the increase in taxable income due to the distribution from the Inherited IRA. Since money is fungible, isn't this last bullet point achieving the same result as rolling over the entire $9.6K (including the RMD) into an IRA in your name, the very thing that the first bullet point above says cannot be done? The answer is that it really isn't the same result and differs from what you wanted to do in several different ways. First, the $9.6K is being put into IRAs for two different people (you and your wife) and not just you alone. Should there, God forbid, be an end to the marriage, that part of your inheritance is gone. Second, you might not even be entitled to make contributions to IRAs (no compensation, or over 70.5 years old in 2016) which would make the whole thing moot. Third, the amount that can be contributed to an IRA is limited to $5500/$6500 for each person. While this does not affect the present case, if the distribution had been $15K instead of $9.6K, not all of that money could be contributed to IRAs for you and your wife. Finally, the contribution to a Traditional IRA might be non-deductible for income tax purposes because the Adjusted Gross Income is too high; once again, not an issue for you for 2016 but something to keep in mind for future years. In contrast, rollovers from one IRA into another IRA (both titled the same) can be in any amount, and they can be done at any time regardless of whether there is compensation for that year or not or what the Adjusted Gross Income is or whether there is coverage by a 401(k) plan. There are no tax consequences to rollovers unless the rollover is from a Traditional IRA to a Roth IRA in which case, the distribution is included in taxable income for that year. What is prohibited is taking the entire amount of the $9.6K distribution from an Inherited IRA and rolling it over into your existing IRA (or establishing a Rollover IRA in your name with that $9.6K); ditto for some money going into your IRA and some into your wife's IRA. I expect that any IRA custodian will likely refuse to allow you to carry out such a rollover transaction but will be glad to accept 2016 contributions (in amounts of up to $5500/$6500) from you into existing IRAs or open a new IRA for you. The custodian will not ask whether you have compensation for 2016 or not (but will check your age!); it is your responsibility to ensure that you do not contribute more than the compensation etc. Incidentally, subject to the $5500/6500 maximum limit, you can (if you choose to do so) contribute the entire amount of your compensation to an IRA, not just the take-home pay amount (which will be smaller than your compensation because of withholding for Social Security and Medicare tax, State and Federal income tax, etc).\",\n \"To make matters worse, if you pay the property tax your mother in law can't take the deduction either. You may be better off paying rent and having her handle the property correctly, as a rental.\",\n \"Is this RRSP through your company? If not, then you should be able to transfer the assets from GWL to CIBC using an RRSP transfer authorization form initiated through CIBC. Once your SD RSP account is set up at CIBC, use their transfer form. There is also a universal form T2033 if CIBC doesn't have one themselves. Beware of transfer out fees at GWL.\",\n \"No that is not a rollover. Many employees have experienced a change of management companies. Sometimes these switches are due to a merger, an acquisition, or just to save money. It is understandable that the old employer would like to see you transfer your funds to either your new employer, or roll them over into a IRA/Roth IRA. So it is not unexpected that they will take this opportunity to nudge you. The thing that congress was trying to prevent were serial rollovers of IRAs. These people would use the 60 day window to have in essence a loan. Some would do this multiple times a year; always making sure they replaced the money in time. The IRA One-Rollover-Per-Year Rule Beginning in 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own (Announcement 2014-15 and Announcement 2014-32). The limit will apply by aggregating all of an individual’s IRAs, including SEP and SIMPLE IRAs as well as traditional and Roth IRAs, effectively treating them as one IRA for purposes of the limit. Direct transfers of IRA money are not limited This change won’t affect your ability to transfer funds from one IRA trustee directly to another, because this type of transfer isn’t a rollover (Revenue Ruling 78-406, 1978-2 C.B. 157). The one-rollover-per-year rule of Internal Revenue Code Section 408(d)(3)(B) applies only to rollovers. Note that the law doesn't mention 401K/403B or the federal TSP. When the 401K changes management companies that is not a rollover.\",\n \"\\\"Yes, you're correct and yes they will. Note that it will be considered as \\\"\\\"sale\\\"\\\" with gains being taxable income to you.\\\"\",\n \"Simply transferring money you own from overseas to Canada will not mean you need to pay tax on it. However if you sell property at a profit - I.e. sell it for more than you paid for it - you may have to pay tax on any gains. This is true whether or not you transfer the money to Canada. Calculating the amount is quite complicated. You might consider getting a tax expert.\",\n \"Yes, your realtor is a moron. (I am a realtor, and sorry you have such a bad one) Every industry has its good and bad. You really should find a new realtor, a good one. You know the 1031 exchange is for rental property only. And that saving $2000 isn't worth staying in the house to complete the two years required occupancy.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["Regarding transferring a residential investment property into your SMSF, no you cannot do it. You cannot transfer residential property into your SMSF from a related party. You can only transfer Business Real Property (that is commercial or industrial property) into a SMSF from a related party. You can buy new residential property inside your SMSF, and you can also borrow within the fund (using a non-recourse loan) to help you buy it, or you could buy it as tenants-in-common with your SMSF (that is you own say 50% in your own name and 50% under the SMSF). Regarding self-managing the investment properties held in your SMSF, yes you can, but you should make sure all your paperwork is in order (all your t's crossed and your i's dotted). You can even charge your SMSF for managing the properties, but this should be at market rates (not more)."],"string":"[\n \"Regarding transferring a residential investment property into your SMSF, no you cannot do it. You cannot transfer residential property into your SMSF from a related party. You can only transfer Business Real Property (that is commercial or industrial property) into a SMSF from a related party. You can buy new residential property inside your SMSF, and you can also borrow within the fund (using a non-recourse loan) to help you buy it, or you could buy it as tenants-in-common with your SMSF (that is you own say 50% in your own name and 50% under the SMSF). Regarding self-managing the investment properties held in your SMSF, yes you can, but you should make sure all your paperwork is in order (all your t's crossed and your i's dotted). You can even charge your SMSF for managing the properties, but this should be at market rates (not more).\"\n]","isConversational":false}}},{"rowIdx":59,"cells":{"_id":{"kind":"string","value":"109"},"query":{"kind":"string","value":"How to account for money earned and spent prior to establishing business bank accounts?"},"gt_ids":{"kind":"list like","value":["73427"],"string":"[\n \"73427\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1],"string":"[\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["73427","492178","413229","229436","71569","107584","83346","174714","97708","297841","224438","77248","385779","499889","396807","192888","542466","37306","259728","344780","53225","71097","309023","226519","120410","520922","74688","328853","562777","71987","547301","203446","394154","367754","28758","396056","464269","501407","468095","192726","290687","576362","570860","190484","596549","258423","369445","195207","308938","189642","366830","425070","292051","146657","109754","354314","489827","127584","17127","390368","206006","10180","3336","419916","40966","348315","268026","208219","299971","188167","499604","30316","508754","441010","503476","492342","183612","100764","334902","470928","202224","54948","576873","295121","64556","1873","296717","52741","218460","333616","242923","300749","384192","127215","152027","332877","268747","162159","194955","143066"],"string":"[\n \"73427\",\n \"492178\",\n \"413229\",\n \"229436\",\n \"71569\",\n \"107584\",\n \"83346\",\n \"174714\",\n \"97708\",\n \"297841\",\n \"224438\",\n \"77248\",\n \"385779\",\n \"499889\",\n \"396807\",\n \"192888\",\n \"542466\",\n \"37306\",\n \"259728\",\n \"344780\",\n \"53225\",\n \"71097\",\n \"309023\",\n \"226519\",\n \"120410\",\n \"520922\",\n \"74688\",\n \"328853\",\n \"562777\",\n \"71987\",\n \"547301\",\n \"203446\",\n \"394154\",\n \"367754\",\n \"28758\",\n \"396056\",\n \"464269\",\n \"501407\",\n \"468095\",\n \"192726\",\n \"290687\",\n \"576362\",\n \"570860\",\n \"190484\",\n \"596549\",\n \"258423\",\n \"369445\",\n \"195207\",\n \"308938\",\n \"189642\",\n \"366830\",\n \"425070\",\n \"292051\",\n \"146657\",\n \"109754\",\n \"354314\",\n \"489827\",\n \"127584\",\n \"17127\",\n \"390368\",\n \"206006\",\n \"10180\",\n \"3336\",\n \"419916\",\n \"40966\",\n \"348315\",\n \"268026\",\n \"208219\",\n \"299971\",\n \"188167\",\n \"499604\",\n \"30316\",\n \"508754\",\n \"441010\",\n \"503476\",\n \"492342\",\n \"183612\",\n \"100764\",\n \"334902\",\n \"470928\",\n \"202224\",\n \"54948\",\n \"576873\",\n \"295121\",\n \"64556\",\n \"1873\",\n \"296717\",\n \"52741\",\n \"218460\",\n \"333616\",\n \"242923\",\n \"300749\",\n \"384192\",\n \"127215\",\n \"152027\",\n \"332877\",\n \"268747\",\n \"162159\",\n \"194955\",\n \"143066\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["Funds earned and spent before opening a dedicated business account should be classified according to their origination. For example, if your business received income, where did that money go? If you took the money personally, it would be considered either a 'distribution' or a 'loan' to you. It is up to you which of the two options you choose. On the flip side, if your business had an expense that you paid personally, that would be considered either a 'contribution of capital' or a 'loan' from you. If you choose to record these transactions as loans, you can offset them together, so you don't need two separate accounts, loan to you and loan from you. When the bank account was opened, the initial deposit came from where? If it came from your personal funds, then it is either a 'contribution of capital' or a 'loan' from you. From the sound of your question, you deposited what remained after the preceding income/expenses. This would, in effect, return the 'loan' account back to zero, if choosing that route. The above would also be how to record any expenses you may pay personally for the business (if any) in the future. Because these transactions were not through a dedicated business bank account, you can't record them in Quickbooks as checks and deposits. Instead, you can use Journal Entries. For any income received, you would debit your capital/loan account and credit your income account. For any expenses, you would debit the appropriate expense account and credit your distribution/loan account. Also, if setting up a loan account, you should choose either Current Asset or Current Liability type. The capital contribution and distribution account should be Equity type. Hope this helps!","open a bank account under the business name and put tthe money in there You can probably simply speak to the banker about having a business account and setting aside money for taxes,, etc no rocket science there just don't lie about your income is most important, or many It's not how much you make its how much you deposit in a bank, that's the first thing the tax man might look at IMO","You should have a separate business account. Mixing business and personal funds is a bad practice. Shop around, you should be able to find a bank that will let you open a free checking account, especially if you are going to have minimal activity (e.g. less than 20 of checks per month) and perhaps maintain a small balance (e.g. $100 or $500).","Typically you give a loan to the company from yourself as a private person, and when the company makes money the company pays it back to you. Then the company pays for all the expenses with the money from the loan. Even if you don't want a business account yet, you can probably ask your bank for a second account (mine in the UK did that without any problems).","You can move money in and out of the business at will, just keep track of every transaction. Ideally you'd use an accounting software like QuickBooks or similar. Create a Capital Contributions account and every time you put money into the business checking account record it as a Capital Contribution. Likewise, if you take money out of the business, it comes from your capital accounts. (You can create a separate Capital Distributions account in your accounting software, or just use a single account for contributions and distributions). Money coming in and out of those capital accounts is not taxable because you will pay taxes based on net earnings regardless of whether or not you have distributed any profits. So there's no need to make a loan to the company, which would have tax consequences. To reimburse yourself for purchases already made, submit an expense report to the company. If the company is unfunded right now, you can make a capital contribution to cover current expenses, submit the expense report, and wait until you have some profits before paying out the expense report or making any distributions. Welcome to entrepreneurship.","or just input it in my accounting software along with receipts, and then when I'm doing taxes this would go under the investment or loses (is it somewhere along that line)? Yes, this. Generally, for the long term you should have a separate bank account and charge card for your business. I started my business (LLC) by filing online, and paying a fee for a registration, and that makes it a business cost right? Startup cost. There are special rules about this. Talk to your tax adviser. For the amounts in question you could probably expense it, but verify.","\"For practical purposes, I would strongly suggest that you do create a separate account for each business you may have that is used only for business purposes, and use it for all of your business income and expenses. This will allow you to get an accurate picture of whether you are making money or not, what your full expenses really are, how much of your personal money you have put into the business, and is an easy way to keep business taxes separate. You will also be able to get a fairly quick read on what your profits are without doing much accounting by looking at the account balance less future taxes and expenses, and less any personal money you've put into the account. Check out this thread from Paypal about setting up a \"\"child\"\" account that is linked to your personal account and can be set up to autosweep payments into your main account, should you like. You will still be able to see transactions for each child account. NOTE: Do be careful to make sure you are reserving the proper amount out of any profits your startup may have for taxes - you don't want to mix this with personal money and then later find out that you owe taxes and have to scramble to come up with the money if you have already spent it This is one of the main reasons to segregate your startup's revenues and profits in the business account. For those using \"\"brick and mortar\"\" banking services rather than a service like Paypal: You likely do not need a business checking account if you are a startup. Most likely, you can simply open a second personal account with your bank in your name, and name it \"\"John Doe DBA Company Name\"\" (DBA = Doing Business As). This way, you can pay expenses and accept payments in the name of your startup. Check with your banker for additional details (localized information).\"","\"When you pay the flight, hotel, conference attendance fees of $100: When you repay the credit card debt of $100: When you receive the gross salary of $5000: Your final balance sheet will show: Your final income statement will show: Under this method, your \"\"Salary\"\" account will show the salary net of business expense. The drawback is that the $4900 does not agree with your official documentation. For tax reporting purposes, you report $5000 to the tax agency, and if possible, report the $100 as Unreimbursed Employee Expenses (you weren't officially reimbursed). For more details see IRS Publication 529.\"","You're lending the money to your business by paying for it directly. The company accounts must reflect a credit (the amount you lend to it) and a debit (what it then puts that loan towards). It's fairly normal for a small(ish) owner-driven company to reflect a large loan-account for the owners. For example, if you have a room at home dedicated for the business it is impractical to pay rent directly via the company. The rental agreement is probably in your name, you pay the rent, and you reconcile it with the company later. You could even charge your company (taxable) interest on this loan. When you draw down the loan from the company you reverse this, debit your loan account and credit the company (paying off the debt). As far as tracking that expenditure, simply handle those third-party invoices in the normal way and file them for reference.","How do I account for this in the bookkeeping? Here is an example below: This is how you would accurately depict contributions made by an owner for a business. If you would want to remove money from your company, or pay yourself back, this would be called withdrawals. It would be the inverse of the first journal entry with cash on the credit side and withdrawals on the debited side (as it is an expense). You and your business are not the same thing. You are two different entities. This is why you are taxed as two different entities. When you (the owner) make contributions, it is considered to be the cash of the business. From here you will make these expenses against the business and not yourself. Good luck,","for starters get a cheap easy accounting software pack like quickbooks and have the salesmen train you on it's use and set-up. the 50k you put into the company will count as paid up share capital. then any future withdrawal from company account will show as loan to director.","\"You are right on track with your idea of setting up a separate account for invoiced income. Create a new account with the type other asset and call it \"\"Receivables\"\" (or something similar). Every time you invoice a client, enter a credit to this account with the amount of the invoice. Once the client pays and you deposit a check, enter a transfer from the \"\"Receivables\"\" account to the bank account. EDIT I overlooked that you wish to account for not-yet-invoiced income. I think that's a bad idea. It will become confusing and will give you the false sense that your financial condition is better than it really is. There are plenty of stories about businesses that have stellar sales, but fail because of lack of cash flow (the business' bills become due before it gets paid by its own customers).\"","In the UK is perfectly acceptable to use your personal bank account as a business account if your a sole trader, although it can be messy. Just record and keep all relevant transaction invoices etc documents for self assessment time. At self assessment time they will tell you the amount of tax you need to pay when you fill out the forms. Not sure how it is Canada. If you get bigger get an accountant.","I have no idea what the traditional accounting way of dealing with this might be; but does your accounts package has the concept of subaccounts within a bank account? If so, to me it would make sense that when a cheque is written, you move money in the accounts package from the bank account to a subaccount named 'Cheques Written'; then when it is cashed, move money from that subaccount to the supplier. Then from a reporting perspective, when you want a report that will correspond to your actual bank statement, run a report that includes the subacconut; when you want a report that tells you how much you have available to spend, rune a report that excludes the subaccount.","In your journal entry, debit the appropriate expense account (office supplies, etc) and credit your equity account. The equity account should be called something like Partner Investments or something like that. You can choose to enter these all separately, on the specific dates listed, or as one entry. Some people choose to summarize the expenses they've paid personally and only enter one entry per month or so, to minimize data entry time and also because the end effect is the same. Of course, the above is assuming you are considering these purchases to be investments in the company, and not expecting the company to repay you. If you are expecting repayment, you could enter a bill instead, or credit an account like 'Loan from Shareholder' rather than the equity account.","Since you're not loaning the company the money, the correct category is Equity. It's not an income type account, rather it represents the balance of Assets - Liabilities = Owner's Equity So you'd put down £100 as the starting balance of Owner's Equity, and then a Cash Balance of £100 in a cash account.","\"This seems almost overkill, but if you want to... I suppose one thing you could do is create a separate money in transit account, similar to Account Payable and Account Receivable. In your bookkeeping, transfer the money from the source account to the holding account on the date that the source bank withdraws it, and then transfer the money to the destination account on the date that the target bank deposits it. This both makes it clear that there is money going between places, and ensures that the daily balance on each \"\"physical\"\" account is accurate. For cash withdrawals and deposits, I'd just use the date when you make the withdrawal, since that is the day from which the money is available in the new location rather than the old one. Note: I don't know if this is the \"\"proper\"\" way to do it in a random jurisdiction, but I doubt being this explicit can get you into trouble.\"","\"I used Quicken, so this may or may not be helpful. I have a Cash account that I call \"\"Temporary Assets and Liabilities\"\" where I track money that I am owed (or that I owe in some cases). So if I pay for something that is really not my expense, it is transferred to this account (\"\"transferred\"\" in Quicken terms). The payment is then not treated as an expense and the reimbursement is not treated as income--the two transactions just balance out.\"","\"$500, this is called \"\"cash basis\"\" accounting. A large company might handle it otherwise, counting shipments/billings as revenue. Not you. Yet.\"","\"Should is a very \"\"strong\"\" word. You do what makes most sense to you. Should I be making a single account for Person and crediting / debiting that account? You can do that. Should I be creating a loan for Person? And if so, would I make a new loan each month or would I keep all of the loans in one account? You can create a loan account (your asset), you don't need to create a new account every time - just change the balance of the existing one. That's essentially the implementation of the first way (\"\"making a single account for a Person\"\"). How do I show the money moving from my checking account to Company and then to Person's loan? You make the payment to Company from your Checking, and you adjust the loan amount to Person from Equity for the same amount. When the Person pays - you clear the loan balance and adjust the Checking balance accordingly. This keeps your balance intact for the whole time (i.e.: your total balance sheet doesn't change, money moves from line to line internally but the totals remain the same). This is the proper trail you're looking for. How do I (or should I even) show the money being reimbursed from the expense? You shouldn't. Company is your expense. Payment by the Person is your income. They net out to zero (unless you charge interest). Do I debit the expense at any point? Of course. Company is your expense account. Should I not concern myself with the source of a loan / repayment and instead just increase the size of the loan? Yes. See above.\"","One approach would be to create Journal Entries that debit asset accounts that are associated with these items and credit an Open Balance Equity account. The value of these contributions would have to be worked out with an accountant, as it depends on the lesser of the adjusted basis vs. the fair market value, as you then depreciate the amounts over time to take the depreciation as a business expense, and it adjusts your basis in the company (to calculate capital gains/losses when you sell). If there were multiple partners, or your accountant wants it this way, you could then debit open balance equity and credit the owner's contribution to a capital account in your name that represents your basis when you sell. From a pure accounting perspective, if the Open Balance Equity account would zero out, you could just skip it and directly credit the capital accounts, but I prefer the Open Balance Equity as it helps know the percentages of initial equity which may influence partner ownership percentages and identify anyone who needs to contribute more to the partnership.","The GnuCash manual has a page with examples of opening new accounts. The tl;dr is: use the Equity:Opening Balance to offset your original amounts. The further explanation from the GnuCash page is: As shown earlier with the Assets:Checking account, the starting balances in an account are typically assigned to a special account called Equity:Opening Balance. To start filling in this chart of account, begin by setting the starting balances for the accounts. Assume that there is $1000 in the savings account and $500 charged on the credit card. Open the Assets:Savings account register. Select View from the menu and check to make sure you are in Basic Ledger style. You will view your transactions in the other modes later, but for now let’s enter a basic transaction using the basic default style. From the Assets:Savings account register window, enter a basic 2 account transaction to set your starting balance to $1000, transferred from Equity:Opening Balance. Remember, basic transactions transfer money from a source account to a destination account. Record the transaction (press the Enter key, or click on the Enter icon). From the Assets:Checking account register window, enter a basic 2 account transaction to set your starting balance to $1000, transferred from Equity:Opening Balance. From the Liabilities:Visa account register window, enter a basic 2 account transaction to set your starting balance to $500, transferred from Equity:Opening Balance. This is done by entering the $500 as a charge in the Visa account (or decrease in the Opening Balance account), since it is money you borrowed. Record the transaction (press the Enter key, or click on the Enter icon). You should now have 3 accounts with opening balances set. Assets:Checking, Assets:Savings, and Liabilities:Visa.","\"Depending on how the check was made out, you may be able to file a DBA (\"\"doing business as\"\"), which would give you the business name locally. Then open an account under that name and deposit the check. Or simply go back to the customer and say \"\"hey, I don't have yhe company bak account open yet; could I exchange this check for one made out to me personally?\"\" That's how I've been handling hobby income under a company name. (I really do ned to file that DBA!)\"","I would take each of these items and any others and consider how you would count it as an expense in the other direction. If you have an account for parking expenses or general transportation funds, credit that account for a refund on your parking. If you have an account for expenses on technology purchases, you would credit that account if you sell a piece of equipment as you replace it with an upgrade. If you lost money (perhaps in a jacket) how would you account for the cash that is lost? Whatever account would would subtract from put a credit for cash found.","If it is more convenient for you - sure, go ahead and create another account. Generally, when you give someone a check - the money is no longer yours. So according to the constructive receipt doctrine, you've paid, whether the check was cashed or not. The QB is reflecting the correct matter of things. It doesn't matter that you're cash-based, the money still laying on your account because you gave someone a check that hasn't been cashed - is not your money and shouldn't be reflected in your books as such.","You actually don't need an accountant. They'll be expensive and at this early a stage unnecessary - what you need is a good bookkeeper who can keep track of what comes in and what goes out. You'll need that to know if you're making money or not and to show the government at the end of the year. Get a copy of QuickBooks and pick up Bookkeeping for Dummies to at least get a sense for what's going on. Have you registered as a sole proprietorship? Make sure you have a vendor's permit so you can legally sell your services in Ontario. You may need to collect HST, in which case you'll need to register for an HST # and submit it on a quarterly basis. Whatever you do, don't fuck with the government - they can freeze your bank accounts to get money they're owed. You need to keep money on hand to pay for any taxes you might owe on the business, ESPECIALLY if it's a sole proprietorship where you'll be tempted to treat profit as income. You don't want to end up with nothing in the bank at the end of the year and $40k owing to the CRA. Get a separate bank account - don't mix personal and business, it's messy. Expense everything you reasonably can.","\"A.1 and B.1 are properly balanced, but \"\"Business Expense\"\" is an expense, not an asset. The T entries should be timestamped. The time should be equal to the time on the credit card receipts. This will make audit and balancing easier. A or B can be used, but if the the business is to be reimbursed for personal expenses, the accounts should be renamed to reflect that fact. More explicit account names could be \"\"Business expense - stationary\"\" and \"\"Personal expense - lunch\"\" or even better \"\"Personal expense - cammil - lunch\"\". With a consistent format, the account names can be computer parsed for higher resolution and organization, but when tallying these high resolution accounts, debits & credits should always be used. When it comes time to collect from employees, only accounts with \"\"Personal expense\"\" need be referenced. When it comes time to collect from \"\"cammil\"\", only net accounts of \"\"Personal expense - cammil\"\" need be referenced. An example of higher resolution, to determine what \"\"cammil\"\" owes, would be to copy the main books, reverse any account beginning with \"\"Personal expense - cammil\"\", and then take the balance. Using the entries in the question as an example, here's the account to determine \"\"cammil\"\"'s balance: Now, after all such balancing entries are performed, the net credit \"\"Personal expense - cammil\"\" is what \"\"cammil\"\" owes to the business. The scheme for account names should be from left to right, general to specific.\"","Its best you start this venture as a Business entity. Whatever the customer pays you is your income. Whatever you pay to the hotel will be your expenses. Apart from this there will be other expenses. So essentially difference between your income and expense will be the profit of the entity and tax will be on the profit. If you do not want to start an Business entity and pay as an individual then please add the country tag, depending on the country there may different ways to account for the funds.","There is no law that requires you to have a separate bank account for your business, or to pay all expenses from a business bank account. It is a GOOD IDEA to have a separate bank account and pay all business expenses from that account and all personal expenses from your personal account, because that makes sorting out what is what much simpler, both in case of an audit and for your own accounting. Whether a particular expenditure is a deductible business expense has nothing to do with what account you pay it from. If you pay advertising expenses for your business from your personal account, that's still (almost certainly) a deductible business expense. If you buy groceries from your business account, that's almost certainly not a deductible business expense. In your case, there are all kinds of rules about when and how much travel is deductible.","\"For anyone that's curious, I had a number of chats with Quickbooks who recommended I import only the relevant business transactions from my personal account & personal credit card in order to lower the tax liability. This way money \"\"paid\"\" from the business account to myself rightly shows up as a transfer and not as income. This means when generating a tax report, it calculates the correct rate of tax to be paid based on income minus allowable expenses, regardless which account they came from.\"","\"Like you said, it's important to keep your personal assets and company assets completely separate to maintain the liability protection of the LLC. I'd recommend getting the business bank account right from the beginning. My wife formed an LLC last year (also as a pass-through sole proprietorship for tax purposes), and we were able to get a small business checking account from Savings Institute and Trust that has no fees (at least for the relatively low quantity of transactions we'll be doing). We wrote it a personal check for startup capital, and since then, the LLC has paid all of its own bills out of its checking account (with associated debit card). Getting the account opened took less than an hour of sitting at the bank. Without knowing exactly where you are in Kentucky, I note that Googling \"\"kentucky small business checking\"\" and visiting a few banks' web sites provided several promising options for no-fee business checking.\"","\"If you are using software like QuickBooks (or even just using spreadsheets or tracking this without software) use two Equity accounts, something like \"\"Capital Contributions\"\" and \"\"Capital Distributions\"\" When you write a personal check to the company, the money goes into the company's checking account and also increases the Capital Contribution account in accordance with double-entry accounting practices. When the company has enough retained earnings to pay you back, you use the Capital Distributions equity account and just write yourself a check. You can also make general journal entries every year to zero out or balance your two capital accounts with Retained Earnings, which (I think) is an automatically generated Equity account in QuickBooks. If this sounds too complex, you could also just use a single \"\"Capital Contributions and Distributions\"\" equity account for your contributions and distributions.\"","\"You manage this account just as any other account. \"\"Petty cash\"\" refers to accounts where the cash money is intended for ad-hoc purchases, where you store an amount of cash in your drawer and take it out as needed. However, other than naming it \"\"petty cash\"\", there's nothing petty about it - it's an account just as any other. Many choose to just \"\"deduct\"\" the amount transferred to \"\"Petty Cash\"\" account and not manage it at all. Here the amount matters - some smaller amounts can fall under \"\"de minimis\"\" rules of the appropriate regulatory authority. Since you told nothing about where you are and what your business is - we can't tell you what the rules are in your case. If you track the usage of this account (and from your description it sounds like you are) - then the name \"\"Petty Cash\"\" is meaningless. It's an account just like any other. Since you have an employee dealing with this cash you should establish some internal audit procedures to ensure that there's no embezzlement and everything is accounted for. You will probably want to reconcile this account more often than others and check more thoroughly on what's going on with it. Since its a \"\"personal finance\"\" forum, I'm assuming you're a sole proprietor or a very small business, and SEC/SOX rules don't apply to you. If they do - you should have a licensed accountant (CPA or whatever public accountancy designation is regulated in your area) to help you with this.\"","I feel the need to separate my freelance accounts from my personal accounts. Yes, you should. Should I start another savings account or a current account? Do you need the money for daily spending? Do you need to re-invest in your business? Use a current account. If you don't need the money for business expenses, put it away in your savings account or even consider term deposits. Don't rule out a hybrid approach either (some in savings account, some in current account). What criteria should I keep in mind while choosing a bank? (I thought of SBI since it has a lot of branches and ATMs). If you are involved in online banking and that is sufficient for most of your needs, bank and ATM locations shouldn't matter all that much. If you are saving a good chunk of money, you want to at least have that keep up with inflation. Research bank term deposit interest rates. The tend to be higher than just having your money sit in a savings account. Again, it depends on how and when you expect to need the money. What do I keep in mind while paying myself? Paying yourself could have tax implications. This depends on how are set up to freelance. Are you a business entity or are you an individual? You should look in to the following in India: The other thing to consider is rewarding yourself for the good work done. Pay yourself a reasonable amount. If you decide to expand and hire people going forward, you will have a better sense of business expenses involved when paying salaries. Tips on managing money in the business account. This is a very generic question. I can only provide a generic response. Know how much you are earning and how much your are putting back in to the business. Be reasonable in how much you pay yourself and do the proper research and paperwork from a taxation point of view.","I would say when starting with Gnucash to start with the level of granularity you are comfortable with while sticking to the double entry bookkeeping practices. So going through each one: Refund for Parking Pass. Assuming you treat the Parking Pass as a sunk cost, i.e. an Expense account, its just a negative entry in the Expense account which turns into a positive one in your Bank account. Yes it may look weird, and if you don't like it you can always 'pay from Equity' the prior month, or your Bank Account if you're backfilling old statements. Selling physical items. If you sold it on eBay and the value is high enough you'll get tax forms indicating you've earned x. Even if its small or not done via eBay, treat it the same way and create a 'Personal Items/Goods' Income account to track all of it. So the money you get in your Bank account would have come from there. Found jacket money would be an Equity entry, either Opening Balances into Cash or Bank account. Remember you are treating Equity / Opening Balances as the state before you started recording every transaction so both the value going into Assets (Banks,Stock,Mutual Funds) and Liabilities (Mortgage, Student Debt, Credit Card Debt) originate from there.","My company did not have income of $1000 and have a $500 expense Why not? Your company received $1000 from you, and based on its agreement with the other company - transferred out half of it. How does it not translate to having $1000 income and $500 expense? When I run a report I want to see that my business has $500 of income not $1000 with a $500 expense You can write in your reports whatever you want, but if you want to see the real picture, then that is exactly what you should be expecting. That said, transferring money from yourself to your company is generally not considered income. You can have it booked as owner's equity, or a owner's loan if the company is required to repay. Unless you're paying to your company for some services provided or assets transferred, that is.","I don't think you need double-entry bookkeeping. To quote Robert Kiyosaki (roughly): Income is when money enters you pocket, and expenses are when money leaves your pocket. Income is an addition; expenses are subtractions. But if you want double-entry accounting, I'm not qualified to answer that. :)","It's income. Create an income account for it, or use a broader “miscellaneous income” account, depending on how precise you want to be.","\"Congratulations on keeping better track of your finances! Typically there will be a class of accounts labelled \"\"Income\"\", under which you will have a separate account for each type of income (stock dividends, paychecks, home appreciation, etc). In that case, showing your income would be a transfer from the Paycheck account to your Checking account. Note that, as there are no offsetting transactions, this means your income account will steadily accrue a balance over time - just ignore this number, it's only the sum of all your paychecks. There are methods of dealing with that number (and making the income account have a zero balance), but you don't need to worry about it at this stage. Just learning to properly track expenses is the major accomplishment.\"","\"Basically, yes. Don't use your business account for personal spending because it may invalidate your limited liability protection. Transfer a chunk of money to your personal account, write it down in your books as \"\"distribution\"\" (or something similar), and use it in whatever way you want from your personal account. The IRS doesn't care per se, but mixing personal and business expenses will cause troubles if you're audited because you'll have problems distinguishing one from another. You should be using some accounting software to make sure you track your expenses and distributions correctly. It will make it easier for you to prepare reports for yourself and your tax preparer, and also track distributions and expenses. I suggest GnuCash, I find it highly effective for a small business with not so many transactions (if you have a lot of transactions, then maybe QuickBooks would be more appropriate).\"","I would suggest opening a new account (credit card and bank) for just your business. This protects you in multiple ways, but is no bigger burden for you other than carrying another card in your wallet. Then QB can download the transactions from your website and reconciling is a cinch. If you got audited, you'd be in for a world of pain right now. From personal experience there are a few charges that go unnoticed that reconciling finds every month at our business. We have a very strict process in place, but some things slip through the cracks.","Before answering specific question, you are liable to pay tax as per your bracket on the income generated. I work with my partner and currently we transfer all earning on my personal bank account. Can this create any issue for me? If you are paying your partner from your account, you would need to maintain proper paperwork to show the portion of money transferred is not income to you. Alternatively create a join Current Account. Move funds there and then move it to your respective accounts. Which sort off account should be talk and by whose name? Can be any account [Savings/Current]. If you are doing more withdrawls open Current else open Savings. It does not matter on whos name the account is. Paperwork to show income matters from tax point of view. What should we take care while transfering money from freelance site to bank? Nothing specific Is there any other alternative to bank? There is paypal etc. However ultimately it flows into a Bank Account. What are other things to be kept in mind? Keep proper record of actual income of each of you, along with expenses. There are certain expenses you can claim from income, for example laptop, internet, mobile phone etc. Consult a CA he will be able to guide and it does not cost much.","Generally loan goes against an asset, in your case though it appear that you don't have any fixed assets related to this loan. So it seems like you got a cash loan (current asset/checking account?) which you spent (expenses). Since you're doing it retroactively, you'll probably just put totals in the expenses without detailing them.","There are really only two options: invoiced, or paid. Everything else is not relevant from a tax or accounting point of view. Of course, if you're invoicing as you go along or collecting deposits once things are in your order books, then that amount of money is relevant. Working things out according to when you invoice is called working on an accrual basis. Working it out according to when you get paid is called working on a cash basis. Wikipedia explains the distinction, which also applies to your expenses: when did you incur them (get the bill) vs when you did you pay it. In some jurisdictions and for some kinds of companies, you can choose which of these two bases to work on (but no other basis.) There is advice on the UK government website about keeping your accounts. It includes a link to a PDF and on page 15 of that 100 page PDF it states: 2.14 The financial statements, with the exception of cash flow information, shall be prepared on the accruals basis of accounting. HENCE, ALL INCOME AND CHARGES RELATING TO THE FINANCIAL YEARTO WHICH THE ACCOUNTS RELATE MUST BE TAKEN INTO ACCOUNT, WITHOUT REGARD TO THE DATE OF PAYMENT OR RECEIPT. That seems pretty clear to me. When you invoice. Period.","You actually don't have to open a business account with your bank, you can have a personal account with the bank and have your business funds go into it, whether it be from cheques or from Eftpos\\Credit Card Facilities. You just have to get your customers to make the cheque out under your name (the same name used for your bank account). If you are trading as a sole trader and you trade under a name other than your own name, then officially you are supposed to register that name with Fair Trading in your state. However, if you are trading using another name and it is not registered, Fair Trading will only become aware of it if someone (usually one of your customers) makes a compliant about you, and they will then ask you to either stop using that name as your trading name or have it registered (if not already registered by someone else).","\"What I've found works best when working on my personal budget is to track my income and spending two different ways: bank accounts and budget categories. Here is what I mean: When I deposit my paycheck, I do two things with it: It goes into my checking account, so the balance of my checking account goes up by the amount of my paycheck. I also \"\"deposit\"\" the money from my checking account into my various budget category balances. This is separate from my bank account balances. Some of my paycheck money goes into my groceries category, some goes into clothing, some into car fuel, entertainment, mortgage, phone, etc. Some goes into longer range bills that only happen once or twice a year, such as car insurance, life insurance, property tax, etc. Some goes into savings goals of ours, such as car replacement, vacation, furniture, etc. Every dollar that we have in a bank account or in cash in our wallets is also accounted for in a budget category. If you add up the balances of our bank accounts and cash, and you add up the balances of our budget categories, they add up to the same number. When we make a purchase, this also gets accounted for twice: The appropriate bank account (or cash wallet) balance gets reduced by the purchase amount. The appropriate budget category gets reduced by the purchase amount. In this way, we don't really need to worry about having separate bank accounts for different purposes. We don't need to put our savings goal money in a separate bank account from our grocery money, if we don't want to. The budget category accounting keeps track of how much money is allocated to each purpose. Now, the budget category amounts are not spent yet; the money in them is still in our bank account, and we can move money around in the categories, if we change our mind on how to allocate them. For example, if we don't spend all of our gas money for the month, we can either keep that money in the gas category, or we can move it to a different category, such as the car replacement category or the vacation category. If the phone bill is more than we expect, we can move money around from a different category to cover it. Now, back to your question: We allocate some money from each paycheck into our furniture category. But the money is not really spent until we actually buy some furniture. When we do, the furniture category balance and bank account balance both go down by the amount of the purchase. All of this can be kept track of on the computer in a spreadsheet. However, it's not easy to keep track of so many categories and bank balances. An easier solution is custom budgeting software designed for this purpose. I use and recommend YNAB.\"","After talking to two CPAs it seems like managing it using an imprest system is the best idea. The base characteristic of an imprest system is that a fixed amount is reserved and later replenished as it runs low. This replenishment will come from another account source, e.g., petty cash will be replenished by cashing a cheque drawn on a bank account. Petty cash imprest system allows only the replenishment of the spend made. So, if you start the month with €100 in your petty cash float and spend €90 of that cash in the month, an amount of €90 will be then placed in your petty cash float to bring the balance of your petty cash float back to €100. The replenishment is credited to the primary cash account, usually a bank account (Dr - Petty Cash a/c, Cr - Bank a/c) and the debits will go to the respective expense accounts, based on the petty cash receipt dockets (Dr- Expense a/c, Cr - Petty Cash a/c). In a non imprest system where a fixed amount is issued every month, e.g., €100 every time cash is required, there is no incentive to ensure all money issued has been documented because when money is all spent a check for a fixed amount is issued. It is much more difficult to reconcile a non imprest system as you never know how much exactly should be in the float. In an imprest system the amount requested is documented, the documentation being the petty cash dockets and their associated receipts or invoices. So at all times you can check how much should be left in the petty cash float by deducting the amount spent from the opening petty cash float.","Do you have a separate bank account for your business? That is generally highly recommended. I have a credit card for my single-member LLC. I prefer it this way because it makes the separation of personal and business expenses very clear. Using a personal credit card, but using it for only business expenses seems to be a reasonable practice. You may be able to do one better though... For your sole proprietorship, you can file a DBA which establishes the business name. The details of this depend on your state. With a DBA, I believe you can open a bank account in the name of your business and you may also be able to open a credit card account in the name of the business. I'm not sure what practical difference it makes, but it does make the personal/business distinction clearer. Though, at that point, you might as well just do the LLC...","\"You should have separate files for each of the two businesses. The business that transfers money out should \"\"write check\"\" in its QB file. The business that receives money should \"\"make deposit\"\" in its QB file. (In QB you \"\"write check\"\" even when you make the payment by some other means like ACH.) Neither business should have the bank accounts of the other explicitly represented. On each side, you will also need to classify the payment as having originated from / gone to some other account - To know what's correct there, we'd need to know why your transferring the money in the first place and how you otherwise have your books established. I think that's probably beyond the scope of what's on-topic / feasible here. Money into your business from your personal account is probably owner's equity, unless you have something else going on. For example, on the S Corp you should be paying yourself a salary. If you overpay by accident, then you might write a check back to the company from your personal account to correct the mistake. That's not equity - It's probably a \"\"negative expense\"\" in some other account that tracks the salary payments.\"","I would suggest at least getting a personal card that you only use for business expenses, even if you don't opt for a business card. It makes it very clear that expenses on that card are business expenses, and is just more professional. The same goes for a checking account, if you have one of those. It makes it easier to defend if you are ever audited, and if you use an accountant or tax preparer.","First, you should probably have a proper consultation with a licensed tax adviser (EA/CPA licensed in your State). In fact you should have had it before you started, but that ship has sailed. You're talking about start-up expenses. You can generally deduct up to $5000 in the year your business starts, and the expenses in excess will be amortized over 180 months (15 years). This is per the IRC Sec. 195. The amortization starts when your business is active (i.e.: you can buy the property, but not actually open the restaurant - you cannot start the depreciation). I have a couple questions about accounting - should all the money I spent be a part of capital spending? Or is it just a part of it? If it qualifies as start-up/organizational expenses - it should be capitalized. If it is spent on capital assets - then it should also be capitalized, but for different reasons and differently. For example, costs of filing paperwork for permits is a start-up expense. Buying a commercial oven is a capital asset purchase which should be depreciated separately, as buying the tables and silverware. If it is a salary expense to your employees - then it is a current expense and shouldn't be capitalized. Our company is LLC if this matters. It matters to how it affects your personal tax return.","The thing is that you only need one entry, not two. That's the beauty of double entry - since you have double entry system, every transaction will create two entries. So you don't need to create two transactions, you only need one. So you got a $30 gift. You credit Income:Gifts and on the other side Assets:Checking. Your general ledger entry (Menu->Tools->General Ledger) will look like this: You end up with balances: Which represent your total income and your current balance. Similarly with expense for food: GL will look like this: Balances: And you keep track of totals properly.","\"Your first and second paragraphs are two different cases. Moving money between a checking account and a savings account will credit Cash and debit Cash, making a GL transaction unnecessary, unless the amounts in the two bank accounts are tracked as two separate GL accounts. You might have account 1001 (Cash-Checking) and account 1002 (Cash-Savings). In that case, a movement of money between these two accounts should be tracked by a transaction between the GL accounts; credit checking, debit savings. It won't affect your balance sheet, but depending on your definition of liquidity of assets it might affect working capital on your statement of cash flows (if you consider the savings account \"\"illiquid\"\" then money moved to it is a decrease in working capital). Basically, what you are creating with your \"\"store credit\"\" accounts for each client is an \"\"unearned revenue\"\" account. When clients pay you cash for work you haven't done yet, or you refund money for a return as \"\"store credit\"\" instead of cash, the credit is a liability account, balancing an increase in cash, inventory, or an expense (if you're giving credit for free, perhaps due to a mistake on your part, you would debit a \"\"Store Credit Expense\"\" account). This can be split out client-by-client in the GL if you wish, avoiding the need for a holding account. The way you want to do it, you'd have a \"\"Client Holding\"\" account. It must be unique in the GL and to the client, and yes, it is a liability account. To transfer to holding, you simply debit Unearned Revenue and credit Client Holding, logging the transaction as \"\"transfer of client store credit\"\" or similar (moving liability to liability; balance sheet doesn't change). Then, as you sell goods or services to the client, you debit Accounts Receivable and credit Revenue, then to record the payment you credit AR and debit Client Holding (up to its current credit balance, after which the client pays you Cash and you debit that, or the client still owes you). To zero out a remaining balance on the Holding account, debit Client Holding and credit Unearned Revenue. I don't think the Holding account, the way you want to use it, is a good idea. If you want to track each customer's store credit balance with a GL account, then create specialized Unearned Revenue accounts for each client who gets a store credit, named for the client and containing their balance (zero or otherwise). If you don't care about it at the GL level, then pool it in one Unearned Revenue account (have one Store Credit account if you must), and track individual amounts off the books.\"","Yes, you should be able to deduct at least some of these expenses. For expense incurred before you started the business: What Are Deductible Startup Costs? The IRS defines “startup costs” as deductible capital expenses that are used to pay for: 1) The cost of “investigating the creation or acquisition of an active trade or business.” This includes costs incurred for surveying markets, product analysis, labor supply, visiting potential business locations and similar expenditures. 2) The cost of getting a business ready to operate (before you open your doors or start generating income). These include employee training and wages, consultant fees, advertising, and travel costs associated with finding suppliers, distributors, and customers. These expenses can only be claimed if your research and preparation ends with the formation of a successful business. The IRS has more information on how to claim the expenses if you don’t go into business. https://www.sba.gov/blogs/startup-cost-tax-deductions-how-write-expense-starting-your-business Once your business is underway, you can deduct expenses, but the exact details depend on how you organized. If you're a sole proprietor for tax purposes, then you'll deduct them on Schedule C of your Form 1040 on your personal tax. If you are a partnership, C-Corp, or S-Corp, they will be accounted at the business level and either passed on to you on a Schedule K (partnership and S-Corp) or deducted directly by the company (C-Corp). In any case, you will need good records that justify your expenses as business related. It might be well worth at least an initial meeting with a CPA to make sure that you get started on the right foot.","Expensing a transfer of funds is incorrect. That will affect the Profit/Loss (Income) statement when you transfer it out and back in, which you do not want, at least for the principle. The interest should be recorded as a interest income. The general way to account for transferring money is to credit the originating account, and debit the destination account. This will only affect the balance sheet accounts. For example: Transferring (buying) 10,000 worth of fix term bank deposits Interest is paid: The bank deposit reaches maturity, so the principle is returned, with the final interest payment. The accounts Checking account and Fixed term bank deposit are asset accounts, which show up on the balance sheet. The Interest income is an income account, which will show up in the income statement. This is how a fixed term/CD is usually recorded. In certain cases, where the business must follow an accounting standard, this may very well be insufficient, but this situation will be unlikely if it's a small private sports club. Having said that, double check to make sure what you've stated is indeed correct, and look back into the past entries to see how it was dealt with before, especially since you said this bookkeeping job is temporary. I would strongly advise against changing non-recent entries, even if they are incorrect. For the insurance payments, that would depend on how the damaged assets were accounted for. It's a little hard to say without more detail-- the extent of the damage, how the diminished value was accounted for in the books, the cost of repair materials, etc.","I am assuming this is USA. While it is a bit of a pain, you are best off to have separate accounts for your business and personal. This way, if it comes to audit, you hand the IRS statements for your business account(s) and they match your return. As a further precaution I would have the card(s) you use for business expenses look different then the ones you use for personal so you don't mess another one up.","\"Journal entry into Books of company: 100 dr. expense a/c 1 200 dr. expense a/c 2 300 dr. expanse a/c 3 // cr. your name 600 Each expense actually could be a total if you don´t want to itemise, to save time if you totaled them on a paper. The paper is essentually an invoice. And the recipts are the primary documents. Entry into Your journal: dr. Company name // cr. cash or bank You want the company to settle at any time the balce is totaled for your name in the company books and the company name in your books. They should be equal and the payment reverses it. Or, just partially pay. Company journal: dr. your name // cr. cash or bank your journal: dr. cash or bank // cr. company name Look up \"\"personal accounts\"\" for the reasoning. Here is some thing on personal accounts. https://books.google.com/books?id=LhPMCgAAQBAJ&pg=PT4&dq=%22personal+account%22+double+entry&hl=es-419&sa=X&redir_esc=y#v=onepage&q=%22personal%20account%22%20double%20entry&f=false\"","Yes you can. You should talk to your tax advisor re the specific expenditures that can be accounted as startup-costs (legal fees are a good candidate, for example). If they add up to significant amounts (>$5K), you'll have to capitalize them over a certain period of time, and deduct from your business' income. This is not a tax advice.:-)","The 'standard' thing to do, after double checking your numbers to see if you can find or remember the actual reason for the discrepancy is to use an Income account for 'extra' money and an expense account for 'lost' money. The Imbalance account is meant as a temporary placeholder for monies not yet put into their right account. I personally use Income:Other Income for such found money, and Expenses:Adjustment for lost money.","As a sole proprietor, the tax liability of your business is calculated based on combining your business income with your personal income together. It is good advice to keep all personal and business financial matters separate. This makes it easier to prove to the IRS that all your business expenses are actually business related. In this case however, the two items [tax payment for personal income vs tax payment for business income] are inseparable. What you can do, however, for your own personal records, is calculate how much of your tax payment relates to your business. I wouldn't get complicated about this; I would simply take the net income of your business as a % of your taxable income, and multiply that against your tax payment. ie: if your business net income is $10,000, and your total taxable income is $50,000, and you paid $6,000 in taxes, I would record that 20% of the $6k was related to business income. If you have a separate bank account for your sole proprietorship, you could make a transfer to your personal account of $1,200, and then make the $6k payment from your personal account. Remember that tax payments for either your sole proprietorship and your personal income will be treated the same: federal tax payments are not tax deductible, and state tax payments are tax deductible, whether they were paid for your sole proprietorship or the rest of your personal income. So even though this method is simplistic [for example, it doesn't factor in that different investment income types earned personally will have a lower rate than your sole proprietorship income], any difference wouldn't have an impact on any future tax liability. This would only be for your own personal record keeping.","I would just create a single liability account to represent the loan, starting with a $0 balance. Then, create a transaction in which the amount of the loan moves from the liability account into your savings account. As you pay the loan off, you'll create new transactions that move money from whichever account you're using to pay it off into your liability account.","\"Depending on how you view the loan, it could either be considered an Asset or a Liability. Since you are not charging interest, it might seem more intuitive to create an \"\"Assets:Cash Loan\"\" account, and transfer money to & from it (when you receive payments) like you would with a bank account. Personally, I prefer to think of all loans as liabilities. Whether it's a debt which you owe someone, or a balance which someone else owes you, since it's an 'unsettled' amount I file it under \"\"Liabilities:Loan\"\". Either way, you record the initial balance as a debit from your bank, and then record payments as credits back to your primary account. The only way that income or expenses ever gets involved would be if you charged interest (income) or if you forgave some or all of the loan (expense) at some point in the future.\"","\"Yes, kinda. Talk to local banks about a business account, and tell them you want to enable certain employees to make deposits but not withdrawals. They don't need to know you're all the same person. For instance I have a PayPal account for business. These allow you to create \"\"sub accounts\"\" for your employees with a variety of access privileges. Of course I control the master account, but I also set up a \"\"sub account\"\" for myself. That is the account I use every day.\"","\"Fees & liabilities Yes, the first problem is that liabilities are being improperly booked. If the fee you charge is fixed upon deposit then the fee should credit \"\"Revenue\"\", the fee charged to you should be booked by crediting cash and then debiting \"\"Expenses\"\", and the remaining should be booked as a liability. If the fee is fixed upon withdrawal then this will become more complex because of the fact that a change in the fee can occur before it can be applied. In this case, the current fee should be credited as \"\"Revenue\"\" and some \"\"Allowance for fee increase\"\" should also be credited. The amount owed to the withdrawer should be booked as a liability as before. Multiple currency bookings I will assume that this is for a cryptocurrency service of some sort considering the comments in your question and your presence on bitcoin.se. Accounting can become very dangerous when mixing denominations. This is why all major accounting standards mandate books be maintained single currency. In your case, if the deposit is in USD, for example, and the liability is in BTC then two books must be maintained, one for each. To account for your operation properly using single currency accounts, the denominations must be exchanged internally and balanced across the two sets of books. For a deposit of BTC/depository of USD, the operation would be the same as described above, but then the cash should be credited away and the liabilities debited away from the USD books with simultaneous cash debits and liability credits on the BTC books. Considering the extreme volatility of cryptocurrency exchange rates, denominating accounts on the wrong set of books will quickly lead to insolvency or loss from improper accounting or both. From revenue to income Revenue can be construed as a liability since it could theoretically exist on the balance sheet. I mention this because all books, despite their name and quarter, are really simply long T accounts, like a blockchain. A blockchain could be subdivided into users' individual income statements & balance sheets, as the reverse of this concept. Revenues are credited, expenses are debited. The difference, \"\"net income\"\", is debited away with a credit to \"\"owners' equity\"\".\"","It took me a while to understand the concept, so I'll break it down as best as I can. There are three parts to the accounting equation: Assets = Liabilities + Owner's Equity We'll look at this in two ways 1. As a business owner you invest (say) 10,000 USD into your bank. The entry would be: Debit: Assets: Cash for 10,000 Credit: Owner's Equity: Contributions for 10,000 In this case, you have assets of 10,000 from your deposit, but it is due to owner contributions and not business transactions. Another example (say a sale): Debit: Assets: Cash for 10,000 Credit: Owner's Equity: Sales for 10,000 Debit: Assets: Cash for 10,000 Credit: Liabilities: Deposits for 10,000 Deposits are a banking term to reflect a bank's obligation to return the amount on demand (though the bank has free reign with it, see fractional banking) You will NEVER debit or credit your bank as it is assumed you will be storing your money there, note bank reconciliation. Hope this helps, comment with any more questions.","The £500 are an expense associated with the loan, just like interest. You should have an expense account where you can put such financing expenses (or should create a new one). Again, treat it the same way you'll treat interest charges in future statements.","\"If you sign the check \"\"For Deposit Only\"\", the bank will put it in your account. You may need to set up a \"\"payable name\"\" on the account matching your DBA alias. However, having counted offerings for a church on several occasions, I know that banks simply have no choice but to be lax about the \"\"Pay to the Order Of\"\" line on checks. Say the church's \"\"legal name\"\" for which the operating funds account was opened is \"\"Saint Barnabas Episcopal Church of Red Bluff\"\". You'll get offering checks made out to \"\"Saint Barnabas\"\", \"\"Saint B's\"\", \"\"Episcopal Church of Red Bluff\"\", \"\"Red Bluff Episcopal\"\", \"\"Youth Group Fund\"\", \"\"Pastor Frank\"\", etc. The bank will take em all; just gotta stamp em with the endorsement for the church. Sometimes the money will be \"\"earmarked\"\" based on the payable line; any attempt to pay the pastor directly will go into his \"\"discretionary fund\"\", and anything payable to a specific subgroup of the church will go into their asset account line, but really all the cash goes directly to the same bank account anyway. For-profit operations are similar; an apartment complex may get checks payable to the apartment name, the management company name, even the landlord. I expect that your freelance work will be no different.\"","\"If you are considering this to be an entry for your business this is how you would handle it.... You said you were making a balance sheet for monthly expenses. So on the Balance Sheet, you would be debiting cash. For the Income Statement side you would be crediting Owner's Equity to balance the equation: Assets = Liabilities + Owner's Equity So if you deposited $100 to your account the equation would be affected thus: $ 100 in Assets (Debit to Cash Account) = 0 Liabilities - $100 (Credit to Owner's Equity) It is correctly stated above from the bank's perspective that they would be \"\"Crediting\"\" you account with $100, and any outflow from the bank account would be debiting your account.\"","\"I can say that I got X dollars from an account like \"\"Income:Benefits\"\"... but where do I credit that money to? \"\"Expenses:Groceries\"\" Yes doesn't feel right, since I never actually spent that money on food, You did, didn't you? You got food. I'm guessing there's an established convention for this already? Doubt it. Established conventions in accounting are for businesses, and more specifically - public companies. So you can find a GAAP, or IFRS guidelines on how to book benefits (hint: salary expense), but it is not something you may find useful in your own household accounting. Do what is most convenient for you. Since it is a double-booking system - you need to have an account on the other side. Expenses:Groceries doesn't feel right? Add Expenses:Groceries:Benefits or Expenses:Benefits or whatever. When you do your expense and cash-flow reports - you can exclude both the income and the expense benefits accounts if you track them separately, so that they don't affect your tracking of the \"\"real\"\" expenses.\"","\"Do not use a shared bank account. One of you can cash/deposit the check in your personal account and then either pay the others in the group cash or write them a check. You open yourself up to many, many problems sharing a bank account and/or money. Treat it like a business as far as income goes, but I would not recommend any type of formal business, LLC, partnership, sole proprietorship, etc. For federal taxes, you just keep track of how much \"\"you\"\" personally are paid and report that at the end of the year as income, most likely on a 1040EZ 1040SE, along with any other income you have.\"","\"One easy way to monitor costs in QuickBooks is to establish sub-bank accounts. For example, you may have an asset account called \"\"State Bank\"\" numbered 11100 (asset, cash and cash equivalents, bank). Convert this to a parent account for a middle school by making subaccounts such as At budget formation, transfer $800 from Operations 11110 to Family Fun Committee 11130. Then write all checks for Family Fun from the Family Fun 11130 subaccount. For fundraising, transfer $0 at budget formation to the X Grade accounts. Do deposit all grade-level receipts into the appropriate grade-level subaccounts and write all checks for the grades from the grade-level subaccounts. The downside to the above is that reconciling the check book each month is slightly more complicated because you will be reconciling one monthly paper bank statement to multiple virtual subaccounts. Also, you must remember to never write a check from the parent \"\"State Bank\"\" 11100, and instead write the checks from the appropriate subaccounts.\"","You should be recording the reimbursement as a negative expense on the original account the expense was recorded. Let's assume you have a $100 expense and $100 salary. Total $200 paycheck. You will have something like this In the reports, it will show that the expense account will have $0 ($100 + ($100)), while income account will have $100 (salary).","\"I have checked with Bank of America, and they say the ONLY way to cash (or deposit, or otherwise get access to the funds represented by a check made out to my business) is to open a business account. They tell me this is a Federal regulation, and every bank will say the same thing. To do this, I need a state-issued \"\"dba\"\" certificate (from the county clerk's office) as well as an Employer ID Number (EIN) issued by the IRS. AND their CHEAPEST business banking account costs $15 / month. I think I can go to the bank that the check is drawn upon, and they will cash it, assuming I have documentation showing that I am the sole proprietor. But I'm not sure.... What a racket!!\"","\"I'm no accounting expert, but I've never heard of anyone using a separate account to track outstanding checks. Instead, the software I use (GnuCash) uses a \"\"reconciled\"\" flag on each transaction. This has 3 states: n: new transaction (the bank doesn't know about it yet), c: cleared transaction (the bank deducted the money), and y: reconciled transaction (the transaction has appeared on a bank statement). The account status line includes a Cleared balance (which should be how much is in your bank account right now), a Reconciled balance (which is how much your last bank statement said you had), and a Present balance (which is how much you'll have after your outstanding checks clear). I believe most accounting packages have a similar feature.\"","\"If your business is structured as a partnership or sole proprietorship you call this investment \"\"partner equity\"\". If instead it is structured as a corporation, then the initial investment is called \"\"paid-in capital\"\". Either way, this represents the capital the initial investors or partners provided to the company in exchange for their ownership stake. The most important thing in your case is that since that initial investment is in the form of inventory, you are going to have to document the value of that investment somehow. You will definitely need a comprehensive manifest of what you contributed, including titles and condition, and if possible you should document the prices at which similar items are being offered for sale at the time you start operating. Having this information will support your claims as to the fair market value of the start-up contribution, should the tax authorities decide to question it.\"","Hmm, let's see, I always get Credit and Debit mixed up, but I'll try: Signing of the contract: Receiving 500 deposit: When you are done Accounts Receivable will have $500 (because you are owed $500), Revenue will have $1000 (because you made $1000 on an accrual basis), and Cash will have $500 (because you have $500 in your pocket).","Assuming you buy the services and products beforehand and then provide them to your clients. Should the cost of these products and services be deducted from my declared income or do I include them and then claim them as allowable expenses? You arrive at your final income after accounting for your incomings and outgoings ? regularly buys products and services on behalf of clients These are your expenses. invoice them for these costs after These are your earnings. These are not exactly allowable expenses, but more as the cost of doing your business, so it will be deducted from your earnings. There will be other business expenses which you need to deduct from your earnings and then you arrive at your income/profit. So before you arrive at your income all allowable expenses have been deducted. include on my invoices to clients VAT if you charge VAT. Any charges you require them to pay i.e. credit card charges etc. You don't need to inform clients about any costs you incur for doing your business unless required by law. If you are unsure about something browse the gov.uk website or obtain the services of an accountant. Accounting issues might be costly on your pocket if mistakes are committed.","\"You don't specify which country you are in, so my answers are more from a best practice view than a legal view.. I don't intend on using it for personal use, but I mean it's just as possible. This is a dangerous proposition.. You shouldn't co-mingle business expenses with personal expenses. If there is a chance this will happen, then stop, make it so that it won't happen. The big danger is in being able to have traceability between what you are doing for the business, and what you are doing for yourself. If you are using this as a \"\"staging\"\" account for investments, etc., are those investments for yourself? Or for the business? Is tax treatment on capital gains and/or dividends the same for personal and business in your jurisdiction? If you buy a widget, is the widget an expense against business income? Or is it an out of pocket expense for personal consumption? The former reduces your taxable income, the latter does not. I don't see the benefit of a real business account because those have features specific to maybe corporations, LLC, and etc. -- nothing beneficial to a sole proprietor who has no reports/employees. The real benefit is that there is a clear delineation between business income/expenses and personal income/expenses. This account can also accept money and hold it from business transactions/sales, and possibly transfer some to the personal account if there's no need for reinvesting said amount/percentage. What you are looking for is a commonly called a current account, because it is used for current expenses. If you are moving money out of the account to your personal account, that speaks to paying yourself, which has other implications as well. The safest/cleanest way to do this is to: While this may sound like overkill, it is the only way to guarantee that income/expenses are allocated to the correct entity (i.e. you, or your business). From a Canadian standpoint:\"","There is no reason for you to open a firm. However, it will help you, if you operate separate bank account for business and personal purposes. You can run your business as proprietorship business. Your inward remittance is your income. You can deduct payment made to your colleagues as salary. You should pay them by way of cheques or bank transfer only. You are also entitled to deduct other business expenses provided you keep proper receipt of the same such as broadband connection charges, depreciation on equipment and more importantly, rent on your house. If your total receipt from such income exceeds INR 60,00,000 you will need to withhold tax on payment made to your colleagues as also subject to audit of your accounts. If you want to grow your business, suggest you should take an Import / Export Code in your own name. You can put any further question in this regard.","\"There is no \"\"standard\"\" way for personal accounting. However, GNUCash default accounts set includes \"\"Expense: Adjustment\"\". It is usually used by the community for reconciliation of unknown small money lost.\"","\"Your debits and credits are perfect. Now, it comes down to a choice of how you want your accounts organized, financially speaking. In terms of taxes, it's recommended you keep a separate set of books just like a corporation and account for them strictly according to law. It's best not to credit phone expenses since it will no longer show on your net reports. A better alternative would be \"\"Phone reimbursement\"\". With that, you can not only see if you've been compensated but also how much you're personally managing these expenses by checking the annual \"\"Phone expense\"\" account. This is all up to personal preference, but so long as you're properly balancing your accounts, you can introduce any level of resolution you wish. I prefer total resolution when it comes to financial accounting. Also, it is not good practice to debit away \"\"Salary\"\". The net of this account will be lower and distorted. An expense reimbursement is not salary anyways, so the proper bookings will follow below. Finally, if GnuCash is calling \"\"Salary\"\" an income account, this is unfortunate. The proper label would be \"\"revenue\"\" since \"\"income\"\" is a net account of expenses from revenue in the income identity. Entries With this, your books will become clearer: your cash assets will remain as clear as you had organized them, but now your income statement will provide higher resolution.\"","I would use the withdrawal date to record, as it represents you no longer have these funds in your account whether you have written a check and/or transferred money you should count the funds as no longer being in your account.","You can receive money directly into your savings bank account. It is perfectly legal. FYI the Bank as part of regulation would report this to RBI. As the funds are received for the services you have rendered, You are liable to pay tax on the income. The income is taxed as professional income similar to the income of Doctors, Lawyers, Accountants etc. If you are paying your colleagues, it would be treated as expense. Not only this, you can also treat any phone calls you make, or equipment your purchase [laptop, desk etc] as expense. The difference become your actual income and you would be taxed as per the rate for individuals. It's advisable you contact an accountant who would advise you better for a nominal fee [few thousand rupees] and help you pay the tax and file the returns. With or without accountant It is very important for you to record all payments and expenses in a book of accounts.","Well, consult with a CPA, but I guess you don't have to pay taxes on 2012 with a correct accounting system since this is the money you are going to completely earn within 2013 so you can record it as future earning which is called deferred revenue or advance payments or unearned revenue.","If you're a sole proprietor there's no reason to have a separate business account, as long as you keep adequate records, as you are one and the same for tax purposes. My husband and I already have 5 accounts and a mortgage with one bank. I don't see the need to open up yet another account. As a contracted accountant, I don't need to write business checks, and my expenses are minimal. As long as I have an present my assumed business name certificate and ID, there's no reason for a bank not to deposit into my personal account.","\"I expect the company wanted to pay you for a product (on a purchase order) rather than as a contract laborer. Whatever. Would they be willing to re-issue the check to you as a sole proprietor of a business named ABC Consulting (or anything like that)? You can register your sole proprietor business with the state using a \"\"Doing Business As\"\" (DBA, or fictitious name), and then open the bank account for your business using the check provided by the customer as the first deposit. (There is likely a smaller registration fee for the DBA.) If they won't re-issue the check and you have to go the LLC route... Scrounge up $125 doing odd jobs or borrowing from a friend or parents. Seriously, anyone can earn that amount of money in a week or two. Besides the filing fee for the LLC, your bank may require you to provide an Operating Agreement (which is not required by the State). The Operating Agreement can be simple, or more complex if you have a partner (even if it's a spouse). If you do have a partner, it is essential to have such an agreement because it would specify the responsibilities and benefits allocated to each partner, particularly in the event of equity distributions (taking money out of the business, or liquidating and ending the LLC). There are websites that will provide you a boilerplate form for Operating Agreements. But if your business is anything more than just single member LLC, you should pay an attorney to draw one up for you so the wording is right. It's a safeguard against potential future lawsuits. And, while we're at it, don't forget to obtain a EIN (equivalent to a SSN) from the IRS for your LLC. There's no cost, but you'll have to have it to file taxes as a business for every year the LLC exists and has income. Good luck!\"","\"Having a separate checking account for the business makes sense. It simplifies documenting your income/expenses. You can \"\"explain\"\" every dollar entering and exiting the account without having to remember that some of them were for non-business items. My credit union allowed me to have a 2nd checking account and allowed me to put whatever I wanted as the name on the check. I think this looked a little better than having my name on the check. I don't see the need for a separate checking account for investing. The money can be kept in a separate savings account that has no fees, and can even earn a little interest. Unless you are doing a lot of investment transactions a month this has worked for me. I fund IRAs and 529 plans this way. We get paychecks 4-5 times a month, but send money to each of the funds once a month. You will need a business account if the number of transactions becomes large. If you deposit dozens of checks every time you go to the bank, the bank will want to move you to a business account.\"","\"Create an account called, say, \"\"Paycheck\"\". When you get paid, create an entry with your gross income as a deposit. For each deduction in your paycheck, create a minus (or expense) entry. After doing that, what will be left in the Paycheck account will be your net income. Simply transfer this amount to the real account your paycheck goes into (your checking account, probably). Almost all the time, the value of your Paycheck account will be 0. It will be nonzero only for a moment every two weeks (or however often you get paid). I don't know if this is the standard way of doing it (in the professional accounting world). It's a way I developed on my own and it works well, I think. I think it's better than just adding a deposit entry in your checking account for your net income as it lets you keep track of all your deductions. (I use Quicken for the Mac. Before they added a Paycheck feature, I used this method. Then they removed the Paycheck feature from the latest version of Quicken for the Mac and I now use this method again.)\"","\"This may be closed as not quite PF, but really \"\"startup\"\" as it's a business question. In general, you should talk to a professional if you have this type of question, specifics like this regarding your tax code. I would expect that as a business, you will use a proper paper trail to show that money, say 1000 units of currency, came in and 900 went out. This is a service, no goods involved. The transaction nets you 100, and you track all of this. In the end you have the gross profit, and then business expenses. The gross amount, 1000, should not be the amount taxed, only the final profit.\"","You can make a capital contribution, not a loan. It's not a taxable event, no interest, and you can take a distribution later when the business has the money to pay you back. So yes, transfer the money. If you use software like Quickbooks, make use of unique accounts for tracking the contribution","\"You will need to set up accounts in your chart of accounts for each of the partners. These are equity accounts where you can track your contributions, share of the profits and losses, and distributions. You're going to have to go back into the beginning years to get this right. I'm not sure what you mean by a \"\"Built-in function\"\". All the accounting software I'm familiar with requires data entry of some kind. You need to post your contributions and distributions to the correct accounts, and close properly at year end. You were indeed legally considered a partnership as soon as you started a for-profit business venture together. It's a bug in the legal system that a written partnership agreement is not necessarily required - you can form a partnership unknowingly. (BTW, a partnership actually is pretty far off from a sole proprietorship, legally and taxwise - the change from one person to two is major. It's the change from two to three or four or more that's incremental ;) I know you said you didn't want to consult a professional, but I have to say that I think it's worth the money to get your books set up by someone who has experience and can show you how to do it. And get a separate bank account for the partnership, if you haven't done so already. And check with your state to see if there are any requirements regarding partnerships. Hope this helps, Mariette IRS Circular 230 Notice: Please note that any tax advice contained in this communication is not intended to be used, and cannot be used, by anyone to avoid penalties that may be imposed under federal tax law.\"","\"I'm assuming you're operating on the cash basis of accounting, based on your comment \"\"Cash, I think that's the only way for a sole propriator (sic)\"\" Consider: There are two distinct but similar-name concepts here: \"\"paid for\"\" (in relation to a expense) and \"\"paid off\"\" (in relation to a debt). These both occur in the case you describe: Under the cash basis of accounting, when you can deduct an expense is based on when you paid for the expense, not when you eventually pay off any resulting debt arising from paying for the expense. Admittedly, \"\"cash basis\"\" isn't a great name because things don't solely revolve around cash. Rather, it's when money has changed hands – whether in the form of cash, check, credit card, etc. Perhaps \"\"monetary transaction basis\"\" might have been a better name since it would capture the paid-for concept whether using cash or credit. Unfortunately, we're stuck with the terminology the industry established.\"","Technically, it's only when you need to pass money through. However consider that the length the account has been open builds history with the financial institution, so I'd open ASAP. Longer history with the bank can help with getting approved for things like business credit lines, business cards, and other perks, though if you're not making money with that business, seek out a bank that does not charge money to have a business account open with them.","Nope sorry guest you are wrong. how can salary and an expense be on the same side of the ledger? Salary 2000 Personal bank 2000 Phone expenses 30 Personal bank 30","It seems that you're complicating things quite a bit. Why would you not create a business entity, open one or more bank accounts for it, and then have the money wired into those accounts? If you plan on being a company then set up the appropriate structure for it. In the U.S., you can form an S-corporation or an LLC and choose pass-through taxation so that all you pay is income tax on what you receive from the business as personal income. The business itself would not have tax liability in such a case. Co-mingling your personal banking with that of your business could create real tax headaches for you if you aren't careful, so it's not worth the trouble or risk.","Typically in GnuCash, account balances that exist at the beginning of the time you're keeping records for are balanced by entries in an Equity account “Equity:Opening Balances”, which is part of the default set of accounts created for you. This account is really just a placeholder so that everything balances, and that's perfectly normal. So, just enter “Equity:Opening Balances” as the “other entry” when entering the first, opening balance, transaction in your Liability account for the loan. If you have not already created the liability account, then just use the “Opening Balance” tab of the New Account window to enter the initial balance as you create the account. (Disclaimer: I have no formal knowledge of accounting; I just use GnuCash and read the users' mailing list.)","Use one journal entry, and split the expenses into the appropriate accounts. This can happen even if you never mix business and personal on the same receipt: say you order office supplies (which where I live are immediately deductible as an expense) and software or hardware (which must be depreciated because they are assets) on the same order. We have an account called Proprietors Loan which represents money the company is lending to the humans who own it, or that the humans are lending to the company. Were I to pay for my personal lunch on a business credit card, it would go through that account, increasing the amount the company has lent me or decreasing the amount I have lent it. Similarly if I made a business purchase with a personal card it would go through that account in the other direction. Where I live, I can lend my company all the money I want any time, but if the company lends me money there can't be an outstanding balance over the corporate year end. If you make two credit card entries of 5 and 10 when you go to reconcile your accounts it will be harder because you'll have to realize they together match the single 15 line on your statement. Making a single entry (your A option) will make reconciling your statement much easier. And that way, you'll probably reconcile your statements, which is vital to knowing you actually recorded everything.","\"I use the (gratis, libre) command-line program ledger for my personal accounts. It handles funds across accounts gracefully, through a feature called \"\"Virtual Accounts\"\". A transaction can add or subtract money from a virtual account, which need not balance with all the other entries in the transaction. Then it's just a matter of setting up reports to include or exclude these accounts.\"","Do not mix personal accounts and corporate accounts. If you're paid as your self person - this money belongs to you, not the corporation. You can contribute it to the corporation, but it is another tax event and you should understand fully the consequences. Talk to a tax adviser (EA/CPA licensed in your State). If they pay to you personally (1099) - it goes on your Schedule C, and you pay SE taxes on it. If they pay to your corporation, the corporation will pay it to you as salary, and will pay payroll taxes on it. Generally, payroll through corporation will be slightly more expensive than regular schedule C. If you have employees/subcontractors, though, you may earn money which is not from your own performance, in which case S-Corp may be an advantage.","\"I don't think it really matters, my understanding is that as a sole trader there is no distinction between your personal and business tax affairs. The distinction between your personal and business account is mainly for your own personal benefit to make it easier to differentiate between \"\"wages\"\" and retained earnings. If you want to maintain this distinction with regard to tax then you need to somehow differentiate between tax paid on your \"\"wage\"\" and tax paid on retained earnings. You could then either make two payments, or pay from either and transfer the difference from the other. Either way, it's just a matter of perspective rather than something with a physical difference.\""],"string":"[\n \"Funds earned and spent before opening a dedicated business account should be classified according to their origination. For example, if your business received income, where did that money go? If you took the money personally, it would be considered either a 'distribution' or a 'loan' to you. It is up to you which of the two options you choose. On the flip side, if your business had an expense that you paid personally, that would be considered either a 'contribution of capital' or a 'loan' from you. If you choose to record these transactions as loans, you can offset them together, so you don't need two separate accounts, loan to you and loan from you. When the bank account was opened, the initial deposit came from where? If it came from your personal funds, then it is either a 'contribution of capital' or a 'loan' from you. From the sound of your question, you deposited what remained after the preceding income/expenses. This would, in effect, return the 'loan' account back to zero, if choosing that route. The above would also be how to record any expenses you may pay personally for the business (if any) in the future. Because these transactions were not through a dedicated business bank account, you can't record them in Quickbooks as checks and deposits. Instead, you can use Journal Entries. For any income received, you would debit your capital/loan account and credit your income account. For any expenses, you would debit the appropriate expense account and credit your distribution/loan account. Also, if setting up a loan account, you should choose either Current Asset or Current Liability type. The capital contribution and distribution account should be Equity type. Hope this helps!\",\n \"open a bank account under the business name and put tthe money in there You can probably simply speak to the banker about having a business account and setting aside money for taxes,, etc no rocket science there just don't lie about your income is most important, or many It's not how much you make its how much you deposit in a bank, that's the first thing the tax man might look at IMO\",\n \"You should have a separate business account. Mixing business and personal funds is a bad practice. Shop around, you should be able to find a bank that will let you open a free checking account, especially if you are going to have minimal activity (e.g. less than 20 of checks per month) and perhaps maintain a small balance (e.g. $100 or $500).\",\n \"Typically you give a loan to the company from yourself as a private person, and when the company makes money the company pays it back to you. Then the company pays for all the expenses with the money from the loan. Even if you don't want a business account yet, you can probably ask your bank for a second account (mine in the UK did that without any problems).\",\n \"You can move money in and out of the business at will, just keep track of every transaction. Ideally you'd use an accounting software like QuickBooks or similar. Create a Capital Contributions account and every time you put money into the business checking account record it as a Capital Contribution. Likewise, if you take money out of the business, it comes from your capital accounts. (You can create a separate Capital Distributions account in your accounting software, or just use a single account for contributions and distributions). Money coming in and out of those capital accounts is not taxable because you will pay taxes based on net earnings regardless of whether or not you have distributed any profits. So there's no need to make a loan to the company, which would have tax consequences. To reimburse yourself for purchases already made, submit an expense report to the company. If the company is unfunded right now, you can make a capital contribution to cover current expenses, submit the expense report, and wait until you have some profits before paying out the expense report or making any distributions. Welcome to entrepreneurship.\",\n \"or just input it in my accounting software along with receipts, and then when I'm doing taxes this would go under the investment or loses (is it somewhere along that line)? Yes, this. Generally, for the long term you should have a separate bank account and charge card for your business. I started my business (LLC) by filing online, and paying a fee for a registration, and that makes it a business cost right? Startup cost. There are special rules about this. Talk to your tax adviser. For the amounts in question you could probably expense it, but verify.\",\n \"\\\"For practical purposes, I would strongly suggest that you do create a separate account for each business you may have that is used only for business purposes, and use it for all of your business income and expenses. This will allow you to get an accurate picture of whether you are making money or not, what your full expenses really are, how much of your personal money you have put into the business, and is an easy way to keep business taxes separate. You will also be able to get a fairly quick read on what your profits are without doing much accounting by looking at the account balance less future taxes and expenses, and less any personal money you've put into the account. Check out this thread from Paypal about setting up a \\\"\\\"child\\\"\\\" account that is linked to your personal account and can be set up to autosweep payments into your main account, should you like. You will still be able to see transactions for each child account. NOTE: Do be careful to make sure you are reserving the proper amount out of any profits your startup may have for taxes - you don't want to mix this with personal money and then later find out that you owe taxes and have to scramble to come up with the money if you have already spent it This is one of the main reasons to segregate your startup's revenues and profits in the business account. For those using \\\"\\\"brick and mortar\\\"\\\" banking services rather than a service like Paypal: You likely do not need a business checking account if you are a startup. Most likely, you can simply open a second personal account with your bank in your name, and name it \\\"\\\"John Doe DBA Company Name\\\"\\\" (DBA = Doing Business As). This way, you can pay expenses and accept payments in the name of your startup. Check with your banker for additional details (localized information).\\\"\",\n \"\\\"When you pay the flight, hotel, conference attendance fees of $100: When you repay the credit card debt of $100: When you receive the gross salary of $5000: Your final balance sheet will show: Your final income statement will show: Under this method, your \\\"\\\"Salary\\\"\\\" account will show the salary net of business expense. The drawback is that the $4900 does not agree with your official documentation. For tax reporting purposes, you report $5000 to the tax agency, and if possible, report the $100 as Unreimbursed Employee Expenses (you weren't officially reimbursed). For more details see IRS Publication 529.\\\"\",\n \"You're lending the money to your business by paying for it directly. The company accounts must reflect a credit (the amount you lend to it) and a debit (what it then puts that loan towards). It's fairly normal for a small(ish) owner-driven company to reflect a large loan-account for the owners. For example, if you have a room at home dedicated for the business it is impractical to pay rent directly via the company. The rental agreement is probably in your name, you pay the rent, and you reconcile it with the company later. You could even charge your company (taxable) interest on this loan. When you draw down the loan from the company you reverse this, debit your loan account and credit the company (paying off the debt). As far as tracking that expenditure, simply handle those third-party invoices in the normal way and file them for reference.\",\n \"How do I account for this in the bookkeeping? Here is an example below: This is how you would accurately depict contributions made by an owner for a business. If you would want to remove money from your company, or pay yourself back, this would be called withdrawals. It would be the inverse of the first journal entry with cash on the credit side and withdrawals on the debited side (as it is an expense). You and your business are not the same thing. You are two different entities. This is why you are taxed as two different entities. When you (the owner) make contributions, it is considered to be the cash of the business. From here you will make these expenses against the business and not yourself. Good luck,\",\n \"for starters get a cheap easy accounting software pack like quickbooks and have the salesmen train you on it's use and set-up. the 50k you put into the company will count as paid up share capital. then any future withdrawal from company account will show as loan to director.\",\n \"\\\"You are right on track with your idea of setting up a separate account for invoiced income. Create a new account with the type other asset and call it \\\"\\\"Receivables\\\"\\\" (or something similar). Every time you invoice a client, enter a credit to this account with the amount of the invoice. Once the client pays and you deposit a check, enter a transfer from the \\\"\\\"Receivables\\\"\\\" account to the bank account. EDIT I overlooked that you wish to account for not-yet-invoiced income. I think that's a bad idea. It will become confusing and will give you the false sense that your financial condition is better than it really is. There are plenty of stories about businesses that have stellar sales, but fail because of lack of cash flow (the business' bills become due before it gets paid by its own customers).\\\"\",\n \"In the UK is perfectly acceptable to use your personal bank account as a business account if your a sole trader, although it can be messy. Just record and keep all relevant transaction invoices etc documents for self assessment time. At self assessment time they will tell you the amount of tax you need to pay when you fill out the forms. Not sure how it is Canada. If you get bigger get an accountant.\",\n \"I have no idea what the traditional accounting way of dealing with this might be; but does your accounts package has the concept of subaccounts within a bank account? If so, to me it would make sense that when a cheque is written, you move money in the accounts package from the bank account to a subaccount named 'Cheques Written'; then when it is cashed, move money from that subaccount to the supplier. Then from a reporting perspective, when you want a report that will correspond to your actual bank statement, run a report that includes the subacconut; when you want a report that tells you how much you have available to spend, rune a report that excludes the subaccount.\",\n \"In your journal entry, debit the appropriate expense account (office supplies, etc) and credit your equity account. The equity account should be called something like Partner Investments or something like that. You can choose to enter these all separately, on the specific dates listed, or as one entry. Some people choose to summarize the expenses they've paid personally and only enter one entry per month or so, to minimize data entry time and also because the end effect is the same. Of course, the above is assuming you are considering these purchases to be investments in the company, and not expecting the company to repay you. If you are expecting repayment, you could enter a bill instead, or credit an account like 'Loan from Shareholder' rather than the equity account.\",\n \"Since you're not loaning the company the money, the correct category is Equity. It's not an income type account, rather it represents the balance of Assets - Liabilities = Owner's Equity So you'd put down £100 as the starting balance of Owner's Equity, and then a Cash Balance of £100 in a cash account.\",\n \"\\\"This seems almost overkill, but if you want to... I suppose one thing you could do is create a separate money in transit account, similar to Account Payable and Account Receivable. In your bookkeeping, transfer the money from the source account to the holding account on the date that the source bank withdraws it, and then transfer the money to the destination account on the date that the target bank deposits it. This both makes it clear that there is money going between places, and ensures that the daily balance on each \\\"\\\"physical\\\"\\\" account is accurate. For cash withdrawals and deposits, I'd just use the date when you make the withdrawal, since that is the day from which the money is available in the new location rather than the old one. Note: I don't know if this is the \\\"\\\"proper\\\"\\\" way to do it in a random jurisdiction, but I doubt being this explicit can get you into trouble.\\\"\",\n \"\\\"I used Quicken, so this may or may not be helpful. I have a Cash account that I call \\\"\\\"Temporary Assets and Liabilities\\\"\\\" where I track money that I am owed (or that I owe in some cases). So if I pay for something that is really not my expense, it is transferred to this account (\\\"\\\"transferred\\\"\\\" in Quicken terms). The payment is then not treated as an expense and the reimbursement is not treated as income--the two transactions just balance out.\\\"\",\n \"\\\"$500, this is called \\\"\\\"cash basis\\\"\\\" accounting. A large company might handle it otherwise, counting shipments/billings as revenue. Not you. Yet.\\\"\",\n \"\\\"Should is a very \\\"\\\"strong\\\"\\\" word. You do what makes most sense to you. Should I be making a single account for Person and crediting / debiting that account? You can do that. Should I be creating a loan for Person? And if so, would I make a new loan each month or would I keep all of the loans in one account? You can create a loan account (your asset), you don't need to create a new account every time - just change the balance of the existing one. That's essentially the implementation of the first way (\\\"\\\"making a single account for a Person\\\"\\\"). How do I show the money moving from my checking account to Company and then to Person's loan? You make the payment to Company from your Checking, and you adjust the loan amount to Person from Equity for the same amount. When the Person pays - you clear the loan balance and adjust the Checking balance accordingly. This keeps your balance intact for the whole time (i.e.: your total balance sheet doesn't change, money moves from line to line internally but the totals remain the same). This is the proper trail you're looking for. How do I (or should I even) show the money being reimbursed from the expense? You shouldn't. Company is your expense. Payment by the Person is your income. They net out to zero (unless you charge interest). Do I debit the expense at any point? Of course. Company is your expense account. Should I not concern myself with the source of a loan / repayment and instead just increase the size of the loan? Yes. See above.\\\"\",\n \"One approach would be to create Journal Entries that debit asset accounts that are associated with these items and credit an Open Balance Equity account. The value of these contributions would have to be worked out with an accountant, as it depends on the lesser of the adjusted basis vs. the fair market value, as you then depreciate the amounts over time to take the depreciation as a business expense, and it adjusts your basis in the company (to calculate capital gains/losses when you sell). If there were multiple partners, or your accountant wants it this way, you could then debit open balance equity and credit the owner's contribution to a capital account in your name that represents your basis when you sell. From a pure accounting perspective, if the Open Balance Equity account would zero out, you could just skip it and directly credit the capital accounts, but I prefer the Open Balance Equity as it helps know the percentages of initial equity which may influence partner ownership percentages and identify anyone who needs to contribute more to the partnership.\",\n \"The GnuCash manual has a page with examples of opening new accounts. The tl;dr is: use the Equity:Opening Balance to offset your original amounts. The further explanation from the GnuCash page is: As shown earlier with the Assets:Checking account, the starting balances in an account are typically assigned to a special account called Equity:Opening Balance. To start filling in this chart of account, begin by setting the starting balances for the accounts. Assume that there is $1000 in the savings account and $500 charged on the credit card. Open the Assets:Savings account register. Select View from the menu and check to make sure you are in Basic Ledger style. You will view your transactions in the other modes later, but for now let’s enter a basic transaction using the basic default style. From the Assets:Savings account register window, enter a basic 2 account transaction to set your starting balance to $1000, transferred from Equity:Opening Balance. Remember, basic transactions transfer money from a source account to a destination account. Record the transaction (press the Enter key, or click on the Enter icon). From the Assets:Checking account register window, enter a basic 2 account transaction to set your starting balance to $1000, transferred from Equity:Opening Balance. From the Liabilities:Visa account register window, enter a basic 2 account transaction to set your starting balance to $500, transferred from Equity:Opening Balance. This is done by entering the $500 as a charge in the Visa account (or decrease in the Opening Balance account), since it is money you borrowed. Record the transaction (press the Enter key, or click on the Enter icon). You should now have 3 accounts with opening balances set. Assets:Checking, Assets:Savings, and Liabilities:Visa.\",\n \"\\\"Depending on how the check was made out, you may be able to file a DBA (\\\"\\\"doing business as\\\"\\\"), which would give you the business name locally. Then open an account under that name and deposit the check. Or simply go back to the customer and say \\\"\\\"hey, I don't have yhe company bak account open yet; could I exchange this check for one made out to me personally?\\\"\\\" That's how I've been handling hobby income under a company name. (I really do ned to file that DBA!)\\\"\",\n \"I would take each of these items and any others and consider how you would count it as an expense in the other direction. If you have an account for parking expenses or general transportation funds, credit that account for a refund on your parking. If you have an account for expenses on technology purchases, you would credit that account if you sell a piece of equipment as you replace it with an upgrade. If you lost money (perhaps in a jacket) how would you account for the cash that is lost? Whatever account would would subtract from put a credit for cash found.\",\n \"If it is more convenient for you - sure, go ahead and create another account. Generally, when you give someone a check - the money is no longer yours. So according to the constructive receipt doctrine, you've paid, whether the check was cashed or not. The QB is reflecting the correct matter of things. It doesn't matter that you're cash-based, the money still laying on your account because you gave someone a check that hasn't been cashed - is not your money and shouldn't be reflected in your books as such.\",\n \"You actually don't need an accountant. They'll be expensive and at this early a stage unnecessary - what you need is a good bookkeeper who can keep track of what comes in and what goes out. You'll need that to know if you're making money or not and to show the government at the end of the year. Get a copy of QuickBooks and pick up Bookkeeping for Dummies to at least get a sense for what's going on. Have you registered as a sole proprietorship? Make sure you have a vendor's permit so you can legally sell your services in Ontario. You may need to collect HST, in which case you'll need to register for an HST # and submit it on a quarterly basis. Whatever you do, don't fuck with the government - they can freeze your bank accounts to get money they're owed. You need to keep money on hand to pay for any taxes you might owe on the business, ESPECIALLY if it's a sole proprietorship where you'll be tempted to treat profit as income. You don't want to end up with nothing in the bank at the end of the year and $40k owing to the CRA. Get a separate bank account - don't mix personal and business, it's messy. Expense everything you reasonably can.\",\n \"\\\"A.1 and B.1 are properly balanced, but \\\"\\\"Business Expense\\\"\\\" is an expense, not an asset. The T entries should be timestamped. The time should be equal to the time on the credit card receipts. This will make audit and balancing easier. A or B can be used, but if the the business is to be reimbursed for personal expenses, the accounts should be renamed to reflect that fact. More explicit account names could be \\\"\\\"Business expense - stationary\\\"\\\" and \\\"\\\"Personal expense - lunch\\\"\\\" or even better \\\"\\\"Personal expense - cammil - lunch\\\"\\\". With a consistent format, the account names can be computer parsed for higher resolution and organization, but when tallying these high resolution accounts, debits & credits should always be used. When it comes time to collect from employees, only accounts with \\\"\\\"Personal expense\\\"\\\" need be referenced. When it comes time to collect from \\\"\\\"cammil\\\"\\\", only net accounts of \\\"\\\"Personal expense - cammil\\\"\\\" need be referenced. An example of higher resolution, to determine what \\\"\\\"cammil\\\"\\\" owes, would be to copy the main books, reverse any account beginning with \\\"\\\"Personal expense - cammil\\\"\\\", and then take the balance. Using the entries in the question as an example, here's the account to determine \\\"\\\"cammil\\\"\\\"'s balance: Now, after all such balancing entries are performed, the net credit \\\"\\\"Personal expense - cammil\\\"\\\" is what \\\"\\\"cammil\\\"\\\" owes to the business. The scheme for account names should be from left to right, general to specific.\\\"\",\n \"Its best you start this venture as a Business entity. Whatever the customer pays you is your income. Whatever you pay to the hotel will be your expenses. Apart from this there will be other expenses. So essentially difference between your income and expense will be the profit of the entity and tax will be on the profit. If you do not want to start an Business entity and pay as an individual then please add the country tag, depending on the country there may different ways to account for the funds.\",\n \"There is no law that requires you to have a separate bank account for your business, or to pay all expenses from a business bank account. It is a GOOD IDEA to have a separate bank account and pay all business expenses from that account and all personal expenses from your personal account, because that makes sorting out what is what much simpler, both in case of an audit and for your own accounting. Whether a particular expenditure is a deductible business expense has nothing to do with what account you pay it from. If you pay advertising expenses for your business from your personal account, that's still (almost certainly) a deductible business expense. If you buy groceries from your business account, that's almost certainly not a deductible business expense. In your case, there are all kinds of rules about when and how much travel is deductible.\",\n \"\\\"For anyone that's curious, I had a number of chats with Quickbooks who recommended I import only the relevant business transactions from my personal account & personal credit card in order to lower the tax liability. This way money \\\"\\\"paid\\\"\\\" from the business account to myself rightly shows up as a transfer and not as income. This means when generating a tax report, it calculates the correct rate of tax to be paid based on income minus allowable expenses, regardless which account they came from.\\\"\",\n \"\\\"Like you said, it's important to keep your personal assets and company assets completely separate to maintain the liability protection of the LLC. I'd recommend getting the business bank account right from the beginning. My wife formed an LLC last year (also as a pass-through sole proprietorship for tax purposes), and we were able to get a small business checking account from Savings Institute and Trust that has no fees (at least for the relatively low quantity of transactions we'll be doing). We wrote it a personal check for startup capital, and since then, the LLC has paid all of its own bills out of its checking account (with associated debit card). Getting the account opened took less than an hour of sitting at the bank. Without knowing exactly where you are in Kentucky, I note that Googling \\\"\\\"kentucky small business checking\\\"\\\" and visiting a few banks' web sites provided several promising options for no-fee business checking.\\\"\",\n \"\\\"If you are using software like QuickBooks (or even just using spreadsheets or tracking this without software) use two Equity accounts, something like \\\"\\\"Capital Contributions\\\"\\\" and \\\"\\\"Capital Distributions\\\"\\\" When you write a personal check to the company, the money goes into the company's checking account and also increases the Capital Contribution account in accordance with double-entry accounting practices. When the company has enough retained earnings to pay you back, you use the Capital Distributions equity account and just write yourself a check. You can also make general journal entries every year to zero out or balance your two capital accounts with Retained Earnings, which (I think) is an automatically generated Equity account in QuickBooks. If this sounds too complex, you could also just use a single \\\"\\\"Capital Contributions and Distributions\\\"\\\" equity account for your contributions and distributions.\\\"\",\n \"\\\"You manage this account just as any other account. \\\"\\\"Petty cash\\\"\\\" refers to accounts where the cash money is intended for ad-hoc purchases, where you store an amount of cash in your drawer and take it out as needed. However, other than naming it \\\"\\\"petty cash\\\"\\\", there's nothing petty about it - it's an account just as any other. Many choose to just \\\"\\\"deduct\\\"\\\" the amount transferred to \\\"\\\"Petty Cash\\\"\\\" account and not manage it at all. Here the amount matters - some smaller amounts can fall under \\\"\\\"de minimis\\\"\\\" rules of the appropriate regulatory authority. Since you told nothing about where you are and what your business is - we can't tell you what the rules are in your case. If you track the usage of this account (and from your description it sounds like you are) - then the name \\\"\\\"Petty Cash\\\"\\\" is meaningless. It's an account just like any other. Since you have an employee dealing with this cash you should establish some internal audit procedures to ensure that there's no embezzlement and everything is accounted for. You will probably want to reconcile this account more often than others and check more thoroughly on what's going on with it. Since its a \\\"\\\"personal finance\\\"\\\" forum, I'm assuming you're a sole proprietor or a very small business, and SEC/SOX rules don't apply to you. If they do - you should have a licensed accountant (CPA or whatever public accountancy designation is regulated in your area) to help you with this.\\\"\",\n \"I feel the need to separate my freelance accounts from my personal accounts. Yes, you should. Should I start another savings account or a current account? Do you need the money for daily spending? Do you need to re-invest in your business? Use a current account. If you don't need the money for business expenses, put it away in your savings account or even consider term deposits. Don't rule out a hybrid approach either (some in savings account, some in current account). What criteria should I keep in mind while choosing a bank? (I thought of SBI since it has a lot of branches and ATMs). If you are involved in online banking and that is sufficient for most of your needs, bank and ATM locations shouldn't matter all that much. If you are saving a good chunk of money, you want to at least have that keep up with inflation. Research bank term deposit interest rates. The tend to be higher than just having your money sit in a savings account. Again, it depends on how and when you expect to need the money. What do I keep in mind while paying myself? Paying yourself could have tax implications. This depends on how are set up to freelance. Are you a business entity or are you an individual? You should look in to the following in India: The other thing to consider is rewarding yourself for the good work done. Pay yourself a reasonable amount. If you decide to expand and hire people going forward, you will have a better sense of business expenses involved when paying salaries. Tips on managing money in the business account. This is a very generic question. I can only provide a generic response. Know how much you are earning and how much your are putting back in to the business. Be reasonable in how much you pay yourself and do the proper research and paperwork from a taxation point of view.\",\n \"I would say when starting with Gnucash to start with the level of granularity you are comfortable with while sticking to the double entry bookkeeping practices. So going through each one: Refund for Parking Pass. Assuming you treat the Parking Pass as a sunk cost, i.e. an Expense account, its just a negative entry in the Expense account which turns into a positive one in your Bank account. Yes it may look weird, and if you don't like it you can always 'pay from Equity' the prior month, or your Bank Account if you're backfilling old statements. Selling physical items. If you sold it on eBay and the value is high enough you'll get tax forms indicating you've earned x. Even if its small or not done via eBay, treat it the same way and create a 'Personal Items/Goods' Income account to track all of it. So the money you get in your Bank account would have come from there. Found jacket money would be an Equity entry, either Opening Balances into Cash or Bank account. Remember you are treating Equity / Opening Balances as the state before you started recording every transaction so both the value going into Assets (Banks,Stock,Mutual Funds) and Liabilities (Mortgage, Student Debt, Credit Card Debt) originate from there.\",\n \"My company did not have income of $1000 and have a $500 expense Why not? Your company received $1000 from you, and based on its agreement with the other company - transferred out half of it. How does it not translate to having $1000 income and $500 expense? When I run a report I want to see that my business has $500 of income not $1000 with a $500 expense You can write in your reports whatever you want, but if you want to see the real picture, then that is exactly what you should be expecting. That said, transferring money from yourself to your company is generally not considered income. You can have it booked as owner's equity, or a owner's loan if the company is required to repay. Unless you're paying to your company for some services provided or assets transferred, that is.\",\n \"I don't think you need double-entry bookkeeping. To quote Robert Kiyosaki (roughly): Income is when money enters you pocket, and expenses are when money leaves your pocket. Income is an addition; expenses are subtractions. But if you want double-entry accounting, I'm not qualified to answer that. :)\",\n \"It's income. Create an income account for it, or use a broader “miscellaneous income” account, depending on how precise you want to be.\",\n \"\\\"Congratulations on keeping better track of your finances! Typically there will be a class of accounts labelled \\\"\\\"Income\\\"\\\", under which you will have a separate account for each type of income (stock dividends, paychecks, home appreciation, etc). In that case, showing your income would be a transfer from the Paycheck account to your Checking account. Note that, as there are no offsetting transactions, this means your income account will steadily accrue a balance over time - just ignore this number, it's only the sum of all your paychecks. There are methods of dealing with that number (and making the income account have a zero balance), but you don't need to worry about it at this stage. Just learning to properly track expenses is the major accomplishment.\\\"\",\n \"\\\"Basically, yes. Don't use your business account for personal spending because it may invalidate your limited liability protection. Transfer a chunk of money to your personal account, write it down in your books as \\\"\\\"distribution\\\"\\\" (or something similar), and use it in whatever way you want from your personal account. The IRS doesn't care per se, but mixing personal and business expenses will cause troubles if you're audited because you'll have problems distinguishing one from another. You should be using some accounting software to make sure you track your expenses and distributions correctly. It will make it easier for you to prepare reports for yourself and your tax preparer, and also track distributions and expenses. I suggest GnuCash, I find it highly effective for a small business with not so many transactions (if you have a lot of transactions, then maybe QuickBooks would be more appropriate).\\\"\",\n \"I would suggest opening a new account (credit card and bank) for just your business. This protects you in multiple ways, but is no bigger burden for you other than carrying another card in your wallet. Then QB can download the transactions from your website and reconciling is a cinch. If you got audited, you'd be in for a world of pain right now. From personal experience there are a few charges that go unnoticed that reconciling finds every month at our business. We have a very strict process in place, but some things slip through the cracks.\",\n \"Before answering specific question, you are liable to pay tax as per your bracket on the income generated. I work with my partner and currently we transfer all earning on my personal bank account. Can this create any issue for me? If you are paying your partner from your account, you would need to maintain proper paperwork to show the portion of money transferred is not income to you. Alternatively create a join Current Account. Move funds there and then move it to your respective accounts. Which sort off account should be talk and by whose name? Can be any account [Savings/Current]. If you are doing more withdrawls open Current else open Savings. It does not matter on whos name the account is. Paperwork to show income matters from tax point of view. What should we take care while transfering money from freelance site to bank? Nothing specific Is there any other alternative to bank? There is paypal etc. However ultimately it flows into a Bank Account. What are other things to be kept in mind? Keep proper record of actual income of each of you, along with expenses. There are certain expenses you can claim from income, for example laptop, internet, mobile phone etc. Consult a CA he will be able to guide and it does not cost much.\",\n \"Generally loan goes against an asset, in your case though it appear that you don't have any fixed assets related to this loan. So it seems like you got a cash loan (current asset/checking account?) which you spent (expenses). Since you're doing it retroactively, you'll probably just put totals in the expenses without detailing them.\",\n \"There are really only two options: invoiced, or paid. Everything else is not relevant from a tax or accounting point of view. Of course, if you're invoicing as you go along or collecting deposits once things are in your order books, then that amount of money is relevant. Working things out according to when you invoice is called working on an accrual basis. Working it out according to when you get paid is called working on a cash basis. Wikipedia explains the distinction, which also applies to your expenses: when did you incur them (get the bill) vs when you did you pay it. In some jurisdictions and for some kinds of companies, you can choose which of these two bases to work on (but no other basis.) There is advice on the UK government website about keeping your accounts. It includes a link to a PDF and on page 15 of that 100 page PDF it states: 2.14 The financial statements, with the exception of cash flow information, shall be prepared on the accruals basis of accounting. HENCE, ALL INCOME AND CHARGES RELATING TO THE FINANCIAL YEARTO WHICH THE ACCOUNTS RELATE MUST BE TAKEN INTO ACCOUNT, WITHOUT REGARD TO THE DATE OF PAYMENT OR RECEIPT. That seems pretty clear to me. When you invoice. Period.\",\n \"You actually don't have to open a business account with your bank, you can have a personal account with the bank and have your business funds go into it, whether it be from cheques or from Eftpos\\\\Credit Card Facilities. You just have to get your customers to make the cheque out under your name (the same name used for your bank account). If you are trading as a sole trader and you trade under a name other than your own name, then officially you are supposed to register that name with Fair Trading in your state. However, if you are trading using another name and it is not registered, Fair Trading will only become aware of it if someone (usually one of your customers) makes a compliant about you, and they will then ask you to either stop using that name as your trading name or have it registered (if not already registered by someone else).\",\n \"\\\"What I've found works best when working on my personal budget is to track my income and spending two different ways: bank accounts and budget categories. Here is what I mean: When I deposit my paycheck, I do two things with it: It goes into my checking account, so the balance of my checking account goes up by the amount of my paycheck. I also \\\"\\\"deposit\\\"\\\" the money from my checking account into my various budget category balances. This is separate from my bank account balances. Some of my paycheck money goes into my groceries category, some goes into clothing, some into car fuel, entertainment, mortgage, phone, etc. Some goes into longer range bills that only happen once or twice a year, such as car insurance, life insurance, property tax, etc. Some goes into savings goals of ours, such as car replacement, vacation, furniture, etc. Every dollar that we have in a bank account or in cash in our wallets is also accounted for in a budget category. If you add up the balances of our bank accounts and cash, and you add up the balances of our budget categories, they add up to the same number. When we make a purchase, this also gets accounted for twice: The appropriate bank account (or cash wallet) balance gets reduced by the purchase amount. The appropriate budget category gets reduced by the purchase amount. In this way, we don't really need to worry about having separate bank accounts for different purposes. We don't need to put our savings goal money in a separate bank account from our grocery money, if we don't want to. The budget category accounting keeps track of how much money is allocated to each purpose. Now, the budget category amounts are not spent yet; the money in them is still in our bank account, and we can move money around in the categories, if we change our mind on how to allocate them. For example, if we don't spend all of our gas money for the month, we can either keep that money in the gas category, or we can move it to a different category, such as the car replacement category or the vacation category. If the phone bill is more than we expect, we can move money around from a different category to cover it. Now, back to your question: We allocate some money from each paycheck into our furniture category. But the money is not really spent until we actually buy some furniture. When we do, the furniture category balance and bank account balance both go down by the amount of the purchase. All of this can be kept track of on the computer in a spreadsheet. However, it's not easy to keep track of so many categories and bank balances. An easier solution is custom budgeting software designed for this purpose. I use and recommend YNAB.\\\"\",\n \"After talking to two CPAs it seems like managing it using an imprest system is the best idea. The base characteristic of an imprest system is that a fixed amount is reserved and later replenished as it runs low. This replenishment will come from another account source, e.g., petty cash will be replenished by cashing a cheque drawn on a bank account. Petty cash imprest system allows only the replenishment of the spend made. So, if you start the month with €100 in your petty cash float and spend €90 of that cash in the month, an amount of €90 will be then placed in your petty cash float to bring the balance of your petty cash float back to €100. The replenishment is credited to the primary cash account, usually a bank account (Dr - Petty Cash a/c, Cr - Bank a/c) and the debits will go to the respective expense accounts, based on the petty cash receipt dockets (Dr- Expense a/c, Cr - Petty Cash a/c). In a non imprest system where a fixed amount is issued every month, e.g., €100 every time cash is required, there is no incentive to ensure all money issued has been documented because when money is all spent a check for a fixed amount is issued. It is much more difficult to reconcile a non imprest system as you never know how much exactly should be in the float. In an imprest system the amount requested is documented, the documentation being the petty cash dockets and their associated receipts or invoices. So at all times you can check how much should be left in the petty cash float by deducting the amount spent from the opening petty cash float.\",\n \"Do you have a separate bank account for your business? That is generally highly recommended. I have a credit card for my single-member LLC. I prefer it this way because it makes the separation of personal and business expenses very clear. Using a personal credit card, but using it for only business expenses seems to be a reasonable practice. You may be able to do one better though... For your sole proprietorship, you can file a DBA which establishes the business name. The details of this depend on your state. With a DBA, I believe you can open a bank account in the name of your business and you may also be able to open a credit card account in the name of the business. I'm not sure what practical difference it makes, but it does make the personal/business distinction clearer. Though, at that point, you might as well just do the LLC...\",\n \"\\\"You should have separate files for each of the two businesses. The business that transfers money out should \\\"\\\"write check\\\"\\\" in its QB file. The business that receives money should \\\"\\\"make deposit\\\"\\\" in its QB file. (In QB you \\\"\\\"write check\\\"\\\" even when you make the payment by some other means like ACH.) Neither business should have the bank accounts of the other explicitly represented. On each side, you will also need to classify the payment as having originated from / gone to some other account - To know what's correct there, we'd need to know why your transferring the money in the first place and how you otherwise have your books established. I think that's probably beyond the scope of what's on-topic / feasible here. Money into your business from your personal account is probably owner's equity, unless you have something else going on. For example, on the S Corp you should be paying yourself a salary. If you overpay by accident, then you might write a check back to the company from your personal account to correct the mistake. That's not equity - It's probably a \\\"\\\"negative expense\\\"\\\" in some other account that tracks the salary payments.\\\"\",\n \"I would suggest at least getting a personal card that you only use for business expenses, even if you don't opt for a business card. It makes it very clear that expenses on that card are business expenses, and is just more professional. The same goes for a checking account, if you have one of those. It makes it easier to defend if you are ever audited, and if you use an accountant or tax preparer.\",\n \"First, you should probably have a proper consultation with a licensed tax adviser (EA/CPA licensed in your State). In fact you should have had it before you started, but that ship has sailed. You're talking about start-up expenses. You can generally deduct up to $5000 in the year your business starts, and the expenses in excess will be amortized over 180 months (15 years). This is per the IRC Sec. 195. The amortization starts when your business is active (i.e.: you can buy the property, but not actually open the restaurant - you cannot start the depreciation). I have a couple questions about accounting - should all the money I spent be a part of capital spending? Or is it just a part of it? If it qualifies as start-up/organizational expenses - it should be capitalized. If it is spent on capital assets - then it should also be capitalized, but for different reasons and differently. For example, costs of filing paperwork for permits is a start-up expense. Buying a commercial oven is a capital asset purchase which should be depreciated separately, as buying the tables and silverware. If it is a salary expense to your employees - then it is a current expense and shouldn't be capitalized. Our company is LLC if this matters. It matters to how it affects your personal tax return.\",\n \"The thing is that you only need one entry, not two. That's the beauty of double entry - since you have double entry system, every transaction will create two entries. So you don't need to create two transactions, you only need one. So you got a $30 gift. You credit Income:Gifts and on the other side Assets:Checking. Your general ledger entry (Menu->Tools->General Ledger) will look like this: You end up with balances: Which represent your total income and your current balance. Similarly with expense for food: GL will look like this: Balances: And you keep track of totals properly.\",\n \"\\\"Your first and second paragraphs are two different cases. Moving money between a checking account and a savings account will credit Cash and debit Cash, making a GL transaction unnecessary, unless the amounts in the two bank accounts are tracked as two separate GL accounts. You might have account 1001 (Cash-Checking) and account 1002 (Cash-Savings). In that case, a movement of money between these two accounts should be tracked by a transaction between the GL accounts; credit checking, debit savings. It won't affect your balance sheet, but depending on your definition of liquidity of assets it might affect working capital on your statement of cash flows (if you consider the savings account \\\"\\\"illiquid\\\"\\\" then money moved to it is a decrease in working capital). Basically, what you are creating with your \\\"\\\"store credit\\\"\\\" accounts for each client is an \\\"\\\"unearned revenue\\\"\\\" account. When clients pay you cash for work you haven't done yet, or you refund money for a return as \\\"\\\"store credit\\\"\\\" instead of cash, the credit is a liability account, balancing an increase in cash, inventory, or an expense (if you're giving credit for free, perhaps due to a mistake on your part, you would debit a \\\"\\\"Store Credit Expense\\\"\\\" account). This can be split out client-by-client in the GL if you wish, avoiding the need for a holding account. The way you want to do it, you'd have a \\\"\\\"Client Holding\\\"\\\" account. It must be unique in the GL and to the client, and yes, it is a liability account. To transfer to holding, you simply debit Unearned Revenue and credit Client Holding, logging the transaction as \\\"\\\"transfer of client store credit\\\"\\\" or similar (moving liability to liability; balance sheet doesn't change). Then, as you sell goods or services to the client, you debit Accounts Receivable and credit Revenue, then to record the payment you credit AR and debit Client Holding (up to its current credit balance, after which the client pays you Cash and you debit that, or the client still owes you). To zero out a remaining balance on the Holding account, debit Client Holding and credit Unearned Revenue. I don't think the Holding account, the way you want to use it, is a good idea. If you want to track each customer's store credit balance with a GL account, then create specialized Unearned Revenue accounts for each client who gets a store credit, named for the client and containing their balance (zero or otherwise). If you don't care about it at the GL level, then pool it in one Unearned Revenue account (have one Store Credit account if you must), and track individual amounts off the books.\\\"\",\n \"Yes, you should be able to deduct at least some of these expenses. For expense incurred before you started the business: What Are Deductible Startup Costs? The IRS defines “startup costs” as deductible capital expenses that are used to pay for: 1) The cost of “investigating the creation or acquisition of an active trade or business.” This includes costs incurred for surveying markets, product analysis, labor supply, visiting potential business locations and similar expenditures. 2) The cost of getting a business ready to operate (before you open your doors or start generating income). These include employee training and wages, consultant fees, advertising, and travel costs associated with finding suppliers, distributors, and customers. These expenses can only be claimed if your research and preparation ends with the formation of a successful business. The IRS has more information on how to claim the expenses if you don’t go into business. https://www.sba.gov/blogs/startup-cost-tax-deductions-how-write-expense-starting-your-business Once your business is underway, you can deduct expenses, but the exact details depend on how you organized. If you're a sole proprietor for tax purposes, then you'll deduct them on Schedule C of your Form 1040 on your personal tax. If you are a partnership, C-Corp, or S-Corp, they will be accounted at the business level and either passed on to you on a Schedule K (partnership and S-Corp) or deducted directly by the company (C-Corp). In any case, you will need good records that justify your expenses as business related. It might be well worth at least an initial meeting with a CPA to make sure that you get started on the right foot.\",\n \"Expensing a transfer of funds is incorrect. That will affect the Profit/Loss (Income) statement when you transfer it out and back in, which you do not want, at least for the principle. The interest should be recorded as a interest income. The general way to account for transferring money is to credit the originating account, and debit the destination account. This will only affect the balance sheet accounts. For example: Transferring (buying) 10,000 worth of fix term bank deposits Interest is paid: The bank deposit reaches maturity, so the principle is returned, with the final interest payment. The accounts Checking account and Fixed term bank deposit are asset accounts, which show up on the balance sheet. The Interest income is an income account, which will show up in the income statement. This is how a fixed term/CD is usually recorded. In certain cases, where the business must follow an accounting standard, this may very well be insufficient, but this situation will be unlikely if it's a small private sports club. Having said that, double check to make sure what you've stated is indeed correct, and look back into the past entries to see how it was dealt with before, especially since you said this bookkeeping job is temporary. I would strongly advise against changing non-recent entries, even if they are incorrect. For the insurance payments, that would depend on how the damaged assets were accounted for. It's a little hard to say without more detail-- the extent of the damage, how the diminished value was accounted for in the books, the cost of repair materials, etc.\",\n \"I am assuming this is USA. While it is a bit of a pain, you are best off to have separate accounts for your business and personal. This way, if it comes to audit, you hand the IRS statements for your business account(s) and they match your return. As a further precaution I would have the card(s) you use for business expenses look different then the ones you use for personal so you don't mess another one up.\",\n \"\\\"Journal entry into Books of company: 100 dr. expense a/c 1 200 dr. expense a/c 2 300 dr. expanse a/c 3 // cr. your name 600 Each expense actually could be a total if you don´t want to itemise, to save time if you totaled them on a paper. The paper is essentually an invoice. And the recipts are the primary documents. Entry into Your journal: dr. Company name // cr. cash or bank You want the company to settle at any time the balce is totaled for your name in the company books and the company name in your books. They should be equal and the payment reverses it. Or, just partially pay. Company journal: dr. your name // cr. cash or bank your journal: dr. cash or bank // cr. company name Look up \\\"\\\"personal accounts\\\"\\\" for the reasoning. Here is some thing on personal accounts. https://books.google.com/books?id=LhPMCgAAQBAJ&pg=PT4&dq=%22personal+account%22+double+entry&hl=es-419&sa=X&redir_esc=y#v=onepage&q=%22personal%20account%22%20double%20entry&f=false\\\"\",\n \"Yes you can. You should talk to your tax advisor re the specific expenditures that can be accounted as startup-costs (legal fees are a good candidate, for example). If they add up to significant amounts (>$5K), you'll have to capitalize them over a certain period of time, and deduct from your business' income. This is not a tax advice.:-)\",\n \"The 'standard' thing to do, after double checking your numbers to see if you can find or remember the actual reason for the discrepancy is to use an Income account for 'extra' money and an expense account for 'lost' money. The Imbalance account is meant as a temporary placeholder for monies not yet put into their right account. I personally use Income:Other Income for such found money, and Expenses:Adjustment for lost money.\",\n \"As a sole proprietor, the tax liability of your business is calculated based on combining your business income with your personal income together. It is good advice to keep all personal and business financial matters separate. This makes it easier to prove to the IRS that all your business expenses are actually business related. In this case however, the two items [tax payment for personal income vs tax payment for business income] are inseparable. What you can do, however, for your own personal records, is calculate how much of your tax payment relates to your business. I wouldn't get complicated about this; I would simply take the net income of your business as a % of your taxable income, and multiply that against your tax payment. ie: if your business net income is $10,000, and your total taxable income is $50,000, and you paid $6,000 in taxes, I would record that 20% of the $6k was related to business income. If you have a separate bank account for your sole proprietorship, you could make a transfer to your personal account of $1,200, and then make the $6k payment from your personal account. Remember that tax payments for either your sole proprietorship and your personal income will be treated the same: federal tax payments are not tax deductible, and state tax payments are tax deductible, whether they were paid for your sole proprietorship or the rest of your personal income. So even though this method is simplistic [for example, it doesn't factor in that different investment income types earned personally will have a lower rate than your sole proprietorship income], any difference wouldn't have an impact on any future tax liability. This would only be for your own personal record keeping.\",\n \"I would just create a single liability account to represent the loan, starting with a $0 balance. Then, create a transaction in which the amount of the loan moves from the liability account into your savings account. As you pay the loan off, you'll create new transactions that move money from whichever account you're using to pay it off into your liability account.\",\n \"\\\"Depending on how you view the loan, it could either be considered an Asset or a Liability. Since you are not charging interest, it might seem more intuitive to create an \\\"\\\"Assets:Cash Loan\\\"\\\" account, and transfer money to & from it (when you receive payments) like you would with a bank account. Personally, I prefer to think of all loans as liabilities. Whether it's a debt which you owe someone, or a balance which someone else owes you, since it's an 'unsettled' amount I file it under \\\"\\\"Liabilities:Loan\\\"\\\". Either way, you record the initial balance as a debit from your bank, and then record payments as credits back to your primary account. The only way that income or expenses ever gets involved would be if you charged interest (income) or if you forgave some or all of the loan (expense) at some point in the future.\\\"\",\n \"\\\"Yes, kinda. Talk to local banks about a business account, and tell them you want to enable certain employees to make deposits but not withdrawals. They don't need to know you're all the same person. For instance I have a PayPal account for business. These allow you to create \\\"\\\"sub accounts\\\"\\\" for your employees with a variety of access privileges. Of course I control the master account, but I also set up a \\\"\\\"sub account\\\"\\\" for myself. That is the account I use every day.\\\"\",\n \"\\\"Fees & liabilities Yes, the first problem is that liabilities are being improperly booked. If the fee you charge is fixed upon deposit then the fee should credit \\\"\\\"Revenue\\\"\\\", the fee charged to you should be booked by crediting cash and then debiting \\\"\\\"Expenses\\\"\\\", and the remaining should be booked as a liability. If the fee is fixed upon withdrawal then this will become more complex because of the fact that a change in the fee can occur before it can be applied. In this case, the current fee should be credited as \\\"\\\"Revenue\\\"\\\" and some \\\"\\\"Allowance for fee increase\\\"\\\" should also be credited. The amount owed to the withdrawer should be booked as a liability as before. Multiple currency bookings I will assume that this is for a cryptocurrency service of some sort considering the comments in your question and your presence on bitcoin.se. Accounting can become very dangerous when mixing denominations. This is why all major accounting standards mandate books be maintained single currency. In your case, if the deposit is in USD, for example, and the liability is in BTC then two books must be maintained, one for each. To account for your operation properly using single currency accounts, the denominations must be exchanged internally and balanced across the two sets of books. For a deposit of BTC/depository of USD, the operation would be the same as described above, but then the cash should be credited away and the liabilities debited away from the USD books with simultaneous cash debits and liability credits on the BTC books. Considering the extreme volatility of cryptocurrency exchange rates, denominating accounts on the wrong set of books will quickly lead to insolvency or loss from improper accounting or both. From revenue to income Revenue can be construed as a liability since it could theoretically exist on the balance sheet. I mention this because all books, despite their name and quarter, are really simply long T accounts, like a blockchain. A blockchain could be subdivided into users' individual income statements & balance sheets, as the reverse of this concept. Revenues are credited, expenses are debited. The difference, \\\"\\\"net income\\\"\\\", is debited away with a credit to \\\"\\\"owners' equity\\\"\\\".\\\"\",\n \"It took me a while to understand the concept, so I'll break it down as best as I can. There are three parts to the accounting equation: Assets = Liabilities + Owner's Equity We'll look at this in two ways 1. As a business owner you invest (say) 10,000 USD into your bank. The entry would be: Debit: Assets: Cash for 10,000 Credit: Owner's Equity: Contributions for 10,000 In this case, you have assets of 10,000 from your deposit, but it is due to owner contributions and not business transactions. Another example (say a sale): Debit: Assets: Cash for 10,000 Credit: Owner's Equity: Sales for 10,000 Debit: Assets: Cash for 10,000 Credit: Liabilities: Deposits for 10,000 Deposits are a banking term to reflect a bank's obligation to return the amount on demand (though the bank has free reign with it, see fractional banking) You will NEVER debit or credit your bank as it is assumed you will be storing your money there, note bank reconciliation. Hope this helps, comment with any more questions.\",\n \"The £500 are an expense associated with the loan, just like interest. You should have an expense account where you can put such financing expenses (or should create a new one). Again, treat it the same way you'll treat interest charges in future statements.\",\n \"\\\"If you sign the check \\\"\\\"For Deposit Only\\\"\\\", the bank will put it in your account. You may need to set up a \\\"\\\"payable name\\\"\\\" on the account matching your DBA alias. However, having counted offerings for a church on several occasions, I know that banks simply have no choice but to be lax about the \\\"\\\"Pay to the Order Of\\\"\\\" line on checks. Say the church's \\\"\\\"legal name\\\"\\\" for which the operating funds account was opened is \\\"\\\"Saint Barnabas Episcopal Church of Red Bluff\\\"\\\". You'll get offering checks made out to \\\"\\\"Saint Barnabas\\\"\\\", \\\"\\\"Saint B's\\\"\\\", \\\"\\\"Episcopal Church of Red Bluff\\\"\\\", \\\"\\\"Red Bluff Episcopal\\\"\\\", \\\"\\\"Youth Group Fund\\\"\\\", \\\"\\\"Pastor Frank\\\"\\\", etc. The bank will take em all; just gotta stamp em with the endorsement for the church. Sometimes the money will be \\\"\\\"earmarked\\\"\\\" based on the payable line; any attempt to pay the pastor directly will go into his \\\"\\\"discretionary fund\\\"\\\", and anything payable to a specific subgroup of the church will go into their asset account line, but really all the cash goes directly to the same bank account anyway. For-profit operations are similar; an apartment complex may get checks payable to the apartment name, the management company name, even the landlord. I expect that your freelance work will be no different.\\\"\",\n \"\\\"If you are considering this to be an entry for your business this is how you would handle it.... You said you were making a balance sheet for monthly expenses. So on the Balance Sheet, you would be debiting cash. For the Income Statement side you would be crediting Owner's Equity to balance the equation: Assets = Liabilities + Owner's Equity So if you deposited $100 to your account the equation would be affected thus: $ 100 in Assets (Debit to Cash Account) = 0 Liabilities - $100 (Credit to Owner's Equity) It is correctly stated above from the bank's perspective that they would be \\\"\\\"Crediting\\\"\\\" you account with $100, and any outflow from the bank account would be debiting your account.\\\"\",\n \"\\\"I can say that I got X dollars from an account like \\\"\\\"Income:Benefits\\\"\\\"... but where do I credit that money to? \\\"\\\"Expenses:Groceries\\\"\\\" Yes doesn't feel right, since I never actually spent that money on food, You did, didn't you? You got food. I'm guessing there's an established convention for this already? Doubt it. Established conventions in accounting are for businesses, and more specifically - public companies. So you can find a GAAP, or IFRS guidelines on how to book benefits (hint: salary expense), but it is not something you may find useful in your own household accounting. Do what is most convenient for you. Since it is a double-booking system - you need to have an account on the other side. Expenses:Groceries doesn't feel right? Add Expenses:Groceries:Benefits or Expenses:Benefits or whatever. When you do your expense and cash-flow reports - you can exclude both the income and the expense benefits accounts if you track them separately, so that they don't affect your tracking of the \\\"\\\"real\\\"\\\" expenses.\\\"\",\n \"\\\"Do not use a shared bank account. One of you can cash/deposit the check in your personal account and then either pay the others in the group cash or write them a check. You open yourself up to many, many problems sharing a bank account and/or money. Treat it like a business as far as income goes, but I would not recommend any type of formal business, LLC, partnership, sole proprietorship, etc. For federal taxes, you just keep track of how much \\\"\\\"you\\\"\\\" personally are paid and report that at the end of the year as income, most likely on a 1040EZ 1040SE, along with any other income you have.\\\"\",\n \"\\\"One easy way to monitor costs in QuickBooks is to establish sub-bank accounts. For example, you may have an asset account called \\\"\\\"State Bank\\\"\\\" numbered 11100 (asset, cash and cash equivalents, bank). Convert this to a parent account for a middle school by making subaccounts such as At budget formation, transfer $800 from Operations 11110 to Family Fun Committee 11130. Then write all checks for Family Fun from the Family Fun 11130 subaccount. For fundraising, transfer $0 at budget formation to the X Grade accounts. Do deposit all grade-level receipts into the appropriate grade-level subaccounts and write all checks for the grades from the grade-level subaccounts. The downside to the above is that reconciling the check book each month is slightly more complicated because you will be reconciling one monthly paper bank statement to multiple virtual subaccounts. Also, you must remember to never write a check from the parent \\\"\\\"State Bank\\\"\\\" 11100, and instead write the checks from the appropriate subaccounts.\\\"\",\n \"You should be recording the reimbursement as a negative expense on the original account the expense was recorded. Let's assume you have a $100 expense and $100 salary. Total $200 paycheck. You will have something like this In the reports, it will show that the expense account will have $0 ($100 + ($100)), while income account will have $100 (salary).\",\n \"\\\"I have checked with Bank of America, and they say the ONLY way to cash (or deposit, or otherwise get access to the funds represented by a check made out to my business) is to open a business account. They tell me this is a Federal regulation, and every bank will say the same thing. To do this, I need a state-issued \\\"\\\"dba\\\"\\\" certificate (from the county clerk's office) as well as an Employer ID Number (EIN) issued by the IRS. AND their CHEAPEST business banking account costs $15 / month. I think I can go to the bank that the check is drawn upon, and they will cash it, assuming I have documentation showing that I am the sole proprietor. But I'm not sure.... What a racket!!\\\"\",\n \"\\\"I'm no accounting expert, but I've never heard of anyone using a separate account to track outstanding checks. Instead, the software I use (GnuCash) uses a \\\"\\\"reconciled\\\"\\\" flag on each transaction. This has 3 states: n: new transaction (the bank doesn't know about it yet), c: cleared transaction (the bank deducted the money), and y: reconciled transaction (the transaction has appeared on a bank statement). The account status line includes a Cleared balance (which should be how much is in your bank account right now), a Reconciled balance (which is how much your last bank statement said you had), and a Present balance (which is how much you'll have after your outstanding checks clear). I believe most accounting packages have a similar feature.\\\"\",\n \"\\\"If your business is structured as a partnership or sole proprietorship you call this investment \\\"\\\"partner equity\\\"\\\". If instead it is structured as a corporation, then the initial investment is called \\\"\\\"paid-in capital\\\"\\\". Either way, this represents the capital the initial investors or partners provided to the company in exchange for their ownership stake. The most important thing in your case is that since that initial investment is in the form of inventory, you are going to have to document the value of that investment somehow. You will definitely need a comprehensive manifest of what you contributed, including titles and condition, and if possible you should document the prices at which similar items are being offered for sale at the time you start operating. Having this information will support your claims as to the fair market value of the start-up contribution, should the tax authorities decide to question it.\\\"\",\n \"Hmm, let's see, I always get Credit and Debit mixed up, but I'll try: Signing of the contract: Receiving 500 deposit: When you are done Accounts Receivable will have $500 (because you are owed $500), Revenue will have $1000 (because you made $1000 on an accrual basis), and Cash will have $500 (because you have $500 in your pocket).\",\n \"Assuming you buy the services and products beforehand and then provide them to your clients. Should the cost of these products and services be deducted from my declared income or do I include them and then claim them as allowable expenses? You arrive at your final income after accounting for your incomings and outgoings ? regularly buys products and services on behalf of clients These are your expenses. invoice them for these costs after These are your earnings. These are not exactly allowable expenses, but more as the cost of doing your business, so it will be deducted from your earnings. There will be other business expenses which you need to deduct from your earnings and then you arrive at your income/profit. So before you arrive at your income all allowable expenses have been deducted. include on my invoices to clients VAT if you charge VAT. Any charges you require them to pay i.e. credit card charges etc. You don't need to inform clients about any costs you incur for doing your business unless required by law. If you are unsure about something browse the gov.uk website or obtain the services of an accountant. Accounting issues might be costly on your pocket if mistakes are committed.\",\n \"\\\"You don't specify which country you are in, so my answers are more from a best practice view than a legal view.. I don't intend on using it for personal use, but I mean it's just as possible. This is a dangerous proposition.. You shouldn't co-mingle business expenses with personal expenses. If there is a chance this will happen, then stop, make it so that it won't happen. The big danger is in being able to have traceability between what you are doing for the business, and what you are doing for yourself. If you are using this as a \\\"\\\"staging\\\"\\\" account for investments, etc., are those investments for yourself? Or for the business? Is tax treatment on capital gains and/or dividends the same for personal and business in your jurisdiction? If you buy a widget, is the widget an expense against business income? Or is it an out of pocket expense for personal consumption? The former reduces your taxable income, the latter does not. I don't see the benefit of a real business account because those have features specific to maybe corporations, LLC, and etc. -- nothing beneficial to a sole proprietor who has no reports/employees. The real benefit is that there is a clear delineation between business income/expenses and personal income/expenses. This account can also accept money and hold it from business transactions/sales, and possibly transfer some to the personal account if there's no need for reinvesting said amount/percentage. What you are looking for is a commonly called a current account, because it is used for current expenses. If you are moving money out of the account to your personal account, that speaks to paying yourself, which has other implications as well. The safest/cleanest way to do this is to: While this may sound like overkill, it is the only way to guarantee that income/expenses are allocated to the correct entity (i.e. you, or your business). From a Canadian standpoint:\\\"\",\n \"There is no reason for you to open a firm. However, it will help you, if you operate separate bank account for business and personal purposes. You can run your business as proprietorship business. Your inward remittance is your income. You can deduct payment made to your colleagues as salary. You should pay them by way of cheques or bank transfer only. You are also entitled to deduct other business expenses provided you keep proper receipt of the same such as broadband connection charges, depreciation on equipment and more importantly, rent on your house. If your total receipt from such income exceeds INR 60,00,000 you will need to withhold tax on payment made to your colleagues as also subject to audit of your accounts. If you want to grow your business, suggest you should take an Import / Export Code in your own name. You can put any further question in this regard.\",\n \"\\\"There is no \\\"\\\"standard\\\"\\\" way for personal accounting. However, GNUCash default accounts set includes \\\"\\\"Expense: Adjustment\\\"\\\". It is usually used by the community for reconciliation of unknown small money lost.\\\"\",\n \"\\\"Your debits and credits are perfect. Now, it comes down to a choice of how you want your accounts organized, financially speaking. In terms of taxes, it's recommended you keep a separate set of books just like a corporation and account for them strictly according to law. It's best not to credit phone expenses since it will no longer show on your net reports. A better alternative would be \\\"\\\"Phone reimbursement\\\"\\\". With that, you can not only see if you've been compensated but also how much you're personally managing these expenses by checking the annual \\\"\\\"Phone expense\\\"\\\" account. This is all up to personal preference, but so long as you're properly balancing your accounts, you can introduce any level of resolution you wish. I prefer total resolution when it comes to financial accounting. Also, it is not good practice to debit away \\\"\\\"Salary\\\"\\\". The net of this account will be lower and distorted. An expense reimbursement is not salary anyways, so the proper bookings will follow below. Finally, if GnuCash is calling \\\"\\\"Salary\\\"\\\" an income account, this is unfortunate. The proper label would be \\\"\\\"revenue\\\"\\\" since \\\"\\\"income\\\"\\\" is a net account of expenses from revenue in the income identity. Entries With this, your books will become clearer: your cash assets will remain as clear as you had organized them, but now your income statement will provide higher resolution.\\\"\",\n \"I would use the withdrawal date to record, as it represents you no longer have these funds in your account whether you have written a check and/or transferred money you should count the funds as no longer being in your account.\",\n \"You can receive money directly into your savings bank account. It is perfectly legal. FYI the Bank as part of regulation would report this to RBI. As the funds are received for the services you have rendered, You are liable to pay tax on the income. The income is taxed as professional income similar to the income of Doctors, Lawyers, Accountants etc. If you are paying your colleagues, it would be treated as expense. Not only this, you can also treat any phone calls you make, or equipment your purchase [laptop, desk etc] as expense. The difference become your actual income and you would be taxed as per the rate for individuals. It's advisable you contact an accountant who would advise you better for a nominal fee [few thousand rupees] and help you pay the tax and file the returns. With or without accountant It is very important for you to record all payments and expenses in a book of accounts.\",\n \"Well, consult with a CPA, but I guess you don't have to pay taxes on 2012 with a correct accounting system since this is the money you are going to completely earn within 2013 so you can record it as future earning which is called deferred revenue or advance payments or unearned revenue.\",\n \"If you're a sole proprietor there's no reason to have a separate business account, as long as you keep adequate records, as you are one and the same for tax purposes. My husband and I already have 5 accounts and a mortgage with one bank. I don't see the need to open up yet another account. As a contracted accountant, I don't need to write business checks, and my expenses are minimal. As long as I have an present my assumed business name certificate and ID, there's no reason for a bank not to deposit into my personal account.\",\n \"\\\"I expect the company wanted to pay you for a product (on a purchase order) rather than as a contract laborer. Whatever. Would they be willing to re-issue the check to you as a sole proprietor of a business named ABC Consulting (or anything like that)? You can register your sole proprietor business with the state using a \\\"\\\"Doing Business As\\\"\\\" (DBA, or fictitious name), and then open the bank account for your business using the check provided by the customer as the first deposit. (There is likely a smaller registration fee for the DBA.) If they won't re-issue the check and you have to go the LLC route... Scrounge up $125 doing odd jobs or borrowing from a friend or parents. Seriously, anyone can earn that amount of money in a week or two. Besides the filing fee for the LLC, your bank may require you to provide an Operating Agreement (which is not required by the State). The Operating Agreement can be simple, or more complex if you have a partner (even if it's a spouse). If you do have a partner, it is essential to have such an agreement because it would specify the responsibilities and benefits allocated to each partner, particularly in the event of equity distributions (taking money out of the business, or liquidating and ending the LLC). There are websites that will provide you a boilerplate form for Operating Agreements. But if your business is anything more than just single member LLC, you should pay an attorney to draw one up for you so the wording is right. It's a safeguard against potential future lawsuits. And, while we're at it, don't forget to obtain a EIN (equivalent to a SSN) from the IRS for your LLC. There's no cost, but you'll have to have it to file taxes as a business for every year the LLC exists and has income. Good luck!\\\"\",\n \"\\\"Having a separate checking account for the business makes sense. It simplifies documenting your income/expenses. You can \\\"\\\"explain\\\"\\\" every dollar entering and exiting the account without having to remember that some of them were for non-business items. My credit union allowed me to have a 2nd checking account and allowed me to put whatever I wanted as the name on the check. I think this looked a little better than having my name on the check. I don't see the need for a separate checking account for investing. The money can be kept in a separate savings account that has no fees, and can even earn a little interest. Unless you are doing a lot of investment transactions a month this has worked for me. I fund IRAs and 529 plans this way. We get paychecks 4-5 times a month, but send money to each of the funds once a month. You will need a business account if the number of transactions becomes large. If you deposit dozens of checks every time you go to the bank, the bank will want to move you to a business account.\\\"\",\n \"\\\"Create an account called, say, \\\"\\\"Paycheck\\\"\\\". When you get paid, create an entry with your gross income as a deposit. For each deduction in your paycheck, create a minus (or expense) entry. After doing that, what will be left in the Paycheck account will be your net income. Simply transfer this amount to the real account your paycheck goes into (your checking account, probably). Almost all the time, the value of your Paycheck account will be 0. It will be nonzero only for a moment every two weeks (or however often you get paid). I don't know if this is the standard way of doing it (in the professional accounting world). It's a way I developed on my own and it works well, I think. I think it's better than just adding a deposit entry in your checking account for your net income as it lets you keep track of all your deductions. (I use Quicken for the Mac. Before they added a Paycheck feature, I used this method. Then they removed the Paycheck feature from the latest version of Quicken for the Mac and I now use this method again.)\\\"\",\n \"\\\"This may be closed as not quite PF, but really \\\"\\\"startup\\\"\\\" as it's a business question. In general, you should talk to a professional if you have this type of question, specifics like this regarding your tax code. I would expect that as a business, you will use a proper paper trail to show that money, say 1000 units of currency, came in and 900 went out. This is a service, no goods involved. The transaction nets you 100, and you track all of this. In the end you have the gross profit, and then business expenses. The gross amount, 1000, should not be the amount taxed, only the final profit.\\\"\",\n \"You can make a capital contribution, not a loan. It's not a taxable event, no interest, and you can take a distribution later when the business has the money to pay you back. So yes, transfer the money. If you use software like Quickbooks, make use of unique accounts for tracking the contribution\",\n \"\\\"You will need to set up accounts in your chart of accounts for each of the partners. These are equity accounts where you can track your contributions, share of the profits and losses, and distributions. You're going to have to go back into the beginning years to get this right. I'm not sure what you mean by a \\\"\\\"Built-in function\\\"\\\". All the accounting software I'm familiar with requires data entry of some kind. You need to post your contributions and distributions to the correct accounts, and close properly at year end. You were indeed legally considered a partnership as soon as you started a for-profit business venture together. It's a bug in the legal system that a written partnership agreement is not necessarily required - you can form a partnership unknowingly. (BTW, a partnership actually is pretty far off from a sole proprietorship, legally and taxwise - the change from one person to two is major. It's the change from two to three or four or more that's incremental ;) I know you said you didn't want to consult a professional, but I have to say that I think it's worth the money to get your books set up by someone who has experience and can show you how to do it. And get a separate bank account for the partnership, if you haven't done so already. And check with your state to see if there are any requirements regarding partnerships. Hope this helps, Mariette IRS Circular 230 Notice: Please note that any tax advice contained in this communication is not intended to be used, and cannot be used, by anyone to avoid penalties that may be imposed under federal tax law.\\\"\",\n \"\\\"I'm assuming you're operating on the cash basis of accounting, based on your comment \\\"\\\"Cash, I think that's the only way for a sole propriator (sic)\\\"\\\" Consider: There are two distinct but similar-name concepts here: \\\"\\\"paid for\\\"\\\" (in relation to a expense) and \\\"\\\"paid off\\\"\\\" (in relation to a debt). These both occur in the case you describe: Under the cash basis of accounting, when you can deduct an expense is based on when you paid for the expense, not when you eventually pay off any resulting debt arising from paying for the expense. Admittedly, \\\"\\\"cash basis\\\"\\\" isn't a great name because things don't solely revolve around cash. Rather, it's when money has changed hands – whether in the form of cash, check, credit card, etc. Perhaps \\\"\\\"monetary transaction basis\\\"\\\" might have been a better name since it would capture the paid-for concept whether using cash or credit. Unfortunately, we're stuck with the terminology the industry established.\\\"\",\n \"Technically, it's only when you need to pass money through. However consider that the length the account has been open builds history with the financial institution, so I'd open ASAP. Longer history with the bank can help with getting approved for things like business credit lines, business cards, and other perks, though if you're not making money with that business, seek out a bank that does not charge money to have a business account open with them.\",\n \"Nope sorry guest you are wrong. how can salary and an expense be on the same side of the ledger? Salary 2000 Personal bank 2000 Phone expenses 30 Personal bank 30\",\n \"It seems that you're complicating things quite a bit. Why would you not create a business entity, open one or more bank accounts for it, and then have the money wired into those accounts? If you plan on being a company then set up the appropriate structure for it. In the U.S., you can form an S-corporation or an LLC and choose pass-through taxation so that all you pay is income tax on what you receive from the business as personal income. The business itself would not have tax liability in such a case. Co-mingling your personal banking with that of your business could create real tax headaches for you if you aren't careful, so it's not worth the trouble or risk.\",\n \"Typically in GnuCash, account balances that exist at the beginning of the time you're keeping records for are balanced by entries in an Equity account “Equity:Opening Balances”, which is part of the default set of accounts created for you. This account is really just a placeholder so that everything balances, and that's perfectly normal. So, just enter “Equity:Opening Balances” as the “other entry” when entering the first, opening balance, transaction in your Liability account for the loan. If you have not already created the liability account, then just use the “Opening Balance” tab of the New Account window to enter the initial balance as you create the account. (Disclaimer: I have no formal knowledge of accounting; I just use GnuCash and read the users' mailing list.)\",\n \"Use one journal entry, and split the expenses into the appropriate accounts. This can happen even if you never mix business and personal on the same receipt: say you order office supplies (which where I live are immediately deductible as an expense) and software or hardware (which must be depreciated because they are assets) on the same order. We have an account called Proprietors Loan which represents money the company is lending to the humans who own it, or that the humans are lending to the company. Were I to pay for my personal lunch on a business credit card, it would go through that account, increasing the amount the company has lent me or decreasing the amount I have lent it. Similarly if I made a business purchase with a personal card it would go through that account in the other direction. Where I live, I can lend my company all the money I want any time, but if the company lends me money there can't be an outstanding balance over the corporate year end. If you make two credit card entries of 5 and 10 when you go to reconcile your accounts it will be harder because you'll have to realize they together match the single 15 line on your statement. Making a single entry (your A option) will make reconciling your statement much easier. And that way, you'll probably reconcile your statements, which is vital to knowing you actually recorded everything.\",\n \"\\\"I use the (gratis, libre) command-line program ledger for my personal accounts. It handles funds across accounts gracefully, through a feature called \\\"\\\"Virtual Accounts\\\"\\\". A transaction can add or subtract money from a virtual account, which need not balance with all the other entries in the transaction. Then it's just a matter of setting up reports to include or exclude these accounts.\\\"\",\n \"Do not mix personal accounts and corporate accounts. If you're paid as your self person - this money belongs to you, not the corporation. You can contribute it to the corporation, but it is another tax event and you should understand fully the consequences. Talk to a tax adviser (EA/CPA licensed in your State). If they pay to you personally (1099) - it goes on your Schedule C, and you pay SE taxes on it. If they pay to your corporation, the corporation will pay it to you as salary, and will pay payroll taxes on it. Generally, payroll through corporation will be slightly more expensive than regular schedule C. If you have employees/subcontractors, though, you may earn money which is not from your own performance, in which case S-Corp may be an advantage.\",\n \"\\\"I don't think it really matters, my understanding is that as a sole trader there is no distinction between your personal and business tax affairs. The distinction between your personal and business account is mainly for your own personal benefit to make it easier to differentiate between \\\"\\\"wages\\\"\\\" and retained earnings. If you want to maintain this distinction with regard to tax then you need to somehow differentiate between tax paid on your \\\"\\\"wage\\\"\\\" and tax paid on retained earnings. You could then either make two payments, or pay from either and transfer the difference from the other. Either way, it's just a matter of perspective rather than something with a physical difference.\\\"\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["Funds earned and spent before opening a dedicated business account should be classified according to their origination. For example, if your business received income, where did that money go? If you took the money personally, it would be considered either a 'distribution' or a 'loan' to you. It is up to you which of the two options you choose. On the flip side, if your business had an expense that you paid personally, that would be considered either a 'contribution of capital' or a 'loan' from you. If you choose to record these transactions as loans, you can offset them together, so you don't need two separate accounts, loan to you and loan from you. When the bank account was opened, the initial deposit came from where? If it came from your personal funds, then it is either a 'contribution of capital' or a 'loan' from you. From the sound of your question, you deposited what remained after the preceding income/expenses. This would, in effect, return the 'loan' account back to zero, if choosing that route. The above would also be how to record any expenses you may pay personally for the business (if any) in the future. Because these transactions were not through a dedicated business bank account, you can't record them in Quickbooks as checks and deposits. Instead, you can use Journal Entries. For any income received, you would debit your capital/loan account and credit your income account. For any expenses, you would debit the appropriate expense account and credit your distribution/loan account. Also, if setting up a loan account, you should choose either Current Asset or Current Liability type. The capital contribution and distribution account should be Equity type. Hope this helps!"],"string":"[\n \"Funds earned and spent before opening a dedicated business account should be classified according to their origination. For example, if your business received income, where did that money go? If you took the money personally, it would be considered either a 'distribution' or a 'loan' to you. It is up to you which of the two options you choose. On the flip side, if your business had an expense that you paid personally, that would be considered either a 'contribution of capital' or a 'loan' from you. If you choose to record these transactions as loans, you can offset them together, so you don't need two separate accounts, loan to you and loan from you. When the bank account was opened, the initial deposit came from where? If it came from your personal funds, then it is either a 'contribution of capital' or a 'loan' from you. From the sound of your question, you deposited what remained after the preceding income/expenses. This would, in effect, return the 'loan' account back to zero, if choosing that route. The above would also be how to record any expenses you may pay personally for the business (if any) in the future. Because these transactions were not through a dedicated business bank account, you can't record them in Quickbooks as checks and deposits. Instead, you can use Journal Entries. For any income received, you would debit your capital/loan account and credit your income account. For any expenses, you would debit the appropriate expense account and credit your distribution/loan account. Also, if setting up a loan account, you should choose either Current Asset or Current Liability type. The capital contribution and distribution account should be Equity type. Hope this helps!\"\n]","isConversational":false}}},{"rowIdx":60,"cells":{"_id":{"kind":"string","value":"9188"},"query":{"kind":"string","value":"Selling mutual fund and buying equivalent ETF: Can I 1031 exchange?"},"gt_ids":{"kind":"list like","value":["265167","580802"],"string":"[\n \"265167\",\n \"580802\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1],"string":"[\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["580802","434694","393090","275340","530631","261902","265167","431610","590010","416787","443354","161019","201355","153112","268423","202630","71601","308967","161041","309923","108433","161746","210149","256010","586010","254230","540292","479420","406920","153660","285135","550319","434252","209996","571124","474745","132966","294097","129070","84368","229143","370244","169886","518735","392465","369266","183910","467575","94689","303193","96926","388057","101852","132111","200212","386173","207929","179737","596518","263591","190687","591157","549767","57457","472663","290317","130188","65702","350317","539263","237133","161155","149305","253971","199634","23217","511385","473658","376800","270992","521133","501214","207316","354280","330237","87722","294644","560783","407185","359201","284809","554015","55893","106863","449124","385310","364735","580429","332278","292762"],"string":"[\n \"580802\",\n \"434694\",\n \"393090\",\n \"275340\",\n \"530631\",\n \"261902\",\n \"265167\",\n \"431610\",\n \"590010\",\n \"416787\",\n \"443354\",\n \"161019\",\n \"201355\",\n \"153112\",\n \"268423\",\n \"202630\",\n \"71601\",\n \"308967\",\n \"161041\",\n \"309923\",\n \"108433\",\n \"161746\",\n \"210149\",\n \"256010\",\n \"586010\",\n \"254230\",\n \"540292\",\n \"479420\",\n \"406920\",\n \"153660\",\n \"285135\",\n \"550319\",\n \"434252\",\n \"209996\",\n \"571124\",\n \"474745\",\n \"132966\",\n \"294097\",\n \"129070\",\n \"84368\",\n \"229143\",\n \"370244\",\n \"169886\",\n \"518735\",\n \"392465\",\n \"369266\",\n \"183910\",\n \"467575\",\n \"94689\",\n \"303193\",\n \"96926\",\n \"388057\",\n \"101852\",\n \"132111\",\n \"200212\",\n \"386173\",\n \"207929\",\n \"179737\",\n \"596518\",\n \"263591\",\n \"190687\",\n \"591157\",\n \"549767\",\n \"57457\",\n \"472663\",\n \"290317\",\n \"130188\",\n \"65702\",\n \"350317\",\n \"539263\",\n \"237133\",\n \"161155\",\n \"149305\",\n \"253971\",\n \"199634\",\n \"23217\",\n \"511385\",\n \"473658\",\n \"376800\",\n \"270992\",\n \"521133\",\n \"501214\",\n \"207316\",\n \"354280\",\n \"330237\",\n \"87722\",\n \"294644\",\n \"560783\",\n \"407185\",\n \"359201\",\n \"284809\",\n \"554015\",\n \"55893\",\n \"106863\",\n \"449124\",\n \"385310\",\n \"364735\",\n \"580429\",\n \"332278\",\n \"292762\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["You cannot do a 1031 exchange with stocks, bonds, mutual funds, or ETFs. There really isn't much difference between an ETF and its equivalent index mutual fund. Both will have minimal capital gains distributions. I would not recommend selling an index mutual fund and taking a short-term capital gain just to buy the equivalent ETF.","Probably. It sounds like you're looking for a 1031-exchange for stocks and bonds. From the wikipedia page for 1031-exchanges: To qualify for Section 1031 of the Internal Revenue Code, the properties exchanged must be held for productive use in a trade or business or for investment. Stocks, bonds, and other properties are listed as expressly excluded by Section 1031 of the Internal Revenue Code, though securitized properties are not excluded. 1031-exchanges usually are applicable in real estate.","would buying the stock of a REIT qualify as a 'Like-Kind' exchange? Short answer, no. Long answer, a 1031 (Starker) exchange only applies to real estate. From the Wikipedia page on the topic: To qualify for Section 1031 of the Internal Revenue Code, the properties exchanged must be held for productive use in a trade or business, or for investment. Stocks, bonds, and other properties are listed as expressly excluded by Section 1031 of the Internal Revenue Code, although securitized properties are not excluded. A REIT, being stock in a real estate company, is excluded from Section 1031.","No, there's nothing special in mutual funds or ETFs. Wash sale rules apply to any asset.","\"It sounds like this is an entirely unsettled question, unfortunately. In the examples you provide, I think it is safe to say that none of those are 'substantially identical'; a small overlap or no overlap certainly should not be considered such by a reasonable interpretation of the rule. This article on Kitces goes into some detail on the topic. A few specifics. First, Former publication 564 explains: Ordinarily, shares issued by one mutual fund are not considered to be substantially identical to shares issued by another mutual fund. Of course, what \"\"ordinarily\"\" means is unspecified (and this is no longer a current publication, so, who knows). The Kitces article goes on to explain that the IRS hasn't really gone after wash sales for mutual funds: Over the years, the IRS has not pursued wash sale abuses against mutual funds, perhaps because it just wasn’t very feasible to crack down on them, or perhaps because it just wasn’t perceived as that big of an abuse. After all, while the rules might allow you to loss-harvest a particular stock you couldn’t have otherwise, it also limits you from harvesting ANY losses if the overall fund is up in the aggregate, since losses on individual stocks can’t pass through to the mutual fund shareholders. But then goes to explain about ETFs being very different: sell SPY, buy IVV or VTI, and you're basically buying/selling the identical thing (99% or so correlation in stocks owned). The recommendation by the article is to look at the correlation in owned stocks, and stay away from things over 95%; that seems reasonable in my book as well. Ultimately, there will no doubt be a large number of “grey” and murky situations, but I suspect that until the IRS provides better guidance (or Congress rewrites/updates the wash sale rules altogether!), in the near term the easiest “red flag” warning is simply to look at the correlation between the original investment being loss-harvested, and the replacement security; at correlations above 0.95, and especially at 0.99+, it’s difficult to argue that the securities are not ”substantially identical” to each other in performance. Basically - use common sense, and don't do anything you think would be hard to defend in an audit, but otherwise you should be okay.\"","\"The IRS rules are actually the same. 26 U.S. Code § 1091 - Loss from wash sales of stock or securities In the case of any loss claimed to have been sustained from any sale or other disposition of shares of stock or securities where it appears that, within a period beginning 30 days before the date of such sale or disposition and ending 30 days after such date, the taxpayer has acquired (by purchase or by an exchange on which the entire amount of gain or loss was recognized by law), or has entered into a contract or option so to acquire, substantially identical stock or securities, then no deduction shall be allowed... What you should take away from the quote above is \"\"substantially identical stock or securities.\"\" With stocks, one company may happen to have a high correlation, Exxon and Mobil come to mind, before their merger of course. With funds or ETFs, the story is different. The IRS has yet to issue rules regarding what level of overlap or correlation makes two funds or ETFs \"\"substantially identical.\"\" Last month, I wrote an article, Tax Loss Harvesting, which analyses the impact of taking losses each year. I study the 2000's which showed an average loss of 1% per year, a 9% loss for the decade. Tax loss harvesting made the decade slightly positive, i.e. an annual boost of approx 1%.\"","I don't believe you can do that. From the IRS: Finally, certain types of property are specifically excluded from Section 1031 treatment. Section 1031 does not apply to exchanges of: I highlighted the relevant items for emphasis.","You are still selling one investment and buying another - the fact that they are managed by the same company should be irrelevant. So yes, it would get the same tax treatment as if they were managed by different companies.","What JoeTaxpayer means is that you can sell one ETF and buy another that will perform substantially the same during the 30 day wash sale period without being considered substantially the same from a wash sale perspective more easily than you could with an individual stock. For example, you could sell an S&P 500 index ETF and then temporarily buy a DJIA index ETF. As these track different indexes, they are not considered to be substantially the same for wash sale purposes, but for a short term investing period, their performance should still be substantially the same.","What you are looking for is a 1031 exchange. https://www.irs.gov/uac/like-kind-exchanges-under-irc-code-section-1031 Whenever you sell business or investment property and you have a gain, you generally have to pay tax on the gain at the time of sale. IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free. You may also sell your house for bitcoin and record the sales price on the deed with an equal or lesser amount that you bought it for.","Yes (most likely). If you are exchanging investments for cash, you will have to pay tax on that - disregarding capital losses, capital loss carryovers, AGI thresholds, and other special rules (which there is no indication of in your question). You will have to calculate the gain on Schedule D, and report that as income on your 1040. This is the case whether you buy different or same stocks.","Your tax efficient reasoning is solid for where you want to distribute your assets. ETFs are often more tax efficient than their equivalent mutual funds but the exact differences would depend on the comparison between the fund and ETF you were considering. The one exception to this rule is Vanguard funds and ETFs which have the exact same tax-efficiency because ETFs are a share class of the corresponding mutual fund.","1031 is a section of the U.S. Internal Revenue Service Code that allows investors to defer capital gains taxes on any exchange of like-kind properties for business or investment purposes. Taxes on capital gains are not charged on the sale of a property if the money is being used to purchase another property - the payment of tax is deferred until property is sold with no re-investment.","The ETF is likely better in this case. The ETF will generally generate less capital gains taxes along the way. In order to pay off investors who leave a mutual fund, the manager will have to sell the fund's assets. This creates a capital gain, which must be distributed to shareholders at the end of the year. The mutual fund holder is essentially taxed on this turnover. The ETF does not have to sell any stock when an investor sells his shares because the investor sells the shares himself on the open market. This will result in a capital gain for the specific person exiting his position, but it does not create a taxable event for anyone else holding the ETF shares.","Yes, to change which stocks you owe you need to sell one and buy the other, which for tax purposes means taking the profit or loss accrued up to then. On the other hand this establishes a new baseline, so you will not be double-faced on those gains. It just makes a mess of this year's tax return, and forced you to set aside some if the money to cover that.","You cannot do a like-kind (Sec. 1031) exchange for personal property, only for business/investment property. Since you said that you traded in your personal car - no like-kind exchange is possible. Also, since the new car doesn't belong to you - you didn't actually perform any exchange. You sold your old car, but you didn't buy a new one. If Turbo-Tax suggests you to fill the exchange form - you must have entered something wrong to make it think there was an exchange. Check your entries again, specifically - check if you entered that you purchased a new car instead of the old one, since you didn't. See an example of where to start looking here.","\"And my CPA is saying no way, it will cost me many thousands in taxes and doesn't make any sense. I'd think so too. It looks like it converts from capitol gains at 14% to something else at about 35% Can be, if your gain under the Sec.1231 rules is classified as depreciation recapture. But, perhaps the buyers will be saving this way? Not your problem even if they were, which they aren't. I would not do something my CPA says \"\"no-way\"\" about. I sometimes prefer not doing some things my CPA says \"\"it may fly\"\" because I'm defensive when it comes to taxes, but if your CPA is not willing to sign something off - don't do it. Ever.\"","\"In June 2016 the American Institute of CPAs sent a letter to the IRS requesting guidance on this question. Quoting from section 4 of this letter, which is available at https://www.aicpa.org/advocacy/tax/downloadabledocuments/aicpa-comment-letter-on-notice-2014-21-virtual-currency-6-10-16.pdf If the IRS believes any property transaction rules should apply differently to virtual currency than to other types of property, taxpayers will need additional guidance in order to properly distinguish the rules and regulations. Section 4, Q&A-1 of Notice 2014-21 states that “general tax principles applicable to property transactions apply to transactions using virtual currency,” which is guidance that is generally helpful in determining the tax consequences of most virtual currency transactions. However, if there are particular factors that distinguish one virtual currency as like-kind to another virtual currency for section 1031 purposes, the IRS should clarify these details (e.g., allowing the treatment of virtual currency held for investment or business as like-kind to another virtual currency) in the form of published guidance. Similarly, taxpayers need specific guidance of special rules or statutory interpretations if the IRS determines that the installment method of section 453 is applied differently for virtual currency than for other types of property. So, at the very least, a peer-reviewed committee of CPAs finds like-kind treatment to have possible grounds for allowance. I would disagree with calling this a \"\"loophole,\"\" however (edit: at least from the viewpoint of the taxpayer.) At a base technological level, a virtual currency-to-virtual currency exchange consists of exchanging knowledge of one sequence of binary digits (private key) for another. What could be more \"\"like-kind\"\" than this?\"","ETF is essentially a stock, from accounting perspective. Treat it as just another stock in the portfolio.","Selling one fund and buying another will incur capital gains tax on the sale for the amount of the gain. I'm not aware of any sort of exemption available due to you moving out of the country. However, long-term capital gains for low-tax-bracket taxpayers is 0%. As long as your total income including the gains fits within the 15% regular tax bracket, you don't pay any long-term capital gains. Options for you that I see to avoid taxes are: Note that even if you do sell it all, it's only the amount of gains that would take your income over the 15% normal tax bracket that would be taxed at the long-term rate of 15%, which may not end up being that much of a tax hit. It may be worth calculating just how bad it would be based on your actual income. Also note that all I'm saying here is for US federal income taxes. The state you most recently lived in may still charge taxes if you're still considered a resident there in some fashion, and I don't know if your new home's government may try to take a cut as well.","While it may not be your preferred outcome, and doesn't eliminate the income, in the event you find yourself in the path described here you have a way to defer gains to the future. but I would then want to buy another house as a rental If you sell this house and buy another investment property (within strict time windows: 45 days to written contract and closed in 180 days), you can transfer your basis and defer your gains via what is called a 1031 like-kind exchange","There is no guidance specifically for this yet, but in my professional opinion, there is not going to be a like kind exchange for crypto. So when you exchange one crypto for another there will be a capital gain, but your basis in the new coin will be the total gain on the old coin.","In response to one of the comments you might be interested in owning the new home as a rental property for a year. You could flip this thinking and make the current home into a rental property for a period of time (1 year seems to be the consensus, consult an accountant familiar with real estate). This will potentially allow for a 1031 exchange into another property -- although I believe that property can't then be a primary residence. All potentially not worth the complication for the tax savings, but figured I'd throw it out there. Also, the 1031 exchange defers taxes until some point in the future in which you finally sell the asset(s) for cash.","Don't let the tax tail wag the investment dog. There is risk in exchanging this (known) property for another (unknown) property. That risk may be more than $9000 worth of risk. Tax considerations are important, but most important is that your investments make money. If you intend to continue as a landlord, you had better be sure you are finding a better deal elsewhere if you are going to trade this property up. I should also mention that you have a 5 year window in which you need to have lived in the home for 2 years. You have time and might be able to sell for a higher price if you wait a little longer.","The money that you put into the ETF is not tax-exempt in the usual sense of the word. It is your money and you don't owe any taxes on it any more unless Congress (or the state that you reside in) imposes a wealth tax at some time in the future. What you will owe taxes on are any dividends or capital gains that the ETF distributes to you each year (even if you have opted to automatically re-invest those amounts into the ETF), and the capital gains when you sell shares of the ETF.","The issue with trading stocks vs. mutual funds (or ETFs) is all about risk. You trade Microsoft you now have a Stock Risk in your portfolio. It drops 5% you are down 5%. Instead if you want to buy Tech and you buy QQQ if MSFT fell 5% the QQQs would not be as impacted to the downside. So if you want to trade a mutual fund, but you want to be able to put in stop sell orders trade ETFs instead. Considering mutual funds it is better to say Invest vs. Trade. Since all fund families have different rules and once you sell (if you sell it early) you will pay a fee and will not be able to invest in that same fund for x number of days (30, 60...)","Is this possible and will it have the intended effect? From the US tax perspective, it most definitely is and will. Is my plan not very similar to Wash Sale? Yes, except that wash sale rules apply for losses, not gains. In any case, since you're not a US tax resident, the US wash sale rules won't apply to you.","Mutual funds buy (and sell) shares in companies in accordance with the policies set forth in their prospectus, not according to the individual needs of an investor, that is, when you invest money in (or withdraw money from) a mutual fund, the manager buys or sells whatever shares that, in the manager's judgement, will be the most appropriate ones (consistent with the investment policies). Thus, a large-cap mutual fund manager will not buy the latest hot small-cap stock that will likely be hugely profitable; he/she must choose only between various large capitalization companies. Some exchange-traded funds are fixed baskets of stocks. Suppose you will not invest in a company X as a matter of principle. Unless a mutual fund prospectus says that it will not invest in X, you may well end up having an investment in X at some time because the fund manager bought shares in X. With such an ETF, you know what is in the basket, and if the basket does not include stock in X now, it will not own stock in X at a later date. Some exchange-traded funds are constructed based on some index and track the index as a matter of policy. Thus, you will not be investing in X unless X becomes part of the index because Standard or Poor or Russell or somebody changed their minds, and the ETF buys X in order to track the index. Finally, some ETFs are exactly like general mutual funds except that you can buy or sell ETF shares at any time at the price at the instant that your order is executed whereas with mutual funds, the price of the mutual fund shares that you have bought or sold is the NAV of the mutual fund shares for that day, which is established based on the closing prices at the end of the trading day of the stocks, bonds etc that the fund owns. So, you might end up owning stock in X at any time based on what the fund manager thinks about X.","Exchange-traded funds are bought and sold like stocks so you'd be able to place stop orders on them just like you could for individual stocks. For example, SPY would be the ticker for an S & P 500 ETF known as a SPDR. Open-end mutual funds don't have stop orders because of how the buying and selling is done which is on unknown prices and often in fractional shares. For example, the Vanguard 500 Index Investor shares(VFINX) would be an example of an S & P 500 tracker here.","\"For a non-ETF mutual fund, you can only buy shares of the mutual fund from the mutual fund itself (at a price that the mutual fund will reveal only at the end of the day) and can only shares back to the mutual fund (again at a price that the mutual fund will reveal only at the end of the day). There is no open market in the sense that you cannot put in a bid to buy, say, 100 shares of VFINX at $217 per share through a brokerage, and if there is a seller willing to sell 100 shares of VFINX to you at $217, then the sale is consummated and you are now the proud owner of 100 shares of VFINX. The only buyer or seller of VFINX is the mutual find itself, and you tell it that you \"\"want to buy 100 shares of VFINX and please take the money out of my checking account\"\". If this order is entered before the markets close at 4 pm, the mutual fund determines its share price as of the end of the day, opens a new account for you and puts 100 shares of VFINX in it (or adds 100 shares of VFINX to your already existing pile of shares) and takes the purchase price out of your checking account via an ACH transfer. Similarly for redeeming/selling shares of VFINX that you own (and these are held in an account at the mutual fund itself, not by your brokerage): you tell the mutual fund to that you \"\"wish to redeem 100 shares and please send the proceeds to my bank account\"\" and the mutual fund does this at the end of the day, and the money appears in your bank account via ACH transfer two or three days later. Generally, these transactions do not need to be for round lots of multiples of 100 shares for efficiency; most mutual fund will gladly sell you fractional shares down to a thousandth of a share. In contrast, shares of an exchange-traded fund (ETF) are just like stock shares in that they can be bought and sold on the open market and your broker will charge you fees for buying and selling them. Selling fractional shares on the open market is generally not possible, and trading in round lots is less expensive. Also, trades occur at all times of the stock exchange day, not just at the end of the day as with non-ETF funds, and the price can fluctuate during the day too. Many non-ETF mutual funds have an ETF equivalent: VOO is the symbol for Vanguard's S&P 500 Index ETF while VFINX is the non-ETF version of the same index fund. Read more about the differences between ETFs and mutual funds, for example, here.\"","\"The IRS has been particularly vague about the \"\"substantially identical\"\" investment part of the wash rule. Many brokers, Schwab for instance, say that only identical CUSIPs (exactly the same ETF) matter for the wash rule in their internal calculations, but warn that the IRS might consider two ETFs over the same index to be substantially identical. In your case, the broker has chosen to call these a wash despite even having different underlying indices. Talking to the broker is the first step as they will report it to the IRS. Though technically you have the final say in your taxes about the cost basis, discussing this with the IRS could be rather painful. First though it is probably worth checking with your broker about exactly what happened. There are other wash sale triggers that frequently trip people up that may have been in play here.\"","This depends on a lot actually - with the overall being your goals and how much you like risk. Question: What are your fees/commissions for selling? $8.95/trade will wipe out some gains on those trades. (.69% if all are sold with $8.95 commission - not including the commission payed when purchased that should be factored into the cost basis) Also, I would recommend doing commission free ETFs. You can get the same affect as a mutual fund without the fees associated with paying someone to invest in ETFs and stocks. On another note: Your portfolio looks rather risky. Although everyone has their own risk preference so this might be yours but if you are thinking about a mutual fund instead of individual stocks you probably are risk averse. I would suggest consulting with an adviser on how to set up for the future. Financial advice is free flowing from your local barber, dentist, and of course StackExchange but I would look towards a professional. Disclaimer: These are my thoughts and opinions only ;) Feel free to add comments below.","You could use HBB and other similar funds that exchange distributions for capital gains. There's HXT and HXS which is Canada and US equity markets. The swap fee + mer is a little more than some funds except for HXT which is very cheap. There's a risk for long term holders that this may eventually get banned and you're forced to sell with a gain at the wrong time, but this won't matter much if you're planning on selling in a few years. You have to pay the capital gains tax eventually. Note, the tax on distributions is really a long term drag on performance and won't make a big difference in the short term.","\"Nobody knows for sure what \"\"substantially identical\"\" means because the IRS hasn't officially defined it. Until they do so, it would come down to the decision of an auditor or a tax court. The rule of thumb that I have always heard is if the funds track the same index, they are probably substantially identical. I think most people wouldn't consider any pair of AGG, CMF, and NYF to be substantially identical, so you should be safe with your tax-loss harvesting strategy.\"","\"According to Wikipedia this is still a wash sale: In the USA wash sale rules are codified in \"\"26 USC § 1091 - Loss from wash sales of stock or securities.\"\" Under Section 1091, a wash sale occurs when a taxpayer sells or trades stock or securities at a loss, and within 30 days before or after the sale:\"","Investopedia laid out the general information of tax treatment on the ETF fund structures as well as their underlying asset classes: http://www.investopedia.com/financial-edge/0213/how-tax-treatments-of-etfs-work.aspx","From the IRS Section 1091. Loss from Wash Sales of Stock or Securities Section 1091(a) provides that in the case of any loss claimed to have been sustained from any sale or other disposition of shares of stock or securities where it appears that, within a period beginning 30 days before the date of such sale or disposition and ending 30 days after such date, the taxpayer has acquired (by purchase or by an exchange on which the entire amount of gain or loss was recognized by law),or has entered into a contract or option so to acquire, substantially identical stock or 3 securities, then no deduction shall be allowed under § 165 The document is not long, 4 pages, and should be read to see the intent. It's tough to choose the one snippet, but the conclusion is this is the definitive response to that question. A purchase within an IRA or other retirement account can create a wash sale if such a purchase would be a wash sale otherwise, i.e. the fact that it's a retirement account doesn't avoid wash rules.","If it is your primary residence and you lived there continuously and for more than 2 years out of the last 5 - then you can exclude the gain under the IRC Sec. 121. In this case, you'll pay no taxes on your gain. If the property has been a rental or you haven't lived there long enough, the rules become more complicated but you may still be able to exclude some portion of the gain, even all of it, depends on the situation. So it doesn't look like 1031 exchange is good for you here, you don't want to carry excluded gain - you want to recognize it and get the tax benefit. However, refinancing after purchase with cash-out money affects the deductability of the loan interest. You can only deduct interest on money used to buy, not cash-out portion. I believe there's a period (60 days IIRC) during which you can do the cash-out refinance and still count it as purchase money, but check with a licensed tax advier (EA/CPA licensed in your State).","You could use a stock-only ISA and invest in Exchange Traded Funds (ETFs). ETFs are managed mutual funds that trade on open exchanges in the same manner as stocks. This changes the specific fund options you have open to you, but there are so many ETFs at this point that any sector you want to invest in is almost certainly represented.","\"If you are buying and selling mutual funds in the same family of funds (e.g. Vanguard), then you can set up an on-line account on the Vanguard website (www.vanguard.com) and it is easy: Vanguard offers a \"\"Transaction\"\" service that allows you to sell shares of VFINX, say, and buy shares of VBTLX, say, from the proceeds of the sale all in one swell foop. But, if you are holding the VFINX shares through your on-line account with, say, eTrade, then it depends on what services eTrade provides to you. Will it allow doing all that in one transaction, or will it wait for the cash to come from Vanguard, and then send the money back to Vanguard to invest in VBTLX? In any case, selling VFINX shares and investing the proceeds in PRWCX shares, say, cannot be done on the Vanguard site only; Vanguard will send the proceeds of the sale of the VFINX shares only to your bank account, not anywhere else. You then need to tell T. Rowe Price (where you presumably have an account already) that you want to invest $X in PRWCX shares and to withdraw the cash from your bank account. If you are doing it all through eTrade, then the money from the sale of VFINX goes from Vanguard to eTrade (into something called a sweep account, or maybe your cash account at eTrade) and you invest it in PRWCX after appropriate delays in receiving the money from Vanguard into eTrade, etc. If your cash account (bank or eTrade) has enough of a balance, you could sell VFINX and buy PRWCX on the same day. where the purchase is made from the money in the cash account and replaced a few days later by the proceeds from Vanguard. Bouncing of checks (or inability to act on a hot tip to invest in something) in the interim is your problem; not the bank's or eTrade's.\"","Interesting, but I don't think we are talking the same thing. This seems to say that that the fund itself doesn't have the rule applied: I.E. the MF can't get hit with the 5% commission when you buy it. That makes sense. What I'm asking though is that when my (say) American Fund that I own already does a rebalance, the constituent holdings change. Those securities are not exempt from the rule and thus when they are transacted can have commissions applied. As a matter of fact the broker for those securities has no idea if the fund is eligible or not. Where did you get this from? As I'm. It studying for a series 7 I'm probably missing some foundational sources.","Behind the scenes, mutual funds and ETFs are very similar. Both can vary widely in purpose and policies, which is why understanding the prospectus before investing is so important. Since both mutual funds and ETFs cover a wide range of choices, any discussion of management, assets, or expenses when discussing the differences between the two is inaccurate. Mutual funds and ETFs can both be either managed or index-based, high expense or low expense, stock or commodity backed. Method of investing When you invest in a mutual fund, you typically set up an account with the mutual fund company and send your money directly to them. There is often a minimum initial investment required to open your mutual fund account. Mutual funds sometimes, but not always, have a load, which is a fee that you pay either when you put money in or take money out. An ETF is a mutual fund that is traded like a stock. To invest, you need a brokerage account that can buy and sell stocks. When you invest, you pay a transaction fee, just as you would if you purchase a stock. There isn't really a minimum investment required as there is with a traditional mutual fund, but you usually need to purchase whole shares of the ETF. There is inherently no load with ETFs. Tax treatment Mutual funds and ETFs are usually taxed the same. However, capital gain distributions, which are taxable events that occur while you are holding the investment, are more common with mutual funds than they are with ETFs, due to the way that ETFs are structured. (See Fidelity: ETF versus mutual funds: Tax efficiency for more details.) That having been said, in an index fund, capital gain distributions are rare anyway, due to the low turnover of the fund. Conclusion When comparing a mutual fund and ETF with similar objectives and expenses and deciding which to choose, it more often comes down to convenience. If you already have a brokerage account and you are planning on making a one-time investment, an ETF could be more convenient. If, on the other hand, you have more than the minimum initial investment required and you also plan on making additional regular monthly investments, a traditional no-load mutual fund account could be more convenient and less expensive.","No, IRA contributions can only be made in the form of cash (rollovers and conversions are different). You'd have to sell the investments in your taxable account, incurring capital gains or losses, then transfer the proceeds to your IRA in cash. Note that the amount you can transfer is subject to the limits on how much one can contribute to the IRA each year. You could look into Vanguard Target Retirement funds, which have a lower $1,000 minimum investment, or Vanguard ETFs.","There is little difference between buying shares in your broker's index fund and shares of their corresponding ETF. In many cases the money invested in an ETF gets essentially stuffed right into the index fund (I believe Vanguard does this, for example). In either case you will be paying a little bit of tax. In the ETF case it will be on the dividends that are paid out. In the index fund case it will additionally be on the capital gains that have been realized within the fund, which are very few for an index fund. Not a ton in either case. The more important tax consideration is between purchase and sale, which is the same in either case. I'd say stick it wherever the lowest fees are.","\"Your question is one of semantics. ETFs and mutual funds have many things in common and provide essentially the same service to investors with minimal differences. It's reasonably correct to say \"\"An ETF is a mutual fund that...\"\" and then follow up with some stuff that is not true of a typical mutual fund. You could do the same with, for example, a hedge fund. \"\"A hedge fund is a mutual fund that doesn't comply with most SEC regulations and thus is limited to accredited investors.\"\" As a matter of practice, when people say \"\"mutual fund\"\" they are talking about traditional mutual funds and pretty much never including ETFs. So is an ETF a mutual fund as the word is commonly used? No.\"","A stock, bond or ETF is basically a commodity. Where you bought it does not really matter, and it has a value in USD only inasmuch as there is a current market price quoted at an American exchange. But nothing prevents you from turning around and selling it on a European exchange where it is also listed for an equivalent amount of EUR (arbitrage activities of investment banks ensure that the price will be equivalent in regard to the current exchange rate). In fact, this can be used as a cheap form of currency conversion. For blue chips at least this is trivial; exotic securities might not be listed in Europe. All you need is a broker who allows you to trade on European exchanges and hold an account denominated in EUR. If necessary, transfer your securities to a broker who does, which should not cost more than a nominal fee. Mutual funds are a different beast though; it might be possible to sell shares on an exchange anyway, or sell them back to the issuer for EUR. It depends. In any case, however, transferring 7 figure sums internationally can trigger all kinds of tax events and money laundering investigations. You really need to hire a financial advisor who has international investment experience for this kind of thing, not ask a web forum!","The problem there is that there's a tax due on that dividend. So, if you wish, you can buy the ETF and specify to reinvest dividends, but you'll have to pay a bit of tax on them, and keep track of your basis, if the account isn't a retirement account.","There are ETFs and mutual funds that pay dividends. Mutual funds and ETFs are quite similar. Your advisor is correct regarding future funds you invest. But you already had incurred the risk of buying an individual stock. That is a 'sunk cost'. If you were satisfied with the returns you could have retained the HD stock you already owned and just put future moneys into an ETF or mutual fund. BTW: does your advisor receive a commission from your purchase of a mutual fund? That may have been his motivation to give you the advice to sell your existing holdings.","Questrade is a Canada based broker offering US stock exchange transactions as well. It says this right on their homepage. ETFs are traded like stocks, so the answer is yes. Why did you think they only offered funds?","As littleadv suggested, you are mixing issues. If you have earned income and are able to deduct an IRA deposit, where those actual dollars came from is irrelevant. The fact that you are taking proceeds from one transaction to deposit to the IRA is a booking entry on your side, but the IRS doesn't care. By the way, when you get that $1000 gain, the broker doesn't withhold tax, so if you take the entire $1000 and put it in the IRA, you owe $150 on one line, but save $250 elsewhere, and are still $100 to the positive on your tax return.","The mutual fund will price at day's end, while the ETF trades during the day, like a stock. If you decide at 10am, that some event will occur during the day that will send the market up, the ETF is preferable. Aside from that, the expenses are identical, a low .14%. No real difference especially in a Roth.","\"As of right now it looks like you can't issue an ETF at least because the underlying \"\"commodity\"\" isn't regulated. (See Winkelvoss ETF). I suspect you would run into this problem with any 1940 act fund (mutual fund), but it's more a situation of \"\"not approved\"\" rather than illegal, so an MLP hedge fund structure would probably be fine. And some googling finds Iterative Instinct Management's Storj SPV.\"","No. Investors purchase ETFs' as they would any other stock, own it under the same circumstances as an equity investment, collecting distributions instead of dividends or interest. The ETF takes care of the internal operations (bond maturities and turnover, accrued interest, payment dates, etc.).","\"Yes- you do not realize gains or losses until you actually sell the stock. After you sell the initial stocks/bonds you have realized the gain. When you buy the new, different stocks you haven't realized anything until you then sell those. There is one exception to this, called the \"\"Wash-Sale Rule\"\". From Investopedia.com: With the wash-sale rule, the IRS disallows a loss deduction from the sale of a security if a ‘substantially identical security' was purchased within 30 days before or after the sale. The wash-sale period is actually 61 days, consisting of the 30 days before and the 30 days after the date of the sale. For example, if you bought 100 shares of IBM on December 1 and then sold 100 shares of IBM on December 15 at a loss, the loss deduction would not be allowed. Similarly, selling IBM on December 15 and then buying it back on January 10 of the following year does not permit a deduction. The wash-sale rule is designed to prevent investors from making trades for the sole purpose of avoiding taxes.\"","http://www.efficientfrontier.com/ef/104/stupid.htm would have some data though a bit old about open-end funds vs an ETF that would be one point. Secondly, do you know that the Math on your ETF will always work out to whole numbers of shares or do you plan on using brokers that would allow fractional shares easily? This is a factor as $3,000 of an open-end fund will automatically go into fractional shares that isn't necessarily the case of an ETF where you have to specify a number of shares when you purchase as well as consider are you doing a market or limit order? These are a couple of things to keep in mind here. Lastly, what if the broker you use charges account maintenance fees for your account? In buying the mutual fund from the fund company directly, there may be a lower likelihood of having such fees. I don't know of any way to buy shares in the ETF directly without using a broker.","It isn't just ETFs, you have normal mutual funds in India which invest internationally. This could be convenient if you don't already have a depository account and a stockbroker. Here's a list of such funds, along with some performance data: Value Research - Equity: International: Long-term Performance. However, you should also be aware that in India, domestic equity and equity fund investing is tax-free in the long-term (longer than one year), but this exemption doesn't apply to international investments. Ref: Invest Around the World.","I agree, one should not let the tax tail wag the investing dog. The only question should be whether he'd buy the stock at today's price. If he wishes to own it long term, he keeps it. To take the loss this year, he'd have to sell soon, and can't buy it back for 30 days. If, for whatever reason, the stock comes back a bit, he's going to buy in higher. To be clear, the story changes for ETFs or mutual funds. You can buy a fund to replace one you're selling, capture the loss, and easily not run afoul of wash sale rules.","Contrary to what you might have heard, moving money between mutual funds, whether or not in the same family of funds, is a taxable event, assuming, of course, that the funds are not in tax-deferred retirement accounts. About the only thing that is not taxable is moving funds between share classes in the same mutual fund, e.g. a conversion from what Vanguard refers to as Investor Shares to Admiral Shares in the same fund. In some cases, the Admiral Shares may have a considerably different price (for example, Vanguard Health Care Fund Investor Shares (VGHCX) and Admiral Shares (VGHAX) are priced at $215.83 and $91.04 respectively and so changing from one class to the other changes the number of shares owned considerably while the net value of the investment remains unchanged.","I was not able to find any authority for the opinion you suggest. Wash sale rules should, IMHO, apply. According to the regulations, you attribute the newly purchased shares to the oldest sold shares for the purposes of the calculation of the disallowed loss and cost basis. (c) Where the amount of stock or securities acquired within the 61-day period is less than the amount of stock or securities sold or otherwise disposed of, then the particular shares of stock or securities the loss from the sale or other disposition of which is not deductible shall be those with which the stock or securities acquired are matched in accordance with the following rule: The stock or securities acquired will be matched in accordance with the order of their acquisition (beginning with the earliest acquisition) with an equal number of the shares of stock or securities sold or otherwise disposed of. You can resort to the claim that you have not, in fact, entered into the contract within 30 days, but when you gave the instructions to reinvest dividends. I don't know if such a claim will hold, but to me it sounds reasonable. This is similar to the rules re short sales (in (g) there). In this case, wash sale rules will not apply (unless you instructed to reinvest dividends within the 30 days prior to the sale). But I'd ask a tax professional if such a claim would hold, talk to a EA/CPA licensed in your state.","Yes, your realtor is a moron. (I am a realtor, and sorry you have such a bad one) Every industry has its good and bad. You really should find a new realtor, a good one. You know the 1031 exchange is for rental property only. And that saving $2000 isn't worth staying in the house to complete the two years required occupancy.","\"Assuming your investments aren't in any kind of tax-advantaged account (like an IRA), they are generally not tracked and you indeed may pay more taxes. What will likely change, however, is your cost basis. You only pay tax on the difference between the value of the investment when you sell it and its value when you bought it. There is no rule that says once you sell an investment and pay taxes on the gain, you will never again pay any taxes on any other investments you then buy with that money. If you own some investment, and it increases in value, and then you sell it, you had a capital gain and owe taxes (depending on your tax bracket, etc.). If you use the money to buy some other investment, and that increases in value, and then you sell it, you had another separate capital gain and again owe taxes. However, every time you sell, you only are subject to capital gains taxes on the gain, not the entire sale price. The value of the investment at the time you bought it is the cost basis. When you sell, you take the sale price and subtract the cost basis to find your gain, So suppose you bought $1000 worth of some ETF many years ago. It went up to $2000 and you sold it. You have $2000 in cash, but $1000 of that is your original money back, so your capital gain is $1000 and that is the amount on which you owe (or may owe) taxes. Suppose you pay 15% tax on this, as you suggest; that is $150, leaving you with $1850. Now suppose you buy another ETF with that. Your cost basis is now $1850. Suppose the investment now increases in value again to $2000. This time when you sell, you still have $2000 in cash, but this is now only $150 more than you paid, so you only owe capital gains taxes on that $150. (A 15% tax on that would be $22.50.) In that example you had one capital gain of $1000 and a second of $150 and paid a total of $172.50 in taxes (150 + 22.50). Suppose instead that you had held the original investment and it had increased in value to $2150 and you had then sold it. You would have a single capital gain of $1150 (2150 minus the original 1000 you paid). 15% of this would be the same $172.50 you paid under the other arrangement. So in essence you pay the same taxes either way. (This example is simplified, of course; in reality, the rate you pay depends on your overall income, so you could pay more if you sell a lot in a single year, since it could push you into a higher tax bracket.) So none of the money is \"\"tax exempt\"\", but each time you sell, you \"\"reset the counter\"\" by paying tax on your gain, and each time you buy, you start a new counter on the basis of whatever you pay for the investment. Assuming you're dealing with ordinary investment instruments like stocks and ETFs, this basis information is typically tracked by the bank or brokerage where you buy and sell them. Technically speaking it is your responsibility to track and report this when you sell an investment, and if you do complicated things like transfer securities from one brokerage to another you may have to do that yourself. In general, however, your bank/brokerage will keep track of cost basis information for you.\"","Sale of a stock creates a capital gain. It can be offset with losses, up to $3000 more than the gains. It can be deferred when held within a retirement account. When you gift appreciated stock, the basis follows. So when I gifted my daughter's trust shares, there was still tax due upon sale. The kiddy tax helped reduce but not eliminate it. And there was no quotes around ownership. The money is gone, her account is for college. No 1031 exchange exists for stock.","This should be posted in /r/Personalfinance. Also, do not do what /u/BlitheCalamity is suggesting. 1. If it is an IRA, simply do an ACAT transfer. No taxes will be incurred if the paperwork is filed correctly. Additionally, there is a 60 rollover provision for IRA accounts... another way to get out of a tax penalty for an IRA account. 2. Check the internal fees for your mutual funds. You may have purchased A shares, which I am guessing is the case since your advisor was an Ed Jones advisor. The ongoing internal expense ratio should be rather low so you might want to consider keeping these funds. An ACAT will allow you to transfer your investments to your new account if you want to keep them. (A shares have a onetime high upfront charge, but low ongoing fee. If you've already paid for the fund, why ditch it for another fund that charges a higher ongoing fee but not an upfront fee? Evaluate your costs.) 3. If this is a non-IRA account, still file an ACAT. It is the easiest way to transfer your account. Edit: Silly me, this is clearly a question regarding an IRA. In that case, there is no tax penalty for selling anything and buying within your IRA as long as you do not take the money out. Like I said, please file an ACAT with the new company otherwise you will have to prove to the IRS that you completed the rollover in 60 days. If not, you will pay income tax and a 10% penalty.","Since you are paying taxes on the distributions from your mutual funds anyway, instead of reinvesting the distributions back into the mutual funds, you could receive them as cash, then contribute them to your Roth IRA once you are able to open one.","\"An Exchange-Traded Fund (ETF) is a special type of mutual fund that is traded on the stock exchange like a stock. To invest, you buy it through a stock broker, just as you would if you were buying an individual stock. When looking at a mutual fund based in the U.S., the easiest way to tell whether or not it is an ETF is by looking at the ticker symbol. Traditional mutual funds have ticker symbols that end in \"\"X\"\", and ETFs have ticker symbols that do not end in \"\"X\"\". The JPMorgan Emerging Markets Equity Fund, with ticker symbol JFAMX, is a traditional mutual fund, not an ETF. JPMorgan does have ETFs; the JPMorgan Diversified Return Emerging Markets Equity ETF, with ticker symbol JPEM, is an example. This ETF invests in similar stocks as JFAMX; however, because it is an index-based fund instead of an actively managed fund, it has lower fees. If you aren't sure about the ticker symbol, the advertising/prospectus of any ETF should clearly state that it is an ETF. (In the example of JPEM above, they put \"\"ETF\"\" right in the fund name.) If you don't see ETF mentioned, it is most likely a traditional mutual fund. Another way to tell is by looking at the \"\"investment minimums\"\" of the fund. JFAMX has a minimum initial investment of $1000. ETFs, however, do not have an investment minimum listed; because it is traded like a stock, you simply buy whole shares at whatever the current share price is. So if you look at the \"\"Fees and Investment Minimums\"\" section of the JPEM page, you'll see the fees listed, but not any investment minimums.\"","As JoeTaxpayer illustrated, yes you can. However, one thing to remember is that unless you live in a state with no state income tax, there may be state tax to pay on those gains. Even so, it's likely a good idea if you expect either your income (or the federal capital gains tax rate) to rise in the future.","ETFs trade on specific exchanges. If your broker deals with those exchanges, you should have access to the ETF. If your broker does not deal with that exchange, then you will not have access through that broker. This is different than, say, mutual funds, which don't trade on the exchanges are proprietary to certain brokerages or financial institutions.","\"Securities and ETFs are also subjected to Estate Tax. Some ways: Draft a \"\"Transfer on Death\"\" instruction to the broker, that triggers a transfer to an account in the beneficiary's name, in most cases avoiding probate. If the broker does not support it, find another broker. Give your brokerage and bank password/token to your beneficiary. Have him transfer out holdings within hours of death. Create a Trust, that survives even after death of an individual. P.S. ETF is treated as Stock (a company that owns other companies), regardless of the nature of the holdings. P.S.2 Above suggestions are only applicable to nonresident alien of the US.\"","Generally, ETFs and mutual funds don't pay taxes (although there are some cases where they do, and some countries where it is a common case). What happens is, the fund reports the portion of the gain attributed to each investor, and the investor pays the tax. In the US, this is reported to you on 1099-DIV as capital gains distribution, and can be either short term (as in the scenario you described), long term, or a mix of both. It doesn't mean you actually get a distribution, though, but if you don't - it reduces your basis.","There are times when investing in an ETF is more convenient than a mutual fund. When you invest in a mutual fund, you often have an account directly with the mutual fund company, or you have an account with a mutual fund broker. Mutual funds often have either a front end or back end load, which essentially gives you a penalty for jumping in and out of funds. ETFs are traded exactly like stocks, so there is inherently no load when buying or selling. If you have a brokerage account and you want to move funds from a stock to a mutual fund, an ETF might be more convenient. With some accounts, an ETF allows you to invest in a fund that you would not be able to invest in otherwise. For example, you might have a 401k account through your employer. You might want to invest in a Vanguard mutual fund, but Vanguard funds are not available with your 401k. If you have access to a brokerage account inside your 401k, you can invest in the Vanguard fund through the associated ETF. Another reason that you might choose an ETF over a mutual fund is if you want to try to short the fund.","\"If your intention is to purchase ETFs on a regular basis (like $x per month), then ETFs may not make sense. You may have to pay a fixed transaction cost like you were buying a stock for each purchase. In a similar no load mutual fund, there are more likely to be no transaction costs (depending on how it is bought). The above paragraph is not very definitive, and is really dependent upon how you would purchase either ETFs or Mutual funds. For example if you have a Fidelity brokerage account, they may let you buy certain ETFs commission free. Okay then either ETFs make great sense. It would not make sense to buy ones that they charge $35 per transaction if you have regular transactions that are smallish. The last two questions seem to be asking if you should buy MF or buy stocks directly. For most people the later is a losing proposition. They do not have the time or ability to buy stocks directly, effectively. Even if they did they may not have the capital to make enough of a difference when one considers all the cost involved. However, if that kind of thing interests you, perhaps you should dabble. Start out small and look at the higher costs of doing so as part of the \"\"cost of doing business\"\".\"","Is wash rule applicable for this? No - because you made a gain on the sale. You paid $13,500 for the stock and sold it for $14,250. The wash rule prevents you from claiming a loss if you buy the same stock again within 30 days. You have no loss to claim, so the rule does not apply.","\"Appreciation of a Capital Asset is a Capital Gain. In the United States, Capital Gains get favorable tax treatment after being held for 12 months. From the IRS newsroom: Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term. The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income. For 2009, the maximum capital gains rate for most people is15%. For lower-income individuals, the rate may be 0% on some or all of the net capital gain. Special types of net capital gain can be taxed at 25% or 28%. The IRS defines a Capital Asset as \"\"most property you own\"\" with a list of exclusions found in Schedule D Instructions. None of the exclusions listed relate to Bond ETFs.\"","The way it is handled with ETF's is that someone has to gather a block of units and redeem them with the fund. So, with the mutual fund you redeem your unit directly with the fund, always, you never sell to another player. With the ETF - its the opposite, you sell to another player. Once a player has a large chunk of units - he can go to the fund and redeem them. These are very specific players (investment banks), not individual investors.","Like-kind of exchanges have a list of requirements. The IRS has not issued formal guidance in the matter. I recommend to be aggressive and claim the exchange, while justifying it with a good analogy to prove good faith (and persuade the IRS official reading it the risk of losing in tax court would be to high). Worst case the IRS will attempt to reject the exchange, at which point you could still pony up to get rid of the problem, interest being the only real risk. For example: Past tax court rulings have stated that collectable gold coins are not like kind to gold bars, and unlike silver coins, but investment grade gold coins are like kind to gold bars. So you could use a justification like this: I hold Bitcoin to be like-kind to Litecoin, because they use the same fundamental technology with just a tweak in the math, as if exchanging different grades of gold bars, which has been approved by tax court ruling #xxxxx. Note that it doesn't matter whether any of this actually makes sense, it just has be reasonable enough for you to believe, and look like it is not worth pursuing to an overworked IRS official glancing at it. I haven't tried this yet, so up to now this is a guess, but it's a good enough guess in my estimation that I will be using it on some rather significant amounts next year.","It was not 100% clear if you have held all of these stocks for over a year. Therefore, depending on your income tax bracket, it might make sense to hold on to the stock until you have held the individual stock for a year to only be taxed at long-term capital gains rates. Also, you need to take into account the Net Investment Income Tax(NIIT), if your current modified adjusted income is above the current threshold. Beyond these, I would think that you would want to apply the same methodology that caused you to buy these in the first place, as it seems to be working well for you. 2 & 3. No. You trigger a taxable event and therefore have to pay capital gains tax on any gains. If you have a loss in the stock and repurchase the stock within 30 days, you don't get to recognize the loss and have to add the loss to your basis in the stock (Wash Sales Rules).","Your ETF will return the interest as dividends. If you hold the ETF on the day before the Ex-Dividend date, you will get the dividend. If you sell before that, you will not. Note that at least one other answer to this question is wrong. You do NOT need to hold on the Record date. There is usually 2 days (or so) between the ex-date and the record date, which corresponds to the number of days it takes for your trade to settle. See the rules as published by the SEC: http://www.sec.gov/answers/dividen.htm","ETFs offer the flexibility of stocks while retaining many of the benefits of mutual funds. Since an ETF is an actual fund, it has the diversification of its potentially many underlying securities. You can find ETFs with stocks at various market caps and style categories. You can have bond or mixed ETFs. You can even get ETFs with equal or fundamental weighting. In short, all the variety benefits of mutual funds. ETFs are typically much less expensive than mutual funds both in terms of management fees (expense ratio) and taxable gains. Most of them are not actively managed; instead they follow an index and therefore have a low turnover. A mutual fund may actively trade and, if not balanced with a loss, will generate capital gains that you pay taxes on. An ETF will produce gains only when shifting to keep inline with the index or you yourself sell. As a reminder: while expense ratio always matters, capital gains and dividends don't matter if the ETF or mutual fund is in a tax-advantaged account. ETFs have no load fees. Instead, because you trade it like a stock, you will pay a commission. Commissions are straight, up-front and perfectly clear. Much easier to understand than the various ways funds might charge you. There are no account minimums to entry with ETFs, but you will need to buy complete shares. Only a few places allow partial shares. It is generally harder to dollar-cost average into an ETF with regular automated investments. Also, like trading stocks, you can do those fancy things like selling short, buying on margin, options, etc. And you can pay attention to the price fluctuations throughout the day if you really want to. Things to make you pause: if you buy (no-load) mutual funds through the parent company, you'll get them at no commission. Many brokerages have No Transaction Fee (NTF) agreements with companies so that you can buy many funds for free. Still look out for that expense ratio though (which is probably paying for that NTF advantage). As sort of a middle ground: index funds can have very low expense ratios, track the same index as an ETF, can be tax-efficient or tax-managed, free to purchase, easy to dollar-cost average and easier to automate/understand. Further reading:","The top long-term capital gains tax rate will rise to 20% effective 1 Jan, 2011, unless Congress decides to do something about it before then. (Will they? Who knows!! There's been talk about it, but, well, it's Congress. They don't even know what they're going to do.) Anyway. The rules about when you can sell stock are mostly concerned with when you can realize a capital loss: if you sell a stock at a loss and then re-buy it for tax purposes within 30 days, it's a wash sale and not eligible for a deduction. However, I don't believe this applies to any stocks once you realize a gain - once you've realized the gain and paid your tax for it, it's all yours, locked in at whatever rate. Your replacement stock will be subject to short-term capital gains for the next year afterwards, and you might need to be careful with identifying the holding period on different lots of your stock, but I don't believe there will be any particular trouble. Please do not rely entirely on my advice and consult also with your tax preparer or lawyer. :) And the IRS documentation: Special Addendum for Nov/Dec 2012! Spoiler alert! Congress did indeed act: they extended the rates, but only temporarily, so now we're looking at tax hikes starting in 2013 instead, only the new top rate++ will be something like 23.8% on account of an extra 3.8% medicare tax on passive earnings (brought to you via Obamacare legislation). But the year and the rates' specifics aside, same thing still applies. And the Republican house and Democratic senate/President are still duking it out. Have fun. ++ 3.8% surtax applies to the lesser of (a) net investment income (b) income over $200,000 ($250k if married). 20% tax rate applies to people in the 15% income tax bracket for ordinary income or higher. Additional tax discounts for property held over 5 years may be available. Consult tax law and your favorite tax professional and prepare to be confused.","The main difference between an ETF and a Mutual Fund is Management. An ETF will track a specific index with NO manager input. A Mutual Fund has a manager that is trying to choose securities for its fund based on the mandate of the fund. Liquidity ETFs trade like a stock, so you can buy at 10am and sell at 11 if you wish. Mutual Funds (most) are valued at the end of each business day, so no intraday trading. Also ETFs are similar to stocks in that you need a buyer/seller for the ETF that you want/have. Whereas a mutual fund's units are sold back to itself. I do not know of many if any liquity issues with an ETF, but you could be stuck holding it if you can not find a buyer (usually the market maker). Mutual Funds can be closed to trading, however it is rare. Tax treatment Both come down to the underlying holdings in the fund or ETF. However, more often in Mutual Funds you could be stuck paying someone else's taxes, not true with an ETF. For example, you buy an Equity Mutual Fund 5 years ago, you sell the fund yourself today for little to no gain. I buy the fund a month ago and the fund manager sells a bunch of the stocks they bought for it 10 years ago for a hefty gain. I have a tax liability, you do not even though it is possible that neither of us have any gains in our pocket. It can even go one step further and 6 months from now I could be down money on paper and still have a tax liability. Expenses A Mutual Fund has an MER or Management Expense Ratio, you pay it no matter what. If the fund has a positive return of 12.5% in any given year and it has an MER of 2.5%, then you are up 10%. However if the fund loses 7.5% with the same MER, you are down 10%. An ETF has a much smaller management fee (typically 0.10-0.95%) but you will have trading costs associated with any trades. Risks involved in these as well as any investment are many and likely too long to go into here. However in general, if you have a Canadian Stock ETF it will have similar risks to a Canadian Equity Mutual Fund. I hope this helps.","My broker offers a service to transfer the shares where you only pay commission once. Therefore say if standard commission is £10, then you don't end up paying £20 (10 for selling + 10 for buy back). You'll have to be okay with the spread though. Hope this helps.","This will work as intended, but there's another point to consider. In the US, the tax rate on proceeds from stock sales is higher for short term holdings, which are defined as held for less than one year. Both rates vary based on your income. Bracket numbers are for fiscal year 2014, filing as single. The difference between short and long term capital gains tax in the US is a minimum of ten percentage points, and works out to 15 percentage points on average. This is substantial. If you won't be reporting much income the year you move to the US (say because you only worked for a portion of the year) it is decidedly to your advantage to wait and sell the stocks in the US, to get that sweet 0% rate. At a minimum, you should hold the position for a year if you sell and rebuy, from a tax optimization perspective. Two caveats:","Just a thought because this is a really good question: Would the buying and selling of blockchain based digital currency, using other blockchain based digital currencies, be subject to like kind treatment and exempt from capital gains until exchanged for a non-blockchain based good or service (or national currency) Suppose someone sells 1 bitcoin to buy 100 monero. Monero's price and bitcoin's price then change to where the 100 monero are 3 bitcoins. The person gets their bitcoin back and has 66.67 monero remaining. This scenario could be: Suppose someone sells 1 bitcoin at $1000 to buy 100 monero at $10. Bitcoin crashes 80% to $200 while monero crashes to only $6 per monero. $6 times 100 is $600 and if the person gets their bitcoin back (at $200 per bitcoi), they still lost money when measured in US Dollars if they move that bitcoin back to US dollars. In reading the IRS on bitcoin, they only care about the US dollar value of bitcoin or monero and in this example, the US dollar value is less. The person may have more bitcoins, but they still lost money if they sell.","\"Usually the new broker will take care of this for you. It can take a couple of weeks. If you are planning to go with Vanguard, you probably want to actually get an account at Vanguard, as Vanguard funds usually aren't \"\"No Transaction Fee\"\" funds with many brokers. If you are planning to invest in ETFs, you'll get more flexibility with a broker.\"","My memory served me correctly. I remember this because it was on my Series 7, so that link is misleading if you are studying for the 7. Here is the exception: > Transactions to Which the Rule is Not Applicable (Proposed FINRA Rule 2121(d)) Consistent with the initial proposal, FINRA Rule 2121(d) provides that FINRA Rule 2121 is not applicable to: (1) **the sale of securities where a prospectus** or offering circular must be delivered and the securities are sold at the specific public offering price, based on NASD IM-2440-1(d); and (2) a transaction in a non-investment grade debt security with a QIB that meets the conditions set forth in proposed FINRA Rule 2122(b)(9), which is described below. If you're studying for the 7, you will know that every mutual fund sale requires the delivery of a prospectus.","In my opinion, if you are doing long-term investing, this is a non-issue. The difference of hours in being able to trade an ETF during the day vs. only being able to trade a traditional mutual fund at day-end is irrelevant if you are holding the investment for a long time. If you are engaging in day trading, market timing, or other advanced/controversial trading practices, then I suppose it could make a difference. For the way I invest (index funds, long-term, set-it-and-forget-it), ETFs have no advantage over traditional mutual funds.","When I did this I sold the stock out of my 401k account. Then transferred the cash to my rollover IRA account. No tax event was created for me. Make sure your rollover IRA account is listed as tax deferred. If this still doesn't work for you then it could be a bug in Quicken and your best bet is the Quicken forums. Good luck.","Mutual funds don't do what ETFs do because, according to how the fund was built in their contract, they can't. That is not how they are built and the people that invested in them expect them to act in a certain way. That is ok, though. Many people still invest in mutual funds partially because of their history but there are some advantages to mutual funds over etfs. Mainly mutual funds must mark-to-market at the end of day while etf values can drift from the asset value especially in crisis. As long enough people invest in mutual funds the funds make enough money on their fees they don't need to change. Maybe mutual funds will go extinct as etfs do have significant advantages, but it likely won't happen soon.","\"Mutual funds don't pay taxes themselves, they distribute any dividends or capital gains to the shareholders. Thus, if you hold a mutual fund in a tax-advantaged account like a 401k or IRA then the distribution isn't a taxable event while in a regular taxable account you would have to pay taxes on the distributions. From Forbes: There can be foreign companies on US stock exchanges that would still work the same way. Unilever for example is an Anglo-Dutch multinational listed on the NYSE as \"\"UN.\"\"\"","\"First, it's an exaggeration to say \"\"every\"\" dollar. Traditional mutual funds, including money-market funds, keep a small fraction of their assets in cash for day-to-day transactions, maybe 1%. If you invest $1, they put that in the cash bucket and issue you a share. If you and 999 other people invest $100 each, not offset by people redeeming, they take the aggregated $100,000 and buy a bond or two. Conversely, if you redeem one share it comes out of cash, but if lots of people redeem they sell some bond(s) to cover those redemptions -- which works as long as the bond(s) can in fact be sold for close enough to their recorded value. And this doesn't mean they \"\"can't fail\"\". Even though they are (almost totally) invested in securities that are thought to be among the safest and most liquid available, in sufficiently extreme circumstances those investments can fall in market value, or they can become illiquid and unavailable to cover \"\"withdrawals\"\" (redemptions). ETFs are also fully invested, but the process is less direct. You don't just send money to the fund company. Instead: Thus as long as the underlyings for your ETF hold their value, which for a money market they are designed to, and the markets are open and the market maker firms are operating, your ETF shares are well backed. See https://en.wikipedia.org/wiki/Exchange-traded_fund for more.\"","\"Here's the detailed section of IRS Pub 590 It looks like you intended to have a \"\"trustee to trustee conversion\"\", but the receiving trustee dropped their ball. The bad news is, a \"\"rollover contribution\"\" needed to be done in 60 days of the distribution. There is good news, you can request an extension from the IRS, with one of the reasons if there was an error by one of the financial institutions involved. Other waivers. If you do not qualify for an automatic waiver, you can apply to the IRS for a waiver of the 60-day rollover requirement. To apply for a waiver, you must submit a request for a letter ruling under the appropriate IRS revenue procedure. This revenue procedure is generally published in the first Internal Revenue Bulletin of the year. You must also pay a user fee with the application. The information is in Revenue Procedure 2016-8 in Internal Revenue Bulletin 2016-1 available at www.irs.gov/irb/2016-01_IRB/ar14.html. In determining whether to grant a waiver, the IRS will consider all relevant facts and circumstances, including: Whether errors were made by the financial institution (other than those described under Automatic waiver , earlier); Whether you were unable to complete the rollover due to death, disability, hospitalization, incarceration, restrictions imposed by a foreign country, or postal error; Whether you used the amount distributed (for example, in the case of payment by check, whether you cashed the check); and How much time has passed since the date of distribution. You can also see if you can get ETrade to \"\"recharacterize\"\" the equity position to your desired target IRA. The positive here is that the allowed decision window for calendar year 2016 rollovers is October 15 2017; the negatives are this is irrevocable, and restricts certain distributions from the target for a year (unlikely to impact your situation, but, you know, \"\"trust but verify\"\" anonymous internet advice); and it requires ETrade to recognize the original transaction was a rollover to a Roth IRA, which they currently don't. But if their system lets them put it through you could end up with the amount in a traditional IRA with no other taxable events to report, which appears to be your goal. Recharacterization FAQ\"","What account you put it in depends on why you have those different accounts. First, if you have them due to regulatory requirements, then you of course must follow said regulations. I doubt that's the case here. Otherwise, you might be splitting based on how they trade (ETFs trade as stocks) or you could be splitting based on how you build a portfolio out of them. When you build a non-speculative stock portfolio, you typically want to limit your holdings in a single stock to a fairly small portion of your portfolio (say, 3%) to limit your exposure to bad stuff happening to a single company. That doesn't apply nearly a much to mutual funds, especially index funds. ETFs are much more like mutual funds here. You can also, of course, create an ETF account and put them there. You also say you have a market index account, what is that used for?","Your three options are: Options 2 and 3 are obviously identical (other than transaction costs), so if you want to keep the stock, go for option 1, otherwise, go for option 3 since you have the same effect as option 2 with no transaction costs. The loss will likely also offset some of the other short term gains you mentioned.","The main difference between a mutual fund and an ETF are how they are bought and sold (from the investors perspective). An ETF is transacted on the open market. This means you normally can't buy partial shares with your initial investment. Having to transact on the open market also means you pay a market price. The market price is always a little bit different from the Net Asset Value (NAV) of the fund. During market hours, the ETF will trade at a premium/discount to the NAV calculated on the previous day. Morningstar's fund analysis will show a graph of the premium/discount to NAV for an ETF. With a mutual fund on the other hand, your investment goes to a fund company, which then grants you shares while under the hood buying the underlying investments. You pay the NAV price and are allowed to buy partial shares. Usually an ETF has a lower expense ratio, but if that's equal and any initial fees/commissions are equal, I would prefer the mutual fund in order to buy partial shares (so your initial investment will be fully invested) and so you don't have to worry about paying premium to NAV","In addition to all the good information that JoeTaxpayer has provided, be aware of this. When you sell mutual fund shares, you can, if you choose to do so, tell the mutual fund company which shares you want to sell (e.g. all shares purchased on xx/yy/2010 plus 10 shares out of 23.147 shares purchased on ss/tt/2011 plus...) and pay taxes on the gains/losses on those specific shares. If you do not specify which shares you want sold, the mutual fund company will tell you the gains/losses based on the average cost basis and you can use this information if you like. Note that some of your gains/losses will be short-term gains or losses if you use the average cost basis. Or, you can use the FIFO method (usually resulting in the largest gain) in which the shares are sold in the order in which they were purchased. This usually results in no short-term gains/losses. Just so that you know, most mutual fund companies will link your checking account in your bank to your account with them (a one-time paperwork deal is necessary in which your bank manager's signature is required on the authorization to be sent to the fund company). After that, the connection is nearly as seamless as with your current system. Tell the fund company you want to invest money in a certain mutual fund and to take the money from your linked checking account, and they will take care of it. Sell some shares and they will deposit the money into your linked bank account, and so on. The mutual fund company will not accept instructions from you (or someone purporting to be you) to sell shares and to send the money to Joe Blow (or to Joe Taxpayer for that matter): the proceeds of redemptions go to your checking account or are used to buy shares in other mutual funds offered by the company (called an exchange and not a redemption). Oh, and most fund companies offer automatic investments (as well as automatic redemptions) at fixed time intervals, just as with your bank.","Let me restate question for clarity. Facts: Question: Are there any taxes for this transaction? Answer: (Added improvements provided by Eric) Generally No. Generally, it is not considered income until you sell and the sale price is greater than the purchase price. But with currency differences, there is an additional complication, section 988 rules apply. It could result in ordinary income or loss.","I think that assuming that you're not looking to trade the fund, an index Mutual Fund is a better overall value than an ETF. The cost difference is negligible, and the ability to dollar-cost average future contributions with no transaction costs. You also have to be careful with ETFs; the spreads are wide on a low-volume fund and some ETFs are going more exotic things that can burn a novice investor. Track two similar funds (say Vanguard Total Stock Market: VTSMX and Vanguard Total Stock Market ETF: VTI), you'll see that they track similarly. If you are a more sophisticated investor, ETFs give you the ability to use options to hedge against declines in value without having to incur capital gains from the sale of the fund. (ie. 20 years from now, can use puts to make up for short-term losses instead of selling shares to avoid losses) For most retail investors, I think you really need to justify using ETFs versus mutual funds. If anything, the limitations of mutual funds (no intra-day trading, no options, etc) discourage speculative behavior that is ultimately not in your best interest. EDIT: Since this answer was written, many brokers have begun offering a suite of ETFs with no transaction fees. That may push the cost equation over to support Index ETFs over Index Mutual Funds, particularly if it's a big ETF with narrow spreads..","It looks like what you're calling a name change was registered as a merger that resulted in an exchange of stock. If that's the case, then what you've been told is correct. You've got one long-term sale and one short-term sale. Based a quick read of the Form 8937 that was filed, it looks like there were multiple entities involved in this event, more than one of which existed prior to it. https://www.mylan.com/-/media/mylancom/files/form%208937%20for%20mylan%20n%20v.pdf","One of the often cited advantages of ETFs is that they have a higher liquidity and that they can be traded at any time during the trading hours. On the other hand they are often proposed as a simple way to invest private funds for people that do not want to always keep an eye on the market, hence the intraday trading is mostly irrelevant for them. I am pretty sure that this is a subjective idea. The fact is you may buy GOOG, AAPL, F or whatever you wish(ETF as well, such as QQQ, SPY etc.) and keep them for a long time. In both cases, if you do not want to keep an on the market it is ok. Because, if you keep them it is called investment(the idea is collecting dividends etc.), if you are day trading then is it called speculation, because you main goal is to earn by buying and selling, of course you may loose as well. So, you do not care about dividends or owning some percent of the company. As, ETFs are derived instruments, their volatility depends on the volatility of the related shares. I'm wondering whether there are secondary effects that make the liquidity argument interesting for private investors, despite not using it themselves. What would these effects be and how do they impact when compared, for example, to mutual funds? Liquidity(ability to turn cash) could create high volatility which means high risk and high reward. From this point of view mutual funds are more safe. Because, money managers know how to diversify the total portfolio and manage income under any market conditions.","Yes. On December 10, you have a wash sale. As long as you don't buy the stock back for 30 days after that, the wash is of no consequence. In other words, you don't have a wash issue if you don't own the stock for 30 days."],"string":"[\n \"You cannot do a 1031 exchange with stocks, bonds, mutual funds, or ETFs. There really isn't much difference between an ETF and its equivalent index mutual fund. Both will have minimal capital gains distributions. I would not recommend selling an index mutual fund and taking a short-term capital gain just to buy the equivalent ETF.\",\n \"Probably. It sounds like you're looking for a 1031-exchange for stocks and bonds. From the wikipedia page for 1031-exchanges: To qualify for Section 1031 of the Internal Revenue Code, the properties exchanged must be held for productive use in a trade or business or for investment. Stocks, bonds, and other properties are listed as expressly excluded by Section 1031 of the Internal Revenue Code, though securitized properties are not excluded. 1031-exchanges usually are applicable in real estate.\",\n \"would buying the stock of a REIT qualify as a 'Like-Kind' exchange? Short answer, no. Long answer, a 1031 (Starker) exchange only applies to real estate. From the Wikipedia page on the topic: To qualify for Section 1031 of the Internal Revenue Code, the properties exchanged must be held for productive use in a trade or business, or for investment. Stocks, bonds, and other properties are listed as expressly excluded by Section 1031 of the Internal Revenue Code, although securitized properties are not excluded. A REIT, being stock in a real estate company, is excluded from Section 1031.\",\n \"No, there's nothing special in mutual funds or ETFs. Wash sale rules apply to any asset.\",\n \"\\\"It sounds like this is an entirely unsettled question, unfortunately. In the examples you provide, I think it is safe to say that none of those are 'substantially identical'; a small overlap or no overlap certainly should not be considered such by a reasonable interpretation of the rule. This article on Kitces goes into some detail on the topic. A few specifics. First, Former publication 564 explains: Ordinarily, shares issued by one mutual fund are not considered to be substantially identical to shares issued by another mutual fund. Of course, what \\\"\\\"ordinarily\\\"\\\" means is unspecified (and this is no longer a current publication, so, who knows). The Kitces article goes on to explain that the IRS hasn't really gone after wash sales for mutual funds: Over the years, the IRS has not pursued wash sale abuses against mutual funds, perhaps because it just wasn’t very feasible to crack down on them, or perhaps because it just wasn’t perceived as that big of an abuse. After all, while the rules might allow you to loss-harvest a particular stock you couldn’t have otherwise, it also limits you from harvesting ANY losses if the overall fund is up in the aggregate, since losses on individual stocks can’t pass through to the mutual fund shareholders. But then goes to explain about ETFs being very different: sell SPY, buy IVV or VTI, and you're basically buying/selling the identical thing (99% or so correlation in stocks owned). The recommendation by the article is to look at the correlation in owned stocks, and stay away from things over 95%; that seems reasonable in my book as well. Ultimately, there will no doubt be a large number of “grey” and murky situations, but I suspect that until the IRS provides better guidance (or Congress rewrites/updates the wash sale rules altogether!), in the near term the easiest “red flag” warning is simply to look at the correlation between the original investment being loss-harvested, and the replacement security; at correlations above 0.95, and especially at 0.99+, it’s difficult to argue that the securities are not ”substantially identical” to each other in performance. Basically - use common sense, and don't do anything you think would be hard to defend in an audit, but otherwise you should be okay.\\\"\",\n \"\\\"The IRS rules are actually the same. 26 U.S. Code § 1091 - Loss from wash sales of stock or securities In the case of any loss claimed to have been sustained from any sale or other disposition of shares of stock or securities where it appears that, within a period beginning 30 days before the date of such sale or disposition and ending 30 days after such date, the taxpayer has acquired (by purchase or by an exchange on which the entire amount of gain or loss was recognized by law), or has entered into a contract or option so to acquire, substantially identical stock or securities, then no deduction shall be allowed... What you should take away from the quote above is \\\"\\\"substantially identical stock or securities.\\\"\\\" With stocks, one company may happen to have a high correlation, Exxon and Mobil come to mind, before their merger of course. With funds or ETFs, the story is different. The IRS has yet to issue rules regarding what level of overlap or correlation makes two funds or ETFs \\\"\\\"substantially identical.\\\"\\\" Last month, I wrote an article, Tax Loss Harvesting, which analyses the impact of taking losses each year. I study the 2000's which showed an average loss of 1% per year, a 9% loss for the decade. Tax loss harvesting made the decade slightly positive, i.e. an annual boost of approx 1%.\\\"\",\n \"I don't believe you can do that. From the IRS: Finally, certain types of property are specifically excluded from Section 1031 treatment. Section 1031 does not apply to exchanges of: I highlighted the relevant items for emphasis.\",\n \"You are still selling one investment and buying another - the fact that they are managed by the same company should be irrelevant. So yes, it would get the same tax treatment as if they were managed by different companies.\",\n \"What JoeTaxpayer means is that you can sell one ETF and buy another that will perform substantially the same during the 30 day wash sale period without being considered substantially the same from a wash sale perspective more easily than you could with an individual stock. For example, you could sell an S&P 500 index ETF and then temporarily buy a DJIA index ETF. As these track different indexes, they are not considered to be substantially the same for wash sale purposes, but for a short term investing period, their performance should still be substantially the same.\",\n \"What you are looking for is a 1031 exchange. https://www.irs.gov/uac/like-kind-exchanges-under-irc-code-section-1031 Whenever you sell business or investment property and you have a gain, you generally have to pay tax on the gain at the time of sale. IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free. You may also sell your house for bitcoin and record the sales price on the deed with an equal or lesser amount that you bought it for.\",\n \"Yes (most likely). If you are exchanging investments for cash, you will have to pay tax on that - disregarding capital losses, capital loss carryovers, AGI thresholds, and other special rules (which there is no indication of in your question). You will have to calculate the gain on Schedule D, and report that as income on your 1040. This is the case whether you buy different or same stocks.\",\n \"Your tax efficient reasoning is solid for where you want to distribute your assets. ETFs are often more tax efficient than their equivalent mutual funds but the exact differences would depend on the comparison between the fund and ETF you were considering. The one exception to this rule is Vanguard funds and ETFs which have the exact same tax-efficiency because ETFs are a share class of the corresponding mutual fund.\",\n \"1031 is a section of the U.S. Internal Revenue Service Code that allows investors to defer capital gains taxes on any exchange of like-kind properties for business or investment purposes. Taxes on capital gains are not charged on the sale of a property if the money is being used to purchase another property - the payment of tax is deferred until property is sold with no re-investment.\",\n \"The ETF is likely better in this case. The ETF will generally generate less capital gains taxes along the way. In order to pay off investors who leave a mutual fund, the manager will have to sell the fund's assets. This creates a capital gain, which must be distributed to shareholders at the end of the year. The mutual fund holder is essentially taxed on this turnover. The ETF does not have to sell any stock when an investor sells his shares because the investor sells the shares himself on the open market. This will result in a capital gain for the specific person exiting his position, but it does not create a taxable event for anyone else holding the ETF shares.\",\n \"Yes, to change which stocks you owe you need to sell one and buy the other, which for tax purposes means taking the profit or loss accrued up to then. On the other hand this establishes a new baseline, so you will not be double-faced on those gains. It just makes a mess of this year's tax return, and forced you to set aside some if the money to cover that.\",\n \"You cannot do a like-kind (Sec. 1031) exchange for personal property, only for business/investment property. Since you said that you traded in your personal car - no like-kind exchange is possible. Also, since the new car doesn't belong to you - you didn't actually perform any exchange. You sold your old car, but you didn't buy a new one. If Turbo-Tax suggests you to fill the exchange form - you must have entered something wrong to make it think there was an exchange. Check your entries again, specifically - check if you entered that you purchased a new car instead of the old one, since you didn't. See an example of where to start looking here.\",\n \"\\\"And my CPA is saying no way, it will cost me many thousands in taxes and doesn't make any sense. I'd think so too. It looks like it converts from capitol gains at 14% to something else at about 35% Can be, if your gain under the Sec.1231 rules is classified as depreciation recapture. But, perhaps the buyers will be saving this way? Not your problem even if they were, which they aren't. I would not do something my CPA says \\\"\\\"no-way\\\"\\\" about. I sometimes prefer not doing some things my CPA says \\\"\\\"it may fly\\\"\\\" because I'm defensive when it comes to taxes, but if your CPA is not willing to sign something off - don't do it. Ever.\\\"\",\n \"\\\"In June 2016 the American Institute of CPAs sent a letter to the IRS requesting guidance on this question. Quoting from section 4 of this letter, which is available at https://www.aicpa.org/advocacy/tax/downloadabledocuments/aicpa-comment-letter-on-notice-2014-21-virtual-currency-6-10-16.pdf If the IRS believes any property transaction rules should apply differently to virtual currency than to other types of property, taxpayers will need additional guidance in order to properly distinguish the rules and regulations. Section 4, Q&A-1 of Notice 2014-21 states that “general tax principles applicable to property transactions apply to transactions using virtual currency,” which is guidance that is generally helpful in determining the tax consequences of most virtual currency transactions. However, if there are particular factors that distinguish one virtual currency as like-kind to another virtual currency for section 1031 purposes, the IRS should clarify these details (e.g., allowing the treatment of virtual currency held for investment or business as like-kind to another virtual currency) in the form of published guidance. Similarly, taxpayers need specific guidance of special rules or statutory interpretations if the IRS determines that the installment method of section 453 is applied differently for virtual currency than for other types of property. So, at the very least, a peer-reviewed committee of CPAs finds like-kind treatment to have possible grounds for allowance. I would disagree with calling this a \\\"\\\"loophole,\\\"\\\" however (edit: at least from the viewpoint of the taxpayer.) At a base technological level, a virtual currency-to-virtual currency exchange consists of exchanging knowledge of one sequence of binary digits (private key) for another. What could be more \\\"\\\"like-kind\\\"\\\" than this?\\\"\",\n \"ETF is essentially a stock, from accounting perspective. Treat it as just another stock in the portfolio.\",\n \"Selling one fund and buying another will incur capital gains tax on the sale for the amount of the gain. I'm not aware of any sort of exemption available due to you moving out of the country. However, long-term capital gains for low-tax-bracket taxpayers is 0%. As long as your total income including the gains fits within the 15% regular tax bracket, you don't pay any long-term capital gains. Options for you that I see to avoid taxes are: Note that even if you do sell it all, it's only the amount of gains that would take your income over the 15% normal tax bracket that would be taxed at the long-term rate of 15%, which may not end up being that much of a tax hit. It may be worth calculating just how bad it would be based on your actual income. Also note that all I'm saying here is for US federal income taxes. The state you most recently lived in may still charge taxes if you're still considered a resident there in some fashion, and I don't know if your new home's government may try to take a cut as well.\",\n \"While it may not be your preferred outcome, and doesn't eliminate the income, in the event you find yourself in the path described here you have a way to defer gains to the future. but I would then want to buy another house as a rental If you sell this house and buy another investment property (within strict time windows: 45 days to written contract and closed in 180 days), you can transfer your basis and defer your gains via what is called a 1031 like-kind exchange\",\n \"There is no guidance specifically for this yet, but in my professional opinion, there is not going to be a like kind exchange for crypto. So when you exchange one crypto for another there will be a capital gain, but your basis in the new coin will be the total gain on the old coin.\",\n \"In response to one of the comments you might be interested in owning the new home as a rental property for a year. You could flip this thinking and make the current home into a rental property for a period of time (1 year seems to be the consensus, consult an accountant familiar with real estate). This will potentially allow for a 1031 exchange into another property -- although I believe that property can't then be a primary residence. All potentially not worth the complication for the tax savings, but figured I'd throw it out there. Also, the 1031 exchange defers taxes until some point in the future in which you finally sell the asset(s) for cash.\",\n \"Don't let the tax tail wag the investment dog. There is risk in exchanging this (known) property for another (unknown) property. That risk may be more than $9000 worth of risk. Tax considerations are important, but most important is that your investments make money. If you intend to continue as a landlord, you had better be sure you are finding a better deal elsewhere if you are going to trade this property up. I should also mention that you have a 5 year window in which you need to have lived in the home for 2 years. You have time and might be able to sell for a higher price if you wait a little longer.\",\n \"The money that you put into the ETF is not tax-exempt in the usual sense of the word. It is your money and you don't owe any taxes on it any more unless Congress (or the state that you reside in) imposes a wealth tax at some time in the future. What you will owe taxes on are any dividends or capital gains that the ETF distributes to you each year (even if you have opted to automatically re-invest those amounts into the ETF), and the capital gains when you sell shares of the ETF.\",\n \"The issue with trading stocks vs. mutual funds (or ETFs) is all about risk. You trade Microsoft you now have a Stock Risk in your portfolio. It drops 5% you are down 5%. Instead if you want to buy Tech and you buy QQQ if MSFT fell 5% the QQQs would not be as impacted to the downside. So if you want to trade a mutual fund, but you want to be able to put in stop sell orders trade ETFs instead. Considering mutual funds it is better to say Invest vs. Trade. Since all fund families have different rules and once you sell (if you sell it early) you will pay a fee and will not be able to invest in that same fund for x number of days (30, 60...)\",\n \"Is this possible and will it have the intended effect? From the US tax perspective, it most definitely is and will. Is my plan not very similar to Wash Sale? Yes, except that wash sale rules apply for losses, not gains. In any case, since you're not a US tax resident, the US wash sale rules won't apply to you.\",\n \"Mutual funds buy (and sell) shares in companies in accordance with the policies set forth in their prospectus, not according to the individual needs of an investor, that is, when you invest money in (or withdraw money from) a mutual fund, the manager buys or sells whatever shares that, in the manager's judgement, will be the most appropriate ones (consistent with the investment policies). Thus, a large-cap mutual fund manager will not buy the latest hot small-cap stock that will likely be hugely profitable; he/she must choose only between various large capitalization companies. Some exchange-traded funds are fixed baskets of stocks. Suppose you will not invest in a company X as a matter of principle. Unless a mutual fund prospectus says that it will not invest in X, you may well end up having an investment in X at some time because the fund manager bought shares in X. With such an ETF, you know what is in the basket, and if the basket does not include stock in X now, it will not own stock in X at a later date. Some exchange-traded funds are constructed based on some index and track the index as a matter of policy. Thus, you will not be investing in X unless X becomes part of the index because Standard or Poor or Russell or somebody changed their minds, and the ETF buys X in order to track the index. Finally, some ETFs are exactly like general mutual funds except that you can buy or sell ETF shares at any time at the price at the instant that your order is executed whereas with mutual funds, the price of the mutual fund shares that you have bought or sold is the NAV of the mutual fund shares for that day, which is established based on the closing prices at the end of the trading day of the stocks, bonds etc that the fund owns. So, you might end up owning stock in X at any time based on what the fund manager thinks about X.\",\n \"Exchange-traded funds are bought and sold like stocks so you'd be able to place stop orders on them just like you could for individual stocks. For example, SPY would be the ticker for an S & P 500 ETF known as a SPDR. Open-end mutual funds don't have stop orders because of how the buying and selling is done which is on unknown prices and often in fractional shares. For example, the Vanguard 500 Index Investor shares(VFINX) would be an example of an S & P 500 tracker here.\",\n \"\\\"For a non-ETF mutual fund, you can only buy shares of the mutual fund from the mutual fund itself (at a price that the mutual fund will reveal only at the end of the day) and can only shares back to the mutual fund (again at a price that the mutual fund will reveal only at the end of the day). There is no open market in the sense that you cannot put in a bid to buy, say, 100 shares of VFINX at $217 per share through a brokerage, and if there is a seller willing to sell 100 shares of VFINX to you at $217, then the sale is consummated and you are now the proud owner of 100 shares of VFINX. The only buyer or seller of VFINX is the mutual find itself, and you tell it that you \\\"\\\"want to buy 100 shares of VFINX and please take the money out of my checking account\\\"\\\". If this order is entered before the markets close at 4 pm, the mutual fund determines its share price as of the end of the day, opens a new account for you and puts 100 shares of VFINX in it (or adds 100 shares of VFINX to your already existing pile of shares) and takes the purchase price out of your checking account via an ACH transfer. Similarly for redeeming/selling shares of VFINX that you own (and these are held in an account at the mutual fund itself, not by your brokerage): you tell the mutual fund to that you \\\"\\\"wish to redeem 100 shares and please send the proceeds to my bank account\\\"\\\" and the mutual fund does this at the end of the day, and the money appears in your bank account via ACH transfer two or three days later. Generally, these transactions do not need to be for round lots of multiples of 100 shares for efficiency; most mutual fund will gladly sell you fractional shares down to a thousandth of a share. In contrast, shares of an exchange-traded fund (ETF) are just like stock shares in that they can be bought and sold on the open market and your broker will charge you fees for buying and selling them. Selling fractional shares on the open market is generally not possible, and trading in round lots is less expensive. Also, trades occur at all times of the stock exchange day, not just at the end of the day as with non-ETF funds, and the price can fluctuate during the day too. Many non-ETF mutual funds have an ETF equivalent: VOO is the symbol for Vanguard's S&P 500 Index ETF while VFINX is the non-ETF version of the same index fund. Read more about the differences between ETFs and mutual funds, for example, here.\\\"\",\n \"\\\"The IRS has been particularly vague about the \\\"\\\"substantially identical\\\"\\\" investment part of the wash rule. Many brokers, Schwab for instance, say that only identical CUSIPs (exactly the same ETF) matter for the wash rule in their internal calculations, but warn that the IRS might consider two ETFs over the same index to be substantially identical. In your case, the broker has chosen to call these a wash despite even having different underlying indices. Talking to the broker is the first step as they will report it to the IRS. Though technically you have the final say in your taxes about the cost basis, discussing this with the IRS could be rather painful. First though it is probably worth checking with your broker about exactly what happened. There are other wash sale triggers that frequently trip people up that may have been in play here.\\\"\",\n \"This depends on a lot actually - with the overall being your goals and how much you like risk. Question: What are your fees/commissions for selling? $8.95/trade will wipe out some gains on those trades. (.69% if all are sold with $8.95 commission - not including the commission payed when purchased that should be factored into the cost basis) Also, I would recommend doing commission free ETFs. You can get the same affect as a mutual fund without the fees associated with paying someone to invest in ETFs and stocks. On another note: Your portfolio looks rather risky. Although everyone has their own risk preference so this might be yours but if you are thinking about a mutual fund instead of individual stocks you probably are risk averse. I would suggest consulting with an adviser on how to set up for the future. Financial advice is free flowing from your local barber, dentist, and of course StackExchange but I would look towards a professional. Disclaimer: These are my thoughts and opinions only ;) Feel free to add comments below.\",\n \"You could use HBB and other similar funds that exchange distributions for capital gains. There's HXT and HXS which is Canada and US equity markets. The swap fee + mer is a little more than some funds except for HXT which is very cheap. There's a risk for long term holders that this may eventually get banned and you're forced to sell with a gain at the wrong time, but this won't matter much if you're planning on selling in a few years. You have to pay the capital gains tax eventually. Note, the tax on distributions is really a long term drag on performance and won't make a big difference in the short term.\",\n \"\\\"Nobody knows for sure what \\\"\\\"substantially identical\\\"\\\" means because the IRS hasn't officially defined it. Until they do so, it would come down to the decision of an auditor or a tax court. The rule of thumb that I have always heard is if the funds track the same index, they are probably substantially identical. I think most people wouldn't consider any pair of AGG, CMF, and NYF to be substantially identical, so you should be safe with your tax-loss harvesting strategy.\\\"\",\n \"\\\"According to Wikipedia this is still a wash sale: In the USA wash sale rules are codified in \\\"\\\"26 USC § 1091 - Loss from wash sales of stock or securities.\\\"\\\" Under Section 1091, a wash sale occurs when a taxpayer sells or trades stock or securities at a loss, and within 30 days before or after the sale:\\\"\",\n \"Investopedia laid out the general information of tax treatment on the ETF fund structures as well as their underlying asset classes: http://www.investopedia.com/financial-edge/0213/how-tax-treatments-of-etfs-work.aspx\",\n \"From the IRS Section 1091. Loss from Wash Sales of Stock or Securities Section 1091(a) provides that in the case of any loss claimed to have been sustained from any sale or other disposition of shares of stock or securities where it appears that, within a period beginning 30 days before the date of such sale or disposition and ending 30 days after such date, the taxpayer has acquired (by purchase or by an exchange on which the entire amount of gain or loss was recognized by law),or has entered into a contract or option so to acquire, substantially identical stock or 3 securities, then no deduction shall be allowed under § 165 The document is not long, 4 pages, and should be read to see the intent. It's tough to choose the one snippet, but the conclusion is this is the definitive response to that question. A purchase within an IRA or other retirement account can create a wash sale if such a purchase would be a wash sale otherwise, i.e. the fact that it's a retirement account doesn't avoid wash rules.\",\n \"If it is your primary residence and you lived there continuously and for more than 2 years out of the last 5 - then you can exclude the gain under the IRC Sec. 121. In this case, you'll pay no taxes on your gain. If the property has been a rental or you haven't lived there long enough, the rules become more complicated but you may still be able to exclude some portion of the gain, even all of it, depends on the situation. So it doesn't look like 1031 exchange is good for you here, you don't want to carry excluded gain - you want to recognize it and get the tax benefit. However, refinancing after purchase with cash-out money affects the deductability of the loan interest. You can only deduct interest on money used to buy, not cash-out portion. I believe there's a period (60 days IIRC) during which you can do the cash-out refinance and still count it as purchase money, but check with a licensed tax advier (EA/CPA licensed in your State).\",\n \"You could use a stock-only ISA and invest in Exchange Traded Funds (ETFs). ETFs are managed mutual funds that trade on open exchanges in the same manner as stocks. This changes the specific fund options you have open to you, but there are so many ETFs at this point that any sector you want to invest in is almost certainly represented.\",\n \"\\\"If you are buying and selling mutual funds in the same family of funds (e.g. Vanguard), then you can set up an on-line account on the Vanguard website (www.vanguard.com) and it is easy: Vanguard offers a \\\"\\\"Transaction\\\"\\\" service that allows you to sell shares of VFINX, say, and buy shares of VBTLX, say, from the proceeds of the sale all in one swell foop. But, if you are holding the VFINX shares through your on-line account with, say, eTrade, then it depends on what services eTrade provides to you. Will it allow doing all that in one transaction, or will it wait for the cash to come from Vanguard, and then send the money back to Vanguard to invest in VBTLX? In any case, selling VFINX shares and investing the proceeds in PRWCX shares, say, cannot be done on the Vanguard site only; Vanguard will send the proceeds of the sale of the VFINX shares only to your bank account, not anywhere else. You then need to tell T. Rowe Price (where you presumably have an account already) that you want to invest $X in PRWCX shares and to withdraw the cash from your bank account. If you are doing it all through eTrade, then the money from the sale of VFINX goes from Vanguard to eTrade (into something called a sweep account, or maybe your cash account at eTrade) and you invest it in PRWCX after appropriate delays in receiving the money from Vanguard into eTrade, etc. If your cash account (bank or eTrade) has enough of a balance, you could sell VFINX and buy PRWCX on the same day. where the purchase is made from the money in the cash account and replaced a few days later by the proceeds from Vanguard. Bouncing of checks (or inability to act on a hot tip to invest in something) in the interim is your problem; not the bank's or eTrade's.\\\"\",\n \"Interesting, but I don't think we are talking the same thing. This seems to say that that the fund itself doesn't have the rule applied: I.E. the MF can't get hit with the 5% commission when you buy it. That makes sense. What I'm asking though is that when my (say) American Fund that I own already does a rebalance, the constituent holdings change. Those securities are not exempt from the rule and thus when they are transacted can have commissions applied. As a matter of fact the broker for those securities has no idea if the fund is eligible or not. Where did you get this from? As I'm. It studying for a series 7 I'm probably missing some foundational sources.\",\n \"Behind the scenes, mutual funds and ETFs are very similar. Both can vary widely in purpose and policies, which is why understanding the prospectus before investing is so important. Since both mutual funds and ETFs cover a wide range of choices, any discussion of management, assets, or expenses when discussing the differences between the two is inaccurate. Mutual funds and ETFs can both be either managed or index-based, high expense or low expense, stock or commodity backed. Method of investing When you invest in a mutual fund, you typically set up an account with the mutual fund company and send your money directly to them. There is often a minimum initial investment required to open your mutual fund account. Mutual funds sometimes, but not always, have a load, which is a fee that you pay either when you put money in or take money out. An ETF is a mutual fund that is traded like a stock. To invest, you need a brokerage account that can buy and sell stocks. When you invest, you pay a transaction fee, just as you would if you purchase a stock. There isn't really a minimum investment required as there is with a traditional mutual fund, but you usually need to purchase whole shares of the ETF. There is inherently no load with ETFs. Tax treatment Mutual funds and ETFs are usually taxed the same. However, capital gain distributions, which are taxable events that occur while you are holding the investment, are more common with mutual funds than they are with ETFs, due to the way that ETFs are structured. (See Fidelity: ETF versus mutual funds: Tax efficiency for more details.) That having been said, in an index fund, capital gain distributions are rare anyway, due to the low turnover of the fund. Conclusion When comparing a mutual fund and ETF with similar objectives and expenses and deciding which to choose, it more often comes down to convenience. If you already have a brokerage account and you are planning on making a one-time investment, an ETF could be more convenient. If, on the other hand, you have more than the minimum initial investment required and you also plan on making additional regular monthly investments, a traditional no-load mutual fund account could be more convenient and less expensive.\",\n \"No, IRA contributions can only be made in the form of cash (rollovers and conversions are different). You'd have to sell the investments in your taxable account, incurring capital gains or losses, then transfer the proceeds to your IRA in cash. Note that the amount you can transfer is subject to the limits on how much one can contribute to the IRA each year. You could look into Vanguard Target Retirement funds, which have a lower $1,000 minimum investment, or Vanguard ETFs.\",\n \"There is little difference between buying shares in your broker's index fund and shares of their corresponding ETF. In many cases the money invested in an ETF gets essentially stuffed right into the index fund (I believe Vanguard does this, for example). In either case you will be paying a little bit of tax. In the ETF case it will be on the dividends that are paid out. In the index fund case it will additionally be on the capital gains that have been realized within the fund, which are very few for an index fund. Not a ton in either case. The more important tax consideration is between purchase and sale, which is the same in either case. I'd say stick it wherever the lowest fees are.\",\n \"\\\"Your question is one of semantics. ETFs and mutual funds have many things in common and provide essentially the same service to investors with minimal differences. It's reasonably correct to say \\\"\\\"An ETF is a mutual fund that...\\\"\\\" and then follow up with some stuff that is not true of a typical mutual fund. You could do the same with, for example, a hedge fund. \\\"\\\"A hedge fund is a mutual fund that doesn't comply with most SEC regulations and thus is limited to accredited investors.\\\"\\\" As a matter of practice, when people say \\\"\\\"mutual fund\\\"\\\" they are talking about traditional mutual funds and pretty much never including ETFs. So is an ETF a mutual fund as the word is commonly used? No.\\\"\",\n \"A stock, bond or ETF is basically a commodity. Where you bought it does not really matter, and it has a value in USD only inasmuch as there is a current market price quoted at an American exchange. But nothing prevents you from turning around and selling it on a European exchange where it is also listed for an equivalent amount of EUR (arbitrage activities of investment banks ensure that the price will be equivalent in regard to the current exchange rate). In fact, this can be used as a cheap form of currency conversion. For blue chips at least this is trivial; exotic securities might not be listed in Europe. All you need is a broker who allows you to trade on European exchanges and hold an account denominated in EUR. If necessary, transfer your securities to a broker who does, which should not cost more than a nominal fee. Mutual funds are a different beast though; it might be possible to sell shares on an exchange anyway, or sell them back to the issuer for EUR. It depends. In any case, however, transferring 7 figure sums internationally can trigger all kinds of tax events and money laundering investigations. You really need to hire a financial advisor who has international investment experience for this kind of thing, not ask a web forum!\",\n \"The problem there is that there's a tax due on that dividend. So, if you wish, you can buy the ETF and specify to reinvest dividends, but you'll have to pay a bit of tax on them, and keep track of your basis, if the account isn't a retirement account.\",\n \"There are ETFs and mutual funds that pay dividends. Mutual funds and ETFs are quite similar. Your advisor is correct regarding future funds you invest. But you already had incurred the risk of buying an individual stock. That is a 'sunk cost'. If you were satisfied with the returns you could have retained the HD stock you already owned and just put future moneys into an ETF or mutual fund. BTW: does your advisor receive a commission from your purchase of a mutual fund? That may have been his motivation to give you the advice to sell your existing holdings.\",\n \"Questrade is a Canada based broker offering US stock exchange transactions as well. It says this right on their homepage. ETFs are traded like stocks, so the answer is yes. Why did you think they only offered funds?\",\n \"As littleadv suggested, you are mixing issues. If you have earned income and are able to deduct an IRA deposit, where those actual dollars came from is irrelevant. The fact that you are taking proceeds from one transaction to deposit to the IRA is a booking entry on your side, but the IRS doesn't care. By the way, when you get that $1000 gain, the broker doesn't withhold tax, so if you take the entire $1000 and put it in the IRA, you owe $150 on one line, but save $250 elsewhere, and are still $100 to the positive on your tax return.\",\n \"The mutual fund will price at day's end, while the ETF trades during the day, like a stock. If you decide at 10am, that some event will occur during the day that will send the market up, the ETF is preferable. Aside from that, the expenses are identical, a low .14%. No real difference especially in a Roth.\",\n \"\\\"As of right now it looks like you can't issue an ETF at least because the underlying \\\"\\\"commodity\\\"\\\" isn't regulated. (See Winkelvoss ETF). I suspect you would run into this problem with any 1940 act fund (mutual fund), but it's more a situation of \\\"\\\"not approved\\\"\\\" rather than illegal, so an MLP hedge fund structure would probably be fine. And some googling finds Iterative Instinct Management's Storj SPV.\\\"\",\n \"No. Investors purchase ETFs' as they would any other stock, own it under the same circumstances as an equity investment, collecting distributions instead of dividends or interest. The ETF takes care of the internal operations (bond maturities and turnover, accrued interest, payment dates, etc.).\",\n \"\\\"Yes- you do not realize gains or losses until you actually sell the stock. After you sell the initial stocks/bonds you have realized the gain. When you buy the new, different stocks you haven't realized anything until you then sell those. There is one exception to this, called the \\\"\\\"Wash-Sale Rule\\\"\\\". From Investopedia.com: With the wash-sale rule, the IRS disallows a loss deduction from the sale of a security if a ‘substantially identical security' was purchased within 30 days before or after the sale. The wash-sale period is actually 61 days, consisting of the 30 days before and the 30 days after the date of the sale. For example, if you bought 100 shares of IBM on December 1 and then sold 100 shares of IBM on December 15 at a loss, the loss deduction would not be allowed. Similarly, selling IBM on December 15 and then buying it back on January 10 of the following year does not permit a deduction. The wash-sale rule is designed to prevent investors from making trades for the sole purpose of avoiding taxes.\\\"\",\n \"http://www.efficientfrontier.com/ef/104/stupid.htm would have some data though a bit old about open-end funds vs an ETF that would be one point. Secondly, do you know that the Math on your ETF will always work out to whole numbers of shares or do you plan on using brokers that would allow fractional shares easily? This is a factor as $3,000 of an open-end fund will automatically go into fractional shares that isn't necessarily the case of an ETF where you have to specify a number of shares when you purchase as well as consider are you doing a market or limit order? These are a couple of things to keep in mind here. Lastly, what if the broker you use charges account maintenance fees for your account? In buying the mutual fund from the fund company directly, there may be a lower likelihood of having such fees. I don't know of any way to buy shares in the ETF directly without using a broker.\",\n \"It isn't just ETFs, you have normal mutual funds in India which invest internationally. This could be convenient if you don't already have a depository account and a stockbroker. Here's a list of such funds, along with some performance data: Value Research - Equity: International: Long-term Performance. However, you should also be aware that in India, domestic equity and equity fund investing is tax-free in the long-term (longer than one year), but this exemption doesn't apply to international investments. Ref: Invest Around the World.\",\n \"I agree, one should not let the tax tail wag the investing dog. The only question should be whether he'd buy the stock at today's price. If he wishes to own it long term, he keeps it. To take the loss this year, he'd have to sell soon, and can't buy it back for 30 days. If, for whatever reason, the stock comes back a bit, he's going to buy in higher. To be clear, the story changes for ETFs or mutual funds. You can buy a fund to replace one you're selling, capture the loss, and easily not run afoul of wash sale rules.\",\n \"Contrary to what you might have heard, moving money between mutual funds, whether or not in the same family of funds, is a taxable event, assuming, of course, that the funds are not in tax-deferred retirement accounts. About the only thing that is not taxable is moving funds between share classes in the same mutual fund, e.g. a conversion from what Vanguard refers to as Investor Shares to Admiral Shares in the same fund. In some cases, the Admiral Shares may have a considerably different price (for example, Vanguard Health Care Fund Investor Shares (VGHCX) and Admiral Shares (VGHAX) are priced at $215.83 and $91.04 respectively and so changing from one class to the other changes the number of shares owned considerably while the net value of the investment remains unchanged.\",\n \"I was not able to find any authority for the opinion you suggest. Wash sale rules should, IMHO, apply. According to the regulations, you attribute the newly purchased shares to the oldest sold shares for the purposes of the calculation of the disallowed loss and cost basis. (c) Where the amount of stock or securities acquired within the 61-day period is less than the amount of stock or securities sold or otherwise disposed of, then the particular shares of stock or securities the loss from the sale or other disposition of which is not deductible shall be those with which the stock or securities acquired are matched in accordance with the following rule: The stock or securities acquired will be matched in accordance with the order of their acquisition (beginning with the earliest acquisition) with an equal number of the shares of stock or securities sold or otherwise disposed of. You can resort to the claim that you have not, in fact, entered into the contract within 30 days, but when you gave the instructions to reinvest dividends. I don't know if such a claim will hold, but to me it sounds reasonable. This is similar to the rules re short sales (in (g) there). In this case, wash sale rules will not apply (unless you instructed to reinvest dividends within the 30 days prior to the sale). But I'd ask a tax professional if such a claim would hold, talk to a EA/CPA licensed in your state.\",\n \"Yes, your realtor is a moron. (I am a realtor, and sorry you have such a bad one) Every industry has its good and bad. You really should find a new realtor, a good one. You know the 1031 exchange is for rental property only. And that saving $2000 isn't worth staying in the house to complete the two years required occupancy.\",\n \"\\\"Assuming your investments aren't in any kind of tax-advantaged account (like an IRA), they are generally not tracked and you indeed may pay more taxes. What will likely change, however, is your cost basis. You only pay tax on the difference between the value of the investment when you sell it and its value when you bought it. There is no rule that says once you sell an investment and pay taxes on the gain, you will never again pay any taxes on any other investments you then buy with that money. If you own some investment, and it increases in value, and then you sell it, you had a capital gain and owe taxes (depending on your tax bracket, etc.). If you use the money to buy some other investment, and that increases in value, and then you sell it, you had another separate capital gain and again owe taxes. However, every time you sell, you only are subject to capital gains taxes on the gain, not the entire sale price. The value of the investment at the time you bought it is the cost basis. When you sell, you take the sale price and subtract the cost basis to find your gain, So suppose you bought $1000 worth of some ETF many years ago. It went up to $2000 and you sold it. You have $2000 in cash, but $1000 of that is your original money back, so your capital gain is $1000 and that is the amount on which you owe (or may owe) taxes. Suppose you pay 15% tax on this, as you suggest; that is $150, leaving you with $1850. Now suppose you buy another ETF with that. Your cost basis is now $1850. Suppose the investment now increases in value again to $2000. This time when you sell, you still have $2000 in cash, but this is now only $150 more than you paid, so you only owe capital gains taxes on that $150. (A 15% tax on that would be $22.50.) In that example you had one capital gain of $1000 and a second of $150 and paid a total of $172.50 in taxes (150 + 22.50). Suppose instead that you had held the original investment and it had increased in value to $2150 and you had then sold it. You would have a single capital gain of $1150 (2150 minus the original 1000 you paid). 15% of this would be the same $172.50 you paid under the other arrangement. So in essence you pay the same taxes either way. (This example is simplified, of course; in reality, the rate you pay depends on your overall income, so you could pay more if you sell a lot in a single year, since it could push you into a higher tax bracket.) So none of the money is \\\"\\\"tax exempt\\\"\\\", but each time you sell, you \\\"\\\"reset the counter\\\"\\\" by paying tax on your gain, and each time you buy, you start a new counter on the basis of whatever you pay for the investment. Assuming you're dealing with ordinary investment instruments like stocks and ETFs, this basis information is typically tracked by the bank or brokerage where you buy and sell them. Technically speaking it is your responsibility to track and report this when you sell an investment, and if you do complicated things like transfer securities from one brokerage to another you may have to do that yourself. In general, however, your bank/brokerage will keep track of cost basis information for you.\\\"\",\n \"Sale of a stock creates a capital gain. It can be offset with losses, up to $3000 more than the gains. It can be deferred when held within a retirement account. When you gift appreciated stock, the basis follows. So when I gifted my daughter's trust shares, there was still tax due upon sale. The kiddy tax helped reduce but not eliminate it. And there was no quotes around ownership. The money is gone, her account is for college. No 1031 exchange exists for stock.\",\n \"This should be posted in /r/Personalfinance. Also, do not do what /u/BlitheCalamity is suggesting. 1. If it is an IRA, simply do an ACAT transfer. No taxes will be incurred if the paperwork is filed correctly. Additionally, there is a 60 rollover provision for IRA accounts... another way to get out of a tax penalty for an IRA account. 2. Check the internal fees for your mutual funds. You may have purchased A shares, which I am guessing is the case since your advisor was an Ed Jones advisor. The ongoing internal expense ratio should be rather low so you might want to consider keeping these funds. An ACAT will allow you to transfer your investments to your new account if you want to keep them. (A shares have a onetime high upfront charge, but low ongoing fee. If you've already paid for the fund, why ditch it for another fund that charges a higher ongoing fee but not an upfront fee? Evaluate your costs.) 3. If this is a non-IRA account, still file an ACAT. It is the easiest way to transfer your account. Edit: Silly me, this is clearly a question regarding an IRA. In that case, there is no tax penalty for selling anything and buying within your IRA as long as you do not take the money out. Like I said, please file an ACAT with the new company otherwise you will have to prove to the IRS that you completed the rollover in 60 days. If not, you will pay income tax and a 10% penalty.\",\n \"Since you are paying taxes on the distributions from your mutual funds anyway, instead of reinvesting the distributions back into the mutual funds, you could receive them as cash, then contribute them to your Roth IRA once you are able to open one.\",\n \"\\\"An Exchange-Traded Fund (ETF) is a special type of mutual fund that is traded on the stock exchange like a stock. To invest, you buy it through a stock broker, just as you would if you were buying an individual stock. When looking at a mutual fund based in the U.S., the easiest way to tell whether or not it is an ETF is by looking at the ticker symbol. Traditional mutual funds have ticker symbols that end in \\\"\\\"X\\\"\\\", and ETFs have ticker symbols that do not end in \\\"\\\"X\\\"\\\". The JPMorgan Emerging Markets Equity Fund, with ticker symbol JFAMX, is a traditional mutual fund, not an ETF. JPMorgan does have ETFs; the JPMorgan Diversified Return Emerging Markets Equity ETF, with ticker symbol JPEM, is an example. This ETF invests in similar stocks as JFAMX; however, because it is an index-based fund instead of an actively managed fund, it has lower fees. If you aren't sure about the ticker symbol, the advertising/prospectus of any ETF should clearly state that it is an ETF. (In the example of JPEM above, they put \\\"\\\"ETF\\\"\\\" right in the fund name.) If you don't see ETF mentioned, it is most likely a traditional mutual fund. Another way to tell is by looking at the \\\"\\\"investment minimums\\\"\\\" of the fund. JFAMX has a minimum initial investment of $1000. ETFs, however, do not have an investment minimum listed; because it is traded like a stock, you simply buy whole shares at whatever the current share price is. So if you look at the \\\"\\\"Fees and Investment Minimums\\\"\\\" section of the JPEM page, you'll see the fees listed, but not any investment minimums.\\\"\",\n \"As JoeTaxpayer illustrated, yes you can. However, one thing to remember is that unless you live in a state with no state income tax, there may be state tax to pay on those gains. Even so, it's likely a good idea if you expect either your income (or the federal capital gains tax rate) to rise in the future.\",\n \"ETFs trade on specific exchanges. If your broker deals with those exchanges, you should have access to the ETF. If your broker does not deal with that exchange, then you will not have access through that broker. This is different than, say, mutual funds, which don't trade on the exchanges are proprietary to certain brokerages or financial institutions.\",\n \"\\\"Securities and ETFs are also subjected to Estate Tax. Some ways: Draft a \\\"\\\"Transfer on Death\\\"\\\" instruction to the broker, that triggers a transfer to an account in the beneficiary's name, in most cases avoiding probate. If the broker does not support it, find another broker. Give your brokerage and bank password/token to your beneficiary. Have him transfer out holdings within hours of death. Create a Trust, that survives even after death of an individual. P.S. ETF is treated as Stock (a company that owns other companies), regardless of the nature of the holdings. P.S.2 Above suggestions are only applicable to nonresident alien of the US.\\\"\",\n \"Generally, ETFs and mutual funds don't pay taxes (although there are some cases where they do, and some countries where it is a common case). What happens is, the fund reports the portion of the gain attributed to each investor, and the investor pays the tax. In the US, this is reported to you on 1099-DIV as capital gains distribution, and can be either short term (as in the scenario you described), long term, or a mix of both. It doesn't mean you actually get a distribution, though, but if you don't - it reduces your basis.\",\n \"There are times when investing in an ETF is more convenient than a mutual fund. When you invest in a mutual fund, you often have an account directly with the mutual fund company, or you have an account with a mutual fund broker. Mutual funds often have either a front end or back end load, which essentially gives you a penalty for jumping in and out of funds. ETFs are traded exactly like stocks, so there is inherently no load when buying or selling. If you have a brokerage account and you want to move funds from a stock to a mutual fund, an ETF might be more convenient. With some accounts, an ETF allows you to invest in a fund that you would not be able to invest in otherwise. For example, you might have a 401k account through your employer. You might want to invest in a Vanguard mutual fund, but Vanguard funds are not available with your 401k. If you have access to a brokerage account inside your 401k, you can invest in the Vanguard fund through the associated ETF. Another reason that you might choose an ETF over a mutual fund is if you want to try to short the fund.\",\n \"\\\"If your intention is to purchase ETFs on a regular basis (like $x per month), then ETFs may not make sense. You may have to pay a fixed transaction cost like you were buying a stock for each purchase. In a similar no load mutual fund, there are more likely to be no transaction costs (depending on how it is bought). The above paragraph is not very definitive, and is really dependent upon how you would purchase either ETFs or Mutual funds. For example if you have a Fidelity brokerage account, they may let you buy certain ETFs commission free. Okay then either ETFs make great sense. It would not make sense to buy ones that they charge $35 per transaction if you have regular transactions that are smallish. The last two questions seem to be asking if you should buy MF or buy stocks directly. For most people the later is a losing proposition. They do not have the time or ability to buy stocks directly, effectively. Even if they did they may not have the capital to make enough of a difference when one considers all the cost involved. However, if that kind of thing interests you, perhaps you should dabble. Start out small and look at the higher costs of doing so as part of the \\\"\\\"cost of doing business\\\"\\\".\\\"\",\n \"Is wash rule applicable for this? No - because you made a gain on the sale. You paid $13,500 for the stock and sold it for $14,250. The wash rule prevents you from claiming a loss if you buy the same stock again within 30 days. You have no loss to claim, so the rule does not apply.\",\n \"\\\"Appreciation of a Capital Asset is a Capital Gain. In the United States, Capital Gains get favorable tax treatment after being held for 12 months. From the IRS newsroom: Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term. The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income. For 2009, the maximum capital gains rate for most people is15%. For lower-income individuals, the rate may be 0% on some or all of the net capital gain. Special types of net capital gain can be taxed at 25% or 28%. The IRS defines a Capital Asset as \\\"\\\"most property you own\\\"\\\" with a list of exclusions found in Schedule D Instructions. None of the exclusions listed relate to Bond ETFs.\\\"\",\n \"The way it is handled with ETF's is that someone has to gather a block of units and redeem them with the fund. So, with the mutual fund you redeem your unit directly with the fund, always, you never sell to another player. With the ETF - its the opposite, you sell to another player. Once a player has a large chunk of units - he can go to the fund and redeem them. These are very specific players (investment banks), not individual investors.\",\n \"Like-kind of exchanges have a list of requirements. The IRS has not issued formal guidance in the matter. I recommend to be aggressive and claim the exchange, while justifying it with a good analogy to prove good faith (and persuade the IRS official reading it the risk of losing in tax court would be to high). Worst case the IRS will attempt to reject the exchange, at which point you could still pony up to get rid of the problem, interest being the only real risk. For example: Past tax court rulings have stated that collectable gold coins are not like kind to gold bars, and unlike silver coins, but investment grade gold coins are like kind to gold bars. So you could use a justification like this: I hold Bitcoin to be like-kind to Litecoin, because they use the same fundamental technology with just a tweak in the math, as if exchanging different grades of gold bars, which has been approved by tax court ruling #xxxxx. Note that it doesn't matter whether any of this actually makes sense, it just has be reasonable enough for you to believe, and look like it is not worth pursuing to an overworked IRS official glancing at it. I haven't tried this yet, so up to now this is a guess, but it's a good enough guess in my estimation that I will be using it on some rather significant amounts next year.\",\n \"It was not 100% clear if you have held all of these stocks for over a year. Therefore, depending on your income tax bracket, it might make sense to hold on to the stock until you have held the individual stock for a year to only be taxed at long-term capital gains rates. Also, you need to take into account the Net Investment Income Tax(NIIT), if your current modified adjusted income is above the current threshold. Beyond these, I would think that you would want to apply the same methodology that caused you to buy these in the first place, as it seems to be working well for you. 2 & 3. No. You trigger a taxable event and therefore have to pay capital gains tax on any gains. If you have a loss in the stock and repurchase the stock within 30 days, you don't get to recognize the loss and have to add the loss to your basis in the stock (Wash Sales Rules).\",\n \"Your ETF will return the interest as dividends. If you hold the ETF on the day before the Ex-Dividend date, you will get the dividend. If you sell before that, you will not. Note that at least one other answer to this question is wrong. You do NOT need to hold on the Record date. There is usually 2 days (or so) between the ex-date and the record date, which corresponds to the number of days it takes for your trade to settle. See the rules as published by the SEC: http://www.sec.gov/answers/dividen.htm\",\n \"ETFs offer the flexibility of stocks while retaining many of the benefits of mutual funds. Since an ETF is an actual fund, it has the diversification of its potentially many underlying securities. You can find ETFs with stocks at various market caps and style categories. You can have bond or mixed ETFs. You can even get ETFs with equal or fundamental weighting. In short, all the variety benefits of mutual funds. ETFs are typically much less expensive than mutual funds both in terms of management fees (expense ratio) and taxable gains. Most of them are not actively managed; instead they follow an index and therefore have a low turnover. A mutual fund may actively trade and, if not balanced with a loss, will generate capital gains that you pay taxes on. An ETF will produce gains only when shifting to keep inline with the index or you yourself sell. As a reminder: while expense ratio always matters, capital gains and dividends don't matter if the ETF or mutual fund is in a tax-advantaged account. ETFs have no load fees. Instead, because you trade it like a stock, you will pay a commission. Commissions are straight, up-front and perfectly clear. Much easier to understand than the various ways funds might charge you. There are no account minimums to entry with ETFs, but you will need to buy complete shares. Only a few places allow partial shares. It is generally harder to dollar-cost average into an ETF with regular automated investments. Also, like trading stocks, you can do those fancy things like selling short, buying on margin, options, etc. And you can pay attention to the price fluctuations throughout the day if you really want to. Things to make you pause: if you buy (no-load) mutual funds through the parent company, you'll get them at no commission. Many brokerages have No Transaction Fee (NTF) agreements with companies so that you can buy many funds for free. Still look out for that expense ratio though (which is probably paying for that NTF advantage). As sort of a middle ground: index funds can have very low expense ratios, track the same index as an ETF, can be tax-efficient or tax-managed, free to purchase, easy to dollar-cost average and easier to automate/understand. Further reading:\",\n \"The top long-term capital gains tax rate will rise to 20% effective 1 Jan, 2011, unless Congress decides to do something about it before then. (Will they? Who knows!! There's been talk about it, but, well, it's Congress. They don't even know what they're going to do.) Anyway. The rules about when you can sell stock are mostly concerned with when you can realize a capital loss: if you sell a stock at a loss and then re-buy it for tax purposes within 30 days, it's a wash sale and not eligible for a deduction. However, I don't believe this applies to any stocks once you realize a gain - once you've realized the gain and paid your tax for it, it's all yours, locked in at whatever rate. Your replacement stock will be subject to short-term capital gains for the next year afterwards, and you might need to be careful with identifying the holding period on different lots of your stock, but I don't believe there will be any particular trouble. Please do not rely entirely on my advice and consult also with your tax preparer or lawyer. :) And the IRS documentation: Special Addendum for Nov/Dec 2012! Spoiler alert! Congress did indeed act: they extended the rates, but only temporarily, so now we're looking at tax hikes starting in 2013 instead, only the new top rate++ will be something like 23.8% on account of an extra 3.8% medicare tax on passive earnings (brought to you via Obamacare legislation). But the year and the rates' specifics aside, same thing still applies. And the Republican house and Democratic senate/President are still duking it out. Have fun. ++ 3.8% surtax applies to the lesser of (a) net investment income (b) income over $200,000 ($250k if married). 20% tax rate applies to people in the 15% income tax bracket for ordinary income or higher. Additional tax discounts for property held over 5 years may be available. Consult tax law and your favorite tax professional and prepare to be confused.\",\n \"The main difference between an ETF and a Mutual Fund is Management. An ETF will track a specific index with NO manager input. A Mutual Fund has a manager that is trying to choose securities for its fund based on the mandate of the fund. Liquidity ETFs trade like a stock, so you can buy at 10am and sell at 11 if you wish. Mutual Funds (most) are valued at the end of each business day, so no intraday trading. Also ETFs are similar to stocks in that you need a buyer/seller for the ETF that you want/have. Whereas a mutual fund's units are sold back to itself. I do not know of many if any liquity issues with an ETF, but you could be stuck holding it if you can not find a buyer (usually the market maker). Mutual Funds can be closed to trading, however it is rare. Tax treatment Both come down to the underlying holdings in the fund or ETF. However, more often in Mutual Funds you could be stuck paying someone else's taxes, not true with an ETF. For example, you buy an Equity Mutual Fund 5 years ago, you sell the fund yourself today for little to no gain. I buy the fund a month ago and the fund manager sells a bunch of the stocks they bought for it 10 years ago for a hefty gain. I have a tax liability, you do not even though it is possible that neither of us have any gains in our pocket. It can even go one step further and 6 months from now I could be down money on paper and still have a tax liability. Expenses A Mutual Fund has an MER or Management Expense Ratio, you pay it no matter what. If the fund has a positive return of 12.5% in any given year and it has an MER of 2.5%, then you are up 10%. However if the fund loses 7.5% with the same MER, you are down 10%. An ETF has a much smaller management fee (typically 0.10-0.95%) but you will have trading costs associated with any trades. Risks involved in these as well as any investment are many and likely too long to go into here. However in general, if you have a Canadian Stock ETF it will have similar risks to a Canadian Equity Mutual Fund. I hope this helps.\",\n \"My broker offers a service to transfer the shares where you only pay commission once. Therefore say if standard commission is £10, then you don't end up paying £20 (10 for selling + 10 for buy back). You'll have to be okay with the spread though. Hope this helps.\",\n \"This will work as intended, but there's another point to consider. In the US, the tax rate on proceeds from stock sales is higher for short term holdings, which are defined as held for less than one year. Both rates vary based on your income. Bracket numbers are for fiscal year 2014, filing as single. The difference between short and long term capital gains tax in the US is a minimum of ten percentage points, and works out to 15 percentage points on average. This is substantial. If you won't be reporting much income the year you move to the US (say because you only worked for a portion of the year) it is decidedly to your advantage to wait and sell the stocks in the US, to get that sweet 0% rate. At a minimum, you should hold the position for a year if you sell and rebuy, from a tax optimization perspective. Two caveats:\",\n \"Just a thought because this is a really good question: Would the buying and selling of blockchain based digital currency, using other blockchain based digital currencies, be subject to like kind treatment and exempt from capital gains until exchanged for a non-blockchain based good or service (or national currency) Suppose someone sells 1 bitcoin to buy 100 monero. Monero's price and bitcoin's price then change to where the 100 monero are 3 bitcoins. The person gets their bitcoin back and has 66.67 monero remaining. This scenario could be: Suppose someone sells 1 bitcoin at $1000 to buy 100 monero at $10. Bitcoin crashes 80% to $200 while monero crashes to only $6 per monero. $6 times 100 is $600 and if the person gets their bitcoin back (at $200 per bitcoi), they still lost money when measured in US Dollars if they move that bitcoin back to US dollars. In reading the IRS on bitcoin, they only care about the US dollar value of bitcoin or monero and in this example, the US dollar value is less. The person may have more bitcoins, but they still lost money if they sell.\",\n \"\\\"Usually the new broker will take care of this for you. It can take a couple of weeks. If you are planning to go with Vanguard, you probably want to actually get an account at Vanguard, as Vanguard funds usually aren't \\\"\\\"No Transaction Fee\\\"\\\" funds with many brokers. If you are planning to invest in ETFs, you'll get more flexibility with a broker.\\\"\",\n \"My memory served me correctly. I remember this because it was on my Series 7, so that link is misleading if you are studying for the 7. Here is the exception: > Transactions to Which the Rule is Not Applicable (Proposed FINRA Rule 2121(d)) Consistent with the initial proposal, FINRA Rule 2121(d) provides that FINRA Rule 2121 is not applicable to: (1) **the sale of securities where a prospectus** or offering circular must be delivered and the securities are sold at the specific public offering price, based on NASD IM-2440-1(d); and (2) a transaction in a non-investment grade debt security with a QIB that meets the conditions set forth in proposed FINRA Rule 2122(b)(9), which is described below. If you're studying for the 7, you will know that every mutual fund sale requires the delivery of a prospectus.\",\n \"In my opinion, if you are doing long-term investing, this is a non-issue. The difference of hours in being able to trade an ETF during the day vs. only being able to trade a traditional mutual fund at day-end is irrelevant if you are holding the investment for a long time. If you are engaging in day trading, market timing, or other advanced/controversial trading practices, then I suppose it could make a difference. For the way I invest (index funds, long-term, set-it-and-forget-it), ETFs have no advantage over traditional mutual funds.\",\n \"When I did this I sold the stock out of my 401k account. Then transferred the cash to my rollover IRA account. No tax event was created for me. Make sure your rollover IRA account is listed as tax deferred. If this still doesn't work for you then it could be a bug in Quicken and your best bet is the Quicken forums. Good luck.\",\n \"Mutual funds don't do what ETFs do because, according to how the fund was built in their contract, they can't. That is not how they are built and the people that invested in them expect them to act in a certain way. That is ok, though. Many people still invest in mutual funds partially because of their history but there are some advantages to mutual funds over etfs. Mainly mutual funds must mark-to-market at the end of day while etf values can drift from the asset value especially in crisis. As long enough people invest in mutual funds the funds make enough money on their fees they don't need to change. Maybe mutual funds will go extinct as etfs do have significant advantages, but it likely won't happen soon.\",\n \"\\\"Mutual funds don't pay taxes themselves, they distribute any dividends or capital gains to the shareholders. Thus, if you hold a mutual fund in a tax-advantaged account like a 401k or IRA then the distribution isn't a taxable event while in a regular taxable account you would have to pay taxes on the distributions. From Forbes: There can be foreign companies on US stock exchanges that would still work the same way. Unilever for example is an Anglo-Dutch multinational listed on the NYSE as \\\"\\\"UN.\\\"\\\"\\\"\",\n \"\\\"First, it's an exaggeration to say \\\"\\\"every\\\"\\\" dollar. Traditional mutual funds, including money-market funds, keep a small fraction of their assets in cash for day-to-day transactions, maybe 1%. If you invest $1, they put that in the cash bucket and issue you a share. If you and 999 other people invest $100 each, not offset by people redeeming, they take the aggregated $100,000 and buy a bond or two. Conversely, if you redeem one share it comes out of cash, but if lots of people redeem they sell some bond(s) to cover those redemptions -- which works as long as the bond(s) can in fact be sold for close enough to their recorded value. And this doesn't mean they \\\"\\\"can't fail\\\"\\\". Even though they are (almost totally) invested in securities that are thought to be among the safest and most liquid available, in sufficiently extreme circumstances those investments can fall in market value, or they can become illiquid and unavailable to cover \\\"\\\"withdrawals\\\"\\\" (redemptions). ETFs are also fully invested, but the process is less direct. You don't just send money to the fund company. Instead: Thus as long as the underlyings for your ETF hold their value, which for a money market they are designed to, and the markets are open and the market maker firms are operating, your ETF shares are well backed. See https://en.wikipedia.org/wiki/Exchange-traded_fund for more.\\\"\",\n \"\\\"Here's the detailed section of IRS Pub 590 It looks like you intended to have a \\\"\\\"trustee to trustee conversion\\\"\\\", but the receiving trustee dropped their ball. The bad news is, a \\\"\\\"rollover contribution\\\"\\\" needed to be done in 60 days of the distribution. There is good news, you can request an extension from the IRS, with one of the reasons if there was an error by one of the financial institutions involved. Other waivers. If you do not qualify for an automatic waiver, you can apply to the IRS for a waiver of the 60-day rollover requirement. To apply for a waiver, you must submit a request for a letter ruling under the appropriate IRS revenue procedure. This revenue procedure is generally published in the first Internal Revenue Bulletin of the year. You must also pay a user fee with the application. The information is in Revenue Procedure 2016-8 in Internal Revenue Bulletin 2016-1 available at www.irs.gov/irb/2016-01_IRB/ar14.html. In determining whether to grant a waiver, the IRS will consider all relevant facts and circumstances, including: Whether errors were made by the financial institution (other than those described under Automatic waiver , earlier); Whether you were unable to complete the rollover due to death, disability, hospitalization, incarceration, restrictions imposed by a foreign country, or postal error; Whether you used the amount distributed (for example, in the case of payment by check, whether you cashed the check); and How much time has passed since the date of distribution. You can also see if you can get ETrade to \\\"\\\"recharacterize\\\"\\\" the equity position to your desired target IRA. The positive here is that the allowed decision window for calendar year 2016 rollovers is October 15 2017; the negatives are this is irrevocable, and restricts certain distributions from the target for a year (unlikely to impact your situation, but, you know, \\\"\\\"trust but verify\\\"\\\" anonymous internet advice); and it requires ETrade to recognize the original transaction was a rollover to a Roth IRA, which they currently don't. But if their system lets them put it through you could end up with the amount in a traditional IRA with no other taxable events to report, which appears to be your goal. Recharacterization FAQ\\\"\",\n \"What account you put it in depends on why you have those different accounts. First, if you have them due to regulatory requirements, then you of course must follow said regulations. I doubt that's the case here. Otherwise, you might be splitting based on how they trade (ETFs trade as stocks) or you could be splitting based on how you build a portfolio out of them. When you build a non-speculative stock portfolio, you typically want to limit your holdings in a single stock to a fairly small portion of your portfolio (say, 3%) to limit your exposure to bad stuff happening to a single company. That doesn't apply nearly a much to mutual funds, especially index funds. ETFs are much more like mutual funds here. You can also, of course, create an ETF account and put them there. You also say you have a market index account, what is that used for?\",\n \"Your three options are: Options 2 and 3 are obviously identical (other than transaction costs), so if you want to keep the stock, go for option 1, otherwise, go for option 3 since you have the same effect as option 2 with no transaction costs. The loss will likely also offset some of the other short term gains you mentioned.\",\n \"The main difference between a mutual fund and an ETF are how they are bought and sold (from the investors perspective). An ETF is transacted on the open market. This means you normally can't buy partial shares with your initial investment. Having to transact on the open market also means you pay a market price. The market price is always a little bit different from the Net Asset Value (NAV) of the fund. During market hours, the ETF will trade at a premium/discount to the NAV calculated on the previous day. Morningstar's fund analysis will show a graph of the premium/discount to NAV for an ETF. With a mutual fund on the other hand, your investment goes to a fund company, which then grants you shares while under the hood buying the underlying investments. You pay the NAV price and are allowed to buy partial shares. Usually an ETF has a lower expense ratio, but if that's equal and any initial fees/commissions are equal, I would prefer the mutual fund in order to buy partial shares (so your initial investment will be fully invested) and so you don't have to worry about paying premium to NAV\",\n \"In addition to all the good information that JoeTaxpayer has provided, be aware of this. When you sell mutual fund shares, you can, if you choose to do so, tell the mutual fund company which shares you want to sell (e.g. all shares purchased on xx/yy/2010 plus 10 shares out of 23.147 shares purchased on ss/tt/2011 plus...) and pay taxes on the gains/losses on those specific shares. If you do not specify which shares you want sold, the mutual fund company will tell you the gains/losses based on the average cost basis and you can use this information if you like. Note that some of your gains/losses will be short-term gains or losses if you use the average cost basis. Or, you can use the FIFO method (usually resulting in the largest gain) in which the shares are sold in the order in which they were purchased. This usually results in no short-term gains/losses. Just so that you know, most mutual fund companies will link your checking account in your bank to your account with them (a one-time paperwork deal is necessary in which your bank manager's signature is required on the authorization to be sent to the fund company). After that, the connection is nearly as seamless as with your current system. Tell the fund company you want to invest money in a certain mutual fund and to take the money from your linked checking account, and they will take care of it. Sell some shares and they will deposit the money into your linked bank account, and so on. The mutual fund company will not accept instructions from you (or someone purporting to be you) to sell shares and to send the money to Joe Blow (or to Joe Taxpayer for that matter): the proceeds of redemptions go to your checking account or are used to buy shares in other mutual funds offered by the company (called an exchange and not a redemption). Oh, and most fund companies offer automatic investments (as well as automatic redemptions) at fixed time intervals, just as with your bank.\",\n \"Let me restate question for clarity. Facts: Question: Are there any taxes for this transaction? Answer: (Added improvements provided by Eric) Generally No. Generally, it is not considered income until you sell and the sale price is greater than the purchase price. But with currency differences, there is an additional complication, section 988 rules apply. It could result in ordinary income or loss.\",\n \"I think that assuming that you're not looking to trade the fund, an index Mutual Fund is a better overall value than an ETF. The cost difference is negligible, and the ability to dollar-cost average future contributions with no transaction costs. You also have to be careful with ETFs; the spreads are wide on a low-volume fund and some ETFs are going more exotic things that can burn a novice investor. Track two similar funds (say Vanguard Total Stock Market: VTSMX and Vanguard Total Stock Market ETF: VTI), you'll see that they track similarly. If you are a more sophisticated investor, ETFs give you the ability to use options to hedge against declines in value without having to incur capital gains from the sale of the fund. (ie. 20 years from now, can use puts to make up for short-term losses instead of selling shares to avoid losses) For most retail investors, I think you really need to justify using ETFs versus mutual funds. If anything, the limitations of mutual funds (no intra-day trading, no options, etc) discourage speculative behavior that is ultimately not in your best interest. EDIT: Since this answer was written, many brokers have begun offering a suite of ETFs with no transaction fees. That may push the cost equation over to support Index ETFs over Index Mutual Funds, particularly if it's a big ETF with narrow spreads..\",\n \"It looks like what you're calling a name change was registered as a merger that resulted in an exchange of stock. If that's the case, then what you've been told is correct. You've got one long-term sale and one short-term sale. Based a quick read of the Form 8937 that was filed, it looks like there were multiple entities involved in this event, more than one of which existed prior to it. https://www.mylan.com/-/media/mylancom/files/form%208937%20for%20mylan%20n%20v.pdf\",\n \"One of the often cited advantages of ETFs is that they have a higher liquidity and that they can be traded at any time during the trading hours. On the other hand they are often proposed as a simple way to invest private funds for people that do not want to always keep an eye on the market, hence the intraday trading is mostly irrelevant for them. I am pretty sure that this is a subjective idea. The fact is you may buy GOOG, AAPL, F or whatever you wish(ETF as well, such as QQQ, SPY etc.) and keep them for a long time. In both cases, if you do not want to keep an on the market it is ok. Because, if you keep them it is called investment(the idea is collecting dividends etc.), if you are day trading then is it called speculation, because you main goal is to earn by buying and selling, of course you may loose as well. So, you do not care about dividends or owning some percent of the company. As, ETFs are derived instruments, their volatility depends on the volatility of the related shares. I'm wondering whether there are secondary effects that make the liquidity argument interesting for private investors, despite not using it themselves. What would these effects be and how do they impact when compared, for example, to mutual funds? Liquidity(ability to turn cash) could create high volatility which means high risk and high reward. From this point of view mutual funds are more safe. Because, money managers know how to diversify the total portfolio and manage income under any market conditions.\",\n \"Yes. On December 10, you have a wash sale. As long as you don't buy the stock back for 30 days after that, the wash is of no consequence. In other words, you don't have a wash issue if you don't own the stock for 30 days.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["I don't believe you can do that. From the IRS: Finally, certain types of property are specifically excluded from Section 1031 treatment. Section 1031 does not apply to exchanges of: I highlighted the relevant items for emphasis.","You cannot do a 1031 exchange with stocks, bonds, mutual funds, or ETFs. There really isn't much difference between an ETF and its equivalent index mutual fund. Both will have minimal capital gains distributions. I would not recommend selling an index mutual fund and taking a short-term capital gain just to buy the equivalent ETF."],"string":"[\n \"I don't believe you can do that. From the IRS: Finally, certain types of property are specifically excluded from Section 1031 treatment. Section 1031 does not apply to exchanges of: I highlighted the relevant items for emphasis.\",\n \"You cannot do a 1031 exchange with stocks, bonds, mutual funds, or ETFs. There really isn't much difference between an ETF and its equivalent index mutual fund. Both will have minimal capital gains distributions. I would not recommend selling an index mutual fund and taking a short-term capital gain just to buy the equivalent ETF.\"\n]","isConversational":false}}},{"rowIdx":61,"cells":{"_id":{"kind":"string","value":"5585"},"query":{"kind":"string","value":"Is there any site you can find out about the 'bonus features' of credit cards?"},"gt_ids":{"kind":"list like","value":["300117"],"string":"[\n \"300117\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1],"string":"[\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["300117","44802","290788","479426","311815","193449","13656","431435","109125","596692","550664","467603","16586","78616","172305","319043","245827","213182","94710","12035","63276","547441","30006","335859","502366","164795","171374","266358","332627","450830","215180","446369","366692","180539","441342","165619","333537","149360","61706","226831","299030","17173","138478","447478","340091","417301","336908","8892","527713","525129","591714","111891","459695","58753","307082","592719","346610","360048","401233","495028","404275","129107","150167","72289","454308","454337","89403","7432","454245","523850","124458","366642","18403","385832","134563","275356","135298","407870","119104","406965","433900","318132","547036","467581","549760","246920","538734","208169","421743","236531","327490","510989","397175","28074","517050","92144","427535","282168","246174","473581"],"string":"[\n \"300117\",\n \"44802\",\n \"290788\",\n \"479426\",\n \"311815\",\n \"193449\",\n \"13656\",\n \"431435\",\n \"109125\",\n \"596692\",\n \"550664\",\n \"467603\",\n \"16586\",\n \"78616\",\n \"172305\",\n \"319043\",\n \"245827\",\n \"213182\",\n \"94710\",\n \"12035\",\n \"63276\",\n \"547441\",\n \"30006\",\n \"335859\",\n \"502366\",\n \"164795\",\n \"171374\",\n \"266358\",\n \"332627\",\n \"450830\",\n \"215180\",\n \"446369\",\n \"366692\",\n \"180539\",\n \"441342\",\n \"165619\",\n \"333537\",\n \"149360\",\n \"61706\",\n \"226831\",\n \"299030\",\n \"17173\",\n \"138478\",\n \"447478\",\n \"340091\",\n \"417301\",\n \"336908\",\n \"8892\",\n \"527713\",\n \"525129\",\n \"591714\",\n \"111891\",\n \"459695\",\n \"58753\",\n \"307082\",\n \"592719\",\n \"346610\",\n \"360048\",\n \"401233\",\n \"495028\",\n \"404275\",\n \"129107\",\n \"150167\",\n \"72289\",\n \"454308\",\n \"454337\",\n \"89403\",\n \"7432\",\n \"454245\",\n \"523850\",\n \"124458\",\n \"366642\",\n \"18403\",\n \"385832\",\n \"134563\",\n \"275356\",\n \"135298\",\n \"407870\",\n \"119104\",\n \"406965\",\n \"433900\",\n \"318132\",\n \"547036\",\n \"467581\",\n \"549760\",\n \"246920\",\n \"538734\",\n \"208169\",\n \"421743\",\n \"236531\",\n \"327490\",\n \"510989\",\n \"397175\",\n \"28074\",\n \"517050\",\n \"92144\",\n \"427535\",\n \"282168\",\n \"246174\",\n \"473581\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["Billshrink offers some pretty neat analysis tools to help you pick a credit card. They focus more on rewards than the features you mention but it might be worth a look. If you use Mint, they offer a similar service, too. If you're not already using Mint, though, I'd look at Billshrink as Mint requires some extensive setup. MOD EDIT Looks like billshrink.com is shut down. From their site: Dear BillShrink customer, As you may have heard, BillShrink.com was shut down on July 31, 2013. While we’re sad to say goodbye, we hope we’ve been able to help you be better informed and save some money along the way! The good news is that much of the innovative award-winning BillShrink technology will still be available via our StatementRewards platform (made available to customers by our partnering financial institutions). Moreover, we expect to re-launch a new money-saving service in the future. To see more of what we’re up to, visit Truaxis.com. We have deleted your personal information as of July 31. We will retain your email address only to announce a preview of the new tool. If you do not want us to retain your email address, you can opt out in the form below. This opt out feature will be available until September 31, 2013. If you have already opted out previously, you do not need to opt out again. If you have any further questions, contact us at info@billshrink.com. Thanks, The BillShrink/Truaxis Team","\"Some features to be aware of are: How you prioritize these features will depend on your specific circumstances. For instance, if your credit score is poor, you may have to choose among cards you can get with that score, and not have much choice on other dimensions. If you frequently travel abroad, a low or zero foreign transaction fee may be important; if you never do, it probably doesn't matter. If you always pay the balance in full, interest rate is less important than it is if you carry a balance. If you frequently travel by air, an airline card may be useful to you; if you don't, you may prefer some other kind of rewards, or cash back. Cards differ along numerous dimensions, especially in the \"\"extra benefits\"\" area, which is often the most difficult area to assess, because in many cases you can't get a full description of these extra benefits until after you get the card. A lot of the choice depends on your personal preferences (e.g., whether you want airline miles, rewards points of some sort, or cash back). Lower fees and interest rates are always better, but it's up to you to decide if a higher fee of some sort outweighs the accompanying benefits (e.g., a better rewards rate). A useful site for finding good offers is NerdWallet.\"","Visa and Mastercard offer a variety of benefits to their cardholders. It's all in the initial information that may come in one, two or more parcels describing the relationship the two of you are in. I can't enumerate the services, but it ranges from things like automatic rental car insurance to price matching. You'll really have to compare the product with your banks'.","BillShrink.com lets you compare credit cards based on all your specifics (miles vs. cash, where you shop the most, etc) and tells you what the best card is for your specific habits. MOD EDIT Looks like billshrink.com is shut down. From their site: Dear BillShrink customer, As you may have heard, BillShrink.com was shut down on July 31, 2013. While we’re sad to say goodbye, we hope we’ve been able to help you be better informed and save some money along the way! The good news is that much of the innovative award-winning BillShrink technology will still be available via our StatementRewards platform (made available to customers by our partnering financial institutions). Moreover, we expect to re-launch a new money-saving service in the future. To see more of what we’re up to, visit Truaxis.com. We have deleted your personal information as of July 31. We will retain your email address only to announce a preview of the new tool. If you do not want us to retain your email address, you can opt out in the form below. This opt out feature will be available until September 31, 2013. If you have already opted out previously, you do not need to opt out again. If you have any further questions, contact us at info@billshrink.com. Thanks, The BillShrink/Truaxis Team","I would look for these features in the credit card: If there is some kind of reward option like cash back or points, you obviously deduct these from the total costs. Chances are the total costs are higher than the rewards, because generally people don't give you money for free. The reward has to be financed somehow. I would adivse against building up credit card debt. It typically has a high interest rate. So, use the credit card only as a method of payment and pay back the debt so quickly that the interest doesn't start to accumulate.","Someone mentioned sign up bonuses but only mentioned dollar values. You might get points, sweet, sweet airline points :) which some might find compelling enough to churn cards so they always have a few open.","The first thing I assess when looking at new credit cards is whether it has no annual fee, the second thing I look at is how long the interest free period is. I always pay my credit card off in full just before the due date. Any rewards program is a bonus. My main credit card is with CBA, I have a credit limit of $20K and pay no annual fee. I get a bonus point for every $ I spend on it, for which I exchange for store gift cards to help with my everyday spending. Approximately 3500 point would get me a $25 gift card. But my main reward with the card is the interest I save by keeping my own money in a Home Loan Offset account whilst I spend with the Bank's money. Then I pay the full amount off by the due date so I do not pay any interest on the credit card. I only use my credit cards for purchases I would usually make anyway and to pay bills, so my spending would be the same with or without a credit card. I can usually save over $500 each year off my Home Loan interest and get about $350 worth of gift cards each year. If I didn't have any Home Loans then I would keep my money in a high interest depost account so I would be increasing my interest payments each year. Sure you can probably get credit cards with more generous rewards programs, but how much are you paying each year in annual fees, and if you don't have an interest free period and you don't pay off all the amount due each month how much are you paying in interest on the card? This is what you need to way up when looking at rewards programs on offer. Nothing is for free, well almost nothing !","Start with the cards you already have. If you don't have enough room on the best card, then ask for a credit increase. You have to keep in mind that some of the programs have a maximum amount you can charge to get the bonus cash back amount. Others have a graduated plan where the first few thousand dollars are at a lower cash back rate. If you do decide to get a new card, make sure you get a large enough credit limit or the work to get a new card was for naught. I would start with bankrate.com to research cards.","\"Usually you need to switch accounts. Lower rate cards usually offer less generous benefits. I'd advise looking at the charts on credit card rates in the back of a magazine like \"\"Money\"\" or \"\"Kiplingers\"\".\"","Your best option is just to pick a card that gives you the best (highest) rewards without charging you an annual or other fees (or the lowest annual or other fees). As you are looking to pay off the full balance by the due date you won't have to worry about the interest rate but just make sure you get an interest free period.","Google has a tool for comparing credit cards. My suggestion would be for a simple, no-annual fee cash back card. Points can be a hassle to redeem, and like they say, cash is king. Assuming you have the credit score for it, Citi Double Cash is a good choice.","a MUST READ for consumers planning to apply for unsecured credit cards! it offers excellent tips on how you can avoid and properly deal with the drawbacks associated with these card programs. hope you can help us promote it to all your friends!","this post offers valuable information we can all use when scouting for frequent flyer credit cards. let's all support this post of my friend, sean travis, by reading and sharing it to all our friends and followers in different social networking sites.","I prefer the TD Gold Elite Visa issued by TD Canada Trust. The card offers a 1% cash back reward, and I can completely avoid the annual fee by maintaining a minimum balance in my TD bank account. In addition to the 1% cash back, other features that I like on the card are: There are some other features (see complete list here), but those are the ones I care about. I used to carry both Aeroplan and Air Miles type of reward cards, but when I wanted to book a flight and discovered the hassle involved, the value of travel points evaporated as far as I was concerned. I also decided I would never again pay an annual fee to earn rewards; it's counter-productive.","How would you respond to these cases: Limited card options - If someone has a bad credit record the cards available may only be those with an annual fee. Not everyone will have your credit record and thus access to the cards you have. Some annual fees may be waived in some cases - Thus, someone may have a card with a fee that could be waived if enough transactions are done on the card. Thus, if someone gives enough business to the credit card company, they will waive the fee. On the point of the rewards, if the card is from a specific retailer, there could be a 10% discount for using that card and if the person purchases more than a couple thousand dollars' worth from that store this is a savings of $200 from the retail prices compared to what would happen in other cases that more than offsets the annual fee. If someone likes to be a handyman and visits Home Depot often there may be programs to give rewards in this case. Credit cards can be useful for doing on-line purchases, flight reservations, rental cars and a few other purchases that to with cash or debit can be difficult if not close to impossible. Some airline cards have a fee, but presumably the perks provide a benefit that outweigh that fee over the year. I'm thinking of the Citibank cards tied to American Airlines, first year free, then an $85 fee.","One reason why some merchants in the US don't accept Discover is that the fee the store is charged is higher than the average. Generally a portion of transaction fee for the network and the issuing bank goes to the rewards program. In some cases a portion of the interest can also be used to fund these programs. Some cards will give you more points when you carry a balance from one month to the next. Therefore encouraging consumers to have interest charges. This portion of the program will be funded from the interest charges. Profits: Rewards: Some rewards are almost always redeemed: cash once the amount of charges gets above a minimum threshold. Some are almost never redeemed: miles with high requirements and tough blackout periods. Credit cards that don't understand how their customers will use their cards can run into problems. If they offer a great rewards program that encourages use, but pays too high a percentage of points earned can lead to problems. This is especially true when a great percentage of users pay in full each month. This hurt Citibank in the 1990's. They had a card with no annual fee forever, and a very high percentage never had to pay interest. People flocked to the card, and kept it as an emergency card, because they knew it would never have a annual fee.","These two categories ensure you will carry the card in your wallet (since they only work for physical locations), but don't tend to have excessive spending (most people maxing out at $200 or so per month, so $2 for the bonus). You then use the same card for other purchases, because you have it on you, where you only get the 1%. It worked for me, I started carrying the Amazon card when I found out it had a higher percentage for gas purchases. I only use it for gas though.","It is always a good idea if you are worried about customer service and hidden gotchas to visit http://getsatisfaction.com - they operate as an independent complaint board for many companies. http://getsatisfaction.com/bankofamerica for example alerts you to many problems with using BofA. In addition, googling for common complaint terms is a great idea. It's easy to learn why bank of america sucks and to see that not too many people think bank of america rocks.","PenFed Platinum Cashback Rewards Visa Card is another good choice. Pros: Cons:","One thing that has not been pointed out as a disadvantage of using Credit Cards: people tend to spend more. You can see This Study, and this one, plus about 500 others. On average people tend to spend about 17% more with credit cards then with cash. This amount dwarphs any perks one gets by having a credit card. The safest way to use one is to only use them for purchases where you cannot make a decision to spend more. One example would be for utility bills (that don't charge a fee) or at the gas pump. Using them at Amazon might have you upgrade your purchase or add some extra items. Using them at restaurants might encourage you to order an extra drink or two. Using them at the coffee shop might have you super size your coffee or add a pastry. Of course this extra spending could lead you into a debt cycle exacerbating the financial hit many struggle with. Please tread carefully if you decide to use them.","\"I'm not going to recommend a specific card. New card offers pop up all the time. My answer would be out of date in a month! As a general rule, if you pay off your balance every month, you should be looking at a cash-back or a rewards card. Cash-back cards will give you some money (say 1%) of every dollar you spend. Some will give you larger amounts of cash-back for certain types of spending (e.g. groceries). With a Rewards card, you usually get \"\"points\"\" or \"\"airline miles\"\", which can be redeemed for merchandise, flights around the wold, concert tickets, etc. With these types of cards, it makes sense to do as much of your spending as possible with the cards, so you can maximize the benefits. Which specific card is best will depend on your shopping habits, and which bank is offering the best deal that week. I recommend you start at http://www.creditcards.com to compare card offerings. For cash-back cards, you can also go to http://www.creditcardtuneup.com, enter some details of your spending, and see which one will give you the most cash back.\"","CreditCards.com has maintained a fairly comprehensive list of offers for many years now. I don't see any straight 2% offers there right now.","\"I think that your best option is to use the internet to look for sites comparing the various features of accounts, and especially forums that are more focused on discussion as you can ask about specific banks and people who have those accounts can answer. \"\"Requests for specific service provider recommendations\"\" are off-topic here, so I won't go into making any of my own bank recommendations, but there are many blogs and forums out there focusing on personal finance.\"","As has been stated, you don't need to actively bank with a credit union to apply for one of their credit cards. That said, one benefit to having account activity, and significant capital with a CU, is to increase the likelihood of having a larger credit line granted to you, when you do apply. If you are going to use the card sparingly however, then this is a non issue. That said, if you really want to maximize card benefits, then you want to look for cards with large sign up bonuses (e.g. Chase Sapphire, or Ink Bold if you have a business) and sign up exclusively for those bonuses. These cards offer rewards in excessive value of $1000 in travel services (hotels/plane tickets), or $500 cash back if you prefer straight cash back redemptions. If you prefer to keep it really simple, you can sign up for a cash back card, like the Amex Fidelity, which offers 2% cash back everywhere, with no annual fee (albeit the cash back is through their investment account, which you don't actually have to 'invest' with). Personally, I have the Penfed card, and use it exclusively for gas (5% cash back). I also have a Charles Schwab bank account, which I keep funded exclusively for ATM withdrawals (free ATM usage, worldwide, 100% fee reimbursement). I use the accounts exclusively for the benefit they provide me, and no more and have never had an issue. I also have 3 dozen other credit cards which I signed up for exclusively for the sign up bonus, but that's outside the scope of this question. I only mention it because you seem to believe it is difficult to get approved for a new credit line. If your credit is good however, you won't have a problem. For a small idea, of how to maximize credit card bonus categories, I would advise you read this. As mentioned in the article, its possible to get rewards almost everywhere you shop. In short, anytime you use cash, you are missing out on a multitude of benefits a credit card offers you (e.g. see the benefits of a visa signature card) in addition to points/cash back.","\"Credit cards have three important advantages. None of them are for day-to-day borrowing of money. Safety - Credit cards have better fraud protection than checks or cash, and better than most debit/check cards. If you buy something with a credit card, you also get the issuer's (think Visa) assurances that your will get the product you paid for, or your money back. At almost any time, if a product you buy is not what you expect, you can work with the issuer, even if the store says \"\"screw you\"\". Security - Credit cards are almost universally accepted as a \"\"security\"\" against damages to the vendor. Hotels, car rentals, boat rentals etc. will accept a credit card as a means of securing their interests. Without that, you may have to make huge deposits, or not be able to rent at all. For example, in my area (touristy) you can not rent a car on debit or cash. You must use a credit card. Around here most hotel rooms require a credit card as well. This is different from area to area, but credit cards are nearly universally accepted. Emergencies - If you're using your credit card properly, then you have some extra padding when stuff goes wrong. For example, it may be cheaper to place a bill on a credit card for a couple months while you recover from a car accident, than to deplete your bank account and have to pay fees. Bonus - Some cards have perks, like miles, points, or cash back. Some can be very beneficial. You need to be careful about the rules with these bonuses. For example, some cards only give you points if you carry a balance. Some only give miles if you shop at certain stores. But if you have a good one, these can be pretty fantastic. A 3% cash back on purchases can make a large difference over time.\"","I got a Capital One credit card because they don't charge a fee for transactions in foreign currencies. So I only use it when I travel abroad. At home, I use 3 different credit cards, each offering different types of rewards (cash back on gas, movies, restaurants, online shopping etc).","\"Not everyone pays their balance in full every month. They may not make interest off of you or me but they do make interest off of a lot of cardholders. In many cases, the interest is variable and the larger your (running) balance, the higher your rate. If you're close to your limit and making minimum payments, you can literally take decades to pay off $2,000 or so. Some people don't pay at all every month and end up paying late fees. Some people use their cards overseas and pay foreign transaction fees. Ever take a cash advance? Me neither but they charge you interest right away for that instead of waiting until your statement. The list of fees and charges is as long as my arm and in tiny print. That's how they make money. The points/bonus/cash back and other rewards programs are to get you in the door. It's like when you see a luxury car advertised for a \"\"too good to be true\"\" price and you get to the lot and find out that the one they are selling for that price is a manual transmission without AC or a radio, they only had one and they sold it an hour before you got there. It got you on the lot though. The rewards programs function in much the same way (minus the disappearing part), they get you interested in their offering among a sea of virtually identical products but rest assured, if the card issuers were losing money because of them, they wouldn't exist for very long.\"","I would recommend you look at Credit Karma and assess your situation. The site is free and will offer a score similar to your FICO score enabling you to best judge when to apply. They advertise, like any web site, and will offer credit card signups, which is how they make money. Disclaimer - I am a blogger and have written about Credit Karma, but no payment from them. I've actually been out drinking with their marketing team, but that was it. Nice bunch.","If you want to farm credit card benefits, there are a few low-cost ways to do so:","\"The bottom line is that you are kind of a terrible customer for them. Granted you are far better than one that does not pay his bills, but you are (probably) in the tier right above that. Rewards cards are used to lure the unorganized into out of control interest rates and late payments. These people are Capital One's, and others, best customers. They have traded hundreds of dollars in interest payments for a couple of dollars in rewards. The CC company says: \"\"YUMMY\"\"! You, on the other hand, cut into their \"\"meager\"\" profits from fees collected from your transactions. Why should they help you make more money? Why should they further cut into your profits? Response to comment: Given your comment I think the bottom line is a matter of perspective. You seem like a logical, altruistic type person who probably seeks a win-win situation in business dealings. This differs from CC companies they operate to seek one thing: enslavement. BTW the \"\"terrible customer\"\" remark should be taken as a compliment. After you get past the marketing lies you begin to see what reward programs and zero percent financing is all about. How do most people end up with 21%+ interest rates? They started with a zero percent balance loan, and was late for a payment. Reward cards work a bit differently. Studies show that people tend to spend about 17% more when they use a reward card. I've caught myself ordering an extra appetizer or beer and have subsequently stopped using a reward card for things I can make a decision at the time of purchase. For people with tight budgets this leads to debt. My \"\"meager\"\" profits paragraph makes sense when you understand the onerous nature of CC companies. They are not interested in earning 2% on purchases (charge 3% and give back 1%) for basically free money. You rightly see this as what should be a win-win for all parties involved. Thus the meager in quotation marks. CC companies are willing to give back 1% and charge 3% if you then pay 15% or more on your balance. Some may disagree with me on the extracting nature of CC companies, but they are wrong. I like him as an actor, but I don't believe Samuel Jackson's lines.\"","First and foremost you should do more research on credit cards and what everything means. As expressed by others the balance transfer fee is not what you think it is. Credit cards can be great, they can also quickly erode your credit score and your standing. So understanding the basics is VERY important. The credit card that is right for you should have the following criteria. The first two points should be straight forward, you should not have to pay a CC company for the privilege to use their card. They should pay you through perks and rewards. It should also be a CC that can be used for what you need it for. If you travel internationally a lot and the CC you choose only works within the US then what good is it? The third point is where you need to ask yourself what you do a lot and if a CC can offer rewards through travel miles, or cash back or other bonuses based on your lifestyle. The transfer fee is not what you think it is, people who already are carrying debt on another credit card and would like to transfer that debt to another credit card would be interested in finding a fee or a low %. People do this to get a batter rate or to get away from a bad credit card. If one charges 28% and another charges 13%, well it makes sense to transfer existing debt over to the 13% provided they don't crush you on fees. Since you have no credit card debt (assumption based on the fact you want to build your credit), you should ask yourself for what purpose and how often do you plan to use the credit card. Would this card be just for emergencies, and wont be used on daily purchases then a credit card that offers 3% cash back on gasoline purchases is not for you. If you however love to travel and plan to use your credit card for a lot of purchases OR have a few large purchases (insurance, tuition etc.) then get a credit card that provides rewards like miles. It really comes down to you and your situation. There are numerous websites dedicated to the best credit card for any situation. The final thing I will say is what I mentioned at the beginning, its important, CC's can be a tool to establish and improve your credit worthiness, they can also be a tool to destroy your credit worthiness, so be careful and make smart choices on what you use your card for. A credit score is like a mountain, it requires a slow and steady discipline to reach the top, but one misstep and that credit score can tumble quickly.","Anything with zero fee and rewards to get started. Discover is typically the easiest, but Chase Freedom is pretty good if you can get it (usually requires higher income and 700+ score though, but not always, check CK approval odds)","I'd say the best course of action would be to call the card issuer and ask them. Converting can definitely be done, but you'll have to enquire about the bonus.","All the fees are added to the amount you actually spend, but they only occur when you do these kind of transactions. They do not happen for any other reason. If you transfer a balance from another credit card this fee is added to your balance. Since this is your first credit card you don't have to transfer any balance. This site says that this is a special type of check, linked to your credit card account, not to your checking account. If you write this type of check to a merchant the additional fees will apply. If you use your credit card at an ATM this fee will be applied on top of the money you withdraw. Usually it is a percentage of the amount you withdraw. According to this site, a cash equivalent is something like casino chips which can be easily converted back into money without any loss. If you use your credit card in a different currency, for example Euro but your credit cards currency is Dollar. Usually a percentage of the amount (~3-5%). If you withdraw money from a foreign currency ATM they add usually a fixed amount plus a percentage or any combination of this.","In a similar situation I wrote about How I Made $4,000+ on a Cash Back Credit Card Offer. The total was actually $4550, and was from an insane offer from a new credit card my bank advertised. 10% cash back on all spending during the first 90 days. I wondered if gift card purchases counted, and more than store cards, I saw that Visa gift cards with a $500 value sold for a $4.95 fee. A 1% hit. It would have been foolish to load up, and realize that they were somehow excluded, so I bought 2 and followed the transaction on line. When I saw the 10% credit, I went full steam, and bought these, $2000 at a time, as that was the limit CVS imposed. In the end, I stopped at $50,000. (And the bank killed the online offer about $25K into this, but still honored my 90 days) Yes, I had to make payments mid cycle to avoid the card limit ($20K), but in the end, the bit of effort paid off. It took a bit over a year and a half to burn through them. In hindsight, I'd do it for $100K if the opportunity came up. Cash in the bank is earning near zero. TL:DR Make a small purchase and confirm your card gives you the bonus you expect.","The length of time you have established credit does improve your credit score in the long run. As long as you can avoid paying interest, you might see if you can get a card with cash back rewards. I have one from Citi that sends me a $50 check every so often when I have enough rewards built up.","this article offers tips you can use to make the most out of your business reward credit card. keep these tips in mind and don't forget to tell share them with your friends, especially those who are also managing small business, like you.","There are quite a few advantages to credit cards in the uk. But don't borrow on them past the grace period. Set up a direct debit to pay amount in full.","Here's one reason that's being overlooked in answers so far. (@ChrisInEdmonton, this is for your comment on @Chad's answer.) How do credit card companies make money? Sure, there's interest charges, but those are offset significantly by the cost of borrowing money, and by people defaulting on their debt / entering bankruptcy. The other way they make money is by processing transactions. They get a cut of whatever you buy. If you're a high-income person, and you're going to process a lot of expenditures with this credit card, your business is worth more. They will be willing to bribe you with things like cash-back, frequent flier miles, and insurance on your auto rentals, so that they can be your #1 go-to card. (This works in concert with the way that some credit card vendors with richer clientele overall - American Express - get to charge higher merchant fees for access to these customers' wallets. But that was mentioned in other answers.) If you're not a high-income person, your business is worth less. If you go somewhere asking for credit, they're going to try and give you a card which will earn them the most money - which probably isn't the one where they give you back 50% of their transaction fee in rewards. It's a calculated risk, since they still have to compete against cash, debit cards, and all the other credit card companies, so they don't have you totally over a barrel, but you shouldn't expect as many freebies, either.","The answer for this question varies from person to person. However most cards give lousy rewards percentage-wise. Take a look at where your money is being spent each month (say with a tool like mint.com), and seek out a card that rewards you in categories where you already spend a lot of money. Many people here have suggested cards with high gas rebates, and that's great if you drive more than anything else. However, the important thing is to pick what benefits you most.","There are lots of things to consider in addition to your questions. The rules changed in the US recently. I think you mean you will save more money. Your interest rate isn't likely to go up, but your principle will, so you will earn more interest income than before. I would wager it won't be a significant amount however. You can certainly earn a reward, either cash back, points, miles or something else. BUT the sticking point with earning things with your card is harder than before. Due to rules changes, merchants can now recuperate the fees they pay for accepting your credit card. Rewards cards have a higher fee than non-rewards cards (because banks aren't in charities). So now, depending on the merchant's choice, you could see a higher cost paying with a credit card (or a debit card) and that cost could wipe out your reward. And if your card has a fee, it has always been true that you need to evaluate the annual fee to confirm the benefit is more than paying for the fee. Additional advantages to credit cards","\"The American Express Centurion Card (the \"\"Black Card\"\") is for extremely wealthy people who like to show off how much they spend. There are no cash back benefits like you have with traditional rewards cards. The benefits are all geared toward spending more money, not saving money. For example, the benefits include a personal travel agent, personal shoppers at high end stores, elite status with airlines and hotels, etc. There are some benefits that you could put a dollar value on. For example, first class upgrades and complementary companion airline tickets. If you like to fly first class and you do a lot of flying, it is conceivable that you could come out ahead. However, someone that does that much flying has probably already achieved elite frequent flyer status and enjoys regular upgrades without the Black card. In my opinion, it is pretty difficult to justify the initiation and annual fees of this card as anything but a luxury.\"","In Canada a good site is: redflagdeals.com","I don't know of any that are comparable to credit cards. There's a reason for that. Debit cards, being newer, have a much lower interchange rate. Since collecting on debt is risky and less predictable, rewards / miles are paid from those interchange fees. This means with a debit card there's less money to pay you with. So what can you do? Assuming your credit isn't terrible, you can just open a credit card account and pay in full for purchases by the grace period. I don't know how all cards work, but my grace period allows me to pay in full by the billing date (roughly a month from purchase) and incur no finance charges. In effect, I get a small 30 day loan with no interest, and a cash back incentive (I dislike miles). You're also less liable for fraud via CC than debit.","What qualifies as a transaction? Does the bill pay count? Otherwise, not sure what you'd do to get 12. If this requires you to actively do something 12x per month, not worth it. But I can easily set up 12 online bill payments.","You should not open bank accounts just to get additional credit cards. You should be careful about carrying too many credit cards and incurring too much debt as you could find yourself in a situation whereby you may not be able to pay off your monthly interest, much less the principal balance. Credit cards are not insurance. With many years of experience under my belt I can tell you that the best approach is to live within (or below) your means and avoid carrying a balance on credit cards. I carry only one credit card (really a charge card) and I pay off the balance every month. Treat a credit card as a 30 day interest free loan and pay your balance off in full every month...as you progress through life you will save yourself a lot of heartache (and money) if you take this approach.","A credit card can be a long running line of credit that will help to boost your FICO score. However if you have student loans, a mortgage, or car payments those will work just as well. If you ever get to the point where you don't have any recent lines of credit, this may eventually end up hurting your score, but until then you really don't need any extras.","let's all support the latest post added to www.securedcreditcardsonline.com! it offers excellent tips college students can use to find, qualify for and eventually get suitable lines of credit they can use for managing their day-to-day expenses. hope you will read it and share it with all your friends!","Unless you spend a lot of money on the TD Gold Elite Visa, and are interested in the Deluxe TD Auto Club, the $99 annual fee is probably not worth it. Instead, the Citi Enrich MasterCard provides the same 1% cash back on all purchases without an annual fee. There's also an unadvertised Platinum version of the card, which includes other perks like car rental insurance, etc. From what I calculated a while back, The PC Financial MasterCard PC Points system works out to a 1% return as well. Unless there are extra deals like 5x point sales that I'm not aware of, cold hard cash would be a better option. Also check out the RFD Credit Card Head to Head article for way more options.","\"Note: this answer is true for the UK, other places may vary. There are a couple of uses for credit cards. The first is to use them in a revolving manner, if you pay off the bill in full every time you get one then with the vast majority of cards you will pay no interest, effecitvely delay your expenses by a month, build your credit rating and with many credit cards you can also get rewards. Generally you should wait until the bill comes to pay it off. This ensures that your usage is reported to the credit ratings agencies. In general you should not draw out cash on credit cards as there is usually a fee and unlike purchases it will start acruing interest immediately. The second is longer term borrowing. This is where you have to be careful. Firstly the \"\"standard\"\" rate on most credit cards is arround 20% APR which is pretty high. Secondly on many cards once you are carrying a balance any purchases start acruing interest immediately. However many credit cards offer promotional rates. In contrast to the standard rates which are an expensive way to borrow the promotional rates often allow you to borrow at 0% APR for some period. Usually when it comes to promotional rates you get the best deal by opening a new credit card and using it immediately. Ideally you should plan to pay off the card before the 0% period ends, if you can't do that then a balance transfer may be an option but be aware than in a few years the market for credit cards may (or may not) have changed. Whatever you do you should ALWAYS make sure to pay at least the minimum payment and do so on time. Not doing so may trigger steep fees, loss of promotional interest rates. There is a site called moneysavingexpert that tracks the best deals.\"","The two factors that will hurt you the most is the age of the credit account, and your available credit to debt ratio. Removing an older account takes that account out of the equation of calculating your overall credit score, which can hurt significantly, especially if that is the only, or one of just a couple, of open credit lines you have available. Reducing your available credit will make your current debt look bigger than what it was before you closed your account. Going over a certain percentage for your debt to available credit can make you look less favorable to lenders. [As stated above, closing a credit card does remove it from the credit utilization calculation which can raise your debt/credit ratio. It does not, however; affect the average age of credit cards. Even closed accounts stay on your credit report for ten years and are credited toward average age of cards. When the closed credit card falls off your report, only then, will the average age of credit cards be recalculated.] And may I suggest getting your free credit report from https://www.annualcreditreport.com . It's the only place considered 'official' to receive your free annual credit report as told by the FTC. Going to other 3rd party sites to pull your credit report can risk your information being traded or sold. EDIT: To answer your second point, there are numerous factors that banks and creditors will consider depending on the type of card you're applying for. The heavier the personal rewards (cash back, flyer miles, discounts, etc.) the bigger the stipulation. Some factors to consider are your income to debt ratio, income to available credit ratio, number of revolving lines of credit, debt to available credit ratio, available credit to debt ratio, and whether or not you have sufficient equity and/or assets to cover both your debt and available credit. They want to make sure that if you go crazy and max out all of your lines of credit, that you are capable of paying it all back in a sufficient amount of time. In other words, your volatility as a debt-consumer.","They are not as good of an option when compared to a card you open chosen based on features and rates. Get a card with a lower rate that can be used anywhere.","These kinds of credit card offers are incredibly common. More often you will get a certain reward if you spend $X within Y days of getting the card. In many cases you can take advantage of them with very little downside. However, are you responsible enough to have a credit card and be able to pay off the balance every month? If not the interest charges could quickly wipe out the $50 bonus you get. And hard inquiries and new accounts could potentially affect your credit score, particularly if you don't have a well-established credit history. There's also the chance you get denied in which case you add a hard inquiry to your credit report for no gain.","If you have self control and a good handle on your finances, which it sounds like - I suggest the following: Note: #3 is important - if you're not able to pay it off each month don't do this because it will cost you a lot in interest. Make sure to check how interest is calculated in case you don't pay it off in full or miss the due date for a month. If you can do this you'll earn some good benefits from the card using money that you're going to spend anyway, as well as build your credit profile. Regarding annual fees -","I'd have a look at Capital One's Online account too, they've got 1.35% interest rate with 10% bonus if you have over $15k deposited. It is still low like all interest rates, but at least it is on top (or at least close)!","Looks like a user-contributed list is the only good solution to this question, so I'll start one by making this answer community wiki, meaning anyone can edit it. We only aim to add major chain, not every mom&pop store (which probably don't qualify). The rewards details page looks like this: The lists are in alphabetical order.","You can find great deals and the forums are full of other information. I also have found when I need to find a deal on something, you can ask or find others on the forums for help. http://slickdeals.net/","\"In the end, all these fees hurt the average consumer, since the merchant ultimately passes cost to consumer. Savvy consumers can stay at par or get ahead, if they put in the effort. It's a pain, but I rotate between 4 cards depending on time of year and type of purchase, to optimize cash back. My cards are: 1. 5% rewards card on certain categories, rotates each quarter 2. 2% travel/dining card (fee card, but I travel a bunch so it's worth it, no foreign transaction fees) 3. 1.5% rewards card for everything else 4. Debit card (swiped as a CC) for small purchases (i.e. lunches) at credit union for \"\"enhanced\"\" high interest checking account, requiring certain # swipes/month. This alone returns to me ~$800/yr.\"","\"These days, just about any bank has the ability to schedule payments for free. I usually use this. My wife has a Chase MasterCard, because they used to automatically credit the 1% cash back monthly. Now they \"\"improved\"\" the card, and you need to go online and redeem the rewards, either in $20 increments, or to pay off a previous purchase, which seems to be a real gimmick. They probably get back the 1% cash back for that purchase if you use this feature. Weird people.\"","For people with attempted to achieve credit rating coming from a huge rely or perhaps organized credit score card issuer then you can discover how complicated its to get authorised. They generally interest some kind of credit score, when you need a low interest rate quote and additional returns after that your credit score has to be excellent.","Usually points have different value depending on what you use it for and how much of them you convert. For many providers, if you have enough (10000+ usually) points, it is possible to convert them 1:1 (which means 1 point converted to 1 cent) to either cash or something that is almost as good as cash ($100 gift card for some popular store or $100 Amazon.com certificate, etc.). Some cards have more exotic ways of getting best value - such as transferring money to pay student loans, retirement accounts, etc. So to get the best value, I'd recommend to make a list of what you can get from your program (most types of reward are uniform - i.e., many gift cards with the same price, so the work may be less than it seems) and calculate point values of each of those. If you want to be really precise take into account that if you buy something with points, you do not earn points on that, which reduces the value a little. In general, these days it is very rare to get a card that produces more than 1% back, though some have up to 5% for certain categories of purchases.","Just to make this a little less vauge, I will base everything on the Mercedes Benz American Express (MB AMEX) card, which is the closest to a $100 annual fee I found on American Express's website. The benefits of a card with an annual fee generally are worth the cost if (and only if) you spend enough money on the card, and avoid paying interest to offset the benefit. Using the MB AMEX card as a reference, it offers 5X points for Mercedes Benz purchases, 3X points at gas stations, 2X points at restaurants, and 1X points everywhere else. Even if we only make purchases at the 1X rate, it only takes charging $10,000 to the card in a year in order to make up the difference. Not too hard to do on a card someone uses as their main method of payment. Every dollar spent at the higher rates only makes that easier. There are a number of other benefits as well. After spending $5,000 on the card in a year, you receive a $500 gift card towards the purchase of a Mercedes Benz car. For anyone on the market for a Mercedes Benz, the card pays for itself multiple times with just this benefit.","I was in the same chicken and egg situation regarding credit cards. I did two things: Now that I have recent good credit history, Capital One has offered to raise my limit. I assume that it is because my credit score has improved and I can probably now switch to a credit card that doesn't have an annual fee.","Correct. By putting expenses on to a credit card which does not charge interest during the grace period, and paying that balance every month, in effect you earn interest on money you've already spent. However, first, savings account interest is something like .05% right now depending on your bank. Yeah it's money, but seriously, that's 4 cents per month on $1000. Second, two things can make this very wrong. If you carry a balance, you'll pay much more in interest than you'd get from practically any investment you could make with the cash in the meantime. Second, a debit card can be used to get cash you already have from an ATM (not everyone takes credit, you know), and it'll cost you little or nothing. Use a credit card for the same purpose and you're paying 40% from the second the money comes out of the machine. Also correct. Rewards cards earn you more the more they're used. That's because the card issuer makes money based on usage; they get 3% of each transaction. They're happy to turn 1% of that, up to a limit or subject to a spending floor, back around to you. Again, check the terms and conditions. Most cards have a limit on total rewards. Many of them also have fees, either while you hold the card or when you try to redeem the rewards. Look for a card with high limits or no limits on rewards from spending, and with no annual fee or reward redemption fee. In addition to the above, you build good credit history with good spending patterns. However, your credit score can fluctuate wildly, because on one day you have very low leverage (percent of credit limit used), and on the next you've bought $200 in groceries and so your leverage went up 20% on a card with a $1000 limit. Leverage under 10% is good, leverage under 40% is OK and leverage over that starts looking bad. With a $1000 limit, with you maxing it out and then paying it off, your credit score can fluctuate by 30 points on any given day.","\"My wife and I have Gap, Kohl's and Amazon cards. They each give extra benefits when using them at their stores, and usually 1% cash back at other places, although we don't use the Gap or Kohl's anywhere else. We don't carry a balance, so as mentioned, the rate doesn't matter. And they are so spread out when we've gotten them (Kohl's for a good 3 years, Amazon about 2 months ago) that I don't expect any issues for credit checks. In fact I just got approved for a mortgage loan, way more than what I know I can really afford. In my mind, credit cards are a bad idea when you use them as \"\"real\"\" credit. If they are used more like a debit card (spending money that you have), its like a loan (you don't have to pay it off til later), and you get paid for it (whether in cash or merchandise).\"","An advantage of using a major credit card is that they act as a buffer and source of recourse between you and the merchant. Cheated and the store won’t answer you letters? Call Visa (or more accuratly, call the number on the back of the card). (That is, #2 on this answer, which you can also reference for a whole list of benefits.)","Apparently it is up to the credit card company on how they want to report your available balance. Another disadvantage to the no-limit credit card may not be apparent to most people, but it is something noted by organizations like The Motley Fool, which is expert in many issues of finance and investment. Part of your credit score, about 30%, considers the amount of money you have borrowed, and the limit on your present credit cards. A no-limit credit card company may report your limit as $0 if you have not used the card, or they may report a maximum limit available to you. They may not, nor are they obligated, to report times when you put tons of expenses on a credit card and then paid them off. While some companies will report your timely payments and paid off amounts, others simply report an extremely low limit. For instance if you spent $100 US Dollars (USD), your limit might be considered $100 USD, or it may merely be reported as zero. You’ll need to check with a credit card company on how they report payments and limits on a no-limit credit card before you obtain one. Some people who are scrupulous are paying off their cards at the end of each month suffer major losses to their credit score, without even realizing it, if their spending ability is rated at zero, or their payments don’t count toward showing credit worthiness. Source","Possibly not relevant to the original asker, but in the UK another advantage of using a credit card is that when making a purchase over £100 and paying by credit card you get additional protection on the purchase which you wouldn't get when paying by debit card. E.g. if you buy something costing £100 and the company goes bust before it's delivered, you can claim the money back from the credit card company. Whereas if you paid by debit card, you would potentially lose out. This protection is a legal requirement under Section 75 of the Consumer Credit Act 1974.","this post offers excellent pointers that can help you choose a suitable line of credit you can use for financing your day-to-day expenses. please help up promote it to all your friends especially to those who are planning to apply for and get secured and prepaid credit cards!","In the United States there are 3 main types of cards. There are organizations that push a credit card with their branding. They aren't a bank so they partner with a bank to offer the card. In the US many colleges and professional sports teams will market a credit card with the team or universities colors and logo. The bank handles the details and the team/university gets a flat fee or a portion of the fees. Many even have annual fees. They market to people who want to show their favorite team colors on their credit card, and are willing to pay extra. Some of these branded cards do come with extra perks: Free shipping, discounts on tickets, being able to buy tickets earlier. There are 4 other types of cards that have limited usage: What makes it confusing is that large business can actually turn a portion of the corporation into a bank. Walmart has been doing this, and so have casinos.","this article talks about tips you can use to improve your chances of qualifying for a credit card, even if you have poor credit standing. please help us promote it by telling your friends to drop by our site and share the articles posted there to their friends.","Yeah, I got one of those and didn't look at the fine print. They gave me a 250 dollar credit limit with so many initial fees just for signing up that the card already had $180 on it when it came.","CitiBank offers a chip card. It's not a chip and pin, but a chip and sign, however it worked well for my all transations. Just call and ask for a 'world credit card' with a chip. https://creditcards.citi.com/credit-cards/citi-thankyou-premier-card/","We use the PC financial credit card. We switched to PC banking about 8 years ago and have been extremely happy with them. You get points for using their banking services and if you use their credit card you earn points. You can use the points earned for free groceries or purchasing anything at No Frills, Independant and Loblawas Superstores. With the points we've earned over the years through just our regular banking, we've purchased a 6 piece patio set, patio swing, tons of free groceries and currently have $500 worth of points that we're using to purchase food and gifts for the Christmas season. You can find out the particulars on their points program throught their webiste at www.pcfinancial.ca","\"Yes, merchants are charged. Visa/Mastercards charge 1 to 2%, of which some part goes to the Visa/MC and the rest to the issuing bank (if you have an HDFC Bank Visa card, HDFC bank is the issuing bank. And yes, you can get a discount from the merchant - while it probably isn't allowed by Visa/MC, some merchants still provide discounts for cash. But you won't get it at places like supermarkets or large brand retail. Late fees + charges can be huge. In multiple ways - first, they all seem to charge a late fee of Rs. 300-500 nowadays, plus service tax of 10%. Then, you will pay interest from the bill date to the eventual payment date. And further, any new purchases you make will attract interest from the day they are made (no \"\"interest-free\"\" period). Interest rates in India on CCs are over 3% a month, so you really must get rid of any open balances. I've written a longish piece on this at http://in.finance.yahoo.com/news/The-good-bad-ugly-credit-yahoofinancein-2903990423.html\"","If you can use and pay off your credit card in full every month, there are plenty of benefits including improved credit, reward points and more. Many fall into the trap of just making the minimum payments and facing high interest charges or missing payments and getting a hit on their credit reports. To start off, put something small that you know you can pay off every month. It could be your Netflix or your gas. Make sure you pay it off before any interest is accrued. Over time, you can ask for higher limits to boost your utilization rate.","In Addition to @JoeTaxpayer's answer, in the UK credit cards offer additional protection than if you were to pay by debit card. This includes (but is not limited to) getting your money back if the company you've bought something from goes bust before your order is complete.","1.Charges or Fee: These are only applicable if you buy something use Credit Card and do not payback in time. Otherwise if you just have a Credit Card, most of them are free. There are some that charge annual fee. You will know when you apply for a card. 2a. Depoist Money [Voucher]: You can deposit money on your card account by check, or online transfer or by visiting the Bank Branch. I am not sure what Voucher you are talking about. You will have to find that out from the company that issued the voucher. 2b. Withdraw from ATM: Withdrwals are charged typically 5%, plus fixed Rs 50. Plus interest if you have not paid back in time. Are you are having excess money, there will be no interest charge. Check with the card on the exact charges. 3.Excess transfer to Bank: The excess can be transferred to Bank account by making a request to the Card Company and giving out the details. The Card Company would have a defined timeline for this. Most of the Banks that issue cards have a policy not to keep excess deposits longer. What you are trying to do it not a routine transaction and depends what you are trying to achieve.","Three big ones that are common in almost all banks (though, individually, they may have other criteria): Other criteria I've seen (while working in the banking industry - varying by bank): the average balance you keep on deposit accounts (checking/savings/CDs/etc), number of overdraft fees in the past 12 months (one bank I worked for wouldn't approve a credit card if a customer had more than 5 overdrafts in the past year), the length of time a customer had been with the bank. Note that a credit card only company, like AmEx, may have different criteria in that they don't offer all the other type of accounts that other other banks do.","\"Dan's link (he deleted his answer, BTW) is fine, it showed the components of the score FICO offers. Each input has data behind it, a bell curve of the behaviors and risk of the person behind it. For example, we've discussed utilization many time here. The ideal utilization is not 0%, but 1-19%. This does not mean paying interest, or carrying charges from month to month. Say I had just one card with a $10K limit. I'd want to be sure I never ran a bill above $2000. If I did, I'd see a slight drop in my score, and next month, it would go back to normal. In my case, I have enough available credit that going over 20% is rare, and if it happened, I'd pay the bill down before the bill was issued, just make a mid-cycle payment. FICO decided that those who go over 20% have a higher risk of default. And it gets higher as it goes up. Same with every aspect of the score's components. You are comparing US to non US use. In the US, it seems far more common to use our cards. In my family's case, we use very little cash, and run most of our spending through our cards. As far as The David is concerned, one should separate those who carry a balance from those who pay in full. The pay in full users are better off for their habits and responsible card use. In the US, it's not easy to rent a car or book a hotel with no card. Cards offer a cash rebate that adds up fast, and purchase protection from fraudulent vendors. They also offer extended warranty coverage. The David, and others, claim that \"\"studies prove those using cards spend 10-15% more than cash buyers.\"\" This is a proven fact from scientific studies. Only they don't exist. The best I've seen proves that college kids given a $20 bill spend more carefully than those given a $20 credit card. This doesn't extrapolate to a family budget, and never will. But that quote has a way of being repeated as fact. Yes, it's non-sense, thank you for reading and quoting my blog, I recognize the quote. The report also shows accounts that have gone to collection. An electric bill isn't a regularly reported item, it's assumed your lights are on. But if you stop paying the bill and they send your account to a collection agency, you'll see it hit your report. In response to the comment below - Journal of Experimental Psychology: Applied article titled Monopoly Money: The Effect of Payment Coupling and Form on Spending Behavior runs 13 pages but on the first page offers \"\"Do consumers spend differently when using one payment mode relative to another mode? For example, do consumers spend more when they receive $50 in the form of a gift card than in the form of cash? If indeed they do, then why? This research addresses these issues.\"\" $50? A $50 gift card is a nuisance, I try to use it up within hours of getting one. As I stated above, the behavior of a person with such a card doesn't scale to a many-thousand-per-month budget. Such articles, in my opinion, are nonsense, proving nothing. Unfortunately, this is a bit of a tangent to the original question, and if I put up a stand-alone \"\"Is it a fact that people spend more if using a card than cash?\"\" the question would result in being closed as one that's seeking opinions, not facts.\"","This isn't exactly the answer you were looking for, but it is something else to consider. Rather than just running money through the card to get the bonus, have you considered spending that $5,000 in the form of good debt? In other words, can you purchase some asset that will create more cashflow than you would be paying on the card with the $5,000 balance? The idea is instead of running up the balance and paying it back off to get the bonus, maybe you could buy an asset for $5,000, create positive cashflow with the opportunity for long term capital gains, and get the credit card bonus. You could even turn around and use the bonus to pay back part of the credit card balance, thus reducing the payments and widening the profit margin on the asset.","The banks don't have to pay for credit card rewards. The merchants end up footing the bill. The merchants that accept credit cards pay from 2-4% in fees on the credit card purchase. Those fees go to support the rewards programs. The merchants also take on most of the risk during a credit card transaction (although the credit card companies would have you believe otherwise). If a thief uses a stolen card to purchase a camera from Mike's Camera Shop for instance, any funds the merchant received will be taken away from the merchant. In addition, the merchant will be hit with a chargeback fee (usually around $20-$60). Finally, since the card was stolen, the merchant will never get their merchandise returned, so Mike's Camera is out the camera as well. No camera, no funds, and a $60 fee to boot. The credit card issuers make $60 on the chargeback fees and have no liability.","Credit cards are a basic building block of a stable financial plan. By using a credit card for every purchase above, say, the price of a coffee you gain a number of material benefits. You get the free use of the bank's money for about a month. You reduce the amount of cash you require to almost nothing. You get a handy budget tracking tool as many credit cards help you assign categories to expenses. You can typically download your transactions and import them into a budget app for handy record keeping. Many cards offer benefits such as extended warranties on items purchased, travel insurance, reward points and other benefits. There is only one caveat: Pay the entire balance, in full, every month, on or before the due date. Don't even THINK about paying anything less and don't EVER be late.","\"There are two things I can think of that might be different in other countries: Until 2013, American Express, Visa and MasterCard prevented businesses from charging extra for credit card usage, and credit card surcharges still illegal in several states. Since credit card companies add a surcharge to credit card purchases, and merchants can't pass that onto credit card users, they just make everyone pay extra instead. Since everyone gets charged the credit card surcharge, you might as well use a credit card and recoup some of that via \"\"rewards\"\" points. Almost all credit cards here have grace periods, where you won't be charged interest if you pay back your loans in full within some period of time (at least 21 days). This makes credit cards attractive to people who don't need a loan, but like the convenience that credit cards provide (not carrying cash, extra insurance, better fraud protection). Apparently grace periods aren't required by law here, so this might be common in other countries as well.\"","**Here's a sneak peek of /r/churning using the [top posts](https://np.reddit.com/r/churning/top/?sort=top&t=year) of the year!** \\#1: [The Economics of Churning: who pays for the rewards?](https://np.reddit.com/r/churning/comments/5oucdq/the_economics_of_churning_who_pays_for_the_rewards/) \\#2: [New all time high sign up bonus !!](https://i.redd.it/aeb0f742mpvy.jpg) | [145 comments](https://np.reddit.com/r/churning/comments/69frvw/new_all_time_high_sign_up_bonus/) \\#3: [Citi Costco Historical High Offer](https://i.redd.it/scowraajipey.png) | [166 comments](https://np.reddit.com/r/churning/comments/5svvxm/citi_costco_historical_high_offer/) ---- ^^I'm ^^a ^^bot, ^^beep ^^boop ^^| ^^Downvote ^^to ^^remove ^^| [^^Contact ^^me](https://www.reddit.com/message/compose/?to=sneakpeekbot) ^^| [^^Info](https://np.reddit.com/r/sneakpeekbot/) ^^| [^^Opt-out](https://np.reddit.com/r/sneakpeekbot/comments/6l7i0m/blacklist/)","It gives an outside prospective on it so you're not getting all your information from one spot. When MeetBeam eventually releases I imagine that page will be updated with more information on fees, requirements for the 4% APY, etc.","I have an American Airlines VISA with miles that has no annual fee, but only because I request that they waive the fee each year. Word to the wise - they've never refused.","It's not so much a credit card, but a financial institution's online platform that either provides this functionality or not. The following Canadian financial institutions show an itemized list of pre-authorized transactions (not an exhaustive list): The following institutions show a total value of pre-authorized transactions: Most other institutions show the available credit (e.g. Chase Financial used by Amazon Rewards), which give an indication of how much you have to spend. By subtracting the current balance and the available balance from the total credit limit, you can get an indication of the total amount of pre-authorized transactions. Example: $1000 - $500 - $400 = $100 is the amount of pre-authorized transactions. From TD's EasyWeb demo (http://tdeasywebdemo.com/v2/#/en/PFS/accounts/activity/chq), it appears that they don't include pre-authorized transactions in the Available Credit. You can verify for yourself by logging in to online banking after you make a purchase and comparing the Available Credit to [Credit Limit - Current Balance]. If it is equal, then they don't include, if it is different (most likely for the value of the transaction), then they do.","\"never carry a balance on a credit card. there is almost always a cheaper way to borrow money. the exception to that rule is when you are offered a 0% promotion on a credit card, but even then watch out for cash advance fees and how payments are applied (typically to promotional balances first). paying interest on daily spending is a bad idea. generally, the only time you should pay interest is on a home loan, car loan or education loan. basically that's because those loans can either allow you to reduce an expense (e.g. apartment rent, taxi fair), or increase your income (by getting a better job). you can try to make an argument about the utility of a dollar, but all sophistry aside you are better off investing than borrowing under normal circumstances. that said, using a credit card (with no annual fee) can build credit for a future car or home loan. the biggest advantage of a credit card is cash back. if you have good credit you can get a credit card that offers at least 1% cash back on every purchase. if you don't have good credit, using a credit card with no annual fee can be a good way to build credit until you can get approved for a 2% card (e.g. citi double cash). additionally, technically, you can get close to 10% cash back by chasing sign up bonuses. however, that requires applying for new cards frequently and keeping track of minimum spend etc. credit cards also protect you from fraud. if someone uses your debit card number, you can be short on cash until your bank fixes it. but if someone uses your credit card number, you can simply dispute the charge when you get the bill. you don't have to worry about how to make rent after an unexpected 2k$ charge. side note: it is a common mis-conception that credit card issuers only make money from cardholder interest and fees. card issuers make a lot of revenue from \"\"interchange fees\"\" paid by merchants every time you use your card. some issuers (e.g. amex) make a majority of their revenue from merchants.\"","this post offers great steps you can take to responsibly and effectively manage your existing line of credit. we believe that by carefully observing these guidelines, you will not only succeed in building and maintaining an excellent credit history but you will also avoid incurring pesky fees and charges usually imposed on delinquent unsecured credit cardholders. and do help us promote it by telling your friends to read and share it with their friends too!","Card-dna.biz undeniably offers the best prepaid cards in the market that stands out in services and costs, claiming to be the best in the market. We also provide all the details regarding the types of card we offer to help you make a decision. Visit our website for more!","As long as you can be trusted with a Credit Card i find that if you have a setup that uses three accounts: 1. your Credit Card, 2. 2. a high interest internet account (most of these accounts don’t have fees), 3. a savings account. The Method that works for me is: 1st i calculate my fixed monthly bills i.e Rent and utilities and then transfer it into my high interest account. for the month whenever i make a purchase i transfer the money into the high interest account ( this way I can keep a running balance of what money I have left to spend in the month. Then when the Credit Card bill comes I transfer the money out of the high interest account across to pay off the Credit Card ( this way you generate interest on the money which you would have spent throughout the month and still maintain $0 of interest from the Credit Card) over a year you can generate at least enough money in interest to go out for dinner on one of free flights!","See if the bank has other credit cards they offer. Many banks have multiple ones: some cards have great benefits, others do not; some cards have high rates, some do not; some cards are secured, some do not. If they have a card that you like ask them to switch you to the card you want. They should be able to do so very easily. Your card number will change, but they will treat it is a replacement so that your credit score will not take a hit during the switch. It may be possible to get them to waive the annual fee, but most won't because each card type they offer are separate products so they only allow you to pick one of their options. If they don't have a card to your liking apply for a card from anther bank that has the benefits and annual fees (zero) that you are looking for. It may be that the new card will start with a lower limit, but it will increase over time, especially as you shift more of your business to the new card. When you cancel the old card before the next year rolls around you will take a small short hit to your credit score, but that is ok.","\"As anecdotal experience, we have a credit account in my name as offered by bank's marketing before I could qualify by common rules for newcomers (I have an account there for years so they knew my history and reliability dynamics I guess), and my wife is subscribed as a secondary user to the same credit account with a separate card. So we share the same limits (e.g. max month usage/overdraft) and benefits (bank's discounts and bonuses when usage passes certain thresholds - and it's easier to gain these points together than alone) so in the end maintenance of the card costs zero or close to that on most months, while the card is in a program to get discounts from hundreds of shops and even offers a free or discounted airport lounge access in some places :) But the bonus program is just that - benefits come and go as global economics changes; e.g. we had free car assistance available for a couple of years but it is gone since last tariff update. Generally it is beneficial for us to do all transactions including rent etc. via these two credit cards to the same account, and then recharge its overdraft as salaries come in - we have an \"\"up to 50 days\"\" cooloff period (till 20th of next calendar month) with no penalties on having taken the loans - but if we ever did overstretch that, then tens of yearly percents would kick in. Using the card(s) for daily ops, there is a play on building up the credit history as well: while we don't really need the loans to get from month to month, it helps build an image in the face of credit organizations, which can help secure e.g. favorable mortgage rates (and other contract conditions) which are out of pocket money range :) I'd say it is not only a \"\"we against the system\"\" sort of game though, as it sort of trains our own financial discipline - every month we have (a chance) to go over our spendings to see what we did, and so we more regularly think about it in the end - so the bank probably benefits from dealing with more-educated less-random customers when it comes to the bigger loans. Regarding internet, we tend to trust more to a debit card which we populate with pocket money sufficient for upcoming or already placed (blocked) transactions. After all, a malicious shop can not sip off thousands of credit money - but only as much as you've pre-allocated there on debit.\"","\"I want to recommend an exercise: Find all the people nearby who you can talk to in less than 24 hours about credit cards: Your family, whoever lives with you, and friends. Now, ask each of them \"\"what's the worst situation you've gotten yourself into with a credit card?\"\" Personally, the ratio of people who I asked who had credit cards to the ratio of people with horror stories about how credit cards screwed up their credit was nearly 1:1. Pretty much, only one of them had managed to avoid the trap that credit cards created (that sole exception had worked for the government at a high paying job and was now retired with adult children and a lucrative pension). Because it's trivially easy over-extend yourself, as a result of how credit cards work (if you had the cash at any second, you would have no need for the credit). But do your own straw poll, and then see what the experience of people around you has been. And if there's a lot more bad than good out there, then ask yourself \"\"am I somehow more fiscally responsible than all of these people?\"\".\"","Every reward program has to have a funding source. If the card gives you x percent back on all purchases. That means that their business is structured to entice you to pump more transactions through the system. Either their other costs are lower, or the increased business allows them to make more money off of late fees, and interest. If the card has you earn extra points for buying a type of item or from a type of store (home stores improvement in the Spring), they are trying to make sure you use their card for what can be a significant amount of business during a small window of time. Sometimes they cap it by saying 5% cash back at home improvement stores during the spring but only on the first $1500 of purchases. That limits it to $75 maximum. Adding more business for them, makes more money for them. Groceries and gas are a good year round purchase categories. Yes there is some variation depending on the season, and the weather, but overall there is not an annual cliff once the season ends. Gas and groceries account for thousands of dollars a year these are not insignificant categories, for many families are recession proof. If they perceive a value from this type of offer they will change their buying behavior. My local grocery store has a deal with a specific gas station. This means that they made a monetary deal. Because you earn points at the grocery store and spend points at the gas station, the grocery store is paying some compensation to the gas station every time you use points. The gas station must be seeing an increase in business so theoretically they don't get 100% compensation from the grocery store. In cases where credit cards give airline miles, the credit card company buys the miles from the airline at a discount because they know that a significant number of miles will never be used.","Buy one and use it but never spend more than you can pay off at the end of the month. Also, remember that the length of credit affects your rating too, so don't go canceling cards and/or getting new ones every time a new gimmick comes along.","http://www.andrewsfcu.org/ is one of the only US financial institutions to issue a low or no annual fee chip and pin visa or mastercard.. Andrews is primarily for civilian employees of the Andrews Air Force Base but is available to members of the American Consumer Council, which offers free membership, see http://www.andrewsfcu.org/page.php?page=330 . The chip and pin card is a visa with $0 annual fee and charges a 1% foreign transaction fee. Getting one is modestly difficult because you have to first join the credit union then apply for the card, then go through underwriting as if it were a personal loan rather than a revolving credit account. Still, for travelers, it is probably worth it.","If you're in the UK: Vouchers: http://www.vouchercodes.co.uk/ Vouchers and deals/offers: http://www.hotukdeals.com/ Cashback schemes: http://www.quidco.com/","Go to bankrate dot com. They will have a lot of metrics there that might give you an idea and rate each category. Capitalization and profitability metrics. May not be as granular as what you are looking for though."],"string":"[\n \"Billshrink offers some pretty neat analysis tools to help you pick a credit card. They focus more on rewards than the features you mention but it might be worth a look. If you use Mint, they offer a similar service, too. If you're not already using Mint, though, I'd look at Billshrink as Mint requires some extensive setup. MOD EDIT Looks like billshrink.com is shut down. From their site: Dear BillShrink customer, As you may have heard, BillShrink.com was shut down on July 31, 2013. While we’re sad to say goodbye, we hope we’ve been able to help you be better informed and save some money along the way! The good news is that much of the innovative award-winning BillShrink technology will still be available via our StatementRewards platform (made available to customers by our partnering financial institutions). Moreover, we expect to re-launch a new money-saving service in the future. To see more of what we’re up to, visit Truaxis.com. We have deleted your personal information as of July 31. We will retain your email address only to announce a preview of the new tool. If you do not want us to retain your email address, you can opt out in the form below. This opt out feature will be available until September 31, 2013. If you have already opted out previously, you do not need to opt out again. If you have any further questions, contact us at info@billshrink.com. Thanks, The BillShrink/Truaxis Team\",\n \"\\\"Some features to be aware of are: How you prioritize these features will depend on your specific circumstances. For instance, if your credit score is poor, you may have to choose among cards you can get with that score, and not have much choice on other dimensions. If you frequently travel abroad, a low or zero foreign transaction fee may be important; if you never do, it probably doesn't matter. If you always pay the balance in full, interest rate is less important than it is if you carry a balance. If you frequently travel by air, an airline card may be useful to you; if you don't, you may prefer some other kind of rewards, or cash back. Cards differ along numerous dimensions, especially in the \\\"\\\"extra benefits\\\"\\\" area, which is often the most difficult area to assess, because in many cases you can't get a full description of these extra benefits until after you get the card. A lot of the choice depends on your personal preferences (e.g., whether you want airline miles, rewards points of some sort, or cash back). Lower fees and interest rates are always better, but it's up to you to decide if a higher fee of some sort outweighs the accompanying benefits (e.g., a better rewards rate). A useful site for finding good offers is NerdWallet.\\\"\",\n \"Visa and Mastercard offer a variety of benefits to their cardholders. It's all in the initial information that may come in one, two or more parcels describing the relationship the two of you are in. I can't enumerate the services, but it ranges from things like automatic rental car insurance to price matching. You'll really have to compare the product with your banks'.\",\n \"BillShrink.com lets you compare credit cards based on all your specifics (miles vs. cash, where you shop the most, etc) and tells you what the best card is for your specific habits. MOD EDIT Looks like billshrink.com is shut down. From their site: Dear BillShrink customer, As you may have heard, BillShrink.com was shut down on July 31, 2013. While we’re sad to say goodbye, we hope we’ve been able to help you be better informed and save some money along the way! The good news is that much of the innovative award-winning BillShrink technology will still be available via our StatementRewards platform (made available to customers by our partnering financial institutions). Moreover, we expect to re-launch a new money-saving service in the future. To see more of what we’re up to, visit Truaxis.com. We have deleted your personal information as of July 31. We will retain your email address only to announce a preview of the new tool. If you do not want us to retain your email address, you can opt out in the form below. This opt out feature will be available until September 31, 2013. If you have already opted out previously, you do not need to opt out again. If you have any further questions, contact us at info@billshrink.com. Thanks, The BillShrink/Truaxis Team\",\n \"I would look for these features in the credit card: If there is some kind of reward option like cash back or points, you obviously deduct these from the total costs. Chances are the total costs are higher than the rewards, because generally people don't give you money for free. The reward has to be financed somehow. I would adivse against building up credit card debt. It typically has a high interest rate. So, use the credit card only as a method of payment and pay back the debt so quickly that the interest doesn't start to accumulate.\",\n \"Someone mentioned sign up bonuses but only mentioned dollar values. You might get points, sweet, sweet airline points :) which some might find compelling enough to churn cards so they always have a few open.\",\n \"The first thing I assess when looking at new credit cards is whether it has no annual fee, the second thing I look at is how long the interest free period is. I always pay my credit card off in full just before the due date. Any rewards program is a bonus. My main credit card is with CBA, I have a credit limit of $20K and pay no annual fee. I get a bonus point for every $ I spend on it, for which I exchange for store gift cards to help with my everyday spending. Approximately 3500 point would get me a $25 gift card. But my main reward with the card is the interest I save by keeping my own money in a Home Loan Offset account whilst I spend with the Bank's money. Then I pay the full amount off by the due date so I do not pay any interest on the credit card. I only use my credit cards for purchases I would usually make anyway and to pay bills, so my spending would be the same with or without a credit card. I can usually save over $500 each year off my Home Loan interest and get about $350 worth of gift cards each year. If I didn't have any Home Loans then I would keep my money in a high interest depost account so I would be increasing my interest payments each year. Sure you can probably get credit cards with more generous rewards programs, but how much are you paying each year in annual fees, and if you don't have an interest free period and you don't pay off all the amount due each month how much are you paying in interest on the card? This is what you need to way up when looking at rewards programs on offer. Nothing is for free, well almost nothing !\",\n \"Start with the cards you already have. If you don't have enough room on the best card, then ask for a credit increase. You have to keep in mind that some of the programs have a maximum amount you can charge to get the bonus cash back amount. Others have a graduated plan where the first few thousand dollars are at a lower cash back rate. If you do decide to get a new card, make sure you get a large enough credit limit or the work to get a new card was for naught. I would start with bankrate.com to research cards.\",\n \"\\\"Usually you need to switch accounts. Lower rate cards usually offer less generous benefits. I'd advise looking at the charts on credit card rates in the back of a magazine like \\\"\\\"Money\\\"\\\" or \\\"\\\"Kiplingers\\\"\\\".\\\"\",\n \"Your best option is just to pick a card that gives you the best (highest) rewards without charging you an annual or other fees (or the lowest annual or other fees). As you are looking to pay off the full balance by the due date you won't have to worry about the interest rate but just make sure you get an interest free period.\",\n \"Google has a tool for comparing credit cards. My suggestion would be for a simple, no-annual fee cash back card. Points can be a hassle to redeem, and like they say, cash is king. Assuming you have the credit score for it, Citi Double Cash is a good choice.\",\n \"a MUST READ for consumers planning to apply for unsecured credit cards! it offers excellent tips on how you can avoid and properly deal with the drawbacks associated with these card programs. hope you can help us promote it to all your friends!\",\n \"this post offers valuable information we can all use when scouting for frequent flyer credit cards. let's all support this post of my friend, sean travis, by reading and sharing it to all our friends and followers in different social networking sites.\",\n \"I prefer the TD Gold Elite Visa issued by TD Canada Trust. The card offers a 1% cash back reward, and I can completely avoid the annual fee by maintaining a minimum balance in my TD bank account. In addition to the 1% cash back, other features that I like on the card are: There are some other features (see complete list here), but those are the ones I care about. I used to carry both Aeroplan and Air Miles type of reward cards, but when I wanted to book a flight and discovered the hassle involved, the value of travel points evaporated as far as I was concerned. I also decided I would never again pay an annual fee to earn rewards; it's counter-productive.\",\n \"How would you respond to these cases: Limited card options - If someone has a bad credit record the cards available may only be those with an annual fee. Not everyone will have your credit record and thus access to the cards you have. Some annual fees may be waived in some cases - Thus, someone may have a card with a fee that could be waived if enough transactions are done on the card. Thus, if someone gives enough business to the credit card company, they will waive the fee. On the point of the rewards, if the card is from a specific retailer, there could be a 10% discount for using that card and if the person purchases more than a couple thousand dollars' worth from that store this is a savings of $200 from the retail prices compared to what would happen in other cases that more than offsets the annual fee. If someone likes to be a handyman and visits Home Depot often there may be programs to give rewards in this case. Credit cards can be useful for doing on-line purchases, flight reservations, rental cars and a few other purchases that to with cash or debit can be difficult if not close to impossible. Some airline cards have a fee, but presumably the perks provide a benefit that outweigh that fee over the year. I'm thinking of the Citibank cards tied to American Airlines, first year free, then an $85 fee.\",\n \"One reason why some merchants in the US don't accept Discover is that the fee the store is charged is higher than the average. Generally a portion of transaction fee for the network and the issuing bank goes to the rewards program. In some cases a portion of the interest can also be used to fund these programs. Some cards will give you more points when you carry a balance from one month to the next. Therefore encouraging consumers to have interest charges. This portion of the program will be funded from the interest charges. Profits: Rewards: Some rewards are almost always redeemed: cash once the amount of charges gets above a minimum threshold. Some are almost never redeemed: miles with high requirements and tough blackout periods. Credit cards that don't understand how their customers will use their cards can run into problems. If they offer a great rewards program that encourages use, but pays too high a percentage of points earned can lead to problems. This is especially true when a great percentage of users pay in full each month. This hurt Citibank in the 1990's. They had a card with no annual fee forever, and a very high percentage never had to pay interest. People flocked to the card, and kept it as an emergency card, because they knew it would never have a annual fee.\",\n \"These two categories ensure you will carry the card in your wallet (since they only work for physical locations), but don't tend to have excessive spending (most people maxing out at $200 or so per month, so $2 for the bonus). You then use the same card for other purchases, because you have it on you, where you only get the 1%. It worked for me, I started carrying the Amazon card when I found out it had a higher percentage for gas purchases. I only use it for gas though.\",\n \"It is always a good idea if you are worried about customer service and hidden gotchas to visit http://getsatisfaction.com - they operate as an independent complaint board for many companies. http://getsatisfaction.com/bankofamerica for example alerts you to many problems with using BofA. In addition, googling for common complaint terms is a great idea. It's easy to learn why bank of america sucks and to see that not too many people think bank of america rocks.\",\n \"PenFed Platinum Cashback Rewards Visa Card is another good choice. Pros: Cons:\",\n \"One thing that has not been pointed out as a disadvantage of using Credit Cards: people tend to spend more. You can see This Study, and this one, plus about 500 others. On average people tend to spend about 17% more with credit cards then with cash. This amount dwarphs any perks one gets by having a credit card. The safest way to use one is to only use them for purchases where you cannot make a decision to spend more. One example would be for utility bills (that don't charge a fee) or at the gas pump. Using them at Amazon might have you upgrade your purchase or add some extra items. Using them at restaurants might encourage you to order an extra drink or two. Using them at the coffee shop might have you super size your coffee or add a pastry. Of course this extra spending could lead you into a debt cycle exacerbating the financial hit many struggle with. Please tread carefully if you decide to use them.\",\n \"\\\"I'm not going to recommend a specific card. New card offers pop up all the time. My answer would be out of date in a month! As a general rule, if you pay off your balance every month, you should be looking at a cash-back or a rewards card. Cash-back cards will give you some money (say 1%) of every dollar you spend. Some will give you larger amounts of cash-back for certain types of spending (e.g. groceries). With a Rewards card, you usually get \\\"\\\"points\\\"\\\" or \\\"\\\"airline miles\\\"\\\", which can be redeemed for merchandise, flights around the wold, concert tickets, etc. With these types of cards, it makes sense to do as much of your spending as possible with the cards, so you can maximize the benefits. Which specific card is best will depend on your shopping habits, and which bank is offering the best deal that week. I recommend you start at http://www.creditcards.com to compare card offerings. For cash-back cards, you can also go to http://www.creditcardtuneup.com, enter some details of your spending, and see which one will give you the most cash back.\\\"\",\n \"CreditCards.com has maintained a fairly comprehensive list of offers for many years now. I don't see any straight 2% offers there right now.\",\n \"\\\"I think that your best option is to use the internet to look for sites comparing the various features of accounts, and especially forums that are more focused on discussion as you can ask about specific banks and people who have those accounts can answer. \\\"\\\"Requests for specific service provider recommendations\\\"\\\" are off-topic here, so I won't go into making any of my own bank recommendations, but there are many blogs and forums out there focusing on personal finance.\\\"\",\n \"As has been stated, you don't need to actively bank with a credit union to apply for one of their credit cards. That said, one benefit to having account activity, and significant capital with a CU, is to increase the likelihood of having a larger credit line granted to you, when you do apply. If you are going to use the card sparingly however, then this is a non issue. That said, if you really want to maximize card benefits, then you want to look for cards with large sign up bonuses (e.g. Chase Sapphire, or Ink Bold if you have a business) and sign up exclusively for those bonuses. These cards offer rewards in excessive value of $1000 in travel services (hotels/plane tickets), or $500 cash back if you prefer straight cash back redemptions. If you prefer to keep it really simple, you can sign up for a cash back card, like the Amex Fidelity, which offers 2% cash back everywhere, with no annual fee (albeit the cash back is through their investment account, which you don't actually have to 'invest' with). Personally, I have the Penfed card, and use it exclusively for gas (5% cash back). I also have a Charles Schwab bank account, which I keep funded exclusively for ATM withdrawals (free ATM usage, worldwide, 100% fee reimbursement). I use the accounts exclusively for the benefit they provide me, and no more and have never had an issue. I also have 3 dozen other credit cards which I signed up for exclusively for the sign up bonus, but that's outside the scope of this question. I only mention it because you seem to believe it is difficult to get approved for a new credit line. If your credit is good however, you won't have a problem. For a small idea, of how to maximize credit card bonus categories, I would advise you read this. As mentioned in the article, its possible to get rewards almost everywhere you shop. In short, anytime you use cash, you are missing out on a multitude of benefits a credit card offers you (e.g. see the benefits of a visa signature card) in addition to points/cash back.\",\n \"\\\"Credit cards have three important advantages. None of them are for day-to-day borrowing of money. Safety - Credit cards have better fraud protection than checks or cash, and better than most debit/check cards. If you buy something with a credit card, you also get the issuer's (think Visa) assurances that your will get the product you paid for, or your money back. At almost any time, if a product you buy is not what you expect, you can work with the issuer, even if the store says \\\"\\\"screw you\\\"\\\". Security - Credit cards are almost universally accepted as a \\\"\\\"security\\\"\\\" against damages to the vendor. Hotels, car rentals, boat rentals etc. will accept a credit card as a means of securing their interests. Without that, you may have to make huge deposits, or not be able to rent at all. For example, in my area (touristy) you can not rent a car on debit or cash. You must use a credit card. Around here most hotel rooms require a credit card as well. This is different from area to area, but credit cards are nearly universally accepted. Emergencies - If you're using your credit card properly, then you have some extra padding when stuff goes wrong. For example, it may be cheaper to place a bill on a credit card for a couple months while you recover from a car accident, than to deplete your bank account and have to pay fees. Bonus - Some cards have perks, like miles, points, or cash back. Some can be very beneficial. You need to be careful about the rules with these bonuses. For example, some cards only give you points if you carry a balance. Some only give miles if you shop at certain stores. But if you have a good one, these can be pretty fantastic. A 3% cash back on purchases can make a large difference over time.\\\"\",\n \"I got a Capital One credit card because they don't charge a fee for transactions in foreign currencies. So I only use it when I travel abroad. At home, I use 3 different credit cards, each offering different types of rewards (cash back on gas, movies, restaurants, online shopping etc).\",\n \"\\\"Not everyone pays their balance in full every month. They may not make interest off of you or me but they do make interest off of a lot of cardholders. In many cases, the interest is variable and the larger your (running) balance, the higher your rate. If you're close to your limit and making minimum payments, you can literally take decades to pay off $2,000 or so. Some people don't pay at all every month and end up paying late fees. Some people use their cards overseas and pay foreign transaction fees. Ever take a cash advance? Me neither but they charge you interest right away for that instead of waiting until your statement. The list of fees and charges is as long as my arm and in tiny print. That's how they make money. The points/bonus/cash back and other rewards programs are to get you in the door. It's like when you see a luxury car advertised for a \\\"\\\"too good to be true\\\"\\\" price and you get to the lot and find out that the one they are selling for that price is a manual transmission without AC or a radio, they only had one and they sold it an hour before you got there. It got you on the lot though. The rewards programs function in much the same way (minus the disappearing part), they get you interested in their offering among a sea of virtually identical products but rest assured, if the card issuers were losing money because of them, they wouldn't exist for very long.\\\"\",\n \"I would recommend you look at Credit Karma and assess your situation. The site is free and will offer a score similar to your FICO score enabling you to best judge when to apply. They advertise, like any web site, and will offer credit card signups, which is how they make money. Disclaimer - I am a blogger and have written about Credit Karma, but no payment from them. I've actually been out drinking with their marketing team, but that was it. Nice bunch.\",\n \"If you want to farm credit card benefits, there are a few low-cost ways to do so:\",\n \"\\\"The bottom line is that you are kind of a terrible customer for them. Granted you are far better than one that does not pay his bills, but you are (probably) in the tier right above that. Rewards cards are used to lure the unorganized into out of control interest rates and late payments. These people are Capital One's, and others, best customers. They have traded hundreds of dollars in interest payments for a couple of dollars in rewards. The CC company says: \\\"\\\"YUMMY\\\"\\\"! You, on the other hand, cut into their \\\"\\\"meager\\\"\\\" profits from fees collected from your transactions. Why should they help you make more money? Why should they further cut into your profits? Response to comment: Given your comment I think the bottom line is a matter of perspective. You seem like a logical, altruistic type person who probably seeks a win-win situation in business dealings. This differs from CC companies they operate to seek one thing: enslavement. BTW the \\\"\\\"terrible customer\\\"\\\" remark should be taken as a compliment. After you get past the marketing lies you begin to see what reward programs and zero percent financing is all about. How do most people end up with 21%+ interest rates? They started with a zero percent balance loan, and was late for a payment. Reward cards work a bit differently. Studies show that people tend to spend about 17% more when they use a reward card. I've caught myself ordering an extra appetizer or beer and have subsequently stopped using a reward card for things I can make a decision at the time of purchase. For people with tight budgets this leads to debt. My \\\"\\\"meager\\\"\\\" profits paragraph makes sense when you understand the onerous nature of CC companies. They are not interested in earning 2% on purchases (charge 3% and give back 1%) for basically free money. You rightly see this as what should be a win-win for all parties involved. Thus the meager in quotation marks. CC companies are willing to give back 1% and charge 3% if you then pay 15% or more on your balance. Some may disagree with me on the extracting nature of CC companies, but they are wrong. I like him as an actor, but I don't believe Samuel Jackson's lines.\\\"\",\n \"First and foremost you should do more research on credit cards and what everything means. As expressed by others the balance transfer fee is not what you think it is. Credit cards can be great, they can also quickly erode your credit score and your standing. So understanding the basics is VERY important. The credit card that is right for you should have the following criteria. The first two points should be straight forward, you should not have to pay a CC company for the privilege to use their card. They should pay you through perks and rewards. It should also be a CC that can be used for what you need it for. If you travel internationally a lot and the CC you choose only works within the US then what good is it? The third point is where you need to ask yourself what you do a lot and if a CC can offer rewards through travel miles, or cash back or other bonuses based on your lifestyle. The transfer fee is not what you think it is, people who already are carrying debt on another credit card and would like to transfer that debt to another credit card would be interested in finding a fee or a low %. People do this to get a batter rate or to get away from a bad credit card. If one charges 28% and another charges 13%, well it makes sense to transfer existing debt over to the 13% provided they don't crush you on fees. Since you have no credit card debt (assumption based on the fact you want to build your credit), you should ask yourself for what purpose and how often do you plan to use the credit card. Would this card be just for emergencies, and wont be used on daily purchases then a credit card that offers 3% cash back on gasoline purchases is not for you. If you however love to travel and plan to use your credit card for a lot of purchases OR have a few large purchases (insurance, tuition etc.) then get a credit card that provides rewards like miles. It really comes down to you and your situation. There are numerous websites dedicated to the best credit card for any situation. The final thing I will say is what I mentioned at the beginning, its important, CC's can be a tool to establish and improve your credit worthiness, they can also be a tool to destroy your credit worthiness, so be careful and make smart choices on what you use your card for. A credit score is like a mountain, it requires a slow and steady discipline to reach the top, but one misstep and that credit score can tumble quickly.\",\n \"Anything with zero fee and rewards to get started. Discover is typically the easiest, but Chase Freedom is pretty good if you can get it (usually requires higher income and 700+ score though, but not always, check CK approval odds)\",\n \"I'd say the best course of action would be to call the card issuer and ask them. Converting can definitely be done, but you'll have to enquire about the bonus.\",\n \"All the fees are added to the amount you actually spend, but they only occur when you do these kind of transactions. They do not happen for any other reason. If you transfer a balance from another credit card this fee is added to your balance. Since this is your first credit card you don't have to transfer any balance. This site says that this is a special type of check, linked to your credit card account, not to your checking account. If you write this type of check to a merchant the additional fees will apply. If you use your credit card at an ATM this fee will be applied on top of the money you withdraw. Usually it is a percentage of the amount you withdraw. According to this site, a cash equivalent is something like casino chips which can be easily converted back into money without any loss. If you use your credit card in a different currency, for example Euro but your credit cards currency is Dollar. Usually a percentage of the amount (~3-5%). If you withdraw money from a foreign currency ATM they add usually a fixed amount plus a percentage or any combination of this.\",\n \"In a similar situation I wrote about How I Made $4,000+ on a Cash Back Credit Card Offer. The total was actually $4550, and was from an insane offer from a new credit card my bank advertised. 10% cash back on all spending during the first 90 days. I wondered if gift card purchases counted, and more than store cards, I saw that Visa gift cards with a $500 value sold for a $4.95 fee. A 1% hit. It would have been foolish to load up, and realize that they were somehow excluded, so I bought 2 and followed the transaction on line. When I saw the 10% credit, I went full steam, and bought these, $2000 at a time, as that was the limit CVS imposed. In the end, I stopped at $50,000. (And the bank killed the online offer about $25K into this, but still honored my 90 days) Yes, I had to make payments mid cycle to avoid the card limit ($20K), but in the end, the bit of effort paid off. It took a bit over a year and a half to burn through them. In hindsight, I'd do it for $100K if the opportunity came up. Cash in the bank is earning near zero. TL:DR Make a small purchase and confirm your card gives you the bonus you expect.\",\n \"The length of time you have established credit does improve your credit score in the long run. As long as you can avoid paying interest, you might see if you can get a card with cash back rewards. I have one from Citi that sends me a $50 check every so often when I have enough rewards built up.\",\n \"this article offers tips you can use to make the most out of your business reward credit card. keep these tips in mind and don't forget to tell share them with your friends, especially those who are also managing small business, like you.\",\n \"There are quite a few advantages to credit cards in the uk. But don't borrow on them past the grace period. Set up a direct debit to pay amount in full.\",\n \"Here's one reason that's being overlooked in answers so far. (@ChrisInEdmonton, this is for your comment on @Chad's answer.) How do credit card companies make money? Sure, there's interest charges, but those are offset significantly by the cost of borrowing money, and by people defaulting on their debt / entering bankruptcy. The other way they make money is by processing transactions. They get a cut of whatever you buy. If you're a high-income person, and you're going to process a lot of expenditures with this credit card, your business is worth more. They will be willing to bribe you with things like cash-back, frequent flier miles, and insurance on your auto rentals, so that they can be your #1 go-to card. (This works in concert with the way that some credit card vendors with richer clientele overall - American Express - get to charge higher merchant fees for access to these customers' wallets. But that was mentioned in other answers.) If you're not a high-income person, your business is worth less. If you go somewhere asking for credit, they're going to try and give you a card which will earn them the most money - which probably isn't the one where they give you back 50% of their transaction fee in rewards. It's a calculated risk, since they still have to compete against cash, debit cards, and all the other credit card companies, so they don't have you totally over a barrel, but you shouldn't expect as many freebies, either.\",\n \"The answer for this question varies from person to person. However most cards give lousy rewards percentage-wise. Take a look at where your money is being spent each month (say with a tool like mint.com), and seek out a card that rewards you in categories where you already spend a lot of money. Many people here have suggested cards with high gas rebates, and that's great if you drive more than anything else. However, the important thing is to pick what benefits you most.\",\n \"There are lots of things to consider in addition to your questions. The rules changed in the US recently. I think you mean you will save more money. Your interest rate isn't likely to go up, but your principle will, so you will earn more interest income than before. I would wager it won't be a significant amount however. You can certainly earn a reward, either cash back, points, miles or something else. BUT the sticking point with earning things with your card is harder than before. Due to rules changes, merchants can now recuperate the fees they pay for accepting your credit card. Rewards cards have a higher fee than non-rewards cards (because banks aren't in charities). So now, depending on the merchant's choice, you could see a higher cost paying with a credit card (or a debit card) and that cost could wipe out your reward. And if your card has a fee, it has always been true that you need to evaluate the annual fee to confirm the benefit is more than paying for the fee. Additional advantages to credit cards\",\n \"\\\"The American Express Centurion Card (the \\\"\\\"Black Card\\\"\\\") is for extremely wealthy people who like to show off how much they spend. There are no cash back benefits like you have with traditional rewards cards. The benefits are all geared toward spending more money, not saving money. For example, the benefits include a personal travel agent, personal shoppers at high end stores, elite status with airlines and hotels, etc. There are some benefits that you could put a dollar value on. For example, first class upgrades and complementary companion airline tickets. If you like to fly first class and you do a lot of flying, it is conceivable that you could come out ahead. However, someone that does that much flying has probably already achieved elite frequent flyer status and enjoys regular upgrades without the Black card. In my opinion, it is pretty difficult to justify the initiation and annual fees of this card as anything but a luxury.\\\"\",\n \"In Canada a good site is: redflagdeals.com\",\n \"I don't know of any that are comparable to credit cards. There's a reason for that. Debit cards, being newer, have a much lower interchange rate. Since collecting on debt is risky and less predictable, rewards / miles are paid from those interchange fees. This means with a debit card there's less money to pay you with. So what can you do? Assuming your credit isn't terrible, you can just open a credit card account and pay in full for purchases by the grace period. I don't know how all cards work, but my grace period allows me to pay in full by the billing date (roughly a month from purchase) and incur no finance charges. In effect, I get a small 30 day loan with no interest, and a cash back incentive (I dislike miles). You're also less liable for fraud via CC than debit.\",\n \"What qualifies as a transaction? Does the bill pay count? Otherwise, not sure what you'd do to get 12. If this requires you to actively do something 12x per month, not worth it. But I can easily set up 12 online bill payments.\",\n \"You should not open bank accounts just to get additional credit cards. You should be careful about carrying too many credit cards and incurring too much debt as you could find yourself in a situation whereby you may not be able to pay off your monthly interest, much less the principal balance. Credit cards are not insurance. With many years of experience under my belt I can tell you that the best approach is to live within (or below) your means and avoid carrying a balance on credit cards. I carry only one credit card (really a charge card) and I pay off the balance every month. Treat a credit card as a 30 day interest free loan and pay your balance off in full every month...as you progress through life you will save yourself a lot of heartache (and money) if you take this approach.\",\n \"A credit card can be a long running line of credit that will help to boost your FICO score. However if you have student loans, a mortgage, or car payments those will work just as well. If you ever get to the point where you don't have any recent lines of credit, this may eventually end up hurting your score, but until then you really don't need any extras.\",\n \"let's all support the latest post added to www.securedcreditcardsonline.com! it offers excellent tips college students can use to find, qualify for and eventually get suitable lines of credit they can use for managing their day-to-day expenses. hope you will read it and share it with all your friends!\",\n \"Unless you spend a lot of money on the TD Gold Elite Visa, and are interested in the Deluxe TD Auto Club, the $99 annual fee is probably not worth it. Instead, the Citi Enrich MasterCard provides the same 1% cash back on all purchases without an annual fee. There's also an unadvertised Platinum version of the card, which includes other perks like car rental insurance, etc. From what I calculated a while back, The PC Financial MasterCard PC Points system works out to a 1% return as well. Unless there are extra deals like 5x point sales that I'm not aware of, cold hard cash would be a better option. Also check out the RFD Credit Card Head to Head article for way more options.\",\n \"\\\"Note: this answer is true for the UK, other places may vary. There are a couple of uses for credit cards. The first is to use them in a revolving manner, if you pay off the bill in full every time you get one then with the vast majority of cards you will pay no interest, effecitvely delay your expenses by a month, build your credit rating and with many credit cards you can also get rewards. Generally you should wait until the bill comes to pay it off. This ensures that your usage is reported to the credit ratings agencies. In general you should not draw out cash on credit cards as there is usually a fee and unlike purchases it will start acruing interest immediately. The second is longer term borrowing. This is where you have to be careful. Firstly the \\\"\\\"standard\\\"\\\" rate on most credit cards is arround 20% APR which is pretty high. Secondly on many cards once you are carrying a balance any purchases start acruing interest immediately. However many credit cards offer promotional rates. In contrast to the standard rates which are an expensive way to borrow the promotional rates often allow you to borrow at 0% APR for some period. Usually when it comes to promotional rates you get the best deal by opening a new credit card and using it immediately. Ideally you should plan to pay off the card before the 0% period ends, if you can't do that then a balance transfer may be an option but be aware than in a few years the market for credit cards may (or may not) have changed. Whatever you do you should ALWAYS make sure to pay at least the minimum payment and do so on time. Not doing so may trigger steep fees, loss of promotional interest rates. There is a site called moneysavingexpert that tracks the best deals.\\\"\",\n \"The two factors that will hurt you the most is the age of the credit account, and your available credit to debt ratio. Removing an older account takes that account out of the equation of calculating your overall credit score, which can hurt significantly, especially if that is the only, or one of just a couple, of open credit lines you have available. Reducing your available credit will make your current debt look bigger than what it was before you closed your account. Going over a certain percentage for your debt to available credit can make you look less favorable to lenders. [As stated above, closing a credit card does remove it from the credit utilization calculation which can raise your debt/credit ratio. It does not, however; affect the average age of credit cards. Even closed accounts stay on your credit report for ten years and are credited toward average age of cards. When the closed credit card falls off your report, only then, will the average age of credit cards be recalculated.] And may I suggest getting your free credit report from https://www.annualcreditreport.com . It's the only place considered 'official' to receive your free annual credit report as told by the FTC. Going to other 3rd party sites to pull your credit report can risk your information being traded or sold. EDIT: To answer your second point, there are numerous factors that banks and creditors will consider depending on the type of card you're applying for. The heavier the personal rewards (cash back, flyer miles, discounts, etc.) the bigger the stipulation. Some factors to consider are your income to debt ratio, income to available credit ratio, number of revolving lines of credit, debt to available credit ratio, available credit to debt ratio, and whether or not you have sufficient equity and/or assets to cover both your debt and available credit. They want to make sure that if you go crazy and max out all of your lines of credit, that you are capable of paying it all back in a sufficient amount of time. In other words, your volatility as a debt-consumer.\",\n \"They are not as good of an option when compared to a card you open chosen based on features and rates. Get a card with a lower rate that can be used anywhere.\",\n \"These kinds of credit card offers are incredibly common. More often you will get a certain reward if you spend $X within Y days of getting the card. In many cases you can take advantage of them with very little downside. However, are you responsible enough to have a credit card and be able to pay off the balance every month? If not the interest charges could quickly wipe out the $50 bonus you get. And hard inquiries and new accounts could potentially affect your credit score, particularly if you don't have a well-established credit history. There's also the chance you get denied in which case you add a hard inquiry to your credit report for no gain.\",\n \"If you have self control and a good handle on your finances, which it sounds like - I suggest the following: Note: #3 is important - if you're not able to pay it off each month don't do this because it will cost you a lot in interest. Make sure to check how interest is calculated in case you don't pay it off in full or miss the due date for a month. If you can do this you'll earn some good benefits from the card using money that you're going to spend anyway, as well as build your credit profile. Regarding annual fees -\",\n \"I'd have a look at Capital One's Online account too, they've got 1.35% interest rate with 10% bonus if you have over $15k deposited. It is still low like all interest rates, but at least it is on top (or at least close)!\",\n \"Looks like a user-contributed list is the only good solution to this question, so I'll start one by making this answer community wiki, meaning anyone can edit it. We only aim to add major chain, not every mom&pop store (which probably don't qualify). The rewards details page looks like this: The lists are in alphabetical order.\",\n \"You can find great deals and the forums are full of other information. I also have found when I need to find a deal on something, you can ask or find others on the forums for help. http://slickdeals.net/\",\n \"\\\"In the end, all these fees hurt the average consumer, since the merchant ultimately passes cost to consumer. Savvy consumers can stay at par or get ahead, if they put in the effort. It's a pain, but I rotate between 4 cards depending on time of year and type of purchase, to optimize cash back. My cards are: 1. 5% rewards card on certain categories, rotates each quarter 2. 2% travel/dining card (fee card, but I travel a bunch so it's worth it, no foreign transaction fees) 3. 1.5% rewards card for everything else 4. Debit card (swiped as a CC) for small purchases (i.e. lunches) at credit union for \\\"\\\"enhanced\\\"\\\" high interest checking account, requiring certain # swipes/month. This alone returns to me ~$800/yr.\\\"\",\n \"\\\"These days, just about any bank has the ability to schedule payments for free. I usually use this. My wife has a Chase MasterCard, because they used to automatically credit the 1% cash back monthly. Now they \\\"\\\"improved\\\"\\\" the card, and you need to go online and redeem the rewards, either in $20 increments, or to pay off a previous purchase, which seems to be a real gimmick. They probably get back the 1% cash back for that purchase if you use this feature. Weird people.\\\"\",\n \"For people with attempted to achieve credit rating coming from a huge rely or perhaps organized credit score card issuer then you can discover how complicated its to get authorised. They generally interest some kind of credit score, when you need a low interest rate quote and additional returns after that your credit score has to be excellent.\",\n \"Usually points have different value depending on what you use it for and how much of them you convert. For many providers, if you have enough (10000+ usually) points, it is possible to convert them 1:1 (which means 1 point converted to 1 cent) to either cash or something that is almost as good as cash ($100 gift card for some popular store or $100 Amazon.com certificate, etc.). Some cards have more exotic ways of getting best value - such as transferring money to pay student loans, retirement accounts, etc. So to get the best value, I'd recommend to make a list of what you can get from your program (most types of reward are uniform - i.e., many gift cards with the same price, so the work may be less than it seems) and calculate point values of each of those. If you want to be really precise take into account that if you buy something with points, you do not earn points on that, which reduces the value a little. In general, these days it is very rare to get a card that produces more than 1% back, though some have up to 5% for certain categories of purchases.\",\n \"Just to make this a little less vauge, I will base everything on the Mercedes Benz American Express (MB AMEX) card, which is the closest to a $100 annual fee I found on American Express's website. The benefits of a card with an annual fee generally are worth the cost if (and only if) you spend enough money on the card, and avoid paying interest to offset the benefit. Using the MB AMEX card as a reference, it offers 5X points for Mercedes Benz purchases, 3X points at gas stations, 2X points at restaurants, and 1X points everywhere else. Even if we only make purchases at the 1X rate, it only takes charging $10,000 to the card in a year in order to make up the difference. Not too hard to do on a card someone uses as their main method of payment. Every dollar spent at the higher rates only makes that easier. There are a number of other benefits as well. After spending $5,000 on the card in a year, you receive a $500 gift card towards the purchase of a Mercedes Benz car. For anyone on the market for a Mercedes Benz, the card pays for itself multiple times with just this benefit.\",\n \"I was in the same chicken and egg situation regarding credit cards. I did two things: Now that I have recent good credit history, Capital One has offered to raise my limit. I assume that it is because my credit score has improved and I can probably now switch to a credit card that doesn't have an annual fee.\",\n \"Correct. By putting expenses on to a credit card which does not charge interest during the grace period, and paying that balance every month, in effect you earn interest on money you've already spent. However, first, savings account interest is something like .05% right now depending on your bank. Yeah it's money, but seriously, that's 4 cents per month on $1000. Second, two things can make this very wrong. If you carry a balance, you'll pay much more in interest than you'd get from practically any investment you could make with the cash in the meantime. Second, a debit card can be used to get cash you already have from an ATM (not everyone takes credit, you know), and it'll cost you little or nothing. Use a credit card for the same purpose and you're paying 40% from the second the money comes out of the machine. Also correct. Rewards cards earn you more the more they're used. That's because the card issuer makes money based on usage; they get 3% of each transaction. They're happy to turn 1% of that, up to a limit or subject to a spending floor, back around to you. Again, check the terms and conditions. Most cards have a limit on total rewards. Many of them also have fees, either while you hold the card or when you try to redeem the rewards. Look for a card with high limits or no limits on rewards from spending, and with no annual fee or reward redemption fee. In addition to the above, you build good credit history with good spending patterns. However, your credit score can fluctuate wildly, because on one day you have very low leverage (percent of credit limit used), and on the next you've bought $200 in groceries and so your leverage went up 20% on a card with a $1000 limit. Leverage under 10% is good, leverage under 40% is OK and leverage over that starts looking bad. With a $1000 limit, with you maxing it out and then paying it off, your credit score can fluctuate by 30 points on any given day.\",\n \"\\\"My wife and I have Gap, Kohl's and Amazon cards. They each give extra benefits when using them at their stores, and usually 1% cash back at other places, although we don't use the Gap or Kohl's anywhere else. We don't carry a balance, so as mentioned, the rate doesn't matter. And they are so spread out when we've gotten them (Kohl's for a good 3 years, Amazon about 2 months ago) that I don't expect any issues for credit checks. In fact I just got approved for a mortgage loan, way more than what I know I can really afford. In my mind, credit cards are a bad idea when you use them as \\\"\\\"real\\\"\\\" credit. If they are used more like a debit card (spending money that you have), its like a loan (you don't have to pay it off til later), and you get paid for it (whether in cash or merchandise).\\\"\",\n \"An advantage of using a major credit card is that they act as a buffer and source of recourse between you and the merchant. Cheated and the store won’t answer you letters? Call Visa (or more accuratly, call the number on the back of the card). (That is, #2 on this answer, which you can also reference for a whole list of benefits.)\",\n \"Apparently it is up to the credit card company on how they want to report your available balance. Another disadvantage to the no-limit credit card may not be apparent to most people, but it is something noted by organizations like The Motley Fool, which is expert in many issues of finance and investment. Part of your credit score, about 30%, considers the amount of money you have borrowed, and the limit on your present credit cards. A no-limit credit card company may report your limit as $0 if you have not used the card, or they may report a maximum limit available to you. They may not, nor are they obligated, to report times when you put tons of expenses on a credit card and then paid them off. While some companies will report your timely payments and paid off amounts, others simply report an extremely low limit. For instance if you spent $100 US Dollars (USD), your limit might be considered $100 USD, or it may merely be reported as zero. You’ll need to check with a credit card company on how they report payments and limits on a no-limit credit card before you obtain one. Some people who are scrupulous are paying off their cards at the end of each month suffer major losses to their credit score, without even realizing it, if their spending ability is rated at zero, or their payments don’t count toward showing credit worthiness. Source\",\n \"Possibly not relevant to the original asker, but in the UK another advantage of using a credit card is that when making a purchase over £100 and paying by credit card you get additional protection on the purchase which you wouldn't get when paying by debit card. E.g. if you buy something costing £100 and the company goes bust before it's delivered, you can claim the money back from the credit card company. Whereas if you paid by debit card, you would potentially lose out. This protection is a legal requirement under Section 75 of the Consumer Credit Act 1974.\",\n \"this post offers excellent pointers that can help you choose a suitable line of credit you can use for financing your day-to-day expenses. please help up promote it to all your friends especially to those who are planning to apply for and get secured and prepaid credit cards!\",\n \"In the United States there are 3 main types of cards. There are organizations that push a credit card with their branding. They aren't a bank so they partner with a bank to offer the card. In the US many colleges and professional sports teams will market a credit card with the team or universities colors and logo. The bank handles the details and the team/university gets a flat fee or a portion of the fees. Many even have annual fees. They market to people who want to show their favorite team colors on their credit card, and are willing to pay extra. Some of these branded cards do come with extra perks: Free shipping, discounts on tickets, being able to buy tickets earlier. There are 4 other types of cards that have limited usage: What makes it confusing is that large business can actually turn a portion of the corporation into a bank. Walmart has been doing this, and so have casinos.\",\n \"this article talks about tips you can use to improve your chances of qualifying for a credit card, even if you have poor credit standing. please help us promote it by telling your friends to drop by our site and share the articles posted there to their friends.\",\n \"Yeah, I got one of those and didn't look at the fine print. They gave me a 250 dollar credit limit with so many initial fees just for signing up that the card already had $180 on it when it came.\",\n \"CitiBank offers a chip card. It's not a chip and pin, but a chip and sign, however it worked well for my all transations. Just call and ask for a 'world credit card' with a chip. https://creditcards.citi.com/credit-cards/citi-thankyou-premier-card/\",\n \"We use the PC financial credit card. We switched to PC banking about 8 years ago and have been extremely happy with them. You get points for using their banking services and if you use their credit card you earn points. You can use the points earned for free groceries or purchasing anything at No Frills, Independant and Loblawas Superstores. With the points we've earned over the years through just our regular banking, we've purchased a 6 piece patio set, patio swing, tons of free groceries and currently have $500 worth of points that we're using to purchase food and gifts for the Christmas season. You can find out the particulars on their points program throught their webiste at www.pcfinancial.ca\",\n \"\\\"Yes, merchants are charged. Visa/Mastercards charge 1 to 2%, of which some part goes to the Visa/MC and the rest to the issuing bank (if you have an HDFC Bank Visa card, HDFC bank is the issuing bank. And yes, you can get a discount from the merchant - while it probably isn't allowed by Visa/MC, some merchants still provide discounts for cash. But you won't get it at places like supermarkets or large brand retail. Late fees + charges can be huge. In multiple ways - first, they all seem to charge a late fee of Rs. 300-500 nowadays, plus service tax of 10%. Then, you will pay interest from the bill date to the eventual payment date. And further, any new purchases you make will attract interest from the day they are made (no \\\"\\\"interest-free\\\"\\\" period). Interest rates in India on CCs are over 3% a month, so you really must get rid of any open balances. I've written a longish piece on this at http://in.finance.yahoo.com/news/The-good-bad-ugly-credit-yahoofinancein-2903990423.html\\\"\",\n \"If you can use and pay off your credit card in full every month, there are plenty of benefits including improved credit, reward points and more. Many fall into the trap of just making the minimum payments and facing high interest charges or missing payments and getting a hit on their credit reports. To start off, put something small that you know you can pay off every month. It could be your Netflix or your gas. Make sure you pay it off before any interest is accrued. Over time, you can ask for higher limits to boost your utilization rate.\",\n \"In Addition to @JoeTaxpayer's answer, in the UK credit cards offer additional protection than if you were to pay by debit card. This includes (but is not limited to) getting your money back if the company you've bought something from goes bust before your order is complete.\",\n \"1.Charges or Fee: These are only applicable if you buy something use Credit Card and do not payback in time. Otherwise if you just have a Credit Card, most of them are free. There are some that charge annual fee. You will know when you apply for a card. 2a. Depoist Money [Voucher]: You can deposit money on your card account by check, or online transfer or by visiting the Bank Branch. I am not sure what Voucher you are talking about. You will have to find that out from the company that issued the voucher. 2b. Withdraw from ATM: Withdrwals are charged typically 5%, plus fixed Rs 50. Plus interest if you have not paid back in time. Are you are having excess money, there will be no interest charge. Check with the card on the exact charges. 3.Excess transfer to Bank: The excess can be transferred to Bank account by making a request to the Card Company and giving out the details. The Card Company would have a defined timeline for this. Most of the Banks that issue cards have a policy not to keep excess deposits longer. What you are trying to do it not a routine transaction and depends what you are trying to achieve.\",\n \"Three big ones that are common in almost all banks (though, individually, they may have other criteria): Other criteria I've seen (while working in the banking industry - varying by bank): the average balance you keep on deposit accounts (checking/savings/CDs/etc), number of overdraft fees in the past 12 months (one bank I worked for wouldn't approve a credit card if a customer had more than 5 overdrafts in the past year), the length of time a customer had been with the bank. Note that a credit card only company, like AmEx, may have different criteria in that they don't offer all the other type of accounts that other other banks do.\",\n \"\\\"Dan's link (he deleted his answer, BTW) is fine, it showed the components of the score FICO offers. Each input has data behind it, a bell curve of the behaviors and risk of the person behind it. For example, we've discussed utilization many time here. The ideal utilization is not 0%, but 1-19%. This does not mean paying interest, or carrying charges from month to month. Say I had just one card with a $10K limit. I'd want to be sure I never ran a bill above $2000. If I did, I'd see a slight drop in my score, and next month, it would go back to normal. In my case, I have enough available credit that going over 20% is rare, and if it happened, I'd pay the bill down before the bill was issued, just make a mid-cycle payment. FICO decided that those who go over 20% have a higher risk of default. And it gets higher as it goes up. Same with every aspect of the score's components. You are comparing US to non US use. In the US, it seems far more common to use our cards. In my family's case, we use very little cash, and run most of our spending through our cards. As far as The David is concerned, one should separate those who carry a balance from those who pay in full. The pay in full users are better off for their habits and responsible card use. In the US, it's not easy to rent a car or book a hotel with no card. Cards offer a cash rebate that adds up fast, and purchase protection from fraudulent vendors. They also offer extended warranty coverage. The David, and others, claim that \\\"\\\"studies prove those using cards spend 10-15% more than cash buyers.\\\"\\\" This is a proven fact from scientific studies. Only they don't exist. The best I've seen proves that college kids given a $20 bill spend more carefully than those given a $20 credit card. This doesn't extrapolate to a family budget, and never will. But that quote has a way of being repeated as fact. Yes, it's non-sense, thank you for reading and quoting my blog, I recognize the quote. The report also shows accounts that have gone to collection. An electric bill isn't a regularly reported item, it's assumed your lights are on. But if you stop paying the bill and they send your account to a collection agency, you'll see it hit your report. In response to the comment below - Journal of Experimental Psychology: Applied article titled Monopoly Money: The Effect of Payment Coupling and Form on Spending Behavior runs 13 pages but on the first page offers \\\"\\\"Do consumers spend differently when using one payment mode relative to another mode? For example, do consumers spend more when they receive $50 in the form of a gift card than in the form of cash? If indeed they do, then why? This research addresses these issues.\\\"\\\" $50? A $50 gift card is a nuisance, I try to use it up within hours of getting one. As I stated above, the behavior of a person with such a card doesn't scale to a many-thousand-per-month budget. Such articles, in my opinion, are nonsense, proving nothing. Unfortunately, this is a bit of a tangent to the original question, and if I put up a stand-alone \\\"\\\"Is it a fact that people spend more if using a card than cash?\\\"\\\" the question would result in being closed as one that's seeking opinions, not facts.\\\"\",\n \"This isn't exactly the answer you were looking for, but it is something else to consider. Rather than just running money through the card to get the bonus, have you considered spending that $5,000 in the form of good debt? In other words, can you purchase some asset that will create more cashflow than you would be paying on the card with the $5,000 balance? The idea is instead of running up the balance and paying it back off to get the bonus, maybe you could buy an asset for $5,000, create positive cashflow with the opportunity for long term capital gains, and get the credit card bonus. You could even turn around and use the bonus to pay back part of the credit card balance, thus reducing the payments and widening the profit margin on the asset.\",\n \"The banks don't have to pay for credit card rewards. The merchants end up footing the bill. The merchants that accept credit cards pay from 2-4% in fees on the credit card purchase. Those fees go to support the rewards programs. The merchants also take on most of the risk during a credit card transaction (although the credit card companies would have you believe otherwise). If a thief uses a stolen card to purchase a camera from Mike's Camera Shop for instance, any funds the merchant received will be taken away from the merchant. In addition, the merchant will be hit with a chargeback fee (usually around $20-$60). Finally, since the card was stolen, the merchant will never get their merchandise returned, so Mike's Camera is out the camera as well. No camera, no funds, and a $60 fee to boot. The credit card issuers make $60 on the chargeback fees and have no liability.\",\n \"Credit cards are a basic building block of a stable financial plan. By using a credit card for every purchase above, say, the price of a coffee you gain a number of material benefits. You get the free use of the bank's money for about a month. You reduce the amount of cash you require to almost nothing. You get a handy budget tracking tool as many credit cards help you assign categories to expenses. You can typically download your transactions and import them into a budget app for handy record keeping. Many cards offer benefits such as extended warranties on items purchased, travel insurance, reward points and other benefits. There is only one caveat: Pay the entire balance, in full, every month, on or before the due date. Don't even THINK about paying anything less and don't EVER be late.\",\n \"\\\"There are two things I can think of that might be different in other countries: Until 2013, American Express, Visa and MasterCard prevented businesses from charging extra for credit card usage, and credit card surcharges still illegal in several states. Since credit card companies add a surcharge to credit card purchases, and merchants can't pass that onto credit card users, they just make everyone pay extra instead. Since everyone gets charged the credit card surcharge, you might as well use a credit card and recoup some of that via \\\"\\\"rewards\\\"\\\" points. Almost all credit cards here have grace periods, where you won't be charged interest if you pay back your loans in full within some period of time (at least 21 days). This makes credit cards attractive to people who don't need a loan, but like the convenience that credit cards provide (not carrying cash, extra insurance, better fraud protection). Apparently grace periods aren't required by law here, so this might be common in other countries as well.\\\"\",\n \"**Here's a sneak peek of /r/churning using the [top posts](https://np.reddit.com/r/churning/top/?sort=top&t=year) of the year!** \\\\#1: [The Economics of Churning: who pays for the rewards?](https://np.reddit.com/r/churning/comments/5oucdq/the_economics_of_churning_who_pays_for_the_rewards/) \\\\#2: [New all time high sign up bonus !!](https://i.redd.it/aeb0f742mpvy.jpg) | [145 comments](https://np.reddit.com/r/churning/comments/69frvw/new_all_time_high_sign_up_bonus/) \\\\#3: [Citi Costco Historical High Offer](https://i.redd.it/scowraajipey.png) | [166 comments](https://np.reddit.com/r/churning/comments/5svvxm/citi_costco_historical_high_offer/) ---- ^^I'm ^^a ^^bot, ^^beep ^^boop ^^| ^^Downvote ^^to ^^remove ^^| [^^Contact ^^me](https://www.reddit.com/message/compose/?to=sneakpeekbot) ^^| [^^Info](https://np.reddit.com/r/sneakpeekbot/) ^^| [^^Opt-out](https://np.reddit.com/r/sneakpeekbot/comments/6l7i0m/blacklist/)\",\n \"It gives an outside prospective on it so you're not getting all your information from one spot. When MeetBeam eventually releases I imagine that page will be updated with more information on fees, requirements for the 4% APY, etc.\",\n \"I have an American Airlines VISA with miles that has no annual fee, but only because I request that they waive the fee each year. Word to the wise - they've never refused.\",\n \"It's not so much a credit card, but a financial institution's online platform that either provides this functionality or not. The following Canadian financial institutions show an itemized list of pre-authorized transactions (not an exhaustive list): The following institutions show a total value of pre-authorized transactions: Most other institutions show the available credit (e.g. Chase Financial used by Amazon Rewards), which give an indication of how much you have to spend. By subtracting the current balance and the available balance from the total credit limit, you can get an indication of the total amount of pre-authorized transactions. Example: $1000 - $500 - $400 = $100 is the amount of pre-authorized transactions. From TD's EasyWeb demo (http://tdeasywebdemo.com/v2/#/en/PFS/accounts/activity/chq), it appears that they don't include pre-authorized transactions in the Available Credit. You can verify for yourself by logging in to online banking after you make a purchase and comparing the Available Credit to [Credit Limit - Current Balance]. If it is equal, then they don't include, if it is different (most likely for the value of the transaction), then they do.\",\n \"\\\"never carry a balance on a credit card. there is almost always a cheaper way to borrow money. the exception to that rule is when you are offered a 0% promotion on a credit card, but even then watch out for cash advance fees and how payments are applied (typically to promotional balances first). paying interest on daily spending is a bad idea. generally, the only time you should pay interest is on a home loan, car loan or education loan. basically that's because those loans can either allow you to reduce an expense (e.g. apartment rent, taxi fair), or increase your income (by getting a better job). you can try to make an argument about the utility of a dollar, but all sophistry aside you are better off investing than borrowing under normal circumstances. that said, using a credit card (with no annual fee) can build credit for a future car or home loan. the biggest advantage of a credit card is cash back. if you have good credit you can get a credit card that offers at least 1% cash back on every purchase. if you don't have good credit, using a credit card with no annual fee can be a good way to build credit until you can get approved for a 2% card (e.g. citi double cash). additionally, technically, you can get close to 10% cash back by chasing sign up bonuses. however, that requires applying for new cards frequently and keeping track of minimum spend etc. credit cards also protect you from fraud. if someone uses your debit card number, you can be short on cash until your bank fixes it. but if someone uses your credit card number, you can simply dispute the charge when you get the bill. you don't have to worry about how to make rent after an unexpected 2k$ charge. side note: it is a common mis-conception that credit card issuers only make money from cardholder interest and fees. card issuers make a lot of revenue from \\\"\\\"interchange fees\\\"\\\" paid by merchants every time you use your card. some issuers (e.g. amex) make a majority of their revenue from merchants.\\\"\",\n \"this post offers great steps you can take to responsibly and effectively manage your existing line of credit. we believe that by carefully observing these guidelines, you will not only succeed in building and maintaining an excellent credit history but you will also avoid incurring pesky fees and charges usually imposed on delinquent unsecured credit cardholders. and do help us promote it by telling your friends to read and share it with their friends too!\",\n \"Card-dna.biz undeniably offers the best prepaid cards in the market that stands out in services and costs, claiming to be the best in the market. We also provide all the details regarding the types of card we offer to help you make a decision. Visit our website for more!\",\n \"As long as you can be trusted with a Credit Card i find that if you have a setup that uses three accounts: 1. your Credit Card, 2. 2. a high interest internet account (most of these accounts don’t have fees), 3. a savings account. The Method that works for me is: 1st i calculate my fixed monthly bills i.e Rent and utilities and then transfer it into my high interest account. for the month whenever i make a purchase i transfer the money into the high interest account ( this way I can keep a running balance of what money I have left to spend in the month. Then when the Credit Card bill comes I transfer the money out of the high interest account across to pay off the Credit Card ( this way you generate interest on the money which you would have spent throughout the month and still maintain $0 of interest from the Credit Card) over a year you can generate at least enough money in interest to go out for dinner on one of free flights!\",\n \"See if the bank has other credit cards they offer. Many banks have multiple ones: some cards have great benefits, others do not; some cards have high rates, some do not; some cards are secured, some do not. If they have a card that you like ask them to switch you to the card you want. They should be able to do so very easily. Your card number will change, but they will treat it is a replacement so that your credit score will not take a hit during the switch. It may be possible to get them to waive the annual fee, but most won't because each card type they offer are separate products so they only allow you to pick one of their options. If they don't have a card to your liking apply for a card from anther bank that has the benefits and annual fees (zero) that you are looking for. It may be that the new card will start with a lower limit, but it will increase over time, especially as you shift more of your business to the new card. When you cancel the old card before the next year rolls around you will take a small short hit to your credit score, but that is ok.\",\n \"\\\"As anecdotal experience, we have a credit account in my name as offered by bank's marketing before I could qualify by common rules for newcomers (I have an account there for years so they knew my history and reliability dynamics I guess), and my wife is subscribed as a secondary user to the same credit account with a separate card. So we share the same limits (e.g. max month usage/overdraft) and benefits (bank's discounts and bonuses when usage passes certain thresholds - and it's easier to gain these points together than alone) so in the end maintenance of the card costs zero or close to that on most months, while the card is in a program to get discounts from hundreds of shops and even offers a free or discounted airport lounge access in some places :) But the bonus program is just that - benefits come and go as global economics changes; e.g. we had free car assistance available for a couple of years but it is gone since last tariff update. Generally it is beneficial for us to do all transactions including rent etc. via these two credit cards to the same account, and then recharge its overdraft as salaries come in - we have an \\\"\\\"up to 50 days\\\"\\\" cooloff period (till 20th of next calendar month) with no penalties on having taken the loans - but if we ever did overstretch that, then tens of yearly percents would kick in. Using the card(s) for daily ops, there is a play on building up the credit history as well: while we don't really need the loans to get from month to month, it helps build an image in the face of credit organizations, which can help secure e.g. favorable mortgage rates (and other contract conditions) which are out of pocket money range :) I'd say it is not only a \\\"\\\"we against the system\\\"\\\" sort of game though, as it sort of trains our own financial discipline - every month we have (a chance) to go over our spendings to see what we did, and so we more regularly think about it in the end - so the bank probably benefits from dealing with more-educated less-random customers when it comes to the bigger loans. Regarding internet, we tend to trust more to a debit card which we populate with pocket money sufficient for upcoming or already placed (blocked) transactions. After all, a malicious shop can not sip off thousands of credit money - but only as much as you've pre-allocated there on debit.\\\"\",\n \"\\\"I want to recommend an exercise: Find all the people nearby who you can talk to in less than 24 hours about credit cards: Your family, whoever lives with you, and friends. Now, ask each of them \\\"\\\"what's the worst situation you've gotten yourself into with a credit card?\\\"\\\" Personally, the ratio of people who I asked who had credit cards to the ratio of people with horror stories about how credit cards screwed up their credit was nearly 1:1. Pretty much, only one of them had managed to avoid the trap that credit cards created (that sole exception had worked for the government at a high paying job and was now retired with adult children and a lucrative pension). Because it's trivially easy over-extend yourself, as a result of how credit cards work (if you had the cash at any second, you would have no need for the credit). But do your own straw poll, and then see what the experience of people around you has been. And if there's a lot more bad than good out there, then ask yourself \\\"\\\"am I somehow more fiscally responsible than all of these people?\\\"\\\".\\\"\",\n \"Every reward program has to have a funding source. If the card gives you x percent back on all purchases. That means that their business is structured to entice you to pump more transactions through the system. Either their other costs are lower, or the increased business allows them to make more money off of late fees, and interest. If the card has you earn extra points for buying a type of item or from a type of store (home stores improvement in the Spring), they are trying to make sure you use their card for what can be a significant amount of business during a small window of time. Sometimes they cap it by saying 5% cash back at home improvement stores during the spring but only on the first $1500 of purchases. That limits it to $75 maximum. Adding more business for them, makes more money for them. Groceries and gas are a good year round purchase categories. Yes there is some variation depending on the season, and the weather, but overall there is not an annual cliff once the season ends. Gas and groceries account for thousands of dollars a year these are not insignificant categories, for many families are recession proof. If they perceive a value from this type of offer they will change their buying behavior. My local grocery store has a deal with a specific gas station. This means that they made a monetary deal. Because you earn points at the grocery store and spend points at the gas station, the grocery store is paying some compensation to the gas station every time you use points. The gas station must be seeing an increase in business so theoretically they don't get 100% compensation from the grocery store. In cases where credit cards give airline miles, the credit card company buys the miles from the airline at a discount because they know that a significant number of miles will never be used.\",\n \"Buy one and use it but never spend more than you can pay off at the end of the month. Also, remember that the length of credit affects your rating too, so don't go canceling cards and/or getting new ones every time a new gimmick comes along.\",\n \"http://www.andrewsfcu.org/ is one of the only US financial institutions to issue a low or no annual fee chip and pin visa or mastercard.. Andrews is primarily for civilian employees of the Andrews Air Force Base but is available to members of the American Consumer Council, which offers free membership, see http://www.andrewsfcu.org/page.php?page=330 . The chip and pin card is a visa with $0 annual fee and charges a 1% foreign transaction fee. Getting one is modestly difficult because you have to first join the credit union then apply for the card, then go through underwriting as if it were a personal loan rather than a revolving credit account. Still, for travelers, it is probably worth it.\",\n \"If you're in the UK: Vouchers: http://www.vouchercodes.co.uk/ Vouchers and deals/offers: http://www.hotukdeals.com/ Cashback schemes: http://www.quidco.com/\",\n \"Go to bankrate dot com. They will have a lot of metrics there that might give you an idea and rate each category. Capitalization and profitability metrics. May not be as granular as what you are looking for though.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["Billshrink offers some pretty neat analysis tools to help you pick a credit card. They focus more on rewards than the features you mention but it might be worth a look. If you use Mint, they offer a similar service, too. If you're not already using Mint, though, I'd look at Billshrink as Mint requires some extensive setup. MOD EDIT Looks like billshrink.com is shut down. From their site: Dear BillShrink customer, As you may have heard, BillShrink.com was shut down on July 31, 2013. While we’re sad to say goodbye, we hope we’ve been able to help you be better informed and save some money along the way! The good news is that much of the innovative award-winning BillShrink technology will still be available via our StatementRewards platform (made available to customers by our partnering financial institutions). Moreover, we expect to re-launch a new money-saving service in the future. To see more of what we’re up to, visit Truaxis.com. We have deleted your personal information as of July 31. We will retain your email address only to announce a preview of the new tool. If you do not want us to retain your email address, you can opt out in the form below. This opt out feature will be available until September 31, 2013. If you have already opted out previously, you do not need to opt out again. If you have any further questions, contact us at info@billshrink.com. Thanks, The BillShrink/Truaxis Team"],"string":"[\n \"Billshrink offers some pretty neat analysis tools to help you pick a credit card. They focus more on rewards than the features you mention but it might be worth a look. If you use Mint, they offer a similar service, too. If you're not already using Mint, though, I'd look at Billshrink as Mint requires some extensive setup. MOD EDIT Looks like billshrink.com is shut down. From their site: Dear BillShrink customer, As you may have heard, BillShrink.com was shut down on July 31, 2013. While we’re sad to say goodbye, we hope we’ve been able to help you be better informed and save some money along the way! The good news is that much of the innovative award-winning BillShrink technology will still be available via our StatementRewards platform (made available to customers by our partnering financial institutions). Moreover, we expect to re-launch a new money-saving service in the future. To see more of what we’re up to, visit Truaxis.com. We have deleted your personal information as of July 31. We will retain your email address only to announce a preview of the new tool. If you do not want us to retain your email address, you can opt out in the form below. This opt out feature will be available until September 31, 2013. If you have already opted out previously, you do not need to opt out again. If you have any further questions, contact us at info@billshrink.com. Thanks, The BillShrink/Truaxis Team\"\n]","isConversational":false}}},{"rowIdx":62,"cells":{"_id":{"kind":"string","value":"5331"},"query":{"kind":"string","value":"Exercises of employee share options"},"gt_ids":{"kind":"list like","value":["200784"],"string":"[\n \"200784\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1],"string":"[\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["220147","74839","143655","530410","340730","212025","580534","12034","595605","259560","52458","409818","488207","175563","61919","595787","446628","340264","259072","163396","261258","33394","7733","134972","203334","23355","43497","237718","5224","73260","193717","39345","313372","56118","102436","492321","344372","200784","248393","4794","178497","87283","541928","518088","447812","525390","469036","1001","273829","213976","393439","314200","451613","357500","587137","361507","248269","15635","76556","544800","367742","77124","139387","277311","382381","361482","236176","302735","401266","287325","199206","63301","388362","204388","250623","396180","135798","441718","183643","362874","400644","570112","434812","107377","263312","483147","38711","151802","186869","576503","575741","55893","306688","34269","570046","178614","57800","374867","460341","3656"],"string":"[\n \"220147\",\n \"74839\",\n \"143655\",\n \"530410\",\n \"340730\",\n \"212025\",\n \"580534\",\n \"12034\",\n \"595605\",\n \"259560\",\n \"52458\",\n \"409818\",\n \"488207\",\n \"175563\",\n \"61919\",\n \"595787\",\n \"446628\",\n \"340264\",\n \"259072\",\n \"163396\",\n \"261258\",\n \"33394\",\n \"7733\",\n \"134972\",\n \"203334\",\n \"23355\",\n \"43497\",\n \"237718\",\n \"5224\",\n \"73260\",\n \"193717\",\n \"39345\",\n \"313372\",\n \"56118\",\n \"102436\",\n \"492321\",\n \"344372\",\n \"200784\",\n \"248393\",\n \"4794\",\n \"178497\",\n \"87283\",\n \"541928\",\n \"518088\",\n \"447812\",\n \"525390\",\n \"469036\",\n \"1001\",\n \"273829\",\n \"213976\",\n \"393439\",\n \"314200\",\n \"451613\",\n \"357500\",\n \"587137\",\n \"361507\",\n \"248269\",\n \"15635\",\n \"76556\",\n \"544800\",\n \"367742\",\n \"77124\",\n \"139387\",\n \"277311\",\n \"382381\",\n \"361482\",\n \"236176\",\n \"302735\",\n \"401266\",\n \"287325\",\n \"199206\",\n \"63301\",\n \"388362\",\n \"204388\",\n \"250623\",\n \"396180\",\n \"135798\",\n \"441718\",\n \"183643\",\n \"362874\",\n \"400644\",\n \"570112\",\n \"434812\",\n \"107377\",\n \"263312\",\n \"483147\",\n \"38711\",\n \"151802\",\n \"186869\",\n \"576503\",\n \"575741\",\n \"55893\",\n \"306688\",\n \"34269\",\n \"570046\",\n \"178614\",\n \"57800\",\n \"374867\",\n \"460341\",\n \"3656\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["Options granted by an employer to an employee are generally different that the standardized options that are traded on public stock option exchanges. They may or may not have somewhat comparable terms, but generally the terms are fairly different. As a holder of an expiring employee option, you can only choose to exercise it by paying the specified price and receiving the shares, or not. It is common that the exercise system will allow you to exercise all the shares and simultaneously sell enough of the acquired shares to cover the option cost of all the shares, thus leaving you owning some of the stock without having to spend any cash. You will owe taxes on the gain on exercise, regardless of what you do with the stock. If you want to buy publicly-traded options, you should consider that completely separately from your employer options other than thinking about how much exposure you have to your company situation. It is very common for employees to be imprudently overexposed to their company's stock (through direct ownership or options).","The option is exercised. The option is converted into shares. That is an optional condition in closing that contract, hence why they are called options.","\"An option is a financial instrument instrument that gives you the right, but not the obligation, to do some transaction in the future at a given price. An employee stock option is a kind of \"\"call option\"\" -- it gives you the right, but not the obligation, to buy the stock at a certain price (the \"\"exercise price\"\", usually set as the price of the stock when the option was granted). The idea is that you would \"\"exercise\"\" the option (buy the stock at the given price as provided by the option), if the value of the stock is higher than the exercise price, and not if it is lower. The option is gifted to you. But that does not mean you get any stock. If and when you choose to exercise the option, you would buy the stock with your own money. At what time you can exercise the option (and how many shares you can exercise at a given time) will be specified in the agreement. Usually, you can only exercise a particular share after it has \"\"vested\"\" (according to some vesting schedule), and you lose the ability to exercise after you no longer work for the company (plus perhaps a grace period), or after the option expires.\"","For the employee, this is an identical tax situation to an at-the-money option purchase. They're buying an asset with a specific cost basis. For the company, you are just issuing shares from treasury as authorized... debit cash, credit additional paid-in-capital and equity. There is no tax consequence for this money received.","When your options vest, you will have the option to buy your company's stock at a particular price (the strike price). A big part of the value of the option is the difference between the price that your company's stock is trading at, and the strike price of the option. If the price of the company stock in the market is lower than the strike price of the option, they are almost worthless. I say 'almost' because there is still the possibility that the stock price could go up before the options expire. If your company is big enough that their stock is not only listed on an exchange, but there is an active options market in your company's stock, you could get a feel for what they are worth by seeing what the market is willing to buy or sell similar exchange listed options. Once the options have vested, you now have the right to purchase your company's stock at the specified strike price until the options expire. When you use that right, you are exercising the option. You don't have to do that until you think it is worthwhile buying company stock at that price. If the company pays a dividend, it would probably be worth exercising the options sooner, (options don't receive a dividend). Ultimately you are buying your company's stock (albeit at a discount). You need to see if your company's stock is still a good investment. If you think your company has growth prospects, you might want to hold onto the stock. If you think you'd be better off putting your money elsewhere in the market, sell the stock you acquired at a discount and use the money to invest in something else. If there are any additional benefits to holding on to the stock for a period of time (e.g. selling part to fit within your capital gain allowance for that year) you should factor that into your investment decision, but it shouldn't force you to invest in, or remain invested in something you would otherwise view as too risky to invest in. A reminder of that fact is that some employees of Enron invested their entire retirement plans into Enron stock, so when Enron went bankrupt, these employees not only lost their job but their savings for retirement as well...","The difference is whether your options qualify as incentive stock options (ISOs), or whether they are non-qualifying options. If your options meet all of the criteria for being ISOs (see here), then (a) you are not taxed when you exercise the options. You treat the sale of the underlying stock as a long term capital gain, with the basis being the exercise price (S). There is something about the alternative minimum tax (AMT) as they pertain to these kinds of options. Calculating your AMT basically means that your ISOs are treated as non-qualifying options. So if your exercise bumps you into AMT territory, too bad, so sad. If you exercise earlier, you do get a clock ticking, as you put it, because one of the caveats of having your options qualify as ISOs is that you hold the underlying stock (a) at least two years after you were granted the options and (b) at least one year after you exercise the options.","It is a very complex question to answer and it really depends. However, here are some points to consider and verify with your accountant or tax expert. First, if you exercise now, the downside is that you may be subject to Alternative Minimum Tax (AMT) based on the theoretical gain on the stock (current price minus your strike price) when you file your tax return. The other obvious downside is that if the company goes nowhere, you are stuck with the stock and potentially lose money. The benefit is that the clock starts ticking for long-term capital gains so if you sell after 1 year from the exercise date (or your company gets sold) then the gain would be taxed as long-term capital gain which is taxed at a lower rate. If your company were to get sold, the gains are not necessarily taxed as ordinary income. If it is a cash transaction then most likely (unless you have exercised and held the stock for over a year). However, if it is a stock sale, then you may end up getting stock of the company that acquires your company. In that situation, the tax event would be when you sell the new shares vs. the time of company sale. Finally, whether to exercise or not also depends on how you feel about the prospects of the company. If you think they will be sold or of more value down the road then exercising makes sense. If you are not sure then you could hedge your bets by only exercising a portion of it. You should definitely consult with a financial advisor or a tax consultant regarding these matters.","I assume I can/will need to file an 83(b) election, in order to avoid tax repercussions? What exactly will this save me from? 83(b) election is for restricted stock grants, not for stock purchases. For restricted stocks, you generally pay income tax when they vest. For startups the price difference between the time of the grant and the time of the vesting can be astronomical and by choosing 83(b) you effectively pay income tax on the value of the grant instead of the value of the vest. Then, you only pay capital gains tax on the difference between the sale price and the grant value when you sell. In your case you're exercising an option, i.e.: you're buying a stock, so 83(b) is irrelevant. What you will pay though is the tax on the difference between the strike price and the stock FMV (unless the stocks you end up buying are restricted - which would have been the case if you exercised your options early, but I don't think is going to be the case now). What steps should I take to (in the eyes of the law) guarantee that the board has received my execution notice? The secretary of the board is a notorious procrastinator and can be very unorganized. You should read what the grant contract/company policy says on that. Ask the HR/manager. Usually, a certified letter with return receipt should be enough, but you should verify the format, the address, and the timeframe.","\"Yes, you would pay no taxes at the time of purchase. In fact, this is not uncommon. Many early employees of startup companies are offered stock options that can be \"\"early-exercised\"\" (exercised before they vest). In such a case, an employee who exercises immediately upon grant (and assuming the exercise price of the option is the FMV at the time of grant) purchases the stock at FMV, and there no no tax paid when filing 83(b) election.\"","\"I'm in the US, so there may be idiosyncrasies with UK taxes that I'm not familiar with, but here's how I've always treated stock I get as compensation. Suppose the vested shares are worth X. If I had X in cash, would I buy my company's stock as an investment? Usually the answer is no, not because I think the stock will tank, but because there's better things I can do with that cash (pay off debt, unfortunately). Therefore I sell the shares and use the cash for something else. You have stock options. So suppose the stock value is X but you can buy it for Y. You can either: Therefore, the math is the same. If you had X in cash, would you buy your company's stock as an investment? If so, then option 2 is best, because you can get X in stock for a lower cost. (Option 3 might be better if the gain on the stock will be taxed higher, but they're pretty much equivalent if there's no chance that the stock will drop below Y) If not, then option 4 is best since you will likely get more than X-Y from selling the options that by exercising them and selling the stock (since options have time value). If option 4 is not a possibility, then option 1 is best - you pocket X-Y as \"\"income\"\" and invest it however you see fit.\"","> But, it seems like the pool is adding value out of nowhere! Options don't simply exercise in the void. There are proceeds from the exercise (option-holders must pay into the company). This amount is an additional investment in the company that hasn't precisely materialized yet, but is generally expected to (and is difficult to alter, as it's likely part of an employment contract).","\"When you exercise your options, you come up with cash to buy the shares. This makes you an owner of the company for shares at the share price your options let you have. Ideally, your share price is at a significant discount to what the company is worth. Being a shareholder, you gain from any share price appreciation in a sale. The only thing the \"\"60-day window\"\" applies to is whether you come up with the cash to buy fast enough, or your shares get permanently deleted from the company finances, where everyone else potentially makes more, you make nothing. The sale of the company is based on whenever the sell finalizes, which is between your company and the acquiring company.\"","The main reason to exercise the shares sooner rather than later is that you have to hold the shares for 1 year to gain access to the long-term capital gains rate when you sell your shares. You do not want short-term capital gains rates to apply to these shares when you sell them. If the company is unable to go public and sells privately, you may not have any choice but to sell your shares immediately. If the company goes public you will simply have to hold your shares for a year after you buy them before selling to get the lower tax rate.","In response to your points #1 and #2: In general, yes it is true that capital gains are only subject to half one's marginal rate of income tax. That doesn't mean 50% of the gain is due as tax... rather, it means that if one's marginal tax rate (tax bracket) on the next $10K would have been, say, 32%, then one is taxed on the gain at 16%. (The percentages are examples, not factual.) However, because these are employee stock options, the tax treatment is different than for a capital gain! Details: On the Federal tax return are lines for reporting Security option benefits (Line 101) and Security options deductions (Line 249). The distinction between a regular capital gain and an employee stock option benefits is important. In many cases the net effect may be the same as a capital gain, but the income is characterized differently and there are cases where it matters. Somebody who is about to or has realized employee stock option benefits should seek professional tax advice. In response to your next two points: No, one cannot transfer a capital gain or other investment income into a TFSA immediately after-the-fact in order to receive the tax-free benefits of the TFSA on that income. Only income and gains earned within a TFSA are free from tax – i.e. The options would have to have been in the TFSA before being exercised. Once a gain or other investment income has been realized in a non-sheltered account, it is considered taxable. The horse has already left the barn, so to speak! However, despite the above, there is another strategy available: One can create an offsetting deduction by contributing some of the realized gain into an RRSP. The RRSP contribution, assuming room is available, would yield a tax deduction to offset some tax due on the gain. However, the RRSP only defers income tax; upon withdrawal of funds, ordinary income tax is due (hopefully, at a lower marginal rate in retirement.) There is no minimum amount of time that money or assets have to be inside a TFSA to benefit from the tax-free nature of the account. However, there are limits on how much money you can move into a TFSA in any given year, and many folks weren't aware of the rules. p.s. Let me add once more that this is a case where I suggest seeking professional tax advice.","\"Alternatively you could exercise 12000 shares for $36000 and immediately sell 7200 shares to recover your exercise price. Then you use the remaining 4800 share to pay the exercise price of the remaining 8000 options. Both scenarios are equivalent but may have different fees associated, so it's worth checking the fine print. Tax wise: The above example is \"\"cash neutral before taxes\"\". The taxes associated with these transaction are substantial, so it's highly recommended to talk with a tax adviser. \"\"cash neutral after taxes\"\" depends highly on your specific tax situation.\"","Its important that you carefully read the agreement, if you accept the job. The options agreement will usually specify the vesting schedule, the strike price, and the number of options you will have. When you start vesting options, you can choose to buy stock at the strike price. When you do exercise the options, your employer will likely withhold state and federal income tax. The strike price will hopefully be well below the market price. Unlike stock, when your employment ends, you usually are not able to hold on to your options. There's typically a small window of time in which you can exercise your options. You should read this part of the agreement carefully and plan accordingly.","Does this technically mean that she has to pay AMT on $400,000? Yes. Well, not exactly 400,000. She paid $1 per share, so 390,000. And if so, is %28 the AMT for this sum? (0.28 * $400,000 = $112,000)? Or does she have to include her salary on top of that before calculating AMT? (Suppose in the fake example that her salary is $100,000 after 401k). All her income is included in calculating the AMT, minus the AMT exemption amount. The difference between the regular calculated tax and the calculated AMT is then added to the regular tax. Note that some deductions allowed for the regular calculation are not allowed for the AMT calculation. How does California state tax come into play for this? California has its own AMT rules, and in California any stock option exercise is subject to AMT, unless you sell the stock in the same year. Here's a nice and easy to understand write up on the issue from the FTB. When would she have to pay the taxes for this huge AMT? Tax is due when income is received (i.e.: when you exercise the options). However, most people don't actually pay the tax then, but rather discover the huge tax liability when they prepare to submit their tax return on April 15th. To avoid that, I'd suggest trying to estimate the tax and adjust your withholding using form W4 so that by the end of the year you have enough withheld. Suppose in the worst case, the company goes completely under. Does she get her massive amounts of tax back? Or if it's tax credit, where can I find more info on this? That would be capital loss, and only up to $3K a year of capital loss can be deducted from the general income. So it will continue offsetting other capital gains or being deducted $3K a year until it all clears out. Is there any way to avoid this tax? (Can she file an 83b election?) You asked and answered. Yes, filing 83(b) election is the way to go to avoid this situation. This should be done within 30 days of the grant, and submitted to the IRS, and a copy attached to the tax return of the grant year. However, if you're considering exercise - that ship has likely sailed a long time ago. Any advice for Little Susie on how she can even afford to pay that much tax on something she can't even sell anytime soon? Don't exercise the options? Should she take out a loan? (e.g. I've heard that in the extreme case, you can find angel investors who are willing to pay all your taxes/strike price, but want 50% of your equity? I've also heard that you can sell your illiquid shares on SecondMarket?) Is she likely to get audited by IRS for pulling something like this? You can take a loan secured by shares you own, there's nothing illegal in it. If you transfer your shares - the IRS only cares about the taxes being paid, however that may be illegal depending on the terms and the conditions of the grant. You'll need to talk to a lawyer about your situation. I suggest talking to a licensed tax adviser (EA/CPA licensed in your State) about the specifics concerning your situation.","That is a weird one. Typically one never needs to layout cash to exercise an option. One would only choose to use option 1, if one is seeking to buy the options. This would occur if an employee was leaving a company, would no longer be eligible for the ISO (and thereby forfeit any option grant), and does not want to exercise the options. However, what is not weird is the way income tax works, you are taxed on your income in the US. I assume you are talking about the US here. So if you exercise 10K shares, if under either option, you will be taxed on the profit from those share. Profit = (actual price - strike price) * shares - fees","What you want is a cashless transaction. It's part of the normal process. My employer gives me 1000 options at $1, I never need to come up with the money, the shares are bought and sold in one set of transactions, and if the stock is worth $10, I see $9000 less tax withholding, hit the account. No need for me to come up with that $1000.","What you will probably get is an option to buy, for £10,000, £10,000 worth of stock. If the stock price on the day your option is granted is £2.50, then that's 4,000 shares. Companies rarely grant discounted options, as there are tax disincentives. The benefit of the stock option is that when you exercise it, you still only pay £10,000, no matter what the 4,000 shares are now worth. This is supposed to be an incentive for you to work harder to increase the value of the company. You should also check the vesting schedule. You will typically not be able to exercise all your options for some years, although some portion of it may vest each year.","I've never heard of an employer offering this kind of arrangement before, so my answer assumes there is no special tax treatment that I'm not aware of. Utilizing the clause is probably equivalent to exercising some of your options, selling the shares back to your employer at FMV, and then exercising more options with the proceeds. In this case if you exercise 7500 shares and sell them back at FMV, your proceeds would be 7500 x $5 = $37,500, with which you could exercise the remaining 12,500 options. The tax implications would be (1) short-term capital gains of 7500 x ($5 - $3) = $15,000 and (2) AMT income of 12,500 x ($5 - $3) = $25,000, assuming you don't sell the shares within the calendar year.","If you're talking about ADBE options, that is an American style option, which can be exercised at any time before expiration. You can exercise your options by calling your broker and instructing them to exercise. Your broker will charge you a nominal fee to do so. As an aside, you probably don't want to exercise the option right now. It still has a lot of time value left, which you'll lose if you exercise. Just sell the option if you don't think ADBE will keep going up.","Options that are not worth exercising just expire. Options that are worth exercising are typically exercised automatically as they expire, resulting in a transfer of stock between the entity that issued the option and the entity that holds it. OCC options automatically exercise when they expire if the value of the option exceeds the transaction cost for the stock transfer (1/4 point to 3/4 point depending).","The company may not permit a transfer of these options. If they do permit it, you simply give him the money and he has them issue the options in your name. As a non-public company, they may have a condition where an exiting employee has to buy the shares or let them expire. If non-employees are allowed to own shares, you give him the money to exercise the options and he takes possession of the stock and transfers it to you. Either way, it seems you really need a lawyer to handle this. Whenever this kind of money is in motion, get a lawyer. By the way, the options are his. You mean he must purchase the shares, correct?","To explain the capital gains part of the question, non qualified stock options (NSOs) are always treated like earned income and have payroll taxes withheld. It's advantageous for the company to issue these because they can deduct them as expenses just as they do your salary. Articles talking about capital gains would probably be referring to incentive stock options (ISOs) or possibly even restricted stock units (RSUs). If you were granted the option to buy the stock and/or hold it for a period of time, then the stock options could be treated as capital gains, short-term gains if you held them for less than a year, and long-term gains if you held them for more than a year. This payment for your NSOs is exactly like a cash bonus. The withholding follows the same guidelines. You may wish to look at what this will mean for your annual salary and adjust your W-4 withholding up or down as appropriate depending on whether the 25% federal withholding rate is more or less than what you think your final marginal rate will be with this bonus included in your annual salary.","The vesting date. Look at publication 525, under stock options, where they talk about ESPP: Your basis is equal to the option price at the time you exercised your option and acquired the stock. The timing and amount of pay period deductions do not affect your basis.","The general rule with stock options is that it's best to wait until expiration to exercise them. The rationale depends on a few factors and there are exceptions. Reasons to wait: There would be cases to exercise early: Tax implications should be checked with a professional advisor specific to your situation. In the employee stock option plans that I have personally seen, you get regular income tax assessed between exercise price and current price at the time you exercise. Your tax basis is then set to the current price. You also pay capital gains tax when you eventually sell, which will be long or short term based on the time that you held the stock. (The time that you held the options does not count.) I believe that other plans may be set up differently.","There are two things to consider: taxes - beneficial treatment for long-term holding, and for ESPP's you can get lower taxes on higher earnings. Also, depending on local laws, some share schemes allow one to avoid some or all on the income tax. For example, in the UK £2000 in shares is treated differently to 2000 in cash vesting - restricted stocks or options can only be sold/exercised years after being granted, as long as the employee keeps his part of the contract (usually - staying at the same place of works through the vesting period). This means job retention for the employees, that's why they don't really care if you exercise the same day or not, they care that you actually keep working until the day when you can exercise arrives. By then you'll get more grants you'll want to wait to vest, and so on. This would keep you at the same place of work for a long time because by quitting you'd be forfeiting the grants.","If you sell your shares for more than their value at the time you received them (i.e. you make a profit) then you will be liable for capital gains tax - but only if the profit exceeds your annual allowance (£11,100, in tax year 2015-16). This is unrelated to how you came by the shares in the first place. (Note that there are certain exemptions to this, which includes some employer share schemes.)","So in a sense, I can think of the employees / option-holders as another investor? That makes sense - but many of the examples I'm finding online are still confusing me. Based on the example above, it seems like option-holders would be paying the same exercise price as the VC. Per [Andreesen Horowitz](https://a16z.com/2016/08/24/options-ownership/) this seems uncommon: > The exercise price of employee options — the price per share needed to actually own the shares — is often less than the original issue price paid by the most recent investor, who holds preferred stock. In reality, would option-holders receive, say, 40% (using example above) for their $6m in exercise value due to receiving common stock, with the founder being diluted to even further?","\"You mention \"\"early exercise\"\" in your title, but you seem to misunderstand what early exercise really means. Some companies offer stock options that vest over a number of years, but which can be exercised before they are vested. That is early exercise. You have vested stock options, so early exercise is not relevant. (It may or may not be the case that your stock options could have been early exercised before they vested, but regardless, you didn't exercise them, so the point is moot.) As littleadv said, 83(b) election is for restricted stocks, often from exercising unvested stock options. Your options are already vested, so they won't be restricted stock. So 83(b) election is not relevant for you. A taxable event happen when you exercise. The point of the 83(b) election is that exercising unvested stock options is not a taxable event, so 83(b) election allows you to force it to be a taxable event. But for you, with vested stock options, there is no need to do this. You mention that you want it not to be taxable upon exercise. But that's what Incentive Stock Options (ISOs) are for. ISOs were designed for the purpose of not being taxable for regular income tax purposes when you exercise (although it is still taxable upon exercise for AMT purposes), and it is only taxed when you sell. However, you have Non-qualified Stock Options. Were you given the option to get ISOs at the beginning? Why did your company give you NQSOs? I don't know the specifics of your situation, but since you mentioned \"\"early exercise\"\" and 83(b) elections, I have a hypothesis as to what might have happened. For people who early-exercise (for plans that allow early-exercise), there is a slight advantage to having NQSOs compared to ISOs. This is because if you early exercise immediately upon grant and do 83(b) election, you pay no taxes upon exercise (because the difference between strike price and FMV is 0), and there are no taxes upon vesting (for regular or AMT), and if you hold it for at least 1 year, upon sale it will be long-term capital gains. On the other hand, for ISOs, it's the same except that for long-term capital gains, you have to hold it 2 years after grant and 1 year after exercise, so the period for long-term capital gains is longer. So companies that allow early exercise will often offer employees either NQSOs or ISOs, where you would choose NQSO if you intend to early-exercise, or ISO otherwise. If (hypothetically) that's what happened, then you chose wrong because you got NQSOs and didn't early exercise.\"","Good questions. I can only add that it may be valuable if the company is bought, they may buy the options. Happened to me in previous company.","\"There are a few other items that you should be aware of when getting options: The strike price is usually determined by an independent valuation of the common shares (called a 409a valuation). This should give you a sense on what the options are worth. Obviously you are hoping that the value becomes many multiple of that. There are two kinds in the US: Non-quals (NQO) and Incentive Stock Options (ISOs). The big difference is that when you exercise Non-quals, you have to pay the tax on the difference between the \"\"fair\"\" market value on the shares and what you paid for them (the strike price). This is important because if the company is private, you likely can not sell any shares until it is public. With ISOs, you don't pay any tax (except AMT tax) on the gain until you actually sell the shares. You should know what kind your getting. Some plans allow for early exercise, essentially allowing you to buy the shares early (and given back if you leave before they vest) which helps you establish capital gains treatment earlier as well as avoid AMT if you have ISOs. This is really complicated direction and you would want to talk to a tax professional. And always a good idea to know how many total shares outstanding in the Company. Very few people ask this question but it is helpful for you to understand the overall value of the options.\"","Let's work from the inside out. Options are not stock. Options are a contract that give you the right to own the stock. For options to have value they have to be exercised. Straight line means that each quarter 1/16th of the option grant becomes yours and the company cannot take it away. Four quarters in a year times four years is 16 quarters. 'Grant' means they are giving you the options at no cost to you. 'Nonqualified' means that there is nothing you have to do, or be, in order to get the options. (Some options are only for management.)","Vesting As you may know a stock option is the right to acquire a given amount of stock at a given price. Actually acquiring the stock is referred to as exercising the option. Your company is offering you options over 200,000 shares but not all of those options can be exercised immediately. Initially you will only be able to acquire 25,000 shares; the other 175,000 have conditions attached, the condition in this case presumably being that you are still employed by the company at the specified time in the future. When the conditions attached to a stock option are satisfied that option is said to have vested - this simply means that the holder of the option can now exercise that option at any time they choose and thereby acquire the relevant shares. Dividends Arguably the primary purpose of most private companies is to make money for their owners (i.e. the shareholders) by selling goods and/or services at a profit. How does that money actually get to the shareholders? There are a few possible ways of which paying a dividend is one. Periodically (potentially annually but possibly more or less frequently or irregularly) the management of a company may look at how it is doing and decide that it can afford to pay so many cents per share as a dividend. Every shareholder would then receive that number of cents multiplied by the number of shares held. So for example in 4 years or so, after all your stock options have vested and assuming you have exercised them you will own 200,000 shares in your company. If the board declares a dividend of 10 cents per share you would receive $20,000. Depending on where you are and your exact circumstances you may or may not have to pay tax on this. Those are the basic concepts - as you might expect there are all kinds of variations and complications that can occur, but that's hopefully enough to get you started.","\"As I recall from the documentation presented to me, any gain over the strike price from an ISO stock option counts as a long term capital gain (for tax purposes) if it's held from 2 years from the date of grant and 1 year from the date of exercise. If you're planning to take advantage of that tax treatment, exercising your options now will start that 1-year countdown clock now as well, and grant you a little more flexibility with regards to when you can sell in the future. Of course, no one's renewed the \"\"Bush tax cuts\"\" yet, so the long-term capital gains rate is going up, and eventually it seems they'll want to charge you Medicare on those gains as well (because they can... ), soo, the benefit of this tax treatment is being reduced... lovely time to be investing, innnit?\"","I like C. Ross and MrChrister's advice to not be heavily weighted in one stock over the long run, especially the stock of your employer. I'll add this: One thing you really ought to find out – and this is where your tax advisor is likely able to help – is whether your company's stock options plan use qualified incentive stock options (ISO) or non-qualified stock options (NQO or NSO). See Wikipedia - Incentive stock option for details. From my understanding, only if your plan is a qualified (or statutory) ISO and you hold the shares for at least 1 year of the date of exercise and 2 years from the date of the option grant could your gain be considered a long-term capital gain. As opposed to: if your options are non-qualified, then your gain may be considered ordinary income no matter how long you wait – in which case there's no tax benefit to waiting to cash out. In terms of hedging the risk if you do choose to hold long, here are some ideas: Sell just enough stock at exercise (i.e. taking some tax hit up front) to at least recover your principal, so your original money is no longer at risk, or If your company has publicly listed options – which is unlikely, if they are very small – then you could purchase put options to insure against losses in your stock. Try a symbol lookup at the CBOE. Note: Hedging with put options is an advanced strategy and I suggest you learn more and seek advice from a pro if you want to consider this route. You'll also need to find out if there are restrictions on trading your employer's public stock or options – many companies have restrictions or black-out periods on employee trading, especially for people who have inside knowledge.","\"Many companies (particularly tech companies like Atlassian) grant their employees \"\"share options\"\" as part of their compensation. A share option is the right to buy a share in the company at a \"\"strike price\"\" specified when the option is granted. Typically these \"\"vest\"\" after 1-4 years so long as the employee stays with the company. Once they do vest, the employee can exercise them by paying the strike price - typically they'd do that if the shares are now more valuable. The amount they pay to exercise the option goes to the company and will show up in the $2.3 million quoted in the question.\"","ISOs (incentive stock options) can be closed out in a cashless transaction. Say the first round vests, 25,000 shares. The stock is worth $7 but your option is to buy at $5 as you say. The broker executes and sells, you get $50,000, with no up front money. Edit based on comment below - you know they vest over 4 years, but how long before they expire? It stands to reason the longer you are able to hold them, the better a chance the company succeeds, and the price rises. The article Understanding employer-granted stock options (PDF) offers a nice discussion of different scenarios supporting my answer.","Yes When exercising a stock option you will be buying the stock at the strike price so you will be putting up your money, if you lose that money you can declare it as a loss like any other transaction. So if the stock is worth $1 and you have 10 options with a strike at $0.50 you will spend $500 when you exercise your options. If you hold those shares and the company is then worth $0 you lost $500. I have not verified my answer so this is solely from my understanding of accounting and finance. Please verify with your accountant to be sure.","Stock options represent an option to buy a share at a given price. What you have been offered is the option to buy the company share at a given price ($5) starting a given date (your golden handcuffs aka vesting schedule). If the company's value doubles in 1 year and the shares are liquid (i.e. you can sell them) then you've just made $125k of profit. If the company's value has gone to zero in 1 year then you've lost nothing other than your hopes of getting rich. As others have mentioned, the mechanics of exercising the option and selling the shares can typically be accomplished without any cash involved. The broker will do both in a single transaction and use the proceeds of the sale to pay the cost of buying the shares. You should always at least cover the taxable portion of the transaction and typically the broker will withhold that tax anyways. Otherwise you could find yourself in a position where you have actually lost money due to tax being owed while the shares decline in value below that tax. You don't have to worry about that right now. Again as people have mentioned options will typically expire 10 years from vesting or 90 days from leaving your employment with the company. I'm sure there are some variations on the theme. Make sure you ask and all this should be part of some written contract. I'm sure you can ask to see it if you wish. Also typical is that stock option grants have to be approved by the board which is normally a technicality. Some general advice:","You would not owe any taxes in the 2015 year, unless you got exercised and called away in 2015. The premium would be short term capital gains barring some other exception I'm not aware of, and if you retain a gain on the underlying shares then that would still be long term capital gains. If it gets called in say April 2016, is the premium+profit+dividends all long term capital gains for the year 2016? The profits are long term capital gains and the premium serves to lower your cost basis, dividends have their own conditions so you'll have to do separate research on that, fortunately they'll likely be negligible compared to the potential capital gains and options premium.","American options (like those on ADBE) can be exercised by the holder anytime before expiration. They will be exercised automatically at expiration if they are in the money. However, if there is still time before expiration (as in this case), and they are not extremely in the money, there is probably extrinsic value to the option, and you should sell it, not exercise it. European options are only automatically exercised at expiration, and only if they are in the money. These are usually cash settled on products like SPX or VIX. They can not be exercised before expiration, but can be sold anytime.","Since the 2 existing answers addressed the question as asked. Let me offer a warning. You have 10,000 options at $1. You've worked four years and the options are vested. The stock is worth $101 when you get a job offer (at another company) which you accept. So you put up $10k and buy the shares. At this moment, you put up $10K for stock worth $1.01M, a $1M profit and ordinary income. You got out of the company just in time. For whatever reason, the stock drops to $21 and at tax time you realize the $1M gain was ordinary income, but now the $800k loss is a capital loss, limited to $3000/yr above capital gains. In other words you have $210k worth of stock but a tax bill on $1M. This is not a contrived story, but a common one from the dotcon bubble. It's a warning that 'buy and hold' has the potential to blow up in your face, even if the shares you buy retain some value.","I'm guessing you're talking about options given to employees. The company can issue stock options at whatever strike price it wants. The difference between the strike price and the actual market value is considered income to the employee. You can get the options at $0 strike just as well (although companies generally just give RSUs instead in this case).","\"A company has 100,000 shares and 100,000 unexercised call options (company issued). Share price and strike price both at $1. What country is this related to? I ask because, in the US, most people I know associate a \"\"call\"\" option with the instrument that is equivalent to 100 shares. So 100,000 calls would be 10,000,000 shares, which exceeds the number of shares you're saying the company has. I don't know if that means you pulled the numbers out of thin air, or whether it means you're thinking of a different type of option? Perhaps you meant incentive stock options meant to be given to employees? Each one of those is equivalent to a single share. They just aren't called \"\"call options\"\". In the rest of my answer, I'm going to assume you meant stock options. I assume the fact that these options exist will slow any price increases on the underlying shares due to potential dilution? I don't think the company can just create stock options without creating the underlying shares in the first place. Said another way, a more likely scenario is that company creates 200,000 shares and agrees to float 50% of them while reserving the other 50% as the pool for incentive employee stock. They then choose to give the employees options on the stock in the incentive pool, rather than outright grants of the stock, for various reasons. (One of which is being nice to the employees in regards to taxes since there is no US tax due at grant time if the strike price is the current price of the underlying stock.) An alternative scenario when the company shares are liquidly traded is that the company simply plans to buy back shares from the market in order to give employees their shares when options are exercised. In this case, the company needs the cash on hand, or cash flow to take money from, to buy those shares at current prices. Anyway, in either case, there is no dilution happening WHEN the options get exercised. Any dilution happened before or at the time the options were created. Meaning, the total number of shares in the company was already pre-set at an earlier time. As a result, the fact that the options exist in themselves will not slow price changes on the stock. However, price changes will be impacted by the total float of shares in the company, or the impact to cash flow if the company has to buy shares to redeem its option commitments. This is almost the same thing you're asking about, but it is technically different as to timing. If this is the case, can this be factored into any option pricing models like black-scholes? You're including the effect just by considering the total float of shares and net profits from cash flow when doing your modelling.\"","\"I'd early-exercised 75% of my grant at $5 and (later) exercised the remaining portion at $2. So did you actually pay the money and got \"\"X\"\" unvested shares? I'll be leaving the company; and they'll be unwinding half of the grant, so I'll get some money back, but now the question is: Do they pay me back from the $5 shares or the $2 shares? This would depend on what your contract says on unvested shares. There can be numerous combinations. More Often these are forfeited. i.e. you are not granted the shares. At times if you have paid then the guideline would give the details what would happen; i.e. only half vest and are priced at market and you are forced to encash them.\"","\"Not necessarily. The abbreviation \"\"ESOP\"\" is ambiguous. There are at least 8 variations I know of: You'll find references on Google to each of those, some more than others. For fun you can even substitute the word \"\"Executive\"\" for \"\"Employee\"\" and I'm sure you'll find more. Really. So you may be mistaken about the \"\"O\"\" referring to \"\"options\"\" and thereby implying it must be about options. Or, you may be right. If you participate in such a plan (or program) then check the documentation and then you'll know what it stands for, and how it works. That being said: companies can have either kind of incentive plan: one that issues stock, or one that issues options, with the intent to eventually issue stock in exchange for the option exercise price. When options are issued, they usually do have an expiration date by which you need to exercise if you want to buy the shares. There may be other conditions attached. For instance, whether the plan is about stocks or options, often there is a vesting schedule that determines when you become eligible to buy or exercise. When you buy the shares, they may be registered directly in your name (you might get a fancy certificate), or they may be deposited in an account in your name. If the company is small and private, the former may be the case, and if public, the latter may be the case. Details vary. Check the plan's documentation and/or with its administrators.\"","With the Employee Stock Purchase Plan stock, if you sell it in less than 18 months from exercise, the discount you bought it at (normally 15%) becomes taxable income and included in your W-2.","To me it depends on things like your net worth, debt, and how other assets are invested. Currently you have 25K invested in the company you work for. If you have 100K in student loans, are a renter, and 12K in your 401K, then I would recommend exercising almost all of your options. In that case you have a much to large part of your world wrapped up in your company. If you have 250K in your 401K, own a home and have an emergency fund with no debt then you are fine with letting it ride. You can afford to absorb a loss of 25K without wrecking your net worth. More than likely, you are somewhere in between (just statistics speaking there). So why not exercise some of them now with the purpose of improving your financial situation? Say do a 1/3 now and when they come available. When 401ks were first invented people put almost all of their money in their company stock. They lost just about everything when the company went down in value and were often a victim of layoffs exasperating the issue. This is akin to the same situation. Most financial advisers recommend against putting any 401K money to company stock, or at least limiting the amount.","Now assume these shares are vested, held for at least 1 year, and are then sold for $5 each. Everything I've read implies that the grantee now owes long-term capital gains taxes on the difference, which would be 10k * ($5 - $1). No. That's exactly what the SO is NQ for. Read more on the differences between ISO and NQSO here. Now assume these shares are vested, held for at least 1 year, and are then sold for $5 each. Everything I've read implies that the grantee now owes long-term capital gains taxes on the difference, which would be 10k * ($5 - $1). At this point you no longer have NQSO, you have RSU. If you filed 83(b) when you exercised, then you pay capital gains tax when they vest. If you didn't - its ordinary income to you. NQSO is a red herring here since once exercised they no longer exist. If you didn't file 83(b), then when the stock vests the difference between the FMV at vest and the money you spent on it when exercising (if any) is considered wages and taxed as ordinary income (+FICA etc). From that point the RSU becomes a regular stock investment and the capital gains clock starts ticking.","If you received shares as part of a bonus you needed to pay income tax on the dollar valuse of those shares at the time you received them. This income tax is based on the dollar value of the bonus and has nothing to do with the shares. If you have since sold these shares you will need to report any capital gain or loss you made from their dollar value when you received them. If you made a gain you would need to pay capital gains tax on the profits (if you held them for more than a year you would get a discount on the capital gains tax you have to pay). If you made a loss you can use that capital loss to reduce any other capital gains in that income year, reduce any other income up to $3000 per year, or carry any additional capital loss forward to future income years to reduce any gains or income (up to $3000 per year) you do have in the future.","Having stock options means that you have worked for and rightfully earned a part of the company's capital appreciation. Takeover of the company would indicate someone is interested in the company (something should be valuable). It would be unwise to not strike before the period lapses since the strike price is always lower than market price and takeovers generally increases stock values ... it is capital gains all the way my friend. Good luck. *observations not in professional capacity. pls consult a professional for investment related advice.","In the question you cited, I assumed immediate exercise, that is why you understood that I was talking about 30 days after grant. I actually mentioned that assumption in the answer. Sec. 83(b) doesn't apply to options, because options are not assets per se. It only applies to restricted stocks. So the 30 days start counting from the time you get the restricted stock, which is when you early-exercise. As to the AMT, the ISO spread will be considered AMT income in the year of the exercise, if you file the 83(b). For NQSO it is ordinary income. That's the whole point of the election. You can find more detailed explanation on this website.","This is an old question that has an accepted answer, but it has gotten bumped due to an edit and the answers given are incorrect. I am assuming this means that every other Friday, the company is going into the open public market, buying those shares and then giving it out to the employees. No. Companies will internally hold shares that it intends to offer employees as additional compensation. There are no open market transactions, so the market price of the stock does not change (at least not due to buying pressure). The only net effect is an equivalent expense for the compensation, but that should already be accounted for in the share price as normal operating expenses. These share may come through an initial buyback from the market, but more common is that when companies issue new shares they keep some internally for exactly this situation. If they issued new shares every pay period, it would dilute the existing shares several times a quarter which would be difficult to account for.","The tax cost at election should be zero. The appreciation is all capital gain beyond your basis, which will be the value at election. IRC §83 applies to property received as compensation for services, where the property is still subject to a substantial risk of forfeiture. It will catch unvested equity given to employees. §83(a) stops taxation until the substantial risk of forfeiture abates (i.e. no tax until stock vests) since the item is revocable and not yet truly income. §83(b) allows the taxpayer to make a quick election (up to 30 days after transfer - firm deadline!) to waive the substantial risk of forfeiture (e.g. treat shares as vested today). The normal operation of §83 takes over after election and the taxable income is generally the value of the vested property minus the price paid for it. If you paid fair market value today, then the difference is zero and your income from the shares is zero. The shares are now yours for tax purposes, though not for legal purposes. That means they are most likely a capital asset in your hands, like other stocks you own or trade. The shares will not be treated as compensation income on vesting, and vesting is not a tax matter for elected shares. If you sell them, you get capital gain (with tax dependent on your holding period) over a basis equal to FMV at the election. The appreciation past election-FMV will be capital gain, rather than ordinary income. This is why the §83(b) election is so valuable. It does not matter at this point whether you bought the restricted shares at FMV or at discount (or received them free) - that only affects the taxes upon §83(b) election.","It really depends. If it is offered as compensation (ie in leiu of, or in addition to salary or cash bonus) then it would be reportable income, and if sold later for a profit then that would be taxable as gains. If this share is purchased as an investment at current value then it would be treated like other securities most likely gains realized at sale. Any discount could be considered income but there are some goofy rules surrounding this enacted to prevent tax evasion and some to spur growth. That is the answer in a nut shell. It is far more complicated in reality as there are somewhere around 2000 pages of regulations deal with different exceptions and scenerios.","\"The simplest thing to do here is to speak to your employer about what is allowed. This should be spelt out in your company's \"\"Stock Options Plan\"\" documentation. In particular, this document will include details of the vesting schedule. For example, the schedule may only allow you to exercise 25% in the first year, 25% in the second year, and the remainder in the third year. Technically I can see no reason to prevent you from the mix-and-match approach you are suggesting. However, this may not be the case according to the schedule specification.\"","Stuff I wish I had known, based on having done the following: Obtained employment at a startup that grants Incentive Stock Options (ISOs); Early-exercised a portion of my options when fair market value was very close to my strike price to minimize AMT; made a section 83b) election and paid my AMT up front for that tax year. All this (the exercise and the AMT) was done out of pocket. I've never see EquityZen or Equidate mention anything about loans for your exercise. My understanding is they help you sell your shares once you actually own them. Stayed at said startup long enough to have my exercised portion of these ISOs vest and count as long term capital gains; Tried to sell them on both EquityZen and Equidate with no success, due to not meeting their transaction minimums. Initial contact with EquityZen was very friendly and helpful, and I even got a notice about a potential sale, but then they hired an intern to answer emails and I remember his responses being particularly dismissive, as if I was wasting their time by trying to sell such a small amount of stock. So that didn't go anywhere. Equidate was a little more friendly and was open to the option of pooling shares with other employees to make a sale in order to meet their minimum, but that never happened either. My advice, if you're thinking about exercising and you're worried about liquidity on the secondary markets, would be to find out what the minimums would be for your specific company on these platforms before you plunk any cash down. Eventually brought my request for liquidity back to the company who helped connect me with an interested external buyer, and we completed the transaction that way. As for employer approval - there's really no reason or basis that your company wouldn't allow it (if you paid to exercise then the shares are yours to sell, though the company may have a right of first refusal). It's not really in the company's best interest to have their shares be illiquid on the secondary markets, since that sends a bad signal to potential investors and future employees.","Both you and the Company were probably benefitted by this decision. Specifically an option grant that was not FRV or more would require you to recognize the option as income whether you had exercised it or not. Additionally a host of other 409A tax issues/penalties could have been levied against you as an employee recipient. I certainly appreciate your concern about a change in compensation, but this is one where Corporate America likely saved your bacon.","Assuming that taxes were withheld when you received the options, you would now only owe tax on the profit from the sale of the stock. The cost basis would be whatever you bought the stock for (the strike price of the options in this case), and the profit will be the total amount received from the sale minus the total cost of those shares. Since you bought the stock more than one year ago, you will get taxed at the long-term capital gains rate of 15% (unless you are in the 39.6% tax bracket, in which case the rate is 20%). As with all tax advice on this site, you need to check with a tax specialist when you actually file, but that should give you a rough indication of what your tax liability is.","Par value SHOULD mean that they are offering you the options with a strike price (exercise price) that is equivalent to the current valuation of the company. Note I said SHOULD. As long as you can confirm with HR (or if you're small enough, just ask the CEO) that your grant price is the same as the current valuation of the company's shares, then things are straight. And while it's very unlikely that someone is doing Something Sneaky, it's always possible. As a reference, my recent grant letter said: [Company] (the “Company”) hereby grants you the following Option to purchase shares of its common stock (“Shares”). The terms and conditions of this Option are set forth in the Stock Option Agreement and the [Company] 2013 Stock Incentive Plan (the “Plan”), both of which are attached to and made a part of this document.","\"A little terminology: Grant: you get a \"\"gift\"\" with strings attached. \"\"Grant\"\" refers to the plan (legal contract) under which you get the stock options. Vesting: these are the strings attached to the grant. As long as you're employed by the company, your options will vest every quarter, proportionally. You'll become an owner of 4687 or 4688 options every quarter. Each such vest event means you'd be getting an opportunity to buy the corresponding amount of stocks at the strike price (and not the current market price which may be higher). Buying is called exercising. Exercising a nonqualified option is a taxable event, and you'll be taxed on the value of the \"\"gift\"\" you got. The value is determined by the difference between the strike price (the price at which you have the option to buy the stock) and the actual fair market value of the stock at the time of vest (based on valuations). Options that are vested are yours (depending on the grant contract, read it carefully, leaving the company may lead to forfeiture). Options that are not vested will disappear once you leave the company. Exercised options become stocks, and are yours. Qualified vs Nonqualifed - refers to the tax treatment. Nonqualified options don't have any special treatment, qualified do. 3.02M stocks issued refers to the value of the options. Consider the total valuation of the company being $302M. With $302M value and 3.02M stocks issued, each stock is worth ~$100. Now, in a year, a new investor comes in, and another 3.02M stocks are issued (if, for example, the new investor wants a 50% stake). In this case, there will be 6.04M stocks issued, for 302M value - each stock is worth $50 now. That is called dilution. Your grant is in nominal options, so in case of dilution, the value of your options will go down. Additional points: If the company is not yet public, selling the stocks may be difficult, and you may own pieces of paper that no-one else wants to buy. You will still pay taxes based on the valuations and you may end up paying for these pieces of paper out of your own pocket. In California, it is illegal to not pay salary to regular employees. Unless you're a senior executive of the company (which I doubt), you should be paid at least $9/hour per the CA minimum wages law.\"","Automatic exercisions can be extremely risky, and the closer to the money the options are, the riskier their exercisions are. It is unlikely that the entire account has negative equity since a responsible broker would forcibly close all positions and pursue the holder for the balance of the debt to reduce solvency risk. Since the broker has automatically exercised a near the money option, it's solvency policy is already risky. Regardless of whether there is negative equity or simply a liability, the least risky course of action is to sell enough of the underlying to satisfy the loan by closing all other positions if necessary as soon as possible. If there is a negative equity after trying to satisfy the loan, the account will need to be funded for the balance of the loan to pay for purchases of the underlying to fully satisfy the loan. Since the underlying can move in such a way to cause this loan to increase, the account should also be funded as soon as possible if necessary. Accounts after exercise For deep in the money exercised options, a call turns into a long underlying on margin while a put turns into a short underlying. The next decision should be based upon risk and position selection. First, if the position is no longer attractive, it should be closed. Since it's deep in the money, simply closing out the exposure to the underlying should extinguish the liability as cash is not marginable, so the cash received from the closing out of the position will repay any margin debt. If the position in the underlying is still attractive then the liability should be managed according to one's liability policy and of course to margin limits. In a margin account, closing the underlying positions on the same day as the exercise will only be considered a day trade. If the positions are closed on any business day after the exercision, there will be no penalty or restriction. Cash option accounts While this is possible, many brokers force an upgrade to a margin account, and the ShareBuilder Options Account Agreement seems ambiguous, but their options trading page implies the upgrade. In a cash account, equities are not marginable, so any margin will trigger a margin call. If the margin debt did not trigger a margin call then it is unlikely that it is a cash account as margin for any security in a cash account except for certain options trades is 100%. Equities are convertible to cash presumably at the bid, so during a call exercise, the exercisor or exercisor's broker pays cash for the underlying at the exercise price, and any deficit is financed with debt, thus underlying can be sold to satisfy that debt or be sold for cash as one normally would. To preempt a forced exercise as a call holder, one could short the underlying, but this will be more expensive, and since probably no broker allows shorting against the box because of its intended use to circumvent capital gains taxes by fraud. The least expensive way to trade out of options positions is to close them themselves rather than take delivery.","\"You are thinking about it this way: \"\"The longer I wait to exericse, the more knowledge and information I'll have, thus the more confidence I can have that I'll be able to sell at a profit, minimizing risk. If I exercise early and still have to wait, there may never be a chance I can sell at a profit, and I'll have lost the money I paid to exercise and any tax I had to pay when I exercised.\"\" All of that is true. But if you exercise early: The fair market value of the stock will probably be lower, so you may pay less income tax when you exercise. (This depends on your tax situation. Currently, ISO exercises affect your AMT.) If the company goes through a phase where the value is unusually high, you'll be able to sell and still get the tax benefits because you exercised earlier. You avoid the nightmare scenario where you leave the company (voluntarily or not) and can't afford to exercise your options because of the tax implications. In many realistic cases, exercising earlier means less risk. Imagine if you're working at a company that is privately held and you expect to be there for another year or so. You are very optimistic about the company, but not sure when it will IPO or get acquired and that may be several years off. The fair market value of the stock is low now, but may be much higher in a year. In this case, it makes a lot of sense to exercise now. The cost is low because the fair market value is low so it won't result in a huge tax bill. And then when you leave in a year, you won't have to choose between forfeiting your options or borrowing money to pay the much higher taxes due to exercise them then.\"","Stock awards by employers are treated and taxed as salary. I.e.: you pay ordinary rate income tax, FICA taxes, State taxes etc. The fact that you got your salary in shares and not cash is irrelevant for tax purposes. Once you got the shares and paid your taxes on them, the treatment is the same as if you got the salary and immediately bought the shares. Holding period for capital gains tax purposes starts at the time you paid your taxes on the award, which is the time at which you get full ownership (i.e.: vesting time, for the restricted stocks). When you sell these stocks - you treat the sale as any other stock sale: you check the holding period for capital gains tax rates, and you do not pay (or get refund) any FICA taxes on the sales transaction. So bottom line: You got $10K salary and you bought $10K worth of company stock, and you sold it at $8K half a year later. You have $10K wages income and $2K short term capital loss.","In the first case, if you wish to own the stock, you just exercise the option, and buy it for the strike price. Else, you can sell the option just before expiration, it will be priced very close to its in-the-money value.","I'm assuming this was a cashless exercise because you had income show up on your w-2. When I had a similar situation, I did the following: If you made $50,000 in salary and $10,000 in stock options then your W-2 now says $60,000. You'll record that on your taxes just like it was regular income. You'll also get a form that talks about your stock sale. But remember, you bought and sold the stock within seconds. Your forms will probably look like this: Bought stock: $10,000 Sold stock: $10,000 + $50 commission Total profit (loss): ($50) From the Turbotax/IRS view point, you lost $50 on the sale of the stock because you paid the commission, but the buy and sell prices were identical or nearly identical.","\"Your company actually will most likely use some sort of options pricing model, either a binomial tree or black-scholes to determine the value for their accounting and, subsequently, for their issuance and realization. First, market value of equity will be determined. Given you're private (although \"\"pre-IPO could mean public tomorrow,\"\"), this will likely revolve around a DCF and/or market approaches. Equity value will then be compared to a cap table to create an equity waterfall, where the different classes of stock and the different options will be valued along tranches. Keep in mind there might be liquidation preferences that would make options essentially further out of the money. As such, your formulae above do not quite work. However, as an employee, it might be difficult to determine the necessary inputs to determine value. To estimate it, however, look for three key pieces of information: 1. Current equity value 2. Option strike price 3. Maturity for Options If the strike is close to the current equity value, and the maturity is long enough, and you expect the company to grow, then it would look like the options have more value than not. Equity value can be derived from enterprise value, or by directly determining it via a DCF or guideline multiples. Reliable forecasts should come from looking at the industry, listening to what management is saying, and then your own information as an insider.\"","\"What could the tax issues with the IRS be? I thought (but not totally certain) that the tax treatment of an ISO option was based on difference between exercise price and FMV at the time of the sale. This is an accounting issue. There were times not so long ago that companies actually did these things on purpose, to boost the stock grant values for their employees (especially senior employees). They would give a grant but date it with an earlier date with a more favorable valuation. This is called \"\"backdating\"\", and it brought companies down and CEOs into criminal courts. In addition, only reasonable compensation is allowed as a deduction for the company, and incorrectly set strike price may be deemed unreasonable. Thus, the deduction the company would take for your compensation can be denied, leading to loss of tax benefit (this was also a weapon used by the IRS at the time against companies doing backdating). Last but not least, company that has intentions of going public cannot allow itself such a blatant disregard of the accounting rules. Even if the mistake was not made on purpose (as it sounds), it is a mistake that has to be corrected. What should I take into consideration to determine whether a 27% increase in shares is a fair exchange for an increase in 270% increase in strike price. Did you know the strike price when you signed the contract? Was it a consideration for you? For most people, the strike price is determined at the board approval, since the valuations are not public and are not disclosed before you actually join, which is already after you've agreed to the terms. So basically, you agreed to get 100 sheets of toilet paper, and instead getting 127 sheets. So you're getting 27 sheets more than you initially agreed to. Why are you complaining? In other words, options are essentially random numbers which are quite useless. By the time you get to exercise them, they'll be diluted through a bunch of additional financing rounds, and their value will be determined for real only after the IPO, or at least when your company's stocks are trading OTC with some reasonable volume. Until then - it's just a number with not much of a meaning. The FMV does matter for early exercise and 83(b) election, if that is an option, but even then - I doubt you can actually negotiate anything.\"","It's still the purchase price or the price at which the shares are purchased or granted. This Investopedia article describes how the price is used for tax purposes: The amount that must be declared [for tax purposes] is determined by subtracting the original purchase or exercise price of the stock (which may be zero) from the fair market value of the stock as of the date that the stock becomes fully vested. Restricted stock awards are similar to stock options. The employer promises to grant the employee a certain number of shares upon the completion of the vesting schedule. The price at which the shares are purchased (or granted, if the price is zero) is the exercise price.","You are the one lending yourself the shares to sell;you purchase the stock at market price and sell at the strike price of the option to the put seller when you exercise the option.","\"The other two answers seem basically correct, but I wanted to add on thing: While you can exercise an \"\"American style\"\" option at any time, it's almost never smart to do so before expiration. In your example, when the underlying stock reaches $110, you can theoretically make $2/share by exercising your option (buying 100 shares @ $108/share) and immediately selling those 100 shares back to the market at $110/share. This is all before commission. In more detail, you'll have these practical issues: You are going to have to pay commissions, which means you'll need a bigger spread to make this worthwhile. You and those who have already answered have you finger on this part, but I include it for completeness. (Even at expiration, if the difference between the last close price and the strike price is pretty close, some \"\"in-the-money\"\" options will be allowed to expire unexercised when the holders can't cover the closing commission costs.) The market value of the option contract itself should also go up as the price of the underlying stock goes up. Unless it's very close to expiration, the option contract should have some \"\"time value\"\" in its market price, so, if you want to close your position at this point, earlier then expiration, it will probably be better for you to sell the contract back to the market (for more money and only one commission) than to exercise and then close the stock position (for less money and two commissions). If you want to exercise and then flip the stock back as your exit strategy, you need to be aware of the settlement times. You probably are not going to instantly have those 100 shares of stock credited to your account, so you may not be able to sell them right away, which could leave you subject to some risk of the price changing. Alternatively, you could sell the stock short to lock in the price, but you'll have to be sure that your brokerage account is set up to allow that and understand how to do this.\"","You likely received the shares as ordinary income for services of $10k, since they withheld taxes at granting. Separately, you likely had a short term capital loss on sale of $2k, since your holding period seems to have been under one year.","Assuming you purchased shares that were granted at a discount under the ESPP the 50% exemption would not apply. It's pretty unusual to see a US parent company ESPP qualify for the 110(1)(d) exemption, as most US plans provide for a discount","\"I don't think its a taxable event since no income has been constructively received (talking about the RSU shareholders here). I believe you're right with the IRC 1033, and the basis of the RSU is the basis of the original stock option (probably zero). Edit: see below. However, once the stock becomes vested - then it is a taxable event (not when the cash is received, but when the chance of forfeiture diminishes, even if the employee doesn't sell the stock), and is an ordinary income, not capital. That is my understanding of the situation, do not consider it as a tax advice in any way. I gave it a bit more though and I don't think IRC 1033 is relevant. You're not doing any exchange or conversion here, because you didn't have anything to convert to begin with, and don't have anything after the \"\"conversion\"\". Your ISO's are forfeited and no longer available, basically - you treat them as you've never had them. What happened is that you've received RSU's, and you treat them as a regular RSU grant, based on its vesting schedule. The tax consequences are exactly as I described in my original response: you recognize ordinary income on the vested stocks, as they vest. Your basis is zero (i.e.: the whole FMV of the stock at the time of vesting is your ordinary income). It should also be reflected in your W2 accordingly.\"","\"It depends on how big the dilution is. Could be a good trade. Do the math yourself, many times nobody else has as all the employees think they are going to get rich because \"\"options\"\" :)\"","This may be a good or a bad deal, depending on the fair market value (FMV) of the stock at the time of exercise. Let's assume the FMV is $6, which is the break even point. In general this would probably be treated as two transactions. So overall you would be cash neutral, but your regular tax income would be increased by $30,000 and your AMT income by $60,000.","These are treasury stocks allocated to the plan. If necessary, a company issues new shares (depending on a company it may require shareholders or only board approval).","the short answer is: No. you do not HAVE to pay $125,000.00 at the end of your first year. that is only the amount IF you decide to exercise. *fine print: But if you leave or get let go (which happens quite frequently at top tier Silicon Valley firms), you lose anything that you don't exercise. you're basically chained by a pair of golden handcuffs. in other words, you're stuck with the company until a liquidation event such as IPO or secondary market selling (you can expect to spend a few years before getting anything out of your stocks) Now, it's hard to say whether or not to exercise at that time, especially given we don't know the details of the company. you only should exercise if you foresee your quitting, anticipate getting fired, AND you strongly feel that stock price will keep going up. if you're in SF bay, i believe you have 10 years until your options expire (at which point they are gone forever, but that's 10 years and usually companies IPO well within 7 years). i would recommend you get a very good tax advisor (someone that understands AMT and stock options tax loopholes/rules like the back of their hand). I'm going to take a long shot and assume that you got an amazing offer and that you got a massive amount of ISOs from them. so i'll give this as an advice - first, congrats on owning a lot on paper today if you're still there. you chose to be an early employee at a good tech company. However, you should be more worried about AMT (alternative min tax). you will get enslaved by the IRS if you exercise your shares and can't pay the AMT. suppose, in your fictional scenario, your stock options increase 2x, on paper. you now own $1 Mil in options. but you would be paying $280000 in taxes if you chose to exercise them right now. Now, unless you can sell that IMMEDIATELY on the secondary market, i would highly advise you not to exercise right now. only exercise your ISOs when you can turn around and sell them (either waiting for IPO, or if company offers secondary market approved trading).","In the real world, there are only two times you'll see that 5% become worth anything - ie, something you can exchange for cash - 1) if another company buys them; (2) if they go public. If neither of these things happen, you cannot do anything with the stock or stock options that you own.","\"I've bought ISO stock over they years -- in NYSE traded companies. Every time I've done so, they've done what's called \"\"sell-to-cover\"\". And the gubmint treats the difference between FMV and purchase price as if it's part of your salary. And for me, they've sold some stock extra to pay estimated taxes. So, if I got this right... 20,000 shares at $3 costs you 60,000 to buy them. In my sell-to-cover at 5 scenario: did I get that right? Keeping only 4,000 shares out of 20,000 doesn't feel right. Maybe because I've always sold at a much ratio between strike price and FMV. Note I made some assumptions: first is that the company will sell some of the stock to pay the taxes for you. Second is your marginal tax rate. Before you do anything check these. Is there some reason to exercise immediately? I'd wait, personally.\"","ESPP is common among US companies, often with a framework similar to your outline. In the US, some ESPPs allow sales of shares to be considered qualifying (subject to capital gains rather than ordinary income tax) if they are sold at least 2 years after the enrollment date and at least 1 year after the purchase date. These details can vary from one plan to another and will be stated in the company's ESPP enrollment documents. Do look at the high and low values of the stock over the last year. If it swings up and down more than 15% (or whatever the discount is), then that risk should be a factor in your decision. If the stock is trending upward over the long term and you are confident in the durability of the company, then you might favor holding.","The answer to your question as asked is no. Call options, even those issued by the company, cannot create new shares unless they are employee stock options. Company-issued warrants, on the other hand, can create new shares.","\"The shares are \"\"imputed income\"\" / payment in kind. You worked in the UK, but are you a \"\"US Person\"\"? If not, you should go back to payroll with this query as this income is taxable in the UK. It is important you find out on what basis they were issued. The company will have answers. Where they aquired at a discount to fair market value ? Where they purchased with a salary deduction as part of a scheme ? Where they acquired by conversion of employee stock options ? If you sell the shares, or are paid dividends, then there will be tax withheld.\"","\"No, because you didn't lose anything. When you exercise ISO \"\"at loss\"\" you're buying stock without a discount, that's it.\"","Fidelity has a good explanation of Restricted Stock Awards: For grants that pay in actual shares, the employee’s tax holding period begins at the time of vesting, and the employee’s tax basis is equal to the amount paid for the stock plus the amount included as ordinary compensation income. Upon a later sale of the shares, assuming the employee holds the shares as a capital asset, the employee would recognize capital gain income or loss; whether such capital gain would be a short- or long-term gain would depend on the time between the beginning of the holding period at vesting and the date of the subsequent sale. Consult your tax adviser regarding the income tax consequences to you. So, you would count from vesting for long-term capital gains purposes. Also note the point to include the amount of income you were considered to have earned as a result of the original vesting [market value then - amount you paid]. (And of course, you reported that as income in 2015/2016, right?) So if you had 300 shares of Stock ABC granted you in 2014 for a price of $5/share, and in 2015 100 of those shares vested at FMV $8/share, and in 2016 100 of those shares vested, current FMV $10/share, you had $300 in income in 2015 and $500 of income in 2016 from this. Then in 2017 you sold 200 shares for $15/share:","Do you simply get call options you can sell on an options exchange? No, you don't get call options that you can sell on an options exchange. Rather, you get rights that you can (generally) sell on the stock exchange. The right issue is in essence a call option – in that it behaves like one, but it is not considered a standardized option contract. is there a special exchange where such rights issues are traded? No. It will normally be done on the stock exchange.","A lot may depend on the nature of a buyout, sometimes it's is for stock and cash, sometimes just stock, or in the case of this google deal, all cash. Since that deal was used, we'll discuss what happens in a cash buyout. If the stock price goes high enough before the buyout date to put you in the money, pull the trigger before the settlement date (in some cases, it might be pulled for you, see below). Otherwise, once the buyout occurs you will either be done or may receive adjusted options in the stock of the company that did the buyout (not applicable in a cash buyout). Typically the price will approach but not exceed the buyout price as the time gets close to the buyout date. If the buyout price is above your option strike price, then you have some hope of being in the money at some point before the buyout; just be sure to exercise in time. You need to check the fine print on the option contract itself to see if it had some provision that determines what happens in the event of a buyout. That will tell you what happens with your particular options. For example Joe Taxpayer just amended his answer to include the standard language from CBOE on it's options, which if I read it right means if you have options via them you need to check with your broker to see what if any special exercise settlement procedures are being imposed by CBOE in this case.","\"An option without the vesting period and the price at which one can exercise the option is of not much value. If vesting is determined by board, then at any given point in time they can change the vesting period to say 3, 5, 10 years any number. The other aspect is at what price you are allowed to exercise the option, ie if the stock is of value 10, you may be given an option to buy this at 10, 20 or 100. This has to be stated upfront for you to know the real value. On listing if the value is say 80, then if you have the option to exercise at 10, or 20 you would make money, else at 100 you loose money and hence choose not to exercise the option. However your having stuck around the company for \"\"x\"\" years in anticipation of making money would go waste. Without a vesting period or the price to exercise the option, they are pretty much meaningless and would depend on the goodwill of the founders\"","\"You were probably not given stock, but stock options. Those options have a strike price and you can do some more research on them if needed. Lets assume that you were given 5K shares at a strike of 20, and they vest 20% per year. Assume the same thing in your second year and you are going to leave in year three. You would have 2K shares from your year 1 grant, and 1K shares from your year 2 grant, so 2K total. If you leave no more shares would be vested. If you leave you have one of two options: To complicate matters subsequent grants may have different strike prices, so perhaps year two grant is at $22 per share. However, in pre-public companies that is not likely the case. For a bit of history, I worked at a pre-ipo company and we were all going to get rich. I was given generous grants, but decided to leave. I really wanted to buy my options but simply didn't have the money. Shortly after I left the company folded, so the money would have been thrown away anyway. When a company is private the motivate their employees with tales of riches, but they are not required to disclose financial data. This company did a very good job of convincing employees that all was fine, when it wasn't. Also I received options in a publicly traded company. Myself and other employees received options that were \"\"underwater\"\" or worth far less than the strike price. You could let them expire so one did not owe money, but they were worthless. Hopefully that answers your question.\"","Your three options are: Options 2 and 3 are obviously identical (other than transaction costs), so if you want to keep the stock, go for option 1, otherwise, go for option 3 since you have the same effect as option 2 with no transaction costs. The loss will likely also offset some of the other short term gains you mentioned.","Note that you're asking about withholding, not about taxing. Withholding doesn't mean this is exactly the tax you'll pay: it means they're withholding a certain amount to make sure you pay taxes on it, but the tax bill at the end of the year is the same regardless of how you choose to do the withholding. Your tax bill may be higher or lower than the withholding amount. As far as tax rate, that will be the same regardless - you're just moving the money from one place to the other. The only difference would be that your tax is based on total shares under the plan - meaning that if you buy 1k shares, for example, at $10, so $1,500 discounted income, if you go the payroll route you get (say) $375 withheld. If you go the share route, you either get $375 worth of stock (so 38 shares) withheld (and then you would lose out on selling that stock, meaning you don't get quite as much out of it at the end) or you would ask them to actually buy rather more shares to make up for it, meaning you'd have a slightly higher total gain. That would involve a slightly higher tax at the end of it, of course. Option 1: Buy and then sell $10000 worth, share-based withholding. Assuming 15% profit, and $10/share at both points, then buy/sell 1000 shares, $1500 in profit to take into account, 38 shares' worth (=$380) withheld. You put in $8500, you get back $9620, net $1120. Option 2: Buy and then sell $13500 worth, share based withholding. Same assumptions. You make about $2000 in pre-tax profit, meaning you owe about $500 in tax withholding. Put in $11475, get back $13000, net $1525. Owe 35% more tax at the end of the year, but you have the full $1500 to spend on whatever you are doing with it. Option 3: Buy and then sell $1000 worth, paycheck withholding. You get the full $10000-$8500 = $1500 up front, but your next paycheck is $375 lighter. Same taxes as Option 1 at the end of the year.","Non-qualified stock options are like regular incentive stock options but without the preferential treatments that ISOs get: Companies like to give NQSOs because they can claim a tax deduction (i.e. a loss) for that difference between exercise price and market price (that you have to report as income).","An option gives you the legal right to buy stock. However, you cannot exercise a stock option unless you have the ability to buy the stock. In the United States, securities not fully registered with the SEC for public sale cannot be purchased except by qualified investors.","The difference is ordinary income. If the price drops and you sell for exactly what you paid, you have an income of D and a capital loss of D which usually cancel each other, but not always. For example, if you already have over $3000 in losses, this loss won't help you, it will carry forward. The above changes a bit if you hold the stock for 2 years after the beginning of the purchase period. If sold between your purchase price and fair market the day you bought, the gain is only the difference, no gain to fair market + loss. Pretty convoluted. Your company should have provided you with a brief FAQ / Q&A to explain this. My friends at Fairmark have an article that explains the ESPP process clearly, Tax Reporting for Qualifying Dispositions of ESPP Shares.","\"Okay, I'm going to give you my opinion based on experience; not any technical understanding. The options - by themselves - are pretty meaningless in terms of determining their value. The business plan going forward, their growth expectations, the additional options to be authorized, the additional preferred stock offers they anticipate, even current estimated value of the company are some of the pieces of data you will be needing. I also want to say something cynical, like \"\"to hell with the stock options give me cold hard\"\" but that's just me. (My experience two-times so far has shown stock options to be worth very very little.)\"","Does this make sense? I'm concerned that by buying shares with post tax income, I'll have ended up being taxed twice or have increased my taxable income. ... The company will then re-reimburse me for the difference in stock price between the vesting and the purchase share price. Sure. Assuming you received a 100-share RSU for shares worth $10, and your marginal tax rate is 30% (all made up numbers), either: or So you're in the same spot either way. You paid $300 to get $1,000 worth of stock. Taxes are the same as well. The full value of the RSU will count as income either way, and you'll either pay tax on the gains of the 100 shares in your RSU our you'll pay tax on gains on the 70 shares in your RSU and the 30 shares you bought. Since they're reimbursing you for any difference the cost basis will be the same (although you might get taxed on the reimbursement, but that should be a relatively small amount). This first year I wanted to keep all of the shares, due to tax reasons and because believe the share price will go up. I don't see how this would make a difference from a tax standpoint. You're going to pay tax on the RSU either way - either in shares or in cash. how does the value of the shares going up make a difference in tax? Additionally I'm concerned that by doing this I'm going to be hit by my bank for GBP->USD exchange fees, foreign money transfer charges, broker purchase fees etc. That might be true - if that's the case then you need to decide whether to keep fighting or decide if it's worth the transaction costs.","There's no best strategy. Options are just pieces of paper, and if the stock price goes below the strike price - they're worthless. Stocks are actual ownership share, whatever the price is - that's what they're worth. So unless you expect the company stock prices to sky-rocket soon, RSU will probably provide better value. You need to do some math and decide whether in your opinion the stock growth in the next few years justifies betting on ESOP. You didn't say what country you're from, but keep in mind that stock options and RSUs are taxed differently and that can affect your end result as well.","Many companies actually just issue new shares for employee compensation instead of buying back existing ones. So actually, the share price should go down because the same value is now diluted over more shares. In addition, this would not necessarily affect companies with many employees than those with fewer employees because companies with more employees tend to be bigger and thus have more shares (among which the change in demand would be distributed). Also, I think many companies do not issue shares to employees every pay day, but just e.g. once every quarter."],"string":"[\n \"Options granted by an employer to an employee are generally different that the standardized options that are traded on public stock option exchanges. They may or may not have somewhat comparable terms, but generally the terms are fairly different. As a holder of an expiring employee option, you can only choose to exercise it by paying the specified price and receiving the shares, or not. It is common that the exercise system will allow you to exercise all the shares and simultaneously sell enough of the acquired shares to cover the option cost of all the shares, thus leaving you owning some of the stock without having to spend any cash. You will owe taxes on the gain on exercise, regardless of what you do with the stock. If you want to buy publicly-traded options, you should consider that completely separately from your employer options other than thinking about how much exposure you have to your company situation. It is very common for employees to be imprudently overexposed to their company's stock (through direct ownership or options).\",\n \"The option is exercised. The option is converted into shares. That is an optional condition in closing that contract, hence why they are called options.\",\n \"\\\"An option is a financial instrument instrument that gives you the right, but not the obligation, to do some transaction in the future at a given price. An employee stock option is a kind of \\\"\\\"call option\\\"\\\" -- it gives you the right, but not the obligation, to buy the stock at a certain price (the \\\"\\\"exercise price\\\"\\\", usually set as the price of the stock when the option was granted). The idea is that you would \\\"\\\"exercise\\\"\\\" the option (buy the stock at the given price as provided by the option), if the value of the stock is higher than the exercise price, and not if it is lower. The option is gifted to you. But that does not mean you get any stock. If and when you choose to exercise the option, you would buy the stock with your own money. At what time you can exercise the option (and how many shares you can exercise at a given time) will be specified in the agreement. Usually, you can only exercise a particular share after it has \\\"\\\"vested\\\"\\\" (according to some vesting schedule), and you lose the ability to exercise after you no longer work for the company (plus perhaps a grace period), or after the option expires.\\\"\",\n \"For the employee, this is an identical tax situation to an at-the-money option purchase. They're buying an asset with a specific cost basis. For the company, you are just issuing shares from treasury as authorized... debit cash, credit additional paid-in-capital and equity. There is no tax consequence for this money received.\",\n \"When your options vest, you will have the option to buy your company's stock at a particular price (the strike price). A big part of the value of the option is the difference between the price that your company's stock is trading at, and the strike price of the option. If the price of the company stock in the market is lower than the strike price of the option, they are almost worthless. I say 'almost' because there is still the possibility that the stock price could go up before the options expire. If your company is big enough that their stock is not only listed on an exchange, but there is an active options market in your company's stock, you could get a feel for what they are worth by seeing what the market is willing to buy or sell similar exchange listed options. Once the options have vested, you now have the right to purchase your company's stock at the specified strike price until the options expire. When you use that right, you are exercising the option. You don't have to do that until you think it is worthwhile buying company stock at that price. If the company pays a dividend, it would probably be worth exercising the options sooner, (options don't receive a dividend). Ultimately you are buying your company's stock (albeit at a discount). You need to see if your company's stock is still a good investment. If you think your company has growth prospects, you might want to hold onto the stock. If you think you'd be better off putting your money elsewhere in the market, sell the stock you acquired at a discount and use the money to invest in something else. If there are any additional benefits to holding on to the stock for a period of time (e.g. selling part to fit within your capital gain allowance for that year) you should factor that into your investment decision, but it shouldn't force you to invest in, or remain invested in something you would otherwise view as too risky to invest in. A reminder of that fact is that some employees of Enron invested their entire retirement plans into Enron stock, so when Enron went bankrupt, these employees not only lost their job but their savings for retirement as well...\",\n \"The difference is whether your options qualify as incentive stock options (ISOs), or whether they are non-qualifying options. If your options meet all of the criteria for being ISOs (see here), then (a) you are not taxed when you exercise the options. You treat the sale of the underlying stock as a long term capital gain, with the basis being the exercise price (S). There is something about the alternative minimum tax (AMT) as they pertain to these kinds of options. Calculating your AMT basically means that your ISOs are treated as non-qualifying options. So if your exercise bumps you into AMT territory, too bad, so sad. If you exercise earlier, you do get a clock ticking, as you put it, because one of the caveats of having your options qualify as ISOs is that you hold the underlying stock (a) at least two years after you were granted the options and (b) at least one year after you exercise the options.\",\n \"It is a very complex question to answer and it really depends. However, here are some points to consider and verify with your accountant or tax expert. First, if you exercise now, the downside is that you may be subject to Alternative Minimum Tax (AMT) based on the theoretical gain on the stock (current price minus your strike price) when you file your tax return. The other obvious downside is that if the company goes nowhere, you are stuck with the stock and potentially lose money. The benefit is that the clock starts ticking for long-term capital gains so if you sell after 1 year from the exercise date (or your company gets sold) then the gain would be taxed as long-term capital gain which is taxed at a lower rate. If your company were to get sold, the gains are not necessarily taxed as ordinary income. If it is a cash transaction then most likely (unless you have exercised and held the stock for over a year). However, if it is a stock sale, then you may end up getting stock of the company that acquires your company. In that situation, the tax event would be when you sell the new shares vs. the time of company sale. Finally, whether to exercise or not also depends on how you feel about the prospects of the company. If you think they will be sold or of more value down the road then exercising makes sense. If you are not sure then you could hedge your bets by only exercising a portion of it. You should definitely consult with a financial advisor or a tax consultant regarding these matters.\",\n \"I assume I can/will need to file an 83(b) election, in order to avoid tax repercussions? What exactly will this save me from? 83(b) election is for restricted stock grants, not for stock purchases. For restricted stocks, you generally pay income tax when they vest. For startups the price difference between the time of the grant and the time of the vesting can be astronomical and by choosing 83(b) you effectively pay income tax on the value of the grant instead of the value of the vest. Then, you only pay capital gains tax on the difference between the sale price and the grant value when you sell. In your case you're exercising an option, i.e.: you're buying a stock, so 83(b) is irrelevant. What you will pay though is the tax on the difference between the strike price and the stock FMV (unless the stocks you end up buying are restricted - which would have been the case if you exercised your options early, but I don't think is going to be the case now). What steps should I take to (in the eyes of the law) guarantee that the board has received my execution notice? The secretary of the board is a notorious procrastinator and can be very unorganized. You should read what the grant contract/company policy says on that. Ask the HR/manager. Usually, a certified letter with return receipt should be enough, but you should verify the format, the address, and the timeframe.\",\n \"\\\"Yes, you would pay no taxes at the time of purchase. In fact, this is not uncommon. Many early employees of startup companies are offered stock options that can be \\\"\\\"early-exercised\\\"\\\" (exercised before they vest). In such a case, an employee who exercises immediately upon grant (and assuming the exercise price of the option is the FMV at the time of grant) purchases the stock at FMV, and there no no tax paid when filing 83(b) election.\\\"\",\n \"\\\"I'm in the US, so there may be idiosyncrasies with UK taxes that I'm not familiar with, but here's how I've always treated stock I get as compensation. Suppose the vested shares are worth X. If I had X in cash, would I buy my company's stock as an investment? Usually the answer is no, not because I think the stock will tank, but because there's better things I can do with that cash (pay off debt, unfortunately). Therefore I sell the shares and use the cash for something else. You have stock options. So suppose the stock value is X but you can buy it for Y. You can either: Therefore, the math is the same. If you had X in cash, would you buy your company's stock as an investment? If so, then option 2 is best, because you can get X in stock for a lower cost. (Option 3 might be better if the gain on the stock will be taxed higher, but they're pretty much equivalent if there's no chance that the stock will drop below Y) If not, then option 4 is best since you will likely get more than X-Y from selling the options that by exercising them and selling the stock (since options have time value). If option 4 is not a possibility, then option 1 is best - you pocket X-Y as \\\"\\\"income\\\"\\\" and invest it however you see fit.\\\"\",\n \"> But, it seems like the pool is adding value out of nowhere! Options don't simply exercise in the void. There are proceeds from the exercise (option-holders must pay into the company). This amount is an additional investment in the company that hasn't precisely materialized yet, but is generally expected to (and is difficult to alter, as it's likely part of an employment contract).\",\n \"\\\"When you exercise your options, you come up with cash to buy the shares. This makes you an owner of the company for shares at the share price your options let you have. Ideally, your share price is at a significant discount to what the company is worth. Being a shareholder, you gain from any share price appreciation in a sale. The only thing the \\\"\\\"60-day window\\\"\\\" applies to is whether you come up with the cash to buy fast enough, or your shares get permanently deleted from the company finances, where everyone else potentially makes more, you make nothing. The sale of the company is based on whenever the sell finalizes, which is between your company and the acquiring company.\\\"\",\n \"The main reason to exercise the shares sooner rather than later is that you have to hold the shares for 1 year to gain access to the long-term capital gains rate when you sell your shares. You do not want short-term capital gains rates to apply to these shares when you sell them. If the company is unable to go public and sells privately, you may not have any choice but to sell your shares immediately. If the company goes public you will simply have to hold your shares for a year after you buy them before selling to get the lower tax rate.\",\n \"In response to your points #1 and #2: In general, yes it is true that capital gains are only subject to half one's marginal rate of income tax. That doesn't mean 50% of the gain is due as tax... rather, it means that if one's marginal tax rate (tax bracket) on the next $10K would have been, say, 32%, then one is taxed on the gain at 16%. (The percentages are examples, not factual.) However, because these are employee stock options, the tax treatment is different than for a capital gain! Details: On the Federal tax return are lines for reporting Security option benefits (Line 101) and Security options deductions (Line 249). The distinction between a regular capital gain and an employee stock option benefits is important. In many cases the net effect may be the same as a capital gain, but the income is characterized differently and there are cases where it matters. Somebody who is about to or has realized employee stock option benefits should seek professional tax advice. In response to your next two points: No, one cannot transfer a capital gain or other investment income into a TFSA immediately after-the-fact in order to receive the tax-free benefits of the TFSA on that income. Only income and gains earned within a TFSA are free from tax – i.e. The options would have to have been in the TFSA before being exercised. Once a gain or other investment income has been realized in a non-sheltered account, it is considered taxable. The horse has already left the barn, so to speak! However, despite the above, there is another strategy available: One can create an offsetting deduction by contributing some of the realized gain into an RRSP. The RRSP contribution, assuming room is available, would yield a tax deduction to offset some tax due on the gain. However, the RRSP only defers income tax; upon withdrawal of funds, ordinary income tax is due (hopefully, at a lower marginal rate in retirement.) There is no minimum amount of time that money or assets have to be inside a TFSA to benefit from the tax-free nature of the account. However, there are limits on how much money you can move into a TFSA in any given year, and many folks weren't aware of the rules. p.s. Let me add once more that this is a case where I suggest seeking professional tax advice.\",\n \"\\\"Alternatively you could exercise 12000 shares for $36000 and immediately sell 7200 shares to recover your exercise price. Then you use the remaining 4800 share to pay the exercise price of the remaining 8000 options. Both scenarios are equivalent but may have different fees associated, so it's worth checking the fine print. Tax wise: The above example is \\\"\\\"cash neutral before taxes\\\"\\\". The taxes associated with these transaction are substantial, so it's highly recommended to talk with a tax adviser. \\\"\\\"cash neutral after taxes\\\"\\\" depends highly on your specific tax situation.\\\"\",\n \"Its important that you carefully read the agreement, if you accept the job. The options agreement will usually specify the vesting schedule, the strike price, and the number of options you will have. When you start vesting options, you can choose to buy stock at the strike price. When you do exercise the options, your employer will likely withhold state and federal income tax. The strike price will hopefully be well below the market price. Unlike stock, when your employment ends, you usually are not able to hold on to your options. There's typically a small window of time in which you can exercise your options. You should read this part of the agreement carefully and plan accordingly.\",\n \"Does this technically mean that she has to pay AMT on $400,000? Yes. Well, not exactly 400,000. She paid $1 per share, so 390,000. And if so, is %28 the AMT for this sum? (0.28 * $400,000 = $112,000)? Or does she have to include her salary on top of that before calculating AMT? (Suppose in the fake example that her salary is $100,000 after 401k). All her income is included in calculating the AMT, minus the AMT exemption amount. The difference between the regular calculated tax and the calculated AMT is then added to the regular tax. Note that some deductions allowed for the regular calculation are not allowed for the AMT calculation. How does California state tax come into play for this? California has its own AMT rules, and in California any stock option exercise is subject to AMT, unless you sell the stock in the same year. Here's a nice and easy to understand write up on the issue from the FTB. When would she have to pay the taxes for this huge AMT? Tax is due when income is received (i.e.: when you exercise the options). However, most people don't actually pay the tax then, but rather discover the huge tax liability when they prepare to submit their tax return on April 15th. To avoid that, I'd suggest trying to estimate the tax and adjust your withholding using form W4 so that by the end of the year you have enough withheld. Suppose in the worst case, the company goes completely under. Does she get her massive amounts of tax back? Or if it's tax credit, where can I find more info on this? That would be capital loss, and only up to $3K a year of capital loss can be deducted from the general income. So it will continue offsetting other capital gains or being deducted $3K a year until it all clears out. Is there any way to avoid this tax? (Can she file an 83b election?) You asked and answered. Yes, filing 83(b) election is the way to go to avoid this situation. This should be done within 30 days of the grant, and submitted to the IRS, and a copy attached to the tax return of the grant year. However, if you're considering exercise - that ship has likely sailed a long time ago. Any advice for Little Susie on how she can even afford to pay that much tax on something she can't even sell anytime soon? Don't exercise the options? Should she take out a loan? (e.g. I've heard that in the extreme case, you can find angel investors who are willing to pay all your taxes/strike price, but want 50% of your equity? I've also heard that you can sell your illiquid shares on SecondMarket?) Is she likely to get audited by IRS for pulling something like this? You can take a loan secured by shares you own, there's nothing illegal in it. If you transfer your shares - the IRS only cares about the taxes being paid, however that may be illegal depending on the terms and the conditions of the grant. You'll need to talk to a lawyer about your situation. I suggest talking to a licensed tax adviser (EA/CPA licensed in your State) about the specifics concerning your situation.\",\n \"That is a weird one. Typically one never needs to layout cash to exercise an option. One would only choose to use option 1, if one is seeking to buy the options. This would occur if an employee was leaving a company, would no longer be eligible for the ISO (and thereby forfeit any option grant), and does not want to exercise the options. However, what is not weird is the way income tax works, you are taxed on your income in the US. I assume you are talking about the US here. So if you exercise 10K shares, if under either option, you will be taxed on the profit from those share. Profit = (actual price - strike price) * shares - fees\",\n \"What you want is a cashless transaction. It's part of the normal process. My employer gives me 1000 options at $1, I never need to come up with the money, the shares are bought and sold in one set of transactions, and if the stock is worth $10, I see $9000 less tax withholding, hit the account. No need for me to come up with that $1000.\",\n \"What you will probably get is an option to buy, for £10,000, £10,000 worth of stock. If the stock price on the day your option is granted is £2.50, then that's 4,000 shares. Companies rarely grant discounted options, as there are tax disincentives. The benefit of the stock option is that when you exercise it, you still only pay £10,000, no matter what the 4,000 shares are now worth. This is supposed to be an incentive for you to work harder to increase the value of the company. You should also check the vesting schedule. You will typically not be able to exercise all your options for some years, although some portion of it may vest each year.\",\n \"I've never heard of an employer offering this kind of arrangement before, so my answer assumes there is no special tax treatment that I'm not aware of. Utilizing the clause is probably equivalent to exercising some of your options, selling the shares back to your employer at FMV, and then exercising more options with the proceeds. In this case if you exercise 7500 shares and sell them back at FMV, your proceeds would be 7500 x $5 = $37,500, with which you could exercise the remaining 12,500 options. The tax implications would be (1) short-term capital gains of 7500 x ($5 - $3) = $15,000 and (2) AMT income of 12,500 x ($5 - $3) = $25,000, assuming you don't sell the shares within the calendar year.\",\n \"If you're talking about ADBE options, that is an American style option, which can be exercised at any time before expiration. You can exercise your options by calling your broker and instructing them to exercise. Your broker will charge you a nominal fee to do so. As an aside, you probably don't want to exercise the option right now. It still has a lot of time value left, which you'll lose if you exercise. Just sell the option if you don't think ADBE will keep going up.\",\n \"Options that are not worth exercising just expire. Options that are worth exercising are typically exercised automatically as they expire, resulting in a transfer of stock between the entity that issued the option and the entity that holds it. OCC options automatically exercise when they expire if the value of the option exceeds the transaction cost for the stock transfer (1/4 point to 3/4 point depending).\",\n \"The company may not permit a transfer of these options. If they do permit it, you simply give him the money and he has them issue the options in your name. As a non-public company, they may have a condition where an exiting employee has to buy the shares or let them expire. If non-employees are allowed to own shares, you give him the money to exercise the options and he takes possession of the stock and transfers it to you. Either way, it seems you really need a lawyer to handle this. Whenever this kind of money is in motion, get a lawyer. By the way, the options are his. You mean he must purchase the shares, correct?\",\n \"To explain the capital gains part of the question, non qualified stock options (NSOs) are always treated like earned income and have payroll taxes withheld. It's advantageous for the company to issue these because they can deduct them as expenses just as they do your salary. Articles talking about capital gains would probably be referring to incentive stock options (ISOs) or possibly even restricted stock units (RSUs). If you were granted the option to buy the stock and/or hold it for a period of time, then the stock options could be treated as capital gains, short-term gains if you held them for less than a year, and long-term gains if you held them for more than a year. This payment for your NSOs is exactly like a cash bonus. The withholding follows the same guidelines. You may wish to look at what this will mean for your annual salary and adjust your W-4 withholding up or down as appropriate depending on whether the 25% federal withholding rate is more or less than what you think your final marginal rate will be with this bonus included in your annual salary.\",\n \"The vesting date. Look at publication 525, under stock options, where they talk about ESPP: Your basis is equal to the option price at the time you exercised your option and acquired the stock. The timing and amount of pay period deductions do not affect your basis.\",\n \"The general rule with stock options is that it's best to wait until expiration to exercise them. The rationale depends on a few factors and there are exceptions. Reasons to wait: There would be cases to exercise early: Tax implications should be checked with a professional advisor specific to your situation. In the employee stock option plans that I have personally seen, you get regular income tax assessed between exercise price and current price at the time you exercise. Your tax basis is then set to the current price. You also pay capital gains tax when you eventually sell, which will be long or short term based on the time that you held the stock. (The time that you held the options does not count.) I believe that other plans may be set up differently.\",\n \"There are two things to consider: taxes - beneficial treatment for long-term holding, and for ESPP's you can get lower taxes on higher earnings. Also, depending on local laws, some share schemes allow one to avoid some or all on the income tax. For example, in the UK £2000 in shares is treated differently to 2000 in cash vesting - restricted stocks or options can only be sold/exercised years after being granted, as long as the employee keeps his part of the contract (usually - staying at the same place of works through the vesting period). This means job retention for the employees, that's why they don't really care if you exercise the same day or not, they care that you actually keep working until the day when you can exercise arrives. By then you'll get more grants you'll want to wait to vest, and so on. This would keep you at the same place of work for a long time because by quitting you'd be forfeiting the grants.\",\n \"If you sell your shares for more than their value at the time you received them (i.e. you make a profit) then you will be liable for capital gains tax - but only if the profit exceeds your annual allowance (£11,100, in tax year 2015-16). This is unrelated to how you came by the shares in the first place. (Note that there are certain exemptions to this, which includes some employer share schemes.)\",\n \"So in a sense, I can think of the employees / option-holders as another investor? That makes sense - but many of the examples I'm finding online are still confusing me. Based on the example above, it seems like option-holders would be paying the same exercise price as the VC. Per [Andreesen Horowitz](https://a16z.com/2016/08/24/options-ownership/) this seems uncommon: > The exercise price of employee options — the price per share needed to actually own the shares — is often less than the original issue price paid by the most recent investor, who holds preferred stock. In reality, would option-holders receive, say, 40% (using example above) for their $6m in exercise value due to receiving common stock, with the founder being diluted to even further?\",\n \"\\\"You mention \\\"\\\"early exercise\\\"\\\" in your title, but you seem to misunderstand what early exercise really means. Some companies offer stock options that vest over a number of years, but which can be exercised before they are vested. That is early exercise. You have vested stock options, so early exercise is not relevant. (It may or may not be the case that your stock options could have been early exercised before they vested, but regardless, you didn't exercise them, so the point is moot.) As littleadv said, 83(b) election is for restricted stocks, often from exercising unvested stock options. Your options are already vested, so they won't be restricted stock. So 83(b) election is not relevant for you. A taxable event happen when you exercise. The point of the 83(b) election is that exercising unvested stock options is not a taxable event, so 83(b) election allows you to force it to be a taxable event. But for you, with vested stock options, there is no need to do this. You mention that you want it not to be taxable upon exercise. But that's what Incentive Stock Options (ISOs) are for. ISOs were designed for the purpose of not being taxable for regular income tax purposes when you exercise (although it is still taxable upon exercise for AMT purposes), and it is only taxed when you sell. However, you have Non-qualified Stock Options. Were you given the option to get ISOs at the beginning? Why did your company give you NQSOs? I don't know the specifics of your situation, but since you mentioned \\\"\\\"early exercise\\\"\\\" and 83(b) elections, I have a hypothesis as to what might have happened. For people who early-exercise (for plans that allow early-exercise), there is a slight advantage to having NQSOs compared to ISOs. This is because if you early exercise immediately upon grant and do 83(b) election, you pay no taxes upon exercise (because the difference between strike price and FMV is 0), and there are no taxes upon vesting (for regular or AMT), and if you hold it for at least 1 year, upon sale it will be long-term capital gains. On the other hand, for ISOs, it's the same except that for long-term capital gains, you have to hold it 2 years after grant and 1 year after exercise, so the period for long-term capital gains is longer. So companies that allow early exercise will often offer employees either NQSOs or ISOs, where you would choose NQSO if you intend to early-exercise, or ISO otherwise. If (hypothetically) that's what happened, then you chose wrong because you got NQSOs and didn't early exercise.\\\"\",\n \"Good questions. I can only add that it may be valuable if the company is bought, they may buy the options. Happened to me in previous company.\",\n \"\\\"There are a few other items that you should be aware of when getting options: The strike price is usually determined by an independent valuation of the common shares (called a 409a valuation). This should give you a sense on what the options are worth. Obviously you are hoping that the value becomes many multiple of that. There are two kinds in the US: Non-quals (NQO) and Incentive Stock Options (ISOs). The big difference is that when you exercise Non-quals, you have to pay the tax on the difference between the \\\"\\\"fair\\\"\\\" market value on the shares and what you paid for them (the strike price). This is important because if the company is private, you likely can not sell any shares until it is public. With ISOs, you don't pay any tax (except AMT tax) on the gain until you actually sell the shares. You should know what kind your getting. Some plans allow for early exercise, essentially allowing you to buy the shares early (and given back if you leave before they vest) which helps you establish capital gains treatment earlier as well as avoid AMT if you have ISOs. This is really complicated direction and you would want to talk to a tax professional. And always a good idea to know how many total shares outstanding in the Company. Very few people ask this question but it is helpful for you to understand the overall value of the options.\\\"\",\n \"Let's work from the inside out. Options are not stock. Options are a contract that give you the right to own the stock. For options to have value they have to be exercised. Straight line means that each quarter 1/16th of the option grant becomes yours and the company cannot take it away. Four quarters in a year times four years is 16 quarters. 'Grant' means they are giving you the options at no cost to you. 'Nonqualified' means that there is nothing you have to do, or be, in order to get the options. (Some options are only for management.)\",\n \"Vesting As you may know a stock option is the right to acquire a given amount of stock at a given price. Actually acquiring the stock is referred to as exercising the option. Your company is offering you options over 200,000 shares but not all of those options can be exercised immediately. Initially you will only be able to acquire 25,000 shares; the other 175,000 have conditions attached, the condition in this case presumably being that you are still employed by the company at the specified time in the future. When the conditions attached to a stock option are satisfied that option is said to have vested - this simply means that the holder of the option can now exercise that option at any time they choose and thereby acquire the relevant shares. Dividends Arguably the primary purpose of most private companies is to make money for their owners (i.e. the shareholders) by selling goods and/or services at a profit. How does that money actually get to the shareholders? There are a few possible ways of which paying a dividend is one. Periodically (potentially annually but possibly more or less frequently or irregularly) the management of a company may look at how it is doing and decide that it can afford to pay so many cents per share as a dividend. Every shareholder would then receive that number of cents multiplied by the number of shares held. So for example in 4 years or so, after all your stock options have vested and assuming you have exercised them you will own 200,000 shares in your company. If the board declares a dividend of 10 cents per share you would receive $20,000. Depending on where you are and your exact circumstances you may or may not have to pay tax on this. Those are the basic concepts - as you might expect there are all kinds of variations and complications that can occur, but that's hopefully enough to get you started.\",\n \"\\\"As I recall from the documentation presented to me, any gain over the strike price from an ISO stock option counts as a long term capital gain (for tax purposes) if it's held from 2 years from the date of grant and 1 year from the date of exercise. If you're planning to take advantage of that tax treatment, exercising your options now will start that 1-year countdown clock now as well, and grant you a little more flexibility with regards to when you can sell in the future. Of course, no one's renewed the \\\"\\\"Bush tax cuts\\\"\\\" yet, so the long-term capital gains rate is going up, and eventually it seems they'll want to charge you Medicare on those gains as well (because they can... ), soo, the benefit of this tax treatment is being reduced... lovely time to be investing, innnit?\\\"\",\n \"I like C. Ross and MrChrister's advice to not be heavily weighted in one stock over the long run, especially the stock of your employer. I'll add this: One thing you really ought to find out – and this is where your tax advisor is likely able to help – is whether your company's stock options plan use qualified incentive stock options (ISO) or non-qualified stock options (NQO or NSO). See Wikipedia - Incentive stock option for details. From my understanding, only if your plan is a qualified (or statutory) ISO and you hold the shares for at least 1 year of the date of exercise and 2 years from the date of the option grant could your gain be considered a long-term capital gain. As opposed to: if your options are non-qualified, then your gain may be considered ordinary income no matter how long you wait – in which case there's no tax benefit to waiting to cash out. In terms of hedging the risk if you do choose to hold long, here are some ideas: Sell just enough stock at exercise (i.e. taking some tax hit up front) to at least recover your principal, so your original money is no longer at risk, or If your company has publicly listed options – which is unlikely, if they are very small – then you could purchase put options to insure against losses in your stock. Try a symbol lookup at the CBOE. Note: Hedging with put options is an advanced strategy and I suggest you learn more and seek advice from a pro if you want to consider this route. You'll also need to find out if there are restrictions on trading your employer's public stock or options – many companies have restrictions or black-out periods on employee trading, especially for people who have inside knowledge.\",\n \"\\\"Many companies (particularly tech companies like Atlassian) grant their employees \\\"\\\"share options\\\"\\\" as part of their compensation. A share option is the right to buy a share in the company at a \\\"\\\"strike price\\\"\\\" specified when the option is granted. Typically these \\\"\\\"vest\\\"\\\" after 1-4 years so long as the employee stays with the company. Once they do vest, the employee can exercise them by paying the strike price - typically they'd do that if the shares are now more valuable. The amount they pay to exercise the option goes to the company and will show up in the $2.3 million quoted in the question.\\\"\",\n \"ISOs (incentive stock options) can be closed out in a cashless transaction. Say the first round vests, 25,000 shares. The stock is worth $7 but your option is to buy at $5 as you say. The broker executes and sells, you get $50,000, with no up front money. Edit based on comment below - you know they vest over 4 years, but how long before they expire? It stands to reason the longer you are able to hold them, the better a chance the company succeeds, and the price rises. The article Understanding employer-granted stock options (PDF) offers a nice discussion of different scenarios supporting my answer.\",\n \"Yes When exercising a stock option you will be buying the stock at the strike price so you will be putting up your money, if you lose that money you can declare it as a loss like any other transaction. So if the stock is worth $1 and you have 10 options with a strike at $0.50 you will spend $500 when you exercise your options. If you hold those shares and the company is then worth $0 you lost $500. I have not verified my answer so this is solely from my understanding of accounting and finance. Please verify with your accountant to be sure.\",\n \"Stock options represent an option to buy a share at a given price. What you have been offered is the option to buy the company share at a given price ($5) starting a given date (your golden handcuffs aka vesting schedule). If the company's value doubles in 1 year and the shares are liquid (i.e. you can sell them) then you've just made $125k of profit. If the company's value has gone to zero in 1 year then you've lost nothing other than your hopes of getting rich. As others have mentioned, the mechanics of exercising the option and selling the shares can typically be accomplished without any cash involved. The broker will do both in a single transaction and use the proceeds of the sale to pay the cost of buying the shares. You should always at least cover the taxable portion of the transaction and typically the broker will withhold that tax anyways. Otherwise you could find yourself in a position where you have actually lost money due to tax being owed while the shares decline in value below that tax. You don't have to worry about that right now. Again as people have mentioned options will typically expire 10 years from vesting or 90 days from leaving your employment with the company. I'm sure there are some variations on the theme. Make sure you ask and all this should be part of some written contract. I'm sure you can ask to see it if you wish. Also typical is that stock option grants have to be approved by the board which is normally a technicality. Some general advice:\",\n \"You would not owe any taxes in the 2015 year, unless you got exercised and called away in 2015. The premium would be short term capital gains barring some other exception I'm not aware of, and if you retain a gain on the underlying shares then that would still be long term capital gains. If it gets called in say April 2016, is the premium+profit+dividends all long term capital gains for the year 2016? The profits are long term capital gains and the premium serves to lower your cost basis, dividends have their own conditions so you'll have to do separate research on that, fortunately they'll likely be negligible compared to the potential capital gains and options premium.\",\n \"American options (like those on ADBE) can be exercised by the holder anytime before expiration. They will be exercised automatically at expiration if they are in the money. However, if there is still time before expiration (as in this case), and they are not extremely in the money, there is probably extrinsic value to the option, and you should sell it, not exercise it. European options are only automatically exercised at expiration, and only if they are in the money. These are usually cash settled on products like SPX or VIX. They can not be exercised before expiration, but can be sold anytime.\",\n \"Since the 2 existing answers addressed the question as asked. Let me offer a warning. You have 10,000 options at $1. You've worked four years and the options are vested. The stock is worth $101 when you get a job offer (at another company) which you accept. So you put up $10k and buy the shares. At this moment, you put up $10K for stock worth $1.01M, a $1M profit and ordinary income. You got out of the company just in time. For whatever reason, the stock drops to $21 and at tax time you realize the $1M gain was ordinary income, but now the $800k loss is a capital loss, limited to $3000/yr above capital gains. In other words you have $210k worth of stock but a tax bill on $1M. This is not a contrived story, but a common one from the dotcon bubble. It's a warning that 'buy and hold' has the potential to blow up in your face, even if the shares you buy retain some value.\",\n \"I'm guessing you're talking about options given to employees. The company can issue stock options at whatever strike price it wants. The difference between the strike price and the actual market value is considered income to the employee. You can get the options at $0 strike just as well (although companies generally just give RSUs instead in this case).\",\n \"\\\"A company has 100,000 shares and 100,000 unexercised call options (company issued). Share price and strike price both at $1. What country is this related to? I ask because, in the US, most people I know associate a \\\"\\\"call\\\"\\\" option with the instrument that is equivalent to 100 shares. So 100,000 calls would be 10,000,000 shares, which exceeds the number of shares you're saying the company has. I don't know if that means you pulled the numbers out of thin air, or whether it means you're thinking of a different type of option? Perhaps you meant incentive stock options meant to be given to employees? Each one of those is equivalent to a single share. They just aren't called \\\"\\\"call options\\\"\\\". In the rest of my answer, I'm going to assume you meant stock options. I assume the fact that these options exist will slow any price increases on the underlying shares due to potential dilution? I don't think the company can just create stock options without creating the underlying shares in the first place. Said another way, a more likely scenario is that company creates 200,000 shares and agrees to float 50% of them while reserving the other 50% as the pool for incentive employee stock. They then choose to give the employees options on the stock in the incentive pool, rather than outright grants of the stock, for various reasons. (One of which is being nice to the employees in regards to taxes since there is no US tax due at grant time if the strike price is the current price of the underlying stock.) An alternative scenario when the company shares are liquidly traded is that the company simply plans to buy back shares from the market in order to give employees their shares when options are exercised. In this case, the company needs the cash on hand, or cash flow to take money from, to buy those shares at current prices. Anyway, in either case, there is no dilution happening WHEN the options get exercised. Any dilution happened before or at the time the options were created. Meaning, the total number of shares in the company was already pre-set at an earlier time. As a result, the fact that the options exist in themselves will not slow price changes on the stock. However, price changes will be impacted by the total float of shares in the company, or the impact to cash flow if the company has to buy shares to redeem its option commitments. This is almost the same thing you're asking about, but it is technically different as to timing. If this is the case, can this be factored into any option pricing models like black-scholes? You're including the effect just by considering the total float of shares and net profits from cash flow when doing your modelling.\\\"\",\n \"\\\"I'd early-exercised 75% of my grant at $5 and (later) exercised the remaining portion at $2. So did you actually pay the money and got \\\"\\\"X\\\"\\\" unvested shares? I'll be leaving the company; and they'll be unwinding half of the grant, so I'll get some money back, but now the question is: Do they pay me back from the $5 shares or the $2 shares? This would depend on what your contract says on unvested shares. There can be numerous combinations. More Often these are forfeited. i.e. you are not granted the shares. At times if you have paid then the guideline would give the details what would happen; i.e. only half vest and are priced at market and you are forced to encash them.\\\"\",\n \"\\\"Not necessarily. The abbreviation \\\"\\\"ESOP\\\"\\\" is ambiguous. There are at least 8 variations I know of: You'll find references on Google to each of those, some more than others. For fun you can even substitute the word \\\"\\\"Executive\\\"\\\" for \\\"\\\"Employee\\\"\\\" and I'm sure you'll find more. Really. So you may be mistaken about the \\\"\\\"O\\\"\\\" referring to \\\"\\\"options\\\"\\\" and thereby implying it must be about options. Or, you may be right. If you participate in such a plan (or program) then check the documentation and then you'll know what it stands for, and how it works. That being said: companies can have either kind of incentive plan: one that issues stock, or one that issues options, with the intent to eventually issue stock in exchange for the option exercise price. When options are issued, they usually do have an expiration date by which you need to exercise if you want to buy the shares. There may be other conditions attached. For instance, whether the plan is about stocks or options, often there is a vesting schedule that determines when you become eligible to buy or exercise. When you buy the shares, they may be registered directly in your name (you might get a fancy certificate), or they may be deposited in an account in your name. If the company is small and private, the former may be the case, and if public, the latter may be the case. Details vary. Check the plan's documentation and/or with its administrators.\\\"\",\n \"With the Employee Stock Purchase Plan stock, if you sell it in less than 18 months from exercise, the discount you bought it at (normally 15%) becomes taxable income and included in your W-2.\",\n \"To me it depends on things like your net worth, debt, and how other assets are invested. Currently you have 25K invested in the company you work for. If you have 100K in student loans, are a renter, and 12K in your 401K, then I would recommend exercising almost all of your options. In that case you have a much to large part of your world wrapped up in your company. If you have 250K in your 401K, own a home and have an emergency fund with no debt then you are fine with letting it ride. You can afford to absorb a loss of 25K without wrecking your net worth. More than likely, you are somewhere in between (just statistics speaking there). So why not exercise some of them now with the purpose of improving your financial situation? Say do a 1/3 now and when they come available. When 401ks were first invented people put almost all of their money in their company stock. They lost just about everything when the company went down in value and were often a victim of layoffs exasperating the issue. This is akin to the same situation. Most financial advisers recommend against putting any 401K money to company stock, or at least limiting the amount.\",\n \"Now assume these shares are vested, held for at least 1 year, and are then sold for $5 each. Everything I've read implies that the grantee now owes long-term capital gains taxes on the difference, which would be 10k * ($5 - $1). No. That's exactly what the SO is NQ for. Read more on the differences between ISO and NQSO here. Now assume these shares are vested, held for at least 1 year, and are then sold for $5 each. Everything I've read implies that the grantee now owes long-term capital gains taxes on the difference, which would be 10k * ($5 - $1). At this point you no longer have NQSO, you have RSU. If you filed 83(b) when you exercised, then you pay capital gains tax when they vest. If you didn't - its ordinary income to you. NQSO is a red herring here since once exercised they no longer exist. If you didn't file 83(b), then when the stock vests the difference between the FMV at vest and the money you spent on it when exercising (if any) is considered wages and taxed as ordinary income (+FICA etc). From that point the RSU becomes a regular stock investment and the capital gains clock starts ticking.\",\n \"If you received shares as part of a bonus you needed to pay income tax on the dollar valuse of those shares at the time you received them. This income tax is based on the dollar value of the bonus and has nothing to do with the shares. If you have since sold these shares you will need to report any capital gain or loss you made from their dollar value when you received them. If you made a gain you would need to pay capital gains tax on the profits (if you held them for more than a year you would get a discount on the capital gains tax you have to pay). If you made a loss you can use that capital loss to reduce any other capital gains in that income year, reduce any other income up to $3000 per year, or carry any additional capital loss forward to future income years to reduce any gains or income (up to $3000 per year) you do have in the future.\",\n \"Having stock options means that you have worked for and rightfully earned a part of the company's capital appreciation. Takeover of the company would indicate someone is interested in the company (something should be valuable). It would be unwise to not strike before the period lapses since the strike price is always lower than market price and takeovers generally increases stock values ... it is capital gains all the way my friend. Good luck. *observations not in professional capacity. pls consult a professional for investment related advice.\",\n \"In the question you cited, I assumed immediate exercise, that is why you understood that I was talking about 30 days after grant. I actually mentioned that assumption in the answer. Sec. 83(b) doesn't apply to options, because options are not assets per se. It only applies to restricted stocks. So the 30 days start counting from the time you get the restricted stock, which is when you early-exercise. As to the AMT, the ISO spread will be considered AMT income in the year of the exercise, if you file the 83(b). For NQSO it is ordinary income. That's the whole point of the election. You can find more detailed explanation on this website.\",\n \"This is an old question that has an accepted answer, but it has gotten bumped due to an edit and the answers given are incorrect. I am assuming this means that every other Friday, the company is going into the open public market, buying those shares and then giving it out to the employees. No. Companies will internally hold shares that it intends to offer employees as additional compensation. There are no open market transactions, so the market price of the stock does not change (at least not due to buying pressure). The only net effect is an equivalent expense for the compensation, but that should already be accounted for in the share price as normal operating expenses. These share may come through an initial buyback from the market, but more common is that when companies issue new shares they keep some internally for exactly this situation. If they issued new shares every pay period, it would dilute the existing shares several times a quarter which would be difficult to account for.\",\n \"The tax cost at election should be zero. The appreciation is all capital gain beyond your basis, which will be the value at election. IRC §83 applies to property received as compensation for services, where the property is still subject to a substantial risk of forfeiture. It will catch unvested equity given to employees. §83(a) stops taxation until the substantial risk of forfeiture abates (i.e. no tax until stock vests) since the item is revocable and not yet truly income. §83(b) allows the taxpayer to make a quick election (up to 30 days after transfer - firm deadline!) to waive the substantial risk of forfeiture (e.g. treat shares as vested today). The normal operation of §83 takes over after election and the taxable income is generally the value of the vested property minus the price paid for it. If you paid fair market value today, then the difference is zero and your income from the shares is zero. The shares are now yours for tax purposes, though not for legal purposes. That means they are most likely a capital asset in your hands, like other stocks you own or trade. The shares will not be treated as compensation income on vesting, and vesting is not a tax matter for elected shares. If you sell them, you get capital gain (with tax dependent on your holding period) over a basis equal to FMV at the election. The appreciation past election-FMV will be capital gain, rather than ordinary income. This is why the §83(b) election is so valuable. It does not matter at this point whether you bought the restricted shares at FMV or at discount (or received them free) - that only affects the taxes upon §83(b) election.\",\n \"It really depends. If it is offered as compensation (ie in leiu of, or in addition to salary or cash bonus) then it would be reportable income, and if sold later for a profit then that would be taxable as gains. If this share is purchased as an investment at current value then it would be treated like other securities most likely gains realized at sale. Any discount could be considered income but there are some goofy rules surrounding this enacted to prevent tax evasion and some to spur growth. That is the answer in a nut shell. It is far more complicated in reality as there are somewhere around 2000 pages of regulations deal with different exceptions and scenerios.\",\n \"\\\"The simplest thing to do here is to speak to your employer about what is allowed. This should be spelt out in your company's \\\"\\\"Stock Options Plan\\\"\\\" documentation. In particular, this document will include details of the vesting schedule. For example, the schedule may only allow you to exercise 25% in the first year, 25% in the second year, and the remainder in the third year. Technically I can see no reason to prevent you from the mix-and-match approach you are suggesting. However, this may not be the case according to the schedule specification.\\\"\",\n \"Stuff I wish I had known, based on having done the following: Obtained employment at a startup that grants Incentive Stock Options (ISOs); Early-exercised a portion of my options when fair market value was very close to my strike price to minimize AMT; made a section 83b) election and paid my AMT up front for that tax year. All this (the exercise and the AMT) was done out of pocket. I've never see EquityZen or Equidate mention anything about loans for your exercise. My understanding is they help you sell your shares once you actually own them. Stayed at said startup long enough to have my exercised portion of these ISOs vest and count as long term capital gains; Tried to sell them on both EquityZen and Equidate with no success, due to not meeting their transaction minimums. Initial contact with EquityZen was very friendly and helpful, and I even got a notice about a potential sale, but then they hired an intern to answer emails and I remember his responses being particularly dismissive, as if I was wasting their time by trying to sell such a small amount of stock. So that didn't go anywhere. Equidate was a little more friendly and was open to the option of pooling shares with other employees to make a sale in order to meet their minimum, but that never happened either. My advice, if you're thinking about exercising and you're worried about liquidity on the secondary markets, would be to find out what the minimums would be for your specific company on these platforms before you plunk any cash down. Eventually brought my request for liquidity back to the company who helped connect me with an interested external buyer, and we completed the transaction that way. As for employer approval - there's really no reason or basis that your company wouldn't allow it (if you paid to exercise then the shares are yours to sell, though the company may have a right of first refusal). It's not really in the company's best interest to have their shares be illiquid on the secondary markets, since that sends a bad signal to potential investors and future employees.\",\n \"Both you and the Company were probably benefitted by this decision. Specifically an option grant that was not FRV or more would require you to recognize the option as income whether you had exercised it or not. Additionally a host of other 409A tax issues/penalties could have been levied against you as an employee recipient. I certainly appreciate your concern about a change in compensation, but this is one where Corporate America likely saved your bacon.\",\n \"Assuming that taxes were withheld when you received the options, you would now only owe tax on the profit from the sale of the stock. The cost basis would be whatever you bought the stock for (the strike price of the options in this case), and the profit will be the total amount received from the sale minus the total cost of those shares. Since you bought the stock more than one year ago, you will get taxed at the long-term capital gains rate of 15% (unless you are in the 39.6% tax bracket, in which case the rate is 20%). As with all tax advice on this site, you need to check with a tax specialist when you actually file, but that should give you a rough indication of what your tax liability is.\",\n \"Par value SHOULD mean that they are offering you the options with a strike price (exercise price) that is equivalent to the current valuation of the company. Note I said SHOULD. As long as you can confirm with HR (or if you're small enough, just ask the CEO) that your grant price is the same as the current valuation of the company's shares, then things are straight. And while it's very unlikely that someone is doing Something Sneaky, it's always possible. As a reference, my recent grant letter said: [Company] (the “Company”) hereby grants you the following Option to purchase shares of its common stock (“Shares”). The terms and conditions of this Option are set forth in the Stock Option Agreement and the [Company] 2013 Stock Incentive Plan (the “Plan”), both of which are attached to and made a part of this document.\",\n \"\\\"A little terminology: Grant: you get a \\\"\\\"gift\\\"\\\" with strings attached. \\\"\\\"Grant\\\"\\\" refers to the plan (legal contract) under which you get the stock options. Vesting: these are the strings attached to the grant. As long as you're employed by the company, your options will vest every quarter, proportionally. You'll become an owner of 4687 or 4688 options every quarter. Each such vest event means you'd be getting an opportunity to buy the corresponding amount of stocks at the strike price (and not the current market price which may be higher). Buying is called exercising. Exercising a nonqualified option is a taxable event, and you'll be taxed on the value of the \\\"\\\"gift\\\"\\\" you got. The value is determined by the difference between the strike price (the price at which you have the option to buy the stock) and the actual fair market value of the stock at the time of vest (based on valuations). Options that are vested are yours (depending on the grant contract, read it carefully, leaving the company may lead to forfeiture). Options that are not vested will disappear once you leave the company. Exercised options become stocks, and are yours. Qualified vs Nonqualifed - refers to the tax treatment. Nonqualified options don't have any special treatment, qualified do. 3.02M stocks issued refers to the value of the options. Consider the total valuation of the company being $302M. With $302M value and 3.02M stocks issued, each stock is worth ~$100. Now, in a year, a new investor comes in, and another 3.02M stocks are issued (if, for example, the new investor wants a 50% stake). In this case, there will be 6.04M stocks issued, for 302M value - each stock is worth $50 now. That is called dilution. Your grant is in nominal options, so in case of dilution, the value of your options will go down. Additional points: If the company is not yet public, selling the stocks may be difficult, and you may own pieces of paper that no-one else wants to buy. You will still pay taxes based on the valuations and you may end up paying for these pieces of paper out of your own pocket. In California, it is illegal to not pay salary to regular employees. Unless you're a senior executive of the company (which I doubt), you should be paid at least $9/hour per the CA minimum wages law.\\\"\",\n \"Automatic exercisions can be extremely risky, and the closer to the money the options are, the riskier their exercisions are. It is unlikely that the entire account has negative equity since a responsible broker would forcibly close all positions and pursue the holder for the balance of the debt to reduce solvency risk. Since the broker has automatically exercised a near the money option, it's solvency policy is already risky. Regardless of whether there is negative equity or simply a liability, the least risky course of action is to sell enough of the underlying to satisfy the loan by closing all other positions if necessary as soon as possible. If there is a negative equity after trying to satisfy the loan, the account will need to be funded for the balance of the loan to pay for purchases of the underlying to fully satisfy the loan. Since the underlying can move in such a way to cause this loan to increase, the account should also be funded as soon as possible if necessary. Accounts after exercise For deep in the money exercised options, a call turns into a long underlying on margin while a put turns into a short underlying. The next decision should be based upon risk and position selection. First, if the position is no longer attractive, it should be closed. Since it's deep in the money, simply closing out the exposure to the underlying should extinguish the liability as cash is not marginable, so the cash received from the closing out of the position will repay any margin debt. If the position in the underlying is still attractive then the liability should be managed according to one's liability policy and of course to margin limits. In a margin account, closing the underlying positions on the same day as the exercise will only be considered a day trade. If the positions are closed on any business day after the exercision, there will be no penalty or restriction. Cash option accounts While this is possible, many brokers force an upgrade to a margin account, and the ShareBuilder Options Account Agreement seems ambiguous, but their options trading page implies the upgrade. In a cash account, equities are not marginable, so any margin will trigger a margin call. If the margin debt did not trigger a margin call then it is unlikely that it is a cash account as margin for any security in a cash account except for certain options trades is 100%. Equities are convertible to cash presumably at the bid, so during a call exercise, the exercisor or exercisor's broker pays cash for the underlying at the exercise price, and any deficit is financed with debt, thus underlying can be sold to satisfy that debt or be sold for cash as one normally would. To preempt a forced exercise as a call holder, one could short the underlying, but this will be more expensive, and since probably no broker allows shorting against the box because of its intended use to circumvent capital gains taxes by fraud. The least expensive way to trade out of options positions is to close them themselves rather than take delivery.\",\n \"\\\"You are thinking about it this way: \\\"\\\"The longer I wait to exericse, the more knowledge and information I'll have, thus the more confidence I can have that I'll be able to sell at a profit, minimizing risk. If I exercise early and still have to wait, there may never be a chance I can sell at a profit, and I'll have lost the money I paid to exercise and any tax I had to pay when I exercised.\\\"\\\" All of that is true. But if you exercise early: The fair market value of the stock will probably be lower, so you may pay less income tax when you exercise. (This depends on your tax situation. Currently, ISO exercises affect your AMT.) If the company goes through a phase where the value is unusually high, you'll be able to sell and still get the tax benefits because you exercised earlier. You avoid the nightmare scenario where you leave the company (voluntarily or not) and can't afford to exercise your options because of the tax implications. In many realistic cases, exercising earlier means less risk. Imagine if you're working at a company that is privately held and you expect to be there for another year or so. You are very optimistic about the company, but not sure when it will IPO or get acquired and that may be several years off. The fair market value of the stock is low now, but may be much higher in a year. In this case, it makes a lot of sense to exercise now. The cost is low because the fair market value is low so it won't result in a huge tax bill. And then when you leave in a year, you won't have to choose between forfeiting your options or borrowing money to pay the much higher taxes due to exercise them then.\\\"\",\n \"Stock awards by employers are treated and taxed as salary. I.e.: you pay ordinary rate income tax, FICA taxes, State taxes etc. The fact that you got your salary in shares and not cash is irrelevant for tax purposes. Once you got the shares and paid your taxes on them, the treatment is the same as if you got the salary and immediately bought the shares. Holding period for capital gains tax purposes starts at the time you paid your taxes on the award, which is the time at which you get full ownership (i.e.: vesting time, for the restricted stocks). When you sell these stocks - you treat the sale as any other stock sale: you check the holding period for capital gains tax rates, and you do not pay (or get refund) any FICA taxes on the sales transaction. So bottom line: You got $10K salary and you bought $10K worth of company stock, and you sold it at $8K half a year later. You have $10K wages income and $2K short term capital loss.\",\n \"In the first case, if you wish to own the stock, you just exercise the option, and buy it for the strike price. Else, you can sell the option just before expiration, it will be priced very close to its in-the-money value.\",\n \"I'm assuming this was a cashless exercise because you had income show up on your w-2. When I had a similar situation, I did the following: If you made $50,000 in salary and $10,000 in stock options then your W-2 now says $60,000. You'll record that on your taxes just like it was regular income. You'll also get a form that talks about your stock sale. But remember, you bought and sold the stock within seconds. Your forms will probably look like this: Bought stock: $10,000 Sold stock: $10,000 + $50 commission Total profit (loss): ($50) From the Turbotax/IRS view point, you lost $50 on the sale of the stock because you paid the commission, but the buy and sell prices were identical or nearly identical.\",\n \"\\\"Your company actually will most likely use some sort of options pricing model, either a binomial tree or black-scholes to determine the value for their accounting and, subsequently, for their issuance and realization. First, market value of equity will be determined. Given you're private (although \\\"\\\"pre-IPO could mean public tomorrow,\\\"\\\"), this will likely revolve around a DCF and/or market approaches. Equity value will then be compared to a cap table to create an equity waterfall, where the different classes of stock and the different options will be valued along tranches. Keep in mind there might be liquidation preferences that would make options essentially further out of the money. As such, your formulae above do not quite work. However, as an employee, it might be difficult to determine the necessary inputs to determine value. To estimate it, however, look for three key pieces of information: 1. Current equity value 2. Option strike price 3. Maturity for Options If the strike is close to the current equity value, and the maturity is long enough, and you expect the company to grow, then it would look like the options have more value than not. Equity value can be derived from enterprise value, or by directly determining it via a DCF or guideline multiples. Reliable forecasts should come from looking at the industry, listening to what management is saying, and then your own information as an insider.\\\"\",\n \"\\\"What could the tax issues with the IRS be? I thought (but not totally certain) that the tax treatment of an ISO option was based on difference between exercise price and FMV at the time of the sale. This is an accounting issue. There were times not so long ago that companies actually did these things on purpose, to boost the stock grant values for their employees (especially senior employees). They would give a grant but date it with an earlier date with a more favorable valuation. This is called \\\"\\\"backdating\\\"\\\", and it brought companies down and CEOs into criminal courts. In addition, only reasonable compensation is allowed as a deduction for the company, and incorrectly set strike price may be deemed unreasonable. Thus, the deduction the company would take for your compensation can be denied, leading to loss of tax benefit (this was also a weapon used by the IRS at the time against companies doing backdating). Last but not least, company that has intentions of going public cannot allow itself such a blatant disregard of the accounting rules. Even if the mistake was not made on purpose (as it sounds), it is a mistake that has to be corrected. What should I take into consideration to determine whether a 27% increase in shares is a fair exchange for an increase in 270% increase in strike price. Did you know the strike price when you signed the contract? Was it a consideration for you? For most people, the strike price is determined at the board approval, since the valuations are not public and are not disclosed before you actually join, which is already after you've agreed to the terms. So basically, you agreed to get 100 sheets of toilet paper, and instead getting 127 sheets. So you're getting 27 sheets more than you initially agreed to. Why are you complaining? In other words, options are essentially random numbers which are quite useless. By the time you get to exercise them, they'll be diluted through a bunch of additional financing rounds, and their value will be determined for real only after the IPO, or at least when your company's stocks are trading OTC with some reasonable volume. Until then - it's just a number with not much of a meaning. The FMV does matter for early exercise and 83(b) election, if that is an option, but even then - I doubt you can actually negotiate anything.\\\"\",\n \"It's still the purchase price or the price at which the shares are purchased or granted. This Investopedia article describes how the price is used for tax purposes: The amount that must be declared [for tax purposes] is determined by subtracting the original purchase or exercise price of the stock (which may be zero) from the fair market value of the stock as of the date that the stock becomes fully vested. Restricted stock awards are similar to stock options. The employer promises to grant the employee a certain number of shares upon the completion of the vesting schedule. The price at which the shares are purchased (or granted, if the price is zero) is the exercise price.\",\n \"You are the one lending yourself the shares to sell;you purchase the stock at market price and sell at the strike price of the option to the put seller when you exercise the option.\",\n \"\\\"The other two answers seem basically correct, but I wanted to add on thing: While you can exercise an \\\"\\\"American style\\\"\\\" option at any time, it's almost never smart to do so before expiration. In your example, when the underlying stock reaches $110, you can theoretically make $2/share by exercising your option (buying 100 shares @ $108/share) and immediately selling those 100 shares back to the market at $110/share. This is all before commission. In more detail, you'll have these practical issues: You are going to have to pay commissions, which means you'll need a bigger spread to make this worthwhile. You and those who have already answered have you finger on this part, but I include it for completeness. (Even at expiration, if the difference between the last close price and the strike price is pretty close, some \\\"\\\"in-the-money\\\"\\\" options will be allowed to expire unexercised when the holders can't cover the closing commission costs.) The market value of the option contract itself should also go up as the price of the underlying stock goes up. Unless it's very close to expiration, the option contract should have some \\\"\\\"time value\\\"\\\" in its market price, so, if you want to close your position at this point, earlier then expiration, it will probably be better for you to sell the contract back to the market (for more money and only one commission) than to exercise and then close the stock position (for less money and two commissions). If you want to exercise and then flip the stock back as your exit strategy, you need to be aware of the settlement times. You probably are not going to instantly have those 100 shares of stock credited to your account, so you may not be able to sell them right away, which could leave you subject to some risk of the price changing. Alternatively, you could sell the stock short to lock in the price, but you'll have to be sure that your brokerage account is set up to allow that and understand how to do this.\\\"\",\n \"You likely received the shares as ordinary income for services of $10k, since they withheld taxes at granting. Separately, you likely had a short term capital loss on sale of $2k, since your holding period seems to have been under one year.\",\n \"Assuming you purchased shares that were granted at a discount under the ESPP the 50% exemption would not apply. It's pretty unusual to see a US parent company ESPP qualify for the 110(1)(d) exemption, as most US plans provide for a discount\",\n \"\\\"I don't think its a taxable event since no income has been constructively received (talking about the RSU shareholders here). I believe you're right with the IRC 1033, and the basis of the RSU is the basis of the original stock option (probably zero). Edit: see below. However, once the stock becomes vested - then it is a taxable event (not when the cash is received, but when the chance of forfeiture diminishes, even if the employee doesn't sell the stock), and is an ordinary income, not capital. That is my understanding of the situation, do not consider it as a tax advice in any way. I gave it a bit more though and I don't think IRC 1033 is relevant. You're not doing any exchange or conversion here, because you didn't have anything to convert to begin with, and don't have anything after the \\\"\\\"conversion\\\"\\\". Your ISO's are forfeited and no longer available, basically - you treat them as you've never had them. What happened is that you've received RSU's, and you treat them as a regular RSU grant, based on its vesting schedule. The tax consequences are exactly as I described in my original response: you recognize ordinary income on the vested stocks, as they vest. Your basis is zero (i.e.: the whole FMV of the stock at the time of vesting is your ordinary income). It should also be reflected in your W2 accordingly.\\\"\",\n \"\\\"It depends on how big the dilution is. Could be a good trade. Do the math yourself, many times nobody else has as all the employees think they are going to get rich because \\\"\\\"options\\\"\\\" :)\\\"\",\n \"This may be a good or a bad deal, depending on the fair market value (FMV) of the stock at the time of exercise. Let's assume the FMV is $6, which is the break even point. In general this would probably be treated as two transactions. So overall you would be cash neutral, but your regular tax income would be increased by $30,000 and your AMT income by $60,000.\",\n \"These are treasury stocks allocated to the plan. If necessary, a company issues new shares (depending on a company it may require shareholders or only board approval).\",\n \"the short answer is: No. you do not HAVE to pay $125,000.00 at the end of your first year. that is only the amount IF you decide to exercise. *fine print: But if you leave or get let go (which happens quite frequently at top tier Silicon Valley firms), you lose anything that you don't exercise. you're basically chained by a pair of golden handcuffs. in other words, you're stuck with the company until a liquidation event such as IPO or secondary market selling (you can expect to spend a few years before getting anything out of your stocks) Now, it's hard to say whether or not to exercise at that time, especially given we don't know the details of the company. you only should exercise if you foresee your quitting, anticipate getting fired, AND you strongly feel that stock price will keep going up. if you're in SF bay, i believe you have 10 years until your options expire (at which point they are gone forever, but that's 10 years and usually companies IPO well within 7 years). i would recommend you get a very good tax advisor (someone that understands AMT and stock options tax loopholes/rules like the back of their hand). I'm going to take a long shot and assume that you got an amazing offer and that you got a massive amount of ISOs from them. so i'll give this as an advice - first, congrats on owning a lot on paper today if you're still there. you chose to be an early employee at a good tech company. However, you should be more worried about AMT (alternative min tax). you will get enslaved by the IRS if you exercise your shares and can't pay the AMT. suppose, in your fictional scenario, your stock options increase 2x, on paper. you now own $1 Mil in options. but you would be paying $280000 in taxes if you chose to exercise them right now. Now, unless you can sell that IMMEDIATELY on the secondary market, i would highly advise you not to exercise right now. only exercise your ISOs when you can turn around and sell them (either waiting for IPO, or if company offers secondary market approved trading).\",\n \"In the real world, there are only two times you'll see that 5% become worth anything - ie, something you can exchange for cash - 1) if another company buys them; (2) if they go public. If neither of these things happen, you cannot do anything with the stock or stock options that you own.\",\n \"\\\"I've bought ISO stock over they years -- in NYSE traded companies. Every time I've done so, they've done what's called \\\"\\\"sell-to-cover\\\"\\\". And the gubmint treats the difference between FMV and purchase price as if it's part of your salary. And for me, they've sold some stock extra to pay estimated taxes. So, if I got this right... 20,000 shares at $3 costs you 60,000 to buy them. In my sell-to-cover at 5 scenario: did I get that right? Keeping only 4,000 shares out of 20,000 doesn't feel right. Maybe because I've always sold at a much ratio between strike price and FMV. Note I made some assumptions: first is that the company will sell some of the stock to pay the taxes for you. Second is your marginal tax rate. Before you do anything check these. Is there some reason to exercise immediately? I'd wait, personally.\\\"\",\n \"ESPP is common among US companies, often with a framework similar to your outline. In the US, some ESPPs allow sales of shares to be considered qualifying (subject to capital gains rather than ordinary income tax) if they are sold at least 2 years after the enrollment date and at least 1 year after the purchase date. These details can vary from one plan to another and will be stated in the company's ESPP enrollment documents. Do look at the high and low values of the stock over the last year. If it swings up and down more than 15% (or whatever the discount is), then that risk should be a factor in your decision. If the stock is trending upward over the long term and you are confident in the durability of the company, then you might favor holding.\",\n \"The answer to your question as asked is no. Call options, even those issued by the company, cannot create new shares unless they are employee stock options. Company-issued warrants, on the other hand, can create new shares.\",\n \"\\\"The shares are \\\"\\\"imputed income\\\"\\\" / payment in kind. You worked in the UK, but are you a \\\"\\\"US Person\\\"\\\"? If not, you should go back to payroll with this query as this income is taxable in the UK. It is important you find out on what basis they were issued. The company will have answers. Where they aquired at a discount to fair market value ? Where they purchased with a salary deduction as part of a scheme ? Where they acquired by conversion of employee stock options ? If you sell the shares, or are paid dividends, then there will be tax withheld.\\\"\",\n \"\\\"No, because you didn't lose anything. When you exercise ISO \\\"\\\"at loss\\\"\\\" you're buying stock without a discount, that's it.\\\"\",\n \"Fidelity has a good explanation of Restricted Stock Awards: For grants that pay in actual shares, the employee’s tax holding period begins at the time of vesting, and the employee’s tax basis is equal to the amount paid for the stock plus the amount included as ordinary compensation income. Upon a later sale of the shares, assuming the employee holds the shares as a capital asset, the employee would recognize capital gain income or loss; whether such capital gain would be a short- or long-term gain would depend on the time between the beginning of the holding period at vesting and the date of the subsequent sale. Consult your tax adviser regarding the income tax consequences to you. So, you would count from vesting for long-term capital gains purposes. Also note the point to include the amount of income you were considered to have earned as a result of the original vesting [market value then - amount you paid]. (And of course, you reported that as income in 2015/2016, right?) So if you had 300 shares of Stock ABC granted you in 2014 for a price of $5/share, and in 2015 100 of those shares vested at FMV $8/share, and in 2016 100 of those shares vested, current FMV $10/share, you had $300 in income in 2015 and $500 of income in 2016 from this. Then in 2017 you sold 200 shares for $15/share:\",\n \"Do you simply get call options you can sell on an options exchange? No, you don't get call options that you can sell on an options exchange. Rather, you get rights that you can (generally) sell on the stock exchange. The right issue is in essence a call option – in that it behaves like one, but it is not considered a standardized option contract. is there a special exchange where such rights issues are traded? No. It will normally be done on the stock exchange.\",\n \"A lot may depend on the nature of a buyout, sometimes it's is for stock and cash, sometimes just stock, or in the case of this google deal, all cash. Since that deal was used, we'll discuss what happens in a cash buyout. If the stock price goes high enough before the buyout date to put you in the money, pull the trigger before the settlement date (in some cases, it might be pulled for you, see below). Otherwise, once the buyout occurs you will either be done or may receive adjusted options in the stock of the company that did the buyout (not applicable in a cash buyout). Typically the price will approach but not exceed the buyout price as the time gets close to the buyout date. If the buyout price is above your option strike price, then you have some hope of being in the money at some point before the buyout; just be sure to exercise in time. You need to check the fine print on the option contract itself to see if it had some provision that determines what happens in the event of a buyout. That will tell you what happens with your particular options. For example Joe Taxpayer just amended his answer to include the standard language from CBOE on it's options, which if I read it right means if you have options via them you need to check with your broker to see what if any special exercise settlement procedures are being imposed by CBOE in this case.\",\n \"\\\"An option without the vesting period and the price at which one can exercise the option is of not much value. If vesting is determined by board, then at any given point in time they can change the vesting period to say 3, 5, 10 years any number. The other aspect is at what price you are allowed to exercise the option, ie if the stock is of value 10, you may be given an option to buy this at 10, 20 or 100. This has to be stated upfront for you to know the real value. On listing if the value is say 80, then if you have the option to exercise at 10, or 20 you would make money, else at 100 you loose money and hence choose not to exercise the option. However your having stuck around the company for \\\"\\\"x\\\"\\\" years in anticipation of making money would go waste. Without a vesting period or the price to exercise the option, they are pretty much meaningless and would depend on the goodwill of the founders\\\"\",\n \"\\\"You were probably not given stock, but stock options. Those options have a strike price and you can do some more research on them if needed. Lets assume that you were given 5K shares at a strike of 20, and they vest 20% per year. Assume the same thing in your second year and you are going to leave in year three. You would have 2K shares from your year 1 grant, and 1K shares from your year 2 grant, so 2K total. If you leave no more shares would be vested. If you leave you have one of two options: To complicate matters subsequent grants may have different strike prices, so perhaps year two grant is at $22 per share. However, in pre-public companies that is not likely the case. For a bit of history, I worked at a pre-ipo company and we were all going to get rich. I was given generous grants, but decided to leave. I really wanted to buy my options but simply didn't have the money. Shortly after I left the company folded, so the money would have been thrown away anyway. When a company is private the motivate their employees with tales of riches, but they are not required to disclose financial data. This company did a very good job of convincing employees that all was fine, when it wasn't. Also I received options in a publicly traded company. Myself and other employees received options that were \\\"\\\"underwater\\\"\\\" or worth far less than the strike price. You could let them expire so one did not owe money, but they were worthless. Hopefully that answers your question.\\\"\",\n \"Your three options are: Options 2 and 3 are obviously identical (other than transaction costs), so if you want to keep the stock, go for option 1, otherwise, go for option 3 since you have the same effect as option 2 with no transaction costs. The loss will likely also offset some of the other short term gains you mentioned.\",\n \"Note that you're asking about withholding, not about taxing. Withholding doesn't mean this is exactly the tax you'll pay: it means they're withholding a certain amount to make sure you pay taxes on it, but the tax bill at the end of the year is the same regardless of how you choose to do the withholding. Your tax bill may be higher or lower than the withholding amount. As far as tax rate, that will be the same regardless - you're just moving the money from one place to the other. The only difference would be that your tax is based on total shares under the plan - meaning that if you buy 1k shares, for example, at $10, so $1,500 discounted income, if you go the payroll route you get (say) $375 withheld. If you go the share route, you either get $375 worth of stock (so 38 shares) withheld (and then you would lose out on selling that stock, meaning you don't get quite as much out of it at the end) or you would ask them to actually buy rather more shares to make up for it, meaning you'd have a slightly higher total gain. That would involve a slightly higher tax at the end of it, of course. Option 1: Buy and then sell $10000 worth, share-based withholding. Assuming 15% profit, and $10/share at both points, then buy/sell 1000 shares, $1500 in profit to take into account, 38 shares' worth (=$380) withheld. You put in $8500, you get back $9620, net $1120. Option 2: Buy and then sell $13500 worth, share based withholding. Same assumptions. You make about $2000 in pre-tax profit, meaning you owe about $500 in tax withholding. Put in $11475, get back $13000, net $1525. Owe 35% more tax at the end of the year, but you have the full $1500 to spend on whatever you are doing with it. Option 3: Buy and then sell $1000 worth, paycheck withholding. You get the full $10000-$8500 = $1500 up front, but your next paycheck is $375 lighter. Same taxes as Option 1 at the end of the year.\",\n \"Non-qualified stock options are like regular incentive stock options but without the preferential treatments that ISOs get: Companies like to give NQSOs because they can claim a tax deduction (i.e. a loss) for that difference between exercise price and market price (that you have to report as income).\",\n \"An option gives you the legal right to buy stock. However, you cannot exercise a stock option unless you have the ability to buy the stock. In the United States, securities not fully registered with the SEC for public sale cannot be purchased except by qualified investors.\",\n \"The difference is ordinary income. If the price drops and you sell for exactly what you paid, you have an income of D and a capital loss of D which usually cancel each other, but not always. For example, if you already have over $3000 in losses, this loss won't help you, it will carry forward. The above changes a bit if you hold the stock for 2 years after the beginning of the purchase period. If sold between your purchase price and fair market the day you bought, the gain is only the difference, no gain to fair market + loss. Pretty convoluted. Your company should have provided you with a brief FAQ / Q&A to explain this. My friends at Fairmark have an article that explains the ESPP process clearly, Tax Reporting for Qualifying Dispositions of ESPP Shares.\",\n \"\\\"Okay, I'm going to give you my opinion based on experience; not any technical understanding. The options - by themselves - are pretty meaningless in terms of determining their value. The business plan going forward, their growth expectations, the additional options to be authorized, the additional preferred stock offers they anticipate, even current estimated value of the company are some of the pieces of data you will be needing. I also want to say something cynical, like \\\"\\\"to hell with the stock options give me cold hard\\\"\\\" but that's just me. (My experience two-times so far has shown stock options to be worth very very little.)\\\"\",\n \"Does this make sense? I'm concerned that by buying shares with post tax income, I'll have ended up being taxed twice or have increased my taxable income. ... The company will then re-reimburse me for the difference in stock price between the vesting and the purchase share price. Sure. Assuming you received a 100-share RSU for shares worth $10, and your marginal tax rate is 30% (all made up numbers), either: or So you're in the same spot either way. You paid $300 to get $1,000 worth of stock. Taxes are the same as well. The full value of the RSU will count as income either way, and you'll either pay tax on the gains of the 100 shares in your RSU our you'll pay tax on gains on the 70 shares in your RSU and the 30 shares you bought. Since they're reimbursing you for any difference the cost basis will be the same (although you might get taxed on the reimbursement, but that should be a relatively small amount). This first year I wanted to keep all of the shares, due to tax reasons and because believe the share price will go up. I don't see how this would make a difference from a tax standpoint. You're going to pay tax on the RSU either way - either in shares or in cash. how does the value of the shares going up make a difference in tax? Additionally I'm concerned that by doing this I'm going to be hit by my bank for GBP->USD exchange fees, foreign money transfer charges, broker purchase fees etc. That might be true - if that's the case then you need to decide whether to keep fighting or decide if it's worth the transaction costs.\",\n \"There's no best strategy. Options are just pieces of paper, and if the stock price goes below the strike price - they're worthless. Stocks are actual ownership share, whatever the price is - that's what they're worth. So unless you expect the company stock prices to sky-rocket soon, RSU will probably provide better value. You need to do some math and decide whether in your opinion the stock growth in the next few years justifies betting on ESOP. You didn't say what country you're from, but keep in mind that stock options and RSUs are taxed differently and that can affect your end result as well.\",\n \"Many companies actually just issue new shares for employee compensation instead of buying back existing ones. So actually, the share price should go down because the same value is now diluted over more shares. In addition, this would not necessarily affect companies with many employees than those with fewer employees because companies with more employees tend to be bigger and thus have more shares (among which the change in demand would be distributed). Also, I think many companies do not issue shares to employees every pay day, but just e.g. once every quarter.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["\"Many companies (particularly tech companies like Atlassian) grant their employees \"\"share options\"\" as part of their compensation. A share option is the right to buy a share in the company at a \"\"strike price\"\" specified when the option is granted. Typically these \"\"vest\"\" after 1-4 years so long as the employee stays with the company. Once they do vest, the employee can exercise them by paying the strike price - typically they'd do that if the shares are now more valuable. The amount they pay to exercise the option goes to the company and will show up in the $2.3 million quoted in the question.\""],"string":"[\n \"\\\"Many companies (particularly tech companies like Atlassian) grant their employees \\\"\\\"share options\\\"\\\" as part of their compensation. A share option is the right to buy a share in the company at a \\\"\\\"strike price\\\"\\\" specified when the option is granted. Typically these \\\"\\\"vest\\\"\\\" after 1-4 years so long as the employee stays with the company. Once they do vest, the employee can exercise them by paying the strike price - typically they'd do that if the shares are now more valuable. The amount they pay to exercise the option goes to the company and will show up in the $2.3 million quoted in the question.\\\"\"\n]","isConversational":false}}},{"rowIdx":63,"cells":{"_id":{"kind":"string","value":"2443"},"query":{"kind":"string","value":"What are some way to transfer money from Hong Kong to India on a monthly basis?"},"gt_ids":{"kind":"list like","value":["305579"],"string":"[\n \"305579\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1],"string":"[\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["519314","21488","69171","453221","379065","217216","467641","60952","359952","525576","183880","563812","286825","426216","307404","150903","263648","236031","38424","78597","245766","187734","320012","115932","475054","80657","251370","259021","93099","56907","450939","478026","456773","394899","346486","521753","417286","412258","24612","96062","489070","77596","393579","476550","305579","20283","558646","107924","581173","120312","446647","291695","224688","384171","516756","396576","366954","322838","80007","185146","589616","469652","306800","232043","291486","538000","237107","277475","554700","361689","210853","428696","319435","524829","78813","291923","482927","205556","202570","281000","131164","55108","549684","488566","257256","169987","397679","564648","203889","126899","472681","223652","25989","510485","334061","286935","57622","450925","194167","582414"],"string":"[\n \"519314\",\n \"21488\",\n \"69171\",\n \"453221\",\n \"379065\",\n \"217216\",\n \"467641\",\n \"60952\",\n \"359952\",\n \"525576\",\n \"183880\",\n \"563812\",\n \"286825\",\n \"426216\",\n \"307404\",\n \"150903\",\n \"263648\",\n \"236031\",\n \"38424\",\n \"78597\",\n \"245766\",\n \"187734\",\n \"320012\",\n \"115932\",\n \"475054\",\n \"80657\",\n \"251370\",\n \"259021\",\n \"93099\",\n \"56907\",\n \"450939\",\n \"478026\",\n \"456773\",\n \"394899\",\n \"346486\",\n \"521753\",\n \"417286\",\n \"412258\",\n \"24612\",\n \"96062\",\n \"489070\",\n \"77596\",\n \"393579\",\n \"476550\",\n \"305579\",\n \"20283\",\n \"558646\",\n \"107924\",\n \"581173\",\n \"120312\",\n \"446647\",\n \"291695\",\n \"224688\",\n \"384171\",\n \"516756\",\n \"396576\",\n \"366954\",\n \"322838\",\n \"80007\",\n \"185146\",\n \"589616\",\n \"469652\",\n \"306800\",\n \"232043\",\n \"291486\",\n \"538000\",\n \"237107\",\n \"277475\",\n \"554700\",\n \"361689\",\n \"210853\",\n \"428696\",\n \"319435\",\n \"524829\",\n \"78813\",\n \"291923\",\n \"482927\",\n \"205556\",\n \"202570\",\n \"281000\",\n \"131164\",\n \"55108\",\n \"549684\",\n \"488566\",\n \"257256\",\n \"169987\",\n \"397679\",\n \"564648\",\n \"203889\",\n \"126899\",\n \"472681\",\n \"223652\",\n \"25989\",\n \"510485\",\n \"334061\",\n \"286935\",\n \"57622\",\n \"450925\",\n \"194167\",\n \"582414\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["\"HSBC, also known as \"\"The Hong Kong and Shanghai Banking Corporation\"\" has banks in India. I would imagine that might be a place to start. Paypal, which is commonly used to pay for items on eBay -- is also available in both India and China. You should, of course, respect any laws regulating this kind of money transfer.\"","Take a look at Transferwise. I find them good for currency conversions and paying people in India from a US bank account.","Wire transfers are the best method. Costs can vary from $10 to $100 or more, depending on the banks and countries involved. There's rarely any saving using the same bank, although HSBC may have reduced charges if you have Premier accounts in both countries (for a one-off transaction, it may not be worth the effort to open an account). However, that cost is insignificant compared to your possible losses on the currency exchange. Assuming your money is currently in Hong Kong Dollars (HKD), it will need to be converted to US Dollars (USD). One place where it could be converted is at your Hong Kong bank. You'll get their retail rate. Make sure you are aware of the rate they will use, and any fees, in advance. Expect to pay around 2-3% from the mid-market rate (the rate you see quoted online, which doesn't fluctuate much for HKD-USD as the currencies are linked). Another place where the currency could be converted is at your US bank. You really don't get any control over that if it arrives as HKD and is then automatically converted into your USD. The rate and fees could be quite poor, especially if it is a minor US bank that has to deal with anther bank for foreign currency. For amounts of this size, it's worthwhile using a specialist currency conversion company instead. Currency Fair in Ireland is one. It's a peer-to-peer exchange that is generally the best deal (at least for the currency pairs I use). You wire the money to them, do the exchange on their site at a rate that is much closer to 0.5% from the midrate, then the money is transferred out by wire for a few dollars. Adds a few days to the process, but will possibly save you close to US$1000. Another established option is Currency Online in New Zealand. There are probably also specialist currency exchange companies in Hong Kong. The basic rule is, don't let the banks exchange currencies at rates that suit them, use a third party that offers a better rate and lower fees.","I use xoom.com to transfer money to India. I've been using them for over 2 years now, they are the fastest and the cheapest for me (the funds are usually available the same day). They seem to have added a lot of European countries to their list. Definitely worth a shot.","There are multiple ways in which you can get money to India; - Citi Bank / HDFC Bank offere similar services [and the credit account can be ICICI Bank] - Ask for a Wire/SWIFT transfer, there would be some changes [in the range of USD 30] - Ask for a company check, it would take around 30 days for you to encash in into your bank account in India.","You could use: SWIFT transfer : ask your counterparty for his bank SWIFT code and beneficiary account numbers; you can do a SWIFT transfer to most countries from your Indian bank). You will need to fill a form where they ask you what you're transferring the money for, etc. Most Indian banks provide this facility. Western Union: I'm not sure if WU is in China, but they are very simple to use. Paypal: They charge heavy fees, but may be the fastest way to get your money across.","You can use xoom.com or western union. They are both pretty much the same, as they do not charge any fees but take a cut of 0.7-0.8% on every dollar. However, there is a minimum and maximum limit of sending money. If you want to transfer more, you can wire money in through a financial institution such as Wells Fargo or Chase bank or look to see if there is a State bank of India around you. I am quite sure that they charge $15 plus 0.20-0.30% on every dollar( The last time I used it). Hope this helps.","how could I transfer the money from UK There are multiple ways, walk into your Bank and ask them to wire transfer to the Bank Account in India. You would need the SWIFT BIC of Bank in India, Account Number, etc. Quite a few Banks [State bank of India, HDFC, ICICI etc] also offer remittance service. Visit their website for more details. does it cost the tax and how much Assuming your status is NRI [Non Resident], there is no tax implications of this in India.","Essentially you can send a Check by mail, you brother deposits into Bank account. It costs very little, the time required would be around 1-2 months. You can do International Wire [Via SWIFT] it would reach in few days, fees are high. You can use specialized remittance services like Money2india, remit2india, or western union etc. The fees are low and generally funds reach in a week.","There are quite a few ways; each has its own pro's and con's SWIFT: Fast reliable payment. Higher Charges. If payments are large and routine the charges can be less Remittance Service: Ideal for person to person transfer. Can be used by Companies to transfer to Individuals. Less Faster compared to SWIFT. Quite Cheaper compared to SWIFT Check's: Long time is getting it cleared in India. Typically around month. Quite Cheap. Almost NIL charges.","The safest, quickest and cheapest option would be to do a wire transfer from your HK account to an account in a US bank. You can contact HSBC and ask them if it would be cheaper if the US bank account is at HSBC as well, but I doubt it would be a significant saving. Check the rates in HK about a wire transfer, in the US, on the receiving side, the fees are not dependent on the amount and are about $10-$15 per occurrence (shop around).","If you are a citizen of India and working in Germany, then you are most likely an NRI (NonResident Indian). If so, you are not entitled to hold an ordinary Indian bank account, and all such existing accounts must be converted to NRO (NonResident Ordinary) accounts. If your Indian bank knows about NRO accounts, then it will be eager to assist you in the process of converting your existing accounts to NRO accounts most likely it also offers a money remittance scheme (names like Remit2India or Money2India) which will take Euros from your EU bank account and deposit INR into your NRO account. Or, you can create an NRE (NonResident External) account to receive remittances from outside India. The difference is that interest earned in an NRO account is taxable income to you in India (and subject to TDS, tax deduction at source) while interest earned in an NRE account is not taxable in India. The remittance process takes a while to set up, but once in place, most remittances take 5 to 6 business days to complete.","There is no difference in taxation in India if you transfer every month or bulk. If you use specialized remittance services from leading Indian Banks, there would be little difference in fees. Assuming you are keeping the funds in NRE account in India and hold it in GBP, you get a slight better rate of interest that what you would get in UK. The interest would not be taxable in India, however it would be in UK. If you convert the funds at hold it in NRE, Rupee account, you would get still better rate of interest. However you are taking the Fx risk when you try and convert this back to GBP incase you decide to stay on. There are no right or wrong answers Edit: There is no limit on the amount of funds earned as NRE that can be got into India tax free. There is a time limit of 7 Years to get the funds back to India tax free. From a tax point of view if you transfer into NRE account its easy. If you transfer into Normal Savings account you would need some paperwork.","Most Banks allow to make an international transfer. As the amounts is very small, there is no paperwork required. Have your dad walk into any Bank and request for a transfer. He should be knowing your Bank's SWIFT BIC, Name and Address and account number. Edit: Under the liberalised remittance scheme, any individual can transfer upto 1 million USD or eq. A CA certificate is required. Please get in touch with your bank in India for exact steps","I am a non-resident alien transferring a limited amount ( in dollars post tax) to India every couple of months. Assuming you are transferring this into an NRE account in India or atleast NRO account in India. As a NRI, by regulations one should not hold normal Savings account. This has to be converted into NRO. I put that money as a fixed deposit in a bank (which gives 6-7 percent annual return) Assuming you have FCNR deposits. Also assuming that you are declaring the taxes in your US Tax returns and paying tax accordingly. There is no tax in India on FCNR. If this was in ordinary FD or in NRO account, you are declaring and paying taxes in India as well as in US. What is the max limit on transferring money back from India to USA? If you have transferred this into NRE account, there is no limit. Other account there is a limit. Read more at Liberalized Remittance Scheme and here. What are the legitimate ways to transfer the money? From India point of view, this has to be Bank to Bank transfers. You can't carry cash [Indian Rupees] outside of India beyond Rs 25000 [or 15000?]. You can't hold excess of USD 250 without valid purpose. Western Union is not authorized to transfer funds out of India. Will there be any tax levied? No assuming you are already paying taxes on the Interest in US and depending on the type of account in India.","Use a remitting service such as Ria Money Transfer. Almost all these services allow you to transfer upto $2999 at a time. So, you would be able to transfer the entire amount of $4500 within 2 business days(There is a monthly limit too, but it will definitely be more than $4500). There are no fees to use these services, but they do scrape off a bit on the currency rate. As of today you are getting 624 GBP for $1000 whereas the market rate is $641.95. You still save roughly $17 and 4 transactions, which adds up to more than $100. Here is a link to Ria's website. Other services, include Xoom, Western Union, Money Dart and Money Gram.","On my recent visit to the bank, I was told that money coming into the NRE account can only be foreign currency and for NRO accounts, the money can come in local currency but has to be a valid source of income (e.g. rent or investments in India). Yes this is correct as per FMEA regulation in India. Now if we use 3rd party remittances like Remitly or Transferwise etc, they usually covert the foreign currency into local currency like INR and then deposit it. The remittance services are better suited for transferring funds to Normal Savings accounts of your loved ones. Most remittance services would transfer funds using a domestic clearing network [NEFT] and hence the trace that funds originated outside of India is lost. There could be some generic remittance that may have direct tie-up with some banks to do direct transfers. How can we achieve this in either NRE/NRO accounts? If not, what are the other options ? You can do a Wire Transfer [SWIFT] from US to Indian NRE account. You can also use the remittance services [if available] from Banks where you hold NRE Account. For example RemittoIndia from HDFC for an NRE account in HDFC, or Money2India from ICICI for an NRE account in ICICI or QuickRemit from SBI etc. These would preserve the history that funds originated from outside India. Similarly you can also deposit a Foreign Currency Check into Indian Bank Account. The funds would take around month or so to get credited. All other funds can be deposited in NRO account.","India is better as the exchange rate conversion will be better. In the US, banks or exchange rate converters do not hold much INR and likely to quote a much worse rate. Best way is to open HSBC premier accounts in both US and India and use their global transfers as in premier accounts the conversion rates are usually decent. HSBC Premier also has good tools to link two accounts, so the process would be transparent. Best conversion rates are given by Middle East banks or FX converters due to the large number of Indians working there, but I suspect opening a bank account in Dubai might not be feasible.","Depending on how tech savvy your client is you could potentially use bitcoin. There is some take of indian regulators stopping bitcoin exchanges, meaning it might be hard to get your money out in your local country but the lack of fees to transfer and not getting killed on the exchange rate every time has a huge impact, especially if your individual transaction sizes are not huge.","MoneyGram said that the person sending money should also be an Indian. There shouldn't be any such restriction. Can you check again what exactly the issue was? Is there another way so I can get money without any problem. You can try Bank Transfers or alternative remittance like Western Union","The best way is to approach your bank and fill out a transfer form to send USD to your US account (if you are visiting India). They will require quite a number of proof (AADHAR, PAN, Passport) copies. Otherwise speak to your bank about how to do a wire transfer from your India A/C to US; after de-moitization regulations have tightened, the best course of action would be to speak to your bank directly.","\"The Option 2 in your answer is how most of the money is moved cross border. It is called International Transfer, most of it carried out using the SWIFT network. This is expensive, at a minimum it costs in the range of USD 30 to USD 50. This becomes a expensive mechanism to transfer small sums of money that individuals are typically looking at. Over a period of years, the low value payments by individuals between certain pair of countries is quite high, example US-India, US-China, Middle-East-India, US-Mexico etc ... With the intention to reduce cost, Banks have built a different work-flow, this is the Option 1. This essentially works on getting money from multiple individuals in EUR. The aggregated sum is converted into INR, then transferred to partner Bank in India via Single SWIFT. Alongside the partner bank is also sent a file of instructions having the credit account. The Partner Bank in India will use the local clearing network [these days NEFT] to credit the funds to the Indian account. Option 3: Other methods include you writing a check in EUR and sending it over to a friend/relative in India to deposit this into Indian Account. Typically very nominal costs. Typically one month of timelines. Option 4: Another method would be to visit an Indian Bank and ask them to issue a \"\"Rupee Draft/Bankers Check\"\" payable in India. The charges for this would be higher than Option 3, less than Option 1. Mail this to friend/relative in India to deposit this into Indian Account. Typically couple of days timelines for transfer to happen.\"","There is a startup targeted specifically to serve you for the situation you describe: - http://peertransfer.com There are other methods. CurrencyFair is one service that might help: - http://currencyfair.com And, there is bitcoin. Because it is new yet, there aren't very liquid markets where bitcoins are exchanged for Rupees or Yuan at decent rates at the present. Once you receive bitcoins transferred to you however, those funds are easily transferred to your B Of A account (using Dwolla to send via ACH to your bank). - https://en.bitcoin.it/wiki/Buying_bitcoins","There is no best way, you can send the money to India or invest into shares in US. It depends on the risk you are ready to take.","It is recommended that you get this using Wire Transfer. The fees is slightly high, it should be in the range of USD 20 - 30. You would get the funds faster, about 3-5 days after the payment is initiated. The Fx conversion would be applied without your knowledge so you would have very little control over it. If you are getting by paper cheque, it would take around 7 - 10 days for the mail to arrive. You would have to deposit this in local Bank, complete a form giving out the details as to why you received the cheque, along with a letter to request the cheque to be cashed ... Generally it takes around 25 days for the funds to get credited. As you would be speaking to someone in Bank, you can try and negotiate a better Fx rate, however for such amounts Bank will not go out of the way, so you may not know what rate gets applied, it would be the standard rate some 20 days later when the actual cheque gets processed. The fees are relatively less in the range of Rs 500 to Rs 1000.","I want to transfer about 60 Lakhs INR from my NRO account in India to my US bank account Yes you can. However there is some paperwork you need to follow. As per FEMA [Foreign Exchange Management Act], any transfer by individuals outside of India need the 15CA & 15CB form. The 15CB is from a CA to state that taxes have been paid on the funds being transferred. The limit is 1 million USD per year. Read more at Liberalized Remittance Scheme and here. What is the best way to transfer it with minimum fees/taxes Assuming you were already declaring the funds held in Banks outside of US in your regular IRS filings, there is no other formality. Question on Minimum fees service recommendation is out of scope on this site. Outward remittance can only be done by Bank Transfer.","If the funds are in NRE account, then there is no issue. You just instruct your bank in India to transfer. If your tax status in India is Non-Resident Indian, you should not be holding a normal Savings bank account. Under the liberalized remittance scheme you can transfer upto 2,50,000 USD per year. You would need to instruct your bank in India to initiate a international wire transfer. The FAQs are here","\"The wire is probably the quick way to go. There may be a lower cost method through an international bank like Citi or HSBC. If you are a US resident or have a \"\"substantial presence\"\" in the United States, the IRS may be interested in the origins of your money.\"","Are there any IRS regulations I should be aware of when sending money to India? None. As long as you are following the standard banking channels. You are also declaring all the accounts held outside US in your tax returns. FBAR. Is it legal to do so? Yes it is legal. do I have to declare how much I am investing and pay extra taxes? As part of FBAR. Income earned [including interest, capital gains, etc] needs to be paid in India [there are some exemptions for example interest on NRE accounts] as well as in the US [relief can be claimed under DTAA Indian version here and US here]. So if you already have paid taxes on salary and say transfer USD 10K to India; there is no tax on this 10K. If this 10K generates an income of say 2K; this 2K is taxable as per normal classification and rules.","Yes, you can transfer money to your account, any bank will do it. The conversion charges will be there i.e. the diff between USD and the rate at which the bank sells it, usually Rs. 2/-, appx. In addition, transaction charge (not very high). As for taking from friends & repaying in India, check UAE tax treatement for taking money from friends (is it considered as your income & are you liable for taxes). As for giving back, get some documentation done as a loan, otherwise your friends may be considered to be taking gift/consideration/income from you and taxed. Most straight forward way is to transfer the money from your mother's account.","If you're really price-sensitive, consider carrying cash in your wallet whenever your brother (or you) comes home to your own country. Besides saving money, this should teach your younger brother to plan well and manage his living costs or otherwise he'll starve. Let's say that a month's living cost is $1500 which includes housing, food, transportation, and the occasional splurging[1]. If your brother's school is in a per-semester basis, chances are he'll visit your home country at about twice a year. That will be $1500 * 6 months = $9000. You can still carry that amount of money in your wallet (that's 90 sheets in $100 bills, which should fit in larger wallets) provided that you're careful. If you or your brother don't go home regularly at least once a year, the 3% transfer fee isn't that big. Let's say that the total amount that you transfer is $18K (for a year's living cost, $1500 * 12 months), the fee for that will be $540 ($18000 * 0.03), which I'll bet is far less than a return airfare from the US to India/China/UAE. [1] I'm living on my own in Singapore right now, and my monthly expenses rarely exceeds S$1500/month, so I'm assuming that in the states that would be USD 1500. You can get a projection for that number yourself.","Can I bring a bankers cheque or DD from singapore bank . Yes you can. Remember if they are payable in Singapore, i.e. SGD denominated, they will take time to clear; typically around a month. Alternatively you can approach an Indian Bank in Singapore they can arrange for a Rupee draft payable in city of your choice. The Banks also have a facility of opening an NRE account in the city/Branch of your choice by opening account with wire transfer. I do not have time for NRE account Money can be transferred into your NRO account as well. You could also use remittance services that provide better exchange rates.","Give a cheque. You can. Your friend would have to deposit this in a Bank that does this service. Not all Banks offer this service in US. It generally would take 1-3 months for the funds to reach. Give a dollar-denominated cheque You can NOT write check on a Rupee account and put USD. You can definitely buy a USD Draft generally payable in the US. There would be some charge for you here and send it by courier, post. It would get paid into your friends account in about a week. Do a SWIFT transfer Yes you can. You may need to walk into a Branch and fill up forms. If the amount is more than specified limit a CA certificate is required. Am I correct in understanding Yes Use my ATM card in the US Yes you can. Specialised money transfer services like Western Union Transfer money out of India is not allowed by Money Transfer services","Do an semi-online transfer. I had a similar situation where i had to transfer 5K USD to a commercial entity. You can request the publisher to give you their bank account details. You will need the SWIFT code of the bank( SWIFT code is a international code that each bank gets to transfer money) You will need bank account number, account name, bank address, address of the publisher. Then just walk into your bank with the above details. Note that you will have to visit a branch in your city that allows forex transfers. They will give you a set of forms to fill up. The above details will be needed to fill up these forms In addition to the above, you will be asked to fill up a purpose code maintained by RBI. This code is used by RBI to understand the reason why you are transferring the money. The bank will provide you with a sheet which will have these codes and explanation of these codes. Read through the codes and in case of any questions ask the bank officials to help Tip: If you have accounts with any private sector banks, please approach them. Public sector banks will give you tough time Hope this helps! Regards, Ravi","Hmmm... As far as I know wire transfers are still the best option. If you make sure your US account accepts international wires for free (like TD Bank does) you'll have eliminated most of the costs (assuming your foreign bank doesn't charge too much for wiring the funds in the first place). Also, if your able to, you could consider wiring 6 or so months at the same time. I'm not familiar with XE.com but it seems it's not set up for transferring money so much as for trading currencies. While you could probably use it to transfer funds if you'd link both your accounts it seems a rather complicated way to go about things. Paypal could be an option if they'd allow you to set up an account in each country (or if you have a relative that could help out), but it gets more expensive than wire-transfers quickly. As for getting the best exchange rate... I've given up on that a long time ago and have accepted that as the cost of living internationally :).","I am on employment based visa in USA and want to send dollars from USA to India from my savings (after paying Tax). How much maximum dollars I can send in a day? month? or in a year regularly? There is no such limit. You can transfer as money you like to yourself anywhere. To pay the Bank Loan-student Loan how much maximum dollars I can send in a day, in a month or in a year? to pay that I have to pay directly to that Bank Account or in any account I can send money? You can transfer to your NRE account in India and move it further. You can also send it directly to the Loan Account [Check with the Bank, they may not be able to receive funds from outside for a Loan Account] My mother is having Green Card. She is not working. She has a NRE account in India. Can I send dollars from my USA Bank account to her NRE account in India? what are the rules for that? any Tax or limit for that? Or I have to get any permission before sending it? If you are sending money to your mother, it would come under Gift Tax act in US. There is no issue in India. Suggest you transfer to your own NRE account.","Meagrely transferring money within your own accounts doesn't result in any tax, however legally once you are an NRI you cannot operate a savings account at all as per Reserve Bank Guidelines found here One option is for you to transfer to a joint account held by a close relative of yours with you and this would be tax free in India.","Can I wire transfer money from the my NRO account in India to my checking account in the USA? Yes you can. However there is some paperwork you need to follow. As per FEMA [Foreign Exchange Management Act], any transfer by individuals outside of India need the 15CA & 15CB form. The 15CB is from a CA to state that taxes have been paid on the funds being transferred. The limit is 1 million USD per year. Read more at Liberalized Remittance Scheme and here. Any limit on the amount and do I have to report this to IRS or any other legal formality? Assuming you were already declaring the funds held in Banks outside of US in your regular IRS filings, there is no other formality.","Online money transfer facility from Axis Remit is a quick and easy way to transfer money from USA to India. AxisRemit is Axis Bank's flagship inward remittance service enables you to transfer money to your beneficiaries through the most efficient channels like online money transfer, exchange houses and money transfer operators.","India has Foreign Exchange Management Act. Under the liberalized scheme, there are limits for individuals to move funds out of India for specific purposes. Any such transfer require a CA certificate, so it would be advisable to talk to a CA to understand the specifics of your case.","He cannot get money from someone else account. Your US resident friend in New York can send money to your Indian friend in Atlanta via Western Union which has presence in almost every corner of the US. Most definitely in the city of Atlanta. Your Indian friend can receive the Western Union transfer, in cash, within minutes after the friend in New York sends it. Here's the site for location search. The sender doesn't need to go anywhere, can send online, so your New York friend doesn't even need to waste much time. In fact - you don't need to bother your friend in New York, you can send it online yourself (assuming you're American/have US bank account). In order to receive the money, your Indian friend will obviously need a proper identification (i.e.: passport).","From you question I understand that you are not an Indian citizen, are staying in India, and transferring your funds for your living / expenses in India. There is no limit on such transfers and the amount is not taxed. The tax comes into picture if you are treated as a resident in India from a tax perspective. Even then the tax is not because you have transferred the funds into India, but the policy of taxing global income. The article at http://www.pwc.in/en_IN/in/assets/pdfs/foreign-nationals-working-in-india.pdf should give you more inputs.","You can use Skrill or any other service like paypal or SWIFT wire. There is no legal restriction to bring money into India. You need to pay taxes depending on how you earned the income, of course the assumption is you earned the money in a legal way.","Can I transfer directly from my US saving account to their Axis bank in India? Yes you can. any kind of tax my parents need to pay? No. From you parents point of view, its a Gift from their daughter and would come under the provisions of Gift Tax [and Not Income Tax]. Gifts from specified relatives [Daughter /sons /parent /siblings] is tax free. It would make sense to keep some paper work around this, for example a simple letter stating that this is a Gift, specify the amount, the date of transfer, the amount actually credited, details of the credit [Bank Statement]. If there is a scrutiny by income tax, it would ease things. any kind of tax I need to pay? In India NO. In US I am assuming your have already paid tax hence no tax.","Western Union, Money to India, Remit to India are some of the services that specilize in remittance and would be cheaper than an International Wire. There is not tax for transfering your own money earner outside India into India. Edit: The business of Remittance is bought into the Service Tax Net by Govt. It is seen that Banks are offering this as a service and hence the tax to Banks which is passed on to customers. 0.12% of tax on the converted amount. IE if you transfer Rs 1,00,000/- you would need to pay a tax of Rs 120/-. Above Rs 1,00,000 the incremental rate is 0.06%","As an Indian resident you can open an Resident Foreign Currency Account, i.e. an USD account. This facility is provided by all major banks. I am not sure if PayPal would transfer money to these accounts or would convert. The alternative is to give this account number along with other Bank details to the company in US and ask them to send money via remittance services.","The Transfer of funds outside of Bangladesh is restricted. Any transfers required the permission of Bangladesh Bank [Central Bank]. So the only legal option is to apply for the permission and see if its granted. Western Union is a Money Transfer and typically is good for getting funds into Bangladesh, most expats in Bangladesh would use the service. It can unfortunately not be used other way round.","From India Tax Point of view, your parents can Gift you the money. There is no tax due to this in India for your parents or for you. Transferring the funds out of India is also possible. Under the Liberalized Remittance Scheme by RBI, one can transfer upto 200,000 USD. Please check with your Bank for the exact paperwork. Typically PAN and a CA certificate mentioning the relevant clauses and certifying the purpose is required. Bank may have some more paperwork on its own.","Is it true that my father and I get better exchange rate if he uses citibank than his local bank and my local bank? No. The rates vary from Bank to Bank and some days some bank may give a better rate and there is no Golden rule that One Bank will always give better rate. For the amount specified, your father needs to walk into his Bank, preferably the branch that deals with Forex or the Main Branch in the city. A better rate would be given. So any leading Bank like HDFC, ICICI, SBI, SBH, Axis will be similar. Please note a CA certificate is required to make such remittance outside of India. having my father send me money in USD in India and I get USD here. In that case, my father would have to pay exchange fees Yes this is the only option. You have to convert INR to USD in India. having my father send me money in INR in India and I exchange INR to USD in the US. In this case, exchange fees would be on me INR cannot be sent to US electronically. It will automatically get converted to USD. There is no bank in US that holds an INR account for you to convert amount into USD.","Like for example I use transferwise to send $x to my dad's account in India, would it show my name as the depositor ? That would depend from bank to bank, it may or may not show your name. Would it be considered as income for my dad ? Assuming your parents are Indian Residents for tax purposes. No. It would be considered as Gift. Gifts between father and son are tax free in India and there is no limit. Any special care/precaution to take before using such services ? Not really. Just to be safe, keep a copy of the transfer instruction / details of debit to you account etc, so that if there is enquiry you have all the data handy. Edit: Clarifying the comment, if you are Resident Alien in US for tax purposes, you would be liable to Gift Tax [Not your parents as they are Indian Residents and would follow Indian tax rules]. As per IRS the liability of Gift tax is on Donor subject to limit of $14000 per year per Donee. So you and your wife can gift your father and mother $14000 each. i.e. $56000 each year. Anything more will be taxable or can be reduced from the overall estate limit.","I want to send some money to Indian in my saving account but I haven't any NRO/NRE account. It is advisable to Open an NRE account. As an NRI you cannot hold a savings account. Please have this converted into NRO account ASAP. Process or Transaction charges or Tax (levied by Indian bank) on money what I'll send to my saving account in India. I know the process or transaction charges (applied by UK banks) from UK to India. There will be a nominal charge levied by banks in India. If you use dedicated Remittance services [Most Leading Indian Banks offer this], these are mostly free. Is there any limit to get rid off tax? Nope there isn't any limit. This depends on service provider. What types of paper work I'll need to do for showing that income is sent from UK after paying tax. If you transfer to NRE account. There is no paperwork required. It is implicit. If not you have to establish that the funds are received from outside India, keep copies of the transfer request initiated, debits to the Bank Account in UK, your salary slips, Passport stamps etc.","Transfer of Millions of USD in and out is not possible for Individuals. There are limits on how much money an individual Indian Ordinary Citizen can send or receive. If an corporate wants to send money, depending on the services offered, they would have to initiate a SWIFT transaction. It typically takes 2-3 days for settlement of International wire.","Every month I will get a return in from my share of the profit which would be used for repayment of capital and interest in India. Not to sure what the business plan is. Please factor all the modalities, Exchange rate fluctuations, etc. My concern is regarding RBI rules and regulations, FEMA guidelines, and Income tax. Under the Liberalized Remittance Scheme; Funds can be transferred outside India. Any profit you make will be taxable in India. You will have to declare this pay tax in as per schedule.","It really depends on the amount of money - I currently have to pay my mortgage in the UK from the US until my house there is sold and my wife sends money from her (US) Paypal account to my UK Paypal account. As personal payments these don't attract the sort of fees you see for ebay payments et al. Compared to the fee-o-rama that a wire transfer turns into (I tried once from BofA to HSBC UK), it is noticeably cheaper for the amount of money we're sending. That said, a lot of the currency transfer services have support for monthly payments and you might get a decent exchange rate and fewer (or no) fees that way.","As you are not a tax resident in India, the income you have earned can be moved to India tax free. However if you are investing the funds into say shares / fixed deposits etc, the income you earn on these funds is taxable in India. The funds can be transferred directly into savings account. However its advisible to open an NRE/NRO account as its easier to track funds for tax purposes. i.e. these accounts by nature certify that the funds received into them are from foreign sources and can easily be explained to the tax authorities. However establishing the origin of funds in ordinary savings accounts needs more paper work. Whenever there is a scrutiny by tax authorities on this savings account, it would need more efforts to establish that the credits are from foreign earnings.","\"How do I get my money from India to UAE account – what are the options, can I do bank transfer from my mom SB account to my international account. As you have transferred money directly to your Mothers account, getting the money back would need some paper work. Consult a CA and Bank in India, they should be able to help you. There are various limits under FEMA that would be applicable. As the amount is small a self declaration would also suffice. If yes how much do I loose in case of 20 lac due to currency conversion and commission (approximate) Not sure I understand this question, are you asking if you had converted X AED into Rs 20 lacs and now you have 20 lacs will you get back \"\"x\"\" AED or how much less? If you Buy and Sell on the same day, typically there is a spread of 3-5% depending on the currency pair. However rates would have move up or down since then and hence this cannot be answered. You would have to see what the rates are. b. can exchange with Friends in UAE and deposit the same in INR to their SB account in india. Stick to Banks or authorized remittance services [like Western Union / Money Gram / etc]. Any other method you are circumventing law. One is not authorized to convert currency outside the normal Banking Channel.\"","Although I have not tried, you can check out the Western Union Money Transfers. http://www.westernunion.com/WUCOMWEB/staticMid.do?method=load&pagename=serviceToBank","How much amount can we transfer from India to the USA? Is the limit per year? As I understand your father in law is Indian Citizen and his tax paid earnings need to be transferred outside of India. Under the Liberalized Remittance Scheme by RBI, one can transfer upto 2,50,000 USD. Please check with your Bank for the exact paperwork. A form 15CA and 15CB [by CA] are required to establish taxes have been paid. What documents we have to present to the bank? See above. Should money be transferred to company's account(Indian Company) to USA company? or can be transferred to my husband's account. Transfer of funds by a Indian Company to US Company has some restrictions. Please check with CA for details. If you father in law has sold the Indian Company and paid the taxes in India; he can transfer the proceeds to his son in US as per the Liberalized Remittance Scheme. Can they just gift the whole amount to my husband? What will be the tax implication on my husband's part in USA and on my father in law in India. The whole amount can be gifted by your father in law to your husband [his son]. There is no tax implication in India as being an Indian resident, gift between close relatives is tax free. There is no tax implication to your husband as he is a US Citizen and as per gift tax the person giving the gift should be paying the applicable taxes. Since the person gifting is not US Citizen; this is not applicable.","All Indian Banks are offering USD accounts known as multicurrency account, where you can hold your fund, this account also permits you to book the USD to INR rates in advance if you require. You can keep your money in this account and also can remit the same back to source or other destination country.","The best, cheapest and safe way is to wire transfer that money from their Bank Account to yours. Ask your bank about information regarding inbound international wire transfer and provide those details to your dad. About how much amounts can he do so : if the amount is more than $10K, you need to provide enough information about where the money is coming from, sources and other legal details. Whatever way you chose, never do transfers in small chunks (which is called structuring), to avoid the legal hassle - as that might result in more issues and every bank has checks in place to find out this way of structuring. I would suggest wire transfer all the money, through proper channel, through the banks. It's better to pay some fees, follow the law and live peacefully than to go through some improper channels to avoid paltry fees and get into serious issues.","Ask them to send a SWIFT payment [aka International Wire]. You would need to give them your bank details, essentially Bank Account, Bank Name & Address, SWIFT BIC, etc. Almost all Public Sector Bank and all leading Private scetor banks are members of SWIFT and can give you a the SWIFT BIC. If you are not sure about other party, it would be wise to open a new account and give the details of this account rather than your normal account.","HSBC exchange spread between HKD and USD was 483 bps (1 bps is 0.0001) on their 24 hours exchange network a few weeks ago when I checked. It is very high for a pair of linked currencies which has very little fluctuation. One should expect less than 5 bps or even 1 bps. I did my currency conversion at a US brokerage which can take HKD currency and then I was able to pick the time/rate and amount I like to make the conversion. Basically, the currency pair runs within a tight band and you just need to buy USD with HKD at the time when it is near the edge of the band to your advantage. There is usually no fee on currency conversion. They make money through the spread. HSBC premier allows you to wire free among countries. I forget whether they offer tighter spread or not. Rob was right on about the cost of transferring money overseas. The majority of the cost is in the conversion, not the wiring.","If you are a non resident Indian, the income you earn and transfer to India is tax free in India. You can hold the funds in USD or convert then into INR, there is no tax implication.","Is it liable for taxation in India? Taxation does not depend on whether to transfer money to India or keep it in GCC. It depends on your tax status. In a given Financial year; 1st April to 31st March, if you are outside of India for more than 182 days, your are Non-Resident Indian, NRI for tax purposes. If you are NRI, income earned outside of India is not taxable in India [even if you transfer the funds to India]. If you are not an NRI, you income in GCC will be taxable in India [Even if you keep the money in GCC]. We both send our salary into a friends account in India and then transfer an amount to our own accounts This is an incorrect practise, If you are NRI, you should not be holding a Savings account, it should be converted into NRO and you can if you want open an NRE account. For your friend where you are transferring money, if there is an income tax audit, there would be quite a few questions asked and your friend has to establish and keep records that this is not GIFT, but more of a convenience agreement.","Regular wire transfer from bank to bank would be the easiest, safest, and likely the cheapest (next to carrying cash over the border) method. Get the SWIFT info from the US bank you want the many land in (I believe all of the ones you mentioned support SWIFT wire transfers), and give it to your family in China. They'll have to find a local bank that supports SWIFT out-going transfers (might not be as easy as in the US) and send it out from there. Other, more expensive, options would be Western Union/MoneyGram. Or carrying cash over the border, which in these amounts can trigger some questioning from the authorities.","If HSBC is an option for the country in which you're living I found they have very comprehensive banking services which are very helpful as an expat, including easy wire transfers initiated online. One key aspect is they will honor your US credit score which is helpful while you build a credit history in the new country. If you have enough on deposit with them you may qualify for the HSBC Premier program which then gives you all of those free of charge. That being said, I think their customer service and bureaucracy is horrendous. So once I had established myself locally I switched to a better local bank and use wire transfer services. If you happen to be an expat in Canada there are now starting to be other options with TD and RBC.","\"Quite a few Bank in India allow Funds Transfer via ATM. One has to first register the beneficiary account and wait for 24 hrs before transacting. However it looks like \"\"Indian Bank\"\" currently does not offer this service. You can call up Indian Bank and ask if they provide this service. Alternativly use the Internet Banking to transfer funds to CitiBank or any other Bank in India.\"","One of my friend is sending 100000 pounds to India, Although you haven't asked, this is a large amount of funds and depending on why it is, there could be taxes to you or lot of paperwork. He is asking for RIB and IBAN and I am not aware of it. India does not have IBAN. IBAN is mostly in Europe, Australia and New Zealand. You would need to give Bank Account Number and SWIFT BIC. The details can be found here. Best talk to your Branch to understand.","Depending on your income/savings level and who you work for (if you work for a big company check with an HSBC Premier advisor, they may waive the requirements), you may qualify for an HSBC Premier account, which can allow you to open accounts in different countries and transfer money between them without a fee. You can also get a Premier account without meeting the requirements if you are willing to pay a monthly fee, but I doubt that will be worth it in the long run for what you need (worth doing the math though if you travel frequently). NOTE: There may be similar offerings from other banks, but this is just the only one I'm aware of.","There are checks, international wire transfers (SWIFT), depending on country pair remittance services.","Check with Lawyer and CA who deals with international laws. It maybe illegal in Saudi Arabia. From India tax point of view, any credits into NRE account is not taxable. However credits to friends/family will be treated as GIFT and friends/family will be liable to pay a gift tax if such transfer are more than Rs 50,000/- per year. Although FEMA does not prohibit explicitly such arrangement, these look like round about way of moving money and can be investigated.","I would recommend wire transfer. I was in your position some years ago, and the US$ cheque took 6 weeks to clear. Wire transfer fees are generally a few tens of pounds, depending on the banks involved.","I use XE.com for almost the same purpose. They have free transfer options, such as ACH withdrawals and deposits. I normally do a online bill payment through my international bank to XE, and have them deposit it in the US via ACH. It takes 1-3 business days, and there's no fee beyond their small percentage (about 1.25%) on top of the exchange rate.","Easily transfer your earnings to India with HDFC Bank's NRE Savings Account. The Non Residential External Account allows you to repatriate the funds held in the account at any point of time. Open a NRE Savings Account now! Check out our website to know more!","The simplest way is you transfer the funds into your NRE account in India. From the NRE account transfer the funds to your brother-in-law and show the purpose as Loan. From 2012 onwards RBI has simplified things under FMEA and your brother-in-law can deposit/repay the loan back into the NRE account. Once the funds are in NRE account you can repatriate then whenever you like. This entire process requires less paperwork. The option you have suggested is also fine, however your brother-in-law needs to engage the services of a CA and he will authenticate the purpose of remittance to the Bank. Based on this certificate the Bank will transfer the funds outside of India.","There are a few standard ways: One thing to keep in mind is that you'll usually be charged a wire and/or service fee for the tranfer.","I did this for a few years and the best way I found was via http://xe.com/ It uses a bank transfer from your UK bank to xe.com (no fees from bank or xe). On the Canadian side, they use EFT (Electronic Fund Transfer, no fees from bank or xe.com) They have very competitive exchange rates. To make a transfer, you log in to xe and arrange your transfer. This locks in the rate and tells you how many GBP you need to transfer in. Then, transfer your money from the UK bank into xe using the details they provide. Two or three days later the money shows up in your Canadian acount. There's a bit of paperwork they need to set it up but it's not very hard. After it's set up, everything else is online. Enjoy!","Can I transfer funds from India to USA which I have borrowed in India. Funds borrowed in India may not be transferred outside of India as per Foreign Exchange Management Act. Loans in rupees to non-residents against security of shares or immovable property in India:- Subject to the directions issued by the Reserve Bank from time to time in this regard, an authorised dealer in India may grant loan to a non-resident Indian, e) the loan amount shall not be remitted outside India;","I think you are asking quite a few questions here; If you have Rs 10000, its better you get it converted in India before you leave. Most Banks and Exchange houses like Western Union would take Rupees and Give you USD. What do they do with USD, there are other who give them USD and need Rupees. They make a spread in this process. If you are getting a salary in USD in US, whenever you want to transfer money to India, the Banks or Remittance services like Western Union would take USD from your US Account and Transfter equivalent Money into your Bank Account in India in Rupees. They will tell the exchange rate applicable. Depending on why visa type & the duration you are going, your company should be able to tell you your tax liabilities in the US. Read similar questions here to get a general idea.","From an India tax point of view your father can gift you unlimited amount of money and the transfer would be under Gift Tax act. As per the act there is NO tax on this transaction. I does not matter if you get yourself added into the joint account or not. From a US tax point of view, this transfer would come under gift tax, however in US the gift tax is applicable on the Donor [i.e. your father]. As your father is not a US Citizen the provisions are not applicable to him. Edit Under the liberalized remittance scheme, an individual can transfer upto USD 1 million every year. A CA certificate is required certifying that the taxes on the funds have been paid. Your Bank would be able to guide you on the exact process.","As the college education is very costly, I want to send USD 25,000 to him as a gift. What is the procedure and what Indian and American tax laws are involved ? This transaction will be treated as gift. As per Indian law you can transfer unlimited amount to your close relative [son-in-law/grandchildren/daughter/etc]. In US the gift tax is on donor, as you are no US citizen you are not bound by this. As your son-in-law/grandchildren are US citizens, there is no tax to them. Your son-in-law may still need to declare this in Form 3250 or such relevant returns. Under the Liberalized remittance scheme [Refer Q3], you can transfer upto USD 250,000 per year. There maybe some forms that you need to fill. Ask your Bank. If the amount is more than USD 25,000 a CA certificate along with 15CA, 15CB need to be filled. Essentially the CA certifies that taxes on the funds being transferred have already been paid to Govt of India. Can I send money to him directly or to his father who is submitting tax returns in USA? This does not make any difference in India. Someone else may answer this question if it makes a difference in US.","From what I understand this is what you can do : You need to raise an invoice to your brother's company in USA Your brother makes a payment into your Indian company's bank account using wire transfer straight into a bank account in your company's name. Your brother wont have to pay taxes on the money that he pays you against an invoice as it would be an expense and would not be considered as profit for tax purposes. Once you have the money you can then file your income tax returns after deducting your own expenses etc in India. I hope this helps.","Three ideas: PayPal is probably the best/cheapest way to transfer small/medium amounts of money overseas.","Yes. The bank is right. The funds need to be deposited in NRO account. Under the liberalised remittance scheme, you can transfer upto 1 million USD per year. There are prescribed forms that need to be signed by a CA (essentially stating taxes are paid). You can then move this out of India.","Have you tried TransferWise. They offer nice cross currency transfers with really low rates.","Yes anyone can credit an NRE account from outside. Most Banks in Dubai should be able to do this [The charges maybe higher], there are other remittance services offered from leading Indian banks like HDFC, ICICI, SBI, Axis etc. A purpose of remittance needs to be provided, ask your Bank / Service Provider in Dubai and they should be able to tell your friend more details.","Many U.S. banks now support POPMoney, which allows recurring electronic transfers between consumer accounts. Even if your bank doesn't support it, you can still use the service. See popmoney.com.","Your NRI friend can use normal Banks or specialized remittance services. There are questions on this website that give pro's and con's. From Indian tax point of you, you have received a gift from friend and as such it falls under Gift Tax act. Any amount upto Rs 50,000 is tax free. Anything above it is taxable as per tax bracket.","We have a house here in India worth Rs. 2 Crores. We want to sell it and take money with us. Selling the house in India will attract Capital Gains Tax. Essentially the price at which you sell the property less of the property was purchased [or deemed value when inherited by you]. The difference is Capital Gains. You have to pay tax on this gains. This is currently at 10% without Indexation and 20% with Indexation. Please note if you hold these funds for more than an year, you would additionally be liable for Wealth tax at 1% above Rs 50 lacs. Can I gift this whole amount to my US Citizen Daughter or what is the maximum limit of Gift amount What will be the tax liability on me and on my Daughter in case of Gift Whether I have to show it in my Income Tax Return or in my Daughter's Tax Return. What US Income Tax Laws says. What will be the procedure to send money as Gift to my Daughter. Assuming you are still Indian citizen when to gift the funds; From Indian tax point of you there is no tax to you. As you daughter is US citizen, there is no gift tax to her. There is no limit in India or US. So you can effectively gift the entire amount without any taxes. If you transfer this after you become a US Resident [for tax purposes], then there is a limit of USD 14,000/- per year per recipient. Effective you can gift your daughter and son-in-law 14,000/- ea and your husband can do the same. Net 14,000 * 4 USD per year. Beyond this you either pay tax or declare this and deduct it from life time estate quota. Again there is no tax for your daughter. What are the routes to take money from India to US Will the money will go directly from my Bank Act.to my Daughter's Bank Account. Will there will be wire transfer from bank to bank Can I send money through other money sender Certified Companies also. The best way is via Bank to Bank transfer. A CA Certificate is required to certify that taxes have been paid on this funds being transferred. Under the liberalized remittance scheme in India, there is a limit of USD 1 Million per year for moving funds outside of India. So you can move around Rs 6-7 Crore a year.","Try looking at Transferwise. They have low fees and often beat the banks. They (broadly speaking) work by finding people who need to convert money the other way round and then just push money around in the respective local currency.","India and the United States have a tax treaty agreement whereby double taxation is avoided. However check with your accountant in the US who should be able to guide you further in this regard. It is now easier to transfer money out of India. As long as the source of the money is legal and can be verified. So if you decide to sell a property, get payments by way of documented bank transactions like cheques and avoid cash deals. Once taxes are paid money can usually be transferred out.","Maintain your U.S. bank accounts. Use xe.com to transfer money back and forth.","You might investigate Paypal if it is available to both of you. the International Transfers page on their site has a way to find out what sort of fee's they would charge you. It might be a lot simpler and easier than doing wire transfers or dealing with banks etc.","Depending what country you are from, there may be better alternatives to transfer money internationally. Opening a bank account is complicated, costs money, and international bank transfers are remarkably expensive.","I have taken to using the service TransferWise. I have found them to be faster and cheaper and easier than using SWIFT, given the US Banking's... antiquated system of doing things. I've made dozens of transfers between my international accounts with TransferWise over the past 18 months. Some of them very large and some of them tiny, and even when there's been an issue (I once wrote an offensive joke in my narration for the transfer and they noticed) they have handled it respectfully and quickly. Prior to transferring money to US accounts, I used the SWIFT system - but SWIFT has a pretty spotty record in the US. Some banks you can do it all online but other banks, as Dheer mentioned, you have to go into the bank and sometimes find a senior staff member before you can find someone who even knows what SWIFT is.","If you’re concerned about transferring USD, I can’t really help you there. But if you’re looking to transfer wealth, I believe that’s where something like Bitcoin could help you. In fact a small or nonexistent processing fee is one of Bitcoin’s biggest strengths as a currency. Off the top of my head, I believe BitPay has services that would suit your needs. And if you’re worried about the volatility of Bitcoin, you can always convert it straight to USD just so you can avoid service fees!","My current favorite service for this kind of transfer is Transferwise. The fees are quite low when compared to the 2.5-3% by high-street banks for currency conversion, to which you need to add the international wire transfer fee, and it's often a lot faster, as they split it into two domestic transfers while the international part + currency conversion happens internally to Transferwise.","How to send the full loan amount from Saudi Arabia (money exchange), because I have a money transfer limit? There is no limit for sending money into India. Just use the right banking channel and transfer the funds. If I sent to India, what about tax and all that in India? In a financial year if you are outside of India for more than 182 days, you are Non-Resident for tax purposes. Any money you earn outside of India is tax free in India. i.e. there is no tax for this funds in India. If it is possible to send the money, to whom do I have to send it (my account, or my parents account) Whatever is convenient, preferably to your own NRE/NRO account. Any documents I have to show for tax issues (in case tax) You have to establish that you are NRI and hence this funds are not taxable. Hence its best you transfer into NRE/NRO account. If you transfer to your parents account, you would need a gift deed to make this non-taxable to your parents. I have savings account my self in Axis Bank, for the past 3 years I am paying taxes, if I send to my Axis Bank account how can I withdraw the full amount (10 lakhs (1,000,000)) on single day Withdrawal is possible by cash or cheque You can write a check, do a NEFT/RTGS transfer to your loan account, you can withdraw cash by giving some notice time to the Branch Manager of your Branch.","\"If wire transfer through your bank does not work then perhaps one of the more popular money transfer services may be what you are looking for such as MoneyGram or Western Union. Now these rely on a trusted \"\"registered\"\" third party to do the money transfer so you need to make sure that you are working with a legitimate broker. Each money transfer service has a site that allows you to perform the search on registered parties around your area. There are certain fees that are sometimes applied due to the amount being transferred. All of these you will want to do some detailed research on before you make the transfer so that you do not get scammed. I would suggest doing a lot of research and asking people that you trust to recommend a trusted broker. I have not personally used the services, but doing a quick search brought many options with different competitive conversion rates as well as fees. Good luck.\"","I successfully used Currency Fair a few times, they seem to cater for both Australia and the UK. If I remember correctly, you can set everything up via Internet. As they explain on their website, first you open an account with them, then you transfer AUD to an Australian bank account that they will give you, then you exchange and transfer the money to your friend on their web page. Usually they are cheaper than PayPal, especially if you have time to play with their exchange by marketplace functionality (not recommended if you just want to do the transfer)."],"string":"[\n \"\\\"HSBC, also known as \\\"\\\"The Hong Kong and Shanghai Banking Corporation\\\"\\\" has banks in India. I would imagine that might be a place to start. Paypal, which is commonly used to pay for items on eBay -- is also available in both India and China. You should, of course, respect any laws regulating this kind of money transfer.\\\"\",\n \"Take a look at Transferwise. I find them good for currency conversions and paying people in India from a US bank account.\",\n \"Wire transfers are the best method. Costs can vary from $10 to $100 or more, depending on the banks and countries involved. There's rarely any saving using the same bank, although HSBC may have reduced charges if you have Premier accounts in both countries (for a one-off transaction, it may not be worth the effort to open an account). However, that cost is insignificant compared to your possible losses on the currency exchange. Assuming your money is currently in Hong Kong Dollars (HKD), it will need to be converted to US Dollars (USD). One place where it could be converted is at your Hong Kong bank. You'll get their retail rate. Make sure you are aware of the rate they will use, and any fees, in advance. Expect to pay around 2-3% from the mid-market rate (the rate you see quoted online, which doesn't fluctuate much for HKD-USD as the currencies are linked). Another place where the currency could be converted is at your US bank. You really don't get any control over that if it arrives as HKD and is then automatically converted into your USD. The rate and fees could be quite poor, especially if it is a minor US bank that has to deal with anther bank for foreign currency. For amounts of this size, it's worthwhile using a specialist currency conversion company instead. Currency Fair in Ireland is one. It's a peer-to-peer exchange that is generally the best deal (at least for the currency pairs I use). You wire the money to them, do the exchange on their site at a rate that is much closer to 0.5% from the midrate, then the money is transferred out by wire for a few dollars. Adds a few days to the process, but will possibly save you close to US$1000. Another established option is Currency Online in New Zealand. There are probably also specialist currency exchange companies in Hong Kong. The basic rule is, don't let the banks exchange currencies at rates that suit them, use a third party that offers a better rate and lower fees.\",\n \"I use xoom.com to transfer money to India. I've been using them for over 2 years now, they are the fastest and the cheapest for me (the funds are usually available the same day). They seem to have added a lot of European countries to their list. Definitely worth a shot.\",\n \"There are multiple ways in which you can get money to India; - Citi Bank / HDFC Bank offere similar services [and the credit account can be ICICI Bank] - Ask for a Wire/SWIFT transfer, there would be some changes [in the range of USD 30] - Ask for a company check, it would take around 30 days for you to encash in into your bank account in India.\",\n \"You could use: SWIFT transfer : ask your counterparty for his bank SWIFT code and beneficiary account numbers; you can do a SWIFT transfer to most countries from your Indian bank). You will need to fill a form where they ask you what you're transferring the money for, etc. Most Indian banks provide this facility. Western Union: I'm not sure if WU is in China, but they are very simple to use. Paypal: They charge heavy fees, but may be the fastest way to get your money across.\",\n \"You can use xoom.com or western union. They are both pretty much the same, as they do not charge any fees but take a cut of 0.7-0.8% on every dollar. However, there is a minimum and maximum limit of sending money. If you want to transfer more, you can wire money in through a financial institution such as Wells Fargo or Chase bank or look to see if there is a State bank of India around you. I am quite sure that they charge $15 plus 0.20-0.30% on every dollar( The last time I used it). Hope this helps.\",\n \"how could I transfer the money from UK There are multiple ways, walk into your Bank and ask them to wire transfer to the Bank Account in India. You would need the SWIFT BIC of Bank in India, Account Number, etc. Quite a few Banks [State bank of India, HDFC, ICICI etc] also offer remittance service. Visit their website for more details. does it cost the tax and how much Assuming your status is NRI [Non Resident], there is no tax implications of this in India.\",\n \"Essentially you can send a Check by mail, you brother deposits into Bank account. It costs very little, the time required would be around 1-2 months. You can do International Wire [Via SWIFT] it would reach in few days, fees are high. You can use specialized remittance services like Money2india, remit2india, or western union etc. The fees are low and generally funds reach in a week.\",\n \"There are quite a few ways; each has its own pro's and con's SWIFT: Fast reliable payment. Higher Charges. If payments are large and routine the charges can be less Remittance Service: Ideal for person to person transfer. Can be used by Companies to transfer to Individuals. Less Faster compared to SWIFT. Quite Cheaper compared to SWIFT Check's: Long time is getting it cleared in India. Typically around month. Quite Cheap. Almost NIL charges.\",\n \"The safest, quickest and cheapest option would be to do a wire transfer from your HK account to an account in a US bank. You can contact HSBC and ask them if it would be cheaper if the US bank account is at HSBC as well, but I doubt it would be a significant saving. Check the rates in HK about a wire transfer, in the US, on the receiving side, the fees are not dependent on the amount and are about $10-$15 per occurrence (shop around).\",\n \"If you are a citizen of India and working in Germany, then you are most likely an NRI (NonResident Indian). If so, you are not entitled to hold an ordinary Indian bank account, and all such existing accounts must be converted to NRO (NonResident Ordinary) accounts. If your Indian bank knows about NRO accounts, then it will be eager to assist you in the process of converting your existing accounts to NRO accounts most likely it also offers a money remittance scheme (names like Remit2India or Money2India) which will take Euros from your EU bank account and deposit INR into your NRO account. Or, you can create an NRE (NonResident External) account to receive remittances from outside India. The difference is that interest earned in an NRO account is taxable income to you in India (and subject to TDS, tax deduction at source) while interest earned in an NRE account is not taxable in India. The remittance process takes a while to set up, but once in place, most remittances take 5 to 6 business days to complete.\",\n \"There is no difference in taxation in India if you transfer every month or bulk. If you use specialized remittance services from leading Indian Banks, there would be little difference in fees. Assuming you are keeping the funds in NRE account in India and hold it in GBP, you get a slight better rate of interest that what you would get in UK. The interest would not be taxable in India, however it would be in UK. If you convert the funds at hold it in NRE, Rupee account, you would get still better rate of interest. However you are taking the Fx risk when you try and convert this back to GBP incase you decide to stay on. There are no right or wrong answers Edit: There is no limit on the amount of funds earned as NRE that can be got into India tax free. There is a time limit of 7 Years to get the funds back to India tax free. From a tax point of view if you transfer into NRE account its easy. If you transfer into Normal Savings account you would need some paperwork.\",\n \"Most Banks allow to make an international transfer. As the amounts is very small, there is no paperwork required. Have your dad walk into any Bank and request for a transfer. He should be knowing your Bank's SWIFT BIC, Name and Address and account number. Edit: Under the liberalised remittance scheme, any individual can transfer upto 1 million USD or eq. A CA certificate is required. Please get in touch with your bank in India for exact steps\",\n \"I am a non-resident alien transferring a limited amount ( in dollars post tax) to India every couple of months. Assuming you are transferring this into an NRE account in India or atleast NRO account in India. As a NRI, by regulations one should not hold normal Savings account. This has to be converted into NRO. I put that money as a fixed deposit in a bank (which gives 6-7 percent annual return) Assuming you have FCNR deposits. Also assuming that you are declaring the taxes in your US Tax returns and paying tax accordingly. There is no tax in India on FCNR. If this was in ordinary FD or in NRO account, you are declaring and paying taxes in India as well as in US. What is the max limit on transferring money back from India to USA? If you have transferred this into NRE account, there is no limit. Other account there is a limit. Read more at Liberalized Remittance Scheme and here. What are the legitimate ways to transfer the money? From India point of view, this has to be Bank to Bank transfers. You can't carry cash [Indian Rupees] outside of India beyond Rs 25000 [or 15000?]. You can't hold excess of USD 250 without valid purpose. Western Union is not authorized to transfer funds out of India. Will there be any tax levied? No assuming you are already paying taxes on the Interest in US and depending on the type of account in India.\",\n \"Use a remitting service such as Ria Money Transfer. Almost all these services allow you to transfer upto $2999 at a time. So, you would be able to transfer the entire amount of $4500 within 2 business days(There is a monthly limit too, but it will definitely be more than $4500). There are no fees to use these services, but they do scrape off a bit on the currency rate. As of today you are getting 624 GBP for $1000 whereas the market rate is $641.95. You still save roughly $17 and 4 transactions, which adds up to more than $100. Here is a link to Ria's website. Other services, include Xoom, Western Union, Money Dart and Money Gram.\",\n \"On my recent visit to the bank, I was told that money coming into the NRE account can only be foreign currency and for NRO accounts, the money can come in local currency but has to be a valid source of income (e.g. rent or investments in India). Yes this is correct as per FMEA regulation in India. Now if we use 3rd party remittances like Remitly or Transferwise etc, they usually covert the foreign currency into local currency like INR and then deposit it. The remittance services are better suited for transferring funds to Normal Savings accounts of your loved ones. Most remittance services would transfer funds using a domestic clearing network [NEFT] and hence the trace that funds originated outside of India is lost. There could be some generic remittance that may have direct tie-up with some banks to do direct transfers. How can we achieve this in either NRE/NRO accounts? If not, what are the other options ? You can do a Wire Transfer [SWIFT] from US to Indian NRE account. You can also use the remittance services [if available] from Banks where you hold NRE Account. For example RemittoIndia from HDFC for an NRE account in HDFC, or Money2India from ICICI for an NRE account in ICICI or QuickRemit from SBI etc. These would preserve the history that funds originated from outside India. Similarly you can also deposit a Foreign Currency Check into Indian Bank Account. The funds would take around month or so to get credited. All other funds can be deposited in NRO account.\",\n \"India is better as the exchange rate conversion will be better. In the US, banks or exchange rate converters do not hold much INR and likely to quote a much worse rate. Best way is to open HSBC premier accounts in both US and India and use their global transfers as in premier accounts the conversion rates are usually decent. HSBC Premier also has good tools to link two accounts, so the process would be transparent. Best conversion rates are given by Middle East banks or FX converters due to the large number of Indians working there, but I suspect opening a bank account in Dubai might not be feasible.\",\n \"Depending on how tech savvy your client is you could potentially use bitcoin. There is some take of indian regulators stopping bitcoin exchanges, meaning it might be hard to get your money out in your local country but the lack of fees to transfer and not getting killed on the exchange rate every time has a huge impact, especially if your individual transaction sizes are not huge.\",\n \"MoneyGram said that the person sending money should also be an Indian. There shouldn't be any such restriction. Can you check again what exactly the issue was? Is there another way so I can get money without any problem. You can try Bank Transfers or alternative remittance like Western Union\",\n \"The best way is to approach your bank and fill out a transfer form to send USD to your US account (if you are visiting India). They will require quite a number of proof (AADHAR, PAN, Passport) copies. Otherwise speak to your bank about how to do a wire transfer from your India A/C to US; after de-moitization regulations have tightened, the best course of action would be to speak to your bank directly.\",\n \"\\\"The Option 2 in your answer is how most of the money is moved cross border. It is called International Transfer, most of it carried out using the SWIFT network. This is expensive, at a minimum it costs in the range of USD 30 to USD 50. This becomes a expensive mechanism to transfer small sums of money that individuals are typically looking at. Over a period of years, the low value payments by individuals between certain pair of countries is quite high, example US-India, US-China, Middle-East-India, US-Mexico etc ... With the intention to reduce cost, Banks have built a different work-flow, this is the Option 1. This essentially works on getting money from multiple individuals in EUR. The aggregated sum is converted into INR, then transferred to partner Bank in India via Single SWIFT. Alongside the partner bank is also sent a file of instructions having the credit account. The Partner Bank in India will use the local clearing network [these days NEFT] to credit the funds to the Indian account. Option 3: Other methods include you writing a check in EUR and sending it over to a friend/relative in India to deposit this into Indian Account. Typically very nominal costs. Typically one month of timelines. Option 4: Another method would be to visit an Indian Bank and ask them to issue a \\\"\\\"Rupee Draft/Bankers Check\\\"\\\" payable in India. The charges for this would be higher than Option 3, less than Option 1. Mail this to friend/relative in India to deposit this into Indian Account. Typically couple of days timelines for transfer to happen.\\\"\",\n \"There is a startup targeted specifically to serve you for the situation you describe: - http://peertransfer.com There are other methods. CurrencyFair is one service that might help: - http://currencyfair.com And, there is bitcoin. Because it is new yet, there aren't very liquid markets where bitcoins are exchanged for Rupees or Yuan at decent rates at the present. Once you receive bitcoins transferred to you however, those funds are easily transferred to your B Of A account (using Dwolla to send via ACH to your bank). - https://en.bitcoin.it/wiki/Buying_bitcoins\",\n \"There is no best way, you can send the money to India or invest into shares in US. It depends on the risk you are ready to take.\",\n \"It is recommended that you get this using Wire Transfer. The fees is slightly high, it should be in the range of USD 20 - 30. You would get the funds faster, about 3-5 days after the payment is initiated. The Fx conversion would be applied without your knowledge so you would have very little control over it. If you are getting by paper cheque, it would take around 7 - 10 days for the mail to arrive. You would have to deposit this in local Bank, complete a form giving out the details as to why you received the cheque, along with a letter to request the cheque to be cashed ... Generally it takes around 25 days for the funds to get credited. As you would be speaking to someone in Bank, you can try and negotiate a better Fx rate, however for such amounts Bank will not go out of the way, so you may not know what rate gets applied, it would be the standard rate some 20 days later when the actual cheque gets processed. The fees are relatively less in the range of Rs 500 to Rs 1000.\",\n \"I want to transfer about 60 Lakhs INR from my NRO account in India to my US bank account Yes you can. However there is some paperwork you need to follow. As per FEMA [Foreign Exchange Management Act], any transfer by individuals outside of India need the 15CA & 15CB form. The 15CB is from a CA to state that taxes have been paid on the funds being transferred. The limit is 1 million USD per year. Read more at Liberalized Remittance Scheme and here. What is the best way to transfer it with minimum fees/taxes Assuming you were already declaring the funds held in Banks outside of US in your regular IRS filings, there is no other formality. Question on Minimum fees service recommendation is out of scope on this site. Outward remittance can only be done by Bank Transfer.\",\n \"If the funds are in NRE account, then there is no issue. You just instruct your bank in India to transfer. If your tax status in India is Non-Resident Indian, you should not be holding a normal Savings bank account. Under the liberalized remittance scheme you can transfer upto 2,50,000 USD per year. You would need to instruct your bank in India to initiate a international wire transfer. The FAQs are here\",\n \"\\\"The wire is probably the quick way to go. There may be a lower cost method through an international bank like Citi or HSBC. If you are a US resident or have a \\\"\\\"substantial presence\\\"\\\" in the United States, the IRS may be interested in the origins of your money.\\\"\",\n \"Are there any IRS regulations I should be aware of when sending money to India? None. As long as you are following the standard banking channels. You are also declaring all the accounts held outside US in your tax returns. FBAR. Is it legal to do so? Yes it is legal. do I have to declare how much I am investing and pay extra taxes? As part of FBAR. Income earned [including interest, capital gains, etc] needs to be paid in India [there are some exemptions for example interest on NRE accounts] as well as in the US [relief can be claimed under DTAA Indian version here and US here]. So if you already have paid taxes on salary and say transfer USD 10K to India; there is no tax on this 10K. If this 10K generates an income of say 2K; this 2K is taxable as per normal classification and rules.\",\n \"Yes, you can transfer money to your account, any bank will do it. The conversion charges will be there i.e. the diff between USD and the rate at which the bank sells it, usually Rs. 2/-, appx. In addition, transaction charge (not very high). As for taking from friends & repaying in India, check UAE tax treatement for taking money from friends (is it considered as your income & are you liable for taxes). As for giving back, get some documentation done as a loan, otherwise your friends may be considered to be taking gift/consideration/income from you and taxed. Most straight forward way is to transfer the money from your mother's account.\",\n \"If you're really price-sensitive, consider carrying cash in your wallet whenever your brother (or you) comes home to your own country. Besides saving money, this should teach your younger brother to plan well and manage his living costs or otherwise he'll starve. Let's say that a month's living cost is $1500 which includes housing, food, transportation, and the occasional splurging[1]. If your brother's school is in a per-semester basis, chances are he'll visit your home country at about twice a year. That will be $1500 * 6 months = $9000. You can still carry that amount of money in your wallet (that's 90 sheets in $100 bills, which should fit in larger wallets) provided that you're careful. If you or your brother don't go home regularly at least once a year, the 3% transfer fee isn't that big. Let's say that the total amount that you transfer is $18K (for a year's living cost, $1500 * 12 months), the fee for that will be $540 ($18000 * 0.03), which I'll bet is far less than a return airfare from the US to India/China/UAE. [1] I'm living on my own in Singapore right now, and my monthly expenses rarely exceeds S$1500/month, so I'm assuming that in the states that would be USD 1500. You can get a projection for that number yourself.\",\n \"Can I bring a bankers cheque or DD from singapore bank . Yes you can. Remember if they are payable in Singapore, i.e. SGD denominated, they will take time to clear; typically around a month. Alternatively you can approach an Indian Bank in Singapore they can arrange for a Rupee draft payable in city of your choice. The Banks also have a facility of opening an NRE account in the city/Branch of your choice by opening account with wire transfer. I do not have time for NRE account Money can be transferred into your NRO account as well. You could also use remittance services that provide better exchange rates.\",\n \"Give a cheque. You can. Your friend would have to deposit this in a Bank that does this service. Not all Banks offer this service in US. It generally would take 1-3 months for the funds to reach. Give a dollar-denominated cheque You can NOT write check on a Rupee account and put USD. You can definitely buy a USD Draft generally payable in the US. There would be some charge for you here and send it by courier, post. It would get paid into your friends account in about a week. Do a SWIFT transfer Yes you can. You may need to walk into a Branch and fill up forms. If the amount is more than specified limit a CA certificate is required. Am I correct in understanding Yes Use my ATM card in the US Yes you can. Specialised money transfer services like Western Union Transfer money out of India is not allowed by Money Transfer services\",\n \"Do an semi-online transfer. I had a similar situation where i had to transfer 5K USD to a commercial entity. You can request the publisher to give you their bank account details. You will need the SWIFT code of the bank( SWIFT code is a international code that each bank gets to transfer money) You will need bank account number, account name, bank address, address of the publisher. Then just walk into your bank with the above details. Note that you will have to visit a branch in your city that allows forex transfers. They will give you a set of forms to fill up. The above details will be needed to fill up these forms In addition to the above, you will be asked to fill up a purpose code maintained by RBI. This code is used by RBI to understand the reason why you are transferring the money. The bank will provide you with a sheet which will have these codes and explanation of these codes. Read through the codes and in case of any questions ask the bank officials to help Tip: If you have accounts with any private sector banks, please approach them. Public sector banks will give you tough time Hope this helps! Regards, Ravi\",\n \"Hmmm... As far as I know wire transfers are still the best option. If you make sure your US account accepts international wires for free (like TD Bank does) you'll have eliminated most of the costs (assuming your foreign bank doesn't charge too much for wiring the funds in the first place). Also, if your able to, you could consider wiring 6 or so months at the same time. I'm not familiar with XE.com but it seems it's not set up for transferring money so much as for trading currencies. While you could probably use it to transfer funds if you'd link both your accounts it seems a rather complicated way to go about things. Paypal could be an option if they'd allow you to set up an account in each country (or if you have a relative that could help out), but it gets more expensive than wire-transfers quickly. As for getting the best exchange rate... I've given up on that a long time ago and have accepted that as the cost of living internationally :).\",\n \"I am on employment based visa in USA and want to send dollars from USA to India from my savings (after paying Tax). How much maximum dollars I can send in a day? month? or in a year regularly? There is no such limit. You can transfer as money you like to yourself anywhere. To pay the Bank Loan-student Loan how much maximum dollars I can send in a day, in a month or in a year? to pay that I have to pay directly to that Bank Account or in any account I can send money? You can transfer to your NRE account in India and move it further. You can also send it directly to the Loan Account [Check with the Bank, they may not be able to receive funds from outside for a Loan Account] My mother is having Green Card. She is not working. She has a NRE account in India. Can I send dollars from my USA Bank account to her NRE account in India? what are the rules for that? any Tax or limit for that? Or I have to get any permission before sending it? If you are sending money to your mother, it would come under Gift Tax act in US. There is no issue in India. Suggest you transfer to your own NRE account.\",\n \"Meagrely transferring money within your own accounts doesn't result in any tax, however legally once you are an NRI you cannot operate a savings account at all as per Reserve Bank Guidelines found here One option is for you to transfer to a joint account held by a close relative of yours with you and this would be tax free in India.\",\n \"Can I wire transfer money from the my NRO account in India to my checking account in the USA? Yes you can. However there is some paperwork you need to follow. As per FEMA [Foreign Exchange Management Act], any transfer by individuals outside of India need the 15CA & 15CB form. The 15CB is from a CA to state that taxes have been paid on the funds being transferred. The limit is 1 million USD per year. Read more at Liberalized Remittance Scheme and here. Any limit on the amount and do I have to report this to IRS or any other legal formality? Assuming you were already declaring the funds held in Banks outside of US in your regular IRS filings, there is no other formality.\",\n \"Online money transfer facility from Axis Remit is a quick and easy way to transfer money from USA to India. AxisRemit is Axis Bank's flagship inward remittance service enables you to transfer money to your beneficiaries through the most efficient channels like online money transfer, exchange houses and money transfer operators.\",\n \"India has Foreign Exchange Management Act. Under the liberalized scheme, there are limits for individuals to move funds out of India for specific purposes. Any such transfer require a CA certificate, so it would be advisable to talk to a CA to understand the specifics of your case.\",\n \"He cannot get money from someone else account. Your US resident friend in New York can send money to your Indian friend in Atlanta via Western Union which has presence in almost every corner of the US. Most definitely in the city of Atlanta. Your Indian friend can receive the Western Union transfer, in cash, within minutes after the friend in New York sends it. Here's the site for location search. The sender doesn't need to go anywhere, can send online, so your New York friend doesn't even need to waste much time. In fact - you don't need to bother your friend in New York, you can send it online yourself (assuming you're American/have US bank account). In order to receive the money, your Indian friend will obviously need a proper identification (i.e.: passport).\",\n \"From you question I understand that you are not an Indian citizen, are staying in India, and transferring your funds for your living / expenses in India. There is no limit on such transfers and the amount is not taxed. The tax comes into picture if you are treated as a resident in India from a tax perspective. Even then the tax is not because you have transferred the funds into India, but the policy of taxing global income. The article at http://www.pwc.in/en_IN/in/assets/pdfs/foreign-nationals-working-in-india.pdf should give you more inputs.\",\n \"You can use Skrill or any other service like paypal or SWIFT wire. There is no legal restriction to bring money into India. You need to pay taxes depending on how you earned the income, of course the assumption is you earned the money in a legal way.\",\n \"Can I transfer directly from my US saving account to their Axis bank in India? Yes you can. any kind of tax my parents need to pay? No. From you parents point of view, its a Gift from their daughter and would come under the provisions of Gift Tax [and Not Income Tax]. Gifts from specified relatives [Daughter /sons /parent /siblings] is tax free. It would make sense to keep some paper work around this, for example a simple letter stating that this is a Gift, specify the amount, the date of transfer, the amount actually credited, details of the credit [Bank Statement]. If there is a scrutiny by income tax, it would ease things. any kind of tax I need to pay? In India NO. In US I am assuming your have already paid tax hence no tax.\",\n \"Western Union, Money to India, Remit to India are some of the services that specilize in remittance and would be cheaper than an International Wire. There is not tax for transfering your own money earner outside India into India. Edit: The business of Remittance is bought into the Service Tax Net by Govt. It is seen that Banks are offering this as a service and hence the tax to Banks which is passed on to customers. 0.12% of tax on the converted amount. IE if you transfer Rs 1,00,000/- you would need to pay a tax of Rs 120/-. Above Rs 1,00,000 the incremental rate is 0.06%\",\n \"As an Indian resident you can open an Resident Foreign Currency Account, i.e. an USD account. This facility is provided by all major banks. I am not sure if PayPal would transfer money to these accounts or would convert. The alternative is to give this account number along with other Bank details to the company in US and ask them to send money via remittance services.\",\n \"The Transfer of funds outside of Bangladesh is restricted. Any transfers required the permission of Bangladesh Bank [Central Bank]. So the only legal option is to apply for the permission and see if its granted. Western Union is a Money Transfer and typically is good for getting funds into Bangladesh, most expats in Bangladesh would use the service. It can unfortunately not be used other way round.\",\n \"From India Tax Point of view, your parents can Gift you the money. There is no tax due to this in India for your parents or for you. Transferring the funds out of India is also possible. Under the Liberalized Remittance Scheme by RBI, one can transfer upto 200,000 USD. Please check with your Bank for the exact paperwork. Typically PAN and a CA certificate mentioning the relevant clauses and certifying the purpose is required. Bank may have some more paperwork on its own.\",\n \"Is it true that my father and I get better exchange rate if he uses citibank than his local bank and my local bank? No. The rates vary from Bank to Bank and some days some bank may give a better rate and there is no Golden rule that One Bank will always give better rate. For the amount specified, your father needs to walk into his Bank, preferably the branch that deals with Forex or the Main Branch in the city. A better rate would be given. So any leading Bank like HDFC, ICICI, SBI, SBH, Axis will be similar. Please note a CA certificate is required to make such remittance outside of India. having my father send me money in USD in India and I get USD here. In that case, my father would have to pay exchange fees Yes this is the only option. You have to convert INR to USD in India. having my father send me money in INR in India and I exchange INR to USD in the US. In this case, exchange fees would be on me INR cannot be sent to US electronically. It will automatically get converted to USD. There is no bank in US that holds an INR account for you to convert amount into USD.\",\n \"Like for example I use transferwise to send $x to my dad's account in India, would it show my name as the depositor ? That would depend from bank to bank, it may or may not show your name. Would it be considered as income for my dad ? Assuming your parents are Indian Residents for tax purposes. No. It would be considered as Gift. Gifts between father and son are tax free in India and there is no limit. Any special care/precaution to take before using such services ? Not really. Just to be safe, keep a copy of the transfer instruction / details of debit to you account etc, so that if there is enquiry you have all the data handy. Edit: Clarifying the comment, if you are Resident Alien in US for tax purposes, you would be liable to Gift Tax [Not your parents as they are Indian Residents and would follow Indian tax rules]. As per IRS the liability of Gift tax is on Donor subject to limit of $14000 per year per Donee. So you and your wife can gift your father and mother $14000 each. i.e. $56000 each year. Anything more will be taxable or can be reduced from the overall estate limit.\",\n \"I want to send some money to Indian in my saving account but I haven't any NRO/NRE account. It is advisable to Open an NRE account. As an NRI you cannot hold a savings account. Please have this converted into NRO account ASAP. Process or Transaction charges or Tax (levied by Indian bank) on money what I'll send to my saving account in India. I know the process or transaction charges (applied by UK banks) from UK to India. There will be a nominal charge levied by banks in India. If you use dedicated Remittance services [Most Leading Indian Banks offer this], these are mostly free. Is there any limit to get rid off tax? Nope there isn't any limit. This depends on service provider. What types of paper work I'll need to do for showing that income is sent from UK after paying tax. If you transfer to NRE account. There is no paperwork required. It is implicit. If not you have to establish that the funds are received from outside India, keep copies of the transfer request initiated, debits to the Bank Account in UK, your salary slips, Passport stamps etc.\",\n \"Transfer of Millions of USD in and out is not possible for Individuals. There are limits on how much money an individual Indian Ordinary Citizen can send or receive. If an corporate wants to send money, depending on the services offered, they would have to initiate a SWIFT transaction. It typically takes 2-3 days for settlement of International wire.\",\n \"Every month I will get a return in from my share of the profit which would be used for repayment of capital and interest in India. Not to sure what the business plan is. Please factor all the modalities, Exchange rate fluctuations, etc. My concern is regarding RBI rules and regulations, FEMA guidelines, and Income tax. Under the Liberalized Remittance Scheme; Funds can be transferred outside India. Any profit you make will be taxable in India. You will have to declare this pay tax in as per schedule.\",\n \"It really depends on the amount of money - I currently have to pay my mortgage in the UK from the US until my house there is sold and my wife sends money from her (US) Paypal account to my UK Paypal account. As personal payments these don't attract the sort of fees you see for ebay payments et al. Compared to the fee-o-rama that a wire transfer turns into (I tried once from BofA to HSBC UK), it is noticeably cheaper for the amount of money we're sending. That said, a lot of the currency transfer services have support for monthly payments and you might get a decent exchange rate and fewer (or no) fees that way.\",\n \"As you are not a tax resident in India, the income you have earned can be moved to India tax free. However if you are investing the funds into say shares / fixed deposits etc, the income you earn on these funds is taxable in India. The funds can be transferred directly into savings account. However its advisible to open an NRE/NRO account as its easier to track funds for tax purposes. i.e. these accounts by nature certify that the funds received into them are from foreign sources and can easily be explained to the tax authorities. However establishing the origin of funds in ordinary savings accounts needs more paper work. Whenever there is a scrutiny by tax authorities on this savings account, it would need more efforts to establish that the credits are from foreign earnings.\",\n \"\\\"How do I get my money from India to UAE account – what are the options, can I do bank transfer from my mom SB account to my international account. As you have transferred money directly to your Mothers account, getting the money back would need some paper work. Consult a CA and Bank in India, they should be able to help you. There are various limits under FEMA that would be applicable. As the amount is small a self declaration would also suffice. If yes how much do I loose in case of 20 lac due to currency conversion and commission (approximate) Not sure I understand this question, are you asking if you had converted X AED into Rs 20 lacs and now you have 20 lacs will you get back \\\"\\\"x\\\"\\\" AED or how much less? If you Buy and Sell on the same day, typically there is a spread of 3-5% depending on the currency pair. However rates would have move up or down since then and hence this cannot be answered. You would have to see what the rates are. b. can exchange with Friends in UAE and deposit the same in INR to their SB account in india. Stick to Banks or authorized remittance services [like Western Union / Money Gram / etc]. Any other method you are circumventing law. One is not authorized to convert currency outside the normal Banking Channel.\\\"\",\n \"Although I have not tried, you can check out the Western Union Money Transfers. http://www.westernunion.com/WUCOMWEB/staticMid.do?method=load&pagename=serviceToBank\",\n \"How much amount can we transfer from India to the USA? Is the limit per year? As I understand your father in law is Indian Citizen and his tax paid earnings need to be transferred outside of India. Under the Liberalized Remittance Scheme by RBI, one can transfer upto 2,50,000 USD. Please check with your Bank for the exact paperwork. A form 15CA and 15CB [by CA] are required to establish taxes have been paid. What documents we have to present to the bank? See above. Should money be transferred to company's account(Indian Company) to USA company? or can be transferred to my husband's account. Transfer of funds by a Indian Company to US Company has some restrictions. Please check with CA for details. If you father in law has sold the Indian Company and paid the taxes in India; he can transfer the proceeds to his son in US as per the Liberalized Remittance Scheme. Can they just gift the whole amount to my husband? What will be the tax implication on my husband's part in USA and on my father in law in India. The whole amount can be gifted by your father in law to your husband [his son]. There is no tax implication in India as being an Indian resident, gift between close relatives is tax free. There is no tax implication to your husband as he is a US Citizen and as per gift tax the person giving the gift should be paying the applicable taxes. Since the person gifting is not US Citizen; this is not applicable.\",\n \"All Indian Banks are offering USD accounts known as multicurrency account, where you can hold your fund, this account also permits you to book the USD to INR rates in advance if you require. You can keep your money in this account and also can remit the same back to source or other destination country.\",\n \"The best, cheapest and safe way is to wire transfer that money from their Bank Account to yours. Ask your bank about information regarding inbound international wire transfer and provide those details to your dad. About how much amounts can he do so : if the amount is more than $10K, you need to provide enough information about where the money is coming from, sources and other legal details. Whatever way you chose, never do transfers in small chunks (which is called structuring), to avoid the legal hassle - as that might result in more issues and every bank has checks in place to find out this way of structuring. I would suggest wire transfer all the money, through proper channel, through the banks. It's better to pay some fees, follow the law and live peacefully than to go through some improper channels to avoid paltry fees and get into serious issues.\",\n \"Ask them to send a SWIFT payment [aka International Wire]. You would need to give them your bank details, essentially Bank Account, Bank Name & Address, SWIFT BIC, etc. Almost all Public Sector Bank and all leading Private scetor banks are members of SWIFT and can give you a the SWIFT BIC. If you are not sure about other party, it would be wise to open a new account and give the details of this account rather than your normal account.\",\n \"HSBC exchange spread between HKD and USD was 483 bps (1 bps is 0.0001) on their 24 hours exchange network a few weeks ago when I checked. It is very high for a pair of linked currencies which has very little fluctuation. One should expect less than 5 bps or even 1 bps. I did my currency conversion at a US brokerage which can take HKD currency and then I was able to pick the time/rate and amount I like to make the conversion. Basically, the currency pair runs within a tight band and you just need to buy USD with HKD at the time when it is near the edge of the band to your advantage. There is usually no fee on currency conversion. They make money through the spread. HSBC premier allows you to wire free among countries. I forget whether they offer tighter spread or not. Rob was right on about the cost of transferring money overseas. The majority of the cost is in the conversion, not the wiring.\",\n \"If you are a non resident Indian, the income you earn and transfer to India is tax free in India. You can hold the funds in USD or convert then into INR, there is no tax implication.\",\n \"Is it liable for taxation in India? Taxation does not depend on whether to transfer money to India or keep it in GCC. It depends on your tax status. In a given Financial year; 1st April to 31st March, if you are outside of India for more than 182 days, your are Non-Resident Indian, NRI for tax purposes. If you are NRI, income earned outside of India is not taxable in India [even if you transfer the funds to India]. If you are not an NRI, you income in GCC will be taxable in India [Even if you keep the money in GCC]. We both send our salary into a friends account in India and then transfer an amount to our own accounts This is an incorrect practise, If you are NRI, you should not be holding a Savings account, it should be converted into NRO and you can if you want open an NRE account. For your friend where you are transferring money, if there is an income tax audit, there would be quite a few questions asked and your friend has to establish and keep records that this is not GIFT, but more of a convenience agreement.\",\n \"Regular wire transfer from bank to bank would be the easiest, safest, and likely the cheapest (next to carrying cash over the border) method. Get the SWIFT info from the US bank you want the many land in (I believe all of the ones you mentioned support SWIFT wire transfers), and give it to your family in China. They'll have to find a local bank that supports SWIFT out-going transfers (might not be as easy as in the US) and send it out from there. Other, more expensive, options would be Western Union/MoneyGram. Or carrying cash over the border, which in these amounts can trigger some questioning from the authorities.\",\n \"If HSBC is an option for the country in which you're living I found they have very comprehensive banking services which are very helpful as an expat, including easy wire transfers initiated online. One key aspect is they will honor your US credit score which is helpful while you build a credit history in the new country. If you have enough on deposit with them you may qualify for the HSBC Premier program which then gives you all of those free of charge. That being said, I think their customer service and bureaucracy is horrendous. So once I had established myself locally I switched to a better local bank and use wire transfer services. If you happen to be an expat in Canada there are now starting to be other options with TD and RBC.\",\n \"\\\"Quite a few Bank in India allow Funds Transfer via ATM. One has to first register the beneficiary account and wait for 24 hrs before transacting. However it looks like \\\"\\\"Indian Bank\\\"\\\" currently does not offer this service. You can call up Indian Bank and ask if they provide this service. Alternativly use the Internet Banking to transfer funds to CitiBank or any other Bank in India.\\\"\",\n \"One of my friend is sending 100000 pounds to India, Although you haven't asked, this is a large amount of funds and depending on why it is, there could be taxes to you or lot of paperwork. He is asking for RIB and IBAN and I am not aware of it. India does not have IBAN. IBAN is mostly in Europe, Australia and New Zealand. You would need to give Bank Account Number and SWIFT BIC. The details can be found here. Best talk to your Branch to understand.\",\n \"Depending on your income/savings level and who you work for (if you work for a big company check with an HSBC Premier advisor, they may waive the requirements), you may qualify for an HSBC Premier account, which can allow you to open accounts in different countries and transfer money between them without a fee. You can also get a Premier account without meeting the requirements if you are willing to pay a monthly fee, but I doubt that will be worth it in the long run for what you need (worth doing the math though if you travel frequently). NOTE: There may be similar offerings from other banks, but this is just the only one I'm aware of.\",\n \"There are checks, international wire transfers (SWIFT), depending on country pair remittance services.\",\n \"Check with Lawyer and CA who deals with international laws. It maybe illegal in Saudi Arabia. From India tax point of view, any credits into NRE account is not taxable. However credits to friends/family will be treated as GIFT and friends/family will be liable to pay a gift tax if such transfer are more than Rs 50,000/- per year. Although FEMA does not prohibit explicitly such arrangement, these look like round about way of moving money and can be investigated.\",\n \"I would recommend wire transfer. I was in your position some years ago, and the US$ cheque took 6 weeks to clear. Wire transfer fees are generally a few tens of pounds, depending on the banks involved.\",\n \"I use XE.com for almost the same purpose. They have free transfer options, such as ACH withdrawals and deposits. I normally do a online bill payment through my international bank to XE, and have them deposit it in the US via ACH. It takes 1-3 business days, and there's no fee beyond their small percentage (about 1.25%) on top of the exchange rate.\",\n \"Easily transfer your earnings to India with HDFC Bank's NRE Savings Account. The Non Residential External Account allows you to repatriate the funds held in the account at any point of time. Open a NRE Savings Account now! Check out our website to know more!\",\n \"The simplest way is you transfer the funds into your NRE account in India. From the NRE account transfer the funds to your brother-in-law and show the purpose as Loan. From 2012 onwards RBI has simplified things under FMEA and your brother-in-law can deposit/repay the loan back into the NRE account. Once the funds are in NRE account you can repatriate then whenever you like. This entire process requires less paperwork. The option you have suggested is also fine, however your brother-in-law needs to engage the services of a CA and he will authenticate the purpose of remittance to the Bank. Based on this certificate the Bank will transfer the funds outside of India.\",\n \"There are a few standard ways: One thing to keep in mind is that you'll usually be charged a wire and/or service fee for the tranfer.\",\n \"I did this for a few years and the best way I found was via http://xe.com/ It uses a bank transfer from your UK bank to xe.com (no fees from bank or xe). On the Canadian side, they use EFT (Electronic Fund Transfer, no fees from bank or xe.com) They have very competitive exchange rates. To make a transfer, you log in to xe and arrange your transfer. This locks in the rate and tells you how many GBP you need to transfer in. Then, transfer your money from the UK bank into xe using the details they provide. Two or three days later the money shows up in your Canadian acount. There's a bit of paperwork they need to set it up but it's not very hard. After it's set up, everything else is online. Enjoy!\",\n \"Can I transfer funds from India to USA which I have borrowed in India. Funds borrowed in India may not be transferred outside of India as per Foreign Exchange Management Act. Loans in rupees to non-residents against security of shares or immovable property in India:- Subject to the directions issued by the Reserve Bank from time to time in this regard, an authorised dealer in India may grant loan to a non-resident Indian, e) the loan amount shall not be remitted outside India;\",\n \"I think you are asking quite a few questions here; If you have Rs 10000, its better you get it converted in India before you leave. Most Banks and Exchange houses like Western Union would take Rupees and Give you USD. What do they do with USD, there are other who give them USD and need Rupees. They make a spread in this process. If you are getting a salary in USD in US, whenever you want to transfer money to India, the Banks or Remittance services like Western Union would take USD from your US Account and Transfter equivalent Money into your Bank Account in India in Rupees. They will tell the exchange rate applicable. Depending on why visa type & the duration you are going, your company should be able to tell you your tax liabilities in the US. Read similar questions here to get a general idea.\",\n \"From an India tax point of view your father can gift you unlimited amount of money and the transfer would be under Gift Tax act. As per the act there is NO tax on this transaction. I does not matter if you get yourself added into the joint account or not. From a US tax point of view, this transfer would come under gift tax, however in US the gift tax is applicable on the Donor [i.e. your father]. As your father is not a US Citizen the provisions are not applicable to him. Edit Under the liberalized remittance scheme, an individual can transfer upto USD 1 million every year. A CA certificate is required certifying that the taxes on the funds have been paid. Your Bank would be able to guide you on the exact process.\",\n \"As the college education is very costly, I want to send USD 25,000 to him as a gift. What is the procedure and what Indian and American tax laws are involved ? This transaction will be treated as gift. As per Indian law you can transfer unlimited amount to your close relative [son-in-law/grandchildren/daughter/etc]. In US the gift tax is on donor, as you are no US citizen you are not bound by this. As your son-in-law/grandchildren are US citizens, there is no tax to them. Your son-in-law may still need to declare this in Form 3250 or such relevant returns. Under the Liberalized remittance scheme [Refer Q3], you can transfer upto USD 250,000 per year. There maybe some forms that you need to fill. Ask your Bank. If the amount is more than USD 25,000 a CA certificate along with 15CA, 15CB need to be filled. Essentially the CA certifies that taxes on the funds being transferred have already been paid to Govt of India. Can I send money to him directly or to his father who is submitting tax returns in USA? This does not make any difference in India. Someone else may answer this question if it makes a difference in US.\",\n \"From what I understand this is what you can do : You need to raise an invoice to your brother's company in USA Your brother makes a payment into your Indian company's bank account using wire transfer straight into a bank account in your company's name. Your brother wont have to pay taxes on the money that he pays you against an invoice as it would be an expense and would not be considered as profit for tax purposes. Once you have the money you can then file your income tax returns after deducting your own expenses etc in India. I hope this helps.\",\n \"Three ideas: PayPal is probably the best/cheapest way to transfer small/medium amounts of money overseas.\",\n \"Yes. The bank is right. The funds need to be deposited in NRO account. Under the liberalised remittance scheme, you can transfer upto 1 million USD per year. There are prescribed forms that need to be signed by a CA (essentially stating taxes are paid). You can then move this out of India.\",\n \"Have you tried TransferWise. They offer nice cross currency transfers with really low rates.\",\n \"Yes anyone can credit an NRE account from outside. Most Banks in Dubai should be able to do this [The charges maybe higher], there are other remittance services offered from leading Indian banks like HDFC, ICICI, SBI, Axis etc. A purpose of remittance needs to be provided, ask your Bank / Service Provider in Dubai and they should be able to tell your friend more details.\",\n \"Many U.S. banks now support POPMoney, which allows recurring electronic transfers between consumer accounts. Even if your bank doesn't support it, you can still use the service. See popmoney.com.\",\n \"Your NRI friend can use normal Banks or specialized remittance services. There are questions on this website that give pro's and con's. From Indian tax point of you, you have received a gift from friend and as such it falls under Gift Tax act. Any amount upto Rs 50,000 is tax free. Anything above it is taxable as per tax bracket.\",\n \"We have a house here in India worth Rs. 2 Crores. We want to sell it and take money with us. Selling the house in India will attract Capital Gains Tax. Essentially the price at which you sell the property less of the property was purchased [or deemed value when inherited by you]. The difference is Capital Gains. You have to pay tax on this gains. This is currently at 10% without Indexation and 20% with Indexation. Please note if you hold these funds for more than an year, you would additionally be liable for Wealth tax at 1% above Rs 50 lacs. Can I gift this whole amount to my US Citizen Daughter or what is the maximum limit of Gift amount What will be the tax liability on me and on my Daughter in case of Gift Whether I have to show it in my Income Tax Return or in my Daughter's Tax Return. What US Income Tax Laws says. What will be the procedure to send money as Gift to my Daughter. Assuming you are still Indian citizen when to gift the funds; From Indian tax point of you there is no tax to you. As you daughter is US citizen, there is no gift tax to her. There is no limit in India or US. So you can effectively gift the entire amount without any taxes. If you transfer this after you become a US Resident [for tax purposes], then there is a limit of USD 14,000/- per year per recipient. Effective you can gift your daughter and son-in-law 14,000/- ea and your husband can do the same. Net 14,000 * 4 USD per year. Beyond this you either pay tax or declare this and deduct it from life time estate quota. Again there is no tax for your daughter. What are the routes to take money from India to US Will the money will go directly from my Bank Act.to my Daughter's Bank Account. Will there will be wire transfer from bank to bank Can I send money through other money sender Certified Companies also. The best way is via Bank to Bank transfer. A CA Certificate is required to certify that taxes have been paid on this funds being transferred. Under the liberalized remittance scheme in India, there is a limit of USD 1 Million per year for moving funds outside of India. So you can move around Rs 6-7 Crore a year.\",\n \"Try looking at Transferwise. They have low fees and often beat the banks. They (broadly speaking) work by finding people who need to convert money the other way round and then just push money around in the respective local currency.\",\n \"India and the United States have a tax treaty agreement whereby double taxation is avoided. However check with your accountant in the US who should be able to guide you further in this regard. It is now easier to transfer money out of India. As long as the source of the money is legal and can be verified. So if you decide to sell a property, get payments by way of documented bank transactions like cheques and avoid cash deals. Once taxes are paid money can usually be transferred out.\",\n \"Maintain your U.S. bank accounts. Use xe.com to transfer money back and forth.\",\n \"You might investigate Paypal if it is available to both of you. the International Transfers page on their site has a way to find out what sort of fee's they would charge you. It might be a lot simpler and easier than doing wire transfers or dealing with banks etc.\",\n \"Depending what country you are from, there may be better alternatives to transfer money internationally. Opening a bank account is complicated, costs money, and international bank transfers are remarkably expensive.\",\n \"I have taken to using the service TransferWise. I have found them to be faster and cheaper and easier than using SWIFT, given the US Banking's... antiquated system of doing things. I've made dozens of transfers between my international accounts with TransferWise over the past 18 months. Some of them very large and some of them tiny, and even when there's been an issue (I once wrote an offensive joke in my narration for the transfer and they noticed) they have handled it respectfully and quickly. Prior to transferring money to US accounts, I used the SWIFT system - but SWIFT has a pretty spotty record in the US. Some banks you can do it all online but other banks, as Dheer mentioned, you have to go into the bank and sometimes find a senior staff member before you can find someone who even knows what SWIFT is.\",\n \"If you’re concerned about transferring USD, I can’t really help you there. But if you’re looking to transfer wealth, I believe that’s where something like Bitcoin could help you. In fact a small or nonexistent processing fee is one of Bitcoin’s biggest strengths as a currency. Off the top of my head, I believe BitPay has services that would suit your needs. And if you’re worried about the volatility of Bitcoin, you can always convert it straight to USD just so you can avoid service fees!\",\n \"My current favorite service for this kind of transfer is Transferwise. The fees are quite low when compared to the 2.5-3% by high-street banks for currency conversion, to which you need to add the international wire transfer fee, and it's often a lot faster, as they split it into two domestic transfers while the international part + currency conversion happens internally to Transferwise.\",\n \"How to send the full loan amount from Saudi Arabia (money exchange), because I have a money transfer limit? There is no limit for sending money into India. Just use the right banking channel and transfer the funds. If I sent to India, what about tax and all that in India? In a financial year if you are outside of India for more than 182 days, you are Non-Resident for tax purposes. Any money you earn outside of India is tax free in India. i.e. there is no tax for this funds in India. If it is possible to send the money, to whom do I have to send it (my account, or my parents account) Whatever is convenient, preferably to your own NRE/NRO account. Any documents I have to show for tax issues (in case tax) You have to establish that you are NRI and hence this funds are not taxable. Hence its best you transfer into NRE/NRO account. If you transfer to your parents account, you would need a gift deed to make this non-taxable to your parents. I have savings account my self in Axis Bank, for the past 3 years I am paying taxes, if I send to my Axis Bank account how can I withdraw the full amount (10 lakhs (1,000,000)) on single day Withdrawal is possible by cash or cheque You can write a check, do a NEFT/RTGS transfer to your loan account, you can withdraw cash by giving some notice time to the Branch Manager of your Branch.\",\n \"\\\"If wire transfer through your bank does not work then perhaps one of the more popular money transfer services may be what you are looking for such as MoneyGram or Western Union. Now these rely on a trusted \\\"\\\"registered\\\"\\\" third party to do the money transfer so you need to make sure that you are working with a legitimate broker. Each money transfer service has a site that allows you to perform the search on registered parties around your area. There are certain fees that are sometimes applied due to the amount being transferred. All of these you will want to do some detailed research on before you make the transfer so that you do not get scammed. I would suggest doing a lot of research and asking people that you trust to recommend a trusted broker. I have not personally used the services, but doing a quick search brought many options with different competitive conversion rates as well as fees. Good luck.\\\"\",\n \"I successfully used Currency Fair a few times, they seem to cater for both Australia and the UK. If I remember correctly, you can set everything up via Internet. As they explain on their website, first you open an account with them, then you transfer AUD to an Australian bank account that they will give you, then you exchange and transfer the money to your friend on their web page. Usually they are cheaper than PayPal, especially if you have time to play with their exchange by marketplace functionality (not recommended if you just want to do the transfer).\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["Western Union, Money to India, Remit to India are some of the services that specilize in remittance and would be cheaper than an International Wire. There is not tax for transfering your own money earner outside India into India. Edit: The business of Remittance is bought into the Service Tax Net by Govt. It is seen that Banks are offering this as a service and hence the tax to Banks which is passed on to customers. 0.12% of tax on the converted amount. IE if you transfer Rs 1,00,000/- you would need to pay a tax of Rs 120/-. Above Rs 1,00,000 the incremental rate is 0.06%"],"string":"[\n \"Western Union, Money to India, Remit to India are some of the services that specilize in remittance and would be cheaper than an International Wire. There is not tax for transfering your own money earner outside India into India. Edit: The business of Remittance is bought into the Service Tax Net by Govt. It is seen that Banks are offering this as a service and hence the tax to Banks which is passed on to customers. 0.12% of tax on the converted amount. IE if you transfer Rs 1,00,000/- you would need to pay a tax of Rs 120/-. Above Rs 1,00,000 the incremental rate is 0.06%\"\n]","isConversational":false}}},{"rowIdx":64,"cells":{"_id":{"kind":"string","value":"4714"},"query":{"kind":"string","value":"Personal finance app where I can mark transactions as “reviewed”?"},"gt_ids":{"kind":"list like","value":["505057","584450","450819","324833"],"string":"[\n \"505057\",\n \"584450\",\n \"450819\",\n \"324833\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1,1,1],"string":"[\n 1,\n 1,\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["584450","505057","353915","109483","211503","314303","19258","170788","196156","29812","497753","180311","225944","405071","117959","103125","274462","151185","38377","324833","140657","17284","259923","256693","450819","28942","65957","171409","281322","114599","308991","281534","157751","322716","47923","246005","473644","76782","580778","420234","529790","45665","419383","214610","224154","447597","129681","85074","232244","591130","552106","432417","598802","386349","467508","309451","340599","67031","239484","51721","538787","57175","91671","440802","218793","20844","130439","120954","55601","482518","407899","425738","285409","537313","428978","101255","144894","296401","136621","312260","430769","318674","305164","273071","200683","380474","268035","492735","478807","118620","480924","349998","196299","350344","477357","374518","268992","220972","345530","344473"],"string":"[\n \"584450\",\n \"505057\",\n \"353915\",\n \"109483\",\n \"211503\",\n \"314303\",\n \"19258\",\n \"170788\",\n \"196156\",\n \"29812\",\n \"497753\",\n \"180311\",\n \"225944\",\n \"405071\",\n \"117959\",\n \"103125\",\n \"274462\",\n \"151185\",\n \"38377\",\n \"324833\",\n \"140657\",\n \"17284\",\n \"259923\",\n \"256693\",\n \"450819\",\n \"28942\",\n \"65957\",\n \"171409\",\n \"281322\",\n \"114599\",\n \"308991\",\n \"281534\",\n \"157751\",\n \"322716\",\n \"47923\",\n \"246005\",\n \"473644\",\n \"76782\",\n \"580778\",\n \"420234\",\n \"529790\",\n \"45665\",\n \"419383\",\n \"214610\",\n \"224154\",\n \"447597\",\n \"129681\",\n \"85074\",\n \"232244\",\n \"591130\",\n \"552106\",\n \"432417\",\n \"598802\",\n \"386349\",\n \"467508\",\n \"309451\",\n \"340599\",\n \"67031\",\n \"239484\",\n \"51721\",\n \"538787\",\n \"57175\",\n \"91671\",\n \"440802\",\n \"218793\",\n \"20844\",\n \"130439\",\n \"120954\",\n \"55601\",\n \"482518\",\n \"407899\",\n \"425738\",\n \"285409\",\n \"537313\",\n \"428978\",\n \"101255\",\n \"144894\",\n \"296401\",\n \"136621\",\n \"312260\",\n \"430769\",\n \"318674\",\n \"305164\",\n \"273071\",\n \"200683\",\n \"380474\",\n \"268035\",\n \"492735\",\n \"478807\",\n \"118620\",\n \"480924\",\n \"349998\",\n \"196299\",\n \"350344\",\n \"477357\",\n \"374518\",\n \"268992\",\n \"220972\",\n \"345530\",\n \"344473\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["\"On mint, you can create your own tags for transactions. So, you could create a tag called \"\"reviewed\"\" and tag each transaction as reviewed once you review it. I've done something similar to this called \"\"reimbursable expense\"\" to tag which purchases I made on behalf of someone else who is going to pay me back.\"","\"Otto, I totally agree with you. That feature would be awesome addition to mint. Have you thought of adding Custom tag called \"\"reviewed\"\" and just mark that to the transaction. Ved\"","I use mint.com for tracking my finances. It works on mobile phones, tablets, and in a browser. If you don't mind the initial hassle of putting in the credentials you use to access your account online, you'll find that you're able to build a comprehensive picture of the state of your finances relatively quickly. It does a great job of separating the various types of financial transactions you engage in, and also lets you customize those classifications with tags. It's ad-supported, so there's no out-of-pocket cost to you, and it doesn't preclude you from using the personal finance software you already have on your phone.","Update: I am now using another app called toshl and I am very satisfied with it. In fact, I am a paying customer. It is web based, but it has clients for iPhone, Android and Windows Phone as well. Another one, I tried is YNAB. Did you consider trying an online app? I am using Wesabe and I am happy with it. I found it much better these web-based ones because I can access my data from anywhere.","I would investigate mint.com further. Plenty of people have written off using them because Intuit purchased them, but that seems like cutting of your nose to spite your face. I think mint.com is worth it for its Trends functionality alone, not to mention its automatic categorization of your purchases, reminders when bills are due, notifications of increased credit card interest rates, and overdraft notices. I don't think mint.com schedules bills & deposits, but it tracks stocks & mutual fund investments and compares your portfolio returns against Dow Jones, S&P 500, or NASDAQ if you wish. I'm not sure I see the advantage of manual transaction entry, but you can add cash or check transactions manually. As I mentioned earlier, automated categorization is a great feature. In addition, you can tag certain transactions as reimbursable or tax-related. If the primary feature you're interested in is stock quotes, maybe something like Yahoo Finance or Google Finance will be enough.","Mint.com is a web app with an iPhone (and Android) app. Also, You Need A Budget appears to support all three.","The best solution I've been able to find for this is MoneyWiz, where both are logged into the same sync account.","Try Cha-Ching from MidnightApps or Moneywell I did not used neither of them for an extended period of time, but I heard the Moneywell is nice.","Some to manage day to day expenses, bills, and to save money. I already a system in place for investments and retirement. I was just wanting to know if there was a good app to help with these things instead of having to use a pen and paper to figure this stuff out when I am on the go away from my computer.","My Finances is a personal finance app for iPhone and iPad. The app uses iCloud to sync the data between your devices if you want to. Otherwise the data is only local and won't be synced to any server. Spoiler: I'm the developer and my opinion may be biased.","You Need A Budget may be what you're looking for. It is focused on budgeting your expenses in advance, and looking forward instead of backward. (Disclosure: I am currently doing some development work for You Need A Budget.)","I like You Need A Budget (YNAB) Pros: Cons:","\"I ended up with YNAB. It worked quite well, and I highly recommend it. It does cost money, but I found it saved me far more than its cost in the first month alone, since I saved between $500 and $1000. And it's flexible; when you overspend on something you can flex your budget, rather than it breaking and you give up in frustration. Dropbox support has recently been added, \"\"cloudifying\"\" it and making it where the smartphone apps can be really useful. I use the iPhone app occasionally, having recently transitioned to an iPhone.\"","\"I currently use Mint for this, which I see that you have already disqualified but not why you have disqualified it. Set \"\"budgets\"\" for how much you want to spend on what type of expense, and then be sure to assign expenses to a budget as they come in. Mint actually learns what expenses go to each budget and eventually does it automatically.\"","Look up You Need A Budget...the methodology is really the key and the software is elegant and practical. It's not about tracking spending, it's about planning what your dollars are going to do. The application automates much of the budget planning and data entry as it remembers your input (and is totally customizable). If you follow their basic blueprint, you can spend just minutes a week. They offer free online classes too (love this). I do not have skin in their game but have been a fan since it was just a spreadsheet. And yes, they have a mobile app, which means you can enter transactions on the go with just a few taps and then have your data synced across the cloud or just across your network.","Mint.com does all of that (except for the cash at hand).","I would suggest that you try ClearCheckbook. It is kind of like Mint, but you can add and remove things (graphs, features, modules) to make it as simple or diverse as you need it to be. It should be a workable solution for simply tracking both income and expenses, yet it will also provide extra features as needed. There is a free option as well as a paid option with added features. I have not used ClearCheckbook before, but according to their features page it looks like you may have to upgrade to the paid option if you want to have complete tagging/custom field flexibility.","http://www.mint.com attaches to all your accounts and lists all your transactions. I love it.","\"While Googling answers for a similar personal dilemma I found Mvelopes. I already have a budget but was looking for a digital way for my husband and I to track our purchases so we know when we've \"\"used the envelope\"\". It's a free app.\"","I had exactly the same need and I ended up using BillGuard and I like it. At the end of the day, it sends an alert where I need to review all the transactions - takes hardly 5seconds and I am on top of all transactions. From the last 1yr I have found 1 fraudulent and 2 duplicate charge using billguard. Didn't really save a ton of money but its useful to understand how you use your credit card. Don't work for or promoting the app, its just useful.","I use MoneyStrands (formerly called Expensr), but mostly just to track expenses and look at reports on my spending habits. It has some really pretty charts, with the ability to drill down into categories and sub-categories, or graph monthly spending for any custom date range. It does a half-decent job of auto-categorizing the imported bank transactions, and you can set up additional rules for common vendors, but I still have to do some manual work after each import. It does a good job of integrating my credit cards, bank accounts, and I can even manually add cash transactions. It has some basic budgeting capabilities, but they're not very useful for someone who needs to carefully budget thier monthly spending. Another one I've heard about is mint.com, but it only supports American banks (last I heard, anyway).","MoneyDashboard or XeroPersonal are similar sites to Mint.com MoneyDashboard is planning on releasing an Android App XeroPersonal is also in development of an Android App For more details about the differences between the two apps, see this Web App question","+1 for YNAB. I used to use MS Money until it was decommissioned. I used that to historically record my spending and investing, and plot my net worth. Whilst YNAB will do that, it is actually geared towards forward planning much more so. In this area, it is fantastic. I like that there are mobile apps for it too.","\"The answer is just close your eyes and ignore it (in your words). I'm right there with you, the amount of detail that I track in my personal finances would be called obscene by some people. But as you look at these features in any accounting application, you need to ask the question \"\"What does this information represent?\"\" In the case of your bank and credit card accounts, the reconciliation marker represents that you have received documentation from the issuing institution which you have verified against your accounts. Marking them off confirms that you have reviewed the information, and that you checked for errors. These markers exist on all transactions, whichever end of the splits you are looking at. When reviewing the Expense side of the transaction, it might make less sense to see these reconciliation markers, because as you stated, nobody receives documentation related to their expenses. However, if you itemized your expenses and kept a separate log of certain transactions (like a notebook where you track gasoline and/or mileage on your car), it might be useful to 'reconcile' your records once a month. Checking off individual transactions, and verifying a new 'balance' in terms of gas consumed or miles driven, would allow you to identify any inconsistencies in your records. Not everyone would find such an activity useful, thus the reconciliation markers are present everywhere but required nowhere.\"","Not web-based, but both Moneydance and You Need A Budget allow this.","Mint.com—Easy solution to provide insight into finances. Pros: Cons:","\"You Need A Budget is a nice budgeting tool that works on the desktop. It is more focused on manual entry and budgeting over auto-downloading and categorizing. It does support downloading transactions from banks and then importing the transaction files. You mentioned having \"\"trust issues\"\" with a bank and this would be safe as you don't enter your credentials into the app. It also has a mobile app that works well. Not exactly what you are looking for, but it would work in India and be safe if you have an untrustworthy bank and it would allow you to import transactions.\"","\"I use \"\"Money Manager Ex\"\" which is a Windows application I use on PC to log my transactions and for simple statistic. They have two versions, simple standlone application and self-hosted web app.\"","For Mac it's definitely iFinance.","You can try SplashMoney. It works on many platforms, including iPhone, iPod and Mac, but also Palm OS, Android, Blackberry and windows. I've been using it —since more than two years now— with my old Palm OS PDA and it works great. As I work mainly with Linux, I've tested very few times its synchronization with its desktop companion running on windows.","\"Quicken. I am in the same situation. I've tried mint.com and switched back to Quicken because i want to know how much money i'll have in my accounts in 2 weeks, 4 weeks, etc. I have to admit though, quicken is getting worse and worse every year. Can't really say i \"\"recommend\"\" it.\"","As far as I know theres no single tool that does all that well. You'll have to keep your investments separate from your daily expenses and money goals. There are a few tools everyone uses. I'm partial to budgeting apps. You can try ynab, everydollar, goodbudget. I wouldn't recommend mint as I personally don't trust my login info with a third party. I don't care who owns them. Just my opinion. I'm working on my own budgeting app. Ideally I'd like to include investments. But thats V2. If you'd like to keep updated on that let me know. Oh, what type of phone do you use?","A desktop application that has the same features (although as already stated, nothing will be identical but if you are looking for functionality then certainly there will be) and pretty simple to use was Microsoft Money, however, Microsoft stopped supporting it with newer versions and while the existing versions will work, I still use mine, there will be no future updates. I like the interface, its simple to use and has all the features you want. They abandoned it in favor of Intuit's Quicken but personally I am not a fan of the Quicken interface. They still had a more extensive and probably too much for the average user application called Office Accounting, but they abandoned future updates and supports on that in favor of Intuit's Quickbooks. Again, I am not a fan of the interface but they are very feature rich including invoicing and payroll, again overkill for the average user. They still have the Small Business Accounting in the form of Microsoft Dynamics, but that is utterly overkill for personal use. I generally don't trust online or cloud based accounting solutions like Mint or even Quicken online because I don't trust my information security to some third party without knowing how they are securing it and what will happen to me if/when they are leaked due to breach. So I like to keep everything local to myself and that's a good move for you, you should do that. It seems at the moment the market standard without much competition is Quicken for personal use and Quickbooks for small business. I would recommend you start with Quicken and if your needs increase in the future, you can easily transfer into Quickbooks to scale up as they are fully compatible with each other. Check it out here and compare their products to see what works best for your needs.","I use iBank for Mac to keep track of my expenses. I also use the iPhone version since they can sync over Wi-Fi and I can capture expenses right on the spot instead of trying to remember what I spent on when I turn on my laptop.","Being new does not allow me yet to vote on your question, but what a good question it is. We share our opinion in separating finances in our very well going mariage. Currently I have found a sort of okay solution in two websites. These are http://www.yunoo.nl and http://www.moneytrackin.com/. You can actually tag spendings with multiple tags. I don't like the idea that the data is on a remote server, but since I have not found a proper local software solution, I just naively trust their promise that your data is save. Then again our financial situation is not that special.","So far I am doing mint.com for a few minutes a couple of times a week, despite my security concerns, and that's working fairly well as practice until my job starts. I'm hoping to get my bank to allow up to date transaction download, and then I'm considering using YNAB once I start my job. I will update this as I go along.","I used to use Quicken, but support for that has been suspended in the UK. I had started using Mvelopes, but support for that was suspended as well! What I use now is an IPhone app called IXpenseit to track my spending.","I use http://moneydance.com/ it has Mac, Windows and Linux versions and works well for my needs.","https://moneycenter.yodlee.com/ You can link your bank accounts, credit cards, trading accounts etc at Yodlee. These will be updated automatically if you share your username and password from your existing financial institutions. You also have the option of creating manual accounts. You will have to manually add/update transactions.","If you're happy manually downloading transaction files from your bank and importing them into your desktop application, try You Need A Budget 4. It hits all three of your requirements. Here are the details about how to import from your bank I've been using YNAB for a few months now and am very impressed with it. It was cheap and it syncs to my mobile phone for on-the-go money management via Dropbox.","Buxfer is a personal-finance web app which you might like. It's not open-source. But at least none of your complaints about financeworks.intuit.com apply to Buxfer. Buxfer offers a piece of software you can download to your own PC, called Firebux. This macro-recording software provides automation that helps you download statements and upload them to Buxfer. So you never have to give Buxfer any of your bank or brokerage usernames or passwords. Buxfer and Firebux are both free of charge. Wesabe, another personal-finance web app, also used to offer data-uploader software, but Wesabe has now gone out of business.","We use YNAB to handle our household budget - their latest version allows cloud sync between Android/iOS devices and various desktop installs. I have the budget folder shared with my wife's Dropbox account so we both an view the budget, enter spending, and make changes.","I love mint.com, it fulls in your information from all your accounts automatically, let's you know where you spend your money and what your net worth is.","\"As I have said before on this site, I personally use Moneydance. They have Mac, Linux and Windows support, and recently added an iOS mobile version that syncs with the desktop. I have only used the Mac \"\"desktop\"\" version, and it seems to function well, but have not tried the other platforms, nor the iOS version. I have no company affiliation, but am a (mostly) happy user. :-)\"","Money Dashboard and Love Money look like two best options out there now that Kublax closed their doors. Mint were making noises last year about spreading to UK/Canada, but I've not heard anything new about that.","I use MoneyStrands.com to manage my spending. It's a lot like Mint, but provides support for more banks, and works with most Canadian financial institutions. I can't really compare them fairly though, since I didn't bother with Mint after learning that they don't care about Canadians. If your bank isn't supported by MoneyStrands, or you don't want to trust an online webiste with your account login, you can create accounts for manually uploaded files. It just means you have to log into your bank yourself, download the transactions as QFX, OFX, CSV or other supported formats, and then upload the files to the appropriate account in MoneyStrands. I love the expense tracking and reporting that MoneyStrands offers, but like Mint, their budgeting feature is seriously lacking. Fortunately I don't need to budget month-to-month, I just use it to see how much I spend on various categories, to help create annual budgets and decide how much I can invest or use for a vacation.","Out Of The Dark OOTD is a budgeting and personal money management web app that does not require you to give out access to your bank accounts or even your personal identity. It's a great tool for people with no financial experience with features like Cash Put-Aside and the Credit Card Debt Terminator and it has tons of instant guides explaining how to use every feature. You can check it out at myootd.org.","\"Yodlee and Mint are good solutions if you don't mind your personal financial information being stored \"\"in the cloud\"\". I do, so I use Quicken. Quicken stores whatever you give to it for as long as you want: so the only question is how to get the credit card transactions you want into it? All my financial institutions allow me to view my credit card statements for a year back, and download them in a form Quicken can read. So you can have a record of your transactions from a year ago right now, and in a year you will have two year's worth.\"","I have been using bearsofts money app, both in mac and iOS. I think only down side with this apps is you need to buy them separately. http://ibearmoney.com/money-mac.html","MoneyDance Is the way to go. I've been using it for years and it works well. It keeps getting better, and best of all, it's completely cross platform! Mac, Windows and linux!","Mint.com is a fantastic free personal finance software that can assist you with managing your money, planning budgets and setting financial goals. I've found the features to be more than adequate with keeping me informed of my financial situation. The advantage with Mint over Microsoft Money is that all of your debit/credit transactions are automatically imported and categorized (imperfectly but good enough). Mint is capable of handling bank accounts, credit card accounts, loans, and assets (such as cars, houses, etc). The downsides are:","Use buxfer.com. It's available in India and most of the features are free.","\"I sort of do this with credit cards. I actually have 4 AMEX cards that I've accumulated over the years. Certain types of expenses go on each card (\"\"General expenses\"\", recurring bills, car-related and business-related) I use AMEX because they have pretty rich iPhone/Android applications to access your accounts and a rich set of alerts. So if we exceed our budget for gas, we get an email about it. Do whatever works for you, but you need to avoid the temptation to over-complicate.\"","PocketSmith is another tool you might like to consider. No personal banking details are required, but you can upload your transactions in a variety of formats. Pocketsmith is interesting because it really focus on your future cash flow, and the main feature of the interface is around having a calendar(s) where you easily enter one off or repetitive expenses/income. http://www.pocketsmith.com/","I haven't used it in years, but look at GnuCash. From the site, one bullet point under Feature Highlights:","In your comment in response to this answer, you said that your biggest issue is oversight, which you can do by checking your online bank account regularly. Mint.com looks good but you're in Australia? Easy, check out getpocketbook.com. Using it and love it, helps a lot to track your tracking, and it's a god-send during tax time.","I'm a big fan of buxfer.com","As I mentioned in my comment, mint.com might work for you. The downsides are giving them access to all your accounts, and still having to manually enter transactions that are done in cash. If you are ok with those however, it can automate almost everything else for you.","The short answer is that there are no great personal finance programs out there any more. In the past, I found Microsoft Money to be slick and feature rich but unfortunately it has been discontinued a few years ago. Your choices now are Quicken and Mint along with the several open-source programs that have been listed by others. In the past, I found the open source programs to be both clunky and not feature-complete for my every day use. It's possible they have improved significantly since I had last looked at them. The biggest limitation I saw with them is weakness of integration with financial service providers (banks, credit card companies, brokerage accounts, etc.) Let's start with Mint. Mint is a web-based tool (owned by the same company as Quicken) whose main feature is its ability to connect to nearly every financial institution you're likely to use. Mint aggregates that data for you and presents it on the homepage. This makes it very easy to see your net worth and changes to it over time, spending trends, track your progress on budgets and long-term goals, etc. Mint allows you to do all of this with little or no data entry. It has support for your investments but does not allow for deep analysis of them. Quicken is a desktop program. It is extremely feature rich in terms of supporting different types of accounts, transactions, reports, reconciliation, etc. One could use Quicken to do everything that I just described about Mint, but the power of Quicken is in its more manual features. For example, while Mint is centred on showing you your status, Quicken allows you to enter transactions in real-time (as you're writing a check, initiating a transfer, etc) and later reconciles them with data from your financial institutions. Link Mint, Quicken has good integration with financial companies so you can generally get away with as little or as much data entry as you want. For example, you can manually enter large checks and transfers (and later match to automatically-downloaded data) but allow small entries like credit card purchases to download automatically. Bottom line, if you're just looking to keep track of where you are at, try Mint. It's very simple and free. If you need more power and want to manage your finances on a more transactional level, try Quicken (though I believe they do not have a trial version, I don't understand why). The learning curve is steep although probably gentler than that of GnuCash. Last note on why Mint.com is free: it's the usual ad-supported model, plus Mint sells aggregated consumer behaviour reports to other institutions (since Mint has everyone's transactions, it can identify consumer trends). If you're not comfortable with that, or with the idea of giving a website passwords to all your financial accounts, you will find Quicken easier to accept. Hope this helps.","I found that an application already exists which does virtually everything I want to do with a reasonable interface. Its called My Personal Index. It has allowed me to look at my asset allocation all in one place. I'll have to enter: The features which solve my problems above include: Note - This is related to an earlier post I made regarding dollar cost averaging and determining rate of returns. (I finally got off my duff and did something about it)","I'm using iBank on my Mac here and that definitely supports different currencies and is also supposed to be able to track investments (I haven't used it to track investments yet, hence the 'supposed to' caveat).","I have been using http://moneydance.com/ for several years now. Works pretty well for me. Another one is http://www.iggsoftware.com/ibank/ I have not used it other than a five minute play session. Looks more mac-ish than Moneydance, but that's all I know.","Perhaps you should use your own tracking software, such as GnuCash, Quicken, Mint, or even Excel. The latter would work given you say you're manually putting in your transactions. There's lots of pre-done spreadsheets for tracking investments if you look around. I'm hoping that a web search gets you help on migrating transaction data, but I've yet to run into any tools to do the export and import beyond a manual effort. Then again, I haven't checked for this lately. Not sure about your other questions, but I'd recommend you edit the question to only contain what you're asking about in the subject.","\"There are some tools that might help you. For example, I have an \"\"Expense It\"\" application on my iPhone, where I can type in a purchase while still at the cashier, the idea is to track expenses on a trip, but the implementation will suit your needs perfectly. Keeping slips is a way to go too, but I personally don't like that because I'm a messy person and after a couple of days all the receipts are gone. If you can keep track of tons of slips - you can just do that.\"","Mint.com does a pretty good job at this, for a free service, but it's mostly for personal finance. It looks at all of your transactions and tries to categorize them, and also allows you to create your own categories and filters. For example, when I started using it, it imported the last three months of my transactions and detected all of my 'coffee house' transactions. This is how I learned that I was spending about $90 a month going to Starbucks, rather than the $30 I had estimated. I know it's not a 'system' like an accounting outfit might use, but most accounting offices I've worked with have had their own home-brewed system.","In all honesty, the best solution I've come across is Microsoft's now defunct Money.","http://www.Mvelopes.com Mvelopes is envelope-style budgeting in an online application. I've tried all of the other applications and I choose to pay for this one for the following reasons:","MoneyStrands is a site very similar to Mint, but does not force you to link bank accounts. You can create manual accounts and use all features of the site without linking to banks.","I use KMyMoney in Linux. They distribute a Mac version too. Plus, it is free!","CashBase has a web app, an iPhone app and an Android app, all sync'ed up. It doesn't integrate with banks automatically, but you can import bank statements as CSV. Disclosure: Filip is CashBase's founder.","CashBase has a web app, an iPhone app and an Android app, all sync'ed up. It doesn't integrate with banks automatically, but you can import bank statements as CSV. Disclosure: Filip is CashBase's founder.","\"We use mint for just that. We have a \"\"shared\"\" account. We each have the mobile app and share the same pin for the application (not our phones -- you can set a pin in the settings on the application). Thus we each share a login to the site, where we have setup all of our accounts. In the \"\"Your Profile\"\" link at the top of the page, you may select the Email & Alerts option. From here you may add a second e-mail account. This way if you go over a budget or have a bill upcoming each of you will get a notification. We have setup budgeting through the web site, and either of us can modify the budget via logging in.\"","\"I'm currently using You Need A Budget for this. It lets you track spending my category and \"\"save\"\" money in particular accounts from month to month. They also have some strong opinions about how one should manage one's cashflow, so check it out to see if it'll work for you. It's neither web-based nor free, but the licensing terms are very reasonable.\"","I like using Mint.com to track my expenses. It makes it very easy to watch my budget and monitor my spending.","They have recently launched an iphone app 'Billguard' in UK which does accounts aggregation which is similiar to mint.com. You can also use try 'Ontrees' iphone app which is another account aggregation software. I am using Yodlee Money center Website for past 4 years which support lot of bank internationally including all major UK banks and creditcards.","\"My wife and I have been ridiculously happy with YNAB. It's not \"\"online,\"\" but syncs across our phones & computers using Dropbox. It supposedly supports different locales and currencies, but I have never needed to try that out.\"","If you would like to use linux I suggest you to use KMyMoney http://kmymoney2.sourceforge.net/ It is based on gnucash but it is easier to use IMO","Google Portfolio does the job: https://www.google.com/finance/portfolio You can add transaction data, view fundamentals and much more.","\"I've tried Mint, and I've tried Quicken. Now, I think Quicken is an annoying, crashy little piece of software, but it is also quite capable; overall I think it has the features you want. You can enter your bills, broken down by category, in advance. You can enter your paychecks, broken down by category (gross income, federal income tax, state income tax, social security, SDI, transfers to tax-protected 401(k) account, etc) in advance. You can enter in your stock trades and it can tell you how much you'll need to end up paying in capital gains taxes. You can even enter in your stock option vesting schedule in advance (it's a royal pain because you can't go back and change anything without deleting everything, but you can do it). It'll forecast your bank account balance in all of your bank accounts in advance with a shiny chart. It'll even model your loans, if you set it up right. I didn't do too much with the \"\"budgeting\"\" tools per se, but the account-balances-daily features sound like the closest thing to what you're looking for that's likely to exist. The only thing that's a trifle tricky is that transfers from one account to another may take multiple days (hello, ACH) and you'll have to decide whether to record them at departure or arrival.\"","Yodlee will also work. I asked a similar question (and provided answers) here. Thrive, so far, is the best in my opinion. Their tech support is top notch and their UI is far superior to Yodlee's (which provides the backend for Mint).","Mint can probably do this. They probably have apps now and their online service has had charts for years.","For any android device you can try: Daily Expense Manager - to track your expenses and a host of other apps to suit your specific needs.","CashBase has a web app, an iPhone app and an Android app, all sync'ed up. It doesn't integrate with banks automatically, but you can import bank statements as CSV. Disclaimer: I'm CashBase's founder.","Mint has worked fairly well for tracking budgets and expenses, but I use GnuCash to plug in the holes. It offers MSFT$ like registers; the ability to track cash expenses, assets, and liabilities; and the option to track individual investment transactions. I also use GnuCash reports for my taxes since it gives a clearer picture of my finances than Mint does.","I generally concur with your sentiments. mint.com has 'hack me' written all over it. I know of two major open source tools for accounting: GNUCash and LedgerSMB. I use GNUCash, which comes close to meeting your needs: The 2.4 series introduced SQL DB support; mysql, postgres and sqlite are all supported. I migrated to sqlite to see how the schema looked and ran, the conclusion was that it runs fine but writing direct sql queries is probably beyond me. I may move it to postgres in the future, just so I can write some decent reports. Note that while it uses HTML for reporting, there is no no web frontend. It still requires a client, and is not multi-user safe. But it's probably about the closest to what you what that still falls under the heading of 'personal finance'. A fork of SQL Ledger, this is postgreSQL only but does have a web frontend. All the open source finance webapps I've found are designed for small to medium busineses. I believe it should meet your needs, though I've never used it. It might be overkill and difficult to use for your limited purposes though. I know one or two people in the regional LUG use LedgerSMB, but I really don't need invoicing and paystubs.","GnuCash—Great for the meticulous who want to know every detail of their finances. Pros: Cons:","www.mint.com is a very good web site that can upload your financial data from your bank and analyze it for you. Security concerns seem to have been addressed reassuringly.","I have been using Acemony http://www.mechcad.net/products/acemoney/ for a couple of years now and extremely happy with it. Very simple and intuitive to use. The best part is - life-long free upgrades","\"What you are describing sounds a lot like the way we handle our household budget. This is possible, but quite difficult to do with an Excel spreadsheet. It is much easier to do with dedicated budgeting software designed for this purpose. When choosing personal budgeting software, I've found that the available packages fall in two broad categories: Some packages take what I would call a proactive approach: You enter in your bank account balances, and assign your money into spending categories. When you deposit your paycheck, you do the same thing: you add this money to your spending categories. Then when you spend money, you assign it to a spending category, and the software keeps track of your category balances. At any time, you can see both your bank balances and your spending category balances. If you need to spend money in a category that doesn't have any more money, you'll need to move money from a different category into that one. This approach is sometimes called the envelope system, because it resembles a digital version of putting your cash into different envelopes with different purposes. A few examples of software in this category are You Need a Budget (YNAB), Mvelopes, and EveryDollar. Other packages take more of a reactive approach: You don't bother assigning a job to the money already in your bank account. Instead, you just enter your monthly income and put together a spending plan. As you spend money, you assign the transactions to a spending category, and at the end of the month, you can see what you actually spent vs. what your plan was, and try to adjust your next budget accordingly. Software that takes this approach includes Quicken and Mint.com. I use and recommend the proactive approach, and it sounds from your question like this is the approach that you are looking for. I've used several different budgeting software packages, and my personal recommendation is for YNAB, the software that we currently use. I don't want this post to sound too much like a commercial, but I believe it will do everything you are looking for. One of the great things about the proactive approach, in my opinion, is how credit card accounts are handled. Since your spending category balances only include real money actually sitting in an account (not projected income for the month), when you spend money out of a category with your credit card, the software deducts the money from the spending category immediately, as it is already spent. The credit card balance goes negative. When the credit card bill comes and you pay it, this is handled in the software as an account transfer from your checking account to your credit card account. The money in the checking account is already set aside for the purpose of paying your credit card bill. Dedicated budgeting software generally has a reconcile feature that makes verifying your bank statements very easy. You just enter the date of your bank statement and the balance, and then the software shows you a list of the transactions that fall in those dates. You can check each one against the transactions on the statement, editing the ones that aren't right and adding any that are missing from the software. After everything checks out, the software marks the transactions as verified, so you can easily see what has cleared and what hasn't. Let me give you an example to clarify, in response to your comment. This example is specific to YNAB, but other software using the same approach would work in a similar way. Let's say that you have a checking account and a credit card account. Your checking account, named CHECKING, has $2,000 in it currently. Your credit card currently has nothing charged on it, because you've just paid your bill and haven't used it yet this billing period. YNAB reports the balance of your credit card account (we'll call this account CREDITCARD), as $0. Every dollar in CHECKING is assigned to a category. For example, you've got $200 in \"\"groceries\"\", $100 in \"\"fast food\"\", $300 in \"\"rent\"\", $50 in \"\"phone\"\", $500 in \"\"emergency fund\"\", etc. If you add up the balance of all of your categories, you'll get $2,000. Let's say that you've written a check to the grocery store for $100. When you enter this in YNAB, you tell it the name of the store, the account that you paid with (CHECKING), and the category that the expense belongs to (groceries). The \"\"groceries\"\" category balance will go down from $200 to $100, and the CHECKING account balance will go down from $2,000 to $1,900. Now, let's say that you've spent $10 on fast food with your credit card. When you enter this in YNAB, you tell it the name of the restaurant, the account that you paid with (CREDITCARD), and the category that the expense belongs to (fast food). YNAB will lower the \"\"fast food\"\" category balance from $100 to $90, and your CREDITCARD account balance will go from $0 to $-10. At this point, if you add up all the category balances, you'll get $1,890. And if you add up your account balances, you'll also get $1,890, because CHECKING has $1,900 and CREDITCARD has $-10. If you get your checking account bank statement at this time, the account balance of $1,900 should match the statement and you'll see the payment to the grocery store, assuming the check has cleared. And if the credit card bill comes now, you'll see the fast food purchase and the balance of $-10. When you write a check to pay this credit card bill, you enter this in YNAB as an account transfer of $10 from CHECKING to CREDITCARD. This transfer does not affect any of your category balances; they remain the same. But now your CHECKING account balance is down to $1,890, and CREDITCARD is back to $0. This works just as well whether you have one checking account and one credit card, or 2 checking accounts, 2 savings accounts, and 3 credit cards. When you want to spend some money, you look at your category balance. If there is money in there, then the money is available to spend somewhere in one of your accounts. Then you pick an account you want to pay with, and, looking at the account balance, if there isn't enough money in that account to pay it, you just need to move some money from another account into that one, or pick a different account. When you pay for an expense with a credit card, the money gets deducted from the category balances immediately, and is no longer available to spend on something else.\"","I'm not directly affiliated with the company (I work for one of the add-on partners) but I can wholeheartedly recommend Xero for both personal and business finances. Their basis is to make accounting simple and clean, without sacrificing any of the power behind having the figures there in the first place.","There isn't one. I haven't been very happy with anything I've tried, commercial or open source. I've used Quicken for a while and been fairly happy with the user experience, but I hate the idea of their sunset policy (forced upgrades) and using proprietary format for the data files. Note that I wouldn't mind using proprietary and/or commercial software if it used a format that allowed me to easily migrate to another application. And no, QIF/OFX/CSV doesn't count. What I've found works well for me is to use Mint.com for pulling transactions from my accounts and categorizing them. I then export the transaction history as a CSV file and convert it to QIF/OFX using csv2ofx, and then import the resulting file into GNUCash. The hardest part is using categories (Mint.com) and accounts (GnuCash) properly. Not perfect by any means, but certainly better than manually exporting transactions from each account.","\"We're in much the same boat as you. We do make use of the transaction download feature of our software, but we don't let it auto-enter the amounts. We use the downloaded transactions to make entering our receipts easier. We each take responsibility for entering our own transactions, and then I go through and download bills, reconcile statements and such. I'm the numbers person in our house, so it's easier for me to take care of this stuff. We have all of our bills on auto-pay so that we don't have to worry about payments not getting made if we don't have time to get to our banking tasks on time. I try to set aside time on Saturday afternoon while my kids have their \"\"screen time\"\", or I'll do it in the evening after the kids are in bed. This year, my wife has been much busier and hasn't had as much time to keep up with her data entry, so we've been doing less well at keeping up with things. Something we're considering (and this might work for you as well) is to use the envelope system for the categories where we're most in danger of over-spending. This way. we would have an easy way to see if we'd overspent a category even if we were behind on our data entry. If you're not familiar with the envelope system, respond here and I'll explain it further.\"","Let an app do it for you, group items and see where you spend your money. One example: https://www.tinkapp.com/en/ Should provide a starting point for showing income vs expenses.","Whether or not I trust them depends entirely on the personal finance application. In the cases of Mint and Quicken, I would trust both. Always make sure to do plenty of research before submitting any personal information to any source.","I have also tried Mvelopes in the past, and my experiences match yours. I currently use the desktop version of YNAB:You Need a Budget (YNAB 4), and I like it much better. Where we failed after a while with Mvelopes, we are succeeding with YNAB, and have been now for the last 3.5 years. I don't want this to sound like a commercial for YNAB (I will give important caveats about YNAB later), but here is why I believe we have done better now with YNAB than before with Mvelopes. I hope that these reasons will be useful to you when you are evaluating your next options. As you said, we also found Mvelopes' interface to be slow and glitchy. YNAB 4 is a desktop app (with synching capabilities) that we found to be much quicker and easier to work with than Mvelopes' Flash-based interface. (That was 4 years ago; hopefully Mvelopes has redone their interface since then.) We also struggled with Mvelopes' connection with our banks. With YNAB 4, there is no connection to the bank: everything has to be entered manually. I initially thought this might be worse, but for us it has been better. I can either enter transactions as they happen on the mobile app, or I can hold on to receipts and enter them every day or two in the evening, categorizing as I go. We always have an up-to-date picture of our finances, and we don't have to mess with trying to match up downloaded transactions that have been screwed up, duplicated, or are missing. We aren't really using YNAB much differently than we were using Mvelopes, but we have learned a few tricks that I think have contributed to our success. One of the things we do differently is that I don't obsess about the cash accounts too much. Cash accounts, for us, are the hardest to keep track of, because most of our cash transactions don't have a receipt: we are paying a friend or family member for something, or leaving a tip, or something like that which we forget about when it comes time to enter into the software. As a result, the cash account balances get off. I periodically enter a correcting transaction to get the balances right, and have a budget category specifically for this that we have to put money in for these unknown transactions. Fortunately for us, our cash spending is a small percent of our total spending (we usually pay with a credit card) so this bit of untracked spending isn't that big of a concern. With YNAB, the current month's budget is right in front of you as soon as you open up the app, which makes it easy to adjust your budget during the month, if necessary. With Mvelopes (at least how their app worked 4 years ago), the budget was somewhat hidden after you funded your budget categories, and it was a bit of a pain to move money around between categories. The ability to adjust your budget in the middle of the month is crucial; if you don't do that, you'll get frustrated the first time you find that you don't have enough money in a category for something you need. YNAB makes it very easy to move money around inside your budget. That having been said, you need to be aware that the current version of YNAB is not a desktop application but a web-based app. YNAB 4, the old desktop version which we have been using, is officially unsupported as of the end of 2016. However, I see that it is still available for sale, if you are interested in it, the YNAB4 help site is still up, and the mobile app you would need to work with it on your phone (called YNAB Classic) is still in the app store. As I said, the current YNAB is now a web app, complete with automatic downloading of transactions from your bank. I have no experience with it (other than playing around with it a little), and so I can't tell you how quick the interface is or how well the auto-downloading of transactions works. As an alternative, another web-based solution is EveryDollar, from Dave Ramsey's company. (I have never tried it.) The advantage of this one is that it is free if you choose not to link it to your banks; the automatic downloading of transactions is a paid feature. I wrote an answer a couple of years ago in which I describe two different approaches that budgeting software packages tend to take. I'm not familiar with Buxfer, so I don't know which approach it takes, but perhaps that answer will help you evaluate all of your software options. On the behavior side of things, besides the relaxing of the cash accounting I mentioned above, we also involve my wife a little less in the budgeting process than we used to. (This is by her choice!) I am the one who enters all the transactions into the software (she hands me all her receipts), I reconcile the accounts at the end of the month, and I set the budget for the next month. We have been doing this long enough now that she knows what the budget is, and we only need to discuss it if we want to do something different with the budget than we have been doing in the past. She has the YNAB app on her phone and can see where we are at with all of our budget categories.","\"Unfortunately I don't think any of the online personal finance applications will do what you're asking. Most (if not all) online person finance software uses a combination of partnerships with the banks themselves and \"\"screen scraping\"\" to import your data. This simplifies things for the user but is typically limited to whenever the service was activated. Online personal finance software is still relatively young and doesn't offer the depth available in a desktop application (yet). If you are unwilling to part with historical data you spent years accumulating you are better off with a desktop application. Online Personal Finance Software Pros Cons Desktop Personal Finance Software Pros Cons In my humble opinion the personal finance software industry really needs a hybrid approach. A desktop application that is synchronized with a website. Offering the stability and tools of a desktop application with the availability of a web application.\"","I use Banktivity. It's very much not free, but it automatically downloads all my bank and credit card activity and has excellent reporting options.","You might check out Thrive. They're almost a carbon copy of Mint from the last I checked, but with some additional and (I think) more useful metrics. For instance, they seemed to help more to plan for future expenses in addition to keeping tabs on individual budgets the way Mint does. Everything is automated in the same way as Mint, though I'm not sure their breadth is as far-reaching now since Mint was bought out by Intuit. Nevertheless, whenever I've had a question on Thrive, I shoot it to the devs and I get a very personal and courteous response within the day. So it depends on what you're looking for: Mint can almost guarantee any US bank will be accessible through their site, however Thrive will work much harder to gain your favor.","I use GNUCash. It's a bit more like Quickbooks than plain Quicken, but it's not all that complicated. Probably the most difficult part is understanding the idea of income accounts. Benefits: For short term planning, I use scheduled transactions. If I'm spending more than I have, it'll show up here. Every paycheck and dollar spent or invested is recorded with the exact date I anticipate it will happen, 30 days in advance. If that would overdraw my checking account, the Future Minimum Balance field will go negative and red. This lets me move float to higher interest savings and retirement funds, and avoids overdraft fees or other mishaps. By looking 30 days ahead in detail, I have enough time to transfer from illiquid assets. For longer term planning, I keep a spreadsheet around that plans out annual expenses. If I'm spending more than I earn, it shows up here. I estimate everything: expenses, savings, taxes, and income. I need this because I have a lot of expenses that are far less frequent than monthly or paycheck-ly. The beauty of it is that once I've got it in place, I can duplicate the sheet and consider tweaks for say taking a new job or moving, or even just changing an insurance plan (probably less relevant for those with access to NHS). Especially when moving to take a new job, it's not as straightforward as comparing salaries, and thus having a document for the status quo to start from lets you focus on the parts that changed.","I recently made the switch to keeping track of my finance (Because I found an app that does almost everything for me). Before, my situation was fairly simple: I was unable to come up with a clear picture of how much I was spending vs saving (altho I had a rough idea). Now I here is what it changes: What I can do now: Is it useful ? Since I don't actually need to save more than I do (I am already saving 60-75% of my income), 1) isn't important. Since I don't have any visibility on my personal situation within a few years, 2) and 3) are not important. Conclusion: Since I don't actually spend any time building theses informations I am happy to use this app. It's kind of fun. If I did'nt had that tool... It would be a waste of time for me. Depends on your situation ? Nb: the app is Moneytree. Works only in Japan."],"string":"[\n \"\\\"On mint, you can create your own tags for transactions. So, you could create a tag called \\\"\\\"reviewed\\\"\\\" and tag each transaction as reviewed once you review it. I've done something similar to this called \\\"\\\"reimbursable expense\\\"\\\" to tag which purchases I made on behalf of someone else who is going to pay me back.\\\"\",\n \"\\\"Otto, I totally agree with you. That feature would be awesome addition to mint. Have you thought of adding Custom tag called \\\"\\\"reviewed\\\"\\\" and just mark that to the transaction. Ved\\\"\",\n \"I use mint.com for tracking my finances. It works on mobile phones, tablets, and in a browser. If you don't mind the initial hassle of putting in the credentials you use to access your account online, you'll find that you're able to build a comprehensive picture of the state of your finances relatively quickly. It does a great job of separating the various types of financial transactions you engage in, and also lets you customize those classifications with tags. It's ad-supported, so there's no out-of-pocket cost to you, and it doesn't preclude you from using the personal finance software you already have on your phone.\",\n \"Update: I am now using another app called toshl and I am very satisfied with it. In fact, I am a paying customer. It is web based, but it has clients for iPhone, Android and Windows Phone as well. Another one, I tried is YNAB. Did you consider trying an online app? I am using Wesabe and I am happy with it. I found it much better these web-based ones because I can access my data from anywhere.\",\n \"I would investigate mint.com further. Plenty of people have written off using them because Intuit purchased them, but that seems like cutting of your nose to spite your face. I think mint.com is worth it for its Trends functionality alone, not to mention its automatic categorization of your purchases, reminders when bills are due, notifications of increased credit card interest rates, and overdraft notices. I don't think mint.com schedules bills & deposits, but it tracks stocks & mutual fund investments and compares your portfolio returns against Dow Jones, S&P 500, or NASDAQ if you wish. I'm not sure I see the advantage of manual transaction entry, but you can add cash or check transactions manually. As I mentioned earlier, automated categorization is a great feature. In addition, you can tag certain transactions as reimbursable or tax-related. If the primary feature you're interested in is stock quotes, maybe something like Yahoo Finance or Google Finance will be enough.\",\n \"Mint.com is a web app with an iPhone (and Android) app. Also, You Need A Budget appears to support all three.\",\n \"The best solution I've been able to find for this is MoneyWiz, where both are logged into the same sync account.\",\n \"Try Cha-Ching from MidnightApps or Moneywell I did not used neither of them for an extended period of time, but I heard the Moneywell is nice.\",\n \"Some to manage day to day expenses, bills, and to save money. I already a system in place for investments and retirement. I was just wanting to know if there was a good app to help with these things instead of having to use a pen and paper to figure this stuff out when I am on the go away from my computer.\",\n \"My Finances is a personal finance app for iPhone and iPad. The app uses iCloud to sync the data between your devices if you want to. Otherwise the data is only local and won't be synced to any server. Spoiler: I'm the developer and my opinion may be biased.\",\n \"You Need A Budget may be what you're looking for. It is focused on budgeting your expenses in advance, and looking forward instead of backward. (Disclosure: I am currently doing some development work for You Need A Budget.)\",\n \"I like You Need A Budget (YNAB) Pros: Cons:\",\n \"\\\"I ended up with YNAB. It worked quite well, and I highly recommend it. It does cost money, but I found it saved me far more than its cost in the first month alone, since I saved between $500 and $1000. And it's flexible; when you overspend on something you can flex your budget, rather than it breaking and you give up in frustration. Dropbox support has recently been added, \\\"\\\"cloudifying\\\"\\\" it and making it where the smartphone apps can be really useful. I use the iPhone app occasionally, having recently transitioned to an iPhone.\\\"\",\n \"\\\"I currently use Mint for this, which I see that you have already disqualified but not why you have disqualified it. Set \\\"\\\"budgets\\\"\\\" for how much you want to spend on what type of expense, and then be sure to assign expenses to a budget as they come in. Mint actually learns what expenses go to each budget and eventually does it automatically.\\\"\",\n \"Look up You Need A Budget...the methodology is really the key and the software is elegant and practical. It's not about tracking spending, it's about planning what your dollars are going to do. The application automates much of the budget planning and data entry as it remembers your input (and is totally customizable). If you follow their basic blueprint, you can spend just minutes a week. They offer free online classes too (love this). I do not have skin in their game but have been a fan since it was just a spreadsheet. And yes, they have a mobile app, which means you can enter transactions on the go with just a few taps and then have your data synced across the cloud or just across your network.\",\n \"Mint.com does all of that (except for the cash at hand).\",\n \"I would suggest that you try ClearCheckbook. It is kind of like Mint, but you can add and remove things (graphs, features, modules) to make it as simple or diverse as you need it to be. It should be a workable solution for simply tracking both income and expenses, yet it will also provide extra features as needed. There is a free option as well as a paid option with added features. I have not used ClearCheckbook before, but according to their features page it looks like you may have to upgrade to the paid option if you want to have complete tagging/custom field flexibility.\",\n \"http://www.mint.com attaches to all your accounts and lists all your transactions. I love it.\",\n \"\\\"While Googling answers for a similar personal dilemma I found Mvelopes. I already have a budget but was looking for a digital way for my husband and I to track our purchases so we know when we've \\\"\\\"used the envelope\\\"\\\". It's a free app.\\\"\",\n \"I had exactly the same need and I ended up using BillGuard and I like it. At the end of the day, it sends an alert where I need to review all the transactions - takes hardly 5seconds and I am on top of all transactions. From the last 1yr I have found 1 fraudulent and 2 duplicate charge using billguard. Didn't really save a ton of money but its useful to understand how you use your credit card. Don't work for or promoting the app, its just useful.\",\n \"I use MoneyStrands (formerly called Expensr), but mostly just to track expenses and look at reports on my spending habits. It has some really pretty charts, with the ability to drill down into categories and sub-categories, or graph monthly spending for any custom date range. It does a half-decent job of auto-categorizing the imported bank transactions, and you can set up additional rules for common vendors, but I still have to do some manual work after each import. It does a good job of integrating my credit cards, bank accounts, and I can even manually add cash transactions. It has some basic budgeting capabilities, but they're not very useful for someone who needs to carefully budget thier monthly spending. Another one I've heard about is mint.com, but it only supports American banks (last I heard, anyway).\",\n \"MoneyDashboard or XeroPersonal are similar sites to Mint.com MoneyDashboard is planning on releasing an Android App XeroPersonal is also in development of an Android App For more details about the differences between the two apps, see this Web App question\",\n \"+1 for YNAB. I used to use MS Money until it was decommissioned. I used that to historically record my spending and investing, and plot my net worth. Whilst YNAB will do that, it is actually geared towards forward planning much more so. In this area, it is fantastic. I like that there are mobile apps for it too.\",\n \"\\\"The answer is just close your eyes and ignore it (in your words). I'm right there with you, the amount of detail that I track in my personal finances would be called obscene by some people. But as you look at these features in any accounting application, you need to ask the question \\\"\\\"What does this information represent?\\\"\\\" In the case of your bank and credit card accounts, the reconciliation marker represents that you have received documentation from the issuing institution which you have verified against your accounts. Marking them off confirms that you have reviewed the information, and that you checked for errors. These markers exist on all transactions, whichever end of the splits you are looking at. When reviewing the Expense side of the transaction, it might make less sense to see these reconciliation markers, because as you stated, nobody receives documentation related to their expenses. However, if you itemized your expenses and kept a separate log of certain transactions (like a notebook where you track gasoline and/or mileage on your car), it might be useful to 'reconcile' your records once a month. Checking off individual transactions, and verifying a new 'balance' in terms of gas consumed or miles driven, would allow you to identify any inconsistencies in your records. Not everyone would find such an activity useful, thus the reconciliation markers are present everywhere but required nowhere.\\\"\",\n \"Not web-based, but both Moneydance and You Need A Budget allow this.\",\n \"Mint.com—Easy solution to provide insight into finances. Pros: Cons:\",\n \"\\\"You Need A Budget is a nice budgeting tool that works on the desktop. It is more focused on manual entry and budgeting over auto-downloading and categorizing. It does support downloading transactions from banks and then importing the transaction files. You mentioned having \\\"\\\"trust issues\\\"\\\" with a bank and this would be safe as you don't enter your credentials into the app. It also has a mobile app that works well. Not exactly what you are looking for, but it would work in India and be safe if you have an untrustworthy bank and it would allow you to import transactions.\\\"\",\n \"\\\"I use \\\"\\\"Money Manager Ex\\\"\\\" which is a Windows application I use on PC to log my transactions and for simple statistic. They have two versions, simple standlone application and self-hosted web app.\\\"\",\n \"For Mac it's definitely iFinance.\",\n \"You can try SplashMoney. It works on many platforms, including iPhone, iPod and Mac, but also Palm OS, Android, Blackberry and windows. I've been using it —since more than two years now— with my old Palm OS PDA and it works great. As I work mainly with Linux, I've tested very few times its synchronization with its desktop companion running on windows.\",\n \"\\\"Quicken. I am in the same situation. I've tried mint.com and switched back to Quicken because i want to know how much money i'll have in my accounts in 2 weeks, 4 weeks, etc. I have to admit though, quicken is getting worse and worse every year. Can't really say i \\\"\\\"recommend\\\"\\\" it.\\\"\",\n \"As far as I know theres no single tool that does all that well. You'll have to keep your investments separate from your daily expenses and money goals. There are a few tools everyone uses. I'm partial to budgeting apps. You can try ynab, everydollar, goodbudget. I wouldn't recommend mint as I personally don't trust my login info with a third party. I don't care who owns them. Just my opinion. I'm working on my own budgeting app. Ideally I'd like to include investments. But thats V2. If you'd like to keep updated on that let me know. Oh, what type of phone do you use?\",\n \"A desktop application that has the same features (although as already stated, nothing will be identical but if you are looking for functionality then certainly there will be) and pretty simple to use was Microsoft Money, however, Microsoft stopped supporting it with newer versions and while the existing versions will work, I still use mine, there will be no future updates. I like the interface, its simple to use and has all the features you want. They abandoned it in favor of Intuit's Quicken but personally I am not a fan of the Quicken interface. They still had a more extensive and probably too much for the average user application called Office Accounting, but they abandoned future updates and supports on that in favor of Intuit's Quickbooks. Again, I am not a fan of the interface but they are very feature rich including invoicing and payroll, again overkill for the average user. They still have the Small Business Accounting in the form of Microsoft Dynamics, but that is utterly overkill for personal use. I generally don't trust online or cloud based accounting solutions like Mint or even Quicken online because I don't trust my information security to some third party without knowing how they are securing it and what will happen to me if/when they are leaked due to breach. So I like to keep everything local to myself and that's a good move for you, you should do that. It seems at the moment the market standard without much competition is Quicken for personal use and Quickbooks for small business. I would recommend you start with Quicken and if your needs increase in the future, you can easily transfer into Quickbooks to scale up as they are fully compatible with each other. Check it out here and compare their products to see what works best for your needs.\",\n \"I use iBank for Mac to keep track of my expenses. I also use the iPhone version since they can sync over Wi-Fi and I can capture expenses right on the spot instead of trying to remember what I spent on when I turn on my laptop.\",\n \"Being new does not allow me yet to vote on your question, but what a good question it is. We share our opinion in separating finances in our very well going mariage. Currently I have found a sort of okay solution in two websites. These are http://www.yunoo.nl and http://www.moneytrackin.com/. You can actually tag spendings with multiple tags. I don't like the idea that the data is on a remote server, but since I have not found a proper local software solution, I just naively trust their promise that your data is save. Then again our financial situation is not that special.\",\n \"So far I am doing mint.com for a few minutes a couple of times a week, despite my security concerns, and that's working fairly well as practice until my job starts. I'm hoping to get my bank to allow up to date transaction download, and then I'm considering using YNAB once I start my job. I will update this as I go along.\",\n \"I used to use Quicken, but support for that has been suspended in the UK. I had started using Mvelopes, but support for that was suspended as well! What I use now is an IPhone app called IXpenseit to track my spending.\",\n \"I use http://moneydance.com/ it has Mac, Windows and Linux versions and works well for my needs.\",\n \"https://moneycenter.yodlee.com/ You can link your bank accounts, credit cards, trading accounts etc at Yodlee. These will be updated automatically if you share your username and password from your existing financial institutions. You also have the option of creating manual accounts. You will have to manually add/update transactions.\",\n \"If you're happy manually downloading transaction files from your bank and importing them into your desktop application, try You Need A Budget 4. It hits all three of your requirements. Here are the details about how to import from your bank I've been using YNAB for a few months now and am very impressed with it. It was cheap and it syncs to my mobile phone for on-the-go money management via Dropbox.\",\n \"Buxfer is a personal-finance web app which you might like. It's not open-source. But at least none of your complaints about financeworks.intuit.com apply to Buxfer. Buxfer offers a piece of software you can download to your own PC, called Firebux. This macro-recording software provides automation that helps you download statements and upload them to Buxfer. So you never have to give Buxfer any of your bank or brokerage usernames or passwords. Buxfer and Firebux are both free of charge. Wesabe, another personal-finance web app, also used to offer data-uploader software, but Wesabe has now gone out of business.\",\n \"We use YNAB to handle our household budget - their latest version allows cloud sync between Android/iOS devices and various desktop installs. I have the budget folder shared with my wife's Dropbox account so we both an view the budget, enter spending, and make changes.\",\n \"I love mint.com, it fulls in your information from all your accounts automatically, let's you know where you spend your money and what your net worth is.\",\n \"\\\"As I have said before on this site, I personally use Moneydance. They have Mac, Linux and Windows support, and recently added an iOS mobile version that syncs with the desktop. I have only used the Mac \\\"\\\"desktop\\\"\\\" version, and it seems to function well, but have not tried the other platforms, nor the iOS version. I have no company affiliation, but am a (mostly) happy user. :-)\\\"\",\n \"Money Dashboard and Love Money look like two best options out there now that Kublax closed their doors. Mint were making noises last year about spreading to UK/Canada, but I've not heard anything new about that.\",\n \"I use MoneyStrands.com to manage my spending. It's a lot like Mint, but provides support for more banks, and works with most Canadian financial institutions. I can't really compare them fairly though, since I didn't bother with Mint after learning that they don't care about Canadians. If your bank isn't supported by MoneyStrands, or you don't want to trust an online webiste with your account login, you can create accounts for manually uploaded files. It just means you have to log into your bank yourself, download the transactions as QFX, OFX, CSV or other supported formats, and then upload the files to the appropriate account in MoneyStrands. I love the expense tracking and reporting that MoneyStrands offers, but like Mint, their budgeting feature is seriously lacking. Fortunately I don't need to budget month-to-month, I just use it to see how much I spend on various categories, to help create annual budgets and decide how much I can invest or use for a vacation.\",\n \"Out Of The Dark OOTD is a budgeting and personal money management web app that does not require you to give out access to your bank accounts or even your personal identity. It's a great tool for people with no financial experience with features like Cash Put-Aside and the Credit Card Debt Terminator and it has tons of instant guides explaining how to use every feature. You can check it out at myootd.org.\",\n \"\\\"Yodlee and Mint are good solutions if you don't mind your personal financial information being stored \\\"\\\"in the cloud\\\"\\\". I do, so I use Quicken. Quicken stores whatever you give to it for as long as you want: so the only question is how to get the credit card transactions you want into it? All my financial institutions allow me to view my credit card statements for a year back, and download them in a form Quicken can read. So you can have a record of your transactions from a year ago right now, and in a year you will have two year's worth.\\\"\",\n \"I have been using bearsofts money app, both in mac and iOS. I think only down side with this apps is you need to buy them separately. http://ibearmoney.com/money-mac.html\",\n \"MoneyDance Is the way to go. I've been using it for years and it works well. It keeps getting better, and best of all, it's completely cross platform! Mac, Windows and linux!\",\n \"Mint.com is a fantastic free personal finance software that can assist you with managing your money, planning budgets and setting financial goals. I've found the features to be more than adequate with keeping me informed of my financial situation. The advantage with Mint over Microsoft Money is that all of your debit/credit transactions are automatically imported and categorized (imperfectly but good enough). Mint is capable of handling bank accounts, credit card accounts, loans, and assets (such as cars, houses, etc). The downsides are:\",\n \"Use buxfer.com. It's available in India and most of the features are free.\",\n \"\\\"I sort of do this with credit cards. I actually have 4 AMEX cards that I've accumulated over the years. Certain types of expenses go on each card (\\\"\\\"General expenses\\\"\\\", recurring bills, car-related and business-related) I use AMEX because they have pretty rich iPhone/Android applications to access your accounts and a rich set of alerts. So if we exceed our budget for gas, we get an email about it. Do whatever works for you, but you need to avoid the temptation to over-complicate.\\\"\",\n \"PocketSmith is another tool you might like to consider. No personal banking details are required, but you can upload your transactions in a variety of formats. Pocketsmith is interesting because it really focus on your future cash flow, and the main feature of the interface is around having a calendar(s) where you easily enter one off or repetitive expenses/income. http://www.pocketsmith.com/\",\n \"I haven't used it in years, but look at GnuCash. From the site, one bullet point under Feature Highlights:\",\n \"In your comment in response to this answer, you said that your biggest issue is oversight, which you can do by checking your online bank account regularly. Mint.com looks good but you're in Australia? Easy, check out getpocketbook.com. Using it and love it, helps a lot to track your tracking, and it's a god-send during tax time.\",\n \"I'm a big fan of buxfer.com\",\n \"As I mentioned in my comment, mint.com might work for you. The downsides are giving them access to all your accounts, and still having to manually enter transactions that are done in cash. If you are ok with those however, it can automate almost everything else for you.\",\n \"The short answer is that there are no great personal finance programs out there any more. In the past, I found Microsoft Money to be slick and feature rich but unfortunately it has been discontinued a few years ago. Your choices now are Quicken and Mint along with the several open-source programs that have been listed by others. In the past, I found the open source programs to be both clunky and not feature-complete for my every day use. It's possible they have improved significantly since I had last looked at them. The biggest limitation I saw with them is weakness of integration with financial service providers (banks, credit card companies, brokerage accounts, etc.) Let's start with Mint. Mint is a web-based tool (owned by the same company as Quicken) whose main feature is its ability to connect to nearly every financial institution you're likely to use. Mint aggregates that data for you and presents it on the homepage. This makes it very easy to see your net worth and changes to it over time, spending trends, track your progress on budgets and long-term goals, etc. Mint allows you to do all of this with little or no data entry. It has support for your investments but does not allow for deep analysis of them. Quicken is a desktop program. It is extremely feature rich in terms of supporting different types of accounts, transactions, reports, reconciliation, etc. One could use Quicken to do everything that I just described about Mint, but the power of Quicken is in its more manual features. For example, while Mint is centred on showing you your status, Quicken allows you to enter transactions in real-time (as you're writing a check, initiating a transfer, etc) and later reconciles them with data from your financial institutions. Link Mint, Quicken has good integration with financial companies so you can generally get away with as little or as much data entry as you want. For example, you can manually enter large checks and transfers (and later match to automatically-downloaded data) but allow small entries like credit card purchases to download automatically. Bottom line, if you're just looking to keep track of where you are at, try Mint. It's very simple and free. If you need more power and want to manage your finances on a more transactional level, try Quicken (though I believe they do not have a trial version, I don't understand why). The learning curve is steep although probably gentler than that of GnuCash. Last note on why Mint.com is free: it's the usual ad-supported model, plus Mint sells aggregated consumer behaviour reports to other institutions (since Mint has everyone's transactions, it can identify consumer trends). If you're not comfortable with that, or with the idea of giving a website passwords to all your financial accounts, you will find Quicken easier to accept. Hope this helps.\",\n \"I found that an application already exists which does virtually everything I want to do with a reasonable interface. Its called My Personal Index. It has allowed me to look at my asset allocation all in one place. I'll have to enter: The features which solve my problems above include: Note - This is related to an earlier post I made regarding dollar cost averaging and determining rate of returns. (I finally got off my duff and did something about it)\",\n \"I'm using iBank on my Mac here and that definitely supports different currencies and is also supposed to be able to track investments (I haven't used it to track investments yet, hence the 'supposed to' caveat).\",\n \"I have been using http://moneydance.com/ for several years now. Works pretty well for me. Another one is http://www.iggsoftware.com/ibank/ I have not used it other than a five minute play session. Looks more mac-ish than Moneydance, but that's all I know.\",\n \"Perhaps you should use your own tracking software, such as GnuCash, Quicken, Mint, or even Excel. The latter would work given you say you're manually putting in your transactions. There's lots of pre-done spreadsheets for tracking investments if you look around. I'm hoping that a web search gets you help on migrating transaction data, but I've yet to run into any tools to do the export and import beyond a manual effort. Then again, I haven't checked for this lately. Not sure about your other questions, but I'd recommend you edit the question to only contain what you're asking about in the subject.\",\n \"\\\"There are some tools that might help you. For example, I have an \\\"\\\"Expense It\\\"\\\" application on my iPhone, where I can type in a purchase while still at the cashier, the idea is to track expenses on a trip, but the implementation will suit your needs perfectly. Keeping slips is a way to go too, but I personally don't like that because I'm a messy person and after a couple of days all the receipts are gone. If you can keep track of tons of slips - you can just do that.\\\"\",\n \"Mint.com does a pretty good job at this, for a free service, but it's mostly for personal finance. It looks at all of your transactions and tries to categorize them, and also allows you to create your own categories and filters. For example, when I started using it, it imported the last three months of my transactions and detected all of my 'coffee house' transactions. This is how I learned that I was spending about $90 a month going to Starbucks, rather than the $30 I had estimated. I know it's not a 'system' like an accounting outfit might use, but most accounting offices I've worked with have had their own home-brewed system.\",\n \"In all honesty, the best solution I've come across is Microsoft's now defunct Money.\",\n \"http://www.Mvelopes.com Mvelopes is envelope-style budgeting in an online application. I've tried all of the other applications and I choose to pay for this one for the following reasons:\",\n \"MoneyStrands is a site very similar to Mint, but does not force you to link bank accounts. You can create manual accounts and use all features of the site without linking to banks.\",\n \"I use KMyMoney in Linux. They distribute a Mac version too. Plus, it is free!\",\n \"CashBase has a web app, an iPhone app and an Android app, all sync'ed up. It doesn't integrate with banks automatically, but you can import bank statements as CSV. Disclosure: Filip is CashBase's founder.\",\n \"CashBase has a web app, an iPhone app and an Android app, all sync'ed up. It doesn't integrate with banks automatically, but you can import bank statements as CSV. Disclosure: Filip is CashBase's founder.\",\n \"\\\"We use mint for just that. We have a \\\"\\\"shared\\\"\\\" account. We each have the mobile app and share the same pin for the application (not our phones -- you can set a pin in the settings on the application). Thus we each share a login to the site, where we have setup all of our accounts. In the \\\"\\\"Your Profile\\\"\\\" link at the top of the page, you may select the Email & Alerts option. From here you may add a second e-mail account. This way if you go over a budget or have a bill upcoming each of you will get a notification. We have setup budgeting through the web site, and either of us can modify the budget via logging in.\\\"\",\n \"\\\"I'm currently using You Need A Budget for this. It lets you track spending my category and \\\"\\\"save\\\"\\\" money in particular accounts from month to month. They also have some strong opinions about how one should manage one's cashflow, so check it out to see if it'll work for you. It's neither web-based nor free, but the licensing terms are very reasonable.\\\"\",\n \"I like using Mint.com to track my expenses. It makes it very easy to watch my budget and monitor my spending.\",\n \"They have recently launched an iphone app 'Billguard' in UK which does accounts aggregation which is similiar to mint.com. You can also use try 'Ontrees' iphone app which is another account aggregation software. I am using Yodlee Money center Website for past 4 years which support lot of bank internationally including all major UK banks and creditcards.\",\n \"\\\"My wife and I have been ridiculously happy with YNAB. It's not \\\"\\\"online,\\\"\\\" but syncs across our phones & computers using Dropbox. It supposedly supports different locales and currencies, but I have never needed to try that out.\\\"\",\n \"If you would like to use linux I suggest you to use KMyMoney http://kmymoney2.sourceforge.net/ It is based on gnucash but it is easier to use IMO\",\n \"Google Portfolio does the job: https://www.google.com/finance/portfolio You can add transaction data, view fundamentals and much more.\",\n \"\\\"I've tried Mint, and I've tried Quicken. Now, I think Quicken is an annoying, crashy little piece of software, but it is also quite capable; overall I think it has the features you want. You can enter your bills, broken down by category, in advance. You can enter your paychecks, broken down by category (gross income, federal income tax, state income tax, social security, SDI, transfers to tax-protected 401(k) account, etc) in advance. You can enter in your stock trades and it can tell you how much you'll need to end up paying in capital gains taxes. You can even enter in your stock option vesting schedule in advance (it's a royal pain because you can't go back and change anything without deleting everything, but you can do it). It'll forecast your bank account balance in all of your bank accounts in advance with a shiny chart. It'll even model your loans, if you set it up right. I didn't do too much with the \\\"\\\"budgeting\\\"\\\" tools per se, but the account-balances-daily features sound like the closest thing to what you're looking for that's likely to exist. The only thing that's a trifle tricky is that transfers from one account to another may take multiple days (hello, ACH) and you'll have to decide whether to record them at departure or arrival.\\\"\",\n \"Yodlee will also work. I asked a similar question (and provided answers) here. Thrive, so far, is the best in my opinion. Their tech support is top notch and their UI is far superior to Yodlee's (which provides the backend for Mint).\",\n \"Mint can probably do this. They probably have apps now and their online service has had charts for years.\",\n \"For any android device you can try: Daily Expense Manager - to track your expenses and a host of other apps to suit your specific needs.\",\n \"CashBase has a web app, an iPhone app and an Android app, all sync'ed up. It doesn't integrate with banks automatically, but you can import bank statements as CSV. Disclaimer: I'm CashBase's founder.\",\n \"Mint has worked fairly well for tracking budgets and expenses, but I use GnuCash to plug in the holes. It offers MSFT$ like registers; the ability to track cash expenses, assets, and liabilities; and the option to track individual investment transactions. I also use GnuCash reports for my taxes since it gives a clearer picture of my finances than Mint does.\",\n \"I generally concur with your sentiments. mint.com has 'hack me' written all over it. I know of two major open source tools for accounting: GNUCash and LedgerSMB. I use GNUCash, which comes close to meeting your needs: The 2.4 series introduced SQL DB support; mysql, postgres and sqlite are all supported. I migrated to sqlite to see how the schema looked and ran, the conclusion was that it runs fine but writing direct sql queries is probably beyond me. I may move it to postgres in the future, just so I can write some decent reports. Note that while it uses HTML for reporting, there is no no web frontend. It still requires a client, and is not multi-user safe. But it's probably about the closest to what you what that still falls under the heading of 'personal finance'. A fork of SQL Ledger, this is postgreSQL only but does have a web frontend. All the open source finance webapps I've found are designed for small to medium busineses. I believe it should meet your needs, though I've never used it. It might be overkill and difficult to use for your limited purposes though. I know one or two people in the regional LUG use LedgerSMB, but I really don't need invoicing and paystubs.\",\n \"GnuCash—Great for the meticulous who want to know every detail of their finances. Pros: Cons:\",\n \"www.mint.com is a very good web site that can upload your financial data from your bank and analyze it for you. Security concerns seem to have been addressed reassuringly.\",\n \"I have been using Acemony http://www.mechcad.net/products/acemoney/ for a couple of years now and extremely happy with it. Very simple and intuitive to use. The best part is - life-long free upgrades\",\n \"\\\"What you are describing sounds a lot like the way we handle our household budget. This is possible, but quite difficult to do with an Excel spreadsheet. It is much easier to do with dedicated budgeting software designed for this purpose. When choosing personal budgeting software, I've found that the available packages fall in two broad categories: Some packages take what I would call a proactive approach: You enter in your bank account balances, and assign your money into spending categories. When you deposit your paycheck, you do the same thing: you add this money to your spending categories. Then when you spend money, you assign it to a spending category, and the software keeps track of your category balances. At any time, you can see both your bank balances and your spending category balances. If you need to spend money in a category that doesn't have any more money, you'll need to move money from a different category into that one. This approach is sometimes called the envelope system, because it resembles a digital version of putting your cash into different envelopes with different purposes. A few examples of software in this category are You Need a Budget (YNAB), Mvelopes, and EveryDollar. Other packages take more of a reactive approach: You don't bother assigning a job to the money already in your bank account. Instead, you just enter your monthly income and put together a spending plan. As you spend money, you assign the transactions to a spending category, and at the end of the month, you can see what you actually spent vs. what your plan was, and try to adjust your next budget accordingly. Software that takes this approach includes Quicken and Mint.com. I use and recommend the proactive approach, and it sounds from your question like this is the approach that you are looking for. I've used several different budgeting software packages, and my personal recommendation is for YNAB, the software that we currently use. I don't want this post to sound too much like a commercial, but I believe it will do everything you are looking for. One of the great things about the proactive approach, in my opinion, is how credit card accounts are handled. Since your spending category balances only include real money actually sitting in an account (not projected income for the month), when you spend money out of a category with your credit card, the software deducts the money from the spending category immediately, as it is already spent. The credit card balance goes negative. When the credit card bill comes and you pay it, this is handled in the software as an account transfer from your checking account to your credit card account. The money in the checking account is already set aside for the purpose of paying your credit card bill. Dedicated budgeting software generally has a reconcile feature that makes verifying your bank statements very easy. You just enter the date of your bank statement and the balance, and then the software shows you a list of the transactions that fall in those dates. You can check each one against the transactions on the statement, editing the ones that aren't right and adding any that are missing from the software. After everything checks out, the software marks the transactions as verified, so you can easily see what has cleared and what hasn't. Let me give you an example to clarify, in response to your comment. This example is specific to YNAB, but other software using the same approach would work in a similar way. Let's say that you have a checking account and a credit card account. Your checking account, named CHECKING, has $2,000 in it currently. Your credit card currently has nothing charged on it, because you've just paid your bill and haven't used it yet this billing period. YNAB reports the balance of your credit card account (we'll call this account CREDITCARD), as $0. Every dollar in CHECKING is assigned to a category. For example, you've got $200 in \\\"\\\"groceries\\\"\\\", $100 in \\\"\\\"fast food\\\"\\\", $300 in \\\"\\\"rent\\\"\\\", $50 in \\\"\\\"phone\\\"\\\", $500 in \\\"\\\"emergency fund\\\"\\\", etc. If you add up the balance of all of your categories, you'll get $2,000. Let's say that you've written a check to the grocery store for $100. When you enter this in YNAB, you tell it the name of the store, the account that you paid with (CHECKING), and the category that the expense belongs to (groceries). The \\\"\\\"groceries\\\"\\\" category balance will go down from $200 to $100, and the CHECKING account balance will go down from $2,000 to $1,900. Now, let's say that you've spent $10 on fast food with your credit card. When you enter this in YNAB, you tell it the name of the restaurant, the account that you paid with (CREDITCARD), and the category that the expense belongs to (fast food). YNAB will lower the \\\"\\\"fast food\\\"\\\" category balance from $100 to $90, and your CREDITCARD account balance will go from $0 to $-10. At this point, if you add up all the category balances, you'll get $1,890. And if you add up your account balances, you'll also get $1,890, because CHECKING has $1,900 and CREDITCARD has $-10. If you get your checking account bank statement at this time, the account balance of $1,900 should match the statement and you'll see the payment to the grocery store, assuming the check has cleared. And if the credit card bill comes now, you'll see the fast food purchase and the balance of $-10. When you write a check to pay this credit card bill, you enter this in YNAB as an account transfer of $10 from CHECKING to CREDITCARD. This transfer does not affect any of your category balances; they remain the same. But now your CHECKING account balance is down to $1,890, and CREDITCARD is back to $0. This works just as well whether you have one checking account and one credit card, or 2 checking accounts, 2 savings accounts, and 3 credit cards. When you want to spend some money, you look at your category balance. If there is money in there, then the money is available to spend somewhere in one of your accounts. Then you pick an account you want to pay with, and, looking at the account balance, if there isn't enough money in that account to pay it, you just need to move some money from another account into that one, or pick a different account. When you pay for an expense with a credit card, the money gets deducted from the category balances immediately, and is no longer available to spend on something else.\\\"\",\n \"I'm not directly affiliated with the company (I work for one of the add-on partners) but I can wholeheartedly recommend Xero for both personal and business finances. Their basis is to make accounting simple and clean, without sacrificing any of the power behind having the figures there in the first place.\",\n \"There isn't one. I haven't been very happy with anything I've tried, commercial or open source. I've used Quicken for a while and been fairly happy with the user experience, but I hate the idea of their sunset policy (forced upgrades) and using proprietary format for the data files. Note that I wouldn't mind using proprietary and/or commercial software if it used a format that allowed me to easily migrate to another application. And no, QIF/OFX/CSV doesn't count. What I've found works well for me is to use Mint.com for pulling transactions from my accounts and categorizing them. I then export the transaction history as a CSV file and convert it to QIF/OFX using csv2ofx, and then import the resulting file into GNUCash. The hardest part is using categories (Mint.com) and accounts (GnuCash) properly. Not perfect by any means, but certainly better than manually exporting transactions from each account.\",\n \"\\\"We're in much the same boat as you. We do make use of the transaction download feature of our software, but we don't let it auto-enter the amounts. We use the downloaded transactions to make entering our receipts easier. We each take responsibility for entering our own transactions, and then I go through and download bills, reconcile statements and such. I'm the numbers person in our house, so it's easier for me to take care of this stuff. We have all of our bills on auto-pay so that we don't have to worry about payments not getting made if we don't have time to get to our banking tasks on time. I try to set aside time on Saturday afternoon while my kids have their \\\"\\\"screen time\\\"\\\", or I'll do it in the evening after the kids are in bed. This year, my wife has been much busier and hasn't had as much time to keep up with her data entry, so we've been doing less well at keeping up with things. Something we're considering (and this might work for you as well) is to use the envelope system for the categories where we're most in danger of over-spending. This way. we would have an easy way to see if we'd overspent a category even if we were behind on our data entry. If you're not familiar with the envelope system, respond here and I'll explain it further.\\\"\",\n \"Let an app do it for you, group items and see where you spend your money. One example: https://www.tinkapp.com/en/ Should provide a starting point for showing income vs expenses.\",\n \"Whether or not I trust them depends entirely on the personal finance application. In the cases of Mint and Quicken, I would trust both. Always make sure to do plenty of research before submitting any personal information to any source.\",\n \"I have also tried Mvelopes in the past, and my experiences match yours. I currently use the desktop version of YNAB:You Need a Budget (YNAB 4), and I like it much better. Where we failed after a while with Mvelopes, we are succeeding with YNAB, and have been now for the last 3.5 years. I don't want this to sound like a commercial for YNAB (I will give important caveats about YNAB later), but here is why I believe we have done better now with YNAB than before with Mvelopes. I hope that these reasons will be useful to you when you are evaluating your next options. As you said, we also found Mvelopes' interface to be slow and glitchy. YNAB 4 is a desktop app (with synching capabilities) that we found to be much quicker and easier to work with than Mvelopes' Flash-based interface. (That was 4 years ago; hopefully Mvelopes has redone their interface since then.) We also struggled with Mvelopes' connection with our banks. With YNAB 4, there is no connection to the bank: everything has to be entered manually. I initially thought this might be worse, but for us it has been better. I can either enter transactions as they happen on the mobile app, or I can hold on to receipts and enter them every day or two in the evening, categorizing as I go. We always have an up-to-date picture of our finances, and we don't have to mess with trying to match up downloaded transactions that have been screwed up, duplicated, or are missing. We aren't really using YNAB much differently than we were using Mvelopes, but we have learned a few tricks that I think have contributed to our success. One of the things we do differently is that I don't obsess about the cash accounts too much. Cash accounts, for us, are the hardest to keep track of, because most of our cash transactions don't have a receipt: we are paying a friend or family member for something, or leaving a tip, or something like that which we forget about when it comes time to enter into the software. As a result, the cash account balances get off. I periodically enter a correcting transaction to get the balances right, and have a budget category specifically for this that we have to put money in for these unknown transactions. Fortunately for us, our cash spending is a small percent of our total spending (we usually pay with a credit card) so this bit of untracked spending isn't that big of a concern. With YNAB, the current month's budget is right in front of you as soon as you open up the app, which makes it easy to adjust your budget during the month, if necessary. With Mvelopes (at least how their app worked 4 years ago), the budget was somewhat hidden after you funded your budget categories, and it was a bit of a pain to move money around between categories. The ability to adjust your budget in the middle of the month is crucial; if you don't do that, you'll get frustrated the first time you find that you don't have enough money in a category for something you need. YNAB makes it very easy to move money around inside your budget. That having been said, you need to be aware that the current version of YNAB is not a desktop application but a web-based app. YNAB 4, the old desktop version which we have been using, is officially unsupported as of the end of 2016. However, I see that it is still available for sale, if you are interested in it, the YNAB4 help site is still up, and the mobile app you would need to work with it on your phone (called YNAB Classic) is still in the app store. As I said, the current YNAB is now a web app, complete with automatic downloading of transactions from your bank. I have no experience with it (other than playing around with it a little), and so I can't tell you how quick the interface is or how well the auto-downloading of transactions works. As an alternative, another web-based solution is EveryDollar, from Dave Ramsey's company. (I have never tried it.) The advantage of this one is that it is free if you choose not to link it to your banks; the automatic downloading of transactions is a paid feature. I wrote an answer a couple of years ago in which I describe two different approaches that budgeting software packages tend to take. I'm not familiar with Buxfer, so I don't know which approach it takes, but perhaps that answer will help you evaluate all of your software options. On the behavior side of things, besides the relaxing of the cash accounting I mentioned above, we also involve my wife a little less in the budgeting process than we used to. (This is by her choice!) I am the one who enters all the transactions into the software (she hands me all her receipts), I reconcile the accounts at the end of the month, and I set the budget for the next month. We have been doing this long enough now that she knows what the budget is, and we only need to discuss it if we want to do something different with the budget than we have been doing in the past. She has the YNAB app on her phone and can see where we are at with all of our budget categories.\",\n \"\\\"Unfortunately I don't think any of the online personal finance applications will do what you're asking. Most (if not all) online person finance software uses a combination of partnerships with the banks themselves and \\\"\\\"screen scraping\\\"\\\" to import your data. This simplifies things for the user but is typically limited to whenever the service was activated. Online personal finance software is still relatively young and doesn't offer the depth available in a desktop application (yet). If you are unwilling to part with historical data you spent years accumulating you are better off with a desktop application. Online Personal Finance Software Pros Cons Desktop Personal Finance Software Pros Cons In my humble opinion the personal finance software industry really needs a hybrid approach. A desktop application that is synchronized with a website. Offering the stability and tools of a desktop application with the availability of a web application.\\\"\",\n \"I use Banktivity. It's very much not free, but it automatically downloads all my bank and credit card activity and has excellent reporting options.\",\n \"You might check out Thrive. They're almost a carbon copy of Mint from the last I checked, but with some additional and (I think) more useful metrics. For instance, they seemed to help more to plan for future expenses in addition to keeping tabs on individual budgets the way Mint does. Everything is automated in the same way as Mint, though I'm not sure their breadth is as far-reaching now since Mint was bought out by Intuit. Nevertheless, whenever I've had a question on Thrive, I shoot it to the devs and I get a very personal and courteous response within the day. So it depends on what you're looking for: Mint can almost guarantee any US bank will be accessible through their site, however Thrive will work much harder to gain your favor.\",\n \"I use GNUCash. It's a bit more like Quickbooks than plain Quicken, but it's not all that complicated. Probably the most difficult part is understanding the idea of income accounts. Benefits: For short term planning, I use scheduled transactions. If I'm spending more than I have, it'll show up here. Every paycheck and dollar spent or invested is recorded with the exact date I anticipate it will happen, 30 days in advance. If that would overdraw my checking account, the Future Minimum Balance field will go negative and red. This lets me move float to higher interest savings and retirement funds, and avoids overdraft fees or other mishaps. By looking 30 days ahead in detail, I have enough time to transfer from illiquid assets. For longer term planning, I keep a spreadsheet around that plans out annual expenses. If I'm spending more than I earn, it shows up here. I estimate everything: expenses, savings, taxes, and income. I need this because I have a lot of expenses that are far less frequent than monthly or paycheck-ly. The beauty of it is that once I've got it in place, I can duplicate the sheet and consider tweaks for say taking a new job or moving, or even just changing an insurance plan (probably less relevant for those with access to NHS). Especially when moving to take a new job, it's not as straightforward as comparing salaries, and thus having a document for the status quo to start from lets you focus on the parts that changed.\",\n \"I recently made the switch to keeping track of my finance (Because I found an app that does almost everything for me). Before, my situation was fairly simple: I was unable to come up with a clear picture of how much I was spending vs saving (altho I had a rough idea). Now I here is what it changes: What I can do now: Is it useful ? Since I don't actually need to save more than I do (I am already saving 60-75% of my income), 1) isn't important. Since I don't have any visibility on my personal situation within a few years, 2) and 3) are not important. Conclusion: Since I don't actually spend any time building theses informations I am happy to use this app. It's kind of fun. If I did'nt had that tool... It would be a waste of time for me. Depends on your situation ? Nb: the app is Moneytree. Works only in Japan.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["\"Otto, I totally agree with you. That feature would be awesome addition to mint. Have you thought of adding Custom tag called \"\"reviewed\"\" and just mark that to the transaction. Ved\"","\"On mint, you can create your own tags for transactions. So, you could create a tag called \"\"reviewed\"\" and tag each transaction as reviewed once you review it. I've done something similar to this called \"\"reimbursable expense\"\" to tag which purchases I made on behalf of someone else who is going to pay me back.\"","Not web-based, but both Moneydance and You Need A Budget allow this.","I had exactly the same need and I ended up using BillGuard and I like it. At the end of the day, it sends an alert where I need to review all the transactions - takes hardly 5seconds and I am on top of all transactions. From the last 1yr I have found 1 fraudulent and 2 duplicate charge using billguard. Didn't really save a ton of money but its useful to understand how you use your credit card. Don't work for or promoting the app, its just useful."],"string":"[\n \"\\\"Otto, I totally agree with you. That feature would be awesome addition to mint. Have you thought of adding Custom tag called \\\"\\\"reviewed\\\"\\\" and just mark that to the transaction. Ved\\\"\",\n \"\\\"On mint, you can create your own tags for transactions. So, you could create a tag called \\\"\\\"reviewed\\\"\\\" and tag each transaction as reviewed once you review it. I've done something similar to this called \\\"\\\"reimbursable expense\\\"\\\" to tag which purchases I made on behalf of someone else who is going to pay me back.\\\"\",\n \"Not web-based, but both Moneydance and You Need A Budget allow this.\",\n \"I had exactly the same need and I ended up using BillGuard and I like it. At the end of the day, it sends an alert where I need to review all the transactions - takes hardly 5seconds and I am on top of all transactions. From the last 1yr I have found 1 fraudulent and 2 duplicate charge using billguard. Didn't really save a ton of money but its useful to understand how you use your credit card. Don't work for or promoting the app, its just useful.\"\n]","isConversational":false}}},{"rowIdx":65,"cells":{"_id":{"kind":"string","value":"5343"},"query":{"kind":"string","value":"“International credit report” for French nationals?"},"gt_ids":{"kind":"list like","value":["2860"],"string":"[\n \"2860\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1],"string":"[\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["346166","50080","184365","118383","241349","79542","309864","2860","215138","501826","105140","259228","105199","420600","516789","557870","558388","204075","153922","453549","462965","18388","566153","18483","36625","240038","282067","402269","266358","66963","255393","509739","42611","361279","132743","450617","367641","499090","406965","191835","488609","242013","591454","516413","309199","275418","368484","249679","45387","248818","321196","248167","260623","320246","390461","319052","404304","307767","173163","533621","11082","510063","111466","530987","447303","304578","186606","351072","495028","289706","358651","288993","382284","304597","423809","267422","413368","531137","555101","203656","242611","118396","197526","244714","418195","106831","72589","85214","124699","573216","36833","334810","166627","519644","97329","241469","310748","521903","499180","329713"],"string":"[\n \"346166\",\n \"50080\",\n \"184365\",\n \"118383\",\n \"241349\",\n \"79542\",\n \"309864\",\n \"2860\",\n \"215138\",\n \"501826\",\n \"105140\",\n \"259228\",\n \"105199\",\n \"420600\",\n \"516789\",\n \"557870\",\n \"558388\",\n \"204075\",\n \"153922\",\n \"453549\",\n \"462965\",\n \"18388\",\n \"566153\",\n \"18483\",\n \"36625\",\n \"240038\",\n \"282067\",\n \"402269\",\n \"266358\",\n \"66963\",\n \"255393\",\n \"509739\",\n \"42611\",\n \"361279\",\n \"132743\",\n \"450617\",\n \"367641\",\n \"499090\",\n \"406965\",\n \"191835\",\n \"488609\",\n \"242013\",\n \"591454\",\n \"516413\",\n \"309199\",\n \"275418\",\n \"368484\",\n \"249679\",\n \"45387\",\n \"248818\",\n \"321196\",\n \"248167\",\n \"260623\",\n \"320246\",\n \"390461\",\n \"319052\",\n \"404304\",\n \"307767\",\n \"173163\",\n \"533621\",\n \"11082\",\n \"510063\",\n \"111466\",\n \"530987\",\n \"447303\",\n \"304578\",\n \"186606\",\n \"351072\",\n \"495028\",\n \"289706\",\n \"358651\",\n \"288993\",\n \"382284\",\n \"304597\",\n \"423809\",\n \"267422\",\n \"413368\",\n \"531137\",\n \"555101\",\n \"203656\",\n \"242611\",\n \"118396\",\n \"197526\",\n \"244714\",\n \"418195\",\n \"106831\",\n \"72589\",\n \"85214\",\n \"124699\",\n \"573216\",\n \"36833\",\n \"334810\",\n \"166627\",\n \"519644\",\n \"97329\",\n \"241469\",\n \"310748\",\n \"521903\",\n \"499180\",\n \"329713\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["Currently the credit history are not International but are local. Many countries don't have a concept of credit history yet. Having said that, if you are moving to US, depending on your history in your country, you can ask the same bank to provide you with a card and then start building history. For example in India I had a card with Citi Bank and when I moved to US for a short period, I was given a card based on my India Card, with equivalent credit in USD. If you are moving often internationally, it would make sense to Bank with a leading bank that provide services in geographies of your interest [Citi, HSBC, etc] and then in a new country approach these institutions to get you some starting credit for you to build a history.","Some countries in European Union are starting to implement credit history sharing, for example now history from polish bureau BIK and German Schufa are mutually available. Similar agreements are planned between polish BIK and bureaus in the Netherlands and United Kingdom.","\"It's not just that credit history is local; it's that it's a private business run for profit. The \"\"big three\"\" credit bureaus in the US are Experian, Equifax and Transunion. They collect information on debt usage and abuse from various companies in the US, and charge a fee to provide that information (and their judgement of you) to companies interested in offering you further credit. But there's nothing stopping a company from collecting international credit histories, or specialized credit histories either (for instance, there's a company called ChexSystems which focuses on retail purchase financing (mostly auto) and checking account abuse, while ignoring other types of lending). That being said, I don't know of any companies which currently collect international credit histories. Perhaps in Europe, with more nations in close geographic proximity, there would be, but not in North America.\"","It seems that your Organizers are not familiar with dealing transfers outside of Euro Zone. You are right IBAN is not used in India. A Bank in France can initiate an International Wire. There are few Banks that offer this online, for most one has to visit the Branch. See this https://expatriates.stackexchange.com/questions/2862/international-money-transfer-online-from-a-french-bank I am not aware of any other term used in France for International Wire, try explaining; Its also called BIC. It would help if you also provide your Correspondent Bank details [This will be a Bank in Europe]. This should be available on your Indian Bank's website.","It appears all you have to do is submit a form. It might be better if she submitted it herself instead of you doing it on her behalf. All natural persons (individuals) and non-natural persons (businesses) are entitled to access and inspect the data held on record about them in the Central Credit Information System (KHR).","Here are two different sources, one from an actual credit reporting agency, Experian. http://www.experian.com/assistance/sample-credit-report.html http://www.aie.org/manage-your-money/understand-credit/your-interactive-guide-to-credit-reports.cfm If what you want to see an actual real credit report, no one in their right mind is going to show you unless they are a close friend or relative.","Equifax has a Single Use offering for $20 for their own score or $30 for the three big guy's reports. I am a fan of Credit Karma which offers a free service that reflects the FICO score as good as any you'd pay for. Since each reporting agency can vary slightly, Credit Karma will have a score that's in the same range. And it's pretty much real time.","\"I'm not aware that any US bank has any way to access your credit rating in France (especially as you basically don't have one!). In the US, banks are not the only way to get finance for a home. In many regions, there are plenty of \"\"owner financed\"\" or \"\"Owner will carry\"\" homes. For these, the previous owner will provide a private mortgage for the balance if you have a large (25%+) downpayment. No strict lending rules, no fancy credit scoring systems, just a large enough downpayment so they know they'll get their money back if they have to foreclose. For the seller, it's a way to shift a house that is hard to sell plus get a regular income. Often this mortgage is for only 3-10 years, but that gives you the time to establish more credit and then refinance. Maybe the interest rate is a little higher also, but again it's just until you can refinance to something better (or sell other assets then pay the loan off quick). For new homes, the builders/developers may offer similar finance. For both owner-will-carry and developer finance, a large deposit will trump any credit rating concerns. There is usually a simplified foreclosure process, so they're not really taking much of a risk, so can afford to be flexible. Make sure the owner mortgage is via a title company, trust company, or escrow company, so that there's a third party involved to ensure each party lives up to their obligations.\"","I visited annualcreditreport.com to get my annual credit report. It is only the report, not the score or FICO score. This is the only outlet I know of that allows you to get your report for free, without a bunch of strings attached or crap to sign up for and cancel later. It was very easy. I was wary of putting in my private information, but how else can they possibly pull you up? Read the instructions carefully. You go to each bureau to fetch your report, and they dutifully give you a free report, but they push hard to try and sell you a score or a report service. It is easy to avoid these if you read carefully. Once you get a report, you have print it out or you can't see it again for another year. Each bureau has a different site, with different rules, and different identity checks to get in. Again, read the instructions and it isn't hard. Instead of printing, I just saved the page as HTML. You get one html file and a folder with all the images and other stuff. This suits me but you might like to print. After you get each report, you have to click a link to back to the annualcreditreport.com site. From there you go to the next bureau. Regarding a score. Everybody does it differently. Free Issac does FICO, but anybody who pulls your credit can generate a score however they like, so getting a score isn't anywhere near as important as making sure your report is accurate. You can use credit.com to simulate a score from one of the bureaus (I can't easily see which one at the moment). It is as easy as annualcreditreport.com and I have no issue getting a simulated score and report card.","As of 2014, this answer is deprecated. Read answer here for recent developments up to January 2015. You can get a free credit report yearly, but you don't get your credit score, just the content of your report. This is useful to make sure your credit history is correct, etc. To get that, visit annualcreditreport.com. Another site which will give you your score for free, really free with no strings attached, is creditkarma.com, which gives you your TransUnion credit score and full TransUnion credit report. The site is run by TransUnion and supported via advertising. At this point Equifax and Experian offer similar services via subscription, but not for free. Update 8/14/2015: CreditKarma now offers the Equifax information as part of their service.","By law, your wife can get her full Equifax credit report (sans-FICO score) instantly (once every 12 months) via https://www.annualcreditreport.com She can even get her FICO score with a 7-day free trial of Equifax Complete Premier.","If you can set up automatic payments (like direct debits in the UK) and you can be disciplined enough to not spend the money on something else then this can be a good way of building/improving your credit rating. Banks / Lenders like it when they see you have previously taken, and repaid, credit. This can help you get better finance deals etc. in the future. Update: as noted in the comments France had a different financial system and people do not have credit ratings, so this point isn't valid in France","I suggest you begin by double checking what kinds of credit products you have and to which credit bureaus your bank reports. Not all financial institutions report to all bureaus. For example, if your bank only reports your one and only line of credit to Experian, TransUnion still won't have a file on you. Also, some lines of credit such as being an authorized user on a credit card aren't tracked by all of the bureaus. The other thing to consider is the amount of time that your lines of credit have been open. You said it's been less than one year but if it's been less than six months you might try waiting six months to try requesting your reports. If none of the above solves your problem, I would respond to their letter exactly as they instruct you to. Send everything certified with return receipt, and get into the habit of saving all of these records. When you send your reply be sure to include all of the requested information, a brief summary of your issue, and a reference to their previous letter to you. If they don't respond to your letter or they aren't able to help you, try calling the credit bureaus directly to inquire about the problem. Usually the consumer phone lines are automated, so try the corporate or business contacts they list on their website. On a final note, never submit your information on any of the bureaus websites. By doing so you agree to binding arbitration agreements which limit your right to sue. Only communicate with the bureaus by mail or on rare occasions phone.","I get my credit scores from all three bureaus for free - no gimmick. I use a combination of banks that offer this service to get my scores. I wrote about this sometime back in my blog. For credit report, the only place to go is AnnualCreditReport.com. I space it out so that I get one every 4 months since there is a once a year restriction per bureau.","http://annualcreditreport.com/ That's the official site for getting your free yearly credit report (one free per year from each of the 3 reporting bureaus).","\"A credit card is a way to borrow money. That's all. Sometimes the loans are very small - $5 - and sometimes they are larger. You can have a credit card with a company (bank or whatever) that you have no other relationship with. They're not a property of a bank account, they are their own thing. The card you describe sounds exactly like a debit card here, and you can treat your Canadian debit card like your French credit card - you pay for things directly from your bank account, assuming the money is in there. In Canada, many small stores take debit but not credit, so do be sure to get a debit card and not only a credit card. Now as to your specific concerns. You aren't going to \"\"forget to make a wire.\"\" You're going to get a bill - perhaps a paper one, perhaps an email - and it will say \"\"here is everything you charged on your credit card this month\"\" along with a date, which will be perhaps 21 days from the statement date, not the date you used the card. Pay the entire balance (not just the minimum payment) by that date and you'll pay no interest. The bill date will be a specific date each month (eg the 23rd) so you can set yourself a reminder to check and pay your bill once a month. Building a credit history has value if you want to borrow a larger amount of money to buy a car or a house, or to start a business. Unlike the US, it doesn't really have an impact on things like getting a job. If you use your card for groceries, you use it enough, no worries. In 5 years it is nice to look back and see \"\"never paid late; mostly paid the entire amount each month; never went over limit; never went into collections\"\" and so on. In my experience you can tell they like you because they keep raising your limit without you asking them to. If you want to buy a $2500 item and your credit limit is $1500 you could prepay $1000 onto the credit card and then use it. Or you could tell the vendor you'd rather use your debit card. Or you could pay $1500 on the credit card and then rest with your debit card. Lots of options. In my experience once you get up to that kind of money they'd rather not use a credit card because of the merchant fees they pay.\"","As someone who spends a lot of time in France, I learned that many French banks will issue debit cards to US citizens, as an add-on feature to a bank account. The fees are not low. Societe Generale charges 8 Euros per month, Credit Agricole charges 30 Euros a year, BNP Paribas charges 12 Euros a month. I'm sure other banks will issue cards as well. You need to show 2 items proving US residence, such as a utility bill, plus a passport. They can open an account immediately, on that basis and it takes about 7-10 days to get your debit card.","You can contact the french agency for stock regulation and ask them : http://www.amf-france.org/","\"http://annualcreditreport.com gives you free access to your 3 credit bureau records. (Annual, not \"\"free\"\". The \"\"free\"\" guys will try to sell you something.)\"","Dunn & Bradstreet offers detailed credit reports on businesses. They are not cheap, but they appear to have information on RIOCAN.","Regardless, it doesn't indicate any financial stress or credit-related issues. Just because you are pissed off about the way the financial industry works, doesn't mean the banks are in poor shape. If France and Germany come crashing down, then you may have some evidence to back your point.","You should pull your credit report from all the credit reporting agencies annually to make sure only the accounts you know of are being reported.","The Government sponsored website will give you one free report from each of the 3 bureaus every year. No subscription or anything of the sort and no ding (that I've seen). Most people check it 3 times, every 4 months. http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre34.shtm","There's an excellent new service called SelfScore that offers US credit cards to international students. They work with students without a credit history and even without an SSN by using other qualifying factors such as major, financial resources in their home country, and employability upon graduation. Worth clarifying: it's neither a secured credit card nor a prepaid card. It's a proper US credit card with no annual fees and a relatively low APR designed to help students build US credit. The spending limit is relatively small but that probably doesn't matter for just building a credit history.","All banks allow online banking. HSBC is reputed the most international traditional one. That said, opening a bank account in a 100% online bank would get you to near 0 cost, and is probably the preferred option. Every online bank is very similar to each other, so I won't make any recommandation here. Exemples are ing-direct, boursorama, Fortuneo. I'm afraid none offer english service, and it might be difficult to get in line with a decent english speaker. All theses banks will likely offer a gold/premier mastercard/visa, so travelling will not be an issue. The fees should be <2% for foreign currencies (it vary slightly), and <3€ if you use the ATM in none euro ones.","\"In the United States, the Fair Credit Reporting Act allows companies to buy your credit information for \"\"legitimate business needs.\"\" The legitimate use of credit scores and credit reporting varies state to state, but like it or not, you can expect a lot more non-lending use of your credit information in the future. Companies and individuals use credit reports as an assessment of general behavior because, unfortunately, they work. You've seen the disclaimers about \"\"past performance…\"\", but unfortunately in this case… past performance really has been shown to be a pretty reliable indicator of future behavior. So…\"","Check with your bank. As of January, 2015, the following banks and credit unions are offering free credit-scores: Announced, in the pipeline: Source: Banks to offer FICO credit scores for free Personal Experience: I've been receiving free FICO score from my credit union for more than 6 months now. Advice: Most people have multiple bank/credit-union accounts. The FICO score will be the same whoever offers it. If none of your financial institutions offer you a free credit-score then you may opt for free services like creditkarma.com or other paid services. None of them are the widely used FICO scores, but they can be a good gauge of your credit standing. Please note that a credit-score is number summarizing your credit-report and should not be confused. In the news:","I can think of two services off the top of my head that offer free credit score information here in the UK. One being from one of the big three. No legal requirement to offer that service for free to consumers as far as I'm am aware There's probably other services too..","I would recommend you look at Credit Karma and assess your situation. The site is free and will offer a score similar to your FICO score enabling you to best judge when to apply. They advertise, like any web site, and will offer credit card signups, which is how they make money. Disclaimer - I am a blogger and have written about Credit Karma, but no payment from them. I've actually been out drinking with their marketing team, but that was it. Nice bunch.","Assuming you are asking about a credit score in the United States, the following applies. To find out your FICO score, navigate to AnnualCreditReport, the official site to help consumers receive their credit report from each of the three organizations providing these scores - Equifax, Experian, and TransUnion. You are - in many states - entitled to a free copy of your credit report from each of these organizations annually. This copy of your credit report will not contain your credit score from that organization. It will, however, contain information that goes into your credit score - the lines of credits on file, any delinquencies reported, etc. If you decide you would like to pay for your credit score from each bureau, you will have the option to receive this information while getting your credit report, but you will have to pay a nominal fee for it. Remember that each of the 3 bureaus gives you a different score. Averaging your 3 scores should give you a good idea of your FICO score. Note that your report is far more important than your score - once you know that, you know if you're in a good place or not. These other questions are so close that they might even be considered duplicates, and provide other suggestions for how to check your score. As a warning, don't trust the many ads out there saying you can get your score for free. Only AnnualCreditReport is considered a safe place for entering the very personal information required to get a score. The FTC backs this up.","Sorry. As far as I know, a person's SS is the only way to establish credit. This is the first thing they ask whenever you apply for any service in the US.","I came to US as an international student several years ago, and I have also experienced the same situation like most of the international students in finding ways to build credit history. Below I list out some possible approaches you may want to consider: I. Get a student job at campus (recommended) I think the best way is to get a student job in university, say a teaching assistant or student helper. In this case, you can be provided with a social security number and start to build your own credit history. II. Get credit card You can also consider to apply for a credit card. There are indeed some financial institutions that can provide credit cards for international students with no or limited credit scores requirement, say Discover and Bank of America. However, it is relatively hard to get approved, simply because hey may put more restriction in other aspects. For example, you may be required to keep sufficient bank balance above several thousand dollars during a period of time, or you should prove that you have relatives with citizenship in US who can provide your financial aid if needed. III. Apply for a loan (recommended) Getting a loan product is another alternative to get out of this difficult situation, but most of people don’t realize that. There are some FinTech start-ups in United States that specifically focus on international students’ loan financing. One representative example is Westbon (Westbon ), an online lending company that specializes in providing car loan for international students with no SSN or credit history. I once used their loan product to finance a Honda Accord, and Westbon reported my loan transaction records to US credit bureau during my repayment process. Later when I officially got my SSN number, I found my credit history has been automatically synchronized and I don’t have to start from all over again. It never be an easy journey for international students to build credit history in United States. What approach you should make really depends on you own situation. I hope the information above can be useful and good luck for your credit journey!","Check with your bank. As of January, 2015, the following banks and credit unions are offering free credit-scores: Announced, in the pipeline: Source: Banks to offer FICO credit scores for free Personal Experience: I've been receiving free FICO score from my credit union for more than 6 months now. Advice: Most people have multiple bank/credit-union accounts. The FICO score will be the same whoever offers it. If none of your financial institutions offer you a free credit-score then you may opt for free services like creditkarma.com or other paid services. Please note that a credit-score is number summarizing your credit-report and should not be confused. In the news:","France is one country where cheques are common. More an more people are using credit cards for typical store payments and wire transfers are slowly gaining traction. There are several cases where cheques come handy: Sure, all these cases could ultimately be resolved with a wire transfer. Sometimes it is just simpler/faster to mail a piece of paper. This said, I believe than in 1à years from now even France will go cheque-less.","\"The major bureaus use the Fair Isaac scoring model, for the most part. Here's an excerpt from a web site (Versions of the FICO scoring model) to explain: One of the first things a newcomer to this board learns is the difference between FICO and FAKO scores. FAKO refers to the non-FICO scores offered by various companies. FAKO scores have little value since few of them are used by lenders and they do not match closely to FICO scores. But even when you stick with FICO scores, confusion can ensue because FICO scores have many different editions, versions, and variations. On a single day, a consumer could theoretically have dozens of different FICO scores, depending on which version and credit agency is used to produce the score. This post provides a summary of the various FICO versions. Please offer any corrections or updates, and they will be edited in. The FICO scoring model with its familiar range of 300 to 850 was first introduced in 1989. Since then, FICO has released five major revisions: 1995, 1998, 2004, 2008, and 2014. Each \"\"edition\"\" uses a different formula and produces a different score. When a new FICO edition is released, many lenders continue using an older version for years before \"\"upgrading.\"\" The 1995 revision is no longer in common use, but later editions are still used by lenders. Most FICO editions are commonly known by the year of introduction: FICO 98, FICO 04, and FICO 08 (although FICO now calls it FICO Score 8, without the zero). The most recent edition is FICO Score 9 introduced in 2014. As of 2014, FICO Score 8 is the most commonly used. However, most mortgage lenders use FICO 04 for Equifax and Transunion, and FICO 98 for Experian. In addition to the \"\"classic\"\" version, FICO offers \"\"Industry Option\"\" versions customized for auto loans, credit cards, installment loans, personal finance loans, and insurance. These have a score range of 250 to 900, so the scores are not fully comparable with \"\"classic\"\" versions. As of 2015, Auto and Bankcard scores are available from myFICO as described here. Citibank provides the Equifax FICO 8 Bankcard score free each month to credit cards holders. Each credit agency (Transunion, Equifax, and Experian) uses a customized version of each FICO edition. As a result, a consumer's FICO scores from each agency may differ even when all credit information is identical among the agencies. Because there are many FICO versions, when a score is received, it's helpful to know which version it is. If a lender provides a credit score, ask for details such as which credit agency was used, which FICO edition was used, and whether the score is an Industry Option version. The lender may not always be willing or able to provide the answers, but it doesn't hurt to ask. Transunion Official name: FICO Risk Score Classic 98 Common name: TU-98 Available directly to consumers: No Real-world score range: 336 to 843 (as shown on page 16 of this Transunion document) Equifax Official name: Equifax FICO Score 4 (also known as Equifax Beacon 96) Common name: EQ-98 This version appears to be seldom used, but a poster reported it used on a mortgage application in 2014. Available directly to consumers: No Experian Official name: Experian FICO Score 2 (also known as Experian FICO Risk Model v2) Common name: EX-98 Available directly to consumers: from myFICO when buying a product that includes all 19 available scores (as described here). Some credit unions such as PSECU provide it free each month to members. Real-world score range: 320 to 844 (as shown on this Experian document) Most mortgage lenders use FICO 04 for Equifax and Transunion, and FICO 98 for Experian. All three scores will normally be pulled and the middle score (not the average) will be used by the lender. Transunion Official name: Transunion FICO Score 4 (also known as Transunion FICO Risk Score Classic 04) Common name: TU-04 Available directly to consumers: from myFICO as described here. Real-world score range: 309 to 839 (as shown on page 16 of this Transunion document) Equifax Official name: Equifax FICO Score 5 (also known as Equifax Beacon 5.0) Common name: EQ-04 Available directly to consumers: from myFICO as described here. Also available from Equifax when buying FICO score (as a one-time purchase with the \"\"Score Power\"\" product available here, or as part of credit monitoring available here). Some credit unions such as DCU provide it free each month to members. Real-world score range: 334 to 818 Experian Official name: Experian FICO Score 3 (also known as Experian FICO Risk Model v3) Common name: EX-04 Available directly to consumers: from myFICO when buying a product that includes all 19 available scores (as described here). Real-world score range: 325 to 850 (as shown on this Experian document) Transunion Official name: Transunion FICO Score 8 (also known as Transunion FICO 8 Risk Score or FICO Risk Score Classic 08) Common name: TU-08 Available directly to consumers: from myFICO as described here. Some credit card issuers such as Discover, Barclays, and Walmart provides it free each month. Real-world score range: 341 to 850 (as shown on page 15 of this Transunion document) Equifax Official name: Equifax FICO Score 8 (also known as Equifax Beacon 09) Common name: EQ-08 Available directly to consumers: from myFICO as described here. Real-world score range: 300 to 850 Experian Official name: Experian FICO Score 8 (also known as Experian FICO Risk Model v8) Common name: EX-08 Available directly to consumers: from myFICO as described here. Real-world score range: 316 to 850 (as shown on this Experian document) How FICO Score 8 differs from previous versions is explained here. In May 2014, a poster named android01 received 850 scores from all three credit agencies, as described in this post. In June 2014, a poster named fused received 850 scores from all three credit agencies, as described in this post. This 2011 press release describes a study of FICO Score 8 scores. From a sample of 250,000 credit reports, it found 0.02% had a score of 850, or about 1 out of every 5000 persons. In 2014, FICO announced a new version called FICO Score 9. More info here. As of February 2016, the score is now available directly to consumers, as described here. This New York Times article says FICO 9 includes two important changes: unpaid debts that result in collection actions will no longer have a negative effect on a score if the debt has been paid. unpaid medical debts will have less negative effect on scores. In 2001, FICO released a new scoring model called NextGen. It is claimed to be an improvement over \"\"classic\"\" FICO models because it tracks more factors. But it has failed to catch on with lenders because its score range of 150 to 950 is incompatible with the familiar 300 to 850 range, requiring lenders to recalculate cutoff scores and revise many rules and policies. Only a small percentage of lenders reportedly use NextGen. Transunion Official name: Precision Available directly to consumers: No Equifax Official name: Pinnacle Available directly to consumers: In 2014, Pentagon Federal Credit Union (PenFed) began to provide this score free to its credit card holders, as discussed in this post. Experian Official name: FICO Advanced Risk Score Available directly to consumers: No I included all of this to make the point that there are many variations of the scoring models, and all of them are customized to one degree or another by each of the major bureaus as a means of giving their models more credibility, as far as they're concerned. To your question about coming up with a \"\"fair\"\" scoring model, can you propose what makes current scoring models unfair? I think it's a safe assumption to make that the financial community has already had a substantial amount of input into how the current scoring models work. To think otherwise implies that the credit bureaus are just kinda \"\"winging it\"\" with whatever they think is best. Their models are designed to give their client creditors the best scoring model possible based on what those creditors have stated is important to them. There isn't a unified single scoring model out there, and the bureaus definitely won't share the details of their modifications. You can always come up with your own custom model, but how it compares to what's widely used, that's anyone's guess. I hope this helps. Good luck!\"","With over 1 billion records our instant nationwide search system allows for unlimited look ups and accesses data from multiple databases to compile the most comprehensive reports available. Start your FREE 7 Day trial today!","See the first item in the list: For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus Note that there's no option for you to limit this sharing. Credit reporting is the business need of the bank, not of the bureaus. They rely on them and others reporting it in their main business: lending. While you can limit the sharing with other banks/insurance companies/service providers so that you won't get offers from them based on the data shared by the bank, you cannot limit the credit reports themselves.","I agree. I pulled my free reports (by going to ftc.gov first to get link to the truly free reports). The Equifax data was out of date. Didn't bother trying to correct it. As I don't need any new credit lines, I just put a security freeze on my records at all four bureaus. Makes my data virtually worthless to any potential identity their, and (best of all) nearly worthless to the bureaus.","\"Dan's link (he deleted his answer, BTW) is fine, it showed the components of the score FICO offers. Each input has data behind it, a bell curve of the behaviors and risk of the person behind it. For example, we've discussed utilization many time here. The ideal utilization is not 0%, but 1-19%. This does not mean paying interest, or carrying charges from month to month. Say I had just one card with a $10K limit. I'd want to be sure I never ran a bill above $2000. If I did, I'd see a slight drop in my score, and next month, it would go back to normal. In my case, I have enough available credit that going over 20% is rare, and if it happened, I'd pay the bill down before the bill was issued, just make a mid-cycle payment. FICO decided that those who go over 20% have a higher risk of default. And it gets higher as it goes up. Same with every aspect of the score's components. You are comparing US to non US use. In the US, it seems far more common to use our cards. In my family's case, we use very little cash, and run most of our spending through our cards. As far as The David is concerned, one should separate those who carry a balance from those who pay in full. The pay in full users are better off for their habits and responsible card use. In the US, it's not easy to rent a car or book a hotel with no card. Cards offer a cash rebate that adds up fast, and purchase protection from fraudulent vendors. They also offer extended warranty coverage. The David, and others, claim that \"\"studies prove those using cards spend 10-15% more than cash buyers.\"\" This is a proven fact from scientific studies. Only they don't exist. The best I've seen proves that college kids given a $20 bill spend more carefully than those given a $20 credit card. This doesn't extrapolate to a family budget, and never will. But that quote has a way of being repeated as fact. Yes, it's non-sense, thank you for reading and quoting my blog, I recognize the quote. The report also shows accounts that have gone to collection. An electric bill isn't a regularly reported item, it's assumed your lights are on. But if you stop paying the bill and they send your account to a collection agency, you'll see it hit your report. In response to the comment below - Journal of Experimental Psychology: Applied article titled Monopoly Money: The Effect of Payment Coupling and Form on Spending Behavior runs 13 pages but on the first page offers \"\"Do consumers spend differently when using one payment mode relative to another mode? For example, do consumers spend more when they receive $50 in the form of a gift card than in the form of cash? If indeed they do, then why? This research addresses these issues.\"\" $50? A $50 gift card is a nuisance, I try to use it up within hours of getting one. As I stated above, the behavior of a person with such a card doesn't scale to a many-thousand-per-month budget. Such articles, in my opinion, are nonsense, proving nothing. Unfortunately, this is a bit of a tangent to the original question, and if I put up a stand-alone \"\"Is it a fact that people spend more if using a card than cash?\"\" the question would result in being closed as one that's seeking opinions, not facts.\"","Neal Neilinger previously worked at Dresdner, BNP Paribas (BNPP.PA) and NSM Capital Management.Calyon, a unit of France's biggest retail bank Credit Agricole (CAGR.PA), said Neilinger will report to Jim Siracusa, global head of debt and credit markets, and would have a global role within its debt and credit markets product line.","Generally, if you have a loan, you have a credit score. But since you have never had a loan before, then it is likely that you do not have a credit score. You should not be worried if you aren't planning on applying for credit and/or loans. If you are wanting to purchase a house, car, or even just having a credit card, you should work on obtaining a secure loan so then you can establish history. Most of the time you have to pay to view your credit score. By law, you can obtain a free copy of your credit report, which it sounds like you have at annualcreditreport.com, which only shows your payment history, but in order to view your credit score, you generally have to pay for it.",">A 2012 study by the Federal Trade Commission found that about 20 percent of consumers who were asked to review their reports discovered an error that was fixed after they disputed it, and more than 10 percent found an error significant enough to affect their credit score. Monitoring also alerts you if an application has been placed for a new account in your name. >Equifax, Experian, and TransUnion have turned monitoring into a business, charging as much as $25 a month for “premium” services that include reports from all three companies. In other words, pay us protection money because we're bad at our jobs and your reputation is suffering as a result of our sloppy work.","Is it possible her husband obtained a card from a bank overseas? Unlikely. A Bank overseas generally will not issue such cards. Is that why she can't find it on the credit report? The data sent to Credit Bureau is periodic and not immediate. At times it may take a month or more for a Bank to start reporting the new card to Credit Agencies. If he got the card recently, she has a freeze in effect and no bank can issue a card in her name without her approval. Possibly timing issue. i.e. the freeze was put after card company pulled the report and approved. It may take sometime to dispatch a new card. So it could be that her husband applied for this card previously before the freeze was put in place.","\"Monitoring all three is good practice. That way, you will be notified as soon as there is a hard pull on any of your reports. Most financial institutions only pull one of your three reports to open new credit. If you're only monitoring one, you won't be alerted to new accounts until about a month passes and they are reported to all three. By this time, restoration will be much, much more difficult than if you called the financial institution immediately to say \"\"that's not me!\"\"\"","It is very important to note the strength and reputation of the country's regulatory agency. You cannot assume the standards of say the SEC (US Securities and Exchange Commission) apply in other countries (even well-developed ones). These regulations force companies to disclose certain information to inform and protect investors. The standards for such practices vary internationally.","\"I agree it seems insulting to pay the credit reporting agencies, but I have no choice at this point. I'd rather pay the small fee per each of them, to freeze accounts, then have thousands stolen. My husband has excellent credit and also we have a rather substantial savings account, that his info could give \"\"would be\"\" identity thieves access too. This whole situation is messed up, and unacceptable! For one, no one EVER gave these credit reporting agencies access to their info, it's just a \"\"give in\"\" being born here. And for two, no one asked for their information to be kept in insecure databases. Higher standards need to be implemented. My poor 72 year old father is outraged when I tell him his info is online. He says, \"\"I don't use the Internet!!! How can it be there?!?!\"\" (Poor old soul lol) I just said, \"\"well dad, it is, whether you use it, or like it or not. It's there\"\" I just need to make sure we are taking the correct steps to protect ourselves. Honestly, I am not finance savvy. This is why I'm asking here in this sub. Thank you for responding, and thanks to anyone else who may offer any advice. I'm not terrified, but I'm definitely miffed...\"","\"It appears that you already know this, but FICO credit scores (as controlled by Fair Isaac Corporation) are the real official credit scores, and FICO takes a cut on their production no matter which of the 3 major credit bureaus calculates the official score (all using slightly different methods). Be careful when obtaining a score for making a big decision that it is a FICO score, because relatively few lenders will lend based on a non-FICO score. That said, some non-FICO scores are easy to obtain and can be roughly translated to an approximation of your score. Barclays US/ Juniper Bank credit cards offer a free Transunion \"\"TransRisk\"\"(TM) score. The TransRisk score is a 900 point scale, while the FICO score is an 850 point scale. This is a simple ratio and you can calculate your approximate FICO score by the formula:\"","\"> Although there are numerous countries that welcome investors Yes, I hear that when one's welcome has been worn out in Japan, Thailand is the place to be. Ladyboys, sluts and frauds, Bangkok is your one-stop shop to get f*cked in more ways than one! >potentially profitable options The key question being, \"\"Profitable for whom?\"\" >Another factor which can help you make up your mind when searching for a good service provider is experience. Yes, Richard Cayne's clients have undoubtedly amassed \"\"extensive experience\"\"; not much money, but experience in spades. Suggest \"\"consulting with them on a wide array\"\" of these experiences first. > Richard Cayne Meyer the manager of the world renowned Meyer International Ah yes, renowned indeed -for spamming and scamming, for cash and dash.\"","The best we can do in the Equifax case is freeze (not lock) our credit files at the credit bureaus and use the free annual credit reports via FTC.GOV. Unfreezing is an extra step one would have to go through before opening a new credit line, renting a new place, getting utilities hooked up, etc. But the freeze (versus the lock) essentially makes one’s data worthless to the credit reporting agencies.","Before this agreement, every country had laws on tax-ability of income [including Global incomes]. Quite a few individuals would get away and did not report such income and pay tax if due. In fact quite a few Multi National banks actively created products that helped US Citizens to move money outside and skip reporting. U.S. in order to step up this effort enacted FATCA; essentially as a compliance mechanism, it started with US Head quartered banks operating globally and made reporting mandatory. It stepped up efforts with other countries to ensure foreign banks also enhance reporting of US nationals. See the benefits, quite a few countries joined up together and as part of OECD, came up with CRS. Thus going forward it will enable tax authorities in member countries to exchange financials impacting taxes. The scope is also for Companies / Organization as quite a few Companies hide away income outside the domiciled country. I have heard a rumor that due to the upcoming Common Reporting Standard the details of bank accounts, including all transactions, will be reported all around the industrialized world and want to know if this is true. Yes this is true and it is not a rumor. The exact amount of data and type of data will be agreed between member countries. However a broad framework exists on what needs to be shared. Is it really true that the Common Reporting Standard is going to cause things like this to happen? It is very important to note; There is no new Tax Legislation. Even without FATCA/CRS, a honest tax payer was bound to pay legitimate tax due as per the existing tax provisions of the country along with the provisions of DTAA [Dual Tax Avoidance Agreements]. The CRS only enables monitoring and compliance. So if one was already tax compliant, there is nothing to worry. If one was exploiting the loop hole; how will authorities know ... well this will be curbed going forward. As a note, Canada and Australia will start CRS reporting from 2018.","\"I think it's worth pointing out explicitly that the biggest difference between a credit card (US/Canada) and a debit card (like your French carte de crédit) is that with a credit card, it's entirely possible to not pay the bill or to pay only the \"\"minimum payment\"\" when asked. This results in you owing significantly more money due to interest, which can snowball into higher and higher levels of debt, and end up getting rapidly out of control. This is the reason why you should ALWAYS pay off the ENTIRE balance every month, as attested to in the other answers; it's not uncommon to find people in the US with thousands of dollars of debt they can't pay off from misuse of credit cards.\"","France taxes capital / dividend gains accrued in France. Hence you will not be able to reduce this liability. India does have a Double Tax Avoidance Treaty with France and you can claim relief for the tax paid in France.","It looks like from their response, they would like you to send a copy of your social security card. Your drivers license or passport will not help verify your social security number. Another option you could try is to get your credit report from one of the other credit bureaus. You should be able to choose from Experian, Trans Union, and Equifax all on annualcreditreport.gov","I believe the answer is that to protect yourself it is good to get credit protection so you will be notified when new credit is taken in your name. Also, you can use http://www.annualcreditreport.com/ to look at your credit report. HINT: While you do that, and while you are in the TransUnion report, you will have the option to DISPUTE adverse items. I always suggest that people dispute everything adverse. That puts the onus on the other parties to produce evidence to TransUnion within 30 days attesting to the validity of the adverse item. You would be surprised how many will simply drop off your report after doing that. Everybody should do this Here is a direct address for TransUnion: https://dispute.transunion.com/dp/dispute/landingPage.jsp ==> Once the disputes are finalized, the results get communicated to the other two bureaus. It is amazing how well it works. It can raise your credit score significantly. It really helps to watch your credit report yourself, and also to get whatever protection is offered that may help protect you against others opening new accounts in your name.","\"To answer the heart of your question, it would be illegal for any credit bureau or creditor to somehow \"\"penalize\"\" you just for trying to make sure that what's being reported about you is accurate. That's why the Fair Credit Reporting Act exists -- that's where the rights (and mechanisms) come from for letting you learn about and request accurate reporting of your credit history. Every creditor is responsible for reporting its own data to the bureaus, using the format provided by those bureaus for doing so. A creditor may not provide all of the information that can be reported, and it may not report information in as timely a manner as it could or should (e.g., payments made may not show up for weeks or even months after they were made, etc.). The bottom line is that the credit bureaus are not arbiters of the data they report. They simply report. They don't draw conclusions, they don't make decisions on what data to report. If a creditor provides data that is within the parameters of what the bureaus ask to be provided, then the bureaus report precisely that -- nothing more, nothing less. If there is an inaccuracy or mistake on your report, it is the fault (and responsibility) of the creditor, and it is therefore up to the creditor to correct it once it has been brought to their attention. Federal laws spell out the process that the bureau has to comply with when you file a dispute, and there are strict standards requiring the creditor to promptly verify valid information or remove anything which is not correct. The credit bureaus are simply automated clearinghouses for the information provided by the creditors who choose to subscribe to each bureau's system. A creditor can choose which (or none) of the bureaus they wish to report to, which is why some accounts show on one bureau's report on you but not another's. What I caution is, just because a credit bureaus reports on your credit doesn't mean they have anything to do with the accuracy or detail of what is being reported. That's up to the creditors.\"","The SCHUFA explicitly says on their website that their scoring system is a secret. However, if your goal is to be credit-worthy for example to get financing for a house or a car or whatever, just pay any loans and your credit card back on time and you'll be fine. There is no need to build a credit history. I just got a mortgage on a new house without any real credit history. I have one credit card which I only use on vacations because some countries don't take my debit card, and I always put money on it before I use it, so I've technically never borrowed money from a bank at all. My banker looked at my SCHUFA with me and we saw that there was nothing in there except for the credit card, which has a 500€ limit and if I maxed it out, the monthly interest would be 6,80€ so he added that 6,80€ to my expenses calculation and that was it. If you're having trouble getting a loan and you don't know why, you can ask the SCHUFA for the data they have on you and you can correct any mistakes they might have made. Sometimes, especially when you have the same full name and birth date as somebody else, the SCHUFA does get things mixed up and you have to sort it out.","I've been in the UK for 3.5 years, and I have the same problem: I can't get even a small loan from my bank; no one will give me a phone contract; it's a nightmare. I have 8 direct debits, I pay everything on time and I earn decent money, but still my credit is seen as no good. I have got a few ideas for you though: Good luck!","I would like to establish credit history - have heard it's useful to gain employment and makes it easy to rent an apartment? Higher credit scores will make it easier with landlords, that's true. As to employment - they do background checks, which means that they usually won't like bad things, but won't care about the good things or no things (they'll know you're a foreigner anyway). Is it safe to assume that this implies I have no history whatsoever? Probably, but you can verify pulling through AnnualCreditReport, don't go around giving your personal information everywhere. Is taking out a secured loan the only way for me? No, but it's one of the easiest. Better would be getting a secured Credit Card, not loan. For loan you'll have to pay interest, for a credit card (assuming you pay off all your purchases immediately) you will only pay the credit card fees (for secured credit cards they charge ~$20-100 yearly fees, so do shop around, the prices vary a lot!). If you're using it wisely, after a year it will be converted to a regular credit card and the collateral will be returned to you with interest (which is actually very competitive, last I heard it was around 2%, twice as much as the online savings accounts). As to a secured loan - you'll be paying 4% to CU for your own money. Doesn't make any sense at all for me. For credit cards you'll at least get some value for your money - convenience, additional fraud protection, etc. The end result will be the same. Usually the credit starts to build up after ~6-12 months (that's why after a year your secured CC will be converted to a regular one). Make sure to have the statement balance in the range of 10-30% of your credit limit, to get the best results. Would it make much better sense to wait till I get a job (then I would have a fixed monthly salary and can apply for a regular CC directly) You can apply, but you'll probably be rejected. As I mentioned in another answer elsewhere, the system in the US is such that you're unable to get credit if you don't already have credit. Which is kindof a magic circle, which you can break with the secured credit card as the least costly solution.","Get a credit card is NOT the answer. The reason people have a bad (or no) credit score is often because they're new to the country, have just turned 18, have previously fallen into arrears or are just bad with money. Getting a credit card is risky because, if you don't stay on top of your payments, it'll just damage your score even more. Now, it sounds like I hate credit cards - but I don't, and they do have their benefits. But avoid them if possible because they can be more hassle than they're worth (ie, paying the credit back on-time, cancelling accounts when the interest comes in, moving money in and out of accounts). It's risky borrowing money from anywhere whether it's a payday lender, a bank, a credit card, etc., so use them as a last resort. If you've got your own income then that's amazing!, try not to live outside of your means and your credit score will look after (and increase) itself. It takes time to build a good credit score, but always make sure you pay the people you owe on time and the full amount. I'd stick with paying your phone provider (and any other direct debits you have setup) and avoid getting a credit card. I'd recommend Noddle to keep track of your credit score and read their FAQ on how to help build it. Unlike Experian, it's free forever so not quite as detailed... but Noddle are owned by CallCredit - one of the biggest Credit Reference Agencies in the UK so they should have the latest information on yourself. In conclusion, if you already have financial commitments like a mobile phone bill, gym membership, store cards, anything that gets paid monthly by direct debit... your credit score will increase (provided you pay the full-amount on time). I hope this helps. PS. I don't work for any of the companies here, but I've been working in the finance sector (more specifically, short-term loans) for 3+ years now.","\"Credit scores are not such a big deal in Canada as they are in the US and even some European countries. One reason for this: the Social Insurance Number (SIN number) isn't used for so many purposes like the Social Security Number (SSN) in the US. The SIN number isn't even required to get credit (but with some exceptions it is needed to open an interest-bearing savings account, so that the interest income can be reported). You can refuse to provide the SIN number to most private companies. Canada also has one of the highest per-capita immigration rates of any large country, so new arrivals are expected, and services are geared up for them. Most of the banks offer special deals for \"\"New Canadians\"\". You should get a credit card (even if just a secured credit card) through them with one of these offers to start a credit file anyway, but there's no need to actually use it much. Auto-paying a utility bill through the card, and paying it off in full each month, is one way to keep it active. No need to ever pay any interest. Most major apartment rental firms will expect a good proportion of their renters to be new to Canada, so should have procedures in place to deal with it (such as a higher deposit). You should not give them your SIN for a credit check, even when you're more established. Same for utilities, they can just charge a higher deposit if they can't credit check you. For private landlords, everything is negotiable (but see the laws link at the end of this answer). You will later need a credit rating for a mortgage on a house (if not paying cash), so it's worth getting that one token credit card. Useful for car rental also. Here's a fairly complete summary of the laws on renting in Canada, which includes the maximum deposits that can be asked for, and notice periods.\"","\"You have what is called in the biz a \"\"thin file\"\". Check with a Credit Union. They will get you a secured card or maybe a straight credit card. They usually will graduate you from a secured card to a real credit card in 12-18 months. Then you are on your way. You should also sign up for Creditkarma to get your credit report updated every week. They make their money on referring people to credit card companies so you might be able to kill two birds with one stone.\"","Depends on your credit score. If you came from foreign country, you might not be having enough Credit Score. In that case, you have to go for Prepaid Credit Card offered by Banks. For prepaid credit card,you have to deposit certain amount of money which will act as your credit line.","When you start living in US, it doesn't actually matter what was your Credit history in another country. Your Credit History in US is tied to your SSN (Social Security Number), which will be awarded once you are in the country legally and apply for it. Getting an SSN also doesn't guarantee you nothing and you have to build your credit history slowly. Opening a Checking or Savings account will not help you in building a credit history. You need to have some type of Credit Account (credit card, car loan, mortgage etc.) linked to your SSN to start building your credit history. When you are new to US, you probably won't find any bank that will give you a Credit Card as you have no Credit history. One alternative is to apply for a secured credit card. A secured credit card is one you get by putting money or paying money to a bank and open a Credit Card against that money, thereby the bank can be secure that they won't lose any money. Once you have that, you can use that to build up your credit history slowly and once you have a good credit history and score, apply for regular Credit Card or apply for a car loan, mortgage etc. When I came to US 8 years ago, my Credit History was nothing, even though I had pretty good balance and credit history back in my country. I applied for secured credit card by paying $500 to a bank ( which got acquired by CapitalOne ), got it approved and used it for everything, for three years. I applied for other cards in the mean time but got rejected every time. Finally got approved for a regular credit card after three years and in one year added a mortgage and car loan, which helped me to get a decent score now. And Yes, a good Credit Score is important and essential for renting an apartment, leasing a car, getting a Credit Card etc. but normally your employer can always arrange for an apartment given your situation or you need to share apartment with someone else. You can rent a car without and credit score, but need a valid US / International Drivers license and a Credit Card :-) Best option will be to open a secured credit card and start building your credit. When your wife and family arrives, they also will be assigned individual SSN and can start building their credit history themselves. Please keep in mind that Credit Score and Credit History is always individual here...","The SCHUFA in Germany works a bit different from the FICO score in the US. My background: I am a German currently living in the US. The information others want to see from the SCHUFA are a bit different. If you want to example rent a house or an apartment, the landlord often wants to see a SCHUFA statement which only shows that there are no negative entries. This statement you can get easily from online and they don't mention your credit score there. If you apply for a real credit or want to lease a car, they want to look deeper in your SCHUFA profile. However, very important is: They need signed permission to do this. Every participating company can submit entries to your profile where the score is calculated from. For example mobile phone plans, leasing a car, applying for a loan. Some lenders decide on the score itself, some on the overall profile and some also take your income into account. Since there is no hire & fire in Germany you are often asked to show your last 3 paychecks. This, in combination with your SCHUFA score is used for determination if you are eligible for a loan or not. However, they check through every entry which is made there and as long as it is reasonable and fits to your income (car for 800 EUR/month with a 1000 EUR salary does not!) you should not have a problem establishing a good score. The, in my eyes, unfair part about Schufa is that they take your zip code and your neighborhood into account when calculating their score. Also moving often affects the score negatively. To finally answer your question: Credit history is also built by mobile phone plans etc. in Germany. As long as you pay everything on time you should be fine. A bad score can definitely hurt you, but it is not as important to have a score as it is in the US because the banks also determine your creditworthiness based on your monthly income and your spending behavior.","For question #1, at least some US-based online brokers do permit direct purchases of stocks on foreign exchanges. Depending on your circumstances, this might be more cost effective than purchasing US-listed ADRs. One such broker is Interactive Brokers, which allows US citizens to directly purchase shares on many different foreign exchanges using their online platform (including in France). For France, I believe their costs are currently 0.1% of the total trade value with a 4€ minimum. I should warn you that the IB platform is not particularly user-friendly, since they market themselves to traders and the learning curve is steep (although accounts are available to individual investors). IB also won't automatically convert currencies for you, so you also need to use their foreign exchange trading interface to acquire the foreign currency used to purchase a foreign stock, which has plusses and minuses. On the plus side, their F/X spread is very competitive, but the interface is, shall we say, not very intuitive. I can't answer question #2 with specific regards to US/France. At least in the case of IB, though, I believe any dividends from a EUR-denominated stock would continue to accumulate in your account in Euros until you decide to convert them to dollars (or you could reinvest in EUR if you so choose).","For instance and to give a comparison to the US - in Austria, almost everybody gets a credit card (without a credit history (e.g. a young person) / with a bad credit history & with a good credit history). The credit history is in the USA much more important than in Austria. In future, the way to assess a credit history will change due to analysis of social networks for instance. This can be considered in addition to traditional scoring procedures. Is your credit history/score like a criminal record? Nope. I mean is it always with you? Not really cause a criminal record will be retained on a central storage (to state it abstract) and a credit history can be calculated by private companies. Also, are there other ways to get credit cards besides with a bank? That depends on the country. In Austria, yes.","Nationwide Flex Account lets you receive money internationally for free, but you have to pay to send it. It meets all your other criteria.","I'm not an expert in the field, but I'm pretty sure they *do*, its just that the customers arent us, but rather the landlords/cc companies/car dealerships/etc. who pay them for credit checks. Those parties do choose to do business with them and have alternatives.","For people with attempted to achieve credit rating coming from a huge rely or perhaps organized credit score card issuer then you can discover how complicated its to get authorised. They generally interest some kind of credit score, when you need a low interest rate quote and additional returns after that your credit score has to be excellent.","\"Customer support, getting information, dealing with stolen identities, etc. I had to file a credit discrepancy report with both. Transunion: \"\"we'll look into it\"\". Equifax: \"\"okay, you need to do this... this.. this... this... this... maybe we now can help you\"\". It's almost faster to let Transunion deal with it, and let Equifax realize they goofed\"","\"Different states have different laws, check your local laws concerning credit. Some states even guarantee you to get one free credit report per year. If you recently apply for an apartment, a mortgage or denied a credit card or loan, you can usually get a free copy from whomever you authorized to pull your credit report. Sign up credit monitoring service, there are quite a few of these. Most credit card companies offer such service, Amex, Chase, Citibank, etc. It' costs around $10-$20 per month. If you sign up a service and pull your own credit report, it's considered a \"\"soft\"\" pull which won't affect your score negatively.\"","To build a US credit record, you need a Social Security Number (SSN), which is now not available for most non-residents. An alternative is an ITIN number, which is now available to non-residents only if they have US income giving a reason to file a US tax return (do you really want to get into all that...). Assuming you did have a reason to get a ITIN (one reason would be if you sold some ebooks via Amazon US, and need a withholding refund under the tax treaty), then recent reports on Flyertalk give mixed results on whether it's possible to get a credit card with an ITIN, and whether that would build a credit record. It does sound possible in some cases. A credit record in any other country would not help. You would certainly need a US address, and banks are increasingly asking for a physical address, rather than just a mailbox. Regardless, building this history would be of limited benefit to you if you later became a US resident, at that point you would be eligible for a new SSN (different from the ITIN) and have to largely start again. If getting a card is the aim, rather than the credit record, you may find some banks that will offer a secured card (or a debit card), to non-residents, especially in areas with lots of Canadian visitors (border, Florida, Arizona). You'd find it a lot easier with a US address though, and you'd need to shop around a lot of banks in person until you find one with the right rules. Most will simply avoid anyone without an SSN.","You can view Standard & Poor's credit ratings here: http://www.standardandpoors.com/ratings/en/us/ You have to register with S&P to access the ratings.","I guess we opt in when we take out credit, or if you sign a lease or anything like that. While credit reporting is the backbone of consumer finance, im not sure exactly how it works, and this may not be the right sub. r/personalfinance may be better. If you get a good answer elsewhere I would be much obliged if you posted it back here.","Since we seem to be discussing credit score and credit history interchangeably, if I can add credit report as the third part of the puzzle, I have another point. Your credit score and credit report can be effective tools to notice identity theft or fraud in your name. Keeping track of your report will allow you to not only protect your good name (which is apparently in dispute here) but also those businesses who ultimately end up paying for the stolen goods or services.","Credit history is local, so when you move to the US you start with the blank slate. Credit history length is a huge factor, so in the first year expect that nobody would trust you and you may be refused credit or asked for deposits. I was asked for deposits at cell phone company and refused for store cards couple of times. My advice - get a secured credit card (that means you put certain sum of money as a deposit in the bank and you get credit equal to that sum of money) and if you have something like a car loan that helps too (of course, you shouldn't buy a car just for that ;) but if you're buying anyway, just know it's not only hurting but also helping when you pay). Once you have a year or two of the history and you've kept with all the payments, you credit score would be OK and everybody would be happy to work with you. In 4-5 years you can have excellent credit record if you pay on time and don't do anything bad. If you are working it the US, a lot of help at first would be to take a letter from your company on an official letterhead saying that you are employed by this and that company and are getting salary of this and that. That can serve as an assurance for some merchants that otherwise would be reluctant to work with you because of the absence of credit history. If you have any assets overseas, especially if they are held in a branch of international bank in US dollars, that could help too. In general, don't count too much on credit for first 1-2 years (though you'd probably could get a car loan, for example, but rates would be exorbitant - easily 10 percentage points higher than with good credit), but it will get better soon.","These cash restrictions are already working in Italy and France. And the reporting of foreign accounts is something that it should have been done a lot of time ago. I'm not sure why the article thinks they are a big deal..","\"I was I a similar position as you, and sometimes credit bureaus might be difficult to deal with, especially when high amounts of money are involved. To make the long story short, someone opened a store credit card under my name and made a charge of around 3k. After reporting this to the bureaus, they did not want to remove the account from my credit report citing that the claim was \"\"frivolous\"\". After filing a police report, the police officer gave me the phone number for the fraud department of this store credit card, and after they investigated, they removed the account from my credit. I would suggest to do the following: Communicating with Creditors and Debt Collectors You have the right to: Stop creditors and debt collectors from reporting fraudulent accounts. After you give them a copy of a valid identity theft report, they may not report fraudulent accounts to the credit reporting companies. Get copies of documents related to the theft of your identity, like transaction records or applications for new accounts. Write to the company that has the documents, and include a copy of your identity theft report. You also can tell the company to give the documents to a specific law enforcement agency. Stop a debt collector from contacting you. In most cases, debt collectors must stop contacting you after you send them a letter telling them to stop. Get written information from a debt collector about a debt, including the name of the creditor and the amount you supposedly owe. If a debt collector contacts you about a debt, request this information in writing. I know that you said that the main problem was that your credit account was combined with another. But there might be a chance that identity theft was involved. If this is the case, and you can prove it, then you might have access to more tools to help you. For example, you can file a report with the FTC, and along with a police report, this can be a powerful tool in stopping these charges. Feel free to go to the identitytheft.gov website for more information.\"","You need to get yourself a credit card, and use it regularly and also repay on time. This will help increase your credit score. Hope you have a regular job which is bringing in money every month, but having just this isnt enough, get a credit card.","I'm really sorry, but what do you mean by ISM? I googled it but found nothing.. Thanks! Anyway, the WF product is really good indeed. Maybe we (r/finance) could start a weekly report too, quoting major reports like this one, and make some comments/analysis. That could be interesting don't you think? It would take quite some time but I think this sub lacks something like this.","\"Not sure about specific French laws. Assuming its not a political party receiving such donations, and it an normal individual ... General common sense answer would be; but it could very well be a generous donation from someone in the Caimans or Germany The onus would be on you to prove it is a generous donation. What is the threshold between \"\"this money looks like money-laundering\"\" and \"\"this money looks like a generous donation\"\"? There is no threshold. By default if you don't know the source; it is money-laundering. In particular: is it up to me to explain where the money comes from, or is it the sender's problem? You have to explain the source of money. That the Bank in Germany may have to do its own due-diligence is separate from your having to explain the source of funds.\"","I don't believe they're right. For international wire transfers you'd need either IBAN or SWIFT codes. I don't think any US bank participates in the IBAN network (mostly Europe and the Far East), so SWIFT is they way to go with the US. Credit unions frequently don't know what and how to do with international transactions because they don't have them that often. Some don't even have SWIFT codes of their own (many, in fact) and use intermediaries to receive money.","\"you can relate everything on a credit report, and how things are calculated, to life scenarios. thats a 100% fact, and thats what people need to go by when designing their credit dicipline/diet. utilization: any kind of resource in life. water, food, energy, and etc. who would you want to live with more, the guy that just eats way too much, uses way too much energy than they need, and wastes way more water than they need? assuming there was no water cycle. payment history: speaks for itself derogatory remarks: s*** happens. thats what makes life life, but when given chances to fix your mistakes and own up to them, like i and every other responsible adult have done, and you dont, thats living up to the exact definition of derogatory. disrespecting and not caring. who wants to lend to someone who doesnt care? so if youre not gonna care, we will just put this special little remark in the derogatory section and show that you dont care about when you make mistakes. f*** it right? lol. well, thats what that section is for. showing you wont try to fix things when they go sour. if i had a guy who was fixing my roof, and did a bad job, but did everything he could to fix it, i wouldnt give him a bad rep at all. if a guy messed up my roof, and just said cya thanks for your money, hes getting a derogatory remark. credit age: just like life. showing the ability to maintain EVERY other aspect of a report for X amount of time. its like getting old as a person. after X amount of years, a lot of people will be able to say more about you as a person. whether youre a real male reproductive organ or an amazing guy. total accounts: is like taking on jobs as a self employed person or any business. if you have a lot of jobs, people must want you to do their work. it shows how people \"\"like you.\"\" hard inquiries: this is the one category of them all i dont fully agree on, can go either way, and i hate it. i really cant think of a life scenario to relate it to, so i kind of think its a prevention mechanism/keep a person in check kind of thing. like to save them from themself and save the lenders. for example, if a guy has great utilization, and just goes insane applying for credit cards, hell get everyone of them because hes showing almost no utilization. then said guy goes and looses his job, but since he racked up 50 cards at 1k each, now he can destroy 50k in credit. thats just my take, but thats EXACTLY how i look at it from TU/EX/EQs point of view.\"","to find out how, please click the link above and read this post NOW! for sure you will learn a lot from it most especially on how you can get rid of errors in your annual credit report.","Yes, there is. I was a victim of Experian's breach last year. The only thing these credit reporting agencies sell is their opinion. If their opinion is not worth shit because they are compromised, then what they sell has little value. Next time you hear a lender explaining to you this credit score thingy, ask them if they still remember how to underwrite without it, because it is going away. They will look at you and try to carefully explain its importance, but you are under no obligation to believe them. Tell them COBOL sucks, and so does much of the '80s music they still listen to.","Is it possible for the card issuing banks to check my score without my permission? As far as I understand these things, that is exactly the whole purpose of these sorts of credit-rating institutions. The banks and other financial businesses are their customers. They exist to serve those customers. Their relationship, if any, with a consumer is probably secondary to that. When you apply for credit, you give that business any permission needed.","This discussion indicates that the accounts are not reported to credit agencies, but the post is also over a year old, and who knows how reliable the information is (it's fairly well-traveled, though). It's based on one person calling up Trans Union and E-Trade and asking people directly.","I'm the contrarian in the crowd. I think credit scores and debt are the closest thing to evil incarnate. You're in good company. The absence of a credit score simply means the agencies have insufficient data in their behavioral model to determine how profitable your business would be to the bank. The higher your score, the more likely the bank is to make a profit from your loan. IMHO, you're better off building up cash and investment reserves than a credit history. With sufficient reserves, you will be able to shop around for a bank that will give you a good rate, if you ever do need a loan. You'll be surprised at how quickly you get in a position where you don't need a loan if you save and invest wisely. I used to have a (high) credit score, and I was miserable about it because there were always bills due. I gave up debt 14 years ago, paid the last debt 7 years ago, and have never. been happier. Raising kids without debt (or credit score) is much more fun than with debt.","Credit is important for many reasons. Establishing credit is an important step and should be no challenge for someone who already has good habits. The same lessons and advice that you would find for a student to establish credit would be applicable to your case as well. Factors that influence credit score, Since you are already established in your home country (Australia), you probably have a credit card (and references) that you can provide for the first few challenges (renting a car, renting an apartment). Here are the steps, Your credit score should improve quickly as the first couple of credit cards and the installment loan show good payment history, low utilization, and gain some age. After 1-2 years, you should have a good score.","\"According to the Fair Credit Reporting Act: any consumer reporting agency may furnish a consumer report [...] to a person which it has reason to believe [...] intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer See p12 (section 604). The usual interpretation of this that I've heard is that a debt collection agency that owns or has been assigned a debt can make hard pulls on your credit report without your consent. This link seems to support that (and references the same part of the act, among others): According to the Fair Credit Reporting Act, [...], any business can access your credit history without your permission provided the business has a valid \"\"permissible purpose.\"\" The FCRA notes that one such permissible purpose is to review your credit information in connection with the collection of a debt. Thus, if you owe money to a debt collector, the debt collector has the legal right to pull and review your credit report. If they haven't been assigned the debt or own it outright, I believe you have a legal right to dispute it. Consult a lawyer if this is actually a situation you face. Once use for this is if the debt collection agency has trouble locating you; since your credit report normally contains current and past addresses, this is one way to locate you.\"","The suggestion may be very delayed, have you personally gone to the Experian Office with all the documentation (in xerox copy and in original)? If not, please do so, there is always a difference between dealing with govt/semi-govt institutions over electronic channels and in person.","\"You can't get your credit score for free, just the report with the information the score is based on. If you got credit reports through annualcreditreport.com, the Score tab would typically contain an advertisement for purchasing your score. If you have an ad-blocker enabled, that might be blocked, explaining the blank page. Try turning off any browser extensions that alter how pages are shown. The accounts page/tab/section should show something like \"\"0 open accounts\"\" or similar, to indicate that it is loading data. Your lack of credit history probably does mean you don't have a credit score, so it's probably not worth paying anything to find that out. The focus should be on the accuracy of the underlying report, since you can do something about that. Should I be worried? I'd say no on that. You'll have an easier time getting credit (and better terms) in the future if you start now with some account, even if it's a secured credit card you don't use much, because the age of the oldest and average accounts are factors in credit scoring models.\"","That is an opinion. I don't think so. Here are some differences: If you use credit responsibly and take the time to make sure the reporting agencies are being accurate, a good report can benefit you. So that isn't like a criminal record. What is also important to know is that in the United States, a credit report is about you, not for you. You are the product being sold. This is, in my opinion, and unfortunate situation but it is what it is. You will more than likely benefit for keeping a good report, even if you never use credit. There are many credit scores that can be calculated from your report; the score is just a number used to compare and evaluate you on a common set of criteria. If you think about it, that doesn't make sense. The score is a reflection of how you use credit. Having and using credit is a commitment. Your are committing to the lender that you will repay them as agreed. Your choice is who you decide to make agreements with. I personally find the business practices of my local credit union to be more palatable than the business practices of the national bank I was with. I chose to use credit provided by the credit union rather than by the bank. I am careful about where I take auto loans from, and to what extent I can control it, where I take home loans from. Since it is absolutely a commitment, you are personally responsible for making sure that you like who you are making commitments with.","Wrong sub. You're looking for /r/personalfinance >will freezing just that credit report hurt them in any way? No, but it will help prevent an identity thief from wrecking your credit. >Can I still get a loan with only one of the three frozen? Depends, but yes. You should freeze your credit at all 5 credit bureaus for personal financial protections.","Generally when items go to collection you will receive a letter in the mail not an email. You can try to dispute the charge with the credit companies (TransUnion, Equifax, and Experian) showing that the charge came after you left the country. Like the answer above me said, disputing it may cause the 7 year clock to restart which leaves it on your account longer. It may just be simpler to try to improve your credit score instead. You can check your credit score as often as you want using Credit Karma online or on your phone.","Some check as part of a background investigation. Money problems can make it hard to establish a level of trust. If your credit is bad you might be easy to bribe. Or you might steal from the company. The level of importance will depend on the job you are applying for, or for the customer you will be working for. Government jobs or government contracts frequently require background checks. Jobs that will involve having access to high value items or money will also require a check.","Be aware that ATM withdrawals often generate hidden fees, which are not obviously declared. Many banks operate e.g. with a currency exchange fee, giving you an exchange rate some 1-2% lower than actually applicable. If you withdraw larger amounts, such a currency exchange fee easily adds up to what you would have paid for a wire transfer, where you would get a better exchange rate. Although it's probably much hassle for you to change banks, another option may be to find a bank which operates both in France and the US. Banks with different national branches often offer cheap and fast wire transfers between same-bank accounts in different countries. E.g. Citibank used to offer such services, but I am not sure if they still serve private customers in France.","so what do you think of this article? we hope you can take the time to post your comments and reactions below. that way, we can help all those who are planning to sign up for credit repair services or are interested to take matters into their own hands in terms of paying off their credit obligations, once and for all.","Credit Sesame monitors your credit score for free. My understanding is that they make their money off of credit card referrals.","If you are assigned a US Social Security number, you can apply for credit while you are here. Making small purchases and paying them off will help with your length of credit history, which is a part of FICO, but inactivity will eventually lead to those accounts being closed. Additionally, many revolving credit companies will charge you annual fees to keep your accounts open, and will require you to maintain a US address, and most want a residential address, not a mail-drop or PO Box. TL;DR: you can do it, but it will likely require an investment of both in time and money that won't make it worth it. Footnote: If you plan on opening US banking or investment accounts, there are regulations that make it difficult for foreign nationals to maintain accounts due to IRS categorization of US Taxpayers vs Foreign Nationals. Unless you have a lot to invest or deposit, most firms won't want to bother with Foreign taxpayer certification (see w8ben)."],"string":"[\n \"Currently the credit history are not International but are local. Many countries don't have a concept of credit history yet. Having said that, if you are moving to US, depending on your history in your country, you can ask the same bank to provide you with a card and then start building history. For example in India I had a card with Citi Bank and when I moved to US for a short period, I was given a card based on my India Card, with equivalent credit in USD. If you are moving often internationally, it would make sense to Bank with a leading bank that provide services in geographies of your interest [Citi, HSBC, etc] and then in a new country approach these institutions to get you some starting credit for you to build a history.\",\n \"Some countries in European Union are starting to implement credit history sharing, for example now history from polish bureau BIK and German Schufa are mutually available. Similar agreements are planned between polish BIK and bureaus in the Netherlands and United Kingdom.\",\n \"\\\"It's not just that credit history is local; it's that it's a private business run for profit. The \\\"\\\"big three\\\"\\\" credit bureaus in the US are Experian, Equifax and Transunion. They collect information on debt usage and abuse from various companies in the US, and charge a fee to provide that information (and their judgement of you) to companies interested in offering you further credit. But there's nothing stopping a company from collecting international credit histories, or specialized credit histories either (for instance, there's a company called ChexSystems which focuses on retail purchase financing (mostly auto) and checking account abuse, while ignoring other types of lending). That being said, I don't know of any companies which currently collect international credit histories. Perhaps in Europe, with more nations in close geographic proximity, there would be, but not in North America.\\\"\",\n \"It seems that your Organizers are not familiar with dealing transfers outside of Euro Zone. You are right IBAN is not used in India. A Bank in France can initiate an International Wire. There are few Banks that offer this online, for most one has to visit the Branch. See this https://expatriates.stackexchange.com/questions/2862/international-money-transfer-online-from-a-french-bank I am not aware of any other term used in France for International Wire, try explaining; Its also called BIC. It would help if you also provide your Correspondent Bank details [This will be a Bank in Europe]. This should be available on your Indian Bank's website.\",\n \"It appears all you have to do is submit a form. It might be better if she submitted it herself instead of you doing it on her behalf. All natural persons (individuals) and non-natural persons (businesses) are entitled to access and inspect the data held on record about them in the Central Credit Information System (KHR).\",\n \"Here are two different sources, one from an actual credit reporting agency, Experian. http://www.experian.com/assistance/sample-credit-report.html http://www.aie.org/manage-your-money/understand-credit/your-interactive-guide-to-credit-reports.cfm If what you want to see an actual real credit report, no one in their right mind is going to show you unless they are a close friend or relative.\",\n \"Equifax has a Single Use offering for $20 for their own score or $30 for the three big guy's reports. I am a fan of Credit Karma which offers a free service that reflects the FICO score as good as any you'd pay for. Since each reporting agency can vary slightly, Credit Karma will have a score that's in the same range. And it's pretty much real time.\",\n \"\\\"I'm not aware that any US bank has any way to access your credit rating in France (especially as you basically don't have one!). In the US, banks are not the only way to get finance for a home. In many regions, there are plenty of \\\"\\\"owner financed\\\"\\\" or \\\"\\\"Owner will carry\\\"\\\" homes. For these, the previous owner will provide a private mortgage for the balance if you have a large (25%+) downpayment. No strict lending rules, no fancy credit scoring systems, just a large enough downpayment so they know they'll get their money back if they have to foreclose. For the seller, it's a way to shift a house that is hard to sell plus get a regular income. Often this mortgage is for only 3-10 years, but that gives you the time to establish more credit and then refinance. Maybe the interest rate is a little higher also, but again it's just until you can refinance to something better (or sell other assets then pay the loan off quick). For new homes, the builders/developers may offer similar finance. For both owner-will-carry and developer finance, a large deposit will trump any credit rating concerns. There is usually a simplified foreclosure process, so they're not really taking much of a risk, so can afford to be flexible. Make sure the owner mortgage is via a title company, trust company, or escrow company, so that there's a third party involved to ensure each party lives up to their obligations.\\\"\",\n \"I visited annualcreditreport.com to get my annual credit report. It is only the report, not the score or FICO score. This is the only outlet I know of that allows you to get your report for free, without a bunch of strings attached or crap to sign up for and cancel later. It was very easy. I was wary of putting in my private information, but how else can they possibly pull you up? Read the instructions carefully. You go to each bureau to fetch your report, and they dutifully give you a free report, but they push hard to try and sell you a score or a report service. It is easy to avoid these if you read carefully. Once you get a report, you have print it out or you can't see it again for another year. Each bureau has a different site, with different rules, and different identity checks to get in. Again, read the instructions and it isn't hard. Instead of printing, I just saved the page as HTML. You get one html file and a folder with all the images and other stuff. This suits me but you might like to print. After you get each report, you have to click a link to back to the annualcreditreport.com site. From there you go to the next bureau. Regarding a score. Everybody does it differently. Free Issac does FICO, but anybody who pulls your credit can generate a score however they like, so getting a score isn't anywhere near as important as making sure your report is accurate. You can use credit.com to simulate a score from one of the bureaus (I can't easily see which one at the moment). It is as easy as annualcreditreport.com and I have no issue getting a simulated score and report card.\",\n \"As of 2014, this answer is deprecated. Read answer here for recent developments up to January 2015. You can get a free credit report yearly, but you don't get your credit score, just the content of your report. This is useful to make sure your credit history is correct, etc. To get that, visit annualcreditreport.com. Another site which will give you your score for free, really free with no strings attached, is creditkarma.com, which gives you your TransUnion credit score and full TransUnion credit report. The site is run by TransUnion and supported via advertising. At this point Equifax and Experian offer similar services via subscription, but not for free. Update 8/14/2015: CreditKarma now offers the Equifax information as part of their service.\",\n \"By law, your wife can get her full Equifax credit report (sans-FICO score) instantly (once every 12 months) via https://www.annualcreditreport.com She can even get her FICO score with a 7-day free trial of Equifax Complete Premier.\",\n \"If you can set up automatic payments (like direct debits in the UK) and you can be disciplined enough to not spend the money on something else then this can be a good way of building/improving your credit rating. Banks / Lenders like it when they see you have previously taken, and repaid, credit. This can help you get better finance deals etc. in the future. Update: as noted in the comments France had a different financial system and people do not have credit ratings, so this point isn't valid in France\",\n \"I suggest you begin by double checking what kinds of credit products you have and to which credit bureaus your bank reports. Not all financial institutions report to all bureaus. For example, if your bank only reports your one and only line of credit to Experian, TransUnion still won't have a file on you. Also, some lines of credit such as being an authorized user on a credit card aren't tracked by all of the bureaus. The other thing to consider is the amount of time that your lines of credit have been open. You said it's been less than one year but if it's been less than six months you might try waiting six months to try requesting your reports. If none of the above solves your problem, I would respond to their letter exactly as they instruct you to. Send everything certified with return receipt, and get into the habit of saving all of these records. When you send your reply be sure to include all of the requested information, a brief summary of your issue, and a reference to their previous letter to you. If they don't respond to your letter or they aren't able to help you, try calling the credit bureaus directly to inquire about the problem. Usually the consumer phone lines are automated, so try the corporate or business contacts they list on their website. On a final note, never submit your information on any of the bureaus websites. By doing so you agree to binding arbitration agreements which limit your right to sue. Only communicate with the bureaus by mail or on rare occasions phone.\",\n \"I get my credit scores from all three bureaus for free - no gimmick. I use a combination of banks that offer this service to get my scores. I wrote about this sometime back in my blog. For credit report, the only place to go is AnnualCreditReport.com. I space it out so that I get one every 4 months since there is a once a year restriction per bureau.\",\n \"http://annualcreditreport.com/ That's the official site for getting your free yearly credit report (one free per year from each of the 3 reporting bureaus).\",\n \"\\\"A credit card is a way to borrow money. That's all. Sometimes the loans are very small - $5 - and sometimes they are larger. You can have a credit card with a company (bank or whatever) that you have no other relationship with. They're not a property of a bank account, they are their own thing. The card you describe sounds exactly like a debit card here, and you can treat your Canadian debit card like your French credit card - you pay for things directly from your bank account, assuming the money is in there. In Canada, many small stores take debit but not credit, so do be sure to get a debit card and not only a credit card. Now as to your specific concerns. You aren't going to \\\"\\\"forget to make a wire.\\\"\\\" You're going to get a bill - perhaps a paper one, perhaps an email - and it will say \\\"\\\"here is everything you charged on your credit card this month\\\"\\\" along with a date, which will be perhaps 21 days from the statement date, not the date you used the card. Pay the entire balance (not just the minimum payment) by that date and you'll pay no interest. The bill date will be a specific date each month (eg the 23rd) so you can set yourself a reminder to check and pay your bill once a month. Building a credit history has value if you want to borrow a larger amount of money to buy a car or a house, or to start a business. Unlike the US, it doesn't really have an impact on things like getting a job. If you use your card for groceries, you use it enough, no worries. In 5 years it is nice to look back and see \\\"\\\"never paid late; mostly paid the entire amount each month; never went over limit; never went into collections\\\"\\\" and so on. In my experience you can tell they like you because they keep raising your limit without you asking them to. If you want to buy a $2500 item and your credit limit is $1500 you could prepay $1000 onto the credit card and then use it. Or you could tell the vendor you'd rather use your debit card. Or you could pay $1500 on the credit card and then rest with your debit card. Lots of options. In my experience once you get up to that kind of money they'd rather not use a credit card because of the merchant fees they pay.\\\"\",\n \"As someone who spends a lot of time in France, I learned that many French banks will issue debit cards to US citizens, as an add-on feature to a bank account. The fees are not low. Societe Generale charges 8 Euros per month, Credit Agricole charges 30 Euros a year, BNP Paribas charges 12 Euros a month. I'm sure other banks will issue cards as well. You need to show 2 items proving US residence, such as a utility bill, plus a passport. They can open an account immediately, on that basis and it takes about 7-10 days to get your debit card.\",\n \"You can contact the french agency for stock regulation and ask them : http://www.amf-france.org/\",\n \"\\\"http://annualcreditreport.com gives you free access to your 3 credit bureau records. (Annual, not \\\"\\\"free\\\"\\\". The \\\"\\\"free\\\"\\\" guys will try to sell you something.)\\\"\",\n \"Dunn & Bradstreet offers detailed credit reports on businesses. They are not cheap, but they appear to have information on RIOCAN.\",\n \"Regardless, it doesn't indicate any financial stress or credit-related issues. Just because you are pissed off about the way the financial industry works, doesn't mean the banks are in poor shape. If France and Germany come crashing down, then you may have some evidence to back your point.\",\n \"You should pull your credit report from all the credit reporting agencies annually to make sure only the accounts you know of are being reported.\",\n \"The Government sponsored website will give you one free report from each of the 3 bureaus every year. No subscription or anything of the sort and no ding (that I've seen). Most people check it 3 times, every 4 months. http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre34.shtm\",\n \"There's an excellent new service called SelfScore that offers US credit cards to international students. They work with students without a credit history and even without an SSN by using other qualifying factors such as major, financial resources in their home country, and employability upon graduation. Worth clarifying: it's neither a secured credit card nor a prepaid card. It's a proper US credit card with no annual fees and a relatively low APR designed to help students build US credit. The spending limit is relatively small but that probably doesn't matter for just building a credit history.\",\n \"All banks allow online banking. HSBC is reputed the most international traditional one. That said, opening a bank account in a 100% online bank would get you to near 0 cost, and is probably the preferred option. Every online bank is very similar to each other, so I won't make any recommandation here. Exemples are ing-direct, boursorama, Fortuneo. I'm afraid none offer english service, and it might be difficult to get in line with a decent english speaker. All theses banks will likely offer a gold/premier mastercard/visa, so travelling will not be an issue. The fees should be <2% for foreign currencies (it vary slightly), and <3€ if you use the ATM in none euro ones.\",\n \"\\\"In the United States, the Fair Credit Reporting Act allows companies to buy your credit information for \\\"\\\"legitimate business needs.\\\"\\\" The legitimate use of credit scores and credit reporting varies state to state, but like it or not, you can expect a lot more non-lending use of your credit information in the future. Companies and individuals use credit reports as an assessment of general behavior because, unfortunately, they work. You've seen the disclaimers about \\\"\\\"past performance…\\\"\\\", but unfortunately in this case… past performance really has been shown to be a pretty reliable indicator of future behavior. So…\\\"\",\n \"Check with your bank. As of January, 2015, the following banks and credit unions are offering free credit-scores: Announced, in the pipeline: Source: Banks to offer FICO credit scores for free Personal Experience: I've been receiving free FICO score from my credit union for more than 6 months now. Advice: Most people have multiple bank/credit-union accounts. The FICO score will be the same whoever offers it. If none of your financial institutions offer you a free credit-score then you may opt for free services like creditkarma.com or other paid services. None of them are the widely used FICO scores, but they can be a good gauge of your credit standing. Please note that a credit-score is number summarizing your credit-report and should not be confused. In the news:\",\n \"I can think of two services off the top of my head that offer free credit score information here in the UK. One being from one of the big three. No legal requirement to offer that service for free to consumers as far as I'm am aware There's probably other services too..\",\n \"I would recommend you look at Credit Karma and assess your situation. The site is free and will offer a score similar to your FICO score enabling you to best judge when to apply. They advertise, like any web site, and will offer credit card signups, which is how they make money. Disclaimer - I am a blogger and have written about Credit Karma, but no payment from them. I've actually been out drinking with their marketing team, but that was it. Nice bunch.\",\n \"Assuming you are asking about a credit score in the United States, the following applies. To find out your FICO score, navigate to AnnualCreditReport, the official site to help consumers receive their credit report from each of the three organizations providing these scores - Equifax, Experian, and TransUnion. You are - in many states - entitled to a free copy of your credit report from each of these organizations annually. This copy of your credit report will not contain your credit score from that organization. It will, however, contain information that goes into your credit score - the lines of credits on file, any delinquencies reported, etc. If you decide you would like to pay for your credit score from each bureau, you will have the option to receive this information while getting your credit report, but you will have to pay a nominal fee for it. Remember that each of the 3 bureaus gives you a different score. Averaging your 3 scores should give you a good idea of your FICO score. Note that your report is far more important than your score - once you know that, you know if you're in a good place or not. These other questions are so close that they might even be considered duplicates, and provide other suggestions for how to check your score. As a warning, don't trust the many ads out there saying you can get your score for free. Only AnnualCreditReport is considered a safe place for entering the very personal information required to get a score. The FTC backs this up.\",\n \"Sorry. As far as I know, a person's SS is the only way to establish credit. This is the first thing they ask whenever you apply for any service in the US.\",\n \"I came to US as an international student several years ago, and I have also experienced the same situation like most of the international students in finding ways to build credit history. Below I list out some possible approaches you may want to consider: I. Get a student job at campus (recommended) I think the best way is to get a student job in university, say a teaching assistant or student helper. In this case, you can be provided with a social security number and start to build your own credit history. II. Get credit card You can also consider to apply for a credit card. There are indeed some financial institutions that can provide credit cards for international students with no or limited credit scores requirement, say Discover and Bank of America. However, it is relatively hard to get approved, simply because hey may put more restriction in other aspects. For example, you may be required to keep sufficient bank balance above several thousand dollars during a period of time, or you should prove that you have relatives with citizenship in US who can provide your financial aid if needed. III. Apply for a loan (recommended) Getting a loan product is another alternative to get out of this difficult situation, but most of people don’t realize that. There are some FinTech start-ups in United States that specifically focus on international students’ loan financing. One representative example is Westbon (Westbon ), an online lending company that specializes in providing car loan for international students with no SSN or credit history. I once used their loan product to finance a Honda Accord, and Westbon reported my loan transaction records to US credit bureau during my repayment process. Later when I officially got my SSN number, I found my credit history has been automatically synchronized and I don’t have to start from all over again. It never be an easy journey for international students to build credit history in United States. What approach you should make really depends on you own situation. I hope the information above can be useful and good luck for your credit journey!\",\n \"Check with your bank. As of January, 2015, the following banks and credit unions are offering free credit-scores: Announced, in the pipeline: Source: Banks to offer FICO credit scores for free Personal Experience: I've been receiving free FICO score from my credit union for more than 6 months now. Advice: Most people have multiple bank/credit-union accounts. The FICO score will be the same whoever offers it. If none of your financial institutions offer you a free credit-score then you may opt for free services like creditkarma.com or other paid services. Please note that a credit-score is number summarizing your credit-report and should not be confused. In the news:\",\n \"France is one country where cheques are common. More an more people are using credit cards for typical store payments and wire transfers are slowly gaining traction. There are several cases where cheques come handy: Sure, all these cases could ultimately be resolved with a wire transfer. Sometimes it is just simpler/faster to mail a piece of paper. This said, I believe than in 1à years from now even France will go cheque-less.\",\n \"\\\"The major bureaus use the Fair Isaac scoring model, for the most part. Here's an excerpt from a web site (Versions of the FICO scoring model) to explain: One of the first things a newcomer to this board learns is the difference between FICO and FAKO scores. FAKO refers to the non-FICO scores offered by various companies. FAKO scores have little value since few of them are used by lenders and they do not match closely to FICO scores. But even when you stick with FICO scores, confusion can ensue because FICO scores have many different editions, versions, and variations. On a single day, a consumer could theoretically have dozens of different FICO scores, depending on which version and credit agency is used to produce the score. This post provides a summary of the various FICO versions. Please offer any corrections or updates, and they will be edited in. The FICO scoring model with its familiar range of 300 to 850 was first introduced in 1989. Since then, FICO has released five major revisions: 1995, 1998, 2004, 2008, and 2014. Each \\\"\\\"edition\\\"\\\" uses a different formula and produces a different score. When a new FICO edition is released, many lenders continue using an older version for years before \\\"\\\"upgrading.\\\"\\\" The 1995 revision is no longer in common use, but later editions are still used by lenders. Most FICO editions are commonly known by the year of introduction: FICO 98, FICO 04, and FICO 08 (although FICO now calls it FICO Score 8, without the zero). The most recent edition is FICO Score 9 introduced in 2014. As of 2014, FICO Score 8 is the most commonly used. However, most mortgage lenders use FICO 04 for Equifax and Transunion, and FICO 98 for Experian. In addition to the \\\"\\\"classic\\\"\\\" version, FICO offers \\\"\\\"Industry Option\\\"\\\" versions customized for auto loans, credit cards, installment loans, personal finance loans, and insurance. These have a score range of 250 to 900, so the scores are not fully comparable with \\\"\\\"classic\\\"\\\" versions. As of 2015, Auto and Bankcard scores are available from myFICO as described here. Citibank provides the Equifax FICO 8 Bankcard score free each month to credit cards holders. Each credit agency (Transunion, Equifax, and Experian) uses a customized version of each FICO edition. As a result, a consumer's FICO scores from each agency may differ even when all credit information is identical among the agencies. Because there are many FICO versions, when a score is received, it's helpful to know which version it is. If a lender provides a credit score, ask for details such as which credit agency was used, which FICO edition was used, and whether the score is an Industry Option version. The lender may not always be willing or able to provide the answers, but it doesn't hurt to ask. Transunion Official name: FICO Risk Score Classic 98 Common name: TU-98 Available directly to consumers: No Real-world score range: 336 to 843 (as shown on page 16 of this Transunion document) Equifax Official name: Equifax FICO Score 4 (also known as Equifax Beacon 96) Common name: EQ-98 This version appears to be seldom used, but a poster reported it used on a mortgage application in 2014. Available directly to consumers: No Experian Official name: Experian FICO Score 2 (also known as Experian FICO Risk Model v2) Common name: EX-98 Available directly to consumers: from myFICO when buying a product that includes all 19 available scores (as described here). Some credit unions such as PSECU provide it free each month to members. Real-world score range: 320 to 844 (as shown on this Experian document) Most mortgage lenders use FICO 04 for Equifax and Transunion, and FICO 98 for Experian. All three scores will normally be pulled and the middle score (not the average) will be used by the lender. Transunion Official name: Transunion FICO Score 4 (also known as Transunion FICO Risk Score Classic 04) Common name: TU-04 Available directly to consumers: from myFICO as described here. Real-world score range: 309 to 839 (as shown on page 16 of this Transunion document) Equifax Official name: Equifax FICO Score 5 (also known as Equifax Beacon 5.0) Common name: EQ-04 Available directly to consumers: from myFICO as described here. Also available from Equifax when buying FICO score (as a one-time purchase with the \\\"\\\"Score Power\\\"\\\" product available here, or as part of credit monitoring available here). Some credit unions such as DCU provide it free each month to members. Real-world score range: 334 to 818 Experian Official name: Experian FICO Score 3 (also known as Experian FICO Risk Model v3) Common name: EX-04 Available directly to consumers: from myFICO when buying a product that includes all 19 available scores (as described here). Real-world score range: 325 to 850 (as shown on this Experian document) Transunion Official name: Transunion FICO Score 8 (also known as Transunion FICO 8 Risk Score or FICO Risk Score Classic 08) Common name: TU-08 Available directly to consumers: from myFICO as described here. Some credit card issuers such as Discover, Barclays, and Walmart provides it free each month. Real-world score range: 341 to 850 (as shown on page 15 of this Transunion document) Equifax Official name: Equifax FICO Score 8 (also known as Equifax Beacon 09) Common name: EQ-08 Available directly to consumers: from myFICO as described here. Real-world score range: 300 to 850 Experian Official name: Experian FICO Score 8 (also known as Experian FICO Risk Model v8) Common name: EX-08 Available directly to consumers: from myFICO as described here. Real-world score range: 316 to 850 (as shown on this Experian document) How FICO Score 8 differs from previous versions is explained here. In May 2014, a poster named android01 received 850 scores from all three credit agencies, as described in this post. In June 2014, a poster named fused received 850 scores from all three credit agencies, as described in this post. This 2011 press release describes a study of FICO Score 8 scores. From a sample of 250,000 credit reports, it found 0.02% had a score of 850, or about 1 out of every 5000 persons. In 2014, FICO announced a new version called FICO Score 9. More info here. As of February 2016, the score is now available directly to consumers, as described here. This New York Times article says FICO 9 includes two important changes: unpaid debts that result in collection actions will no longer have a negative effect on a score if the debt has been paid. unpaid medical debts will have less negative effect on scores. In 2001, FICO released a new scoring model called NextGen. It is claimed to be an improvement over \\\"\\\"classic\\\"\\\" FICO models because it tracks more factors. But it has failed to catch on with lenders because its score range of 150 to 950 is incompatible with the familiar 300 to 850 range, requiring lenders to recalculate cutoff scores and revise many rules and policies. Only a small percentage of lenders reportedly use NextGen. Transunion Official name: Precision Available directly to consumers: No Equifax Official name: Pinnacle Available directly to consumers: In 2014, Pentagon Federal Credit Union (PenFed) began to provide this score free to its credit card holders, as discussed in this post. Experian Official name: FICO Advanced Risk Score Available directly to consumers: No I included all of this to make the point that there are many variations of the scoring models, and all of them are customized to one degree or another by each of the major bureaus as a means of giving their models more credibility, as far as they're concerned. To your question about coming up with a \\\"\\\"fair\\\"\\\" scoring model, can you propose what makes current scoring models unfair? I think it's a safe assumption to make that the financial community has already had a substantial amount of input into how the current scoring models work. To think otherwise implies that the credit bureaus are just kinda \\\"\\\"winging it\\\"\\\" with whatever they think is best. Their models are designed to give their client creditors the best scoring model possible based on what those creditors have stated is important to them. There isn't a unified single scoring model out there, and the bureaus definitely won't share the details of their modifications. You can always come up with your own custom model, but how it compares to what's widely used, that's anyone's guess. I hope this helps. Good luck!\\\"\",\n \"With over 1 billion records our instant nationwide search system allows for unlimited look ups and accesses data from multiple databases to compile the most comprehensive reports available. Start your FREE 7 Day trial today!\",\n \"See the first item in the list: For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus Note that there's no option for you to limit this sharing. Credit reporting is the business need of the bank, not of the bureaus. They rely on them and others reporting it in their main business: lending. While you can limit the sharing with other banks/insurance companies/service providers so that you won't get offers from them based on the data shared by the bank, you cannot limit the credit reports themselves.\",\n \"I agree. I pulled my free reports (by going to ftc.gov first to get link to the truly free reports). The Equifax data was out of date. Didn't bother trying to correct it. As I don't need any new credit lines, I just put a security freeze on my records at all four bureaus. Makes my data virtually worthless to any potential identity their, and (best of all) nearly worthless to the bureaus.\",\n \"\\\"Dan's link (he deleted his answer, BTW) is fine, it showed the components of the score FICO offers. Each input has data behind it, a bell curve of the behaviors and risk of the person behind it. For example, we've discussed utilization many time here. The ideal utilization is not 0%, but 1-19%. This does not mean paying interest, or carrying charges from month to month. Say I had just one card with a $10K limit. I'd want to be sure I never ran a bill above $2000. If I did, I'd see a slight drop in my score, and next month, it would go back to normal. In my case, I have enough available credit that going over 20% is rare, and if it happened, I'd pay the bill down before the bill was issued, just make a mid-cycle payment. FICO decided that those who go over 20% have a higher risk of default. And it gets higher as it goes up. Same with every aspect of the score's components. You are comparing US to non US use. In the US, it seems far more common to use our cards. In my family's case, we use very little cash, and run most of our spending through our cards. As far as The David is concerned, one should separate those who carry a balance from those who pay in full. The pay in full users are better off for their habits and responsible card use. In the US, it's not easy to rent a car or book a hotel with no card. Cards offer a cash rebate that adds up fast, and purchase protection from fraudulent vendors. They also offer extended warranty coverage. The David, and others, claim that \\\"\\\"studies prove those using cards spend 10-15% more than cash buyers.\\\"\\\" This is a proven fact from scientific studies. Only they don't exist. The best I've seen proves that college kids given a $20 bill spend more carefully than those given a $20 credit card. This doesn't extrapolate to a family budget, and never will. But that quote has a way of being repeated as fact. Yes, it's non-sense, thank you for reading and quoting my blog, I recognize the quote. The report also shows accounts that have gone to collection. An electric bill isn't a regularly reported item, it's assumed your lights are on. But if you stop paying the bill and they send your account to a collection agency, you'll see it hit your report. In response to the comment below - Journal of Experimental Psychology: Applied article titled Monopoly Money: The Effect of Payment Coupling and Form on Spending Behavior runs 13 pages but on the first page offers \\\"\\\"Do consumers spend differently when using one payment mode relative to another mode? For example, do consumers spend more when they receive $50 in the form of a gift card than in the form of cash? If indeed they do, then why? This research addresses these issues.\\\"\\\" $50? A $50 gift card is a nuisance, I try to use it up within hours of getting one. As I stated above, the behavior of a person with such a card doesn't scale to a many-thousand-per-month budget. Such articles, in my opinion, are nonsense, proving nothing. Unfortunately, this is a bit of a tangent to the original question, and if I put up a stand-alone \\\"\\\"Is it a fact that people spend more if using a card than cash?\\\"\\\" the question would result in being closed as one that's seeking opinions, not facts.\\\"\",\n \"Neal Neilinger previously worked at Dresdner, BNP Paribas (BNPP.PA) and NSM Capital Management.Calyon, a unit of France's biggest retail bank Credit Agricole (CAGR.PA), said Neilinger will report to Jim Siracusa, global head of debt and credit markets, and would have a global role within its debt and credit markets product line.\",\n \"Generally, if you have a loan, you have a credit score. But since you have never had a loan before, then it is likely that you do not have a credit score. You should not be worried if you aren't planning on applying for credit and/or loans. If you are wanting to purchase a house, car, or even just having a credit card, you should work on obtaining a secure loan so then you can establish history. Most of the time you have to pay to view your credit score. By law, you can obtain a free copy of your credit report, which it sounds like you have at annualcreditreport.com, which only shows your payment history, but in order to view your credit score, you generally have to pay for it.\",\n \">A 2012 study by the Federal Trade Commission found that about 20 percent of consumers who were asked to review their reports discovered an error that was fixed after they disputed it, and more than 10 percent found an error significant enough to affect their credit score. Monitoring also alerts you if an application has been placed for a new account in your name. >Equifax, Experian, and TransUnion have turned monitoring into a business, charging as much as $25 a month for “premium” services that include reports from all three companies. In other words, pay us protection money because we're bad at our jobs and your reputation is suffering as a result of our sloppy work.\",\n \"Is it possible her husband obtained a card from a bank overseas? Unlikely. A Bank overseas generally will not issue such cards. Is that why she can't find it on the credit report? The data sent to Credit Bureau is periodic and not immediate. At times it may take a month or more for a Bank to start reporting the new card to Credit Agencies. If he got the card recently, she has a freeze in effect and no bank can issue a card in her name without her approval. Possibly timing issue. i.e. the freeze was put after card company pulled the report and approved. It may take sometime to dispatch a new card. So it could be that her husband applied for this card previously before the freeze was put in place.\",\n \"\\\"Monitoring all three is good practice. That way, you will be notified as soon as there is a hard pull on any of your reports. Most financial institutions only pull one of your three reports to open new credit. If you're only monitoring one, you won't be alerted to new accounts until about a month passes and they are reported to all three. By this time, restoration will be much, much more difficult than if you called the financial institution immediately to say \\\"\\\"that's not me!\\\"\\\"\\\"\",\n \"It is very important to note the strength and reputation of the country's regulatory agency. You cannot assume the standards of say the SEC (US Securities and Exchange Commission) apply in other countries (even well-developed ones). These regulations force companies to disclose certain information to inform and protect investors. The standards for such practices vary internationally.\",\n \"\\\"I agree it seems insulting to pay the credit reporting agencies, but I have no choice at this point. I'd rather pay the small fee per each of them, to freeze accounts, then have thousands stolen. My husband has excellent credit and also we have a rather substantial savings account, that his info could give \\\"\\\"would be\\\"\\\" identity thieves access too. This whole situation is messed up, and unacceptable! For one, no one EVER gave these credit reporting agencies access to their info, it's just a \\\"\\\"give in\\\"\\\" being born here. And for two, no one asked for their information to be kept in insecure databases. Higher standards need to be implemented. My poor 72 year old father is outraged when I tell him his info is online. He says, \\\"\\\"I don't use the Internet!!! How can it be there?!?!\\\"\\\" (Poor old soul lol) I just said, \\\"\\\"well dad, it is, whether you use it, or like it or not. It's there\\\"\\\" I just need to make sure we are taking the correct steps to protect ourselves. Honestly, I am not finance savvy. This is why I'm asking here in this sub. Thank you for responding, and thanks to anyone else who may offer any advice. I'm not terrified, but I'm definitely miffed...\\\"\",\n \"\\\"It appears that you already know this, but FICO credit scores (as controlled by Fair Isaac Corporation) are the real official credit scores, and FICO takes a cut on their production no matter which of the 3 major credit bureaus calculates the official score (all using slightly different methods). Be careful when obtaining a score for making a big decision that it is a FICO score, because relatively few lenders will lend based on a non-FICO score. That said, some non-FICO scores are easy to obtain and can be roughly translated to an approximation of your score. Barclays US/ Juniper Bank credit cards offer a free Transunion \\\"\\\"TransRisk\\\"\\\"(TM) score. The TransRisk score is a 900 point scale, while the FICO score is an 850 point scale. This is a simple ratio and you can calculate your approximate FICO score by the formula:\\\"\",\n \"\\\"> Although there are numerous countries that welcome investors Yes, I hear that when one's welcome has been worn out in Japan, Thailand is the place to be. Ladyboys, sluts and frauds, Bangkok is your one-stop shop to get f*cked in more ways than one! >potentially profitable options The key question being, \\\"\\\"Profitable for whom?\\\"\\\" >Another factor which can help you make up your mind when searching for a good service provider is experience. Yes, Richard Cayne's clients have undoubtedly amassed \\\"\\\"extensive experience\\\"\\\"; not much money, but experience in spades. Suggest \\\"\\\"consulting with them on a wide array\\\"\\\" of these experiences first. > Richard Cayne Meyer the manager of the world renowned Meyer International Ah yes, renowned indeed -for spamming and scamming, for cash and dash.\\\"\",\n \"The best we can do in the Equifax case is freeze (not lock) our credit files at the credit bureaus and use the free annual credit reports via FTC.GOV. Unfreezing is an extra step one would have to go through before opening a new credit line, renting a new place, getting utilities hooked up, etc. But the freeze (versus the lock) essentially makes one’s data worthless to the credit reporting agencies.\",\n \"Before this agreement, every country had laws on tax-ability of income [including Global incomes]. Quite a few individuals would get away and did not report such income and pay tax if due. In fact quite a few Multi National banks actively created products that helped US Citizens to move money outside and skip reporting. U.S. in order to step up this effort enacted FATCA; essentially as a compliance mechanism, it started with US Head quartered banks operating globally and made reporting mandatory. It stepped up efforts with other countries to ensure foreign banks also enhance reporting of US nationals. See the benefits, quite a few countries joined up together and as part of OECD, came up with CRS. Thus going forward it will enable tax authorities in member countries to exchange financials impacting taxes. The scope is also for Companies / Organization as quite a few Companies hide away income outside the domiciled country. I have heard a rumor that due to the upcoming Common Reporting Standard the details of bank accounts, including all transactions, will be reported all around the industrialized world and want to know if this is true. Yes this is true and it is not a rumor. The exact amount of data and type of data will be agreed between member countries. However a broad framework exists on what needs to be shared. Is it really true that the Common Reporting Standard is going to cause things like this to happen? It is very important to note; There is no new Tax Legislation. Even without FATCA/CRS, a honest tax payer was bound to pay legitimate tax due as per the existing tax provisions of the country along with the provisions of DTAA [Dual Tax Avoidance Agreements]. The CRS only enables monitoring and compliance. So if one was already tax compliant, there is nothing to worry. If one was exploiting the loop hole; how will authorities know ... well this will be curbed going forward. As a note, Canada and Australia will start CRS reporting from 2018.\",\n \"\\\"I think it's worth pointing out explicitly that the biggest difference between a credit card (US/Canada) and a debit card (like your French carte de crédit) is that with a credit card, it's entirely possible to not pay the bill or to pay only the \\\"\\\"minimum payment\\\"\\\" when asked. This results in you owing significantly more money due to interest, which can snowball into higher and higher levels of debt, and end up getting rapidly out of control. This is the reason why you should ALWAYS pay off the ENTIRE balance every month, as attested to in the other answers; it's not uncommon to find people in the US with thousands of dollars of debt they can't pay off from misuse of credit cards.\\\"\",\n \"France taxes capital / dividend gains accrued in France. Hence you will not be able to reduce this liability. India does have a Double Tax Avoidance Treaty with France and you can claim relief for the tax paid in France.\",\n \"It looks like from their response, they would like you to send a copy of your social security card. Your drivers license or passport will not help verify your social security number. Another option you could try is to get your credit report from one of the other credit bureaus. You should be able to choose from Experian, Trans Union, and Equifax all on annualcreditreport.gov\",\n \"I believe the answer is that to protect yourself it is good to get credit protection so you will be notified when new credit is taken in your name. Also, you can use http://www.annualcreditreport.com/ to look at your credit report. HINT: While you do that, and while you are in the TransUnion report, you will have the option to DISPUTE adverse items. I always suggest that people dispute everything adverse. That puts the onus on the other parties to produce evidence to TransUnion within 30 days attesting to the validity of the adverse item. You would be surprised how many will simply drop off your report after doing that. Everybody should do this Here is a direct address for TransUnion: https://dispute.transunion.com/dp/dispute/landingPage.jsp ==> Once the disputes are finalized, the results get communicated to the other two bureaus. It is amazing how well it works. It can raise your credit score significantly. It really helps to watch your credit report yourself, and also to get whatever protection is offered that may help protect you against others opening new accounts in your name.\",\n \"\\\"To answer the heart of your question, it would be illegal for any credit bureau or creditor to somehow \\\"\\\"penalize\\\"\\\" you just for trying to make sure that what's being reported about you is accurate. That's why the Fair Credit Reporting Act exists -- that's where the rights (and mechanisms) come from for letting you learn about and request accurate reporting of your credit history. Every creditor is responsible for reporting its own data to the bureaus, using the format provided by those bureaus for doing so. A creditor may not provide all of the information that can be reported, and it may not report information in as timely a manner as it could or should (e.g., payments made may not show up for weeks or even months after they were made, etc.). The bottom line is that the credit bureaus are not arbiters of the data they report. They simply report. They don't draw conclusions, they don't make decisions on what data to report. If a creditor provides data that is within the parameters of what the bureaus ask to be provided, then the bureaus report precisely that -- nothing more, nothing less. If there is an inaccuracy or mistake on your report, it is the fault (and responsibility) of the creditor, and it is therefore up to the creditor to correct it once it has been brought to their attention. Federal laws spell out the process that the bureau has to comply with when you file a dispute, and there are strict standards requiring the creditor to promptly verify valid information or remove anything which is not correct. The credit bureaus are simply automated clearinghouses for the information provided by the creditors who choose to subscribe to each bureau's system. A creditor can choose which (or none) of the bureaus they wish to report to, which is why some accounts show on one bureau's report on you but not another's. What I caution is, just because a credit bureaus reports on your credit doesn't mean they have anything to do with the accuracy or detail of what is being reported. That's up to the creditors.\\\"\",\n \"The SCHUFA explicitly says on their website that their scoring system is a secret. However, if your goal is to be credit-worthy for example to get financing for a house or a car or whatever, just pay any loans and your credit card back on time and you'll be fine. There is no need to build a credit history. I just got a mortgage on a new house without any real credit history. I have one credit card which I only use on vacations because some countries don't take my debit card, and I always put money on it before I use it, so I've technically never borrowed money from a bank at all. My banker looked at my SCHUFA with me and we saw that there was nothing in there except for the credit card, which has a 500€ limit and if I maxed it out, the monthly interest would be 6,80€ so he added that 6,80€ to my expenses calculation and that was it. If you're having trouble getting a loan and you don't know why, you can ask the SCHUFA for the data they have on you and you can correct any mistakes they might have made. Sometimes, especially when you have the same full name and birth date as somebody else, the SCHUFA does get things mixed up and you have to sort it out.\",\n \"I've been in the UK for 3.5 years, and I have the same problem: I can't get even a small loan from my bank; no one will give me a phone contract; it's a nightmare. I have 8 direct debits, I pay everything on time and I earn decent money, but still my credit is seen as no good. I have got a few ideas for you though: Good luck!\",\n \"I would like to establish credit history - have heard it's useful to gain employment and makes it easy to rent an apartment? Higher credit scores will make it easier with landlords, that's true. As to employment - they do background checks, which means that they usually won't like bad things, but won't care about the good things or no things (they'll know you're a foreigner anyway). Is it safe to assume that this implies I have no history whatsoever? Probably, but you can verify pulling through AnnualCreditReport, don't go around giving your personal information everywhere. Is taking out a secured loan the only way for me? No, but it's one of the easiest. Better would be getting a secured Credit Card, not loan. For loan you'll have to pay interest, for a credit card (assuming you pay off all your purchases immediately) you will only pay the credit card fees (for secured credit cards they charge ~$20-100 yearly fees, so do shop around, the prices vary a lot!). If you're using it wisely, after a year it will be converted to a regular credit card and the collateral will be returned to you with interest (which is actually very competitive, last I heard it was around 2%, twice as much as the online savings accounts). As to a secured loan - you'll be paying 4% to CU for your own money. Doesn't make any sense at all for me. For credit cards you'll at least get some value for your money - convenience, additional fraud protection, etc. The end result will be the same. Usually the credit starts to build up after ~6-12 months (that's why after a year your secured CC will be converted to a regular one). Make sure to have the statement balance in the range of 10-30% of your credit limit, to get the best results. Would it make much better sense to wait till I get a job (then I would have a fixed monthly salary and can apply for a regular CC directly) You can apply, but you'll probably be rejected. As I mentioned in another answer elsewhere, the system in the US is such that you're unable to get credit if you don't already have credit. Which is kindof a magic circle, which you can break with the secured credit card as the least costly solution.\",\n \"Get a credit card is NOT the answer. The reason people have a bad (or no) credit score is often because they're new to the country, have just turned 18, have previously fallen into arrears or are just bad with money. Getting a credit card is risky because, if you don't stay on top of your payments, it'll just damage your score even more. Now, it sounds like I hate credit cards - but I don't, and they do have their benefits. But avoid them if possible because they can be more hassle than they're worth (ie, paying the credit back on-time, cancelling accounts when the interest comes in, moving money in and out of accounts). It's risky borrowing money from anywhere whether it's a payday lender, a bank, a credit card, etc., so use them as a last resort. If you've got your own income then that's amazing!, try not to live outside of your means and your credit score will look after (and increase) itself. It takes time to build a good credit score, but always make sure you pay the people you owe on time and the full amount. I'd stick with paying your phone provider (and any other direct debits you have setup) and avoid getting a credit card. I'd recommend Noddle to keep track of your credit score and read their FAQ on how to help build it. Unlike Experian, it's free forever so not quite as detailed... but Noddle are owned by CallCredit - one of the biggest Credit Reference Agencies in the UK so they should have the latest information on yourself. In conclusion, if you already have financial commitments like a mobile phone bill, gym membership, store cards, anything that gets paid monthly by direct debit... your credit score will increase (provided you pay the full-amount on time). I hope this helps. PS. I don't work for any of the companies here, but I've been working in the finance sector (more specifically, short-term loans) for 3+ years now.\",\n \"\\\"Credit scores are not such a big deal in Canada as they are in the US and even some European countries. One reason for this: the Social Insurance Number (SIN number) isn't used for so many purposes like the Social Security Number (SSN) in the US. The SIN number isn't even required to get credit (but with some exceptions it is needed to open an interest-bearing savings account, so that the interest income can be reported). You can refuse to provide the SIN number to most private companies. Canada also has one of the highest per-capita immigration rates of any large country, so new arrivals are expected, and services are geared up for them. Most of the banks offer special deals for \\\"\\\"New Canadians\\\"\\\". You should get a credit card (even if just a secured credit card) through them with one of these offers to start a credit file anyway, but there's no need to actually use it much. Auto-paying a utility bill through the card, and paying it off in full each month, is one way to keep it active. No need to ever pay any interest. Most major apartment rental firms will expect a good proportion of their renters to be new to Canada, so should have procedures in place to deal with it (such as a higher deposit). You should not give them your SIN for a credit check, even when you're more established. Same for utilities, they can just charge a higher deposit if they can't credit check you. For private landlords, everything is negotiable (but see the laws link at the end of this answer). You will later need a credit rating for a mortgage on a house (if not paying cash), so it's worth getting that one token credit card. Useful for car rental also. Here's a fairly complete summary of the laws on renting in Canada, which includes the maximum deposits that can be asked for, and notice periods.\\\"\",\n \"\\\"You have what is called in the biz a \\\"\\\"thin file\\\"\\\". Check with a Credit Union. They will get you a secured card or maybe a straight credit card. They usually will graduate you from a secured card to a real credit card in 12-18 months. Then you are on your way. You should also sign up for Creditkarma to get your credit report updated every week. They make their money on referring people to credit card companies so you might be able to kill two birds with one stone.\\\"\",\n \"Depends on your credit score. If you came from foreign country, you might not be having enough Credit Score. In that case, you have to go for Prepaid Credit Card offered by Banks. For prepaid credit card,you have to deposit certain amount of money which will act as your credit line.\",\n \"When you start living in US, it doesn't actually matter what was your Credit history in another country. Your Credit History in US is tied to your SSN (Social Security Number), which will be awarded once you are in the country legally and apply for it. Getting an SSN also doesn't guarantee you nothing and you have to build your credit history slowly. Opening a Checking or Savings account will not help you in building a credit history. You need to have some type of Credit Account (credit card, car loan, mortgage etc.) linked to your SSN to start building your credit history. When you are new to US, you probably won't find any bank that will give you a Credit Card as you have no Credit history. One alternative is to apply for a secured credit card. A secured credit card is one you get by putting money or paying money to a bank and open a Credit Card against that money, thereby the bank can be secure that they won't lose any money. Once you have that, you can use that to build up your credit history slowly and once you have a good credit history and score, apply for regular Credit Card or apply for a car loan, mortgage etc. When I came to US 8 years ago, my Credit History was nothing, even though I had pretty good balance and credit history back in my country. I applied for secured credit card by paying $500 to a bank ( which got acquired by CapitalOne ), got it approved and used it for everything, for three years. I applied for other cards in the mean time but got rejected every time. Finally got approved for a regular credit card after three years and in one year added a mortgage and car loan, which helped me to get a decent score now. And Yes, a good Credit Score is important and essential for renting an apartment, leasing a car, getting a Credit Card etc. but normally your employer can always arrange for an apartment given your situation or you need to share apartment with someone else. You can rent a car without and credit score, but need a valid US / International Drivers license and a Credit Card :-) Best option will be to open a secured credit card and start building your credit. When your wife and family arrives, they also will be assigned individual SSN and can start building their credit history themselves. Please keep in mind that Credit Score and Credit History is always individual here...\",\n \"The SCHUFA in Germany works a bit different from the FICO score in the US. My background: I am a German currently living in the US. The information others want to see from the SCHUFA are a bit different. If you want to example rent a house or an apartment, the landlord often wants to see a SCHUFA statement which only shows that there are no negative entries. This statement you can get easily from online and they don't mention your credit score there. If you apply for a real credit or want to lease a car, they want to look deeper in your SCHUFA profile. However, very important is: They need signed permission to do this. Every participating company can submit entries to your profile where the score is calculated from. For example mobile phone plans, leasing a car, applying for a loan. Some lenders decide on the score itself, some on the overall profile and some also take your income into account. Since there is no hire & fire in Germany you are often asked to show your last 3 paychecks. This, in combination with your SCHUFA score is used for determination if you are eligible for a loan or not. However, they check through every entry which is made there and as long as it is reasonable and fits to your income (car for 800 EUR/month with a 1000 EUR salary does not!) you should not have a problem establishing a good score. The, in my eyes, unfair part about Schufa is that they take your zip code and your neighborhood into account when calculating their score. Also moving often affects the score negatively. To finally answer your question: Credit history is also built by mobile phone plans etc. in Germany. As long as you pay everything on time you should be fine. A bad score can definitely hurt you, but it is not as important to have a score as it is in the US because the banks also determine your creditworthiness based on your monthly income and your spending behavior.\",\n \"For question #1, at least some US-based online brokers do permit direct purchases of stocks on foreign exchanges. Depending on your circumstances, this might be more cost effective than purchasing US-listed ADRs. One such broker is Interactive Brokers, which allows US citizens to directly purchase shares on many different foreign exchanges using their online platform (including in France). For France, I believe their costs are currently 0.1% of the total trade value with a 4€ minimum. I should warn you that the IB platform is not particularly user-friendly, since they market themselves to traders and the learning curve is steep (although accounts are available to individual investors). IB also won't automatically convert currencies for you, so you also need to use their foreign exchange trading interface to acquire the foreign currency used to purchase a foreign stock, which has plusses and minuses. On the plus side, their F/X spread is very competitive, but the interface is, shall we say, not very intuitive. I can't answer question #2 with specific regards to US/France. At least in the case of IB, though, I believe any dividends from a EUR-denominated stock would continue to accumulate in your account in Euros until you decide to convert them to dollars (or you could reinvest in EUR if you so choose).\",\n \"For instance and to give a comparison to the US - in Austria, almost everybody gets a credit card (without a credit history (e.g. a young person) / with a bad credit history & with a good credit history). The credit history is in the USA much more important than in Austria. In future, the way to assess a credit history will change due to analysis of social networks for instance. This can be considered in addition to traditional scoring procedures. Is your credit history/score like a criminal record? Nope. I mean is it always with you? Not really cause a criminal record will be retained on a central storage (to state it abstract) and a credit history can be calculated by private companies. Also, are there other ways to get credit cards besides with a bank? That depends on the country. In Austria, yes.\",\n \"Nationwide Flex Account lets you receive money internationally for free, but you have to pay to send it. It meets all your other criteria.\",\n \"I'm not an expert in the field, but I'm pretty sure they *do*, its just that the customers arent us, but rather the landlords/cc companies/car dealerships/etc. who pay them for credit checks. Those parties do choose to do business with them and have alternatives.\",\n \"For people with attempted to achieve credit rating coming from a huge rely or perhaps organized credit score card issuer then you can discover how complicated its to get authorised. They generally interest some kind of credit score, when you need a low interest rate quote and additional returns after that your credit score has to be excellent.\",\n \"\\\"Customer support, getting information, dealing with stolen identities, etc. I had to file a credit discrepancy report with both. Transunion: \\\"\\\"we'll look into it\\\"\\\". Equifax: \\\"\\\"okay, you need to do this... this.. this... this... this... maybe we now can help you\\\"\\\". It's almost faster to let Transunion deal with it, and let Equifax realize they goofed\\\"\",\n \"\\\"Different states have different laws, check your local laws concerning credit. Some states even guarantee you to get one free credit report per year. If you recently apply for an apartment, a mortgage or denied a credit card or loan, you can usually get a free copy from whomever you authorized to pull your credit report. Sign up credit monitoring service, there are quite a few of these. Most credit card companies offer such service, Amex, Chase, Citibank, etc. It' costs around $10-$20 per month. If you sign up a service and pull your own credit report, it's considered a \\\"\\\"soft\\\"\\\" pull which won't affect your score negatively.\\\"\",\n \"To build a US credit record, you need a Social Security Number (SSN), which is now not available for most non-residents. An alternative is an ITIN number, which is now available to non-residents only if they have US income giving a reason to file a US tax return (do you really want to get into all that...). Assuming you did have a reason to get a ITIN (one reason would be if you sold some ebooks via Amazon US, and need a withholding refund under the tax treaty), then recent reports on Flyertalk give mixed results on whether it's possible to get a credit card with an ITIN, and whether that would build a credit record. It does sound possible in some cases. A credit record in any other country would not help. You would certainly need a US address, and banks are increasingly asking for a physical address, rather than just a mailbox. Regardless, building this history would be of limited benefit to you if you later became a US resident, at that point you would be eligible for a new SSN (different from the ITIN) and have to largely start again. If getting a card is the aim, rather than the credit record, you may find some banks that will offer a secured card (or a debit card), to non-residents, especially in areas with lots of Canadian visitors (border, Florida, Arizona). You'd find it a lot easier with a US address though, and you'd need to shop around a lot of banks in person until you find one with the right rules. Most will simply avoid anyone without an SSN.\",\n \"You can view Standard & Poor's credit ratings here: http://www.standardandpoors.com/ratings/en/us/ You have to register with S&P to access the ratings.\",\n \"I guess we opt in when we take out credit, or if you sign a lease or anything like that. While credit reporting is the backbone of consumer finance, im not sure exactly how it works, and this may not be the right sub. r/personalfinance may be better. If you get a good answer elsewhere I would be much obliged if you posted it back here.\",\n \"Since we seem to be discussing credit score and credit history interchangeably, if I can add credit report as the third part of the puzzle, I have another point. Your credit score and credit report can be effective tools to notice identity theft or fraud in your name. Keeping track of your report will allow you to not only protect your good name (which is apparently in dispute here) but also those businesses who ultimately end up paying for the stolen goods or services.\",\n \"Credit history is local, so when you move to the US you start with the blank slate. Credit history length is a huge factor, so in the first year expect that nobody would trust you and you may be refused credit or asked for deposits. I was asked for deposits at cell phone company and refused for store cards couple of times. My advice - get a secured credit card (that means you put certain sum of money as a deposit in the bank and you get credit equal to that sum of money) and if you have something like a car loan that helps too (of course, you shouldn't buy a car just for that ;) but if you're buying anyway, just know it's not only hurting but also helping when you pay). Once you have a year or two of the history and you've kept with all the payments, you credit score would be OK and everybody would be happy to work with you. In 4-5 years you can have excellent credit record if you pay on time and don't do anything bad. If you are working it the US, a lot of help at first would be to take a letter from your company on an official letterhead saying that you are employed by this and that company and are getting salary of this and that. That can serve as an assurance for some merchants that otherwise would be reluctant to work with you because of the absence of credit history. If you have any assets overseas, especially if they are held in a branch of international bank in US dollars, that could help too. In general, don't count too much on credit for first 1-2 years (though you'd probably could get a car loan, for example, but rates would be exorbitant - easily 10 percentage points higher than with good credit), but it will get better soon.\",\n \"These cash restrictions are already working in Italy and France. And the reporting of foreign accounts is something that it should have been done a lot of time ago. I'm not sure why the article thinks they are a big deal..\",\n \"\\\"I was I a similar position as you, and sometimes credit bureaus might be difficult to deal with, especially when high amounts of money are involved. To make the long story short, someone opened a store credit card under my name and made a charge of around 3k. After reporting this to the bureaus, they did not want to remove the account from my credit report citing that the claim was \\\"\\\"frivolous\\\"\\\". After filing a police report, the police officer gave me the phone number for the fraud department of this store credit card, and after they investigated, they removed the account from my credit. I would suggest to do the following: Communicating with Creditors and Debt Collectors You have the right to: Stop creditors and debt collectors from reporting fraudulent accounts. After you give them a copy of a valid identity theft report, they may not report fraudulent accounts to the credit reporting companies. Get copies of documents related to the theft of your identity, like transaction records or applications for new accounts. Write to the company that has the documents, and include a copy of your identity theft report. You also can tell the company to give the documents to a specific law enforcement agency. Stop a debt collector from contacting you. In most cases, debt collectors must stop contacting you after you send them a letter telling them to stop. Get written information from a debt collector about a debt, including the name of the creditor and the amount you supposedly owe. If a debt collector contacts you about a debt, request this information in writing. I know that you said that the main problem was that your credit account was combined with another. But there might be a chance that identity theft was involved. If this is the case, and you can prove it, then you might have access to more tools to help you. For example, you can file a report with the FTC, and along with a police report, this can be a powerful tool in stopping these charges. Feel free to go to the identitytheft.gov website for more information.\\\"\",\n \"You need to get yourself a credit card, and use it regularly and also repay on time. This will help increase your credit score. Hope you have a regular job which is bringing in money every month, but having just this isnt enough, get a credit card.\",\n \"I'm really sorry, but what do you mean by ISM? I googled it but found nothing.. Thanks! Anyway, the WF product is really good indeed. Maybe we (r/finance) could start a weekly report too, quoting major reports like this one, and make some comments/analysis. That could be interesting don't you think? It would take quite some time but I think this sub lacks something like this.\",\n \"\\\"Not sure about specific French laws. Assuming its not a political party receiving such donations, and it an normal individual ... General common sense answer would be; but it could very well be a generous donation from someone in the Caimans or Germany The onus would be on you to prove it is a generous donation. What is the threshold between \\\"\\\"this money looks like money-laundering\\\"\\\" and \\\"\\\"this money looks like a generous donation\\\"\\\"? There is no threshold. By default if you don't know the source; it is money-laundering. In particular: is it up to me to explain where the money comes from, or is it the sender's problem? You have to explain the source of money. That the Bank in Germany may have to do its own due-diligence is separate from your having to explain the source of funds.\\\"\",\n \"I don't believe they're right. For international wire transfers you'd need either IBAN or SWIFT codes. I don't think any US bank participates in the IBAN network (mostly Europe and the Far East), so SWIFT is they way to go with the US. Credit unions frequently don't know what and how to do with international transactions because they don't have them that often. Some don't even have SWIFT codes of their own (many, in fact) and use intermediaries to receive money.\",\n \"\\\"you can relate everything on a credit report, and how things are calculated, to life scenarios. thats a 100% fact, and thats what people need to go by when designing their credit dicipline/diet. utilization: any kind of resource in life. water, food, energy, and etc. who would you want to live with more, the guy that just eats way too much, uses way too much energy than they need, and wastes way more water than they need? assuming there was no water cycle. payment history: speaks for itself derogatory remarks: s*** happens. thats what makes life life, but when given chances to fix your mistakes and own up to them, like i and every other responsible adult have done, and you dont, thats living up to the exact definition of derogatory. disrespecting and not caring. who wants to lend to someone who doesnt care? so if youre not gonna care, we will just put this special little remark in the derogatory section and show that you dont care about when you make mistakes. f*** it right? lol. well, thats what that section is for. showing you wont try to fix things when they go sour. if i had a guy who was fixing my roof, and did a bad job, but did everything he could to fix it, i wouldnt give him a bad rep at all. if a guy messed up my roof, and just said cya thanks for your money, hes getting a derogatory remark. credit age: just like life. showing the ability to maintain EVERY other aspect of a report for X amount of time. its like getting old as a person. after X amount of years, a lot of people will be able to say more about you as a person. whether youre a real male reproductive organ or an amazing guy. total accounts: is like taking on jobs as a self employed person or any business. if you have a lot of jobs, people must want you to do their work. it shows how people \\\"\\\"like you.\\\"\\\" hard inquiries: this is the one category of them all i dont fully agree on, can go either way, and i hate it. i really cant think of a life scenario to relate it to, so i kind of think its a prevention mechanism/keep a person in check kind of thing. like to save them from themself and save the lenders. for example, if a guy has great utilization, and just goes insane applying for credit cards, hell get everyone of them because hes showing almost no utilization. then said guy goes and looses his job, but since he racked up 50 cards at 1k each, now he can destroy 50k in credit. thats just my take, but thats EXACTLY how i look at it from TU/EX/EQs point of view.\\\"\",\n \"to find out how, please click the link above and read this post NOW! for sure you will learn a lot from it most especially on how you can get rid of errors in your annual credit report.\",\n \"Yes, there is. I was a victim of Experian's breach last year. The only thing these credit reporting agencies sell is their opinion. If their opinion is not worth shit because they are compromised, then what they sell has little value. Next time you hear a lender explaining to you this credit score thingy, ask them if they still remember how to underwrite without it, because it is going away. They will look at you and try to carefully explain its importance, but you are under no obligation to believe them. Tell them COBOL sucks, and so does much of the '80s music they still listen to.\",\n \"Is it possible for the card issuing banks to check my score without my permission? As far as I understand these things, that is exactly the whole purpose of these sorts of credit-rating institutions. The banks and other financial businesses are their customers. They exist to serve those customers. Their relationship, if any, with a consumer is probably secondary to that. When you apply for credit, you give that business any permission needed.\",\n \"This discussion indicates that the accounts are not reported to credit agencies, but the post is also over a year old, and who knows how reliable the information is (it's fairly well-traveled, though). It's based on one person calling up Trans Union and E-Trade and asking people directly.\",\n \"I'm the contrarian in the crowd. I think credit scores and debt are the closest thing to evil incarnate. You're in good company. The absence of a credit score simply means the agencies have insufficient data in their behavioral model to determine how profitable your business would be to the bank. The higher your score, the more likely the bank is to make a profit from your loan. IMHO, you're better off building up cash and investment reserves than a credit history. With sufficient reserves, you will be able to shop around for a bank that will give you a good rate, if you ever do need a loan. You'll be surprised at how quickly you get in a position where you don't need a loan if you save and invest wisely. I used to have a (high) credit score, and I was miserable about it because there were always bills due. I gave up debt 14 years ago, paid the last debt 7 years ago, and have never. been happier. Raising kids without debt (or credit score) is much more fun than with debt.\",\n \"Credit is important for many reasons. Establishing credit is an important step and should be no challenge for someone who already has good habits. The same lessons and advice that you would find for a student to establish credit would be applicable to your case as well. Factors that influence credit score, Since you are already established in your home country (Australia), you probably have a credit card (and references) that you can provide for the first few challenges (renting a car, renting an apartment). Here are the steps, Your credit score should improve quickly as the first couple of credit cards and the installment loan show good payment history, low utilization, and gain some age. After 1-2 years, you should have a good score.\",\n \"\\\"According to the Fair Credit Reporting Act: any consumer reporting agency may furnish a consumer report [...] to a person which it has reason to believe [...] intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer See p12 (section 604). The usual interpretation of this that I've heard is that a debt collection agency that owns or has been assigned a debt can make hard pulls on your credit report without your consent. This link seems to support that (and references the same part of the act, among others): According to the Fair Credit Reporting Act, [...], any business can access your credit history without your permission provided the business has a valid \\\"\\\"permissible purpose.\\\"\\\" The FCRA notes that one such permissible purpose is to review your credit information in connection with the collection of a debt. Thus, if you owe money to a debt collector, the debt collector has the legal right to pull and review your credit report. If they haven't been assigned the debt or own it outright, I believe you have a legal right to dispute it. Consult a lawyer if this is actually a situation you face. Once use for this is if the debt collection agency has trouble locating you; since your credit report normally contains current and past addresses, this is one way to locate you.\\\"\",\n \"The suggestion may be very delayed, have you personally gone to the Experian Office with all the documentation (in xerox copy and in original)? If not, please do so, there is always a difference between dealing with govt/semi-govt institutions over electronic channels and in person.\",\n \"\\\"You can't get your credit score for free, just the report with the information the score is based on. If you got credit reports through annualcreditreport.com, the Score tab would typically contain an advertisement for purchasing your score. If you have an ad-blocker enabled, that might be blocked, explaining the blank page. Try turning off any browser extensions that alter how pages are shown. The accounts page/tab/section should show something like \\\"\\\"0 open accounts\\\"\\\" or similar, to indicate that it is loading data. Your lack of credit history probably does mean you don't have a credit score, so it's probably not worth paying anything to find that out. The focus should be on the accuracy of the underlying report, since you can do something about that. Should I be worried? I'd say no on that. You'll have an easier time getting credit (and better terms) in the future if you start now with some account, even if it's a secured credit card you don't use much, because the age of the oldest and average accounts are factors in credit scoring models.\\\"\",\n \"That is an opinion. I don't think so. Here are some differences: If you use credit responsibly and take the time to make sure the reporting agencies are being accurate, a good report can benefit you. So that isn't like a criminal record. What is also important to know is that in the United States, a credit report is about you, not for you. You are the product being sold. This is, in my opinion, and unfortunate situation but it is what it is. You will more than likely benefit for keeping a good report, even if you never use credit. There are many credit scores that can be calculated from your report; the score is just a number used to compare and evaluate you on a common set of criteria. If you think about it, that doesn't make sense. The score is a reflection of how you use credit. Having and using credit is a commitment. Your are committing to the lender that you will repay them as agreed. Your choice is who you decide to make agreements with. I personally find the business practices of my local credit union to be more palatable than the business practices of the national bank I was with. I chose to use credit provided by the credit union rather than by the bank. I am careful about where I take auto loans from, and to what extent I can control it, where I take home loans from. Since it is absolutely a commitment, you are personally responsible for making sure that you like who you are making commitments with.\",\n \"Wrong sub. You're looking for /r/personalfinance >will freezing just that credit report hurt them in any way? No, but it will help prevent an identity thief from wrecking your credit. >Can I still get a loan with only one of the three frozen? Depends, but yes. You should freeze your credit at all 5 credit bureaus for personal financial protections.\",\n \"Generally when items go to collection you will receive a letter in the mail not an email. You can try to dispute the charge with the credit companies (TransUnion, Equifax, and Experian) showing that the charge came after you left the country. Like the answer above me said, disputing it may cause the 7 year clock to restart which leaves it on your account longer. It may just be simpler to try to improve your credit score instead. You can check your credit score as often as you want using Credit Karma online or on your phone.\",\n \"Some check as part of a background investigation. Money problems can make it hard to establish a level of trust. If your credit is bad you might be easy to bribe. Or you might steal from the company. The level of importance will depend on the job you are applying for, or for the customer you will be working for. Government jobs or government contracts frequently require background checks. Jobs that will involve having access to high value items or money will also require a check.\",\n \"Be aware that ATM withdrawals often generate hidden fees, which are not obviously declared. Many banks operate e.g. with a currency exchange fee, giving you an exchange rate some 1-2% lower than actually applicable. If you withdraw larger amounts, such a currency exchange fee easily adds up to what you would have paid for a wire transfer, where you would get a better exchange rate. Although it's probably much hassle for you to change banks, another option may be to find a bank which operates both in France and the US. Banks with different national branches often offer cheap and fast wire transfers between same-bank accounts in different countries. E.g. Citibank used to offer such services, but I am not sure if they still serve private customers in France.\",\n \"so what do you think of this article? we hope you can take the time to post your comments and reactions below. that way, we can help all those who are planning to sign up for credit repair services or are interested to take matters into their own hands in terms of paying off their credit obligations, once and for all.\",\n \"Credit Sesame monitors your credit score for free. My understanding is that they make their money off of credit card referrals.\",\n \"If you are assigned a US Social Security number, you can apply for credit while you are here. Making small purchases and paying them off will help with your length of credit history, which is a part of FICO, but inactivity will eventually lead to those accounts being closed. Additionally, many revolving credit companies will charge you annual fees to keep your accounts open, and will require you to maintain a US address, and most want a residential address, not a mail-drop or PO Box. TL;DR: you can do it, but it will likely require an investment of both in time and money that won't make it worth it. Footnote: If you plan on opening US banking or investment accounts, there are regulations that make it difficult for foreign nationals to maintain accounts due to IRS categorization of US Taxpayers vs Foreign Nationals. Unless you have a lot to invest or deposit, most firms won't want to bother with Foreign taxpayer certification (see w8ben).\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["\"I'm not aware that any US bank has any way to access your credit rating in France (especially as you basically don't have one!). In the US, banks are not the only way to get finance for a home. In many regions, there are plenty of \"\"owner financed\"\" or \"\"Owner will carry\"\" homes. For these, the previous owner will provide a private mortgage for the balance if you have a large (25%+) downpayment. No strict lending rules, no fancy credit scoring systems, just a large enough downpayment so they know they'll get their money back if they have to foreclose. For the seller, it's a way to shift a house that is hard to sell plus get a regular income. Often this mortgage is for only 3-10 years, but that gives you the time to establish more credit and then refinance. Maybe the interest rate is a little higher also, but again it's just until you can refinance to something better (or sell other assets then pay the loan off quick). For new homes, the builders/developers may offer similar finance. For both owner-will-carry and developer finance, a large deposit will trump any credit rating concerns. There is usually a simplified foreclosure process, so they're not really taking much of a risk, so can afford to be flexible. Make sure the owner mortgage is via a title company, trust company, or escrow company, so that there's a third party involved to ensure each party lives up to their obligations.\""],"string":"[\n \"\\\"I'm not aware that any US bank has any way to access your credit rating in France (especially as you basically don't have one!). In the US, banks are not the only way to get finance for a home. In many regions, there are plenty of \\\"\\\"owner financed\\\"\\\" or \\\"\\\"Owner will carry\\\"\\\" homes. For these, the previous owner will provide a private mortgage for the balance if you have a large (25%+) downpayment. No strict lending rules, no fancy credit scoring systems, just a large enough downpayment so they know they'll get their money back if they have to foreclose. For the seller, it's a way to shift a house that is hard to sell plus get a regular income. Often this mortgage is for only 3-10 years, but that gives you the time to establish more credit and then refinance. Maybe the interest rate is a little higher also, but again it's just until you can refinance to something better (or sell other assets then pay the loan off quick). For new homes, the builders/developers may offer similar finance. For both owner-will-carry and developer finance, a large deposit will trump any credit rating concerns. There is usually a simplified foreclosure process, so they're not really taking much of a risk, so can afford to be flexible. Make sure the owner mortgage is via a title company, trust company, or escrow company, so that there's a third party involved to ensure each party lives up to their obligations.\\\"\"\n]","isConversational":false}}},{"rowIdx":66,"cells":{"_id":{"kind":"string","value":"7876"},"query":{"kind":"string","value":"Why do stocks split?"},"gt_ids":{"kind":"list like","value":["533779"],"string":"[\n \"533779\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1],"string":"[\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["231781","26315","161895","533779","388065","537418","198592","211343","227284","584836","124368","359734","130499","399345","111827","282565","333605","80289","493438","117576","500250","240844","378906","555608","539664","463907","566553","414505","481169","169308","345404","117082","177093","513620","193266","565041","578261","80024","453521","456407","21189","14133","325682","258433","534870","286494","598295","432104","91012","229633","100546","571203","343452","411617","533712","21975","28183","553856","196478","148435","330303","40160","74560","576136","306782","152014","246690","545719","70853","61103","9876","140481","55920","522040","369762","445943","69487","224811","32600","272117","147025","596736","178296","137478","524940","171645","240422","283168","535043","42042","57286","65235","108965","95889","418150","593455","188839","563405","444747","304085"],"string":"[\n \"231781\",\n \"26315\",\n \"161895\",\n \"533779\",\n \"388065\",\n \"537418\",\n \"198592\",\n \"211343\",\n \"227284\",\n \"584836\",\n \"124368\",\n \"359734\",\n \"130499\",\n \"399345\",\n \"111827\",\n \"282565\",\n \"333605\",\n \"80289\",\n \"493438\",\n \"117576\",\n \"500250\",\n \"240844\",\n \"378906\",\n \"555608\",\n \"539664\",\n \"463907\",\n \"566553\",\n \"414505\",\n \"481169\",\n \"169308\",\n \"345404\",\n \"117082\",\n \"177093\",\n \"513620\",\n \"193266\",\n \"565041\",\n \"578261\",\n \"80024\",\n \"453521\",\n \"456407\",\n \"21189\",\n \"14133\",\n \"325682\",\n \"258433\",\n \"534870\",\n \"286494\",\n \"598295\",\n \"432104\",\n \"91012\",\n \"229633\",\n \"100546\",\n \"571203\",\n \"343452\",\n \"411617\",\n \"533712\",\n \"21975\",\n \"28183\",\n \"553856\",\n \"196478\",\n \"148435\",\n \"330303\",\n \"40160\",\n \"74560\",\n \"576136\",\n \"306782\",\n \"152014\",\n \"246690\",\n \"545719\",\n \"70853\",\n \"61103\",\n \"9876\",\n \"140481\",\n \"55920\",\n \"522040\",\n \"369762\",\n \"445943\",\n \"69487\",\n \"224811\",\n \"32600\",\n \"272117\",\n \"147025\",\n \"596736\",\n \"178296\",\n \"137478\",\n \"524940\",\n \"171645\",\n \"240422\",\n \"283168\",\n \"535043\",\n \"42042\",\n \"57286\",\n \"65235\",\n \"108965\",\n \"95889\",\n \"418150\",\n \"593455\",\n \"188839\",\n \"563405\",\n \"444747\",\n \"304085\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["From Investopedia, A stock split is usually done by companies that have seen their share price increase to levels that are either too high or are beyond the price levels of similar companies in their sector. The primary motive is to make shares seem more affordable to small investors even though the underlying value of the company has not changed. From Wikipedia, It is often claimed that stock splits, in and of themselves, lead to higher stock prices; research, however, does not bear this out. What is true is that stock splits are usually initiated after a large run up in share price...stock splits do increase the liquidity of a stock; there are more buyers and sellers for 10 shares at $10 than 1 share at $100. Some companies have the opposite strategy: by refusing to split the stock and keeping the price high, they reduce trading volume. Berkshire Hathaway is a notable example of this. Something more to munch on, Why Warren Buffett Is Against Stock Splits.","To make you happy. The thing is, if they split 10 for 1, its still the exact same value in total. There are just more shares that are worth 35 instead of 350each. You need to know things like how many shares there are <the float> how rapidly the company is growing. If it has earnings at all and how much. There is a lot more to the value of a company than the price of the stock alone.","The reason to do a stock split is to get the price of the stock down to an affordable range. If your stock costs $100,000 per share, you are seriously cutting in to the number of people who can afford to buy it. I can think of two reasons NOT to do a stock split. The biggest is, Why bother? If your stock is trading at a reasonable price, why change anything? It takes time and effort, which equals money, to do a stock split. If this serves no purpose, you're just wasting that effort. The other reason is that you don't want to drive your stock price down too low. Low prices are normally associated with highly speculative start-up companies, and so can give a wrong impression of your company. Also, low prices make it difficult for the price to reflect small changes. If your stock is trading at $10.00, a 1/2 of 1% change is 5 cents. But if it's trading at $1.50, a 1/2 of 1% change is a fraction of a penny. Does it go up by that penny or not? You've turned a smooth scale into a series of hurdles.","Stock splits are typically done to increase the liquidity of stock merely by converting every stock of the company into multiple stocks of lower face value. For example, if the initial face value of the stock was $10 and the stock got split 10:1, the new face value of the stock would be $1 each. This has a proportional effect on the market value of the stock also. If the stock was trading at $50, after the split the stock should ideally adjust to $5. This is to ensure that despite the stock split, the market capitalization of the company should remain the same. Number of Shares * Stock Price = Market Capitalization = CONSTANT","Most of the time when a stock splits to create more shares, it is done to bring the price per share down to a level that makes potential investors more comfortable. There are psychological reasons why some companies keep the price in the $30 to $60 range. Others like to have the price keep rising into the hundreds or thousands a share. The split doesn't help current investors, with the possible exception that the news spurs interest in the stock which leads to a short term rise in prices; but it also doesn't hurt current investors. When a reverse stock split is done, the purpose is for one of several reasons:","\"Vitalik has mentioned this in a comment but I think it ought to be expanded upon: Companies that aren't already penny stocks really don't stand to gain anything from trying to prevent short interest. Short selling does not inherently lower the stock price - not any more so than any other kind of selling. When somebody shorts a stock, it's simply borrowed from another investor's margin; as long as it's not a naked short resulting in an FTD (Failure To Deliver) then it does not add any \"\"artificial\"\" selling pressure. In fact, shorting can actually drive the price up in the long term due to stops and margin calls. Not a guarantee, of course, but if a rally occurs then a high short interest can cause a cascade effect from the short \"\"squeeze\"\", resulting in an even bigger rally than what would have occurred with zero short interest. Many investors actually treat a high short interest as a bullish signal. Compare with margin buying - essentially the opposite of short selling - which has the opposite effect. If investors buy stocks on margin, then if the value of that stock decreases too rapidly they will be forced to sell, which can cause the exact same cascade effect as a short interest but in the opposite direction. Shorting is (in a sense) evening out the odds by inflating the buying pressure at lower stock prices when the borrowers decide to cover and take profits. Bottom line is that, aside from (illegal) insider trading, it doesn't do businesses any good to try to manipulate their stock price or any trading activity. Yes, a company can raise capital by selling additional common shares, but a split really has no effect on the amount of capital they'd be able to raise because it doesn't change the actual market cap, and a dilution is a dilution regardless of the current stock price. If a company's market cap is $1 billion then it doesn't matter if they issue 1 million shares at $50.00 each or 10 million shares at $5.00 each; either way it nets them $50 million from the sale and causes a 5% dilution, to which the market will react accordingly. They don't do it because there'd be no point.\"","A reason not to split your stock is that the value of the company might fall back again, and if its stock price falls below $1 it will be delisted from the NYSE. So if the value of your company grows tenfold so the shares go from $5 to $50, you do a ten-for-one split, and then its value shrinks back to where it started, you're off the stock exchange.","Investopedia has a good definition. Stock dividends are similar to cash dividends; however, instead of cash, a company pays out stock. Stock splits occur when a company perceives that its stock price may be too high. Stock splits are usually done to increase the liquidity of the stock (more shares outstanding) and to make it more affordable for investors to buy regular lots (a regular lot = 100 shares).","Are you really talking about share price, or share value? Because what about stock splits? Market Cap stays the same, but the price per share is lowered. This is so that the stock is more liquid and accessible to a greater number of investors. This encourages people to invest in the stock though. I can't really think of any reasons why a company would want to lower their share value or discourage people from investing unless they are trying to reacquire shares. Returning value to the shareholders is the #1 priority of any publicly traded company.","The reason a company creates more stock is to generate more capital so that this can be utilized and more returns can be generated. It is commonly done as a follow on public offer. Typically the funds are used to retire high cost debts and fund future expansion. What stops the company from doing it? Are Small investors cheated? It's like you have joined a car pool with 4 people and you are beliving that you own 1/4th of the total seats ... so when most of them decide that we would be better of using Minivan with 4 more persons, you cannot complain that you now only own 1/8 of the total seats. Even before you were having just one seat, and even after you just have one seat ... overall it maybe better as the ride would be good ... :)","You can argue that cash dividend is a kind of split as well by this logic. The stock price on ex-dividend gets a hit coincidental with the dividend to be paid, so one can argue that the investor has the same cash value on the day the dividend was paid as if it wouldn't be paid at all. However, for the company to distribute stocks instead of cash may be advantageous if they have low cash reserves but significant amount of treasury stocks, and the stocks are of high liquidity. It is also a way for the company to release treasury stocks without diluting the current shareholders and creating taxable income to the company, that's an important factor to consider. This is in fact the real answer to your question. The main difference between split and stock dividend is that in split, the stock distributions proportions don't change. With stock dividend - they do. While the outstanding share proportions do not change, total proportions do, because of the treasury stocks being distributed. So company has less stocks in its vaults, but everyone else still has the same proportions of ownership. Compare this to split: company's treasury stocks would be split as well, and it would continue essentially sitting on the same proportion of stocks. That shift of treasury stocks to the outside shareholders - this is what makes it a dividend.","Are you sure you're not just looking at prices that are adjusted for the split, e.g. Yahoo? For example, Gilead Sciences (GILD) split a few months ago, but if you look at a price chart, there isn't an interruption even though the split is clearly marked. (Look in the past six months; it split in January). However, you could also simply be watching companies that happen to not split, for a variety of reasons. This isn't a criticism, but rather just a consequence of whatever stocks you happen to be watching. However, a quick search for information on stock splits yields a few articles (mainly from the Motley Fool) that argue that fewer companies are performing stock splits in recent years; the articles mainly talk about tech companies, and they make the argument that even though the shares in Google and Apple have a high stock price: Google and Apple aren't all that expensive by traditional valuation metrics. Google trades at just 15 times next year's projected profitability. Apple fetches a mere 13 times fiscal 2012's bottom-line estimates. These articles are a bit dated in terms of the stock prices, but the rationale is probably still good. Similar logic could apply for other companies; for example, since May 2009, Panera's stock price has climbed by almost a factor of 4 without splitting. The articles also make the point that stock splits were traditionally seen as bullish signs because: Companies splitting to bring their share prices back down to more accessible levels were optimistic in building those sand castles back up. One could make a fair argument that the overall economic climate isn't as bullish as it used to be, although I would only be convinced that this was affecting stock splits if data could be gathered and tested. A stock split can also raise the price of a stock because if small investors feel the stock is suddenly more accessible to them, they purchase more of it and might therefore drive up the price. (See the Investopedia article on stock splits for more information). Companies might not see the necessity in doing this because their stock price isn't high enough to warrant a split or because the price isn't high enough to outprice smaller investors. One interesting point to make, however, is that even though stock splits can drive small investors to buy more of the stock, this isn't always a gain for the company because professional investors (firms, institutions, etc.) have a tendency to sell after a split. The paper is a bit old, but it's still a very neat read. It's possible that more and more companies no longer see any advantage to splitting because it might not affect their stock price in the long run, and arguably could even hurt it. Considering that large/professional investors likely hold a higher percentage of a company's shares than smaller investors, if a stock split triggers a wave of selling by the former, the increasing propensity to buy of the latter may not be enough to offset the decline in price. Note: My answer only refers to standard stock splits; the reasons above may not apply to a decrease in the number of reverse stock splits (which may not be a phenomenon; I don't know).","Lets pretend that TELSA decided to split its stock 10 shares for 1. Now the stock is $35 dollars- would that make you happy? You dont have any idea how companies are valued. Berkshire Hathaway Inc. Class A NYSE: BRK.A - Oct 31, 12:58 PM EDT 280,210.00 USD","A stock dividend isn't exactly a split. Example: You have 100 shares of stock worth $5 a share (total value $500). The company wants to distribute a dividend worth 1%. You could expect a check for $5. But If they wanted to do a stock dividend they could send you 0.01 shares for every share you own, in your case you will be given a single share worth $5. Now you own 101 shares. Why a share dividend? It doesn't take cash to give the dividend. It keeps the money invested in the company. Some investors re-invest a cash dividend, some don't. A cash dividend is generally taxable income for the investor; a stock dividend isn't. Some investors prefer one over the other, but it depends on their specific financial picture. Neither a stock dividend, a cash dividend or split changes anything. The split changes the price to meet a goal. The cash dividend lowers the price by sending excess cash to the investors. The stock dividend lowers the price by creating new shares and retaining cash. It company picks the message and the method. depending on their goals and situation. Remember that a company may want to give a dividend because they have a history of doing so, but not have the cash to do so. It is like a split because the number of shares you own will go up, and the price per share will go down. But a split is generally done to bring the price of a share to within a specific range. The company sees a benefit to having a stock mid priced, instead of very high or very low.","You are correct in thinking actual number of shares do not matter, the value is the value. However there are cases where share price does play a role. Berkshire Hathaway for example has not split because Warren Buffet believes it has cut down on the liquidity of the stock, as well as attracting investors with an eye for the longer term. There have also been things written on the psychology of a share price. For example, some people are attracted to shares that split, because it reflects a company is growing.","A company typically goes public in order to bring in additional capital. In an IPO, the company (through its officials) will typically do so by issuing additional shares, and offering to sell those to investors. If they did not do that, then there would be no net capital gain for the company; if person A sells share in company C to person B, then company C does not benefit directly from the exchange. By issuing and selling additional shares, the total value of all stock in the company can increase. Being publicly traded also greatly increases the confidence in the valuation of the company, as a consequence of the perfect market theory. There is nothing in this that says that initial investors (cofounders, employees, etc.) need to sell their shares in the process. They might choose to do so, or they might not; or they might be prevented from doing so by terms of any agreements that they have signed or by insider trading laws. Compare What happens to internal stock when a company goes public? Depending on specifics, it might be reasonable for the company to perform a share split prior to the initial public offering. That, however, doesn't affect the total value of the shares, only the price per share.","\"After the initial public offering, the company can raise money by selling more stock (equity financing) or selling debt (e.g. borrowing money). If a company's stock price is high, they can raise money with equity financing on more favorable terms. When companies raise money with equity financing, they create new shares and dilute the existing shareholders, so the number of shares outstanding is not fixed. Companies can also return money to shareholders by buying their own equity, and this is called a share repurchase. It's best for companies to repurchase their shared when their stock price is low, but \"\"American companies have a terrible track record of buying their own shares high and selling them low.\"\" The management of a company typically likes a rising stock price, so their stock options are more valuable and they can justify bigger pay packages.\"","In theory*, if a company has 1m shares at $10 and does a 10 for 1 split, then the day after it has 10m shares at $1 (assuming no market move). So both the price and the number of share change, keeping the total value of the company unchanged. Regarding your BIS, I suspect that the new number of shares has not been reported yet because it's an ETF (the number of shares in issue changes everyday due to in/out flows). Your TWX example is not ideal either because there was a spin off on the same day as the stock split so you need to separate the two effects. * Some studies have documented a positive stock split effect - one of the suggested reasons is that the stock becomes more liquid after the split. But other studies have rejected that conclusion, so you can probably safely consider that on average it will not have a material effect.","A Company start with say $100. Lets say the max it can borrow from bank is $100 @ $10 a year as Interest. After a years say, On the $200 the company made a profit of $110. So it now has total $310 Option 1: Company pays back the Bank $100 + $10. It further gave away the $100 back to shareholders as dividends. The Balance with company $100. It can again start the second year, borrow from Bank $100 @ 10 interest and restart. Option 2: Company pays back the Bank $100 + $10. It now has $200. It can now borrow $200 from Bank @ $20. After a year it makes a profit of $250. [Economics of scale result $30 more] Quite a few companies in growth phase use Option 2 as they can grow faster, achieve economies of scale, keep competition at bay, etc Now if I had a share of this company say 1 @ $1, by end of first year its value would be $2, at the end of year 2 it would be $3.3. Now there is someone else who wants to buy this share at end of year 1. I would say this share gives me 100% returns every year, so I will not sell at $2. Give me $3 at the end of first year. The buyer would think well, if I buy this at $3, first year I would notionally get $.3 and from then on $1 every year. Not bad. This is still better than other stocks and better than Bank CD etc ... So as long as the company is doing well and expected to do well in future its price keeps on increasing as there is someone who want to buy. Why would someone want to sell and not hold one: 1. Needs cash for buying house or other purposes, close to retirement etc 2. Is balancing the portfolio to make is less risk based 3. Quite a few similar reasons Why would someone feel its right to buy: 1. Has cash and is young is open to small risk 2. Believes the value will still go up further 3. Quite a few similar reasons","\"A stock split can force short sellers of penny stocks to cover their shorts and cauuse the price to appreciate. Example: Someone shorts a worthless pump and dump stock, 10,000 shares at .50. They have to put up $25,000.00 in margin ($2.50 per share for stocks under $2.50). The company announces a 3 to 1 split. Now the short investor must come up with $50,000.00 additional margin or be be \"\"bought in\"\". The short squeeze is on.\"","\"In 2005, Apple announced a split on Feb 11... CUPERTINO, California — February 11, 2005 — Apple® announced today that its Board of Directors has approved a two-for-one split of the Company’s common stock and a proportional increase in the number of Apple common shares authorized from 900 million to 1.8 billion. Each shareholder of record at the close of business on February 18, 2005 will receive one additional share for every outstanding share held on the record date, and trading will begin on a split-adjusted basis on February 28, 2005. ...one month after announcing earnings. CUPERTINO, California—January 12, 2005—Apple® today announced financial results for its fiscal 2005 first quarter ended December 25, 2004. For the quarter, the Company posted a net profit of $295 million, or $.70 per diluted share. These results compare to a net profit of $63 million, or $.17 per diluted share, in the year-ago quarter. Revenue for the quarter was $3.49 billion, up 74 percent from the year-ago quarter. Gross margin was 28.5 percent, up from 26.7 percent in the year-ago quarter. International sales accounted for 41 percent of the quarter’s revenue. I wouldn't expect Apple to offer another split, as it's become somewhat fashionable among tech companies to have high stock prices (see GOOG or NFLX or even BRK-A/BRK-B). Additionally, as a split does nothing to the underlying value of the company, it shouldn't affect your decision to purchase AAPL. (That said, it may change the perception of a stock as \"\"cheap\"\" or \"\"expensive\"\" per human psychology). So, to answer your question: companies will usually announce a stock split after releasing their financial results for the preceding fiscal year. Regardless of results, though, splits happen when the board decides it is advantageous to the company to split its stocks.\"","There has been a lot of research on the effects of stock splits. Some studies have concluded that: However note that (i) these are averages over large samples and does not say it will work on every split and (ii) most of the research is a bit dated and more recent papers have often struggled to find any significant performance impact after 1990, possibly because the effect has been well documented and the arbitrage no longer exists. This document summarises the existing research on the subject although it seems to miss some of the more recent papers. More practically, if you pay a commission per share, you will pay more commissions after the split than before. Bottom line: don't overthink it and focus on other criteria to decide when/whether to invest.","Short answer: No, it only matters if you want to use covered calls strategies. The price of a share is not important. Some companies make stock splits from time to time so that the price of their shares is more affordable to small investors. It is a decision of the company's board to keep the price high or low. More important is the capitalization for these shares. If you have lots of money to invest, the best is to divide and invest a fixed pourcentage of your portfolio in each company you choose. The only difference is if you eventually decide to use covered call strategies. To have a buy write on Google will cost you a lot of money and you will only be able to sell 1 option for every 100 shares. Bottom line: the price is not important, capitalization and estimated earnings are. Hope this answers your question.","Overpriced shares: Cheaper to raise new capital through secondary share offerings or debt using shares as a security. Fends off hostile take overs, since the company is too dear. When a company is taken over it needs only one set of management. Top management of the company that is taken over loses their jobs - no one wants to lose their job. Shareholders love to see share price grow - sale brings them profit, secures jobs for company management. Shares are used as a currency during acquisitions, if company shares are overpriced that means they can buy another company on the cheap - paying with the overpriced shares. Undervalued shares: More expensive to raise additional capital through secondary share offerings - for the same amount of capital the management has to offer a bigger chunk of the company; have to offer bigger chunk of a company as a security as well. Makes company vulnerable to hostile take overs, company is undervalues - makes it an attractive bargain. Once the company is taken over top management will almost certainly lose jobs. Falling price makes shareholders unhappy - they will vote management out. Makes difficult to acquire other companies.","No, I think you are misunderstanding the Math. Stock splits are a way to control relatively where the price per share can be for a company as companies can split or reverse split shares which would be similar to taking dimes and giving 2 nickels for each dime, each is 10 cents but the number of coins has varied. This doesn't create any additional value since it is still 10 cents whether it is 1 dime or 2 nickels. Share repurchase programs though are done to prevent dilution as executives and those with incentive-stock options may get shares in the company that increase the number of outstanding shares that would be something to note.","The bonus share also improves the liquidity however there is some difference in treatment. Lets say a company has 100 shares, of $10 ea. The total capital of the compnay is 100*10 = 1000. Assuming the company is doing well, its share is now available in the market for $100 ea. Now lets say the company has made a profit of $1000 and this also gets factored into the price of $100. Lets say the company decides to keep this $1000 kept as Cash Reserve and is not distributed as dividends. In a share split say (1:1), the book value of each share is now reduced to $5, the number of shares increase to 200. The share capital stays at 200*5 = 1000. The market value of shares come down to $50 ea. In a Bonus share issue say (1:1), the funds $1000 are moved from Cash Reserve and transferred to share capital. The book value of each share will remain same as $10, the number of shares increase to 200. The share capital increases to 200*10 = 2000. The market value of shares come down to $50 ea. So essentially from a liquidity point of view both give the same benefit. As to why some companies issue bonus and not a split, this is because of multiple reasons. A split beyond a point cannot be done, ie $10 can be split to $1 ea but it doesn't look good to make it $0.50. The other reason is there is adequate cash reserve and you want to convert this into share holders capital. Having a larger share holders capital improves some of the health ratios for the compnay. At times bouns is used to play upon that one is getting something free.","The other answer has some good points, to which I'll add this: I believe you're only considering a company's Initial Public Offering (IPO), when shares are first offered to the public. An IPO is the way most companies get a public listing on the stock market. However, companies often go to market again and again to issue/sell more shares, after their IPO. These secondary offerings don't make as many headlines as an IPO, but they are typical-enough occurrences in markets. When a company goes back to the market to raise additional funds (perhaps to fund expansion), the value of the company's existing shares that are being traded is a good indicator of what they may expect to get for a secondary offering of shares. A company about to raise money desires a higher share price, because that will permit them to issue less shares for the amount of money they need. If the share price drops, they would need to issue more shares for the same amount of money – and dilute existing owners' share of the overall equity further. Also, consider corporate acquisitions: When one company wants to buy another, instead of the transaction being entirely in cash (maybe they don't have that much in the bank!), there's often an equity component, which involves swapping shares of the company being acquired for new shares in the acquiring company or merged company. In that case, the values of the shares in the public marketplace also matter, to provide relative valuations for the companies, etc.","\"The key difference I've found between a stock split and a stock dividend – of the exact same stock and class, as opposed to a spin-off – seems to be from the company's own accounting perspective. There doesn't appear to be any actual transfer of value to the shareholder with either kind of transaction; i.e. in theory, each transaction would be immaterial to the value of your holdings. With respect to the company's accounting, a stock split affects the par value of the shares, whereas a stock dividend reduces the retained earnings account in order to increase paid-in or contributed capital. I found a good online source which explains the history behind this accounting difference: McGraw-Hill - Intermediate Accounting eBook, 6/e - Chapter 18 - Stock Dividends and Splits. Small quote: [...] Besides being based on fallacious reasoning, accounting for stock dividends by artificially reclassifying “earned” capital as “invested” capital conflicts with the reporting objective of reporting shareholders' equity by source. Despite these limitations, this outdated accounting standard still applies. Since neither the corporation nor its shareholders apparently benefits from stock dividends, why do companies declare them?23 Occasionally, a company tries to give shareholders the illusion that they are receiving a real dividend. Another reason is merely to enable the corporation to take advantage of the accepted accounting practice of capitalizing retained earnings. Specifically, a company might wish to reduce an existing balance in retained earnings—otherwise available for cash dividends—so it can reinvest the earned assets represented by that balance without carrying a large balance in retained earnings. [...] There's a lot more on that page, before and after, worth reading. From another book: Google Books - Comparative Income Taxation, a Structural Analysis - page 314 - Stock Dividends. Small quote: The distribution of dividends in the form of stock or \"\"bonus\"\" shares to existing shareholders typically involves a transfer for corporate law purposes of retained earnings into stated capital. It can been [sic] viewed as a deemed distribution of a cash dividend to the shareholders followed by a corresponding contribution to capital or as solely as an event at the corporate level which has no effect on the shareholders whose economic interest in the corporation is unchanged by the receipt of additional shares. The systems have taken varied approaches to the stock dividend problem. The treatment is in part a function of the rules dealing with distributions of stated capital. [emphases above are mine] [... continues w/descriptions of different countries' tax treatments of the kinds of stock dividends. Includes U.S., Sweden, Japan, Netherlands, Canada, Australia, U.K., France, Germany. ...] As far as why a corporation might want to capitalize earnings and reduce the equity otherwise available for dividends, I can only imagine that, ignoring taxes for a moment, that it may have something to do with capital ratios that need to be maintained for financing or regulatory purposes? Yet, I remain curious. If I discover more on this then I'll update my answer. Additional resources:\"","Firstly a stock split is easy, for example each unit of stock is converted into 10 units. So if you owned 1% of the company before the stock split, you will still own 1% after the stock split, but have 10 times the number of shares. The company does not pay out any money when doing this and there is no effect on tax for the company or the share holder. Now onto stock dividend… When a company make a profit, the company gives some of the profit to the share holders as a dividend; this is normally paid in cash. An investor may then wish to buy more shares in the company using the money from the dividend. However buying shares used to have a large cost in broker charges etc. Therefore some companies allowed share holders to choose to have the dividend paid as shares. The company buys enough of their own shares to cover the payout, only having one set of broker charges and then sends the correct number of shares to each share holder that has opted for a stock dividend. (Along with any cash that was not enough to buy a complete share.) This made since when you had paper shares and admin costs where high for stock brokers. It does not make sense these days. A stock dividend is taxed as if you had been paid the dividend in cash and then brought the stock yourself.","You ask if Tesla being a car company should feel a pressure to split their stock because their share price is much higher than the other car companies. But is Tesla a car company? It was founded by Elon Musk who founded PayPal and SpaceX. He sees him self as the next generation of entrepreneurs that came after Jobs and Gates. So he compares Tesla ($142) companies to Google ($856), Amazon ($284) and eBay ($52). But even if you see Tesla as a car company, Musk sees it more like Audi ($828) or BMW ($100) then he does Ford ($16.30) just because the base price of their models ($80,000+) is much greater than Ford or GM. The theory is that keeping the share price in a lower range helps investors. But since 40% of the company is owned by mutual funds is that really a concern? Therefore most small investors get the company though a mutual fund.","The stock split, it is similar to what happened to Apple a little while back. When Google split 2 to 1, it means that each share holder got 2 shares for each 1 share they had and each share was 1/2 the price.","\"Someone who buys a stock is fundamentally buying a share of all future dividends, plus the future liquidation value of the company in the event that it is liquidated. While some investors may buy stocks in the hope that they will be able to find other people willing to pay more for the stock than they did, that's a zero sum game. The only way investors can make money in the aggregate is if either stocks pay dividends or if the money paid for company assets at liquidation exceeds total net price for which the company sold shares. One advantage of dividends from a market-rationality perspective is that dividend payments are easy to evaluate than company value. Ideally, the share price of a company should match the present per-share cash value of all future dividends and liquidation, but it's generally impossible to know in advance what that value will be. Stock prices may sometimes rise because of factors which increase the expected per-share cash value of future dividends and liquidations. In a sane market, rising prices on an item will reduce people's eagerness to buy and increase people's eagerness to sell. Unfortunately, in a marketplace where steady price appreciation is expected the feedback mechanisms responsible for stability get reversed. Rapidly rising prices act as a red flag to buyers--unfortunately, bulls don't see red flags as signal to stop, but rather as a signal to charge ahead. For a variety of reasons including the disparate treatment of dividends and capital gains, it's often not practical for a company to try to stabilize stock prices through dividends and stock sales. Nonetheless, dividends are in a sense far more \"\"real\"\" than stock price appreciation, since paying dividends generally requires that companies actually have sources of revenues and profits. By contrast, it's possible for stock prices to go through the roof for companies which have relatively few assets of value and no real expectation of becoming profitable businesses, simply because investors see rising stock prices as a \"\"buy\"\" signal independent of any real worth.\"","\"Share price is based on demand. Assuming the same amount of shares are made available for trade then stocks with a higher demand will have a higher price. So say a company has 1000 shares in total and that company needs to raise $100. They decide to sell 100 shares for $1 to raise their $100. If there is demand for 100 shares for at least $1 then they achieve their goal. But if the market decides the shares in this company are only worth 50 cents then the company only raises $50. So where do they get the other $50 they needed? Well one option is to sell another 100 shares. The dilution comes about because in the first scenario the company retains ownership of 900 or 90% of the equity. In the second scenario it retains ownership of only 800 shares or 80% of the equity. The benefit to the company and shareholders of a higher price is basically just math. Any multiple of shares times a higher price means there is more value to owning those shares. Therefore they can sell fewer shares to raise the same amount. A lot of starts up offer employees shares as part of their remuneration package because cash flow is typically tight when starting a new business. So if you're trying to attract the best and brightest it's easier to offer them shares if they are worth more than those of company with a similar opportunity down the road. Share price can also act as something of a credit score. In that a higher share price \"\"may\"\" reflect a more credit worthy company and therefore \"\"may\"\" make it easier for that company to obtain credit. All else being equal, it also makes it more expensive for a competitor to take over a company the higher the share price. So it can offer some defensive and offensive advantages. All ceteris paribus of course.\"","There are two reasons to do a reverse split. Those partial shares will then be turned into cash and returned to the investors. For large institutional investors such as mutual funds or pension funds it results in only a small amount of cash because the fund has merged all the investors shares together. If the company is trying to meet the minimum price level of the exchange they have little choice. If they don't do the reverse split they will be delisted. If the goal is to reduce the number of investors they are using one of the methods of going private: A publicly held company may deregister its equity securities when they are held by less than 300 shareholders of record or less than 500 shareholders of record, where the company does not have significant assets. Depending on the facts and circumstances, the company may no longer be required to file periodic reports with the SEC once the number of shareholders of record drops below the above thresholds. A number of kinds of transactions can result in a company going private, including:","Companies do both quite often. They have opposite effects on the share price, but not on the total value to the shareholders. Doing both causes value to shareholders to rise (ie, any un-bought back shares now own a larger percentage of the company and are worth more) and drops the per-share price (so it is easier to buy a share of the stock). To some that's irrelevant, but some might want a share of an otherwise-expensive stock without paying $700 for it. As a specific example of this, Apple (APPL) split its stock in 2014 and also continued a significant buyback program: Apple announces $17B repurchase program, Oct 2014 Apple stock splits 7-to-1 in June 2014. This led to their stock in total being worth more, but costing substantially less per share.","Simple: Do a stock split. Each 1 Ordinary share now = 100 Ordinary shares (or 100,000 or whatever you choose). Then sell 20 (or 20,000) of them to your third party. (Stock splits are fairly routine occurrence. Apple for example has done several, most recently in 2014 when 1 share = 7 shares). Alternatively you could go the route of creating a new share class with different rights, preferences etc. But this is more complicated.","It comes down to the practical value of paying dividends. The investor can continually receive a stream of income without selling shares of the stock. If the stock did not pay a dividend and wanted continual income, the investor would have to continually sell shares to gain this stream of income, incurring transaction costs and increased time and effort involved with making these transactions.","\"Simple answer is because the stocks don't split. Most stocks would have a similar high price per share if they didn't split occasionally. Why don't they split? A better way to ask this is probably, why DO most stocks split? The standard answer is that it gives the appearance that stocks are \"\"cheap\"\" again and encourages investors to buy them. Some people, Warren Buffett (of Berkshire Hathaway) don't want any part of these shenanigans and refuse to split their stocks. Buffett also has commented that he thinks splitting a stock also adds unnecessary volatility.\"","A stock dividend converts some of the reserves and surplus on the company's balance sheet into paid-up capital and securities premium account without involving any actual cash outflow to the shareholders. While cash dividends are eyed by the investors due to their cash yield, issuance of stock dividends are indicators of growing confidence of the management and the shareholders in the company. The fact that shareholders want to convert free cash sitting on the balance sheet (which can ideally be taken out as dividends) into blocked money in exchange for shares is symbolic to their confidence in the company. This in turn is expected to lead to an increase in market price of the stock.","people buy stocks because there is more to Return on Investment than whether dividends are issued or not. Some people want ownership and the ability to influence decisions by using the rights associated with their class of stock. Another reason would be to park capital in a place that would grow faster than the rate of inflation. these are only a few of many reasons why people would buy stock.","\"I'll skip the \"\"authorizing....\"\" and go right to uses of new shares: Companies need stock as another liquid asset for a variety of purposes, and if not enough stock is available, then may be forced to the open market to acquire, either by exchanging cash or taking on debt to get the cash.\"","You haven't seen one because you haven't looked for one properly. You can set a google alert for stock split and get information about major issues splitting their stocks quite regularly, as well as a daily dose of recommendations from people without a say in the matter for big companies to split their stock. Stock splits are announced in advance by company management.","/ in relative to the Tesla's performance, and current inflation. They can split and reverse split at anytime the board decides without any regard to inflation or performance. OP points to Tesla at 350- he doesn't point to PE. It makes no differences what the price of one share is. If they split 10 for 1 it would be 35- but what difference does that make- the PE remains the same. OP does not understand value- only price.","This IS a stock split. http://en.wikipedia.org/wiki/Stock_split Ratios of 2-for-1, 3-for-1, and 3-for-2 splits are the most common, but any ratio is possible. Splits of 4-for-3, 5-for-2, and 5-for-4 are used, though less frequently. Investors will sometimes receive cash payments in lieu of fractional shares.","Why do companies exist? Well, the corporate charter describes why the company exists. Usually the purpose is to enrich the shareholders. The owners of a company want to make money, in other words. There are a number of ways that a shareholder can make money off a stock: As such, maintaining the stock price and dividend payouts are generally the number one concern for any company in the long term. Most of the company's business is going to be directed towards making the company more valuable for a future buyout, or more valuable in terms of what it can pay its shareholders directly. Note that the company doesn't always need to be worried about the specifics of the day-to-day moves of the stock. If it keeps the finances in line - solid profits, margins, earnings growth and the like - and can credibly tell people that it's generally a valuable business, it can usually shrug off any medium-term blips as market craziness. Some companies are more explicitly long-term about things than others (e.g. Berkshire Hathaway basically tells people that it doesn't care all that much about what happens in the short term). Of course, companies are abstractions, and they're run by people. To make the people running the company worry about the stock price, you give them stock. Or stock options, or something like that. A major executive at a big company is likely to have a significant amount of stock. If the company does well, he does well; if it does poorly, he does poorly. Despite a few limitations, this is really a powerful incentive. If a company is losing a lot of money, or if its profits are falling so it's just losing a lot of its value as a business, the owners (stockholders) tend to get upset, and may vote in new management, or launch some sort of shareholder lawsuit. And, as previously noted, to raise funds, a company can also issue new shares to the market as a secondary offering as well (and they can issue fewer shares if the price is high - meaning that whatever the company is worth afterward, the existing owners own proportionally more of it).","People buy stocks with the intention of making money. They either expect the price to continue to rise or that they will get dividends and the price will not drop (enough) to wipe out their dividend earnings.","Apart from making money from the price difference, some stocks also give dividends, or bonus issues. For long term investors whom are looking for steady income, they may be more interested with the dividend pay-out instead of the capital-appreciation.","\"This could be another reason. \"\"Companies buy their own stock in the market place to reduce the number of shares outstanding, and thus boosts the earnings per share. It also boosts the stock price, which benefits management that has stock options. \"\" Taken from this article. http://www.forbes.com/sites/investor/2014/01/06/the-most-reliable-indicator-of-an-approaching-market-top/ and this article \"\"Why are stock rising?\"\" may help as well. http://www.forbes.com/sites/investor/2013/12/23/why-are-stocks-rising/\"","Originally, stocks were ownership in a company just like any other business- you expected to make a profit from your investment, which is what we call dividends to stock holders. Since these dividends had real value, the stock price was based on what this return rate was, factoring in what it might be expected to be in the future, etc. Nowdays many companies never issue any dividends, so you have to consider the full value of the company and what benefit could be gained by another company if it were to acquire it. the market will likely adjust the share price to factor in what the value of the company might be to an acquirer. But otherwise, some companies today trading at an astronimical price, and which nevers pays a dividend- chalk it up to market stupidity. In this investor'd mind, there is no logical reason for these prices, except based on the idea that someone else might pay you more for it later... for what reason? I can't figure it out. Take it back to it's roots and imagine pitching a new business idea to you uncle to invest in- it will make almost nothing compared to it's share price, and even what it does make it won't pay anything to him for his investment. Why wouldn't he just laugh at you?","There's a premium or discount for various stocks subject to influence by the alternatives available to investors, meaning investments are susceptible to the principle of supply and demand. This is easily seen when industries or business models get hot, and everybody wants a tech company, a social media company, or a solar company in his portfolio. You'll see bubbles like the dotcom bubble, the RE bubble, etc., as people start to think that the industry and not its performance are all that matters. The stock price of a desired industry or company is inflated beyond what might otherwise be expected, to accommodate the premium that the investment can demand. So if bonds become uniformly less attractive in terms of returns, and certain institutional investors are largely obliged to continue purchasing them anyway, then flexible investors will need to look elsewhere. As more people want to buy stocks, the price rises. Supply and demand is sometimes so elementary it feels nearly counter-intuitive, but it applies here as elsewhere.","\"A company doesn't offer up 100% of its shares to the market. There's a float amount of varying significance, maybe 30% of the shares are put up for public offer. Generally some amount of current shareholders will pledge some or all of their shares for offer to the public. This may be how the venture capital, private equity or other current investors cash out their initial investment. The company may issue new shares in order to raise money for some initiative. It may be a combination of existing shares and new. Additionally, a company may hold some \"\"treasury shares\"\" on its balance sheet. In this instance fluctuations in the share price directly affect the health of the balance sheet. As far as incentive goes, stock options to management and C-Suite employees keep everyone interested in an increasing stock price.\"","Companies are expected to make a profit, otherwise there is no point to their existence and no motivation for investment. That profit comes back to shareholders as growth and/or dividend. If a company is doing well and has a healthy profit to turn back into investment to facilitate increased future earnings, it increases shareholder equity and share price. If a company is doing well and has a healthy profit to pay out in dividend, it makes the shares more attractive to investors which pushes the price up. Either way, shares go up. Share prices drop when companies lose money, or there are market disturbances affecting all companies (recessions), or when individual companies fail. Averaged over all companies over the long term (decades), stocks can be reasonably expected to go up.","Companies pay their employees in stocks and stock options, so they have an incentive towards increasing a company's share price. There are many elements that go into a stock's price. For example, if you hold a stock for eternity you should be indifferent if the expected present value of all its future dividends (i.e. earnings) equals the price you paid for it. Also, buy-back policies and voting rights determine stock price as well. The theory is that since shareholders want return on their investments they would promote company executives in such a way that their incentives are aligned to increase the share price.","The same applies if you were looking for a business to buy: would you pay more for a business that is doing well making increasing profits year after year, or for a business that is not doing so well and is losing money. A share in a company is basically a small part of a company which a shareholder can own. So would you rather own a part of a company that is increasing profits year after year or one that is continuously losing money? Someone would buy shares in a company in order to make a better return than they could make elsewhere. They can make a profit through two ways: first, a share of the company's profits through dividends, and second capital gains from the price of the shares going up. Why does the price of the shares go up over the long term when a company does well and increases profits? Because when a company increases profits they are making more and more money which increases the net worth of the company. More investors would prefer to buy shares in a company that makes increasing profits because this will increase the net worth of the company, and in turn will drive the share price higher over the long term. A company's increase in profits creates higher demand for the company's shares. Think about it, if interest rates are so low like they are now, where it is hard to get a return higher than inflation, why wouldn't investors then search for higher returns in good performing companies in the stock market? More investors' and traders' wanting some of the pie, creates higher demand for good performing stocks driving the share price higher. The demand for these companies is there primarily because the companies are increasing their profits and net worth, so over the long term the share price will increase in-line with the net worth. Over the short to medium term other factors can also affect the share price, sometime opposite to how the company is actually performing; however this is a whole different answer to a whole different question.","Not directly Nintendo, but: A company would want its share price to be high if it wants to sell its stock, e.g. on IPO or on subsequent offerings. However, if they want to buy back some shares, it would be in their interest to get more stock for the buck. There may of course be derivative values associated with a high share price, e.g. if they bet on the price or have agreements with investors for particular milestones to be reached. Employees might hold shares and be motivated by share price increases, so a decrease may not be desired, unless they are into some kind of insider trading (buy low, sell high). And last, over-valued share prices may undermine trust in a company, and failing to inform shareholders sufficiently may be outright illegal. Besides those reasons related to law, funding, sales, public relations and company image, companies should be pretty much independent from their own share prices, in contrast to share distribution.","\"In an IPO (initial public offering) or APO (additional public offering) situation, a small group of stakeholders (as few as one) basically decide to offer an additional number of \"\"shares\"\" of equity in the company. Usually, these \"\"shares\"\" are all equal; if you own one share you own a percentage of the company equal to that of anyone else who owns one share. The sum total of all shares, theoretically, equals the entire value of the company, and so with N shares in existence, one share is equivalent to 1/Nth the company, and entitles you to 1/Nth of the profits of the company, and more importantly to some, gives you a vote in company matters which carries a weight of 1/Nth of the entire shareholder body. Now, not all of these shares are public. Most companies have the majority (51%+) of shares owned by a small number of \"\"controlling interests\"\". These entities, usually founding owners or their families, may be prohibited by agreement from selling their shares on the open market (other controlling interests have right of first refusal). For \"\"private\"\" companies, ALL the shares are divided this way. For \"\"public\"\" companies, the remainder is available on the open market, and those shares can be bought and sold without involvement by the company. Buyers can't buy more shares than are available on the entire market. Now, when a company wants to make more money, a high share price at the time of the issue is always good, for two reasons. First, the company only makes money on the initial sale of a share of stock; once it's in a third party's hands, any profit from further sale of the stock goes to the seller, not the company. So, it does little good to the company for its share price to soar a month after its issue; the company's already made its money from selling the stock. If the company knew that its shares would be in higher demand in a month, it should have waited, because it could have raised the same amount of money by selling fewer shares. Second, the price of a stock is based on its demand in the market, and a key component of that is scarcity; the fewer shares of a company that are available, the more they'll cost. When a company issues more stock, there's more shares available, so people can get all they want and the demand drops, taking the share price with it. When there's more shares, each share (being a smaller percentage of the company) earns less in dividends as well, which figures into several key metrics for determining whether to buy or sell stock, like earnings per share and price/earnings ratio. Now, you also asked about \"\"dilution\"\". That's pretty straightforward. By adding more shares of stock to the overall pool, you increase that denominator; each share becomes a smaller percentage of the company. The \"\"privately-held\"\" stocks are reduced in the same way. The problem with simply adding stocks to the open market, getting their initial purchase price, is that a larger overall percentage of the company is now on the open market, meaning the \"\"controlling interests\"\" have less control of their company. If at any time the majority of shares are not owned by the controlling interests, then even if they all agree to vote a certain way (for instance, whether or not to merge assets with another company) another entity could buy all the public shares (or convince all existing public shareholders of their point of view) and overrule them. There are various ways to avoid this. The most common is to issue multiple types of stock. Typically, \"\"common\"\" stock carries equal voting rights and equal shares of profits. \"\"Preferred stock\"\" typically trades a higher share of earnings for no voting rights. A company may therefore keep all the \"\"common\"\" stock in private hands and offer only preferred stock on the market. There are other ways to \"\"class\"\" stocks, most of which have a similar tradeoff between earnings percentage and voting percentage (typically by balancing these two you normalize the price of stocks; if one stock had better dividends and more voting weight than another, the other stock would be near-worthless), but companies may create and issue \"\"superstock\"\" to controlling interests to guarantee both profits and control. You'll never see a \"\"superstock\"\" on the open market; where they exist, they are very closely held. But, if a company issues \"\"superstock\"\", the market will see that and the price of their publicly-available \"\"common stock\"\" will depreciate sharply. Another common way to increase market cap without diluting shares is simply to create more shares than you issue publicly; the remainder goes to the current controlling interests. When Facebook solicited outside investment (before it went public), that's basically what happened; the original founders were issued additional shares to maintain controlling interests (though not as significant), balancing the issue of new shares to the investors. The \"\"ideal\"\" form of this is a \"\"stock split\"\"; the company simply multiplies the number of shares it has outstanding by X, and issues X-1 additional shares to each current holder of one share. This effectively divides the price of one share by X, lowering the barrier to purchase a share and thus hopefully driving up demand for the shares overall by making it easier for the average Joe Investor to get their foot in the door. However, issuing shares to controlling interests increases the total number of shares available, decreasing the market value of public shares that much more and reducing the amount of money the company can make from the stock offering.\"","\"In some sense, I agree, but let's look at Apple who in 1997 when Steve came back as CEO and had to beg monies from Microsoft (which he received as a professional courtesy) to stay afloat swore he would never have to do again and literally deemed investors as a \"\"necessary evil\"\". He presided over one of the most profound rainy day funds (which eclipsed the US Government for a few days in its depth) because he never wanted to be in that position again. He died and Tim Cook initiated splits and buybacks. I think Cook went too far in one direction and Jobs in the other. Another stock to consider in a similar light is Starbucks. But these stocks are performing, I'm an investor, and I'm not going to complain about management decisions when ROI is at are above 20/30ish percent. Other companies like Thomson Reuters fail to achieve a cohesive diverse presence in multiple markets inexpensively sans their newsdesk operations. I'm not saying your wrong, it's just a formula of trust and strategy.\"","Some investors (pension funds or insurance companies) need to pay out a certain amount of money to their clients. They need cash on a periodical basis, and thus prefer dividend paying stock more.","The 1 for 1 split could be the case where a company is being split into two parts. The new part may be spun off, or sold to another company. Any time a company splits into two parts, the ratio of the resulting companies needs to be determined.","I see a false assumption that you are making. (Almost always) When you buy stock the cash you spend does not go to the company. Instead it goes to someone else who is selling their shares. The exception to this is when you buy shares in an IPO. Those of us who have saved all our lives for retirement want income producing investments once we retire. (Hopefully) We have saved up quite a bit of money. To have us purchase their stock companies have to offer us dividends.","There are two main ways you can make money through shares: through dividends and through capital gains. If the company is performing well and increasing profits year after year, its Net Worth will increase, and if the company continues to beat expectations, then over the long term the share price will follow and increase as well. On the other hand, if the company performs poorly, has a lot of debt and is losing money, it may well stop paying dividends. There will be more demand for stocks that perform well than those that perform badly, thus driving the share price of these stocks up even if they don't pay out dividends. There are many market participants that will use different information to make their decisions to buy or sell a particular stock. Some will be long term buy and hold, others will be day traders, and there is everything in between. Some will use fundamentals to make their decisions, others will use charts and technicals, some will use a combination, and others will use completely different information and methods. These different market participants will create demand at various times, thus driving the share price of good companies up over time. The annual returns from dividends are often between 1% and 6%, and, in some cases, up to 10%. However, annual returns from capital gains can be 20%, 50%, 100% or more. That is the main reason why people still buy stocks that pay no dividends. It is my reason for buying them too.","First, corporate profits can grow relative to GDP. If companies succeed in growing revenue without paying much more to workers, then corporate profits and stock prices will grow relative to GDP. That has been happening for the last couple decades. If you require that we keep corporate profits vs GDP constant, then borrowing/leverage is how you do it. Companies can expand their operations on a fixed amount of shareholder equity, and as long as they can grow their profits faster than the cost of the debt, then shareholders keep the upside. But this also means that share prices will quickly fall if profits decline even a small amount, because the debt must still be paid off.","How are shareholders sure to receive a fair percentage of each company? At the time the split occurs, each investor owns the same proportion of each new company that they owned in the first. What the investor does with it after that (selling one, for example) is irrelevant from a fairness perspective. Suppose company A splits into companies B and C. You own enough stock to have 1% of A. It splits. Now you have a bunch of shares of B and C. How much? Well, you have 1% of B and 1% of C. What if all the profitable projects are in B? Then shares of B will be worth more than those of C. But it should be the case that the value of your shares of B plus the value of your shares of C are equal to the original value of your shares of A. Completely fair. In fact, if the split was economically justified, then B + C > A. And the gains are realized proportionally by all equityholders. Remember, when a stock splits, every share splits so that everyone owns both companies in the same proportion as everyone else. Executives don't determine what the prices of the resulting companies are...that is determined by the market. A fair market will value the child companies such that together they are worth what the original was.","When you invest in stocks, there are two possible ways to make money: Many people speculate just on the stock price, which would result in a gain (or loss), but only once you have resold the shares. Others don't really care about the stock price. They get dividends every so often, and hopefully, the return will be better than other types of investments. If you're in there for the long run, you do not really care what the price of the stock is. It is often highly volatile, and often completely disconnected from anything, so it's not because today you have a theoretical gain (because the current stock price is higher than your buying price) that you will effectively realise that gain when you sell (need I enumerate the numerous crashes that prevented this from happening?). Returns will often be more spectacular on share resale than on dividends, but it goes both ways (you can lose a lot if you resell at the wrong time). Dividends tend to be a bit more stable, and unless the company goes bankrupt (or a few other unfortunate events), you still hold shares in the company even if the price goes down, and you could still get dividends. And you can still resell the stock on top of that! Of course, not all companies distribute dividends. In that case, you only have the hope of reselling at a higher price (or that the company will distribute dividends in the future). Welcome to the next bubble...","\"As I understand it, a company raises money by sharing parts of it (\"\"ownership\"\") to people who buy stocks from it. It's not \"\"ownership\"\" in quotes, it's ownership in a non-ironic way. You own part of the company. If the company has 100 million shares outstanding you own 1/100,000,000th of it per share, it's small but you're an owner. In most cases you also get to vote on company issues as a shareholder. (though non-voting shares are becoming a thing). After the initial share offer, you're not buying your shares from the company, you're buying your shares from an owner of the company. The company doesn't control the price of the shares or the shares themselves. I get that some stocks pay dividends, and that as these change the price of the stock may change accordingly. The company pays a dividend, not the stock. The company is distributing earnings to it's owners your proportion of the earnings are equal to your proportion of ownership. If you own a single share in the company referenced above you would get $1 in the case of a $100,000,000 dividend (1/100,000,000th of the dividend for your 1/100,000,000th ownership stake). I don't get why the price otherwise goes up or down (why demand changes) with earnings, and speculation on earnings. Companies are generally valued based on what they will be worth in the future. What do the prospects look like for this industry? A company that only makes typewriters probably became less valuable as computers became more prolific. Was a new law just passed that would hurt our ability to operate? Did a new competitor enter the industry to force us to change prices in order to stay competitive? If we have to charge less for our product, it stands to reason our earnings in the future will be similarly reduced. So what if the company's making more money now than it did when I bought the share? Presumably the company would then be more valuable. None of that is filtered my way as a \"\"part owner\"\". Yes it is, as a dividend; or in the case of a company not paying a dividend you're rewarded by an appreciating value. Why should the value of the shares change? A multitude of reasons generally revolving around the company's ability to profit in the future.\"","The shareholders can't all re-invest their dividends -- it's not possible. Paying a dividend doesn't issue any new shares, so unless some of the existing shareholders sell their shares instead of re-investing, there aren't any shares available for the shareholders to re-invest in.","Not directly. But companies benefit in various ways from a higher stock price. One way a high stock price can hurt a company is that many companies do share buybacks when the price is too high. Economically speaking, a company should only buy back shares when those shares are undervalued. But, management may have incentives to do buybacks at irrationally high prices.","Do a share split. Your initial 1 share each becomes 10 (or 100) shares each, then you can sell/gift/etc shares as needed.","It's a way to help normalize the meaning of the earnings report. Some companies like Google have a small number of publicly traded shares (322 Million). Others like Microsoft have much larger numbers of shares (8.3 Billion). The meaning depends on the stock. If it's a utility company that doesn't really grow, you don't want to see lots of changes -- the earnings per share should be stable. If it's a growth company, earnings should be growing quickly, and flat growth means that the stock is probably going down, especially if slow growth wasn't expected.","I'm guessing you're conflating bonus share issuance with stock split. That seems very common to me, from a quick search; there's even some issues of terminology between the US and Europe, I think - it seems some Europeans may use Bonus Shares to mean Stock Split, as opposed to the more common meaning in the US of Stock Dividend. Sometimes a bonus share issuance is (incorrectly) called a stock split, like in this public announcement from STADA in 2004. It is a 1:1 bonus share issuance (meaning they issue one bonus share to everyone who has one share now), but it is in essence the same thing as a stock split (a 2:1 stock split, namely). They combined the 1:1 from bonus share with the wording 'split', causing the confusion. Bonus share issuance, also known as a stock dividend, is covered well in this question/answer on this site, or from a search online. It has no obvious effect initially - both involve doubling shares out there and halving the price - but it has a substantially different treatment in terms of accounting, both to the company and to your tax accountant.","One reason a company might choose to pay a dividend is because of the desire of influential stockholders to receive the dividend. In the case of Ford, for example, there are 70 million shares of Class B stock which receive the same dividend per share as do the common stock holders. Even though there are 3.8 billion shares of common stock, the Class B owners (which are Ford family) hold 40% of the voting power and so their desires are given much weight. The Class B owners prefer regular dividends because if enough were to sell their Class B shares, all Class B shares (as a block) would have their voting power drop from 40% to 30%, and with further sales all special voting would be lost and each Class B share would be equivalent to a common share in voting power. Hence the Class B owners, both for themselves and for all of the family members holding Class B, avoid selling shares and prefer receiving dividends.","Fully paid up Shares issued in which no more money is required to be paid to the company by shareholders on the value of the shares. When a company issues shares upon incorporation or through an issuance, either initial or secondary, shareholders are required to pay a set amount for those shares. Once the company has received the full amount from shareholders, the shares become fully paid shares. authorised share capital The number of stock units that a publicly traded company can issue as stated in its articles of incorporation, or as agreed upon by shareholder vote. Authorized share capital is often not fully used by management in order to leave room for future issuance of additional stock in case the company needs to raise capital quickly. Another reason to keep shares in the company treasury is to retain a controlling interest in the company. If so, why not just give the existing shareholders the $500 million, (and do a stock split if desired)? Stock splits, bonus issues doesn't generate any capital for the firm, which it required.","You have plenty of good answers, but I want to add something that might help you grow your intuition on stocks. There are a lot of differences between the example I am going to give and how the stock market actually runs, but the basic concepts are the same. Lets say your friend asks you if he can borrow some money to start up a company, in exchange you will have some ownership in this company. You have essentially just bought yourself some stock. Now as your friend starts to grow, he is doing well, but he needs more cash to buy assets in order to grow the company more. He is forced with an option, either give you some of the profits, or buy these assets sooner. You decide you don't really need the money right now, and think he can do a lot better with spending the money to buy stuff. This is essentially the same as a company electing to not pay dividends, but instead invest into the future. You as a stock holder are fine with it since you know the money is going toward investing in the future. Even if you never get paid a dividend, as a company grows, you can then turn around and sell the stock to someone else for more money then you gave originally. Of course you always take the risk of having the company failing and loosing some if not all of your investment, but that is just the risk of the market.","\"The company was paying \"\"only\"\" $1 a share in dividends, compared to $10 a share in earnings. That is a so-called payout ratio of 10%, which is low. A more normal payout ratio would be 40%, something like $4 a share. If a $13 stock had a $4 dividend, the dividend yield would be about 30%, which would be \"\"too high,\"\" meaning that the price would go up to drive down the resulting yield. Even $1 a share on a $13 stock is a high dividend of about 7%, allowing for appreciation to say, the $20-$25 range. Graham was a great believer in the theory that management should pay out \"\"most\"\" of its earnings in dividends. He believed that by holding dividends so far below earnings, the company was either being \"\"stingy,\"\" or signalling that the $10 a share of earnings was unsustainable. Either of these would be bad for the stock. For instance, if $1 a share in dividends actually represented a 40% payout ratio, it would signal management's belief that they could normally earn only $2.50 a year instead of $10.\"","\"There's no need for an index to have a currency as its purpose is not to act as an asset but rather to signal investors about the performance of a collection of stocks. An index can be price-weighted, meaning that its value equals the (arithmetic) average of the prices of each stock in the index. With no stock splits, the return on this index is the same as the return on a portfolio composed of one share of each stock. If there is a stock split, however instead of dividing by the number of stocks, as you normally would when taking the arithmetic average, you divide it by the number that will make the value of the index pre-stock-split (arithmetic average) equal to the value post stock split. Then use that dividing number for all periods until a new stock split occurs. An index can be value-weighted, meaning that its changes in value track the percentage changes in total market capitalization of the stocks in the index. Price weighted indexes ignore for \"\"firm size\"\" and percentage changes in price weighted indexes are not robust to stock-splits. Value weighted indexes take \"\"firm size\"\" into account and are robust to stock-splits. DJIA is price-weighted. S&P 500 is value-weighted.\"","\"Supply and Demand, pure and simple! There are two basic forms of this - a change in the quantity demanded/supplied at any given price, and a true change in the amount of demand/supply itself. Please note that this can be distinct from the underlying change in the value of the company and/or its expected future cash flows, which are a function of both financial performance and future expectations. If more people want the stock that are willing to sell it at a given price at a given point in time, sellers will begin to offer the stocks at higher prices until the market is no longer willing to bear the new price, and vice versa. This will reduce the quantity of stocks demanded by buyers until the quantity demanded and the quantity supplied once again reach an equilibrium, at which point a transaction occurs. Because people are motivated to buy and sell for different reasons at different times, and because people have different opinions on a constant flow of new information, prices change frequently. This is one of the reasons why executives of a recent IPO don't typically sell all of their stock at once. In addition to legal restrictions and the message this would send to the market, if they flooded the market with additional quantities of stock supplied, all else being equal, since there is no corresponding increase in the quantity demanded, the price would drop significantly. Sometimes, the demand itself for a company's stock shifts. Unlike a simple change in price driven by quantity supplied versus quantity demanded, this is a more fundamental shift. For example, let's suppose that the current demand for rare earth metals is driven by their commercial applications in consumer electronics. Now if new devices are developed that no longer require these metals, the demand for them will fall, regardless of the actions of individual buyers and sellers in the market. Another example is when the \"\"rules of the game\"\" for an industry change dramatically. Markets are behavioral. In this sense prices are most directly driven by human behavior, which hopefully is based on well-informed opinions and facts. This is why sometimes the price keeps going up when financial performance decreases, and why sometimes it does not rise even while performance is improving. This is also why some companies' stock continues to rise even when they lose huge sums of money year after year. The key to understanding these scenarios is the opinions and expectations that buyers and sellers have of that information, which is expressed in their market behavior.\"","For the same reason you wanted it when you bought it. No-one guarantees that you'll be able to sell the stock you hold, and in fact many people get stuck with stocks they'd like to sell, but no-one is buying. But if investors think there's a profit potential that is not exhausted yet - they'll want to buy the stock.","When a stock price rises, the company's assets are worth more. This doesn't mean it gets more cash directly, but it can liquidate (= sell) some of its stocks for a higher return than before.","Scrip dividends are similar to stock splits. With a stock split, 100 shares can turn into 200 shares; with scrip dividends they might turn into 105 shares.","There are a few reasons, dependent on the location of the company. The first, as you mentioned is that it means that the employee is invested in the companies success - in theory this should motivate the employee to work hard in order to increase the value of their holdings. Sometimes these have a vestment period which requires that they hold the stock for a certain amount of time before they are able to sell, and that they continue working at the company for a certain amount of time. The second, is that unlike cash, providing stocks doesn't come out of the companies liquid cash. While it is still an expense and does devalue the shares of other shareholders, it doesn't effect the daily working capital which is important to maintain to ensure business continuity. And the third, and this is for the employee, is tax reasons. In particular for substantial amounts. Of course this is dependent on jurisdiction but you can often achieve lower tax rates on receiving shares vs a cash equivalent sum, as you can draw out the money over time lowering your tax obligation each year, or other methods which aren't possible to look into now. Hope this helps.","Cash flow is needed for expansion, either to increase manufacturing capacity or to expand the workforce. Other times companies use it to purchase other companies. Microsoft and Google have both used their cash or stocks to purchase companies. Examples by Google include YouTube, Keyhole (Google Earth), and now part of Motorola to expand into Phones. If you are investing for the future, you don't want a lot of dividends. They do bring tax issues. That is not a big problem if you are investing in an IRA or 401K. It is an issue if the non-tax-defered mutual fund distributes those dividends via the 1099, forcing you to address it on your taxes each year. Some investors do like dividends, but they are looking for their investments to generate cash. Who would require it? Would it be an SEC requirement? Even more government paperwork for companies.","The folks who hold stock are the legal owners of the company. If a majority of stock holders become unhappy with the management of a company they can fire the executives and put in new management, or they can direct the company to close its doors and sell off its assets. As a crude approximation, the stock holders are happier when the stock price goes up and unhappier when it goes down. Therefore, executives are highly motivated to drive the stock price up. A frequent criticism of corporate governence is that management can be so motivated to drive the stock price up, that they will take actions that drive the stock price up in the current year, even if undercuts the company in the long term.","Well, if one share cost $100 and the company needs to raise $10000, then the company will issue 100 shares for that price. Right? However, say there's 100 shares out there now, then each share holder owns 1/100th of the company. Now the company will remain the same, but it's shared between 200 shareholders after the issuing of new shares. That means each share holder now owns 1/200th of the company. And hence only gets 1/200th of their earnings etc.","No. Not directly. A company issues stock in order to raise capital for building its business. Once the initial shares are sold to the public, the company doesn't receive additional funds from future transactions of those shares of stock between the public. However, the company could issue more shares at the new higher price to raise more capital.","One difference is the bid/ask spread will cost you more in a lower cost stock than a higher cost one. Say you have two highly liquid stocks with tiny spreads: If you wanted to buy say $2,000 of stock: Now imagine these are almost identical ETFs tracking the S&P 500 index and extrapolate this to a trade of $2,000,000 and you can see there's some cost savings in the higher priced stock. As a practical example, recently a popular S&P 500 ETF (Vanguard's VOO) did a reverse split to help investors minimize this oft-missed cost.","\"Here is one study http://rfs.oxfordjournals.org/content/7/4/711.short I quote from the abstract \"\"In a variety of tests, marginal price drop is not significantly different from the dividend amount. Thus, over the last several decades, one-for-one marginal price drop has been an excellent (average) rule of thumb.\"\"\"","IBM is famous for spending lots of money on stock buyback to keep the stock price higher. The technique works, and investors in growth stocks generally prefer a high market prices to a taxable dividend payment. Dividends are ways to return shareholder value when a company generates a lot of cash, but doesn't have alot of growth. Electric and gas companies are a classic example of high-dividend companies.","There are a few reason why share prices increase or decrease, the foremost is expectation of the investors that the company/economy will do well/not well, that is expectation of profit/intrinsic value growth over some time frame (1-4 qtrs.)there is also demand & supply mismatch over (usually) short time. If you really see, the actual 'value' of a company is it's net-worth (cash+asset+stock in trade+brand value+other intangibles+other incomes)/no of shares outstanding, which (in a way) is the book value, then all shares should trade at their book value, the actual number but it does not, the expectation of investors that a share would be purchased by another investor at a higher price because the outlook of the company over a long time is good.","A private company say has 100 shares with single owner Mr X, now it needs say 10,000/- to run the company, if they can get a price of say 1000 per share, then they just need to issue 10 additional shares, so now the total shares is 110 [100 older plus 10]. So now the owner's share in the company is around 91%. However if they can get a price of only Rs 200 per share, they need to create 50 more shares. So now the total shares is 150 [100 older plus 50]. So now Mr X's equity in his own company is down to 66%. While this may still be OK, if it continues and goes below 50%, there is chances that he [Original owner] will be thrown out","If you want to see one split, well, a reverse split anyway, keep an eye on TZA, FAZ, BGZ, and any Direxion fund. These funds decay continuously forever. Once they get close to $10-$15 or so, they reverse-split them back to the $30-$50 range and the process starts over. This happens about once a year. A few years ago I sent Direxion an email asking what happens when they run out of shares to reverse split and the reply was that's its an open fund where shares can be created or redeemed at will. That still didn't answer the question of what happens when they run out of shares. If they create new shares, the price will drop below the $10 level where many fund managers aren't allowed to buy.","The most significant reason is that if the board of directors of a company neglects the stock value, the stockholders will vote them out of their jobs.","Stephen's answer is the 100% correct one made with the common Economics assumption, that people are rational. A company that never has paid dividends, is still worth something to people because of its potential to start paying dividends later and it is often better to grow now and payoff later. However, the actual answer is much more disapointing, because people are not rational and the stock market is no longer about investing in companies or earning dividends. Most of the value of a stock is for the same reason that gold, stamps, coins and bitcoins, and Australian houses are worth anything, that is, because enough people say it is worth something*. Even stocks that pay dividends, very few people buy it for dividends. They buy it because they believe someone else will be willing to buy it for slightly more, shortly after. Different traders have different timeframes, ranging from seconds to months. *Houses and stock are of course partially valuable due to the fundamentals, but the major reason they are purchased is just to resell at a profit.","Stock dilution is legal because, in theory, the issuance of new shares shouldn't affect actual shareholder value. The other answers have explained fairly well why this is so. In practice, however, the issuance of new shares can destroy shareholder value. This normally happens when the issuing company: In these cases, the issuance of more shares merely reduces each shareholder's stake in the company without building proportional shareholder value.","It's important to remember what a share is. It's a tiny portion of ownership of a company. Let's pretend we're talking about shares in a manufacturing company. The company has one million shares on its register. You own one thousand of them. That means that you own 1/1000th of the company. These shares are valued by the market at $10 per share. The company has machinery and land worth $1M. That means that for every dollar of the company you own, 10c of that value is backed by the physical assets of the company. If the company closed shop tomorrow, you could, in theory at least, get $1 back per share. The other $9 of the share value is value based on speculation about the future and current ability of the company to grow and earn income. The company is using its $1M in assets and land to produce goods which cost the company $1M in ongoing costs (wages, marketing, raw cost of goods etc...) to produce and make $2M per year in sales. That means the company is making a profit of $1M per annum (let's assume for the sake of simplicity that this profit is after tax). Now what can the company do with its $1M profit? It can hand it out to the owners of the company (which means you would get a $1 dividend each year for each share that you own) or it can re-invest that money into additional equipment, product lines or something which will grow the business. The dividend would be nice, but if the owners bought $500k worth of new machinery and land and spent another $500k on ongoing costs and next year we would end up with a profit of $1.5M. So in ten years time, if the company paid out everything in dividends, you would have doubled your money, but they would have machines which are ten years older and would not have grown in value for that entire time. However, if they reinvested their profits, the compounding growth will have resulted in a company many times larger than it started. Eventually in practice there is a limit to the growth of most companies and it is at this limit where dividends should be being paid out. But in most cases you don't want a company to pay a dividend. Remember that dividends are taxed, meaning that the government eats into your profits today instead of in the distant future where your money will have grown much higher. Dividends are bad for long term growth, despite the rather nice feeling they give when they hit your bank account (this is a simplification but is generally true). TL;DR - A company that holds and reinvests its profits can become larger and grow faster making more profit in the future to eventually pay out. Do you want a $1 dividend every year for the next 10 years or do you want a $10 dividend in 5 years time instead?","If a stock that makes up a big part of the Dow Jones Industrial Average decided to issue a huge number of additional shares, that will make the index go up. At least this is what should happen, since an index is basically a sum of the market cap of the contributing companies. No, indices can have various weightings. The DJIA is a price-weighted index not market-cap weighted. An alternative weighting besides market-cap and price is equal weighting. From Dow Jones: Dow Jones Industrial Average™. Introduced in May 1896, the index, also referred to as The Dow®, is a price-weighted measure of 30 U.S. blue-chip companies. Thus, I can wonder what in the new shares makes the index go up? If a stock is split, the Dow divisor is adjusted as one could easily see how the current Dow value isn't equal to the sum or the share prices of the members of the index. In other cases, there may be a dilution of earnings but that doesn't necessarily affect the stock price directly as there may be options exercised or secondary offerings made. SO if the index, goes up, will the ETF DIA also go up automatically although no additional buying has happened in the ETF itself? If the index rises and the ETF doesn't proportionally, then there is an arbitrage opportunity for someone to buy the DIA shares that can be redeemed for the underlying stocks that are worth more in this case. Look at the Creation and Redemption Unit process that exists for ETFs.","You buy stocks for dividends over the long term. If a share of stock pays $1.00 in dividends every quarter, that's four dollars a year. If you bought it for $40, it pays out $4 in a year, and it's still worth roughly $40 at the end of the year, you're $4 richer. People will often invest large amounts of money in stable stocks not planning to sell it, but only collect the dividends which are either re-invested or pulled out as income.","\"The stock should fall by approximately the amount of the dividend as that is what is paid out. If you have a stock trading at $10/share and it pays a $1/share dividend, the price should drop to $9 as what was trading before the dividend was paid would be both the dividend and the stock itself. If the person bought just for the dividend then it would likely be neutral as there isn't anything extra to be gained. Consider if this wasn't the case. Wouldn't one be able to buy a stock a few days before the dividend and sell just after for a nice profit? That doesn't make sense and is the reason for the drop in price. Similarly, if a stock has a split or spin-off there may be changes in the price to reflect that adjustment in value of the company. If I give you 2 nickels for a dime, the overall value is still 10 cents though this would be 2 coins instead of one. Some charts may show a \"\"Dividend adjusted\"\" price to factor out these transactions so be careful of what prices are quoted.\"","Your autograph analogy seems relevant to me. But it is not just speculation. In the long run, investing in stocks is like investing in the economy. In the long run, the economy is expected to grow , hence stock prices are expected to go up. Now in theory: the price of any financial instrument is equal to the net present value today of all the future cash flows from the instrument. So if company's earnings improve, shareholders hope that the earnings will trickle down to them either in form of dividends or in form of capital gain. So they buy the stock, creating demand for it. I can try to explain more if this did not make any sense. :)","Two of the main ways that investors benefit financially from a stock are dividends and increases in the price of the stock. In the example as described, the benefits came primarily from dividends, leaving less benefits to be realized in terms of an increase in the value of the company. Another way to put that is that the company paid its profits to shareholders in the form of a dividend, instead of accumulating that as an increase in the value of the company. The company could have chosen to take those profits and reinvest them in growing the business, which would lead to lower dividends but (hopefully) an increase in the valuation of the stock, but they chose to pay dividends instead. This still rewards the investors, but share prices stay low.","Any time there is a share adjustment from spin-off, merger, stock split, or reverse slit; there is zero chance for the stockholders to hang on to fractional shares. They are turned into cash. For the employees in the 401K program or investors via a mutual fund or ETF this isn't a problem. Because the fraction of a share left over is compared to the thousands or millions of shares owned by the fund as a collective. For the individual investor in the company this can be a problem that they aren't happy about. In some cases the fractional share is a byproduct that will result from any of these events. In the case of a corporate merger or spin-off most investors will not have an integer number of shares, so that fraction leftover that gets converted to cash isn't a big deal. When they want to boost the price to a specific range to meet a regulatory requirement, they are getting desperate and don't care that some will be forced out. In other cases it is by design to force many shareholders out. They want to go private. They to 1-for-1000 split. If you had less than 1000 shares pre-split then you will end up with zero shares plus cash. They know exactly what number to use. The result after the split is that the number of investors is small enough they they can now fall under a different set of regulations. They have gone dark, they don't have to file as many reports, and they can keep control of the company. Once the Board of Directors or the majority stockholders votes on this, the small investors have no choice."],"string":"[\n \"From Investopedia, A stock split is usually done by companies that have seen their share price increase to levels that are either too high or are beyond the price levels of similar companies in their sector. The primary motive is to make shares seem more affordable to small investors even though the underlying value of the company has not changed. From Wikipedia, It is often claimed that stock splits, in and of themselves, lead to higher stock prices; research, however, does not bear this out. What is true is that stock splits are usually initiated after a large run up in share price...stock splits do increase the liquidity of a stock; there are more buyers and sellers for 10 shares at $10 than 1 share at $100. Some companies have the opposite strategy: by refusing to split the stock and keeping the price high, they reduce trading volume. Berkshire Hathaway is a notable example of this. Something more to munch on, Why Warren Buffett Is Against Stock Splits.\",\n \"To make you happy. The thing is, if they split 10 for 1, its still the exact same value in total. There are just more shares that are worth 35 instead of 350each. You need to know things like how many shares there are <the float> how rapidly the company is growing. If it has earnings at all and how much. There is a lot more to the value of a company than the price of the stock alone.\",\n \"The reason to do a stock split is to get the price of the stock down to an affordable range. If your stock costs $100,000 per share, you are seriously cutting in to the number of people who can afford to buy it. I can think of two reasons NOT to do a stock split. The biggest is, Why bother? If your stock is trading at a reasonable price, why change anything? It takes time and effort, which equals money, to do a stock split. If this serves no purpose, you're just wasting that effort. The other reason is that you don't want to drive your stock price down too low. Low prices are normally associated with highly speculative start-up companies, and so can give a wrong impression of your company. Also, low prices make it difficult for the price to reflect small changes. If your stock is trading at $10.00, a 1/2 of 1% change is 5 cents. But if it's trading at $1.50, a 1/2 of 1% change is a fraction of a penny. Does it go up by that penny or not? You've turned a smooth scale into a series of hurdles.\",\n \"Stock splits are typically done to increase the liquidity of stock merely by converting every stock of the company into multiple stocks of lower face value. For example, if the initial face value of the stock was $10 and the stock got split 10:1, the new face value of the stock would be $1 each. This has a proportional effect on the market value of the stock also. If the stock was trading at $50, after the split the stock should ideally adjust to $5. This is to ensure that despite the stock split, the market capitalization of the company should remain the same. Number of Shares * Stock Price = Market Capitalization = CONSTANT\",\n \"Most of the time when a stock splits to create more shares, it is done to bring the price per share down to a level that makes potential investors more comfortable. There are psychological reasons why some companies keep the price in the $30 to $60 range. Others like to have the price keep rising into the hundreds or thousands a share. The split doesn't help current investors, with the possible exception that the news spurs interest in the stock which leads to a short term rise in prices; but it also doesn't hurt current investors. When a reverse stock split is done, the purpose is for one of several reasons:\",\n \"\\\"Vitalik has mentioned this in a comment but I think it ought to be expanded upon: Companies that aren't already penny stocks really don't stand to gain anything from trying to prevent short interest. Short selling does not inherently lower the stock price - not any more so than any other kind of selling. When somebody shorts a stock, it's simply borrowed from another investor's margin; as long as it's not a naked short resulting in an FTD (Failure To Deliver) then it does not add any \\\"\\\"artificial\\\"\\\" selling pressure. In fact, shorting can actually drive the price up in the long term due to stops and margin calls. Not a guarantee, of course, but if a rally occurs then a high short interest can cause a cascade effect from the short \\\"\\\"squeeze\\\"\\\", resulting in an even bigger rally than what would have occurred with zero short interest. Many investors actually treat a high short interest as a bullish signal. Compare with margin buying - essentially the opposite of short selling - which has the opposite effect. If investors buy stocks on margin, then if the value of that stock decreases too rapidly they will be forced to sell, which can cause the exact same cascade effect as a short interest but in the opposite direction. Shorting is (in a sense) evening out the odds by inflating the buying pressure at lower stock prices when the borrowers decide to cover and take profits. Bottom line is that, aside from (illegal) insider trading, it doesn't do businesses any good to try to manipulate their stock price or any trading activity. Yes, a company can raise capital by selling additional common shares, but a split really has no effect on the amount of capital they'd be able to raise because it doesn't change the actual market cap, and a dilution is a dilution regardless of the current stock price. If a company's market cap is $1 billion then it doesn't matter if they issue 1 million shares at $50.00 each or 10 million shares at $5.00 each; either way it nets them $50 million from the sale and causes a 5% dilution, to which the market will react accordingly. They don't do it because there'd be no point.\\\"\",\n \"A reason not to split your stock is that the value of the company might fall back again, and if its stock price falls below $1 it will be delisted from the NYSE. So if the value of your company grows tenfold so the shares go from $5 to $50, you do a ten-for-one split, and then its value shrinks back to where it started, you're off the stock exchange.\",\n \"Investopedia has a good definition. Stock dividends are similar to cash dividends; however, instead of cash, a company pays out stock. Stock splits occur when a company perceives that its stock price may be too high. Stock splits are usually done to increase the liquidity of the stock (more shares outstanding) and to make it more affordable for investors to buy regular lots (a regular lot = 100 shares).\",\n \"Are you really talking about share price, or share value? Because what about stock splits? Market Cap stays the same, but the price per share is lowered. This is so that the stock is more liquid and accessible to a greater number of investors. This encourages people to invest in the stock though. I can't really think of any reasons why a company would want to lower their share value or discourage people from investing unless they are trying to reacquire shares. Returning value to the shareholders is the #1 priority of any publicly traded company.\",\n \"The reason a company creates more stock is to generate more capital so that this can be utilized and more returns can be generated. It is commonly done as a follow on public offer. Typically the funds are used to retire high cost debts and fund future expansion. What stops the company from doing it? Are Small investors cheated? It's like you have joined a car pool with 4 people and you are beliving that you own 1/4th of the total seats ... so when most of them decide that we would be better of using Minivan with 4 more persons, you cannot complain that you now only own 1/8 of the total seats. Even before you were having just one seat, and even after you just have one seat ... overall it maybe better as the ride would be good ... :)\",\n \"You can argue that cash dividend is a kind of split as well by this logic. The stock price on ex-dividend gets a hit coincidental with the dividend to be paid, so one can argue that the investor has the same cash value on the day the dividend was paid as if it wouldn't be paid at all. However, for the company to distribute stocks instead of cash may be advantageous if they have low cash reserves but significant amount of treasury stocks, and the stocks are of high liquidity. It is also a way for the company to release treasury stocks without diluting the current shareholders and creating taxable income to the company, that's an important factor to consider. This is in fact the real answer to your question. The main difference between split and stock dividend is that in split, the stock distributions proportions don't change. With stock dividend - they do. While the outstanding share proportions do not change, total proportions do, because of the treasury stocks being distributed. So company has less stocks in its vaults, but everyone else still has the same proportions of ownership. Compare this to split: company's treasury stocks would be split as well, and it would continue essentially sitting on the same proportion of stocks. That shift of treasury stocks to the outside shareholders - this is what makes it a dividend.\",\n \"Are you sure you're not just looking at prices that are adjusted for the split, e.g. Yahoo? For example, Gilead Sciences (GILD) split a few months ago, but if you look at a price chart, there isn't an interruption even though the split is clearly marked. (Look in the past six months; it split in January). However, you could also simply be watching companies that happen to not split, for a variety of reasons. This isn't a criticism, but rather just a consequence of whatever stocks you happen to be watching. However, a quick search for information on stock splits yields a few articles (mainly from the Motley Fool) that argue that fewer companies are performing stock splits in recent years; the articles mainly talk about tech companies, and they make the argument that even though the shares in Google and Apple have a high stock price: Google and Apple aren't all that expensive by traditional valuation metrics. Google trades at just 15 times next year's projected profitability. Apple fetches a mere 13 times fiscal 2012's bottom-line estimates. These articles are a bit dated in terms of the stock prices, but the rationale is probably still good. Similar logic could apply for other companies; for example, since May 2009, Panera's stock price has climbed by almost a factor of 4 without splitting. The articles also make the point that stock splits were traditionally seen as bullish signs because: Companies splitting to bring their share prices back down to more accessible levels were optimistic in building those sand castles back up. One could make a fair argument that the overall economic climate isn't as bullish as it used to be, although I would only be convinced that this was affecting stock splits if data could be gathered and tested. A stock split can also raise the price of a stock because if small investors feel the stock is suddenly more accessible to them, they purchase more of it and might therefore drive up the price. (See the Investopedia article on stock splits for more information). Companies might not see the necessity in doing this because their stock price isn't high enough to warrant a split or because the price isn't high enough to outprice smaller investors. One interesting point to make, however, is that even though stock splits can drive small investors to buy more of the stock, this isn't always a gain for the company because professional investors (firms, institutions, etc.) have a tendency to sell after a split. The paper is a bit old, but it's still a very neat read. It's possible that more and more companies no longer see any advantage to splitting because it might not affect their stock price in the long run, and arguably could even hurt it. Considering that large/professional investors likely hold a higher percentage of a company's shares than smaller investors, if a stock split triggers a wave of selling by the former, the increasing propensity to buy of the latter may not be enough to offset the decline in price. Note: My answer only refers to standard stock splits; the reasons above may not apply to a decrease in the number of reverse stock splits (which may not be a phenomenon; I don't know).\",\n \"Lets pretend that TELSA decided to split its stock 10 shares for 1. Now the stock is $35 dollars- would that make you happy? You dont have any idea how companies are valued. Berkshire Hathaway Inc. Class A NYSE: BRK.A - Oct 31, 12:58 PM EDT 280,210.00 USD\",\n \"A stock dividend isn't exactly a split. Example: You have 100 shares of stock worth $5 a share (total value $500). The company wants to distribute a dividend worth 1%. You could expect a check for $5. But If they wanted to do a stock dividend they could send you 0.01 shares for every share you own, in your case you will be given a single share worth $5. Now you own 101 shares. Why a share dividend? It doesn't take cash to give the dividend. It keeps the money invested in the company. Some investors re-invest a cash dividend, some don't. A cash dividend is generally taxable income for the investor; a stock dividend isn't. Some investors prefer one over the other, but it depends on their specific financial picture. Neither a stock dividend, a cash dividend or split changes anything. The split changes the price to meet a goal. The cash dividend lowers the price by sending excess cash to the investors. The stock dividend lowers the price by creating new shares and retaining cash. It company picks the message and the method. depending on their goals and situation. Remember that a company may want to give a dividend because they have a history of doing so, but not have the cash to do so. It is like a split because the number of shares you own will go up, and the price per share will go down. But a split is generally done to bring the price of a share to within a specific range. The company sees a benefit to having a stock mid priced, instead of very high or very low.\",\n \"You are correct in thinking actual number of shares do not matter, the value is the value. However there are cases where share price does play a role. Berkshire Hathaway for example has not split because Warren Buffet believes it has cut down on the liquidity of the stock, as well as attracting investors with an eye for the longer term. There have also been things written on the psychology of a share price. For example, some people are attracted to shares that split, because it reflects a company is growing.\",\n \"A company typically goes public in order to bring in additional capital. In an IPO, the company (through its officials) will typically do so by issuing additional shares, and offering to sell those to investors. If they did not do that, then there would be no net capital gain for the company; if person A sells share in company C to person B, then company C does not benefit directly from the exchange. By issuing and selling additional shares, the total value of all stock in the company can increase. Being publicly traded also greatly increases the confidence in the valuation of the company, as a consequence of the perfect market theory. There is nothing in this that says that initial investors (cofounders, employees, etc.) need to sell their shares in the process. They might choose to do so, or they might not; or they might be prevented from doing so by terms of any agreements that they have signed or by insider trading laws. Compare What happens to internal stock when a company goes public? Depending on specifics, it might be reasonable for the company to perform a share split prior to the initial public offering. That, however, doesn't affect the total value of the shares, only the price per share.\",\n \"\\\"After the initial public offering, the company can raise money by selling more stock (equity financing) or selling debt (e.g. borrowing money). If a company's stock price is high, they can raise money with equity financing on more favorable terms. When companies raise money with equity financing, they create new shares and dilute the existing shareholders, so the number of shares outstanding is not fixed. Companies can also return money to shareholders by buying their own equity, and this is called a share repurchase. It's best for companies to repurchase their shared when their stock price is low, but \\\"\\\"American companies have a terrible track record of buying their own shares high and selling them low.\\\"\\\" The management of a company typically likes a rising stock price, so their stock options are more valuable and they can justify bigger pay packages.\\\"\",\n \"In theory*, if a company has 1m shares at $10 and does a 10 for 1 split, then the day after it has 10m shares at $1 (assuming no market move). So both the price and the number of share change, keeping the total value of the company unchanged. Regarding your BIS, I suspect that the new number of shares has not been reported yet because it's an ETF (the number of shares in issue changes everyday due to in/out flows). Your TWX example is not ideal either because there was a spin off on the same day as the stock split so you need to separate the two effects. * Some studies have documented a positive stock split effect - one of the suggested reasons is that the stock becomes more liquid after the split. But other studies have rejected that conclusion, so you can probably safely consider that on average it will not have a material effect.\",\n \"A Company start with say $100. Lets say the max it can borrow from bank is $100 @ $10 a year as Interest. After a years say, On the $200 the company made a profit of $110. So it now has total $310 Option 1: Company pays back the Bank $100 + $10. It further gave away the $100 back to shareholders as dividends. The Balance with company $100. It can again start the second year, borrow from Bank $100 @ 10 interest and restart. Option 2: Company pays back the Bank $100 + $10. It now has $200. It can now borrow $200 from Bank @ $20. After a year it makes a profit of $250. [Economics of scale result $30 more] Quite a few companies in growth phase use Option 2 as they can grow faster, achieve economies of scale, keep competition at bay, etc Now if I had a share of this company say 1 @ $1, by end of first year its value would be $2, at the end of year 2 it would be $3.3. Now there is someone else who wants to buy this share at end of year 1. I would say this share gives me 100% returns every year, so I will not sell at $2. Give me $3 at the end of first year. The buyer would think well, if I buy this at $3, first year I would notionally get $.3 and from then on $1 every year. Not bad. This is still better than other stocks and better than Bank CD etc ... So as long as the company is doing well and expected to do well in future its price keeps on increasing as there is someone who want to buy. Why would someone want to sell and not hold one: 1. Needs cash for buying house or other purposes, close to retirement etc 2. Is balancing the portfolio to make is less risk based 3. Quite a few similar reasons Why would someone feel its right to buy: 1. Has cash and is young is open to small risk 2. Believes the value will still go up further 3. Quite a few similar reasons\",\n \"\\\"A stock split can force short sellers of penny stocks to cover their shorts and cauuse the price to appreciate. Example: Someone shorts a worthless pump and dump stock, 10,000 shares at .50. They have to put up $25,000.00 in margin ($2.50 per share for stocks under $2.50). The company announces a 3 to 1 split. Now the short investor must come up with $50,000.00 additional margin or be be \\\"\\\"bought in\\\"\\\". The short squeeze is on.\\\"\",\n \"\\\"In 2005, Apple announced a split on Feb 11... CUPERTINO, California — February 11, 2005 — Apple® announced today that its Board of Directors has approved a two-for-one split of the Company’s common stock and a proportional increase in the number of Apple common shares authorized from 900 million to 1.8 billion. Each shareholder of record at the close of business on February 18, 2005 will receive one additional share for every outstanding share held on the record date, and trading will begin on a split-adjusted basis on February 28, 2005. ...one month after announcing earnings. CUPERTINO, California—January 12, 2005—Apple® today announced financial results for its fiscal 2005 first quarter ended December 25, 2004. For the quarter, the Company posted a net profit of $295 million, or $.70 per diluted share. These results compare to a net profit of $63 million, or $.17 per diluted share, in the year-ago quarter. Revenue for the quarter was $3.49 billion, up 74 percent from the year-ago quarter. Gross margin was 28.5 percent, up from 26.7 percent in the year-ago quarter. International sales accounted for 41 percent of the quarter’s revenue. I wouldn't expect Apple to offer another split, as it's become somewhat fashionable among tech companies to have high stock prices (see GOOG or NFLX or even BRK-A/BRK-B). Additionally, as a split does nothing to the underlying value of the company, it shouldn't affect your decision to purchase AAPL. (That said, it may change the perception of a stock as \\\"\\\"cheap\\\"\\\" or \\\"\\\"expensive\\\"\\\" per human psychology). So, to answer your question: companies will usually announce a stock split after releasing their financial results for the preceding fiscal year. Regardless of results, though, splits happen when the board decides it is advantageous to the company to split its stocks.\\\"\",\n \"There has been a lot of research on the effects of stock splits. Some studies have concluded that: However note that (i) these are averages over large samples and does not say it will work on every split and (ii) most of the research is a bit dated and more recent papers have often struggled to find any significant performance impact after 1990, possibly because the effect has been well documented and the arbitrage no longer exists. This document summarises the existing research on the subject although it seems to miss some of the more recent papers. More practically, if you pay a commission per share, you will pay more commissions after the split than before. Bottom line: don't overthink it and focus on other criteria to decide when/whether to invest.\",\n \"Short answer: No, it only matters if you want to use covered calls strategies. The price of a share is not important. Some companies make stock splits from time to time so that the price of their shares is more affordable to small investors. It is a decision of the company's board to keep the price high or low. More important is the capitalization for these shares. If you have lots of money to invest, the best is to divide and invest a fixed pourcentage of your portfolio in each company you choose. The only difference is if you eventually decide to use covered call strategies. To have a buy write on Google will cost you a lot of money and you will only be able to sell 1 option for every 100 shares. Bottom line: the price is not important, capitalization and estimated earnings are. Hope this answers your question.\",\n \"Overpriced shares: Cheaper to raise new capital through secondary share offerings or debt using shares as a security. Fends off hostile take overs, since the company is too dear. When a company is taken over it needs only one set of management. Top management of the company that is taken over loses their jobs - no one wants to lose their job. Shareholders love to see share price grow - sale brings them profit, secures jobs for company management. Shares are used as a currency during acquisitions, if company shares are overpriced that means they can buy another company on the cheap - paying with the overpriced shares. Undervalued shares: More expensive to raise additional capital through secondary share offerings - for the same amount of capital the management has to offer a bigger chunk of the company; have to offer bigger chunk of a company as a security as well. Makes company vulnerable to hostile take overs, company is undervalues - makes it an attractive bargain. Once the company is taken over top management will almost certainly lose jobs. Falling price makes shareholders unhappy - they will vote management out. Makes difficult to acquire other companies.\",\n \"No, I think you are misunderstanding the Math. Stock splits are a way to control relatively where the price per share can be for a company as companies can split or reverse split shares which would be similar to taking dimes and giving 2 nickels for each dime, each is 10 cents but the number of coins has varied. This doesn't create any additional value since it is still 10 cents whether it is 1 dime or 2 nickels. Share repurchase programs though are done to prevent dilution as executives and those with incentive-stock options may get shares in the company that increase the number of outstanding shares that would be something to note.\",\n \"The bonus share also improves the liquidity however there is some difference in treatment. Lets say a company has 100 shares, of $10 ea. The total capital of the compnay is 100*10 = 1000. Assuming the company is doing well, its share is now available in the market for $100 ea. Now lets say the company has made a profit of $1000 and this also gets factored into the price of $100. Lets say the company decides to keep this $1000 kept as Cash Reserve and is not distributed as dividends. In a share split say (1:1), the book value of each share is now reduced to $5, the number of shares increase to 200. The share capital stays at 200*5 = 1000. The market value of shares come down to $50 ea. In a Bonus share issue say (1:1), the funds $1000 are moved from Cash Reserve and transferred to share capital. The book value of each share will remain same as $10, the number of shares increase to 200. The share capital increases to 200*10 = 2000. The market value of shares come down to $50 ea. So essentially from a liquidity point of view both give the same benefit. As to why some companies issue bonus and not a split, this is because of multiple reasons. A split beyond a point cannot be done, ie $10 can be split to $1 ea but it doesn't look good to make it $0.50. The other reason is there is adequate cash reserve and you want to convert this into share holders capital. Having a larger share holders capital improves some of the health ratios for the compnay. At times bouns is used to play upon that one is getting something free.\",\n \"The other answer has some good points, to which I'll add this: I believe you're only considering a company's Initial Public Offering (IPO), when shares are first offered to the public. An IPO is the way most companies get a public listing on the stock market. However, companies often go to market again and again to issue/sell more shares, after their IPO. These secondary offerings don't make as many headlines as an IPO, but they are typical-enough occurrences in markets. When a company goes back to the market to raise additional funds (perhaps to fund expansion), the value of the company's existing shares that are being traded is a good indicator of what they may expect to get for a secondary offering of shares. A company about to raise money desires a higher share price, because that will permit them to issue less shares for the amount of money they need. If the share price drops, they would need to issue more shares for the same amount of money – and dilute existing owners' share of the overall equity further. Also, consider corporate acquisitions: When one company wants to buy another, instead of the transaction being entirely in cash (maybe they don't have that much in the bank!), there's often an equity component, which involves swapping shares of the company being acquired for new shares in the acquiring company or merged company. In that case, the values of the shares in the public marketplace also matter, to provide relative valuations for the companies, etc.\",\n \"\\\"The key difference I've found between a stock split and a stock dividend – of the exact same stock and class, as opposed to a spin-off – seems to be from the company's own accounting perspective. There doesn't appear to be any actual transfer of value to the shareholder with either kind of transaction; i.e. in theory, each transaction would be immaterial to the value of your holdings. With respect to the company's accounting, a stock split affects the par value of the shares, whereas a stock dividend reduces the retained earnings account in order to increase paid-in or contributed capital. I found a good online source which explains the history behind this accounting difference: McGraw-Hill - Intermediate Accounting eBook, 6/e - Chapter 18 - Stock Dividends and Splits. Small quote: [...] Besides being based on fallacious reasoning, accounting for stock dividends by artificially reclassifying “earned” capital as “invested” capital conflicts with the reporting objective of reporting shareholders' equity by source. Despite these limitations, this outdated accounting standard still applies. Since neither the corporation nor its shareholders apparently benefits from stock dividends, why do companies declare them?23 Occasionally, a company tries to give shareholders the illusion that they are receiving a real dividend. Another reason is merely to enable the corporation to take advantage of the accepted accounting practice of capitalizing retained earnings. Specifically, a company might wish to reduce an existing balance in retained earnings—otherwise available for cash dividends—so it can reinvest the earned assets represented by that balance without carrying a large balance in retained earnings. [...] There's a lot more on that page, before and after, worth reading. From another book: Google Books - Comparative Income Taxation, a Structural Analysis - page 314 - Stock Dividends. Small quote: The distribution of dividends in the form of stock or \\\"\\\"bonus\\\"\\\" shares to existing shareholders typically involves a transfer for corporate law purposes of retained earnings into stated capital. It can been [sic] viewed as a deemed distribution of a cash dividend to the shareholders followed by a corresponding contribution to capital or as solely as an event at the corporate level which has no effect on the shareholders whose economic interest in the corporation is unchanged by the receipt of additional shares. The systems have taken varied approaches to the stock dividend problem. The treatment is in part a function of the rules dealing with distributions of stated capital. [emphases above are mine] [... continues w/descriptions of different countries' tax treatments of the kinds of stock dividends. Includes U.S., Sweden, Japan, Netherlands, Canada, Australia, U.K., France, Germany. ...] As far as why a corporation might want to capitalize earnings and reduce the equity otherwise available for dividends, I can only imagine that, ignoring taxes for a moment, that it may have something to do with capital ratios that need to be maintained for financing or regulatory purposes? Yet, I remain curious. If I discover more on this then I'll update my answer. Additional resources:\\\"\",\n \"Firstly a stock split is easy, for example each unit of stock is converted into 10 units. So if you owned 1% of the company before the stock split, you will still own 1% after the stock split, but have 10 times the number of shares. The company does not pay out any money when doing this and there is no effect on tax for the company or the share holder. Now onto stock dividend… When a company make a profit, the company gives some of the profit to the share holders as a dividend; this is normally paid in cash. An investor may then wish to buy more shares in the company using the money from the dividend. However buying shares used to have a large cost in broker charges etc. Therefore some companies allowed share holders to choose to have the dividend paid as shares. The company buys enough of their own shares to cover the payout, only having one set of broker charges and then sends the correct number of shares to each share holder that has opted for a stock dividend. (Along with any cash that was not enough to buy a complete share.) This made since when you had paper shares and admin costs where high for stock brokers. It does not make sense these days. A stock dividend is taxed as if you had been paid the dividend in cash and then brought the stock yourself.\",\n \"You ask if Tesla being a car company should feel a pressure to split their stock because their share price is much higher than the other car companies. But is Tesla a car company? It was founded by Elon Musk who founded PayPal and SpaceX. He sees him self as the next generation of entrepreneurs that came after Jobs and Gates. So he compares Tesla ($142) companies to Google ($856), Amazon ($284) and eBay ($52). But even if you see Tesla as a car company, Musk sees it more like Audi ($828) or BMW ($100) then he does Ford ($16.30) just because the base price of their models ($80,000+) is much greater than Ford or GM. The theory is that keeping the share price in a lower range helps investors. But since 40% of the company is owned by mutual funds is that really a concern? Therefore most small investors get the company though a mutual fund.\",\n \"The stock split, it is similar to what happened to Apple a little while back. When Google split 2 to 1, it means that each share holder got 2 shares for each 1 share they had and each share was 1/2 the price.\",\n \"\\\"Someone who buys a stock is fundamentally buying a share of all future dividends, plus the future liquidation value of the company in the event that it is liquidated. While some investors may buy stocks in the hope that they will be able to find other people willing to pay more for the stock than they did, that's a zero sum game. The only way investors can make money in the aggregate is if either stocks pay dividends or if the money paid for company assets at liquidation exceeds total net price for which the company sold shares. One advantage of dividends from a market-rationality perspective is that dividend payments are easy to evaluate than company value. Ideally, the share price of a company should match the present per-share cash value of all future dividends and liquidation, but it's generally impossible to know in advance what that value will be. Stock prices may sometimes rise because of factors which increase the expected per-share cash value of future dividends and liquidations. In a sane market, rising prices on an item will reduce people's eagerness to buy and increase people's eagerness to sell. Unfortunately, in a marketplace where steady price appreciation is expected the feedback mechanisms responsible for stability get reversed. Rapidly rising prices act as a red flag to buyers--unfortunately, bulls don't see red flags as signal to stop, but rather as a signal to charge ahead. For a variety of reasons including the disparate treatment of dividends and capital gains, it's often not practical for a company to try to stabilize stock prices through dividends and stock sales. Nonetheless, dividends are in a sense far more \\\"\\\"real\\\"\\\" than stock price appreciation, since paying dividends generally requires that companies actually have sources of revenues and profits. By contrast, it's possible for stock prices to go through the roof for companies which have relatively few assets of value and no real expectation of becoming profitable businesses, simply because investors see rising stock prices as a \\\"\\\"buy\\\"\\\" signal independent of any real worth.\\\"\",\n \"\\\"Share price is based on demand. Assuming the same amount of shares are made available for trade then stocks with a higher demand will have a higher price. So say a company has 1000 shares in total and that company needs to raise $100. They decide to sell 100 shares for $1 to raise their $100. If there is demand for 100 shares for at least $1 then they achieve their goal. But if the market decides the shares in this company are only worth 50 cents then the company only raises $50. So where do they get the other $50 they needed? Well one option is to sell another 100 shares. The dilution comes about because in the first scenario the company retains ownership of 900 or 90% of the equity. In the second scenario it retains ownership of only 800 shares or 80% of the equity. The benefit to the company and shareholders of a higher price is basically just math. Any multiple of shares times a higher price means there is more value to owning those shares. Therefore they can sell fewer shares to raise the same amount. A lot of starts up offer employees shares as part of their remuneration package because cash flow is typically tight when starting a new business. So if you're trying to attract the best and brightest it's easier to offer them shares if they are worth more than those of company with a similar opportunity down the road. Share price can also act as something of a credit score. In that a higher share price \\\"\\\"may\\\"\\\" reflect a more credit worthy company and therefore \\\"\\\"may\\\"\\\" make it easier for that company to obtain credit. All else being equal, it also makes it more expensive for a competitor to take over a company the higher the share price. So it can offer some defensive and offensive advantages. All ceteris paribus of course.\\\"\",\n \"There are two reasons to do a reverse split. Those partial shares will then be turned into cash and returned to the investors. For large institutional investors such as mutual funds or pension funds it results in only a small amount of cash because the fund has merged all the investors shares together. If the company is trying to meet the minimum price level of the exchange they have little choice. If they don't do the reverse split they will be delisted. If the goal is to reduce the number of investors they are using one of the methods of going private: A publicly held company may deregister its equity securities when they are held by less than 300 shareholders of record or less than 500 shareholders of record, where the company does not have significant assets. Depending on the facts and circumstances, the company may no longer be required to file periodic reports with the SEC once the number of shareholders of record drops below the above thresholds. A number of kinds of transactions can result in a company going private, including:\",\n \"Companies do both quite often. They have opposite effects on the share price, but not on the total value to the shareholders. Doing both causes value to shareholders to rise (ie, any un-bought back shares now own a larger percentage of the company and are worth more) and drops the per-share price (so it is easier to buy a share of the stock). To some that's irrelevant, but some might want a share of an otherwise-expensive stock without paying $700 for it. As a specific example of this, Apple (APPL) split its stock in 2014 and also continued a significant buyback program: Apple announces $17B repurchase program, Oct 2014 Apple stock splits 7-to-1 in June 2014. This led to their stock in total being worth more, but costing substantially less per share.\",\n \"Simple: Do a stock split. Each 1 Ordinary share now = 100 Ordinary shares (or 100,000 or whatever you choose). Then sell 20 (or 20,000) of them to your third party. (Stock splits are fairly routine occurrence. Apple for example has done several, most recently in 2014 when 1 share = 7 shares). Alternatively you could go the route of creating a new share class with different rights, preferences etc. But this is more complicated.\",\n \"It comes down to the practical value of paying dividends. The investor can continually receive a stream of income without selling shares of the stock. If the stock did not pay a dividend and wanted continual income, the investor would have to continually sell shares to gain this stream of income, incurring transaction costs and increased time and effort involved with making these transactions.\",\n \"\\\"Simple answer is because the stocks don't split. Most stocks would have a similar high price per share if they didn't split occasionally. Why don't they split? A better way to ask this is probably, why DO most stocks split? The standard answer is that it gives the appearance that stocks are \\\"\\\"cheap\\\"\\\" again and encourages investors to buy them. Some people, Warren Buffett (of Berkshire Hathaway) don't want any part of these shenanigans and refuse to split their stocks. Buffett also has commented that he thinks splitting a stock also adds unnecessary volatility.\\\"\",\n \"A stock dividend converts some of the reserves and surplus on the company's balance sheet into paid-up capital and securities premium account without involving any actual cash outflow to the shareholders. While cash dividends are eyed by the investors due to their cash yield, issuance of stock dividends are indicators of growing confidence of the management and the shareholders in the company. The fact that shareholders want to convert free cash sitting on the balance sheet (which can ideally be taken out as dividends) into blocked money in exchange for shares is symbolic to their confidence in the company. This in turn is expected to lead to an increase in market price of the stock.\",\n \"people buy stocks because there is more to Return on Investment than whether dividends are issued or not. Some people want ownership and the ability to influence decisions by using the rights associated with their class of stock. Another reason would be to park capital in a place that would grow faster than the rate of inflation. these are only a few of many reasons why people would buy stock.\",\n \"\\\"I'll skip the \\\"\\\"authorizing....\\\"\\\" and go right to uses of new shares: Companies need stock as another liquid asset for a variety of purposes, and if not enough stock is available, then may be forced to the open market to acquire, either by exchanging cash or taking on debt to get the cash.\\\"\",\n \"You haven't seen one because you haven't looked for one properly. You can set a google alert for stock split and get information about major issues splitting their stocks quite regularly, as well as a daily dose of recommendations from people without a say in the matter for big companies to split their stock. Stock splits are announced in advance by company management.\",\n \"/ in relative to the Tesla's performance, and current inflation. They can split and reverse split at anytime the board decides without any regard to inflation or performance. OP points to Tesla at 350- he doesn't point to PE. It makes no differences what the price of one share is. If they split 10 for 1 it would be 35- but what difference does that make- the PE remains the same. OP does not understand value- only price.\",\n \"This IS a stock split. http://en.wikipedia.org/wiki/Stock_split Ratios of 2-for-1, 3-for-1, and 3-for-2 splits are the most common, but any ratio is possible. Splits of 4-for-3, 5-for-2, and 5-for-4 are used, though less frequently. Investors will sometimes receive cash payments in lieu of fractional shares.\",\n \"Why do companies exist? Well, the corporate charter describes why the company exists. Usually the purpose is to enrich the shareholders. The owners of a company want to make money, in other words. There are a number of ways that a shareholder can make money off a stock: As such, maintaining the stock price and dividend payouts are generally the number one concern for any company in the long term. Most of the company's business is going to be directed towards making the company more valuable for a future buyout, or more valuable in terms of what it can pay its shareholders directly. Note that the company doesn't always need to be worried about the specifics of the day-to-day moves of the stock. If it keeps the finances in line - solid profits, margins, earnings growth and the like - and can credibly tell people that it's generally a valuable business, it can usually shrug off any medium-term blips as market craziness. Some companies are more explicitly long-term about things than others (e.g. Berkshire Hathaway basically tells people that it doesn't care all that much about what happens in the short term). Of course, companies are abstractions, and they're run by people. To make the people running the company worry about the stock price, you give them stock. Or stock options, or something like that. A major executive at a big company is likely to have a significant amount of stock. If the company does well, he does well; if it does poorly, he does poorly. Despite a few limitations, this is really a powerful incentive. If a company is losing a lot of money, or if its profits are falling so it's just losing a lot of its value as a business, the owners (stockholders) tend to get upset, and may vote in new management, or launch some sort of shareholder lawsuit. And, as previously noted, to raise funds, a company can also issue new shares to the market as a secondary offering as well (and they can issue fewer shares if the price is high - meaning that whatever the company is worth afterward, the existing owners own proportionally more of it).\",\n \"People buy stocks with the intention of making money. They either expect the price to continue to rise or that they will get dividends and the price will not drop (enough) to wipe out their dividend earnings.\",\n \"Apart from making money from the price difference, some stocks also give dividends, or bonus issues. For long term investors whom are looking for steady income, they may be more interested with the dividend pay-out instead of the capital-appreciation.\",\n \"\\\"This could be another reason. \\\"\\\"Companies buy their own stock in the market place to reduce the number of shares outstanding, and thus boosts the earnings per share. It also boosts the stock price, which benefits management that has stock options. \\\"\\\" Taken from this article. http://www.forbes.com/sites/investor/2014/01/06/the-most-reliable-indicator-of-an-approaching-market-top/ and this article \\\"\\\"Why are stock rising?\\\"\\\" may help as well. http://www.forbes.com/sites/investor/2013/12/23/why-are-stocks-rising/\\\"\",\n \"Originally, stocks were ownership in a company just like any other business- you expected to make a profit from your investment, which is what we call dividends to stock holders. Since these dividends had real value, the stock price was based on what this return rate was, factoring in what it might be expected to be in the future, etc. Nowdays many companies never issue any dividends, so you have to consider the full value of the company and what benefit could be gained by another company if it were to acquire it. the market will likely adjust the share price to factor in what the value of the company might be to an acquirer. But otherwise, some companies today trading at an astronimical price, and which nevers pays a dividend- chalk it up to market stupidity. In this investor'd mind, there is no logical reason for these prices, except based on the idea that someone else might pay you more for it later... for what reason? I can't figure it out. Take it back to it's roots and imagine pitching a new business idea to you uncle to invest in- it will make almost nothing compared to it's share price, and even what it does make it won't pay anything to him for his investment. Why wouldn't he just laugh at you?\",\n \"There's a premium or discount for various stocks subject to influence by the alternatives available to investors, meaning investments are susceptible to the principle of supply and demand. This is easily seen when industries or business models get hot, and everybody wants a tech company, a social media company, or a solar company in his portfolio. You'll see bubbles like the dotcom bubble, the RE bubble, etc., as people start to think that the industry and not its performance are all that matters. The stock price of a desired industry or company is inflated beyond what might otherwise be expected, to accommodate the premium that the investment can demand. So if bonds become uniformly less attractive in terms of returns, and certain institutional investors are largely obliged to continue purchasing them anyway, then flexible investors will need to look elsewhere. As more people want to buy stocks, the price rises. Supply and demand is sometimes so elementary it feels nearly counter-intuitive, but it applies here as elsewhere.\",\n \"\\\"A company doesn't offer up 100% of its shares to the market. There's a float amount of varying significance, maybe 30% of the shares are put up for public offer. Generally some amount of current shareholders will pledge some or all of their shares for offer to the public. This may be how the venture capital, private equity or other current investors cash out their initial investment. The company may issue new shares in order to raise money for some initiative. It may be a combination of existing shares and new. Additionally, a company may hold some \\\"\\\"treasury shares\\\"\\\" on its balance sheet. In this instance fluctuations in the share price directly affect the health of the balance sheet. As far as incentive goes, stock options to management and C-Suite employees keep everyone interested in an increasing stock price.\\\"\",\n \"Companies are expected to make a profit, otherwise there is no point to their existence and no motivation for investment. That profit comes back to shareholders as growth and/or dividend. If a company is doing well and has a healthy profit to turn back into investment to facilitate increased future earnings, it increases shareholder equity and share price. If a company is doing well and has a healthy profit to pay out in dividend, it makes the shares more attractive to investors which pushes the price up. Either way, shares go up. Share prices drop when companies lose money, or there are market disturbances affecting all companies (recessions), or when individual companies fail. Averaged over all companies over the long term (decades), stocks can be reasonably expected to go up.\",\n \"Companies pay their employees in stocks and stock options, so they have an incentive towards increasing a company's share price. There are many elements that go into a stock's price. For example, if you hold a stock for eternity you should be indifferent if the expected present value of all its future dividends (i.e. earnings) equals the price you paid for it. Also, buy-back policies and voting rights determine stock price as well. The theory is that since shareholders want return on their investments they would promote company executives in such a way that their incentives are aligned to increase the share price.\",\n \"The same applies if you were looking for a business to buy: would you pay more for a business that is doing well making increasing profits year after year, or for a business that is not doing so well and is losing money. A share in a company is basically a small part of a company which a shareholder can own. So would you rather own a part of a company that is increasing profits year after year or one that is continuously losing money? Someone would buy shares in a company in order to make a better return than they could make elsewhere. They can make a profit through two ways: first, a share of the company's profits through dividends, and second capital gains from the price of the shares going up. Why does the price of the shares go up over the long term when a company does well and increases profits? Because when a company increases profits they are making more and more money which increases the net worth of the company. More investors would prefer to buy shares in a company that makes increasing profits because this will increase the net worth of the company, and in turn will drive the share price higher over the long term. A company's increase in profits creates higher demand for the company's shares. Think about it, if interest rates are so low like they are now, where it is hard to get a return higher than inflation, why wouldn't investors then search for higher returns in good performing companies in the stock market? More investors' and traders' wanting some of the pie, creates higher demand for good performing stocks driving the share price higher. The demand for these companies is there primarily because the companies are increasing their profits and net worth, so over the long term the share price will increase in-line with the net worth. Over the short to medium term other factors can also affect the share price, sometime opposite to how the company is actually performing; however this is a whole different answer to a whole different question.\",\n \"Not directly Nintendo, but: A company would want its share price to be high if it wants to sell its stock, e.g. on IPO or on subsequent offerings. However, if they want to buy back some shares, it would be in their interest to get more stock for the buck. There may of course be derivative values associated with a high share price, e.g. if they bet on the price or have agreements with investors for particular milestones to be reached. Employees might hold shares and be motivated by share price increases, so a decrease may not be desired, unless they are into some kind of insider trading (buy low, sell high). And last, over-valued share prices may undermine trust in a company, and failing to inform shareholders sufficiently may be outright illegal. Besides those reasons related to law, funding, sales, public relations and company image, companies should be pretty much independent from their own share prices, in contrast to share distribution.\",\n \"\\\"In an IPO (initial public offering) or APO (additional public offering) situation, a small group of stakeholders (as few as one) basically decide to offer an additional number of \\\"\\\"shares\\\"\\\" of equity in the company. Usually, these \\\"\\\"shares\\\"\\\" are all equal; if you own one share you own a percentage of the company equal to that of anyone else who owns one share. The sum total of all shares, theoretically, equals the entire value of the company, and so with N shares in existence, one share is equivalent to 1/Nth the company, and entitles you to 1/Nth of the profits of the company, and more importantly to some, gives you a vote in company matters which carries a weight of 1/Nth of the entire shareholder body. Now, not all of these shares are public. Most companies have the majority (51%+) of shares owned by a small number of \\\"\\\"controlling interests\\\"\\\". These entities, usually founding owners or their families, may be prohibited by agreement from selling their shares on the open market (other controlling interests have right of first refusal). For \\\"\\\"private\\\"\\\" companies, ALL the shares are divided this way. For \\\"\\\"public\\\"\\\" companies, the remainder is available on the open market, and those shares can be bought and sold without involvement by the company. Buyers can't buy more shares than are available on the entire market. Now, when a company wants to make more money, a high share price at the time of the issue is always good, for two reasons. First, the company only makes money on the initial sale of a share of stock; once it's in a third party's hands, any profit from further sale of the stock goes to the seller, not the company. So, it does little good to the company for its share price to soar a month after its issue; the company's already made its money from selling the stock. If the company knew that its shares would be in higher demand in a month, it should have waited, because it could have raised the same amount of money by selling fewer shares. Second, the price of a stock is based on its demand in the market, and a key component of that is scarcity; the fewer shares of a company that are available, the more they'll cost. When a company issues more stock, there's more shares available, so people can get all they want and the demand drops, taking the share price with it. When there's more shares, each share (being a smaller percentage of the company) earns less in dividends as well, which figures into several key metrics for determining whether to buy or sell stock, like earnings per share and price/earnings ratio. Now, you also asked about \\\"\\\"dilution\\\"\\\". That's pretty straightforward. By adding more shares of stock to the overall pool, you increase that denominator; each share becomes a smaller percentage of the company. The \\\"\\\"privately-held\\\"\\\" stocks are reduced in the same way. The problem with simply adding stocks to the open market, getting their initial purchase price, is that a larger overall percentage of the company is now on the open market, meaning the \\\"\\\"controlling interests\\\"\\\" have less control of their company. If at any time the majority of shares are not owned by the controlling interests, then even if they all agree to vote a certain way (for instance, whether or not to merge assets with another company) another entity could buy all the public shares (or convince all existing public shareholders of their point of view) and overrule them. There are various ways to avoid this. The most common is to issue multiple types of stock. Typically, \\\"\\\"common\\\"\\\" stock carries equal voting rights and equal shares of profits. \\\"\\\"Preferred stock\\\"\\\" typically trades a higher share of earnings for no voting rights. A company may therefore keep all the \\\"\\\"common\\\"\\\" stock in private hands and offer only preferred stock on the market. There are other ways to \\\"\\\"class\\\"\\\" stocks, most of which have a similar tradeoff between earnings percentage and voting percentage (typically by balancing these two you normalize the price of stocks; if one stock had better dividends and more voting weight than another, the other stock would be near-worthless), but companies may create and issue \\\"\\\"superstock\\\"\\\" to controlling interests to guarantee both profits and control. You'll never see a \\\"\\\"superstock\\\"\\\" on the open market; where they exist, they are very closely held. But, if a company issues \\\"\\\"superstock\\\"\\\", the market will see that and the price of their publicly-available \\\"\\\"common stock\\\"\\\" will depreciate sharply. Another common way to increase market cap without diluting shares is simply to create more shares than you issue publicly; the remainder goes to the current controlling interests. When Facebook solicited outside investment (before it went public), that's basically what happened; the original founders were issued additional shares to maintain controlling interests (though not as significant), balancing the issue of new shares to the investors. The \\\"\\\"ideal\\\"\\\" form of this is a \\\"\\\"stock split\\\"\\\"; the company simply multiplies the number of shares it has outstanding by X, and issues X-1 additional shares to each current holder of one share. This effectively divides the price of one share by X, lowering the barrier to purchase a share and thus hopefully driving up demand for the shares overall by making it easier for the average Joe Investor to get their foot in the door. However, issuing shares to controlling interests increases the total number of shares available, decreasing the market value of public shares that much more and reducing the amount of money the company can make from the stock offering.\\\"\",\n \"\\\"In some sense, I agree, but let's look at Apple who in 1997 when Steve came back as CEO and had to beg monies from Microsoft (which he received as a professional courtesy) to stay afloat swore he would never have to do again and literally deemed investors as a \\\"\\\"necessary evil\\\"\\\". He presided over one of the most profound rainy day funds (which eclipsed the US Government for a few days in its depth) because he never wanted to be in that position again. He died and Tim Cook initiated splits and buybacks. I think Cook went too far in one direction and Jobs in the other. Another stock to consider in a similar light is Starbucks. But these stocks are performing, I'm an investor, and I'm not going to complain about management decisions when ROI is at are above 20/30ish percent. Other companies like Thomson Reuters fail to achieve a cohesive diverse presence in multiple markets inexpensively sans their newsdesk operations. I'm not saying your wrong, it's just a formula of trust and strategy.\\\"\",\n \"Some investors (pension funds or insurance companies) need to pay out a certain amount of money to their clients. They need cash on a periodical basis, and thus prefer dividend paying stock more.\",\n \"The 1 for 1 split could be the case where a company is being split into two parts. The new part may be spun off, or sold to another company. Any time a company splits into two parts, the ratio of the resulting companies needs to be determined.\",\n \"I see a false assumption that you are making. (Almost always) When you buy stock the cash you spend does not go to the company. Instead it goes to someone else who is selling their shares. The exception to this is when you buy shares in an IPO. Those of us who have saved all our lives for retirement want income producing investments once we retire. (Hopefully) We have saved up quite a bit of money. To have us purchase their stock companies have to offer us dividends.\",\n \"There are two main ways you can make money through shares: through dividends and through capital gains. If the company is performing well and increasing profits year after year, its Net Worth will increase, and if the company continues to beat expectations, then over the long term the share price will follow and increase as well. On the other hand, if the company performs poorly, has a lot of debt and is losing money, it may well stop paying dividends. There will be more demand for stocks that perform well than those that perform badly, thus driving the share price of these stocks up even if they don't pay out dividends. There are many market participants that will use different information to make their decisions to buy or sell a particular stock. Some will be long term buy and hold, others will be day traders, and there is everything in between. Some will use fundamentals to make their decisions, others will use charts and technicals, some will use a combination, and others will use completely different information and methods. These different market participants will create demand at various times, thus driving the share price of good companies up over time. The annual returns from dividends are often between 1% and 6%, and, in some cases, up to 10%. However, annual returns from capital gains can be 20%, 50%, 100% or more. That is the main reason why people still buy stocks that pay no dividends. It is my reason for buying them too.\",\n \"First, corporate profits can grow relative to GDP. If companies succeed in growing revenue without paying much more to workers, then corporate profits and stock prices will grow relative to GDP. That has been happening for the last couple decades. If you require that we keep corporate profits vs GDP constant, then borrowing/leverage is how you do it. Companies can expand their operations on a fixed amount of shareholder equity, and as long as they can grow their profits faster than the cost of the debt, then shareholders keep the upside. But this also means that share prices will quickly fall if profits decline even a small amount, because the debt must still be paid off.\",\n \"How are shareholders sure to receive a fair percentage of each company? At the time the split occurs, each investor owns the same proportion of each new company that they owned in the first. What the investor does with it after that (selling one, for example) is irrelevant from a fairness perspective. Suppose company A splits into companies B and C. You own enough stock to have 1% of A. It splits. Now you have a bunch of shares of B and C. How much? Well, you have 1% of B and 1% of C. What if all the profitable projects are in B? Then shares of B will be worth more than those of C. But it should be the case that the value of your shares of B plus the value of your shares of C are equal to the original value of your shares of A. Completely fair. In fact, if the split was economically justified, then B + C > A. And the gains are realized proportionally by all equityholders. Remember, when a stock splits, every share splits so that everyone owns both companies in the same proportion as everyone else. Executives don't determine what the prices of the resulting companies are...that is determined by the market. A fair market will value the child companies such that together they are worth what the original was.\",\n \"When you invest in stocks, there are two possible ways to make money: Many people speculate just on the stock price, which would result in a gain (or loss), but only once you have resold the shares. Others don't really care about the stock price. They get dividends every so often, and hopefully, the return will be better than other types of investments. If you're in there for the long run, you do not really care what the price of the stock is. It is often highly volatile, and often completely disconnected from anything, so it's not because today you have a theoretical gain (because the current stock price is higher than your buying price) that you will effectively realise that gain when you sell (need I enumerate the numerous crashes that prevented this from happening?). Returns will often be more spectacular on share resale than on dividends, but it goes both ways (you can lose a lot if you resell at the wrong time). Dividends tend to be a bit more stable, and unless the company goes bankrupt (or a few other unfortunate events), you still hold shares in the company even if the price goes down, and you could still get dividends. And you can still resell the stock on top of that! Of course, not all companies distribute dividends. In that case, you only have the hope of reselling at a higher price (or that the company will distribute dividends in the future). Welcome to the next bubble...\",\n \"\\\"As I understand it, a company raises money by sharing parts of it (\\\"\\\"ownership\\\"\\\") to people who buy stocks from it. It's not \\\"\\\"ownership\\\"\\\" in quotes, it's ownership in a non-ironic way. You own part of the company. If the company has 100 million shares outstanding you own 1/100,000,000th of it per share, it's small but you're an owner. In most cases you also get to vote on company issues as a shareholder. (though non-voting shares are becoming a thing). After the initial share offer, you're not buying your shares from the company, you're buying your shares from an owner of the company. The company doesn't control the price of the shares or the shares themselves. I get that some stocks pay dividends, and that as these change the price of the stock may change accordingly. The company pays a dividend, not the stock. The company is distributing earnings to it's owners your proportion of the earnings are equal to your proportion of ownership. If you own a single share in the company referenced above you would get $1 in the case of a $100,000,000 dividend (1/100,000,000th of the dividend for your 1/100,000,000th ownership stake). I don't get why the price otherwise goes up or down (why demand changes) with earnings, and speculation on earnings. Companies are generally valued based on what they will be worth in the future. What do the prospects look like for this industry? A company that only makes typewriters probably became less valuable as computers became more prolific. Was a new law just passed that would hurt our ability to operate? Did a new competitor enter the industry to force us to change prices in order to stay competitive? If we have to charge less for our product, it stands to reason our earnings in the future will be similarly reduced. So what if the company's making more money now than it did when I bought the share? Presumably the company would then be more valuable. None of that is filtered my way as a \\\"\\\"part owner\\\"\\\". Yes it is, as a dividend; or in the case of a company not paying a dividend you're rewarded by an appreciating value. Why should the value of the shares change? A multitude of reasons generally revolving around the company's ability to profit in the future.\\\"\",\n \"The shareholders can't all re-invest their dividends -- it's not possible. Paying a dividend doesn't issue any new shares, so unless some of the existing shareholders sell their shares instead of re-investing, there aren't any shares available for the shareholders to re-invest in.\",\n \"Not directly. But companies benefit in various ways from a higher stock price. One way a high stock price can hurt a company is that many companies do share buybacks when the price is too high. Economically speaking, a company should only buy back shares when those shares are undervalued. But, management may have incentives to do buybacks at irrationally high prices.\",\n \"Do a share split. Your initial 1 share each becomes 10 (or 100) shares each, then you can sell/gift/etc shares as needed.\",\n \"It's a way to help normalize the meaning of the earnings report. Some companies like Google have a small number of publicly traded shares (322 Million). Others like Microsoft have much larger numbers of shares (8.3 Billion). The meaning depends on the stock. If it's a utility company that doesn't really grow, you don't want to see lots of changes -- the earnings per share should be stable. If it's a growth company, earnings should be growing quickly, and flat growth means that the stock is probably going down, especially if slow growth wasn't expected.\",\n \"I'm guessing you're conflating bonus share issuance with stock split. That seems very common to me, from a quick search; there's even some issues of terminology between the US and Europe, I think - it seems some Europeans may use Bonus Shares to mean Stock Split, as opposed to the more common meaning in the US of Stock Dividend. Sometimes a bonus share issuance is (incorrectly) called a stock split, like in this public announcement from STADA in 2004. It is a 1:1 bonus share issuance (meaning they issue one bonus share to everyone who has one share now), but it is in essence the same thing as a stock split (a 2:1 stock split, namely). They combined the 1:1 from bonus share with the wording 'split', causing the confusion. Bonus share issuance, also known as a stock dividend, is covered well in this question/answer on this site, or from a search online. It has no obvious effect initially - both involve doubling shares out there and halving the price - but it has a substantially different treatment in terms of accounting, both to the company and to your tax accountant.\",\n \"One reason a company might choose to pay a dividend is because of the desire of influential stockholders to receive the dividend. In the case of Ford, for example, there are 70 million shares of Class B stock which receive the same dividend per share as do the common stock holders. Even though there are 3.8 billion shares of common stock, the Class B owners (which are Ford family) hold 40% of the voting power and so their desires are given much weight. The Class B owners prefer regular dividends because if enough were to sell their Class B shares, all Class B shares (as a block) would have their voting power drop from 40% to 30%, and with further sales all special voting would be lost and each Class B share would be equivalent to a common share in voting power. Hence the Class B owners, both for themselves and for all of the family members holding Class B, avoid selling shares and prefer receiving dividends.\",\n \"Fully paid up Shares issued in which no more money is required to be paid to the company by shareholders on the value of the shares. When a company issues shares upon incorporation or through an issuance, either initial or secondary, shareholders are required to pay a set amount for those shares. Once the company has received the full amount from shareholders, the shares become fully paid shares. authorised share capital The number of stock units that a publicly traded company can issue as stated in its articles of incorporation, or as agreed upon by shareholder vote. Authorized share capital is often not fully used by management in order to leave room for future issuance of additional stock in case the company needs to raise capital quickly. Another reason to keep shares in the company treasury is to retain a controlling interest in the company. If so, why not just give the existing shareholders the $500 million, (and do a stock split if desired)? Stock splits, bonus issues doesn't generate any capital for the firm, which it required.\",\n \"You have plenty of good answers, but I want to add something that might help you grow your intuition on stocks. There are a lot of differences between the example I am going to give and how the stock market actually runs, but the basic concepts are the same. Lets say your friend asks you if he can borrow some money to start up a company, in exchange you will have some ownership in this company. You have essentially just bought yourself some stock. Now as your friend starts to grow, he is doing well, but he needs more cash to buy assets in order to grow the company more. He is forced with an option, either give you some of the profits, or buy these assets sooner. You decide you don't really need the money right now, and think he can do a lot better with spending the money to buy stuff. This is essentially the same as a company electing to not pay dividends, but instead invest into the future. You as a stock holder are fine with it since you know the money is going toward investing in the future. Even if you never get paid a dividend, as a company grows, you can then turn around and sell the stock to someone else for more money then you gave originally. Of course you always take the risk of having the company failing and loosing some if not all of your investment, but that is just the risk of the market.\",\n \"\\\"The company was paying \\\"\\\"only\\\"\\\" $1 a share in dividends, compared to $10 a share in earnings. That is a so-called payout ratio of 10%, which is low. A more normal payout ratio would be 40%, something like $4 a share. If a $13 stock had a $4 dividend, the dividend yield would be about 30%, which would be \\\"\\\"too high,\\\"\\\" meaning that the price would go up to drive down the resulting yield. Even $1 a share on a $13 stock is a high dividend of about 7%, allowing for appreciation to say, the $20-$25 range. Graham was a great believer in the theory that management should pay out \\\"\\\"most\\\"\\\" of its earnings in dividends. He believed that by holding dividends so far below earnings, the company was either being \\\"\\\"stingy,\\\"\\\" or signalling that the $10 a share of earnings was unsustainable. Either of these would be bad for the stock. For instance, if $1 a share in dividends actually represented a 40% payout ratio, it would signal management's belief that they could normally earn only $2.50 a year instead of $10.\\\"\",\n \"\\\"There's no need for an index to have a currency as its purpose is not to act as an asset but rather to signal investors about the performance of a collection of stocks. An index can be price-weighted, meaning that its value equals the (arithmetic) average of the prices of each stock in the index. With no stock splits, the return on this index is the same as the return on a portfolio composed of one share of each stock. If there is a stock split, however instead of dividing by the number of stocks, as you normally would when taking the arithmetic average, you divide it by the number that will make the value of the index pre-stock-split (arithmetic average) equal to the value post stock split. Then use that dividing number for all periods until a new stock split occurs. An index can be value-weighted, meaning that its changes in value track the percentage changes in total market capitalization of the stocks in the index. Price weighted indexes ignore for \\\"\\\"firm size\\\"\\\" and percentage changes in price weighted indexes are not robust to stock-splits. Value weighted indexes take \\\"\\\"firm size\\\"\\\" into account and are robust to stock-splits. DJIA is price-weighted. S&P 500 is value-weighted.\\\"\",\n \"\\\"Supply and Demand, pure and simple! There are two basic forms of this - a change in the quantity demanded/supplied at any given price, and a true change in the amount of demand/supply itself. Please note that this can be distinct from the underlying change in the value of the company and/or its expected future cash flows, which are a function of both financial performance and future expectations. If more people want the stock that are willing to sell it at a given price at a given point in time, sellers will begin to offer the stocks at higher prices until the market is no longer willing to bear the new price, and vice versa. This will reduce the quantity of stocks demanded by buyers until the quantity demanded and the quantity supplied once again reach an equilibrium, at which point a transaction occurs. Because people are motivated to buy and sell for different reasons at different times, and because people have different opinions on a constant flow of new information, prices change frequently. This is one of the reasons why executives of a recent IPO don't typically sell all of their stock at once. In addition to legal restrictions and the message this would send to the market, if they flooded the market with additional quantities of stock supplied, all else being equal, since there is no corresponding increase in the quantity demanded, the price would drop significantly. Sometimes, the demand itself for a company's stock shifts. Unlike a simple change in price driven by quantity supplied versus quantity demanded, this is a more fundamental shift. For example, let's suppose that the current demand for rare earth metals is driven by their commercial applications in consumer electronics. Now if new devices are developed that no longer require these metals, the demand for them will fall, regardless of the actions of individual buyers and sellers in the market. Another example is when the \\\"\\\"rules of the game\\\"\\\" for an industry change dramatically. Markets are behavioral. In this sense prices are most directly driven by human behavior, which hopefully is based on well-informed opinions and facts. This is why sometimes the price keeps going up when financial performance decreases, and why sometimes it does not rise even while performance is improving. This is also why some companies' stock continues to rise even when they lose huge sums of money year after year. The key to understanding these scenarios is the opinions and expectations that buyers and sellers have of that information, which is expressed in their market behavior.\\\"\",\n \"For the same reason you wanted it when you bought it. No-one guarantees that you'll be able to sell the stock you hold, and in fact many people get stuck with stocks they'd like to sell, but no-one is buying. But if investors think there's a profit potential that is not exhausted yet - they'll want to buy the stock.\",\n \"When a stock price rises, the company's assets are worth more. This doesn't mean it gets more cash directly, but it can liquidate (= sell) some of its stocks for a higher return than before.\",\n \"Scrip dividends are similar to stock splits. With a stock split, 100 shares can turn into 200 shares; with scrip dividends they might turn into 105 shares.\",\n \"There are a few reasons, dependent on the location of the company. The first, as you mentioned is that it means that the employee is invested in the companies success - in theory this should motivate the employee to work hard in order to increase the value of their holdings. Sometimes these have a vestment period which requires that they hold the stock for a certain amount of time before they are able to sell, and that they continue working at the company for a certain amount of time. The second, is that unlike cash, providing stocks doesn't come out of the companies liquid cash. While it is still an expense and does devalue the shares of other shareholders, it doesn't effect the daily working capital which is important to maintain to ensure business continuity. And the third, and this is for the employee, is tax reasons. In particular for substantial amounts. Of course this is dependent on jurisdiction but you can often achieve lower tax rates on receiving shares vs a cash equivalent sum, as you can draw out the money over time lowering your tax obligation each year, or other methods which aren't possible to look into now. Hope this helps.\",\n \"Cash flow is needed for expansion, either to increase manufacturing capacity or to expand the workforce. Other times companies use it to purchase other companies. Microsoft and Google have both used their cash or stocks to purchase companies. Examples by Google include YouTube, Keyhole (Google Earth), and now part of Motorola to expand into Phones. If you are investing for the future, you don't want a lot of dividends. They do bring tax issues. That is not a big problem if you are investing in an IRA or 401K. It is an issue if the non-tax-defered mutual fund distributes those dividends via the 1099, forcing you to address it on your taxes each year. Some investors do like dividends, but they are looking for their investments to generate cash. Who would require it? Would it be an SEC requirement? Even more government paperwork for companies.\",\n \"The folks who hold stock are the legal owners of the company. If a majority of stock holders become unhappy with the management of a company they can fire the executives and put in new management, or they can direct the company to close its doors and sell off its assets. As a crude approximation, the stock holders are happier when the stock price goes up and unhappier when it goes down. Therefore, executives are highly motivated to drive the stock price up. A frequent criticism of corporate governence is that management can be so motivated to drive the stock price up, that they will take actions that drive the stock price up in the current year, even if undercuts the company in the long term.\",\n \"Well, if one share cost $100 and the company needs to raise $10000, then the company will issue 100 shares for that price. Right? However, say there's 100 shares out there now, then each share holder owns 1/100th of the company. Now the company will remain the same, but it's shared between 200 shareholders after the issuing of new shares. That means each share holder now owns 1/200th of the company. And hence only gets 1/200th of their earnings etc.\",\n \"No. Not directly. A company issues stock in order to raise capital for building its business. Once the initial shares are sold to the public, the company doesn't receive additional funds from future transactions of those shares of stock between the public. However, the company could issue more shares at the new higher price to raise more capital.\",\n \"One difference is the bid/ask spread will cost you more in a lower cost stock than a higher cost one. Say you have two highly liquid stocks with tiny spreads: If you wanted to buy say $2,000 of stock: Now imagine these are almost identical ETFs tracking the S&P 500 index and extrapolate this to a trade of $2,000,000 and you can see there's some cost savings in the higher priced stock. As a practical example, recently a popular S&P 500 ETF (Vanguard's VOO) did a reverse split to help investors minimize this oft-missed cost.\",\n \"\\\"Here is one study http://rfs.oxfordjournals.org/content/7/4/711.short I quote from the abstract \\\"\\\"In a variety of tests, marginal price drop is not significantly different from the dividend amount. Thus, over the last several decades, one-for-one marginal price drop has been an excellent (average) rule of thumb.\\\"\\\"\\\"\",\n \"IBM is famous for spending lots of money on stock buyback to keep the stock price higher. The technique works, and investors in growth stocks generally prefer a high market prices to a taxable dividend payment. Dividends are ways to return shareholder value when a company generates a lot of cash, but doesn't have alot of growth. Electric and gas companies are a classic example of high-dividend companies.\",\n \"There are a few reason why share prices increase or decrease, the foremost is expectation of the investors that the company/economy will do well/not well, that is expectation of profit/intrinsic value growth over some time frame (1-4 qtrs.)there is also demand & supply mismatch over (usually) short time. If you really see, the actual 'value' of a company is it's net-worth (cash+asset+stock in trade+brand value+other intangibles+other incomes)/no of shares outstanding, which (in a way) is the book value, then all shares should trade at their book value, the actual number but it does not, the expectation of investors that a share would be purchased by another investor at a higher price because the outlook of the company over a long time is good.\",\n \"A private company say has 100 shares with single owner Mr X, now it needs say 10,000/- to run the company, if they can get a price of say 1000 per share, then they just need to issue 10 additional shares, so now the total shares is 110 [100 older plus 10]. So now the owner's share in the company is around 91%. However if they can get a price of only Rs 200 per share, they need to create 50 more shares. So now the total shares is 150 [100 older plus 50]. So now Mr X's equity in his own company is down to 66%. While this may still be OK, if it continues and goes below 50%, there is chances that he [Original owner] will be thrown out\",\n \"If you want to see one split, well, a reverse split anyway, keep an eye on TZA, FAZ, BGZ, and any Direxion fund. These funds decay continuously forever. Once they get close to $10-$15 or so, they reverse-split them back to the $30-$50 range and the process starts over. This happens about once a year. A few years ago I sent Direxion an email asking what happens when they run out of shares to reverse split and the reply was that's its an open fund where shares can be created or redeemed at will. That still didn't answer the question of what happens when they run out of shares. If they create new shares, the price will drop below the $10 level where many fund managers aren't allowed to buy.\",\n \"The most significant reason is that if the board of directors of a company neglects the stock value, the stockholders will vote them out of their jobs.\",\n \"Stephen's answer is the 100% correct one made with the common Economics assumption, that people are rational. A company that never has paid dividends, is still worth something to people because of its potential to start paying dividends later and it is often better to grow now and payoff later. However, the actual answer is much more disapointing, because people are not rational and the stock market is no longer about investing in companies or earning dividends. Most of the value of a stock is for the same reason that gold, stamps, coins and bitcoins, and Australian houses are worth anything, that is, because enough people say it is worth something*. Even stocks that pay dividends, very few people buy it for dividends. They buy it because they believe someone else will be willing to buy it for slightly more, shortly after. Different traders have different timeframes, ranging from seconds to months. *Houses and stock are of course partially valuable due to the fundamentals, but the major reason they are purchased is just to resell at a profit.\",\n \"Stock dilution is legal because, in theory, the issuance of new shares shouldn't affect actual shareholder value. The other answers have explained fairly well why this is so. In practice, however, the issuance of new shares can destroy shareholder value. This normally happens when the issuing company: In these cases, the issuance of more shares merely reduces each shareholder's stake in the company without building proportional shareholder value.\",\n \"It's important to remember what a share is. It's a tiny portion of ownership of a company. Let's pretend we're talking about shares in a manufacturing company. The company has one million shares on its register. You own one thousand of them. That means that you own 1/1000th of the company. These shares are valued by the market at $10 per share. The company has machinery and land worth $1M. That means that for every dollar of the company you own, 10c of that value is backed by the physical assets of the company. If the company closed shop tomorrow, you could, in theory at least, get $1 back per share. The other $9 of the share value is value based on speculation about the future and current ability of the company to grow and earn income. The company is using its $1M in assets and land to produce goods which cost the company $1M in ongoing costs (wages, marketing, raw cost of goods etc...) to produce and make $2M per year in sales. That means the company is making a profit of $1M per annum (let's assume for the sake of simplicity that this profit is after tax). Now what can the company do with its $1M profit? It can hand it out to the owners of the company (which means you would get a $1 dividend each year for each share that you own) or it can re-invest that money into additional equipment, product lines or something which will grow the business. The dividend would be nice, but if the owners bought $500k worth of new machinery and land and spent another $500k on ongoing costs and next year we would end up with a profit of $1.5M. So in ten years time, if the company paid out everything in dividends, you would have doubled your money, but they would have machines which are ten years older and would not have grown in value for that entire time. However, if they reinvested their profits, the compounding growth will have resulted in a company many times larger than it started. Eventually in practice there is a limit to the growth of most companies and it is at this limit where dividends should be being paid out. But in most cases you don't want a company to pay a dividend. Remember that dividends are taxed, meaning that the government eats into your profits today instead of in the distant future where your money will have grown much higher. Dividends are bad for long term growth, despite the rather nice feeling they give when they hit your bank account (this is a simplification but is generally true). TL;DR - A company that holds and reinvests its profits can become larger and grow faster making more profit in the future to eventually pay out. Do you want a $1 dividend every year for the next 10 years or do you want a $10 dividend in 5 years time instead?\",\n \"If a stock that makes up a big part of the Dow Jones Industrial Average decided to issue a huge number of additional shares, that will make the index go up. At least this is what should happen, since an index is basically a sum of the market cap of the contributing companies. No, indices can have various weightings. The DJIA is a price-weighted index not market-cap weighted. An alternative weighting besides market-cap and price is equal weighting. From Dow Jones: Dow Jones Industrial Average™. Introduced in May 1896, the index, also referred to as The Dow®, is a price-weighted measure of 30 U.S. blue-chip companies. Thus, I can wonder what in the new shares makes the index go up? If a stock is split, the Dow divisor is adjusted as one could easily see how the current Dow value isn't equal to the sum or the share prices of the members of the index. In other cases, there may be a dilution of earnings but that doesn't necessarily affect the stock price directly as there may be options exercised or secondary offerings made. SO if the index, goes up, will the ETF DIA also go up automatically although no additional buying has happened in the ETF itself? If the index rises and the ETF doesn't proportionally, then there is an arbitrage opportunity for someone to buy the DIA shares that can be redeemed for the underlying stocks that are worth more in this case. Look at the Creation and Redemption Unit process that exists for ETFs.\",\n \"You buy stocks for dividends over the long term. If a share of stock pays $1.00 in dividends every quarter, that's four dollars a year. If you bought it for $40, it pays out $4 in a year, and it's still worth roughly $40 at the end of the year, you're $4 richer. People will often invest large amounts of money in stable stocks not planning to sell it, but only collect the dividends which are either re-invested or pulled out as income.\",\n \"\\\"The stock should fall by approximately the amount of the dividend as that is what is paid out. If you have a stock trading at $10/share and it pays a $1/share dividend, the price should drop to $9 as what was trading before the dividend was paid would be both the dividend and the stock itself. If the person bought just for the dividend then it would likely be neutral as there isn't anything extra to be gained. Consider if this wasn't the case. Wouldn't one be able to buy a stock a few days before the dividend and sell just after for a nice profit? That doesn't make sense and is the reason for the drop in price. Similarly, if a stock has a split or spin-off there may be changes in the price to reflect that adjustment in value of the company. If I give you 2 nickels for a dime, the overall value is still 10 cents though this would be 2 coins instead of one. Some charts may show a \\\"\\\"Dividend adjusted\\\"\\\" price to factor out these transactions so be careful of what prices are quoted.\\\"\",\n \"Your autograph analogy seems relevant to me. But it is not just speculation. In the long run, investing in stocks is like investing in the economy. In the long run, the economy is expected to grow , hence stock prices are expected to go up. Now in theory: the price of any financial instrument is equal to the net present value today of all the future cash flows from the instrument. So if company's earnings improve, shareholders hope that the earnings will trickle down to them either in form of dividends or in form of capital gain. So they buy the stock, creating demand for it. I can try to explain more if this did not make any sense. :)\",\n \"Two of the main ways that investors benefit financially from a stock are dividends and increases in the price of the stock. In the example as described, the benefits came primarily from dividends, leaving less benefits to be realized in terms of an increase in the value of the company. Another way to put that is that the company paid its profits to shareholders in the form of a dividend, instead of accumulating that as an increase in the value of the company. The company could have chosen to take those profits and reinvest them in growing the business, which would lead to lower dividends but (hopefully) an increase in the valuation of the stock, but they chose to pay dividends instead. This still rewards the investors, but share prices stay low.\",\n \"Any time there is a share adjustment from spin-off, merger, stock split, or reverse slit; there is zero chance for the stockholders to hang on to fractional shares. They are turned into cash. For the employees in the 401K program or investors via a mutual fund or ETF this isn't a problem. Because the fraction of a share left over is compared to the thousands or millions of shares owned by the fund as a collective. For the individual investor in the company this can be a problem that they aren't happy about. In some cases the fractional share is a byproduct that will result from any of these events. In the case of a corporate merger or spin-off most investors will not have an integer number of shares, so that fraction leftover that gets converted to cash isn't a big deal. When they want to boost the price to a specific range to meet a regulatory requirement, they are getting desperate and don't care that some will be forced out. In other cases it is by design to force many shareholders out. They want to go private. They to 1-for-1000 split. If you had less than 1000 shares pre-split then you will end up with zero shares plus cash. They know exactly what number to use. The result after the split is that the number of investors is small enough they they can now fall under a different set of regulations. They have gone dark, they don't have to file as many reports, and they can keep control of the company. Once the Board of Directors or the majority stockholders votes on this, the small investors have no choice.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["Stock splits are typically done to increase the liquidity of stock merely by converting every stock of the company into multiple stocks of lower face value. For example, if the initial face value of the stock was $10 and the stock got split 10:1, the new face value of the stock would be $1 each. This has a proportional effect on the market value of the stock also. If the stock was trading at $50, after the split the stock should ideally adjust to $5. This is to ensure that despite the stock split, the market capitalization of the company should remain the same. Number of Shares * Stock Price = Market Capitalization = CONSTANT"],"string":"[\n \"Stock splits are typically done to increase the liquidity of stock merely by converting every stock of the company into multiple stocks of lower face value. For example, if the initial face value of the stock was $10 and the stock got split 10:1, the new face value of the stock would be $1 each. This has a proportional effect on the market value of the stock also. If the stock was trading at $50, after the split the stock should ideally adjust to $5. This is to ensure that despite the stock split, the market capitalization of the company should remain the same. Number of Shares * Stock Price = Market Capitalization = CONSTANT\"\n]","isConversational":false}}},{"rowIdx":67,"cells":{"_id":{"kind":"string","value":"7622"},"query":{"kind":"string","value":"Best way to pay off debt?"},"gt_ids":{"kind":"list like","value":["253369","378594"],"string":"[\n \"253369\",\n \"378594\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1],"string":"[\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["416796","223380","449294","535742","94373","343208","463085","457945","20610","256323","31189","60720","197796","373554","199248","319773","81206","517361","114592","490648","569240","396889","394474","519675","544858","549359","159762","494306","491692","205273","353911","596936","581697","175768","320703","188015","390655","463260","481898","512699","525557","36826","453627","508453","106495","356183","128574","586626","431884","487621","431212","271525","56332","157923","115717","42806","466707","451457","220241","428150","28230","109880","5827","95321","559523","329249","599499","243520","273631","538014","529229","262026","83411","288268","552383","312166","101363","440620","28191","345895","577517","78361","340484","245786","273095","47565","508510","467857","499752","388095","130812","85353","306808","181816","414674","160193","249971","162631","394467","241189"],"string":"[\n \"416796\",\n \"223380\",\n \"449294\",\n \"535742\",\n \"94373\",\n \"343208\",\n \"463085\",\n \"457945\",\n \"20610\",\n \"256323\",\n \"31189\",\n \"60720\",\n \"197796\",\n \"373554\",\n \"199248\",\n \"319773\",\n \"81206\",\n \"517361\",\n \"114592\",\n \"490648\",\n \"569240\",\n \"396889\",\n \"394474\",\n \"519675\",\n \"544858\",\n \"549359\",\n \"159762\",\n \"494306\",\n \"491692\",\n \"205273\",\n \"353911\",\n \"596936\",\n \"581697\",\n \"175768\",\n \"320703\",\n \"188015\",\n \"390655\",\n \"463260\",\n \"481898\",\n \"512699\",\n \"525557\",\n \"36826\",\n \"453627\",\n \"508453\",\n \"106495\",\n \"356183\",\n \"128574\",\n \"586626\",\n \"431884\",\n \"487621\",\n \"431212\",\n \"271525\",\n \"56332\",\n \"157923\",\n \"115717\",\n \"42806\",\n \"466707\",\n \"451457\",\n \"220241\",\n \"428150\",\n \"28230\",\n \"109880\",\n \"5827\",\n \"95321\",\n \"559523\",\n \"329249\",\n \"599499\",\n \"243520\",\n \"273631\",\n \"538014\",\n \"529229\",\n \"262026\",\n \"83411\",\n \"288268\",\n \"552383\",\n \"312166\",\n \"101363\",\n \"440620\",\n \"28191\",\n \"345895\",\n \"577517\",\n \"78361\",\n \"340484\",\n \"245786\",\n \"273095\",\n \"47565\",\n \"508510\",\n \"467857\",\n \"499752\",\n \"388095\",\n \"130812\",\n \"85353\",\n \"306808\",\n \"181816\",\n \"414674\",\n \"160193\",\n \"249971\",\n \"162631\",\n \"394467\",\n \"241189\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["\"Pay off the highest rate debt. Interest on both are charged on the balance owed, nothing more complicated than that. There are those who would call a mortgage \"\"front loaded\"\" but that's nonsense. Of course most of the payment is interest at the beginning because the debt is higher and you start with a 30 year term. The fastest way to pay off multiple debts is always from highest rate first and then the next and so on.\"","It's very simple, line up your debt in the order of interest rate, tax adjusted, and start with the highest rate. Too simple? If knocking off the $7500 loan feels better to you than the fact that you are still paying 9% on $7500 (as part of the $20K) makes you feel bad, just pay off the $7500. I'd rather be ahead $210/yr. (A celebrity advocates the small wins promoting good feelings and encouragement. If that actually works for some, I won't criticize it here) If freeing up the $200/mo payment enables you to do something else that's beneficial, that's another story. I've written how $10,000 of student loan can keep you from qualifying for $30K or more of mortgage. In isolation, highest rate. With the rest of the picture, other advice might be more suitable. Welcome to Money.SE","If you can get a rate of savings that is higher than your debt, you save. If you can't then you pay off your debt. That makes the most of the money you have. Also to think about: what are you goals? Do you want to own a home, start a family, further your education, move to a new town? All of these you would need to save up for. If you can do these large transactions in cash you will be better off. If it were me I would do what I think is a parroting of Dave Ramsay's advice Congratulations by the way. It isn't easy to do what you have accomplished and you will lead a simpler life if you don't have to worry about money everyday.","Excellent question and it is a debate that is often raised. Mathematically you are probably best off using option #1. Any money that is above and beyond minimum payments earns a pretty high interest rate, about 6.82% in the form of saved interest payments. The problem is you are likely to get discouraged. Personal finance is a lot about behavior, and after working at this for a year, and still having 5 loans, albeit a lower balance, might take a bit of fight out of you. Paying off such a large balance, in a reasonable time, will take a lot of fight. With the debt snowball, you pay the minimum to the student loan, save in an outside account, and when it is large enough, you execute option #2. So a year from now you might only have three loans instead of five. If you behaved exactly the same your balance would be higher after that year then using the previous method. However often one does not behave the same. Because the goals are shorter and more attainable it is easier to delay some gratification. The 8 dollars you are saving in your weekly gas budget, because of low prices, is meaningful when saving for a 4K goal, where it is meaningless when looking at it as a 74K goal. With the 4K goal you are more apt to put that money in your savings, where the 74K goal you might spend it on a latte. For me, the debt snowball worked really well. With either option make sure that excess payments actually go to a reduction in principle not a prepayment of interest. Given this you may be left with no option. For example if method #1 you only prepay interest, you are forced to use option #2.","\"It is true that all else being equal, you will pay a lower amount of total interest by paying down your highest interest rate debts first. However, all else is not always equal. I'm going to try to come up with some reasons why it might be better in some circumstances to pay your debts in a different order. And I'll try to use as much math as possible. :) Let's say that your goal is to eliminate all of your debt as fast as possible. The faster you do this, the lower the total interest that you will pay. Now, let's consider the different methods that you could take to get there: You could pay the highest interest first, you could pay the lowest interest first, or you could pay something in the middle first. No matter which path you choose, the quicker you pay everything off, the lower total interest you will pay. In addition to that, the quicker you pay everything off, the difference in total interest paid between the most optimal method and the least optimal method will be less. To put this in mathematical notation: limt→0 Δ Interest(t) = 0 Given that, anything we can do to speed up the time it takes to get to \"\"debt free\"\" is to our advantage. When paying large amounts of debt as fast as possible, sacrifice is needed. And this means that psychology comes into play. I don't know about you, but for me, gamifying the system makes everything easier. (After all, gamification is what gets us to write answers here on SE.) One way to do this is to eliminate individual debts as quickly as possible. For example, let's say that I've got 10 debts. 5 of them are for $1k each. 3 of them are for $5k each, 1 is a $20k car loan, and 1 is a $100k mortgage. Each one has a monthly payment. Let's say that I've got $3k sitting in the bank that I want to use to kickstart my debt reduction. I could pay all $3k toward one of my larger loans, or I could immediately pay off 3 of my 10 loans. Ignore interest for the moment, and let's say that we are going to pay off the smallest loans first. When I eliminate these three loans, three of my monthly payments are also gone. Now let's say that with the money I was paying toward these eliminated debts, and some other money I was able to scrape together $500 a month that I want to use toward debt reduction. In four months, I've eliminated the last two $1k debts, and I'm down to 5 debts instead of 10. Achievement Unlocked! Instead of this strategy, I could have paid toward my largest interest rate. Let's say that was one of the $5k loans. I paid the $3k toward the bank to it, and because I still had all the monthly payments after that, I was only able to scrape together $400 a month extra toward debt reduction. In four months, I still have 10 debts. Now let's say that after these four months, I have a bad month, and some unexpected expenses come up. If I've eliminated 5 of my debts, my monthly payments are less, and I'll have an easier month then I would have had if I still had 10 monthly payments to deal with. Each time I eliminate a debt, the amount extra I have each month to tackle the remaining debts gets bigger. And if your goal is eliminating debt quickly, these early wins can really help motivate you on. It really feels like you are getting somewhere when your monthly bills go down. It also helps you with the debt free mindset. You start to see a future where you aren't sending payments to the banks each month. This method of paying your smaller debts first has been popularized in recent years by Dave Ramsey, and he calls it the debt snowball method. There might be other reasons why you would pick one debt over another to pay first. For example, let's say that one of your loans is with a bank that has terrible customer service. They don't send you bills on time, they process your payment late, their website stinks, they are a constant source of stress, and you are getting sick of them. That would be a great reason to pay that debt first, and never set foot in that bank again. In conclusion: If you have a constant amount of extra cash each month that you are going to use to reduce your debt, and this will never change, then, yes, you will save money over the long run by paying the highest interest debt first. However, if you are trying to eliminate your debt as fast as possible, and you are sacrificing in your budget, sending every extra penny you can scrape together toward debt reduction, the \"\"snowball\"\" method of knocking out the small debts first can help motivate you to continue to sacrifice toward your goal, and can also ease the cash flow situation in difficult months when you find yourself with less extra to send in.\"","\"Wow, you guys get really cheap finance. here a mortage is 5.5 - 9% and car loans about 15 - 20%. Anyway back to the question. The rule is reduce the largest interest rate first (\"\"the most expensive money\"\"). For 0% loans, you should try to never pay it off, it's literally \"\"free money\"\" so just pay only the absolute minimum on 0% loans. Pass it to your estate, and try to get your kids to do the same. In fact if you have 11,000 and a $20,000 @ 0% loan and you have the option, you're better to put the 11,000 into a safe investment system that returns > 0% and just use the interest to pay off the $20k. The method of paying off the numerically smallest debt first, called \"\"snowballing\"\", is generally aimed at the general public, and for when you can't make much progress wekk to week. Thus it is best to get the lowest hanging fruit that shows progress, than to try and have years worth of hard discipline just to make a tiny progress. It's called snowballing, because after paying off that first debt, you keep your lifestyle the same and put the freed up money on as extra payments to the next target. Generally this is only worth while if (1) you have poor discipline, (2) the interest gap isn't too disparate (eg 5% and 25%, it is far better to pay off the 25%, (3) you don't go out and immediately renew the lower debt. Also as mentioned, snowballing is aimed at small regular payments. You can do it with a lump sum, but honestly for a lump sum you can get better return taking it off the most expensive interest rate first (as the discipline issue doesn't apply). Another consideration is put it off the most renewable finance. Paying off your car... so your car's paid off. If you have an emergency, redrawing on that asset means a new loan. But if you put it off the house (conditional on interest rates not being to dissimilar) it means you can often redraw some or all of the money if you have an emergency. This can often be better than paying down the car, and then having to pay application fees to get a new unsecured loan. Many modern banks actually use \"\"mortgage offsetting\"\" which allows them to do this - you can keep your lump sum in a standard (or even fixed term) and the value of it is deducted \"\"as if\"\" you'd paid it off your mortgage. So you get the benefit without the commitment. The bank is contracted for the length of the mortgage to a third party financier, so they really don't want you to change your end of the arrangement. And there is the hope you might spend it to ;) giving them a few more dollars. But this can be very helpful arragement, especially if you're financing stuff, because it keeps the mortgage costs down, but makes you look liquid for your investment borrowing.\"","\"I don't have enough reputation in this community to comment yet, so this \"\"answer\"\" is really just a minor furtherance of JoeTaxpayer's comment... THe only thing I might add to this great answer - make all minimum payments, and send all extra available cash to the highest interest card. If OP will pay in full after 6 month, this may make little difference, but it will be a few dollars in his pocket instead of the bank. – JoeTaxpayer♦ Dec 2 at 17:42 ...on Ben Miller's excellent answer. Once you have taken JoeTaxpayer's advice and ordered your cards by interest rate and have paid off the highest interest card first, take that same payment and add it to your next-highest card's minimum payment. Once THAT is payed off, take the combined amounts that you were paying to cards one and two and apply it all to card three along with its minimum payment. You see where this is going. By aggregating your payments thusly, each card will get paid off successively more quickly than the previous one, without increasing your overall payments to the cards, and you are retiring the highest-interest debt first. Your last card will then be paid off in record time, because you have combined all of the payments for cards 1-4. One other amplification: Since we don't know which account has which interest rate, it may be more advantageous to order them by balance, with the smallest first. That way you retire the first card quickly, which gives you a sense of accomplishment, and by the time you reach your highest balance card, you have snowballed all of your payments and are now throwing boulders instead of pebbles at it. You'll have to do that math to see which method has the most benefit. Then roll it all into the car payment. Then roll it into your student debt. Etc.\"","Depends upon the debt cost. Assuming it is consumer debt or credit card debt, it is better to pay that off first, it is the best investment you can make. Let's say it is credit card debt. If you pay 18% interst and have for example a $1,000 amount. If you pay it off you save $180 in interest ($1,000 times 18%). You would have to earn 18% on 1,000 to generate $180 if it was in aninvestment. Here is a link discussing ways of reducing debt Once you have debt paid off you have the cashflow to begin building wealth. The key is in the cashflow.","Without knowing your credit situation or your full budget it's a little difficult, but i'd go with the snowball method for now: It may seem like not a big deal to have this kind of debt but you really should be looking at it as if your walking around with your hair on fire. It's a HUGE emergency. Debt, especially looming CC debt with high rates, can make things worse (think water on grease fire) really quickly so the faster you get rid of it the better. Good luck!","Pay the highest rate debt first, it's as simple as that. When that debt is paid (the 24% card in this case) pay off the next one. As far as having an emergency fund is concerned, I consider it a second priority. If one owes 24% money, that $2000 emergency fund is costing $480/yr. Ouch. Avoid the behaviors that got you into debt in the first place, and pay the cards off as fast as you can. When you have no balance, start to save, first into the emergency account, then toward retirement.","\"It is typically best to pay minimum payments to 2 of the loans and pay aggressively on the third loan. Some will tell you to pay the highest interest rate loan off first because \"\"personal finance\"\" is about \"\"finance\"\" and mathematically that saves you the most interest. Some will tell you to pay the smallest balance loan off first because \"\"personal finance\"\" is \"\"personal\"\" and the psychological \"\"win\"\" of paying off a loan is more valuable than the small amount of interest difference between this strategy and paying off the loan with the highest interest rate first.\"","The Avalanche method does not work because most people don't have enough money to make an avalanche. If you somehow had a windfall that was greater or equal to your highest credit card balance, then by all means pay that one off. However, most people do not have that kind of situation. Instead they should use the debt snow ball method. They only have regular income that is typically much smaller then the balances. Another part of your plan that is especially troubling is that you are continuing to utilize credit cards. You need to cut them up, and stop using them. First of course save $1000 for a small emergency fund, the pay them off smallest to largest. Do a budget each and every month. Work an extra job or three. Any extra money that hubby brings in goes towards one of the credit cards. BTW you don't have a math problem you have a behavior problem.","Ditto to Victor. The simple rule is: Pay the minimums on all so you don't get any late fees, etc, then pay off the highest interest rate loan first. A couple of special cases do come to mind: If one or more of these are credit cards, then, here in the U.S. at least, credit cards charge you interest on the average daily balance, unless you pay off the balance entirely, in which case you pay zero interest. So for example say you had two credit cards, both with 1% per month interest, with debt of $2000 and $1000. You have $1500 available. Ignoring minimum payments for the moment, if you put that $1500 against the larger balance, you would still pay interest on the full amount for the current month, or $30. But if you paid off the smaller and put the difference against the larger, then your interest for the current month would be only $15. (Either way, your interest for NEXT month would be the same -- 1% of the $1500 remaining balance or $15 -- assuming you couldn't pay off the other card.) If one or more of the loans are mortgage loans on which you are paying mortgage insurance, then when you get the balance below a certain point -- usually 80% of the original loan amount -- you no longer have to pay mortgage insurance premiums. Thus the amount you are paying on such premiums needs to be factored into the calculation. There may be other special cases. Those are the ones that I've run into.","If what you are paying in interest on the debt is a higher percentage than what your investments are returning, the best investment you can make is to pay off the debt. If you're lucky enough to be paying historically low rates (as I am on my mortgage) and getting good returns on the investments so the latter is the higher percentage, the balance goes the other way and you'd want to continue paying off the debt relatively slowly -- essentially treating it as a leveraged investment. If you aren't sure, paying off the debt should probably be the default prefrence.","\"My advice: IMO, all things being somewhat equal, you should always try to retire debts as quickly as possible in most cases, so start with the small cases. The method of calculating credit card interest is written on the statement. Usually it is \"\"average daily balance method\"\". Don't sweat the details. Just pay the things off.\"","I have heard that it is better for your credit score to pay them down over time. Will it make much of a difference? I have never heard that, however, the financial institutions (who are charging you an amount of interest which was at one time in the not so distant past classified and punishable in state criminal codes) really enjoy you thinking that way. You are clearly capable of doing the math yourself. While I don't know the exact numbers, I am totally confident that you will find in about 5 or 10 minutes (if that long) that eliminating debt of any kind in your life will pay an immediate return that beats the great majority of other investments in terms of risk/reward. After the immediate financial return, there is a quieter, subtler, and even greater long term benefit. Basic principle: Highest Rates First Perhaps this decision could be considered slightly less important than deciding not to smoke during your youth; but I would put it as a close second. You are already in a position where you can see the damage that your prior decisions (about financial debt) have produced. Run the clock back to the time in your life when you were debt free. Now, pay off that debt with the big check, and start from zero. Now, turn on your psychic powers and predict the same amount of time, in the future, with the same amount of money (don't even try to adjust for inflation; just use flat dollars) WITHOUT losing the money which you have given to the financial institutions during this previous part of your life. Do you now see why the financial institutions want you to think about slowly paying them off instead of waking up tomorrow without owing them anything ?","When paying off multiple debts there is a protocol that many support. Payoff your debts according to the snowball method. The snowball method proposes that you make minimum payments on all debts except the smallest one. Payoff the smallest debt as quickly as possible. As smaller debts are paid off, that makes one less minimum payment you need to make, leaving you with more money to put against the next smallest debt. So in your case, pay off the smaller debt completely, then follow up on the larger one by making regular payments at least equal to the sum of your two current minimum payments. You'll see immediate progress in tackling your debt and have one less minimum to worry about, which can serve as a little safety of it's own if you have a bad month. As to saving the thousand dollars, that is pragmatic and prudent. It's not financially useful (you won't make any money in a savings account), but having cash on hand for emergencies and various other reasons is an important security for modern living. As suggested in another answer, you can forgo saving this thousand and put it against debt now, because you will have a freed up credit card. Credit can certainly give you that same security. This is an alternative option, but not all emergencies will take a credit card. You typically can't make rent with your credit card, for example. Good luck paying your debts and I hope you can soon enjoy the freedom of a debt free life.","I see some merit in the other answers, which are all based on the snowball method. However, I would like to present an alternative approach which would be the optimal way in case you have perfect self-control. (Given your amount of debt, most likely you currently do not have perfect self-control, but we will come to that.) The first step is to think about what the minimum amount of emergency funds are that you need and to compare this number with your credit card limit. If your limits are such that your credit cards can still cover potential emergency expenses, use all of the 4000$ to repay the debt on the loan with the higher interest rate. Some answer wrote that Others may disagree as it is more efficient to pay down the 26%er. However, if you pay it all of within the year the difference only comes to $260. This is bad advice because you will probably not pay back the loan within one year. Where would you miraculously obtain 20 000$ for that? Thus, paying back the higher interest loan will save you more money than just 260$. Next, follow @Chris 's advice and refinance your debt under a lower rate. This is much more impactful than choosing the right loan to repay. Make sure to consult with different banks to get the best rate. Reducing your interest rate has utmost priority! From your accumulated debt we can probably infer that you do not have perfect self-control and will be able to minimize your spending/maximize your debt repayments. Thus, you need to incentivize yourself to follow such behavior. A powerful way to do this is to have a family member or very close friend monitor your purchase and saving behavior. If you cannot control yourself, someone else must. It should rather be a a person you trust than the banks you owe money.","The best approach depends on how much of an emergency fund you have. If you have no emergency fund Calculate how much you need in order to pay your expenses for 1 month and put at least that amount in a savings account. 3-6 months' worth of expenses is better. Put the remainder towards one credit card. If you have less than 3 months' worth of expenses in your emergency fund Deposit 1 additional month's worth of expenses into your savings account and apply the rest to one card. If you have an emergency fund that you're completely comfortable with Pay $8000 towards one card and $2000 towards the other one. Paying off one card fully gets rid of a bill that you have to think about each month, even if the two cards are otherwise identical.","See many past answers: you will usually save the most money by paying off the highest-intetest-rate loan first. (Remember to allow for tax effects, if any, when comparing real interest rates.) Some folks are more motivated to simplify their finances than to save money; in that case you might pay off the smallest loan first.","Keep in mind that you NEED to have a cash reserve. Blindly applying all stray cash to debt reduction is a bad idea. Your lenders do not care about your balance. All they care about is your NEXT payment. It is therefore imperative that you have a cash reserve that can carry these payments for several months. Having zero cash reserves puts you at high risk for such simple things as the payroll clerk at work missing the monthly deposit (Rare, but it happens.) I've also been in situations where a major client had a cash flow issue and delayed payment, and our company had to borrow to meet payroll that month. Fortunately, we were in good standing with the bank and had low debt, but it could have been catastrophic for any employees living paycheque to paycheque.","\"Welcome to Money.SE. Your question is similar to a number of others. The \"\"How do I pay my debt down?\"\" and \"\"How do I invest extra money?\"\" is a bit of a continuum since there's no consensus than one should pay off the last cent of debt before investing. Oversimplify it for me: the correct order of investing offers a good look at this. You see, Pete's answer on your question is perfectly fine, but, since you make no mention of, say, a matched 401(k), I'd suggest that any answer to a question like yours should first take a step back and evaluate the bigger picture. A dollar for dollar matched 401(k) beats paying off even an 18% credit card. Absent any tangents, any thought of investing, saving for anything else, etc, my answer is simple, line up the debt, highest interest rate to lowest. Keep in mind the post-tax rate, i.e. a 6% student loan you can deduct, is an effective 4.5% if you are in the 25% bracket.\"","Others have suggested paying off the student loan, mostly for the satisfaction of one less payment, but I suggest you do the math on how much interest you would save by paying early on each of the loans: When you do the calculations I think you'll see why paying toward the debt with the highest interest rate is almost always the best advice. Whether you can refinance the mortgage to a lower rate is a separate question, but the above calculation would still apply, just with different amortization schedules.","There are a few ways you can go about paying this off quickly (and safely): You could start paying $386 monthly (ie, double what you're paying now). You'll pay less interest in the long run because they can only charge you for the amount outstanding. Remember, 6.8% of $12k is more than 6.8% of $6k. However, your plan sounds more sensible. Say you get to $6k paid off and $6k saved, you're able to pay off what's left and that's almost $200 a month you'll have extra. Although what I like about this is - if you become ill, lose your job, or whatever, then you're still able make the $193 payments, PLUS you'll have money saved for day-to-day expenses (food, water, gas, electricity, etc.) long enough to see yourself through. PS. They may charge you a settlement fee because if you pay early then they miss out on money... but check your contract with them first. Hope this helps!","\"Dave Ramsey would tell you to pay the smallest debt off first, regardless of interest rate, to build momentum for your debt snowball. Doing so also gives you some \"\"wins\"\" sooner than later in the goal of becoming debt free.\"","\"There is no magic formula to this, quite simply: earn, cut expenses, and pay. It sounds like you can use a little bit of help in the earning area. While it sounds like you are career focused (which is great) what else can you do to earn? Can you start a low cost of entry side business? Examples would include tutoring, consulting, or even baby sitting. Can you work a part time job that is outside of your career field (waiter, gas station, etc...)? One thing that will help greatly is a written budget each and every month. Have a plan on where to spend your money. Then as you pay off a loan throw that money at the next one. No matter if you use the smallest loan first or highest interest rate first method if you do that your debt payments will \"\"snowball\"\", and you will gain momentum. I'd encourage you to keep good records and do projections. Keeping good records will give you hope when you begin to feel discouraged (it happens to just about everyone). Doing projections will give you goals to meet and then exceed. The wife and I had a lot of success using the cash envelope system and found that we almost always had money left over at the end of the pay cycle. For us that money went to pay off more debt. Do you contribute to a 401K? I'd cut that to at least the match, and if you want to get crazy cut it to zero. The main thing to know is that you can do it. I'd encourage you to pay off all your loans not just the high interests ones.\"","\"When is the best time to pay? At the end of each year? If you save $1,000 each month at 1% so as to pay $12,000 at EOY on a 4.75% loan, you've lost \"\"4.75% - 1% = 3.75%\"\" over that year. (And that's presuming you put the money in a \"\"high yield\"\" online savings account.) Thus, the best time to pay is as soon as you have the money. EDIT: This all assumes that you have an emergency fund (more than the bare minimum $1K), zero other debt with a higher rate than 4.75% and that you are getting the full company match from 401(k).\"","No. It means each month the total amount you owe goes up by a factor of (1+0.298/12). So if you owed $23K at the beginning of the month, at the end you owe a total of 23K*1.0248=$23,571. Then subtract the $804 you are paying. If you want to think of it in terms of interest and principal, you are paying $571 a month in interest and 233 toward principle, I guess. Paying off debt with a lower interest rate using debt with a higher interest rate is throwing a lot of money away and impoverishing yourself needlessly. Psychology can't get around that. If you want a psychological aid, decide how much you are going to pay toward these debts and have it automatically deducted from your paycheck so you never see it. Make the minimum payment on every debt you have except the one with the highest interest rate. Pay the very most you can toward that. Then when it is paid off, move to the next highest. Do all your spending out of the lowest rate card, or avoid using these credit cards until your financial discipline and resources allow you to pay all credit cards off completely at the end of each month.","By rounding my house payments up to the nearest $50.00, my 30 year mortgage was paid off in 7 years. Initially, my mortgage payment was roughly $600, $50 going to principal and $550 going to interest (banker's profits). By paying $650, I was actually doubling the amount I was paying on principal. Since interest is computed as a function (percentage) of the outstanding principal balance, the amount of my fixed payment that went to interest decreased each month, and the amount that went to principal increased. In 7 years I owned my home free and clear, and started putting the money I had been putting into the mortgage payments into investments. A rule of thumb I have discovered is that it takes half the time to save money to meet a goal that it takes to pay off the same debt.","Pay the the smallest balance first. The sooner you pay that off, the sooner you can pay more on the mortgage.","It does make sense to combine debts and pay off the worst (highest interest rate). However, if you can't get any loan, you should focus on the worst debt and pay that off. Then take the same amount of money you were paying to the next worse debt, and so on until you're clean. Let's look at an example. Debt A is at 5%, Debt B is at 10% and Debt C is at 15%. You are paying AB and C. On a monthly basis, you save 100€ to pay off C. Once C is payed off, you keep on saving 100€ and add whatever you were paying to Debt C to those savings. This way, you can pay off Debt B at an increased rate. When B is cleared, you save 100€ + whatever you were paying to Debt B and Debt C to clear Debt A. That's the theory.","In my opinion, it generally makes sense to focus all of your debt-reduction energy and funds on one loan at a time. There are two reasons for this: It will allow you to more quickly move from 4 loans to 3 loans, and then 2, and then 1, providing you with a sense of progress and motivation. As you reduce the number of loans that you have, your monthly minimum payment obligations will be reduced. Then, if you have a month with an emergency expense, you will have more income available to you for your emergency without getting behind on your loans. There is debate about whether to pay loans in order of the loan balance or in order of interest rate (you can read about this here and here), but in your case, your highest interest loans also have the lowest balance, so either method would have you picking the same loans first. You have already chosen, wisely, to start with the $1500, 6.8% loans. Send all of your $1000 to one of these loans, and continue to work aggressively to knock out all four as quickly as possible.","\"First to actually answer the question \"\"how long at these rates/payments?\"\"- These is nothing magic or nefarious about what the bank is doing. They add accrued interest and take your payment off the new total. I'd make higher payments to the 8.75% debt until it's gone, $100/mo extra and be done. The first debt, if you bump it to $50 will be paid in 147 months, at $75/mo, 92 months. Everything you pay above the minimum goes right to the principal balance and gets you closer to paying it off. The debt snowball is not the ideal way to pay off your debt. Say I have one 24% credit card the bank was nice enough to give me a $20,000 line of credit on. I also have 20 cards each with $1000 in credit, all at 6%. The snowball dictates that the smallest debt be paid first, so while I pay the minimum on the 24% card, the 6% cards get paid off one by one, but I'm supposed to feel good about the process, as I reduce the number of cards every few months. The correct way to line up debt is to pay off the (tax adjusted) highest rate first, as an extra $100 to the 24% card saves you $2/mo vs 50 cents/mo for the 6% cards. I wrote an article discussing the Debt Snowball which links to a calculator where you can see the difference in methods. I note that if the difference from lowest to highest rate is small, the Snowball method will only cost you a small amount more. If, by coincidence, the balances are close, the difference will also be small. The above aside, it's the rest of your situation that will tell you the right path for you. For example, a matched 401(k) deposit should take priority over most debt repayment. The $11,000 might be better conserved for a house downpayment as that $66/mo is student loan and won't count as the housing debt, rather \"\"other debt\"\" and part of the higher ratio when qualifying for the mortgage. If you already have taken this into account, by all means, pay off the 8.75% debt asap, then start paying off the 3% faster. Keep in mind, this is likely the lowest rate debt one can have and once paid off, you can't withdraw it again. So it's important to consider the big picture first. (Are you depositing to a retirement account? Is it a 401(k) and are you getting any matching from the company?)\"","Starting up a company is fun, stressful, and exciting. It's also often a lot harder than you expect. Income, revenue, and cash flow are big concerns, and you need to be able to eat while you're hunting down your first paying customers. Don't pay off all the debt if that will leave you without any money for living expenses. Perhaps a compromise is in order? Pay off the high-interest loans first, and continue to make payments on the lower-interest loans while you start up. It doesn't have to be all or nothing.","Keep in mind that by fully paying off one of your loans, you will reduce your minimum repayments. This will make you feel richer than you actually are. This will make you buy stuff that it seems like you can afford, probably putting some of it on credit. As you can't actually afford this, this will leave you, in a years time, with the same amount of debt you have now or more, but with a slightly bigger tv. Assuming your home loan has no penalties for paying off extra, then put all 11k into there to keep your monthly repayments as high as possible.","This is a case where human nature and arithmetic lead to different results. Depending on the your income, the effective interest rate on the mortgage is probably right around 2.5%. So purely by arithmetic, the absolute cheapest way to go is to put the $11k to the bigger car loan, then pay off the mortgage, then the smaller car loan. The Debt Snowball is more effective however, because it works better for people. Progress is demonstrated quickly, which maintains (and often enhances) motivation to continue. I can say as a case in point, having tried both methods, that if does indeed work. So, I am with you ... pay off the car loan first, and roll that payment into the bigger car loan. If you add no extra dollars, you should get the small loan paid off in 6 to 8 months and the bigger car loan in another 16 to 18 months. It sounds like from your message that you have another $1500 or so a month. If that is the case ... small loan paid off in two months, bigger loan paid off in another year. If you stick with the Ramsay program, you then build an emergency fund and start investing. Good luck!","Pay the debt down. Any kind of debt equals risk. No debt equals no risk and a better chance to have that money earn you income down the road once it's invested. That and you will sleep so much better knowing you have ZERO debt. You 6 month emergency fund is probably good. Remember to keep it at 6 months living expenses (restaurants don't count as living expenses).","The answer will vary person to person and situation to situation. But the basic concept to always consider is this: What interest rate am I paying on my debt? 10%? 18%? And what interest rate am I making on my savings/investment, etc? 3%? 7%? It won't give you a hard and fast answer, but will definitely let you know if you should take a closer look at it. I'd suggest talking to a financial planner about it. Find a fee-based planner that you can turn to intermittently to make sure you are on the right track...not a commission-based planner, a fee-based one. (with respectful apologies to any commission-based planners who may read this.) My instinct is usually to pay off the debt, try to clean everything up so you don't have anything outstanding that is charging you interest. Debt is clutter, it's stressful, it can be a reminder of money you wish you hadn't spent. As long as you have access to money in case of emergency, job loss, etc, get your debt paid off and keep it paid off. You'll sleep much better.","\"The best way I know of to get the interest rate lowered is to call the credit card company and simply ask. Typically if a credit card company thinks you will leave them for another company they will be willing to work with you. There is also the option of transfering some of the higher interest debt to one of the lower interest credit cards. It sounds like you have your friend on the right track by focusing all extra money on the credit card with the highest interest rate. Then after that one is paid off send all extra to the next highest one and so on. The classic \"\"snowball\"\" effect.\"","The definitive answer is: It Depends. What are your goals? First and foremost, you need to have at least 3 months expenses in cash or equivalent. (i.e. an investment that you can withdraw from quickly, and without penalty). The good news is that you don't have to come up with it instantly. Set a time frame - one year - for creating this safety net, and pay towards that goal. This is the single most important piece of financial advice you will receive. Now determine what you need to do. For example, you may need a car. Compare interest rates on your student loan and the car loan. Put your cash towards whichever is higher. If you don't need a car or other big ticket item, then you may consider sticking your surplus into the student loans. 50k at $1650 a month will be paid down in about 3 years, which might be a bit long to live the monastic lifestyle. I'd look at paying down the smallest loan first (assuming relatively similar rates), and freeing up that payment for yourself. So if you can pay off 1650 a month, and free up $100 of that in six months, then you can reward yourself with half that surplus, and apply the other half to the next loan. (This is different than some would suggest because you're talking about entering severe spartan mode, which is not sustainable.) Remember that life happens. You'll meet someone. You'll have an accident, your brother will get sick and you'll give him some money to help out. You've got to be prepared for these events, and for these reasons, I don't recommend living that close to the edge. Remember, you're not in default, and you do have the option of continuing to pay the minimum for a long time.","Pay off your car loan. Here is why: As you mentioned, the interest on your home mortgage is tax deductible. This may not completely offset the difference in interest between your two loans, but it makes them much closer. Once your car debt is gone, you have eliminated a payment from your life. Now, here's the trick: take the money that you had been paying on your car debt, and set it aside for your next car. When the time comes to replace your car, you'll be able to pay cash for your car, which has several advantages.","\"Your companies are declining to lower your rates because you are describing it as being kind. When I was in a similar situation, I called each one, starting with the highest rate, and said this: For the last little while things have been tight and my balances have crept up on all my cards. Now I'm about to start a fairly dramatic paydown. I'm going to be doing highest-rate fastest, which is you. Are you able to lower my rate so that you can continue to collect it? Some said no. Some said \"\"ask again when you've paid more than the minimum three months in a row.\"\" Most said yes, and sometimes by a dramatic amount. It made a real difference to getting things under control. I agree with the other answers that $50 extra on each card is just not as fulfilling as putting all the extra to a single card. If you must still use a card (to put gas in your car, buy groceries etc) getting one card to zero will return you to not paying interest even when you use it, so you might want to start with your lowest balance and then go to highest-rate once you have one clear one you can use. (If your balances are all so high that it will take a year or more to get one to zero, then maybe not. But if one is low drive it down first.) As for the consolidation loan, for some people it's the key to saving interest and getting the debt behind them. For others it's a chance to catch their breath and run up even more debt. Most people cannot predict in advance which they will be or which others will be. Be aware that it is a risk. You can vow that you will never again cover payroll with a cash advance from the company credit card (or your personal one) but when push comes to shove, you just might anyway.\"","If you want to pay them off as quickly as possible, pay the minimum payment on the larger two and dump as much as you can into the one with the 8.75% interest. Then, even though it has a slightly lower interest rate, I would attack the one with the next smallest balance after that, while continuing to make the minimum payment on the one with the largest balance.","I know your question is about your credit score, but practically speaking, you should pay of the debt with the highest interest rate first. Doing do will save you money, which is the same net effect as making more money. Your time frame to pay it all off is short (you said 6 month), but just in case it takes longer, take care of the expensive debt first.","\"There are two solutions. One is financially better, the other is psychologically better. Financially better: You should pay off loans in the order of interest rate, so the 9% first, then the six percent, then the 3-4%. If you pay back $1000, the first one saves you $90 a year in interest, the second saves you $60, the third $30-$40 a year. Every year until everything is paid back. Psychologically better: Some people have psychological problems paying back debt, and it is better for them to pay back small loans first. If you feel better having two loans instead of three, and feeling better makes you able to save money and pay back the other loans, while having three loans would make you depressed and unable to make savings - pay back the smaller loan. If you don't have that kind of problem, use the \"\"financially better\"\" method.\"","I'd start paying off the smallest balance first. Hopefully, that can get cleared in a few months. When that happens, close the account and try to get your bank loan again. Keep repeating this process until either you pay off all of the debt. After you've paid off one or two loans and put the negative marks of your credit history further into the past, you'll be able to make better progress.","There are non-financial costs to having a debt: you need to remember to make monthly payments, perhaps keep track of changing interest rates, be aware of conditions of the debt, archive the related paperwork. Life is simpler with fewer debts, and that has value. Of course, if the difference in interest rate is large, then that is more important and the higher interest should be paid off first. But if the difference is only half a percentage point or so, you may decide that having fewer debts is in itself worth the bit of extra interest you pay.","You mention only two debts, mortgage and student loan, but you mention $19K in savings, which suggests that you are a saver, and likely do not have other debts. You did not mention your (net) income and expenses (income statement), but since you have substantial savings, you likely live within your means (income > expenses). Since you mention $38K in retirement, we might conclude you are regularly saving for retirement (are you saving 10% toward retirement)? You did not mention any medical condition or other debts, that might require a large savings, so I would suggest having 6 months savings ($2.5K x 6 = $15K) but should your net expenses be less, you might reduce this ($2K x 6 = $12K). You do not mention any investment you might want to make, but since you did not mention any candidate investments, we can assume you have no (specific) investments you find particularly attractive. You did not mention anything you were saving to purchase that you might want to purchase. You have combined $19K + $50K = $69K savings, and $15K would be a comfortable emergency savings, leaving $54K you could use to reduce mortgage or student loan debt. The mortgage debt interest @4.5%, is higher, so paying that debt off would be like earning 4.5% guaranteed return on your money, tax-free. At your income, your marginal tax rate is low enough that the mortgage interest deduction (if you do itemize) would not reduce this return much (15% if you itemize). The student loan debt interest @2.8%, would be like earning 2.8% guaranteed return on your money, tax-free. Clearly the higher return on your 'investment' in paying off debt would be reducing your mortgage balance (over 50% higher return on investment, compared to the student loan debt). You did not mention any circumstance that might cause the student loan rate to increase, the mortgage rate to increase, nor did you mention any difficulty making both the mortgage and student loan payments, the amounts of either payment, nor the number of years remaining to pay on either. Should you need (or desire) to reduce your payments, you could choose to payoff the student loan to eliminate one payment, and thus decrease your expenses. Or you could choose to pay down the mortgage, and refinance (or refactor) the mortgage to obtain a smaller payment. Another strategy (assuming you have had your house for 5-7 years), might be to pay the mortgage down enough to refinance into a 15 year loan, and (assuming you have a good credit score) obtain a lower (3%) rate. But I am going to suggest you consider a blended approach. Combine the Dave Ramsey Debt Snowball approach with the reduce the interest rate approach. Take the $54K ($57K?) available (after reserving 6 months emergency fund), and split between both. You pay your mortgage down by $27K and your student loan debt down by $27K. Your blended return on investment is (2.8+4.5)/2 = 3.65%, and you have the following Balance Sheet: Assets: Debts: The next steps would be to, There are two great reasons for paying off the student loan debt. One is the Dave Ramsey Debt Snowball approach which is that this is the smaller debt, and thus represents a psychological win, and the other is that student loan debt has special treatment even in bankruptcy.","\"Although there is no single best answer to your situation, several other people have already suggest it in some form: always pay off your highest after-tax (!) interest loan first! That being said, you probably also have heard about the differentiation for good debt vs. bad debt. Good debt is considered a mortgage for buying your primary home or, as is the case here, debt for education. As far as I am concerned, those are pretty much the only two types of debt I'd ever tolerate. (There may be exceptions for health/medical reasons.) Everything else is consumer debt and my personal rule is, don't buy it if you don't have the money for it! Meaning, don't take on consumer debt. One other thing you may consider before accelerating paying off your student debt, the interest paid on it may be tax deductible. So you should look at what the true interest is on your student loan after taxes. If it is in the (very) low single digits, meaning between 1-3%, you may consider using the extra money towards an automatic investment plan into an ETF index fund. But that would be a question you should discuss with your tax accountant or financial adviser. It is also critical in that case that you don't view the money invested as \"\"found\"\" money later on, unless you have paid off all your debt. (This part is the most difficult for most people so be very cautious and conscious if you decide to go this route!) At any rate, congratulations on making so much progress paying off your debt! Keep it going.\"","So my advice for your financial situation depends on your aims. Are you aiming to: - Completely clear your debt - Clear one card to free up more monthly income. - Clear some debt to allow further controlled spending - Clear one card and focus on just using one, having 2nd as emergency. There are other things you may wish to do but you said to pay off some / all of 2 credit card bills. If you want to contact me I can plan this more precisely. Some seem the same but other factors can come into play as well. Differing rates of interest make the options clearer. My first advice would be to call the card companies and see if you can get better rates first. SCENARIO (some figures made up for visual) Credit Card Debts 8,000 8,000 Monthly payment 100 100 APR % 10 10 Ignoring APR this will be 80 months to repay (otherwise 140 months using my example amounts above) £28,000 repaid over 11 years 8 months. Your Suggestion As per your suggestion originally, paying off cards equally will allow smaller debt on both cards. Credit Card Debt 3,000 3,000 Monthly payment 100 100 APR % 10 10 With a 0% APR this would be paid off in 2 years 6 months. Cards are available to get free balance transfers, need to look into this. With the 10% APR this would take 3 years 1 month. £10,000 lump and £7,400 repaid over 3 years 1 month (saving £10,600 and 8 years 7 months) AIM: To clear debt completely. My advice here is to use the £10,000 lump sum to pay off one credit card, the remaining £2,000 can then come off the other card. This will free up your outgoings (was 2 x £100) by £100. But then use this £100 to pay off the card, this will result in the following: Credit Card Debt 6,000 Monthly payment 200 APR % 10 With a 0% APR this would be paid off in 2 years 6 months. Cards are available to get free balance transfers, need to look into this. With 10% APR this would take roughly 3 years 1 month. £10,000 lump and £7,400 repaid over 3 years 1 month (saving £10,600 and 8 years 7 months). This option is the same as above, but you have the options on the odd tight month to reduce payments to £100. This also will allow the 2nd card to be used interest free for an emergency purchase (to be paid off without any interest charge) If rates are different, pay of the one with the higher APR AIM: Clear one card to free up more monthly income. AIM: Clear one card and focus on just using one, having 2nd as emergency. Same as above, but don’t increase to £200, leave monthly payment at £100. Credit Card Debt 6,000 Monthly payment 100 APR % 10 With a 0% APR this would be paid off in 5 years. With the 10% APR this would take 88 months (7 years 4 months) £10,000 lump and £8,800 repaid over 7 years and 4 months (saving £9,200 and 4 years 4 months). This also allows for some extra spending (even racking back up the debt – although not advised) AIM: Clear some debt to allow further controlled spending As above apart from this will allow you to spend to get back up to full £16,000 debt. NOTE My figures are theoretical, paying off £500 (£250x2) a month instead of the £100 (10%APR) would take: Lump sum 10,000, remaining 6,000 – 14 months (£17,000 paid) Lump sum 5,000, remaining 2 x 5,500 – 26 months (£18,000 paid) Lump Sum 0, remaining 2 x 8,000 – 40 months (£20,000 paid) Now I have finished waffling, I hope you have an idea on what you are aiming to achieve and a better idea of what to do when you receive the income Stephen.","If you have a debt that has very low interest now, but you are aware that it's not going to stay that way (0% introductory APR on a credit card, for example), it can make sense to pay that off before the higher rate kicks in.","\"First, pay off the highest interest first. If you have 80%, pay it first. Paying off a card/loan with a lower rate, but a lower payment or a lower balance can help your mental capacity by having fewer things to pay. But, this should be a decision where things are similar, such as 20-25%, not 20-80%. What about any actual loans? Any loans with a fixed payment and a fixed amount? If you must continue to use CC while paying them off, use the one with the lowest interest rate. Call all of your debtors and ask for reduction in interest rate. This is not the option to take first... This is a strategic possibility and will cause credit score issues... If you are considering bankruptcy or not paying back some, then you have even more negotiation power. Consider calling them all and telling them that you only have a little bit of money and would like to negotiate a settlement with them. \"\"I have only a limited amount of money, and lots of debt. I will pay back whomever gives me the best deal.\"\" See what they say. They may not negotiate until you stop paying them for a few months... It is not uncommon to get them to reduce interest (even to 0%) and/or take a reduction in the amount due - up to 25 cents on the dollar. To do this, you might need to pay the amount all at once, so look into loans from sources like retirement, home equity, life insurance, family... Also, cut out all expenses. Cut them hard; cut until it hurts. Cut out the cell phone (get a pre-paid plan and/or budget $10-20/month), cut out all things like alcohol, tobacco, firearms, lottery, tattoos, cable tv, steak, eating out. Some people would suggest that you consider pets and finding them a new home. No games, no trips, no movies, no new clothes... Cut out soft drinks, candy, and junk food. Take precautions to stay healthy - don't wear shoes in the house, brush your teeth, take a multi vitamin, get exercise, eat healthy (this is not expensive, organic stuff, just regular groceries). Consider other ways to save, like moving in with family or friends. Having family or friends live with you and pay rent. Analyze costs like daycare vs. job income. Apply for assistance - there are lots of levels, and some don't rely on others, such as daycare. Consider making more money - new job, 2nd job, overtime, new career. Consider commute - walk, bike, take the bus. Work 4/10's. Telework. Make a list of every expense and prioritize them. Only keep things which are really necessary. Good Luck.\"","When you're debt free everything you own feels different. The lack of financial stress in your life goes away. BUT! before you do go gung-ho on paying down debt think through these steps (and no I did not come up with them. Dave Ramsey did and others). Truncated from - http://www.daveramsey.com/new/baby-steps/ I have 1 credit card. Only use it for business/travel but pay it off every month (yay for auto-draft). Everthing else is cash/debit and we live by a budget. If it's not in the budget we don't buy it. Easy as pie. The hard part is disciplining yourself to wait. Our society is gear for BUY NOW! PAY LATER! and well you can see where that has taken our country and families. And celebrate the small victories. Pay off 1 debt then go have a nice dinner. Things like that help keep you motivated and pursuing the end goal.","First of all a big thumbs up for Ben's answer. A few small things you can do to help you on your way. Hopefully you are not more in debt that 6 months of salary in debt because that is a really tough road. first thing you need to do is get some professional help. The National Foundation for Credit Counseling (NFCC) offers free or low-cost debt counseling to help you through the process. Visit them at NFCC.org or call 1-800-388-2227 to find a local affiliate office near you. You might want to only use cash for a while. If not and you have a credit card with no balance always use that card because it will be interest free. Remember if you use credit cards as a payment system and not credit, you actually get free interest. If you roll even a penny over into the next statement you are paying interest day one of each purchase. Pay credit cards with highest interest rate first an pay minimums to others This one I like the best. As you get money pay your credit card. You interest is being compounded daily. Pay your cards when you have money, not when they are due. Have a mindset that reminds how much something is really going to cost you If you plan on taking 3 years to get out of debt and you buy something for $100 that is really costs you $156.08 Three years of compound 16% interest. 5b. Conversely if you sell something for $100 on eBay that is like selling something for $156.08.","Simply, you should put your money into whatever has the higher interest rate, savings or repayment of debt. Let's say at the beginning of month A you put $1000 into each account. In the case of the savings, at the end of month A you will have $1001.6 ($1000 + 1000 x 2% annual interest / 12) In the case of a loan, at the end of month A you will have $1005.7. ($17000 plus 6.8 interest for one month is 17096.3. On $16000, the new value is 16090.6. The difference between these is $1005.7. 5.7 / 1.6 = 3.56 Therefore, using your money to repay your loan nets you a return about 3.5 times greater.","This is pretty simple in theory, harder to do in practice. You will be surprised how quickly the debt will disappear. Doing these things will work, I know from experience.","Strictly from a fastest payback standpoint, the rule is to make all minimum payments and send any extra funds to the highest interest loan next. This will result in the lowest interest paid each year. The decision to consolidate depends on the impact it will have to both your payment and overall payoff schedule. It sounds like your priority might need to be cash flow and not overall savings. e.g. taking a 4% loan that has a high payment, but stretching it over more time can lower the payment, even at a bit higher rate. You just need to be aware of the cost and decide based on what you can live with. I hope you are in a good field that would see improvements to your income over these next few years.","\"A major thing to consider when deciding whether to invest or pay off debt is cash flow. Specifically, how each choice affects your cash flow, and how your cash flow is affected by various events. Simply enough, your cash flow is the amount of money that passes through your finances during a given period (often a month or a year). Some of this is necessary payments, like staying current on loans, rent, etc., while other parts are not necessary, such as eating out. For example, you currently have $5,500 debt at 3% and another $2,500 at 5%. This means that every month, your cashflow effect of these loans is ($5,500 * 3% / 12) + ($2,500 * 5% / 12) = $24 interest (before any applicable tax effects), plus any required payments toward the principal which you don't state. To have the $8,000 paid off in 30 years, you'd be paying another $33 toward the principal, for a total of about $60 per month before tax effects in your case. If you take the full $7,000 you have available and use it to pay off the debt starting with the higher-interest loan, then your situation changes such that you now: Assuming that the repayment timeline remains the same, the cashflow effect of the above becomes $1,000 * 3% / 12 = $2.50/month interest plus $2.78/month toward the principal, again before tax effects. In one fell swoop, you just reduced your monthly payment from $60 to $5.25. Per year, this means $720 to $63, so on the $7,000 \"\"invested\"\" in repayment you get $657 in return every year for a 9.4% annual return on investment. It will take you about 11 years to use only this money to save another $7,000, as opposed to the 30 years original repayment schedule. If the extra payment goes toward knocking time off the existing repayment schedule but keeping the amount paid toward the principal per month the same, you are now paying $33 toward the principal plus $2.50 interest against the $1,000 loan, which means by paying $35.50/month you will be debt free in 30 months: two and a half years, instead of 30 years, an effective 92% reduction in repayment time. You immediately have another about $25/month in your budget, and in two and a half years you will have $60 per month that you wouldn't have if you stuck with the original repayment schedule. If instead the total amount paid remains the same, you are then paying about $57.50/month toward the principal and will be debt free in less than a year and a half. Not too shabby, if you ask me. Also, don't forget that this is a known, guaranteed return in that you know what you would be paying in interest if you didn't do this, and you know what you will be paying in interest if you do this. Even if the interest rate is variable, you can calculate this to a reasonable degree of certainty. The difference between those two is your return on investment. Compare this to the fact that while an investment in the S&P might have similar returns over long periods of time, the stock market is much more volatile in the shorter term (as the past two decades have so eloquently demonstrated). It doesn't do you much good if an investment returns 10% per year over 30 years, if when you need the money it's down 30% because you bought at a local peak and have held the investment for only a year. Also consider if you go back to school, are you going to feel better about a $5.25/month payment or a $60/month payment? (Even if the payments on old debt are deferred while you are studying, you will still have to pay the money, and it will likely be accruing interest in the meantime.) Now, I really don't advocate emptying your savings account entirely the way I did in the example above. Stuff happens all the time, and some stuff that happens costs money. Instead, you should be keeping some of that money easily available in a liquid, non-volatile form (which basically means a savings account without withdrawal penalties or a money market fund, not the stock market). How much depends on your necessary expenses; a buffer of three months' worth of expenses is an often recommended starting point for an emergency fund. The above should however help you evaluate how much to keep, how much to invest and how much to use to pay off loans early, respectively.\"","First, make sure you have some money in a savings account that you can use instead of credit cards for making future purchases that go beyond what you have in your checking account. $1000 is a good amount to start with, so just take that out of the $5000. Then pay off the Best Buy card. You shouldn't be worried about the minimum payment. Determine what you can pay per month (say, $400), and take the minimum payments out of that. Then choose one card to get the rest of your $400, plus the remaining $1500 of your $5000. This should be the highest-interest card, mathematically, but it may or may not be your best choice; it depends on your personality. Some people get a psychological lift out of seeing debts disappear, and it gives them more motivation to keep going. Those people may be better served by paying off the smallest debts first, to get them out of the way. I'm an INTP, so it bothers me more to think that I'll be paying a little more in interest over the long term by taking that route.","\"Think of yourself as a business with two accounts, \"\"cash\"\" and \"\"net worth\"\". Your goal is to make money. \"\"Cash\"\" is what you need to meet your obligations. You need to pay your rent/mortgage, utilities, buy food, pay for transportation, service debt, etc. If you make $100 a month, and your obligations are $90, you're clearing $10. \"\"Net worth\"\" are assets that you own, including cash, retirement savings, investments, or even tangible goods like real property or items you collect with value. The \"\"pay off debt\"\" versus \"\"save money\"\" debate, in my opinion, is driven by two things, in this order: If you start saving too soon, you'll have a hard time getting by when your car suddenly needs a $500 repair or you need a new furnace. You need to improve your cash flow so that you actually have discretionary income. Pay off those credit cards, then start directing those old payments into savings and investments.\"","I am answering this in light of the OP mentioning the desire to buy a house. A proper mortgage uses debt to income ratios. Typically 28/36 which means 28% of monthly gross can go toward PITI (principal, interest, tax, insurance) and the total debt can go as high as 36% including credit cards and car payment etc. So, if you earn $5000/mo (for easy math) the 8% gap (between 28 and 36) is $400. If you have zero debt, they don't let you use it for the mortgage, it's just ignored. So a low interest long term student loan should not be accelerated if you are planning to buy a house, better put that money to the down payment. But for credit cards, the $400/mo carries $8000 (banks treat it as though the payment is 5% of debt owed). So, I'd attack that debt with a vengeance. No eating out, no movies, beer, etc. Pay it off as if your life depended on it, and you'll be happier in the long run.","\"Victor addressed the card issue with an excellent answer, I'd like to take a stab at the budget and income side. Your question clearly stated \"\"I am left with no extra money\"\" each month. Whenever I read such an assertion, I ask the person, \"\"but surely, X% of people in your country get by on a salary that's 95% of yours.\"\" In other words, there's the juggling of the debt itself, which as Victor's math shows, is one piece of the puzzle. The next piece is to sift through your budget and find $100/mo you spend that could be better spent reducing your debt. Turn down the temperature in the winter, up in the summer, etc. Take lunch to work. No Lattes. Really look at the budget and do something. On the income side. There are countless ways to earn a bit of extra money. I knew a blogger who started a site called \"\"Deliver away Debt.\"\" He told a story of delivering pizza every Friday and Saturday night. The guy had a great day job, in high tech, but it didn't lend itself to overtime, and he had the time available those two evenings to make money to kill off the debt he and his wife had. Our minimum wage is currently just over $7, but I happened to see a sign in a pizza shop window offering this exact position. $10/hr plus gas money. They wanted about 8 hours a weekend and said in general, tips pushed the rate to well over $15/hr. (They assumed I was asking for the job, and I said I was asking for a friend). This is just one idea. Next, and last. I knew a gal with a three bedroom small house. Tight budget. I suggested she find a roommate. She got so many responses, she took in two people, and the rents paid her mortgage bill in full. Out of debt in just over a year, instead of 4+. And in her case, no extra hours at all. There are sites with literally 100's of ideas. It takes one to match your time, interest, and skill. When you are at $0 extra, even finding $250/mo will change your life.\"","Let's say I have two loans (say 2 car loans), and the high interest loan has a higher balance. Both have a monthly payment of, say, $500. My income fluctuates a lot, so occasionally I only have $750. I get hit with big fees those months, or maybe I just have to eat beans for those months. I come on some extra money. Maybe enough to get rid of the low interest small loan. Paying off the smaller loan frees up cash. I don't have to eat beans on the bad months.","The other answers have offered some great advice, but here is an alternative that hasn't been mentioned yet. I'm assuming that you have an adequately-sized emergency fund in savings, and that your cars are your only non-mortgage debt. Since you still have car debt, you probably don't have anything saved for buying a new car when your current cars are at the end-of-life. Consider paying off your car loans early, then begin saving for your next car. Having cash in the bank for a car is very freeing, and it changes your mindset when it comes time to purchase a car, as it is easy to waste a lot of money on something that depreciates rapidly when you aren't paying for it immediately. This approach might be counterintuitive if your car loan interest rate is less than your mortgage rate, but you will probably need another car before you need another house, and paying cash for a car is worth doing.","Get a loan at a decent interest rate and use that to pay off all of the credit cards. Then pay into that loan and leave the credit cards alone. Cancel them and don't use them. Credit card debt is possibly the worst kind of debt. So expensive. It's not designed for long term borrowing. It's designed to be paid off completely every month. Get a single loan and consolidate all your debt into it. It will have a lower interest rate and cost you a lot less in the long term.","In your scenario, I would do the following: If, in the short term, something should happen, you can always tap into a line of credit or even a cash advance on the credit card. But, you should in no way be paying $70 a month in interest. Assume you want to pay off the Credit card over 12 payments, you would need to pay about 450 a month, which costs 400 in interest. At the end of the year, you have $5000 in savings, and $0 debt. The alternative, is to pay off the credit card right now, and put that $450 into savings, you would have $5400 in savings, and $0 debt. I'm usually the last to recommend a $0 safety net, but I make an exception in the case of retirable credit card debt. In the worst case, you are no worse off than you are now, in the best case, you're up about $400 at the end of the year.","This is more of an interesting question then it looks on first sight. In the USA there are some tax reliefs for mortgage payments, which we don’t have in the UK unless you are renting out the property with the mortgage. So firstly work out the interest rate on each loan taking into account any tax reliefs, etc. Then you need to consider the charges for paying off a loan, for example often there is a charge if you pay off a mortgage. These days in the UK, most mortgagees allow you to pay off at least 10% a year without hitting such a charge – but check your mortgage offer document. How interest is calculated when you make an early payment may be different between your loans – so check. Then you need to consider what will happen if you need another loan. Some mortgages allow you to take back any overpayments, most don’t. Re-mortgaging to increase the size of your mortgage often has high charges. Then there is the effect on your credit rating: paying more of a loan each month then you need to, often improves your credit rating. You also need to consider how interest rates may change, for example if you mortgage is a fixed rate but your car loan is not and you expect interest rates to rise, do the calculations based on what you expect interest rates to be over the length of the loans. However, normally it is best to pay off the loan with the highest interest rate first. Reasons for penalties for paying of some loans in the UK. In the UK some short term loans (normally under 3 years) add on all the interest at the start of the loan, so you don’t save any interest if you pay of the loan quicker. This is due to the banks having to cover their admin costs, and there being no admin charge to take out the loan. Fixed rate loans/mortgagees have penalties for overpayment, as otherwise when interest rates go down, people will change to other lenders, so making it a “one way bet” that the banks will always loose. (I believe in the USA, the central bank will under right such loans, so the banks don’t take the risk.)","\"Check the terms of your mortgage. If you are in a fixed-term mortgage, you can likely \"\"over-pay\"\" a fixed amount of the capital each year: typically 10%. Eg if you owe £300,000 on the mortgage, you can pay off an additional £30,000 this year. Next year you'd owe something like £260,000 so could pay off £26,000. You'd need to check the terms of your mortgage to see what this limit is. You can actually pay off more than this, but would become liable to pay an \"\"early repayment fee\"\" or similar, which is usually something like 3-5% of the mortgage amount. Note that this usually means you would need to re-finance the mortgage anyway If you are not on a fixed-term mortgage than, in the UK at least, you are pretty much free to over-pay as much as you would like or refinance the mortgage. If you are in a fixed-term mortgage, it is usually better to simply over-pay by that maximum allowed amount until the fixed period ends, at which point you can re-finance onto a mortgage that allows higher overpayments. This isn't always the case, though, depending on your interest rate, how high the early repayment charge is, and how much you are able to over-pay. At the very least, you're going to need to do some sums! If you do choose to over-pay up to the limit, then you'd want to over-pay as much as you can at the start of the year (ie don't divide the over-payment by 12, pay it all as early as you can) to reduce interest payments. Then once you hit the limit, put the rest into a savings account: once you are out of the fixed term you can then pay the rest as a lump sum when refinancing.\"","The optimal way to pay off all cards in the least amount of time is a waterfall approach, with the most money going to the account with the highest interest rate, or in the event of a tie, the lowest balance. Then when that account is paid off, go to the next one. There's a bit of wiggle room if one is tax deductible, but in this case, there shouldn't be. So, what you should do is pay off card 2, then 1, then 3, using the waterfall scheme. You have correctly identified that card 2 will be paid off in 18 months. Figure out what the balance will be on Card 1 at that time, and how long the new payment of $1105 will take to get it paid off. Then figure out how long it'll take to pay off card 3 with $1365. Without crunching the numbers myself, I'm guessing you'll be debt free in about 26 months or so, that card 3 will be paid off before you are done with Card 1. So what you'd do in that case is pay off card 1 using the combined total payment.","Not that I doubted everyone's assumption but I wanted to see the math so I did some spreadsheet hacking. I assumed a monthly payments for 30 years which left us with total payments of 483.89. I then assumed we'd pay an extra $200/month in one of two scenarios. Scenario 1 we just paid that $200 directly to the lender. In scenario 2 we set the extra $200 aside every month until we were able to pay off the $10k at 7%. I assumed that the minimum payments were allocated proportionately and the overpayments were allocated evenly. That meant we paid off loan 5 at about month 77, loan 4 in month 88, loan 3 in month 120, loan 2 in month 165, and loan 1 in month 170. Getting over to scenario 2 where we pay $483.89 to lender and save $200 separately. In month 48 we've saved $9600 relative to the principle remaining in loan 3 of $9547. We pay that off and we're left with loan 1,2,4,5 with a combined principle of about $60930. At this point we are now going to make payments of 683.89 instead of saving towards principle. Now our weighted average interest rate is 6.800% instead of 6.824%. We can calculate the number of payments left given a principle of 60930, interest of 6.8%, and payment of 683.89 to be 124.4 months left for a total of 172.4 months Conclusion: Scenario 1 pays off the debt 3 months sooner with the same monthly expenditure as scenario 2.","\"Given the exact formula that goes into the 'Fair Issac\"\" calculation is a closely guarded trade secret, AND that each agency has their own formula, I'm not sure there's really any 100% for sure authoritative answer to the question in terms of which option would be best. There are a lot of balancing factors, like how long you've had accounts, payment history over time, etc. Stuff that is known to HURT a score can include things like closing a longstanding account. If you have a very low interest loan (like some car companies offer now and then) I'd just make the normal payments. If you have something at a higher interest rate, especially above 6-7%, then I'd worry less about credit score and more about how much I'm going to pay in interest and pay it off as rapidly as I could. The big key is 'never pay late' more than anything else, Followed by how much of your debt capacity is used (which paying down any account, loan or credit card, will help), and long standing relationships (length of history) See this (approximate) chart and notice that any early payoff is basically going lower your 'capacity used', possibly reduce the types of credit used (if it's the last loan of that type), all of which should help your score.\"","Should I pay off the credit cards now or do the monthly payments thing? It need not be a binary choice; you could take the middle ground. Assuming that an emergency fund of $10-15k is sufficient, you could pay off one credit card and do the monthly payment for the other cards. With one card cleared, you may feel better. I would choose to clear the card with the highest interest, followed by the smallest debt first as it's the mathematically optimum way. I should also let you know that there's this debt-snowball method which is not as optimum but has some valid reasons for existing. Choose the optimum way if you're financially disciplined. p.s. I'm not trained financially, nor am I in the industry. Just my two cents.","\"Plus one to Alexandre for pointing out this is possible. It is also possible to run with scissors, and I would recommend neither. Your money problems are very small and doing something so dramatic to solve them will probably put you in a worse financial decision. Why would you put your home, at risk, to pay off such a small amount (less than 5K)? The \"\"one payment\"\" or consolidation mantra, for a person like you, will often lead a person into reoccurring the same debt and having the consolidation loan. You don't need one payment you need no payments. First off stop borrowing. Second increase your income by working more or selling stuff. You might want to clean some houses, baby sit, or mow some lawns instead of the traditional job. Third decrease your spending. Let your loved ones know it will be a lean Christmas this year. Cut cable as you won't have time to watch TV anyway. If you do all that could you find $1000 per month? I bet you could find more. Doing all that and you will be done in 5 months and still own your home outright. You are a great candidate to pay off your bills by the snowball method, or smallest to largest. While it may not be, on paper, the most mathematically efficient it helps people with motivation and hope. It sounds like you could use that. List your bills smallest to largest and pay off the smallest first while paying minimums on the rest. You can do it!\"","1. you want /r/personalfiance 2. 1 payment or 4-5 makes no difference 3. what makes the difference are a) interest rate b) pay as much as possible every month 4. pay as much as you can into the credit card with the highest interest rate, and the minimum payment on the rest; as you pay off a credit card, make as big of a payment to the one that has the highest interest rate 5. stop charging anything on any credit card and stop getting into any kind of debt 6. as you pay off a credit card, call the company and cancel it.","\"Aside from employer 401(k) matches (which may double your money immediately), paying off debts is almost always the best place to start. Paying off a debt early is a zero-risk operation and will earn you N% (where N is your interest rate). Is that a good deal for a zero-risk return? The closest equivalent today (Aug 24, 2012) is that you can earn about 2.68% on 10-year Treasury bonds. Unless you have a really, really good interest rate (or the interest is tax-deductible), paying off your loan will offer an excellent risk-adjusted return, so you should do that. The \"\"really good\"\" interest rate is typically a mortgage or student loans. (Mortgage interest is also tax-deductible, at least for now.) In those cases, you're not going to gain nearly as much by paying the loan early, and the loan is large - larger than the amount you want to have in risk-free investments. You want to invest for returns, as well! So you can save for retirement instead (in a 401(k) or similar account) and take on a little risk.\"","You should check out Dave Ramsey's Baby Steps. He has an great and well organized plan for getting out of debt and building wealth. My wife and I have followed the plan and will be paying off our home this year :) His advice on debt payments is to pay off the smallest balance first. This helps motivate you and your husband to push harder on your debts. Once the first pay is paid the money that would have gone to that debt is applied to the next smallest debt and so on. This is called a 'debt snowball' since by the end you will have plenty of money to pay that last few debts. While working on the smallest debt, making minimum payments on the others. Stop using the credit cards entirely! Don't use gimmicks to avoid facing the reality of the debt. Close your accounts and commit to never borrowing money again. This is a huge physiological shift. I used credit cards all the time for decades, that is a thing of the past for us, we pay cash or don't buy it. In your case, paying the 80% interest loan off is likely to be priority. I didn't even realize that was legal. Hopefully that is also the smallest balance. Start making a monthly budget and sticking to it. Check out Dave's 'irregular income' budget form, it is meant for couples in your situation. The first steps will be to pay food, rent, utilities and transportation. After that, list your debts in priority order and pay them as your husbands income comes in during the month. Don't despair, you two can get your financial life cleaned up! You just need a good plan and a lot of focus.","It isn't always clear cut that you should pay off a debt at all, particularly a mortgage. In simple terms, if you are making a better return than what the bank is charging you, and the investment meets your risk criteria, then you should not pay back the debt. In the UK for example, mortgage rates are currently quite low. Around 2.5 - 3% is typical at the moment. On the other hand, you might reasonably expect a long run average return of around 9 - 11% on property (3 - 5% rental yield, and the rest on capital gains). To make the decision properly you need take into account the following:","If you have the money and the determination to pay off all the cards in six months, then the order will make little difference to your credit score, and to your finances. If you had less money available (say you could pay off $500 a month in total), then it would be good for financial reasons to pay off the credit card with the highest interest rate first, so you pay less interest. It would be good for psychological reasons to pay the card with the smallest amount first (so you feel successful quickly, and some people need that feeling of success to continue paying off, just psychological). And if these things contradict each other, figure out what is more important. And whatever you do, paying back your debt is better than not paying it back. So if you can't make up your mind, then you pay #1, then #2, then #3, then #4, then #5.","\"Without knowing what the balances are, I associate \"\"uncomfortable\"\" with high, as in tens of thousands. What I would do: is 1) cut up the cards and stop using them, and 2) have some balance transfer offers in hand the next time you call to negotiate with the companies. Essentially, you will have to convince them that they will have to explain one of two things to their boss: why they lowered your rate or why you left. They can collect less interest from you or no interest from you. It's up to them. If they don't offer you something that's in the ballpark of your balance transfer offer, then bid them goodbye and complete the balance transfer. As far as paying them off, the top two modes of repayment are lowest balance first (aka snowball) or high interest rate first. Both methods are similar in that you pay minimums on all but the method's focus point. Whether it is lowest balance or highest interest rate, you pay ALL of your extra money on the lowest balance or the highest interest debt until it is gone and then you move onto the next one in the list. For what it's worth, I prefer the lowest balance method, you see progress faster.\"","\"I have never double-answered till now. This loan can't be taken out of context. By the way, how much is it? What rate? \"\"Debt bad.\"\" Really? Line the debt up. This is the highest debt you have. But, you work for a company that offers a generous match, i.e. the match to your 401(k). Now, it's a choice, pay off 6% debt or deposit that money to get an immediate 100% return. Your question has validity. In the end, we can tell you when to pay off the debt. After - The issue is that you are quoting a third party without having the discussion or ever being privy to it. In court, this is called 'hearsay.' The best we can do is offer both sides of the issue and priority for the payments. Welcome to Money.SE, nice first question.\"","With a credit card debt at 17%, you should basically not eat in order to pay the balance off. This should be gone within the month. That being said, I would have a hard time reducing my contributions below the 4%, but would certainly do it to the 4%. However, I would also deliver pizzas on nights and weekends and work all available overtime. Coincidentally the pizza place by my home is hiring delivery drivers however, they did not disclose how much they typically make. Only that they make min wage plus tips. Make sure you stop borrowing first, then try to have this knocked out in 4 weeks or less.","The chances are good that the interest you are going to pay on the debt is going to be higher than the interest you are going to receive on any type of short term investments. That would make the paying off of the debt worth more to you in the long run than saving your money. Note that without the particulars of your situation this is all just theory crafting so consult the details of you loan agreements. I cannot imagine that a credit provider did not discuss this with you before you put pen on paper.","\"Allen, welcome to Money.SE. You've stumbled into the issue of Debt Snowball, which is the \"\"low balance\"\" method of paying off debt. The other being \"\"high interest.\"\" I absolutely agree that when one has a pile of cards, say a dozen, there is a psychological benefit to paying off the low balances and knocking off card after card. I am not dismissive of that motivation. Personal Finance has that first word, personal, and one size rarely fits all. For those who are numbers-oriented, it's worth doing the math, a simple spreadsheet showing the cost of the DS vs paying by rate. If that cost is even a couple hundred dollars, I'll still concede that one less payment, envelope, stamp, etc, favors the DS method. On the other hand, there's the debt so large that the best payoff is 2 or 3 years away. During that time, $10000 paid toward the 24% card is saving you $2400/yr vs the $500 if paid toward 5% debt. Hard core DSers don't even want to discuss the numbers, strangely enough. In your case, you don't have a pile of anything. The mortgage isn't even up for discussion. You have just 2 car loans. Send the $11,000 to the $19K loan carrying the 2.5%. This will save you $500 over the next 2 years vs paying the zero loan down. Once you've done that, the remaining $8000 will become your lowest balance, and you should flip to the Debt Snowball method, which will keep you paying that debt off. DS is a tool that should be pulled out for the masses, the radio audience that The David (Dave Ramsey, radio show host) appeals to. They may comprise the majority of those with high credit card debt, and have greatest success using this method. But, you exhibit none of their symptoms, and are best served by the math. By bringing up the topic here, you've found yourself in the same situation as the guy who happens to order a white wine at a wedding, and finds his Mormon cousin offering to take him to an AA meeting the next day. In past articles on this decision, I've referenced a spreadsheet one can download. It offers an easy way to see your choice without writing your own excel doc. For the situation described here, the low balance total interest is $546 vs $192 for the higher interest. Not quite the $500 difference I estimated. The $350 difference is low due to the small rate difference and relatively short payoffs. In my opinion, knowledge is power, and you can decide either way. What's important is that if you pay off the zero interest first, you can say \"\"I knew it was a $350 difference, but I'd rather have just one outstanding loan for the remain time.\"\" My issue with DS is when it's preached like a religion, and followers are told to not even run the numbers. I wrote an article, Thinking about Dave Ramsey a number of years back, but the topic never gets old.\"","Don't frett to much about your retirement savings just put something towards it each year. You could be dead in ten years. You should always try to clear out debt when you can. But don't wipe yourself out! Expedite the repayment process.","I'm going to suggest a slightly different approach. Most answers seem to suggest paying off the lower rate card to clear it. Some answers / comments also talk about emergency funds. One risk of paying off a card is that the card issuer may choose to reduce your credit limit if they see you as high risk, to prevent you re-spending the money. If you don't trust yourself with the card then this could be a good thing (and remember you're always free to ask for a limit decrease). But if you want access to emergency funds, then I would suggest paying half onto each card. That way if one card cuts you off, you have a chance of still having access to the other in an emergency.","It is one thing to take the advice of some numb-skulls on a web site, it is another thing to take the advice of someone who is really wealthy. For myself, I enjoy a very low interest rate (less than 3%) and am aggressively paying down my mortgage. One night I was contemplating slowing that down, and even the possibility of borrowing more to purchase another rental property. I went to bed and picked up Kevin O'Leary's book(Cold Hard Truth On Men, Women, and Money: 50 Common Money Mistakes and How to Fix Them), which I happened to be reading at the time. The first line I read, went something like: The best investment anyone can make is to pay off their mortgage early. He then did some math with the assumption that the person was making a 3% mortgage payment. Any conflicting advice has to be weighted against what Mr. O'Leary has accomplished in his life. Mark Cuban also has a similar view on debt. From what I heard, 70% of the Forbes richest list would claim that getting out of debt is a critical step to wealth building. My plan is to do that, pay off my home in about 33 (September '16) more weeks and see where I can go from there.","If you hadn't done it already cut up the cards. Don't close the accounts because it could hurt your credit score even more. Switching some or all of the CC debt onto low rate cards, or a debt consolidation loan is a way that some people use to reduce their credit card payments. The biggest risk is that you become less aggressive with the loan payback. If you were planning on paying $800 in minimum payments,plus $200 extra each month; then still pay $1000 with the new loan and remaining credit cards. Another risk is that you start overusing the credit card again, because you have available credit on the card that was paid off with the loan. The third risk, which you haven't proposed, occurs when people switch unsecured credit card dept, to a secured 2nd mortgage debt. This then puts the family home at risk.","I would pay the minimum amounts on all loans then pay off the $5,500 @ 7.25% (highest interest rate), then pay any remainder on the $2,000 @ 5.5%. Even though (1) and (3) are at the same rate, I would pay (3) off first as it is a smaller amount and thus can be paid off sooner - giving you less loans to concentrate on paying off .","With all due respect to The David, the $1000 is best put against 20%+ debt, no sitting in checking as part of some emergency fund. I'd agree with the decision to pay off the lower rate card. Why? Because we can do the math, and can see the cost in doing so. Low enough that other factors come in, namely, a freed up card. That card can function as the emergency one in the short term. Long term, once these high rate cards are paid off, you'll build your proper emergency fund, but the cost is too high right now. The $4000 is a nice start, but the most important thing is to get your budget under control. Only you can decide how much you can cut back, and go after this debt as if it were life or death.","I agree with the Dave Ramsey method as well. If you don't have $1k in the bank already, do that. Total up the smaller debts and the best buy card. if they are $4k all together, then pay them off. Don't get caught up in keeping the smaller one around because they are at zero percent. If they exceed $4k, then payoff the interest bomb best buy card, then pay off the smaller ones, starting with the smaller balance. That is the only tweak I will make here. Dropping any amount into the Citi balance is pointless because it only reduces the amount, not the total number of hands reaching into your bank account.","\"Pay off your debt. As you witnessed, no \"\"investment\"\" % is guaranteed. But your debt payments are... so if you have cash, the best way to \"\"invest\"\" it is to pay off your debt. Since your car is depreciating while your house may be appreciating (don't know but it's possible) you should pay off your car loan first. You're losing money in more than one way on that investment.\"","\"I will add one thought on to this thread. This is a financial concept called \"\"Net Present Value\"\". In plain English, it means \"\"What's the best use for your money right now?\"\" So, let's say you have an extra €300/month which is not being spent on living expenses. If you leave that money under your pillow (or spend it on beer or fancy electronics!) instead of paying off your startersloan early, that is costing you 300*(0.04/12) per month, every month. So €1/month, or €12/year. This is cumulative for the life of your loan. So not paying €300 this month will ultimately cost you €120 assuming you keep the loan open for 10 years. If you're saying \"\"pay my debts or spend the money on a snappy smartphone?\"\" the answer is that you should pay your debts. Now, here's the important part. Let's suppose you have a better use for the money than beer or electronics. Let's suppose you have a mutual fund which will reliably provide you with a return of 10% a year. If you put that €300/month into a high-yield fund, and if the returns are consistent, you are STILL paying that €12/year (because you invested elsewhere and didn't pay your debts), but you are realizing profits of 300*(0.1/12)=€2.5/month on the invested money. €2.5-1=€1.5/month, which is a net gain. So, in some cases, paying off your debt may not be the best use of your money. There are a number of other questions involved which are related to your exposure to capital gains taxes, incentives or disincentives for holding debt, &c. &c. These are generally country specific. A poster above who seems to be familiar with Netherlands law did a good explanation of some of those incentives. I'm in the US, and our incentive and disincentive system is different. TL;DR: It depends.\"","It's pretty simple - the less money you owe the less interest you pay. Paying down debt gives a guaranteed return of the interest rate of the debt. So paying off your starter loan is equivalent to a 4% return. That's not a bad return in the current environment so it makes sense to do it unless you can find an investment which you think is likely to pay significantly better. (Note this is a general answer, not Netherlands-specific. There may be other considerations, around tax for example, which have to be factored into the calculation).","\"Pete B mentioned adjusting your payments using the Debt Snowball Method and I agree it is one possible solution, another being the Debt Avalanche Method. Here is a link that describes both. There was a time in my past when I had 17 credit lines open totaling about $12,000. If I had paid them the way the banks asked (minimum monthly payments) it would have taken decades to pay off. Then I was shown these two techniques and as a result I was able pay them down rapidly and close all but 2 lines within 5 years. Like others I am going to say that if you already own your house free and clear never Never NEVER put a loan on it unless the loan is (a) to improve the house, or (b) a life & death emergency. If you get sick or fired and miss even a single payment on a HELOC you could lose your house forever and that just plain sucks. Not only will you then be forced into renting a place (money down the drain) but your credit rating will take such a huge hit it will be years (if ever) before you can even try and buy a new home. Debts come and go, as do the \"\"toys\"\" and other things we buy with that debt. Homes are security & stability for tomorrow. Never give that up for a little ease & comfort today. UPDATE: I had to go looking for it but here is some software that I used all those years ago to figure out my strategy for paying down all my credit bills. It's a bit clunky but it's super easy to use plus it has some other variations on snowball and avalanche methods as well. I definitely found it helpful.\"","Pay it all off now before you change your mind. Having an emergency fund is important but that assumes you'll have the discipline to leave it alone. Obviously, you don't or you wouldn't have amassed $36k in cc debt. Regardless of the rates, your icome or any other factor, that's just way too much and a pretty good indication that you've got problems managing money. Pay them off now while you still can!","\"It may be the case that some of your debts have a flat regular fee in addition to the interest, which will go away when the debt is completely paid. For example, my mortgage has an approximately $400/year \"\"package fee\"\" as well as its (quite low) interest. When I finish paying the mortgage, I won't have to pay that fee anymore, so it is theoretically possible that spending extra money on paying off my mortgage would be better than spending it on paying off some other debt. I think it's unlikely that it would actually ever be my optimal move in practice, but the point is, there may be an advantage, financial or otherwise, to getting rid of a particular debt, other than merely removing the burden of interest. Those are special situations, though, and in the majority of cases, starting with the highest interest loan will be the right move.\"","While paying off your debt quickly is obviously desirable it is simply not going to be possible. Even with tight budgeting I think you will struggle to put more than £500 or so per month towards your debt. I would keep trying to move the highest interest debt onto something cheaper, be it a loan, a balance transfer credit card ( http://www.moneysavingexpert.com/credit-cards/balance-transfer-credit-cards#nofees ) etc. It is also worth looking at your current credit cards more carefully. Sometimes you may be able to get a balance transfer deal on an existing card by talking to the card issuer, then shuffle your debt around to take advantage of it ( http://www.moneysavingexpert.com/credit-cards/cut-credit-card-interest ) Some think it's taboo but in your position I would also be seriously considering if you have any friends and family who can lend you money at a less crippling interest rate.","Mostly to play devil's advocate, I will recommend something different than everybody else. If you can pay off the entire $3,000 balance and are torn between saving that money somewhere that will earn a return and paying it off now to be debt-free, why not a little of both? What if you pay half now and then save the other half and make a big payment at the end. Essentially that becomes two $1,500 payments: one now, one right before the 0% due date. To me, the half up-front significantly reduces the risk, but leaves some cash available to grow.","\"The best thing to do is to completely pay off one credit card, then apply the left over to the highest interest card. After that, ALL of your expenses that can be put on a credit card, should be put on the one that you just paid off. At the end of the month, pay off a different credit card and the highest interest, and move all your purchasing to that card. Keep going around the circle until you are able to pay them all off. Doing this will be good for your credit score as the debt on the cards will now be \"\"new\"\". If you're really desperate to increase your credit score (e.g. refinancing a house) you can use balance transfers to temporarily make it appear that you have zero debt but it will cost you some money, typically balance transfers cost something like $35 + 2%.\"","Its very silly of you to have house savings while you have these debts. Your total (listed) debt is 1657, with a savings of 2000, and a tax refund of 985. I'd be done with the Apple loan and CC tomorrow. Does that accomplish the goal of making a significant difference in your debt? Yes it does. This will leave you with 1328. I'd keep 500 or so in an emergency fund, and put the rest to the car. Although 828 will not help much with the car it would probably knock a month off. Next work like crazy to pay off the car. Get a second job or work overtime. Then save a emergency fund of 3 to 6 months of expenses as if you already owned the house. I would tend to go on the high side as I suspect you are single. Only then does it makes sense to save for a down payment. Although it is an American institution, the book The Millionaire Next Door might be helpful for you. Your most powerful wealth building tool is your income. When one handicaps that tool with payments and exorbitant lifestyle choices you greatly reduce your ability to become wealthy. These amounts are so small, you should just knock them out."],"string":"[\n \"\\\"Pay off the highest rate debt. Interest on both are charged on the balance owed, nothing more complicated than that. There are those who would call a mortgage \\\"\\\"front loaded\\\"\\\" but that's nonsense. Of course most of the payment is interest at the beginning because the debt is higher and you start with a 30 year term. The fastest way to pay off multiple debts is always from highest rate first and then the next and so on.\\\"\",\n \"It's very simple, line up your debt in the order of interest rate, tax adjusted, and start with the highest rate. Too simple? If knocking off the $7500 loan feels better to you than the fact that you are still paying 9% on $7500 (as part of the $20K) makes you feel bad, just pay off the $7500. I'd rather be ahead $210/yr. (A celebrity advocates the small wins promoting good feelings and encouragement. If that actually works for some, I won't criticize it here) If freeing up the $200/mo payment enables you to do something else that's beneficial, that's another story. I've written how $10,000 of student loan can keep you from qualifying for $30K or more of mortgage. In isolation, highest rate. With the rest of the picture, other advice might be more suitable. Welcome to Money.SE\",\n \"If you can get a rate of savings that is higher than your debt, you save. If you can't then you pay off your debt. That makes the most of the money you have. Also to think about: what are you goals? Do you want to own a home, start a family, further your education, move to a new town? All of these you would need to save up for. If you can do these large transactions in cash you will be better off. If it were me I would do what I think is a parroting of Dave Ramsay's advice Congratulations by the way. It isn't easy to do what you have accomplished and you will lead a simpler life if you don't have to worry about money everyday.\",\n \"Excellent question and it is a debate that is often raised. Mathematically you are probably best off using option #1. Any money that is above and beyond minimum payments earns a pretty high interest rate, about 6.82% in the form of saved interest payments. The problem is you are likely to get discouraged. Personal finance is a lot about behavior, and after working at this for a year, and still having 5 loans, albeit a lower balance, might take a bit of fight out of you. Paying off such a large balance, in a reasonable time, will take a lot of fight. With the debt snowball, you pay the minimum to the student loan, save in an outside account, and when it is large enough, you execute option #2. So a year from now you might only have three loans instead of five. If you behaved exactly the same your balance would be higher after that year then using the previous method. However often one does not behave the same. Because the goals are shorter and more attainable it is easier to delay some gratification. The 8 dollars you are saving in your weekly gas budget, because of low prices, is meaningful when saving for a 4K goal, where it is meaningless when looking at it as a 74K goal. With the 4K goal you are more apt to put that money in your savings, where the 74K goal you might spend it on a latte. For me, the debt snowball worked really well. With either option make sure that excess payments actually go to a reduction in principle not a prepayment of interest. Given this you may be left with no option. For example if method #1 you only prepay interest, you are forced to use option #2.\",\n \"\\\"It is true that all else being equal, you will pay a lower amount of total interest by paying down your highest interest rate debts first. However, all else is not always equal. I'm going to try to come up with some reasons why it might be better in some circumstances to pay your debts in a different order. And I'll try to use as much math as possible. :) Let's say that your goal is to eliminate all of your debt as fast as possible. The faster you do this, the lower the total interest that you will pay. Now, let's consider the different methods that you could take to get there: You could pay the highest interest first, you could pay the lowest interest first, or you could pay something in the middle first. No matter which path you choose, the quicker you pay everything off, the lower total interest you will pay. In addition to that, the quicker you pay everything off, the difference in total interest paid between the most optimal method and the least optimal method will be less. To put this in mathematical notation: limt→0 Δ Interest(t) = 0 Given that, anything we can do to speed up the time it takes to get to \\\"\\\"debt free\\\"\\\" is to our advantage. When paying large amounts of debt as fast as possible, sacrifice is needed. And this means that psychology comes into play. I don't know about you, but for me, gamifying the system makes everything easier. (After all, gamification is what gets us to write answers here on SE.) One way to do this is to eliminate individual debts as quickly as possible. For example, let's say that I've got 10 debts. 5 of them are for $1k each. 3 of them are for $5k each, 1 is a $20k car loan, and 1 is a $100k mortgage. Each one has a monthly payment. Let's say that I've got $3k sitting in the bank that I want to use to kickstart my debt reduction. I could pay all $3k toward one of my larger loans, or I could immediately pay off 3 of my 10 loans. Ignore interest for the moment, and let's say that we are going to pay off the smallest loans first. When I eliminate these three loans, three of my monthly payments are also gone. Now let's say that with the money I was paying toward these eliminated debts, and some other money I was able to scrape together $500 a month that I want to use toward debt reduction. In four months, I've eliminated the last two $1k debts, and I'm down to 5 debts instead of 10. Achievement Unlocked! Instead of this strategy, I could have paid toward my largest interest rate. Let's say that was one of the $5k loans. I paid the $3k toward the bank to it, and because I still had all the monthly payments after that, I was only able to scrape together $400 a month extra toward debt reduction. In four months, I still have 10 debts. Now let's say that after these four months, I have a bad month, and some unexpected expenses come up. If I've eliminated 5 of my debts, my monthly payments are less, and I'll have an easier month then I would have had if I still had 10 monthly payments to deal with. Each time I eliminate a debt, the amount extra I have each month to tackle the remaining debts gets bigger. And if your goal is eliminating debt quickly, these early wins can really help motivate you on. It really feels like you are getting somewhere when your monthly bills go down. It also helps you with the debt free mindset. You start to see a future where you aren't sending payments to the banks each month. This method of paying your smaller debts first has been popularized in recent years by Dave Ramsey, and he calls it the debt snowball method. There might be other reasons why you would pick one debt over another to pay first. For example, let's say that one of your loans is with a bank that has terrible customer service. They don't send you bills on time, they process your payment late, their website stinks, they are a constant source of stress, and you are getting sick of them. That would be a great reason to pay that debt first, and never set foot in that bank again. In conclusion: If you have a constant amount of extra cash each month that you are going to use to reduce your debt, and this will never change, then, yes, you will save money over the long run by paying the highest interest debt first. However, if you are trying to eliminate your debt as fast as possible, and you are sacrificing in your budget, sending every extra penny you can scrape together toward debt reduction, the \\\"\\\"snowball\\\"\\\" method of knocking out the small debts first can help motivate you to continue to sacrifice toward your goal, and can also ease the cash flow situation in difficult months when you find yourself with less extra to send in.\\\"\",\n \"\\\"Wow, you guys get really cheap finance. here a mortage is 5.5 - 9% and car loans about 15 - 20%. Anyway back to the question. The rule is reduce the largest interest rate first (\\\"\\\"the most expensive money\\\"\\\"). For 0% loans, you should try to never pay it off, it's literally \\\"\\\"free money\\\"\\\" so just pay only the absolute minimum on 0% loans. Pass it to your estate, and try to get your kids to do the same. In fact if you have 11,000 and a $20,000 @ 0% loan and you have the option, you're better to put the 11,000 into a safe investment system that returns > 0% and just use the interest to pay off the $20k. The method of paying off the numerically smallest debt first, called \\\"\\\"snowballing\\\"\\\", is generally aimed at the general public, and for when you can't make much progress wekk to week. Thus it is best to get the lowest hanging fruit that shows progress, than to try and have years worth of hard discipline just to make a tiny progress. It's called snowballing, because after paying off that first debt, you keep your lifestyle the same and put the freed up money on as extra payments to the next target. Generally this is only worth while if (1) you have poor discipline, (2) the interest gap isn't too disparate (eg 5% and 25%, it is far better to pay off the 25%, (3) you don't go out and immediately renew the lower debt. Also as mentioned, snowballing is aimed at small regular payments. You can do it with a lump sum, but honestly for a lump sum you can get better return taking it off the most expensive interest rate first (as the discipline issue doesn't apply). Another consideration is put it off the most renewable finance. Paying off your car... so your car's paid off. If you have an emergency, redrawing on that asset means a new loan. But if you put it off the house (conditional on interest rates not being to dissimilar) it means you can often redraw some or all of the money if you have an emergency. This can often be better than paying down the car, and then having to pay application fees to get a new unsecured loan. Many modern banks actually use \\\"\\\"mortgage offsetting\\\"\\\" which allows them to do this - you can keep your lump sum in a standard (or even fixed term) and the value of it is deducted \\\"\\\"as if\\\"\\\" you'd paid it off your mortgage. So you get the benefit without the commitment. The bank is contracted for the length of the mortgage to a third party financier, so they really don't want you to change your end of the arrangement. And there is the hope you might spend it to ;) giving them a few more dollars. But this can be very helpful arragement, especially if you're financing stuff, because it keeps the mortgage costs down, but makes you look liquid for your investment borrowing.\\\"\",\n \"\\\"I don't have enough reputation in this community to comment yet, so this \\\"\\\"answer\\\"\\\" is really just a minor furtherance of JoeTaxpayer's comment... THe only thing I might add to this great answer - make all minimum payments, and send all extra available cash to the highest interest card. If OP will pay in full after 6 month, this may make little difference, but it will be a few dollars in his pocket instead of the bank. – JoeTaxpayer♦ Dec 2 at 17:42 ...on Ben Miller's excellent answer. Once you have taken JoeTaxpayer's advice and ordered your cards by interest rate and have paid off the highest interest card first, take that same payment and add it to your next-highest card's minimum payment. Once THAT is payed off, take the combined amounts that you were paying to cards one and two and apply it all to card three along with its minimum payment. You see where this is going. By aggregating your payments thusly, each card will get paid off successively more quickly than the previous one, without increasing your overall payments to the cards, and you are retiring the highest-interest debt first. Your last card will then be paid off in record time, because you have combined all of the payments for cards 1-4. One other amplification: Since we don't know which account has which interest rate, it may be more advantageous to order them by balance, with the smallest first. That way you retire the first card quickly, which gives you a sense of accomplishment, and by the time you reach your highest balance card, you have snowballed all of your payments and are now throwing boulders instead of pebbles at it. You'll have to do that math to see which method has the most benefit. Then roll it all into the car payment. Then roll it into your student debt. Etc.\\\"\",\n \"Depends upon the debt cost. Assuming it is consumer debt or credit card debt, it is better to pay that off first, it is the best investment you can make. Let's say it is credit card debt. If you pay 18% interst and have for example a $1,000 amount. If you pay it off you save $180 in interest ($1,000 times 18%). You would have to earn 18% on 1,000 to generate $180 if it was in aninvestment. Here is a link discussing ways of reducing debt Once you have debt paid off you have the cashflow to begin building wealth. The key is in the cashflow.\",\n \"Without knowing your credit situation or your full budget it's a little difficult, but i'd go with the snowball method for now: It may seem like not a big deal to have this kind of debt but you really should be looking at it as if your walking around with your hair on fire. It's a HUGE emergency. Debt, especially looming CC debt with high rates, can make things worse (think water on grease fire) really quickly so the faster you get rid of it the better. Good luck!\",\n \"Pay the highest rate debt first, it's as simple as that. When that debt is paid (the 24% card in this case) pay off the next one. As far as having an emergency fund is concerned, I consider it a second priority. If one owes 24% money, that $2000 emergency fund is costing $480/yr. Ouch. Avoid the behaviors that got you into debt in the first place, and pay the cards off as fast as you can. When you have no balance, start to save, first into the emergency account, then toward retirement.\",\n \"\\\"It is typically best to pay minimum payments to 2 of the loans and pay aggressively on the third loan. Some will tell you to pay the highest interest rate loan off first because \\\"\\\"personal finance\\\"\\\" is about \\\"\\\"finance\\\"\\\" and mathematically that saves you the most interest. Some will tell you to pay the smallest balance loan off first because \\\"\\\"personal finance\\\"\\\" is \\\"\\\"personal\\\"\\\" and the psychological \\\"\\\"win\\\"\\\" of paying off a loan is more valuable than the small amount of interest difference between this strategy and paying off the loan with the highest interest rate first.\\\"\",\n \"The Avalanche method does not work because most people don't have enough money to make an avalanche. If you somehow had a windfall that was greater or equal to your highest credit card balance, then by all means pay that one off. However, most people do not have that kind of situation. Instead they should use the debt snow ball method. They only have regular income that is typically much smaller then the balances. Another part of your plan that is especially troubling is that you are continuing to utilize credit cards. You need to cut them up, and stop using them. First of course save $1000 for a small emergency fund, the pay them off smallest to largest. Do a budget each and every month. Work an extra job or three. Any extra money that hubby brings in goes towards one of the credit cards. BTW you don't have a math problem you have a behavior problem.\",\n \"Ditto to Victor. The simple rule is: Pay the minimums on all so you don't get any late fees, etc, then pay off the highest interest rate loan first. A couple of special cases do come to mind: If one or more of these are credit cards, then, here in the U.S. at least, credit cards charge you interest on the average daily balance, unless you pay off the balance entirely, in which case you pay zero interest. So for example say you had two credit cards, both with 1% per month interest, with debt of $2000 and $1000. You have $1500 available. Ignoring minimum payments for the moment, if you put that $1500 against the larger balance, you would still pay interest on the full amount for the current month, or $30. But if you paid off the smaller and put the difference against the larger, then your interest for the current month would be only $15. (Either way, your interest for NEXT month would be the same -- 1% of the $1500 remaining balance or $15 -- assuming you couldn't pay off the other card.) If one or more of the loans are mortgage loans on which you are paying mortgage insurance, then when you get the balance below a certain point -- usually 80% of the original loan amount -- you no longer have to pay mortgage insurance premiums. Thus the amount you are paying on such premiums needs to be factored into the calculation. There may be other special cases. Those are the ones that I've run into.\",\n \"If what you are paying in interest on the debt is a higher percentage than what your investments are returning, the best investment you can make is to pay off the debt. If you're lucky enough to be paying historically low rates (as I am on my mortgage) and getting good returns on the investments so the latter is the higher percentage, the balance goes the other way and you'd want to continue paying off the debt relatively slowly -- essentially treating it as a leveraged investment. If you aren't sure, paying off the debt should probably be the default prefrence.\",\n \"\\\"My advice: IMO, all things being somewhat equal, you should always try to retire debts as quickly as possible in most cases, so start with the small cases. The method of calculating credit card interest is written on the statement. Usually it is \\\"\\\"average daily balance method\\\"\\\". Don't sweat the details. Just pay the things off.\\\"\",\n \"I have heard that it is better for your credit score to pay them down over time. Will it make much of a difference? I have never heard that, however, the financial institutions (who are charging you an amount of interest which was at one time in the not so distant past classified and punishable in state criminal codes) really enjoy you thinking that way. You are clearly capable of doing the math yourself. While I don't know the exact numbers, I am totally confident that you will find in about 5 or 10 minutes (if that long) that eliminating debt of any kind in your life will pay an immediate return that beats the great majority of other investments in terms of risk/reward. After the immediate financial return, there is a quieter, subtler, and even greater long term benefit. Basic principle: Highest Rates First Perhaps this decision could be considered slightly less important than deciding not to smoke during your youth; but I would put it as a close second. You are already in a position where you can see the damage that your prior decisions (about financial debt) have produced. Run the clock back to the time in your life when you were debt free. Now, pay off that debt with the big check, and start from zero. Now, turn on your psychic powers and predict the same amount of time, in the future, with the same amount of money (don't even try to adjust for inflation; just use flat dollars) WITHOUT losing the money which you have given to the financial institutions during this previous part of your life. Do you now see why the financial institutions want you to think about slowly paying them off instead of waking up tomorrow without owing them anything ?\",\n \"When paying off multiple debts there is a protocol that many support. Payoff your debts according to the snowball method. The snowball method proposes that you make minimum payments on all debts except the smallest one. Payoff the smallest debt as quickly as possible. As smaller debts are paid off, that makes one less minimum payment you need to make, leaving you with more money to put against the next smallest debt. So in your case, pay off the smaller debt completely, then follow up on the larger one by making regular payments at least equal to the sum of your two current minimum payments. You'll see immediate progress in tackling your debt and have one less minimum to worry about, which can serve as a little safety of it's own if you have a bad month. As to saving the thousand dollars, that is pragmatic and prudent. It's not financially useful (you won't make any money in a savings account), but having cash on hand for emergencies and various other reasons is an important security for modern living. As suggested in another answer, you can forgo saving this thousand and put it against debt now, because you will have a freed up credit card. Credit can certainly give you that same security. This is an alternative option, but not all emergencies will take a credit card. You typically can't make rent with your credit card, for example. Good luck paying your debts and I hope you can soon enjoy the freedom of a debt free life.\",\n \"I see some merit in the other answers, which are all based on the snowball method. However, I would like to present an alternative approach which would be the optimal way in case you have perfect self-control. (Given your amount of debt, most likely you currently do not have perfect self-control, but we will come to that.) The first step is to think about what the minimum amount of emergency funds are that you need and to compare this number with your credit card limit. If your limits are such that your credit cards can still cover potential emergency expenses, use all of the 4000$ to repay the debt on the loan with the higher interest rate. Some answer wrote that Others may disagree as it is more efficient to pay down the 26%er. However, if you pay it all of within the year the difference only comes to $260. This is bad advice because you will probably not pay back the loan within one year. Where would you miraculously obtain 20 000$ for that? Thus, paying back the higher interest loan will save you more money than just 260$. Next, follow @Chris 's advice and refinance your debt under a lower rate. This is much more impactful than choosing the right loan to repay. Make sure to consult with different banks to get the best rate. Reducing your interest rate has utmost priority! From your accumulated debt we can probably infer that you do not have perfect self-control and will be able to minimize your spending/maximize your debt repayments. Thus, you need to incentivize yourself to follow such behavior. A powerful way to do this is to have a family member or very close friend monitor your purchase and saving behavior. If you cannot control yourself, someone else must. It should rather be a a person you trust than the banks you owe money.\",\n \"The best approach depends on how much of an emergency fund you have. If you have no emergency fund Calculate how much you need in order to pay your expenses for 1 month and put at least that amount in a savings account. 3-6 months' worth of expenses is better. Put the remainder towards one credit card. If you have less than 3 months' worth of expenses in your emergency fund Deposit 1 additional month's worth of expenses into your savings account and apply the rest to one card. If you have an emergency fund that you're completely comfortable with Pay $8000 towards one card and $2000 towards the other one. Paying off one card fully gets rid of a bill that you have to think about each month, even if the two cards are otherwise identical.\",\n \"See many past answers: you will usually save the most money by paying off the highest-intetest-rate loan first. (Remember to allow for tax effects, if any, when comparing real interest rates.) Some folks are more motivated to simplify their finances than to save money; in that case you might pay off the smallest loan first.\",\n \"Keep in mind that you NEED to have a cash reserve. Blindly applying all stray cash to debt reduction is a bad idea. Your lenders do not care about your balance. All they care about is your NEXT payment. It is therefore imperative that you have a cash reserve that can carry these payments for several months. Having zero cash reserves puts you at high risk for such simple things as the payroll clerk at work missing the monthly deposit (Rare, but it happens.) I've also been in situations where a major client had a cash flow issue and delayed payment, and our company had to borrow to meet payroll that month. Fortunately, we were in good standing with the bank and had low debt, but it could have been catastrophic for any employees living paycheque to paycheque.\",\n \"\\\"Welcome to Money.SE. Your question is similar to a number of others. The \\\"\\\"How do I pay my debt down?\\\"\\\" and \\\"\\\"How do I invest extra money?\\\"\\\" is a bit of a continuum since there's no consensus than one should pay off the last cent of debt before investing. Oversimplify it for me: the correct order of investing offers a good look at this. You see, Pete's answer on your question is perfectly fine, but, since you make no mention of, say, a matched 401(k), I'd suggest that any answer to a question like yours should first take a step back and evaluate the bigger picture. A dollar for dollar matched 401(k) beats paying off even an 18% credit card. Absent any tangents, any thought of investing, saving for anything else, etc, my answer is simple, line up the debt, highest interest rate to lowest. Keep in mind the post-tax rate, i.e. a 6% student loan you can deduct, is an effective 4.5% if you are in the 25% bracket.\\\"\",\n \"Others have suggested paying off the student loan, mostly for the satisfaction of one less payment, but I suggest you do the math on how much interest you would save by paying early on each of the loans: When you do the calculations I think you'll see why paying toward the debt with the highest interest rate is almost always the best advice. Whether you can refinance the mortgage to a lower rate is a separate question, but the above calculation would still apply, just with different amortization schedules.\",\n \"There are a few ways you can go about paying this off quickly (and safely): You could start paying $386 monthly (ie, double what you're paying now). You'll pay less interest in the long run because they can only charge you for the amount outstanding. Remember, 6.8% of $12k is more than 6.8% of $6k. However, your plan sounds more sensible. Say you get to $6k paid off and $6k saved, you're able to pay off what's left and that's almost $200 a month you'll have extra. Although what I like about this is - if you become ill, lose your job, or whatever, then you're still able make the $193 payments, PLUS you'll have money saved for day-to-day expenses (food, water, gas, electricity, etc.) long enough to see yourself through. PS. They may charge you a settlement fee because if you pay early then they miss out on money... but check your contract with them first. Hope this helps!\",\n \"\\\"Dave Ramsey would tell you to pay the smallest debt off first, regardless of interest rate, to build momentum for your debt snowball. Doing so also gives you some \\\"\\\"wins\\\"\\\" sooner than later in the goal of becoming debt free.\\\"\",\n \"\\\"There is no magic formula to this, quite simply: earn, cut expenses, and pay. It sounds like you can use a little bit of help in the earning area. While it sounds like you are career focused (which is great) what else can you do to earn? Can you start a low cost of entry side business? Examples would include tutoring, consulting, or even baby sitting. Can you work a part time job that is outside of your career field (waiter, gas station, etc...)? One thing that will help greatly is a written budget each and every month. Have a plan on where to spend your money. Then as you pay off a loan throw that money at the next one. No matter if you use the smallest loan first or highest interest rate first method if you do that your debt payments will \\\"\\\"snowball\\\"\\\", and you will gain momentum. I'd encourage you to keep good records and do projections. Keeping good records will give you hope when you begin to feel discouraged (it happens to just about everyone). Doing projections will give you goals to meet and then exceed. The wife and I had a lot of success using the cash envelope system and found that we almost always had money left over at the end of the pay cycle. For us that money went to pay off more debt. Do you contribute to a 401K? I'd cut that to at least the match, and if you want to get crazy cut it to zero. The main thing to know is that you can do it. I'd encourage you to pay off all your loans not just the high interests ones.\\\"\",\n \"\\\"When is the best time to pay? At the end of each year? If you save $1,000 each month at 1% so as to pay $12,000 at EOY on a 4.75% loan, you've lost \\\"\\\"4.75% - 1% = 3.75%\\\"\\\" over that year. (And that's presuming you put the money in a \\\"\\\"high yield\\\"\\\" online savings account.) Thus, the best time to pay is as soon as you have the money. EDIT: This all assumes that you have an emergency fund (more than the bare minimum $1K), zero other debt with a higher rate than 4.75% and that you are getting the full company match from 401(k).\\\"\",\n \"No. It means each month the total amount you owe goes up by a factor of (1+0.298/12). So if you owed $23K at the beginning of the month, at the end you owe a total of 23K*1.0248=$23,571. Then subtract the $804 you are paying. If you want to think of it in terms of interest and principal, you are paying $571 a month in interest and 233 toward principle, I guess. Paying off debt with a lower interest rate using debt with a higher interest rate is throwing a lot of money away and impoverishing yourself needlessly. Psychology can't get around that. If you want a psychological aid, decide how much you are going to pay toward these debts and have it automatically deducted from your paycheck so you never see it. Make the minimum payment on every debt you have except the one with the highest interest rate. Pay the very most you can toward that. Then when it is paid off, move to the next highest. Do all your spending out of the lowest rate card, or avoid using these credit cards until your financial discipline and resources allow you to pay all credit cards off completely at the end of each month.\",\n \"By rounding my house payments up to the nearest $50.00, my 30 year mortgage was paid off in 7 years. Initially, my mortgage payment was roughly $600, $50 going to principal and $550 going to interest (banker's profits). By paying $650, I was actually doubling the amount I was paying on principal. Since interest is computed as a function (percentage) of the outstanding principal balance, the amount of my fixed payment that went to interest decreased each month, and the amount that went to principal increased. In 7 years I owned my home free and clear, and started putting the money I had been putting into the mortgage payments into investments. A rule of thumb I have discovered is that it takes half the time to save money to meet a goal that it takes to pay off the same debt.\",\n \"Pay the the smallest balance first. The sooner you pay that off, the sooner you can pay more on the mortgage.\",\n \"It does make sense to combine debts and pay off the worst (highest interest rate). However, if you can't get any loan, you should focus on the worst debt and pay that off. Then take the same amount of money you were paying to the next worse debt, and so on until you're clean. Let's look at an example. Debt A is at 5%, Debt B is at 10% and Debt C is at 15%. You are paying AB and C. On a monthly basis, you save 100€ to pay off C. Once C is payed off, you keep on saving 100€ and add whatever you were paying to Debt C to those savings. This way, you can pay off Debt B at an increased rate. When B is cleared, you save 100€ + whatever you were paying to Debt B and Debt C to clear Debt A. That's the theory.\",\n \"In my opinion, it generally makes sense to focus all of your debt-reduction energy and funds on one loan at a time. There are two reasons for this: It will allow you to more quickly move from 4 loans to 3 loans, and then 2, and then 1, providing you with a sense of progress and motivation. As you reduce the number of loans that you have, your monthly minimum payment obligations will be reduced. Then, if you have a month with an emergency expense, you will have more income available to you for your emergency without getting behind on your loans. There is debate about whether to pay loans in order of the loan balance or in order of interest rate (you can read about this here and here), but in your case, your highest interest loans also have the lowest balance, so either method would have you picking the same loans first. You have already chosen, wisely, to start with the $1500, 6.8% loans. Send all of your $1000 to one of these loans, and continue to work aggressively to knock out all four as quickly as possible.\",\n \"\\\"First to actually answer the question \\\"\\\"how long at these rates/payments?\\\"\\\"- These is nothing magic or nefarious about what the bank is doing. They add accrued interest and take your payment off the new total. I'd make higher payments to the 8.75% debt until it's gone, $100/mo extra and be done. The first debt, if you bump it to $50 will be paid in 147 months, at $75/mo, 92 months. Everything you pay above the minimum goes right to the principal balance and gets you closer to paying it off. The debt snowball is not the ideal way to pay off your debt. Say I have one 24% credit card the bank was nice enough to give me a $20,000 line of credit on. I also have 20 cards each with $1000 in credit, all at 6%. The snowball dictates that the smallest debt be paid first, so while I pay the minimum on the 24% card, the 6% cards get paid off one by one, but I'm supposed to feel good about the process, as I reduce the number of cards every few months. The correct way to line up debt is to pay off the (tax adjusted) highest rate first, as an extra $100 to the 24% card saves you $2/mo vs 50 cents/mo for the 6% cards. I wrote an article discussing the Debt Snowball which links to a calculator where you can see the difference in methods. I note that if the difference from lowest to highest rate is small, the Snowball method will only cost you a small amount more. If, by coincidence, the balances are close, the difference will also be small. The above aside, it's the rest of your situation that will tell you the right path for you. For example, a matched 401(k) deposit should take priority over most debt repayment. The $11,000 might be better conserved for a house downpayment as that $66/mo is student loan and won't count as the housing debt, rather \\\"\\\"other debt\\\"\\\" and part of the higher ratio when qualifying for the mortgage. If you already have taken this into account, by all means, pay off the 8.75% debt asap, then start paying off the 3% faster. Keep in mind, this is likely the lowest rate debt one can have and once paid off, you can't withdraw it again. So it's important to consider the big picture first. (Are you depositing to a retirement account? Is it a 401(k) and are you getting any matching from the company?)\\\"\",\n \"Starting up a company is fun, stressful, and exciting. It's also often a lot harder than you expect. Income, revenue, and cash flow are big concerns, and you need to be able to eat while you're hunting down your first paying customers. Don't pay off all the debt if that will leave you without any money for living expenses. Perhaps a compromise is in order? Pay off the high-interest loans first, and continue to make payments on the lower-interest loans while you start up. It doesn't have to be all or nothing.\",\n \"Keep in mind that by fully paying off one of your loans, you will reduce your minimum repayments. This will make you feel richer than you actually are. This will make you buy stuff that it seems like you can afford, probably putting some of it on credit. As you can't actually afford this, this will leave you, in a years time, with the same amount of debt you have now or more, but with a slightly bigger tv. Assuming your home loan has no penalties for paying off extra, then put all 11k into there to keep your monthly repayments as high as possible.\",\n \"This is a case where human nature and arithmetic lead to different results. Depending on the your income, the effective interest rate on the mortgage is probably right around 2.5%. So purely by arithmetic, the absolute cheapest way to go is to put the $11k to the bigger car loan, then pay off the mortgage, then the smaller car loan. The Debt Snowball is more effective however, because it works better for people. Progress is demonstrated quickly, which maintains (and often enhances) motivation to continue. I can say as a case in point, having tried both methods, that if does indeed work. So, I am with you ... pay off the car loan first, and roll that payment into the bigger car loan. If you add no extra dollars, you should get the small loan paid off in 6 to 8 months and the bigger car loan in another 16 to 18 months. It sounds like from your message that you have another $1500 or so a month. If that is the case ... small loan paid off in two months, bigger loan paid off in another year. If you stick with the Ramsay program, you then build an emergency fund and start investing. Good luck!\",\n \"Pay the debt down. Any kind of debt equals risk. No debt equals no risk and a better chance to have that money earn you income down the road once it's invested. That and you will sleep so much better knowing you have ZERO debt. You 6 month emergency fund is probably good. Remember to keep it at 6 months living expenses (restaurants don't count as living expenses).\",\n \"The answer will vary person to person and situation to situation. But the basic concept to always consider is this: What interest rate am I paying on my debt? 10%? 18%? And what interest rate am I making on my savings/investment, etc? 3%? 7%? It won't give you a hard and fast answer, but will definitely let you know if you should take a closer look at it. I'd suggest talking to a financial planner about it. Find a fee-based planner that you can turn to intermittently to make sure you are on the right track...not a commission-based planner, a fee-based one. (with respectful apologies to any commission-based planners who may read this.) My instinct is usually to pay off the debt, try to clean everything up so you don't have anything outstanding that is charging you interest. Debt is clutter, it's stressful, it can be a reminder of money you wish you hadn't spent. As long as you have access to money in case of emergency, job loss, etc, get your debt paid off and keep it paid off. You'll sleep much better.\",\n \"\\\"The best way I know of to get the interest rate lowered is to call the credit card company and simply ask. Typically if a credit card company thinks you will leave them for another company they will be willing to work with you. There is also the option of transfering some of the higher interest debt to one of the lower interest credit cards. It sounds like you have your friend on the right track by focusing all extra money on the credit card with the highest interest rate. Then after that one is paid off send all extra to the next highest one and so on. The classic \\\"\\\"snowball\\\"\\\" effect.\\\"\",\n \"The definitive answer is: It Depends. What are your goals? First and foremost, you need to have at least 3 months expenses in cash or equivalent. (i.e. an investment that you can withdraw from quickly, and without penalty). The good news is that you don't have to come up with it instantly. Set a time frame - one year - for creating this safety net, and pay towards that goal. This is the single most important piece of financial advice you will receive. Now determine what you need to do. For example, you may need a car. Compare interest rates on your student loan and the car loan. Put your cash towards whichever is higher. If you don't need a car or other big ticket item, then you may consider sticking your surplus into the student loans. 50k at $1650 a month will be paid down in about 3 years, which might be a bit long to live the monastic lifestyle. I'd look at paying down the smallest loan first (assuming relatively similar rates), and freeing up that payment for yourself. So if you can pay off 1650 a month, and free up $100 of that in six months, then you can reward yourself with half that surplus, and apply the other half to the next loan. (This is different than some would suggest because you're talking about entering severe spartan mode, which is not sustainable.) Remember that life happens. You'll meet someone. You'll have an accident, your brother will get sick and you'll give him some money to help out. You've got to be prepared for these events, and for these reasons, I don't recommend living that close to the edge. Remember, you're not in default, and you do have the option of continuing to pay the minimum for a long time.\",\n \"Pay off your car loan. Here is why: As you mentioned, the interest on your home mortgage is tax deductible. This may not completely offset the difference in interest between your two loans, but it makes them much closer. Once your car debt is gone, you have eliminated a payment from your life. Now, here's the trick: take the money that you had been paying on your car debt, and set it aside for your next car. When the time comes to replace your car, you'll be able to pay cash for your car, which has several advantages.\",\n \"\\\"Your companies are declining to lower your rates because you are describing it as being kind. When I was in a similar situation, I called each one, starting with the highest rate, and said this: For the last little while things have been tight and my balances have crept up on all my cards. Now I'm about to start a fairly dramatic paydown. I'm going to be doing highest-rate fastest, which is you. Are you able to lower my rate so that you can continue to collect it? Some said no. Some said \\\"\\\"ask again when you've paid more than the minimum three months in a row.\\\"\\\" Most said yes, and sometimes by a dramatic amount. It made a real difference to getting things under control. I agree with the other answers that $50 extra on each card is just not as fulfilling as putting all the extra to a single card. If you must still use a card (to put gas in your car, buy groceries etc) getting one card to zero will return you to not paying interest even when you use it, so you might want to start with your lowest balance and then go to highest-rate once you have one clear one you can use. (If your balances are all so high that it will take a year or more to get one to zero, then maybe not. But if one is low drive it down first.) As for the consolidation loan, for some people it's the key to saving interest and getting the debt behind them. For others it's a chance to catch their breath and run up even more debt. Most people cannot predict in advance which they will be or which others will be. Be aware that it is a risk. You can vow that you will never again cover payroll with a cash advance from the company credit card (or your personal one) but when push comes to shove, you just might anyway.\\\"\",\n \"If you want to pay them off as quickly as possible, pay the minimum payment on the larger two and dump as much as you can into the one with the 8.75% interest. Then, even though it has a slightly lower interest rate, I would attack the one with the next smallest balance after that, while continuing to make the minimum payment on the one with the largest balance.\",\n \"I know your question is about your credit score, but practically speaking, you should pay of the debt with the highest interest rate first. Doing do will save you money, which is the same net effect as making more money. Your time frame to pay it all off is short (you said 6 month), but just in case it takes longer, take care of the expensive debt first.\",\n \"\\\"There are two solutions. One is financially better, the other is psychologically better. Financially better: You should pay off loans in the order of interest rate, so the 9% first, then the six percent, then the 3-4%. If you pay back $1000, the first one saves you $90 a year in interest, the second saves you $60, the third $30-$40 a year. Every year until everything is paid back. Psychologically better: Some people have psychological problems paying back debt, and it is better for them to pay back small loans first. If you feel better having two loans instead of three, and feeling better makes you able to save money and pay back the other loans, while having three loans would make you depressed and unable to make savings - pay back the smaller loan. If you don't have that kind of problem, use the \\\"\\\"financially better\\\"\\\" method.\\\"\",\n \"I'd start paying off the smallest balance first. Hopefully, that can get cleared in a few months. When that happens, close the account and try to get your bank loan again. Keep repeating this process until either you pay off all of the debt. After you've paid off one or two loans and put the negative marks of your credit history further into the past, you'll be able to make better progress.\",\n \"There are non-financial costs to having a debt: you need to remember to make monthly payments, perhaps keep track of changing interest rates, be aware of conditions of the debt, archive the related paperwork. Life is simpler with fewer debts, and that has value. Of course, if the difference in interest rate is large, then that is more important and the higher interest should be paid off first. But if the difference is only half a percentage point or so, you may decide that having fewer debts is in itself worth the bit of extra interest you pay.\",\n \"You mention only two debts, mortgage and student loan, but you mention $19K in savings, which suggests that you are a saver, and likely do not have other debts. You did not mention your (net) income and expenses (income statement), but since you have substantial savings, you likely live within your means (income > expenses). Since you mention $38K in retirement, we might conclude you are regularly saving for retirement (are you saving 10% toward retirement)? You did not mention any medical condition or other debts, that might require a large savings, so I would suggest having 6 months savings ($2.5K x 6 = $15K) but should your net expenses be less, you might reduce this ($2K x 6 = $12K). You do not mention any investment you might want to make, but since you did not mention any candidate investments, we can assume you have no (specific) investments you find particularly attractive. You did not mention anything you were saving to purchase that you might want to purchase. You have combined $19K + $50K = $69K savings, and $15K would be a comfortable emergency savings, leaving $54K you could use to reduce mortgage or student loan debt. The mortgage debt interest @4.5%, is higher, so paying that debt off would be like earning 4.5% guaranteed return on your money, tax-free. At your income, your marginal tax rate is low enough that the mortgage interest deduction (if you do itemize) would not reduce this return much (15% if you itemize). The student loan debt interest @2.8%, would be like earning 2.8% guaranteed return on your money, tax-free. Clearly the higher return on your 'investment' in paying off debt would be reducing your mortgage balance (over 50% higher return on investment, compared to the student loan debt). You did not mention any circumstance that might cause the student loan rate to increase, the mortgage rate to increase, nor did you mention any difficulty making both the mortgage and student loan payments, the amounts of either payment, nor the number of years remaining to pay on either. Should you need (or desire) to reduce your payments, you could choose to payoff the student loan to eliminate one payment, and thus decrease your expenses. Or you could choose to pay down the mortgage, and refinance (or refactor) the mortgage to obtain a smaller payment. Another strategy (assuming you have had your house for 5-7 years), might be to pay the mortgage down enough to refinance into a 15 year loan, and (assuming you have a good credit score) obtain a lower (3%) rate. But I am going to suggest you consider a blended approach. Combine the Dave Ramsey Debt Snowball approach with the reduce the interest rate approach. Take the $54K ($57K?) available (after reserving 6 months emergency fund), and split between both. You pay your mortgage down by $27K and your student loan debt down by $27K. Your blended return on investment is (2.8+4.5)/2 = 3.65%, and you have the following Balance Sheet: Assets: Debts: The next steps would be to, There are two great reasons for paying off the student loan debt. One is the Dave Ramsey Debt Snowball approach which is that this is the smaller debt, and thus represents a psychological win, and the other is that student loan debt has special treatment even in bankruptcy.\",\n \"\\\"Although there is no single best answer to your situation, several other people have already suggest it in some form: always pay off your highest after-tax (!) interest loan first! That being said, you probably also have heard about the differentiation for good debt vs. bad debt. Good debt is considered a mortgage for buying your primary home or, as is the case here, debt for education. As far as I am concerned, those are pretty much the only two types of debt I'd ever tolerate. (There may be exceptions for health/medical reasons.) Everything else is consumer debt and my personal rule is, don't buy it if you don't have the money for it! Meaning, don't take on consumer debt. One other thing you may consider before accelerating paying off your student debt, the interest paid on it may be tax deductible. So you should look at what the true interest is on your student loan after taxes. If it is in the (very) low single digits, meaning between 1-3%, you may consider using the extra money towards an automatic investment plan into an ETF index fund. But that would be a question you should discuss with your tax accountant or financial adviser. It is also critical in that case that you don't view the money invested as \\\"\\\"found\\\"\\\" money later on, unless you have paid off all your debt. (This part is the most difficult for most people so be very cautious and conscious if you decide to go this route!) At any rate, congratulations on making so much progress paying off your debt! Keep it going.\\\"\",\n \"So my advice for your financial situation depends on your aims. Are you aiming to: - Completely clear your debt - Clear one card to free up more monthly income. - Clear some debt to allow further controlled spending - Clear one card and focus on just using one, having 2nd as emergency. There are other things you may wish to do but you said to pay off some / all of 2 credit card bills. If you want to contact me I can plan this more precisely. Some seem the same but other factors can come into play as well. Differing rates of interest make the options clearer. My first advice would be to call the card companies and see if you can get better rates first. SCENARIO (some figures made up for visual) Credit Card Debts 8,000 8,000 Monthly payment 100 100 APR % 10 10 Ignoring APR this will be 80 months to repay (otherwise 140 months using my example amounts above) £28,000 repaid over 11 years 8 months. Your Suggestion As per your suggestion originally, paying off cards equally will allow smaller debt on both cards. Credit Card Debt 3,000 3,000 Monthly payment 100 100 APR % 10 10 With a 0% APR this would be paid off in 2 years 6 months. Cards are available to get free balance transfers, need to look into this. With the 10% APR this would take 3 years 1 month. £10,000 lump and £7,400 repaid over 3 years 1 month (saving £10,600 and 8 years 7 months) AIM: To clear debt completely. My advice here is to use the £10,000 lump sum to pay off one credit card, the remaining £2,000 can then come off the other card. This will free up your outgoings (was 2 x £100) by £100. But then use this £100 to pay off the card, this will result in the following: Credit Card Debt 6,000 Monthly payment 200 APR % 10 With a 0% APR this would be paid off in 2 years 6 months. Cards are available to get free balance transfers, need to look into this. With 10% APR this would take roughly 3 years 1 month. £10,000 lump and £7,400 repaid over 3 years 1 month (saving £10,600 and 8 years 7 months). This option is the same as above, but you have the options on the odd tight month to reduce payments to £100. This also will allow the 2nd card to be used interest free for an emergency purchase (to be paid off without any interest charge) If rates are different, pay of the one with the higher APR AIM: Clear one card to free up more monthly income. AIM: Clear one card and focus on just using one, having 2nd as emergency. Same as above, but don’t increase to £200, leave monthly payment at £100. Credit Card Debt 6,000 Monthly payment 100 APR % 10 With a 0% APR this would be paid off in 5 years. With the 10% APR this would take 88 months (7 years 4 months) £10,000 lump and £8,800 repaid over 7 years and 4 months (saving £9,200 and 4 years 4 months). This also allows for some extra spending (even racking back up the debt – although not advised) AIM: Clear some debt to allow further controlled spending As above apart from this will allow you to spend to get back up to full £16,000 debt. NOTE My figures are theoretical, paying off £500 (£250x2) a month instead of the £100 (10%APR) would take: Lump sum 10,000, remaining 6,000 – 14 months (£17,000 paid) Lump sum 5,000, remaining 2 x 5,500 – 26 months (£18,000 paid) Lump Sum 0, remaining 2 x 8,000 – 40 months (£20,000 paid) Now I have finished waffling, I hope you have an idea on what you are aiming to achieve and a better idea of what to do when you receive the income Stephen.\",\n \"If you have a debt that has very low interest now, but you are aware that it's not going to stay that way (0% introductory APR on a credit card, for example), it can make sense to pay that off before the higher rate kicks in.\",\n \"\\\"First, pay off the highest interest first. If you have 80%, pay it first. Paying off a card/loan with a lower rate, but a lower payment or a lower balance can help your mental capacity by having fewer things to pay. But, this should be a decision where things are similar, such as 20-25%, not 20-80%. What about any actual loans? Any loans with a fixed payment and a fixed amount? If you must continue to use CC while paying them off, use the one with the lowest interest rate. Call all of your debtors and ask for reduction in interest rate. This is not the option to take first... This is a strategic possibility and will cause credit score issues... If you are considering bankruptcy or not paying back some, then you have even more negotiation power. Consider calling them all and telling them that you only have a little bit of money and would like to negotiate a settlement with them. \\\"\\\"I have only a limited amount of money, and lots of debt. I will pay back whomever gives me the best deal.\\\"\\\" See what they say. They may not negotiate until you stop paying them for a few months... It is not uncommon to get them to reduce interest (even to 0%) and/or take a reduction in the amount due - up to 25 cents on the dollar. To do this, you might need to pay the amount all at once, so look into loans from sources like retirement, home equity, life insurance, family... Also, cut out all expenses. Cut them hard; cut until it hurts. Cut out the cell phone (get a pre-paid plan and/or budget $10-20/month), cut out all things like alcohol, tobacco, firearms, lottery, tattoos, cable tv, steak, eating out. Some people would suggest that you consider pets and finding them a new home. No games, no trips, no movies, no new clothes... Cut out soft drinks, candy, and junk food. Take precautions to stay healthy - don't wear shoes in the house, brush your teeth, take a multi vitamin, get exercise, eat healthy (this is not expensive, organic stuff, just regular groceries). Consider other ways to save, like moving in with family or friends. Having family or friends live with you and pay rent. Analyze costs like daycare vs. job income. Apply for assistance - there are lots of levels, and some don't rely on others, such as daycare. Consider making more money - new job, 2nd job, overtime, new career. Consider commute - walk, bike, take the bus. Work 4/10's. Telework. Make a list of every expense and prioritize them. Only keep things which are really necessary. Good Luck.\\\"\",\n \"When you're debt free everything you own feels different. The lack of financial stress in your life goes away. BUT! before you do go gung-ho on paying down debt think through these steps (and no I did not come up with them. Dave Ramsey did and others). Truncated from - http://www.daveramsey.com/new/baby-steps/ I have 1 credit card. Only use it for business/travel but pay it off every month (yay for auto-draft). Everthing else is cash/debit and we live by a budget. If it's not in the budget we don't buy it. Easy as pie. The hard part is disciplining yourself to wait. Our society is gear for BUY NOW! PAY LATER! and well you can see where that has taken our country and families. And celebrate the small victories. Pay off 1 debt then go have a nice dinner. Things like that help keep you motivated and pursuing the end goal.\",\n \"First of all a big thumbs up for Ben's answer. A few small things you can do to help you on your way. Hopefully you are not more in debt that 6 months of salary in debt because that is a really tough road. first thing you need to do is get some professional help. The National Foundation for Credit Counseling (NFCC) offers free or low-cost debt counseling to help you through the process. Visit them at NFCC.org or call 1-800-388-2227 to find a local affiliate office near you. You might want to only use cash for a while. If not and you have a credit card with no balance always use that card because it will be interest free. Remember if you use credit cards as a payment system and not credit, you actually get free interest. If you roll even a penny over into the next statement you are paying interest day one of each purchase. Pay credit cards with highest interest rate first an pay minimums to others This one I like the best. As you get money pay your credit card. You interest is being compounded daily. Pay your cards when you have money, not when they are due. Have a mindset that reminds how much something is really going to cost you If you plan on taking 3 years to get out of debt and you buy something for $100 that is really costs you $156.08 Three years of compound 16% interest. 5b. Conversely if you sell something for $100 on eBay that is like selling something for $156.08.\",\n \"Simply, you should put your money into whatever has the higher interest rate, savings or repayment of debt. Let's say at the beginning of month A you put $1000 into each account. In the case of the savings, at the end of month A you will have $1001.6 ($1000 + 1000 x 2% annual interest / 12) In the case of a loan, at the end of month A you will have $1005.7. ($17000 plus 6.8 interest for one month is 17096.3. On $16000, the new value is 16090.6. The difference between these is $1005.7. 5.7 / 1.6 = 3.56 Therefore, using your money to repay your loan nets you a return about 3.5 times greater.\",\n \"This is pretty simple in theory, harder to do in practice. You will be surprised how quickly the debt will disappear. Doing these things will work, I know from experience.\",\n \"Strictly from a fastest payback standpoint, the rule is to make all minimum payments and send any extra funds to the highest interest loan next. This will result in the lowest interest paid each year. The decision to consolidate depends on the impact it will have to both your payment and overall payoff schedule. It sounds like your priority might need to be cash flow and not overall savings. e.g. taking a 4% loan that has a high payment, but stretching it over more time can lower the payment, even at a bit higher rate. You just need to be aware of the cost and decide based on what you can live with. I hope you are in a good field that would see improvements to your income over these next few years.\",\n \"\\\"A major thing to consider when deciding whether to invest or pay off debt is cash flow. Specifically, how each choice affects your cash flow, and how your cash flow is affected by various events. Simply enough, your cash flow is the amount of money that passes through your finances during a given period (often a month or a year). Some of this is necessary payments, like staying current on loans, rent, etc., while other parts are not necessary, such as eating out. For example, you currently have $5,500 debt at 3% and another $2,500 at 5%. This means that every month, your cashflow effect of these loans is ($5,500 * 3% / 12) + ($2,500 * 5% / 12) = $24 interest (before any applicable tax effects), plus any required payments toward the principal which you don't state. To have the $8,000 paid off in 30 years, you'd be paying another $33 toward the principal, for a total of about $60 per month before tax effects in your case. If you take the full $7,000 you have available and use it to pay off the debt starting with the higher-interest loan, then your situation changes such that you now: Assuming that the repayment timeline remains the same, the cashflow effect of the above becomes $1,000 * 3% / 12 = $2.50/month interest plus $2.78/month toward the principal, again before tax effects. In one fell swoop, you just reduced your monthly payment from $60 to $5.25. Per year, this means $720 to $63, so on the $7,000 \\\"\\\"invested\\\"\\\" in repayment you get $657 in return every year for a 9.4% annual return on investment. It will take you about 11 years to use only this money to save another $7,000, as opposed to the 30 years original repayment schedule. If the extra payment goes toward knocking time off the existing repayment schedule but keeping the amount paid toward the principal per month the same, you are now paying $33 toward the principal plus $2.50 interest against the $1,000 loan, which means by paying $35.50/month you will be debt free in 30 months: two and a half years, instead of 30 years, an effective 92% reduction in repayment time. You immediately have another about $25/month in your budget, and in two and a half years you will have $60 per month that you wouldn't have if you stuck with the original repayment schedule. If instead the total amount paid remains the same, you are then paying about $57.50/month toward the principal and will be debt free in less than a year and a half. Not too shabby, if you ask me. Also, don't forget that this is a known, guaranteed return in that you know what you would be paying in interest if you didn't do this, and you know what you will be paying in interest if you do this. Even if the interest rate is variable, you can calculate this to a reasonable degree of certainty. The difference between those two is your return on investment. Compare this to the fact that while an investment in the S&P might have similar returns over long periods of time, the stock market is much more volatile in the shorter term (as the past two decades have so eloquently demonstrated). It doesn't do you much good if an investment returns 10% per year over 30 years, if when you need the money it's down 30% because you bought at a local peak and have held the investment for only a year. Also consider if you go back to school, are you going to feel better about a $5.25/month payment or a $60/month payment? (Even if the payments on old debt are deferred while you are studying, you will still have to pay the money, and it will likely be accruing interest in the meantime.) Now, I really don't advocate emptying your savings account entirely the way I did in the example above. Stuff happens all the time, and some stuff that happens costs money. Instead, you should be keeping some of that money easily available in a liquid, non-volatile form (which basically means a savings account without withdrawal penalties or a money market fund, not the stock market). How much depends on your necessary expenses; a buffer of three months' worth of expenses is an often recommended starting point for an emergency fund. The above should however help you evaluate how much to keep, how much to invest and how much to use to pay off loans early, respectively.\\\"\",\n \"First, make sure you have some money in a savings account that you can use instead of credit cards for making future purchases that go beyond what you have in your checking account. $1000 is a good amount to start with, so just take that out of the $5000. Then pay off the Best Buy card. You shouldn't be worried about the minimum payment. Determine what you can pay per month (say, $400), and take the minimum payments out of that. Then choose one card to get the rest of your $400, plus the remaining $1500 of your $5000. This should be the highest-interest card, mathematically, but it may or may not be your best choice; it depends on your personality. Some people get a psychological lift out of seeing debts disappear, and it gives them more motivation to keep going. Those people may be better served by paying off the smallest debts first, to get them out of the way. I'm an INTP, so it bothers me more to think that I'll be paying a little more in interest over the long term by taking that route.\",\n \"\\\"Think of yourself as a business with two accounts, \\\"\\\"cash\\\"\\\" and \\\"\\\"net worth\\\"\\\". Your goal is to make money. \\\"\\\"Cash\\\"\\\" is what you need to meet your obligations. You need to pay your rent/mortgage, utilities, buy food, pay for transportation, service debt, etc. If you make $100 a month, and your obligations are $90, you're clearing $10. \\\"\\\"Net worth\\\"\\\" are assets that you own, including cash, retirement savings, investments, or even tangible goods like real property or items you collect with value. The \\\"\\\"pay off debt\\\"\\\" versus \\\"\\\"save money\\\"\\\" debate, in my opinion, is driven by two things, in this order: If you start saving too soon, you'll have a hard time getting by when your car suddenly needs a $500 repair or you need a new furnace. You need to improve your cash flow so that you actually have discretionary income. Pay off those credit cards, then start directing those old payments into savings and investments.\\\"\",\n \"I am answering this in light of the OP mentioning the desire to buy a house. A proper mortgage uses debt to income ratios. Typically 28/36 which means 28% of monthly gross can go toward PITI (principal, interest, tax, insurance) and the total debt can go as high as 36% including credit cards and car payment etc. So, if you earn $5000/mo (for easy math) the 8% gap (between 28 and 36) is $400. If you have zero debt, they don't let you use it for the mortgage, it's just ignored. So a low interest long term student loan should not be accelerated if you are planning to buy a house, better put that money to the down payment. But for credit cards, the $400/mo carries $8000 (banks treat it as though the payment is 5% of debt owed). So, I'd attack that debt with a vengeance. No eating out, no movies, beer, etc. Pay it off as if your life depended on it, and you'll be happier in the long run.\",\n \"\\\"Victor addressed the card issue with an excellent answer, I'd like to take a stab at the budget and income side. Your question clearly stated \\\"\\\"I am left with no extra money\\\"\\\" each month. Whenever I read such an assertion, I ask the person, \\\"\\\"but surely, X% of people in your country get by on a salary that's 95% of yours.\\\"\\\" In other words, there's the juggling of the debt itself, which as Victor's math shows, is one piece of the puzzle. The next piece is to sift through your budget and find $100/mo you spend that could be better spent reducing your debt. Turn down the temperature in the winter, up in the summer, etc. Take lunch to work. No Lattes. Really look at the budget and do something. On the income side. There are countless ways to earn a bit of extra money. I knew a blogger who started a site called \\\"\\\"Deliver away Debt.\\\"\\\" He told a story of delivering pizza every Friday and Saturday night. The guy had a great day job, in high tech, but it didn't lend itself to overtime, and he had the time available those two evenings to make money to kill off the debt he and his wife had. Our minimum wage is currently just over $7, but I happened to see a sign in a pizza shop window offering this exact position. $10/hr plus gas money. They wanted about 8 hours a weekend and said in general, tips pushed the rate to well over $15/hr. (They assumed I was asking for the job, and I said I was asking for a friend). This is just one idea. Next, and last. I knew a gal with a three bedroom small house. Tight budget. I suggested she find a roommate. She got so many responses, she took in two people, and the rents paid her mortgage bill in full. Out of debt in just over a year, instead of 4+. And in her case, no extra hours at all. There are sites with literally 100's of ideas. It takes one to match your time, interest, and skill. When you are at $0 extra, even finding $250/mo will change your life.\\\"\",\n \"Let's say I have two loans (say 2 car loans), and the high interest loan has a higher balance. Both have a monthly payment of, say, $500. My income fluctuates a lot, so occasionally I only have $750. I get hit with big fees those months, or maybe I just have to eat beans for those months. I come on some extra money. Maybe enough to get rid of the low interest small loan. Paying off the smaller loan frees up cash. I don't have to eat beans on the bad months.\",\n \"The other answers have offered some great advice, but here is an alternative that hasn't been mentioned yet. I'm assuming that you have an adequately-sized emergency fund in savings, and that your cars are your only non-mortgage debt. Since you still have car debt, you probably don't have anything saved for buying a new car when your current cars are at the end-of-life. Consider paying off your car loans early, then begin saving for your next car. Having cash in the bank for a car is very freeing, and it changes your mindset when it comes time to purchase a car, as it is easy to waste a lot of money on something that depreciates rapidly when you aren't paying for it immediately. This approach might be counterintuitive if your car loan interest rate is less than your mortgage rate, but you will probably need another car before you need another house, and paying cash for a car is worth doing.\",\n \"Get a loan at a decent interest rate and use that to pay off all of the credit cards. Then pay into that loan and leave the credit cards alone. Cancel them and don't use them. Credit card debt is possibly the worst kind of debt. So expensive. It's not designed for long term borrowing. It's designed to be paid off completely every month. Get a single loan and consolidate all your debt into it. It will have a lower interest rate and cost you a lot less in the long term.\",\n \"In your scenario, I would do the following: If, in the short term, something should happen, you can always tap into a line of credit or even a cash advance on the credit card. But, you should in no way be paying $70 a month in interest. Assume you want to pay off the Credit card over 12 payments, you would need to pay about 450 a month, which costs 400 in interest. At the end of the year, you have $5000 in savings, and $0 debt. The alternative, is to pay off the credit card right now, and put that $450 into savings, you would have $5400 in savings, and $0 debt. I'm usually the last to recommend a $0 safety net, but I make an exception in the case of retirable credit card debt. In the worst case, you are no worse off than you are now, in the best case, you're up about $400 at the end of the year.\",\n \"This is more of an interesting question then it looks on first sight. In the USA there are some tax reliefs for mortgage payments, which we don’t have in the UK unless you are renting out the property with the mortgage. So firstly work out the interest rate on each loan taking into account any tax reliefs, etc. Then you need to consider the charges for paying off a loan, for example often there is a charge if you pay off a mortgage. These days in the UK, most mortgagees allow you to pay off at least 10% a year without hitting such a charge – but check your mortgage offer document. How interest is calculated when you make an early payment may be different between your loans – so check. Then you need to consider what will happen if you need another loan. Some mortgages allow you to take back any overpayments, most don’t. Re-mortgaging to increase the size of your mortgage often has high charges. Then there is the effect on your credit rating: paying more of a loan each month then you need to, often improves your credit rating. You also need to consider how interest rates may change, for example if you mortgage is a fixed rate but your car loan is not and you expect interest rates to rise, do the calculations based on what you expect interest rates to be over the length of the loans. However, normally it is best to pay off the loan with the highest interest rate first. Reasons for penalties for paying of some loans in the UK. In the UK some short term loans (normally under 3 years) add on all the interest at the start of the loan, so you don’t save any interest if you pay of the loan quicker. This is due to the banks having to cover their admin costs, and there being no admin charge to take out the loan. Fixed rate loans/mortgagees have penalties for overpayment, as otherwise when interest rates go down, people will change to other lenders, so making it a “one way bet” that the banks will always loose. (I believe in the USA, the central bank will under right such loans, so the banks don’t take the risk.)\",\n \"\\\"Check the terms of your mortgage. If you are in a fixed-term mortgage, you can likely \\\"\\\"over-pay\\\"\\\" a fixed amount of the capital each year: typically 10%. Eg if you owe £300,000 on the mortgage, you can pay off an additional £30,000 this year. Next year you'd owe something like £260,000 so could pay off £26,000. You'd need to check the terms of your mortgage to see what this limit is. You can actually pay off more than this, but would become liable to pay an \\\"\\\"early repayment fee\\\"\\\" or similar, which is usually something like 3-5% of the mortgage amount. Note that this usually means you would need to re-finance the mortgage anyway If you are not on a fixed-term mortgage than, in the UK at least, you are pretty much free to over-pay as much as you would like or refinance the mortgage. If you are in a fixed-term mortgage, it is usually better to simply over-pay by that maximum allowed amount until the fixed period ends, at which point you can re-finance onto a mortgage that allows higher overpayments. This isn't always the case, though, depending on your interest rate, how high the early repayment charge is, and how much you are able to over-pay. At the very least, you're going to need to do some sums! If you do choose to over-pay up to the limit, then you'd want to over-pay as much as you can at the start of the year (ie don't divide the over-payment by 12, pay it all as early as you can) to reduce interest payments. Then once you hit the limit, put the rest into a savings account: once you are out of the fixed term you can then pay the rest as a lump sum when refinancing.\\\"\",\n \"The optimal way to pay off all cards in the least amount of time is a waterfall approach, with the most money going to the account with the highest interest rate, or in the event of a tie, the lowest balance. Then when that account is paid off, go to the next one. There's a bit of wiggle room if one is tax deductible, but in this case, there shouldn't be. So, what you should do is pay off card 2, then 1, then 3, using the waterfall scheme. You have correctly identified that card 2 will be paid off in 18 months. Figure out what the balance will be on Card 1 at that time, and how long the new payment of $1105 will take to get it paid off. Then figure out how long it'll take to pay off card 3 with $1365. Without crunching the numbers myself, I'm guessing you'll be debt free in about 26 months or so, that card 3 will be paid off before you are done with Card 1. So what you'd do in that case is pay off card 1 using the combined total payment.\",\n \"Not that I doubted everyone's assumption but I wanted to see the math so I did some spreadsheet hacking. I assumed a monthly payments for 30 years which left us with total payments of 483.89. I then assumed we'd pay an extra $200/month in one of two scenarios. Scenario 1 we just paid that $200 directly to the lender. In scenario 2 we set the extra $200 aside every month until we were able to pay off the $10k at 7%. I assumed that the minimum payments were allocated proportionately and the overpayments were allocated evenly. That meant we paid off loan 5 at about month 77, loan 4 in month 88, loan 3 in month 120, loan 2 in month 165, and loan 1 in month 170. Getting over to scenario 2 where we pay $483.89 to lender and save $200 separately. In month 48 we've saved $9600 relative to the principle remaining in loan 3 of $9547. We pay that off and we're left with loan 1,2,4,5 with a combined principle of about $60930. At this point we are now going to make payments of 683.89 instead of saving towards principle. Now our weighted average interest rate is 6.800% instead of 6.824%. We can calculate the number of payments left given a principle of 60930, interest of 6.8%, and payment of 683.89 to be 124.4 months left for a total of 172.4 months Conclusion: Scenario 1 pays off the debt 3 months sooner with the same monthly expenditure as scenario 2.\",\n \"\\\"Given the exact formula that goes into the 'Fair Issac\\\"\\\" calculation is a closely guarded trade secret, AND that each agency has their own formula, I'm not sure there's really any 100% for sure authoritative answer to the question in terms of which option would be best. There are a lot of balancing factors, like how long you've had accounts, payment history over time, etc. Stuff that is known to HURT a score can include things like closing a longstanding account. If you have a very low interest loan (like some car companies offer now and then) I'd just make the normal payments. If you have something at a higher interest rate, especially above 6-7%, then I'd worry less about credit score and more about how much I'm going to pay in interest and pay it off as rapidly as I could. The big key is 'never pay late' more than anything else, Followed by how much of your debt capacity is used (which paying down any account, loan or credit card, will help), and long standing relationships (length of history) See this (approximate) chart and notice that any early payoff is basically going lower your 'capacity used', possibly reduce the types of credit used (if it's the last loan of that type), all of which should help your score.\\\"\",\n \"Should I pay off the credit cards now or do the monthly payments thing? It need not be a binary choice; you could take the middle ground. Assuming that an emergency fund of $10-15k is sufficient, you could pay off one credit card and do the monthly payment for the other cards. With one card cleared, you may feel better. I would choose to clear the card with the highest interest, followed by the smallest debt first as it's the mathematically optimum way. I should also let you know that there's this debt-snowball method which is not as optimum but has some valid reasons for existing. Choose the optimum way if you're financially disciplined. p.s. I'm not trained financially, nor am I in the industry. Just my two cents.\",\n \"\\\"Plus one to Alexandre for pointing out this is possible. It is also possible to run with scissors, and I would recommend neither. Your money problems are very small and doing something so dramatic to solve them will probably put you in a worse financial decision. Why would you put your home, at risk, to pay off such a small amount (less than 5K)? The \\\"\\\"one payment\\\"\\\" or consolidation mantra, for a person like you, will often lead a person into reoccurring the same debt and having the consolidation loan. You don't need one payment you need no payments. First off stop borrowing. Second increase your income by working more or selling stuff. You might want to clean some houses, baby sit, or mow some lawns instead of the traditional job. Third decrease your spending. Let your loved ones know it will be a lean Christmas this year. Cut cable as you won't have time to watch TV anyway. If you do all that could you find $1000 per month? I bet you could find more. Doing all that and you will be done in 5 months and still own your home outright. You are a great candidate to pay off your bills by the snowball method, or smallest to largest. While it may not be, on paper, the most mathematically efficient it helps people with motivation and hope. It sounds like you could use that. List your bills smallest to largest and pay off the smallest first while paying minimums on the rest. You can do it!\\\"\",\n \"1. you want /r/personalfiance 2. 1 payment or 4-5 makes no difference 3. what makes the difference are a) interest rate b) pay as much as possible every month 4. pay as much as you can into the credit card with the highest interest rate, and the minimum payment on the rest; as you pay off a credit card, make as big of a payment to the one that has the highest interest rate 5. stop charging anything on any credit card and stop getting into any kind of debt 6. as you pay off a credit card, call the company and cancel it.\",\n \"\\\"Aside from employer 401(k) matches (which may double your money immediately), paying off debts is almost always the best place to start. Paying off a debt early is a zero-risk operation and will earn you N% (where N is your interest rate). Is that a good deal for a zero-risk return? The closest equivalent today (Aug 24, 2012) is that you can earn about 2.68% on 10-year Treasury bonds. Unless you have a really, really good interest rate (or the interest is tax-deductible), paying off your loan will offer an excellent risk-adjusted return, so you should do that. The \\\"\\\"really good\\\"\\\" interest rate is typically a mortgage or student loans. (Mortgage interest is also tax-deductible, at least for now.) In those cases, you're not going to gain nearly as much by paying the loan early, and the loan is large - larger than the amount you want to have in risk-free investments. You want to invest for returns, as well! So you can save for retirement instead (in a 401(k) or similar account) and take on a little risk.\\\"\",\n \"You should check out Dave Ramsey's Baby Steps. He has an great and well organized plan for getting out of debt and building wealth. My wife and I have followed the plan and will be paying off our home this year :) His advice on debt payments is to pay off the smallest balance first. This helps motivate you and your husband to push harder on your debts. Once the first pay is paid the money that would have gone to that debt is applied to the next smallest debt and so on. This is called a 'debt snowball' since by the end you will have plenty of money to pay that last few debts. While working on the smallest debt, making minimum payments on the others. Stop using the credit cards entirely! Don't use gimmicks to avoid facing the reality of the debt. Close your accounts and commit to never borrowing money again. This is a huge physiological shift. I used credit cards all the time for decades, that is a thing of the past for us, we pay cash or don't buy it. In your case, paying the 80% interest loan off is likely to be priority. I didn't even realize that was legal. Hopefully that is also the smallest balance. Start making a monthly budget and sticking to it. Check out Dave's 'irregular income' budget form, it is meant for couples in your situation. The first steps will be to pay food, rent, utilities and transportation. After that, list your debts in priority order and pay them as your husbands income comes in during the month. Don't despair, you two can get your financial life cleaned up! You just need a good plan and a lot of focus.\",\n \"It isn't always clear cut that you should pay off a debt at all, particularly a mortgage. In simple terms, if you are making a better return than what the bank is charging you, and the investment meets your risk criteria, then you should not pay back the debt. In the UK for example, mortgage rates are currently quite low. Around 2.5 - 3% is typical at the moment. On the other hand, you might reasonably expect a long run average return of around 9 - 11% on property (3 - 5% rental yield, and the rest on capital gains). To make the decision properly you need take into account the following:\",\n \"If you have the money and the determination to pay off all the cards in six months, then the order will make little difference to your credit score, and to your finances. If you had less money available (say you could pay off $500 a month in total), then it would be good for financial reasons to pay off the credit card with the highest interest rate first, so you pay less interest. It would be good for psychological reasons to pay the card with the smallest amount first (so you feel successful quickly, and some people need that feeling of success to continue paying off, just psychological). And if these things contradict each other, figure out what is more important. And whatever you do, paying back your debt is better than not paying it back. So if you can't make up your mind, then you pay #1, then #2, then #3, then #4, then #5.\",\n \"\\\"Without knowing what the balances are, I associate \\\"\\\"uncomfortable\\\"\\\" with high, as in tens of thousands. What I would do: is 1) cut up the cards and stop using them, and 2) have some balance transfer offers in hand the next time you call to negotiate with the companies. Essentially, you will have to convince them that they will have to explain one of two things to their boss: why they lowered your rate or why you left. They can collect less interest from you or no interest from you. It's up to them. If they don't offer you something that's in the ballpark of your balance transfer offer, then bid them goodbye and complete the balance transfer. As far as paying them off, the top two modes of repayment are lowest balance first (aka snowball) or high interest rate first. Both methods are similar in that you pay minimums on all but the method's focus point. Whether it is lowest balance or highest interest rate, you pay ALL of your extra money on the lowest balance or the highest interest debt until it is gone and then you move onto the next one in the list. For what it's worth, I prefer the lowest balance method, you see progress faster.\\\"\",\n \"\\\"I have never double-answered till now. This loan can't be taken out of context. By the way, how much is it? What rate? \\\"\\\"Debt bad.\\\"\\\" Really? Line the debt up. This is the highest debt you have. But, you work for a company that offers a generous match, i.e. the match to your 401(k). Now, it's a choice, pay off 6% debt or deposit that money to get an immediate 100% return. Your question has validity. In the end, we can tell you when to pay off the debt. After - The issue is that you are quoting a third party without having the discussion or ever being privy to it. In court, this is called 'hearsay.' The best we can do is offer both sides of the issue and priority for the payments. Welcome to Money.SE, nice first question.\\\"\",\n \"With a credit card debt at 17%, you should basically not eat in order to pay the balance off. This should be gone within the month. That being said, I would have a hard time reducing my contributions below the 4%, but would certainly do it to the 4%. However, I would also deliver pizzas on nights and weekends and work all available overtime. Coincidentally the pizza place by my home is hiring delivery drivers however, they did not disclose how much they typically make. Only that they make min wage plus tips. Make sure you stop borrowing first, then try to have this knocked out in 4 weeks or less.\",\n \"The chances are good that the interest you are going to pay on the debt is going to be higher than the interest you are going to receive on any type of short term investments. That would make the paying off of the debt worth more to you in the long run than saving your money. Note that without the particulars of your situation this is all just theory crafting so consult the details of you loan agreements. I cannot imagine that a credit provider did not discuss this with you before you put pen on paper.\",\n \"\\\"Allen, welcome to Money.SE. You've stumbled into the issue of Debt Snowball, which is the \\\"\\\"low balance\\\"\\\" method of paying off debt. The other being \\\"\\\"high interest.\\\"\\\" I absolutely agree that when one has a pile of cards, say a dozen, there is a psychological benefit to paying off the low balances and knocking off card after card. I am not dismissive of that motivation. Personal Finance has that first word, personal, and one size rarely fits all. For those who are numbers-oriented, it's worth doing the math, a simple spreadsheet showing the cost of the DS vs paying by rate. If that cost is even a couple hundred dollars, I'll still concede that one less payment, envelope, stamp, etc, favors the DS method. On the other hand, there's the debt so large that the best payoff is 2 or 3 years away. During that time, $10000 paid toward the 24% card is saving you $2400/yr vs the $500 if paid toward 5% debt. Hard core DSers don't even want to discuss the numbers, strangely enough. In your case, you don't have a pile of anything. The mortgage isn't even up for discussion. You have just 2 car loans. Send the $11,000 to the $19K loan carrying the 2.5%. This will save you $500 over the next 2 years vs paying the zero loan down. Once you've done that, the remaining $8000 will become your lowest balance, and you should flip to the Debt Snowball method, which will keep you paying that debt off. DS is a tool that should be pulled out for the masses, the radio audience that The David (Dave Ramsey, radio show host) appeals to. They may comprise the majority of those with high credit card debt, and have greatest success using this method. But, you exhibit none of their symptoms, and are best served by the math. By bringing up the topic here, you've found yourself in the same situation as the guy who happens to order a white wine at a wedding, and finds his Mormon cousin offering to take him to an AA meeting the next day. In past articles on this decision, I've referenced a spreadsheet one can download. It offers an easy way to see your choice without writing your own excel doc. For the situation described here, the low balance total interest is $546 vs $192 for the higher interest. Not quite the $500 difference I estimated. The $350 difference is low due to the small rate difference and relatively short payoffs. In my opinion, knowledge is power, and you can decide either way. What's important is that if you pay off the zero interest first, you can say \\\"\\\"I knew it was a $350 difference, but I'd rather have just one outstanding loan for the remain time.\\\"\\\" My issue with DS is when it's preached like a religion, and followers are told to not even run the numbers. I wrote an article, Thinking about Dave Ramsey a number of years back, but the topic never gets old.\\\"\",\n \"Don't frett to much about your retirement savings just put something towards it each year. You could be dead in ten years. You should always try to clear out debt when you can. But don't wipe yourself out! Expedite the repayment process.\",\n \"I'm going to suggest a slightly different approach. Most answers seem to suggest paying off the lower rate card to clear it. Some answers / comments also talk about emergency funds. One risk of paying off a card is that the card issuer may choose to reduce your credit limit if they see you as high risk, to prevent you re-spending the money. If you don't trust yourself with the card then this could be a good thing (and remember you're always free to ask for a limit decrease). But if you want access to emergency funds, then I would suggest paying half onto each card. That way if one card cuts you off, you have a chance of still having access to the other in an emergency.\",\n \"It is one thing to take the advice of some numb-skulls on a web site, it is another thing to take the advice of someone who is really wealthy. For myself, I enjoy a very low interest rate (less than 3%) and am aggressively paying down my mortgage. One night I was contemplating slowing that down, and even the possibility of borrowing more to purchase another rental property. I went to bed and picked up Kevin O'Leary's book(Cold Hard Truth On Men, Women, and Money: 50 Common Money Mistakes and How to Fix Them), which I happened to be reading at the time. The first line I read, went something like: The best investment anyone can make is to pay off their mortgage early. He then did some math with the assumption that the person was making a 3% mortgage payment. Any conflicting advice has to be weighted against what Mr. O'Leary has accomplished in his life. Mark Cuban also has a similar view on debt. From what I heard, 70% of the Forbes richest list would claim that getting out of debt is a critical step to wealth building. My plan is to do that, pay off my home in about 33 (September '16) more weeks and see where I can go from there.\",\n \"If you hadn't done it already cut up the cards. Don't close the accounts because it could hurt your credit score even more. Switching some or all of the CC debt onto low rate cards, or a debt consolidation loan is a way that some people use to reduce their credit card payments. The biggest risk is that you become less aggressive with the loan payback. If you were planning on paying $800 in minimum payments,plus $200 extra each month; then still pay $1000 with the new loan and remaining credit cards. Another risk is that you start overusing the credit card again, because you have available credit on the card that was paid off with the loan. The third risk, which you haven't proposed, occurs when people switch unsecured credit card dept, to a secured 2nd mortgage debt. This then puts the family home at risk.\",\n \"I would pay the minimum amounts on all loans then pay off the $5,500 @ 7.25% (highest interest rate), then pay any remainder on the $2,000 @ 5.5%. Even though (1) and (3) are at the same rate, I would pay (3) off first as it is a smaller amount and thus can be paid off sooner - giving you less loans to concentrate on paying off .\",\n \"With all due respect to The David, the $1000 is best put against 20%+ debt, no sitting in checking as part of some emergency fund. I'd agree with the decision to pay off the lower rate card. Why? Because we can do the math, and can see the cost in doing so. Low enough that other factors come in, namely, a freed up card. That card can function as the emergency one in the short term. Long term, once these high rate cards are paid off, you'll build your proper emergency fund, but the cost is too high right now. The $4000 is a nice start, but the most important thing is to get your budget under control. Only you can decide how much you can cut back, and go after this debt as if it were life or death.\",\n \"I agree with the Dave Ramsey method as well. If you don't have $1k in the bank already, do that. Total up the smaller debts and the best buy card. if they are $4k all together, then pay them off. Don't get caught up in keeping the smaller one around because they are at zero percent. If they exceed $4k, then payoff the interest bomb best buy card, then pay off the smaller ones, starting with the smaller balance. That is the only tweak I will make here. Dropping any amount into the Citi balance is pointless because it only reduces the amount, not the total number of hands reaching into your bank account.\",\n \"\\\"Pay off your debt. As you witnessed, no \\\"\\\"investment\\\"\\\" % is guaranteed. But your debt payments are... so if you have cash, the best way to \\\"\\\"invest\\\"\\\" it is to pay off your debt. Since your car is depreciating while your house may be appreciating (don't know but it's possible) you should pay off your car loan first. You're losing money in more than one way on that investment.\\\"\",\n \"\\\"I will add one thought on to this thread. This is a financial concept called \\\"\\\"Net Present Value\\\"\\\". In plain English, it means \\\"\\\"What's the best use for your money right now?\\\"\\\" So, let's say you have an extra €300/month which is not being spent on living expenses. If you leave that money under your pillow (or spend it on beer or fancy electronics!) instead of paying off your startersloan early, that is costing you 300*(0.04/12) per month, every month. So €1/month, or €12/year. This is cumulative for the life of your loan. So not paying €300 this month will ultimately cost you €120 assuming you keep the loan open for 10 years. If you're saying \\\"\\\"pay my debts or spend the money on a snappy smartphone?\\\"\\\" the answer is that you should pay your debts. Now, here's the important part. Let's suppose you have a better use for the money than beer or electronics. Let's suppose you have a mutual fund which will reliably provide you with a return of 10% a year. If you put that €300/month into a high-yield fund, and if the returns are consistent, you are STILL paying that €12/year (because you invested elsewhere and didn't pay your debts), but you are realizing profits of 300*(0.1/12)=€2.5/month on the invested money. €2.5-1=€1.5/month, which is a net gain. So, in some cases, paying off your debt may not be the best use of your money. There are a number of other questions involved which are related to your exposure to capital gains taxes, incentives or disincentives for holding debt, &c. &c. These are generally country specific. A poster above who seems to be familiar with Netherlands law did a good explanation of some of those incentives. I'm in the US, and our incentive and disincentive system is different. TL;DR: It depends.\\\"\",\n \"It's pretty simple - the less money you owe the less interest you pay. Paying down debt gives a guaranteed return of the interest rate of the debt. So paying off your starter loan is equivalent to a 4% return. That's not a bad return in the current environment so it makes sense to do it unless you can find an investment which you think is likely to pay significantly better. (Note this is a general answer, not Netherlands-specific. There may be other considerations, around tax for example, which have to be factored into the calculation).\",\n \"\\\"Pete B mentioned adjusting your payments using the Debt Snowball Method and I agree it is one possible solution, another being the Debt Avalanche Method. Here is a link that describes both. There was a time in my past when I had 17 credit lines open totaling about $12,000. If I had paid them the way the banks asked (minimum monthly payments) it would have taken decades to pay off. Then I was shown these two techniques and as a result I was able pay them down rapidly and close all but 2 lines within 5 years. Like others I am going to say that if you already own your house free and clear never Never NEVER put a loan on it unless the loan is (a) to improve the house, or (b) a life & death emergency. If you get sick or fired and miss even a single payment on a HELOC you could lose your house forever and that just plain sucks. Not only will you then be forced into renting a place (money down the drain) but your credit rating will take such a huge hit it will be years (if ever) before you can even try and buy a new home. Debts come and go, as do the \\\"\\\"toys\\\"\\\" and other things we buy with that debt. Homes are security & stability for tomorrow. Never give that up for a little ease & comfort today. UPDATE: I had to go looking for it but here is some software that I used all those years ago to figure out my strategy for paying down all my credit bills. It's a bit clunky but it's super easy to use plus it has some other variations on snowball and avalanche methods as well. I definitely found it helpful.\\\"\",\n \"Pay it all off now before you change your mind. Having an emergency fund is important but that assumes you'll have the discipline to leave it alone. Obviously, you don't or you wouldn't have amassed $36k in cc debt. Regardless of the rates, your icome or any other factor, that's just way too much and a pretty good indication that you've got problems managing money. Pay them off now while you still can!\",\n \"\\\"It may be the case that some of your debts have a flat regular fee in addition to the interest, which will go away when the debt is completely paid. For example, my mortgage has an approximately $400/year \\\"\\\"package fee\\\"\\\" as well as its (quite low) interest. When I finish paying the mortgage, I won't have to pay that fee anymore, so it is theoretically possible that spending extra money on paying off my mortgage would be better than spending it on paying off some other debt. I think it's unlikely that it would actually ever be my optimal move in practice, but the point is, there may be an advantage, financial or otherwise, to getting rid of a particular debt, other than merely removing the burden of interest. Those are special situations, though, and in the majority of cases, starting with the highest interest loan will be the right move.\\\"\",\n \"While paying off your debt quickly is obviously desirable it is simply not going to be possible. Even with tight budgeting I think you will struggle to put more than £500 or so per month towards your debt. I would keep trying to move the highest interest debt onto something cheaper, be it a loan, a balance transfer credit card ( http://www.moneysavingexpert.com/credit-cards/balance-transfer-credit-cards#nofees ) etc. It is also worth looking at your current credit cards more carefully. Sometimes you may be able to get a balance transfer deal on an existing card by talking to the card issuer, then shuffle your debt around to take advantage of it ( http://www.moneysavingexpert.com/credit-cards/cut-credit-card-interest ) Some think it's taboo but in your position I would also be seriously considering if you have any friends and family who can lend you money at a less crippling interest rate.\",\n \"Mostly to play devil's advocate, I will recommend something different than everybody else. If you can pay off the entire $3,000 balance and are torn between saving that money somewhere that will earn a return and paying it off now to be debt-free, why not a little of both? What if you pay half now and then save the other half and make a big payment at the end. Essentially that becomes two $1,500 payments: one now, one right before the 0% due date. To me, the half up-front significantly reduces the risk, but leaves some cash available to grow.\",\n \"\\\"The best thing to do is to completely pay off one credit card, then apply the left over to the highest interest card. After that, ALL of your expenses that can be put on a credit card, should be put on the one that you just paid off. At the end of the month, pay off a different credit card and the highest interest, and move all your purchasing to that card. Keep going around the circle until you are able to pay them all off. Doing this will be good for your credit score as the debt on the cards will now be \\\"\\\"new\\\"\\\". If you're really desperate to increase your credit score (e.g. refinancing a house) you can use balance transfers to temporarily make it appear that you have zero debt but it will cost you some money, typically balance transfers cost something like $35 + 2%.\\\"\",\n \"Its very silly of you to have house savings while you have these debts. Your total (listed) debt is 1657, with a savings of 2000, and a tax refund of 985. I'd be done with the Apple loan and CC tomorrow. Does that accomplish the goal of making a significant difference in your debt? Yes it does. This will leave you with 1328. I'd keep 500 or so in an emergency fund, and put the rest to the car. Although 828 will not help much with the car it would probably knock a month off. Next work like crazy to pay off the car. Get a second job or work overtime. Then save a emergency fund of 3 to 6 months of expenses as if you already owned the house. I would tend to go on the high side as I suspect you are single. Only then does it makes sense to save for a down payment. Although it is an American institution, the book The Millionaire Next Door might be helpful for you. Your most powerful wealth building tool is your income. When one handicaps that tool with payments and exorbitant lifestyle choices you greatly reduce your ability to become wealthy. These amounts are so small, you should just knock them out.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["\"The key phrase in your post is that the options are \"\"in a good position now\"\". They may be worthless in three months or a year. If I was you I would cash in the options and pay off the debt. Cash in enough to also cover taxes. You may want to cash them all in.\"","The most tax efficient way to get some cash would be to sell some stocks from the Fidelity account that have the lowest capital gains. The tax will typically be 15% of the capital gains. This will be a one-time cost which should save you money compared to paying 7.5% on the loan year after year. Tax on selling the stock options will probably be higher, since you imply there would be high capital gains, and some of the proceeds might even be taxed as income, not capital gains."],"string":"[\n \"\\\"The key phrase in your post is that the options are \\\"\\\"in a good position now\\\"\\\". They may be worthless in three months or a year. If I was you I would cash in the options and pay off the debt. Cash in enough to also cover taxes. You may want to cash them all in.\\\"\",\n \"The most tax efficient way to get some cash would be to sell some stocks from the Fidelity account that have the lowest capital gains. The tax will typically be 15% of the capital gains. This will be a one-time cost which should save you money compared to paying 7.5% on the loan year after year. Tax on selling the stock options will probably be higher, since you imply there would be high capital gains, and some of the proceeds might even be taxed as income, not capital gains.\"\n]","isConversational":false}}},{"rowIdx":68,"cells":{"_id":{"kind":"string","value":"4678"},"query":{"kind":"string","value":"Finance, Cash or Lease?"},"gt_ids":{"kind":"list like","value":["305153"],"string":"[\n \"305153\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1],"string":"[\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["179891","85373","536773","148469","307158","63042","27693","504918","488258","244004","108924","352833","481852","273480","78754","134632","359131","289441","311748","34626","427884","386151","522532","205098","376016","476103","311446","487678","9146","125986","265904","408932","213393","316035","47015","386996","68928","282101","7575","77939","533185","280805","361687","429899","453301","585241","215225","516631","584106","385929","383039","166314","67663","185405","305153","67154","291883","58005","546831","568670","170471","178501","221439","560308","214749","475440","224057","321207","205742","273735","144433","301643","380103","344740","317913","439942","504479","501432","26339","269898","354974","261382","93215","580711","261220","451092","50047","260095","494616","15539","49069","188676","256362","119379","379189","111184","265477","205946","498034","543365"],"string":"[\n \"179891\",\n \"85373\",\n \"536773\",\n \"148469\",\n \"307158\",\n \"63042\",\n \"27693\",\n \"504918\",\n \"488258\",\n \"244004\",\n \"108924\",\n \"352833\",\n \"481852\",\n \"273480\",\n \"78754\",\n \"134632\",\n \"359131\",\n \"289441\",\n \"311748\",\n \"34626\",\n \"427884\",\n \"386151\",\n \"522532\",\n \"205098\",\n \"376016\",\n \"476103\",\n \"311446\",\n \"487678\",\n \"9146\",\n \"125986\",\n \"265904\",\n \"408932\",\n \"213393\",\n \"316035\",\n \"47015\",\n \"386996\",\n \"68928\",\n \"282101\",\n \"7575\",\n \"77939\",\n \"533185\",\n \"280805\",\n \"361687\",\n \"429899\",\n \"453301\",\n \"585241\",\n \"215225\",\n \"516631\",\n \"584106\",\n \"385929\",\n \"383039\",\n \"166314\",\n \"67663\",\n \"185405\",\n \"305153\",\n \"67154\",\n \"291883\",\n \"58005\",\n \"546831\",\n \"568670\",\n \"170471\",\n \"178501\",\n \"221439\",\n \"560308\",\n \"214749\",\n \"475440\",\n \"224057\",\n \"321207\",\n \"205742\",\n \"273735\",\n \"144433\",\n \"301643\",\n \"380103\",\n \"344740\",\n \"317913\",\n \"439942\",\n \"504479\",\n \"501432\",\n \"26339\",\n \"269898\",\n \"354974\",\n \"261382\",\n \"93215\",\n \"580711\",\n \"261220\",\n \"451092\",\n \"50047\",\n \"260095\",\n \"494616\",\n \"15539\",\n \"49069\",\n \"188676\",\n \"256362\",\n \"119379\",\n \"379189\",\n \"111184\",\n \"265477\",\n \"205946\",\n \"498034\",\n \"543365\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["Full payment is always better than auto-loan if you are prudent with finances. I.E if you take a loan, you are factoring the EMI hence your savings will remain as is. However if you manage well, you can buy the car with cash and at the same time put aside the notional EMI as savings and investments. The other factor to consider is what return your cash is giving. If this more than auto-loan interest rate post taxes, you should opt for loan. For example if auto-loan is 10% and you are getting a return of 15% after taxes on investment then loan is better. Company Car lease depends on terms. More often you get break on taxes on the EMI component. But you have to buy at the end of lease period and re-register the car in your name, so there is additional cost. Some companies give lease at very favourable rates. Plus if you leave the job lease has to be broken and it becomes more expensive.","If you plan to keep this asset for ten years then you can take the deprecation of its cost over that time period. For simplicity lets treat that as 120 monthly payments. So at a purchase price of $60,000 you are committing around $500 per month not including vehicle maintenance. I typically allocate around 20 percent of the purchase price of my vehicles for future maintenance costs. Since you have the cash to purchase this outright you have an option not afforded to most people. This adds for additional consideration. Here is an example. You purchase a $60,000 car and put $10,000 down. You finance $50,000 at 2.84% over 60 months. Your total finance cost is $53,693 if you do not miss any payments. The question here is can you make more than $3,693 on the $50,000 that you would retain in this situation over a five year period? I know that I most certainly can and is an excellent example of why I finance my vehicles. Obviously this all goes out the window if you do not have the credit for top rates. I have also negotiated a vehicle maintenance plan with the dealership at the time of my vehicle purchases. Most dealerships offer this service, the key here is negotiating. On my last truck I was able to get an all inclusive maintenance policy for 72 months for 8% of the purchase price. Your mileage will vary with manufacturer and dealership. As described in the comments above it is never beneficial for an individual to lease. You end up paying more for the newer models. I consider that to be a lifestyle choice as it is most certainly not a sound financial decision.","I am here to provide awesome guidance on leasing a van or car for your business. Talk about the benefits and the drawbacks. Cash is king and if you can buy a van outright that will always be the best deal. Most people cannot do that and so leasing is the next best option in terms of business.","If you are talking straight dollars then leasing is always a losing proposition when compared with purchasing. The financial workings of leasing are so confusing that people don’t realize that leasing invariably costs more than an equivalent loan. And even if they did, the extra cost is difficult to calculate. Still, many people can’t afford the higher payments of a typical loan, at least not without putting a substantial amount down. If payments are an issue, consider buying a lower-cost vehicle or a reliable used car. http://www.consumerreports.org/cro/2012/12/buying-vs-leasing-basics/index.htm If you are talking about convenience, lifestyle, ability to purchase a car you could not pay for outright, then you will have to evaluate that.","\"A lease is a rental plain and simple. You borrow money to finance the expected depreciation over the course of the lease term. This arrangement will almost always cost more over time of your \"\"ownership.\"\" That does not mean that a lease is always a worse \"\"deal.\"\" Cars are almost always a losing proposition; save for the oddball Porsche or Ferrari that is too scarce relative to demand. You accept ownership of a car and it starts to lose value. New cars lose value faster than used cars. Typically, if you were to purchase the car, then sell it after 3 years, the total cost over those three years will work out to less total money than the equivalent 36 month lease. But, you will have to come up with a lot more money down, or a higher monthly payment, and/or sell the car after 36 months (assuming the pretty standard 36 month lease). With this in mind, some cars lease better than others because the projected depreciation is more favorable than other brands or models. Personally, I bought a slightly used car certified pre-owned with a agreeable factory warranty extension. My next car I may lease. Late model cars are getting so unbelievably expensive to maintain that more and more I feel like a long term rental has merit. Just understand that for the convenience, for the freeing up of your cash flow, for the unlikelihood of maintenance, to not bother with resale or trading the car in, a lease will cost a premium over a purchase over the same time frame.\"","\"Welcome to Personal Finance and Money. This answer will depend a lot on what is most important to the buyer, for example, whether it is important to always be in a newer car, to save money, or strike a balance between the two. There are trade-offs and I don't think there is one right answer for all circumstances. Leasing Leasing does make financial sense for at least two types of people I'm aware of: The company I work for provides company cars to sales executives, which we lease. We lease because it wouldn't be appropriate for a salesperson to meet a client in a car that clearly appears used. Similarly, I know people who value being in a newer car all the time, and for them, leasing makes more financial sense then buying a new car every 2-3 years, and selling their old car which is now 2-3 years old and has depreciated significantly. They understand that they are paying more to always be able to be in a newer car. I used to work with a manager who, every time the new model of the car he owned came out, would see the car and buy it on the spot, even though he already owned last year's model, and he didn't need two cars. He just couldn't help himself; he felt he had to have the new model. It's no use sermonizing about how he \"\"should\"\" learn to save money by just being content with what he had. In reality, if he is going to buy the new model every year no matter what, he should lease rather than buy. From my experience, I would only recommend leasing if you would otherwise be buying a new car on a regular basis, and the lease would be less expensive. This is probably the most cost effective way to maintain the highest possible quality, but would cost much more than buying and holding a new car or buying a value used car. I don't see reliability as much of a factor here since the seller will have a very good idea of how much maintenance will cost, but you will pay a premium to be able to pay a fixed cost for maintenance instead of risking a worse-than-average experience. Buying New According to Edmunds and BIGResearch, only a relatively small number of people are ever in the market for a new car at a given point in time. While you do pay quite a bit more to own a brand new car instead of the same car that is 2-3 years old, there are several reasons I'm aware of why people buy new cars: Number 4 is probably the biggest reason, and many people are willing to pay for the certainty of knowing that the miles are correct, the parts are new, the car is in good working condition, etc. Additionally, some makes of cars have much higher resale values than others (such as Hondas), meaning that there isn't as large of a drop in price between a new car and a used car. Many people consider buying a new car the best way to ensure they get the best reliability since they know the initial condition of the car and can care for it meticulously from that point on. This can especially make sense when the buyer intends to keep the car for the like of the car as the buyer will then benefit from having no car payments once it is paid off. Buying Used Buying a used car is the most affordable option, but for a given quality of car the reliability can be a significant potential pitfall. It can be very difficult for a non-professional to tell whether they are getting a good value. Additionally, it is hard for an owner who wants to sell a used car in excellent condition to get the true value of the car, and much easier for an unscrupulous seller to to get the market price by selling to an unaware buyer (the \"\"lemons\"\" problem in economics). You could buy an inspected car with a limited warranty from a retail seller like CarMax or a dealership, but you often pay a significant premium that cancels out much of the biggest reason to buy used - saving money. However, there is an opportunity to save money when buying used if you're willing to compromise on the condition of the car (if you don't care whether a car has hail damage, for example), or if you are able to wait until you find a motivated/distressed seller who needs to sell quickly and is willing to sell at a discount. If cost is your primary priority, buying a used car is likely the best option, but I would recommend the following in all circumstances: If the seller isn't willing to offer both of these, I would walk away. When buying used, you will also need to consider maintenance, which will vary significantly based on the make and model of the car as well as the condition, which is another risk you need to be willing to take on if you choose to buy used.\"","I'd pay cash. Car loans are amortized, so sometimes you can get upside-down on the loan between 18-30 months because you are pre-paying interest. This can get you into trouble if you get into an accident. Given the low rate and the type of car you're buying, you're probably fine either way.","I'm a finance manager at a dealership. The thing that I tell people about leasing: It's good if you plan to make more money in the future. You can get a new car. The downside of leasing. When you get out of your lease you will either pay straight cash, get another loan for the unit, or get a new unit. 3 years down the road you have no idea what interest rates will be. If you lock in your rate today you are guaranteed that rate. With the government increasing rates we could see higher rates that could cost you more. Also if you get a loan today it will be 5-6 years. Leasing will have a 3 year lease with another 5-6 year loan on top of that. Causing to pay more in the long run If your brother doesn't have straight cash to pay for it at the end of 3 years I recommend buying new","A Lease is an entirely different way of getting a car. In two situations it makes sense, in all other scenarios it generally doesn't make sense to lease. In the case of always wanting a new car every 2 or 3 years it can make sense to lease. Of course if you drive more the allowed miles you will pay extra at the end of the lease. If you can take the monthly lease as a business expense leasing makes sense. Otherwise you want to pay cash, or get financing. Does zero percent make sense? Sometimes. The only way to make sense of the numbers is to start with your bank, have them approve of the loan first. Then armed with the maximum loan amount they will give you and the rate and the length of the loan, then visit the dealer. You have to run the numbers for your situation. It depends on your income, your other expenses, your credit score, your bank, what deal the dealership is running, how much you have for a down payment. Here is an example. For a recent loan situation I saw: 36 months, 1.49% rate, 20K loan, total interest paid: ~$466. Armed with that information can the person get a better deal at the dealership? There was only one way to find out. In that case the credit union was better. The rebate was larger than the interest paid.","If you are looking to build wealth, leasing is a bad idea. But so is buying a new car. All cars lose value once you buy them. New cars lose anywhere between 30-60% of their value in the first 4 years of ownership. Buying a good quality, used car is the way to go if you are looking to build wealth. And keeping the car for a while is also desirable. Re-leasing every three years is no way to build wealth. The American Car Payment is probably the biggest factor holding many people back from building wealth. Don't fall into the trap - buy a used car and drive it for as long as you can until the maintenance gets too pricey. Then upgrade to a better used car, etc. If you cannot buy a car outright with cash, you cannot afford it. Period.","Unless you are getting better than a 2.95% return on that money market account. Pay cash. That's the purely logical way to make the decision. However if it were me I'd pay cash anyway just because I like the idea of not owing money and having the hassle of dealing with a payment every month.","I agree with Speedbird389 - I leased an economy car 10 years ago, paid the residual at the end of the lease because I knew the car would last a long time, but that cost me $5000 more than if I had bought it in the first place...","Without knowing the terms of the company leased car, it's hard to know if that would be preferable to purchasing a car yourself. So I'll concentrate on the two purchase options - getting a loan or paying in full from savings. If the goal is simply to minimize the amount paid for this car, then paying the full cost up-front is best, because it avoids the financing and interest charges associated with a loan. However, the money you would pay for this car would come out of somewhere (your savings). If your savings were in an investment earning a risk-adjusted return rate of, say, 5% APY and the loan cost 1% APY, you'd have more money in the long run by keeping as much money in your savings as possible, and paying the loan as slowly as possible, because the return rate on your savings is higher. Those numbers are theoretical, of course. You have to make a decision based on your expectation of the performance of your investments, and on the cost of the loan. But depending on your risk tolerance and the loan terms available to you, a loan may well make sense. This is especially true when loans costs are subsidized by manufacturers, who often offer favorable financing on new cars to drive demand. But even bank loans on cars can be pretty inexpensive because the car is a form of collateral with predictable future value. And finally, you should consider tax treatment -- not usually a consideration in purchases of cars by consumers in the US, but can vary due to business use and certainly may be different in India. See also: How smart is it to really be 100% debt free?","\"This question has been asked and answered before. Financially, owning a car will be more economical than leasing one in most cases. The reason for this is that leasing arrangements are designed to make a profit for the leasing company over and above the value of the car. A leasing company that does not profit off their customers will not be in business for long. This is a zero-sum game and the leasing customer is the loser. The lion's share of the customer losses are in maintenance and in the event of an accident or other damage. In both cases, leasing arrangements are designed to make a large profit for the owner. The average customer assumes they will never get into an accident and they underestimate the losses they will take on the maintenance. For example, if both oxygen sensors need to be replaced and it would have cost you $800 to replace them yourself, but the leasing company charges you $1200, then BOOM! you just lost $400. If the car is totaled, the customer will lose many thousands of dollars. Leasing contracts are designed to make money for the owner, not the customer. Another way leasing agents make money is on \"\"required maintenance\"\". Most leasing contracts require the leasor to perform \"\"required\"\" maintenance, oil changes, tire rotations, etc. Also, with newer cars manufacturers recalls are common. Those are required as well. Nearly nobody does this maintenance correctly. This gives the agent the excuse to charge the customer thousands of dollars when the vehicle is returned. Bills of $4000 to $6000 on a 3 year lease for failure to perform required maintenance are common. Its items like this that allow the leasing agent to get a profit on what looks like a \"\"good deal\"\" when the customer walked in the door 3 years previously. The advantage of leasing is that it costs less up front and it is more convenient to switch to a different car because you don't have to sell the car.\"","As a general rule of thumb, and assuming you have a choice, my advice is to pay cash for things things that depreciate, expenses, and consumables. Consider credit (even if you have cash) for things that will appreciate in value or generate cash flow. That is, use credit as leverage.","Which to do is determined by how you like to consume cars. If you don't drive a lot and like to get a new car every 2-3 years, leasing is often the better choice. If you drive a lot or want to keep a car longer than 3 years, you're normally better buying.","In a perfect world scenario you would get a car 2-5 years old that has very little mileage. One of the long standing archaic rules of the car world is that age trumps mileage. This was a good rule when any idiot could roll back an odometer. Chances are now that if you rolled your odometer back the car was serviced somewhere, had inspection or whatever and it is on a report. If seller was found to do this they could face jail time and obviously now their car is almost worthless. Why do I mention this? Because you can take a look at 2011 cars. Those with 20K miles go for just a little more than those with 100K miles. As an owner you will start incurring heavy maintenance costs around 100K on most newer cars. By buying cars with lower mileage, keeping them for a year or two, and reselling them before they get up in miles, you can stay in that magic area where you can drive a pretty good car for $200-300 a month. Note that this takes work on both the buying and selling side and you often need cash to get these cars (dealers are good about siphoning really good used cars to employees/friends). This is a great strategy for keeping costs down and car value up but obviously a lot of people try to do this and it takes work and you have to be willing to settle sometimes on a car that is fine, but not exactly what you want. As for leasing this really gets into three main components: If you are going to do EVERYTHING at a dealership and you want something new or newish you might as well lease. At least then you can shop around for apples to apples. The problem with buying a new/used car from the dealers in perpetuity isn't the buying process. It is the fact that they will screw you on the trade-in. A car that books for 20K may trade-in for 17K. Even if the dealer says they are giving you 20K, then they make you pay list price for the car. I have many many times negotiated a price of a car and then wife brought in our car separately and I can count on ZERO fingers how many times that the dealership honored both sides of the negotiations. Not only did they not honor them but most refused to talk with us after they found out. With a lease you don't have to worry about losing this money in the negotiations. You might pay a little extra (or not since you can shop around) but after the lease you wash your hands of the car. The one caveat to this is the high-end market. When you are talking your Acura, Mercedes, Lexus... It is probably better to buy and trade in every couple years. You lose too much equity by leasing, where it won't cover the trade-in gap and cost of your money being elsewhere. I have a friend that does this and gets a slightly better car every 2-3 years with same monthly payment. Another factor to consider is the price of a car. If your car will be worth over $15K at time of sale you are going to have a hard time selling it by owner. When amounts get this high people often need financing. Yes they can get personal financing but most people are too lazy to do this. So the number of used car buyers on let's say craigslist are way way fewer as you start getting over $10-12K and I have found $15K to be kind of that magic amount. The pro-buy-used side is easy. Aim for those cars around $12-18K that are out there (and many still under warranty). These owners will have issues finding cash buyers. They will drop prices somewhere between book price and dealer trade-in. In lucky cases where they need cash maybe below dealer trade-in. And remember these sellers aren't dealing with 100s let alone 10 buyers. You drive the car for 3-4 years. Maybe it is $7-10K. But now you will get much much closer to book price because there will be far more buyers in this range.","Here's another way to look at this that might make the decision easier: Looking at it this way you can turn this into a financial arbitrage opportunity, returning 2.5% compared to paying cash for the vehicle and carrying the student loan. Of course you need to take other factors into account as well, such as your need for liquidity and credit. I hope this helps!","Here are the reasons I did not lease my current car. When you lease, you're tied in at a monthly payment for 48 months or more. The only way to get out of that payment is to transfer the lease or buy out the lease. If you buy/finance, you can always sell the car or trade it in to get out of the payments. Or you can pay down more of the vehicle to lower the payments. Most leases calculate the cost of leasing based on the 'residual value' of the vehicle. Often these values are far lower than the actual worth of the vehicle if you owned it for those months and sold it yourself. So when you do the math, the lease costs you more -especially with today's low financing rates.","\"I usually recommend along these lines. If you are going to drive the same car for many years, then buy. Your almost always better to buy, and then drive a car for 10 years than to lease and replace it every 2 years. If you want a new car every two years then lease. You're usually better off leasing if you're going to replace the car before the auto loan is paid off or shortly there after. Also you can get \"\"more car\"\" for the same monthly money via leasing. I honestly would advise you to either buy out your lease, or buy a barely used car. Then drive it for as long as you can. Take the extra money you would spend and spend it on an awesome vacation or something. Also, if you're only driving 15 miles a day, then get a cheap, but solid car. Again, just my advice.\"","Leasing is not exactly a scam, but it doesn't seem to be the right product for you. The point of leasing over buying is that it turns the capital purchase of a car which needs to be depreciated for tax purposes into what is effectively a rental expense. Rent is an expense that can be deducted directly without depreciation. If you are not operating a business where you can take advantage of leasing's tax advantages, leasing is probably not for you. Because of the tax advantages, a lease can be more profitable for the car dealer. They can get a commission or finder's fee on the lease as well as the commission on the car sale. That extra profit comes from somewhere, presumably from you. If a business, you can then pass part of that to the government. As an individual, you lose that advantage. At this point, the best financial decision that you could make would be to buy out the lease on your current car. Lease prices are set based on the assumption that the car will have been abused during the course of the lease. If you are driving the car less than expected, its value is probably higher than the cost of buying out the lease. If you buy that car, you can drive it for years. Save up some money and buy your next car for cash rather than using financing. Of course, if you really want a new car and can afford it, you may not want to buy out the lease. That is of course your decision. You don't have to maximize your current financial position if buying a new car would return more satisfaction for the money in the long run. I would try to avoid financing for what is essentially a pleasure purchase though.","Leasing is never a good idea. A car is a depreciating asset -- it loses money over time. Pay cash for your car and buy used ones until your net worth reaches at least $1M.","Regarding the opportunity cost comparison, consider the following two scenarios assuming a three-year lease: Option A: Keep your current car for three years In this scenario, you start with a car that's worth $10,000 and end with a car that's worth $7,000 after three years. Option B: Sell your current car, invest proceeds, lease new car Here, you'll start out with $10,000 and invest it. You'll start with $10,000 in cash from the sale of your old car, and end with $10,000 plus investment gains. You'll have to estimate the return of your investment based on your investing style. Option C: Use the $10k from proceeds as down payment for new car In this scenario you'll get a reduction in finance charges on your lease, but you'll be out $10,000 at the end. Overall Cost Comparison To compare the total cost to own your current car versus replacing it with a new leased car, first look up the cost of ownership for your current car for the same term as the lease you're considering. Edmunds offers this research and calls it True Cost to Own. Specifically, you'll want to include depreciation, fuel, insurance, maintenance and repairs. If you still owe money you should also factor the remaining payments. So the formula is: Cost to keep car = Depreciation + Fuel + Insurance + Maintenance + Repairs On the lease side consider taxes and fees, all lease payments, fuel, and maintenance. Assume repairs will be covered under warranty. Assume you will put down no money on the lease and you will finance fees, taxes, title, and license when calculating lease payments. You also need to consider the cost to pay off your current car's loan if applicable. Then you should subtract the gains you expect from investing for three years the proceeds from the sale of your car. Assume that repairs will be covered under warranty. The formula to lease looks like: Lease Cost = Fuel + Insurance + Maintenance + Lease payments - (gains from investing $10k) For option C, where you use the $10k from proceeds as down payment for new lease, it will be: Lease Cost = Fuel + Insurance + Maintenance + Lease payments + $10,000 A somewhat intangible factor to consider is that you'll have to pay for body damage to a leased car at the end of the lease, whereas you are obviously free to leave damage unrepaired on your own vehicle.","\"You are still paying a heavy price for the 'instant gratification' of driving (renting) a brand-new car that you will not own at the end of the terms. It is not a good idea in your case, since this luxury expense sounds like a large amount of money for you. Edited to better answer question The most cost effective solution: Purchase a $2000 car now. Place the $300/mo payment aside for 3 years. Then, go buy a similar car that is 3 years old. You will have almost $10k in cash and probably will need minimal, if any, financing. Same as this answer from Pete: https://money.stackexchange.com/a/63079/40014 Does this plan seem like a reasonable way to proceed, or a big mistake? \"\"Reasonable\"\" is what you must decide. As the first paragraph states, you are paying a large expense to operate the vehicle. Whether you lease or buy, you are still paying this expense, especially from the depreciation on a new vehicle. It does not seem reasonable to pay for this luxury if the cost is significant to you. That said, it will probably not be a 'big mistake' that will destroy your finances, just not the best way to set yourself up for long-term success.\"","If you have the money to pay cash for the car. Then 0 months will save you the most money. There are of course several caveats. The money for the car has to be in a relatively liquid form. Selling stocks which would trigger taxes may make the pay cash option non-optimal. Paying cash for the car shouldn't leave you car rich but cash poor. Taking all your savings to pay cash would not be a good idea. Note: paying cash doesn't involve taking a wheelbarrow full of bills to the dealer; You can use a a check. If cash is not an option then the longest time period balanced by the rates available is best. If the bank says x percent for 12-23 months, y percent for 24-47 months, Z percent for 48 to... It may be best to take the 47 month loan, because it keeps the middle rate for a long time. You want to lock in the lowest rate you can, for the longest period they allow. The longer period keeps the required minimum monthly payment as low as possible. The lower rate saves you on interest. Remember you generally can pay the loan off sooner by making extra or larger payments. Leasing. Never lease unless you are writing off the monthly lease payment as a business expense. If the choice is monthly lease payments or depreciation for tax purposes the lease can make the most sense. If business taxes aren't involved then leasing only means that you have a complex deal where you finance the most expensive part of the ownership period, you have to watch the mileage for several years, and you may have to pay a large amount at the end of the period for damages and excess miles. Plus many times you don't end up with the car at the end of the lease. In the United States one way to get a good deal if you have to get a loan: take the rebate from the dealer; and the loan from a bank/credit Union. The interest rate at banking institution is a better range of rates and length. Plus you get the dealer cash. Many times the dealer will only give you the 0% interest rate if you pay in 12 months and skip the rebate; where the interest paid to the bank will be less than the rebate.","\"It's a very simple equation. If we forget about the stress and limitations that come with the so-called \"\"lease\"\", and make the following assumptions: Then after 3 years of using this new car: I will never understand why people still \"\"lease\"\" a car. Even for very low income people who have to have a car, financing a per-owned decent car would do, but it's just \"\"show off\"\" seduction and lure that either unknowing minded or idiot teenagers fall for.\"","I never understood why people lease rather than buy or finance. I'm financing a new civic 09 @ 0.9%. At the end of the 5 year terms I will have paid less than $800 in interest.","Your short-term time frame makes buying used the best option, but it seems you already are aware of that. Look into a certified pre-owned model if you are concerned about lemons. You will usually get some sort of warranty. However, be aware that any car can be a headache with repairs. I would not recommend a lease because basically you are still paying for the depreciation on the car plus interest. Generally, this is the most expensive way to drive a car. You may find the numbers look good for a lease but beware of the 'gotchas' in the terms that can put you way over budget (over mileage, wear and tear, etc.). My best recommendation is to buy gently used with cash. This gives you the most flexibility and best resale value. If you finance a late-model vehicle, be aware that depreciation can leave you upside-down on your loan. That would put you in the position of having to shell out cash just to get rid of the car.","One additional reason to pay with cash rather than financing is that you will be able to completely shut down the dealership from haggling over finance terms and get right to the point of haggling over the cost of the car (which you should always do).","Cash price is $22,500. Financed, it's the same thing (0% interest) but you pay a $1500 fee. 1500/22500 = 6.6%. Basically the APR for your loan is 1.1% per year but you are paying it all upfront. Opportunity cost: If you take the $22,500 you plan to pay for the car and invested it, could you earn more than the $1500 interest on the car loan? According to google, as of today you can get 1 year CD @ 1.25% so yes. It's likely that interest rates will be going up in medium term so you can potentially earn even more. Insurance cost: If you finance you'll have to get comprehensive insurance which could be costly. However, if you are planning to get it anyway (it's a brand new car after all), that's a wash. Which brings me to my main point: Why do you have $90k in a savings account? Even if you are planning to buy a house you should have that money invested in liquid assets earning you interest. Conclusion: Take the cheap money while it's available. You never know when interest rates will go up again.","Rule of thumb is always BUY, NEVER lease, unless you plan to use it for a business where you can expense the lease payments. Leasing is the biggest scam. Lease is just a fancy word for renting and the dealerships PRAY that people like us lease. As for new or old, new cars have better warranty but you may get a great deal on a 1-3 year old used car.","Dealer financing should be ignored until AFTER you have agreed on the price of the car, since otherwise they tack the costs of it back onto the car's purchase price. They aren't offering you a $2500 cash incentive, but adding a $2500 surcharge if you take their financing package -- which means you're actually paying significantly more than 0.9% for that loan! Remember that you can borrow from folks other than the dealer. If you do that, you still get the cash price, since the dealer is getting cash. Check your other options, and calculate the REAL cost of each, before making your decisions. And remember to watch out for introductory/variable rates on loans! Leasing is generally a bad deal unless you intend to sell the car within three years or so.","\"Electric does make a difference when considering whether to lease or buy. The make/model is something to consider. The state you live in also makes a difference. If you are purchasing a small electric compliance car (like the Fiat 500e), leasing is almost always a better deal. These cars are often only available in certain states (California and Oregon), and the lease deals available are very enticing. For example, the Fiat 500e is often available at well under $100/mo in a three-year lease with $0 down, while purchasing it would cost far more ($30k, minus credits/rebates = $20k), even when considering the residual value. If you want to own a Tesla Model S, I recommend purchasing a used car -- the market is somewhat flooded with used Teslas because some owners like to upgrade to the latest and greatest features and take a pretty big loss on their \"\"old\"\" Tesla. You can save a lot of money on a pre-owned Model S with relatively low miles, and the battery packs have been holding up well. If you have your heart set on a new Model S, I would treat it like any other vehicle and do the comparison of lease vs buy. One thing to keep in mind that buying a Model S before the end of 2016 will grandfather you into the free supercharging for life, which makes the car more valuable in the future. Right now (2016/2017) there is a $7500 federal tax credit when buying an electric vehicle. If you lease, the leasing company gets the credit, not you. The cost of the lease should indirectly reflect this credit, however. Some states have additional incentives. California has a $2500 rebate, for example, that you can receive even if you lease the vehicle. To summarize: a small compliance car often has very good reasons to lease. An expensive luxury car like the Tesla can be looked at like any other lease vs buy decision, and buying a used Model S may save the most money.\"","I am a carsalesman. Lets get one thing straight, we are not allowed to give people a better deal just because they pay cash, regardless of what some people say. That can be seen a discrimination as not all people are fortunate enough to have cash available. if anything, finance is better for the dealership, as we get finance commission and the finance company DOES pay us the total amount immidiatly","Look at the basic cost of the lease. Option 1: keep the car for three years. Pay for repairs during that time then sell it for $7,000. Option 2: Sell the current car for $10,000. Lease a new car for three years. Assume no need for repairs during those three years. At the end of the three years return the car in return for $0. Cost of option 1 is $3000 plus repairs. Cost of Option 2 is 36 months x monthly lease cost. The first $83 of the monthly lease cost is to cover the $3000 fixed cost of option 1. The rest of the monthly lease cost is to cover the cost of repairs. Also remember that some leases have a initial down payment due at signing, and penalties for condition, and excess mileage. The lease company may also require a higher level of insurance for the lease to cover their investment if you have an accident. Plus If you fall in love with a different car two year from now, or your needs change you are locked in until the end of the lease period.","I have a colleague who always leases cars first. He's very well off, has piles of money in savings, owns a home, and the cherry on top, he could just write a check for the car.... He sees the lease as an insurance policy on the first couple of years of the car's life. If it gets in an accident or he finds something about it he doesn't like, he can give it back to the dealer at the end of the term with no hassle and move on to the next car. Some people value the fact that a lease is a rental. If you're leasing a luxury car or something you couldn't otherwise afford, no amount of mental gymnastics will turn this in to a good idea. Separately, you should never make a down payment on a lease. If the car is totaled early on, you will not recoupe the money you put down. The issue here is that while the numbers all work out the same between a lease and a purchase your situation is different. If the leased car is totaled, the bank gets its money back from an insurer. If that payment doesn't cover the value of the car, the GAP insurance will cover it. In either situation, if there's an excess remaining it will be returned to you. The issue is the excess may not fully replace your down payment. If you then went to lease another car you would need to come up with that down payment again because you couldn't just simply choose to lease a used car; like you could in the case of a purchase. Additionally, GAP is generally included in a lease whether you want it or not. As far as I'm concerned it doesn't make financial sense to mitigate the value of the GAP coverage once you've decided to live in a lease situation.","If you lease a car, you are paying for the depreciation of a certain number of miles, even if you don't actually use those miles. Since you know you will be well under the standard number of miles when your lease is up, and you already know that you want to keep the car, buying is better than leasing.","this would make sense assuming debt payments incl. interest to the market for the debt assumed to purchase said boat/yacht is less than the lease payments over the life of both terms. If your lease payments are lower than term loan pmts incl. interest (or a similar debt instrument) then OP would still be right. TVM is irrespective of a competitors (or lessor in this case) Kc. Although, this goes completely out the window if it's a bond-like debt vehicle since those cash flows are distributed in a completely different manner.","If given the option of up front or monthly, here are some scenarios where it would be beneficial to pay the lease up front instead of monthly (neither of which are affected by inflation): Barring the above scenarios or some reason you don't want to keep money around (such as if you have some sort of addiction causing you to spend money, or you have an imminent lawsuit which will take all of your money), you are better off paying monthly.","Two adages come to mind. Never finance a depreciating asset. If you can't pay cash for a car, you can't afford it. If you decide you can finance at a low rate and invest at a higher one, you're leveraging your capital. The risk here is that your investment drops in value, or your cash flow stops and you are unable to continue payments and have to sell the car, or surrender it. There are fewer risks if you buy the car outright. There is one cost that is not considered though. Opportunity cost. Since you've declared transportation necessary, I'd say that opportunity cost is worth the lower risk, assuming you have enough cash left after buying a car to fund your emergency fund. Which brings me to my final point. Be sure to buy a quality used car, not a new one. Your emergency fund should be able to replace the car completely, in the case of a total loss where you are at fault and the loss is not covered by insurance. TLDR: My opinion is that it would be better to pay for a quality, efficient, basic transportation car up front than to take on a debt.","this article talks about the good and bad sides of purchasing and leasing business equipment. hope you can share this piece with all your friends, most especially with small business owners who are looking for methods to acquire office or manufacturing equipment.","Some things you missed in your analysis: How will financing change your insurance costs? I.e. what is the difference between the insurance that you would buy for yourself and what they require? Note that it is possible that your insurance preferences are more stringent than the financing company's. If so, this isn't a big deal. But what's important is to consider if that's true. Because if you'd prefer to drive with only the legal minimum insurance and they insist that you have full coverage with no more than a $1000 deductible, that's a significant difference. Remember that you don't have $22.5k for six years. You have an average of $10.5k (($22.5k + -$1500)/2) for six years. Because you make payments ($24k) throughout. So you start with $22.5k and subtract $333.33 a month until you reach -$1500. That neglects both investment gains and potential losses. It's not the $333 payment that will freak out mortgage companies. It's the $24k debt. But that's offset by your $22.5k in assets at the beginning. And the car of course counts as an asset, albeit at lower than its sale value. I.e. from the bank's perspective, paying $22.5k for a car out of savings is almost as bad as borrowing $24k for a car. Both reduce your net worth. Watch out for hidden fees. In particular, 0% interest can often change into higher interest under certain circumstances. If we assume a 7% return for the six years, that's about $1400 the first year and less each year after. Perhaps $4500 over six years. But you aren't going to get a 7% return if you keep $24,000 in a bank account in case you have to pay off the loan. Instead, you'll get more like 1%, less than inflation. Even five year Certificates of Deposit are only about 2%, right around inflation (1.9% for previous twelve months). You can't keep the $24,000 in a securities account and be sure that it will be there when you need it. If the market crashes tomorrow, your $24,000 might be worth $12,000 instead. You'd have to throw in extra money from elsewhere. Instead of making $4500 at the cost of $1500, you'd have paid $25,500 for $12,000. Not a good deal. So for your plan to work, that $24,000 needs to be in an account that won't fall in value. You either need to compromise on the idea of a separate account that is always there when you need it, or you have to accept rather low returns. Personally, I would prefer not to have the debt and not to pay extra on the insurance. But that's me. The potential investment returns are not worth it to me. If you give up the separate account, you can make a few thousand dollars more. But your risk is higher.","Don't let the tail of credit score wag the dog of prudent financial planning. If you have a sufficient emergency fund in addition to the car cost, then buying the car for cash is to my mind a better plan. But if the car purchase would deplete your emergency fund, then I'd go for the loan. Cash in hand gives you optionality that can be very valuable when things go wrong. And credit will be withdrawn at exactly the most painful moment.","\"There are two reasons leases are generally a worse deal than buying. First, inherent in the lease is the concept of trading in the car at the end of the lease term. As we all know, cars depreciate the most in the first year or two. By repeatedly leasing cars on short time frames, you own the vehicles during those most expensive years. Of course there's nothing stopping you from doing the same thing when buying (be it via cash or loan), but leasing builds in a schedule and encourages you to stick to it. Second, it is easier for the dealer salesperson to hide things from the consumer in a lease contract. Most salespeople will try to get a car purchaser to focus on the monthly payment, or they'll four-box the purchaser, but even then there's only 4 numbers, and most consumers have a rough idea what they are and what they mean. But in a lease the numbers in question are renamed and obscured. \"\"Price\"\" becomes \"\"capitalized cost\"\". \"\"Interest rate\"\" becomes \"\"money factor\"\" and is divided by 2400, making it look really small and not easily translatable without a calculator or pencil and paper. \"\"Down payment\"\" becomes a capitalized cost reduction. There's a new concept \"\"residual value.\"\" Neither of those reasons change when interest rate is lower.\"","In general I'd say, yeah, if you can pay cash, pay cash. If you pay cash, then by definition you pay zero interest. If you get a loan, you'll pay interest. Most people get a loan to buy a car because they don't have the cash. Possible reasons not to pay cash when you could: One: Technically you can pay cash, but if you did, you would have little or no reserve for emergencies. Like if the car costs, say, $20,000.00, and you have $20,010.00 in your bank account, then technically you could afford to pay cash, but you probably shouldn't, because you don't want to have just $10 left. What if tomorrow something comes up? Two: Arguably, you have a place to invest money that pays more than the interest on the loan. Like say you can get a car loan for, whatever the going rate is today, say 6%. And you know a place to invest your money that is very safe and almost guaranteed to pay 10%. It would make sense to borrow to buy the car, invest the cash, and then withdraw money from the investment to make the payments on the car. You'd end up 4% ahead. There are a lot of catches to that strategy, though. The biggest is that the more the investment pays, the more likely that it is risky. If you thought the investment would pay 10% but it ends up paying only 4%, then you will lose money by this strategy. Also, there's the psychological element: Many people SAY and fully INTEND to invest their money, but then find other things they want to buy and so spend it instead. If you pay cash, you're committed.","There are several factors here. Firstly, there's opportunity cost, i.e. what you would get with the money elsewhere. If you have higher interest opportunities (investing, paying down debt) elsewhere, you could be paying that down instead. There's also domino effects: by reducing your liquid savings to or below the minimum, you can't move any of it into tax advantaged retirement accounts earning higher interest. Then there's the insurance costs. You are required to buy extra insurance to protect your lender. You should factor in the extra insurance you would buy vs the insurance required. Given that you can buy the car yourself, catastrophic insurance may not be necessary, or you may prefer a higher deductible than your lender will allow. If you're not sufficiently capitalized, you may need gap insurance to cover when your car depreciates faster than your loan is paid down. A 30 percent payment should be enough to not need it though. Finally, there's some value in having options. If you have the loan and the cash, you can likely pay it off without penalty. But it will be harder to get the loan if you don't finance it. Maybe you can take out a loan against the car later, but I haven't looked into the fees that might incur. If it's any help, I'm in the last stretch of a 3 year car loan. At the time paying in cash wasn't an option, and having done it I recognize that it's more complicated than it seems.","Trade-in values are generally below what you can get in a private sale. To directly answer your question, you should sell the crossover yourself and use the balance to purchase your new vehicle. I would encourage you to use the $9k to finance directly without a lease, especially if you are planning on financing after the lease term. The lease will not save you money over the time you drive the vehicle in this case, and worse, will likely expose you to risk of having to pay additional fees if you break certain terms in the lease (mileage, wear and tear, etc) Best option mathematically is to use the $9k to purchase a vehicle for cash. This provides the lowest total cost of ownership. Even if you are afraid of purchasing a lemon, leasing a vehicle is awfully expensive insurance against that possibility. You would have to rack up some significant repairs to justify the cost of the lease vs cash over the term of operating the vehicle.","I might be missing something, but I always understood that leasing is about managing cash-flow in a business. You have a fixed monthly out-going as opposed to an up-front payment. My accountant (here in Germany) recommended: pay cash, take a loan (often the manufactures offer good rates) or lease - in that order. The leasing company has to raise the cash from somewhere and they don't want to make a loss on the deal. They will probably know better than I how to manage that and will therefore be calculating in the projected resale value at the end of the leasing period. I can't see how an electric car would make any difference here. These people are probably better informed about the resale value of any type of car than I am. My feeling is to buy using a loan from the manufacturer. The rates are often good and I have also got good deals on insurance as a part of that package. Here in Germany the sales tax (VAT) can be immediately claimed back in full when the loan deal is signed.","If you want the new car, pay cash for it. Here's why: By paying cash for the car, you immediately save $2,500 off the price of the car. That is not insignificant, it's 8.3% off. By paying cash, you'll never be upside down on the car, and you can sell the car anytime you want. You said that all you need to do is beat the 0.9% interest rate with your investment to come out ahead. That doesn't take into account the discount you would have gotten by paying cash. $30,000 invested for 5 years at 1.6% (rough estimate) would get you $2,500 (the discount), so the rate you need to beat to come out ahead is actually 2.5%. Still doable, but it is much less of a sure thing on a 5 year investment, and much less worth the trouble. New cars are an expensive luxury. If you are wealthy enough, a new car certainly can be appropriate for you. However, if you don't like the idea of paying $30k in cash all at once, that is a strong indication that perhaps the new car is a luxury you aren't in a position to buy at this time. Borrowing the money and paying for it over time makes it psychologically easier to over spend on transportation.","An expense is an expense. You can deduct your lease payment subject to some limitations, but you don't make out by having more expenses. Higher expenses mean lower profit. Is leasing better than owning? It depends on the car you'd buy. If your business doesn't benefit from flashiness of your car, then buying a quality used car (a few years old at most) would probably be a wiser decision financially. I'd think hard about whether you really need an up-to-date car.","It's my understand that leasing is never the better overall deal, with the possible exception of a person who would otherwise buy a brand new car every 2 or 3 years, and does not drive a lot of miles. Note: in the case of a company car, Canadian taxes let you deduct the entire lease payment (which clearly has some principal in it) if you lease, while if you buy you can only deduct the interest, and must depreciate the car according to their schedule. This can make leasing more attractive to those buying a car through a corporation. I don't know if this applies in the US. The numbers you ran through in class presumably involved calculating the interest paid over the term of the loan. Can you not just redo the calculation using actual interest and lease numbers from a randomly chosen current car ad? I suspect if you do, you will discover leasing is still not the right choice.","Not long after college in my new job I bought a used car with payments, I have never done that since. I just don't like having a car payment. I have bought every car since then with cash. You should never borrow money to buy a car There are several things that come into play when buying a car. When you are shopping with cash you tend to be more conservative with your purchases look at this Study on Credit card purchases. A Dunn & Bradstreet study found that people spend 12-18% more when using credit cards than when using cash. And McDonald's found that the average transaction rose from $4.50 to $7.00 when customers used plastic instead of cash. I would bet you if you had $27,000 dollars cash in your hand you wouldn't buy that car. You'd find a better deal, and or a cheaper car. When you finance it, it just doesn't seem to hurt as bad. Even though it's worse because now you are paying interest. A new car is just insanity unless you have a high net worth, at least seven figures. Your $27,000 car in 5 years will be worth about $6500. That's like striking a match to $340 dollars a month, you can't afford to lose that much money. Pay Cash If you lose your job, get hurt, or any number of things that can cost you money or reduce your income, it's no problem with a paid for car. They don't repo paid for cars. You have so much more flexibility when you don't have payments. You mention you have 10k in cash, and a $2000 a month positive cash flow. I would find a deal on a 8000 - 9000 car I would not buy from a dealer*. Sell the car you have put that money with the positive cash flow and every other dime you can get at your student loans and any other debt you have, keep renting cheap keep the college lifestyle (broke) until you are completely out of debt. Then I would save for a house. Finally I would read this Dave Ramsey book, if I would have read this at your age, I would literally be a millionaire by now, I'm 37. *Don't buy from a dealer Find a private sale car that you can get a deal on, pay less than Kelly Blue Book. Pay a little money $50 - 75 to have an automotive technician to check it out for you and get a car fax, to make sure there are no major problems. I have worked in the automotive industry for 20 + years and you rarely get a good deal from a dealer. “Everything popular is wrong.” Oscar Wilde","In the U.S., most car dealers provide lease financing through one company (usually a subsidiary of the auto manufacturer). Whereas they provide loan financing through a variety of companies, some of whom offer very high interest rate loans and sell the loans as collateralized debt obligations (CDOs). Have you checked whether Chase or First Tech Credit Union offers a suitable car lease?","For a lease, your payment is a function of sale price minus residual value. If the car has a low residual value then the lease payments will be higher. If it has a high residual value then lease payments will be lower but the purchase price at the end of the lease will be higher (potentially even higher than the KBB of the car). There is no gaming the system. Whether you buy now or lease now and buy later, you will be paying for the entire car. Calculate the payments in both scenarios with appropriate interest rates/money factors, sale price, and residual value. This will demonstrate there is no free lunch to be had here. Also, don't forget that financing the vehicle after a three year lease will probably mean a higher interest rate than if you were to finance it all now. With a purchase now you will likely get more favorable financing terms and be able to talk them down on sale price. Leasing will not allow such flexibility generally. Tldr No, that's not how it works. If you plan on owning the car for the duration of a loan (e.g. 5 years) it will be cheaper to just finance now.","\"Now, to buy in full (and essentially have zero savings), buy in part (£10000 deposit, followed by a loan of £4000) or PCP/HP more of the value? So, you are assessing if the car is worth having with either none or only 4,000 in savings. This is the most critical information you have provided. My outright opinion is to always buy a mildly used car as I hate the idea of loans and interest. With the amount of money that you currently possess, I believe the \"\"Buy-in-part\"\" option is best as it reduces your interest liability; but, I don't believe you should do it currently. 4,000 is a rather small cash fund for if something were to go boom in the night. As for your question of interest: This is completely dependent on the amount you are able to pay per period and the total interest you are willing to spend, rows four and seven respectively. This is your money, and no one can tell you what's best to do with it than yourself. Keep looking for good leasing deals or if you think you can survive financial strife with 4,000 then follow your heart. \"\"Depreciation\"\" fluctuates to the buyer, so never assume what the car may lose in the next 2-3 years. Hope it all goes well my friend.\"","The only reason to lend the money in this scenario is cashflow. But considering you buy a $15000 car, your lifestyle is not super luxurious, so $15000 spare cash is enough.","There needs to be more numbers with your choices, without those any answer is purely speculation. Assuming that India is much like the US, you are almost always better to go with a company leased car. That is if you are not responsible for the lease if your employment ends with the company. Here in the US companies typically reimburse, so tax free, their employees for about 50 cents per mile, or about 31 cents per kilometer. This barely covers the gas and insurance and falls way short when one includes deprecation and maintenance. So it is better to have the company to pick up all those costs. Borrowing money on a car is just plain dumb no matter what the interest rate. So I would stick with choice number 1 or 3 depending on the arrangement for the company leased car. The next question becomes how much you should spend for a car? I would say enough to keep you happy and safe, but not much more than that until you are wealthy.","Your practice of waiting until you can pay cash is a good one. It will certainly prevent you from getting into debt! Now, to be clear, your question puts a credit card in the same category as a loan, but it doesn't have to be. You could use a credit card almost like cash, if you are careful. I'm not familiar with the system in France, but in the US, even if you are paying cash all the time, there are some benefits to getting a credit card and paying it off in full every month, instead of simply paying with cash. Some of those benefits are: One pretty big downside of having a credit card depends on your personality. Some people, once they have credit, end up spending beyond their means, and end up getting into debt. Please look into whether credit cards work the same way in France before considering the above advice. As for your question regarding getting a loan vs paying cash, that will usually be personal preference, since with a loan you can buy expensive items (such as a house or car) much sooner than you otherwise could if you waited until you saved the money. For example, it might take 10 years or more to build up enough money to purchase a house with cash, so if you don't want to wait that long, you'll need to finance it.","Approximately 25% of all cars sold last year were leased, which is the highest on record. When you are leasing you don't own the car, instead you are basically renting it for a fixed term, and turning it back to the dealership. It is very cost effective, because the manufacturers have a keen interest in making lots of cars. They are often subsidizing the lease by giving incentives to the dealer. They are gambling on the future value of their cars. They can lose on that gamble. The car business has turned into a financial nightmare for the car companies; they have huge development costs as the cars become more like mobile computing platforms loaded with sensors, and software that is constantly changing. They can't hold a model for 20 years like Mercedes was able to do in the past. Now they have to constantly update their products. The only way to survive as a car maker is to pump out volume, and the leasing programs, which are quietly being underwritten by the manufacturers help them increase the production quantities, which helps lower the fixed development costs. If only the defense contractors could do this! they are stuck spending billions to build 20 planes, and so each one has a staggering price tag. In the future, the car companies that will survive are those that have terrific credit, and low borrowing costs. That means Japanese and Germans will own the car business entirely in the end, and countries with higher borrowing costs (like America and Brasil) will not be competitive. Luckily Ford is so frugal, due to the lingering spirit of its founder, that they can hold out. One thing strongly in favor of leasing is that you have zero maintenance costs typically. The repair risk is significant in luxury cars. When you buy a 10 year old BMW, and when the tranny goes, it costs a fortune. Having a superb car for 30 months for a few hundred bucks a month is something a lot of people enjoy doing. Who can blame them? you spend an hour or 2 a day in your car, and why not live in a nice place?","I'd finance the car (for 60 or 48 months), but stash enough money in a separate account so to guarantee the ability to pay it off in case of job loss. The rationales would be: Note that I'd only do this if the loan rate were very low (under 2%).","Well, it really doesn't make sense to pay for either in cash. For these purchases, unless you're super wealthy, you won't be paying it in full. If you were to pay in full, then I don't see any practical point to withdraw that money in cash.","I would not claim to be a personal expert in rental property. I do have friends and family and acquaintances who run rental units for additional income and/or make a full time living at the rental business. As JoeTaxpayer points out, rentals are a cash-eating business. You need to have enough liquid funds to endure uncertainty with maintenance and vacancy costs. Often a leveraged rental will show high ROI or CAGR, but that must be balanced by your overall risk and liquidity position. I have been told that a good rule-of-thumb is to buy in cash with a target ROI of 10%. Of course, YMMV and might not be realistic for your market. It may require you to do some serious bargain hunting, which seems reasonable based on the stagnant market you described. Some examples: The main point here is assessing the risk associated with financing real estate. The ROI (or CAGR) of a financed property looks great, but consider the Net Income. A few expensive maintenance events or vacancies will quickly get you to a negative cash flow. Multiply this by a few rentals and your risk exposure is multiplied too! Note that i did not factor in appreciation based on OP information. Cash Purchase with some very rough estimates based on OP example Net Income = (RENT - TAX - MAINT) = $17200 per year Finance Purchase rough estimate with 20% down Net Income = (RENT - MORT - TAX - MAINT) = $7500 per year","When getting a car always start with your bank or credit union. They are very likely to offer better loan rate than the dealer. Because you start there you have a data point so you can tell if the dealer is giving you a good rate. Having the loan approved before going to the dealer allows you to negotiate the best deal for the purchase price for the car. When you are negotiating price, length of loan, down payment, and trade in it can get very confusing to determine if the deal is a good one. Sometimes you can also get a bigger rebate or discount because to the dealer you are paying cash. The general advice is that a lease for the average consumer is a bad deal. You are paying for the most expensive months, and at the end of the lease you don't have a car. With a loan you keep the car after you are done paying for it. Another reason to avoid the lease. It allows you to purchase a car that is two or three years old. These are the ones that just came off lease. I am not a car dealer, and I have never needed a work visa, but I think their concern is that there is a greater risk of you not being in the country for the entire period of the lease.","You SHOULDN'T lease one if you are going to get an economy car, if you don't drive too much (<15K / year), and you want to hang on to the car for a long time. Otherwise, if you are a regular driver, driving a leased new quality car can be cost effective. Many cars now have bumper-to-bumper warranties that last as long as the lease (say 80K). So there is rarely any extra costs apart from regular maintenance. The sweet spot for most new cars is in the 5th, 6th, or 7th years, after they are paid off. But at that point, you may find you have maintenance bills that are approaching an average of $200 - $300 per month. In which case, a lease starts to look pretty good. I owned a 7 year old Honda Accord that cost only $80 less per month in maintenance than the new leased VW that replaced it. Haven't looked back after that. Into my 3rd car and 9th year of leasing.","You need to do the maths exactly. The cost of buying a car in cash and using a loan is not the same. The dealership will often get paid a significant amount of money if you get a loan through them. On the other hand, they may have a hold over you if you need their loan (no cash, and the bank won't give you money). One strategy is that while you discuss the price with the dealer, you indicate that you are going to get a loan through them. And then when you've got the best price for the car, that's when you tell them it's cash. Remember that the car dealer will do what's best for their finances without any consideration of what's good for you, so you are perfectly in your rights to do the same to them.","Indeed - the math. I bought my car 6 years ago. It was an ex showroom model (not demo) so came fully kitted and with a decent discount. I had the cash, but the salesman wanted me to take financing on half of the price *and gave me a discount* so that I would. It was a 3 year loan at a very low rate and was therefore lower than the cash price I had gotten. So I took the deal. I can only assume he was getting better commission rates for financing than he was selling cars. Either way, worked out for me.","There is a 3rd option: take the cash back offer, but get the money from a auto loan from your bank or credit union. The loan will only be for. $22,500 which can still be a better deal than option B. Of course the monthly payment can make it harder to qualify for the mortgage. Using the MS Excel goal seek tool and the pmt() function: will make the total payment equal to 24K. Both numbers are well above the rates charged by my credit union so option C would be cheaper than option B.","To directly answer your question, the best choice is to pay cash and place the rest on your student loan. This is saving you from paying more interest. To offer some advise, consider purchasing a cheaper car to place more money towards your student loan debt. This will be the best financial decision in the long-term. I suspect the reason you are considering financing this vehicle is that the cash payment feels like a lot. Trust your instinct here. This vehicle sounds like large splurge considering your current debt, and your gut is telling you as much. Be patient. Use your liquid funds to get a more affordable vehicle and attack the debt. That is setting yourself up for financial success.","You need to look at the numbers when you're ready to transact. What your crossover is worth now, what the truck will lease for then, what financing deals may or may not be available will all change. I'm not sure why you've already decided you will lease the truck, perhaps you're planning to take advantage of some kind of business write off. I would personally never put anything down on a lease, though I have argued with people on here about that particular decision. The reality is you need to look at the numbers. Some banks will adjust the interest you pay on your lease to account for your down payment, some don't. Consider a $9,000 lease, $250 per month for 36 months. Consider you pay $1,000 up front as a down payment. Example 1: $1,000 lowers the amount due on the lease to $8,000 lowering your monthly payment to $222.22 from $250, the downpayment has accomplished nothing. Over the 36 months you will have still paid the same $9,000. Example 2: $1,000 up front changes the amount owed and other fees generally applicable to a lease (gap insurance etc) and your payment drops to $215, your total over the lease is now $8,740 ($1,000 down and $7,740 in payments). You need to look at the numbers. In general if you know you will be purchasing the truck at the end of the lease it's more financially advantageous to just purchase it from the start.","First, who is saying that it is a better option? In general it is best to pay cash for things when you can. I think the reality is that for most people owning a house would be very difficult without some sort of financing. That said, one argument for financing a house these days even if you could afford to pay cash is that the interest rates are very low. For a 30-year fixed loan you can borrow money under 4.5% APR with decent credit. If you are willing to accept even a little risk you could almost certainly invest that same money and get a return higher than 4.5%. With the US mortgage interest tax deduction the numbers are even more favorable for financing. Those rates look even more attractive when you consider you are paying for the house with today's dollars and paying back the loan with dollars from up to 30 years in the future, which will be worth much less.","I've seen this approach to buying/funding cars described in a couple of different ways over the years. Random thoughts:","You know what? Pay cash, but ask for a discount. And something fairly hefty. Don't be afraid to bargain. The discount will be worth more than the interest you'd get on the same amount of money. And if the salesman doesn't give you a decent discount, ask to speak to the manager. And if that doesn't work, try another store. Good luck with it!","Debt creates risk. The more debt you take on, the higher your risk. What happens if you lose your job, miss a payment, or forget to write the final payment check for the exact amount needed, and are left with a balance of $1 (meaning the back-dated interest would be applied)? There is too much risk for little reward? If you paid monthly at 0% and put your money in your savings account like you mentioned, how much interest would you really accrue? Probably not much, since savings account rates suck right now. If you can pay cash for it now, do it. So pay cash now and own it outright. Why prolong it? Is there something looming in the future that you think will require your money? If so, I would put off the purchase. No one can predict the future. Why not pay cash for it now, and pay yourself what would have been the monthly payment? In three years, you have your money back. And there is no risk at all. Also, when making large purchases with cash, you can sometimes get better discounts if you ask.","\"Buying now with a mortgage gets you: Waiting to buy with all cash gets you: These are also some of the pros or cons for the rent or buy dilemma that Paul mentioned in comments to the OP. This is a very complex, multi-faceted question, that would not respond well to being put into any equation or financial model. Most people answer the question with \"\"buy the home now with a mortgage\"\" if they can pay for the down payment. This is why the mortgage industry exists. The people who would want to finance now rather than buy with all cash later would not only be analyzing the question in terms of financial health but also in terms of general well being. They might consider the tremendous pride that comes with home ownership and living under a roof of one's own. Who can say that those people are wrong?\"","What percentage of your savings is the full car payment? If it's a significant chunk, then I'd finance some of the cost of the car in order to maintain liquidity.","Two cases: You take the credit and reinvest the cash equivalent (be it a savings account or otherwise), yielding you the x% at virtually zero risk. Unless of course you consider possibility of your own negligence a risk (in case of missed payments, etc.). You pay by cash and have the peace of mind at the cost of that x%. The ultimate decision depends on which you value more - the $ you get from x%, or the peace of mind.","Good question. If a person has a choice, it is probably better to pay cash. But not always. If your large pile of cash can earn more being invested than cost of the interest to borrow a similar large pile of cash, it is beneficial to get a mortgage. Otherwise pay cash. EXAMPLE: A house costs $100,000. I have $100,000 in extra money. I can invest that at 5% per year, and I can borrow an additional $100,000 at 2% per year. Since I can make more on my pile of cash than it costs to borrow another pile of cash, borrowing is better. Compound interest is the most powerful force on the planet according to Albert Einstein (maybe). That isn't likely for most people though. Here is the results from some online financial calculators. http://www.calcxml.com/do/hom03 Borrowing $100,000 with 2% interest for 30 years will cost a total of $148.662. You get $100,000, but it cost you $48,662 to do it. http://www.calcxml.com/do/sav07 Saving $100,000 in a bank account with an interest rate of %5 will be worth $432,194 in 30 years. By not spending the money you will earn $332,194 over the course of 30 years. So if you can invest at 5% and borrow at 2% you will end up with $283,532 more than if you didn't. It is a pretty extreme example, and financial advisers make a lot of money figuring out the complex nature of money to make situations like that possible.","The answer to this question is very different depending on the type of item. From a purely financial perspective you would want to answer these questions which you may not have enough information to answer: Realistically the question I prefer to ask are: When something fails there is a big difference to me between having the cash and having an insurance policy that is suppose to cover it even if they are theoretically the same value. Some insurance policies may even be better than cash, like homeowners insurance might help take care of details like finding a contractor to fix the issue, finding temporary housing if your house burns down, etc.","It is easier to get a loan on a rental than a flip, which is a huge advantage to rental properties. Leverage allows you to increase your returns and make more money off appreciation and higher rents. I use ARMs to finance my rental properties that are amortized over 30 years. I have to put 20 percent down, but my portfolio lender lets me get as many loans as I want. Because I put 20 percent down on my rental properties and they still have great cash flow I can buy three times as many properties as I could with cash purchases. Buying more rental properties amplifies the other advantages like cash flow, equity pay down and the tax advantages.","Cash is very effective at getting a discount when buying from individuals (craigslist, garage sales, estate sales, flea markets, etc.). I'll make an offer, then thumb through the cash while they consider it. There eyes will dart back and forth between my eyes and the cash as they decide whether to take my offer. Car dealers do seem to be very unique. The dealer I bought at recently said that 70% of their deals were cash purchases, JoeTaxpayer's dealer said 1% were cash purchases. I've had good luck negotiating with cash for well-loved cars (under $10K) from both individuals or used dealers. I'm also looking for carpet for my house and the first vendor I went to offered at 5% discount if I paid up front (no financing).","\"With a gross income of $ 95,000 per year, and a net savings rate of over $ 18,000 per year, a budget of $ 3,600 per year for automobile interest and depreciation is not irresponsible. But poor car choices, poor car maintenance habits, and driving habits that risk totalling cars are irresponsible. Also, not fully understanding a lease deal is irresponsible. The \"\"great lease deal\"\" might be encouraging you to make a different \"\"poor car choice\"\" than you made last time. A \"\"great deal\"\" on a bad car is not really a great deal. Also, depending on the contract and your driving habits, you might have a surprising cost at the end of the lease.\"","Quite honestly, with the current interest rates, you're better off getting a loan, putting the cash into some top performing equity funds and paying down on the loan. If for some reason you're in need of the capital, the stocks are going to be much more liquid. Being debt free is a good thing, but there is also a right way to leverage yourself. At the end of the day though, and despite what anyone on this site tells you, you need to run the numbers, make the long term projections to determine what's the best route to take.","\"Typically, there are three ways an acquisition is financed. What is used is called the \"\"consideration\"\". 1.) Cash - Existing cash on the balance sheet is used. Think of it like purchasing something with your debit card. 2.) Stock - This a bit more complicated. The acquiring company issues new shares and exchanges those shares for shares of the acquiree. Because new shares are issued, this can have a dilutive effect on the stock price of the acquirer. However, it can have an accretive effect if enough synergistic value between the two companies is realized and/or expected. 3.) Debt - Basically like taking out a loan. The \"\"consideration\"\" for a deal is often reported, as you read in your article. Most deals are a combination of cash/stock/debt. (Debt is often referred to as \"\"cash\"\" - i.e. if you take out a loan, you are essentially receiving cash.) When it comes to which is best to use, there are quantitative analyses for that - with a specific focus on the acquirer's EPS (Earnings per share) post-deal. The factors that are considered are the forgone interest on cash, the additional interest gained from taking on debt, and the dilutive effects of issuing new stock. There is no right answer for which is best, as there are multiple different factors and circumstances involved across M&A deals. Each company has different borrowing rates and synergistic value expected from their deals. One big factor is the timing and stock price of both companies during the deal. If the acquirer is trading at an all time high and the acquiree is at an all time low, then perhaps an all-stock deal would be advantageous to the buyer. Typically, companies want to avoid stock deals because they are the most dilutive.\"","The most economical way is to save your money, and buy a 1+ year old used car with cash.","See what the contract says about transfers or subleases. A lease is a credit agreement, so the lessor may not allow transfers. You probably ought to talk to an accountant about this. You can probably recognize most of the costs associated with the car without re-financing it in another lease.","With new cars it's usually the other way around: finance at a low APR or get cash back when you buy it outright. With used cars you usually don't know how much they have invested in the car, so it's more difficult to know how low they're willing to go. Regardless, I do think it's odd that they would knock 2K off the price if you finance with them, but not if you pay cash. The only reason they would do that is if they intend to make at least 2K in interest over the life of the loan, but they have no way of guaranteeing you won't refi. Therefore, I suspect they are bluffing and would probably close the deal if you wrote them a check (or put the cash on the table) for 2K less. However, if they won't budge and will only knock off 2K if you finance, you could finance and pay it off in full a week later. Just make sure they don't have any hidden origination fees or pay-off-early fees.","I would like to add that from my own research, a pro to leasing over buying a new vehicle would be that with the lease the entire 7,500 federal incentive is applied directly to the lease, or so they say. If you buy a new car you get a 7,500 federal tax incentive also but if you dont have 7,500 bucks in taxes this wont be as much value. It doesn't sense to me to buy used since you dont get the tax incentive and also if you're in california the 2,500 rebate only applies to buying new or leasing 30 month or longer.","\"as a used dealer in subprime sales, finance has to be higher than cash because every finance deal has a lender that takes a percentage \"\"discount\"\" on every deal financed. if you notice a dealer is hesitant to give a price before knowing if cash or finance, because every bit of a cash deal's profit will be taken by a finance company in order to finance the deal and then there's no deal. you might be approved but if you're not willing to pay more for a finance deal, the deal isn't happening if I have $5000 in a car, you want to buy it for $6000 and the finance lender wants to take $1200 as a \"\"buy-fee\"\" leaving me $4800 in the end.\"","There are some who argue that you should lease an electric car. These factors are in addition to all the normal pros and cons of leasing vs. buying. The technology is still new and is advancing rapidly. In 2-3 years, the newer model may have significantly improved features, range, and efficiency, as well as lower prices. If you are the type of person to upgrade regularly to the latest and greatest, leasing can make it a smoother transition. It is hard to predict the depreciation of the vehicles. This is both because of the above factors, but also because these kinds of cars are newer and so the statistical models used to predict their future values are less refined. The models for predicting gas car prices have been honed for decades. EV Manufacturers have in the past made some mistakes in their residual value estimations. When you lease a car, you get essentially an option to buy the car at the future predicted residual value. If, at the end of the lease, the market value of the car is higher than the residual value, you can purchase the car at the predetermined price, making yourself some extra money. If the value is lower than the residual, you can return the car or renegotiate. I know a relatively large number of electric vehicle owners. Most or all of the ones who got the vehicle new leased it. The rest bought used vehicles coming off lease, which can also be a good deal.","I actually didn't do the math with your numbers, but I recall Sal from Khan Academy did a nice video about your question, challenging the notion that it is always better to buy. https://www.youtube.com/watch?v=YL10H_EcB-E","A loan with modest interest is better than paying by cash if there are better alternatives for investment. For example, suppose you are buying a house. Consider two extremes: a) you pay the house entirely by cash, b) the entire buy is financed by the bank. Historically, real (subtracting inflation) house prices (at least in the U.S.) have not risen at all in the long run, and investing all of your own capital in this way may not be optimal. Notice that we are looking at a situation where one is buying a house and living in it in any case. Rent savings are equal in cases a) and b). If instead you were buying a house not for yourself, but as a separate investment for renting out, then you would receive rent. In the case a), the real return on your capital will be zero, whereas in case b), you can invest the cash in e.g. the stock market and get, on average, 7% (the stock market has yielded a 7% real return annually including dividends) annually minus the bank's interest rate. If the interest is lower than 7%, it may be profitable to take the loan. Of course, the final decision depends on your risk preferences.","\"It is going to save you more money in the long run to pay at once with cash. If you take out a loan, you will pay interest on the balance, costing you money. If you pay off the balance immediately, there is no difference between the options and your question becomes irrelevant. There is no credit rating benefit to placing large purchases on your cards, especially since your credit is fine. My advice is to pay in cash in this case, mostly because it makes you 'feel' the purchase. This is what you are describing in your question. This instinct helps you recognize potential problems, instead of masking them with debt. Questions like: \"\"Do I need this?\"\" \"\"Am I overextending myself financially with this purchase?\"\" \"\"Am I holding enough cash-on-hand for emergencies?\"\" You may be fine in these areas, but I would still argue that cash makes you a better buyer because the expense feels much more significant, making you more cautious and discerning. You are right to feel these things before dropping a large sum of money. Let it inform you and help you make better decisions. Don't mask it or be paralyzed by it!\"","The good debt/bad debt paradigm only applies if you are considering this as a pure investment situation and not factoring in: A house is something you live in and a car is something you use for transportation. These are not substitutes for each other! While you can live in your car in a pinch, you can't take your house to the shops. Looking at the car, I will simplify it to 3 options: You can now make a list of pros and cons for each one and decide the value you place on each of them. E.g. public transport will add 5h travel time per week @ $X per hour (how much you value your leisure time), an expensive car will make me feel good and I value that at $Y. For each option, put all the benefits together - this is the value of that option to you. Then put all of the costs together - this is what the option costs you. Then make a decision on which is the best value for you. Once you have decided which option is best for you then you can consider how you will fund it.","If you can generate a higher ROI by renting than by cashing out and investing, then you should rent it out. Please consider your risk tolerance as well. It's always a personal decision whether to assume higher risk for a higher return.","“The plot of land definitely is going to give better results in long term.” Will it? Land is not guaranteed to go up in value. And a car can provide more employment opportunities for you. You need to look at your specific situation—with specific numbers—rather than using rules of thumb as hard guidelines.","\"If you mortgage after the fact you will usually pay an extra .25% higher on the interest rate because a \"\"cash out\"\" refinance is treated as riskier than a new home purchase mortgage. You might save enough on the purchase price of the home with a cash offer to make that higher interest rate worth it, but in most cases, if you are planning to hold the loan for a long time, it's best to get that mortgage at the time of purchase. You might be able to get the same deal with an offer that says you will pay cash if there are any problems getting the loan approved.\"","\"It depends on what your plans for the future are.. Taking out a loan is not a bad thing if it is at a good rate and under good terms and you are sure you can handle the payments. If you buy the car with cash you may be giving up the opportunity to later get a great rate on that $8k. However, you are probably not utilizing that $20k to make as much interest as you'd then be paying if you did take the $8k on loan. Since you say \"\"house fund\"\" I assume you are saving to make a down payment on a new house. If you plan to buy that house within the next 6 months the hard pulls on your credit report from applying for the car loan will probably ding your credit score for the next 6 months which might cost you on your mortgage rate. However, if you don't plan to buy for a few more years and if you've never had a car payment before then the auto loan would actually be adding diversity to your credit history and in the long run would help your score. Another factor to consider is the loan-to-value ratio you are shooting for. LTV affects the interest rate, requirements for private mortgage insurance, etc.. Mortgage rates are at an all-time low and lower than auto-rates, so depending on the terms of the house purchase that $8k might be better spent on the car than the house. In short, if you want to buy the house soon (rates are loooow, market is a buyer's market), and you need that $8k to get a better mortgage rate or prevent you from being required to buy PMI you should probably put it toward the house. Otherwise you should probably put it toward the car. Last piece of advice. If you absolutely must buy a house and a car in the same short time-frame, do them both on the same day so that your credit score is not dinged before applying for one or the other. With mortgages this may be difficult considering the longer closing procedures, but try to time it so that your credit is getting checked by the mortgage broker and the auto lender on the same day.\"","Some questions: Will you need a car after 18 months? What are you going to do then? How likely are you able to go over the mileage? Granted paying $300 per month seems somewhat attractive as a fixed cost. However lease are notorious for forcing people into making bad decisions. If your car is over miles, or there is some slight damage (even normal wear and tear), or you customize your car (such as window tint) the dealer can demand extra dollars or force you to purchase the car for more than it is actually worth. The bottom line is leasing is one of the most expensive ways to own a vehicle, and while you have a great income you have a poor net worth. So yes I would say it is somewhat irresponsible for you to own a vehicle. If I was in your shoes, I would cut my gym expenses, cut my retirement contributions to the match, and buy another used car. I understand you may have some burnout over your last car, but it is the best mathematical choice. Having said all that you have a great income and you can absorb a lot of less than efficient decisions. You will probably be okay leasing the car. I would suggest going for a longer term, or cutting something to pay off the student loans earlier. This way there is some cushion between when the lease ends and the student loan ends. This way, when lease turn in comes, you will have some room in your budget to pay some fees as you won't have your student loan payment (assuming around 1400/month) that you can then pay to the dealer.","\"This is my opinion as a car nut. It depends on what you want out of a car. For your situation (paying cash, want to keep the car long-term but also save money) I recommend seriously considering a slightly used vehicle, maybe 2 or 3 years old, or a \"\"certified pre-owned vehicle\"\". Reasons: Much less expensive than a brand new car because the first two years have the biggest depreciation hit. Cars come with a 4-year warranty, so a 3 year old car will still be in warranty. Yes, a certified pre-owned car will have a bit of a premium compared to a private-party used car, but the peace of mind of knowing it's in good shape is worth the extra cost considering you want to keep it long term. Consumer Reports will have good advice on the best values in used cars.\"","\"In most cases of purchases the general advice is to save the money and then make the purchase. Paying cash for a car is recommended over paying credit for example. For a house, getting a mortgage is recommended. Says who? These rules of thumb hide the actual equations behind them; they should be understood as heuristics, not as the word of god. The Basics The basic idea is, if you pay for something upfront, you pay some fixed cost, call it X, where as with a loan you need to pay interest payments on X, say %I, as well as at least fixed payments P at timeframe T, resulting in some long term payment IX. Your Assumption To some, this obviously means upfront payments are better than interest payments, as by the time the loan is paid off, you will have paid more than X. This is a good rule of thumb (like Newtonian's equations) at low X, high %I, and moderate T, because all of that serves to make the end result IX > X. Counter Examples Are there circumstances where the opposite is true? Here's a simple but contrived one: you don't pay the full timeframe. Suppose you die, declare bankruptcy, move to another country, or any other event that reduces T in such a way that XI is less than X. This actually is a big concern for older debtors or those who contract terminal illnesses, as you can't squeeze those payments out of the dead. This is basically manipulating the whole concept. Let's try a less contrived example: suppose you can get a return higher than %I. I can currently get a loan at around %3 due to good credit, but index funds in the long run tend to pay %4-%5. Taking a loan and investing it may pay off, and would be better than waiting to have the money, even in some less than ideal markets. This is basically manipulating T to deal with IX. Even less contrived and very real world, suppose you know your cash flow will increase soon; a promotion, an inheritance, a good market return. It may be better to take the loan now, enjoy whatever product you get until that cash flows in, then pay it all off at once; the enjoyment of the product will make the slight additional interest worth it. This isn't so much manipulating any part of the equation, it's just you have different goals than the loan. Home Loan Analysis For long term mortgages, X is high, usually higher than a few years pay; it would be a large burden to save that money for most people. %I is also typically fairly low; P is directly related to %I, and the bank can't afford to raise payments too much, or people will rent instead, meaning P needs to be affordable. This does not apply in very expensive areas, which is why cities are often mostly renters. T is also extremely long; usually mortgages are for 15 or 30 years, though 10 year options are available. Even with these shorter terms, it's basically the longest term loan a human will ever take. This long term means there is plenty of time for the market to have a fluctuation and raise the investments current price above the remainder of the loan and interest accrued, allowing you to sell at a profit. As well, consider the opportunity cost; while saving money for a home, you still need a place to live. This additional cost is comparable to mortgage payments, meaning X has a hidden constant; the cost of renting. Often X + R > IX, making taking a loan a better choice than saving up. Conclusion \"\"The general advice\"\" is a good heuristic for most common human payments; we have relatively long life spans compared to most common payments, and the opportunity cost of not having most goods is relatively low. However, certain things have a high opportunity cost; if you can't talk to HR, you can't apply for jobs (phone), if you can't get to work, you can't eat (car), and if you have no where to live, it's hard to keep a job (house). For things with high opportunity costs, the interest payments are more than worth it.\""],"string":"[\n \"Full payment is always better than auto-loan if you are prudent with finances. I.E if you take a loan, you are factoring the EMI hence your savings will remain as is. However if you manage well, you can buy the car with cash and at the same time put aside the notional EMI as savings and investments. The other factor to consider is what return your cash is giving. If this more than auto-loan interest rate post taxes, you should opt for loan. For example if auto-loan is 10% and you are getting a return of 15% after taxes on investment then loan is better. Company Car lease depends on terms. More often you get break on taxes on the EMI component. But you have to buy at the end of lease period and re-register the car in your name, so there is additional cost. Some companies give lease at very favourable rates. Plus if you leave the job lease has to be broken and it becomes more expensive.\",\n \"If you plan to keep this asset for ten years then you can take the deprecation of its cost over that time period. For simplicity lets treat that as 120 monthly payments. So at a purchase price of $60,000 you are committing around $500 per month not including vehicle maintenance. I typically allocate around 20 percent of the purchase price of my vehicles for future maintenance costs. Since you have the cash to purchase this outright you have an option not afforded to most people. This adds for additional consideration. Here is an example. You purchase a $60,000 car and put $10,000 down. You finance $50,000 at 2.84% over 60 months. Your total finance cost is $53,693 if you do not miss any payments. The question here is can you make more than $3,693 on the $50,000 that you would retain in this situation over a five year period? I know that I most certainly can and is an excellent example of why I finance my vehicles. Obviously this all goes out the window if you do not have the credit for top rates. I have also negotiated a vehicle maintenance plan with the dealership at the time of my vehicle purchases. Most dealerships offer this service, the key here is negotiating. On my last truck I was able to get an all inclusive maintenance policy for 72 months for 8% of the purchase price. Your mileage will vary with manufacturer and dealership. As described in the comments above it is never beneficial for an individual to lease. You end up paying more for the newer models. I consider that to be a lifestyle choice as it is most certainly not a sound financial decision.\",\n \"I am here to provide awesome guidance on leasing a van or car for your business. Talk about the benefits and the drawbacks. Cash is king and if you can buy a van outright that will always be the best deal. Most people cannot do that and so leasing is the next best option in terms of business.\",\n \"If you are talking straight dollars then leasing is always a losing proposition when compared with purchasing. The financial workings of leasing are so confusing that people don’t realize that leasing invariably costs more than an equivalent loan. And even if they did, the extra cost is difficult to calculate. Still, many people can’t afford the higher payments of a typical loan, at least not without putting a substantial amount down. If payments are an issue, consider buying a lower-cost vehicle or a reliable used car. http://www.consumerreports.org/cro/2012/12/buying-vs-leasing-basics/index.htm If you are talking about convenience, lifestyle, ability to purchase a car you could not pay for outright, then you will have to evaluate that.\",\n \"\\\"A lease is a rental plain and simple. You borrow money to finance the expected depreciation over the course of the lease term. This arrangement will almost always cost more over time of your \\\"\\\"ownership.\\\"\\\" That does not mean that a lease is always a worse \\\"\\\"deal.\\\"\\\" Cars are almost always a losing proposition; save for the oddball Porsche or Ferrari that is too scarce relative to demand. You accept ownership of a car and it starts to lose value. New cars lose value faster than used cars. Typically, if you were to purchase the car, then sell it after 3 years, the total cost over those three years will work out to less total money than the equivalent 36 month lease. But, you will have to come up with a lot more money down, or a higher monthly payment, and/or sell the car after 36 months (assuming the pretty standard 36 month lease). With this in mind, some cars lease better than others because the projected depreciation is more favorable than other brands or models. Personally, I bought a slightly used car certified pre-owned with a agreeable factory warranty extension. My next car I may lease. Late model cars are getting so unbelievably expensive to maintain that more and more I feel like a long term rental has merit. Just understand that for the convenience, for the freeing up of your cash flow, for the unlikelihood of maintenance, to not bother with resale or trading the car in, a lease will cost a premium over a purchase over the same time frame.\\\"\",\n \"\\\"Welcome to Personal Finance and Money. This answer will depend a lot on what is most important to the buyer, for example, whether it is important to always be in a newer car, to save money, or strike a balance between the two. There are trade-offs and I don't think there is one right answer for all circumstances. Leasing Leasing does make financial sense for at least two types of people I'm aware of: The company I work for provides company cars to sales executives, which we lease. We lease because it wouldn't be appropriate for a salesperson to meet a client in a car that clearly appears used. Similarly, I know people who value being in a newer car all the time, and for them, leasing makes more financial sense then buying a new car every 2-3 years, and selling their old car which is now 2-3 years old and has depreciated significantly. They understand that they are paying more to always be able to be in a newer car. I used to work with a manager who, every time the new model of the car he owned came out, would see the car and buy it on the spot, even though he already owned last year's model, and he didn't need two cars. He just couldn't help himself; he felt he had to have the new model. It's no use sermonizing about how he \\\"\\\"should\\\"\\\" learn to save money by just being content with what he had. In reality, if he is going to buy the new model every year no matter what, he should lease rather than buy. From my experience, I would only recommend leasing if you would otherwise be buying a new car on a regular basis, and the lease would be less expensive. This is probably the most cost effective way to maintain the highest possible quality, but would cost much more than buying and holding a new car or buying a value used car. I don't see reliability as much of a factor here since the seller will have a very good idea of how much maintenance will cost, but you will pay a premium to be able to pay a fixed cost for maintenance instead of risking a worse-than-average experience. Buying New According to Edmunds and BIGResearch, only a relatively small number of people are ever in the market for a new car at a given point in time. While you do pay quite a bit more to own a brand new car instead of the same car that is 2-3 years old, there are several reasons I'm aware of why people buy new cars: Number 4 is probably the biggest reason, and many people are willing to pay for the certainty of knowing that the miles are correct, the parts are new, the car is in good working condition, etc. Additionally, some makes of cars have much higher resale values than others (such as Hondas), meaning that there isn't as large of a drop in price between a new car and a used car. Many people consider buying a new car the best way to ensure they get the best reliability since they know the initial condition of the car and can care for it meticulously from that point on. This can especially make sense when the buyer intends to keep the car for the like of the car as the buyer will then benefit from having no car payments once it is paid off. Buying Used Buying a used car is the most affordable option, but for a given quality of car the reliability can be a significant potential pitfall. It can be very difficult for a non-professional to tell whether they are getting a good value. Additionally, it is hard for an owner who wants to sell a used car in excellent condition to get the true value of the car, and much easier for an unscrupulous seller to to get the market price by selling to an unaware buyer (the \\\"\\\"lemons\\\"\\\" problem in economics). You could buy an inspected car with a limited warranty from a retail seller like CarMax or a dealership, but you often pay a significant premium that cancels out much of the biggest reason to buy used - saving money. However, there is an opportunity to save money when buying used if you're willing to compromise on the condition of the car (if you don't care whether a car has hail damage, for example), or if you are able to wait until you find a motivated/distressed seller who needs to sell quickly and is willing to sell at a discount. If cost is your primary priority, buying a used car is likely the best option, but I would recommend the following in all circumstances: If the seller isn't willing to offer both of these, I would walk away. When buying used, you will also need to consider maintenance, which will vary significantly based on the make and model of the car as well as the condition, which is another risk you need to be willing to take on if you choose to buy used.\\\"\",\n \"I'd pay cash. Car loans are amortized, so sometimes you can get upside-down on the loan between 18-30 months because you are pre-paying interest. This can get you into trouble if you get into an accident. Given the low rate and the type of car you're buying, you're probably fine either way.\",\n \"I'm a finance manager at a dealership. The thing that I tell people about leasing: It's good if you plan to make more money in the future. You can get a new car. The downside of leasing. When you get out of your lease you will either pay straight cash, get another loan for the unit, or get a new unit. 3 years down the road you have no idea what interest rates will be. If you lock in your rate today you are guaranteed that rate. With the government increasing rates we could see higher rates that could cost you more. Also if you get a loan today it will be 5-6 years. Leasing will have a 3 year lease with another 5-6 year loan on top of that. Causing to pay more in the long run If your brother doesn't have straight cash to pay for it at the end of 3 years I recommend buying new\",\n \"A Lease is an entirely different way of getting a car. In two situations it makes sense, in all other scenarios it generally doesn't make sense to lease. In the case of always wanting a new car every 2 or 3 years it can make sense to lease. Of course if you drive more the allowed miles you will pay extra at the end of the lease. If you can take the monthly lease as a business expense leasing makes sense. Otherwise you want to pay cash, or get financing. Does zero percent make sense? Sometimes. The only way to make sense of the numbers is to start with your bank, have them approve of the loan first. Then armed with the maximum loan amount they will give you and the rate and the length of the loan, then visit the dealer. You have to run the numbers for your situation. It depends on your income, your other expenses, your credit score, your bank, what deal the dealership is running, how much you have for a down payment. Here is an example. For a recent loan situation I saw: 36 months, 1.49% rate, 20K loan, total interest paid: ~$466. Armed with that information can the person get a better deal at the dealership? There was only one way to find out. In that case the credit union was better. The rebate was larger than the interest paid.\",\n \"If you are looking to build wealth, leasing is a bad idea. But so is buying a new car. All cars lose value once you buy them. New cars lose anywhere between 30-60% of their value in the first 4 years of ownership. Buying a good quality, used car is the way to go if you are looking to build wealth. And keeping the car for a while is also desirable. Re-leasing every three years is no way to build wealth. The American Car Payment is probably the biggest factor holding many people back from building wealth. Don't fall into the trap - buy a used car and drive it for as long as you can until the maintenance gets too pricey. Then upgrade to a better used car, etc. If you cannot buy a car outright with cash, you cannot afford it. Period.\",\n \"Unless you are getting better than a 2.95% return on that money market account. Pay cash. That's the purely logical way to make the decision. However if it were me I'd pay cash anyway just because I like the idea of not owing money and having the hassle of dealing with a payment every month.\",\n \"I agree with Speedbird389 - I leased an economy car 10 years ago, paid the residual at the end of the lease because I knew the car would last a long time, but that cost me $5000 more than if I had bought it in the first place...\",\n \"Without knowing the terms of the company leased car, it's hard to know if that would be preferable to purchasing a car yourself. So I'll concentrate on the two purchase options - getting a loan or paying in full from savings. If the goal is simply to minimize the amount paid for this car, then paying the full cost up-front is best, because it avoids the financing and interest charges associated with a loan. However, the money you would pay for this car would come out of somewhere (your savings). If your savings were in an investment earning a risk-adjusted return rate of, say, 5% APY and the loan cost 1% APY, you'd have more money in the long run by keeping as much money in your savings as possible, and paying the loan as slowly as possible, because the return rate on your savings is higher. Those numbers are theoretical, of course. You have to make a decision based on your expectation of the performance of your investments, and on the cost of the loan. But depending on your risk tolerance and the loan terms available to you, a loan may well make sense. This is especially true when loans costs are subsidized by manufacturers, who often offer favorable financing on new cars to drive demand. But even bank loans on cars can be pretty inexpensive because the car is a form of collateral with predictable future value. And finally, you should consider tax treatment -- not usually a consideration in purchases of cars by consumers in the US, but can vary due to business use and certainly may be different in India. See also: How smart is it to really be 100% debt free?\",\n \"\\\"This question has been asked and answered before. Financially, owning a car will be more economical than leasing one in most cases. The reason for this is that leasing arrangements are designed to make a profit for the leasing company over and above the value of the car. A leasing company that does not profit off their customers will not be in business for long. This is a zero-sum game and the leasing customer is the loser. The lion's share of the customer losses are in maintenance and in the event of an accident or other damage. In both cases, leasing arrangements are designed to make a large profit for the owner. The average customer assumes they will never get into an accident and they underestimate the losses they will take on the maintenance. For example, if both oxygen sensors need to be replaced and it would have cost you $800 to replace them yourself, but the leasing company charges you $1200, then BOOM! you just lost $400. If the car is totaled, the customer will lose many thousands of dollars. Leasing contracts are designed to make money for the owner, not the customer. Another way leasing agents make money is on \\\"\\\"required maintenance\\\"\\\". Most leasing contracts require the leasor to perform \\\"\\\"required\\\"\\\" maintenance, oil changes, tire rotations, etc. Also, with newer cars manufacturers recalls are common. Those are required as well. Nearly nobody does this maintenance correctly. This gives the agent the excuse to charge the customer thousands of dollars when the vehicle is returned. Bills of $4000 to $6000 on a 3 year lease for failure to perform required maintenance are common. Its items like this that allow the leasing agent to get a profit on what looks like a \\\"\\\"good deal\\\"\\\" when the customer walked in the door 3 years previously. The advantage of leasing is that it costs less up front and it is more convenient to switch to a different car because you don't have to sell the car.\\\"\",\n \"As a general rule of thumb, and assuming you have a choice, my advice is to pay cash for things things that depreciate, expenses, and consumables. Consider credit (even if you have cash) for things that will appreciate in value or generate cash flow. That is, use credit as leverage.\",\n \"Which to do is determined by how you like to consume cars. If you don't drive a lot and like to get a new car every 2-3 years, leasing is often the better choice. If you drive a lot or want to keep a car longer than 3 years, you're normally better buying.\",\n \"In a perfect world scenario you would get a car 2-5 years old that has very little mileage. One of the long standing archaic rules of the car world is that age trumps mileage. This was a good rule when any idiot could roll back an odometer. Chances are now that if you rolled your odometer back the car was serviced somewhere, had inspection or whatever and it is on a report. If seller was found to do this they could face jail time and obviously now their car is almost worthless. Why do I mention this? Because you can take a look at 2011 cars. Those with 20K miles go for just a little more than those with 100K miles. As an owner you will start incurring heavy maintenance costs around 100K on most newer cars. By buying cars with lower mileage, keeping them for a year or two, and reselling them before they get up in miles, you can stay in that magic area where you can drive a pretty good car for $200-300 a month. Note that this takes work on both the buying and selling side and you often need cash to get these cars (dealers are good about siphoning really good used cars to employees/friends). This is a great strategy for keeping costs down and car value up but obviously a lot of people try to do this and it takes work and you have to be willing to settle sometimes on a car that is fine, but not exactly what you want. As for leasing this really gets into three main components: If you are going to do EVERYTHING at a dealership and you want something new or newish you might as well lease. At least then you can shop around for apples to apples. The problem with buying a new/used car from the dealers in perpetuity isn't the buying process. It is the fact that they will screw you on the trade-in. A car that books for 20K may trade-in for 17K. Even if the dealer says they are giving you 20K, then they make you pay list price for the car. I have many many times negotiated a price of a car and then wife brought in our car separately and I can count on ZERO fingers how many times that the dealership honored both sides of the negotiations. Not only did they not honor them but most refused to talk with us after they found out. With a lease you don't have to worry about losing this money in the negotiations. You might pay a little extra (or not since you can shop around) but after the lease you wash your hands of the car. The one caveat to this is the high-end market. When you are talking your Acura, Mercedes, Lexus... It is probably better to buy and trade in every couple years. You lose too much equity by leasing, where it won't cover the trade-in gap and cost of your money being elsewhere. I have a friend that does this and gets a slightly better car every 2-3 years with same monthly payment. Another factor to consider is the price of a car. If your car will be worth over $15K at time of sale you are going to have a hard time selling it by owner. When amounts get this high people often need financing. Yes they can get personal financing but most people are too lazy to do this. So the number of used car buyers on let's say craigslist are way way fewer as you start getting over $10-12K and I have found $15K to be kind of that magic amount. The pro-buy-used side is easy. Aim for those cars around $12-18K that are out there (and many still under warranty). These owners will have issues finding cash buyers. They will drop prices somewhere between book price and dealer trade-in. In lucky cases where they need cash maybe below dealer trade-in. And remember these sellers aren't dealing with 100s let alone 10 buyers. You drive the car for 3-4 years. Maybe it is $7-10K. But now you will get much much closer to book price because there will be far more buyers in this range.\",\n \"Here's another way to look at this that might make the decision easier: Looking at it this way you can turn this into a financial arbitrage opportunity, returning 2.5% compared to paying cash for the vehicle and carrying the student loan. Of course you need to take other factors into account as well, such as your need for liquidity and credit. I hope this helps!\",\n \"Here are the reasons I did not lease my current car. When you lease, you're tied in at a monthly payment for 48 months or more. The only way to get out of that payment is to transfer the lease or buy out the lease. If you buy/finance, you can always sell the car or trade it in to get out of the payments. Or you can pay down more of the vehicle to lower the payments. Most leases calculate the cost of leasing based on the 'residual value' of the vehicle. Often these values are far lower than the actual worth of the vehicle if you owned it for those months and sold it yourself. So when you do the math, the lease costs you more -especially with today's low financing rates.\",\n \"\\\"I usually recommend along these lines. If you are going to drive the same car for many years, then buy. Your almost always better to buy, and then drive a car for 10 years than to lease and replace it every 2 years. If you want a new car every two years then lease. You're usually better off leasing if you're going to replace the car before the auto loan is paid off or shortly there after. Also you can get \\\"\\\"more car\\\"\\\" for the same monthly money via leasing. I honestly would advise you to either buy out your lease, or buy a barely used car. Then drive it for as long as you can. Take the extra money you would spend and spend it on an awesome vacation or something. Also, if you're only driving 15 miles a day, then get a cheap, but solid car. Again, just my advice.\\\"\",\n \"Leasing is not exactly a scam, but it doesn't seem to be the right product for you. The point of leasing over buying is that it turns the capital purchase of a car which needs to be depreciated for tax purposes into what is effectively a rental expense. Rent is an expense that can be deducted directly without depreciation. If you are not operating a business where you can take advantage of leasing's tax advantages, leasing is probably not for you. Because of the tax advantages, a lease can be more profitable for the car dealer. They can get a commission or finder's fee on the lease as well as the commission on the car sale. That extra profit comes from somewhere, presumably from you. If a business, you can then pass part of that to the government. As an individual, you lose that advantage. At this point, the best financial decision that you could make would be to buy out the lease on your current car. Lease prices are set based on the assumption that the car will have been abused during the course of the lease. If you are driving the car less than expected, its value is probably higher than the cost of buying out the lease. If you buy that car, you can drive it for years. Save up some money and buy your next car for cash rather than using financing. Of course, if you really want a new car and can afford it, you may not want to buy out the lease. That is of course your decision. You don't have to maximize your current financial position if buying a new car would return more satisfaction for the money in the long run. I would try to avoid financing for what is essentially a pleasure purchase though.\",\n \"Leasing is never a good idea. A car is a depreciating asset -- it loses money over time. Pay cash for your car and buy used ones until your net worth reaches at least $1M.\",\n \"Regarding the opportunity cost comparison, consider the following two scenarios assuming a three-year lease: Option A: Keep your current car for three years In this scenario, you start with a car that's worth $10,000 and end with a car that's worth $7,000 after three years. Option B: Sell your current car, invest proceeds, lease new car Here, you'll start out with $10,000 and invest it. You'll start with $10,000 in cash from the sale of your old car, and end with $10,000 plus investment gains. You'll have to estimate the return of your investment based on your investing style. Option C: Use the $10k from proceeds as down payment for new car In this scenario you'll get a reduction in finance charges on your lease, but you'll be out $10,000 at the end. Overall Cost Comparison To compare the total cost to own your current car versus replacing it with a new leased car, first look up the cost of ownership for your current car for the same term as the lease you're considering. Edmunds offers this research and calls it True Cost to Own. Specifically, you'll want to include depreciation, fuel, insurance, maintenance and repairs. If you still owe money you should also factor the remaining payments. So the formula is: Cost to keep car = Depreciation + Fuel + Insurance + Maintenance + Repairs On the lease side consider taxes and fees, all lease payments, fuel, and maintenance. Assume repairs will be covered under warranty. Assume you will put down no money on the lease and you will finance fees, taxes, title, and license when calculating lease payments. You also need to consider the cost to pay off your current car's loan if applicable. Then you should subtract the gains you expect from investing for three years the proceeds from the sale of your car. Assume that repairs will be covered under warranty. The formula to lease looks like: Lease Cost = Fuel + Insurance + Maintenance + Lease payments - (gains from investing $10k) For option C, where you use the $10k from proceeds as down payment for new lease, it will be: Lease Cost = Fuel + Insurance + Maintenance + Lease payments + $10,000 A somewhat intangible factor to consider is that you'll have to pay for body damage to a leased car at the end of the lease, whereas you are obviously free to leave damage unrepaired on your own vehicle.\",\n \"\\\"You are still paying a heavy price for the 'instant gratification' of driving (renting) a brand-new car that you will not own at the end of the terms. It is not a good idea in your case, since this luxury expense sounds like a large amount of money for you. Edited to better answer question The most cost effective solution: Purchase a $2000 car now. Place the $300/mo payment aside for 3 years. Then, go buy a similar car that is 3 years old. You will have almost $10k in cash and probably will need minimal, if any, financing. Same as this answer from Pete: https://money.stackexchange.com/a/63079/40014 Does this plan seem like a reasonable way to proceed, or a big mistake? \\\"\\\"Reasonable\\\"\\\" is what you must decide. As the first paragraph states, you are paying a large expense to operate the vehicle. Whether you lease or buy, you are still paying this expense, especially from the depreciation on a new vehicle. It does not seem reasonable to pay for this luxury if the cost is significant to you. That said, it will probably not be a 'big mistake' that will destroy your finances, just not the best way to set yourself up for long-term success.\\\"\",\n \"If you have the money to pay cash for the car. Then 0 months will save you the most money. There are of course several caveats. The money for the car has to be in a relatively liquid form. Selling stocks which would trigger taxes may make the pay cash option non-optimal. Paying cash for the car shouldn't leave you car rich but cash poor. Taking all your savings to pay cash would not be a good idea. Note: paying cash doesn't involve taking a wheelbarrow full of bills to the dealer; You can use a a check. If cash is not an option then the longest time period balanced by the rates available is best. If the bank says x percent for 12-23 months, y percent for 24-47 months, Z percent for 48 to... It may be best to take the 47 month loan, because it keeps the middle rate for a long time. You want to lock in the lowest rate you can, for the longest period they allow. The longer period keeps the required minimum monthly payment as low as possible. The lower rate saves you on interest. Remember you generally can pay the loan off sooner by making extra or larger payments. Leasing. Never lease unless you are writing off the monthly lease payment as a business expense. If the choice is monthly lease payments or depreciation for tax purposes the lease can make the most sense. If business taxes aren't involved then leasing only means that you have a complex deal where you finance the most expensive part of the ownership period, you have to watch the mileage for several years, and you may have to pay a large amount at the end of the period for damages and excess miles. Plus many times you don't end up with the car at the end of the lease. In the United States one way to get a good deal if you have to get a loan: take the rebate from the dealer; and the loan from a bank/credit Union. The interest rate at banking institution is a better range of rates and length. Plus you get the dealer cash. Many times the dealer will only give you the 0% interest rate if you pay in 12 months and skip the rebate; where the interest paid to the bank will be less than the rebate.\",\n \"\\\"It's a very simple equation. If we forget about the stress and limitations that come with the so-called \\\"\\\"lease\\\"\\\", and make the following assumptions: Then after 3 years of using this new car: I will never understand why people still \\\"\\\"lease\\\"\\\" a car. Even for very low income people who have to have a car, financing a per-owned decent car would do, but it's just \\\"\\\"show off\\\"\\\" seduction and lure that either unknowing minded or idiot teenagers fall for.\\\"\",\n \"I never understood why people lease rather than buy or finance. I'm financing a new civic 09 @ 0.9%. At the end of the 5 year terms I will have paid less than $800 in interest.\",\n \"Your short-term time frame makes buying used the best option, but it seems you already are aware of that. Look into a certified pre-owned model if you are concerned about lemons. You will usually get some sort of warranty. However, be aware that any car can be a headache with repairs. I would not recommend a lease because basically you are still paying for the depreciation on the car plus interest. Generally, this is the most expensive way to drive a car. You may find the numbers look good for a lease but beware of the 'gotchas' in the terms that can put you way over budget (over mileage, wear and tear, etc.). My best recommendation is to buy gently used with cash. This gives you the most flexibility and best resale value. If you finance a late-model vehicle, be aware that depreciation can leave you upside-down on your loan. That would put you in the position of having to shell out cash just to get rid of the car.\",\n \"One additional reason to pay with cash rather than financing is that you will be able to completely shut down the dealership from haggling over finance terms and get right to the point of haggling over the cost of the car (which you should always do).\",\n \"Cash price is $22,500. Financed, it's the same thing (0% interest) but you pay a $1500 fee. 1500/22500 = 6.6%. Basically the APR for your loan is 1.1% per year but you are paying it all upfront. Opportunity cost: If you take the $22,500 you plan to pay for the car and invested it, could you earn more than the $1500 interest on the car loan? According to google, as of today you can get 1 year CD @ 1.25% so yes. It's likely that interest rates will be going up in medium term so you can potentially earn even more. Insurance cost: If you finance you'll have to get comprehensive insurance which could be costly. However, if you are planning to get it anyway (it's a brand new car after all), that's a wash. Which brings me to my main point: Why do you have $90k in a savings account? Even if you are planning to buy a house you should have that money invested in liquid assets earning you interest. Conclusion: Take the cheap money while it's available. You never know when interest rates will go up again.\",\n \"Rule of thumb is always BUY, NEVER lease, unless you plan to use it for a business where you can expense the lease payments. Leasing is the biggest scam. Lease is just a fancy word for renting and the dealerships PRAY that people like us lease. As for new or old, new cars have better warranty but you may get a great deal on a 1-3 year old used car.\",\n \"Dealer financing should be ignored until AFTER you have agreed on the price of the car, since otherwise they tack the costs of it back onto the car's purchase price. They aren't offering you a $2500 cash incentive, but adding a $2500 surcharge if you take their financing package -- which means you're actually paying significantly more than 0.9% for that loan! Remember that you can borrow from folks other than the dealer. If you do that, you still get the cash price, since the dealer is getting cash. Check your other options, and calculate the REAL cost of each, before making your decisions. And remember to watch out for introductory/variable rates on loans! Leasing is generally a bad deal unless you intend to sell the car within three years or so.\",\n \"\\\"Electric does make a difference when considering whether to lease or buy. The make/model is something to consider. The state you live in also makes a difference. If you are purchasing a small electric compliance car (like the Fiat 500e), leasing is almost always a better deal. These cars are often only available in certain states (California and Oregon), and the lease deals available are very enticing. For example, the Fiat 500e is often available at well under $100/mo in a three-year lease with $0 down, while purchasing it would cost far more ($30k, minus credits/rebates = $20k), even when considering the residual value. If you want to own a Tesla Model S, I recommend purchasing a used car -- the market is somewhat flooded with used Teslas because some owners like to upgrade to the latest and greatest features and take a pretty big loss on their \\\"\\\"old\\\"\\\" Tesla. You can save a lot of money on a pre-owned Model S with relatively low miles, and the battery packs have been holding up well. If you have your heart set on a new Model S, I would treat it like any other vehicle and do the comparison of lease vs buy. One thing to keep in mind that buying a Model S before the end of 2016 will grandfather you into the free supercharging for life, which makes the car more valuable in the future. Right now (2016/2017) there is a $7500 federal tax credit when buying an electric vehicle. If you lease, the leasing company gets the credit, not you. The cost of the lease should indirectly reflect this credit, however. Some states have additional incentives. California has a $2500 rebate, for example, that you can receive even if you lease the vehicle. To summarize: a small compliance car often has very good reasons to lease. An expensive luxury car like the Tesla can be looked at like any other lease vs buy decision, and buying a used Model S may save the most money.\\\"\",\n \"I am a carsalesman. Lets get one thing straight, we are not allowed to give people a better deal just because they pay cash, regardless of what some people say. That can be seen a discrimination as not all people are fortunate enough to have cash available. if anything, finance is better for the dealership, as we get finance commission and the finance company DOES pay us the total amount immidiatly\",\n \"Look at the basic cost of the lease. Option 1: keep the car for three years. Pay for repairs during that time then sell it for $7,000. Option 2: Sell the current car for $10,000. Lease a new car for three years. Assume no need for repairs during those three years. At the end of the three years return the car in return for $0. Cost of option 1 is $3000 plus repairs. Cost of Option 2 is 36 months x monthly lease cost. The first $83 of the monthly lease cost is to cover the $3000 fixed cost of option 1. The rest of the monthly lease cost is to cover the cost of repairs. Also remember that some leases have a initial down payment due at signing, and penalties for condition, and excess mileage. The lease company may also require a higher level of insurance for the lease to cover their investment if you have an accident. Plus If you fall in love with a different car two year from now, or your needs change you are locked in until the end of the lease period.\",\n \"I have a colleague who always leases cars first. He's very well off, has piles of money in savings, owns a home, and the cherry on top, he could just write a check for the car.... He sees the lease as an insurance policy on the first couple of years of the car's life. If it gets in an accident or he finds something about it he doesn't like, he can give it back to the dealer at the end of the term with no hassle and move on to the next car. Some people value the fact that a lease is a rental. If you're leasing a luxury car or something you couldn't otherwise afford, no amount of mental gymnastics will turn this in to a good idea. Separately, you should never make a down payment on a lease. If the car is totaled early on, you will not recoupe the money you put down. The issue here is that while the numbers all work out the same between a lease and a purchase your situation is different. If the leased car is totaled, the bank gets its money back from an insurer. If that payment doesn't cover the value of the car, the GAP insurance will cover it. In either situation, if there's an excess remaining it will be returned to you. The issue is the excess may not fully replace your down payment. If you then went to lease another car you would need to come up with that down payment again because you couldn't just simply choose to lease a used car; like you could in the case of a purchase. Additionally, GAP is generally included in a lease whether you want it or not. As far as I'm concerned it doesn't make financial sense to mitigate the value of the GAP coverage once you've decided to live in a lease situation.\",\n \"If you lease a car, you are paying for the depreciation of a certain number of miles, even if you don't actually use those miles. Since you know you will be well under the standard number of miles when your lease is up, and you already know that you want to keep the car, buying is better than leasing.\",\n \"this would make sense assuming debt payments incl. interest to the market for the debt assumed to purchase said boat/yacht is less than the lease payments over the life of both terms. If your lease payments are lower than term loan pmts incl. interest (or a similar debt instrument) then OP would still be right. TVM is irrespective of a competitors (or lessor in this case) Kc. Although, this goes completely out the window if it's a bond-like debt vehicle since those cash flows are distributed in a completely different manner.\",\n \"If given the option of up front or monthly, here are some scenarios where it would be beneficial to pay the lease up front instead of monthly (neither of which are affected by inflation): Barring the above scenarios or some reason you don't want to keep money around (such as if you have some sort of addiction causing you to spend money, or you have an imminent lawsuit which will take all of your money), you are better off paying monthly.\",\n \"Two adages come to mind. Never finance a depreciating asset. If you can't pay cash for a car, you can't afford it. If you decide you can finance at a low rate and invest at a higher one, you're leveraging your capital. The risk here is that your investment drops in value, or your cash flow stops and you are unable to continue payments and have to sell the car, or surrender it. There are fewer risks if you buy the car outright. There is one cost that is not considered though. Opportunity cost. Since you've declared transportation necessary, I'd say that opportunity cost is worth the lower risk, assuming you have enough cash left after buying a car to fund your emergency fund. Which brings me to my final point. Be sure to buy a quality used car, not a new one. Your emergency fund should be able to replace the car completely, in the case of a total loss where you are at fault and the loss is not covered by insurance. TLDR: My opinion is that it would be better to pay for a quality, efficient, basic transportation car up front than to take on a debt.\",\n \"this article talks about the good and bad sides of purchasing and leasing business equipment. hope you can share this piece with all your friends, most especially with small business owners who are looking for methods to acquire office or manufacturing equipment.\",\n \"Some things you missed in your analysis: How will financing change your insurance costs? I.e. what is the difference between the insurance that you would buy for yourself and what they require? Note that it is possible that your insurance preferences are more stringent than the financing company's. If so, this isn't a big deal. But what's important is to consider if that's true. Because if you'd prefer to drive with only the legal minimum insurance and they insist that you have full coverage with no more than a $1000 deductible, that's a significant difference. Remember that you don't have $22.5k for six years. You have an average of $10.5k (($22.5k + -$1500)/2) for six years. Because you make payments ($24k) throughout. So you start with $22.5k and subtract $333.33 a month until you reach -$1500. That neglects both investment gains and potential losses. It's not the $333 payment that will freak out mortgage companies. It's the $24k debt. But that's offset by your $22.5k in assets at the beginning. And the car of course counts as an asset, albeit at lower than its sale value. I.e. from the bank's perspective, paying $22.5k for a car out of savings is almost as bad as borrowing $24k for a car. Both reduce your net worth. Watch out for hidden fees. In particular, 0% interest can often change into higher interest under certain circumstances. If we assume a 7% return for the six years, that's about $1400 the first year and less each year after. Perhaps $4500 over six years. But you aren't going to get a 7% return if you keep $24,000 in a bank account in case you have to pay off the loan. Instead, you'll get more like 1%, less than inflation. Even five year Certificates of Deposit are only about 2%, right around inflation (1.9% for previous twelve months). You can't keep the $24,000 in a securities account and be sure that it will be there when you need it. If the market crashes tomorrow, your $24,000 might be worth $12,000 instead. You'd have to throw in extra money from elsewhere. Instead of making $4500 at the cost of $1500, you'd have paid $25,500 for $12,000. Not a good deal. So for your plan to work, that $24,000 needs to be in an account that won't fall in value. You either need to compromise on the idea of a separate account that is always there when you need it, or you have to accept rather low returns. Personally, I would prefer not to have the debt and not to pay extra on the insurance. But that's me. The potential investment returns are not worth it to me. If you give up the separate account, you can make a few thousand dollars more. But your risk is higher.\",\n \"Don't let the tail of credit score wag the dog of prudent financial planning. If you have a sufficient emergency fund in addition to the car cost, then buying the car for cash is to my mind a better plan. But if the car purchase would deplete your emergency fund, then I'd go for the loan. Cash in hand gives you optionality that can be very valuable when things go wrong. And credit will be withdrawn at exactly the most painful moment.\",\n \"\\\"There are two reasons leases are generally a worse deal than buying. First, inherent in the lease is the concept of trading in the car at the end of the lease term. As we all know, cars depreciate the most in the first year or two. By repeatedly leasing cars on short time frames, you own the vehicles during those most expensive years. Of course there's nothing stopping you from doing the same thing when buying (be it via cash or loan), but leasing builds in a schedule and encourages you to stick to it. Second, it is easier for the dealer salesperson to hide things from the consumer in a lease contract. Most salespeople will try to get a car purchaser to focus on the monthly payment, or they'll four-box the purchaser, but even then there's only 4 numbers, and most consumers have a rough idea what they are and what they mean. But in a lease the numbers in question are renamed and obscured. \\\"\\\"Price\\\"\\\" becomes \\\"\\\"capitalized cost\\\"\\\". \\\"\\\"Interest rate\\\"\\\" becomes \\\"\\\"money factor\\\"\\\" and is divided by 2400, making it look really small and not easily translatable without a calculator or pencil and paper. \\\"\\\"Down payment\\\"\\\" becomes a capitalized cost reduction. There's a new concept \\\"\\\"residual value.\\\"\\\" Neither of those reasons change when interest rate is lower.\\\"\",\n \"In general I'd say, yeah, if you can pay cash, pay cash. If you pay cash, then by definition you pay zero interest. If you get a loan, you'll pay interest. Most people get a loan to buy a car because they don't have the cash. Possible reasons not to pay cash when you could: One: Technically you can pay cash, but if you did, you would have little or no reserve for emergencies. Like if the car costs, say, $20,000.00, and you have $20,010.00 in your bank account, then technically you could afford to pay cash, but you probably shouldn't, because you don't want to have just $10 left. What if tomorrow something comes up? Two: Arguably, you have a place to invest money that pays more than the interest on the loan. Like say you can get a car loan for, whatever the going rate is today, say 6%. And you know a place to invest your money that is very safe and almost guaranteed to pay 10%. It would make sense to borrow to buy the car, invest the cash, and then withdraw money from the investment to make the payments on the car. You'd end up 4% ahead. There are a lot of catches to that strategy, though. The biggest is that the more the investment pays, the more likely that it is risky. If you thought the investment would pay 10% but it ends up paying only 4%, then you will lose money by this strategy. Also, there's the psychological element: Many people SAY and fully INTEND to invest their money, but then find other things they want to buy and so spend it instead. If you pay cash, you're committed.\",\n \"There are several factors here. Firstly, there's opportunity cost, i.e. what you would get with the money elsewhere. If you have higher interest opportunities (investing, paying down debt) elsewhere, you could be paying that down instead. There's also domino effects: by reducing your liquid savings to or below the minimum, you can't move any of it into tax advantaged retirement accounts earning higher interest. Then there's the insurance costs. You are required to buy extra insurance to protect your lender. You should factor in the extra insurance you would buy vs the insurance required. Given that you can buy the car yourself, catastrophic insurance may not be necessary, or you may prefer a higher deductible than your lender will allow. If you're not sufficiently capitalized, you may need gap insurance to cover when your car depreciates faster than your loan is paid down. A 30 percent payment should be enough to not need it though. Finally, there's some value in having options. If you have the loan and the cash, you can likely pay it off without penalty. But it will be harder to get the loan if you don't finance it. Maybe you can take out a loan against the car later, but I haven't looked into the fees that might incur. If it's any help, I'm in the last stretch of a 3 year car loan. At the time paying in cash wasn't an option, and having done it I recognize that it's more complicated than it seems.\",\n \"Trade-in values are generally below what you can get in a private sale. To directly answer your question, you should sell the crossover yourself and use the balance to purchase your new vehicle. I would encourage you to use the $9k to finance directly without a lease, especially if you are planning on financing after the lease term. The lease will not save you money over the time you drive the vehicle in this case, and worse, will likely expose you to risk of having to pay additional fees if you break certain terms in the lease (mileage, wear and tear, etc) Best option mathematically is to use the $9k to purchase a vehicle for cash. This provides the lowest total cost of ownership. Even if you are afraid of purchasing a lemon, leasing a vehicle is awfully expensive insurance against that possibility. You would have to rack up some significant repairs to justify the cost of the lease vs cash over the term of operating the vehicle.\",\n \"I might be missing something, but I always understood that leasing is about managing cash-flow in a business. You have a fixed monthly out-going as opposed to an up-front payment. My accountant (here in Germany) recommended: pay cash, take a loan (often the manufactures offer good rates) or lease - in that order. The leasing company has to raise the cash from somewhere and they don't want to make a loss on the deal. They will probably know better than I how to manage that and will therefore be calculating in the projected resale value at the end of the leasing period. I can't see how an electric car would make any difference here. These people are probably better informed about the resale value of any type of car than I am. My feeling is to buy using a loan from the manufacturer. The rates are often good and I have also got good deals on insurance as a part of that package. Here in Germany the sales tax (VAT) can be immediately claimed back in full when the loan deal is signed.\",\n \"If you want the new car, pay cash for it. Here's why: By paying cash for the car, you immediately save $2,500 off the price of the car. That is not insignificant, it's 8.3% off. By paying cash, you'll never be upside down on the car, and you can sell the car anytime you want. You said that all you need to do is beat the 0.9% interest rate with your investment to come out ahead. That doesn't take into account the discount you would have gotten by paying cash. $30,000 invested for 5 years at 1.6% (rough estimate) would get you $2,500 (the discount), so the rate you need to beat to come out ahead is actually 2.5%. Still doable, but it is much less of a sure thing on a 5 year investment, and much less worth the trouble. New cars are an expensive luxury. If you are wealthy enough, a new car certainly can be appropriate for you. However, if you don't like the idea of paying $30k in cash all at once, that is a strong indication that perhaps the new car is a luxury you aren't in a position to buy at this time. Borrowing the money and paying for it over time makes it psychologically easier to over spend on transportation.\",\n \"An expense is an expense. You can deduct your lease payment subject to some limitations, but you don't make out by having more expenses. Higher expenses mean lower profit. Is leasing better than owning? It depends on the car you'd buy. If your business doesn't benefit from flashiness of your car, then buying a quality used car (a few years old at most) would probably be a wiser decision financially. I'd think hard about whether you really need an up-to-date car.\",\n \"It's my understand that leasing is never the better overall deal, with the possible exception of a person who would otherwise buy a brand new car every 2 or 3 years, and does not drive a lot of miles. Note: in the case of a company car, Canadian taxes let you deduct the entire lease payment (which clearly has some principal in it) if you lease, while if you buy you can only deduct the interest, and must depreciate the car according to their schedule. This can make leasing more attractive to those buying a car through a corporation. I don't know if this applies in the US. The numbers you ran through in class presumably involved calculating the interest paid over the term of the loan. Can you not just redo the calculation using actual interest and lease numbers from a randomly chosen current car ad? I suspect if you do, you will discover leasing is still not the right choice.\",\n \"Not long after college in my new job I bought a used car with payments, I have never done that since. I just don't like having a car payment. I have bought every car since then with cash. You should never borrow money to buy a car There are several things that come into play when buying a car. When you are shopping with cash you tend to be more conservative with your purchases look at this Study on Credit card purchases. A Dunn & Bradstreet study found that people spend 12-18% more when using credit cards than when using cash. And McDonald's found that the average transaction rose from $4.50 to $7.00 when customers used plastic instead of cash. I would bet you if you had $27,000 dollars cash in your hand you wouldn't buy that car. You'd find a better deal, and or a cheaper car. When you finance it, it just doesn't seem to hurt as bad. Even though it's worse because now you are paying interest. A new car is just insanity unless you have a high net worth, at least seven figures. Your $27,000 car in 5 years will be worth about $6500. That's like striking a match to $340 dollars a month, you can't afford to lose that much money. Pay Cash If you lose your job, get hurt, or any number of things that can cost you money or reduce your income, it's no problem with a paid for car. They don't repo paid for cars. You have so much more flexibility when you don't have payments. You mention you have 10k in cash, and a $2000 a month positive cash flow. I would find a deal on a 8000 - 9000 car I would not buy from a dealer*. Sell the car you have put that money with the positive cash flow and every other dime you can get at your student loans and any other debt you have, keep renting cheap keep the college lifestyle (broke) until you are completely out of debt. Then I would save for a house. Finally I would read this Dave Ramsey book, if I would have read this at your age, I would literally be a millionaire by now, I'm 37. *Don't buy from a dealer Find a private sale car that you can get a deal on, pay less than Kelly Blue Book. Pay a little money $50 - 75 to have an automotive technician to check it out for you and get a car fax, to make sure there are no major problems. I have worked in the automotive industry for 20 + years and you rarely get a good deal from a dealer. “Everything popular is wrong.” Oscar Wilde\",\n \"In the U.S., most car dealers provide lease financing through one company (usually a subsidiary of the auto manufacturer). Whereas they provide loan financing through a variety of companies, some of whom offer very high interest rate loans and sell the loans as collateralized debt obligations (CDOs). Have you checked whether Chase or First Tech Credit Union offers a suitable car lease?\",\n \"For a lease, your payment is a function of sale price minus residual value. If the car has a low residual value then the lease payments will be higher. If it has a high residual value then lease payments will be lower but the purchase price at the end of the lease will be higher (potentially even higher than the KBB of the car). There is no gaming the system. Whether you buy now or lease now and buy later, you will be paying for the entire car. Calculate the payments in both scenarios with appropriate interest rates/money factors, sale price, and residual value. This will demonstrate there is no free lunch to be had here. Also, don't forget that financing the vehicle after a three year lease will probably mean a higher interest rate than if you were to finance it all now. With a purchase now you will likely get more favorable financing terms and be able to talk them down on sale price. Leasing will not allow such flexibility generally. Tldr No, that's not how it works. If you plan on owning the car for the duration of a loan (e.g. 5 years) it will be cheaper to just finance now.\",\n \"\\\"Now, to buy in full (and essentially have zero savings), buy in part (£10000 deposit, followed by a loan of £4000) or PCP/HP more of the value? So, you are assessing if the car is worth having with either none or only 4,000 in savings. This is the most critical information you have provided. My outright opinion is to always buy a mildly used car as I hate the idea of loans and interest. With the amount of money that you currently possess, I believe the \\\"\\\"Buy-in-part\\\"\\\" option is best as it reduces your interest liability; but, I don't believe you should do it currently. 4,000 is a rather small cash fund for if something were to go boom in the night. As for your question of interest: This is completely dependent on the amount you are able to pay per period and the total interest you are willing to spend, rows four and seven respectively. This is your money, and no one can tell you what's best to do with it than yourself. Keep looking for good leasing deals or if you think you can survive financial strife with 4,000 then follow your heart. \\\"\\\"Depreciation\\\"\\\" fluctuates to the buyer, so never assume what the car may lose in the next 2-3 years. Hope it all goes well my friend.\\\"\",\n \"The only reason to lend the money in this scenario is cashflow. But considering you buy a $15000 car, your lifestyle is not super luxurious, so $15000 spare cash is enough.\",\n \"There needs to be more numbers with your choices, without those any answer is purely speculation. Assuming that India is much like the US, you are almost always better to go with a company leased car. That is if you are not responsible for the lease if your employment ends with the company. Here in the US companies typically reimburse, so tax free, their employees for about 50 cents per mile, or about 31 cents per kilometer. This barely covers the gas and insurance and falls way short when one includes deprecation and maintenance. So it is better to have the company to pick up all those costs. Borrowing money on a car is just plain dumb no matter what the interest rate. So I would stick with choice number 1 or 3 depending on the arrangement for the company leased car. The next question becomes how much you should spend for a car? I would say enough to keep you happy and safe, but not much more than that until you are wealthy.\",\n \"Your practice of waiting until you can pay cash is a good one. It will certainly prevent you from getting into debt! Now, to be clear, your question puts a credit card in the same category as a loan, but it doesn't have to be. You could use a credit card almost like cash, if you are careful. I'm not familiar with the system in France, but in the US, even if you are paying cash all the time, there are some benefits to getting a credit card and paying it off in full every month, instead of simply paying with cash. Some of those benefits are: One pretty big downside of having a credit card depends on your personality. Some people, once they have credit, end up spending beyond their means, and end up getting into debt. Please look into whether credit cards work the same way in France before considering the above advice. As for your question regarding getting a loan vs paying cash, that will usually be personal preference, since with a loan you can buy expensive items (such as a house or car) much sooner than you otherwise could if you waited until you saved the money. For example, it might take 10 years or more to build up enough money to purchase a house with cash, so if you don't want to wait that long, you'll need to finance it.\",\n \"Approximately 25% of all cars sold last year were leased, which is the highest on record. When you are leasing you don't own the car, instead you are basically renting it for a fixed term, and turning it back to the dealership. It is very cost effective, because the manufacturers have a keen interest in making lots of cars. They are often subsidizing the lease by giving incentives to the dealer. They are gambling on the future value of their cars. They can lose on that gamble. The car business has turned into a financial nightmare for the car companies; they have huge development costs as the cars become more like mobile computing platforms loaded with sensors, and software that is constantly changing. They can't hold a model for 20 years like Mercedes was able to do in the past. Now they have to constantly update their products. The only way to survive as a car maker is to pump out volume, and the leasing programs, which are quietly being underwritten by the manufacturers help them increase the production quantities, which helps lower the fixed development costs. If only the defense contractors could do this! they are stuck spending billions to build 20 planes, and so each one has a staggering price tag. In the future, the car companies that will survive are those that have terrific credit, and low borrowing costs. That means Japanese and Germans will own the car business entirely in the end, and countries with higher borrowing costs (like America and Brasil) will not be competitive. Luckily Ford is so frugal, due to the lingering spirit of its founder, that they can hold out. One thing strongly in favor of leasing is that you have zero maintenance costs typically. The repair risk is significant in luxury cars. When you buy a 10 year old BMW, and when the tranny goes, it costs a fortune. Having a superb car for 30 months for a few hundred bucks a month is something a lot of people enjoy doing. Who can blame them? you spend an hour or 2 a day in your car, and why not live in a nice place?\",\n \"I'd finance the car (for 60 or 48 months), but stash enough money in a separate account so to guarantee the ability to pay it off in case of job loss. The rationales would be: Note that I'd only do this if the loan rate were very low (under 2%).\",\n \"Well, it really doesn't make sense to pay for either in cash. For these purchases, unless you're super wealthy, you won't be paying it in full. If you were to pay in full, then I don't see any practical point to withdraw that money in cash.\",\n \"I would not claim to be a personal expert in rental property. I do have friends and family and acquaintances who run rental units for additional income and/or make a full time living at the rental business. As JoeTaxpayer points out, rentals are a cash-eating business. You need to have enough liquid funds to endure uncertainty with maintenance and vacancy costs. Often a leveraged rental will show high ROI or CAGR, but that must be balanced by your overall risk and liquidity position. I have been told that a good rule-of-thumb is to buy in cash with a target ROI of 10%. Of course, YMMV and might not be realistic for your market. It may require you to do some serious bargain hunting, which seems reasonable based on the stagnant market you described. Some examples: The main point here is assessing the risk associated with financing real estate. The ROI (or CAGR) of a financed property looks great, but consider the Net Income. A few expensive maintenance events or vacancies will quickly get you to a negative cash flow. Multiply this by a few rentals and your risk exposure is multiplied too! Note that i did not factor in appreciation based on OP information. Cash Purchase with some very rough estimates based on OP example Net Income = (RENT - TAX - MAINT) = $17200 per year Finance Purchase rough estimate with 20% down Net Income = (RENT - MORT - TAX - MAINT) = $7500 per year\",\n \"When getting a car always start with your bank or credit union. They are very likely to offer better loan rate than the dealer. Because you start there you have a data point so you can tell if the dealer is giving you a good rate. Having the loan approved before going to the dealer allows you to negotiate the best deal for the purchase price for the car. When you are negotiating price, length of loan, down payment, and trade in it can get very confusing to determine if the deal is a good one. Sometimes you can also get a bigger rebate or discount because to the dealer you are paying cash. The general advice is that a lease for the average consumer is a bad deal. You are paying for the most expensive months, and at the end of the lease you don't have a car. With a loan you keep the car after you are done paying for it. Another reason to avoid the lease. It allows you to purchase a car that is two or three years old. These are the ones that just came off lease. I am not a car dealer, and I have never needed a work visa, but I think their concern is that there is a greater risk of you not being in the country for the entire period of the lease.\",\n \"You SHOULDN'T lease one if you are going to get an economy car, if you don't drive too much (<15K / year), and you want to hang on to the car for a long time. Otherwise, if you are a regular driver, driving a leased new quality car can be cost effective. Many cars now have bumper-to-bumper warranties that last as long as the lease (say 80K). So there is rarely any extra costs apart from regular maintenance. The sweet spot for most new cars is in the 5th, 6th, or 7th years, after they are paid off. But at that point, you may find you have maintenance bills that are approaching an average of $200 - $300 per month. In which case, a lease starts to look pretty good. I owned a 7 year old Honda Accord that cost only $80 less per month in maintenance than the new leased VW that replaced it. Haven't looked back after that. Into my 3rd car and 9th year of leasing.\",\n \"You need to do the maths exactly. The cost of buying a car in cash and using a loan is not the same. The dealership will often get paid a significant amount of money if you get a loan through them. On the other hand, they may have a hold over you if you need their loan (no cash, and the bank won't give you money). One strategy is that while you discuss the price with the dealer, you indicate that you are going to get a loan through them. And then when you've got the best price for the car, that's when you tell them it's cash. Remember that the car dealer will do what's best for their finances without any consideration of what's good for you, so you are perfectly in your rights to do the same to them.\",\n \"Indeed - the math. I bought my car 6 years ago. It was an ex showroom model (not demo) so came fully kitted and with a decent discount. I had the cash, but the salesman wanted me to take financing on half of the price *and gave me a discount* so that I would. It was a 3 year loan at a very low rate and was therefore lower than the cash price I had gotten. So I took the deal. I can only assume he was getting better commission rates for financing than he was selling cars. Either way, worked out for me.\",\n \"There is a 3rd option: take the cash back offer, but get the money from a auto loan from your bank or credit union. The loan will only be for. $22,500 which can still be a better deal than option B. Of course the monthly payment can make it harder to qualify for the mortgage. Using the MS Excel goal seek tool and the pmt() function: will make the total payment equal to 24K. Both numbers are well above the rates charged by my credit union so option C would be cheaper than option B.\",\n \"To directly answer your question, the best choice is to pay cash and place the rest on your student loan. This is saving you from paying more interest. To offer some advise, consider purchasing a cheaper car to place more money towards your student loan debt. This will be the best financial decision in the long-term. I suspect the reason you are considering financing this vehicle is that the cash payment feels like a lot. Trust your instinct here. This vehicle sounds like large splurge considering your current debt, and your gut is telling you as much. Be patient. Use your liquid funds to get a more affordable vehicle and attack the debt. That is setting yourself up for financial success.\",\n \"You need to look at the numbers when you're ready to transact. What your crossover is worth now, what the truck will lease for then, what financing deals may or may not be available will all change. I'm not sure why you've already decided you will lease the truck, perhaps you're planning to take advantage of some kind of business write off. I would personally never put anything down on a lease, though I have argued with people on here about that particular decision. The reality is you need to look at the numbers. Some banks will adjust the interest you pay on your lease to account for your down payment, some don't. Consider a $9,000 lease, $250 per month for 36 months. Consider you pay $1,000 up front as a down payment. Example 1: $1,000 lowers the amount due on the lease to $8,000 lowering your monthly payment to $222.22 from $250, the downpayment has accomplished nothing. Over the 36 months you will have still paid the same $9,000. Example 2: $1,000 up front changes the amount owed and other fees generally applicable to a lease (gap insurance etc) and your payment drops to $215, your total over the lease is now $8,740 ($1,000 down and $7,740 in payments). You need to look at the numbers. In general if you know you will be purchasing the truck at the end of the lease it's more financially advantageous to just purchase it from the start.\",\n \"First, who is saying that it is a better option? In general it is best to pay cash for things when you can. I think the reality is that for most people owning a house would be very difficult without some sort of financing. That said, one argument for financing a house these days even if you could afford to pay cash is that the interest rates are very low. For a 30-year fixed loan you can borrow money under 4.5% APR with decent credit. If you are willing to accept even a little risk you could almost certainly invest that same money and get a return higher than 4.5%. With the US mortgage interest tax deduction the numbers are even more favorable for financing. Those rates look even more attractive when you consider you are paying for the house with today's dollars and paying back the loan with dollars from up to 30 years in the future, which will be worth much less.\",\n \"I've seen this approach to buying/funding cars described in a couple of different ways over the years. Random thoughts:\",\n \"You know what? Pay cash, but ask for a discount. And something fairly hefty. Don't be afraid to bargain. The discount will be worth more than the interest you'd get on the same amount of money. And if the salesman doesn't give you a decent discount, ask to speak to the manager. And if that doesn't work, try another store. Good luck with it!\",\n \"Debt creates risk. The more debt you take on, the higher your risk. What happens if you lose your job, miss a payment, or forget to write the final payment check for the exact amount needed, and are left with a balance of $1 (meaning the back-dated interest would be applied)? There is too much risk for little reward? If you paid monthly at 0% and put your money in your savings account like you mentioned, how much interest would you really accrue? Probably not much, since savings account rates suck right now. If you can pay cash for it now, do it. So pay cash now and own it outright. Why prolong it? Is there something looming in the future that you think will require your money? If so, I would put off the purchase. No one can predict the future. Why not pay cash for it now, and pay yourself what would have been the monthly payment? In three years, you have your money back. And there is no risk at all. Also, when making large purchases with cash, you can sometimes get better discounts if you ask.\",\n \"\\\"Buying now with a mortgage gets you: Waiting to buy with all cash gets you: These are also some of the pros or cons for the rent or buy dilemma that Paul mentioned in comments to the OP. This is a very complex, multi-faceted question, that would not respond well to being put into any equation or financial model. Most people answer the question with \\\"\\\"buy the home now with a mortgage\\\"\\\" if they can pay for the down payment. This is why the mortgage industry exists. The people who would want to finance now rather than buy with all cash later would not only be analyzing the question in terms of financial health but also in terms of general well being. They might consider the tremendous pride that comes with home ownership and living under a roof of one's own. Who can say that those people are wrong?\\\"\",\n \"What percentage of your savings is the full car payment? If it's a significant chunk, then I'd finance some of the cost of the car in order to maintain liquidity.\",\n \"Two cases: You take the credit and reinvest the cash equivalent (be it a savings account or otherwise), yielding you the x% at virtually zero risk. Unless of course you consider possibility of your own negligence a risk (in case of missed payments, etc.). You pay by cash and have the peace of mind at the cost of that x%. The ultimate decision depends on which you value more - the $ you get from x%, or the peace of mind.\",\n \"Good question. If a person has a choice, it is probably better to pay cash. But not always. If your large pile of cash can earn more being invested than cost of the interest to borrow a similar large pile of cash, it is beneficial to get a mortgage. Otherwise pay cash. EXAMPLE: A house costs $100,000. I have $100,000 in extra money. I can invest that at 5% per year, and I can borrow an additional $100,000 at 2% per year. Since I can make more on my pile of cash than it costs to borrow another pile of cash, borrowing is better. Compound interest is the most powerful force on the planet according to Albert Einstein (maybe). That isn't likely for most people though. Here is the results from some online financial calculators. http://www.calcxml.com/do/hom03 Borrowing $100,000 with 2% interest for 30 years will cost a total of $148.662. You get $100,000, but it cost you $48,662 to do it. http://www.calcxml.com/do/sav07 Saving $100,000 in a bank account with an interest rate of %5 will be worth $432,194 in 30 years. By not spending the money you will earn $332,194 over the course of 30 years. So if you can invest at 5% and borrow at 2% you will end up with $283,532 more than if you didn't. It is a pretty extreme example, and financial advisers make a lot of money figuring out the complex nature of money to make situations like that possible.\",\n \"The answer to this question is very different depending on the type of item. From a purely financial perspective you would want to answer these questions which you may not have enough information to answer: Realistically the question I prefer to ask are: When something fails there is a big difference to me between having the cash and having an insurance policy that is suppose to cover it even if they are theoretically the same value. Some insurance policies may even be better than cash, like homeowners insurance might help take care of details like finding a contractor to fix the issue, finding temporary housing if your house burns down, etc.\",\n \"It is easier to get a loan on a rental than a flip, which is a huge advantage to rental properties. Leverage allows you to increase your returns and make more money off appreciation and higher rents. I use ARMs to finance my rental properties that are amortized over 30 years. I have to put 20 percent down, but my portfolio lender lets me get as many loans as I want. Because I put 20 percent down on my rental properties and they still have great cash flow I can buy three times as many properties as I could with cash purchases. Buying more rental properties amplifies the other advantages like cash flow, equity pay down and the tax advantages.\",\n \"Cash is very effective at getting a discount when buying from individuals (craigslist, garage sales, estate sales, flea markets, etc.). I'll make an offer, then thumb through the cash while they consider it. There eyes will dart back and forth between my eyes and the cash as they decide whether to take my offer. Car dealers do seem to be very unique. The dealer I bought at recently said that 70% of their deals were cash purchases, JoeTaxpayer's dealer said 1% were cash purchases. I've had good luck negotiating with cash for well-loved cars (under $10K) from both individuals or used dealers. I'm also looking for carpet for my house and the first vendor I went to offered at 5% discount if I paid up front (no financing).\",\n \"\\\"With a gross income of $ 95,000 per year, and a net savings rate of over $ 18,000 per year, a budget of $ 3,600 per year for automobile interest and depreciation is not irresponsible. But poor car choices, poor car maintenance habits, and driving habits that risk totalling cars are irresponsible. Also, not fully understanding a lease deal is irresponsible. The \\\"\\\"great lease deal\\\"\\\" might be encouraging you to make a different \\\"\\\"poor car choice\\\"\\\" than you made last time. A \\\"\\\"great deal\\\"\\\" on a bad car is not really a great deal. Also, depending on the contract and your driving habits, you might have a surprising cost at the end of the lease.\\\"\",\n \"Quite honestly, with the current interest rates, you're better off getting a loan, putting the cash into some top performing equity funds and paying down on the loan. If for some reason you're in need of the capital, the stocks are going to be much more liquid. Being debt free is a good thing, but there is also a right way to leverage yourself. At the end of the day though, and despite what anyone on this site tells you, you need to run the numbers, make the long term projections to determine what's the best route to take.\",\n \"\\\"Typically, there are three ways an acquisition is financed. What is used is called the \\\"\\\"consideration\\\"\\\". 1.) Cash - Existing cash on the balance sheet is used. Think of it like purchasing something with your debit card. 2.) Stock - This a bit more complicated. The acquiring company issues new shares and exchanges those shares for shares of the acquiree. Because new shares are issued, this can have a dilutive effect on the stock price of the acquirer. However, it can have an accretive effect if enough synergistic value between the two companies is realized and/or expected. 3.) Debt - Basically like taking out a loan. The \\\"\\\"consideration\\\"\\\" for a deal is often reported, as you read in your article. Most deals are a combination of cash/stock/debt. (Debt is often referred to as \\\"\\\"cash\\\"\\\" - i.e. if you take out a loan, you are essentially receiving cash.) When it comes to which is best to use, there are quantitative analyses for that - with a specific focus on the acquirer's EPS (Earnings per share) post-deal. The factors that are considered are the forgone interest on cash, the additional interest gained from taking on debt, and the dilutive effects of issuing new stock. There is no right answer for which is best, as there are multiple different factors and circumstances involved across M&A deals. Each company has different borrowing rates and synergistic value expected from their deals. One big factor is the timing and stock price of both companies during the deal. If the acquirer is trading at an all time high and the acquiree is at an all time low, then perhaps an all-stock deal would be advantageous to the buyer. Typically, companies want to avoid stock deals because they are the most dilutive.\\\"\",\n \"The most economical way is to save your money, and buy a 1+ year old used car with cash.\",\n \"See what the contract says about transfers or subleases. A lease is a credit agreement, so the lessor may not allow transfers. You probably ought to talk to an accountant about this. You can probably recognize most of the costs associated with the car without re-financing it in another lease.\",\n \"With new cars it's usually the other way around: finance at a low APR or get cash back when you buy it outright. With used cars you usually don't know how much they have invested in the car, so it's more difficult to know how low they're willing to go. Regardless, I do think it's odd that they would knock 2K off the price if you finance with them, but not if you pay cash. The only reason they would do that is if they intend to make at least 2K in interest over the life of the loan, but they have no way of guaranteeing you won't refi. Therefore, I suspect they are bluffing and would probably close the deal if you wrote them a check (or put the cash on the table) for 2K less. However, if they won't budge and will only knock off 2K if you finance, you could finance and pay it off in full a week later. Just make sure they don't have any hidden origination fees or pay-off-early fees.\",\n \"I would like to add that from my own research, a pro to leasing over buying a new vehicle would be that with the lease the entire 7,500 federal incentive is applied directly to the lease, or so they say. If you buy a new car you get a 7,500 federal tax incentive also but if you dont have 7,500 bucks in taxes this wont be as much value. It doesn't sense to me to buy used since you dont get the tax incentive and also if you're in california the 2,500 rebate only applies to buying new or leasing 30 month or longer.\",\n \"\\\"as a used dealer in subprime sales, finance has to be higher than cash because every finance deal has a lender that takes a percentage \\\"\\\"discount\\\"\\\" on every deal financed. if you notice a dealer is hesitant to give a price before knowing if cash or finance, because every bit of a cash deal's profit will be taken by a finance company in order to finance the deal and then there's no deal. you might be approved but if you're not willing to pay more for a finance deal, the deal isn't happening if I have $5000 in a car, you want to buy it for $6000 and the finance lender wants to take $1200 as a \\\"\\\"buy-fee\\\"\\\" leaving me $4800 in the end.\\\"\",\n \"There are some who argue that you should lease an electric car. These factors are in addition to all the normal pros and cons of leasing vs. buying. The technology is still new and is advancing rapidly. In 2-3 years, the newer model may have significantly improved features, range, and efficiency, as well as lower prices. If you are the type of person to upgrade regularly to the latest and greatest, leasing can make it a smoother transition. It is hard to predict the depreciation of the vehicles. This is both because of the above factors, but also because these kinds of cars are newer and so the statistical models used to predict their future values are less refined. The models for predicting gas car prices have been honed for decades. EV Manufacturers have in the past made some mistakes in their residual value estimations. When you lease a car, you get essentially an option to buy the car at the future predicted residual value. If, at the end of the lease, the market value of the car is higher than the residual value, you can purchase the car at the predetermined price, making yourself some extra money. If the value is lower than the residual, you can return the car or renegotiate. I know a relatively large number of electric vehicle owners. Most or all of the ones who got the vehicle new leased it. The rest bought used vehicles coming off lease, which can also be a good deal.\",\n \"I actually didn't do the math with your numbers, but I recall Sal from Khan Academy did a nice video about your question, challenging the notion that it is always better to buy. https://www.youtube.com/watch?v=YL10H_EcB-E\",\n \"A loan with modest interest is better than paying by cash if there are better alternatives for investment. For example, suppose you are buying a house. Consider two extremes: a) you pay the house entirely by cash, b) the entire buy is financed by the bank. Historically, real (subtracting inflation) house prices (at least in the U.S.) have not risen at all in the long run, and investing all of your own capital in this way may not be optimal. Notice that we are looking at a situation where one is buying a house and living in it in any case. Rent savings are equal in cases a) and b). If instead you were buying a house not for yourself, but as a separate investment for renting out, then you would receive rent. In the case a), the real return on your capital will be zero, whereas in case b), you can invest the cash in e.g. the stock market and get, on average, 7% (the stock market has yielded a 7% real return annually including dividends) annually minus the bank's interest rate. If the interest is lower than 7%, it may be profitable to take the loan. Of course, the final decision depends on your risk preferences.\",\n \"\\\"It is going to save you more money in the long run to pay at once with cash. If you take out a loan, you will pay interest on the balance, costing you money. If you pay off the balance immediately, there is no difference between the options and your question becomes irrelevant. There is no credit rating benefit to placing large purchases on your cards, especially since your credit is fine. My advice is to pay in cash in this case, mostly because it makes you 'feel' the purchase. This is what you are describing in your question. This instinct helps you recognize potential problems, instead of masking them with debt. Questions like: \\\"\\\"Do I need this?\\\"\\\" \\\"\\\"Am I overextending myself financially with this purchase?\\\"\\\" \\\"\\\"Am I holding enough cash-on-hand for emergencies?\\\"\\\" You may be fine in these areas, but I would still argue that cash makes you a better buyer because the expense feels much more significant, making you more cautious and discerning. You are right to feel these things before dropping a large sum of money. Let it inform you and help you make better decisions. Don't mask it or be paralyzed by it!\\\"\",\n \"The good debt/bad debt paradigm only applies if you are considering this as a pure investment situation and not factoring in: A house is something you live in and a car is something you use for transportation. These are not substitutes for each other! While you can live in your car in a pinch, you can't take your house to the shops. Looking at the car, I will simplify it to 3 options: You can now make a list of pros and cons for each one and decide the value you place on each of them. E.g. public transport will add 5h travel time per week @ $X per hour (how much you value your leisure time), an expensive car will make me feel good and I value that at $Y. For each option, put all the benefits together - this is the value of that option to you. Then put all of the costs together - this is what the option costs you. Then make a decision on which is the best value for you. Once you have decided which option is best for you then you can consider how you will fund it.\",\n \"If you can generate a higher ROI by renting than by cashing out and investing, then you should rent it out. Please consider your risk tolerance as well. It's always a personal decision whether to assume higher risk for a higher return.\",\n \"“The plot of land definitely is going to give better results in long term.” Will it? Land is not guaranteed to go up in value. And a car can provide more employment opportunities for you. You need to look at your specific situation—with specific numbers—rather than using rules of thumb as hard guidelines.\",\n \"\\\"If you mortgage after the fact you will usually pay an extra .25% higher on the interest rate because a \\\"\\\"cash out\\\"\\\" refinance is treated as riskier than a new home purchase mortgage. You might save enough on the purchase price of the home with a cash offer to make that higher interest rate worth it, but in most cases, if you are planning to hold the loan for a long time, it's best to get that mortgage at the time of purchase. You might be able to get the same deal with an offer that says you will pay cash if there are any problems getting the loan approved.\\\"\",\n \"\\\"It depends on what your plans for the future are.. Taking out a loan is not a bad thing if it is at a good rate and under good terms and you are sure you can handle the payments. If you buy the car with cash you may be giving up the opportunity to later get a great rate on that $8k. However, you are probably not utilizing that $20k to make as much interest as you'd then be paying if you did take the $8k on loan. Since you say \\\"\\\"house fund\\\"\\\" I assume you are saving to make a down payment on a new house. If you plan to buy that house within the next 6 months the hard pulls on your credit report from applying for the car loan will probably ding your credit score for the next 6 months which might cost you on your mortgage rate. However, if you don't plan to buy for a few more years and if you've never had a car payment before then the auto loan would actually be adding diversity to your credit history and in the long run would help your score. Another factor to consider is the loan-to-value ratio you are shooting for. LTV affects the interest rate, requirements for private mortgage insurance, etc.. Mortgage rates are at an all-time low and lower than auto-rates, so depending on the terms of the house purchase that $8k might be better spent on the car than the house. In short, if you want to buy the house soon (rates are loooow, market is a buyer's market), and you need that $8k to get a better mortgage rate or prevent you from being required to buy PMI you should probably put it toward the house. Otherwise you should probably put it toward the car. Last piece of advice. If you absolutely must buy a house and a car in the same short time-frame, do them both on the same day so that your credit score is not dinged before applying for one or the other. With mortgages this may be difficult considering the longer closing procedures, but try to time it so that your credit is getting checked by the mortgage broker and the auto lender on the same day.\\\"\",\n \"Some questions: Will you need a car after 18 months? What are you going to do then? How likely are you able to go over the mileage? Granted paying $300 per month seems somewhat attractive as a fixed cost. However lease are notorious for forcing people into making bad decisions. If your car is over miles, or there is some slight damage (even normal wear and tear), or you customize your car (such as window tint) the dealer can demand extra dollars or force you to purchase the car for more than it is actually worth. The bottom line is leasing is one of the most expensive ways to own a vehicle, and while you have a great income you have a poor net worth. So yes I would say it is somewhat irresponsible for you to own a vehicle. If I was in your shoes, I would cut my gym expenses, cut my retirement contributions to the match, and buy another used car. I understand you may have some burnout over your last car, but it is the best mathematical choice. Having said all that you have a great income and you can absorb a lot of less than efficient decisions. You will probably be okay leasing the car. I would suggest going for a longer term, or cutting something to pay off the student loans earlier. This way there is some cushion between when the lease ends and the student loan ends. This way, when lease turn in comes, you will have some room in your budget to pay some fees as you won't have your student loan payment (assuming around 1400/month) that you can then pay to the dealer.\",\n \"\\\"This is my opinion as a car nut. It depends on what you want out of a car. For your situation (paying cash, want to keep the car long-term but also save money) I recommend seriously considering a slightly used vehicle, maybe 2 or 3 years old, or a \\\"\\\"certified pre-owned vehicle\\\"\\\". Reasons: Much less expensive than a brand new car because the first two years have the biggest depreciation hit. Cars come with a 4-year warranty, so a 3 year old car will still be in warranty. Yes, a certified pre-owned car will have a bit of a premium compared to a private-party used car, but the peace of mind of knowing it's in good shape is worth the extra cost considering you want to keep it long term. Consumer Reports will have good advice on the best values in used cars.\\\"\",\n \"\\\"In most cases of purchases the general advice is to save the money and then make the purchase. Paying cash for a car is recommended over paying credit for example. For a house, getting a mortgage is recommended. Says who? These rules of thumb hide the actual equations behind them; they should be understood as heuristics, not as the word of god. The Basics The basic idea is, if you pay for something upfront, you pay some fixed cost, call it X, where as with a loan you need to pay interest payments on X, say %I, as well as at least fixed payments P at timeframe T, resulting in some long term payment IX. Your Assumption To some, this obviously means upfront payments are better than interest payments, as by the time the loan is paid off, you will have paid more than X. This is a good rule of thumb (like Newtonian's equations) at low X, high %I, and moderate T, because all of that serves to make the end result IX > X. Counter Examples Are there circumstances where the opposite is true? Here's a simple but contrived one: you don't pay the full timeframe. Suppose you die, declare bankruptcy, move to another country, or any other event that reduces T in such a way that XI is less than X. This actually is a big concern for older debtors or those who contract terminal illnesses, as you can't squeeze those payments out of the dead. This is basically manipulating the whole concept. Let's try a less contrived example: suppose you can get a return higher than %I. I can currently get a loan at around %3 due to good credit, but index funds in the long run tend to pay %4-%5. Taking a loan and investing it may pay off, and would be better than waiting to have the money, even in some less than ideal markets. This is basically manipulating T to deal with IX. Even less contrived and very real world, suppose you know your cash flow will increase soon; a promotion, an inheritance, a good market return. It may be better to take the loan now, enjoy whatever product you get until that cash flows in, then pay it all off at once; the enjoyment of the product will make the slight additional interest worth it. This isn't so much manipulating any part of the equation, it's just you have different goals than the loan. Home Loan Analysis For long term mortgages, X is high, usually higher than a few years pay; it would be a large burden to save that money for most people. %I is also typically fairly low; P is directly related to %I, and the bank can't afford to raise payments too much, or people will rent instead, meaning P needs to be affordable. This does not apply in very expensive areas, which is why cities are often mostly renters. T is also extremely long; usually mortgages are for 15 or 30 years, though 10 year options are available. Even with these shorter terms, it's basically the longest term loan a human will ever take. This long term means there is plenty of time for the market to have a fluctuation and raise the investments current price above the remainder of the loan and interest accrued, allowing you to sell at a profit. As well, consider the opportunity cost; while saving money for a home, you still need a place to live. This additional cost is comparable to mortgage payments, meaning X has a hidden constant; the cost of renting. Often X + R > IX, making taking a loan a better choice than saving up. Conclusion \\\"\\\"The general advice\\\"\\\" is a good heuristic for most common human payments; we have relatively long life spans compared to most common payments, and the opportunity cost of not having most goods is relatively low. However, certain things have a high opportunity cost; if you can't talk to HR, you can't apply for jobs (phone), if you can't get to work, you can't eat (car), and if you have no where to live, it's hard to keep a job (house). For things with high opportunity costs, the interest payments are more than worth it.\\\"\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["\"Now, to buy in full (and essentially have zero savings), buy in part (£10000 deposit, followed by a loan of £4000) or PCP/HP more of the value? So, you are assessing if the car is worth having with either none or only 4,000 in savings. This is the most critical information you have provided. My outright opinion is to always buy a mildly used car as I hate the idea of loans and interest. With the amount of money that you currently possess, I believe the \"\"Buy-in-part\"\" option is best as it reduces your interest liability; but, I don't believe you should do it currently. 4,000 is a rather small cash fund for if something were to go boom in the night. As for your question of interest: This is completely dependent on the amount you are able to pay per period and the total interest you are willing to spend, rows four and seven respectively. This is your money, and no one can tell you what's best to do with it than yourself. Keep looking for good leasing deals or if you think you can survive financial strife with 4,000 then follow your heart. \"\"Depreciation\"\" fluctuates to the buyer, so never assume what the car may lose in the next 2-3 years. Hope it all goes well my friend.\""],"string":"[\n \"\\\"Now, to buy in full (and essentially have zero savings), buy in part (£10000 deposit, followed by a loan of £4000) or PCP/HP more of the value? So, you are assessing if the car is worth having with either none or only 4,000 in savings. This is the most critical information you have provided. My outright opinion is to always buy a mildly used car as I hate the idea of loans and interest. With the amount of money that you currently possess, I believe the \\\"\\\"Buy-in-part\\\"\\\" option is best as it reduces your interest liability; but, I don't believe you should do it currently. 4,000 is a rather small cash fund for if something were to go boom in the night. As for your question of interest: This is completely dependent on the amount you are able to pay per period and the total interest you are willing to spend, rows four and seven respectively. This is your money, and no one can tell you what's best to do with it than yourself. Keep looking for good leasing deals or if you think you can survive financial strife with 4,000 then follow your heart. \\\"\\\"Depreciation\\\"\\\" fluctuates to the buyer, so never assume what the car may lose in the next 2-3 years. Hope it all goes well my friend.\\\"\"\n]","isConversational":false}}},{"rowIdx":69,"cells":{"_id":{"kind":"string","value":"932"},"query":{"kind":"string","value":"Is freelance income earned by a U.S. citizen while living abroad subject to state income tax?"},"gt_ids":{"kind":"list like","value":["48722","387010"],"string":"[\n \"48722\",\n \"387010\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1],"string":"[\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["303287","457455","185999","319965","332314","110061","387010","264068","498589","483704","594784","375423","360629","452899","495827","123468","104128","240796","510599","72135","218730","185384","29817","95724","66262","187706","523431","548299","177575","294738","121551","385221","183477","535673","73666","541682","19245","386941","140428","274359","5762","347186","394059","266516","557647","276411","172872","48722","32610","383172","340037","113451","447940","332626","282958","377753","116181","254106","202340","284086","352052","588591","232282","59686","93744","319158","299752","535918","237738","193367","507107","585562","496036","424175","110862","588327","571430","349424","404026","34338","196321","218498","162286","483942","130934","352266","478408","197501","23747","207531","558618","540671","486485","475115","249859","499407","355369","120899","71338","506368"],"string":"[\n \"303287\",\n \"457455\",\n \"185999\",\n \"319965\",\n \"332314\",\n \"110061\",\n \"387010\",\n \"264068\",\n \"498589\",\n \"483704\",\n \"594784\",\n \"375423\",\n \"360629\",\n \"452899\",\n \"495827\",\n \"123468\",\n \"104128\",\n \"240796\",\n \"510599\",\n \"72135\",\n \"218730\",\n \"185384\",\n \"29817\",\n \"95724\",\n \"66262\",\n \"187706\",\n \"523431\",\n \"548299\",\n \"177575\",\n \"294738\",\n \"121551\",\n \"385221\",\n \"183477\",\n \"535673\",\n \"73666\",\n \"541682\",\n \"19245\",\n \"386941\",\n \"140428\",\n \"274359\",\n \"5762\",\n \"347186\",\n \"394059\",\n \"266516\",\n \"557647\",\n \"276411\",\n \"172872\",\n \"48722\",\n \"32610\",\n \"383172\",\n \"340037\",\n \"113451\",\n \"447940\",\n \"332626\",\n \"282958\",\n \"377753\",\n \"116181\",\n \"254106\",\n \"202340\",\n \"284086\",\n \"352052\",\n \"588591\",\n \"232282\",\n \"59686\",\n \"93744\",\n \"319158\",\n \"299752\",\n \"535918\",\n \"237738\",\n \"193367\",\n \"507107\",\n \"585562\",\n \"496036\",\n \"424175\",\n \"110862\",\n \"588327\",\n \"571430\",\n \"349424\",\n \"404026\",\n \"34338\",\n \"196321\",\n \"218498\",\n \"162286\",\n \"483942\",\n \"130934\",\n \"352266\",\n \"478408\",\n \"197501\",\n \"23747\",\n \"207531\",\n \"558618\",\n \"540671\",\n \"486485\",\n \"475115\",\n \"249859\",\n \"499407\",\n \"355369\",\n \"120899\",\n \"71338\",\n \"506368\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["Where you earn your money makes no difference to the IRS. Citizen/permanent resident means you pay income tax. To make matters worse given your situation it's virtually certain you have unreported foreign bank accounts--something that's also an important issue.","It essentially works the same. Some states don't have any income taxes at all (like Florida or Wyoming), some only tax income derived in the state, and some tax worldwide income (like New York or California), similarly to the Federal income taxes. However, if you're living abroad (i.e.: you're a citizen or resident of a foreign country and you live there), you're not considered resident by most of the states (check with your state for specific definitions) for most, if not all, the time of your residency abroad. In such case - you don't pay state taxes, only Federal. You have to remember that foreign income exclusion doesn't apply to the income from your 401k, so you pay the taxes as if you're in the US. You can not use foreign taxes credit as well (but depending on the tax treaty with the country you're moving to, your 401k income might not be taxable there). In some cases you may end up with double taxation: US will tax your 401k income as you're a US citizen and the income is derived from the US sources, and the foreign country will tax the income based on its own laws. This is not a tax advice, and this answer was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer.","You're not physically present in the US, you're not a US citizen, you're not a green card holder, and you don't have a business that is registered in the US - US laws do not apply to you. You're not in any way under the US jurisdiction. Effectively connected income is income effectively connected to your business in the US. You're not in the US, so there's nothing to effectively connect your income to. Quote from the link: You usually are considered to be engaged in a U.S. trade or business when you perform personal services in the United States. You ask: If I form an LLC or C corp am I liable for this withholding tax? If you form a legal entity in a US jurisdiction - then that entity becomes subjected to that jurisdiction. If you're physically present in the US - then ECI may become an issue, and you also may become a resident based on the length of your stay.","Fear tactics posted above, likely by IRS agents. Yes, you qualify based on the residence test. You perform your work outside the US. You gather business data in a foreign country. The income is excluded.","If you have income in the US, you will owe US income tax on it, unless there is a treaty with your country that says otherwise.","It depends and I would not just jump into conclusion as I have seen cases where offering some services are not U.S. sourced income. I'll advise you speak with a knowledgeable tax professional.","\"New York will want to you to pay taxes on income from \"\"New York sources\"\". I'm not sure what this means to a freelance web developer. If your wife is doing freelance web development under the same business entity as she did in New York (ie. a New York sole proprietor, corporation, etc), you probably do need to file. From nonresident tax form manual: http://tax.ny.gov/pdf/2011/inc/it203i_2011.pdf If you were a nonresident of New York State, you are subject to New York State tax on income you received from New York State sources in 2011. If you were a resident of New York State for only part of 2011, you are subject to New York State tax on all income you received while you were a resident of the state and on income you received from New York State sources while you were a nonresident. To compute the amount of tax due, use Form IT-203, Nonresident and Part-Year Resident Income Tax Return. You will compute a base tax as if you were a full-year resident, then determine the percentage of your income that is subject to New York State tax and the amount of tax apportioned to New York State.\"","\"If a person is not a U.S. citizen and they live and work outside the U.S., then any income they make from a U.S. company or person for services provided does not qualify as \"\"U.S. Source income\"\" according to the IRS. Therefore you wouldn't need to worry about withholding or providing tax forms for them for U.S. taxes. See the IRS Publication 519 U.S. Tax Guide for Aliens.\"","\"Am I eligible for declaring my earnings to the IRS? You're always eligible. You're probably asking whether you're required. In the US it doesn't matter where you deposit the money, it matters where you earn it. Money is earned where the services are provided. This is called \"\"sourcing\"\". So if you are working in a foreign country - you're only subject to the US laws to the extent you're a US citizen/permanent resident or qualify for the substantial presence test.\"","\"There's no \"\"183 days\"\" rule. As a US citizen you must pay taxes on all your income, where you live is irrelevant.\"","If you're a US citizen/resident - you pay taxes on your worldwide income regardless of where you live. The logic is that Americans generally don't agree to the view that there's more than one country in the world. If you're non-US person, not physically present in the US, and provide contract work for a US employer - you generally don't pay taxes in the US. The logic is that the US doesn't actually have any jurisdiction over that money, you didn't earn it in the US. That said, your employer might withheld tax and remit it to the IRS, and you'll have to chase them for refund. If you receive income from the US rental property or dividends from a US company - you pay income tax to the US on that income, and then bargain with your home tax authority on refunds of the difference between what you paid in the US and what you should have paid at home. You can also file non-resident tax return in the US to claim what you have paid in excess. The logic is that the money sourced in the US should be taxed in the US. You earned that money in the US. There are additional rules to more specific situation, and there are also bilateral treaties between countries (including a US-Canadian treaty) that supersede national laws. Bottom line, not only that each country has its own laws, there are also different laws for different situations, and if some of the international treaties apply to you - it further complicates the situation. If something is not clear - get a professional advice form a tax accountant licensed in the relevant jurisdictions (in your case - any of the US states, and the Canadian province where you live).","\"Even though you will meet the physical presence test, you cannot claim the FEIE because your tax home will remain the US. From the IRS: Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. Your tax home is the place where you are permanently or indefinitely engaged to work as an employee or self-employed individual. Having a \"\"tax home\"\" in a given location does not necessarily mean that the given location is your residence or domicile for tax purposes. ... You are not considered to have a tax home in a foreign country for any period in which your abode is in the United States. However, your abode is not necessarily in the United States while you are temporarily in the United States. Your abode is also not necessarily in the United States merely because you maintain a dwelling in the United States, whether or not your spouse or dependents use the dwelling. ... The location of your tax home often depends on whether your assignment is temporary or indefinite. If you are temporarily absent from your tax home in the United States on business, you may be able to deduct your away from home expenses (for travel, meals, and lodging) but you would not qualify for the foreign earned income exclusion. If your new work assignment is for an indefinite period, your new place of employment becomes your tax home, and you would not be able to deduct any of the related expenses that you have in the general area of this new work assignment. If your new tax home is in a foreign country and you meet the other requirements, your earnings may qualify for the foreign earned income exclusion. If you expect your employment away from home in a single location to last, and it does last, for 1 year or less, it is temporary unless facts and circumstances indicate otherwise. If you expect it to last for more than 1 year, it is indefinite. If you expect your employment to last for 1 year or less, but at some later date you expect it to last longer than 1 year, it is temporary (in the absence of facts and circumstances indicating otherwise) until your expectation changes. For guidance on how to determine your tax home refer to Revenue Ruling 93-86. Your main place of business is in the US and this will not change, because your business isn't relocating. If you are intending to work remotely while you are abroad, you should get educated on the relevant laws on where you are going. Most countries don't take kindly to unauthorized work being performed by foreign visitors. And yes, even though you aren't generating income or involving anyone in their country, the authorities still well may disapprove of your working. My answer to a very similar question on Expatriates.\"","\"Do I need to pay taxes in India in this scenario? For India tax purposes, you would still qualify as \"\"Resident Indian\"\". As a resident Indian you have to pay taxes on Global income. It is not relevant whether you transfer the money back to India to keep in US. The income is generated and taxable. Depending on your contract, presumably you are working as a free lance; certain expenses are allowed to be deducted from your income, for example if you purchase equipment to help carry out the work, stay / entertainment costs, etc. Consult a professional CA who should be able to guide you on what is eligible and what is not. The balance along with your other income will be taxed as per tax brackets. There is exemption for certain category of workers, mostly in entertainment industry where such income is not taxable. This does not apply to your case.\"","If your gross income is only $3000, then you don't need to file: https://www.irs.gov/pub/irs-pdf/p501.pdf That said, pay careful attention to: https://www.irs.gov/individuals/international-taxpayers/taxpayers-living-abroad You should be reporting ALL income, without regard to WHERE you earned it, on your US taxes. Not doing so could indeed get you in trouble if you are audited. Your level of worry depends on how much of the tax law you are willing to dodge, and how lucky you feel.","\"Its not for US citizens - its for US residents. If the US considers you as a tax resident - you'll be treated the same as a US citizen, regardless of your immigration status. The question is very unclear, since it is not mentioned whether your US sourced income \"\"from the Internet\"\" is sales in the US, sales on-line, services you provide, investments, or what else. All these are treated differently. For some kinds of US-sourced income you should have paid taxes in the US already, regardless of where you physically reside. For others - not. In any case, if you become US tax resident, you'll be taxed on your worldwide income, not only the $10K deposited in the US bank account. ALL of your income, everywhere in the world, must be declared to the US government and will be taxed. You should seek professional advice, before you move to the US, in order to understand your responsibilities, liabilities and rights. I suggest looking for a EA/CPA licensed in California and experienced with taxation of foreigners (look for someone in the SF or LA metropolitan areas). Keep in mind that there may be a tax treaty between the US and your home country that may affect your Federal (but not California) taxes.\"","Under Income Tax Act, tax liability depends on residency as defined under section 6 of the Income Tax Act, and not on citizenship. If you are resident in India, then your global income is taxable. As it appears from your question, you are not resident of India (182 days stay in India in a FY), as such you will have absolutely no tax liability for whatever income you earn outside India.","Short answer: it's complicated. The UK govt pages on foreign income are probably your best starting point: http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/LeavingOrComingIntoTheUK/DG_10027480 As you can see, it depends on your precise residence status here. (There is a tax treaty between the UK and the US so you wouldn't be double taxed on the income either way. But there might still be reporting obligations).","You should consult a US CPA to ensure your situation is handled correctly. It appears, the money is Israel source income and not US source income regardless if you receive it while living in the U.S. If you file the correct form, I suspect the form is 1040NR and your state form to disclose your income, if any, in 2015 and 2016, it should not be a problem. Having said that, if you do earn any type of income while in the U.S. , you are required to disclose it to both the IRS and state.","A) a tax treaty probably covers this for the avoidance of double taxation. Tax treaties can be very cryptic and have little precedence clarifying them http://www.irs.gov/businesses/international/article/0,,id=169552,00.html B) I'm going to say NO since the source of your income is going to be US based. But the UK tax laws might also have specific verbage for resident source income. sorry it is an inconclusive answer, but should be some factors to consider and point you in the right direction.","Yes, you do. Since you've been a green card holder since the beginning of the year - your whole worldwide income for the whole year is taxable in the US. You can take credit for the taxes paid in the UK (use form 1116) to reduce your US tax liability.","\"Most (if not all states) in the US are only interested in source income. If you worked in that state they want to tax it. Many states have reciprocity agreements with neighboring states to exempt income earned when a person works in lets say Virginia, but lives in a state that touches Virginia. Most states don't consider interest and dividends for individuals as source income. They don't care where the bank or mutual fund branch is located, or headquartered.If it is interest from a business they will allocate it to the state where the business is located. If you may ask you to allocate the funds between two states if you move during the year, but most people will just divide the interest and dividends based on the number of days in each state unless there is a way to directly allocate the funds to a particular state. Consider this: Where is the money when it is in a bank with multiple branches? The money is only electronic, and your actual \"\"$'s\"\" may be in a federal reserve branch. Pension funds are invested in projects all over the US.\"","Technically, if you earn in US (being paid there, which means you have a work visa) and live in other country, you must pay taxes in both countries. International treaties try to decrease the double-taxation, and in this case, you may pay in your country the difference of what you have paid in US. ie. your Country is 20% and USA is 15%, you will pay 5%, and vice-versa. This works only with certain areas. You must know the tax legislation of both countries, and I recommend you seek for advisory. This site have all the basic information you need: http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion Good luck.","\"You may be considered a resident for tax purposes. To meet the substantial presence test, you must have been physically present in the United States on at least: 31 days during the current year, and 183 days during the 3 year period that includes the current year and the 2 years immediately before. To satisfy the 183 days requirement, count: All of the days you were present in the current year, and One-third of the days you were present in the first year before the current year, and One-sixth of the days you were present in the second year before the current year. If you are exempt, I'd check that ending your residence in Germany doesn't violate terms of the visa, in which case you'd lose your exempt status. If you are certain that you can maintain your exempt status, then the income would definitively not be taxed by the US as it is not effectively connected income: You are considered to be engaged in a trade or business in the United States if you are temporarily present in the United States as a nonimmigrant on an \"\"F,\"\" \"\"J,\"\" \"\"M,\"\" or \"\"Q\"\" visa. The taxable part of any U.S. source scholarship or fellowship grant received by a nonimmigrant in \"\"F,\"\" \"\"J,\"\" \"\"M,\"\" or \"\"Q\"\" status is treated as effectively connected with a trade or business in the United States. and your scholarship is sourced from outside the US: Generally, the source of scholarships, fellowship grants, grants, prizes, and awards is the residence of the payer regardless of who actually disburses the funds. I would look into this from a German perspective. If they have a rule similiar to the US for scholarships, then you will still be counted as a resident there.\"","You won't be paying any taxes for income generated in the US as long as you are not-resident in India. You pay US taxes. You can file a null return in India just in case (all zeroes). If you have any income in India - bank deposits in your name, house rental income and so on - that needs to be declared and tax needs to be paid in India.","According to the Colorado form CY104PN, Colorado taxes income earned while working in or being a resident of the State of Colorado. Assuming you never set foot in the State of Colorado, I read it as if you will only be liable to pay taxes in the State of New York (on all of your income, of course). You can get a more reliable opinion from a Colorado-licensed CPA.","One other consideration. If you are a US citizen or Resident Alien, you are going to owe US income taxes regardless of where you earn the money. Here it is straight from the horse's mouth: Tax guide for US Citizens living abroad","\"If you're a US citizen, money earned while in the US is sourced to the US. So you can't apply FTC/FEIE to the amounts attributable to the periods of your work while in the US even if it is a short business trip. Tax treaties may affect this. Most tax treaties have explicit provisions to exclude short trips from the sourcing rules, however due to the \"\"saving clause\"\" these would probably not apply to you if you're a US citizen - you'll need to read the relevant treaty. Your home country should allow credit for the US taxes paid on the US-sourced income, and the double-taxation avoidance provision should apply in this case. The technicalities depend on your specific country. You would probably not just remove it from the taxable income, there probably is a form similar to the US form 1116 to calculate the available credit.\"","\"Can I use the foreign earned income exclusion in my situation? Only partially, since the days you spent in the US should be excluded. You'll have to prorate your exclusion limit, and only apply it to the income earned while not in the US. If not, how should I go about this to avoid being doubly taxed for 2014? The amounts you cannot exclude are taxable in the US, and you can use a portion of your Norwegian tax to offset the US tax liability. Use form 1116 for that. Form 1116 with form 2555 on the same return will require some arithmetic exercises, but there are worksheets for that in the instructions. In addition, US-Norwegian treaty may come into play, so check that out. It may help you reduce the tax liability in the US or claim credit on the US taxes in Norway. It seems that Norway has a bilateral tax treaty with the US, that, if I'm reading it correctly, seems to indicate that \"\"visiting researchers to universities\"\" (which really seems like I would qualify as) should not be taxed by either country for the duration of their stay. The relevant portion of the treaty is Article 16. Article 16(2)(b) allows you $5000 exemption for up to a year stay in the US for your salary from the Norwegian school. You will still be taxed in Norway. To claim the treaty benefit you need to attach form 8833 to your tax return, and deduct the appropriate amount on line 21 of your form 1040. However, since you're a US citizen, that article doesn't apply to you (See the \"\"savings clause\"\" in the Article 22). I didn't even give a thought to state taxes; those should only apply to income sourced from the state I lived in, right (AKA $0)? I don't know what State you were in, so hard to say, but yes - the State you were in is the one to tax you. Note that the tax treaty between Norway and the US is between Norway and the Federal government, and doesn't apply to States. So the income you earned while in the US will be taxable by the State you were at, and you'll need to file a \"\"non-resident\"\" return there (if that State has income taxes - not all do).\"","If you're an American, and willing to give up citizenship, good luck to you. Otherwise, Uncle Sam still wants his due -- Americans are responsible for paying taxes on income earned anywhere on earth, regardless of their residence.","Residents pay tax on all of the income they receive during the calendar year from all sources, so you'll at least need to file and pay New York state income taxes on this money regardless. I can't answer whether you'll need to file and pay Colorado state income tax on this money as well. Generally speaking, you need to file a return for each state in which you live, receive income, or have business interests. If you are required to file a Colorado state income tax return, however, you can claim a credit for taxes paid to another state on your New York state income tax return using form IT-112-R (see the form and instructions).","\"You owe taxes to the state where you earned the income, and also to the state where you physically live. Most, maybe all, states have laws that let you claim credits for taxes paid to other states so that you're not paying double taxes by living in one state while working in another. Most states have deals with all their neighboring states so that you only have to file taxes in one. For example, I live in Michigan, and Michigan borders Ohio. Lots of people who live near the border live in one state but work in the other. So the two have a deal that anyone who lives in Michigan but works in Ohio just has to file a Michigan tax return and pay Michigan taxes, and anyone who lives in Ohio and works in Michigan just has to pay Ohio taxes. Oh, I should note that these adjacent state deals apply only to employment income, not business income. If you own a business in another state, you'll still have to file taxes in that state. You still should get tax credits in your residence state. In general the fact that you use a server in another state doesn't make you liable for taxes in that state. I understand that New York says that if you work from home and the company headquarters is in New York, you have to pay New York taxes. Maybe there are a few other states who do this. But just because a server is in their state? I've never heard of this. If I order business supplies that are shipped from a warehouse in Arizona, that doesn't make me liable for Arizona income taxes, etc. You are legally a \"\"resident\"\" of the state where you actually live. If you have a home and live in it most of the time, then you are a resident of the state where that home is. A \"\"home\"\" doesn't have to be a house. It could be an apartment, an RV that you live in in a trailer park, a tent, etc. If you don't own any sort of fixed home and you travel around a lot, this could be tricky. You mentioned Oklahoma. Oklahoma defines \"\"resident\"\" as follows: An Oklahoma resident is a person domiciled in this state for the entire tax year. “Domicile” is the place established as a person’s true, fixed, and permanent home. It is the place you intend to return whenever you are away (as on vacation abroad, business assignment, educational leave or military assignment). A domicile, once established, remains until a new one is adopted. (https://www.ok.gov/tax/documents/511NRPkt-14.pdf) I'm not sure that that clears things up for you. You can't just pick a state with low taxes and claim that as your residence. No way is the state where you actually live going to accept that. If you are in an ambiguous situation, like you spend 6 months per year in state A and 6 months in state B and you have no fixed home in either -- maybe you stay at motels or live in your minivan -- you might get away with picking the state with the most favorable tax laws as your residence. But if you spend 7 months in state A and 5 months in state B, state A will almost surely claim you are a resident and owe them taxes. If you regularly wander the country, never spend more than a few days in any one place, and rarely come back to the same place twice, then you have a complicated situation and you probably need to talk to a tax lawyer.\"","As the name says, its for income earned in a Foreign country. If you have been paying US income tax on this while living in the US, nothing is going to change here. You should be informing yourself on how to avoid double taxation in your new country of residence. Passive income earned abroad (dividends, interest) also do not fall under this exemption. The purpose of the Foreign Earned Income Exclusion is to make it easy for expats who work abroad to avoid double income taxation without going through the complicated process of applying for tax credits. The US is the only industrial country that taxes its residents regardless of where they reside. That is also why it only goes to about $100,000 a year. If you are a high earner, they want to make it more difficult. Also as a side note, since you are going to be abroad for a year. I will point out that if you have more than $10,000 in foreign accounts at any point in the year you need to declare this in an FBAR form. This is not advertised as well as it should be and carries ridiculous penalties for non-compliance. I can't count the number of times I have heard a US expat say that they were unaware of this.","\"I would suggest to get an authoritative response from a CPA. In any case it would be for your own benefit to have at least the first couple of years of tax returns prepared by a professional. However, from my own personal experience, in your situation the income should not be regarded as \"\"US income\"\" but rather income in your home country. Thus it should not appear on the US tax forms because you were not resident when you had it, it was given to you by your employer (which is X(Europe), not X(USA)), and you should have paid local taxes in your home country on it.\"","From the Massachusetts Department of Revenue: 1st - Massachusetts Source Income That is Excluded Massachusetts gross income excludes certain items of income derived from sources within Massachusetts: non-business related interest, dividends and gains from the sale or exchange of intangibles, and qualified pension income. 2nd - Massachusetts Source Income That is Included: Massachusetts gross income includes items of income derived from sources within Massachusetts. This includes income: 3rd - Trade or business, Including Employment Carried on in Massachusetts: A nonresident has a trade or business, including any employment carried on in Massachusetts if: A nonresident generally is not engaged in a trade or business, including any employment carried on in Massachusetts if the nonresident's presence for business in Massachusetts is casual, isolated and inconsequential. A nonresident's presence for business in Massachusetts will ordinarily be considered casual, isolated and inconsequential if it meets the requirements of the Ancillary Activity Test (AAT) and Examples. When nonresidents earn or derive income from sources both within Massachusetts and elsewhere, and no exact determination can be made of the amount of Massachusetts source income, an apportionment of income must be made to determine that amount considered Massachusetts gross income. 4th - Apportionment of Income: Apportionment Methods: The three most common apportionment methods used to determine Massachusetts source income are as follows: Gross income is multiplied by a: So if you go to Massachusetts to work, you have to pay the tax. If you collect a share of the profit or revenue from Massachusetts, you have to pay tax on that. If you work from Oregon and are paid for that work, then you don't pay Massachusetts tax on that. If anything, your company might have to pay Oregon taxes on revenue you generate (you are their agent or employee in Oregon). Does the answer change depending on whether the income is reported at 1099 or W-2? This shouldn't matter legally. It's possible that it would be easier to see that the work was done in Oregon in one or the other. I.e. it doesn't make any legal difference but may make a practical difference. All this assumes that you are purely an employee or contractor and not an owner. If you are an owner, you have to pay taxes on any income from your Massachusetts business. Note that this applies to things like copyrights and real estate as well as the business. This also assumes that you are doing your work in Oregon. If you live in Oregon and travel to Massachusetts to work, you pay taxes on your Massachusetts income in Massachusetts.","\"I'm working on similar problem space. There seems to be some working ambiguity in this space - most focus seems to be on more complex cases of income like Dividends and Capital Gains. The US seems to take a position of \"\"where the work was performed\"\" not \"\"where the work was paid\"\" for purposes of the FEIE. See this link. The Foreign Tax Credit(FTC) is applied (regardless of FEIE) based on taxes paid in the other Country. In the event you take the FEIE, you need to exclude that from the income possible to claim on the FTC. i.e. (TOTAL WAGES(X) - Excluded Income) There is a weird caveat on TOTAL WAGES(X) that says you can only apply the FTC to foreign-sourced income which means that potentially we are liable for the on-US-soil income at crazy rates. See this link.. Upon which... there is probably not a good answer short of writing your congressperson.\"","If you are paid by foreigners then it is quite possible they don't file anything with the IRS. All of this income you are required to report as business income on schedule C. There are opportunities on schedule C to deduct expenses like your health insurance, travel, telephone calls, capital expenses like a new computer, etc... You will be charged both the employees and employers share of social security/medicare, around ~17% or so, and that will be added onto your 1040. You may still need a local business license to do the work locally, and may require a home business permit in some cities. In some places, cities subscribe to data services based on your IRS tax return.... and will find out a year or two later that someone is running an unlicensed business. This could result in a fine, or perhaps just a nice letter from the city attorneys office that it would be a good time to get the right licenses. Generally, tax treaties exist to avoid or limit double taxation. For instance, if you travel to Norway to give a report and are paid during this time, the treaty would explain whether that is taxable in Norway. You can usually get a credit for taxes paid to foreign countries against your US taxes, which helps avoid paying double taxes in the USA. If you were to go live in Norway for more than a year, the first $80,000/year or so is completely wiped off your US income. This does NOT apply if you live in the USA and are paid from Norway. If you have a bank account overseas with more than $10,000 of value in it at any time during the year, you owe the US Government a FinCEN Form 114 (FBAR). This is pretty important, there are some large fines for not doing it. It could occur if you needed an account to get paid in Norway and then send the money here... If the Norwegian company wires the money to you from their account or sends a check in US$, and you don't have a foreign bank account, then this would not apply.","You're not subject to the US tax laws, and since the income is not US-sourced, it is not subject to withholding. Your employer doesn't need any form, but if they insist - you can provide them a W8-BEN to certify your non-resident status. Keep in mind that if you do come to the US, the money you earn while in the US is US-sourced and subject to the US taxes and withholding, even if you're non-resident.","To answer my own question, at least to the extent of my understanding. Here the IRS says that all income for a foreign person from a US-based company is taxable with 30%. Here the IRS says that this tax should be withhold at source by whomever pays you. In case there is a tax treaty with the country, the tax can even be waived in the US. Of course, if you don't declare it in your home country, the US bank could probably give information requested by the home country authorities. For the other two cases (when there's no US party involved) I can't find anything on the IRS website, which kind of make sense. If I am using an account in the US just to receive and send money shouldn't imply any tax. Thanks to @litteadv for pointing me into the right direction.","You might need to check yes... but I would check out New York's nonresident income tax requirements... My guess is yes if you meet the requirements, but I am not an expert nor do I work in the accounting or legal field. Check out New York's nonresident tax page explaination","The data provided in your question is irrelevant. The data that you provided in the comments (that you're physically present in the US while doing the work) is the only relevant information needed to answer your question. You will need to pay taxes in the US for the earnings. The company invoicing the US client will also need to pay taxes in the US for its earnings from these invoices. You can transfer between bank accounts and deposit whatever you want anywhere you want, no-one cares (with respect to the US taxes, check with Indian tax accountant about Indian requirements).","\"I believe you have to file a tax return, because state tax refund is considered income effectively connected with US trade or business, and the 1040NR instructions section \"\"Who Must File\"\" includes people who were engaged in trade or business in the US and had a gross income. You won't end up having to pay any taxes as the income is less than your personal exemption of $4050.\"","Tax liability in US: You would need to determine if you are a resident alien or non resident alien. Resident alien are taxed normally as per US citizens. For the annual remuneration you have quoted it would be in the range of 25%. Refer http://www.moneychimp.com/features/tax_brackets.htm To determine if you are resident alien or non resident alien, you need to be present for certain period in US. There is also an exemption even if you meet this you can still be treated as non resident alien if your tax home is outside US [India in this case] Refer to the link for details to determine your category, the durations are for number of days in financial year, hence it matters when you are in US and the exact durations. http://www.irs.gov/taxtopics/tc851.html Also note that if you are assessed as resident alien, even the income from India will be taxed in US unless you declare there is no income in India. Tax liability in India: The tax liability in India would be depending on your NRI status. This again is tied to the financial year and the number of days you are in country. While the year you are going out of India you need to be away for atleast 183 days for you be considred are NRI. So if you are treated as Indian resident, you would have to pay tax in India on entire income. In the worst case, depending on the period you travel and the dates you travel, you could get classified as citizen in US as well as India and have to pay tax at both places. India and US do not have a dual tax avoidance treaty for individuals. Its there for certain category like small business and certain professions like teacher, research etc.","\"You'll need to read carefully the German laws on tax residency, in many European (and other) tax laws the loss of residency due to absence is conditioned on acquiring residency elsewhere. But in general, it is possible to use treaties and statuses so that you end up not being resident anywhere, but it doesn't mean that the income is no longer taxed. Generally every country taxes income sourced to it unless an exclusion applies, so if you can no longer apply the treaty due to not being a resident - you'll need to look for general exclusions in the tax law. I don't know how Germany taxes scholarships under the general rules, you'll have to check it. It is possible that they're not taxed. Many people try to raise the argument of \"\"I'm not a resident\"\" to avoid income taxes altogether on earnings on their work - this would not work. But with a special kind of income like scholarship, which may be exempt under the law, it may. Keep in mind, that the treaty has \"\"who is or was immediately before visiting a Contracting State a resident of the other Contracting State\"\" language in some relevant cases, so you may still apply it in the US even if no longer resident in Germany.\"","Every country has its own tax code. Consult a professional in each country regarding income earned in that country. Anything else is speculation.","Depending on what software you use. It has to be reported as a foreign income and you can claim foreign tax paid as a foreign tax credit.","This is a complicated question that relies on the US-India Tax Treaty to determine whether the income is taxable to the US or to India. The relevant provision is likely Article 15 on Personal Services. http://www.irs.gov/pub/irs-trty/india.pdf It seems plausible that your business is personal services, but that's a fact-driven question based on your business model. If the online training is 'personal services' provided by you from India, then it is likely foreign source income under the treaty. The 'fixed base' and '90 days' provisions in Article 15 would not apply to an India resident working solely outside the US. The question is whether your US LLC was a US taxpayer. If the LLC was a taxpayer, then it has an obligation to pay US tax on any worldwide income and it also arguably disqualifies you from Article 15 (which applies to individuals and firms of individuals, but not companies). If you were the sole owner of the US LLC, and you did not make a Form 8832 election to be treated as subject to entity taxation, then the LLC was a disregarded entity. If you had other owners, and did not make an election, then you are a partnership and I suspect but cannot conclude that the treaty analysis is still valid. So this is fact-dependent, but you may be exempt from US tax under the tax treaty. However, you may have still had an obligation to file Forms 1099 for your worker. You can also late-file Forms 1099 reporting the nonemployee compensation paid to your worker. Note that this may have tax consequences on the worker if the worker failed to report the income in those years.","This person must pay taxes in both the overseas country and in the U.S. This is unusual; generally, only the U.S. demands this. Depending on the specific country, he would likely not be taxed twice as the U.S. generally recognises tax paid in a different country. Note there are some gotchas, though. For example, although Canada has a generally higher tax scheme than the U.S., you may still end up owing tax if you use the Tax-Free Savings Account system in Canada, as that is not recognised in the U.S. As to whether or not this person should form a company, that is far too broad a question. It's going to depend in large part on the tax situations of the countries involved. This person needs to consult an accountant specialising in this situation. That is, on personal versus business tax and on tax involving U.S. citizens. Yes, this person can and indeed must file and pay taxes in the U.S., from outside the U.S.","No state taxes, but Italy also has a favorable treaty with the US Federal Government. Look into to lowering your federal taxes to 5% ;) its a thick read, http://www.irs.gov/businesses/international/article/0,,id=169601,00.html and also try to determine if the Foreign Earned Income Exclusion applies to you, reducing your Federal tax to ZERO on the first $95,100 earned abroad. http://www.irs.gov/businesses/small/international/article/0,,id=97130,00.html but then you may be subject to a 20%+ italy tax. so maybe you should just try for the tax treaty","\"It depends on the rules in the specific places you stay. Specific places being countries or states. Some states may consider pension payments to be taxable income, others may not. Some may consider presence for X days to constitute residency, X days may be 60 days in a calendar year whether or not those days are continuous. It doesn't matter so much where your mailbox or mail handling service is located, it matters: You may owe taxes in more than one place. Some states will allow you to offset other states' taxes against theirs. Some states in the US are really harsh on income taxes. It's my understanding that if you own real estate in New York, all of your income, no matter the source, is taxable income in New York whether or not you were ever in the state that year. Ultimately, you can't just put up your hand and say, \"\"that's my tax domicile so I'm exempt from all your taxes.\"\" There is no umbrella US regulation on this topic, the states determine who they consider to be residents and how those residents are to be taxed. While it's possible you may be considered a resident of multiple states and owe income taxes in multiple states, it's equally possible that you won't meet the residency criteria for any state regardless of whether or not that state has an income tax. The issue you face, as addressed in @Jay's answer, Oklahoma will consider you a resident of OK until you have established residency somewhere else.\"","From tax perspective, any income you earn for services performed while you're in the US is US-sourced. The location of the person paying you is of no consequence. From immigration law perspective, you cannot work for anyone other than your employer as listed on your I-20. So freelancing would be in violation of your visa, again - location of the customer is of no consequence.","4 months working from your kitchen doesn't sound like an isolated or incidental transaction. So I think that yes, that income would be taxable by NYS (and NYC/Yonkers if the kitchen is in these cities).","If you're not a NY (tax) resident, then as long as you're not physically present in New York - you do not owe NY taxes on compensation for your services. But that is if you're a 1099 contractor/employee. If you're a partner/shareholder in a partnership/LLC/S-Corp registered or conducting business in New York, and that company pays you money - you do owe NY taxes. See this page of the NY revenue agency for more details.","\"Yes, it will be taxable in the US. You will report your worldwide income, and will be able to take credit for any Indian tax paid. However, the portions that are tax-free in India will be fully taxable for you in the US. Keep in mind, in addition to the taxes, the FBAR requirements and the FATCA forms you may need to be filing as well. Failure to file (regardless of if any tax is actually owed) will trigger a $10K penalty. I suggest you have a US-licensed EA/CPA (tax adviser) to help you with your US tax return. Keep in mind that a \"\"regular\"\" American tax preparer knows very little of the specific requirements for foreigners and may land you in trouble. Similarly, the \"\"off-the-shelf\"\" tax software or tax preparation outlets (like H&R Block) are ill-suited for foreigners in the US. It would be best to talk to a EA/CPA who is also familiar with Indian financial terms and Indo-US tax treaty.\"","\"The IRS taxes worldwide income of its citizens and green card holders. Generally, for those Americans genuinely living/working overseas the IRS takes the somewhat reasonable position of being in \"\"2nd place\"\" tax-wise. That is, you are expected to pay taxes in the country you are living in, and these taxes can reduce the tax you would have owed in the USA. Unfortunately, all of this has to be documented and tax returns are still required every year. Your European friends may find this quite surprising as I've heard, for instance, that France will not tax you if you go live and work in Germany. A foreign company operating in a foreign country under foreign law is not typically required to give you a W-2, 1099, or any of the forms you are used to. Indeed, you should be paying taxes in the place where you live and work, which is probably somewhat different than the USA. Keep all these records as they may be useful for your USA taxes as well. You are required to total up what you were paid in Euros and convert them to US$. This will go on the income section of a 1040. You should be paying taxes in the EU country where you live. You can also total those up and convert to US$. This may be useful for a foreign tax credit. If you are living in the EU long term, like over 330 days/year or you have your home and family there, then you might qualify for a very large exemption from your income for US tax purposes, called the Foreign Earned Income Exclusion. This is explained in IRS Publication 54. The purpose of this is primarily to avoid double taxation. FBAR is a serious thing. In past years, the FBAR form went to a Financial Crimes unit in Detroit, not the regular IRS address. Also, getting an extension to file taxes does not extend the deadline for the FBAR. Some rich people have paid multi-million dollar fines over FBAR and not paying taxes on foreign accounts. I've heard you can get a $10,000 FBAR penalty for inadvertent, non-willful violations so be sure to send those in and it goes up from there to $250k or half the value of the account, whichever is more. You also need to know about whether you need to do FATCA reporting with your 1040. There are indeed, a lot of obnoxious things you need to know about that came into existence over the years and are still on the law books -- because of the perpetual 'arms race' between the government and would be cheaters, non-payers and their advisors. http://www.irs.gov/publications/p54/ http://americansabroad.org/\"","As a nonresident sole proprietor or partnership You are not a sole proprietor or a member of a legal partnership. You are an employee for a corporation. Does the nature of your work require you to be present in New York regularly? If you are in New York for personal reasons, you are simply telecommuting. You must pay taxes personally for your W-2 income, but your business entity never moved from Wyoming. If this were not true, companies would have to pay corporate income tax to every state in which they have a telecommuter. For example, I live in Florida but telecommute to a company in Michigan. Does my employer pay Florida business tax? Of course not. Your business would only owe New York if the nature of the business requires a consistent and regular business presence in New York, such as maintaining an office for a portion of every year so clients could see you.","Most of the years I filed while a non-resident of the US, I didn't owe a dime to the US government. Same was actually true for Canada, though I did have some income there that was eligible for taxation. AFAIK, even if I hadn't, I would have been required to file, but perhaps that isn't necessary for everyone.","\"If you are a permanent resident (and it wasn't taken away or abandoned), then you are a resident alien for U.S. tax purposes. (One of the two tests for being a resident alien is the \"\"green card test\"\".) Being a resident alien means all your worldwide income is subject to U.S. taxes, regardless of where you live or work. That doesn't necessarily mean you need to actually pay taxes on your income again if you've already paid it -- you may be able to use the Foreign Tax Credit to reduce your taxes by the amount already paid to a foreign government -- but you need to report it on U.S. tax forms just like income from the U.S., and you can then apply any tax credits that you may qualify for. As a resident alien, you file taxes using Form 1040. You are required to file taxes if your income for a particular year is above a certain threshold. This threshold is described in the first few pages of the 1040 instructions for each year. For 2013, for Single filing status under 65, it is $10000. The only way you can legally not file is if your income the whole year was below this amount. You should go back and file taxes if you were required to but failed to. Having filed taxes when required is very important if you want to naturalize later on. It is also one component of demonstrating you're maintaining residency in the U.S., which you're required to do as a permanent resident being outside the U.S. for a long time, or else you'll lose your permanent residency. (Even filing taxes might not be enough, as your description of your presence in the U.S. shows you only go there for brief periods each year, not really living there. You're lucky you haven't lost your green card already; any time you go there you run a great risk of them noticing and taking it away.)\"","If you earn money while in the US or from renting your US house - you have to pay taxes to the US on that income. If you become US tax resident - you have to pay US taxes on your worldwide income. Whether or not you're in the US illegally or receiving income while breaking any other law - doesn't matter at all.","\"It depends on how long you stay and where you earn your income. You can be a US resident for tax purposes even if you are not for immigration purposes. The \"\"substantive presence test\"\" probably applies to you: You will be considered a United States resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States (U.S.) on at least: https://www.irs.gov/Individuals/International-Taxpayers/Substantial-Presence-Test There are some exceptions to this test, and tax treaties may also apply. See IRS Publication 519 for more information.\"","Eeeeeeh... No, you don't. In Canada, and pretty much any country with common sense they will rarely charge you for income made outside its borders. In the worst case scenario you're taxed on income deemed resulting from investment (stocks, bonds, etc.), but the general rule is... You don't pay taxes on income made abroad.","There's nothing wrong with your reasoning except that you expect the tax laws to make perfect sense. More often than not they don't. I suggest getting in touch with a professional tax preparer (preferably with a CPA or EA designation), who will be able to understand the issue, including the relevant portions of the French-US tax treaty, and explain it to you. You will probably also need to do some reporting in France, so get a professional advice from a French tax professional as well. So, in my tax return, can I say that I had no US revenue at all during this whole year? I doubt it.","Unfortunately, you are required, but most states do have agreements with neighboring states that let the states share the collected taxes without the person having to pay double taxes. So being as this is your first tax return in your current situation, you might be wise to have a professional fill it out for you this year and then next year you can use it as a template. Additionally, I really would like to see someone challenge this across state lines taxation in court. It sure seems to me that it is a inter-state tariff/duty, which the state's are expressly forbidden from doing in the constitution.","This question came up again (Living in Florida working remotely - NY employer withholds NYS taxes - Correct or Incorrect?) and the poster on the new version didn't find the existing answers to be adequate, so I'm adding a new answer. NYS will tax this income if the arrangement is for the convenience of the employee. If the arrangement is necessary to complete the work, then you should have no NYS tax. New York state taxes all New York-source salary and wage income of nonresident employees when the arrangement is for convenience rather than by necessity (Laws of New York, § 601(e), 20 NYCRR 132.18). Source: http://www.journalofaccountancy.com/issues/2009/jun/20091371.html Similar text can also be found here: http://www.koscpa.com/newsletter-article/state-tax-consequences-telecommuting/ The NYS tax document governing this situation seems to be TSB-M-06(5)I. I looked at this page from NYS that was mentioned in the answer by @littleadv. That language does at first glance seem to lead to a different answer, but the ruling in the tax memo seems to say that if you're out of state only for your convenience then the services were performed in NYS for NYS tax purpose. From the memo: However, any allowance claimed for days worked outside New York State must be based upon the performance of services which of necessity, as distinguished from convenience, obligate the employee to out-of- state duties in the service of his employer.","You're doing business in the US and derive income from the US, so I'd say that yes, you should file a non-resident tax return in the US. And in Connecticut, as well, since that's where you're conducting business (via your domestic LLC registered there). Since you paid more than $600 to your contractor, you're probably also supposed to send a 1099 to him on that account on behalf of your LLC (which is you, essentially, if you're the only member).","Yes you do. You're under the jurisdiction of at least one country where you're resident, or where you're citizen. You may be under jurisdiction of more than one country. Each country has its own laws about what and how should be taxed and countries have treaties between them to resolve jurisdiction issues and double taxation situations, so you should talk to a tax accountant licensed to provide you with an advice.","Of course you're reportable to the IRS. Your income is someone's expense, they'll report it if required. What you're probably asking is whether you need to pay any taxes in the US. If you're neither US citizen nor a green card holder, and you don't step foot to the US - you will probably not need to pay taxes there.","\"Yes. You do have to pay taxes in the UK as well but it depends on how much you have already been taxed in the US. http://taxaid.org.uk/situations/migrant-workernew-to-the-uk/income-from-abroad-arising-basis-vs-remittance-basis Say, you have to pay 20% tax in the UK for your earnings here. You ARE required to pay the same percentage on your foreign income as well. Now, if your \"\"home\"\" country already taxed you at 10% (for the sake of example), then you only need to pay the \"\"remaining\"\" 10% in the UK. However, the tax law in the UK does allow you to choose between \"\"arising\"\" basis and \"\"remittance\"\" basis on your income from the country you are domiciled in. What I have explained above is based on when income \"\"arises.\"\" But the laws are complicated, and you are almost always better off by paying it on \"\"arising\"\" basis.\"","\"What would be the best strategy to avoid paying income taxes on the sale after I move to another US state? Leaving the US and terminating your US residency before the sale closes. Otherwise consider checking your home country's tax treaty with the US. In any case, for proper tax planning you should employ a licensed tax adviser - an EA, CPA or an attorney licensed in your State (the one you'd be when the sale closes). No-one else is legally allowed to provide you tax advice on the matter. Because the company abroad is befriended, I have control over when (and e.g. in how many chunks) the earnings of the sale flow into my LLC. So I can plan where I live when that money hits my US account. I'm not familiar with the term \"\"befriended\"\" in this context, but form what I understand your description - its a shell corporation under your own control. This means that the transfer of money between the corporation and your LLC is of no consequence, you constructively received the money when the corporation got it, not the LLC. Your fundamental misunderstanding is that there's importance to when the money hits your US bank account. This is irrelevant. The US taxes your worldwide income, so it is taxed when you earn it, not when you transfer it into the country (as opposed to some other countries, for example India or the UK). As such, in your current scheme, it seems to me that you're breaking the US tax law. This is my personal impression, of course, get a professional advice from a licensed tax professional as I defined earlier.\"","Hi u/Sagiv1, Short answer: Yes, you do have to pay taxes in Israel for all your worldincome. Long answer: All countries within the OCDE consider you as a fiscal resident in the country where you spend over half a year in (183 days and up). If you do not spend that much time in any country, there are other tying measures to avoid people not being fiscal residents in any country. Since you are living in Israel, you will have to pay all your worlwide generated income in Israel, following the tax regulation that is in place there. I am no Isarely Tax Lawyer so I cannot help you there. Having a lot of business internationally brings other headaches with it. Taking for example the U.S. there is a possibility that they withold taxes in their payments. It is unlikely, though, as they have a Tax Treaty to prevent double taxation. You can ask for this witholded money to be returned from the U.S. or other countries through each country's internal process. Another thing to take into account is that you can be taxed in other countries for any revenue you generate in said country. This is especially relevant for revenue that comes from Real Estate. The country where the real estate is will tax you in the country and you will have to deduct these taxes paid in your country, Israel in this case. If there is no tax treaty you might possibly be paying twice. I know you said you do promotion, but I have to warn you about this, because I ignore what other countries tax or do not tax. So been giving more info won't hurt. If the US is the main and/or only country you will be doing business with, I strongly recommend you real the Tax treaty with lots of love and patience. You can find it here: https://www.irs.gov/pub/irs-trty/israel.pdf or here: Treaty:http://mfa.gov.il/Style%20Library/AmanotPdf/005118.pdf Amendment: http://mfa.gov.il/Style%20Library/AmanotPdf/005120.pdf If you are from Israel and prefer it in Hebrew, here are the treaties in your language: Treaty: http://mfa.gov.il/Style%20Library/AmanotPdf/005119.pdf Amendment: http://mfa.gov.il/Style%20Library/AmanotPdf/005121.pdf Normally most IRS Departments have sections with very uselful help on these sort of matters. I'd recomment you to take a look at yours. Last, what I've explained is the normal process that applies almost all over the world. But each country has their own distinctions and you need to look carefully. Take what I said as a starting point and do your own research or ideally try to find a tax consultant/lawyer who helps you. Best of luck.","\"Be careful here: If ACME were in California, I would pay taxes on USD 17,000 because I had revenue of 20,000 and expenses of 3,000. To CALIFORNIA. And California taxes S-Corps. And, in addition, you'd pay $800 for the right of doing business in the State. All that in addition to the regular Federal and State taxes to the State where you're resident. Suppose that ACME is in Britain (or anywhere else for that matter). My revenue and expenses are the same, but now my money has been earned and my expenses incurred in a foreign country. Same thing exactly. Except that you'll have to pay taxes to the UK. There may be some provision in the tax treaty to help you though, so you may end up paying less taxes when working in the UK than in California. Check with a licensed tax adviser (EA/CPA licensed in your State) who won't run away from you after you say the words \"\"Tax Treaty\"\". Does it even make sense to use my S-Corporation to do business in a foreign country? That should be a business decision, don't let the tax considerations drive your business.\"","A non-resident alien is only allowed for deductions connected to producing a US-sourced income (See IRC Sec. 873). Thus you can only deduct things that qualify as business expenses, and State taxes on your wages. In addition you can deduct a bunch of stuff explicitly allowed (like tax preparation, charitable contributions, casualty losses, etc) but sales tax is not in that list.","\"New York State is one of a few states that will go after telecommuter taxes (such that some people may end up paying double tax even if they don't live in NY). There are a few ways that you can avoid this. If you NEVER come to NY for work, and your employer can stipulate that your position is only available to be filled remotely, you will likely be covered. But there are a myriad of factors relating to this such as whether the employer reimburses you for your home office and whether you keep \"\"business records\"\" at your office. Provided you can easily document the the factors in TSB-M-06(5)I, you shouldn't have to pay NYS taxes. (source: I've worked with a NYS tax attorney as an employer to deal with this exact scenario).\"","You should add it to all the other income and continue paying taxes as you would on your Irish salary. That is true for both the US and the Irish sides of the equation. In case you didn't know - your Irish earnings are taxable in the US, since the US taxes all of your income. Your Amazon.com earnings are taxable in Ireland since that's where you earned it. You can use the FEIE/FTC as appropriate on your US tax return to reduce your tax liability, but all of your income should be reported.","It is not a question of where you have your driver's license. It is a question of the states' tax related residency rules. (Though a driver's license can be a part of that question.) Since you likely have a residence in NYC and so can prove residency through a lease, bills, etc., you probably have to file as a NYS/NYC resident. I do have to question your maintaining a California driver's license if you are not a resident. If you are attempting to maintain dual-residency, look into both states' residency rules to see if you are liable for taxes in both states. California seems particularly picky about these types of situations, probably due to concerns that you may be trying to circumvent California taxes. That said, it usually revolves around income in the state. Of course, if you maintain residency in California as well, the argument can be made that you owe some taxes due to the fact that you take advantage of state services. (E.g. you drive on California roads.) I suggest you consult a tax professional knowledgeable in these issues to sort out the details.","\"For Non-Resident filers, New York taxes New York-sourced income. That includes: real or tangible personal property located in New York State (including certain gains or losses from the sale or exchange of an interest in an entity that owns real property in New York State); services performed in New York State; a business, trade, profession, or occupation carried on in New York State; and a New York S corporation in which you are a shareholder (including installment income from an IRC 453 transaction). There are some exclusions as well. It is all covered in the instructions to form IT-203. However, keep in mind that \"\"filing\"\" as non-resident doesn't make you non-resident. If you spend 184 days or more in New York State, and you have a place to stay there - you are resident. See definitions here. Even if you don't actually live there and consider yourself a CT resident.\"","The United States taxes nonresident aliens on two types of income: First, a nonresident alien who is engaged in a trade or business in the United States is taxed on income that is effectively connected with that trade or business. Second, certain types of U.S.-source payments are subject to income tax withholding. The determination of when a nonresident alien is engaged in a U.S. trade or business is highly fact-specific and complex. However, keeping assets in a U.S. bank account should not be treated as a U.S. trade or business. A nonresident alien's interest income is generally subject to U.S. federal income tax withholding at a rate of 30 percent under Section 1441 of the tax code. Interest on bank deposits, however, benefit from an exception under Section 1441(c)(10), so long as that interest is not effectively connected with a U.S. trade or business. Even though no tax needs to be withheld on interest on a bank deposit, the bank should still report that interest each year to the IRS on Form 1042-S. The IRS can then send that information to the tax authority in Brazil. Please keep in mind that state and local tax rules are all different, and whether interest on the bank deposits is subject to state or local tax will depend on which state the bank is in. Also, the United States does tax nonresident aliens on wages paid from a U.S. company, if those wages are treated as U.S.-source income. Generally, wages are U.S.-source income if the employee provides services while physically present in the United States. There are a few exceptions to this rule, but they depend on the amount of wages and other factors that are specific to the employee's situation. This is an area where you should really consult with a U.S. tax advisor before the employment starts. Maybe your company will pay for it?","It also depends on where you work. If you move your home and your job then the date you establish residency in the new state is the key date. All income before that date is considered income for state 1, and all income on or after that date is income for state 2. If there is a big difference in income you will want to clearly establish residency because it impacts your wallet. If they had the same rates moving wouldn't impact your wallet, but it would impact each state. So make sure when going from high tax state to low tax state that you register your vehicles, register to vote, get a new drivers license... It becomes more complex if you move your home but not your job. In that case where you work might be the deciding factor. Same states have agreed that where you live is the deciding factor; in other cases it is not. For Virginia, Maryland, and DC you pay based on where you live if the two states involved are DC, MD, VA. But if you Live in Delaware and work in Virginia Virginia wants a cut of your income tax. So before you move you need to research reciprocity for the two states. From Massachusetts information for Nonresident and Part-Year Resident Income, Exemptions, Deductions and Credits Massachusetts gross income includes items of income derived from sources within Massachusetts. This includes income: a few questions later: Massachusetts residents and part-year residents are allowed a credit for taxes due to any other jurisdiction. The credit is available only on income reported and taxed on a Massachusetts return. Nonresidents may not claim the taxes paid to other jurisdiction credit on their Massachusetts Form 1-NR/PY. The credit is allowed for income taxes paid to: The credit is not allowed for: taxes paid to the U.S. government or a foreign country other than Canada; city or local tax; and interest and penalty paid to another jurisdiction. The computation is based on comparing the Massachusetts income tax on income reported to the other jurisdiction to the actual tax paid to the other jurisdiction; the credit is limited to the smaller of these two numbers. The other jurisdiction credit is a line item on the tax form but you must calculate it on the worksheet in the instruction booklet and also enter the credit information on the Schedule OJC. So if you move your house to New Hampshire, but continue to work in Massachusetts you will owe income tax to Massachusetts for that income even after you move and establish residency in New Hampshire.","\"As you are earning an income by working in India, you are required to pay tax in India. If you contract is of freelance, then the income earned by you has to be self declared and taxes paid accordingly. There are some expenses one can claim, a CA should be able to guide you. Not sure why the Swiss comapny is paying taxes?. Are they depositing this with Income Tax, India, do they have a TAN Number. If yes, then you don't need to pay tax. But you need to get a statement from your company showing the tax paid on behalf of you. You can also verify the tax paid on your behalf via \"\"http://incometaxindia.gov.in/26ASTaxCreditStatement.asp\"\" you cna register. Alternatively if you have a Bank Account in India with a PAN card on their records, most Banks provide a link to directly see\"","From my research it looks like its an income NOT effectively connected with the trade of business. This page has the exact details https://www.irs.gov/individuals/international-taxpayers/effectively-connected-income-eci","\"If you live outside the US, then you probably need to deal with foreign tax credits, foreign income exclusions, FBAR forms (you probably have bank account balances enough for the 10K threshold) , various monsters the Congress enacted against you like form 8939 (if you have enough banking and investment accounts), form 3520 (if you have a IRA-like local pension), form 5471 (if you have a stake in a foreign business), form 8833 (if you have treaty claims) etc ect - that's just what I had the pleasure of coming across, there's more. TurboTax/H&R Block At Home/etc/etc are not for you. These programs are developed for a \"\"mainstream\"\" American citizen and resident who has nothing, or practically nothing, abroad. They may support the FBAR/FATCA forms (IIRC H&R Block has a problem with Fatca, didn't check if they fixed it for 2013. Heard reports that TurboTax support is not perfect as well), but nothing more than that. If you know the stuff well enough to fill the forms manually - go for it (I'm not sure they even provide all these forms in the software though). Now, specifically to your questions: Turbo tax doesn't seem to like the fact that my wife is a foreigner and doesn't have a social security number. It keeps bugging me to input a valid Ssn for her. I input all zeros for now. Not sure what to do. No, you cannot do that. You need to think whether you even want to include your wife in the return. Does she have income? Do you want to pay US taxes on her income? If she's not a US citizen/green card holder, why would you want that? Consider it again. If you decide to include here after all - you have to get an ITIN for her (instead of SSN). If you hire a professional to do your taxes, that professional will also guide you through the ITIN process. Turbo tax forces me to fill out a 29something form that establishes bonafide residency. Is this really necessary? Again in here it bugs me about wife's Ssn Form 2555 probably. Yes, it is, and yes, you have to have a ITIN for your wife if she's included. My previous state is California, and for my present state I input Foreign. When I get to the state tax portion turbo doesn't seem to realize that I have input foreign and it wants me to choose a valid state. However I think my first question is do i have to file a California tax now that I am not it's resident anymore? I do not have any assets in California. No house, no phone bill etc If you're not a resident in California, then why would you file? But you might be a partial resident, if you lived in CA part of the year. If so, you need to file 540NR for the part of the year you were a resident. If you have a better way to file tax based on this situation could you please share with me? As I said - hire a professional, preferably one that practices in your country of residence and knows the provisions of that country's tax treaty with the US. You can also hire a professional in the US, but get a good one, that specializes on expats.\"","\"What theyre fishing for is whether the money was earned in the U.S. It's essentially an interest shelter, and/or avoiding double taxation. They're saying if you keep income you make outside the US in a bank inside the US, the US thanks you for storing your foreign money here and doesn't tax the interest (but the nation where you earned that income might). There is no question that the AirBNB income is \"\"connected with a US trade or business\"\". So your next question is whether the fraction of interest earned from that income can be broken out, or whether IRS requires you to declare all the interest from that account. Honestly given the amount of tax at stake, it may not be worth your time researching. Now since you seem to be a resident nonresident alien, it seems apparent that whatever economic value you are creating to earn your salary, is being performed in the United States. If this is for an American company and wages paid in USD, no question, that's a US trade or business. But what if it's for a Swedish company running on Swedish servers, serving Swedes and paid in Kroner to a Swedish bank which you then transfer to your US bank? Does it matter if your boots are on sovereign US soil? This is a complex question, and some countries (UK) say \"\"if your boots are in our nation, it is trade/income in our nation\"\"... Others (CA) do not. This is probably a separate question to search or ask. To be clear, the fact that your days as a teacher or trainee do not count toward residency, is a separate question from whether your salary as same counts as US income.\"","I believe the answer is no, since your income from royalties and app sales would fall under FDAP income. (another conformation of this would be the fact that Apple and Google requested a W8-BEN form from you and not a W8-ECI form) Generally, All income EXCEPT FDAP income (fixed or determinable annual or periodical income) are ECI income. FDAP income includes income from interest, rent, dividends etc. IRS link to a list of all Income classified under FDAP below:- https://www.irs.gov/individuals/international-taxpayers/fixed-determinable-annual-periodical-fdap-income https://www.irs.gov/pub/irs-pdf/iw8eci.pdf (page 3 - under effectively connected income)","\"By living in Sweden and having a Swedish personal identification number (personnummer), you are required to declare your entire worldwide income for tax purposes with the Swedish tax authorities, Skatteverket. It would seem to not make any difference if some of that income is kept outside of Sweden. A company that has no permanent base of operations within Sweden should not deduct any preliminary taxes for an employee that lives in Sweden. Rather, the employee should apply for \"\"special A tax\"\" (\"\"SA\"\" tax status), and pay the taxes that, had the company had a permanent base of operations in Sweden, the company would have paid. The information available on the tax authority's web site in English seems limited, but the relevant page in Swedish in your situation is very likely Lön från utländska arbetsgivare utan fast driftställe i Sverige. There is a summary at Paying taxes – for individuals. Particularly do note the summary section: When staying for at least six months, you are considered as resident in Sweden for tax purposes, and are liable for taxation in Sweden on all of your worldwide income. You must also file a Swedish income tax return. Your tax return must be filed no later than May 2nd of the year after the fiscal year. as well as that: If you stay in Sweden for a continuous period of at least six months you are considered to be resident in Sweden. /.../ As a resident you are liable for taxation in Sweden on all of your worldwide income. In some cases a tax treaty with with your ordinary country of residence may limit the Swedish taxation. /.../ For a more detailed answer, including which exact forms you need to fill out and what data is needed, I strongly recommend that you either contact Skatteverket (they are usually quite nice to deal with, and they tend to realize that everyone benefits from getting the tax paperwork and payments right from the beginning), or find an attorney specializing in Swedish tax law. They even point out themselves that (my emphasis): the practical applications of these rules are relatively complicated and for more information you can contact the Tax Information (“Skatteupplysningen”) at 0771 567 567.\"","This depends on the state law. In case of the State of New York - these are the criteria for sourcing the NY income: As a sole proprietor or partnership, your New York source income includes: Business activities As a nonresident sole proprietor or partnership, you carry on a business, trade, profession, or occupation within New York State if you (or your business): As you can see, the qualification depends on the way you do business, and the amount of business transactions you have in New York. If it is not clear to you - talk to a CPA/EA licensed to practice in the State of New York to give you an advice.","Do I pay tax to the US and then also pay it in India for my income, or does my American partner, who holds 15% of the monthly income, pay tax in the US for his income? Of course you do, what kind of question is this? You have income earned in the US by a US entity, and the entity is taxed. Since LLC is a disregarded entity - the tax shifts to you personally. You should file form 1040NR. You should also talk to a tax professional who's proficient in the Indo-US tax treaty, since it may affect your situation.","Canada doesn't tax non-residents on income earned/incurred outside of Canada. So, your sister should start with this page to determine the residency status. If she is indeed determined to be non-resident - she should look here to see her obligations. If all she earns she earns outside of Canada - her obligations will be very little, if at all. This is similar to almost any other country in the world, with the notable exception of the United States of America. US citizens are taxed regardless of their residency status, everywhere in the world on worldwide income (unless tax treaty says otherwise).","\"My employer decided to pay my salary in India after I submit a form W-8BEN. This means that the wages / salary is deemed accrued for work from India. Hence your employer need not withhold and pay taxes on this wage in US. Is this payment taxable in the States since I am staying outside of States? Should I declare this income to IRS in case if I go back to the States later this year? No tax is due as the work is done outside on US. If you go back this would be similar to as you had gone first. Depending on your \"\"tax residency status\"\" you would have to declare all assets. If my US employer wires my US salary to my NRE account is that taxable in India? This is still taxable in India. It is advised that you have the funds transferred into a regular savings account. Please note you have to pay taxes in advance as per prescribed due dates in Sept, Dec, March. how does the Indian tax man identify if it is a taxable income and not just the regular remittance. This question is off topic here. Whether income taxes finds out about this is irrelevant. By law one is required to pay taxes on income earned in India.\"","There is no such thing as double taxation. If you pay tax in the US, you CAN claim tax credits from India tax authority. For example, if you pay 100 tax in USA and your tax liability in India is 200, then you will only pay 100 (200 India tax liability minus 100 tax credits on foreign tax paid in the USA). This is always true and not depending on any treaty. If there is a treaty, the tax rate in the United States is set on the treaty and you CAN claim that final tax rate based upon that treaty. If you operate an LLC, and the income is NOT derived from United States and you have no ties with the US and that LLC is register to a foreign person (not company but a real human) then you will not have to submit tax return in the US... I advice you to read this: http://www.irs.gov/businesses/small/article/0,,id=98277,00.html","\"IRS Pub 554 states (click to read full IRS doc): \"\"Do not file a federal income tax return if you do not meet the filing requirements and are not due a refund. ... If you are a U.S. citizen or resident alien, you must file a return if your gross income for the year was at least the amount shown on the appropriate line in Table 1-1 below. \"\" You may not have wage income, but you will probably have interest, dividend, capital gains, or proceeds from sale of a house (and there is a special note that you must file in this case, even if you enjoy the exclusion for primary residence)\"","There are just too many variables here... Will you legally be considered a permanent resident from the moment you move? Will you work from home as a contractor or as an employee? Those are not questions you can answer yourself, they really depend on your circumstances and how the tax authorities will look at them. I strongly encourage you to speak to an advisor. Very generally spoken, at your place of residence you pay taxes for your worldwide income, at the place of your work base (which is not clear if this really would be Turkey) you pay taxes on the income generated there. If it's one and the same country, it's simple. If not, then theoretically you pay twice. However, most countries have double taxation treaties to avoid just that. This usually works so that the taxes paid abroad (in Turkey) would be deducted from your tax debt at your place of residence. But you might want to read the treaty to be sure how this would be in your specific case (all treaties are publicly available), and you should really consider speaking to a professional.","What taxes will I have to pay to India? Income earned outside of India when your status is Non-Resident Indian, there is no tax applicable. You can repatriate the funds back to India within 7 years without any tax event. Someone else may put an answer about US taxes.","If the work is done in India, then the income arising out of it, is taxable when received by you, and not when it come into India ...","Normally, yes, you would have to pay. If you are in the US, or a citizen of the US, then IRC Sec. 61 would levy tax on all income. Even if you find money on the ground, that will generally be taxable income (the treasure trove doctrine). If you are paying foreign income taxes, the US may allow credit.","Per the IRS instructions on filing as Head of Household as a Citizen Living Abroad, if you choose to file only your own taxes, and you qualify for Head of Household without them, the IRS does not consider you married: If you are a U.S. citizen married to a nonresident alien you may qualify to use the head of household tax rates. You are considered unmarried for head of household purposes if your spouse was a nonresident alien at any time during the year and you do not choose to treat your nonresident spouse as a resident alien. However, your spouse is not a qualifying person for head of household purposes. You must have another qualifying person and meet the other tests to be eligible to file as a head of household. As such, you could file as Married Filing Separately (if you have no children) or Head of Household (if you have one or more children, a parent, etc. for whom you paid more than half of their upkeep - see the document for more information). You also may choose to file as Married Filing Jointly, if it benefits you to do so (it may, if she earns much less than you). See the IRS document Nonresident Spouse Treated As Resident for more information. If you choose to treat her as a resident, then you must declare her worldwide income. In some circumstances this will be beneficial for you, if you earn substantially more than her and it lowers your tax rate overall to do so. Married Filing Separately severely limits your ability to take some deductions and credits, so it's well worth seeing which is better.","You're free to provide services, but if you stay in one country for more than half a year - you're generally considered to be its resident for tax purposes. Germany is no exception to the rule, in fact - this is true to almost any country in the world. If you provide the services from Poland, and never set foot in Germany - they won't say a word.","If you were NRI during the period you earned the income, its tax free in India and you can bring it back anytime within 7 years. There is a limit on total amount but its quite huge. If you were not an NRI during that period [when you earned in US] then whatever you have earned is taxable even in India, it does not matter whether you keep the funds in US or bring it back to India. You get the benefit of Double Tax and can deduct the tax already paid.","It means you must pay federal (and possibly state) tax on any income you produce in America -- including Internet and mail-order sales. Tax treaties may keep you from having to pay tax on it again in your own country, or may not.","Since you have already paid tax to the Government of Uk, no tax will be levied on the money earned outside India. As per the Income tax act, any income received in India in all cases is taxable irrespective of the tax payer's residential status. A NRI after receiving income from outside India cannot be taxed as income because of remittance of such income to India.","I am from India. I visited US 6-8 times on business VISA and then started 2 Member LLC. Myself and My wife as LLC Members. We provide Online Training to american students from India. Also Got EIN number. Never employed any one. Do i need to pay taxes? Students from USA pays online by Paypal and i am paying taxes in India. Do i need to pay Taxes in US? DO i need to file the Tax returns? Please guide me. I formed LLC in 2010. I opened an Office-taken Virtual office for 75 USD per month to open LLC in 2010. As there is physical virtual address, am i liable for US taxes? All my earning is Online, free lancing.","I believe I have to pay taxes in US since it is a US broker. No, not at all. The fact that the broker is a US broker has nothing to do with your tax liabilities. You should update the banks and the broker with your change of status submitting form W8-BEN to them. Consult a tax professional proficient with Indo-US tax treaty as to what you should put in part II. The broker might withhold some of your income and remit it as taxes to the IRS based on what you put in W8-BEN and the type of income, but you can have it refunded (if it exceeds your liability) by submitting a tax return (form 1040-NR). You do have to pay tax in India, based on the Indian tax law, for your profits in the US. Consult with an Indian tax accountant on that. If I'm not mistaken, there are also currency transfer restrictions in India that you should be aware of."],"string":"[\n \"Where you earn your money makes no difference to the IRS. Citizen/permanent resident means you pay income tax. To make matters worse given your situation it's virtually certain you have unreported foreign bank accounts--something that's also an important issue.\",\n \"It essentially works the same. Some states don't have any income taxes at all (like Florida or Wyoming), some only tax income derived in the state, and some tax worldwide income (like New York or California), similarly to the Federal income taxes. However, if you're living abroad (i.e.: you're a citizen or resident of a foreign country and you live there), you're not considered resident by most of the states (check with your state for specific definitions) for most, if not all, the time of your residency abroad. In such case - you don't pay state taxes, only Federal. You have to remember that foreign income exclusion doesn't apply to the income from your 401k, so you pay the taxes as if you're in the US. You can not use foreign taxes credit as well (but depending on the tax treaty with the country you're moving to, your 401k income might not be taxable there). In some cases you may end up with double taxation: US will tax your 401k income as you're a US citizen and the income is derived from the US sources, and the foreign country will tax the income based on its own laws. This is not a tax advice, and this answer was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer.\",\n \"You're not physically present in the US, you're not a US citizen, you're not a green card holder, and you don't have a business that is registered in the US - US laws do not apply to you. You're not in any way under the US jurisdiction. Effectively connected income is income effectively connected to your business in the US. You're not in the US, so there's nothing to effectively connect your income to. Quote from the link: You usually are considered to be engaged in a U.S. trade or business when you perform personal services in the United States. You ask: If I form an LLC or C corp am I liable for this withholding tax? If you form a legal entity in a US jurisdiction - then that entity becomes subjected to that jurisdiction. If you're physically present in the US - then ECI may become an issue, and you also may become a resident based on the length of your stay.\",\n \"Fear tactics posted above, likely by IRS agents. Yes, you qualify based on the residence test. You perform your work outside the US. You gather business data in a foreign country. The income is excluded.\",\n \"If you have income in the US, you will owe US income tax on it, unless there is a treaty with your country that says otherwise.\",\n \"It depends and I would not just jump into conclusion as I have seen cases where offering some services are not U.S. sourced income. I'll advise you speak with a knowledgeable tax professional.\",\n \"\\\"New York will want to you to pay taxes on income from \\\"\\\"New York sources\\\"\\\". I'm not sure what this means to a freelance web developer. If your wife is doing freelance web development under the same business entity as she did in New York (ie. a New York sole proprietor, corporation, etc), you probably do need to file. From nonresident tax form manual: http://tax.ny.gov/pdf/2011/inc/it203i_2011.pdf If you were a nonresident of New York State, you are subject to New York State tax on income you received from New York State sources in 2011. If you were a resident of New York State for only part of 2011, you are subject to New York State tax on all income you received while you were a resident of the state and on income you received from New York State sources while you were a nonresident. To compute the amount of tax due, use Form IT-203, Nonresident and Part-Year Resident Income Tax Return. You will compute a base tax as if you were a full-year resident, then determine the percentage of your income that is subject to New York State tax and the amount of tax apportioned to New York State.\\\"\",\n \"\\\"If a person is not a U.S. citizen and they live and work outside the U.S., then any income they make from a U.S. company or person for services provided does not qualify as \\\"\\\"U.S. Source income\\\"\\\" according to the IRS. Therefore you wouldn't need to worry about withholding or providing tax forms for them for U.S. taxes. See the IRS Publication 519 U.S. Tax Guide for Aliens.\\\"\",\n \"\\\"Am I eligible for declaring my earnings to the IRS? You're always eligible. You're probably asking whether you're required. In the US it doesn't matter where you deposit the money, it matters where you earn it. Money is earned where the services are provided. This is called \\\"\\\"sourcing\\\"\\\". So if you are working in a foreign country - you're only subject to the US laws to the extent you're a US citizen/permanent resident or qualify for the substantial presence test.\\\"\",\n \"\\\"There's no \\\"\\\"183 days\\\"\\\" rule. As a US citizen you must pay taxes on all your income, where you live is irrelevant.\\\"\",\n \"If you're a US citizen/resident - you pay taxes on your worldwide income regardless of where you live. The logic is that Americans generally don't agree to the view that there's more than one country in the world. If you're non-US person, not physically present in the US, and provide contract work for a US employer - you generally don't pay taxes in the US. The logic is that the US doesn't actually have any jurisdiction over that money, you didn't earn it in the US. That said, your employer might withheld tax and remit it to the IRS, and you'll have to chase them for refund. If you receive income from the US rental property or dividends from a US company - you pay income tax to the US on that income, and then bargain with your home tax authority on refunds of the difference between what you paid in the US and what you should have paid at home. You can also file non-resident tax return in the US to claim what you have paid in excess. The logic is that the money sourced in the US should be taxed in the US. You earned that money in the US. There are additional rules to more specific situation, and there are also bilateral treaties between countries (including a US-Canadian treaty) that supersede national laws. Bottom line, not only that each country has its own laws, there are also different laws for different situations, and if some of the international treaties apply to you - it further complicates the situation. If something is not clear - get a professional advice form a tax accountant licensed in the relevant jurisdictions (in your case - any of the US states, and the Canadian province where you live).\",\n \"\\\"Even though you will meet the physical presence test, you cannot claim the FEIE because your tax home will remain the US. From the IRS: Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. Your tax home is the place where you are permanently or indefinitely engaged to work as an employee or self-employed individual. Having a \\\"\\\"tax home\\\"\\\" in a given location does not necessarily mean that the given location is your residence or domicile for tax purposes. ... You are not considered to have a tax home in a foreign country for any period in which your abode is in the United States. However, your abode is not necessarily in the United States while you are temporarily in the United States. Your abode is also not necessarily in the United States merely because you maintain a dwelling in the United States, whether or not your spouse or dependents use the dwelling. ... The location of your tax home often depends on whether your assignment is temporary or indefinite. If you are temporarily absent from your tax home in the United States on business, you may be able to deduct your away from home expenses (for travel, meals, and lodging) but you would not qualify for the foreign earned income exclusion. If your new work assignment is for an indefinite period, your new place of employment becomes your tax home, and you would not be able to deduct any of the related expenses that you have in the general area of this new work assignment. If your new tax home is in a foreign country and you meet the other requirements, your earnings may qualify for the foreign earned income exclusion. If you expect your employment away from home in a single location to last, and it does last, for 1 year or less, it is temporary unless facts and circumstances indicate otherwise. If you expect it to last for more than 1 year, it is indefinite. If you expect your employment to last for 1 year or less, but at some later date you expect it to last longer than 1 year, it is temporary (in the absence of facts and circumstances indicating otherwise) until your expectation changes. For guidance on how to determine your tax home refer to Revenue Ruling 93-86. Your main place of business is in the US and this will not change, because your business isn't relocating. If you are intending to work remotely while you are abroad, you should get educated on the relevant laws on where you are going. Most countries don't take kindly to unauthorized work being performed by foreign visitors. And yes, even though you aren't generating income or involving anyone in their country, the authorities still well may disapprove of your working. My answer to a very similar question on Expatriates.\\\"\",\n \"\\\"Do I need to pay taxes in India in this scenario? For India tax purposes, you would still qualify as \\\"\\\"Resident Indian\\\"\\\". As a resident Indian you have to pay taxes on Global income. It is not relevant whether you transfer the money back to India to keep in US. The income is generated and taxable. Depending on your contract, presumably you are working as a free lance; certain expenses are allowed to be deducted from your income, for example if you purchase equipment to help carry out the work, stay / entertainment costs, etc. Consult a professional CA who should be able to guide you on what is eligible and what is not. The balance along with your other income will be taxed as per tax brackets. There is exemption for certain category of workers, mostly in entertainment industry where such income is not taxable. This does not apply to your case.\\\"\",\n \"If your gross income is only $3000, then you don't need to file: https://www.irs.gov/pub/irs-pdf/p501.pdf That said, pay careful attention to: https://www.irs.gov/individuals/international-taxpayers/taxpayers-living-abroad You should be reporting ALL income, without regard to WHERE you earned it, on your US taxes. Not doing so could indeed get you in trouble if you are audited. Your level of worry depends on how much of the tax law you are willing to dodge, and how lucky you feel.\",\n \"\\\"Its not for US citizens - its for US residents. If the US considers you as a tax resident - you'll be treated the same as a US citizen, regardless of your immigration status. The question is very unclear, since it is not mentioned whether your US sourced income \\\"\\\"from the Internet\\\"\\\" is sales in the US, sales on-line, services you provide, investments, or what else. All these are treated differently. For some kinds of US-sourced income you should have paid taxes in the US already, regardless of where you physically reside. For others - not. In any case, if you become US tax resident, you'll be taxed on your worldwide income, not only the $10K deposited in the US bank account. ALL of your income, everywhere in the world, must be declared to the US government and will be taxed. You should seek professional advice, before you move to the US, in order to understand your responsibilities, liabilities and rights. I suggest looking for a EA/CPA licensed in California and experienced with taxation of foreigners (look for someone in the SF or LA metropolitan areas). Keep in mind that there may be a tax treaty between the US and your home country that may affect your Federal (but not California) taxes.\\\"\",\n \"Under Income Tax Act, tax liability depends on residency as defined under section 6 of the Income Tax Act, and not on citizenship. If you are resident in India, then your global income is taxable. As it appears from your question, you are not resident of India (182 days stay in India in a FY), as such you will have absolutely no tax liability for whatever income you earn outside India.\",\n \"Short answer: it's complicated. The UK govt pages on foreign income are probably your best starting point: http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/LeavingOrComingIntoTheUK/DG_10027480 As you can see, it depends on your precise residence status here. (There is a tax treaty between the UK and the US so you wouldn't be double taxed on the income either way. But there might still be reporting obligations).\",\n \"You should consult a US CPA to ensure your situation is handled correctly. It appears, the money is Israel source income and not US source income regardless if you receive it while living in the U.S. If you file the correct form, I suspect the form is 1040NR and your state form to disclose your income, if any, in 2015 and 2016, it should not be a problem. Having said that, if you do earn any type of income while in the U.S. , you are required to disclose it to both the IRS and state.\",\n \"A) a tax treaty probably covers this for the avoidance of double taxation. Tax treaties can be very cryptic and have little precedence clarifying them http://www.irs.gov/businesses/international/article/0,,id=169552,00.html B) I'm going to say NO since the source of your income is going to be US based. But the UK tax laws might also have specific verbage for resident source income. sorry it is an inconclusive answer, but should be some factors to consider and point you in the right direction.\",\n \"Yes, you do. Since you've been a green card holder since the beginning of the year - your whole worldwide income for the whole year is taxable in the US. You can take credit for the taxes paid in the UK (use form 1116) to reduce your US tax liability.\",\n \"\\\"Most (if not all states) in the US are only interested in source income. If you worked in that state they want to tax it. Many states have reciprocity agreements with neighboring states to exempt income earned when a person works in lets say Virginia, but lives in a state that touches Virginia. Most states don't consider interest and dividends for individuals as source income. They don't care where the bank or mutual fund branch is located, or headquartered.If it is interest from a business they will allocate it to the state where the business is located. If you may ask you to allocate the funds between two states if you move during the year, but most people will just divide the interest and dividends based on the number of days in each state unless there is a way to directly allocate the funds to a particular state. Consider this: Where is the money when it is in a bank with multiple branches? The money is only electronic, and your actual \\\"\\\"$'s\\\"\\\" may be in a federal reserve branch. Pension funds are invested in projects all over the US.\\\"\",\n \"Technically, if you earn in US (being paid there, which means you have a work visa) and live in other country, you must pay taxes in both countries. International treaties try to decrease the double-taxation, and in this case, you may pay in your country the difference of what you have paid in US. ie. your Country is 20% and USA is 15%, you will pay 5%, and vice-versa. This works only with certain areas. You must know the tax legislation of both countries, and I recommend you seek for advisory. This site have all the basic information you need: http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion Good luck.\",\n \"\\\"You may be considered a resident for tax purposes. To meet the substantial presence test, you must have been physically present in the United States on at least: 31 days during the current year, and 183 days during the 3 year period that includes the current year and the 2 years immediately before. To satisfy the 183 days requirement, count: All of the days you were present in the current year, and One-third of the days you were present in the first year before the current year, and One-sixth of the days you were present in the second year before the current year. If you are exempt, I'd check that ending your residence in Germany doesn't violate terms of the visa, in which case you'd lose your exempt status. If you are certain that you can maintain your exempt status, then the income would definitively not be taxed by the US as it is not effectively connected income: You are considered to be engaged in a trade or business in the United States if you are temporarily present in the United States as a nonimmigrant on an \\\"\\\"F,\\\"\\\" \\\"\\\"J,\\\"\\\" \\\"\\\"M,\\\"\\\" or \\\"\\\"Q\\\"\\\" visa. The taxable part of any U.S. source scholarship or fellowship grant received by a nonimmigrant in \\\"\\\"F,\\\"\\\" \\\"\\\"J,\\\"\\\" \\\"\\\"M,\\\"\\\" or \\\"\\\"Q\\\"\\\" status is treated as effectively connected with a trade or business in the United States. and your scholarship is sourced from outside the US: Generally, the source of scholarships, fellowship grants, grants, prizes, and awards is the residence of the payer regardless of who actually disburses the funds. I would look into this from a German perspective. If they have a rule similiar to the US for scholarships, then you will still be counted as a resident there.\\\"\",\n \"You won't be paying any taxes for income generated in the US as long as you are not-resident in India. You pay US taxes. You can file a null return in India just in case (all zeroes). If you have any income in India - bank deposits in your name, house rental income and so on - that needs to be declared and tax needs to be paid in India.\",\n \"According to the Colorado form CY104PN, Colorado taxes income earned while working in or being a resident of the State of Colorado. Assuming you never set foot in the State of Colorado, I read it as if you will only be liable to pay taxes in the State of New York (on all of your income, of course). You can get a more reliable opinion from a Colorado-licensed CPA.\",\n \"One other consideration. If you are a US citizen or Resident Alien, you are going to owe US income taxes regardless of where you earn the money. Here it is straight from the horse's mouth: Tax guide for US Citizens living abroad\",\n \"\\\"If you're a US citizen, money earned while in the US is sourced to the US. So you can't apply FTC/FEIE to the amounts attributable to the periods of your work while in the US even if it is a short business trip. Tax treaties may affect this. Most tax treaties have explicit provisions to exclude short trips from the sourcing rules, however due to the \\\"\\\"saving clause\\\"\\\" these would probably not apply to you if you're a US citizen - you'll need to read the relevant treaty. Your home country should allow credit for the US taxes paid on the US-sourced income, and the double-taxation avoidance provision should apply in this case. The technicalities depend on your specific country. You would probably not just remove it from the taxable income, there probably is a form similar to the US form 1116 to calculate the available credit.\\\"\",\n \"\\\"Can I use the foreign earned income exclusion in my situation? Only partially, since the days you spent in the US should be excluded. You'll have to prorate your exclusion limit, and only apply it to the income earned while not in the US. If not, how should I go about this to avoid being doubly taxed for 2014? The amounts you cannot exclude are taxable in the US, and you can use a portion of your Norwegian tax to offset the US tax liability. Use form 1116 for that. Form 1116 with form 2555 on the same return will require some arithmetic exercises, but there are worksheets for that in the instructions. In addition, US-Norwegian treaty may come into play, so check that out. It may help you reduce the tax liability in the US or claim credit on the US taxes in Norway. It seems that Norway has a bilateral tax treaty with the US, that, if I'm reading it correctly, seems to indicate that \\\"\\\"visiting researchers to universities\\\"\\\" (which really seems like I would qualify as) should not be taxed by either country for the duration of their stay. The relevant portion of the treaty is Article 16. Article 16(2)(b) allows you $5000 exemption for up to a year stay in the US for your salary from the Norwegian school. You will still be taxed in Norway. To claim the treaty benefit you need to attach form 8833 to your tax return, and deduct the appropriate amount on line 21 of your form 1040. However, since you're a US citizen, that article doesn't apply to you (See the \\\"\\\"savings clause\\\"\\\" in the Article 22). I didn't even give a thought to state taxes; those should only apply to income sourced from the state I lived in, right (AKA $0)? I don't know what State you were in, so hard to say, but yes - the State you were in is the one to tax you. Note that the tax treaty between Norway and the US is between Norway and the Federal government, and doesn't apply to States. So the income you earned while in the US will be taxable by the State you were at, and you'll need to file a \\\"\\\"non-resident\\\"\\\" return there (if that State has income taxes - not all do).\\\"\",\n \"If you're an American, and willing to give up citizenship, good luck to you. Otherwise, Uncle Sam still wants his due -- Americans are responsible for paying taxes on income earned anywhere on earth, regardless of their residence.\",\n \"Residents pay tax on all of the income they receive during the calendar year from all sources, so you'll at least need to file and pay New York state income taxes on this money regardless. I can't answer whether you'll need to file and pay Colorado state income tax on this money as well. Generally speaking, you need to file a return for each state in which you live, receive income, or have business interests. If you are required to file a Colorado state income tax return, however, you can claim a credit for taxes paid to another state on your New York state income tax return using form IT-112-R (see the form and instructions).\",\n \"\\\"You owe taxes to the state where you earned the income, and also to the state where you physically live. Most, maybe all, states have laws that let you claim credits for taxes paid to other states so that you're not paying double taxes by living in one state while working in another. Most states have deals with all their neighboring states so that you only have to file taxes in one. For example, I live in Michigan, and Michigan borders Ohio. Lots of people who live near the border live in one state but work in the other. So the two have a deal that anyone who lives in Michigan but works in Ohio just has to file a Michigan tax return and pay Michigan taxes, and anyone who lives in Ohio and works in Michigan just has to pay Ohio taxes. Oh, I should note that these adjacent state deals apply only to employment income, not business income. If you own a business in another state, you'll still have to file taxes in that state. You still should get tax credits in your residence state. In general the fact that you use a server in another state doesn't make you liable for taxes in that state. I understand that New York says that if you work from home and the company headquarters is in New York, you have to pay New York taxes. Maybe there are a few other states who do this. But just because a server is in their state? I've never heard of this. If I order business supplies that are shipped from a warehouse in Arizona, that doesn't make me liable for Arizona income taxes, etc. You are legally a \\\"\\\"resident\\\"\\\" of the state where you actually live. If you have a home and live in it most of the time, then you are a resident of the state where that home is. A \\\"\\\"home\\\"\\\" doesn't have to be a house. It could be an apartment, an RV that you live in in a trailer park, a tent, etc. If you don't own any sort of fixed home and you travel around a lot, this could be tricky. You mentioned Oklahoma. Oklahoma defines \\\"\\\"resident\\\"\\\" as follows: An Oklahoma resident is a person domiciled in this state for the entire tax year. “Domicile” is the place established as a person’s true, fixed, and permanent home. It is the place you intend to return whenever you are away (as on vacation abroad, business assignment, educational leave or military assignment). A domicile, once established, remains until a new one is adopted. (https://www.ok.gov/tax/documents/511NRPkt-14.pdf) I'm not sure that that clears things up for you. You can't just pick a state with low taxes and claim that as your residence. No way is the state where you actually live going to accept that. If you are in an ambiguous situation, like you spend 6 months per year in state A and 6 months in state B and you have no fixed home in either -- maybe you stay at motels or live in your minivan -- you might get away with picking the state with the most favorable tax laws as your residence. But if you spend 7 months in state A and 5 months in state B, state A will almost surely claim you are a resident and owe them taxes. If you regularly wander the country, never spend more than a few days in any one place, and rarely come back to the same place twice, then you have a complicated situation and you probably need to talk to a tax lawyer.\\\"\",\n \"As the name says, its for income earned in a Foreign country. If you have been paying US income tax on this while living in the US, nothing is going to change here. You should be informing yourself on how to avoid double taxation in your new country of residence. Passive income earned abroad (dividends, interest) also do not fall under this exemption. The purpose of the Foreign Earned Income Exclusion is to make it easy for expats who work abroad to avoid double income taxation without going through the complicated process of applying for tax credits. The US is the only industrial country that taxes its residents regardless of where they reside. That is also why it only goes to about $100,000 a year. If you are a high earner, they want to make it more difficult. Also as a side note, since you are going to be abroad for a year. I will point out that if you have more than $10,000 in foreign accounts at any point in the year you need to declare this in an FBAR form. This is not advertised as well as it should be and carries ridiculous penalties for non-compliance. I can't count the number of times I have heard a US expat say that they were unaware of this.\",\n \"\\\"I would suggest to get an authoritative response from a CPA. In any case it would be for your own benefit to have at least the first couple of years of tax returns prepared by a professional. However, from my own personal experience, in your situation the income should not be regarded as \\\"\\\"US income\\\"\\\" but rather income in your home country. Thus it should not appear on the US tax forms because you were not resident when you had it, it was given to you by your employer (which is X(Europe), not X(USA)), and you should have paid local taxes in your home country on it.\\\"\",\n \"From the Massachusetts Department of Revenue: 1st - Massachusetts Source Income That is Excluded Massachusetts gross income excludes certain items of income derived from sources within Massachusetts: non-business related interest, dividends and gains from the sale or exchange of intangibles, and qualified pension income. 2nd - Massachusetts Source Income That is Included: Massachusetts gross income includes items of income derived from sources within Massachusetts. This includes income: 3rd - Trade or business, Including Employment Carried on in Massachusetts: A nonresident has a trade or business, including any employment carried on in Massachusetts if: A nonresident generally is not engaged in a trade or business, including any employment carried on in Massachusetts if the nonresident's presence for business in Massachusetts is casual, isolated and inconsequential. A nonresident's presence for business in Massachusetts will ordinarily be considered casual, isolated and inconsequential if it meets the requirements of the Ancillary Activity Test (AAT) and Examples. When nonresidents earn or derive income from sources both within Massachusetts and elsewhere, and no exact determination can be made of the amount of Massachusetts source income, an apportionment of income must be made to determine that amount considered Massachusetts gross income. 4th - Apportionment of Income: Apportionment Methods: The three most common apportionment methods used to determine Massachusetts source income are as follows: Gross income is multiplied by a: So if you go to Massachusetts to work, you have to pay the tax. If you collect a share of the profit or revenue from Massachusetts, you have to pay tax on that. If you work from Oregon and are paid for that work, then you don't pay Massachusetts tax on that. If anything, your company might have to pay Oregon taxes on revenue you generate (you are their agent or employee in Oregon). Does the answer change depending on whether the income is reported at 1099 or W-2? This shouldn't matter legally. It's possible that it would be easier to see that the work was done in Oregon in one or the other. I.e. it doesn't make any legal difference but may make a practical difference. All this assumes that you are purely an employee or contractor and not an owner. If you are an owner, you have to pay taxes on any income from your Massachusetts business. Note that this applies to things like copyrights and real estate as well as the business. This also assumes that you are doing your work in Oregon. If you live in Oregon and travel to Massachusetts to work, you pay taxes on your Massachusetts income in Massachusetts.\",\n \"\\\"I'm working on similar problem space. There seems to be some working ambiguity in this space - most focus seems to be on more complex cases of income like Dividends and Capital Gains. The US seems to take a position of \\\"\\\"where the work was performed\\\"\\\" not \\\"\\\"where the work was paid\\\"\\\" for purposes of the FEIE. See this link. The Foreign Tax Credit(FTC) is applied (regardless of FEIE) based on taxes paid in the other Country. In the event you take the FEIE, you need to exclude that from the income possible to claim on the FTC. i.e. (TOTAL WAGES(X) - Excluded Income) There is a weird caveat on TOTAL WAGES(X) that says you can only apply the FTC to foreign-sourced income which means that potentially we are liable for the on-US-soil income at crazy rates. See this link.. Upon which... there is probably not a good answer short of writing your congressperson.\\\"\",\n \"If you are paid by foreigners then it is quite possible they don't file anything with the IRS. All of this income you are required to report as business income on schedule C. There are opportunities on schedule C to deduct expenses like your health insurance, travel, telephone calls, capital expenses like a new computer, etc... You will be charged both the employees and employers share of social security/medicare, around ~17% or so, and that will be added onto your 1040. You may still need a local business license to do the work locally, and may require a home business permit in some cities. In some places, cities subscribe to data services based on your IRS tax return.... and will find out a year or two later that someone is running an unlicensed business. This could result in a fine, or perhaps just a nice letter from the city attorneys office that it would be a good time to get the right licenses. Generally, tax treaties exist to avoid or limit double taxation. For instance, if you travel to Norway to give a report and are paid during this time, the treaty would explain whether that is taxable in Norway. You can usually get a credit for taxes paid to foreign countries against your US taxes, which helps avoid paying double taxes in the USA. If you were to go live in Norway for more than a year, the first $80,000/year or so is completely wiped off your US income. This does NOT apply if you live in the USA and are paid from Norway. If you have a bank account overseas with more than $10,000 of value in it at any time during the year, you owe the US Government a FinCEN Form 114 (FBAR). This is pretty important, there are some large fines for not doing it. It could occur if you needed an account to get paid in Norway and then send the money here... If the Norwegian company wires the money to you from their account or sends a check in US$, and you don't have a foreign bank account, then this would not apply.\",\n \"You're not subject to the US tax laws, and since the income is not US-sourced, it is not subject to withholding. Your employer doesn't need any form, but if they insist - you can provide them a W8-BEN to certify your non-resident status. Keep in mind that if you do come to the US, the money you earn while in the US is US-sourced and subject to the US taxes and withholding, even if you're non-resident.\",\n \"To answer my own question, at least to the extent of my understanding. Here the IRS says that all income for a foreign person from a US-based company is taxable with 30%. Here the IRS says that this tax should be withhold at source by whomever pays you. In case there is a tax treaty with the country, the tax can even be waived in the US. Of course, if you don't declare it in your home country, the US bank could probably give information requested by the home country authorities. For the other two cases (when there's no US party involved) I can't find anything on the IRS website, which kind of make sense. If I am using an account in the US just to receive and send money shouldn't imply any tax. Thanks to @litteadv for pointing me into the right direction.\",\n \"You might need to check yes... but I would check out New York's nonresident income tax requirements... My guess is yes if you meet the requirements, but I am not an expert nor do I work in the accounting or legal field. Check out New York's nonresident tax page explaination\",\n \"The data provided in your question is irrelevant. The data that you provided in the comments (that you're physically present in the US while doing the work) is the only relevant information needed to answer your question. You will need to pay taxes in the US for the earnings. The company invoicing the US client will also need to pay taxes in the US for its earnings from these invoices. You can transfer between bank accounts and deposit whatever you want anywhere you want, no-one cares (with respect to the US taxes, check with Indian tax accountant about Indian requirements).\",\n \"\\\"I believe you have to file a tax return, because state tax refund is considered income effectively connected with US trade or business, and the 1040NR instructions section \\\"\\\"Who Must File\\\"\\\" includes people who were engaged in trade or business in the US and had a gross income. You won't end up having to pay any taxes as the income is less than your personal exemption of $4050.\\\"\",\n \"Tax liability in US: You would need to determine if you are a resident alien or non resident alien. Resident alien are taxed normally as per US citizens. For the annual remuneration you have quoted it would be in the range of 25%. Refer http://www.moneychimp.com/features/tax_brackets.htm To determine if you are resident alien or non resident alien, you need to be present for certain period in US. There is also an exemption even if you meet this you can still be treated as non resident alien if your tax home is outside US [India in this case] Refer to the link for details to determine your category, the durations are for number of days in financial year, hence it matters when you are in US and the exact durations. http://www.irs.gov/taxtopics/tc851.html Also note that if you are assessed as resident alien, even the income from India will be taxed in US unless you declare there is no income in India. Tax liability in India: The tax liability in India would be depending on your NRI status. This again is tied to the financial year and the number of days you are in country. While the year you are going out of India you need to be away for atleast 183 days for you be considred are NRI. So if you are treated as Indian resident, you would have to pay tax in India on entire income. In the worst case, depending on the period you travel and the dates you travel, you could get classified as citizen in US as well as India and have to pay tax at both places. India and US do not have a dual tax avoidance treaty for individuals. Its there for certain category like small business and certain professions like teacher, research etc.\",\n \"\\\"You'll need to read carefully the German laws on tax residency, in many European (and other) tax laws the loss of residency due to absence is conditioned on acquiring residency elsewhere. But in general, it is possible to use treaties and statuses so that you end up not being resident anywhere, but it doesn't mean that the income is no longer taxed. Generally every country taxes income sourced to it unless an exclusion applies, so if you can no longer apply the treaty due to not being a resident - you'll need to look for general exclusions in the tax law. I don't know how Germany taxes scholarships under the general rules, you'll have to check it. It is possible that they're not taxed. Many people try to raise the argument of \\\"\\\"I'm not a resident\\\"\\\" to avoid income taxes altogether on earnings on their work - this would not work. But with a special kind of income like scholarship, which may be exempt under the law, it may. Keep in mind, that the treaty has \\\"\\\"who is or was immediately before visiting a Contracting State a resident of the other Contracting State\\\"\\\" language in some relevant cases, so you may still apply it in the US even if no longer resident in Germany.\\\"\",\n \"Every country has its own tax code. Consult a professional in each country regarding income earned in that country. Anything else is speculation.\",\n \"Depending on what software you use. It has to be reported as a foreign income and you can claim foreign tax paid as a foreign tax credit.\",\n \"This is a complicated question that relies on the US-India Tax Treaty to determine whether the income is taxable to the US or to India. The relevant provision is likely Article 15 on Personal Services. http://www.irs.gov/pub/irs-trty/india.pdf It seems plausible that your business is personal services, but that's a fact-driven question based on your business model. If the online training is 'personal services' provided by you from India, then it is likely foreign source income under the treaty. The 'fixed base' and '90 days' provisions in Article 15 would not apply to an India resident working solely outside the US. The question is whether your US LLC was a US taxpayer. If the LLC was a taxpayer, then it has an obligation to pay US tax on any worldwide income and it also arguably disqualifies you from Article 15 (which applies to individuals and firms of individuals, but not companies). If you were the sole owner of the US LLC, and you did not make a Form 8832 election to be treated as subject to entity taxation, then the LLC was a disregarded entity. If you had other owners, and did not make an election, then you are a partnership and I suspect but cannot conclude that the treaty analysis is still valid. So this is fact-dependent, but you may be exempt from US tax under the tax treaty. However, you may have still had an obligation to file Forms 1099 for your worker. You can also late-file Forms 1099 reporting the nonemployee compensation paid to your worker. Note that this may have tax consequences on the worker if the worker failed to report the income in those years.\",\n \"This person must pay taxes in both the overseas country and in the U.S. This is unusual; generally, only the U.S. demands this. Depending on the specific country, he would likely not be taxed twice as the U.S. generally recognises tax paid in a different country. Note there are some gotchas, though. For example, although Canada has a generally higher tax scheme than the U.S., you may still end up owing tax if you use the Tax-Free Savings Account system in Canada, as that is not recognised in the U.S. As to whether or not this person should form a company, that is far too broad a question. It's going to depend in large part on the tax situations of the countries involved. This person needs to consult an accountant specialising in this situation. That is, on personal versus business tax and on tax involving U.S. citizens. Yes, this person can and indeed must file and pay taxes in the U.S., from outside the U.S.\",\n \"No state taxes, but Italy also has a favorable treaty with the US Federal Government. Look into to lowering your federal taxes to 5% ;) its a thick read, http://www.irs.gov/businesses/international/article/0,,id=169601,00.html and also try to determine if the Foreign Earned Income Exclusion applies to you, reducing your Federal tax to ZERO on the first $95,100 earned abroad. http://www.irs.gov/businesses/small/international/article/0,,id=97130,00.html but then you may be subject to a 20%+ italy tax. so maybe you should just try for the tax treaty\",\n \"\\\"It depends on the rules in the specific places you stay. Specific places being countries or states. Some states may consider pension payments to be taxable income, others may not. Some may consider presence for X days to constitute residency, X days may be 60 days in a calendar year whether or not those days are continuous. It doesn't matter so much where your mailbox or mail handling service is located, it matters: You may owe taxes in more than one place. Some states will allow you to offset other states' taxes against theirs. Some states in the US are really harsh on income taxes. It's my understanding that if you own real estate in New York, all of your income, no matter the source, is taxable income in New York whether or not you were ever in the state that year. Ultimately, you can't just put up your hand and say, \\\"\\\"that's my tax domicile so I'm exempt from all your taxes.\\\"\\\" There is no umbrella US regulation on this topic, the states determine who they consider to be residents and how those residents are to be taxed. While it's possible you may be considered a resident of multiple states and owe income taxes in multiple states, it's equally possible that you won't meet the residency criteria for any state regardless of whether or not that state has an income tax. The issue you face, as addressed in @Jay's answer, Oklahoma will consider you a resident of OK until you have established residency somewhere else.\\\"\",\n \"From tax perspective, any income you earn for services performed while you're in the US is US-sourced. The location of the person paying you is of no consequence. From immigration law perspective, you cannot work for anyone other than your employer as listed on your I-20. So freelancing would be in violation of your visa, again - location of the customer is of no consequence.\",\n \"4 months working from your kitchen doesn't sound like an isolated or incidental transaction. So I think that yes, that income would be taxable by NYS (and NYC/Yonkers if the kitchen is in these cities).\",\n \"If you're not a NY (tax) resident, then as long as you're not physically present in New York - you do not owe NY taxes on compensation for your services. But that is if you're a 1099 contractor/employee. If you're a partner/shareholder in a partnership/LLC/S-Corp registered or conducting business in New York, and that company pays you money - you do owe NY taxes. See this page of the NY revenue agency for more details.\",\n \"\\\"Yes, it will be taxable in the US. You will report your worldwide income, and will be able to take credit for any Indian tax paid. However, the portions that are tax-free in India will be fully taxable for you in the US. Keep in mind, in addition to the taxes, the FBAR requirements and the FATCA forms you may need to be filing as well. Failure to file (regardless of if any tax is actually owed) will trigger a $10K penalty. I suggest you have a US-licensed EA/CPA (tax adviser) to help you with your US tax return. Keep in mind that a \\\"\\\"regular\\\"\\\" American tax preparer knows very little of the specific requirements for foreigners and may land you in trouble. Similarly, the \\\"\\\"off-the-shelf\\\"\\\" tax software or tax preparation outlets (like H&R Block) are ill-suited for foreigners in the US. It would be best to talk to a EA/CPA who is also familiar with Indian financial terms and Indo-US tax treaty.\\\"\",\n \"\\\"The IRS taxes worldwide income of its citizens and green card holders. Generally, for those Americans genuinely living/working overseas the IRS takes the somewhat reasonable position of being in \\\"\\\"2nd place\\\"\\\" tax-wise. That is, you are expected to pay taxes in the country you are living in, and these taxes can reduce the tax you would have owed in the USA. Unfortunately, all of this has to be documented and tax returns are still required every year. Your European friends may find this quite surprising as I've heard, for instance, that France will not tax you if you go live and work in Germany. A foreign company operating in a foreign country under foreign law is not typically required to give you a W-2, 1099, or any of the forms you are used to. Indeed, you should be paying taxes in the place where you live and work, which is probably somewhat different than the USA. Keep all these records as they may be useful for your USA taxes as well. You are required to total up what you were paid in Euros and convert them to US$. This will go on the income section of a 1040. You should be paying taxes in the EU country where you live. You can also total those up and convert to US$. This may be useful for a foreign tax credit. If you are living in the EU long term, like over 330 days/year or you have your home and family there, then you might qualify for a very large exemption from your income for US tax purposes, called the Foreign Earned Income Exclusion. This is explained in IRS Publication 54. The purpose of this is primarily to avoid double taxation. FBAR is a serious thing. In past years, the FBAR form went to a Financial Crimes unit in Detroit, not the regular IRS address. Also, getting an extension to file taxes does not extend the deadline for the FBAR. Some rich people have paid multi-million dollar fines over FBAR and not paying taxes on foreign accounts. I've heard you can get a $10,000 FBAR penalty for inadvertent, non-willful violations so be sure to send those in and it goes up from there to $250k or half the value of the account, whichever is more. You also need to know about whether you need to do FATCA reporting with your 1040. There are indeed, a lot of obnoxious things you need to know about that came into existence over the years and are still on the law books -- because of the perpetual 'arms race' between the government and would be cheaters, non-payers and their advisors. http://www.irs.gov/publications/p54/ http://americansabroad.org/\\\"\",\n \"As a nonresident sole proprietor or partnership You are not a sole proprietor or a member of a legal partnership. You are an employee for a corporation. Does the nature of your work require you to be present in New York regularly? If you are in New York for personal reasons, you are simply telecommuting. You must pay taxes personally for your W-2 income, but your business entity never moved from Wyoming. If this were not true, companies would have to pay corporate income tax to every state in which they have a telecommuter. For example, I live in Florida but telecommute to a company in Michigan. Does my employer pay Florida business tax? Of course not. Your business would only owe New York if the nature of the business requires a consistent and regular business presence in New York, such as maintaining an office for a portion of every year so clients could see you.\",\n \"Most of the years I filed while a non-resident of the US, I didn't owe a dime to the US government. Same was actually true for Canada, though I did have some income there that was eligible for taxation. AFAIK, even if I hadn't, I would have been required to file, but perhaps that isn't necessary for everyone.\",\n \"\\\"If you are a permanent resident (and it wasn't taken away or abandoned), then you are a resident alien for U.S. tax purposes. (One of the two tests for being a resident alien is the \\\"\\\"green card test\\\"\\\".) Being a resident alien means all your worldwide income is subject to U.S. taxes, regardless of where you live or work. That doesn't necessarily mean you need to actually pay taxes on your income again if you've already paid it -- you may be able to use the Foreign Tax Credit to reduce your taxes by the amount already paid to a foreign government -- but you need to report it on U.S. tax forms just like income from the U.S., and you can then apply any tax credits that you may qualify for. As a resident alien, you file taxes using Form 1040. You are required to file taxes if your income for a particular year is above a certain threshold. This threshold is described in the first few pages of the 1040 instructions for each year. For 2013, for Single filing status under 65, it is $10000. The only way you can legally not file is if your income the whole year was below this amount. You should go back and file taxes if you were required to but failed to. Having filed taxes when required is very important if you want to naturalize later on. It is also one component of demonstrating you're maintaining residency in the U.S., which you're required to do as a permanent resident being outside the U.S. for a long time, or else you'll lose your permanent residency. (Even filing taxes might not be enough, as your description of your presence in the U.S. shows you only go there for brief periods each year, not really living there. You're lucky you haven't lost your green card already; any time you go there you run a great risk of them noticing and taking it away.)\\\"\",\n \"If you earn money while in the US or from renting your US house - you have to pay taxes to the US on that income. If you become US tax resident - you have to pay US taxes on your worldwide income. Whether or not you're in the US illegally or receiving income while breaking any other law - doesn't matter at all.\",\n \"\\\"It depends on how long you stay and where you earn your income. You can be a US resident for tax purposes even if you are not for immigration purposes. The \\\"\\\"substantive presence test\\\"\\\" probably applies to you: You will be considered a United States resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States (U.S.) on at least: https://www.irs.gov/Individuals/International-Taxpayers/Substantial-Presence-Test There are some exceptions to this test, and tax treaties may also apply. See IRS Publication 519 for more information.\\\"\",\n \"Eeeeeeh... No, you don't. In Canada, and pretty much any country with common sense they will rarely charge you for income made outside its borders. In the worst case scenario you're taxed on income deemed resulting from investment (stocks, bonds, etc.), but the general rule is... You don't pay taxes on income made abroad.\",\n \"There's nothing wrong with your reasoning except that you expect the tax laws to make perfect sense. More often than not they don't. I suggest getting in touch with a professional tax preparer (preferably with a CPA or EA designation), who will be able to understand the issue, including the relevant portions of the French-US tax treaty, and explain it to you. You will probably also need to do some reporting in France, so get a professional advice from a French tax professional as well. So, in my tax return, can I say that I had no US revenue at all during this whole year? I doubt it.\",\n \"Unfortunately, you are required, but most states do have agreements with neighboring states that let the states share the collected taxes without the person having to pay double taxes. So being as this is your first tax return in your current situation, you might be wise to have a professional fill it out for you this year and then next year you can use it as a template. Additionally, I really would like to see someone challenge this across state lines taxation in court. It sure seems to me that it is a inter-state tariff/duty, which the state's are expressly forbidden from doing in the constitution.\",\n \"This question came up again (Living in Florida working remotely - NY employer withholds NYS taxes - Correct or Incorrect?) and the poster on the new version didn't find the existing answers to be adequate, so I'm adding a new answer. NYS will tax this income if the arrangement is for the convenience of the employee. If the arrangement is necessary to complete the work, then you should have no NYS tax. New York state taxes all New York-source salary and wage income of nonresident employees when the arrangement is for convenience rather than by necessity (Laws of New York, § 601(e), 20 NYCRR 132.18). Source: http://www.journalofaccountancy.com/issues/2009/jun/20091371.html Similar text can also be found here: http://www.koscpa.com/newsletter-article/state-tax-consequences-telecommuting/ The NYS tax document governing this situation seems to be TSB-M-06(5)I. I looked at this page from NYS that was mentioned in the answer by @littleadv. That language does at first glance seem to lead to a different answer, but the ruling in the tax memo seems to say that if you're out of state only for your convenience then the services were performed in NYS for NYS tax purpose. From the memo: However, any allowance claimed for days worked outside New York State must be based upon the performance of services which of necessity, as distinguished from convenience, obligate the employee to out-of- state duties in the service of his employer.\",\n \"You're doing business in the US and derive income from the US, so I'd say that yes, you should file a non-resident tax return in the US. And in Connecticut, as well, since that's where you're conducting business (via your domestic LLC registered there). Since you paid more than $600 to your contractor, you're probably also supposed to send a 1099 to him on that account on behalf of your LLC (which is you, essentially, if you're the only member).\",\n \"Yes you do. You're under the jurisdiction of at least one country where you're resident, or where you're citizen. You may be under jurisdiction of more than one country. Each country has its own laws about what and how should be taxed and countries have treaties between them to resolve jurisdiction issues and double taxation situations, so you should talk to a tax accountant licensed to provide you with an advice.\",\n \"Of course you're reportable to the IRS. Your income is someone's expense, they'll report it if required. What you're probably asking is whether you need to pay any taxes in the US. If you're neither US citizen nor a green card holder, and you don't step foot to the US - you will probably not need to pay taxes there.\",\n \"\\\"Yes. You do have to pay taxes in the UK as well but it depends on how much you have already been taxed in the US. http://taxaid.org.uk/situations/migrant-workernew-to-the-uk/income-from-abroad-arising-basis-vs-remittance-basis Say, you have to pay 20% tax in the UK for your earnings here. You ARE required to pay the same percentage on your foreign income as well. Now, if your \\\"\\\"home\\\"\\\" country already taxed you at 10% (for the sake of example), then you only need to pay the \\\"\\\"remaining\\\"\\\" 10% in the UK. However, the tax law in the UK does allow you to choose between \\\"\\\"arising\\\"\\\" basis and \\\"\\\"remittance\\\"\\\" basis on your income from the country you are domiciled in. What I have explained above is based on when income \\\"\\\"arises.\\\"\\\" But the laws are complicated, and you are almost always better off by paying it on \\\"\\\"arising\\\"\\\" basis.\\\"\",\n \"\\\"What would be the best strategy to avoid paying income taxes on the sale after I move to another US state? Leaving the US and terminating your US residency before the sale closes. Otherwise consider checking your home country's tax treaty with the US. In any case, for proper tax planning you should employ a licensed tax adviser - an EA, CPA or an attorney licensed in your State (the one you'd be when the sale closes). No-one else is legally allowed to provide you tax advice on the matter. Because the company abroad is befriended, I have control over when (and e.g. in how many chunks) the earnings of the sale flow into my LLC. So I can plan where I live when that money hits my US account. I'm not familiar with the term \\\"\\\"befriended\\\"\\\" in this context, but form what I understand your description - its a shell corporation under your own control. This means that the transfer of money between the corporation and your LLC is of no consequence, you constructively received the money when the corporation got it, not the LLC. Your fundamental misunderstanding is that there's importance to when the money hits your US bank account. This is irrelevant. The US taxes your worldwide income, so it is taxed when you earn it, not when you transfer it into the country (as opposed to some other countries, for example India or the UK). As such, in your current scheme, it seems to me that you're breaking the US tax law. This is my personal impression, of course, get a professional advice from a licensed tax professional as I defined earlier.\\\"\",\n \"Hi u/Sagiv1, Short answer: Yes, you do have to pay taxes in Israel for all your worldincome. Long answer: All countries within the OCDE consider you as a fiscal resident in the country where you spend over half a year in (183 days and up). If you do not spend that much time in any country, there are other tying measures to avoid people not being fiscal residents in any country. Since you are living in Israel, you will have to pay all your worlwide generated income in Israel, following the tax regulation that is in place there. I am no Isarely Tax Lawyer so I cannot help you there. Having a lot of business internationally brings other headaches with it. Taking for example the U.S. there is a possibility that they withold taxes in their payments. It is unlikely, though, as they have a Tax Treaty to prevent double taxation. You can ask for this witholded money to be returned from the U.S. or other countries through each country's internal process. Another thing to take into account is that you can be taxed in other countries for any revenue you generate in said country. This is especially relevant for revenue that comes from Real Estate. The country where the real estate is will tax you in the country and you will have to deduct these taxes paid in your country, Israel in this case. If there is no tax treaty you might possibly be paying twice. I know you said you do promotion, but I have to warn you about this, because I ignore what other countries tax or do not tax. So been giving more info won't hurt. If the US is the main and/or only country you will be doing business with, I strongly recommend you real the Tax treaty with lots of love and patience. You can find it here: https://www.irs.gov/pub/irs-trty/israel.pdf or here: Treaty:http://mfa.gov.il/Style%20Library/AmanotPdf/005118.pdf Amendment: http://mfa.gov.il/Style%20Library/AmanotPdf/005120.pdf If you are from Israel and prefer it in Hebrew, here are the treaties in your language: Treaty: http://mfa.gov.il/Style%20Library/AmanotPdf/005119.pdf Amendment: http://mfa.gov.il/Style%20Library/AmanotPdf/005121.pdf Normally most IRS Departments have sections with very uselful help on these sort of matters. I'd recomment you to take a look at yours. Last, what I've explained is the normal process that applies almost all over the world. But each country has their own distinctions and you need to look carefully. Take what I said as a starting point and do your own research or ideally try to find a tax consultant/lawyer who helps you. Best of luck.\",\n \"\\\"Be careful here: If ACME were in California, I would pay taxes on USD 17,000 because I had revenue of 20,000 and expenses of 3,000. To CALIFORNIA. And California taxes S-Corps. And, in addition, you'd pay $800 for the right of doing business in the State. All that in addition to the regular Federal and State taxes to the State where you're resident. Suppose that ACME is in Britain (or anywhere else for that matter). My revenue and expenses are the same, but now my money has been earned and my expenses incurred in a foreign country. Same thing exactly. Except that you'll have to pay taxes to the UK. There may be some provision in the tax treaty to help you though, so you may end up paying less taxes when working in the UK than in California. Check with a licensed tax adviser (EA/CPA licensed in your State) who won't run away from you after you say the words \\\"\\\"Tax Treaty\\\"\\\". Does it even make sense to use my S-Corporation to do business in a foreign country? That should be a business decision, don't let the tax considerations drive your business.\\\"\",\n \"A non-resident alien is only allowed for deductions connected to producing a US-sourced income (See IRC Sec. 873). Thus you can only deduct things that qualify as business expenses, and State taxes on your wages. In addition you can deduct a bunch of stuff explicitly allowed (like tax preparation, charitable contributions, casualty losses, etc) but sales tax is not in that list.\",\n \"\\\"New York State is one of a few states that will go after telecommuter taxes (such that some people may end up paying double tax even if they don't live in NY). There are a few ways that you can avoid this. If you NEVER come to NY for work, and your employer can stipulate that your position is only available to be filled remotely, you will likely be covered. But there are a myriad of factors relating to this such as whether the employer reimburses you for your home office and whether you keep \\\"\\\"business records\\\"\\\" at your office. Provided you can easily document the the factors in TSB-M-06(5)I, you shouldn't have to pay NYS taxes. (source: I've worked with a NYS tax attorney as an employer to deal with this exact scenario).\\\"\",\n \"You should add it to all the other income and continue paying taxes as you would on your Irish salary. That is true for both the US and the Irish sides of the equation. In case you didn't know - your Irish earnings are taxable in the US, since the US taxes all of your income. Your Amazon.com earnings are taxable in Ireland since that's where you earned it. You can use the FEIE/FTC as appropriate on your US tax return to reduce your tax liability, but all of your income should be reported.\",\n \"It is not a question of where you have your driver's license. It is a question of the states' tax related residency rules. (Though a driver's license can be a part of that question.) Since you likely have a residence in NYC and so can prove residency through a lease, bills, etc., you probably have to file as a NYS/NYC resident. I do have to question your maintaining a California driver's license if you are not a resident. If you are attempting to maintain dual-residency, look into both states' residency rules to see if you are liable for taxes in both states. California seems particularly picky about these types of situations, probably due to concerns that you may be trying to circumvent California taxes. That said, it usually revolves around income in the state. Of course, if you maintain residency in California as well, the argument can be made that you owe some taxes due to the fact that you take advantage of state services. (E.g. you drive on California roads.) I suggest you consult a tax professional knowledgeable in these issues to sort out the details.\",\n \"\\\"For Non-Resident filers, New York taxes New York-sourced income. That includes: real or tangible personal property located in New York State (including certain gains or losses from the sale or exchange of an interest in an entity that owns real property in New York State); services performed in New York State; a business, trade, profession, or occupation carried on in New York State; and a New York S corporation in which you are a shareholder (including installment income from an IRC 453 transaction). There are some exclusions as well. It is all covered in the instructions to form IT-203. However, keep in mind that \\\"\\\"filing\\\"\\\" as non-resident doesn't make you non-resident. If you spend 184 days or more in New York State, and you have a place to stay there - you are resident. See definitions here. Even if you don't actually live there and consider yourself a CT resident.\\\"\",\n \"The United States taxes nonresident aliens on two types of income: First, a nonresident alien who is engaged in a trade or business in the United States is taxed on income that is effectively connected with that trade or business. Second, certain types of U.S.-source payments are subject to income tax withholding. The determination of when a nonresident alien is engaged in a U.S. trade or business is highly fact-specific and complex. However, keeping assets in a U.S. bank account should not be treated as a U.S. trade or business. A nonresident alien's interest income is generally subject to U.S. federal income tax withholding at a rate of 30 percent under Section 1441 of the tax code. Interest on bank deposits, however, benefit from an exception under Section 1441(c)(10), so long as that interest is not effectively connected with a U.S. trade or business. Even though no tax needs to be withheld on interest on a bank deposit, the bank should still report that interest each year to the IRS on Form 1042-S. The IRS can then send that information to the tax authority in Brazil. Please keep in mind that state and local tax rules are all different, and whether interest on the bank deposits is subject to state or local tax will depend on which state the bank is in. Also, the United States does tax nonresident aliens on wages paid from a U.S. company, if those wages are treated as U.S.-source income. Generally, wages are U.S.-source income if the employee provides services while physically present in the United States. There are a few exceptions to this rule, but they depend on the amount of wages and other factors that are specific to the employee's situation. This is an area where you should really consult with a U.S. tax advisor before the employment starts. Maybe your company will pay for it?\",\n \"It also depends on where you work. If you move your home and your job then the date you establish residency in the new state is the key date. All income before that date is considered income for state 1, and all income on or after that date is income for state 2. If there is a big difference in income you will want to clearly establish residency because it impacts your wallet. If they had the same rates moving wouldn't impact your wallet, but it would impact each state. So make sure when going from high tax state to low tax state that you register your vehicles, register to vote, get a new drivers license... It becomes more complex if you move your home but not your job. In that case where you work might be the deciding factor. Same states have agreed that where you live is the deciding factor; in other cases it is not. For Virginia, Maryland, and DC you pay based on where you live if the two states involved are DC, MD, VA. But if you Live in Delaware and work in Virginia Virginia wants a cut of your income tax. So before you move you need to research reciprocity for the two states. From Massachusetts information for Nonresident and Part-Year Resident Income, Exemptions, Deductions and Credits Massachusetts gross income includes items of income derived from sources within Massachusetts. This includes income: a few questions later: Massachusetts residents and part-year residents are allowed a credit for taxes due to any other jurisdiction. The credit is available only on income reported and taxed on a Massachusetts return. Nonresidents may not claim the taxes paid to other jurisdiction credit on their Massachusetts Form 1-NR/PY. The credit is allowed for income taxes paid to: The credit is not allowed for: taxes paid to the U.S. government or a foreign country other than Canada; city or local tax; and interest and penalty paid to another jurisdiction. The computation is based on comparing the Massachusetts income tax on income reported to the other jurisdiction to the actual tax paid to the other jurisdiction; the credit is limited to the smaller of these two numbers. The other jurisdiction credit is a line item on the tax form but you must calculate it on the worksheet in the instruction booklet and also enter the credit information on the Schedule OJC. So if you move your house to New Hampshire, but continue to work in Massachusetts you will owe income tax to Massachusetts for that income even after you move and establish residency in New Hampshire.\",\n \"\\\"As you are earning an income by working in India, you are required to pay tax in India. If you contract is of freelance, then the income earned by you has to be self declared and taxes paid accordingly. There are some expenses one can claim, a CA should be able to guide you. Not sure why the Swiss comapny is paying taxes?. Are they depositing this with Income Tax, India, do they have a TAN Number. If yes, then you don't need to pay tax. But you need to get a statement from your company showing the tax paid on behalf of you. You can also verify the tax paid on your behalf via \\\"\\\"http://incometaxindia.gov.in/26ASTaxCreditStatement.asp\\\"\\\" you cna register. Alternatively if you have a Bank Account in India with a PAN card on their records, most Banks provide a link to directly see\\\"\",\n \"From my research it looks like its an income NOT effectively connected with the trade of business. This page has the exact details https://www.irs.gov/individuals/international-taxpayers/effectively-connected-income-eci\",\n \"\\\"If you live outside the US, then you probably need to deal with foreign tax credits, foreign income exclusions, FBAR forms (you probably have bank account balances enough for the 10K threshold) , various monsters the Congress enacted against you like form 8939 (if you have enough banking and investment accounts), form 3520 (if you have a IRA-like local pension), form 5471 (if you have a stake in a foreign business), form 8833 (if you have treaty claims) etc ect - that's just what I had the pleasure of coming across, there's more. TurboTax/H&R Block At Home/etc/etc are not for you. These programs are developed for a \\\"\\\"mainstream\\\"\\\" American citizen and resident who has nothing, or practically nothing, abroad. They may support the FBAR/FATCA forms (IIRC H&R Block has a problem with Fatca, didn't check if they fixed it for 2013. Heard reports that TurboTax support is not perfect as well), but nothing more than that. If you know the stuff well enough to fill the forms manually - go for it (I'm not sure they even provide all these forms in the software though). Now, specifically to your questions: Turbo tax doesn't seem to like the fact that my wife is a foreigner and doesn't have a social security number. It keeps bugging me to input a valid Ssn for her. I input all zeros for now. Not sure what to do. No, you cannot do that. You need to think whether you even want to include your wife in the return. Does she have income? Do you want to pay US taxes on her income? If she's not a US citizen/green card holder, why would you want that? Consider it again. If you decide to include here after all - you have to get an ITIN for her (instead of SSN). If you hire a professional to do your taxes, that professional will also guide you through the ITIN process. Turbo tax forces me to fill out a 29something form that establishes bonafide residency. Is this really necessary? Again in here it bugs me about wife's Ssn Form 2555 probably. Yes, it is, and yes, you have to have a ITIN for your wife if she's included. My previous state is California, and for my present state I input Foreign. When I get to the state tax portion turbo doesn't seem to realize that I have input foreign and it wants me to choose a valid state. However I think my first question is do i have to file a California tax now that I am not it's resident anymore? I do not have any assets in California. No house, no phone bill etc If you're not a resident in California, then why would you file? But you might be a partial resident, if you lived in CA part of the year. If so, you need to file 540NR for the part of the year you were a resident. If you have a better way to file tax based on this situation could you please share with me? As I said - hire a professional, preferably one that practices in your country of residence and knows the provisions of that country's tax treaty with the US. You can also hire a professional in the US, but get a good one, that specializes on expats.\\\"\",\n \"\\\"What theyre fishing for is whether the money was earned in the U.S. It's essentially an interest shelter, and/or avoiding double taxation. They're saying if you keep income you make outside the US in a bank inside the US, the US thanks you for storing your foreign money here and doesn't tax the interest (but the nation where you earned that income might). There is no question that the AirBNB income is \\\"\\\"connected with a US trade or business\\\"\\\". So your next question is whether the fraction of interest earned from that income can be broken out, or whether IRS requires you to declare all the interest from that account. Honestly given the amount of tax at stake, it may not be worth your time researching. Now since you seem to be a resident nonresident alien, it seems apparent that whatever economic value you are creating to earn your salary, is being performed in the United States. If this is for an American company and wages paid in USD, no question, that's a US trade or business. But what if it's for a Swedish company running on Swedish servers, serving Swedes and paid in Kroner to a Swedish bank which you then transfer to your US bank? Does it matter if your boots are on sovereign US soil? This is a complex question, and some countries (UK) say \\\"\\\"if your boots are in our nation, it is trade/income in our nation\\\"\\\"... Others (CA) do not. This is probably a separate question to search or ask. To be clear, the fact that your days as a teacher or trainee do not count toward residency, is a separate question from whether your salary as same counts as US income.\\\"\",\n \"I believe the answer is no, since your income from royalties and app sales would fall under FDAP income. (another conformation of this would be the fact that Apple and Google requested a W8-BEN form from you and not a W8-ECI form) Generally, All income EXCEPT FDAP income (fixed or determinable annual or periodical income) are ECI income. FDAP income includes income from interest, rent, dividends etc. IRS link to a list of all Income classified under FDAP below:- https://www.irs.gov/individuals/international-taxpayers/fixed-determinable-annual-periodical-fdap-income https://www.irs.gov/pub/irs-pdf/iw8eci.pdf (page 3 - under effectively connected income)\",\n \"\\\"By living in Sweden and having a Swedish personal identification number (personnummer), you are required to declare your entire worldwide income for tax purposes with the Swedish tax authorities, Skatteverket. It would seem to not make any difference if some of that income is kept outside of Sweden. A company that has no permanent base of operations within Sweden should not deduct any preliminary taxes for an employee that lives in Sweden. Rather, the employee should apply for \\\"\\\"special A tax\\\"\\\" (\\\"\\\"SA\\\"\\\" tax status), and pay the taxes that, had the company had a permanent base of operations in Sweden, the company would have paid. The information available on the tax authority's web site in English seems limited, but the relevant page in Swedish in your situation is very likely Lön från utländska arbetsgivare utan fast driftställe i Sverige. There is a summary at Paying taxes – for individuals. Particularly do note the summary section: When staying for at least six months, you are considered as resident in Sweden for tax purposes, and are liable for taxation in Sweden on all of your worldwide income. You must also file a Swedish income tax return. Your tax return must be filed no later than May 2nd of the year after the fiscal year. as well as that: If you stay in Sweden for a continuous period of at least six months you are considered to be resident in Sweden. /.../ As a resident you are liable for taxation in Sweden on all of your worldwide income. In some cases a tax treaty with with your ordinary country of residence may limit the Swedish taxation. /.../ For a more detailed answer, including which exact forms you need to fill out and what data is needed, I strongly recommend that you either contact Skatteverket (they are usually quite nice to deal with, and they tend to realize that everyone benefits from getting the tax paperwork and payments right from the beginning), or find an attorney specializing in Swedish tax law. They even point out themselves that (my emphasis): the practical applications of these rules are relatively complicated and for more information you can contact the Tax Information (“Skatteupplysningen”) at 0771 567 567.\\\"\",\n \"This depends on the state law. In case of the State of New York - these are the criteria for sourcing the NY income: As a sole proprietor or partnership, your New York source income includes: Business activities As a nonresident sole proprietor or partnership, you carry on a business, trade, profession, or occupation within New York State if you (or your business): As you can see, the qualification depends on the way you do business, and the amount of business transactions you have in New York. If it is not clear to you - talk to a CPA/EA licensed to practice in the State of New York to give you an advice.\",\n \"Do I pay tax to the US and then also pay it in India for my income, or does my American partner, who holds 15% of the monthly income, pay tax in the US for his income? Of course you do, what kind of question is this? You have income earned in the US by a US entity, and the entity is taxed. Since LLC is a disregarded entity - the tax shifts to you personally. You should file form 1040NR. You should also talk to a tax professional who's proficient in the Indo-US tax treaty, since it may affect your situation.\",\n \"Canada doesn't tax non-residents on income earned/incurred outside of Canada. So, your sister should start with this page to determine the residency status. If she is indeed determined to be non-resident - she should look here to see her obligations. If all she earns she earns outside of Canada - her obligations will be very little, if at all. This is similar to almost any other country in the world, with the notable exception of the United States of America. US citizens are taxed regardless of their residency status, everywhere in the world on worldwide income (unless tax treaty says otherwise).\",\n \"\\\"My employer decided to pay my salary in India after I submit a form W-8BEN. This means that the wages / salary is deemed accrued for work from India. Hence your employer need not withhold and pay taxes on this wage in US. Is this payment taxable in the States since I am staying outside of States? Should I declare this income to IRS in case if I go back to the States later this year? No tax is due as the work is done outside on US. If you go back this would be similar to as you had gone first. Depending on your \\\"\\\"tax residency status\\\"\\\" you would have to declare all assets. If my US employer wires my US salary to my NRE account is that taxable in India? This is still taxable in India. It is advised that you have the funds transferred into a regular savings account. Please note you have to pay taxes in advance as per prescribed due dates in Sept, Dec, March. how does the Indian tax man identify if it is a taxable income and not just the regular remittance. This question is off topic here. Whether income taxes finds out about this is irrelevant. By law one is required to pay taxes on income earned in India.\\\"\",\n \"There is no such thing as double taxation. If you pay tax in the US, you CAN claim tax credits from India tax authority. For example, if you pay 100 tax in USA and your tax liability in India is 200, then you will only pay 100 (200 India tax liability minus 100 tax credits on foreign tax paid in the USA). This is always true and not depending on any treaty. If there is a treaty, the tax rate in the United States is set on the treaty and you CAN claim that final tax rate based upon that treaty. If you operate an LLC, and the income is NOT derived from United States and you have no ties with the US and that LLC is register to a foreign person (not company but a real human) then you will not have to submit tax return in the US... I advice you to read this: http://www.irs.gov/businesses/small/article/0,,id=98277,00.html\",\n \"\\\"IRS Pub 554 states (click to read full IRS doc): \\\"\\\"Do not file a federal income tax return if you do not meet the filing requirements and are not due a refund. ... If you are a U.S. citizen or resident alien, you must file a return if your gross income for the year was at least the amount shown on the appropriate line in Table 1-1 below. \\\"\\\" You may not have wage income, but you will probably have interest, dividend, capital gains, or proceeds from sale of a house (and there is a special note that you must file in this case, even if you enjoy the exclusion for primary residence)\\\"\",\n \"There are just too many variables here... Will you legally be considered a permanent resident from the moment you move? Will you work from home as a contractor or as an employee? Those are not questions you can answer yourself, they really depend on your circumstances and how the tax authorities will look at them. I strongly encourage you to speak to an advisor. Very generally spoken, at your place of residence you pay taxes for your worldwide income, at the place of your work base (which is not clear if this really would be Turkey) you pay taxes on the income generated there. If it's one and the same country, it's simple. If not, then theoretically you pay twice. However, most countries have double taxation treaties to avoid just that. This usually works so that the taxes paid abroad (in Turkey) would be deducted from your tax debt at your place of residence. But you might want to read the treaty to be sure how this would be in your specific case (all treaties are publicly available), and you should really consider speaking to a professional.\",\n \"What taxes will I have to pay to India? Income earned outside of India when your status is Non-Resident Indian, there is no tax applicable. You can repatriate the funds back to India within 7 years without any tax event. Someone else may put an answer about US taxes.\",\n \"If the work is done in India, then the income arising out of it, is taxable when received by you, and not when it come into India ...\",\n \"Normally, yes, you would have to pay. If you are in the US, or a citizen of the US, then IRC Sec. 61 would levy tax on all income. Even if you find money on the ground, that will generally be taxable income (the treasure trove doctrine). If you are paying foreign income taxes, the US may allow credit.\",\n \"Per the IRS instructions on filing as Head of Household as a Citizen Living Abroad, if you choose to file only your own taxes, and you qualify for Head of Household without them, the IRS does not consider you married: If you are a U.S. citizen married to a nonresident alien you may qualify to use the head of household tax rates. You are considered unmarried for head of household purposes if your spouse was a nonresident alien at any time during the year and you do not choose to treat your nonresident spouse as a resident alien. However, your spouse is not a qualifying person for head of household purposes. You must have another qualifying person and meet the other tests to be eligible to file as a head of household. As such, you could file as Married Filing Separately (if you have no children) or Head of Household (if you have one or more children, a parent, etc. for whom you paid more than half of their upkeep - see the document for more information). You also may choose to file as Married Filing Jointly, if it benefits you to do so (it may, if she earns much less than you). See the IRS document Nonresident Spouse Treated As Resident for more information. If you choose to treat her as a resident, then you must declare her worldwide income. In some circumstances this will be beneficial for you, if you earn substantially more than her and it lowers your tax rate overall to do so. Married Filing Separately severely limits your ability to take some deductions and credits, so it's well worth seeing which is better.\",\n \"You're free to provide services, but if you stay in one country for more than half a year - you're generally considered to be its resident for tax purposes. Germany is no exception to the rule, in fact - this is true to almost any country in the world. If you provide the services from Poland, and never set foot in Germany - they won't say a word.\",\n \"If you were NRI during the period you earned the income, its tax free in India and you can bring it back anytime within 7 years. There is a limit on total amount but its quite huge. If you were not an NRI during that period [when you earned in US] then whatever you have earned is taxable even in India, it does not matter whether you keep the funds in US or bring it back to India. You get the benefit of Double Tax and can deduct the tax already paid.\",\n \"It means you must pay federal (and possibly state) tax on any income you produce in America -- including Internet and mail-order sales. Tax treaties may keep you from having to pay tax on it again in your own country, or may not.\",\n \"Since you have already paid tax to the Government of Uk, no tax will be levied on the money earned outside India. As per the Income tax act, any income received in India in all cases is taxable irrespective of the tax payer's residential status. A NRI after receiving income from outside India cannot be taxed as income because of remittance of such income to India.\",\n \"I am from India. I visited US 6-8 times on business VISA and then started 2 Member LLC. Myself and My wife as LLC Members. We provide Online Training to american students from India. Also Got EIN number. Never employed any one. Do i need to pay taxes? Students from USA pays online by Paypal and i am paying taxes in India. Do i need to pay Taxes in US? DO i need to file the Tax returns? Please guide me. I formed LLC in 2010. I opened an Office-taken Virtual office for 75 USD per month to open LLC in 2010. As there is physical virtual address, am i liable for US taxes? All my earning is Online, free lancing.\",\n \"I believe I have to pay taxes in US since it is a US broker. No, not at all. The fact that the broker is a US broker has nothing to do with your tax liabilities. You should update the banks and the broker with your change of status submitting form W8-BEN to them. Consult a tax professional proficient with Indo-US tax treaty as to what you should put in part II. The broker might withhold some of your income and remit it as taxes to the IRS based on what you put in W8-BEN and the type of income, but you can have it refunded (if it exceeds your liability) by submitting a tax return (form 1040-NR). You do have to pay tax in India, based on the Indian tax law, for your profits in the US. Consult with an Indian tax accountant on that. If I'm not mistaken, there are also currency transfer restrictions in India that you should be aware of.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["No state taxes, but Italy also has a favorable treaty with the US Federal Government. Look into to lowering your federal taxes to 5% ;) its a thick read, http://www.irs.gov/businesses/international/article/0,,id=169601,00.html and also try to determine if the Foreign Earned Income Exclusion applies to you, reducing your Federal tax to ZERO on the first $95,100 earned abroad. http://www.irs.gov/businesses/small/international/article/0,,id=97130,00.html but then you may be subject to a 20%+ italy tax. so maybe you should just try for the tax treaty","\"New York will want to you to pay taxes on income from \"\"New York sources\"\". I'm not sure what this means to a freelance web developer. If your wife is doing freelance web development under the same business entity as she did in New York (ie. a New York sole proprietor, corporation, etc), you probably do need to file. From nonresident tax form manual: http://tax.ny.gov/pdf/2011/inc/it203i_2011.pdf If you were a nonresident of New York State, you are subject to New York State tax on income you received from New York State sources in 2011. If you were a resident of New York State for only part of 2011, you are subject to New York State tax on all income you received while you were a resident of the state and on income you received from New York State sources while you were a nonresident. To compute the amount of tax due, use Form IT-203, Nonresident and Part-Year Resident Income Tax Return. You will compute a base tax as if you were a full-year resident, then determine the percentage of your income that is subject to New York State tax and the amount of tax apportioned to New York State.\""],"string":"[\n \"No state taxes, but Italy also has a favorable treaty with the US Federal Government. Look into to lowering your federal taxes to 5% ;) its a thick read, http://www.irs.gov/businesses/international/article/0,,id=169601,00.html and also try to determine if the Foreign Earned Income Exclusion applies to you, reducing your Federal tax to ZERO on the first $95,100 earned abroad. http://www.irs.gov/businesses/small/international/article/0,,id=97130,00.html but then you may be subject to a 20%+ italy tax. so maybe you should just try for the tax treaty\",\n \"\\\"New York will want to you to pay taxes on income from \\\"\\\"New York sources\\\"\\\". I'm not sure what this means to a freelance web developer. If your wife is doing freelance web development under the same business entity as she did in New York (ie. a New York sole proprietor, corporation, etc), you probably do need to file. From nonresident tax form manual: http://tax.ny.gov/pdf/2011/inc/it203i_2011.pdf If you were a nonresident of New York State, you are subject to New York State tax on income you received from New York State sources in 2011. If you were a resident of New York State for only part of 2011, you are subject to New York State tax on all income you received while you were a resident of the state and on income you received from New York State sources while you were a nonresident. To compute the amount of tax due, use Form IT-203, Nonresident and Part-Year Resident Income Tax Return. You will compute a base tax as if you were a full-year resident, then determine the percentage of your income that is subject to New York State tax and the amount of tax apportioned to New York State.\\\"\"\n]","isConversational":false}}},{"rowIdx":70,"cells":{"_id":{"kind":"string","value":"10845"},"query":{"kind":"string","value":"Rationale behind using 12, 26 and 9 to calculate MACD"},"gt_ids":{"kind":"list like","value":["191588"],"string":"[\n \"191588\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1],"string":"[\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["191588","193012","518932","71708","489933","257185","180428","434421","164987","388980","221627","142726","35006","65120","463462","206350","76063","483232","571349","42620","456667","414172","190603","565501","206895","501488","488285","266508","2810","309314","423177","197046","258897","87667","592665","66210","18750","251002","482477","24191","201272","207325","110865","392851","82479","519088","402690","510589","244524","591230","86318","575169","140804","522372","227669","143302","169754","379232","492801","149555","220025","270233","15504","277217","545805","492346","416732","278387","245117","142146","176786","293484","115079","121418","14368","511241","592914","28271","88964","402466","465320","32714","112946","260085","310714","395650","224695","36193","394151","83587","409434","160842","253926","67229","222577","173052","96697","521326","266397","276860"],"string":"[\n \"191588\",\n \"193012\",\n \"518932\",\n \"71708\",\n \"489933\",\n \"257185\",\n \"180428\",\n \"434421\",\n \"164987\",\n \"388980\",\n \"221627\",\n \"142726\",\n \"35006\",\n \"65120\",\n \"463462\",\n \"206350\",\n \"76063\",\n \"483232\",\n \"571349\",\n \"42620\",\n \"456667\",\n \"414172\",\n \"190603\",\n \"565501\",\n \"206895\",\n \"501488\",\n \"488285\",\n \"266508\",\n \"2810\",\n \"309314\",\n \"423177\",\n \"197046\",\n \"258897\",\n \"87667\",\n \"592665\",\n \"66210\",\n \"18750\",\n \"251002\",\n \"482477\",\n \"24191\",\n \"201272\",\n \"207325\",\n \"110865\",\n \"392851\",\n \"82479\",\n \"519088\",\n \"402690\",\n \"510589\",\n \"244524\",\n \"591230\",\n \"86318\",\n \"575169\",\n \"140804\",\n \"522372\",\n \"227669\",\n \"143302\",\n \"169754\",\n \"379232\",\n \"492801\",\n \"149555\",\n \"220025\",\n \"270233\",\n \"15504\",\n \"277217\",\n \"545805\",\n \"492346\",\n \"416732\",\n \"278387\",\n \"245117\",\n \"142146\",\n \"176786\",\n \"293484\",\n \"115079\",\n \"121418\",\n \"14368\",\n \"511241\",\n \"592914\",\n \"28271\",\n \"88964\",\n \"402466\",\n \"465320\",\n \"32714\",\n \"112946\",\n \"260085\",\n \"310714\",\n \"395650\",\n \"224695\",\n \"36193\",\n \"394151\",\n \"83587\",\n \"409434\",\n \"160842\",\n \"253926\",\n \"67229\",\n \"222577\",\n \"173052\",\n \"96697\",\n \"521326\",\n \"266397\",\n \"276860\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["The values of 12, 26 and 9 are the typical industry standard setting used with the MACD, however other values can be substituted depending on your trading style and goals. The 26d EMA is considered the long moving average when in this case it is compared to the shorter 12d EMA. If you used a 5d EMA and a 10d EMA then the 10d EMA would be considered the long MA. It is based on what you are comparing it with. Apart from providing signals for a reversal in trend, MACD can also be used as an early indication to a possible end to a trend. What you look out for is divergence between the price and the MACD. See chart below of an example: Here I have used 10d & 3d EMAs and 1 for the signal (as I did not want the signal to show up). I am simply using the MACD as a momentum indicator - which work by providing higher highs in the MACD with higher highs in price. This shows that the momentum in the trend is good so the trend should continue. However the last high in price is not met with a higher high in the MACD. The green lines demonstrate bearish divergence between price and the MACD, which is an indication that the momentum of the trend is slowing down. This could provide forewarning that the trend may be about to end and to take caution - i.e. not a good time to be buying this stock or if you already own it you may want to tighten up your stop loss.","The 'standard' in such moving average crossover systems is 50/200. The numbers are essentially arbitrary as long as the long term average is greater than the short term and there is some different between the averages in terms of the smoothing they provide (i.e. comparing a 74 day MA to a 75 day MA isn't what the system is intended for) There are plenty of software programs that will let you run through many possible values for the system over historical data. I concur with the other answers in that this system/indicator alone isn't very good. However, I disagree with their blanket brushing off of technical analysis. There are many successful traders out there. The moving average cross over system is perhaps the second most primitive example of technical strategies categorized as trend following systems (buying new recent highs and selling new recent lows being the most simple). This particular system isn't very powerful because of its poor use of simple moving averages. A simple moving average is intended to smooth out data, but smoothing comes at the cost of lagging from the present. A simple moving average essentially gives you an idealized smoothing of price action for the day at that is one half of their period ago. So your 200 day simple moving average shows you an idealized smoothing of price action 100 days ago. A lot can happen in 100 days and that is why this system is far from ideal.","Edit3: Regarding the usefulness of the bare number itself, it is not useful unless, for example, an employer uses that average in the computation of how many options the employer grants to the employee as part of the compensation paid. One of my employers used just such an average. What is far more common is to use two or more moving averages, of different periods, plotted on a chart. My original response continues below... Assuming there are 252 trading days a year, the following chart does what you have done but with a moving average: AAPL on Stockcharts.com Edit: BTW, I looked up the number of Federal holidays, there are 9. The average year has 365.2422 days. 365.2422 × 5/7 = 260.8873. Subtract 9 and you get 251.8873 trading days in the average year. So 252 is a better number for the SMA than 250 if you want to average a year. Edit2: Here is the same chart with more than one average included: AAPL chart w/indicators","I looked at this a little more closely but the answer Victor provided is essentially correct. The key to look at in the google finance graph is the red labled SMA(###d) would indicate the period units are d=days. If you change the time axis of the graph it will shift to SMA(###m) for period in minutes or SMA(###w) for period in weeks. Hope this clears things up!","\"I would have to disagree with the other responders. In technical analysis of stock charts, various short and long term moving averages are used to give an indication of the trend of the stock in the short and long term, as compared to the current price. I would prefer to use the term moving average (MA) rather than average as the MA is recalculated every day (or at appropriate frequencies for your data) on the period you are using. I would also expand on the term \"\"moving average\"\". There are two that are commonly used Going back to the question, of the value of this number, For example if the current price is above the 200 day EWMA and also above the 30 day EWMA, then the stock is broadly trending upwards. Conversely if current price is below the 200 day EWMA and also below the 30 day EWMA, then the stock is broadly trending downwards. These numbers are chosen on the basis of the market you are trading in, the volatility and other factors. For another example of how a number of moving averages are used together, please have a read of Daryl Guppy's Multiple Moving Average, though this does not use moving averages as large as 200 days.\"","Moving Average is mere average line based on historical period; broadly use to view the trend. But it has no relation to price action in due future course. If price is going below 20 SMA then in near future even the SMA will start directing toward south. In your case if price has fallen below all the short period average lines and long period average line then it is bearish in nature. Soon in few days you may find 20 SMA leading downwards followed by closest period and then long. Also SMA and EMA can best be observed in charting software in candlestick mode. Because these moving averages can also be adjusted and viewed based on Opening price, High prices, Low Price or closing price. In you case I guess the data is of closing price data. Overlapping of averages may be sign of reversals. So if you want to buy this stock you may have to wait till all the average lines cross-over and when new trend begins with SMA of shortest avg period (20) leading above the long avg period (90 days in your case). Then you can buy and just follow the trend. I hope it answers you question.","That metric is not very useful for anything other than very extremely long trading periods. Most strategies or concerned with price movement over much shorter time frames, 15 mins, 1 hr, 4 hr, daily, weekly, monthly. The MA or moving average is a trend following lagging indicator used to smooth out price fluctuations and more accurately reflect the price of trading instrument such as a stock (AAPL), commodity, or currency pair. Traders are generally concerned with current market trends and price action of the instrument they are trading. As such, an extremely long MA (average daily price, over a period of 365 days) are generally not that important.","One of the most obvious uses of SMAs is the detection of a trend reversal. A trend reversal happens when a short term SMA crosses over a longer term SMA. For example, if a 20 day moving average was, previously, above a 200 day moving average, but has crossed over the 200 day and is currently below the 200 day then the security has performed a 'death cross' and the trend is for lower and lower prices. Stockcharts.com has excellent 'chart school' for the beginning chart user. They also provide excellent charts. Here is a link: http://stockcharts.com/school/doku.php?id=chart_school I like to use a 20 day SMA, a 200 day SMA, and a 21 day EMA.","The difference is that for the one year time frame the data is represented based on daily data and the SMA is 20 days, whilst for the 5 year timeframe the data is automatically represented as weekly data with the SMA represented by 20 weeks not 20 days anymore. This happens due to daily data on this chart being too much data to represent over a 5 year period so the data defaults to weekly data over such a long period. If the chart is represented as weekly data then any indicators will also have to be represented in weekly data. If you use a more sophisticated charting program you can actually select to see daily or weekly data over longer periods such as 5 years or more.","While trading in stochastic I've understood, one needs reference (SMA/EMA/Bolinger Band and even RSI) to verify trade prior entering it. Stochastic is nothing to do with price or volume it is about speed. Adjusting K% has ability to turn you from Day trader to -> swing trader to -> long term investor. So you adjust your k% according to chart time-frame. Stochastic setup for 1 min, 5 min ,15, 30, 60 min, daily, weekly, monthly, quarterly, half yearly and yearly are all different. If you try hopping from one time-frame to another just because it is below oversold or above overbought region with same K%, you may get confused. Worst you may not square-off your loss making trade. And rather not use excel; charts gives better visual for oscillators.","As you point out, the moving average is just MA(k)t = (Pt-1 + … + Pt-k )/k and is applied in technical analysis (TA) to smooth out volatile (noise) price action. If it has any logic to it, you might want to think in terms of return series (Pt - Pt-1 / Pt-1) and you could hypothesize that prices are in fact predictable and will oscillate below and above a running moving average. Below is a link to a study on MA trading rules, published in the Journal of Finance, with the conclusion of predictive power and abnormal returns from such strategies. As with any decision made upon historical arguments, one should be aware of structural changes and or data mining. Simple technical trading rules and the stochastic properties of stock returns Brock, W., J. Lakonishok and B. Le Baron, 1992, Simple technical trading rules and the stochastic properties of stock returns, Journal of Finance, 47, 1731-64. MA rules betterthan chance in US stock market, 1897-1986 I don't know whether you are new to TA or not, but a great commercial site, with plenty of computer-generated signals is FinViz.","Technical analysis is insufficient. You're halfway to figuring it out if you start to question why a 50 day moving average vs 200 vs 173. Invest in companies that are attractively valued vs. their sales/growth/divends/anythingelsereal","A shorter term MA would be used for short term changes in price whilst a long term MA would be used for longer term movements in price. A 200 day SMA is widely used to determine the trend of the stock, simply a cross above the 200 day SMA would mean the stock may be entering an uptrend and a cross below that the price may be entering a downtrend. If the price is continuosly going above and below in a short period of time it is usually range trading. Then there are EMAs (Expodential Moving Averages) and WMAs (weighted moving averages) which give more emphasis to the latest price data than the earlier price data in the period chosen compared to a SMA. MAs can be used in many different ways, too many to list all here. The best way to learn about them is to read some TA books and articles about them, then choose a couple of strategies where you can use them in combination with a couple of other indicators that are complimentary with each other.","Because in the case for 100/101, if you wanted to placed a limit buy order at top of the bid list you would place it at 101 and get filled straight away. If placing a limit buy order at the top of 91 (for 90/98) you would not get filled but just be placed at the top of the list. You might get filled at a lower price if an ask comes in matching your bid, however you might never get filled. In regards to market orders, with the 100/101 being more liquid, if your market order is larger than the orders at 101, then the remainder of your order should still get filled at only a slightly higher price. In regards to market orders with the 90/98, being less liquid, it is likely that only part of your order gets filled, and any remained either doesn't get filled or gets filled at a much higher price.","\"Google's RSI is using a 10 period on 2 minute bars - i.e. it is based upon the last 20 minutes of data. Yahoo's RSI is using a 14 period lookback on an undetermined timeframe (you could maybe mouse-over and see what incremental part of the chart is giving) and given the \"\"choppier\"\" price chart, probably 30 second or 1 minute bars. Given the difference in both the period specified and the periodicity of the charts - you should expect different results.\"","\"The formula for standard deviation is fairly simple in both the discrete and continuous cases. It's mostly safe to use the discrete case when working with adjusted closing prices. Once you've calculated the standard deviation for a given time period, the next task (in the simplest case) is to calculate the mean of that same period. This allows you to roughly approximate the distribution, which can give you all sorts of testable hypotheses. Two standard deviations (σ) away from the mean (μ) is given by: It doesn't make any sense to talk about \"\"two standard deviations away from the price\"\" unless that price is the mean or some other statistic for a given time period. Normally you would look at how far the price is from the mean, e.g. does the price fall two or three standard deviations away from the mean or some other technical indicator like the Average True Range (an exponential moving average of the True Range), some support level, another security, etc. For most of this answer, I'll assume we're using the mean for the chosen time period as a base. However, the answer is still more complicated than many people realize. As I said before, to calculate the standard deviation, you need to decide on a time period. For example, you could use S&P 500 data from Yahoo Finance and calculate the standard deviation for all adjusted closing prices since January 3, 1950. Downloading the data into Stata and applying the summarize command gives me: As you can probably see, however, these numbers don't make much sense. Looking at the data, we can see that the S&P 500 hasn't traded close to 424.4896 since November 1992. Clearly, we can't assume that this mean and standard deviation as representative of current market conditions. Furthermore, these numbers would imply that the S&P 500 is currently trading at almost three standard deviations away from its mean, which for many distribution is a highly improbable event. The Great Recession, quantitative easing, etc. may have changed the market significantly, but not to such a great extent. The problem arises from the fact that security prices are usually non-stationary.. This means that the underlying distribution from which security prices are \"\"drawn\"\" shifts through time and space. For example, prices could be normally distributed in the 50's, then gamma distributed in the 60's because of a shock, then normally distributed again in the 70's. This implies that calculating summary statistics, e.g. mean, standard deviation, etc. are essentially meaningless for time periods in which prices could follow multiple distributions. For this and other reasons, it's standard practice to look at the standard deviation of returns or differences instead of prices. I covered in detail the reasons for this and various procedures to use in another answer. In short, you can calculate the first difference for each period, which is merely the difference between the closing price of that period and the closing price of the previous period. This will usually give you a stationary process, from which you can obtain more meaningful values of the standard deviation, mean, etc. Let's use the S&P500 as an example again. This time, however, I'm only using data from 1990 onwards, for the sake of simplicity (and to make the graphs a bit more manageable). The summary statistics look like this: and the graph looks like this; the mean is the central horizontal red line, and the top and bottom lines indicate one standard deviation above and below the mean, respectively. As you can see, the graph seems to indicate that there were long periods in which the index was priced well outside this range. Although this could be the case, the graph definitely exhibits a trend, along with some seemingly exogenous shocks (see my linked answer). Taking the first difference, however, yields these summary statistics: with a graph like this: This looks a lot more reasonable. In periods of recession, the price appears much more volatile, and it breaches the +/- one standard deviation lines indicated on the graph. This is only a simple summary, but using first differencing as part of the wider process of detrending/decomposing a time series is a good first step. For some technical indicators, however, stationary isn't as relevant. This is the case for some types of moving averages and their associated indicators. Take Bollinger bands for instance. These are technical indicators that show a number of standard deviations above and below a moving average. Like any calculation of standard deviation, moving average, statistic, etc. they require data over a specified time period. The analyst chooses a certain number of historical periods, e.g. 20, and calculates the moving average for that many previous periods and the moving/rolling standard deviation for those same periods as well. The Bollinger bands represent the values a certain number of standard deviations away from the moving average at a given point in time. At this given point, you can calculate the value two standard deviations \"\"away from the value,\"\" but doing so still requires the historical stock price (or at least the historical moving average). If you're only given the price in isolation, you're out of luck. Moving averages can indirectly sidestep some of the issues of stationarity I described above because it's straightforward to estimate a time series with a process built from a moving average (specifically, an auto-regressive moving average process) but the econometrics of time series is a topic for another day. The Stata code I used to generate the graphs and summary statistics:\"","Is that indicator can only be used for short-term trade? First of all, indicator works perfect during trends and oscillator works perfectly in the range market(or flat market). So, indicator can be used for long term, as well as short term. I mean if it is a range market, using this or any other indicator will not help much, so it you should consider market direction first. If it can be used to long-term trade, is there something I need to change from the parameters used? like, only using SMMA(5,8,13)? The parameters are there to change them. Of course you can change them based on your trading style. Considering my statement above does not mean that trading is very easy. I never use indicators alone to make trading decisions. It is always good to use oscillator to filter out bad trading signals.","Standard Deviation is a mathematical term that is useful in many areas. It can be considered a measure of how tight the data points are to the average. If there is consistency in the measurement system, then a point that is two standard from the average can be considered an outlier. It doesn't even need to be time based. We can say that a child born weighing less than X pounds is more than 2 standard deviations below the average. Using it to look at a price or an index value doesn't make a lot of sense because many expect there to be long term growth. For example you would never say that you will buy a new jacket for your child when they are two standard deviations above their average height. You can say you will buy or sell a financial instrument when the P/E ratio is 2 standard deviations from some average. It could be the average of the long term history, or the index, or the sector. You could do the same thing for earnings per share or many other business of financial statistics. A standard deviation calculated from a time series assumes that the measurement will normally stay withing some bounds. And that straying from those bounds is a sign of the right time to buy or sell.","I believe it’s because the old ticker machines only had 32 symbols making each symbol (1/32) a tick. (Back in the London Stock / Debt exchange in the 18th century) . The first ever government bond was issued by the Bank of England in 1693 to raise money to fund a war against France","Different moving averages work and not work for different indexes. I have seen simulations where during bull or bear markets the moving averages work differently. Here is an example: http://www.indexresult.com/MovingAverage/Exponential/200/SP500","You've flipped the numerator and denominator around, and need to multiply by 100 to get percentage rather than 10: I like to use a simple example to assess reasonableness of an approach, if you had invested $100 and after 1 year had $150, your approach would yield: But since $50 is half of $100, we know the rate of return should be 50%, so we know that approach is off. But, flipping the numerator and denominator and multiplying by 100 gets us the 50% we expected: Edit: Good catch by @DJohnM you've called it 9 years, but it's actually 11, so you'd want to adjust accordingly.","(12 * 100) * 1.01 = 1212 Assuming the $12 ask can absorb your whole 100 share order.","You can use google docs to create a spreadsheet. In field A2, I put Google will load the prices into the sheet. At that point, I add the following into C12, then copy that line all the way down to the botton of column C. You can find my spreadsheet here. It calculates the moving 10 day standard deviation as a percentage of average price for that time period.","One could use technical indicators in any number of ways...they aren't rigidly defined for use in any particular way. If they were, only computers would use them. Having said that, moving averages are frequently used by people operating on the assumption that short-term price movements will soon be reverted back to a longer-term mean. So if the price shoots up today, traders who use moving averages may believe it will come back down pretty soon. If this is the belief (and it usually is for this type of trader), a price significantly above a moving average could indicate an overpriced stock. A price below the moving average could indicate an underpriced stock. Similarly, a short-term moving average above the long-term moving average may indicate an overpriced stock. When you are dealing with more than one frequency, though, there is more disagreement about how to use technical indicators. Some traders would probably say the opposite: that a short term average above the long term average indicates an upward movement that will continue because they believe the stock has momentum. Note that I am not saying I believe in using these averages to predict mean reversion or momentum effects, just that traders who rely on moving averages frequently do.","fibonacci levels (retracements,expansions, arcs) are all arbitrary numbers with no statistical significance. that said thousands of traders world over use, view and depend on fib numbers in their trading ranging from forex, stock commodities etc the point is if it's traded a fibonacci number has been used on it, because of this unanimity on their significance & application the fibonacci's thus act as valid anchors since so many traders are looking at the same levels (self-fulfilling prophecy). the values of the fib numbers are all equally significant i.e the 23.6. 38.2, 50, or 61.8 are statistically all equally likely to occur. you just have to be vigilant as your trade approaches the fib levels.","Still working on exact answer to question....for now: (BONUS) Here is how to pull a graphical chart with the required data: Therefore: As r14 = the indicator for RSI. The above pull would pull Google, 6months, line chart, linear, large, with a 50 day moving average, a 200 day exponential moving average, volume, and followed up with RSI. Reference Link: Finance Yahoo! API's","The curved lines (on my screen orange, yellow and pink) are simple moving averages. The fuchsia and blue straight lines are automatically generated trend lines. Those lines are attempting to show how a stock is trending by showing potential bounce points and are commonly used in technical analysis (TA).","\"The simple answer for the so-called 'Rule of X' would be found by: In your case: Update: If you want an approximation closer to the nominal \"\"Rule of 72\"\" value, use this equation that incorporates a better approximation for the natural log. The \"\"Rule of 72\"\" fits this for an interest rate of 7.79% for a growth multiple of 2: The rule of 72 comes from by approximating the natural logarithms as such: The 2 is the multiple of growth. The rate r here is not in percent, so to change to percent (say, R) you have to multiply by 100: The number 72 is often used because it is easier to divide evenly than 69.3 and is a better fit approximation for the natural log and common interest rates. If you need more, you can find all this on Wikipedia: https://en.wikipedia.org/wiki/Rule_of_72#Derivation\"","The author is using the simple Dietz method, (alternatively the modified Dietz), with the assumption that the net cash-flow occurs halfway through the time period. Let's say the time period is one year for illustration, so the cash-flow would be at the end of the second quarter. The money-weighted method gives a more accurate return, but has to be solved by trial-and-error or using a computer. The money-weighted return is 11.2718 % and the simple or modified Dietz return is 11.2676 %. When the sums are done backwards to check, the Dietz is half a dollar out with a final value of $11,999.50 while the money-weighted return recalculates exactly $12,000. It is worth pointing out that the return changes if the cash-flow is not in the middle of the time period. A case with the cash-flow at the end of Q3 is added to illustrate.","\"Are you sure you're using the same date range? If you're using Max, then you're not, as ^FTMC goes back to 12/1/1985 while ^GDAXI only goes back to 11/1/1990. If I enter a custom date range of 11/1/1990 through 10/24/2015, I get: and: which, other than the dates it chose to use as labels on the x-axes, look identical. (I tried to add the URLs of the charts, but it looks like the Yahoo! URLs don't include the comparison symbol, which makes them useless for this answer. They're easy enough to construct though, just add the secondary symbol using the Comparison button and set the date range using the calendar button.) On your PS, I don't know, as you can see by my charts it even chose different labels when the date ranges were identical (although at least it didn't scale different dates differently), so maybe it's trying to be \"\"smart\"\" and choose dates based on the total amount of data available for the primary symbol, which is different in the two cases.\"","You can do it graphically at zignals.com and freestockcharts.com.","Firstly, you mean resistance not support, as a support is below the current price and resistance is above the price. Secondly using a MA as support or resistance would mean that that support or resistance level would move up or down as the price moved up or down and would not be static at $25. Generally stocks will range trade more often than they will be trending (either up or down), so a stock can be range trading between a support and resistance levels for months and even years, and usually the longer it range trades for, the bigger the outbreak (either up or down) will be when it does happen. Using a MA (especially shorter dated ones) as support or resistance (or as a up or down trend line) works better when a stock is already trending up or down. When a stock is moving sideways it will tend to keep crossing above and below the MA, and you will be whipsawed if you try to use them as your trigger for entry in these situations. Compare the two charts below: In the first chart the stock is up-trending for over 6 months and the 50d EMA is being used as a support or up-trending line. As long as the price does not break through and close under the 50d EMA then the uptrend continues. You could use this EMA line as a means of entering the stock when prices move towards the EMA and bounce off it back up again. Or you could use it as your stop loss level, so if price closes below the EMA line you would sell your position. In the second chart, the stock has been range trading between the support line at about $21.80 and the resistance line at about $25.50 for 10 months. In this case the price has been moving above and below the 50d EMA during these 10 months and you may have been whipsawed many times if you were trading each break above or below the 50d EMA. A better strategy here would be to buy the stock as it approached the support line and bounces up off it and then close and reverse your position (go short) when the price approached the resistance line and bounces down off it. Edit: When range trading you would have your stops just below the support line when going long and just above the resistance line when going short, that way if it does break through support or resistance and starts trending you will be covered. So this shows that different strategies should be used when a stock is trending to when it is range trading. MAs are better used as entry signal during an established uptrend or downtrend than when a stock is range trading.","Ya idk..I initially thought a moving average but that can't be it since when price crosses below trend line we see trend line continues to increase. https://villavu.com/forum/showthread.php?t=112371 but this says that it is in fact a monthly average. I don't see how that is possible, as adding a number below the average of a set to that set should decrease the average. People say 'the mean chases the margin,' not a fan of that terminology myself though. Edit: ah wait the yellow line is daily average, not price. If monthly average is calculated on close price, then this is possible. **so the answer then is the trend line is the monthly average**.","This is a note from my broker, CMC Markets, who use Morningstar: Morningstar calculate the P/E Ratio using a weighted average of the most recent earnings and the projected earnings for the next year. This may result in a different P/E Ratio to those based solely on past earnings as reported on some sites and other publications. They show the P/E as being 9.93. So obviously past earnings would usually be used but you would need to check with your source which numbers they are using. Also, as BHP's results just came out yesterday it may take a while for the most recent financial details to be updated.","The paragraph before on page 115 states: Scaling corresponds to having a weight in the long and short legs that is different from one and varies over time, but the strategy is still self-financing. Meaning that the long and short positions are no longer equal due to weighting one side more highly than the other. The weighting of one side (either long or short) is the number between 0.2 and 2 that you mention.","\"Mathematically it's arbitrary - you could just as easily use the bid or the midpoint as the denominator, so long as you're consistent when comparing securities. So there's not a fundamental reason to use the ask. The best argument I can come up with is that most analysis is done from the buy side, so looking at liquidity costs (meaning how much does the value drop instantaneously purely because of the bid-ask spread) when you buy a security would be more relevant by using the ask (purchase price) as the basis. Meaning, if a stock has a bid-ask range of $95-$100, if you buy the stock at $100 (the ask), you immediately \"\"lose\"\" 5% (5/100) of its value since you can only sell it for $95.\"","I don't think you can always assume a 12-month time horizon. Sometimes, the analyst's comments might provide some color on what kind of a time horizon they're thinking of, but it might be quite vague.","When using the Stochastic Indicator your basic aim is to buy (go long) when the stochastic becomes oversold (goes below 20%) and then the %K line crosses above the %D line at a market low, and to sell (go short) when the stochastic becomes overbought (goes above 80%) and then the %K line crosses below the %D line at a market high. Other indicators or candlestick patters can also be used to further confirm the trade. Below is a chart of a trade I recently took on GUD.AX using the Slow Stochastic in combination with support and resistance levels as well as a candlestick pattern. When I conducted my stock search on the evening of 28th July 2015, GUD was one of the results from the search that I particularly liked. The Slow Stochastic had just made a crossover in the oversold area just as the price was bouncing off its recent lows at the support line. But what I really like about this opportunity was that there was also a bullish reversal candle (a Hammer) at this short term market bottom. The high for the day was $8.34, so I placed a stop buy order to buy the stock tomorrow if the price opened or moved above this high of today. So I would only buy if the stock hit or moved above $8.35 during the next days trading. So if the stock opened and stayed below the previous day's high I would not buy the stock and my order would be canceled at the end of the day. This is very important because it stops you from getting into trades that don't go in the direction you want. If this happens then you could check the chart again after market close to see if it is still worthwhile to place a new order for the next day. On the 29th July 2015 the stock did open higher at $8.42 (which is where my order got executed) and closed at $8.46. So I ended up buying slightly above my target price but it did move higher on the day, so a successful entry overall. I had placed my initial stop loss at $8.09 (just below the low of the previous day of $8.10). If the trade had gone against me in the following days the most I would have lost was 1% of my total account capital. My target for this trade was $9.86 (just below the resistance line near $10), which would represent a 5% gain against my total account capital (or approx. 16.7% gain on the trade). So my win to loss ratio was 5:1. As you can see from the chart, the next day gapped up at the open and prices continued moving up strongly during the day. The next day was a slightly negative day, and then a few days later, on the 5th August 2015 my target price of $9.86 was reached (with a high of $9.88 for that day), so my order was closed for a total profit of 16.7% on the face value of the trade. However, as I bought on margin (using CFDs) my actual profit on the initial margin I had invested was 167%. My total time in the trade was 7 days, and I spent about an hour in the evening doing my searches and placing my orders, then less than 10 minutes managing the trade each evening after market close. The stock did go up a bit further after my profit target was reached, but the day after that the price started to fall as the price hit the resistance line and the Slow Stochastic did a crossover in the overbought area. Overall, this was a very ideal trade and I was very happy with it. Not all my trades reach my profit targets and I may get stopped out at a smaller profit or I might make a small loss (as I move my stops up as the price moves up). The key to successful trading over the long term is to keep you losses small and let your profits run (with my longer term trend trading I don't have profit targets and let my profits run until I get stopped out, but with my shorter term trading I do use a profit target usually 5 or 6 times the size of my initial stop). If you have an average win to average loss ratio of 3:1 or higher and have a success rate of 50% winners you will make money over the long term.","The Wikipedia has an article on money flow index. The article which you link to correctly uses the typical price. You state that you are comparing the closing prices, which is incorrect. I'm making no statement on the validity of the money flow index itself, just answering your question.","This is how I've understood this concept. Fibonacci nos/levels/ratios/%s is based on concept of sequential increment. You may find lot of info about Fibonacci on net. In stock market this concept is used to predict psychological level. While a trend is form, usually price tend to accumulate/consolidate at these level. How the percentage/ ratio make impact is - check any long trend...Now draw a fibbo retracement from immediate previous high and connect it's low. You will see new levels of intermediate trend. In broader term you will find after reversal a leg (trend) is formed, then body and then head which is smaller; then price reverses. The first leg that forms if it refuses to break 23.6% or 38.2% then the previous trend may continue. 50% is normal; usually this level is indecision phase. Even 61.8% is seen as indecision but it is crucial level as it is breakout level towards 100%. Now if the stock retraces 100% then it is sign a new big trend is forming. Now for day trader 23.6%,38.2% and 50% level are very crucial from trading purpose. This concept is so realistic that every level is considered and respected. Suppose if a candle or bar starts at 23.6% level and crosses 38.2% and directly hits 50%. Then the next bar or candle will revert and first hit 38.2% and then continue with the trend. It means price comes back, forms it area at this level and then continue whichever direction the force directs it. You never trade fibo alone, you need help of oscillators or other tools to confirm it.","Log-returns are very commonly used in financial maths, especially quantitative finance. The important property is that they're symmetrical around 0 with respect to addition. This property makes it possible to talk about an average return. For instance, if a stock goes down 20% over a period of time, it has to gain 25% to be back where you started. For the log-return on the other hand the numbers are 0.223 down over a period of time, and 0.223 up to get you back to square 1. In this sense, you can simply take an arithmetic average and it makes sense. You can freely add up or subtract values on the log-return scale, like log-interest rates or log-inflation rates. Whereas the arithmetic mean of (non-log) returns is simply meaningless: A stock with returns -3% and +3% would have 0% on average, when in fact the stock has declined in price? The correct approach on direct price-returns would be to take a different mean (e.g. geometric) to get a decent average. And yet it will be hard to incorporate other information, like subtracting the risk-free rate or the inflation rate to get rate-adjusted average returns. In short: Log-returns are easier to handle computationally, esp. in bulk, but non-log-returns are easier to comprehend/imagine as a number of their own.","Simple math: 50-25=25, hence decline from 50 to 25 is a 50% decline (you lose half), while an advance from 25 to 50 is 100% gain (you gain 100%, double your 25 to 50). Their point is that if you have more upswings than downswings - you'll gain more on long positions during upswings than on short positions during downswings on average. Again - simple math.","Assuming cell A1 contains the number of trades: will price up to A1=100 at 17 each, and the rest at 14 each. The key is the MAX and MIN. They keep an item from being counted twice. If X would end up negative, MAX(0,x) clamps it to 0. By extension, if X-100 would be negative, MAX(0, X-100) would be 0 -- ie: that number doesn't increase til X>100. When A1=99, MIN(a1,100) == 99, and MAX(0,a1-100) == 0. When A1=100, MIN(a1,100) == 100, and MAX(0,a1-100) == 0. When A1=101, MIN(a1,100) == 100, and MAX(0,a1-100) == 1. Of course, if the 100th item should be $14, then change the 100s to 99s.","So for quarters So, if Q1's value was 10 and Q2's value was 25 For closing or opening prices, I would use closing prices. For instance, some used Adjusted Close or Close on Yahoo Finance (see this example of AAPL). Added Note: In your example, for your example, you'll want to take the absolute value of the denominator (aka: divisor), so an Excel formula might look like the below example ... ... where the new and old are cells.","Too calculate these values, information contained in the company's financial statements (income, balance, or cashflow) will be needed along with the price. Google finance does not maintain this information for BME. You will need to find another source for this information or analyze another another symbol's financial section (BAC for example).","Every class my Finance Prof writes a number on the board, I have no idea what it is other than it is related to the field of Finance. But I have it on good authority that it will be a bonus question on the final exam to find out what it is. Date | # Written ---|--- Oct. 12 | 13 Oct. 17 | 15 Oct. 19| 15 Oct. 24 | 15 Oct. 26 | 15 Nov. 2 | 11 If anyone knows please help a brother out. Dates are North American.","This is a useful metric in that it gives you a trust factor on how reliable the beta is for future expectations It is akin to velocity and acceleration First and second order derivatives of distance / time. Erratic acceleration implies the velocity is less trustworthy Same idea for beta","where A1 is the number of trades. you may have to change the number 100 to 99 depending on how the 100th trade is charged. The idea is to use the if statement to determine the price of the trades. Once you are over the threshold the price is 14*number over threshold.","Daily > Weekly > Monthly. This statement says that if you use daily returns you will get more noise than if you used weekly or monthly returns. Much of the research performed uses monthly returns, although weekly returns have been used as well. For HFT you would need to detrend the data in order to spot true turning points.","No, and using a 37 year old formula in finance that is as simple as: should make it obvious technical analysis is more of a game for retail traders than investment advice. When it comes to currencies, there are a myriad of macroeconomic occurrences that do not follow a predictable timescale. Using indicators like RSI on any time frame will not magically illuminate broad human psychology and give you an edge. It is theoretically possible for a single public stock's price to be driven by a range of technical traders who all buy at RSI 30 and sell at RSI 70, after becoming a favorite stock on social media, but it is infinitely more likely for all market participants to have completely different goals.","\"The CBOE states, in an investor's guide to Interest Rate Options: The Options’ Underlying Values Underlying values for the option contracts are 10 times the underlying Treasury yields (rates)— 13-week T-bill yield (for IRX), 5-year T-note yield (for FVX), 10-year T-note yield (for TNX) and 30-year T-bond yield (for TYX). The Yahoo! rate listed is the actual Treasury yield; the Google Finance and CBOE rates reflect the 10 times value. I don't think there's a specific advantage to \"\"being contrary\"\", more likely it's a mistake, or just different.\"","\"I think that the general public is conditioned to think more in terms of points rather than percentages, so that 200 points is easier to fathom than the equivalent percent. We all translate internally what this means. Of course it is less precise, but it also makes for good copy in the publishing industry (\"\"Market Down 1000 points!\"\")\"","\"In general, moving averages never seemed that much better for drawing trends, just removing volatility. However, in this case, they do seem more relevant because the moving averages seem to at least remove the noise of many of the other \"\"revisions.\"\" Comparing the intial numbers to the previous weeks' revised figures is hardly an apples-to-apples comparison, because there is more data available on the previous weeks' figures.\"","You can use trade volume for divergence and convergence studies","It's not stopped. Crossing a moving average is considered a signal to buy or sell. Yahoo stock charts offer the ability to add moving averages to the charts, and you can observe all stocks cross the line regularly. As a contrast to Victor's charts, you can see that Apple, over the last two years, has traded above and below the 50 day MA. A believer in technical analysis using MA will observe a buy signal in Dec '11 just under $400, with a sell in mid-$500s in May. Moving averages are a form of following the trend, and work well when either trend is strong. It's when the stock is too close to the line that's it's tough to call whether it's time to be in or out.","\"Total Return is the percent change in value (including andy dividends) of an instrument. The \"\"trailing 12-month\"\" means that your starting point is the value 12 months ago. So the formula is: where V is the value of the instrument on the reference date, V0 is the value of the instrument 12 months prior to the reference date, and D is the amount of dividends paid between the two dates.\"","\"Good observation. In fact, the S&P index itself is guilty of not including dividends. So when you look at the index alone, the delta between any two points in time diverges, and the 20 return observed if one fails to include dividends is meaningless, in my my humble opinion. Yahoo finance will let you look at a stock ticker and offer you an \"\"adjusted close\"\" to include the dividend effect.\"","\"$36 dividend/900 DJIA = 4% 5.5% bond yield = ($36 dividend/660 DJIA) Graham wrote this at a very different time in financial markets- interest rates were much higher, and the DJIA much lower. In addition, bonds were yielding more than stocks, unlike today when the DJIA % the 10yr Treasury yield 2.63% and 2.13% respectively. In addition, his \"\"weigher of the odds\"\" suggests waiting to invest until equity prices are lower (usually dividends aren't reduced), and therefore the DJIA dividend yield would rise relative to bond yields.\"","\"I was afraid of this. If you are using 12 P/Y and 12 C/Y, then your interest rate should not be divided by 12. Also, you should use \"\"END\"\" as this means monthly payments are made at the end of the month - a usual default.\"","\"Well, the first one is based on the \"\"Pert\"\" formula for continuously-compounded present value, while the second one is the periodically-compounded variant. Typically, the continuously-compounded models represent the ideal; as the compounding period of time-valued money shrinks towards zero, and the discount rate (or interest rate if positive) stays constant over the time period examined, the periodic equation's results approach that of the continuously-compounded equation. Those two assumptions (a constant rate and continuous balance adjustment from interest) that allow simplification to the continuous form are usually incorrect in real-world finance; virtually all financial institutions accrue interest monthly, for a variety of reasons including simpler bookkeeping and less money paid or owed in interest. They also, unless prohibited by contract, accrue this interest based on a rate that can change daily or even more granularly based on what financial markets are doing. Most often, the calculation is periodic based on the \"\"average daily balance\"\" and an agreed rate that, if variable, is based on the \"\"average daily rate\"\" over the previous observed period. So, you should use the first form for fast calculation of a rough value based on estimated variables. You should use the second form when you have accurate periodic information on the variables involved. Stated alternately, use the first form to predict the future, use the second form in retrospect to the past.\"","Since you have the balance at equal periods and the cash flows at the period ends, the best return calculation in this case is the true time-weighted return. See http://en.wikipedia.org/wiki/Time-weighted_return#Formulae So, notwithstanding some ambiguity about your figures, here is a calculation using the first three periods from your second table. Giving a total return over the three periods of -23.88% If the periods are months, multiply by four to annualise.","\"The \\^ symbol means exponentiation. You're multiplying by 216 instead. So rephrasing that in Excel functions (without just using \"\"=FV(0.004308,216,-175)\"\"), you'd have \"\"=((POWER(1.004308,216)-1)/0.004308)*175\"\". Note that I originally mentioned the difference between .004308 and 0.0517/12 because it makes roughly a $2.56 difference in the answer.\"","There's no rule of thumb but the purpose of candlesticks of any kind (fixed, volume weighted etc.) is to display the intra-period price action. So if you'd fit 3 years worth of 1 minute bars on a chart, candlesticks become useless and you might as well use a line chart.","\"He's calculating portfolio variance. The general formula for the variance of a portfolio composed of two securities looks like this: where w_a and w_b are the weights of each stock in the portfolio and the sigmas represent the standard deviation/risk of each asset or portfolio. In the case of perfect positive or negative correlation, applying some algebra to the formula relating covariance to the correlation coefficient (rho, the Greek letter that looks like \"\"p\"\"): tells us that the covariance we need in the original formula is simply the product of the standard deviations and the correlation coefficient (-1 in this case). Combining that result with our original formula yields this calculation: Technically we've calculated the portfolio's variance and not it's standard deviation/risk, but since the square root of 0 is still 0, that doesn't matter. The Wikipedia article on Modern Portfolio Theory has a section that describes the mathematical methods I used above. The entire article is worth a read, however.\"","\"Here's a formula; I had to go over to SEMath, use their MathJax to compose the answer and then paste this screen shot. As a result, I can't fix a typo: \"\"ST\"\" is the same as \"\"St\"\"\"","\"This chart concerns an option contract, not a stock. The method of analysis is to assume that the price of an option contract is normally distributed around some mean which is presumably the current price of the underlying asset. As the date of expiration of the contract gets closer the variation around the mean in the possible end price for the contract will decrease. Undoubtedly the publisher has measured typical deviations from the mean as a function of time until expiration from historical data. Based on this data, the program that computes the probability has the following inputs: (1) the mean (current asset price) (2) the time until expiration (3) the expected standard deviation based on (2) With this information the probability distribution that you see is generated (the green hump). This is a \"\"normal\"\" or Gaussian distribution. For a normal distribution the probability of a particular event is equal to the area under the curve to the right of the value line (in the example above the value chosen is 122.49). This area can be computed with the formula: This formula is called the probability density for x, where x is the value (122.49 in the example above). Tau (T) is the reciprocal of the variance (which can be computed from the standard deviation). Mu (μ) is the mean. The main assumption such a calculation makes is that the price of the asset will not change between now and the time of expiration. Obviously that is not true in most cases because the prices of stocks and bonds constantly fluctuate. A secondary assumption is that the distribution of the option price around the mean will a normal (or Gaussian) distribution. This is obviously a crude assumption and common sense would suggest it is not the most accurate distribution. In fact, various studies have shown that the Burr Distribution is actually a more accurate model for the distribution of option contract prices.\"","Your observation is mostly right, that 1 is a the number around which this varies. You are actually referencing PEG, P/E to Growth ratio, which is a common benchmark to use to evaluate a stock. The article I link to provides more discussion.","No no, I didn't forget. 3 times 12 is 36 minus 20 is $16 more. Thank you, I just needed someone to acknowledge that's they were incorrect. How's that get top comment though?! So frustrating. Edit: okay, not top comment anymore but still up there.","The dividend yield can be used to compare a stock to other forms of investments that generate income to the investor - such as bonds. I could purchase a stock that pays out a certain dividend yield or purchase a bond that pays out a certain interest. Of course, there are many other variables to consider in addition to yield when making this type of investment decision. The dividend yield can be an important consideration if you are looking to invest in stocks for an income stream in addition to investing in stocks for gain by a rising stock price. The reason to use Dividend/market price is that it changes the dividend from a flat number such as $1 to a percentage of the stock price, which thus allows it to be more directly compared with bonds and such which return a percentage yeild.","Well that will depend on the time frame you are looking at it. You can't compare the RSI on a five minute chart to the RSI on a daily chart. The minute chart would represent the momentum of very small trends whilst the daily chart would represent the momentum of much larger trends. On the daily chart the shares might be experiencing a strong uptrend with a rising RSI. During each day the price might move up at the open then come down some, then back up a bit more and repeat this several times during the day before closing higher. During the day the RSI might have moved slightly higher. But during a single day on the 5 minute chart the price may have gone through several up and down trends, with the RSI going into oversold and overbought several times. What you should be looking at to strengthen the signal from the RSI is to watch for when the RSI is in the overbought at the same time the price is reaching a peak, or when the RSI is in the oversold at the same time the price is reaching a trout. These could represent potential turning points in price. The time frame to use would depend on the type of trading you are attempting to undertake. If you prefer day trading (being in and out of a trade in minutes to hours) you might look at time frames of minutes to hours. If you prefer longer term position, trend or swing trading you would probably stick to daily charts. If you prefer longer term active investing you might stick to a combination of daily, weekly and monthly charts.","\"Without researching the securities in question I couldn't tell you which cycle each is in, but your answer is that they have different expiration cycles. The following definition is from the CBOE website; \"\"Expiration cycle An expiration cycle relates to the dates on which options on a particular underlying security expire. A given option, other than LEAPS®, will be assigned to one of three cycles, the January cycle, the February cycle or the March cycle.\"\"\"","The first statement is talking about a sudden sharp increase in volume (double or more of average volume) with a sudden increase in price. In other words, there has been a last rush to buy the stock exhausting all the current bulls (buyers), so the bears (sellers) take over, at least temporarily. Whilst the second statement is talking about a gradual increase in volume as the price up trends (thus the use of a volume oscillator). In other words (in an uptrend), the bulls (buyers) are gradually increasing in numbers sending the price higher, and new buyers keep entering the market. (The opposite is the case for a down-trend).","The previous day's close on Thursday 10th October was 5,000.00 The close on Friday 11th October is 5,025.92 So the gain on Friday was 25.92 (5025.92 - 5000) or 0.52% (25.92/5000 x 100%). No mystery!","Volatility is a shitty metric and is sample dependent, What is more interesting is point recurrence, i.e. how many times has a certain point been touched in x time, you can make good day trading strategies off point recurrence (relative that is).","Have you actually read the Wikipedia article? To calculate the DJIA, the sum of the prices of all 30 stocks is divided by a divisor, the Dow Divisor. The divisor is adjusted in case of stock splits, spinoffs or similar structural changes, to ensure that such events do not in themselves alter the numerical value of the DJIA. Early on, the initial divisor was composed of the original number of component companies; which made the DJIA at first, a simple arithmetic average. The present divisor, after many adjustments, is less than one (meaning the index is larger than the sum of the prices of the components). That is: DJIA = sum(p) / d where p are the prices of the component stocks and d is the Dow Divisor. Events such as stock splits or changes in the list of the companies composing the index alter the sum of the component prices. In these cases, in order to avoid discontinuity in the index, the Dow Divisor is updated so that the quotations right before and after the event coincide: DJIA = sum(p_old) / d_old = sum(p_new) / d_new The Dow Divisor was 0.14602128057775 on December 24, 2015.[40] Presently, every $1 change in price in a particular stock within the average, equates to a 6.848 (or 1 ÷ 0.14602128057775) point movement. Knowing the old prices, new prices (e.g. following a split), and old divisor, you can easily compute the new divisor... Edit: Also, the detailed methodology is published by SP Indices (PDF). Edit #2: For simplicity's sake, assume the DJIA is an index that contains 4 stocks, with a price of $100.00 each. One of the stocks splits 2:1, meaning the new price/share is $50.00. Plugging the numbers into the above equation, we can determine the new Dow Divisor: 400 / 4 = 350 / d => d = 3.5","You're talking about floating rate loans. It's so that the bond is marked back to market every 90 days. Any more often would be a hassle to deal with for everyone involved, any less often and they would be significant variance from LIBOR vs. the loan's specific rate.","\"This is called \"\"change\"\" or \"\"movement\"\" - the change (in points or percentage) from the last closing value. You can read more about the ticker tape on Investopedia, the format you're referring to comes from there.\"","This strategy is called trading the 'Golden Cross' if the 50 day SMA moves above the 200 day, or the 'Death Cross' when the 50 day SMA moves below the 200 day SMA. Long-term indicators carry more weight than shorter-term indicators, and this cross, in a positive direction signals a change in momentum of the stock. You will not catch the very bottom using this method, but there is a better chance that you will catch a move near the beginning of a longer-term trend. Golden Cross Information - Zacks","Relative Strength Indicators are also trailing indicators. They are based on the number of recent upticks or downticks in an investment's price. (The size of a tick is quantized, and related to the investment's price.) By the time enough upticks have accumulated to generate a buy signal, the investment has already increased in price significantly. Similarly, by the time enough downticks have accumulated a to generate a sell signal, the investment has already dropped in price significantly. The theory of Relative Strength Indicators is based on the hope that moves found by these indicators are likely to continue after the signal is generated. But even if this is the case, someone who relies on these indicators will miss out on the first part of the move. Dorsey-Wright offers investment research based on the theory of Relative Strength Indicators. They offer investment vehicles based on this research. They also work with local investment advisors to develop custom back-tested strategies. They have published a white-paper, with references to others' research.","Here's a few demo steps, first calculating the year to date return, then calculating the Q4 quarterly return based on the cumulative returns for Q3 and Q4. It's fine to use closing price to closing price as return periods.","well well, good question, worth a discussion, the more filters you add to your strategy (volatility in this case), the lower its predictive power. i mean, one could further filter it by day of the week, whether prices are above or below a 200 day moving average...etc.","\"Most likely because they don't know what they're talking about. They all have a belief without evidence that information set X is internalised into the price but information set Y is not. If there is some stock characteristic, call it y, that belongs to set Y, then that moves the gauge towards a \"\"buy\"\" recommendation. However, the issue is that no evidence has been used to determine the constituents of X and Y, or even whether Y exists in any non-trivial sense.\"","The actual price is represented on charts and not the change in price as a percentage, because it is the actual price which is used in all other parts of analysis (both technical and fundamental), and it is the actual figure the security is bought and sold at. A change in price has to be relative to a previous price at a previous time, and we can easily work out the change in price over any given time period. I think what you are concerned about is how to compare a certain actual price change in low priced securities to the same actual price change in a higher priced securities. For example: $1.00 rise in a $2.00 stock representing a 50% increase in price; $1.00 rise in a $10.00 stock representing a 10% increase in price. On a standard chart both of these look the same, as they both show a $1.00 increase in price. So what can we do to show the true representation of the percentage increase in price? It is actually quite simple. You view the chart using a log scale instead of a standard scale (most charting packages should have this option). What may look like a bubble on a standard scale chart, looks like a healthy uptrend on a log scale chart and represents a true picture of the percentage change in price. Example of Standard Price Scale VS LOG Price Scale on a Chart Standard Price Scale On the standard scale the price seems to have very little movement from Mar09 to Jan12 and then the price seems to zoom up after Jan12 to Mar13. This is because a 4% increase (for example) of $0.50 is only $0.02, whilst a 4% increase of $7.00 $0.28, so the increases seem much bigger at the end of the chart. LOG Price Scale On the LOG chart however, these price changes seem to be more evenly displayed no matter at what price level the price change has occurred at. This thus give a better representation of how fast or slow the price is rising or falling, or the size of the change in price.","\"Some technical indicators (e.g. Williams %R) indicate whether the market is overbought or oversold. ... Every time a stock or commodity is bought, it is also sold. And vice versa. So how can anything ever be over-bought or over-sold? But I'm sure I'm missing something. What is it? You're thinking of this as a normal purchase, but that's not really how equity markets operate. First, just because there are shares of stock purchased, it doesn't mean that there was real investor buyer and seller demand for that instrument (at that point in time). Markets have dedicated middlemen called Market Makers, who are responsible to make sure that there is always someone to buy or sell; this ensures that all instruments have sufficient liquidity. Market Makers may decide to lower their bid on a stock based on a high number of sellers, or raise their ask for a high number of buyers. During an investor rush to buy or sell an instrument (perhaps in response to a news release), it's possible for Market Makers to accumulate a large number of shares, without end-investors being involved on both sides of the transaction. This is one example of how instruments can be over-bought or over-sold. Since Williams %R creates over-bought and over-sold signals based on historical averages of open / close prices, perhaps it's better to think of these terms as \"\"over-valued\"\" and \"\"under-valued\"\". Of course, there could be good reason for instruments to open or close outside their expected ranges, so Williams %R is just a tool to give you clues... not a real evaluation of the instrument's true value.\"","\"Yes if and only if you properly use P/Y and C/Y. For your familiarity, I recommend also trying it with I = 7.56% / 12, and P/Y and C/Y = 1. I like to think of P/Y and C/Y as \"\"per period\"\" and prefer to divide the interest rate by the number of periods per year, but so long as you keep everything coherent in the solver, you will get the correct answer with both approaches.\"","A moving average will act as support or resistance to a stock only when the stock is trending. The way it acts as support for instance is similar to a trend-line. Take the daily chart of CBA over the last 6 months: The first chart shows CBA with an uptrend support line. The second chart shows CBA during the same period with 50 day EMA as a support. Both can be used as support for the uptrend. Generally you can used these types of support (or resistance in a downtrend) to determine when to buy a stock and when to sell a stock. If I was looking to buy CBA whilst it was uptrending, one strategy I could use was to wait until it hit or got very close to the support trend-line and then buy as it re-bounces back up. If I already held the stock I could use a break down below the uptrend support line as a stop to exit out of the stock.","\"Below is just a little information on this topic from my small unique book \"\"The small stock trader\"\": The most significant non-company-specific factor affecting stock price is the market sentiment, while the most significant company-specific factor is the earning power of the company. Perhaps it would be safe to say that technical analysis is more related to psychology/emotions, while fundamental analysis is more related to reason – that is why it is said that fundamental analysis tells you what to trade and technical analysis tells you when to trade. Thus, many stock traders use technical analysis as a timing tool for their entry and exit points. Technical analysis is more suitable for short-term trading and works best with large caps, for stock prices of large caps are more correlated with the general market, while small caps are more affected by company-specific news and speculation…: Perhaps small stock traders should not waste a lot of time on fundamental analysis; avoid overanalyzing the financial position, market position, and management of the focus companies. It is difficult to make wise trading decisions based only on fundamental analysis (company-specific news accounts for only about 25 percent of stock price fluctuations). There are only a few important figures and ratios to look at, such as: perhaps also: Furthermore, single ratios and figures do not tell much, so it is wise to use a few ratios and figures in combination. You should look at their trends and also compare them with the company’s main competitors and the industry average. Preferably, you want to see trend improvements in these above-mentioned figures and ratios, or at least some stability when the times are tough. Despite all the exotic names found in technical analysis, simply put, it is the study of supply and demand for the stock, in order to predict and follow the trend. Many stock traders claim stock price just represents the current supply and demand for that stock and moves to the greater side of the forces of supply and demand. If you focus on a few simple small caps, perhaps you should just use the basic principles of technical analysis, such as: I have no doubt that there are different ways to make money in the stock market. Some may succeed purely on the basis of technical analysis, some purely due to fundamental analysis, and others from a combination of these two like most of the great stock traders have done (Jesse Livermore, Bernard Baruch, Gerald Loeb, Nicolas Darvas, William O’Neil, and Steven Cohen). It is just a matter of finding out what best fits your personality. I hope the above little information from my small unique book was a little helpful! Mika (author of \"\"The small stock trader\"\")\"","At the bottom of the page you linked to, NASDAQ provides a link to this page on nasdaqtrader.com, which states Each FINRA member firm is required to report its “total” short interest positions in all customer and proprietary accounts in NASDAQ-listed securities twice a month. These reports are used to calculate short interest in NASDAQ stocks. FINRA member firms are required to report their short positions as of settlement on (1) the 15th of each month, or the preceding business day if the 15th is not a business day, and (2) as of settlement on the last business day of the month.* The reports must be filed by the second business day after the reporting settlement date. FINRA compiles the short interest data and provides it for publication on the 8th business day after the reporting settlement date. The dates you are seeing are the dates the member firms settled their trades. In general (also from nasdaq.com), the settlement date is The date on which payment is made to settle a trade. For stocks traded on US exchanges, settlement is currently three business days after the trade.","If you download the historical data from Yahoo, you will see two different close prices. The one labeled 'Close' is simply the price that was quoted on that particular day. The one labeled 'Adj Close' is the close price that has been adjusted for any splits and dividends that have occurred after that date. For example, if a stock splits 10:1 on a particular date, then the adjusted close for all dates prior to that split will have been divided by 10. If a dividend is paid, then all dates prior will have that amount subtracted from their adjusted quote. Using the adjusted close allows you to compare any two dates and see the true relative return.","You are calculating using different methods. For example, to obtain 6.45% 6.44647 This is effectively the same as the money-weighted return calculation. In arriving at 6.06% you have calculated the true time-weighted return. Both answers are right, but they are different measures. To use time-weighted returns you need to know the value of the investment at the time of every cash flow. Modified Dietz uses a simple approximation to avoid that requirement. Money-weighted return gives results that are more accurate for back calculating than Modified Dietz, (also without requiring interim valuations), but the calculation is more complex. See How to Calculate your Portfolio's Rate of Return for a decent reference.","TWRR = (2012Q4 x 2013Q1 x 2013Q2) ^ (1/3) = ?? (1.1 * .809 * 1.29) ^ (1/3) = 1.047 or 4.7% return. No imaginary numbers needed. But. Your second line there is wrong $15,750 - $15,000 - $4,000 ? The $15K already contains the $4k, why did you subtract it again? This a homework problem?","Nine years of investment would span Jan 1 2007 to Jan 1 2016. Taking the following valuation dates with The annual effective interest rate is 4.268 %","\"The dow jones is an index of 30 stocks that's weighted based on the price per share of these stocks. To calculate the DJIA, the sum of the prices of all 30 stocks is divided by a divisor, the Dow Divisor. The divisor is adjusted in case of stock splits, spinoffs or similar structural changes, to ensure that such events do not in themselves alter the numerical value of the DJIA. Prices are the result of supply and demand. Demand is defined as simply as \"\"I want this badly enough to pay cash for it\"\", \"\"supply is \"\"I own this and don't want to own it, therefore I'll sell it\"\" When investors go about deciding they'd like to buy some stock from people who own it and are wanting to sell it, a market is generated and a price both are willing to sell/buy at is found. If the price is too high/low, you won't sell or buy. The price has to be \"\"right\"\" based on your own personal valuation. Since these trades are done through an exchange and are so common, literally millions of shares are traded per day, you get the best price available at that moment for your shares. If person A is only willing to give you 100 dollars and person B is willing to give you 100.01, screw person A. I'm selling shares to person B. When this done on a macro-level (millions of shares traded per day) the exchanges will track and make public the \"\"price movement\"\" of what the market is willing to give for each and every publicly traded stock. TLDR: SUPPLY AND DEMAND. DOW USES THEIR OWN METHODS.\"","Mostly some custom work i've done myself, bayesian and time series models, but there is some pattern matching. Most TA functions such as MA's, MACD's, BollingerBands, are simple ways of doing time series analysis. MA's are basic filters. MACD is essentially a way of viewing acceleration, as its the informational difference between filters. BB's are mean reverters based on standard deviation/ RSI is a ratio of filtered up to down moves basically generating an indicator based on how strong the market has moved.","The data for ES_F normally is joined on the contract expiry date, i.e. june is joined to the next month on the expiry date. The discrepancy to the real thing in practice might be significant, as seasonal strategies (as we call these) are mined fairly often.","\"Probably the best way to investigate this is to look at an example. First, as the commenters above have already said, the log-return from one period is log(price at time t/price at time t-1) which is approximately equal to the percentage change in the price from time t-1 to time t, provided that this percentage change is not big compared to the size of the price. (Note that you have to use the natural log, ie. log to the base e -- ln button on a calculator -- here.) The main use of the log-return is that is a proxy for the percentage change in the price, which turns out to be mathematically convenient, for various reasons which have mostly already been mentioned in the comments. But you already know this; your actual question is about the average log-return over a period of time. What does this indicate about the stock? The answer is: if the stock price is not changing very much, then the average log-return is about equal to the average percentage change in the price, and is very easy and quick to calculate. But if the stock price is very volatile, then the average log-return can be wildly different to the average percentage change in the price. Here is an example: the closing prices for Pitchfork Oil from last week's trading are: 10, 5, 12, 5, 10, 2, 15. The percentage changes are: -0.5, 1.4, -0.58, 1, -0.8, 6.5 (where -0.5 means -50%, etc.) The average percentage change is 1.17, or 117%. On the other hand, the log-returns for the same period are -0.69, 0.88, -0.88, 0.69, -1.6, 2, and the average log-return is about 0.068. If we used this as a proxy for the average percentage change in the price over the whole seven days, we would get 6.8% instead of 117%, which is wildly wrong. The reason why it is wrong is because the price fluctuated so much. On the other hand, the closing prices for United Marshmallow over the same period are 10, 11, 12, 11, 12, 13, 15. The average percentage change from day to day is 0.073, and the average log-return is 0.068, so in this case the log-return is very close to the percentage change. And it has the advantage of being computable from just the first and last prices, because the properties of logarithms imply that it simplifies to (log(15)-log(10))/6. Notice that this is exactly the same as for Pitchfork Oil. So one reason why you might be interested in the average log-return is that it gives a very quick way to estimate the average return, if the stock price is not changing very much. Another, more subtle reason, is that it actually behaves better than the percentage return. When the price of Pitchfork jumps from 5 to 12 and then crashes back to 5 again, the percentage changes are +140% and -58%, for an average of +82%. That sounds good, but if you had bought it at 5, and then sold it at 5, you would actually have made 0% on your money. The log-returns for the same period do not have this disturbing property, because they do add up to 0%. What's the real difference in this example? Well, if you had bought $1 worth of Pitchfork on Tuesday, when it was 5, and sold it on Wednesday, when it was 12, you would have made a profit of $1.40. If you had then bought another $1 on Wednesday and sold it on Thursday, you would have made a loss of $0.58. Overall, your profit would have been $0.82. This is what the average percentage return is calculating. On the other hand, if you had been a long-term investor who had bought on Tuesday and hung on until Thursday, then quoting an \"\"average return\"\" of 82% is highly misleading, because it in no way corresponds to the return of 0% which you actually got! The moral is that it may be better to look at the log-returns if you are a buy-and-hold type of investor, because log-returns cancel out when prices fluctuate, whereas percentage changes in price do not. But the flip-side of this is that your average log-return over a period of time does not give you much information about what the prices have been doing, since it is just (log(final price) - log(initial price))/number of periods. Since it is so easy to calculate from the initial and final prices themselves, you commonly won't see it in the financial pages, as far as I know. Finally, to answer your question: \"\"Does knowing this single piece of information indicate something about the stock?\"\", I would say: not really. From the point of view of this one indicator, Pitchfork Oil and United Marshmallow look like identical investments, when they are clearly not. Knowing the average log-return is exactly the same as knowing the ratio between the final and initial prices.\"","Technically you should take the quarterly dividend yield as a fraction, add one, take the cube root, and subtract one (and then multiple by the stock price, if you want a dollar amount per share rather than a rate). This is to account for the fact that you could have re-invested the monthly dividends and earned dividends on that reinvestment. However, the difference between this and just dividing by three is going to be negligible over the range of dividend rates that are realistically paid out by ordinary stocks.","the strategy is tested all the way to 97. how is the continuous series backadjusted? the emini is rolledover and Ratio back adjusted to the 2nd nearest contract, 9 days prior to expiration. since it is an intraday trade, the discrepancy to the real thing should be next to irrelevant. but comparing it to the spx could make it interesting. what would be a good format to present the results ? jpeg? pdf ?","Its kind of a dumb question because no one believes that you can earn 8% in the short term in the market, but for arguments sake the math is painfully easy. Keep in mind I am an engineer not a finance guy. So the first payment will earn you one month at 8%, the second, two. In effect three months at 8% on 997. You can do it that way because the payments are equal: 997 * (.08 /12) *3 = earnings ~= 20 So with the second method you pay: 997 * 3 - 20 = 2971","However, you have to remember that not all dividends are paid quarterly. For example one stock I recently purchased has a price of $8.03 and the Div/yield = 0.08/11.9 . $.08 * 4 = $0.32 which is only 3.9% (But this stock pays monthly dividends). $.08 * 12 = $0.96 which is 11.9 %. So over the course of a year assuming the stock price and the dividends didn't change you would make 11.9%"],"string":"[\n \"The values of 12, 26 and 9 are the typical industry standard setting used with the MACD, however other values can be substituted depending on your trading style and goals. The 26d EMA is considered the long moving average when in this case it is compared to the shorter 12d EMA. If you used a 5d EMA and a 10d EMA then the 10d EMA would be considered the long MA. It is based on what you are comparing it with. Apart from providing signals for a reversal in trend, MACD can also be used as an early indication to a possible end to a trend. What you look out for is divergence between the price and the MACD. See chart below of an example: Here I have used 10d & 3d EMAs and 1 for the signal (as I did not want the signal to show up). I am simply using the MACD as a momentum indicator - which work by providing higher highs in the MACD with higher highs in price. This shows that the momentum in the trend is good so the trend should continue. However the last high in price is not met with a higher high in the MACD. The green lines demonstrate bearish divergence between price and the MACD, which is an indication that the momentum of the trend is slowing down. This could provide forewarning that the trend may be about to end and to take caution - i.e. not a good time to be buying this stock or if you already own it you may want to tighten up your stop loss.\",\n \"The 'standard' in such moving average crossover systems is 50/200. The numbers are essentially arbitrary as long as the long term average is greater than the short term and there is some different between the averages in terms of the smoothing they provide (i.e. comparing a 74 day MA to a 75 day MA isn't what the system is intended for) There are plenty of software programs that will let you run through many possible values for the system over historical data. I concur with the other answers in that this system/indicator alone isn't very good. However, I disagree with their blanket brushing off of technical analysis. There are many successful traders out there. The moving average cross over system is perhaps the second most primitive example of technical strategies categorized as trend following systems (buying new recent highs and selling new recent lows being the most simple). This particular system isn't very powerful because of its poor use of simple moving averages. A simple moving average is intended to smooth out data, but smoothing comes at the cost of lagging from the present. A simple moving average essentially gives you an idealized smoothing of price action for the day at that is one half of their period ago. So your 200 day simple moving average shows you an idealized smoothing of price action 100 days ago. A lot can happen in 100 days and that is why this system is far from ideal.\",\n \"Edit3: Regarding the usefulness of the bare number itself, it is not useful unless, for example, an employer uses that average in the computation of how many options the employer grants to the employee as part of the compensation paid. One of my employers used just such an average. What is far more common is to use two or more moving averages, of different periods, plotted on a chart. My original response continues below... Assuming there are 252 trading days a year, the following chart does what you have done but with a moving average: AAPL on Stockcharts.com Edit: BTW, I looked up the number of Federal holidays, there are 9. The average year has 365.2422 days. 365.2422 × 5/7 = 260.8873. Subtract 9 and you get 251.8873 trading days in the average year. So 252 is a better number for the SMA than 250 if you want to average a year. Edit2: Here is the same chart with more than one average included: AAPL chart w/indicators\",\n \"I looked at this a little more closely but the answer Victor provided is essentially correct. The key to look at in the google finance graph is the red labled SMA(###d) would indicate the period units are d=days. If you change the time axis of the graph it will shift to SMA(###m) for period in minutes or SMA(###w) for period in weeks. Hope this clears things up!\",\n \"\\\"I would have to disagree with the other responders. In technical analysis of stock charts, various short and long term moving averages are used to give an indication of the trend of the stock in the short and long term, as compared to the current price. I would prefer to use the term moving average (MA) rather than average as the MA is recalculated every day (or at appropriate frequencies for your data) on the period you are using. I would also expand on the term \\\"\\\"moving average\\\"\\\". There are two that are commonly used Going back to the question, of the value of this number, For example if the current price is above the 200 day EWMA and also above the 30 day EWMA, then the stock is broadly trending upwards. Conversely if current price is below the 200 day EWMA and also below the 30 day EWMA, then the stock is broadly trending downwards. These numbers are chosen on the basis of the market you are trading in, the volatility and other factors. For another example of how a number of moving averages are used together, please have a read of Daryl Guppy's Multiple Moving Average, though this does not use moving averages as large as 200 days.\\\"\",\n \"Moving Average is mere average line based on historical period; broadly use to view the trend. But it has no relation to price action in due future course. If price is going below 20 SMA then in near future even the SMA will start directing toward south. In your case if price has fallen below all the short period average lines and long period average line then it is bearish in nature. Soon in few days you may find 20 SMA leading downwards followed by closest period and then long. Also SMA and EMA can best be observed in charting software in candlestick mode. Because these moving averages can also be adjusted and viewed based on Opening price, High prices, Low Price or closing price. In you case I guess the data is of closing price data. Overlapping of averages may be sign of reversals. So if you want to buy this stock you may have to wait till all the average lines cross-over and when new trend begins with SMA of shortest avg period (20) leading above the long avg period (90 days in your case). Then you can buy and just follow the trend. I hope it answers you question.\",\n \"That metric is not very useful for anything other than very extremely long trading periods. Most strategies or concerned with price movement over much shorter time frames, 15 mins, 1 hr, 4 hr, daily, weekly, monthly. The MA or moving average is a trend following lagging indicator used to smooth out price fluctuations and more accurately reflect the price of trading instrument such as a stock (AAPL), commodity, or currency pair. Traders are generally concerned with current market trends and price action of the instrument they are trading. As such, an extremely long MA (average daily price, over a period of 365 days) are generally not that important.\",\n \"One of the most obvious uses of SMAs is the detection of a trend reversal. A trend reversal happens when a short term SMA crosses over a longer term SMA. For example, if a 20 day moving average was, previously, above a 200 day moving average, but has crossed over the 200 day and is currently below the 200 day then the security has performed a 'death cross' and the trend is for lower and lower prices. Stockcharts.com has excellent 'chart school' for the beginning chart user. They also provide excellent charts. Here is a link: http://stockcharts.com/school/doku.php?id=chart_school I like to use a 20 day SMA, a 200 day SMA, and a 21 day EMA.\",\n \"The difference is that for the one year time frame the data is represented based on daily data and the SMA is 20 days, whilst for the 5 year timeframe the data is automatically represented as weekly data with the SMA represented by 20 weeks not 20 days anymore. This happens due to daily data on this chart being too much data to represent over a 5 year period so the data defaults to weekly data over such a long period. If the chart is represented as weekly data then any indicators will also have to be represented in weekly data. If you use a more sophisticated charting program you can actually select to see daily or weekly data over longer periods such as 5 years or more.\",\n \"While trading in stochastic I've understood, one needs reference (SMA/EMA/Bolinger Band and even RSI) to verify trade prior entering it. Stochastic is nothing to do with price or volume it is about speed. Adjusting K% has ability to turn you from Day trader to -> swing trader to -> long term investor. So you adjust your k% according to chart time-frame. Stochastic setup for 1 min, 5 min ,15, 30, 60 min, daily, weekly, monthly, quarterly, half yearly and yearly are all different. If you try hopping from one time-frame to another just because it is below oversold or above overbought region with same K%, you may get confused. Worst you may not square-off your loss making trade. And rather not use excel; charts gives better visual for oscillators.\",\n \"As you point out, the moving average is just MA(k)t = (Pt-1 + … + Pt-k )/k and is applied in technical analysis (TA) to smooth out volatile (noise) price action. If it has any logic to it, you might want to think in terms of return series (Pt - Pt-1 / Pt-1) and you could hypothesize that prices are in fact predictable and will oscillate below and above a running moving average. Below is a link to a study on MA trading rules, published in the Journal of Finance, with the conclusion of predictive power and abnormal returns from such strategies. As with any decision made upon historical arguments, one should be aware of structural changes and or data mining. Simple technical trading rules and the stochastic properties of stock returns Brock, W., J. Lakonishok and B. Le Baron, 1992, Simple technical trading rules and the stochastic properties of stock returns, Journal of Finance, 47, 1731-64. MA rules betterthan chance in US stock market, 1897-1986 I don't know whether you are new to TA or not, but a great commercial site, with plenty of computer-generated signals is FinViz.\",\n \"Technical analysis is insufficient. You're halfway to figuring it out if you start to question why a 50 day moving average vs 200 vs 173. Invest in companies that are attractively valued vs. their sales/growth/divends/anythingelsereal\",\n \"A shorter term MA would be used for short term changes in price whilst a long term MA would be used for longer term movements in price. A 200 day SMA is widely used to determine the trend of the stock, simply a cross above the 200 day SMA would mean the stock may be entering an uptrend and a cross below that the price may be entering a downtrend. If the price is continuosly going above and below in a short period of time it is usually range trading. Then there are EMAs (Expodential Moving Averages) and WMAs (weighted moving averages) which give more emphasis to the latest price data than the earlier price data in the period chosen compared to a SMA. MAs can be used in many different ways, too many to list all here. The best way to learn about them is to read some TA books and articles about them, then choose a couple of strategies where you can use them in combination with a couple of other indicators that are complimentary with each other.\",\n \"Because in the case for 100/101, if you wanted to placed a limit buy order at top of the bid list you would place it at 101 and get filled straight away. If placing a limit buy order at the top of 91 (for 90/98) you would not get filled but just be placed at the top of the list. You might get filled at a lower price if an ask comes in matching your bid, however you might never get filled. In regards to market orders, with the 100/101 being more liquid, if your market order is larger than the orders at 101, then the remainder of your order should still get filled at only a slightly higher price. In regards to market orders with the 90/98, being less liquid, it is likely that only part of your order gets filled, and any remained either doesn't get filled or gets filled at a much higher price.\",\n \"\\\"Google's RSI is using a 10 period on 2 minute bars - i.e. it is based upon the last 20 minutes of data. Yahoo's RSI is using a 14 period lookback on an undetermined timeframe (you could maybe mouse-over and see what incremental part of the chart is giving) and given the \\\"\\\"choppier\\\"\\\" price chart, probably 30 second or 1 minute bars. Given the difference in both the period specified and the periodicity of the charts - you should expect different results.\\\"\",\n \"\\\"The formula for standard deviation is fairly simple in both the discrete and continuous cases. It's mostly safe to use the discrete case when working with adjusted closing prices. Once you've calculated the standard deviation for a given time period, the next task (in the simplest case) is to calculate the mean of that same period. This allows you to roughly approximate the distribution, which can give you all sorts of testable hypotheses. Two standard deviations (σ) away from the mean (μ) is given by: It doesn't make any sense to talk about \\\"\\\"two standard deviations away from the price\\\"\\\" unless that price is the mean or some other statistic for a given time period. Normally you would look at how far the price is from the mean, e.g. does the price fall two or three standard deviations away from the mean or some other technical indicator like the Average True Range (an exponential moving average of the True Range), some support level, another security, etc. For most of this answer, I'll assume we're using the mean for the chosen time period as a base. However, the answer is still more complicated than many people realize. As I said before, to calculate the standard deviation, you need to decide on a time period. For example, you could use S&P 500 data from Yahoo Finance and calculate the standard deviation for all adjusted closing prices since January 3, 1950. Downloading the data into Stata and applying the summarize command gives me: As you can probably see, however, these numbers don't make much sense. Looking at the data, we can see that the S&P 500 hasn't traded close to 424.4896 since November 1992. Clearly, we can't assume that this mean and standard deviation as representative of current market conditions. Furthermore, these numbers would imply that the S&P 500 is currently trading at almost three standard deviations away from its mean, which for many distribution is a highly improbable event. The Great Recession, quantitative easing, etc. may have changed the market significantly, but not to such a great extent. The problem arises from the fact that security prices are usually non-stationary.. This means that the underlying distribution from which security prices are \\\"\\\"drawn\\\"\\\" shifts through time and space. For example, prices could be normally distributed in the 50's, then gamma distributed in the 60's because of a shock, then normally distributed again in the 70's. This implies that calculating summary statistics, e.g. mean, standard deviation, etc. are essentially meaningless for time periods in which prices could follow multiple distributions. For this and other reasons, it's standard practice to look at the standard deviation of returns or differences instead of prices. I covered in detail the reasons for this and various procedures to use in another answer. In short, you can calculate the first difference for each period, which is merely the difference between the closing price of that period and the closing price of the previous period. This will usually give you a stationary process, from which you can obtain more meaningful values of the standard deviation, mean, etc. Let's use the S&P500 as an example again. This time, however, I'm only using data from 1990 onwards, for the sake of simplicity (and to make the graphs a bit more manageable). The summary statistics look like this: and the graph looks like this; the mean is the central horizontal red line, and the top and bottom lines indicate one standard deviation above and below the mean, respectively. As you can see, the graph seems to indicate that there were long periods in which the index was priced well outside this range. Although this could be the case, the graph definitely exhibits a trend, along with some seemingly exogenous shocks (see my linked answer). Taking the first difference, however, yields these summary statistics: with a graph like this: This looks a lot more reasonable. In periods of recession, the price appears much more volatile, and it breaches the +/- one standard deviation lines indicated on the graph. This is only a simple summary, but using first differencing as part of the wider process of detrending/decomposing a time series is a good first step. For some technical indicators, however, stationary isn't as relevant. This is the case for some types of moving averages and their associated indicators. Take Bollinger bands for instance. These are technical indicators that show a number of standard deviations above and below a moving average. Like any calculation of standard deviation, moving average, statistic, etc. they require data over a specified time period. The analyst chooses a certain number of historical periods, e.g. 20, and calculates the moving average for that many previous periods and the moving/rolling standard deviation for those same periods as well. The Bollinger bands represent the values a certain number of standard deviations away from the moving average at a given point in time. At this given point, you can calculate the value two standard deviations \\\"\\\"away from the value,\\\"\\\" but doing so still requires the historical stock price (or at least the historical moving average). If you're only given the price in isolation, you're out of luck. Moving averages can indirectly sidestep some of the issues of stationarity I described above because it's straightforward to estimate a time series with a process built from a moving average (specifically, an auto-regressive moving average process) but the econometrics of time series is a topic for another day. The Stata code I used to generate the graphs and summary statistics:\\\"\",\n \"Is that indicator can only be used for short-term trade? First of all, indicator works perfect during trends and oscillator works perfectly in the range market(or flat market). So, indicator can be used for long term, as well as short term. I mean if it is a range market, using this or any other indicator will not help much, so it you should consider market direction first. If it can be used to long-term trade, is there something I need to change from the parameters used? like, only using SMMA(5,8,13)? The parameters are there to change them. Of course you can change them based on your trading style. Considering my statement above does not mean that trading is very easy. I never use indicators alone to make trading decisions. It is always good to use oscillator to filter out bad trading signals.\",\n \"Standard Deviation is a mathematical term that is useful in many areas. It can be considered a measure of how tight the data points are to the average. If there is consistency in the measurement system, then a point that is two standard from the average can be considered an outlier. It doesn't even need to be time based. We can say that a child born weighing less than X pounds is more than 2 standard deviations below the average. Using it to look at a price or an index value doesn't make a lot of sense because many expect there to be long term growth. For example you would never say that you will buy a new jacket for your child when they are two standard deviations above their average height. You can say you will buy or sell a financial instrument when the P/E ratio is 2 standard deviations from some average. It could be the average of the long term history, or the index, or the sector. You could do the same thing for earnings per share or many other business of financial statistics. A standard deviation calculated from a time series assumes that the measurement will normally stay withing some bounds. And that straying from those bounds is a sign of the right time to buy or sell.\",\n \"I believe it’s because the old ticker machines only had 32 symbols making each symbol (1/32) a tick. (Back in the London Stock / Debt exchange in the 18th century) . The first ever government bond was issued by the Bank of England in 1693 to raise money to fund a war against France\",\n \"Different moving averages work and not work for different indexes. I have seen simulations where during bull or bear markets the moving averages work differently. Here is an example: http://www.indexresult.com/MovingAverage/Exponential/200/SP500\",\n \"You've flipped the numerator and denominator around, and need to multiply by 100 to get percentage rather than 10: I like to use a simple example to assess reasonableness of an approach, if you had invested $100 and after 1 year had $150, your approach would yield: But since $50 is half of $100, we know the rate of return should be 50%, so we know that approach is off. But, flipping the numerator and denominator and multiplying by 100 gets us the 50% we expected: Edit: Good catch by @DJohnM you've called it 9 years, but it's actually 11, so you'd want to adjust accordingly.\",\n \"(12 * 100) * 1.01 = 1212 Assuming the $12 ask can absorb your whole 100 share order.\",\n \"You can use google docs to create a spreadsheet. In field A2, I put Google will load the prices into the sheet. At that point, I add the following into C12, then copy that line all the way down to the botton of column C. You can find my spreadsheet here. It calculates the moving 10 day standard deviation as a percentage of average price for that time period.\",\n \"One could use technical indicators in any number of ways...they aren't rigidly defined for use in any particular way. If they were, only computers would use them. Having said that, moving averages are frequently used by people operating on the assumption that short-term price movements will soon be reverted back to a longer-term mean. So if the price shoots up today, traders who use moving averages may believe it will come back down pretty soon. If this is the belief (and it usually is for this type of trader), a price significantly above a moving average could indicate an overpriced stock. A price below the moving average could indicate an underpriced stock. Similarly, a short-term moving average above the long-term moving average may indicate an overpriced stock. When you are dealing with more than one frequency, though, there is more disagreement about how to use technical indicators. Some traders would probably say the opposite: that a short term average above the long term average indicates an upward movement that will continue because they believe the stock has momentum. Note that I am not saying I believe in using these averages to predict mean reversion or momentum effects, just that traders who rely on moving averages frequently do.\",\n \"fibonacci levels (retracements,expansions, arcs) are all arbitrary numbers with no statistical significance. that said thousands of traders world over use, view and depend on fib numbers in their trading ranging from forex, stock commodities etc the point is if it's traded a fibonacci number has been used on it, because of this unanimity on their significance & application the fibonacci's thus act as valid anchors since so many traders are looking at the same levels (self-fulfilling prophecy). the values of the fib numbers are all equally significant i.e the 23.6. 38.2, 50, or 61.8 are statistically all equally likely to occur. you just have to be vigilant as your trade approaches the fib levels.\",\n \"Still working on exact answer to question....for now: (BONUS) Here is how to pull a graphical chart with the required data: Therefore: As r14 = the indicator for RSI. The above pull would pull Google, 6months, line chart, linear, large, with a 50 day moving average, a 200 day exponential moving average, volume, and followed up with RSI. Reference Link: Finance Yahoo! API's\",\n \"The curved lines (on my screen orange, yellow and pink) are simple moving averages. The fuchsia and blue straight lines are automatically generated trend lines. Those lines are attempting to show how a stock is trending by showing potential bounce points and are commonly used in technical analysis (TA).\",\n \"\\\"The simple answer for the so-called 'Rule of X' would be found by: In your case: Update: If you want an approximation closer to the nominal \\\"\\\"Rule of 72\\\"\\\" value, use this equation that incorporates a better approximation for the natural log. The \\\"\\\"Rule of 72\\\"\\\" fits this for an interest rate of 7.79% for a growth multiple of 2: The rule of 72 comes from by approximating the natural logarithms as such: The 2 is the multiple of growth. The rate r here is not in percent, so to change to percent (say, R) you have to multiply by 100: The number 72 is often used because it is easier to divide evenly than 69.3 and is a better fit approximation for the natural log and common interest rates. If you need more, you can find all this on Wikipedia: https://en.wikipedia.org/wiki/Rule_of_72#Derivation\\\"\",\n \"The author is using the simple Dietz method, (alternatively the modified Dietz), with the assumption that the net cash-flow occurs halfway through the time period. Let's say the time period is one year for illustration, so the cash-flow would be at the end of the second quarter. The money-weighted method gives a more accurate return, but has to be solved by trial-and-error or using a computer. The money-weighted return is 11.2718 % and the simple or modified Dietz return is 11.2676 %. When the sums are done backwards to check, the Dietz is half a dollar out with a final value of $11,999.50 while the money-weighted return recalculates exactly $12,000. It is worth pointing out that the return changes if the cash-flow is not in the middle of the time period. A case with the cash-flow at the end of Q3 is added to illustrate.\",\n \"\\\"Are you sure you're using the same date range? If you're using Max, then you're not, as ^FTMC goes back to 12/1/1985 while ^GDAXI only goes back to 11/1/1990. If I enter a custom date range of 11/1/1990 through 10/24/2015, I get: and: which, other than the dates it chose to use as labels on the x-axes, look identical. (I tried to add the URLs of the charts, but it looks like the Yahoo! URLs don't include the comparison symbol, which makes them useless for this answer. They're easy enough to construct though, just add the secondary symbol using the Comparison button and set the date range using the calendar button.) On your PS, I don't know, as you can see by my charts it even chose different labels when the date ranges were identical (although at least it didn't scale different dates differently), so maybe it's trying to be \\\"\\\"smart\\\"\\\" and choose dates based on the total amount of data available for the primary symbol, which is different in the two cases.\\\"\",\n \"You can do it graphically at zignals.com and freestockcharts.com.\",\n \"Firstly, you mean resistance not support, as a support is below the current price and resistance is above the price. Secondly using a MA as support or resistance would mean that that support or resistance level would move up or down as the price moved up or down and would not be static at $25. Generally stocks will range trade more often than they will be trending (either up or down), so a stock can be range trading between a support and resistance levels for months and even years, and usually the longer it range trades for, the bigger the outbreak (either up or down) will be when it does happen. Using a MA (especially shorter dated ones) as support or resistance (or as a up or down trend line) works better when a stock is already trending up or down. When a stock is moving sideways it will tend to keep crossing above and below the MA, and you will be whipsawed if you try to use them as your trigger for entry in these situations. Compare the two charts below: In the first chart the stock is up-trending for over 6 months and the 50d EMA is being used as a support or up-trending line. As long as the price does not break through and close under the 50d EMA then the uptrend continues. You could use this EMA line as a means of entering the stock when prices move towards the EMA and bounce off it back up again. Or you could use it as your stop loss level, so if price closes below the EMA line you would sell your position. In the second chart, the stock has been range trading between the support line at about $21.80 and the resistance line at about $25.50 for 10 months. In this case the price has been moving above and below the 50d EMA during these 10 months and you may have been whipsawed many times if you were trading each break above or below the 50d EMA. A better strategy here would be to buy the stock as it approached the support line and bounces up off it and then close and reverse your position (go short) when the price approached the resistance line and bounces down off it. Edit: When range trading you would have your stops just below the support line when going long and just above the resistance line when going short, that way if it does break through support or resistance and starts trending you will be covered. So this shows that different strategies should be used when a stock is trending to when it is range trading. MAs are better used as entry signal during an established uptrend or downtrend than when a stock is range trading.\",\n \"Ya idk..I initially thought a moving average but that can't be it since when price crosses below trend line we see trend line continues to increase. https://villavu.com/forum/showthread.php?t=112371 but this says that it is in fact a monthly average. I don't see how that is possible, as adding a number below the average of a set to that set should decrease the average. People say 'the mean chases the margin,' not a fan of that terminology myself though. Edit: ah wait the yellow line is daily average, not price. If monthly average is calculated on close price, then this is possible. **so the answer then is the trend line is the monthly average**.\",\n \"This is a note from my broker, CMC Markets, who use Morningstar: Morningstar calculate the P/E Ratio using a weighted average of the most recent earnings and the projected earnings for the next year. This may result in a different P/E Ratio to those based solely on past earnings as reported on some sites and other publications. They show the P/E as being 9.93. So obviously past earnings would usually be used but you would need to check with your source which numbers they are using. Also, as BHP's results just came out yesterday it may take a while for the most recent financial details to be updated.\",\n \"The paragraph before on page 115 states: Scaling corresponds to having a weight in the long and short legs that is different from one and varies over time, but the strategy is still self-financing. Meaning that the long and short positions are no longer equal due to weighting one side more highly than the other. The weighting of one side (either long or short) is the number between 0.2 and 2 that you mention.\",\n \"\\\"Mathematically it's arbitrary - you could just as easily use the bid or the midpoint as the denominator, so long as you're consistent when comparing securities. So there's not a fundamental reason to use the ask. The best argument I can come up with is that most analysis is done from the buy side, so looking at liquidity costs (meaning how much does the value drop instantaneously purely because of the bid-ask spread) when you buy a security would be more relevant by using the ask (purchase price) as the basis. Meaning, if a stock has a bid-ask range of $95-$100, if you buy the stock at $100 (the ask), you immediately \\\"\\\"lose\\\"\\\" 5% (5/100) of its value since you can only sell it for $95.\\\"\",\n \"I don't think you can always assume a 12-month time horizon. Sometimes, the analyst's comments might provide some color on what kind of a time horizon they're thinking of, but it might be quite vague.\",\n \"When using the Stochastic Indicator your basic aim is to buy (go long) when the stochastic becomes oversold (goes below 20%) and then the %K line crosses above the %D line at a market low, and to sell (go short) when the stochastic becomes overbought (goes above 80%) and then the %K line crosses below the %D line at a market high. Other indicators or candlestick patters can also be used to further confirm the trade. Below is a chart of a trade I recently took on GUD.AX using the Slow Stochastic in combination with support and resistance levels as well as a candlestick pattern. When I conducted my stock search on the evening of 28th July 2015, GUD was one of the results from the search that I particularly liked. The Slow Stochastic had just made a crossover in the oversold area just as the price was bouncing off its recent lows at the support line. But what I really like about this opportunity was that there was also a bullish reversal candle (a Hammer) at this short term market bottom. The high for the day was $8.34, so I placed a stop buy order to buy the stock tomorrow if the price opened or moved above this high of today. So I would only buy if the stock hit or moved above $8.35 during the next days trading. So if the stock opened and stayed below the previous day's high I would not buy the stock and my order would be canceled at the end of the day. This is very important because it stops you from getting into trades that don't go in the direction you want. If this happens then you could check the chart again after market close to see if it is still worthwhile to place a new order for the next day. On the 29th July 2015 the stock did open higher at $8.42 (which is where my order got executed) and closed at $8.46. So I ended up buying slightly above my target price but it did move higher on the day, so a successful entry overall. I had placed my initial stop loss at $8.09 (just below the low of the previous day of $8.10). If the trade had gone against me in the following days the most I would have lost was 1% of my total account capital. My target for this trade was $9.86 (just below the resistance line near $10), which would represent a 5% gain against my total account capital (or approx. 16.7% gain on the trade). So my win to loss ratio was 5:1. As you can see from the chart, the next day gapped up at the open and prices continued moving up strongly during the day. The next day was a slightly negative day, and then a few days later, on the 5th August 2015 my target price of $9.86 was reached (with a high of $9.88 for that day), so my order was closed for a total profit of 16.7% on the face value of the trade. However, as I bought on margin (using CFDs) my actual profit on the initial margin I had invested was 167%. My total time in the trade was 7 days, and I spent about an hour in the evening doing my searches and placing my orders, then less than 10 minutes managing the trade each evening after market close. The stock did go up a bit further after my profit target was reached, but the day after that the price started to fall as the price hit the resistance line and the Slow Stochastic did a crossover in the overbought area. Overall, this was a very ideal trade and I was very happy with it. Not all my trades reach my profit targets and I may get stopped out at a smaller profit or I might make a small loss (as I move my stops up as the price moves up). The key to successful trading over the long term is to keep you losses small and let your profits run (with my longer term trend trading I don't have profit targets and let my profits run until I get stopped out, but with my shorter term trading I do use a profit target usually 5 or 6 times the size of my initial stop). If you have an average win to average loss ratio of 3:1 or higher and have a success rate of 50% winners you will make money over the long term.\",\n \"The Wikipedia has an article on money flow index. The article which you link to correctly uses the typical price. You state that you are comparing the closing prices, which is incorrect. I'm making no statement on the validity of the money flow index itself, just answering your question.\",\n \"This is how I've understood this concept. Fibonacci nos/levels/ratios/%s is based on concept of sequential increment. You may find lot of info about Fibonacci on net. In stock market this concept is used to predict psychological level. While a trend is form, usually price tend to accumulate/consolidate at these level. How the percentage/ ratio make impact is - check any long trend...Now draw a fibbo retracement from immediate previous high and connect it's low. You will see new levels of intermediate trend. In broader term you will find after reversal a leg (trend) is formed, then body and then head which is smaller; then price reverses. The first leg that forms if it refuses to break 23.6% or 38.2% then the previous trend may continue. 50% is normal; usually this level is indecision phase. Even 61.8% is seen as indecision but it is crucial level as it is breakout level towards 100%. Now if the stock retraces 100% then it is sign a new big trend is forming. Now for day trader 23.6%,38.2% and 50% level are very crucial from trading purpose. This concept is so realistic that every level is considered and respected. Suppose if a candle or bar starts at 23.6% level and crosses 38.2% and directly hits 50%. Then the next bar or candle will revert and first hit 38.2% and then continue with the trend. It means price comes back, forms it area at this level and then continue whichever direction the force directs it. You never trade fibo alone, you need help of oscillators or other tools to confirm it.\",\n \"Log-returns are very commonly used in financial maths, especially quantitative finance. The important property is that they're symmetrical around 0 with respect to addition. This property makes it possible to talk about an average return. For instance, if a stock goes down 20% over a period of time, it has to gain 25% to be back where you started. For the log-return on the other hand the numbers are 0.223 down over a period of time, and 0.223 up to get you back to square 1. In this sense, you can simply take an arithmetic average and it makes sense. You can freely add up or subtract values on the log-return scale, like log-interest rates or log-inflation rates. Whereas the arithmetic mean of (non-log) returns is simply meaningless: A stock with returns -3% and +3% would have 0% on average, when in fact the stock has declined in price? The correct approach on direct price-returns would be to take a different mean (e.g. geometric) to get a decent average. And yet it will be hard to incorporate other information, like subtracting the risk-free rate or the inflation rate to get rate-adjusted average returns. In short: Log-returns are easier to handle computationally, esp. in bulk, but non-log-returns are easier to comprehend/imagine as a number of their own.\",\n \"Simple math: 50-25=25, hence decline from 50 to 25 is a 50% decline (you lose half), while an advance from 25 to 50 is 100% gain (you gain 100%, double your 25 to 50). Their point is that if you have more upswings than downswings - you'll gain more on long positions during upswings than on short positions during downswings on average. Again - simple math.\",\n \"Assuming cell A1 contains the number of trades: will price up to A1=100 at 17 each, and the rest at 14 each. The key is the MAX and MIN. They keep an item from being counted twice. If X would end up negative, MAX(0,x) clamps it to 0. By extension, if X-100 would be negative, MAX(0, X-100) would be 0 -- ie: that number doesn't increase til X>100. When A1=99, MIN(a1,100) == 99, and MAX(0,a1-100) == 0. When A1=100, MIN(a1,100) == 100, and MAX(0,a1-100) == 0. When A1=101, MIN(a1,100) == 100, and MAX(0,a1-100) == 1. Of course, if the 100th item should be $14, then change the 100s to 99s.\",\n \"So for quarters So, if Q1's value was 10 and Q2's value was 25 For closing or opening prices, I would use closing prices. For instance, some used Adjusted Close or Close on Yahoo Finance (see this example of AAPL). Added Note: In your example, for your example, you'll want to take the absolute value of the denominator (aka: divisor), so an Excel formula might look like the below example ... ... where the new and old are cells.\",\n \"Too calculate these values, information contained in the company's financial statements (income, balance, or cashflow) will be needed along with the price. Google finance does not maintain this information for BME. You will need to find another source for this information or analyze another another symbol's financial section (BAC for example).\",\n \"Every class my Finance Prof writes a number on the board, I have no idea what it is other than it is related to the field of Finance. But I have it on good authority that it will be a bonus question on the final exam to find out what it is. Date | # Written ---|--- Oct. 12 | 13 Oct. 17 | 15 Oct. 19| 15 Oct. 24 | 15 Oct. 26 | 15 Nov. 2 | 11 If anyone knows please help a brother out. Dates are North American.\",\n \"This is a useful metric in that it gives you a trust factor on how reliable the beta is for future expectations It is akin to velocity and acceleration First and second order derivatives of distance / time. Erratic acceleration implies the velocity is less trustworthy Same idea for beta\",\n \"where A1 is the number of trades. you may have to change the number 100 to 99 depending on how the 100th trade is charged. The idea is to use the if statement to determine the price of the trades. Once you are over the threshold the price is 14*number over threshold.\",\n \"Daily > Weekly > Monthly. This statement says that if you use daily returns you will get more noise than if you used weekly or monthly returns. Much of the research performed uses monthly returns, although weekly returns have been used as well. For HFT you would need to detrend the data in order to spot true turning points.\",\n \"No, and using a 37 year old formula in finance that is as simple as: should make it obvious technical analysis is more of a game for retail traders than investment advice. When it comes to currencies, there are a myriad of macroeconomic occurrences that do not follow a predictable timescale. Using indicators like RSI on any time frame will not magically illuminate broad human psychology and give you an edge. It is theoretically possible for a single public stock's price to be driven by a range of technical traders who all buy at RSI 30 and sell at RSI 70, after becoming a favorite stock on social media, but it is infinitely more likely for all market participants to have completely different goals.\",\n \"\\\"The CBOE states, in an investor's guide to Interest Rate Options: The Options’ Underlying Values Underlying values for the option contracts are 10 times the underlying Treasury yields (rates)— 13-week T-bill yield (for IRX), 5-year T-note yield (for FVX), 10-year T-note yield (for TNX) and 30-year T-bond yield (for TYX). The Yahoo! rate listed is the actual Treasury yield; the Google Finance and CBOE rates reflect the 10 times value. I don't think there's a specific advantage to \\\"\\\"being contrary\\\"\\\", more likely it's a mistake, or just different.\\\"\",\n \"\\\"I think that the general public is conditioned to think more in terms of points rather than percentages, so that 200 points is easier to fathom than the equivalent percent. We all translate internally what this means. Of course it is less precise, but it also makes for good copy in the publishing industry (\\\"\\\"Market Down 1000 points!\\\"\\\")\\\"\",\n \"\\\"In general, moving averages never seemed that much better for drawing trends, just removing volatility. However, in this case, they do seem more relevant because the moving averages seem to at least remove the noise of many of the other \\\"\\\"revisions.\\\"\\\" Comparing the intial numbers to the previous weeks' revised figures is hardly an apples-to-apples comparison, because there is more data available on the previous weeks' figures.\\\"\",\n \"You can use trade volume for divergence and convergence studies\",\n \"It's not stopped. Crossing a moving average is considered a signal to buy or sell. Yahoo stock charts offer the ability to add moving averages to the charts, and you can observe all stocks cross the line regularly. As a contrast to Victor's charts, you can see that Apple, over the last two years, has traded above and below the 50 day MA. A believer in technical analysis using MA will observe a buy signal in Dec '11 just under $400, with a sell in mid-$500s in May. Moving averages are a form of following the trend, and work well when either trend is strong. It's when the stock is too close to the line that's it's tough to call whether it's time to be in or out.\",\n \"\\\"Total Return is the percent change in value (including andy dividends) of an instrument. The \\\"\\\"trailing 12-month\\\"\\\" means that your starting point is the value 12 months ago. So the formula is: where V is the value of the instrument on the reference date, V0 is the value of the instrument 12 months prior to the reference date, and D is the amount of dividends paid between the two dates.\\\"\",\n \"\\\"Good observation. In fact, the S&P index itself is guilty of not including dividends. So when you look at the index alone, the delta between any two points in time diverges, and the 20 return observed if one fails to include dividends is meaningless, in my my humble opinion. Yahoo finance will let you look at a stock ticker and offer you an \\\"\\\"adjusted close\\\"\\\" to include the dividend effect.\\\"\",\n \"\\\"$36 dividend/900 DJIA = 4% 5.5% bond yield = ($36 dividend/660 DJIA) Graham wrote this at a very different time in financial markets- interest rates were much higher, and the DJIA much lower. In addition, bonds were yielding more than stocks, unlike today when the DJIA % the 10yr Treasury yield 2.63% and 2.13% respectively. In addition, his \\\"\\\"weigher of the odds\\\"\\\" suggests waiting to invest until equity prices are lower (usually dividends aren't reduced), and therefore the DJIA dividend yield would rise relative to bond yields.\\\"\",\n \"\\\"I was afraid of this. If you are using 12 P/Y and 12 C/Y, then your interest rate should not be divided by 12. Also, you should use \\\"\\\"END\\\"\\\" as this means monthly payments are made at the end of the month - a usual default.\\\"\",\n \"\\\"Well, the first one is based on the \\\"\\\"Pert\\\"\\\" formula for continuously-compounded present value, while the second one is the periodically-compounded variant. Typically, the continuously-compounded models represent the ideal; as the compounding period of time-valued money shrinks towards zero, and the discount rate (or interest rate if positive) stays constant over the time period examined, the periodic equation's results approach that of the continuously-compounded equation. Those two assumptions (a constant rate and continuous balance adjustment from interest) that allow simplification to the continuous form are usually incorrect in real-world finance; virtually all financial institutions accrue interest monthly, for a variety of reasons including simpler bookkeeping and less money paid or owed in interest. They also, unless prohibited by contract, accrue this interest based on a rate that can change daily or even more granularly based on what financial markets are doing. Most often, the calculation is periodic based on the \\\"\\\"average daily balance\\\"\\\" and an agreed rate that, if variable, is based on the \\\"\\\"average daily rate\\\"\\\" over the previous observed period. So, you should use the first form for fast calculation of a rough value based on estimated variables. You should use the second form when you have accurate periodic information on the variables involved. Stated alternately, use the first form to predict the future, use the second form in retrospect to the past.\\\"\",\n \"Since you have the balance at equal periods and the cash flows at the period ends, the best return calculation in this case is the true time-weighted return. See http://en.wikipedia.org/wiki/Time-weighted_return#Formulae So, notwithstanding some ambiguity about your figures, here is a calculation using the first three periods from your second table. Giving a total return over the three periods of -23.88% If the periods are months, multiply by four to annualise.\",\n \"\\\"The \\\\^ symbol means exponentiation. You're multiplying by 216 instead. So rephrasing that in Excel functions (without just using \\\"\\\"=FV(0.004308,216,-175)\\\"\\\"), you'd have \\\"\\\"=((POWER(1.004308,216)-1)/0.004308)*175\\\"\\\". Note that I originally mentioned the difference between .004308 and 0.0517/12 because it makes roughly a $2.56 difference in the answer.\\\"\",\n \"There's no rule of thumb but the purpose of candlesticks of any kind (fixed, volume weighted etc.) is to display the intra-period price action. So if you'd fit 3 years worth of 1 minute bars on a chart, candlesticks become useless and you might as well use a line chart.\",\n \"\\\"He's calculating portfolio variance. The general formula for the variance of a portfolio composed of two securities looks like this: where w_a and w_b are the weights of each stock in the portfolio and the sigmas represent the standard deviation/risk of each asset or portfolio. In the case of perfect positive or negative correlation, applying some algebra to the formula relating covariance to the correlation coefficient (rho, the Greek letter that looks like \\\"\\\"p\\\"\\\"): tells us that the covariance we need in the original formula is simply the product of the standard deviations and the correlation coefficient (-1 in this case). Combining that result with our original formula yields this calculation: Technically we've calculated the portfolio's variance and not it's standard deviation/risk, but since the square root of 0 is still 0, that doesn't matter. The Wikipedia article on Modern Portfolio Theory has a section that describes the mathematical methods I used above. The entire article is worth a read, however.\\\"\",\n \"\\\"Here's a formula; I had to go over to SEMath, use their MathJax to compose the answer and then paste this screen shot. As a result, I can't fix a typo: \\\"\\\"ST\\\"\\\" is the same as \\\"\\\"St\\\"\\\"\\\"\",\n \"\\\"This chart concerns an option contract, not a stock. The method of analysis is to assume that the price of an option contract is normally distributed around some mean which is presumably the current price of the underlying asset. As the date of expiration of the contract gets closer the variation around the mean in the possible end price for the contract will decrease. Undoubtedly the publisher has measured typical deviations from the mean as a function of time until expiration from historical data. Based on this data, the program that computes the probability has the following inputs: (1) the mean (current asset price) (2) the time until expiration (3) the expected standard deviation based on (2) With this information the probability distribution that you see is generated (the green hump). This is a \\\"\\\"normal\\\"\\\" or Gaussian distribution. For a normal distribution the probability of a particular event is equal to the area under the curve to the right of the value line (in the example above the value chosen is 122.49). This area can be computed with the formula: This formula is called the probability density for x, where x is the value (122.49 in the example above). Tau (T) is the reciprocal of the variance (which can be computed from the standard deviation). Mu (μ) is the mean. The main assumption such a calculation makes is that the price of the asset will not change between now and the time of expiration. Obviously that is not true in most cases because the prices of stocks and bonds constantly fluctuate. A secondary assumption is that the distribution of the option price around the mean will a normal (or Gaussian) distribution. This is obviously a crude assumption and common sense would suggest it is not the most accurate distribution. In fact, various studies have shown that the Burr Distribution is actually a more accurate model for the distribution of option contract prices.\\\"\",\n \"Your observation is mostly right, that 1 is a the number around which this varies. You are actually referencing PEG, P/E to Growth ratio, which is a common benchmark to use to evaluate a stock. The article I link to provides more discussion.\",\n \"No no, I didn't forget. 3 times 12 is 36 minus 20 is $16 more. Thank you, I just needed someone to acknowledge that's they were incorrect. How's that get top comment though?! So frustrating. Edit: okay, not top comment anymore but still up there.\",\n \"The dividend yield can be used to compare a stock to other forms of investments that generate income to the investor - such as bonds. I could purchase a stock that pays out a certain dividend yield or purchase a bond that pays out a certain interest. Of course, there are many other variables to consider in addition to yield when making this type of investment decision. The dividend yield can be an important consideration if you are looking to invest in stocks for an income stream in addition to investing in stocks for gain by a rising stock price. The reason to use Dividend/market price is that it changes the dividend from a flat number such as $1 to a percentage of the stock price, which thus allows it to be more directly compared with bonds and such which return a percentage yeild.\",\n \"Well that will depend on the time frame you are looking at it. You can't compare the RSI on a five minute chart to the RSI on a daily chart. The minute chart would represent the momentum of very small trends whilst the daily chart would represent the momentum of much larger trends. On the daily chart the shares might be experiencing a strong uptrend with a rising RSI. During each day the price might move up at the open then come down some, then back up a bit more and repeat this several times during the day before closing higher. During the day the RSI might have moved slightly higher. But during a single day on the 5 minute chart the price may have gone through several up and down trends, with the RSI going into oversold and overbought several times. What you should be looking at to strengthen the signal from the RSI is to watch for when the RSI is in the overbought at the same time the price is reaching a peak, or when the RSI is in the oversold at the same time the price is reaching a trout. These could represent potential turning points in price. The time frame to use would depend on the type of trading you are attempting to undertake. If you prefer day trading (being in and out of a trade in minutes to hours) you might look at time frames of minutes to hours. If you prefer longer term position, trend or swing trading you would probably stick to daily charts. If you prefer longer term active investing you might stick to a combination of daily, weekly and monthly charts.\",\n \"\\\"Without researching the securities in question I couldn't tell you which cycle each is in, but your answer is that they have different expiration cycles. The following definition is from the CBOE website; \\\"\\\"Expiration cycle An expiration cycle relates to the dates on which options on a particular underlying security expire. A given option, other than LEAPS®, will be assigned to one of three cycles, the January cycle, the February cycle or the March cycle.\\\"\\\"\\\"\",\n \"The first statement is talking about a sudden sharp increase in volume (double or more of average volume) with a sudden increase in price. In other words, there has been a last rush to buy the stock exhausting all the current bulls (buyers), so the bears (sellers) take over, at least temporarily. Whilst the second statement is talking about a gradual increase in volume as the price up trends (thus the use of a volume oscillator). In other words (in an uptrend), the bulls (buyers) are gradually increasing in numbers sending the price higher, and new buyers keep entering the market. (The opposite is the case for a down-trend).\",\n \"The previous day's close on Thursday 10th October was 5,000.00 The close on Friday 11th October is 5,025.92 So the gain on Friday was 25.92 (5025.92 - 5000) or 0.52% (25.92/5000 x 100%). No mystery!\",\n \"Volatility is a shitty metric and is sample dependent, What is more interesting is point recurrence, i.e. how many times has a certain point been touched in x time, you can make good day trading strategies off point recurrence (relative that is).\",\n \"Have you actually read the Wikipedia article? To calculate the DJIA, the sum of the prices of all 30 stocks is divided by a divisor, the Dow Divisor. The divisor is adjusted in case of stock splits, spinoffs or similar structural changes, to ensure that such events do not in themselves alter the numerical value of the DJIA. Early on, the initial divisor was composed of the original number of component companies; which made the DJIA at first, a simple arithmetic average. The present divisor, after many adjustments, is less than one (meaning the index is larger than the sum of the prices of the components). That is: DJIA = sum(p) / d where p are the prices of the component stocks and d is the Dow Divisor. Events such as stock splits or changes in the list of the companies composing the index alter the sum of the component prices. In these cases, in order to avoid discontinuity in the index, the Dow Divisor is updated so that the quotations right before and after the event coincide: DJIA = sum(p_old) / d_old = sum(p_new) / d_new The Dow Divisor was 0.14602128057775 on December 24, 2015.[40] Presently, every $1 change in price in a particular stock within the average, equates to a 6.848 (or 1 ÷ 0.14602128057775) point movement. Knowing the old prices, new prices (e.g. following a split), and old divisor, you can easily compute the new divisor... Edit: Also, the detailed methodology is published by SP Indices (PDF). Edit #2: For simplicity's sake, assume the DJIA is an index that contains 4 stocks, with a price of $100.00 each. One of the stocks splits 2:1, meaning the new price/share is $50.00. Plugging the numbers into the above equation, we can determine the new Dow Divisor: 400 / 4 = 350 / d => d = 3.5\",\n \"You're talking about floating rate loans. It's so that the bond is marked back to market every 90 days. Any more often would be a hassle to deal with for everyone involved, any less often and they would be significant variance from LIBOR vs. the loan's specific rate.\",\n \"\\\"This is called \\\"\\\"change\\\"\\\" or \\\"\\\"movement\\\"\\\" - the change (in points or percentage) from the last closing value. You can read more about the ticker tape on Investopedia, the format you're referring to comes from there.\\\"\",\n \"This strategy is called trading the 'Golden Cross' if the 50 day SMA moves above the 200 day, or the 'Death Cross' when the 50 day SMA moves below the 200 day SMA. Long-term indicators carry more weight than shorter-term indicators, and this cross, in a positive direction signals a change in momentum of the stock. You will not catch the very bottom using this method, but there is a better chance that you will catch a move near the beginning of a longer-term trend. Golden Cross Information - Zacks\",\n \"Relative Strength Indicators are also trailing indicators. They are based on the number of recent upticks or downticks in an investment's price. (The size of a tick is quantized, and related to the investment's price.) By the time enough upticks have accumulated to generate a buy signal, the investment has already increased in price significantly. Similarly, by the time enough downticks have accumulated a to generate a sell signal, the investment has already dropped in price significantly. The theory of Relative Strength Indicators is based on the hope that moves found by these indicators are likely to continue after the signal is generated. But even if this is the case, someone who relies on these indicators will miss out on the first part of the move. Dorsey-Wright offers investment research based on the theory of Relative Strength Indicators. They offer investment vehicles based on this research. They also work with local investment advisors to develop custom back-tested strategies. They have published a white-paper, with references to others' research.\",\n \"Here's a few demo steps, first calculating the year to date return, then calculating the Q4 quarterly return based on the cumulative returns for Q3 and Q4. It's fine to use closing price to closing price as return periods.\",\n \"well well, good question, worth a discussion, the more filters you add to your strategy (volatility in this case), the lower its predictive power. i mean, one could further filter it by day of the week, whether prices are above or below a 200 day moving average...etc.\",\n \"\\\"Most likely because they don't know what they're talking about. They all have a belief without evidence that information set X is internalised into the price but information set Y is not. If there is some stock characteristic, call it y, that belongs to set Y, then that moves the gauge towards a \\\"\\\"buy\\\"\\\" recommendation. However, the issue is that no evidence has been used to determine the constituents of X and Y, or even whether Y exists in any non-trivial sense.\\\"\",\n \"The actual price is represented on charts and not the change in price as a percentage, because it is the actual price which is used in all other parts of analysis (both technical and fundamental), and it is the actual figure the security is bought and sold at. A change in price has to be relative to a previous price at a previous time, and we can easily work out the change in price over any given time period. I think what you are concerned about is how to compare a certain actual price change in low priced securities to the same actual price change in a higher priced securities. For example: $1.00 rise in a $2.00 stock representing a 50% increase in price; $1.00 rise in a $10.00 stock representing a 10% increase in price. On a standard chart both of these look the same, as they both show a $1.00 increase in price. So what can we do to show the true representation of the percentage increase in price? It is actually quite simple. You view the chart using a log scale instead of a standard scale (most charting packages should have this option). What may look like a bubble on a standard scale chart, looks like a healthy uptrend on a log scale chart and represents a true picture of the percentage change in price. Example of Standard Price Scale VS LOG Price Scale on a Chart Standard Price Scale On the standard scale the price seems to have very little movement from Mar09 to Jan12 and then the price seems to zoom up after Jan12 to Mar13. This is because a 4% increase (for example) of $0.50 is only $0.02, whilst a 4% increase of $7.00 $0.28, so the increases seem much bigger at the end of the chart. LOG Price Scale On the LOG chart however, these price changes seem to be more evenly displayed no matter at what price level the price change has occurred at. This thus give a better representation of how fast or slow the price is rising or falling, or the size of the change in price.\",\n \"\\\"Some technical indicators (e.g. Williams %R) indicate whether the market is overbought or oversold. ... Every time a stock or commodity is bought, it is also sold. And vice versa. So how can anything ever be over-bought or over-sold? But I'm sure I'm missing something. What is it? You're thinking of this as a normal purchase, but that's not really how equity markets operate. First, just because there are shares of stock purchased, it doesn't mean that there was real investor buyer and seller demand for that instrument (at that point in time). Markets have dedicated middlemen called Market Makers, who are responsible to make sure that there is always someone to buy or sell; this ensures that all instruments have sufficient liquidity. Market Makers may decide to lower their bid on a stock based on a high number of sellers, or raise their ask for a high number of buyers. During an investor rush to buy or sell an instrument (perhaps in response to a news release), it's possible for Market Makers to accumulate a large number of shares, without end-investors being involved on both sides of the transaction. This is one example of how instruments can be over-bought or over-sold. Since Williams %R creates over-bought and over-sold signals based on historical averages of open / close prices, perhaps it's better to think of these terms as \\\"\\\"over-valued\\\"\\\" and \\\"\\\"under-valued\\\"\\\". Of course, there could be good reason for instruments to open or close outside their expected ranges, so Williams %R is just a tool to give you clues... not a real evaluation of the instrument's true value.\\\"\",\n \"\\\"Yes if and only if you properly use P/Y and C/Y. For your familiarity, I recommend also trying it with I = 7.56% / 12, and P/Y and C/Y = 1. I like to think of P/Y and C/Y as \\\"\\\"per period\\\"\\\" and prefer to divide the interest rate by the number of periods per year, but so long as you keep everything coherent in the solver, you will get the correct answer with both approaches.\\\"\",\n \"A moving average will act as support or resistance to a stock only when the stock is trending. The way it acts as support for instance is similar to a trend-line. Take the daily chart of CBA over the last 6 months: The first chart shows CBA with an uptrend support line. The second chart shows CBA during the same period with 50 day EMA as a support. Both can be used as support for the uptrend. Generally you can used these types of support (or resistance in a downtrend) to determine when to buy a stock and when to sell a stock. If I was looking to buy CBA whilst it was uptrending, one strategy I could use was to wait until it hit or got very close to the support trend-line and then buy as it re-bounces back up. If I already held the stock I could use a break down below the uptrend support line as a stop to exit out of the stock.\",\n \"\\\"Below is just a little information on this topic from my small unique book \\\"\\\"The small stock trader\\\"\\\": The most significant non-company-specific factor affecting stock price is the market sentiment, while the most significant company-specific factor is the earning power of the company. Perhaps it would be safe to say that technical analysis is more related to psychology/emotions, while fundamental analysis is more related to reason – that is why it is said that fundamental analysis tells you what to trade and technical analysis tells you when to trade. Thus, many stock traders use technical analysis as a timing tool for their entry and exit points. Technical analysis is more suitable for short-term trading and works best with large caps, for stock prices of large caps are more correlated with the general market, while small caps are more affected by company-specific news and speculation…: Perhaps small stock traders should not waste a lot of time on fundamental analysis; avoid overanalyzing the financial position, market position, and management of the focus companies. It is difficult to make wise trading decisions based only on fundamental analysis (company-specific news accounts for only about 25 percent of stock price fluctuations). There are only a few important figures and ratios to look at, such as: perhaps also: Furthermore, single ratios and figures do not tell much, so it is wise to use a few ratios and figures in combination. You should look at their trends and also compare them with the company’s main competitors and the industry average. Preferably, you want to see trend improvements in these above-mentioned figures and ratios, or at least some stability when the times are tough. Despite all the exotic names found in technical analysis, simply put, it is the study of supply and demand for the stock, in order to predict and follow the trend. Many stock traders claim stock price just represents the current supply and demand for that stock and moves to the greater side of the forces of supply and demand. If you focus on a few simple small caps, perhaps you should just use the basic principles of technical analysis, such as: I have no doubt that there are different ways to make money in the stock market. Some may succeed purely on the basis of technical analysis, some purely due to fundamental analysis, and others from a combination of these two like most of the great stock traders have done (Jesse Livermore, Bernard Baruch, Gerald Loeb, Nicolas Darvas, William O’Neil, and Steven Cohen). It is just a matter of finding out what best fits your personality. I hope the above little information from my small unique book was a little helpful! Mika (author of \\\"\\\"The small stock trader\\\"\\\")\\\"\",\n \"At the bottom of the page you linked to, NASDAQ provides a link to this page on nasdaqtrader.com, which states Each FINRA member firm is required to report its “total” short interest positions in all customer and proprietary accounts in NASDAQ-listed securities twice a month. These reports are used to calculate short interest in NASDAQ stocks. FINRA member firms are required to report their short positions as of settlement on (1) the 15th of each month, or the preceding business day if the 15th is not a business day, and (2) as of settlement on the last business day of the month.* The reports must be filed by the second business day after the reporting settlement date. FINRA compiles the short interest data and provides it for publication on the 8th business day after the reporting settlement date. The dates you are seeing are the dates the member firms settled their trades. In general (also from nasdaq.com), the settlement date is The date on which payment is made to settle a trade. For stocks traded on US exchanges, settlement is currently three business days after the trade.\",\n \"If you download the historical data from Yahoo, you will see two different close prices. The one labeled 'Close' is simply the price that was quoted on that particular day. The one labeled 'Adj Close' is the close price that has been adjusted for any splits and dividends that have occurred after that date. For example, if a stock splits 10:1 on a particular date, then the adjusted close for all dates prior to that split will have been divided by 10. If a dividend is paid, then all dates prior will have that amount subtracted from their adjusted quote. Using the adjusted close allows you to compare any two dates and see the true relative return.\",\n \"You are calculating using different methods. For example, to obtain 6.45% 6.44647 This is effectively the same as the money-weighted return calculation. In arriving at 6.06% you have calculated the true time-weighted return. Both answers are right, but they are different measures. To use time-weighted returns you need to know the value of the investment at the time of every cash flow. Modified Dietz uses a simple approximation to avoid that requirement. Money-weighted return gives results that are more accurate for back calculating than Modified Dietz, (also without requiring interim valuations), but the calculation is more complex. See How to Calculate your Portfolio's Rate of Return for a decent reference.\",\n \"TWRR = (2012Q4 x 2013Q1 x 2013Q2) ^ (1/3) = ?? (1.1 * .809 * 1.29) ^ (1/3) = 1.047 or 4.7% return. No imaginary numbers needed. But. Your second line there is wrong $15,750 - $15,000 - $4,000 ? The $15K already contains the $4k, why did you subtract it again? This a homework problem?\",\n \"Nine years of investment would span Jan 1 2007 to Jan 1 2016. Taking the following valuation dates with The annual effective interest rate is 4.268 %\",\n \"\\\"The dow jones is an index of 30 stocks that's weighted based on the price per share of these stocks. To calculate the DJIA, the sum of the prices of all 30 stocks is divided by a divisor, the Dow Divisor. The divisor is adjusted in case of stock splits, spinoffs or similar structural changes, to ensure that such events do not in themselves alter the numerical value of the DJIA. Prices are the result of supply and demand. Demand is defined as simply as \\\"\\\"I want this badly enough to pay cash for it\\\"\\\", \\\"\\\"supply is \\\"\\\"I own this and don't want to own it, therefore I'll sell it\\\"\\\" When investors go about deciding they'd like to buy some stock from people who own it and are wanting to sell it, a market is generated and a price both are willing to sell/buy at is found. If the price is too high/low, you won't sell or buy. The price has to be \\\"\\\"right\\\"\\\" based on your own personal valuation. Since these trades are done through an exchange and are so common, literally millions of shares are traded per day, you get the best price available at that moment for your shares. If person A is only willing to give you 100 dollars and person B is willing to give you 100.01, screw person A. I'm selling shares to person B. When this done on a macro-level (millions of shares traded per day) the exchanges will track and make public the \\\"\\\"price movement\\\"\\\" of what the market is willing to give for each and every publicly traded stock. TLDR: SUPPLY AND DEMAND. DOW USES THEIR OWN METHODS.\\\"\",\n \"Mostly some custom work i've done myself, bayesian and time series models, but there is some pattern matching. Most TA functions such as MA's, MACD's, BollingerBands, are simple ways of doing time series analysis. MA's are basic filters. MACD is essentially a way of viewing acceleration, as its the informational difference between filters. BB's are mean reverters based on standard deviation/ RSI is a ratio of filtered up to down moves basically generating an indicator based on how strong the market has moved.\",\n \"The data for ES_F normally is joined on the contract expiry date, i.e. june is joined to the next month on the expiry date. The discrepancy to the real thing in practice might be significant, as seasonal strategies (as we call these) are mined fairly often.\",\n \"\\\"Probably the best way to investigate this is to look at an example. First, as the commenters above have already said, the log-return from one period is log(price at time t/price at time t-1) which is approximately equal to the percentage change in the price from time t-1 to time t, provided that this percentage change is not big compared to the size of the price. (Note that you have to use the natural log, ie. log to the base e -- ln button on a calculator -- here.) The main use of the log-return is that is a proxy for the percentage change in the price, which turns out to be mathematically convenient, for various reasons which have mostly already been mentioned in the comments. But you already know this; your actual question is about the average log-return over a period of time. What does this indicate about the stock? The answer is: if the stock price is not changing very much, then the average log-return is about equal to the average percentage change in the price, and is very easy and quick to calculate. But if the stock price is very volatile, then the average log-return can be wildly different to the average percentage change in the price. Here is an example: the closing prices for Pitchfork Oil from last week's trading are: 10, 5, 12, 5, 10, 2, 15. The percentage changes are: -0.5, 1.4, -0.58, 1, -0.8, 6.5 (where -0.5 means -50%, etc.) The average percentage change is 1.17, or 117%. On the other hand, the log-returns for the same period are -0.69, 0.88, -0.88, 0.69, -1.6, 2, and the average log-return is about 0.068. If we used this as a proxy for the average percentage change in the price over the whole seven days, we would get 6.8% instead of 117%, which is wildly wrong. The reason why it is wrong is because the price fluctuated so much. On the other hand, the closing prices for United Marshmallow over the same period are 10, 11, 12, 11, 12, 13, 15. The average percentage change from day to day is 0.073, and the average log-return is 0.068, so in this case the log-return is very close to the percentage change. And it has the advantage of being computable from just the first and last prices, because the properties of logarithms imply that it simplifies to (log(15)-log(10))/6. Notice that this is exactly the same as for Pitchfork Oil. So one reason why you might be interested in the average log-return is that it gives a very quick way to estimate the average return, if the stock price is not changing very much. Another, more subtle reason, is that it actually behaves better than the percentage return. When the price of Pitchfork jumps from 5 to 12 and then crashes back to 5 again, the percentage changes are +140% and -58%, for an average of +82%. That sounds good, but if you had bought it at 5, and then sold it at 5, you would actually have made 0% on your money. The log-returns for the same period do not have this disturbing property, because they do add up to 0%. What's the real difference in this example? Well, if you had bought $1 worth of Pitchfork on Tuesday, when it was 5, and sold it on Wednesday, when it was 12, you would have made a profit of $1.40. If you had then bought another $1 on Wednesday and sold it on Thursday, you would have made a loss of $0.58. Overall, your profit would have been $0.82. This is what the average percentage return is calculating. On the other hand, if you had been a long-term investor who had bought on Tuesday and hung on until Thursday, then quoting an \\\"\\\"average return\\\"\\\" of 82% is highly misleading, because it in no way corresponds to the return of 0% which you actually got! The moral is that it may be better to look at the log-returns if you are a buy-and-hold type of investor, because log-returns cancel out when prices fluctuate, whereas percentage changes in price do not. But the flip-side of this is that your average log-return over a period of time does not give you much information about what the prices have been doing, since it is just (log(final price) - log(initial price))/number of periods. Since it is so easy to calculate from the initial and final prices themselves, you commonly won't see it in the financial pages, as far as I know. Finally, to answer your question: \\\"\\\"Does knowing this single piece of information indicate something about the stock?\\\"\\\", I would say: not really. From the point of view of this one indicator, Pitchfork Oil and United Marshmallow look like identical investments, when they are clearly not. Knowing the average log-return is exactly the same as knowing the ratio between the final and initial prices.\\\"\",\n \"Technically you should take the quarterly dividend yield as a fraction, add one, take the cube root, and subtract one (and then multiple by the stock price, if you want a dollar amount per share rather than a rate). This is to account for the fact that you could have re-invested the monthly dividends and earned dividends on that reinvestment. However, the difference between this and just dividing by three is going to be negligible over the range of dividend rates that are realistically paid out by ordinary stocks.\",\n \"the strategy is tested all the way to 97. how is the continuous series backadjusted? the emini is rolledover and Ratio back adjusted to the 2nd nearest contract, 9 days prior to expiration. since it is an intraday trade, the discrepancy to the real thing should be next to irrelevant. but comparing it to the spx could make it interesting. what would be a good format to present the results ? jpeg? pdf ?\",\n \"Its kind of a dumb question because no one believes that you can earn 8% in the short term in the market, but for arguments sake the math is painfully easy. Keep in mind I am an engineer not a finance guy. So the first payment will earn you one month at 8%, the second, two. In effect three months at 8% on 997. You can do it that way because the payments are equal: 997 * (.08 /12) *3 = earnings ~= 20 So with the second method you pay: 997 * 3 - 20 = 2971\",\n \"However, you have to remember that not all dividends are paid quarterly. For example one stock I recently purchased has a price of $8.03 and the Div/yield = 0.08/11.9 . $.08 * 4 = $0.32 which is only 3.9% (But this stock pays monthly dividends). $.08 * 12 = $0.96 which is 11.9 %. So over the course of a year assuming the stock price and the dividends didn't change you would make 11.9%\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["The values of 12, 26 and 9 are the typical industry standard setting used with the MACD, however other values can be substituted depending on your trading style and goals. The 26d EMA is considered the long moving average when in this case it is compared to the shorter 12d EMA. If you used a 5d EMA and a 10d EMA then the 10d EMA would be considered the long MA. It is based on what you are comparing it with. Apart from providing signals for a reversal in trend, MACD can also be used as an early indication to a possible end to a trend. What you look out for is divergence between the price and the MACD. See chart below of an example: Here I have used 10d & 3d EMAs and 1 for the signal (as I did not want the signal to show up). I am simply using the MACD as a momentum indicator - which work by providing higher highs in the MACD with higher highs in price. This shows that the momentum in the trend is good so the trend should continue. However the last high in price is not met with a higher high in the MACD. The green lines demonstrate bearish divergence between price and the MACD, which is an indication that the momentum of the trend is slowing down. This could provide forewarning that the trend may be about to end and to take caution - i.e. not a good time to be buying this stock or if you already own it you may want to tighten up your stop loss."],"string":"[\n \"The values of 12, 26 and 9 are the typical industry standard setting used with the MACD, however other values can be substituted depending on your trading style and goals. The 26d EMA is considered the long moving average when in this case it is compared to the shorter 12d EMA. If you used a 5d EMA and a 10d EMA then the 10d EMA would be considered the long MA. It is based on what you are comparing it with. Apart from providing signals for a reversal in trend, MACD can also be used as an early indication to a possible end to a trend. What you look out for is divergence between the price and the MACD. See chart below of an example: Here I have used 10d & 3d EMAs and 1 for the signal (as I did not want the signal to show up). I am simply using the MACD as a momentum indicator - which work by providing higher highs in the MACD with higher highs in price. This shows that the momentum in the trend is good so the trend should continue. However the last high in price is not met with a higher high in the MACD. The green lines demonstrate bearish divergence between price and the MACD, which is an indication that the momentum of the trend is slowing down. This could provide forewarning that the trend may be about to end and to take caution - i.e. not a good time to be buying this stock or if you already own it you may want to tighten up your stop loss.\"\n]","isConversational":false}}},{"rowIdx":71,"cells":{"_id":{"kind":"string","value":"3394"},"query":{"kind":"string","value":"What is the easiest way to back-test index funds and ETFs?"},"gt_ids":{"kind":"list like","value":["445971","342258","129319","570664"],"string":"[\n \"445971\",\n \"342258\",\n \"129319\",\n \"570664\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1,1,1],"string":"[\n 1,\n 1,\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["445971","117049","475426","240519","528034","570664","88417","406457","239683","342258","71230","373620","403870","188855","517935","172374","88105","224765","516379","404911","295993","553377","523221","532616","122679","383399","471322","376396","454896","99568","465971","423177","484599","448745","235592","299016","296401","573708","105391","591089","276983","501153","159471","108579","526346","412830","484730","174227","381362","168347","402466","226628","595850","387980","429929","386299","200921","75063","309969","195191","51721","232736","189341","171831","305758","263464","436020","49893","131044","521326","112208","324697","408524","89591","386173","84800","599255","485054","279785","21103","336284","200984","596106","263829","346345","144628","558042","176489","476260","239137","237450","466845","391215","138487","313525","246531","369551","220486","148721","546379"],"string":"[\n \"445971\",\n \"117049\",\n \"475426\",\n \"240519\",\n \"528034\",\n \"570664\",\n \"88417\",\n \"406457\",\n \"239683\",\n \"342258\",\n \"71230\",\n \"373620\",\n \"403870\",\n \"188855\",\n \"517935\",\n \"172374\",\n \"88105\",\n \"224765\",\n \"516379\",\n \"404911\",\n \"295993\",\n \"553377\",\n \"523221\",\n \"532616\",\n \"122679\",\n \"383399\",\n \"471322\",\n \"376396\",\n \"454896\",\n \"99568\",\n \"465971\",\n \"423177\",\n \"484599\",\n \"448745\",\n \"235592\",\n \"299016\",\n \"296401\",\n \"573708\",\n \"105391\",\n \"591089\",\n \"276983\",\n \"501153\",\n \"159471\",\n \"108579\",\n \"526346\",\n \"412830\",\n \"484730\",\n \"174227\",\n \"381362\",\n \"168347\",\n \"402466\",\n \"226628\",\n \"595850\",\n \"387980\",\n \"429929\",\n \"386299\",\n \"200921\",\n \"75063\",\n \"309969\",\n \"195191\",\n \"51721\",\n \"232736\",\n \"189341\",\n \"171831\",\n \"305758\",\n \"263464\",\n \"436020\",\n \"49893\",\n \"131044\",\n \"521326\",\n \"112208\",\n \"324697\",\n \"408524\",\n \"89591\",\n \"386173\",\n \"84800\",\n \"599255\",\n \"485054\",\n \"279785\",\n \"21103\",\n \"336284\",\n \"200984\",\n \"596106\",\n \"263829\",\n \"346345\",\n \"144628\",\n \"558042\",\n \"176489\",\n \"476260\",\n \"239137\",\n \"237450\",\n \"466845\",\n \"391215\",\n \"138487\",\n \"313525\",\n \"246531\",\n \"369551\",\n \"220486\",\n \"148721\",\n \"546379\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["\"Back-testing itself is flawed. \"\"Past performance is no guarantee of future results\"\" is an important lesson to understand. Market strategies of one kind or another work until they don't. Edited in -- AssetPlay.net provides a tool that's halfway to what you are looking for. It only goes back to 1972, however. Just to try it, I compared 100% S&P to a 60/40 blend of S&P with 5 yr t-bills (a misnamed asset, 5 yr treasuries are 'notes' not 'bills') I found the mix actually had a better return with lower volatility. Now, can I count on that to work moving forward? Rates fell during most of this entire period so bonds/notes both looked pretty good. This is my point regarding the backtest concept. GeniusTrader appears more sophisticated, but command line work on PCs is beyond me. It may be worth a look for you, JP. ETF Replay appears to be another backtest tool. It has its drawbacks, however, (ETFs only)\"","\"It's easy for me to look at an IRA, no deposits or withdrawal in a year, and compare the return to some index. Once you start adding transactions, not so easy. Here's a method that answers your goal as closely as I can offer: SPY goes back to 1993. It's the most quoted EFT that replicates the S&P 500, and you specifically asked to compare how the investment would have gone if you were in such a fund. This is an important distinction, as I don't have to adjust for its .09% expense, as you would have been subject to it in this fund. Simply go to Yahoo, and start with the historical prices. Easy to do this on a spreadsheet. I'll assume you can find all your purchases inc dates & dollars invested. Look these up and treat those dollars as purchases of SPY. Once the list is done, go back and look up the dividends, issues quarterly, and on the dividend date, add the shares it would purchase based on that day's price. Of course, any withdrawals get accounted for the same way, take out the number of SPY shares it would have bought. Remember to include the commission on SPY, whatever your broker charges. If I've missed something, I'm sure we'll see someone point that out, I'd be happy to edit that in, to make this wiki-worthy. Edit - due to the nature of comments and the inability to edit, I'm adding this here. Perhaps I'm reading the question too pedantically, perhaps not. I'm reading it as \"\"if instead of doing whatever I did, I invested in an S&P index fund, how would I have performed?\"\" To measure one's return against a benchmark, the mechanics of the benchmarks calculation are not needed. In a comment I offer an example - if there were an ETF based on some type of black-box investing for which the investments were not disclosed at all, only day's end pricing, my answer above still applies exactly. The validity of such comparisons is a different question, but the fact that the formulation of the EFT doesn't come into play remains. In my comment below which I removed I hypothesized an ETF name, not intending it to come off as sarcastic. For the record, if one wishes to start JoesETF, I'm ok with it.\"","\"Google Docs spreadsheets have a function for filling in stock and fund prices. You can use that data to graph (fund1 / fund2) over some time period. Syntax: =GoogleFinance(\"\"symbol\"\", \"\"attribute\"\", \"\"start_date\"\", \"\"num_days|end_date\"\", \"\"interval\"\") where: This analysis won’t include dividends or distributions. Yahoo provides adjusted data, if you want to include that.\"","I have asked myself this exact same question many times. The analysis would be simple if you invested all your money in a single day, but I did not and therefore I would need to convert your cash transactions into Index fund buys/sells. I got tired of trying to do this using Yahoo's data and excel so I built a website in my spare time. I humbly suggest you try my website out in the hopes that it helps you perform this computation: http://www.amibeatingthemarket.com/","\"As other people have posted starting with \"\"fictional money\"\" is the best way to test a strategy, learn about the platform you are using, etc. That being said I would about how Fundamental Analysis works . Fundamental Analysis is the very basis of learning about an assets true value is priced. However in my humble opinion, I personally just stick with Index funds. In layman's terms Index Funds are essentially computer programs that buy or sell the underlying assets based on the Index they are associated with in the portion of the underlying index. Therefore you will usually be doing as good or as bad as the market. I personally have the background, education, and skillsets to build very complex models to do fundamental analysis but even I invest primarily in index funds because a well made and well researched stock model could take 8 hours or more and Modern Portfolio Theory would suggest that most investors will inevitably have a regression to the mean and have gains equal to the market rate or return over time. Which is what an index fund already does but without the hours of work and transaction cost.\"","check pastsat-backtesting , backtesting tool, where one can can test on well known technical indicators without coding skills","\"I've just started using Personal Capital (www.personalcapital.com) after seeing the recommendation at several places. I believe it gives you what you want to see, but I don't think you can back populate it with old information. So if you log in and link accounts today, you'll have it going forward. I only put in my investment accounts as I use another tool to track my day-to-day spending. I use Personal Capital to track my investment returns over time. How did my portfolio compare to S&P 500, etc. And here is a shot of the \"\"You Index\"\" which I think is close to what you are looking for:\"","I have a free account on http://optionshouse.com/ that allows me to invest fake money into different stocks and test their tracking software. It is free and easy to do, just create an account there and they give you $4000 (fake) to invest in the stock market. They do this so that you can test their tracking and other assorted tools, in hopes that you'll choose to invest your real hard earned money with them.","Yes, add the stocks/mutual funds that you want and then you would just need to add all the transactions that you theoretically would have made. Performing the look up on the price at each date that you would have sold or bought is quite tedious as well as adding each transaction.","\"I'd start with a Google search for \"\"best backtesting tools.\"\" Does your online brokerage offer anything? You already understand that the data is the important part. The good stuff isn't free. But yeah, if you have some money to spend you can get more than enough data to completely overwhelm you. :)\"","\"Assuming that the ETF is tracking an index, is there a reason for not looking at using details on the index? Typically the exact constituents of an index are proprietary, and companies will not publish them publicly without a license. S&P is the heavyweight in this area, and the exact details of the constituents at any one time are not listed anywhere. They do list the methodology, and announcements as to index changes, but not a full list of actual underlying constituents. Is there a easy way to automatically (ie. through an API or something, not through just reading a prospectus) get information about an ETF's underlying securities? I have looked for this information before, and based on my own searches, in a word: no. Index providers, and providers of APIs which provide index information, make money off of such services. The easiest way may be to navigate to each provider and download the CSV with the full list of holdings, if one exists. You can then drop this into your pipeline and write a program to pull the data from the CSV file. You could drop the entire CSV into Excel and use VBA to automagically pull the data into a usable format. For example, on the page for XIU.TO on the Blackrock site, after clicking the \"\"All Holdings\"\" tab there is a link to \"\"Download holdings\"\", which will provide you with a CSV. I am not sure if all providers look at this. Alternatively, you could write the ETF company themselves.\"","I spent a while looking for something similar a few weeks back and ended up getting frustrated and asking to borrow a friend's Bloombterg. I wish you the best of luck finding something, but I wasn't able to. S&P and Morningstar have some stuff on their site, but I wasn't able to make use of it. Edit: Also, Bloomberg allows shared terminals. Depending on how much you think as a firm, these questions might come up, it might be worth the 20k / year","Fund performance at NAV (%) for latest quarter, YTD, and average annual total returns for 1, 3, 5, 10 years. P/E ratio (1 yr. forecast), P/B ratio, Beta, Sharpe ratio, Wtd. avg. market cap, fund assets. I guess I would want to calculate all these things based off of the data that I would be working with. I will assume I am working with daily fund values per share over 10+ years.","\"Save the effort. For personal finance purpose, just use the simple tools. For example, if you like P&G very much but you want to diversify with ETF, use: http://etfdb.com/stock/PG/ https://www.etfchannel.com/finder/?a=etfsholding&symbol=PG Pick a ETF with highest weighting. Replace \"\"PG\"\" in the link with other tickers.\"","I use and recommend barchart.com. Again you have to register but it's free. Although it's a US system it has a full listing of UK stocks and ETFs under International > London. The big advantage of barchart.com is that you can do advanced technical screening with Stochastics and RS, new highs and lows, moving averages etc. You're not stuck with just fundamentals, which in my opinion belong to a previous era. Even if you don't share that opinion you'd still find barchart.com useful for UK stocks.","If you just want to track an index, then ETFs are, generally speaking, the better way.","Based on my experience with OpenQuant, which is a development platform for automated trading strategies (and therefore can be easily be used for backtesting your personal strategy), I can give a little insight into what you might look for in such a platform. OpenQuant is a coding environment, which reads data feeds from a variety of sources (more on that in the second point), and runs the code for your strategy on that data and gives you the results. The data could be imported from a live data feed or from historical data, either through numerous API's, CSV/Excel, etc. You can write your own strategies using the custom C# libraries included with the software, which spares you from implementing your own code for technical indicators, basic statistical functions, etc. Getting the data is another issue. You could use joe's strategy and calculate option prices yourself, although you need to exercise caution when doing this to test a strategy. However, there is no substitute for backtesting a strategy on real data. Markets change over time, and depending on how far back you're interested in testing your strategy, you may run into problems. The reason there is no substitute for using real data is that attempting to replicate the data may fail in some circumstances, and you need a method of verifying that the data you're generating is correct and realistic. Calculating a few values, comparing them to the real values, and calibrating accordingly is a good idea, but you have to decide for yourself how many checks you want to do. More is better, but it may not be enough to realistically test your strategy. Disclaimer: Lest you interpret my post as a shameless plug for the OpenQuant platform, I'll state that I found the interface awful (it looked vaguely like Office 2000 but ten years too late) and the documentation woefully incomplete. I last used the software in 2010, so it may have improved in the intervening years, but your mileage may vary. I only use it as an example to give some insight into what you might look for in a backtesting platform. When you actually begin trading, a different platform is likely in order. That being said, it responded fairly quickly and the learning curve wasn't too steep. The platform wasn't too expensive at the time (about $700 for a license with no data feeds, I think) but I was happy that the cost wasn't coming out of my pocket. It's only gotten more expensive and I'm not sure it's worth it.","\"An ETF does not track any one individual stock. It \"\"is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund.\"\" Check out this link to learn more about ETFs. The easiest way see what ETF tracks a stock is to determine what sector and industry that company is in and find some ETF that trade it. The ETF will likely trade that stock, assuming that its market cap and exchange it trades on fits within the parameters of the ETF.\"","Trading data can be had cheaply from: http://eoddata.com/products/historicaldata.aspx The SEC will give you machine readable financial statements for American companies for free, but that only goes back 3 or 4 years. Beyond that, you will have to pay for a rather expensive service like CapitalIQ or CRSP or whatever. Note that you will need considerable programming knowledge to pull this off.","Google Finance will do all the bullet points in your list and a few more. The only drawback is that you have to enter ALL buy and sell manually. It has an import feature, but it does not work with all trading software. http://www.google.com/finance Let me know if it works. Also, yahoo.com/finance has a good tool, but I still like better Google's application.","ETFs are legally required to publicly disclose their positions at every point in time. The reason for this is that for an ETF to issue shares of ETF they do NOT take cash in exchange but underlying securities - this is called a creation unit. So people need to know which shares to deliver to the fund to get a share of ETF in exchange. This is never done by retail clients, however, but by nominated market makers. Retail persons will normally trade shares only in the secondary market (ie. on a stock exchange), which does not require new shares of the ETF to be issued. However, they do not normally make it easy to find this information in a digestible way, and each ETF does it their own way. So typically services that offer this information are payable (as somebody has to scrape the information from a variety of sources or incentivise ETF providers to send it to them). If you have access to a Bloomberg terminal, this information is available from there. Otherwise there are paid for services that offer it. Searching on Google for ETF constituent data, I found two companies that offer it: See if you can find what you need there. Good luck. (etfdb even has a stock exposure tool freely available that allows you to see which ETFs have large exposure to a stock of your choosing, see here: http://etfdb.com/tool/etf-stock-exposure-tool/). Since this data is in a table format you could easily download it automatically using table parsing tools for your chosen programming language. PS: Don't bother with underlying index constituents, they are NOT required to be made public and index providers will normally charge handsomely for this so normally only institutional investors will have this information.","\"You could use any of various financial APIs (e.g., Yahoo finance) to get prices of some reference stock and bond index funds. That would be a reasonable approximation to market performance over a given time span. As for inflation data, just googling \"\"monthly inflation data\"\" gave me two pages with numbers that seem to agree and go back to 1914. If you want to double-check their numbers you could go to the source at the BLS. As for whether any existing analysis exists, I'm not sure exactly what you mean. I don't think you need to do much analysis to show that stock returns are different over different time periods.\"","Buy as much data as you can, make a model, automate the back testing, see if it works over the past decade or so. If the returns are offering a superior risk adjusted return then you have a valid model, if not try an other model. If you don't know how to program, learn how to.","At this time, Google Finance doesn't support historical return or dividend data, only share prices. The attributes for mutual funds such as return52 are only available as real-time data, not historical. Yahoo also does not appear to offer market return data including dividends. For example, the S&P 500 index does not account for dividends--the S&P ^SPXTR index does, but is unavailable through Yahoo Finance.","For your purposes, I would recommend using direct investment in a no-load mutual fund. I mostly use Vanguard and would recommend them. They just about invented index funds, usually have the lowest (internal) expenses for index and many other funds, if you take electronic instead of paper statements there is no maintenance fee, have no transaction commission, can do periodic automatic investment from a bank account etc. A typical index fund there would require an initial $3000 investment and would have a minimum of $100 for each additional investment. If you can't come up with an initial sum of that size, you might be able to find a broker with a lower minimum and suitable free ETFs trades as others have suggested.","Algo traders/quants/market backtesters/coders/et al. I am looking to backtest basic things like the correlation of P/E, EV/EBITDA, etc. to market performance. I know a little R and Python. What is the easiest way to learn to backtest this sort of stuff? I want to eventually get into algo trading sort of stuff. I'd **greatly** appreciate it!","You can use a tool like WikiInvest the advantage being it can pull data from most brokerages and you don't have to enter them manually. I do not know how well it handles dividends though.","I dont know if this data is available for the 1980s, but this response to an old question of mine discusses how you can pull stock related information from google or yahoo finance over a certain period of time. You could do this in excel or google spreadsheet and see if you could get the data you're looking for. Quote from old post: Google Docs spreadsheets have a function for filling in stock and fund prices. You can use that data to graph (fund1 / fund2) over some time period.","Does anyone know if there is a way to set up a practice account? I only have index ETFs currently, and would like to play around and get a feel for other stocks/options before putting real money into it.","\"The majority (about 80%) of mutual funds are underperforming their underlying indexes. This is why ETFs have seen massive capital inflows compared to equity funds, which have seen significant withdrawals in the last years. I would definitively recommend going with an ETF. In addition to pure index based ETFs that (almost) track broad market indexes like the S&P 500 there are quite a few more \"\"quant\"\" oriented ETFs that even outperformed the S&P. I am long the S&P trough iShares ETFs and have dividend paying ETFs and some quant ETFS on top (Invesco Powershares) in my portfolio.\"","I had the same problem and was looking for a software that would give me easy access to historical financial statements of a company, preferably in a chart. So that I could easily compare earnings per share or other data between competitors. Have a look at Stockdance this might be what you are looking for. Reuters Terminal is way out of my league (price and complexity) and Yahoo and Google Finance just don't offer the features I want, especially on financials. Stockdance offers a sort of stock selection check list on which you can define your own criterion’s. Hence it makes no investment suggestions but let's you implement your own investing strategy.","You can do it graphically at zignals.com and freestockcharts.com.","Are you looking for something like Morningstar.com? They provide information about lots of mutual funds so you can search based on many factors and find good candidate mutual funds. Use their fund screener to pick funds with long track records of beating the S&P500.","R/stockmarket is probably the best. When I have some free time I can test that strategy back as long as you would like in quantstrat, although the only problem with testing futures is joining the consolidated contracts, however I can test it with SPY as SPY returns and ES_F track very closely.","R has really good package that lets you calculate the return of rebalanced portfolios. The package is called: PerformanceAnalytics (see: http://www.inside-r.org/packages/cran/PerformanceAnalytics/docs/Return.portfolio). I quickly wrote a small script for you that lets you do exactly what you want. Code: By default the portfolio is rebalanced to an equally weighted portfolio. It is also possible to rebalance your portfolio using custom weights. See the documentation on how to do this. In order for this code to work you need to have your data already in return terms. You can do this easily in Excel. Make sure your data in excel looks like this: Than export your data to a CSV file. Note: before you run the code make sure you have installed the package PerformanceAnalytics. You can do this as follows: Let me know if you have any questions regarding the above.","This site should help you to accomplish what you are looking for: https://www.quantopian.com","Google Portfolio does the job: https://www.google.com/finance/portfolio You can add transaction data, view fundamentals and much more.","\"A couple options that I know of: Interactive Brokers offers a \"\"paper trading\"\" mode to its account holders that allows you to start with a pretend stack of money and place simulated trades to test trading ideas. They also provide an API that allows you to interface with their platform programmatically for retrieving quotes, placing orders, and the such. As you noted, however, it's not free; you must hold a funded brokerage account in order to qualify for access to their platform. In order to maintain an account, there are minimums for required equity and monthly activity (measured in dollars that you spend on commissions), so you won't get access to their platform without having a decent amount of skin in the game. IB's native API is Java-based; IbPy is an unofficial wrapper that makes the interface available in Python. I've not used IB at all myself, but I've heard good things about their API and its accessibility via IbPy. Edit: IB now supports Python natively via their published API, so using IbPy is no longer needed, unless you wish to use Python 2.x. The officially supported API is based on Python 3. TD Ameritrade also offers an API that is usable by its brokerage clients. They do not offer any such \"\"paper trading\"\" mode, so you would need to \"\"execute\"\" transactions based on quotes at the corresponding trade times and then keep track of your simulated account history yourself. The API supports quote retrieval, price history, and trade execution, among other functions. TDA might be more attractive than IB if you're looking for a low-cost link into market data, as I believe their minimum-equity levels are lower. To get access, you'll need to sign up for an API developer account, which I believe requires an NDA. I don't believe there is an official Python implementation of the API, but if you're a capable Python writer, you shouldn't have trouble hooking up to the published interfaces. Some caveats: as when doing any strategy backtesting, you'll want to be sure to be pessimistic when doing so, so your optimism doesn't make your trades look more successful than they would be in the real world. At a minimum, you'll want to ensure that your simulations transact at the posted bid/ask prices, not necessarily the last trade's price, as well as any commissions and fees associated with the trade. A more robust scheme would also take into account the depth of the order book (also known as level 2 quotes), which can cause additional slippage in the prices at which you buy/sell your security. An even more robust scheme would take into account the potential latency of trade execution, looking at all prices over some time period that covers the maximum expected latency and simulating the trade at the worst-possible price.\"","MoneyChimp is great for this. It only offers full year returns, but it compounds the results correctly, including dividends. For mid year results, just adjust a bit based on the data you can find from Google or Yahoo to add some return (or loss) for the months.",".INX (the S&P 500 index itself) does not include reinvested dividens. You can figure total return by going to Yahoo finance, historical data. Choose the start year, and end year. You should find that data for SPY (going back to 1993) will show an adjusted close, and takes dividends into account. This isn't perfect as SPY has a .09% expense ratio, but it's better than just the S&P index. One of the more popular Dow ETF is DIA, this will let you similarly track the Dow while accounting for dividends.","You haven't looked very far if you didn't find index tracking exchange-traded funds (ETFs) on the Toronto Stock Exchange. There are at least a half dozen major exchange-traded fund families that I'm aware of, including Canadian-listed offerings from some of the larger ETF providers from the U.S. The Toronto Stock Exchange (TSX) maintains a list of ETF providers that have products listed on the TSX.","\"From How are indexes weighted?: Market-capitalization weighted indexes (or market cap- or cap-weighted indexes) weight their securities by market value as measured by capitalization: that is, current security price * outstanding shares. The vast majority of equity indexes today are cap-weighted, including the S&P 500 and the FTSE 100. In a cap-weighted index, changes in the market value of larger securities move the index’s overall trajectory more than those of smaller ones. If the fund you are referencing is an ETF then there may be some work to do to figure out what underlying securities to use when handling Creation and Redemption units as an ETF will generally have shares created in 50,000 shares at a time through Authorized Participants. If the fund you are referencing is an open-end fund then there is still cash flows to manage in the fund as the fund has create and redeem shares in on a daily basis. Note in both cases that there can be updates to an index such as quarterly rebalancing of outstanding share counts, changes in members because of mergers, acquisitions or spin-offs and possibly a few other factors. How to Beat the Benchmark has a piece that may also be useful here for those indices with many members from 1998: As you can see, its TE is also persistently positive, but if anything seems to be declining over time. In fact, the average net TE for the whole period is +0.155% per month, or an astounding +1.88% pa net after expenses. The fund expense ratio is 0.61% annually, for a whopping before expense TE of +2.5% annually. This is once again highly statistically significant, with p values of 0.015 after expenses and 0.0022 before expenses. (The SD of the TE is higher for DFSCX than for NAESX, lowering its degree of statistical significance.) It is remarkable enough for any fund to beat its benchmark by 2.5% annually over 17 years, but it is downright eerie to see this done by an index fund. To complete the picture, since 1992 the Vanguard Extended Index Fund has beaten its benchmark (the Wilshire 4500) by 0.56% per year after expenses (0.81% net of expenses), and even the Vanguard Index Trust 500 has beaten its benchmark by a razor thin 0.08% annually before (but not after) expenses in the same period. So what is going on here? A hint is found in DFA's 1996 Reference Guide: The 9-10 Portfolio captures the return behavior of U.S. small company stocks as identified by Rolf Banz and other academic researchers. Dimensional employs a \"\"patient buyer\"\" discount block trading strategy which has resulted in negative total trading costs, despite the poor liquidity of small company stocks. Beginning in 1982, Ibbotson Associates of Chicago has used the 9-10 Portfolio results to calculate the performance of small company stocks for their Stocks, Bonds, Bills, and Inflation yearbook. A small cap index fund cannot possibly own all of the thousands of stocks in its benchmark; instead it owns a \"\"representative sample.\"\" Further, these stocks are usually thinly traded, with wide bid/ask spreads. In essence what the folks at DFA learned was that they could tell the market makers in these stocks, \"\"Look old chaps, we don't have to own your stock, and unless you let us inside your spread, we'll pitch our tents elsewhere. Further, we're prepared to wait until a motivated seller wishes to unload a large block.\"\" In a sense, this gives the fund the luxury of picking and choosing stocks at prices more favorable than generally available. Hence, higher long term returns. It appears that Vanguard did not tumble onto this until a decade later, but tumble they did. To complete the picture, this strategy works best in the thinnest markets, so the excess returns are greatest in the smallest stocks, which is why the positive TE is greatest for the DFA 9-10 Fund, less in the Vanguard Small Cap Fund, less still in the Vanguard Index Extended Fund, and minuscule with the S&P500. There are some who say the biggest joke in the world of finance is the idea of value added active management. If so, then the punch line seems to be this: If you really want to beat the indexes, then you gotta buy an index fund.\"","Why don't you look at the actual funds and etfs in question rather than seeking a general conclusion about all pairs of funds and etfs? For example, Vanguard's total stock market index fund (VTSAX) and ETF (VTI). Comparing the two on yahoo finance I find no difference over the last 5 years visually. For a different pair of funds you may find something very slightly different. In many cases the index fund and ETF will not have the same benchmark and fees so comparisons get a little more cloudy. I recall a while ago there was an article that was pointing out that at the time emerging market ETF's had higher fees than corresponding index funds. For this reason I think you should examine your question on a case-by-case basis. Index fund and ETF returns are all publicly available so you don't have to guess.","\"Although is not online, I use a standalone version from http://jstock.sourceforge.net It got drag-n-drop boxes, to let me design my own indicators. However, it only contain technical analysis information, not fundamental analysis information. It does come with tutorial http://jstock.sourceforge.net/help_stock_indicator_editor.html#indicator-example, on how to to build an indicator, to screen \"\"Stock which Its Price Hits Their 14 Days Maximum\"\"\"","One thing to be aware of when choosing mutual funds and index ETFs is the total fees and costs. The TD Ameritrade site almost certainly had links that would let you see the total fees (as an annual percentage) for each of the funds. Within a category, the lowest fees percentage is best, since that is directly subtracted from your performance. As an aside, your allocation seems overly conservative to me for someone that is 25 years old. You will likely work for 40 or so years and the average stock market cycle is about 7 years. So you will likely see 5 or so complete cycles. Worrying about stability of principal too young will really cut into your returns. My daughter is your age and I have advised her to be 100% in equities and then to start dialing that back in about 25 years or so.","The recommended way to track TSP funds in online portfolio tools is to track the underlying index and know that the results are pretty close. Not a perfect solution: :( Source including suggested ETFs: http://finance.yahoo.com/news/breaking-down-tsp-investment-funds-194600393.html Related, but not exactly what you are looking for, Personal Capital will track your TSP holdings: http://themilitarywallet.com/manage-thrift-savings-plan/","Sounds like you are a candidate for stock trading simulators. Or just pick stocks and use Yahoo! or Google finance tools to track and see how you do. I wouldn't suggest you put real money into it. You need to learn about research and timing and a bunch of other topics you can learn about here. I personally just stick to life cycle funds that are managed products that offer me a cruise control setting for investing.","absolutely $SPY ETF is the way to go if your point of comparison is the S&P and you want to do low maintenance.","I also searched for some time before discovering Market Archive, which AFAIK is the most affordable option that basically gives you a massive multi-GB dump of data. I needed sufficient data to build a model and didn't want to work through an API or have to hand-pick the securities to train from. After trying to do this on my own by scraping Yahoo and using the various known tools, I decided my time was better spent not dealing with rate-limiting issues and parsing quirks and whatnot, so I just subscribed to Market Archive (they update the data daily).","I was going to comment above, but I must have 50 reputation to comment. This is a question that vexes me, and I've given it some thought in the past. Morningstar is a good choice for simple, well-organized financial histories. It has more info available for free than some may realize. Enter the ticker symbol, and then click either the Financials or the Key Ratios tab, and you will get 5-10 years of some key financial stats. (A premium subscription is $185 per year, which is not too outrageous.) The American Association of Individual Investors (AAII) provides some good histories, and a screener, for a $29 annual fee. Zacks allows you to chart a metric like EPS going back a long ways, and so you can then click the chart in order to get the specific number. That is certainly easier than sorting through financial reports from the SEC. (A message just popped up to say that I'm not allowed to provide more than 2 links, so my contribution to this topic will end here. You can do a search to find the Zacks website. I love StackExchange and usually consult it for coding advice. It just happens to be an odd coincidence that this is my first answer. I might even have added that aside in a comment, but again, I can't comment as of yet.) It's problem, however, that the universe of free financial information is a graveyard of good resources that no longer exist. It seems that eventually everyone who provides this information wants to cash in on it. littleadv, above, says that someone should be paid to organize all this information. However, think that some basic financial information, organized like normal data (and, hey, this is not rocket science, but Excel 101) should be readily available for free. Maybe this is a project that needs to happen. With a mission statement of not selling people out later on. The closest thing out there may be Quandl (can't link; do a search), which provides a lot of charts for free, and provides a beautiful and flexible API. But its core US fundamental data, provided by Sharadar, costs $150 per quarter. So, not even a basic EPS chart is available there for free. With all of the power that corporations have over our society, I think they could be tabulating this information for us, rather than providing it to us in a data-dumb format that is the equivalent of printing a SQL database as a PDF! A company that is worth hundreds of billions on the stock market, and it can't be bothered to provide us with a basic Excel chart that summarizes its own historical earnings? Or, with all that the government does to try to help us understand all of these investments, they cannot simply tabulate some basic financial information for us? This stuff matters a great deal to our lives, and I think that much of it could and should be available, for free, to all of us, rather than mainly to financial professionals and those creating glossy annual reports. So, I disagree that yet another entity needs to be making money off providing the BASIC transparency about something as simple as historical earnings. Thank you for indulging that tangent. I know that SE prides itself on focused answers. A wonderful resource that I greatly appreciate.","Here's a few demo steps, first calculating the year to date return, then calculating the Q4 quarterly return based on the cumulative returns for Q3 and Q4. It's fine to use closing price to closing price as return periods.","Hey Sheehan, I believe Schwab provides this info. None of the online free portfolio managers I know of gives you this info. The now defunct MS Money used to have this. The best thing to do is to use a spreadsheet. Or you could use the one I use. http://www.moneycone.com/did-you-beat-the-market-mr-investor/ . (disclaimer: that's my blog)","If you had a trading system, and by trading system I mean the criteria setup that you will take a trade on, then once a setup comes up at what price will you open the trade and at what price you will close the trade. As an example, if you want to buy once price breaks through resistance at $10.00 you might place your buy order at $10.05. So once you have a written trading system you could do backtesting on this system to get a percentage of win trades to loosing trades, your average win size to average lose size, then from this you could work out your expectancy for each trade that you follow your trading system on.","\"If you want the answer from the horse's mouth, go to the website of the ETF or mutual find, and the expense ratio will be listed there, both on the \"\"Important Information\"\" part of the front page, as well as in the .pdf file that you click on to download the Prospectus. Oh wait, you don't want to go the fund's website at all, just to a query site where you type in something like VFINX. hit SEARCH, and out pops the expense ratio for the Vanguard S&P 500 Index Fund? Well, have you considered MorningStar?\"","While it is certainly easy to manage single fund, I am not sure it's the right strategy. It's been proven again and again that portfolio diversification is key to long term gains in wealth. I think your best option is to invest in low cost index funds and ETFs. While rebalancing your portfolio is hard, it is vastly simpler if your portfolio only has ETFs.","\"I used to use etfconnect before they went paid and started concentrating on closed end funds. These days my source of information is spread out. The primary source about the instrument (ETF) itself is etfdb, backed by information from Morningstar and Yahoo Finance. For comparison charts Google Finance can't be beat. For actual solid details about a specific ETF, would check read the prospectus from the managing firm itself. One other comment, never trust a site that \"\"tells you\"\" which securities to buy. The idea is that you need sources of solid information about financial instruments to make a decision, not a site that makes the decision for you. This is due to the fact that everyone has different strategies and goals for their money and a single site saying buy X sell Y will probably lead you to lose your money.\"","I'm a finance newb....sorry ahead of time for everyone slamming their heads against the the wall. I'm going to go ahead and possibly answer my own question. Do I just go back 4 months at a time from their 10K and record the stock price on that date?","This is what I used during my MBA. My biggest complaint is that it is not a database for analytic (it pulls from a database). I hear think or swim has the capability to extract data and offers a free version - anyone know if that is true?","\"My answer is Microsoft Excel. Google \"\"VBA for dummies\"\" (seriously) and find out if your brokerage offers an 'API'. With a brief understanding of coding you can get a spreadsheet that is live connected to your brokers data stream. Say you have a spreadsheet with the 1990 value of each in the first two columns (cells a1 and b1). Maybe this formula could be the third column, it'll tell you how much to buy or sell to rebalance them. then to iterate the rebalance, set both a2 and b2 to =C1 and drag the formula through row 25, one row for each year. It'll probably be a little more work than that, but you get the idea.\"","Something to consider is how do you want to handle fractional shares. Most open-end funds can easily go to fractional shares to that if you want to invest $500 in a fund each month, it is a relatively easy transaction where some shares will be fractional and handled easily. An ETF may not always work that way unless you go through something like Sharebuilder that would allow the fractional shares as if the ETF is trading at $150/share, you could buy 3 shares but still have $50 that you want to invest but can't as stocks trade in whole share numbers usually. This is without adding brokerage commissions. Depending on the broker, re-investing dividends may or may not be that simple as fractional shares could be a problem since those 3 shares aren't likely to have enough of a dividend to equal another share being bought with the proceeds. If you want the flexibility of stop and limit orders then the ETF may make more sense while the open-end fund is simply to invest whole dollar amounts that then lead to fractional shares. Don't forget to factor in minimums and other stuff as VFIAX may have a bit of a minimum to it as well as possible fees that could be annoying as I remember VFINX having some account maintenance fees that were a bit irksome back in the day that may still be around in some cases so be sure to read the fine print on things.","I found that an application already exists which does virtually everything I want to do with a reasonable interface. Its called My Personal Index. It has allowed me to look at my asset allocation all in one place. I'll have to enter: The features which solve my problems above include: Note - This is related to an earlier post I made regarding dollar cost averaging and determining rate of returns. (I finally got off my duff and did something about it)","Do you have a broker? Any online brokerage (TD Ameritrade, E*Trade, Scott Trade, etc) offer the functionality that you want. If you're not interested in opening a brokerage account, you can search for threads here related to stock market simulation, since most of those services also provide the features that you want. If you do you have a physical broker at some firm, contact him/her and ask about the online tools that the brokerage offers. Almost all of them have portfolio management tools available to clients.","Another possibly more flexible option is Yahoo finance here is an example for the dow.. http://finance.yahoo.com/q/hp?s=%5EDJI&a=9&b=1&c=1928&d=3&e=10&f=2012&g=d&z=66&y=0 Some of the individual stocks you can dl directly to a spreadsheet (not sure why this isn't offer for indexs but copy and paste should work). http://finance.yahoo.com/q/hp?s=ACTC.OB+Historical+Prices","Sure, Yahoo Finance does this for FREE.","I use Yahoo Finance to plot my portfolio value over time. Yahoo Finance uses SigFig to link accounts (I've linked to Fidelity), which then allows you to see you exact portfolio and see a plot of its historical value. I'm not sure what other websites SigFig will allow you to sync with, but it is worth a try. Here is what the plot I have looks like, although this is slightly out of date, but still gives you an idea of what to expect.","I'd recommend looking at fundamental analysis as well -- technical analysis seems to be good for buy and sell points, but not for picking what to buy. You can get better outperformance by buying the right stuff, and it can be surprisingly easy to create a formula that works. I'd check out Morningstar, AAII, or Equities Lab (fairly complicated but it lets you do technical and fundamental analysis together). Also read Benjamin Graham, and/or Ken Fisher (they are wildly different, which is why I recommend them both).","\"TD e-series index funds are great for regular contributions every paycheck since there is no trading commission. The personal finance blog \"\"Canadian Couch Potato\"\" has great examples of what they call \"\"model portfolios\"\" and one consists of entirely TD e-series index funds. Check it out: http://canadiancouchpotato.com/model-portfolios-2/ The e-series portfolio that is described in the Model Portfolios (linked above) made returns of just over 10%. This is very similar to the ETF Model Portolio. One thing to remember is that these funds have a 30 day no sell time frame, otherwise a 2% fee is applied to the funds you withdraw.\"","About 10 years ago, I used to use MetaStock Trader which was a very sound tool, with a large number of indicators, but it has been a number of years since I have used it, so my comments on it will be out of date. At the time it relied upon me purchasing trading data myself, which is why I switched to Incredible Charts. I currently use Incredible Charts which I have done for a number of years, initially on the free adware service, now on the $10/year for EOD data access. There are quicker levels of data access, which might suit you, but I can't comment on these. It is web-based which is key for me. The data quality is very good and the number of inbuilt indicators is excellent. You can build search routines on the basis of specific indicators which is very effective. I'm looking at VectorVest, as a replacement for (or in addition to) Incredible Charts, as it has very powerful backtesting routines and the ability to run test portfolios with specific buy/sell criteria that can simulate and backtest a number of trading scenarios at the same time. The advantage of all of these is they are not tied to a particular broker.","I found one such tool here: Point-to-Point Returns tool","the strategy is tested all the way to 97. how is the continuous series backadjusted? the emini is rolledover and Ratio back adjusted to the 2nd nearest contract, 9 days prior to expiration. since it is an intraday trade, the discrepancy to the real thing should be next to irrelevant. but comparing it to the spx could make it interesting. what would be a good format to present the results ? jpeg? pdf ?","You can check the website for the company that manages the fund. For example, take the iShares Nasdaq Biotechnology ETF (IBB). iShares publishes the complete list of the fund's holdings on their website. This information isn't always easy to find or available, but it's a place to start. For some index funds, you should just be able to look up the index the fund is trying to match. This won't be perfect (take Vanguard's S&P 500 ETF (VOO); the fund holds 503 stocks, while the S&P 500 index is comprised of exactly 500), but once again, it's a place to start. A few more points to keep in mind. Remember that many ETF's, including equity ETF's, will hold a small portion of their assets in cash or cash-equivalent instruments to assist with rebalancing. For index funds, this may not be reflected in the index itself, and it may not show up in the list of holdings. VOO is an example of this. However, that information is usually available in the fund's prospectus or the fund's site. Also, I doubt that many stock ETF's, at least index funds, change their asset allocations all that frequently. The amounts may change slightly, but depending on the size of their holdings in a given stock, it's unlikely that the fund's manager would drop it entirely.","One of the key things to look for is trading volume. I think the price spread will be better on high volume ETFs, which means you'll be able to sell for more when the time comes. Check Google or Yahoo finance for those stats.","Index Funds & ETFs, if they are tracking the same index, will be the same in an ideal world. The difference would be because of the following factors: Expense ratio: i.e. the expense the funds charge. This varies and hence it would lead to a difference in performance. Tracking error: this means that there is a small percentage of error between the actual index composition and the fund composition. This is due to various reasons. Effectively this would result in the difference between values. Demand / Supply: with ETFs, the fund is traded on stock exchanges like a stock. If the general feeling is that the index is rising, it could lead to an increase in the price of the ETF. Index funds on the other hand would remain the same for the day and are less liquid. This results in a price increase / decrease depending on the market. The above explains the reason for the difference. Regarding which one to buy, one would need to consider other factors like: a) How easy is it to buy ETFs? Do you already hold Demat A/C & access to brokers to help you conduct the transaction or do you need to open an additional account at some cost. b) Normally funds do not need any account, but are you OK with less liquidity as it would take more time to redeem funds.","I am mostly interested in day to day records, and would like the data to contain information such as dividend payouts, and other parameters commonly available, such as on : http://finviz.com/screener.ashx ... but the kind of queries you can do is limited. For instance you can only go back two years.","It isn't just ETFs, you have normal mutual funds in India which invest internationally. This could be convenient if you don't already have a depository account and a stockbroker. Here's a list of such funds, along with some performance data: Value Research - Equity: International: Long-term Performance. However, you should also be aware that in India, domestic equity and equity fund investing is tax-free in the long-term (longer than one year), but this exemption doesn't apply to international investments. Ref: Invest Around the World.","\"Your broker, Ameritrade, offers a variety of Exchange Traded Funds (ETFs) that you can buy and sell with zero commission. An ETF is like a mutual fund, but you buy and sell shares the same way you buy and sell shares of stocks. From your point of view, the relevance of this is that you can buy and sell as many or as few shares as you like, even down to a single share. Note that to get the commission-free trades on the available ETFs you have to sign up for it in your account profile. Be sure to do that before you enter any buy orders. You'll want to start by looking at the Ameritrade's list of commission-free ETFs. Notice that they are divided into different categories: stocks, bonds, international, and commodities. Which categories you pick from will depend on your personal investing goals, time horizon, risk tolerance, and so on. There are lots of questions and answers on this site that talk about asset allocation. You should read them, as it is the most important decision you will make with your portfolio. The other thing you want to be aware of is the expense ratio for each fund. These expenses reduce the fund's return (they are included in the calculation of the net asset value of the shares), so lower is definitely better. Personally, I wouldn't even consider paying more than about 0.10% (commonly read \"\"10 basis points\"\" or \"\"10 bp\"\") for a broad-based domestic stock fund. For a sectoral fund you might put up with as much as 20 bp in expenses. Bond funds tend to be a little more expensive, so maybe allow as much as 25 bp, and likewise for international funds. I've never invested in commodity funds, so I'll let someone else opine on appropriate expense ratios for those. Once you've decided what funds you want (and have signed up for commission-free trades), all you have to do is enter the trade orders. The website where you manage your account has tutorials on how to do that. After that you should be all set. Good luck with your investing!\"","Around Oct 03 2010 the SPY closed at 113. Today it is trading at 130. After four months, that means that the S&P is up 15% over that particular 4 month period. You said you need something pretty low maintenance, and you are comparing your returns to the S&P 500 (which as @duffbeer703 points out is a good thing to compare against because of its diversification). To kill two birds with one stone, I would sell your fund that you have and take the proceeds and purchase the ETF SPY. SPY trades like a stock but mirrors the S&P 500's performance. It has extremely low fees (as opposed to what I suspect your BlackRock fund has). You can own it in an Etrade or Fidelity or other low cost broker account. Then you will be extremely low maintenance, fully diversified (among stocks) and you don't have to compare your performance against the S&P :)","You can get this data from a variety of sources, but likely not all from 1 source. Yahoo is a good source, as is Google, but some stock markets also give away some of this data, and there's foreign websites which provide data for foreign exchanges. Some Googling is required, as is knowledge of web scraping (R, Python, Ruby or Perl are great tools for this...).","Go to http://finance.google.com, search for the stock you want. When you are seeing the stock information, in the top left corner there's a link that says 'Historical prices'. Click on it. then select the date range, click update (don't forget this) and 'Download to spreadsheet' (on the right, below the chart). For example, this link takes you to the historical data for MSFT for the last 10 years. http://finance.yahoo.com has something similar, like this. In this case the link to download a CSV is at the bottom of the table.","\"Instead of using the actual index, use a mutual fund as a proxy for the index. Mutual funds will include dividend income, and usually report data on the value of a \"\"hypothetical $10,000 investment\"\" over the life of the fund. If you take those dollar values and normalize them, you should get what you want. There are so many different factors that feed into general trends that it will be difficult to draw conclusions from this sort of data. Things like news flow, earnings reporting periods, business cycles, geopolitical activity, etc all affect the various sectors of the economy differently.\"","\"the \"\"how\"\" all depends on your level of computer savvy. Are you an Excel spreadsheet user or can you write in programming languages such as python? Either approach have math functions that make the calculation of ROI and Volatility trivial. If you're a python coder, then look up \"\"pandas\"\" (http://pandas.pydata.org/) - it handles a lot of the book-keeping and downloading of end of day equities data. With a dozen lines of code, you can compute ROI and volatility.\"","\"Many online brokers have a \"\"virtual\"\" or \"\"paper\"\" trading feature to them. You can make trades in near-real time with a fake account balance and it will treat it as though you were making the trade at that time. No need to manage the math yourself - plus, you can even do more complicated trades (One-Cancels-Other/One-Triggers-Other).\"","A number of places. First, fast and cheap, you can probably get this from EODData.com, as part of a historical index price download -- they have good customer service in my experience and will likely confirm it for you before you buy. Any number of other providers can get it for you too. Likely Capital IQ, Bloomberg, and other professional solutions. I checked a number of free sites, and Market Watch was the only that had a longer history than a few months.","Yes, there are plenty of sites that will do this for you. Yahoo, and MarketWatch are a few that come to mind first. I'm sure you could find plenty of others.","If you want to go far upstream, you can get mutual fund NAV and dividend data from the Nasdaq Mutual Fund Quotation Service (MFQS). This isn't for end-users but rather is offered as a part of the regulatory framework. Not surprisingly, there is a fee for data access. From Nasdaq's MFQS specifications page: To promote market transparency, Nasdaq operates the Mutual Fund Quotation Service (MFQS). MFQS is designed to facilitate the collection and dissemination of daily price, dividends and capital distributions data for mutual funds, money market funds, unit investment trusts (UITs), annuities and structured products.","Why do all this work yourself? Pay a modest price to have a professional do this for you. Look at the tickers PUTX, PUTW.","Yahoo's primary business isn't providing mutual fund performance data. They aim to be convenient, but often leave something to be desired in terms of completeness. Try Morningstar instead. Their mission is investment research. Here's a link to Morningstar's data for the fund you specified. If you scroll down, you'll see:","(For people looking at this question many years later...) Schwab and Fidelity offer a wide selection of commission-free ETFs. You need an initial purchase amount, though, of (when last I checked at Schwab) $1,000.","\"This is the same answer as for your other question, but you can easily do this yourself: ( initial adjusted close / final adjusted close ) ^ ( 1 / ( # of years sampled) ) Note: \"\"# of years sampled\"\" can be a fraction, so the one week # of years sampled would be 1/52. Crazy to say, but yahoo finance is better at quick, easy, and free data. Just pick a security, go to historical prices, and use the \"\"adjusted close\"\". money.msn's best at presenting finances quick, easy, and cheap.\"","If you use Google Finance, you will get incorrect results because Google Finance does not show the dividend history. Since your requirement is that dividends are re-invested, you should use Yahoo Finance instead, downloading the historical 'adjusted' price.","From an article I wrote a while back: “Dalbar Inc., a Boston-based financial services research firm, has been measuring the effects of investors’ decisions to buy, sell, and switch into and out of mutual funds since 1984. The key finding always has been that the average investor earns significantly less than the return reported by their funds. (For the 20 years ended Dec. 31, 2006, the average stock fund investor earned a paltry 4.3 average annual compounded return compared to 11.8 percent for the Standard & Poor’s 500 index.)” It's one thing to look at the indexes. But quite another to understand what other investors are actually getting. The propensity to sell low and buy high is proven by the data Dalbar publishes. And really makes the case to go after the magic S&P - 0.09% gotten from an ETF.","There are a few ETFs that fall into the money market category: SHV, BIL, PVI and MINT. What normally looks like an insignificant expense ratio looks pretty big when compared to the small yields offered by these funds. The same holds for the spread and transaction fees. For that reason, I'm not sure if the fund route is worth it.","Index funds: Some of the funds listed by US SIF are index funds. ETFs: ETFdb has a list, though it's pretty short at the moment.","Well i dont know of any calculator but you can do the following 1) Google S&P 500 chart 2) Find out whats the S&P index points (P1) on the first date 3) Find out whats the S&P index points (P2) on the second date 4) P1 - P2 = result","\"There are several brokerages which have lower minimum deposits (often $500) and allow purchase of index ETFs. I won't name them to avoid advertising. The best way to find out is to go to your bank, and ask to see a financial advisor. Then explain your difficulty to the advisor (who should caution you about the issues with investing such a small amount) and ask for advice on where to find a suitable broker. Also, sometimes banks offer services where you can buy shares of a fund through your bank account. This is probably not \"\"as good\"\" as the brokerage (performance may be not as good, fees may come out higher), but especially for small amounts and for convenience, this may be easier. Again, you should inquire at your institution.\"","As I recall, the Scottrade minimum is only $500. (By the way, Scottrade has a feature to automatically reinvest any dividends which the securities pay) Once you have an account, you can buy into an index fund. SPY tracks the S&P 500. It is also currently paying nearly 2% in dividends. You can shop for other alternatives here: http://seekingalpha.com/insight/etf_hub/etf_guide/selector/article/39431-core-building-blocks-large-mid-small-cap-us-etfs","The closest I can think of from the back of my head is http://finviz.com/map.ashx, which display a nice map and allows for different intervals. It has different scopes (S&P500, ETFs, World), but does not allow for specific date ranges, though.","\"You cannot actually buy an index in the true sense of the word. An index is created and maintained by a company like Standard and Poor's who licenses the use of the index to firms like Vanguard. The S&P 500 is an example of an index. The S&P 500 \"\"index includes 500 leading companies\"\", many finical companies sell products which track to this index. The two most popular products which track to indexes are Mutual Funds (as called Index Funds and Index Mutual Funds) and Exchange Traded Funds (as called ETFs). Each Index Mutual Fund or ETF has an index which it tracks against, meaning they hold securities which make up a sample of the index (some indexes like bond indexes are very hard to hold everything that makes them up). Looking at the Vanguard S&P 500 Index Mutual Fund (ticker VFINX) we see that it tracks against the S&P 500 index. Looking at its holdings we see the 500-ish stocks that it holds along with a small amount of bonds and cash to handle cash flow for people buying and sell shares. If we look at the Vanguard S&P 500 ETF (ticker VOO) we see that it also tracks against the S&P 500 index. Looking at its holdings we see they are very similar to the similar Index Mutual Fund. Other companies like T. Rowe Price have similar offering. Look at the T. Rowe Price Equity Index 500 Fund (ticker PREIX) its holdings in stocks are the same as the similar Vanguard fund and like the Vanguard fund it also holds a small amount of bonds and cash to handle cash flow. The only real difference between different products which track against the same index is in the expense ratio (fees for managing the fund) and in the small differences in the execution of the funds. For the most part execution of the funds do not really matter to most people (it has a very small effect), what matters is the expense (the fees paid to own the fund). If we just compare the expense ratio of the Vanguard and T. Rowe Price funds we see (as of 27 Feb 2016) Vanguard has an expense ratio of 0.17% for it Index Mutual Fund and 0.05% for its ETF, while T. Rowe Price has an expense ratio of 0.27%. These are just the fees for the funds themselves, there are also account maintenance fees (which normally go down as the amount of money you have invested at a firm go up) and in the case of ETFs execution cost (cost to trade the shares along with the difference between the bid and ask on the shares). If you are just starting out I would say going with the Index Mutual Fund would easier and most likely would cost less over-all if you are buying a small amount of shares every month. When choosing a company look at the expense ratio on the funds and the account maintenance fees (along with the account minimals). Vanguard is well known for having low fees and they in fact were the first to offer Index Mutual Funds. For more info on the S&P 500 index see also this Investopedia entry on the S&P 500 index. Do not worry if this is all a bit confusing it is to most people (myself included) at first.\"","\"Funds which track the same index may have different nominal prices. From an investors point of view, this is not important. What is important is that when the underlying index moves by a given percentage, the price of the tracking funds also move by an equal percentage. In other words, if the S&P500 rises by 5%, then the price of those funds tracking the S&P500 will also rise by 5%. Therefore, investing a given amount in any of the tracking funds will produce the same profit or loss, regardless of the nominal prices at which the individual funds are trading. To see this, use the \"\"compare\"\" function available on the popular online charting services. For example, in Google finance call up a chart of the S&P500 index, then use the compare textbox to enter the codes for the various ETFs tracking the S&P500. You will see that they all track the S&P500 equally so that your relative returns will be equal from each of the tracking funds. Any small difference in total returns will be attributable to management fees and expenses, which is why low fees are so important in passive investing.\"","Google Finance and Yahoo Finance have been transitioning their API (data interface) over the last 3 months. They are currently unreliable. If you're just interested in historical price data, I would recommend either Quandl or Tiingo (I am not affiliated with either, but I use them as data sources). Both have the same historical data (open, close, high, low, dividends, etc.) on a daily closing for thousands of Ticker symbols. Each service requires you to register and get a unique token. For basic historical data, there is no charge. I've been using both for many months and the data quality has been excellent and API (at least for python) is very easy! If you have an inclination for python software development, you can read about the drama with Google and Yahoo finance at the pandas-datareader group at https://github.com/pydata/pandas-datareader."],"string":"[\n \"\\\"Back-testing itself is flawed. \\\"\\\"Past performance is no guarantee of future results\\\"\\\" is an important lesson to understand. Market strategies of one kind or another work until they don't. Edited in -- AssetPlay.net provides a tool that's halfway to what you are looking for. It only goes back to 1972, however. Just to try it, I compared 100% S&P to a 60/40 blend of S&P with 5 yr t-bills (a misnamed asset, 5 yr treasuries are 'notes' not 'bills') I found the mix actually had a better return with lower volatility. Now, can I count on that to work moving forward? Rates fell during most of this entire period so bonds/notes both looked pretty good. This is my point regarding the backtest concept. GeniusTrader appears more sophisticated, but command line work on PCs is beyond me. It may be worth a look for you, JP. ETF Replay appears to be another backtest tool. It has its drawbacks, however, (ETFs only)\\\"\",\n \"\\\"It's easy for me to look at an IRA, no deposits or withdrawal in a year, and compare the return to some index. Once you start adding transactions, not so easy. Here's a method that answers your goal as closely as I can offer: SPY goes back to 1993. It's the most quoted EFT that replicates the S&P 500, and you specifically asked to compare how the investment would have gone if you were in such a fund. This is an important distinction, as I don't have to adjust for its .09% expense, as you would have been subject to it in this fund. Simply go to Yahoo, and start with the historical prices. Easy to do this on a spreadsheet. I'll assume you can find all your purchases inc dates & dollars invested. Look these up and treat those dollars as purchases of SPY. Once the list is done, go back and look up the dividends, issues quarterly, and on the dividend date, add the shares it would purchase based on that day's price. Of course, any withdrawals get accounted for the same way, take out the number of SPY shares it would have bought. Remember to include the commission on SPY, whatever your broker charges. If I've missed something, I'm sure we'll see someone point that out, I'd be happy to edit that in, to make this wiki-worthy. Edit - due to the nature of comments and the inability to edit, I'm adding this here. Perhaps I'm reading the question too pedantically, perhaps not. I'm reading it as \\\"\\\"if instead of doing whatever I did, I invested in an S&P index fund, how would I have performed?\\\"\\\" To measure one's return against a benchmark, the mechanics of the benchmarks calculation are not needed. In a comment I offer an example - if there were an ETF based on some type of black-box investing for which the investments were not disclosed at all, only day's end pricing, my answer above still applies exactly. The validity of such comparisons is a different question, but the fact that the formulation of the EFT doesn't come into play remains. In my comment below which I removed I hypothesized an ETF name, not intending it to come off as sarcastic. For the record, if one wishes to start JoesETF, I'm ok with it.\\\"\",\n \"\\\"Google Docs spreadsheets have a function for filling in stock and fund prices. You can use that data to graph (fund1 / fund2) over some time period. Syntax: =GoogleFinance(\\\"\\\"symbol\\\"\\\", \\\"\\\"attribute\\\"\\\", \\\"\\\"start_date\\\"\\\", \\\"\\\"num_days|end_date\\\"\\\", \\\"\\\"interval\\\"\\\") where: This analysis won’t include dividends or distributions. Yahoo provides adjusted data, if you want to include that.\\\"\",\n \"I have asked myself this exact same question many times. The analysis would be simple if you invested all your money in a single day, but I did not and therefore I would need to convert your cash transactions into Index fund buys/sells. I got tired of trying to do this using Yahoo's data and excel so I built a website in my spare time. I humbly suggest you try my website out in the hopes that it helps you perform this computation: http://www.amibeatingthemarket.com/\",\n \"\\\"As other people have posted starting with \\\"\\\"fictional money\\\"\\\" is the best way to test a strategy, learn about the platform you are using, etc. That being said I would about how Fundamental Analysis works . Fundamental Analysis is the very basis of learning about an assets true value is priced. However in my humble opinion, I personally just stick with Index funds. In layman's terms Index Funds are essentially computer programs that buy or sell the underlying assets based on the Index they are associated with in the portion of the underlying index. Therefore you will usually be doing as good or as bad as the market. I personally have the background, education, and skillsets to build very complex models to do fundamental analysis but even I invest primarily in index funds because a well made and well researched stock model could take 8 hours or more and Modern Portfolio Theory would suggest that most investors will inevitably have a regression to the mean and have gains equal to the market rate or return over time. Which is what an index fund already does but without the hours of work and transaction cost.\\\"\",\n \"check pastsat-backtesting , backtesting tool, where one can can test on well known technical indicators without coding skills\",\n \"\\\"I've just started using Personal Capital (www.personalcapital.com) after seeing the recommendation at several places. I believe it gives you what you want to see, but I don't think you can back populate it with old information. So if you log in and link accounts today, you'll have it going forward. I only put in my investment accounts as I use another tool to track my day-to-day spending. I use Personal Capital to track my investment returns over time. How did my portfolio compare to S&P 500, etc. And here is a shot of the \\\"\\\"You Index\\\"\\\" which I think is close to what you are looking for:\\\"\",\n \"I have a free account on http://optionshouse.com/ that allows me to invest fake money into different stocks and test their tracking software. It is free and easy to do, just create an account there and they give you $4000 (fake) to invest in the stock market. They do this so that you can test their tracking and other assorted tools, in hopes that you'll choose to invest your real hard earned money with them.\",\n \"Yes, add the stocks/mutual funds that you want and then you would just need to add all the transactions that you theoretically would have made. Performing the look up on the price at each date that you would have sold or bought is quite tedious as well as adding each transaction.\",\n \"\\\"I'd start with a Google search for \\\"\\\"best backtesting tools.\\\"\\\" Does your online brokerage offer anything? You already understand that the data is the important part. The good stuff isn't free. But yeah, if you have some money to spend you can get more than enough data to completely overwhelm you. :)\\\"\",\n \"\\\"Assuming that the ETF is tracking an index, is there a reason for not looking at using details on the index? Typically the exact constituents of an index are proprietary, and companies will not publish them publicly without a license. S&P is the heavyweight in this area, and the exact details of the constituents at any one time are not listed anywhere. They do list the methodology, and announcements as to index changes, but not a full list of actual underlying constituents. Is there a easy way to automatically (ie. through an API or something, not through just reading a prospectus) get information about an ETF's underlying securities? I have looked for this information before, and based on my own searches, in a word: no. Index providers, and providers of APIs which provide index information, make money off of such services. The easiest way may be to navigate to each provider and download the CSV with the full list of holdings, if one exists. You can then drop this into your pipeline and write a program to pull the data from the CSV file. You could drop the entire CSV into Excel and use VBA to automagically pull the data into a usable format. For example, on the page for XIU.TO on the Blackrock site, after clicking the \\\"\\\"All Holdings\\\"\\\" tab there is a link to \\\"\\\"Download holdings\\\"\\\", which will provide you with a CSV. I am not sure if all providers look at this. Alternatively, you could write the ETF company themselves.\\\"\",\n \"I spent a while looking for something similar a few weeks back and ended up getting frustrated and asking to borrow a friend's Bloombterg. I wish you the best of luck finding something, but I wasn't able to. S&P and Morningstar have some stuff on their site, but I wasn't able to make use of it. Edit: Also, Bloomberg allows shared terminals. Depending on how much you think as a firm, these questions might come up, it might be worth the 20k / year\",\n \"Fund performance at NAV (%) for latest quarter, YTD, and average annual total returns for 1, 3, 5, 10 years. P/E ratio (1 yr. forecast), P/B ratio, Beta, Sharpe ratio, Wtd. avg. market cap, fund assets. I guess I would want to calculate all these things based off of the data that I would be working with. I will assume I am working with daily fund values per share over 10+ years.\",\n \"\\\"Save the effort. For personal finance purpose, just use the simple tools. For example, if you like P&G very much but you want to diversify with ETF, use: http://etfdb.com/stock/PG/ https://www.etfchannel.com/finder/?a=etfsholding&symbol=PG Pick a ETF with highest weighting. Replace \\\"\\\"PG\\\"\\\" in the link with other tickers.\\\"\",\n \"I use and recommend barchart.com. Again you have to register but it's free. Although it's a US system it has a full listing of UK stocks and ETFs under International > London. The big advantage of barchart.com is that you can do advanced technical screening with Stochastics and RS, new highs and lows, moving averages etc. You're not stuck with just fundamentals, which in my opinion belong to a previous era. Even if you don't share that opinion you'd still find barchart.com useful for UK stocks.\",\n \"If you just want to track an index, then ETFs are, generally speaking, the better way.\",\n \"Based on my experience with OpenQuant, which is a development platform for automated trading strategies (and therefore can be easily be used for backtesting your personal strategy), I can give a little insight into what you might look for in such a platform. OpenQuant is a coding environment, which reads data feeds from a variety of sources (more on that in the second point), and runs the code for your strategy on that data and gives you the results. The data could be imported from a live data feed or from historical data, either through numerous API's, CSV/Excel, etc. You can write your own strategies using the custom C# libraries included with the software, which spares you from implementing your own code for technical indicators, basic statistical functions, etc. Getting the data is another issue. You could use joe's strategy and calculate option prices yourself, although you need to exercise caution when doing this to test a strategy. However, there is no substitute for backtesting a strategy on real data. Markets change over time, and depending on how far back you're interested in testing your strategy, you may run into problems. The reason there is no substitute for using real data is that attempting to replicate the data may fail in some circumstances, and you need a method of verifying that the data you're generating is correct and realistic. Calculating a few values, comparing them to the real values, and calibrating accordingly is a good idea, but you have to decide for yourself how many checks you want to do. More is better, but it may not be enough to realistically test your strategy. Disclaimer: Lest you interpret my post as a shameless plug for the OpenQuant platform, I'll state that I found the interface awful (it looked vaguely like Office 2000 but ten years too late) and the documentation woefully incomplete. I last used the software in 2010, so it may have improved in the intervening years, but your mileage may vary. I only use it as an example to give some insight into what you might look for in a backtesting platform. When you actually begin trading, a different platform is likely in order. That being said, it responded fairly quickly and the learning curve wasn't too steep. The platform wasn't too expensive at the time (about $700 for a license with no data feeds, I think) but I was happy that the cost wasn't coming out of my pocket. It's only gotten more expensive and I'm not sure it's worth it.\",\n \"\\\"An ETF does not track any one individual stock. It \\\"\\\"is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund.\\\"\\\" Check out this link to learn more about ETFs. The easiest way see what ETF tracks a stock is to determine what sector and industry that company is in and find some ETF that trade it. The ETF will likely trade that stock, assuming that its market cap and exchange it trades on fits within the parameters of the ETF.\\\"\",\n \"Trading data can be had cheaply from: http://eoddata.com/products/historicaldata.aspx The SEC will give you machine readable financial statements for American companies for free, but that only goes back 3 or 4 years. Beyond that, you will have to pay for a rather expensive service like CapitalIQ or CRSP or whatever. Note that you will need considerable programming knowledge to pull this off.\",\n \"Google Finance will do all the bullet points in your list and a few more. The only drawback is that you have to enter ALL buy and sell manually. It has an import feature, but it does not work with all trading software. http://www.google.com/finance Let me know if it works. Also, yahoo.com/finance has a good tool, but I still like better Google's application.\",\n \"ETFs are legally required to publicly disclose their positions at every point in time. The reason for this is that for an ETF to issue shares of ETF they do NOT take cash in exchange but underlying securities - this is called a creation unit. So people need to know which shares to deliver to the fund to get a share of ETF in exchange. This is never done by retail clients, however, but by nominated market makers. Retail persons will normally trade shares only in the secondary market (ie. on a stock exchange), which does not require new shares of the ETF to be issued. However, they do not normally make it easy to find this information in a digestible way, and each ETF does it their own way. So typically services that offer this information are payable (as somebody has to scrape the information from a variety of sources or incentivise ETF providers to send it to them). If you have access to a Bloomberg terminal, this information is available from there. Otherwise there are paid for services that offer it. Searching on Google for ETF constituent data, I found two companies that offer it: See if you can find what you need there. Good luck. (etfdb even has a stock exposure tool freely available that allows you to see which ETFs have large exposure to a stock of your choosing, see here: http://etfdb.com/tool/etf-stock-exposure-tool/). Since this data is in a table format you could easily download it automatically using table parsing tools for your chosen programming language. PS: Don't bother with underlying index constituents, they are NOT required to be made public and index providers will normally charge handsomely for this so normally only institutional investors will have this information.\",\n \"\\\"You could use any of various financial APIs (e.g., Yahoo finance) to get prices of some reference stock and bond index funds. That would be a reasonable approximation to market performance over a given time span. As for inflation data, just googling \\\"\\\"monthly inflation data\\\"\\\" gave me two pages with numbers that seem to agree and go back to 1914. If you want to double-check their numbers you could go to the source at the BLS. As for whether any existing analysis exists, I'm not sure exactly what you mean. I don't think you need to do much analysis to show that stock returns are different over different time periods.\\\"\",\n \"Buy as much data as you can, make a model, automate the back testing, see if it works over the past decade or so. If the returns are offering a superior risk adjusted return then you have a valid model, if not try an other model. If you don't know how to program, learn how to.\",\n \"At this time, Google Finance doesn't support historical return or dividend data, only share prices. The attributes for mutual funds such as return52 are only available as real-time data, not historical. Yahoo also does not appear to offer market return data including dividends. For example, the S&P 500 index does not account for dividends--the S&P ^SPXTR index does, but is unavailable through Yahoo Finance.\",\n \"For your purposes, I would recommend using direct investment in a no-load mutual fund. I mostly use Vanguard and would recommend them. They just about invented index funds, usually have the lowest (internal) expenses for index and many other funds, if you take electronic instead of paper statements there is no maintenance fee, have no transaction commission, can do periodic automatic investment from a bank account etc. A typical index fund there would require an initial $3000 investment and would have a minimum of $100 for each additional investment. If you can't come up with an initial sum of that size, you might be able to find a broker with a lower minimum and suitable free ETFs trades as others have suggested.\",\n \"Algo traders/quants/market backtesters/coders/et al. I am looking to backtest basic things like the correlation of P/E, EV/EBITDA, etc. to market performance. I know a little R and Python. What is the easiest way to learn to backtest this sort of stuff? I want to eventually get into algo trading sort of stuff. I'd **greatly** appreciate it!\",\n \"You can use a tool like WikiInvest the advantage being it can pull data from most brokerages and you don't have to enter them manually. I do not know how well it handles dividends though.\",\n \"I dont know if this data is available for the 1980s, but this response to an old question of mine discusses how you can pull stock related information from google or yahoo finance over a certain period of time. You could do this in excel or google spreadsheet and see if you could get the data you're looking for. Quote from old post: Google Docs spreadsheets have a function for filling in stock and fund prices. You can use that data to graph (fund1 / fund2) over some time period.\",\n \"Does anyone know if there is a way to set up a practice account? I only have index ETFs currently, and would like to play around and get a feel for other stocks/options before putting real money into it.\",\n \"\\\"The majority (about 80%) of mutual funds are underperforming their underlying indexes. This is why ETFs have seen massive capital inflows compared to equity funds, which have seen significant withdrawals in the last years. I would definitively recommend going with an ETF. In addition to pure index based ETFs that (almost) track broad market indexes like the S&P 500 there are quite a few more \\\"\\\"quant\\\"\\\" oriented ETFs that even outperformed the S&P. I am long the S&P trough iShares ETFs and have dividend paying ETFs and some quant ETFS on top (Invesco Powershares) in my portfolio.\\\"\",\n \"I had the same problem and was looking for a software that would give me easy access to historical financial statements of a company, preferably in a chart. So that I could easily compare earnings per share or other data between competitors. Have a look at Stockdance this might be what you are looking for. Reuters Terminal is way out of my league (price and complexity) and Yahoo and Google Finance just don't offer the features I want, especially on financials. Stockdance offers a sort of stock selection check list on which you can define your own criterion’s. Hence it makes no investment suggestions but let's you implement your own investing strategy.\",\n \"You can do it graphically at zignals.com and freestockcharts.com.\",\n \"Are you looking for something like Morningstar.com? They provide information about lots of mutual funds so you can search based on many factors and find good candidate mutual funds. Use their fund screener to pick funds with long track records of beating the S&P500.\",\n \"R/stockmarket is probably the best. When I have some free time I can test that strategy back as long as you would like in quantstrat, although the only problem with testing futures is joining the consolidated contracts, however I can test it with SPY as SPY returns and ES_F track very closely.\",\n \"R has really good package that lets you calculate the return of rebalanced portfolios. The package is called: PerformanceAnalytics (see: http://www.inside-r.org/packages/cran/PerformanceAnalytics/docs/Return.portfolio). I quickly wrote a small script for you that lets you do exactly what you want. Code: By default the portfolio is rebalanced to an equally weighted portfolio. It is also possible to rebalance your portfolio using custom weights. See the documentation on how to do this. In order for this code to work you need to have your data already in return terms. You can do this easily in Excel. Make sure your data in excel looks like this: Than export your data to a CSV file. Note: before you run the code make sure you have installed the package PerformanceAnalytics. You can do this as follows: Let me know if you have any questions regarding the above.\",\n \"This site should help you to accomplish what you are looking for: https://www.quantopian.com\",\n \"Google Portfolio does the job: https://www.google.com/finance/portfolio You can add transaction data, view fundamentals and much more.\",\n \"\\\"A couple options that I know of: Interactive Brokers offers a \\\"\\\"paper trading\\\"\\\" mode to its account holders that allows you to start with a pretend stack of money and place simulated trades to test trading ideas. They also provide an API that allows you to interface with their platform programmatically for retrieving quotes, placing orders, and the such. As you noted, however, it's not free; you must hold a funded brokerage account in order to qualify for access to their platform. In order to maintain an account, there are minimums for required equity and monthly activity (measured in dollars that you spend on commissions), so you won't get access to their platform without having a decent amount of skin in the game. IB's native API is Java-based; IbPy is an unofficial wrapper that makes the interface available in Python. I've not used IB at all myself, but I've heard good things about their API and its accessibility via IbPy. Edit: IB now supports Python natively via their published API, so using IbPy is no longer needed, unless you wish to use Python 2.x. The officially supported API is based on Python 3. TD Ameritrade also offers an API that is usable by its brokerage clients. They do not offer any such \\\"\\\"paper trading\\\"\\\" mode, so you would need to \\\"\\\"execute\\\"\\\" transactions based on quotes at the corresponding trade times and then keep track of your simulated account history yourself. The API supports quote retrieval, price history, and trade execution, among other functions. TDA might be more attractive than IB if you're looking for a low-cost link into market data, as I believe their minimum-equity levels are lower. To get access, you'll need to sign up for an API developer account, which I believe requires an NDA. I don't believe there is an official Python implementation of the API, but if you're a capable Python writer, you shouldn't have trouble hooking up to the published interfaces. Some caveats: as when doing any strategy backtesting, you'll want to be sure to be pessimistic when doing so, so your optimism doesn't make your trades look more successful than they would be in the real world. At a minimum, you'll want to ensure that your simulations transact at the posted bid/ask prices, not necessarily the last trade's price, as well as any commissions and fees associated with the trade. A more robust scheme would also take into account the depth of the order book (also known as level 2 quotes), which can cause additional slippage in the prices at which you buy/sell your security. An even more robust scheme would take into account the potential latency of trade execution, looking at all prices over some time period that covers the maximum expected latency and simulating the trade at the worst-possible price.\\\"\",\n \"MoneyChimp is great for this. It only offers full year returns, but it compounds the results correctly, including dividends. For mid year results, just adjust a bit based on the data you can find from Google or Yahoo to add some return (or loss) for the months.\",\n \".INX (the S&P 500 index itself) does not include reinvested dividens. You can figure total return by going to Yahoo finance, historical data. Choose the start year, and end year. You should find that data for SPY (going back to 1993) will show an adjusted close, and takes dividends into account. This isn't perfect as SPY has a .09% expense ratio, but it's better than just the S&P index. One of the more popular Dow ETF is DIA, this will let you similarly track the Dow while accounting for dividends.\",\n \"You haven't looked very far if you didn't find index tracking exchange-traded funds (ETFs) on the Toronto Stock Exchange. There are at least a half dozen major exchange-traded fund families that I'm aware of, including Canadian-listed offerings from some of the larger ETF providers from the U.S. The Toronto Stock Exchange (TSX) maintains a list of ETF providers that have products listed on the TSX.\",\n \"\\\"From How are indexes weighted?: Market-capitalization weighted indexes (or market cap- or cap-weighted indexes) weight their securities by market value as measured by capitalization: that is, current security price * outstanding shares. The vast majority of equity indexes today are cap-weighted, including the S&P 500 and the FTSE 100. In a cap-weighted index, changes in the market value of larger securities move the index’s overall trajectory more than those of smaller ones. If the fund you are referencing is an ETF then there may be some work to do to figure out what underlying securities to use when handling Creation and Redemption units as an ETF will generally have shares created in 50,000 shares at a time through Authorized Participants. If the fund you are referencing is an open-end fund then there is still cash flows to manage in the fund as the fund has create and redeem shares in on a daily basis. Note in both cases that there can be updates to an index such as quarterly rebalancing of outstanding share counts, changes in members because of mergers, acquisitions or spin-offs and possibly a few other factors. How to Beat the Benchmark has a piece that may also be useful here for those indices with many members from 1998: As you can see, its TE is also persistently positive, but if anything seems to be declining over time. In fact, the average net TE for the whole period is +0.155% per month, or an astounding +1.88% pa net after expenses. The fund expense ratio is 0.61% annually, for a whopping before expense TE of +2.5% annually. This is once again highly statistically significant, with p values of 0.015 after expenses and 0.0022 before expenses. (The SD of the TE is higher for DFSCX than for NAESX, lowering its degree of statistical significance.) It is remarkable enough for any fund to beat its benchmark by 2.5% annually over 17 years, but it is downright eerie to see this done by an index fund. To complete the picture, since 1992 the Vanguard Extended Index Fund has beaten its benchmark (the Wilshire 4500) by 0.56% per year after expenses (0.81% net of expenses), and even the Vanguard Index Trust 500 has beaten its benchmark by a razor thin 0.08% annually before (but not after) expenses in the same period. So what is going on here? A hint is found in DFA's 1996 Reference Guide: The 9-10 Portfolio captures the return behavior of U.S. small company stocks as identified by Rolf Banz and other academic researchers. Dimensional employs a \\\"\\\"patient buyer\\\"\\\" discount block trading strategy which has resulted in negative total trading costs, despite the poor liquidity of small company stocks. Beginning in 1982, Ibbotson Associates of Chicago has used the 9-10 Portfolio results to calculate the performance of small company stocks for their Stocks, Bonds, Bills, and Inflation yearbook. A small cap index fund cannot possibly own all of the thousands of stocks in its benchmark; instead it owns a \\\"\\\"representative sample.\\\"\\\" Further, these stocks are usually thinly traded, with wide bid/ask spreads. In essence what the folks at DFA learned was that they could tell the market makers in these stocks, \\\"\\\"Look old chaps, we don't have to own your stock, and unless you let us inside your spread, we'll pitch our tents elsewhere. Further, we're prepared to wait until a motivated seller wishes to unload a large block.\\\"\\\" In a sense, this gives the fund the luxury of picking and choosing stocks at prices more favorable than generally available. Hence, higher long term returns. It appears that Vanguard did not tumble onto this until a decade later, but tumble they did. To complete the picture, this strategy works best in the thinnest markets, so the excess returns are greatest in the smallest stocks, which is why the positive TE is greatest for the DFA 9-10 Fund, less in the Vanguard Small Cap Fund, less still in the Vanguard Index Extended Fund, and minuscule with the S&P500. There are some who say the biggest joke in the world of finance is the idea of value added active management. If so, then the punch line seems to be this: If you really want to beat the indexes, then you gotta buy an index fund.\\\"\",\n \"Why don't you look at the actual funds and etfs in question rather than seeking a general conclusion about all pairs of funds and etfs? For example, Vanguard's total stock market index fund (VTSAX) and ETF (VTI). Comparing the two on yahoo finance I find no difference over the last 5 years visually. For a different pair of funds you may find something very slightly different. In many cases the index fund and ETF will not have the same benchmark and fees so comparisons get a little more cloudy. I recall a while ago there was an article that was pointing out that at the time emerging market ETF's had higher fees than corresponding index funds. For this reason I think you should examine your question on a case-by-case basis. Index fund and ETF returns are all publicly available so you don't have to guess.\",\n \"\\\"Although is not online, I use a standalone version from http://jstock.sourceforge.net It got drag-n-drop boxes, to let me design my own indicators. However, it only contain technical analysis information, not fundamental analysis information. It does come with tutorial http://jstock.sourceforge.net/help_stock_indicator_editor.html#indicator-example, on how to to build an indicator, to screen \\\"\\\"Stock which Its Price Hits Their 14 Days Maximum\\\"\\\"\\\"\",\n \"One thing to be aware of when choosing mutual funds and index ETFs is the total fees and costs. The TD Ameritrade site almost certainly had links that would let you see the total fees (as an annual percentage) for each of the funds. Within a category, the lowest fees percentage is best, since that is directly subtracted from your performance. As an aside, your allocation seems overly conservative to me for someone that is 25 years old. You will likely work for 40 or so years and the average stock market cycle is about 7 years. So you will likely see 5 or so complete cycles. Worrying about stability of principal too young will really cut into your returns. My daughter is your age and I have advised her to be 100% in equities and then to start dialing that back in about 25 years or so.\",\n \"The recommended way to track TSP funds in online portfolio tools is to track the underlying index and know that the results are pretty close. Not a perfect solution: :( Source including suggested ETFs: http://finance.yahoo.com/news/breaking-down-tsp-investment-funds-194600393.html Related, but not exactly what you are looking for, Personal Capital will track your TSP holdings: http://themilitarywallet.com/manage-thrift-savings-plan/\",\n \"Sounds like you are a candidate for stock trading simulators. Or just pick stocks and use Yahoo! or Google finance tools to track and see how you do. I wouldn't suggest you put real money into it. You need to learn about research and timing and a bunch of other topics you can learn about here. I personally just stick to life cycle funds that are managed products that offer me a cruise control setting for investing.\",\n \"absolutely $SPY ETF is the way to go if your point of comparison is the S&P and you want to do low maintenance.\",\n \"I also searched for some time before discovering Market Archive, which AFAIK is the most affordable option that basically gives you a massive multi-GB dump of data. I needed sufficient data to build a model and didn't want to work through an API or have to hand-pick the securities to train from. After trying to do this on my own by scraping Yahoo and using the various known tools, I decided my time was better spent not dealing with rate-limiting issues and parsing quirks and whatnot, so I just subscribed to Market Archive (they update the data daily).\",\n \"I was going to comment above, but I must have 50 reputation to comment. This is a question that vexes me, and I've given it some thought in the past. Morningstar is a good choice for simple, well-organized financial histories. It has more info available for free than some may realize. Enter the ticker symbol, and then click either the Financials or the Key Ratios tab, and you will get 5-10 years of some key financial stats. (A premium subscription is $185 per year, which is not too outrageous.) The American Association of Individual Investors (AAII) provides some good histories, and a screener, for a $29 annual fee. Zacks allows you to chart a metric like EPS going back a long ways, and so you can then click the chart in order to get the specific number. That is certainly easier than sorting through financial reports from the SEC. (A message just popped up to say that I'm not allowed to provide more than 2 links, so my contribution to this topic will end here. You can do a search to find the Zacks website. I love StackExchange and usually consult it for coding advice. It just happens to be an odd coincidence that this is my first answer. I might even have added that aside in a comment, but again, I can't comment as of yet.) It's problem, however, that the universe of free financial information is a graveyard of good resources that no longer exist. It seems that eventually everyone who provides this information wants to cash in on it. littleadv, above, says that someone should be paid to organize all this information. However, think that some basic financial information, organized like normal data (and, hey, this is not rocket science, but Excel 101) should be readily available for free. Maybe this is a project that needs to happen. With a mission statement of not selling people out later on. The closest thing out there may be Quandl (can't link; do a search), which provides a lot of charts for free, and provides a beautiful and flexible API. But its core US fundamental data, provided by Sharadar, costs $150 per quarter. So, not even a basic EPS chart is available there for free. With all of the power that corporations have over our society, I think they could be tabulating this information for us, rather than providing it to us in a data-dumb format that is the equivalent of printing a SQL database as a PDF! A company that is worth hundreds of billions on the stock market, and it can't be bothered to provide us with a basic Excel chart that summarizes its own historical earnings? Or, with all that the government does to try to help us understand all of these investments, they cannot simply tabulate some basic financial information for us? This stuff matters a great deal to our lives, and I think that much of it could and should be available, for free, to all of us, rather than mainly to financial professionals and those creating glossy annual reports. So, I disagree that yet another entity needs to be making money off providing the BASIC transparency about something as simple as historical earnings. Thank you for indulging that tangent. I know that SE prides itself on focused answers. A wonderful resource that I greatly appreciate.\",\n \"Here's a few demo steps, first calculating the year to date return, then calculating the Q4 quarterly return based on the cumulative returns for Q3 and Q4. It's fine to use closing price to closing price as return periods.\",\n \"Hey Sheehan, I believe Schwab provides this info. None of the online free portfolio managers I know of gives you this info. The now defunct MS Money used to have this. The best thing to do is to use a spreadsheet. Or you could use the one I use. http://www.moneycone.com/did-you-beat-the-market-mr-investor/ . (disclaimer: that's my blog)\",\n \"If you had a trading system, and by trading system I mean the criteria setup that you will take a trade on, then once a setup comes up at what price will you open the trade and at what price you will close the trade. As an example, if you want to buy once price breaks through resistance at $10.00 you might place your buy order at $10.05. So once you have a written trading system you could do backtesting on this system to get a percentage of win trades to loosing trades, your average win size to average lose size, then from this you could work out your expectancy for each trade that you follow your trading system on.\",\n \"\\\"If you want the answer from the horse's mouth, go to the website of the ETF or mutual find, and the expense ratio will be listed there, both on the \\\"\\\"Important Information\\\"\\\" part of the front page, as well as in the .pdf file that you click on to download the Prospectus. Oh wait, you don't want to go the fund's website at all, just to a query site where you type in something like VFINX. hit SEARCH, and out pops the expense ratio for the Vanguard S&P 500 Index Fund? Well, have you considered MorningStar?\\\"\",\n \"While it is certainly easy to manage single fund, I am not sure it's the right strategy. It's been proven again and again that portfolio diversification is key to long term gains in wealth. I think your best option is to invest in low cost index funds and ETFs. While rebalancing your portfolio is hard, it is vastly simpler if your portfolio only has ETFs.\",\n \"\\\"I used to use etfconnect before they went paid and started concentrating on closed end funds. These days my source of information is spread out. The primary source about the instrument (ETF) itself is etfdb, backed by information from Morningstar and Yahoo Finance. For comparison charts Google Finance can't be beat. For actual solid details about a specific ETF, would check read the prospectus from the managing firm itself. One other comment, never trust a site that \\\"\\\"tells you\\\"\\\" which securities to buy. The idea is that you need sources of solid information about financial instruments to make a decision, not a site that makes the decision for you. This is due to the fact that everyone has different strategies and goals for their money and a single site saying buy X sell Y will probably lead you to lose your money.\\\"\",\n \"I'm a finance newb....sorry ahead of time for everyone slamming their heads against the the wall. I'm going to go ahead and possibly answer my own question. Do I just go back 4 months at a time from their 10K and record the stock price on that date?\",\n \"This is what I used during my MBA. My biggest complaint is that it is not a database for analytic (it pulls from a database). I hear think or swim has the capability to extract data and offers a free version - anyone know if that is true?\",\n \"\\\"My answer is Microsoft Excel. Google \\\"\\\"VBA for dummies\\\"\\\" (seriously) and find out if your brokerage offers an 'API'. With a brief understanding of coding you can get a spreadsheet that is live connected to your brokers data stream. Say you have a spreadsheet with the 1990 value of each in the first two columns (cells a1 and b1). Maybe this formula could be the third column, it'll tell you how much to buy or sell to rebalance them. then to iterate the rebalance, set both a2 and b2 to =C1 and drag the formula through row 25, one row for each year. It'll probably be a little more work than that, but you get the idea.\\\"\",\n \"Something to consider is how do you want to handle fractional shares. Most open-end funds can easily go to fractional shares to that if you want to invest $500 in a fund each month, it is a relatively easy transaction where some shares will be fractional and handled easily. An ETF may not always work that way unless you go through something like Sharebuilder that would allow the fractional shares as if the ETF is trading at $150/share, you could buy 3 shares but still have $50 that you want to invest but can't as stocks trade in whole share numbers usually. This is without adding brokerage commissions. Depending on the broker, re-investing dividends may or may not be that simple as fractional shares could be a problem since those 3 shares aren't likely to have enough of a dividend to equal another share being bought with the proceeds. If you want the flexibility of stop and limit orders then the ETF may make more sense while the open-end fund is simply to invest whole dollar amounts that then lead to fractional shares. Don't forget to factor in minimums and other stuff as VFIAX may have a bit of a minimum to it as well as possible fees that could be annoying as I remember VFINX having some account maintenance fees that were a bit irksome back in the day that may still be around in some cases so be sure to read the fine print on things.\",\n \"I found that an application already exists which does virtually everything I want to do with a reasonable interface. Its called My Personal Index. It has allowed me to look at my asset allocation all in one place. I'll have to enter: The features which solve my problems above include: Note - This is related to an earlier post I made regarding dollar cost averaging and determining rate of returns. (I finally got off my duff and did something about it)\",\n \"Do you have a broker? Any online brokerage (TD Ameritrade, E*Trade, Scott Trade, etc) offer the functionality that you want. If you're not interested in opening a brokerage account, you can search for threads here related to stock market simulation, since most of those services also provide the features that you want. If you do you have a physical broker at some firm, contact him/her and ask about the online tools that the brokerage offers. Almost all of them have portfolio management tools available to clients.\",\n \"Another possibly more flexible option is Yahoo finance here is an example for the dow.. http://finance.yahoo.com/q/hp?s=%5EDJI&a=9&b=1&c=1928&d=3&e=10&f=2012&g=d&z=66&y=0 Some of the individual stocks you can dl directly to a spreadsheet (not sure why this isn't offer for indexs but copy and paste should work). http://finance.yahoo.com/q/hp?s=ACTC.OB+Historical+Prices\",\n \"Sure, Yahoo Finance does this for FREE.\",\n \"I use Yahoo Finance to plot my portfolio value over time. Yahoo Finance uses SigFig to link accounts (I've linked to Fidelity), which then allows you to see you exact portfolio and see a plot of its historical value. I'm not sure what other websites SigFig will allow you to sync with, but it is worth a try. Here is what the plot I have looks like, although this is slightly out of date, but still gives you an idea of what to expect.\",\n \"I'd recommend looking at fundamental analysis as well -- technical analysis seems to be good for buy and sell points, but not for picking what to buy. You can get better outperformance by buying the right stuff, and it can be surprisingly easy to create a formula that works. I'd check out Morningstar, AAII, or Equities Lab (fairly complicated but it lets you do technical and fundamental analysis together). Also read Benjamin Graham, and/or Ken Fisher (they are wildly different, which is why I recommend them both).\",\n \"\\\"TD e-series index funds are great for regular contributions every paycheck since there is no trading commission. The personal finance blog \\\"\\\"Canadian Couch Potato\\\"\\\" has great examples of what they call \\\"\\\"model portfolios\\\"\\\" and one consists of entirely TD e-series index funds. Check it out: http://canadiancouchpotato.com/model-portfolios-2/ The e-series portfolio that is described in the Model Portfolios (linked above) made returns of just over 10%. This is very similar to the ETF Model Portolio. One thing to remember is that these funds have a 30 day no sell time frame, otherwise a 2% fee is applied to the funds you withdraw.\\\"\",\n \"About 10 years ago, I used to use MetaStock Trader which was a very sound tool, with a large number of indicators, but it has been a number of years since I have used it, so my comments on it will be out of date. At the time it relied upon me purchasing trading data myself, which is why I switched to Incredible Charts. I currently use Incredible Charts which I have done for a number of years, initially on the free adware service, now on the $10/year for EOD data access. There are quicker levels of data access, which might suit you, but I can't comment on these. It is web-based which is key for me. The data quality is very good and the number of inbuilt indicators is excellent. You can build search routines on the basis of specific indicators which is very effective. I'm looking at VectorVest, as a replacement for (or in addition to) Incredible Charts, as it has very powerful backtesting routines and the ability to run test portfolios with specific buy/sell criteria that can simulate and backtest a number of trading scenarios at the same time. The advantage of all of these is they are not tied to a particular broker.\",\n \"I found one such tool here: Point-to-Point Returns tool\",\n \"the strategy is tested all the way to 97. how is the continuous series backadjusted? the emini is rolledover and Ratio back adjusted to the 2nd nearest contract, 9 days prior to expiration. since it is an intraday trade, the discrepancy to the real thing should be next to irrelevant. but comparing it to the spx could make it interesting. what would be a good format to present the results ? jpeg? pdf ?\",\n \"You can check the website for the company that manages the fund. For example, take the iShares Nasdaq Biotechnology ETF (IBB). iShares publishes the complete list of the fund's holdings on their website. This information isn't always easy to find or available, but it's a place to start. For some index funds, you should just be able to look up the index the fund is trying to match. This won't be perfect (take Vanguard's S&P 500 ETF (VOO); the fund holds 503 stocks, while the S&P 500 index is comprised of exactly 500), but once again, it's a place to start. A few more points to keep in mind. Remember that many ETF's, including equity ETF's, will hold a small portion of their assets in cash or cash-equivalent instruments to assist with rebalancing. For index funds, this may not be reflected in the index itself, and it may not show up in the list of holdings. VOO is an example of this. However, that information is usually available in the fund's prospectus or the fund's site. Also, I doubt that many stock ETF's, at least index funds, change their asset allocations all that frequently. The amounts may change slightly, but depending on the size of their holdings in a given stock, it's unlikely that the fund's manager would drop it entirely.\",\n \"One of the key things to look for is trading volume. I think the price spread will be better on high volume ETFs, which means you'll be able to sell for more when the time comes. Check Google or Yahoo finance for those stats.\",\n \"Index Funds & ETFs, if they are tracking the same index, will be the same in an ideal world. The difference would be because of the following factors: Expense ratio: i.e. the expense the funds charge. This varies and hence it would lead to a difference in performance. Tracking error: this means that there is a small percentage of error between the actual index composition and the fund composition. This is due to various reasons. Effectively this would result in the difference between values. Demand / Supply: with ETFs, the fund is traded on stock exchanges like a stock. If the general feeling is that the index is rising, it could lead to an increase in the price of the ETF. Index funds on the other hand would remain the same for the day and are less liquid. This results in a price increase / decrease depending on the market. The above explains the reason for the difference. Regarding which one to buy, one would need to consider other factors like: a) How easy is it to buy ETFs? Do you already hold Demat A/C & access to brokers to help you conduct the transaction or do you need to open an additional account at some cost. b) Normally funds do not need any account, but are you OK with less liquidity as it would take more time to redeem funds.\",\n \"I am mostly interested in day to day records, and would like the data to contain information such as dividend payouts, and other parameters commonly available, such as on : http://finviz.com/screener.ashx ... but the kind of queries you can do is limited. For instance you can only go back two years.\",\n \"It isn't just ETFs, you have normal mutual funds in India which invest internationally. This could be convenient if you don't already have a depository account and a stockbroker. Here's a list of such funds, along with some performance data: Value Research - Equity: International: Long-term Performance. However, you should also be aware that in India, domestic equity and equity fund investing is tax-free in the long-term (longer than one year), but this exemption doesn't apply to international investments. Ref: Invest Around the World.\",\n \"\\\"Your broker, Ameritrade, offers a variety of Exchange Traded Funds (ETFs) that you can buy and sell with zero commission. An ETF is like a mutual fund, but you buy and sell shares the same way you buy and sell shares of stocks. From your point of view, the relevance of this is that you can buy and sell as many or as few shares as you like, even down to a single share. Note that to get the commission-free trades on the available ETFs you have to sign up for it in your account profile. Be sure to do that before you enter any buy orders. You'll want to start by looking at the Ameritrade's list of commission-free ETFs. Notice that they are divided into different categories: stocks, bonds, international, and commodities. Which categories you pick from will depend on your personal investing goals, time horizon, risk tolerance, and so on. There are lots of questions and answers on this site that talk about asset allocation. You should read them, as it is the most important decision you will make with your portfolio. The other thing you want to be aware of is the expense ratio for each fund. These expenses reduce the fund's return (they are included in the calculation of the net asset value of the shares), so lower is definitely better. Personally, I wouldn't even consider paying more than about 0.10% (commonly read \\\"\\\"10 basis points\\\"\\\" or \\\"\\\"10 bp\\\"\\\") for a broad-based domestic stock fund. For a sectoral fund you might put up with as much as 20 bp in expenses. Bond funds tend to be a little more expensive, so maybe allow as much as 25 bp, and likewise for international funds. I've never invested in commodity funds, so I'll let someone else opine on appropriate expense ratios for those. Once you've decided what funds you want (and have signed up for commission-free trades), all you have to do is enter the trade orders. The website where you manage your account has tutorials on how to do that. After that you should be all set. Good luck with your investing!\\\"\",\n \"Around Oct 03 2010 the SPY closed at 113. Today it is trading at 130. After four months, that means that the S&P is up 15% over that particular 4 month period. You said you need something pretty low maintenance, and you are comparing your returns to the S&P 500 (which as @duffbeer703 points out is a good thing to compare against because of its diversification). To kill two birds with one stone, I would sell your fund that you have and take the proceeds and purchase the ETF SPY. SPY trades like a stock but mirrors the S&P 500's performance. It has extremely low fees (as opposed to what I suspect your BlackRock fund has). You can own it in an Etrade or Fidelity or other low cost broker account. Then you will be extremely low maintenance, fully diversified (among stocks) and you don't have to compare your performance against the S&P :)\",\n \"You can get this data from a variety of sources, but likely not all from 1 source. Yahoo is a good source, as is Google, but some stock markets also give away some of this data, and there's foreign websites which provide data for foreign exchanges. Some Googling is required, as is knowledge of web scraping (R, Python, Ruby or Perl are great tools for this...).\",\n \"Go to http://finance.google.com, search for the stock you want. When you are seeing the stock information, in the top left corner there's a link that says 'Historical prices'. Click on it. then select the date range, click update (don't forget this) and 'Download to spreadsheet' (on the right, below the chart). For example, this link takes you to the historical data for MSFT for the last 10 years. http://finance.yahoo.com has something similar, like this. In this case the link to download a CSV is at the bottom of the table.\",\n \"\\\"Instead of using the actual index, use a mutual fund as a proxy for the index. Mutual funds will include dividend income, and usually report data on the value of a \\\"\\\"hypothetical $10,000 investment\\\"\\\" over the life of the fund. If you take those dollar values and normalize them, you should get what you want. There are so many different factors that feed into general trends that it will be difficult to draw conclusions from this sort of data. Things like news flow, earnings reporting periods, business cycles, geopolitical activity, etc all affect the various sectors of the economy differently.\\\"\",\n \"\\\"the \\\"\\\"how\\\"\\\" all depends on your level of computer savvy. Are you an Excel spreadsheet user or can you write in programming languages such as python? Either approach have math functions that make the calculation of ROI and Volatility trivial. If you're a python coder, then look up \\\"\\\"pandas\\\"\\\" (http://pandas.pydata.org/) - it handles a lot of the book-keeping and downloading of end of day equities data. With a dozen lines of code, you can compute ROI and volatility.\\\"\",\n \"\\\"Many online brokers have a \\\"\\\"virtual\\\"\\\" or \\\"\\\"paper\\\"\\\" trading feature to them. You can make trades in near-real time with a fake account balance and it will treat it as though you were making the trade at that time. No need to manage the math yourself - plus, you can even do more complicated trades (One-Cancels-Other/One-Triggers-Other).\\\"\",\n \"A number of places. First, fast and cheap, you can probably get this from EODData.com, as part of a historical index price download -- they have good customer service in my experience and will likely confirm it for you before you buy. Any number of other providers can get it for you too. Likely Capital IQ, Bloomberg, and other professional solutions. I checked a number of free sites, and Market Watch was the only that had a longer history than a few months.\",\n \"Yes, there are plenty of sites that will do this for you. Yahoo, and MarketWatch are a few that come to mind first. I'm sure you could find plenty of others.\",\n \"If you want to go far upstream, you can get mutual fund NAV and dividend data from the Nasdaq Mutual Fund Quotation Service (MFQS). This isn't for end-users but rather is offered as a part of the regulatory framework. Not surprisingly, there is a fee for data access. From Nasdaq's MFQS specifications page: To promote market transparency, Nasdaq operates the Mutual Fund Quotation Service (MFQS). MFQS is designed to facilitate the collection and dissemination of daily price, dividends and capital distributions data for mutual funds, money market funds, unit investment trusts (UITs), annuities and structured products.\",\n \"Why do all this work yourself? Pay a modest price to have a professional do this for you. Look at the tickers PUTX, PUTW.\",\n \"Yahoo's primary business isn't providing mutual fund performance data. They aim to be convenient, but often leave something to be desired in terms of completeness. Try Morningstar instead. Their mission is investment research. Here's a link to Morningstar's data for the fund you specified. If you scroll down, you'll see:\",\n \"(For people looking at this question many years later...) Schwab and Fidelity offer a wide selection of commission-free ETFs. You need an initial purchase amount, though, of (when last I checked at Schwab) $1,000.\",\n \"\\\"This is the same answer as for your other question, but you can easily do this yourself: ( initial adjusted close / final adjusted close ) ^ ( 1 / ( # of years sampled) ) Note: \\\"\\\"# of years sampled\\\"\\\" can be a fraction, so the one week # of years sampled would be 1/52. Crazy to say, but yahoo finance is better at quick, easy, and free data. Just pick a security, go to historical prices, and use the \\\"\\\"adjusted close\\\"\\\". money.msn's best at presenting finances quick, easy, and cheap.\\\"\",\n \"If you use Google Finance, you will get incorrect results because Google Finance does not show the dividend history. Since your requirement is that dividends are re-invested, you should use Yahoo Finance instead, downloading the historical 'adjusted' price.\",\n \"From an article I wrote a while back: “Dalbar Inc., a Boston-based financial services research firm, has been measuring the effects of investors’ decisions to buy, sell, and switch into and out of mutual funds since 1984. The key finding always has been that the average investor earns significantly less than the return reported by their funds. (For the 20 years ended Dec. 31, 2006, the average stock fund investor earned a paltry 4.3 average annual compounded return compared to 11.8 percent for the Standard & Poor’s 500 index.)” It's one thing to look at the indexes. But quite another to understand what other investors are actually getting. The propensity to sell low and buy high is proven by the data Dalbar publishes. And really makes the case to go after the magic S&P - 0.09% gotten from an ETF.\",\n \"There are a few ETFs that fall into the money market category: SHV, BIL, PVI and MINT. What normally looks like an insignificant expense ratio looks pretty big when compared to the small yields offered by these funds. The same holds for the spread and transaction fees. For that reason, I'm not sure if the fund route is worth it.\",\n \"Index funds: Some of the funds listed by US SIF are index funds. ETFs: ETFdb has a list, though it's pretty short at the moment.\",\n \"Well i dont know of any calculator but you can do the following 1) Google S&P 500 chart 2) Find out whats the S&P index points (P1) on the first date 3) Find out whats the S&P index points (P2) on the second date 4) P1 - P2 = result\",\n \"\\\"There are several brokerages which have lower minimum deposits (often $500) and allow purchase of index ETFs. I won't name them to avoid advertising. The best way to find out is to go to your bank, and ask to see a financial advisor. Then explain your difficulty to the advisor (who should caution you about the issues with investing such a small amount) and ask for advice on where to find a suitable broker. Also, sometimes banks offer services where you can buy shares of a fund through your bank account. This is probably not \\\"\\\"as good\\\"\\\" as the brokerage (performance may be not as good, fees may come out higher), but especially for small amounts and for convenience, this may be easier. Again, you should inquire at your institution.\\\"\",\n \"As I recall, the Scottrade minimum is only $500. (By the way, Scottrade has a feature to automatically reinvest any dividends which the securities pay) Once you have an account, you can buy into an index fund. SPY tracks the S&P 500. It is also currently paying nearly 2% in dividends. You can shop for other alternatives here: http://seekingalpha.com/insight/etf_hub/etf_guide/selector/article/39431-core-building-blocks-large-mid-small-cap-us-etfs\",\n \"The closest I can think of from the back of my head is http://finviz.com/map.ashx, which display a nice map and allows for different intervals. It has different scopes (S&P500, ETFs, World), but does not allow for specific date ranges, though.\",\n \"\\\"You cannot actually buy an index in the true sense of the word. An index is created and maintained by a company like Standard and Poor's who licenses the use of the index to firms like Vanguard. The S&P 500 is an example of an index. The S&P 500 \\\"\\\"index includes 500 leading companies\\\"\\\", many finical companies sell products which track to this index. The two most popular products which track to indexes are Mutual Funds (as called Index Funds and Index Mutual Funds) and Exchange Traded Funds (as called ETFs). Each Index Mutual Fund or ETF has an index which it tracks against, meaning they hold securities which make up a sample of the index (some indexes like bond indexes are very hard to hold everything that makes them up). Looking at the Vanguard S&P 500 Index Mutual Fund (ticker VFINX) we see that it tracks against the S&P 500 index. Looking at its holdings we see the 500-ish stocks that it holds along with a small amount of bonds and cash to handle cash flow for people buying and sell shares. If we look at the Vanguard S&P 500 ETF (ticker VOO) we see that it also tracks against the S&P 500 index. Looking at its holdings we see they are very similar to the similar Index Mutual Fund. Other companies like T. Rowe Price have similar offering. Look at the T. Rowe Price Equity Index 500 Fund (ticker PREIX) its holdings in stocks are the same as the similar Vanguard fund and like the Vanguard fund it also holds a small amount of bonds and cash to handle cash flow. The only real difference between different products which track against the same index is in the expense ratio (fees for managing the fund) and in the small differences in the execution of the funds. For the most part execution of the funds do not really matter to most people (it has a very small effect), what matters is the expense (the fees paid to own the fund). If we just compare the expense ratio of the Vanguard and T. Rowe Price funds we see (as of 27 Feb 2016) Vanguard has an expense ratio of 0.17% for it Index Mutual Fund and 0.05% for its ETF, while T. Rowe Price has an expense ratio of 0.27%. These are just the fees for the funds themselves, there are also account maintenance fees (which normally go down as the amount of money you have invested at a firm go up) and in the case of ETFs execution cost (cost to trade the shares along with the difference between the bid and ask on the shares). If you are just starting out I would say going with the Index Mutual Fund would easier and most likely would cost less over-all if you are buying a small amount of shares every month. When choosing a company look at the expense ratio on the funds and the account maintenance fees (along with the account minimals). Vanguard is well known for having low fees and they in fact were the first to offer Index Mutual Funds. For more info on the S&P 500 index see also this Investopedia entry on the S&P 500 index. Do not worry if this is all a bit confusing it is to most people (myself included) at first.\\\"\",\n \"\\\"Funds which track the same index may have different nominal prices. From an investors point of view, this is not important. What is important is that when the underlying index moves by a given percentage, the price of the tracking funds also move by an equal percentage. In other words, if the S&P500 rises by 5%, then the price of those funds tracking the S&P500 will also rise by 5%. Therefore, investing a given amount in any of the tracking funds will produce the same profit or loss, regardless of the nominal prices at which the individual funds are trading. To see this, use the \\\"\\\"compare\\\"\\\" function available on the popular online charting services. For example, in Google finance call up a chart of the S&P500 index, then use the compare textbox to enter the codes for the various ETFs tracking the S&P500. You will see that they all track the S&P500 equally so that your relative returns will be equal from each of the tracking funds. Any small difference in total returns will be attributable to management fees and expenses, which is why low fees are so important in passive investing.\\\"\",\n \"Google Finance and Yahoo Finance have been transitioning their API (data interface) over the last 3 months. They are currently unreliable. If you're just interested in historical price data, I would recommend either Quandl or Tiingo (I am not affiliated with either, but I use them as data sources). Both have the same historical data (open, close, high, low, dividends, etc.) on a daily closing for thousands of Ticker symbols. Each service requires you to register and get a unique token. For basic historical data, there is no charge. I've been using both for many months and the data quality has been excellent and API (at least for python) is very easy! If you have an inclination for python software development, you can read about the drama with Google and Yahoo finance at the pandas-datareader group at https://github.com/pydata/pandas-datareader.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["\"Back-testing itself is flawed. \"\"Past performance is no guarantee of future results\"\" is an important lesson to understand. Market strategies of one kind or another work until they don't. Edited in -- AssetPlay.net provides a tool that's halfway to what you are looking for. It only goes back to 1972, however. Just to try it, I compared 100% S&P to a 60/40 blend of S&P with 5 yr t-bills (a misnamed asset, 5 yr treasuries are 'notes' not 'bills') I found the mix actually had a better return with lower volatility. Now, can I count on that to work moving forward? Rates fell during most of this entire period so bonds/notes both looked pretty good. This is my point regarding the backtest concept. GeniusTrader appears more sophisticated, but command line work on PCs is beyond me. It may be worth a look for you, JP. ETF Replay appears to be another backtest tool. It has its drawbacks, however, (ETFs only)\"","\"I'd start with a Google search for \"\"best backtesting tools.\"\" Does your online brokerage offer anything? You already understand that the data is the important part. The good stuff isn't free. But yeah, if you have some money to spend you can get more than enough data to completely overwhelm you. :)\"","yAnother potential tool for you would be a Monte Carlo Simulator. here's one http://financial-dictionary.thefreedictionary.com/Business+Fundamentals I know that past performance is no guarantee..... but I think it's in many cases not exactly a flawed tool, and especially with respect to money managers a good way to find good ones. If a manager has shown an ability over time to consistently beat the market, yes he might be due for a bad day, but you'd generally expect that they should be able to continue that trend. I'd apply the same logic to pundits. If their track record sucks, and they constantly seem to whipsaw you with their advice, why listen to them other than","check pastsat-backtesting , backtesting tool, where one can can test on well known technical indicators without coding skills"],"string":"[\n \"\\\"Back-testing itself is flawed. \\\"\\\"Past performance is no guarantee of future results\\\"\\\" is an important lesson to understand. Market strategies of one kind or another work until they don't. Edited in -- AssetPlay.net provides a tool that's halfway to what you are looking for. It only goes back to 1972, however. Just to try it, I compared 100% S&P to a 60/40 blend of S&P with 5 yr t-bills (a misnamed asset, 5 yr treasuries are 'notes' not 'bills') I found the mix actually had a better return with lower volatility. Now, can I count on that to work moving forward? Rates fell during most of this entire period so bonds/notes both looked pretty good. This is my point regarding the backtest concept. GeniusTrader appears more sophisticated, but command line work on PCs is beyond me. It may be worth a look for you, JP. ETF Replay appears to be another backtest tool. It has its drawbacks, however, (ETFs only)\\\"\",\n \"\\\"I'd start with a Google search for \\\"\\\"best backtesting tools.\\\"\\\" Does your online brokerage offer anything? You already understand that the data is the important part. The good stuff isn't free. But yeah, if you have some money to spend you can get more than enough data to completely overwhelm you. :)\\\"\",\n \"yAnother potential tool for you would be a Monte Carlo Simulator. here's one http://financial-dictionary.thefreedictionary.com/Business+Fundamentals I know that past performance is no guarantee..... but I think it's in many cases not exactly a flawed tool, and especially with respect to money managers a good way to find good ones. If a manager has shown an ability over time to consistently beat the market, yes he might be due for a bad day, but you'd generally expect that they should be able to continue that trend. I'd apply the same logic to pundits. If their track record sucks, and they constantly seem to whipsaw you with their advice, why listen to them other than\",\n \"check pastsat-backtesting , backtesting tool, where one can can test on well known technical indicators without coding skills\"\n]","isConversational":false}}},{"rowIdx":72,"cells":{"_id":{"kind":"string","value":"3801"},"query":{"kind":"string","value":"Can a bunch of wealthy people force Facebook to go public?"},"gt_ids":{"kind":"list like","value":["390529","307776"],"string":"[\n \"390529\",\n \"307776\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1],"string":"[\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["390529","394734","69017","171236","156903","373581","507816","570634","415237","667","445901","132138","453987","171385","314538","513446","542998","535110","371293","449624","598705","462517","297360","50410","232620","35252","409133","88157","14216","57424","500603","545558","305111","374597","584135","79105","298666","7593","554262","319920","471247","195604","242085","452454","144899","592198","418503","260712","457234","460757","488618","587426","207853","102023","217286","516807","105129","98285","519877","550164","65405","177648","241718","308814","526062","451898","160844","337049","49393","72861","518908","207058","402660","136988","508489","65290","507995","316056","226617","129187","358826","315375","327914","359476","282565","396580","444752","31697","587541","158639","202148","516359","73321","210779","556209","120271","21818","12027","117415","187568"],"string":"[\n \"390529\",\n \"394734\",\n \"69017\",\n \"171236\",\n \"156903\",\n \"373581\",\n \"507816\",\n \"570634\",\n \"415237\",\n \"667\",\n \"445901\",\n \"132138\",\n \"453987\",\n \"171385\",\n \"314538\",\n \"513446\",\n \"542998\",\n \"535110\",\n \"371293\",\n \"449624\",\n \"598705\",\n \"462517\",\n \"297360\",\n \"50410\",\n \"232620\",\n \"35252\",\n \"409133\",\n \"88157\",\n \"14216\",\n \"57424\",\n \"500603\",\n \"545558\",\n \"305111\",\n \"374597\",\n \"584135\",\n \"79105\",\n \"298666\",\n \"7593\",\n \"554262\",\n \"319920\",\n \"471247\",\n \"195604\",\n \"242085\",\n \"452454\",\n \"144899\",\n \"592198\",\n \"418503\",\n \"260712\",\n \"457234\",\n \"460757\",\n \"488618\",\n \"587426\",\n \"207853\",\n \"102023\",\n \"217286\",\n \"516807\",\n \"105129\",\n \"98285\",\n \"519877\",\n \"550164\",\n \"65405\",\n \"177648\",\n \"241718\",\n \"308814\",\n \"526062\",\n \"451898\",\n \"160844\",\n \"337049\",\n \"49393\",\n \"72861\",\n \"518908\",\n \"207058\",\n \"402660\",\n \"136988\",\n \"508489\",\n \"65290\",\n \"507995\",\n \"316056\",\n \"226617\",\n \"129187\",\n \"358826\",\n \"315375\",\n \"327914\",\n \"359476\",\n \"282565\",\n \"396580\",\n \"444752\",\n \"31697\",\n \"587541\",\n \"158639\",\n \"202148\",\n \"516359\",\n \"73321\",\n \"210779\",\n \"556209\",\n \"120271\",\n \"21818\",\n \"12027\",\n \"117415\",\n \"187568\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["\"In the US, a private company with less than 500 owners can dictate who can or can't become a shareholder (this is true in general, but I'm sure there are loopholes). Prior to Google's IPO I could not buy shares in Google at any price. The reason Google was \"\"forced\"\" to go public is the 500 shareholder rule. At a high level, with 500 shareholders the company is forced to do some extra financial accounting and they no longer can control who owns a share of the company, allowing me to purchase shares of google at that point. At that point, it typically becomes in the companies best interest to go public. See this article about Google approaching the 500 shareholder limit in 2003. Further, Sorkin is not quite correct that \"\"securities laws mandate that the company go public\"\" if by \"\"go public\"\" we mean list on a stock exchange, available for general purchase. Securities laws mandate what has to be reported in financial reporting and when you have to report it. Securities laws also can dictate restrictions on ownership of stock and if a company can impose their own restrictions. A group of investors cannot force a company onto a stock exchange. If shares of Facebook are already for sale to anyone, then having >500 shareholders will force Facebook to file more paperwork with the SEC, it won't force Facebook onto the NYSE or NASDAQ. When that point is reached, it may be in Facebook's best interest to have an IPO, but they will not be required by law to do so. Update: CNN article discusses likely Facebook IPO in 2012. When companies have more than 500 shareholders, they're required to make significant financial disclosures -- though they can choose to remain private and keep their stock from trading publicly. However, most companies facing mandatory disclosures opt to go public. The Securities and Exchange Commission gives businesses lots of time to prepare for that milestone. Companies have until 120 days after the end of the fiscal year in which they cross the 500-shareholder line to begin making their disclosures. If Facebook tips the scale this year, that gives it until April 2012 to start filing financial reports.\"","Employees were already cashing out their RSUs and selling stock on private markets. >Even if Facebook could resist, an eager army of Facebook employees is pushing hard for an I.P.O., according to Eric Eldon of TechCrunch. In 2008, Facebook adopted a new restricted stock program that prevented employees from selling their shares until an I.P.O. or a sale, or if Facebook permitted it. They still could have stayed private if they really wanted to. They were compensating employees in stock, and those employees wanted to cash out. The underwriters wanted to cash out before the financials became open to public scrutiny.","The SEC requires that they register with the SEC due to having more than 500 shareholders. With that comes public reporting and all kinds of regulatory compliance. At that point it is more of a practical necessity to follow through with an IPO, even though it is not a legal one. http://dealbook.nytimes.com/2011/11/29/facebook-may-be-forced-to-go-public-amid-market-gloom/","Here is something I have always wondered. Companies are required to go public after they have a certain number of investors. Used to be 500 now 2000. Can a company that has been forced to go public, then be made private again? How?","Here's the reality: Facebook was forced into an IPO because of stupid federal regulations. They would have happily continued to stay closely held and raked in money while maintaining their mystique. If there is any problem, start at the root.","Have a proxy battle if you care so much about the long-term prospects of facebook or sue him for negligence. If you've been paying attention to google/facebook/yahoo's recent massive acquisition spree recently, you either wouldn't care so much about this deal or shouldn't be in the stock if you were concerned about Zuckerberg playing venture capital.","Sure.. its possible, its exactly what activist investors do (with institutional money - e.g. pension funds, family foundations). Crowdsourcing probably implies an average <$100 donation per contributor in your mind however, so you'd need a lot of contributors (as opposed to an institution writing a $1B check out of the box) As a benchmark, you can start agitating even without owning shares, but it probably lends credibility to have a few percentage points. As of today, GS's market cap is $46B, JPM's market cap is $122B, BAML's market cap is $77B... so you'd need at least $1B of capital to buy a percentage point or two. At $100 per ticket. that's 10M individual donors.","For Facebook and such companies, their ability to earn billions only happens through an IPO because that business model doesn't generate revenue. Without some drastic change that no one has mentioned, Facebook cannot make a profit, much less multi-billion dollar yearly profits. So you launch an IPO to rip off the suckers","Actually regulation was really helpful here: some investors tried to invest into facebook privately, having very limited information. IPO just made things visible. Perhaps a shitty analogy would help you to understand: > When John was beating his wife privately that was OK because nobody saw her face. I'm sure she was asking for it. But now due to stupid federal regulations there is an open investigation and everybody knows she was beaten. This sucks. Start at the root: fight with those stupid federal regulations which break into private homes. This makes as much sense as your comment.","Sure, you're happy to trust Page or Zuckerberg to put money to good use. But sometimes bad managers burn through company resources, desperately trying to save their jobs. Great managers with long term visions deserve a long leash, but companies with bad management can sometimes be helped with outside discipline.","It's amateurish to expect Facebook to do anything other than what Zuckerberg wants. His shares give him control over the company. This was known before the IPO. People that thought he would change and take actions that would benefit them, instead of himself are learning an expensive lesson.","It would depend on the bounds of your hypothetical. If the investor group is blind to cost + has infinite money and the existing management is unwilling to comply at any cost, then management will destroy the company before the investor group can take it over. If the existing management follow rational choice theory; then an investment group with unlimited money could take over, hold a special meeting on it, etc. Shareholders can't force management to do anything per se, as management decisions that violate fiduciary duty aren't criminally liable unless the act itself is a crime. So if an investor group were to try a hostile takeover, and Twitter mgmt said we'll see you in hell; then they could just shut down every data center, sell off twitter.com, terminate all the employees, issue a billion new shares, issue every employee a million $0.01 strike warrants, etc. until there's nothing left to take over just to spite them. Defensive strategies get pretty creative and are highly amusing to watch if you don't have a dog in the fight.","It's a good point and I think you answered the question yourself, most IPOs don't have the option. There is a real risk of an undersubscribed IPO, which can be a real problem for a company since they can't easily go back to the market for money. Facebook might have a tough time issuing an IPO under the current market conditions, especially following Zynga's weak showing. They might feel safer with a traditional IPO.","Yeah from what I've read, Facebook is pilling up the profits so they could be in very good position to do the RA as well. Its crazy if you think about the Google one.. At least $100m more went to the shareholders due to the different fee structure. Why wouldn't you do that if you had the option?","In reality, shareholders have very few rights other than the right to profits and the right to vote on a board. In general, a proxy fight to replace the board is complicated and expensive, so unless the interested parties buy close to 50% of the shares it's unlikely to be successful. Furthermore, a lot of the shares are held by insiders and institutions. I suppose if a large group of shareholders got together and demanded this, the existing directors may listen and give in to avoid unhappy shareholders being a general annoyance. That seems pretty unlikely unless the stake gets large. There's a great episode of NPR Planet Money [board games](http://www.npr.org/sections/money/2017/07/19/538141248/episode-594-board-games) which talks about one man's struggle to get the company to take some action.","Presumably they would lose value eventually. They're not going to turn a profit anytime soon. There may come a day when they've burned through their cash, can't get anymore private equity dollars, and have no choice but to either raise money with public equity or entertain discounted offers to buy a controlling interest.","What you describe there is the textbook definition of a proxy fight: buy a 5-10% stake (we're talking $10-$15 billion here for major money center banks), work with other shareholders, try to replace the directors, change business practices, etc. It's a strategy that works in many cases, but the sheer amount of stock you'd have to buy to effect a traditional proxy fight makes this strategy neither probable nor plausible. Like I said, the only believable way to do this is a proxy fight via the press: buy a small number of shares, table resolutions at the annual meetings, and leverage those resolutions with the press.","Let’s turn this round. Now what if the only people willing to own part of company are doing it due to the expectation that they will make money in the short term form the company….","Anti-Facebook circlejerk continues. Where were these articles before it went public ? It makes it seem like bad for common investors when in reality they couldn't even get in on the stock. It was the institutional funds and connected investors who bought the stock at 38. The common market actually was the one that didn't support the stock once it went public. If anyone, it's the institutional funds that got screwed.","If you hold at least $2,000 of a company's shares for at least a year you can submit a proxy filing -- a stockholder proposal at the shareholders' meeting. Then you can use the media to agitate around that proposal. (See Hugh Fearnley-Whittingstall, mentioned here as well). Companies have been known to bow to media pressure around minority shareholder proposals. The guidelines for proxy filings are here: http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=47b43cbb88844faad586861c05c81595&rgn=div5&view=text&node=17:3.0.1.1.1&idno=17#17:3.0.1.1.1.2.82.201 Buying enough shares to assume control of a major money center bank is not possible, regardless of the amount of money you can raise (remember: there are poison pill provisions, not to mention the fact that the more shares you want to buy, the higher the price will be). tl;dr: The way to do what you're trying to do is not by accumulating shares but by using the media. You need $2,000.","this will not work, why they fuck they are slow to act? are they waiting for something while robbing everyone blind... just go to a rich guy and take his stuff he will never share, never. he will lie and cheat like mr gates here.","Maybe you should read the *whole* thread before replying? From [the story I linked above:](http://www.computerweekly.com/news/2240150767/Facebook-shareholders-sue-over-misleading-IPO) >It has emerged that only a select group of insiders were aware that Facebook was forecast to earn tens of millions of dollars less than had been publicly stated. You can announce news, or you can withhold it as corporate proprietary information. What you most definitely *cannot* do is just tell a few friends.","So in a ten year history the company makes one misstep (one which makes perfect sense; it was just an error in timing) and we want to throw out all the leadership and take control? Where is this kind of uproar at investment banks that leveraged themselves out on a limb in stormy waters? Or at Microsoft that routinely pours money down product holes without marketing and advertising support? Or any of a dozen other companies that make stupid decisions driven by the ego or short-sightedness of the CEO? No, let's beat on one of the best executives on Wall Street because we're whiny about short-term losses in pursuit of long-term gains. We need more honeypots for stupid investors like Facebook - maybe if enough idiots get burned they'll just get out.","Their reputation is still stellar, just because people we're dumb enough to buy in at 38$ doesn't reflect on facebook, it reflects on the underwriters. You think FB would have said no with the IPO price had been 100$?","Yes, because he told Morgan Stanley and a few others that quarterly earnings were going to be down - but no one else - and because he is perceived as being an untrustworthy weasel. I'm not saying Zuckerberg isn't a slimy weasel, but it was the underwriter's, in this case Morgan Stanley, job to let this be known, or not known, but certainly not known to only a few of their top investors and insider people. When filing a lawsuit, you go where the money is. In this case, Zuckerberg and his billions.","You are right that Facebook really doesn't get impacted as they got their $38. However it would make it slightly more difficult for Facebook to raise more money in future as large investors would be more cautious. This can keep the price lowers than it actually needs to be. Quite a few companies try to list the IPO at lower price so that it keeps going up and have more positive effect overall there by making it easier for future borrowings. See related question Why would a company care about the price of its own shares in the stock market?","Together the founders represent 100% of the outstanding stock, so they can do it however they like.","Everyone has a price. If nobody is selling shares, then increase the price you will buy them for. And then wait. Somebody will have some hospital bills to pay for eventually. I buy illiquid investments all the time, and thats typically what happens. Great companies do not have liquidity problems.","We don't know how to make money in the stock market, therefore no one should be allowed to. ~Fuckers If Bill Gates wants to give the government some of his money, [here's the form](https://www.pay.gov/paygov/forms/formInstance.html?agencyFormId=23779454). If he wants to give the government some of other peoples' money, he should shut the hell up.","Seems a little strange: You exercised an option we were fully aware of and now we don't like you so vote our way or we sue. F that - two investors wanting to control the company with an undersized holding is a no go.","Activist investors can control as little as 2% of a company and still have a large effect on strategy. Since the demand is so low (removal of one account) isn't it a pretty easy choice to just make the shareholders happy?","There could be an impact on Facebook because just before the IPO, Morgan Stanley apparently sent information to selected clients that their analysts had just lowered their valuation of the company. There were also reports yesterday that the lowered valuation came about because Facebook sent some revised preliminary estimates of second quarter earnings (showing lower than expected earnings) to Morgan Stanley, and least one talking head said that Facebook might also face charges depending on what the cover letters and the e-mails back and forth between Facebook and Morgan Stanley said. Investigations have already been opened. Yes, a company wants to sell the stock being offered at the IPO at the highest price possible, but if it misled the public when offering the stock for sale (through its underwriters), it can also be liable, possibly even criminally liable. Material added in Edit: In fact, a lawsuit has already been filed in the US District Court in Manhattan in this matter. Whether the SEC ever does anything about the matter remains to be seen.","I mean, the ultimate goal of the takeover would be removing a specific account, so if twitter shuts down all accounts, the it's a win (granted the investors don't care about monetary losses, which of course they do). Still, activist investors can get into proxy fights for board seats and even strategy with just 2% of a company. If there were enough people invested only in removing Trump, the trade of unhappy shareholders vs Trump seems easy to make.","Being pushed to produce quarterly numbers isn't always the best for a company's long-term strategies. Whether or not this will happen is the question, however. Private companies don't need to post immediate substantial profits, public companies are expected to.","\"I personally think that this is how IPOs are going to work going forward. Company ownership trading will happen behind closed doors, then the hype is built in the limelight way above expectations, then the over valued IPO will drop allowing the backroom deal makers to cash out of the company, The problem isn't social networking, it is \"\"the next big thing\"\" mindset of Wall Street\"","\"Thanks for your question Dai. The circumstances under which these buyouts can occur is based on the US takeover code and related legislation, as well as the laws of the state in which the company is incorporated. It's not actually the case that a company such as Dell needs to entice or force every shareholder to sell. What is salient is the conditions under which the bidder can acquire a controlling interest in the target company and effect a merger. This usually involves acquiring at least a majority of the outstanding shares. Methods of Acquisition The quickest way for a company to be acquired is the \"\"One Step\"\" method. In this case, the bidder simply calls for a shareholder vote. If the shareholders approve the terms of the offer, the deal can go forward (excepting any legal or other impediments to the deal). In the \"\"Two-Step\"\" method, which is the case with Dell, the bidder issues a \"\"tender offer\"\" which you mentioned, where the current shareholders can agree to sell their shares to the bidder, usually at a premium. If the bidder secures the acceptance of 90% of the shares, they can immediately go forward with what is called a \"\"short form\"\" merger, and can effect the merger without ever calling for a shareholder meeting or vote. Any stockholders that hold out and do not want to sell are \"\"squeezed out\"\" once the merger has been effected, but retain the right to redeem their outstanding shares at the valuation of the tender offer. In the case you mentioned, if shareholders controlling 25% of the shares (not necessarily 25% of the shareholders) were to oppose the tender offer, there would be serveral alternatives. If the bidder did not have at least 51% of the shares secured, they would likely either increase the valuation of the tender offer, or choose to abandon the takeover. If the bidder had 51% or more of the shares secured, but not 90%, they could issue a proxy statement, call for a shareholder meeting and a vote to effect the merger. Or, they could increase the tender offer in order to try to secure 90% of the shares in order to effect the short form merger. If the bidder is able to secure even 51% of the shares, either through the proxy or by way of a controlling interest along with a consortium of other shareholders, they are able to effect the merger and squeeze out the remaining shareholders at the price of the tender offer (majority rules!). Some states' laws specify additional circumstances under which the bidder can force the current shareholders to exchange their shares for cash or converted shares, but not Delaware, where Dell is incorporate. There are also several special cases. With a \"\"top-up\"\" provision, if the company's board/management is in favor of the merger, they can simply issue more and more shares until the bidder has acquired 90% of the total outstanding shares needed for the \"\"short form\"\" merger. Top-up provisions are very common in cases of a tender offer. If the board/management opposes the merger, this is considered a \"\"hostile\"\" takover, and they can effect \"\"poison pill\"\" measures which have the opposite effect of a \"\"top-up\"\" and dilute the bidders percent of outstanding shares. However, if the bidder can secure 51% of the shares, they can simply vote to replace the current board, who can then replace the current management, such that the new board and management will put into place whatever provisions are amenable to the bidder. In the case of a short form merger or a vote to effect a merger, the shareholders who do not wish to sell have the right to sell at the tender price, or they can oppose the deal on legal grounds by arguing that the valuation of the tender offer is materially unfair. However, there are very few cases which I'm aware of where this type of challenge has been successful. However, they do not have the power to stop the merger, which has been agreed to by the majority of the shareholders. This is similar to how when the president is elected, the minority voters can't stop the new president from being inaugurated, or how you can be affected if you own a condo and the condo owners' association votes to change the rules in a way you don't like. Tough luck for you if you don't like it! If you want more detail, I'd recommend checking out a web guide from 2011 here as well as related articles from the Harvard Law blog here. I hope that helps!\"","\"We're not in Bubble #2, There is another land rush in the web due to how easy it is to get in and how everywhere else is terrible to work at this moment. Groupon is the big outlier b/c it's a sales company and not a tech company. Facebook (which I personally hate but am forced to use it) is worth what someone is willing to pay for it, all companies with stock are the same way. Will it have a market cap of $100B, you bet! There are a few once in a decade companies that will do something uniqure very very well. Think Google, Apple, Microsoft, Intel, Cisco. Facebook IMO is a walled garden, where your information is free to enter but forbidden to leave. Your data is their data, your web habits are known to them and are tracked by them. They know more about your like's dislikes, web habits than you yourself do. Damn! That's some powerful shit that people who want to peddle anything and everything to you will want. You are actively being tracked by each \"\"like\"\" button you come across on the web. Now for this whole Facebook IPO, Google has shown the power of the tech IPO post Bubble #1 in 2004. Well guess what Wall Street/Private Equity/Hedge Funds/Global Captial wants in! That's easy money to them, it doesn't want to be left out in another bubble, another hit, whatever you want to call it. That drives up the initial offering price, more media, more exposure, more demand, etc. So now Facebook has this hugely valuable database of individuals that it owns and doesn't share to anyone else and a huge demand for it.\"","@Joe.E, I disagree with your logic. The IPO clearly didn't go well--not relative to other IPOs. Were it not for the stocks underwriters stepping in late in the trading day, Facebook would likely have closed below their opening price. This story and others indicate that institution investors were given negative information by an analyst for the underwriters that other investors didn't have. This inside knowledge is certainly contributing to the drop in the stock. It's fair to argue that many individual investors were suckered into buying the stock at the IPO price because of this incomplete disclosure. It wouldn't surprise if what's happens has a negative impact on future trading volume, and creates reluctance to invest in the firm--which would certainly be an additional negative outcome beyond the dropping stock price. Edit: Dilip mentioned a lawsuit. Here's a link to an article about it.","Even people who did think it was a good didn't really get screwed. If you are an investor who thinks Facebook is a good buy then fucking hold it. The company hasn't even released its first quarter of earnings yet. If the people who bought Facebook are right about it it will be worth it in five years. The fact is we cannot say whether or not that is going to happen right now. The only people who really got screwed are the ones who wanted to flip it. If you wanted to flip it you lost a lot of money, but the retail investors who figured that Facebook long-term was worth the money, didn't get screwed. They might be wrong and might lose all their money five years from now, but they didn't get screwed yet.","Two methods: 1: Become really close friend with Marky. Probably have to take a bullet for him or something. 2: Become a major client of the investment bank that will launch the IPO (most likely Goldman), and the bank will offer you some shares before the IPO. In order to become a major client you probably have to spend several millions per year in transaction fee.","The purpose is to go public but also to generate more wealth. The real money comes when market values you at a price more than your cash flow. If a company brings in $1000 of cash flow, then that is what the employees and owners have to distribute among themselves. But if they are likely to increase to $2000 next and $4000 next year and they go public then the stock will do well. In this case, the promoters and employees with options/RSUs will benefit as well. The increased visibility is also very useful. Look at Google or FB. They didn't need the IPO proceed when they went public. They had enough cash from their business but then they would only have $1-10 billion a year. But due to the IPO their investors and employees have a huge net worth. Basically, with just a small % of shares in the public you can value the company at a high price valuing in the future cash flows (with a discount rate etc.). So instead of realizing the profit over the next 15 years, you get to enjoy it right away.","I have no pity for them either, especially since the average Joe almost never gets to buy shares in an IPO, and FB shares were priced at 100 times earnings. However, if some folks had inside info that FBs earnings were down prior to the IPO, then they this needs close examination, and, if it really took place, prosecution. It is a dangerous precedent to allow this sort of thing to take place. Oh, and Zuckerberg didn't set the price. Morgan Stanley did.","Well their money is in the company so it does matter to them. If I give a company $20k and see them blow through cash, throwing money at anything that seems like a business model, I'm going to get very concerned. You have the same issues at a private company, it's just that your shareholders are more heavily invested.","The mushroom republic, keep the public in the dark and feed 'em shit. Money buys choices and influence. The richies are cowards and fear they might have to get their fingernails dirty and perform a legitimate service in society if others are allowed to compete with them. When does the mass boycott start where everybody stops paying their mortgate/rent, insurance and taxes? That would reboot an economy.","You write loaded statements. Force is probably gunna be the only way. Current banking structure is complete fuckery. Too big to fall, consequence free institutions and you speak of them as if they will treat, you or anyone fairly.",">While I think it's crazy that all these companies are getting such high valuations, I really want to see Facebook's financials. Lack of transparency really hurts. I think any corporation over some set size should be mandated to keep all its financials fully transparent, including line by line day to day accounting. As it is, it's a black box and we can only guess.","This sounds like a pretty cool idea, and upon reflection, maybe not so crazy as it sounded to me at first. One suggestion: introduce some (probably vaguely described) rule change that makes it easy for people to contribute from their retirement account(s). That would allow you to plausibly increase the average contribution by a lot, maybe from hundreds like aranaxon described to thousands. If I were trying to do this right now, I'd gather as much money as I could (obviously) and try like hell to make alliances with pension funds and other major non profits that routinely buy a lot of common stock. Then I'd pick one fairly large bank and buy as much as possible. Be aware of [poison pills](http://en.wikipedia.org/wiki/Poison_pill) and similar common arrangements that exist to prevent this sort of thing. Partnering with other institutions would help to alleviate them. Once I controlled (with my new-found buddies) a major bank, I'd be quick to replace the board and fire senior management. I'd do everything possible to get around paying any [golden parachutes](http://en.wikipedia.org/wiki/Golden_parachute). Then make all the changes I want to the bank's practices. The general idea would be that, after this, the *threat* of doing it to another bank would be enough to get them to change, without actually having to pull off a corporate takeover.","\"[Here you go](http://www.computerweekly.com/news/2240150767/Facebook-shareholders-sue-over-misleading-IPO) It's a classic case of \"\"the worst thing you can do is give them an actual reason to go after you.\"\" The real reason folks are hating on the Facebook IPO is, as others have indicated, that they just want to dislike Zuckerberg and the IPO wasn't the instant gold everyone wants to think that IPOs are. But this (honestly minor) information fuckup is going to be the rope that is needed to hang Facebook and Morgan Stanley. It's like Al Capone terrorizing and murdering all across central America, but getting sent to jail on tax fraud.\"","Well lets see... JP Morgan Chase, for example, has a market cap of $118 billion. The U.S. labor force is about 158 million people. So if every working american kicked in about 400 bucks, you'd have enough money to buy a a controlling stake in JPM. Goldman Sachs has a market cap of $44 billion. You could buy a controlling stake in Goldman if every working american threw in about 150 bucks. Of course you'd have to purchase the stock at a large premium if you're trying to gain a controlling stake.","In all honesty, if they truly need the funding, they didn’t have a choice unless they could get one of their strategics to pony up more money. It’s either raise capital from PE or IPO at that point. They’re not going to get a third strategic in the door, especially at that valuation.","I didn't mean that in a pedantic sense. Facebook hasn't been a simple object belonging to a particular person for some time now. I would say his influence must now be lessening, and other forces will determine FB's destiny.","\"After the IPO, the market said \"\"Oh fuck, what were we thinking? We gave them too much money. We'll extract it from the schmucks that bought in.\"\" It was essentially a wealth transfer from the folks that bought to Facebook. How is that a \"\"disaster\"\" for FB?\"","You can become an activist share holder with as little as one share depending on your strategy an example of this was Hugh Fearnley-Whittingstall (excellent name) vs Tesco (a huge supermarket, think walmart). He purchased one share which gave him the right to table a resolution at the AGM, then used the media to beat Tesco into submission over his particular issue however very few of the institution share holders (think large banks, pension funds, insurance companies) voted in favor so he failed miserably, but Tesco later caved slightly through fear of bad press. Also Carl Icahn is pretty well noted for doing things like this. Regarding the amount of money, you would need to raise a hell of a lot to buy enough shares to have anything like enough of a block to influence the company directly, but to attend the AGM, ask questions and generally be a pain in the ass you only need modest amount of shares, in some cases just one share.","Because people bought their shares under the premise that they would make more money and if the company completely lied about that they will be subject to several civil and criminal violations. If people didn't believe the company was going to make more money, they would have valued their shares lower during the IPO by not forming much of a market at all.","Their problem is that the overwhelming majority of their stock is owned by pension funds, hedge funds and other funds who have no interest in long term financing. They are only interested in quarterly profits. Once a company goes public, the only way to get it out of the stock market zoo is for a single investor to acquire over 50% of the stock. The companies that you mentioned are way too big for that to happen.","Based on several of the comments, I can foresee a situation in which an activist investor kicks in a lot of his own money, which, along with funds from kickstarter and possibly some of the investor's buddies, are enough to purchase a major share in a large bank, and by persuading other sympathetic shareholders, they are able to make headway in changing the industry. While improbable, it would at least be plausible.","\"The reason to go public is to get money. Not to be snarky, but your question is like asking, \"\"Why should a company try to sell its products, when if they just piled them up in a warehouse they wouldn't have to worry about shipping and customer complaints and collecting sales tax?\"\" The answer, of course, is because they want the money. Sure, there are disadvantages to going public, like more regulation, required financial disclosures, and having to answer to stockholders. That's the price you pay for accepting money from people. They're not going to give you money for nothing.\"","They are actually pretty common and it's the reason that anyone who takes a Board seat at a company without D&O insurance is playing russian roulette. Now winning a shareholder suit on the merits (whether personal or derivative liability) is a whole different story - at least in Delaware Chancellery (fun fact DE has two judicial systems, one for corporate stuff with world class talent and one for everything else). There's this doctrine called the 'Business Judgment Rule' which is a very high bar for a shareholder to overcome. Otherwise you'd see shareholder suits for every business deal that went wrong. The other problem these Uber investors might run into is they haven't realized a loss, nor are they likely to have a negative return on the initial investment. Marking down a gain against a high water mark is an uphill battle. Based on what it public, idk the cause of action, maybe Kalanick is going back on contractual language in his separation agreement (which is currently non-public) or that some of his actions as CEO could be considered self-dealing (again, not information currently in the public domain). Or maybe it's just a threat to put all the non-public shitty things he has done in a pleading and therefore put it in the public domain.","If they own enough shares to vote to sell, you will be paid the offer price quoted to you. At that point if you do not wish to sell your only recourse will be to file a lawsuit. This is a common tactic for significant shareholders who have a minority stake and cannot block the sale because they have insufficient voting rights. What usually happens then is that they either settle the lawsuit out of court by paying a little more to the holdouts or the lawsuit is thrown out and they take the original offer from the buyer. Rarely does a lawsuit from a buyout go to trial.","Yes and no. Courts do understand the idea of tyranny of the majority. Specifically, actions that hurt the company for personal gain is still theft against the minority shareholders. It's common misconception that this fiduciary duty means that a CEO's job is to raise the price of their stock. The truth is, stock price is a number that has an extremely tenuous relation to actual company health. So, it's entirely possible for a shareholder lawsuit to happen. It's just typically cheaper and less hassle to sell the stocks for a loss and get out while they can.","This is far more important than Facebook shares. Models for games like theirs can easily be changed to find new revenue streams. Heck, if they wanted they could up and move to Google+ and still make money. Or start a traditional game app factory.","Your first scenario, involving shareholders in a private corp being limited by a contractual agreement, is common in practice. Frequent clauses include methods of valuing the shares if someone wants to sell, first right of refusal [you have to attempt to sell to the other shareholders, before you can sell to a 3rd party], and many others. These clauses are governed by contract law [ie: some clauses may be illegal in contract law, and therefore couldn't be applied here]. A Universal Shareholders' Agreement is just the same as the above, but applied to more people. You would never get an already public company to convert to a universal shareholders' agreement - because even 1 share voting 'no' would block it [due to corporate law limiting the power of a corporation from abusing minority shareholder value]. In practice, these agreements universally exist at the start of incorporation, or at least at the first moment shares become available. An example is the Canadian mega-construction company PCL*, which is employee-owned. When the original owner transferred the corporation to his employees, there was a USA in place which still today governs how the corporation operates. In theory you could have a 'public company' where most shares are already owned by the founders, and 100% of remaining shares are owned by a specific group of individuals, in which case you may be able to get a USA signed. But it wouldn't really happen in practice. *[Note that while PCL is broadly owned by a large group of employees, it is not a 'public company' because any random schmuck can't simply buy a share on the Toronto Stock Exchange. I assume most exchanges would prevent corporations from being listed if they had ownership restrictions like this].","My understanding was that if they cash out they only have to pay capital gains tax on it, which is lower than income tax for their bracket. You also have to think about tax on dividends from these stock options, which is only 15%, which is paltry to regular incometax rate that the rich pay on their salaries. According to Wikipedia: Congress passed the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), which included some of the cuts Bush requested and which he signed into law on May 28, 2003. Under the new law, qualified dividends are taxed at the same rate as long-term capital gains, which is 15 percent for most individual taxpayers Anyways, SOMETHING needs to be done.","Great for Facebook but why does a company like Sun Microsystems or FedEx sell stock? In order to reach quarterly goals a publicly traded company has to make sure they stay in the black every quarter by cutting cutting cutting cost which may not be good for a long term goal of investing in new ideas or processes.","\"While I agree with you (I wouldn't buy Facebook above $15), hence my term \"\"suckers\"\" when referring to people who bought into Facebook's IPO - I still think there should be some kind of rule in place that an IPO has to reflect a companies actual value. The IPO price of $38 meant that Facebook's P/E ratio was 104x which is absurd for an IPO.\"","\"Discussing individual stocks is discouraged here, so I'll make my answer somewhat generic. Keep in mind, some companies go public in a way that takes the shares that are held by the investment VCs (venture capitalists) and cashes them out of their positions, i.e. most if not all shares are made public. In that case, the day after IPO, the original investors have their money, and, short of the risk of being sued for fraud, could not care less what the stock does. Other companies float a small portion up front, and retain the rest. This is a way of creating a market and valuing the company, but not floating so many shares the market has trouble absorbing it. This stock has a \"\"Shares Outstanding\"\" of 2.74B but has only floated 757.21M. The nearly 2 billion shares held by the original investors certainly impact their wallets with how this IPO went. See the key statistics for the details.\"","Does anyone else think that all this facebook snafu was intentional to put egg on the face of sniveling mark zuckerberg? It seems like many in the business world treat him as though he got lucky not that he is a savy business person.","Say I am an employee of Facebook and I will be able to sell stares at enough of a profit to pay of my mortgage and have enough money left to cover my living costs for many years. I also believe that there is a 95% chance that the stock price will go up in the next few years. Do I take a 5% risk, when I can transform my life without taking any risk? (The USA tax system as explained by JoeTaxpayer increases the risk.) So you have a person being very logical and selling stocks that they believe will go up in value by more than any other investment they could have. It is called risk control. (Lot of people will know the above; therefore some people will delay buying stock until Lock Up expiration day hoping the price will be lower on that day. So the price may not go down.)","Who can buy Uber for anything close to their current valuation? They're worth more on paper than Ford, GM, or Tesla. And founders and execs usually don't get the same seniority of shares and liquidation preferences as VCs.","That's not what is entirely happening. It's two separate situations. They don't have equal voting and some are able to vote more than once. The two investors want to keep it that way while the rest want to implement an even voting system. The two investors have been asked to drop their lawsuit against the old CEO since he's no longer with the company but it's implied that they will continue to sue him because he still has influence and the ability to elect new board members which he recently added two. Also it's disengrnous to say just the two investors. They are being asked to do this by the shareholders.","Only on an accounting basis. The moment they start selling, it would plunge. Take a look at all the small float tech IPOs. Big pop, but once the lockup period ends, it drops 50% as insiders sell. In the end, fundamentals will rule. Facebook managed to unload a quarter of the company at the vastly inflated $38, which is very impressive. The other tech IPOs typically sell less than 10%, because selling more would lead to very low share prices. Remember, these guys are not retail investors selling 100 shares. The ticker shows the price of the last block of shares that was traded, but when someone tries to sell a couple million shares, then it will plunge.","> practically a venture bet > Zuckerberg made a $20bn bet I gotta agree, I mean Zuckerberg is so well known as a preeminent venture capitalist with a great track record - how can I pass up the opportunity? Also as an institutional investor, its so incredibly difficult to find a venture fund for me to put my money into, I really do need someone like him to spend my money. I mean why bother to get in at the ground floor when I can buy the company after its been hyped up right? Buy high, sell low has always been my motto!","$42.05 was the first prospective price reported in the mainstream press, and was a number that I would think got *that* many more people to jump on the bandwagon - see the CNN link I posted. And see this, too: [*ReadWriteWeb:* Were Facebook Investors Fooling Themselves? Psychologists Say Yes - June 15, 2012](http://www.readwriteweb.com/archives/were-facebook-investors-fooling-themselves-psychologists-say-yes.php)","With interest rates so low it could take a while. I agree with your capital comment but one key thing to remember is that the entire company would now change and the long-term viability of it could be jeopardized. Shareholders would focus on short-term, mainly quarterly results at the expense of long-term investment and growth strategies. This is also a reason as to why we're seeing relatively fewer IPOs in recent years compared to earlier time periods despite the value of the market growing.","You guys seem to have forgotten the most important part of this equation ... i work for a bank and I can tell u this as a painful fact ... every business is governed by its paperwork ... articles bylaws operating agreements amendments and minutes .. if a companys paperwork says that the 51% owner can fire everyone and move to Alaska and that paperwork is proper (signed and binding) it is with minimal excavation law... case in point every company is different .. and it is formed and governed by its paperwork.","I wish I saved some permalinks for how many times I've said it was one giant Pump 'n Dump for all the owners. If I had any ownership in Facebook, I would have liquidated everything I had on IPO day and never looked back. I'm surprised Zuckerberg didn't do the same (insofar as he's able to).","\"Should be titled, \"\"Facebook IPO: Could Mark Zuckerberg _Be Worth_ $24 Billion?\"\" They are reportedly looking to float only 10% of shares, at $10 billion, valuing the company at $100 billion. That doesn't mean Zuckerberg gets a paycheck of $24B on that day. While I think it's crazy that all these companies are getting such high valuations, I really want to see Facebook's financials. I also wonder how much worse Facebook will get with unnecessary shit when their goal is to meet their next quarter earnings.\"","Zuckerberg already cashed out $1B. But that was planned from the get-go so he could diversify. Employees with stock options still have to wait before they can cash out. I think its 6 months after IPO.","> He has a special class of shares that grants him 37 percent voting power even though his equity stake is much lower, and public shareholders will have less than 2 percent of votes. Fuck off with your phoney stock.","\"You bring up good points. But Facebook is getting a lot of bad press and folks are starting to get a little paranoid. I can see the website's traffic decrease because of this (at least form users in the \"\"Western\"\" world). So perhaps my idea might work for Facebook? Maybe they should offer a two-tier system before it loses its users?\"","\"again, you feel compelled to add terminology that you don't seem to understand. There is no chicanery necessary to \"\"bet\"\" against a company. It's called shorting. Our you buy a sell option (a \"\"put\"\"). These have been around for ever. Individuals can do it if they desire. Market manipulation is another matter and certainly does happen. Thus far, there does not appear to be any evidence that FB's stock price was manipulated downward, it was just over-priced to begin with.\"","No. You're entitled to 1% of votes at the shareholders' meeting (unless there's class division between shareholders, that is). If more than 50% of the shareholders vote to close the company, sell off its assets and distribute the proceeds to the owners - you'll get 1% share of the distributions.","I agree with the premise and vehemently disagree with the solution! Why in the name of all that is holy would you think giving the power to a random group of wealthy people is going to end up in ANY WAY better?! They will take that power, and grab every thing they can! The solution is ridiculous and DOESN'T follow from the problem! If you want a solution, you want REAL oversight! You want people checking these decisions and verifying them that you and the people can trust! We don't trust the market! We don't trust big money! You don't trust the government! That's why I was looking for a solution that works for everyone! Why, after all that work we went through, have you thrown it all away and gone back to this tripe?!","Yes, and EY was complacent to opine on those financials and provide a bullshit comfort letter to the book runners... More likely Zuckerberg kept saying to price it higher and MS wanted to be part of some history and didn't make a wise decision and gave in.","A company typically goes public in order to bring in additional capital. In an IPO, the company (through its officials) will typically do so by issuing additional shares, and offering to sell those to investors. If they did not do that, then there would be no net capital gain for the company; if person A sells share in company C to person B, then company C does not benefit directly from the exchange. By issuing and selling additional shares, the total value of all stock in the company can increase. Being publicly traded also greatly increases the confidence in the valuation of the company, as a consequence of the perfect market theory. There is nothing in this that says that initial investors (cofounders, employees, etc.) need to sell their shares in the process. They might choose to do so, or they might not; or they might be prevented from doing so by terms of any agreements that they have signed or by insider trading laws. Compare What happens to internal stock when a company goes public? Depending on specifics, it might be reasonable for the company to perform a share split prior to the initial public offering. That, however, doesn't affect the total value of the shares, only the price per share.","you are exactly right. people keep going on about how facebook and their ipo is a failure etc, they are totally wrong. all of this was done for one reason only - the insiders who had all these crazy valuations and forecasts etc on paper that were not actually worth anything IRL, could cash out and get some money off the back of fools. the fb ipo was a huge success for mark zuckerburg and others - not so much a success in the real world though. sadly, this whole model and 'social networking' bubble should have 'popped' long before it got to this stage, myspace should have signaled that.","There are not necessarily large shareholders, maybe every other Joe Schmoe owns 3 or 5 shares; and many shares might be inside investment funds. If you are looking for voting rights, typically, the banks/investment companies that host the accounts of the individual shareholders/fund owners have the collective voting rights, so the Fidelity's and Vanguard's of the world will be the main and deciding voters. That is very common.","Alright business types, how is facebook worth anywhere near 24B? Where is this revenue coming from? Also, how are they so sure facebook isn't going to be the next myspace, given how fickle the population is and how many people are already fed up with facebook to the point where they have closed accounts?","They didn't have enough money to cash everybody out. And at a $100B valuation, a lot of people wanted out. Note that they only earn a billion dollars (only 1% of the initial speculated valuation), and most of that needs to be reinvested into the company to keep it going. They need to spend money buying Instagram and other patents/startups, etc to ward of competitors.","No, there is no such list, as the other answers mention it is practically impossible to compile one. However you can see the institutional investors of a public company. MSN Money has this information available in a fair amount of details. For example see the Institutional Investors of GOOG","Why should they? If investors' don't want nonvoting shares, they shouldn't buy them. I don't like the big banks, but it's not like they are fleecing little old ladies here. The people with the first rights to the shares tend to be institutions who know what they are getting.","No, I was only partially sarcastic. The new stock sale goes to FB, not paid out to stockholders, at this point. Whether the stock is price right depends on how that investment is spent. People forget that stock is sold to generate investment capital, not to get a short-tem bump, and see who is left holding the bag. Was FB overpriced? It depends.","The stock market is generally a long term investment platform. The share prices reflect more the companies potential to be profitable in the future rather than its actual value. Companies that have good potential can over perform their actual value. We saw this regularly in the early days of the internet prior to the .com bust. Companies would go up exponentially based on their idea's and potential. Investors learned from that and are demanding more these days. As a result companies that do not show growth potential go down. Companies that show growth and potential (apple and google for 2 easy examples) continue to go up. Many companies have specific days where employees can buy and sell stocks. there are minor ripples in the market on these days as the demand and supply are temporarily altered by a large segment of the owner base making trades. For this reason some companies have a closed pool that is only open to inside trades that then executes the orders over time so that the effect is minimized on the actual stock price. This is not happening with face book. Instead many of the investors are dumping their stock directly into the market. These are savvy investors and if there was potential for profit remaining you would not see the full scale exodus from the stock. The fact that it is visible is scaring off investors itself. I can not think of another instance that has gone like facebook, especially one that was called so accurately by many industry pundits.","There are a lot of people speculating that Facebook will use the money they got from this to buy companies that could be used to turn their user base into more income. With the stocks dropping in value, it might even be a good time to invest in them.","Hmm, but pretty much all the smart money was on the stock not doing so hot in the first place. Leading up to the IPO there seemed to be more evidence just browsing sites like Fortune, Forbes, Reuters and the like against buying FB than there was to buy it. A lot of people probably just got suckered into the hype.","You cannot trade in pre-IPO shares of companies like Facebook without being an accredited investor. If a website or company doesn't mention that requirement, they are a scam. A legitimate market for private shares is SecondMarket.","In principle I agree with you. However the allegation is that the people managing the IPO withheld crucial information and informed insiders against investing. Maybe the allegations are false, but it should still be looked into. If the IPO shared crucial details with insider traders while keeping it from the public at large that would affect the investor's risk-assessment of a stock, that's insider trading and should be punished accordingly.","You don't have to go through an exchange. That wasn't the problem. It was that the people trading on them wouldn't be willing to take your offer. An exchange can't just list a company. They need that company's consent and the company need's the exchange's consent. I don't know if you're aware of this but that was also an entirely new disaster during Facebook's IPO. Computer glitches didn't help. What you're talking about is a called a secondary market, kind of. Stock exchanges offer those too, especially for options. That's the typical stock footage you see of guys on wall street yelling and screaming while throwing paper up in the air.","Not going to happen for Facebook since there will be too much demand and the order will go to the top clients of the underwriting investment banks. In general though, if you wanted a piece of a smaller IPO you'd just have to get in touch with a broker whose investment banking department is on the underwriting syndicate (say Merrill Lynch or Smith Barney) since IPOs often have a percentage that they allocate to retail clients (i.e. you) as well as institutional (i.e. hedge funds, pension funds, mutual funds etc.). The more in demand the IPO the harder it is to get a piece.","Nobody is going to short sell stocks through a lender that forces people to buy in as soon as it is getting good for them."],"string":"[\n \"\\\"In the US, a private company with less than 500 owners can dictate who can or can't become a shareholder (this is true in general, but I'm sure there are loopholes). Prior to Google's IPO I could not buy shares in Google at any price. The reason Google was \\\"\\\"forced\\\"\\\" to go public is the 500 shareholder rule. At a high level, with 500 shareholders the company is forced to do some extra financial accounting and they no longer can control who owns a share of the company, allowing me to purchase shares of google at that point. At that point, it typically becomes in the companies best interest to go public. See this article about Google approaching the 500 shareholder limit in 2003. Further, Sorkin is not quite correct that \\\"\\\"securities laws mandate that the company go public\\\"\\\" if by \\\"\\\"go public\\\"\\\" we mean list on a stock exchange, available for general purchase. Securities laws mandate what has to be reported in financial reporting and when you have to report it. Securities laws also can dictate restrictions on ownership of stock and if a company can impose their own restrictions. A group of investors cannot force a company onto a stock exchange. If shares of Facebook are already for sale to anyone, then having >500 shareholders will force Facebook to file more paperwork with the SEC, it won't force Facebook onto the NYSE or NASDAQ. When that point is reached, it may be in Facebook's best interest to have an IPO, but they will not be required by law to do so. Update: CNN article discusses likely Facebook IPO in 2012. When companies have more than 500 shareholders, they're required to make significant financial disclosures -- though they can choose to remain private and keep their stock from trading publicly. However, most companies facing mandatory disclosures opt to go public. The Securities and Exchange Commission gives businesses lots of time to prepare for that milestone. Companies have until 120 days after the end of the fiscal year in which they cross the 500-shareholder line to begin making their disclosures. If Facebook tips the scale this year, that gives it until April 2012 to start filing financial reports.\\\"\",\n \"Employees were already cashing out their RSUs and selling stock on private markets. >Even if Facebook could resist, an eager army of Facebook employees is pushing hard for an I.P.O., according to Eric Eldon of TechCrunch. In 2008, Facebook adopted a new restricted stock program that prevented employees from selling their shares until an I.P.O. or a sale, or if Facebook permitted it. They still could have stayed private if they really wanted to. They were compensating employees in stock, and those employees wanted to cash out. The underwriters wanted to cash out before the financials became open to public scrutiny.\",\n \"The SEC requires that they register with the SEC due to having more than 500 shareholders. With that comes public reporting and all kinds of regulatory compliance. At that point it is more of a practical necessity to follow through with an IPO, even though it is not a legal one. http://dealbook.nytimes.com/2011/11/29/facebook-may-be-forced-to-go-public-amid-market-gloom/\",\n \"Here is something I have always wondered. Companies are required to go public after they have a certain number of investors. Used to be 500 now 2000. Can a company that has been forced to go public, then be made private again? How?\",\n \"Here's the reality: Facebook was forced into an IPO because of stupid federal regulations. They would have happily continued to stay closely held and raked in money while maintaining their mystique. If there is any problem, start at the root.\",\n \"Have a proxy battle if you care so much about the long-term prospects of facebook or sue him for negligence. If you've been paying attention to google/facebook/yahoo's recent massive acquisition spree recently, you either wouldn't care so much about this deal or shouldn't be in the stock if you were concerned about Zuckerberg playing venture capital.\",\n \"Sure.. its possible, its exactly what activist investors do (with institutional money - e.g. pension funds, family foundations). Crowdsourcing probably implies an average <$100 donation per contributor in your mind however, so you'd need a lot of contributors (as opposed to an institution writing a $1B check out of the box) As a benchmark, you can start agitating even without owning shares, but it probably lends credibility to have a few percentage points. As of today, GS's market cap is $46B, JPM's market cap is $122B, BAML's market cap is $77B... so you'd need at least $1B of capital to buy a percentage point or two. At $100 per ticket. that's 10M individual donors.\",\n \"For Facebook and such companies, their ability to earn billions only happens through an IPO because that business model doesn't generate revenue. Without some drastic change that no one has mentioned, Facebook cannot make a profit, much less multi-billion dollar yearly profits. So you launch an IPO to rip off the suckers\",\n \"Actually regulation was really helpful here: some investors tried to invest into facebook privately, having very limited information. IPO just made things visible. Perhaps a shitty analogy would help you to understand: > When John was beating his wife privately that was OK because nobody saw her face. I'm sure she was asking for it. But now due to stupid federal regulations there is an open investigation and everybody knows she was beaten. This sucks. Start at the root: fight with those stupid federal regulations which break into private homes. This makes as much sense as your comment.\",\n \"Sure, you're happy to trust Page or Zuckerberg to put money to good use. But sometimes bad managers burn through company resources, desperately trying to save their jobs. Great managers with long term visions deserve a long leash, but companies with bad management can sometimes be helped with outside discipline.\",\n \"It's amateurish to expect Facebook to do anything other than what Zuckerberg wants. His shares give him control over the company. This was known before the IPO. People that thought he would change and take actions that would benefit them, instead of himself are learning an expensive lesson.\",\n \"It would depend on the bounds of your hypothetical. If the investor group is blind to cost + has infinite money and the existing management is unwilling to comply at any cost, then management will destroy the company before the investor group can take it over. If the existing management follow rational choice theory; then an investment group with unlimited money could take over, hold a special meeting on it, etc. Shareholders can't force management to do anything per se, as management decisions that violate fiduciary duty aren't criminally liable unless the act itself is a crime. So if an investor group were to try a hostile takeover, and Twitter mgmt said we'll see you in hell; then they could just shut down every data center, sell off twitter.com, terminate all the employees, issue a billion new shares, issue every employee a million $0.01 strike warrants, etc. until there's nothing left to take over just to spite them. Defensive strategies get pretty creative and are highly amusing to watch if you don't have a dog in the fight.\",\n \"It's a good point and I think you answered the question yourself, most IPOs don't have the option. There is a real risk of an undersubscribed IPO, which can be a real problem for a company since they can't easily go back to the market for money. Facebook might have a tough time issuing an IPO under the current market conditions, especially following Zynga's weak showing. They might feel safer with a traditional IPO.\",\n \"Yeah from what I've read, Facebook is pilling up the profits so they could be in very good position to do the RA as well. Its crazy if you think about the Google one.. At least $100m more went to the shareholders due to the different fee structure. Why wouldn't you do that if you had the option?\",\n \"In reality, shareholders have very few rights other than the right to profits and the right to vote on a board. In general, a proxy fight to replace the board is complicated and expensive, so unless the interested parties buy close to 50% of the shares it's unlikely to be successful. Furthermore, a lot of the shares are held by insiders and institutions. I suppose if a large group of shareholders got together and demanded this, the existing directors may listen and give in to avoid unhappy shareholders being a general annoyance. That seems pretty unlikely unless the stake gets large. There's a great episode of NPR Planet Money [board games](http://www.npr.org/sections/money/2017/07/19/538141248/episode-594-board-games) which talks about one man's struggle to get the company to take some action.\",\n \"Presumably they would lose value eventually. They're not going to turn a profit anytime soon. There may come a day when they've burned through their cash, can't get anymore private equity dollars, and have no choice but to either raise money with public equity or entertain discounted offers to buy a controlling interest.\",\n \"What you describe there is the textbook definition of a proxy fight: buy a 5-10% stake (we're talking $10-$15 billion here for major money center banks), work with other shareholders, try to replace the directors, change business practices, etc. It's a strategy that works in many cases, but the sheer amount of stock you'd have to buy to effect a traditional proxy fight makes this strategy neither probable nor plausible. Like I said, the only believable way to do this is a proxy fight via the press: buy a small number of shares, table resolutions at the annual meetings, and leverage those resolutions with the press.\",\n \"Let’s turn this round. Now what if the only people willing to own part of company are doing it due to the expectation that they will make money in the short term form the company….\",\n \"Anti-Facebook circlejerk continues. Where were these articles before it went public ? It makes it seem like bad for common investors when in reality they couldn't even get in on the stock. It was the institutional funds and connected investors who bought the stock at 38. The common market actually was the one that didn't support the stock once it went public. If anyone, it's the institutional funds that got screwed.\",\n \"If you hold at least $2,000 of a company's shares for at least a year you can submit a proxy filing -- a stockholder proposal at the shareholders' meeting. Then you can use the media to agitate around that proposal. (See Hugh Fearnley-Whittingstall, mentioned here as well). Companies have been known to bow to media pressure around minority shareholder proposals. The guidelines for proxy filings are here: http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=47b43cbb88844faad586861c05c81595&rgn=div5&view=text&node=17:3.0.1.1.1&idno=17#17:3.0.1.1.1.2.82.201 Buying enough shares to assume control of a major money center bank is not possible, regardless of the amount of money you can raise (remember: there are poison pill provisions, not to mention the fact that the more shares you want to buy, the higher the price will be). tl;dr: The way to do what you're trying to do is not by accumulating shares but by using the media. You need $2,000.\",\n \"this will not work, why they fuck they are slow to act? are they waiting for something while robbing everyone blind... just go to a rich guy and take his stuff he will never share, never. he will lie and cheat like mr gates here.\",\n \"Maybe you should read the *whole* thread before replying? From [the story I linked above:](http://www.computerweekly.com/news/2240150767/Facebook-shareholders-sue-over-misleading-IPO) >It has emerged that only a select group of insiders were aware that Facebook was forecast to earn tens of millions of dollars less than had been publicly stated. You can announce news, or you can withhold it as corporate proprietary information. What you most definitely *cannot* do is just tell a few friends.\",\n \"So in a ten year history the company makes one misstep (one which makes perfect sense; it was just an error in timing) and we want to throw out all the leadership and take control? Where is this kind of uproar at investment banks that leveraged themselves out on a limb in stormy waters? Or at Microsoft that routinely pours money down product holes without marketing and advertising support? Or any of a dozen other companies that make stupid decisions driven by the ego or short-sightedness of the CEO? No, let's beat on one of the best executives on Wall Street because we're whiny about short-term losses in pursuit of long-term gains. We need more honeypots for stupid investors like Facebook - maybe if enough idiots get burned they'll just get out.\",\n \"Their reputation is still stellar, just because people we're dumb enough to buy in at 38$ doesn't reflect on facebook, it reflects on the underwriters. You think FB would have said no with the IPO price had been 100$?\",\n \"Yes, because he told Morgan Stanley and a few others that quarterly earnings were going to be down - but no one else - and because he is perceived as being an untrustworthy weasel. I'm not saying Zuckerberg isn't a slimy weasel, but it was the underwriter's, in this case Morgan Stanley, job to let this be known, or not known, but certainly not known to only a few of their top investors and insider people. When filing a lawsuit, you go where the money is. In this case, Zuckerberg and his billions.\",\n \"You are right that Facebook really doesn't get impacted as they got their $38. However it would make it slightly more difficult for Facebook to raise more money in future as large investors would be more cautious. This can keep the price lowers than it actually needs to be. Quite a few companies try to list the IPO at lower price so that it keeps going up and have more positive effect overall there by making it easier for future borrowings. See related question Why would a company care about the price of its own shares in the stock market?\",\n \"Together the founders represent 100% of the outstanding stock, so they can do it however they like.\",\n \"Everyone has a price. If nobody is selling shares, then increase the price you will buy them for. And then wait. Somebody will have some hospital bills to pay for eventually. I buy illiquid investments all the time, and thats typically what happens. Great companies do not have liquidity problems.\",\n \"We don't know how to make money in the stock market, therefore no one should be allowed to. ~Fuckers If Bill Gates wants to give the government some of his money, [here's the form](https://www.pay.gov/paygov/forms/formInstance.html?agencyFormId=23779454). If he wants to give the government some of other peoples' money, he should shut the hell up.\",\n \"Seems a little strange: You exercised an option we were fully aware of and now we don't like you so vote our way or we sue. F that - two investors wanting to control the company with an undersized holding is a no go.\",\n \"Activist investors can control as little as 2% of a company and still have a large effect on strategy. Since the demand is so low (removal of one account) isn't it a pretty easy choice to just make the shareholders happy?\",\n \"There could be an impact on Facebook because just before the IPO, Morgan Stanley apparently sent information to selected clients that their analysts had just lowered their valuation of the company. There were also reports yesterday that the lowered valuation came about because Facebook sent some revised preliminary estimates of second quarter earnings (showing lower than expected earnings) to Morgan Stanley, and least one talking head said that Facebook might also face charges depending on what the cover letters and the e-mails back and forth between Facebook and Morgan Stanley said. Investigations have already been opened. Yes, a company wants to sell the stock being offered at the IPO at the highest price possible, but if it misled the public when offering the stock for sale (through its underwriters), it can also be liable, possibly even criminally liable. Material added in Edit: In fact, a lawsuit has already been filed in the US District Court in Manhattan in this matter. Whether the SEC ever does anything about the matter remains to be seen.\",\n \"I mean, the ultimate goal of the takeover would be removing a specific account, so if twitter shuts down all accounts, the it's a win (granted the investors don't care about monetary losses, which of course they do). Still, activist investors can get into proxy fights for board seats and even strategy with just 2% of a company. If there were enough people invested only in removing Trump, the trade of unhappy shareholders vs Trump seems easy to make.\",\n \"Being pushed to produce quarterly numbers isn't always the best for a company's long-term strategies. Whether or not this will happen is the question, however. Private companies don't need to post immediate substantial profits, public companies are expected to.\",\n \"\\\"I personally think that this is how IPOs are going to work going forward. Company ownership trading will happen behind closed doors, then the hype is built in the limelight way above expectations, then the over valued IPO will drop allowing the backroom deal makers to cash out of the company, The problem isn't social networking, it is \\\"\\\"the next big thing\\\"\\\" mindset of Wall Street\\\"\",\n \"\\\"Thanks for your question Dai. The circumstances under which these buyouts can occur is based on the US takeover code and related legislation, as well as the laws of the state in which the company is incorporated. It's not actually the case that a company such as Dell needs to entice or force every shareholder to sell. What is salient is the conditions under which the bidder can acquire a controlling interest in the target company and effect a merger. This usually involves acquiring at least a majority of the outstanding shares. Methods of Acquisition The quickest way for a company to be acquired is the \\\"\\\"One Step\\\"\\\" method. In this case, the bidder simply calls for a shareholder vote. If the shareholders approve the terms of the offer, the deal can go forward (excepting any legal or other impediments to the deal). In the \\\"\\\"Two-Step\\\"\\\" method, which is the case with Dell, the bidder issues a \\\"\\\"tender offer\\\"\\\" which you mentioned, where the current shareholders can agree to sell their shares to the bidder, usually at a premium. If the bidder secures the acceptance of 90% of the shares, they can immediately go forward with what is called a \\\"\\\"short form\\\"\\\" merger, and can effect the merger without ever calling for a shareholder meeting or vote. Any stockholders that hold out and do not want to sell are \\\"\\\"squeezed out\\\"\\\" once the merger has been effected, but retain the right to redeem their outstanding shares at the valuation of the tender offer. In the case you mentioned, if shareholders controlling 25% of the shares (not necessarily 25% of the shareholders) were to oppose the tender offer, there would be serveral alternatives. If the bidder did not have at least 51% of the shares secured, they would likely either increase the valuation of the tender offer, or choose to abandon the takeover. If the bidder had 51% or more of the shares secured, but not 90%, they could issue a proxy statement, call for a shareholder meeting and a vote to effect the merger. Or, they could increase the tender offer in order to try to secure 90% of the shares in order to effect the short form merger. If the bidder is able to secure even 51% of the shares, either through the proxy or by way of a controlling interest along with a consortium of other shareholders, they are able to effect the merger and squeeze out the remaining shareholders at the price of the tender offer (majority rules!). Some states' laws specify additional circumstances under which the bidder can force the current shareholders to exchange their shares for cash or converted shares, but not Delaware, where Dell is incorporate. There are also several special cases. With a \\\"\\\"top-up\\\"\\\" provision, if the company's board/management is in favor of the merger, they can simply issue more and more shares until the bidder has acquired 90% of the total outstanding shares needed for the \\\"\\\"short form\\\"\\\" merger. Top-up provisions are very common in cases of a tender offer. If the board/management opposes the merger, this is considered a \\\"\\\"hostile\\\"\\\" takover, and they can effect \\\"\\\"poison pill\\\"\\\" measures which have the opposite effect of a \\\"\\\"top-up\\\"\\\" and dilute the bidders percent of outstanding shares. However, if the bidder can secure 51% of the shares, they can simply vote to replace the current board, who can then replace the current management, such that the new board and management will put into place whatever provisions are amenable to the bidder. In the case of a short form merger or a vote to effect a merger, the shareholders who do not wish to sell have the right to sell at the tender price, or they can oppose the deal on legal grounds by arguing that the valuation of the tender offer is materially unfair. However, there are very few cases which I'm aware of where this type of challenge has been successful. However, they do not have the power to stop the merger, which has been agreed to by the majority of the shareholders. This is similar to how when the president is elected, the minority voters can't stop the new president from being inaugurated, or how you can be affected if you own a condo and the condo owners' association votes to change the rules in a way you don't like. Tough luck for you if you don't like it! If you want more detail, I'd recommend checking out a web guide from 2011 here as well as related articles from the Harvard Law blog here. I hope that helps!\\\"\",\n \"\\\"We're not in Bubble #2, There is another land rush in the web due to how easy it is to get in and how everywhere else is terrible to work at this moment. Groupon is the big outlier b/c it's a sales company and not a tech company. Facebook (which I personally hate but am forced to use it) is worth what someone is willing to pay for it, all companies with stock are the same way. Will it have a market cap of $100B, you bet! There are a few once in a decade companies that will do something uniqure very very well. Think Google, Apple, Microsoft, Intel, Cisco. Facebook IMO is a walled garden, where your information is free to enter but forbidden to leave. Your data is their data, your web habits are known to them and are tracked by them. They know more about your like's dislikes, web habits than you yourself do. Damn! That's some powerful shit that people who want to peddle anything and everything to you will want. You are actively being tracked by each \\\"\\\"like\\\"\\\" button you come across on the web. Now for this whole Facebook IPO, Google has shown the power of the tech IPO post Bubble #1 in 2004. Well guess what Wall Street/Private Equity/Hedge Funds/Global Captial wants in! That's easy money to them, it doesn't want to be left out in another bubble, another hit, whatever you want to call it. That drives up the initial offering price, more media, more exposure, more demand, etc. So now Facebook has this hugely valuable database of individuals that it owns and doesn't share to anyone else and a huge demand for it.\\\"\",\n \"@Joe.E, I disagree with your logic. The IPO clearly didn't go well--not relative to other IPOs. Were it not for the stocks underwriters stepping in late in the trading day, Facebook would likely have closed below their opening price. This story and others indicate that institution investors were given negative information by an analyst for the underwriters that other investors didn't have. This inside knowledge is certainly contributing to the drop in the stock. It's fair to argue that many individual investors were suckered into buying the stock at the IPO price because of this incomplete disclosure. It wouldn't surprise if what's happens has a negative impact on future trading volume, and creates reluctance to invest in the firm--which would certainly be an additional negative outcome beyond the dropping stock price. Edit: Dilip mentioned a lawsuit. Here's a link to an article about it.\",\n \"Even people who did think it was a good didn't really get screwed. If you are an investor who thinks Facebook is a good buy then fucking hold it. The company hasn't even released its first quarter of earnings yet. If the people who bought Facebook are right about it it will be worth it in five years. The fact is we cannot say whether or not that is going to happen right now. The only people who really got screwed are the ones who wanted to flip it. If you wanted to flip it you lost a lot of money, but the retail investors who figured that Facebook long-term was worth the money, didn't get screwed. They might be wrong and might lose all their money five years from now, but they didn't get screwed yet.\",\n \"Two methods: 1: Become really close friend with Marky. Probably have to take a bullet for him or something. 2: Become a major client of the investment bank that will launch the IPO (most likely Goldman), and the bank will offer you some shares before the IPO. In order to become a major client you probably have to spend several millions per year in transaction fee.\",\n \"The purpose is to go public but also to generate more wealth. The real money comes when market values you at a price more than your cash flow. If a company brings in $1000 of cash flow, then that is what the employees and owners have to distribute among themselves. But if they are likely to increase to $2000 next and $4000 next year and they go public then the stock will do well. In this case, the promoters and employees with options/RSUs will benefit as well. The increased visibility is also very useful. Look at Google or FB. They didn't need the IPO proceed when they went public. They had enough cash from their business but then they would only have $1-10 billion a year. But due to the IPO their investors and employees have a huge net worth. Basically, with just a small % of shares in the public you can value the company at a high price valuing in the future cash flows (with a discount rate etc.). So instead of realizing the profit over the next 15 years, you get to enjoy it right away.\",\n \"I have no pity for them either, especially since the average Joe almost never gets to buy shares in an IPO, and FB shares were priced at 100 times earnings. However, if some folks had inside info that FBs earnings were down prior to the IPO, then they this needs close examination, and, if it really took place, prosecution. It is a dangerous precedent to allow this sort of thing to take place. Oh, and Zuckerberg didn't set the price. Morgan Stanley did.\",\n \"Well their money is in the company so it does matter to them. If I give a company $20k and see them blow through cash, throwing money at anything that seems like a business model, I'm going to get very concerned. You have the same issues at a private company, it's just that your shareholders are more heavily invested.\",\n \"The mushroom republic, keep the public in the dark and feed 'em shit. Money buys choices and influence. The richies are cowards and fear they might have to get their fingernails dirty and perform a legitimate service in society if others are allowed to compete with them. When does the mass boycott start where everybody stops paying their mortgate/rent, insurance and taxes? That would reboot an economy.\",\n \"You write loaded statements. Force is probably gunna be the only way. Current banking structure is complete fuckery. Too big to fall, consequence free institutions and you speak of them as if they will treat, you or anyone fairly.\",\n \">While I think it's crazy that all these companies are getting such high valuations, I really want to see Facebook's financials. Lack of transparency really hurts. I think any corporation over some set size should be mandated to keep all its financials fully transparent, including line by line day to day accounting. As it is, it's a black box and we can only guess.\",\n \"This sounds like a pretty cool idea, and upon reflection, maybe not so crazy as it sounded to me at first. One suggestion: introduce some (probably vaguely described) rule change that makes it easy for people to contribute from their retirement account(s). That would allow you to plausibly increase the average contribution by a lot, maybe from hundreds like aranaxon described to thousands. If I were trying to do this right now, I'd gather as much money as I could (obviously) and try like hell to make alliances with pension funds and other major non profits that routinely buy a lot of common stock. Then I'd pick one fairly large bank and buy as much as possible. Be aware of [poison pills](http://en.wikipedia.org/wiki/Poison_pill) and similar common arrangements that exist to prevent this sort of thing. Partnering with other institutions would help to alleviate them. Once I controlled (with my new-found buddies) a major bank, I'd be quick to replace the board and fire senior management. I'd do everything possible to get around paying any [golden parachutes](http://en.wikipedia.org/wiki/Golden_parachute). Then make all the changes I want to the bank's practices. The general idea would be that, after this, the *threat* of doing it to another bank would be enough to get them to change, without actually having to pull off a corporate takeover.\",\n \"\\\"[Here you go](http://www.computerweekly.com/news/2240150767/Facebook-shareholders-sue-over-misleading-IPO) It's a classic case of \\\"\\\"the worst thing you can do is give them an actual reason to go after you.\\\"\\\" The real reason folks are hating on the Facebook IPO is, as others have indicated, that they just want to dislike Zuckerberg and the IPO wasn't the instant gold everyone wants to think that IPOs are. But this (honestly minor) information fuckup is going to be the rope that is needed to hang Facebook and Morgan Stanley. It's like Al Capone terrorizing and murdering all across central America, but getting sent to jail on tax fraud.\\\"\",\n \"Well lets see... JP Morgan Chase, for example, has a market cap of $118 billion. The U.S. labor force is about 158 million people. So if every working american kicked in about 400 bucks, you'd have enough money to buy a a controlling stake in JPM. Goldman Sachs has a market cap of $44 billion. You could buy a controlling stake in Goldman if every working american threw in about 150 bucks. Of course you'd have to purchase the stock at a large premium if you're trying to gain a controlling stake.\",\n \"In all honesty, if they truly need the funding, they didn’t have a choice unless they could get one of their strategics to pony up more money. It’s either raise capital from PE or IPO at that point. They’re not going to get a third strategic in the door, especially at that valuation.\",\n \"I didn't mean that in a pedantic sense. Facebook hasn't been a simple object belonging to a particular person for some time now. I would say his influence must now be lessening, and other forces will determine FB's destiny.\",\n \"\\\"After the IPO, the market said \\\"\\\"Oh fuck, what were we thinking? We gave them too much money. We'll extract it from the schmucks that bought in.\\\"\\\" It was essentially a wealth transfer from the folks that bought to Facebook. How is that a \\\"\\\"disaster\\\"\\\" for FB?\\\"\",\n \"You can become an activist share holder with as little as one share depending on your strategy an example of this was Hugh Fearnley-Whittingstall (excellent name) vs Tesco (a huge supermarket, think walmart). He purchased one share which gave him the right to table a resolution at the AGM, then used the media to beat Tesco into submission over his particular issue however very few of the institution share holders (think large banks, pension funds, insurance companies) voted in favor so he failed miserably, but Tesco later caved slightly through fear of bad press. Also Carl Icahn is pretty well noted for doing things like this. Regarding the amount of money, you would need to raise a hell of a lot to buy enough shares to have anything like enough of a block to influence the company directly, but to attend the AGM, ask questions and generally be a pain in the ass you only need modest amount of shares, in some cases just one share.\",\n \"Because people bought their shares under the premise that they would make more money and if the company completely lied about that they will be subject to several civil and criminal violations. If people didn't believe the company was going to make more money, they would have valued their shares lower during the IPO by not forming much of a market at all.\",\n \"Their problem is that the overwhelming majority of their stock is owned by pension funds, hedge funds and other funds who have no interest in long term financing. They are only interested in quarterly profits. Once a company goes public, the only way to get it out of the stock market zoo is for a single investor to acquire over 50% of the stock. The companies that you mentioned are way too big for that to happen.\",\n \"Based on several of the comments, I can foresee a situation in which an activist investor kicks in a lot of his own money, which, along with funds from kickstarter and possibly some of the investor's buddies, are enough to purchase a major share in a large bank, and by persuading other sympathetic shareholders, they are able to make headway in changing the industry. While improbable, it would at least be plausible.\",\n \"\\\"The reason to go public is to get money. Not to be snarky, but your question is like asking, \\\"\\\"Why should a company try to sell its products, when if they just piled them up in a warehouse they wouldn't have to worry about shipping and customer complaints and collecting sales tax?\\\"\\\" The answer, of course, is because they want the money. Sure, there are disadvantages to going public, like more regulation, required financial disclosures, and having to answer to stockholders. That's the price you pay for accepting money from people. They're not going to give you money for nothing.\\\"\",\n \"They are actually pretty common and it's the reason that anyone who takes a Board seat at a company without D&O insurance is playing russian roulette. Now winning a shareholder suit on the merits (whether personal or derivative liability) is a whole different story - at least in Delaware Chancellery (fun fact DE has two judicial systems, one for corporate stuff with world class talent and one for everything else). There's this doctrine called the 'Business Judgment Rule' which is a very high bar for a shareholder to overcome. Otherwise you'd see shareholder suits for every business deal that went wrong. The other problem these Uber investors might run into is they haven't realized a loss, nor are they likely to have a negative return on the initial investment. Marking down a gain against a high water mark is an uphill battle. Based on what it public, idk the cause of action, maybe Kalanick is going back on contractual language in his separation agreement (which is currently non-public) or that some of his actions as CEO could be considered self-dealing (again, not information currently in the public domain). Or maybe it's just a threat to put all the non-public shitty things he has done in a pleading and therefore put it in the public domain.\",\n \"If they own enough shares to vote to sell, you will be paid the offer price quoted to you. At that point if you do not wish to sell your only recourse will be to file a lawsuit. This is a common tactic for significant shareholders who have a minority stake and cannot block the sale because they have insufficient voting rights. What usually happens then is that they either settle the lawsuit out of court by paying a little more to the holdouts or the lawsuit is thrown out and they take the original offer from the buyer. Rarely does a lawsuit from a buyout go to trial.\",\n \"Yes and no. Courts do understand the idea of tyranny of the majority. Specifically, actions that hurt the company for personal gain is still theft against the minority shareholders. It's common misconception that this fiduciary duty means that a CEO's job is to raise the price of their stock. The truth is, stock price is a number that has an extremely tenuous relation to actual company health. So, it's entirely possible for a shareholder lawsuit to happen. It's just typically cheaper and less hassle to sell the stocks for a loss and get out while they can.\",\n \"This is far more important than Facebook shares. Models for games like theirs can easily be changed to find new revenue streams. Heck, if they wanted they could up and move to Google+ and still make money. Or start a traditional game app factory.\",\n \"Your first scenario, involving shareholders in a private corp being limited by a contractual agreement, is common in practice. Frequent clauses include methods of valuing the shares if someone wants to sell, first right of refusal [you have to attempt to sell to the other shareholders, before you can sell to a 3rd party], and many others. These clauses are governed by contract law [ie: some clauses may be illegal in contract law, and therefore couldn't be applied here]. A Universal Shareholders' Agreement is just the same as the above, but applied to more people. You would never get an already public company to convert to a universal shareholders' agreement - because even 1 share voting 'no' would block it [due to corporate law limiting the power of a corporation from abusing minority shareholder value]. In practice, these agreements universally exist at the start of incorporation, or at least at the first moment shares become available. An example is the Canadian mega-construction company PCL*, which is employee-owned. When the original owner transferred the corporation to his employees, there was a USA in place which still today governs how the corporation operates. In theory you could have a 'public company' where most shares are already owned by the founders, and 100% of remaining shares are owned by a specific group of individuals, in which case you may be able to get a USA signed. But it wouldn't really happen in practice. *[Note that while PCL is broadly owned by a large group of employees, it is not a 'public company' because any random schmuck can't simply buy a share on the Toronto Stock Exchange. I assume most exchanges would prevent corporations from being listed if they had ownership restrictions like this].\",\n \"My understanding was that if they cash out they only have to pay capital gains tax on it, which is lower than income tax for their bracket. You also have to think about tax on dividends from these stock options, which is only 15%, which is paltry to regular incometax rate that the rich pay on their salaries. According to Wikipedia: Congress passed the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), which included some of the cuts Bush requested and which he signed into law on May 28, 2003. Under the new law, qualified dividends are taxed at the same rate as long-term capital gains, which is 15 percent for most individual taxpayers Anyways, SOMETHING needs to be done.\",\n \"Great for Facebook but why does a company like Sun Microsystems or FedEx sell stock? In order to reach quarterly goals a publicly traded company has to make sure they stay in the black every quarter by cutting cutting cutting cost which may not be good for a long term goal of investing in new ideas or processes.\",\n \"\\\"While I agree with you (I wouldn't buy Facebook above $15), hence my term \\\"\\\"suckers\\\"\\\" when referring to people who bought into Facebook's IPO - I still think there should be some kind of rule in place that an IPO has to reflect a companies actual value. The IPO price of $38 meant that Facebook's P/E ratio was 104x which is absurd for an IPO.\\\"\",\n \"\\\"Discussing individual stocks is discouraged here, so I'll make my answer somewhat generic. Keep in mind, some companies go public in a way that takes the shares that are held by the investment VCs (venture capitalists) and cashes them out of their positions, i.e. most if not all shares are made public. In that case, the day after IPO, the original investors have their money, and, short of the risk of being sued for fraud, could not care less what the stock does. Other companies float a small portion up front, and retain the rest. This is a way of creating a market and valuing the company, but not floating so many shares the market has trouble absorbing it. This stock has a \\\"\\\"Shares Outstanding\\\"\\\" of 2.74B but has only floated 757.21M. The nearly 2 billion shares held by the original investors certainly impact their wallets with how this IPO went. See the key statistics for the details.\\\"\",\n \"Does anyone else think that all this facebook snafu was intentional to put egg on the face of sniveling mark zuckerberg? It seems like many in the business world treat him as though he got lucky not that he is a savy business person.\",\n \"Say I am an employee of Facebook and I will be able to sell stares at enough of a profit to pay of my mortgage and have enough money left to cover my living costs for many years. I also believe that there is a 95% chance that the stock price will go up in the next few years. Do I take a 5% risk, when I can transform my life without taking any risk? (The USA tax system as explained by JoeTaxpayer increases the risk.) So you have a person being very logical and selling stocks that they believe will go up in value by more than any other investment they could have. It is called risk control. (Lot of people will know the above; therefore some people will delay buying stock until Lock Up expiration day hoping the price will be lower on that day. So the price may not go down.)\",\n \"Who can buy Uber for anything close to their current valuation? They're worth more on paper than Ford, GM, or Tesla. And founders and execs usually don't get the same seniority of shares and liquidation preferences as VCs.\",\n \"That's not what is entirely happening. It's two separate situations. They don't have equal voting and some are able to vote more than once. The two investors want to keep it that way while the rest want to implement an even voting system. The two investors have been asked to drop their lawsuit against the old CEO since he's no longer with the company but it's implied that they will continue to sue him because he still has influence and the ability to elect new board members which he recently added two. Also it's disengrnous to say just the two investors. They are being asked to do this by the shareholders.\",\n \"Only on an accounting basis. The moment they start selling, it would plunge. Take a look at all the small float tech IPOs. Big pop, but once the lockup period ends, it drops 50% as insiders sell. In the end, fundamentals will rule. Facebook managed to unload a quarter of the company at the vastly inflated $38, which is very impressive. The other tech IPOs typically sell less than 10%, because selling more would lead to very low share prices. Remember, these guys are not retail investors selling 100 shares. The ticker shows the price of the last block of shares that was traded, but when someone tries to sell a couple million shares, then it will plunge.\",\n \"> practically a venture bet > Zuckerberg made a $20bn bet I gotta agree, I mean Zuckerberg is so well known as a preeminent venture capitalist with a great track record - how can I pass up the opportunity? Also as an institutional investor, its so incredibly difficult to find a venture fund for me to put my money into, I really do need someone like him to spend my money. I mean why bother to get in at the ground floor when I can buy the company after its been hyped up right? Buy high, sell low has always been my motto!\",\n \"$42.05 was the first prospective price reported in the mainstream press, and was a number that I would think got *that* many more people to jump on the bandwagon - see the CNN link I posted. And see this, too: [*ReadWriteWeb:* Were Facebook Investors Fooling Themselves? Psychologists Say Yes - June 15, 2012](http://www.readwriteweb.com/archives/were-facebook-investors-fooling-themselves-psychologists-say-yes.php)\",\n \"With interest rates so low it could take a while. I agree with your capital comment but one key thing to remember is that the entire company would now change and the long-term viability of it could be jeopardized. Shareholders would focus on short-term, mainly quarterly results at the expense of long-term investment and growth strategies. This is also a reason as to why we're seeing relatively fewer IPOs in recent years compared to earlier time periods despite the value of the market growing.\",\n \"You guys seem to have forgotten the most important part of this equation ... i work for a bank and I can tell u this as a painful fact ... every business is governed by its paperwork ... articles bylaws operating agreements amendments and minutes .. if a companys paperwork says that the 51% owner can fire everyone and move to Alaska and that paperwork is proper (signed and binding) it is with minimal excavation law... case in point every company is different .. and it is formed and governed by its paperwork.\",\n \"I wish I saved some permalinks for how many times I've said it was one giant Pump 'n Dump for all the owners. If I had any ownership in Facebook, I would have liquidated everything I had on IPO day and never looked back. I'm surprised Zuckerberg didn't do the same (insofar as he's able to).\",\n \"\\\"Should be titled, \\\"\\\"Facebook IPO: Could Mark Zuckerberg _Be Worth_ $24 Billion?\\\"\\\" They are reportedly looking to float only 10% of shares, at $10 billion, valuing the company at $100 billion. That doesn't mean Zuckerberg gets a paycheck of $24B on that day. While I think it's crazy that all these companies are getting such high valuations, I really want to see Facebook's financials. I also wonder how much worse Facebook will get with unnecessary shit when their goal is to meet their next quarter earnings.\\\"\",\n \"Zuckerberg already cashed out $1B. But that was planned from the get-go so he could diversify. Employees with stock options still have to wait before they can cash out. I think its 6 months after IPO.\",\n \"> He has a special class of shares that grants him 37 percent voting power even though his equity stake is much lower, and public shareholders will have less than 2 percent of votes. Fuck off with your phoney stock.\",\n \"\\\"You bring up good points. But Facebook is getting a lot of bad press and folks are starting to get a little paranoid. I can see the website's traffic decrease because of this (at least form users in the \\\"\\\"Western\\\"\\\" world). So perhaps my idea might work for Facebook? Maybe they should offer a two-tier system before it loses its users?\\\"\",\n \"\\\"again, you feel compelled to add terminology that you don't seem to understand. There is no chicanery necessary to \\\"\\\"bet\\\"\\\" against a company. It's called shorting. Our you buy a sell option (a \\\"\\\"put\\\"\\\"). These have been around for ever. Individuals can do it if they desire. Market manipulation is another matter and certainly does happen. Thus far, there does not appear to be any evidence that FB's stock price was manipulated downward, it was just over-priced to begin with.\\\"\",\n \"No. You're entitled to 1% of votes at the shareholders' meeting (unless there's class division between shareholders, that is). If more than 50% of the shareholders vote to close the company, sell off its assets and distribute the proceeds to the owners - you'll get 1% share of the distributions.\",\n \"I agree with the premise and vehemently disagree with the solution! Why in the name of all that is holy would you think giving the power to a random group of wealthy people is going to end up in ANY WAY better?! They will take that power, and grab every thing they can! The solution is ridiculous and DOESN'T follow from the problem! If you want a solution, you want REAL oversight! You want people checking these decisions and verifying them that you and the people can trust! We don't trust the market! We don't trust big money! You don't trust the government! That's why I was looking for a solution that works for everyone! Why, after all that work we went through, have you thrown it all away and gone back to this tripe?!\",\n \"Yes, and EY was complacent to opine on those financials and provide a bullshit comfort letter to the book runners... More likely Zuckerberg kept saying to price it higher and MS wanted to be part of some history and didn't make a wise decision and gave in.\",\n \"A company typically goes public in order to bring in additional capital. In an IPO, the company (through its officials) will typically do so by issuing additional shares, and offering to sell those to investors. If they did not do that, then there would be no net capital gain for the company; if person A sells share in company C to person B, then company C does not benefit directly from the exchange. By issuing and selling additional shares, the total value of all stock in the company can increase. Being publicly traded also greatly increases the confidence in the valuation of the company, as a consequence of the perfect market theory. There is nothing in this that says that initial investors (cofounders, employees, etc.) need to sell their shares in the process. They might choose to do so, or they might not; or they might be prevented from doing so by terms of any agreements that they have signed or by insider trading laws. Compare What happens to internal stock when a company goes public? Depending on specifics, it might be reasonable for the company to perform a share split prior to the initial public offering. That, however, doesn't affect the total value of the shares, only the price per share.\",\n \"you are exactly right. people keep going on about how facebook and their ipo is a failure etc, they are totally wrong. all of this was done for one reason only - the insiders who had all these crazy valuations and forecasts etc on paper that were not actually worth anything IRL, could cash out and get some money off the back of fools. the fb ipo was a huge success for mark zuckerburg and others - not so much a success in the real world though. sadly, this whole model and 'social networking' bubble should have 'popped' long before it got to this stage, myspace should have signaled that.\",\n \"There are not necessarily large shareholders, maybe every other Joe Schmoe owns 3 or 5 shares; and many shares might be inside investment funds. If you are looking for voting rights, typically, the banks/investment companies that host the accounts of the individual shareholders/fund owners have the collective voting rights, so the Fidelity's and Vanguard's of the world will be the main and deciding voters. That is very common.\",\n \"Alright business types, how is facebook worth anywhere near 24B? Where is this revenue coming from? Also, how are they so sure facebook isn't going to be the next myspace, given how fickle the population is and how many people are already fed up with facebook to the point where they have closed accounts?\",\n \"They didn't have enough money to cash everybody out. And at a $100B valuation, a lot of people wanted out. Note that they only earn a billion dollars (only 1% of the initial speculated valuation), and most of that needs to be reinvested into the company to keep it going. They need to spend money buying Instagram and other patents/startups, etc to ward of competitors.\",\n \"No, there is no such list, as the other answers mention it is practically impossible to compile one. However you can see the institutional investors of a public company. MSN Money has this information available in a fair amount of details. For example see the Institutional Investors of GOOG\",\n \"Why should they? If investors' don't want nonvoting shares, they shouldn't buy them. I don't like the big banks, but it's not like they are fleecing little old ladies here. The people with the first rights to the shares tend to be institutions who know what they are getting.\",\n \"No, I was only partially sarcastic. The new stock sale goes to FB, not paid out to stockholders, at this point. Whether the stock is price right depends on how that investment is spent. People forget that stock is sold to generate investment capital, not to get a short-tem bump, and see who is left holding the bag. Was FB overpriced? It depends.\",\n \"The stock market is generally a long term investment platform. The share prices reflect more the companies potential to be profitable in the future rather than its actual value. Companies that have good potential can over perform their actual value. We saw this regularly in the early days of the internet prior to the .com bust. Companies would go up exponentially based on their idea's and potential. Investors learned from that and are demanding more these days. As a result companies that do not show growth potential go down. Companies that show growth and potential (apple and google for 2 easy examples) continue to go up. Many companies have specific days where employees can buy and sell stocks. there are minor ripples in the market on these days as the demand and supply are temporarily altered by a large segment of the owner base making trades. For this reason some companies have a closed pool that is only open to inside trades that then executes the orders over time so that the effect is minimized on the actual stock price. This is not happening with face book. Instead many of the investors are dumping their stock directly into the market. These are savvy investors and if there was potential for profit remaining you would not see the full scale exodus from the stock. The fact that it is visible is scaring off investors itself. I can not think of another instance that has gone like facebook, especially one that was called so accurately by many industry pundits.\",\n \"There are a lot of people speculating that Facebook will use the money they got from this to buy companies that could be used to turn their user base into more income. With the stocks dropping in value, it might even be a good time to invest in them.\",\n \"Hmm, but pretty much all the smart money was on the stock not doing so hot in the first place. Leading up to the IPO there seemed to be more evidence just browsing sites like Fortune, Forbes, Reuters and the like against buying FB than there was to buy it. A lot of people probably just got suckered into the hype.\",\n \"You cannot trade in pre-IPO shares of companies like Facebook without being an accredited investor. If a website or company doesn't mention that requirement, they are a scam. A legitimate market for private shares is SecondMarket.\",\n \"In principle I agree with you. However the allegation is that the people managing the IPO withheld crucial information and informed insiders against investing. Maybe the allegations are false, but it should still be looked into. If the IPO shared crucial details with insider traders while keeping it from the public at large that would affect the investor's risk-assessment of a stock, that's insider trading and should be punished accordingly.\",\n \"You don't have to go through an exchange. That wasn't the problem. It was that the people trading on them wouldn't be willing to take your offer. An exchange can't just list a company. They need that company's consent and the company need's the exchange's consent. I don't know if you're aware of this but that was also an entirely new disaster during Facebook's IPO. Computer glitches didn't help. What you're talking about is a called a secondary market, kind of. Stock exchanges offer those too, especially for options. That's the typical stock footage you see of guys on wall street yelling and screaming while throwing paper up in the air.\",\n \"Not going to happen for Facebook since there will be too much demand and the order will go to the top clients of the underwriting investment banks. In general though, if you wanted a piece of a smaller IPO you'd just have to get in touch with a broker whose investment banking department is on the underwriting syndicate (say Merrill Lynch or Smith Barney) since IPOs often have a percentage that they allocate to retail clients (i.e. you) as well as institutional (i.e. hedge funds, pension funds, mutual funds etc.). The more in demand the IPO the harder it is to get a piece.\",\n \"Nobody is going to short sell stocks through a lender that forces people to buy in as soon as it is getting good for them.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["\"In the US, a private company with less than 500 owners can dictate who can or can't become a shareholder (this is true in general, but I'm sure there are loopholes). Prior to Google's IPO I could not buy shares in Google at any price. The reason Google was \"\"forced\"\" to go public is the 500 shareholder rule. At a high level, with 500 shareholders the company is forced to do some extra financial accounting and they no longer can control who owns a share of the company, allowing me to purchase shares of google at that point. At that point, it typically becomes in the companies best interest to go public. See this article about Google approaching the 500 shareholder limit in 2003. Further, Sorkin is not quite correct that \"\"securities laws mandate that the company go public\"\" if by \"\"go public\"\" we mean list on a stock exchange, available for general purchase. Securities laws mandate what has to be reported in financial reporting and when you have to report it. Securities laws also can dictate restrictions on ownership of stock and if a company can impose their own restrictions. A group of investors cannot force a company onto a stock exchange. If shares of Facebook are already for sale to anyone, then having >500 shareholders will force Facebook to file more paperwork with the SEC, it won't force Facebook onto the NYSE or NASDAQ. When that point is reached, it may be in Facebook's best interest to have an IPO, but they will not be required by law to do so. Update: CNN article discusses likely Facebook IPO in 2012. When companies have more than 500 shareholders, they're required to make significant financial disclosures -- though they can choose to remain private and keep their stock from trading publicly. However, most companies facing mandatory disclosures opt to go public. The Securities and Exchange Commission gives businesses lots of time to prepare for that milestone. Companies have until 120 days after the end of the fiscal year in which they cross the 500-shareholder line to begin making their disclosures. If Facebook tips the scale this year, that gives it until April 2012 to start filing financial reports.\"","\"@Alex B's answer hits most of it, but leaves out one thing: most companies control who can own their non-public shares, and prohibit transfers, sales, or in some cases, even ongoing ownership by ex-employees. So it's not that hard to ensure you stay under 500 investors. Remember that Sharespost isn't an exchange or clearinghouse; it's basically a bulletin board with some light contract services and third-party escrow services. I'd guess that many of the companies on their \"\"hot\"\" list explicitly prohibit the sale of their non-public shares.\""],"string":"[\n \"\\\"In the US, a private company with less than 500 owners can dictate who can or can't become a shareholder (this is true in general, but I'm sure there are loopholes). Prior to Google's IPO I could not buy shares in Google at any price. The reason Google was \\\"\\\"forced\\\"\\\" to go public is the 500 shareholder rule. At a high level, with 500 shareholders the company is forced to do some extra financial accounting and they no longer can control who owns a share of the company, allowing me to purchase shares of google at that point. At that point, it typically becomes in the companies best interest to go public. See this article about Google approaching the 500 shareholder limit in 2003. Further, Sorkin is not quite correct that \\\"\\\"securities laws mandate that the company go public\\\"\\\" if by \\\"\\\"go public\\\"\\\" we mean list on a stock exchange, available for general purchase. Securities laws mandate what has to be reported in financial reporting and when you have to report it. Securities laws also can dictate restrictions on ownership of stock and if a company can impose their own restrictions. A group of investors cannot force a company onto a stock exchange. If shares of Facebook are already for sale to anyone, then having >500 shareholders will force Facebook to file more paperwork with the SEC, it won't force Facebook onto the NYSE or NASDAQ. When that point is reached, it may be in Facebook's best interest to have an IPO, but they will not be required by law to do so. Update: CNN article discusses likely Facebook IPO in 2012. When companies have more than 500 shareholders, they're required to make significant financial disclosures -- though they can choose to remain private and keep their stock from trading publicly. However, most companies facing mandatory disclosures opt to go public. The Securities and Exchange Commission gives businesses lots of time to prepare for that milestone. Companies have until 120 days after the end of the fiscal year in which they cross the 500-shareholder line to begin making their disclosures. If Facebook tips the scale this year, that gives it until April 2012 to start filing financial reports.\\\"\",\n \"\\\"@Alex B's answer hits most of it, but leaves out one thing: most companies control who can own their non-public shares, and prohibit transfers, sales, or in some cases, even ongoing ownership by ex-employees. So it's not that hard to ensure you stay under 500 investors. Remember that Sharespost isn't an exchange or clearinghouse; it's basically a bulletin board with some light contract services and third-party escrow services. I'd guess that many of the companies on their \\\"\\\"hot\\\"\\\" list explicitly prohibit the sale of their non-public shares.\\\"\"\n]","isConversational":false}}},{"rowIdx":73,"cells":{"_id":{"kind":"string","value":"2376"},"query":{"kind":"string","value":"Why do gas stations charge different amounts in the same local area?"},"gt_ids":{"kind":"list like","value":["64263","549833","91545","324411","114417","407455","402249","244961"],"string":"[\n \"64263\",\n \"549833\",\n \"91545\",\n \"324411\",\n \"114417\",\n \"407455\",\n \"402249\",\n \"244961\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1,1,1,1,1,1,1],"string":"[\n 1,\n 1,\n 1,\n 1,\n 1,\n 1,\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["407455","244961","227562","91545","549833","64263","402249","114417","324411","106371","223626","42569","260638","280056","567511","103932","482813","117378","101519","335774","555999","571690","460674","489160","231654","173986","324037","265013","63528","81071","517667","357","60529","430686","24222","224031","355592","181101","457611","438125","24344","107857","161162","583337","83452","319450","130128","479449","196308","410123","245531","492210","488127","32966","70064","1392","367007","599325","281662","245827","187002","309771","212131","503171","448225","282714","67716","63365","430610","17338","247901","36321","254509","102540","336601","493638","207160","259245","106324","595981","218360","354565","472298","177403","47738","452330","21194","181398","100188","339581","231369","21490","50562","438400","92144","293676","36717","140126","498140","189741"],"string":"[\n \"407455\",\n \"244961\",\n \"227562\",\n \"91545\",\n \"549833\",\n \"64263\",\n \"402249\",\n \"114417\",\n \"324411\",\n \"106371\",\n \"223626\",\n \"42569\",\n \"260638\",\n \"280056\",\n \"567511\",\n \"103932\",\n \"482813\",\n \"117378\",\n \"101519\",\n \"335774\",\n \"555999\",\n \"571690\",\n \"460674\",\n \"489160\",\n \"231654\",\n \"173986\",\n \"324037\",\n \"265013\",\n \"63528\",\n \"81071\",\n \"517667\",\n \"357\",\n \"60529\",\n \"430686\",\n \"24222\",\n \"224031\",\n \"355592\",\n \"181101\",\n \"457611\",\n \"438125\",\n \"24344\",\n \"107857\",\n \"161162\",\n \"583337\",\n \"83452\",\n \"319450\",\n \"130128\",\n \"479449\",\n \"196308\",\n \"410123\",\n \"245531\",\n \"492210\",\n \"488127\",\n \"32966\",\n \"70064\",\n \"1392\",\n \"367007\",\n \"599325\",\n \"281662\",\n \"245827\",\n \"187002\",\n \"309771\",\n \"212131\",\n \"503171\",\n \"448225\",\n \"282714\",\n \"67716\",\n \"63365\",\n \"430610\",\n \"17338\",\n \"247901\",\n \"36321\",\n \"254509\",\n \"102540\",\n \"336601\",\n \"493638\",\n \"207160\",\n \"259245\",\n \"106324\",\n \"595981\",\n \"218360\",\n \"354565\",\n \"472298\",\n \"177403\",\n \"47738\",\n \"452330\",\n \"21194\",\n \"181398\",\n \"100188\",\n \"339581\",\n \"231369\",\n \"21490\",\n \"50562\",\n \"438400\",\n \"92144\",\n \"293676\",\n \"36717\",\n \"140126\",\n \"498140\",\n \"189741\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["One factor I haven't seen mentioned is volume. Suppliers will charge a slightly lower price to the station if they buy in full tanker truck loads instead of smaller quantities. Where I am this is probably still the largest factor in price spread with all newer bigger stations being 20-30 cents cheaper than the old small ones (often a repair shop with 2 pumps out front); the only reason it's slowly becoming less pronounced is that the old small stations are steadily closing up as their tanks fail leak inspections because they don't sell enough gas to justify repair and replacement.","\"I'll echo: many factors. Brand: There are generally two levels of pricing: \"\"major brand\"\" and \"\"discount brand\"\". You can generally expect the \"\"discount brand\"\" to cost about 5-10 cents less per gallon in the same neighborhood as \"\"major brand\"\" gas. This is for a number of sub-factors; chief among them is that not all gasolines are created equal. A lot of the major brands (Shell, Texaco, Chevron, BP, Exxon) have proprietary detergents and cleaning agents that the discount brands do not. They're also generally closer to the real octane rating of the gas, have less ethanol (you'll see the sign that says \"\"contains up to 10% ethanol\"\"; the bargain brands are right up at that limit while the top-tier brands keep it lower) and have stricter requirements about storage tank maintenance. Anyone who tells you that all gas is the same, send em my way; I tried to save a few bux buying the cheaper stuff and now my car needs an engine overhaul because of fouling causing premature wear. A couple of my co-workers got a fuel system overhaul free from the local supermarket because the storage tank wasn't properly purged, and they got water into their gas tanks. Market Price: Yes, this is of course a factor. Generally, gas prices at the pump rise very quickly when the market price of crude or gasoline goes up, then fall more slowly than the market price, because the margins on gas sales for a C-store are very slim. When prices change, the C-stores lose either way; when prices rise they have to pay more than they got from the last tankful to buy the next one, and when prices fall they don't recoup the cost of their current tank. By quickly increasing the price to match commodities market prices, then gradually lowering them over time even if the market collapses, they mitigate the losses both ways. Overhead: A gas station right next to a highway probably had to pay more for that land, both to buy/lease it and in property taxes. Nicer (newer, cleaner) stations generally have to pay more to stay that way. The higher your operating costs, the more you'll have to charge for your gas. You can usually do so because the nicer station will attract customers willing to pay a few cents more for the nicer facilities. Taxation: Most States charge a tax on gasoline, in addition to a Federal tax on gas. That revenue either goes into the State's general fund, or is earmarked for transportation costs like road maintenance. California's gas prices are sky-high across the state, because they have the highest gas tax. I'm not sure Colorado, Wyoming and Montana have gas taxes at all. Proximity to other stations: No matter what you have to pay for the land and facilities, if there's another station across the street, you have to be within a penny of their price or people will vote with their feet. While \"\"predatory pricing\"\" (taking a loss on sales in one area, buffered by profits elsewhere, in order to drive out competition) is technically illegal, you see it all the time in the C-store industry and it is very difficult to prove. This is a primary cause of neighborhood-to-neighborhood changes; a C-store will look around the other stations on their street corner, and the ones down the road a block or two each direction, when determining what they can sell gas for that day. The guy five blocks down has a completely different pool of competing stations. Population Distribution: With a lot of people in a particular area, there's a big \"\"pie\"\" of customer dollars for C-stores to compete for. This generally leads to increased prices because the stations don't have to be AS cutthroat; regardless of how good your price is, you have only so many pumps, and at some point people will pay more to use the open pump than wait for the cheaper one. The reverse is true in rural areas; with only two stations in an entire small town, those two stations will become extremely cutthroat. However, rural prices also vary more; with only one station in easy walking distance from where you ran out of gas, they can charge you $6 to fill that gallon gas can if they want, and you'll pay it because the next gas station's another 20 miles down the road and probably has even higher prices. This, along with overhead, is generally why the Rockies states have the lowest average prices; land's cheap and people are scarce in Wyoming. But, the \"\"price-gouging\"\" can be seen in the rural Southwest, where there's a LOT of ground to cover between gas stations, and so the \"\"last chance gas\"\" along major highways just outside of town, each a nickel to a dime more than the previous station, is a common stereotype. Transportation costs: Prices are higher on the East and West Coasts than in the Gulf States for a very simple reason; the bulk of the U.S. refinery capacity is along the Gulf Coast between Galveston and the Florida border. The further you are from there, the more it costs to get the fuel from the refinery to the gas station, and that cost is reflected at the pump. In fact, the East Coast imports gasoline by tanker even though the United States is now a net exporter of gasoline, because it's cheaper to buy it from foreign sources than it would be to watch it drip through the limited pipeline capacity that exists between the Gulf states and the Eastern Seaboard.\"","\"This is the best tl;dr I could make, [original](http://globalmillennial.org/2017/05/28/gas-station-argument-direct-competition-leads-different-prices/) reduced by 90%. (I'm a bot) ***** > There is a difference between a branded station and an unbranded station. > A branded station will order their gas from their corporate parent - a Chevron station will get their gas from the Chevron rack at their local fuel terminal. > An unbranded/independent station has a much wider range of fuel they can buy, and usually get quotes from multiple fuel marketing companies The station will buy the fuel from the marketer, who transports the fuel from the rack to the station. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6ejaxi/the_gas_station_argument_why_direct_competition/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~133499 tl;drs so far.\"\") | [Theory](http://np.reddit.com/r/autotldr/comments/31bfht/theory_autotldr_concept/) | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **station**^#1 **price**^#2 **fuel**^#3 **more**^#4 **petrol**^#5\"","There are many factors. Most gas stations price their gas based on what it will cost them to replace it. So when their supplier raises the price that it charges the station the station typically raises its prices proportionality. The suppliers tend to have their own rates. The business needs to make a profit so the business sets the price where it feels it will make the most money. Some stations buy bargain gas. Many people say they find this gas to be just fine. Personally some stations gas seems to make my cars run much worse. I can say that my mileage can vary by as much as 4 miles to the gallon based on where I get my gas. So I pay more to go to those stations that consistently have provided me good gasoline. However higher prices do not necessarily mean better gas. We have a BP just down the street that seems to have bad gas while one about a half a mile away that I prefer because I have never had a bad tank of gas. Both are priced about the same. Also some localities have special tax zones. These are local taxes levied based on the location. We have 4 different zones here in Peoria IL (150k pop). That does not take into account the smaller cities around us.","Location, Location, Location. The closer to the highway, the more they can charge. People want to go less than a mile from the exit to get gas. Therefore they save time, but spend more money. That is understandable, so the gas station takes advantage of the situation.","\"This is known as \"\"Zone Pricing\"\" or \"\"Geographical Pricing\"\". http://articles.latimes.com/2005/jun/19/business/fi-calprice19 Such price variations may seem odd, but they are not unique to Anaheim. On any given day, in any major U.S. city, a single brand of gasoline will sell for a wide range of prices even when the cost to make and deliver the fuel is the same. The primary culprit is zone pricing, a secret and pervasive oil company strategy to boost profits by charging dealers different amounts for fuel based on traffic volume, station amenities, nearby household incomes, the strength of competitors and other factors. It's a controversial strategy, but the courts have thus far deemed it legal, and the Federal Trade Commission recently said the effect on consumers was ambiguous because some customers got hurt by higher prices while others benefited from lower ones. http://en.wikipedia.org/wiki/Geographical_pricing Zone pricing, as practiced in the gasoline industry in the United States, is the pricing of gasoline based on a complex and secret weighting of factors, such as the number of competing stations, number of vehicles, average traffic flow, population density, and geographic characteristics. This can result in two branded gas stations only a few miles apart selling gasoline at a price differential of as much as $0.50 per gallon. But the short answer is \"\"because they can\"\". It's legal, provided that some people are paying less while others are paying more. Essentially the larger, richer audience is subsidizing the product for other areas. It's not terribly different than the way most drugs are priced in the world.\"","Some of this is demand management. The local BJ's wholesale club sells gas $0.10-0.15/gallon less than the prevailing rate. Typically there are lines of 3-5 cars waiting for a pump during busy periods. People are price-conscious when buying gas, which draws crowds and the retailer actually wants a line -- the whole point of the gas station is to draw traffic to the warehouse club. Other gas stations have the opposite problem -- big crowds lead to fewer people buying food and drinks in the convenience store, which is where the business actually makes its money. They want a steady stream of people. In my area, there is a gas station that is on a busy intersection right off the highway ramp going to the airport. Their problem is that people returning rental cars used to swarm the gas station and cause traffic tie-ups on the road -- a problem averted by marking up the gas $0.30.","When I ran a gas station, our price was largely set by our neighbors-- the other gas stations in the area. We couldn't go below the current cost of replacement gas, but other than that we wanted to be at .05 over the average. (We got away with charging more because we were the last station on a major road.) Everybody else did the same thing. Also, we only set prices once a day, early in the morning before the commuter rush. Changing prices while somebody is pumping gas Was Not Done, for fairly obvious reasons. So, you'd get these ripples of price-changing, as one station changed its price, and then all its neighbors would react to that the next day, and then THEIR neighbors would change the day after that, and so on.","I only have anecdotal evidence here as members of my family used to own a grocery store / gas station, but they were often time charged much more to have the gasoline delivered to than many gas stations which were just a mile or two away (up to 15% more). Also depending upon the branding of the gas station, they are required to use certain distributors (i.e. if you are an Exxon gas station you can only use a few select vendors) which gave them less control of their final cost. All in all the gasoline often had smaller margins than items in the grocery store, which are already extremely low.","\"I think the key to this question is to think about how people tick. The underlying assumption in any decision that measures monetary value or other economic principles is that we're rational actors in a global marketplace. Life isn't a ledger or a taxi on a meter. If you have time on your hands or enjoy the act of driving when you run your errands, that diversion to save a dime on gas isn't a net loss, it just is. That may be a different story if you need to get your rental car returned so that you can fly home -- in that case, you're ok with getting hosed by the gas station strategically located between hotels and the airport. Our motivations are deeper than that. Some people get a feeling of satisfaction or security from always getting the \"\"best deal\"\". Some folks visit a particular gas station because the clerks are friendly or the coffee is good. Others want to pay more -- they buy \"\"premium\"\" gas from Exxon/Mobil because they are premium people who \"\"buy the best\"\".\"","[This article](http://www.factcheck.org/2011/03/who-sells-american-gasoline/) shows that gasoline at any given station is combined in transport or processing; making it impossible to tell if your oil came from a certain company. >While gasoline is sold at about 162,000 retail outlets across the nation, about one-third of these stations are “unbranded” dealers that may sell gasoline of any brand. The remainder of the outlets are “branded” stations, but may not necessarily be selling gasoline produced at that company’s refineries. This is because gasoline from different refineries is often combined for shipment by pipeline, and companies owning service stations in the same area may be purchasing gasoline at the same bulk terminal. In that case, the only difference between the gasoline at station X versus the gasoline at station Y may be the small amount of additives that those companies add to the gasoline before it gets to the pump.","Family has owned a gas stations for 10+ years. Gas is a bitch to own and most retailers make about 20¢ a gallon profit not including insurance/repairs. Hard to find gas station pump parts along with the high cost of repairing it if it breaks. It's mainly used to attract customers inside the store because that's where you make the profit.","That's the gas station 7/11 and the like. But not the bodegas and other inner-city grocery stores that charge 3x the normal price for (often crappy) bread and eggs because there aren't many competitors when you live out on Avenue Q in Brooklyn, or in Northern, KY but don't have a car.","Competition, or actually lack of competition, mostly due to a demand curve that has minimal change due to price. You would buy the equivalent, cheaper option if it was available, but the store has little interest in offering multiple, competing options that would drive their same store revenue down. And the competing stores (Grocery, Department, Drug, Card) have similar overhead costs (floor space, lights, personnel). Most carry the cards for incremental revenue, and observe little advantage to lower price for a card (customers seldom buy more cards due to a lower price). Thus they mark the price to what (most) customers are willing to pay. You may choose to shop the various stores and find the one that has a (slightly) better pricing for cards, and then stop at that store when you want to buy a card. But many cards are sold as an incremental purchase as part of a larger shopping trip (convenience), as the customer combines trips (reduce the time spent shopping, albeit not reducing the money spent).","Sinclair, Murphy, Conoco, BP/Phillips, ARC0, Pilot, Flying J, Love’s, RaceTrac, Valero. Theses are only some of the gas stations that don't import. You can choose where your has comes from fact is your too lazy to do a Google search.",">For instance in far upstate New York its probably cheaper to truck gas from a refinery outside of Montreal than from a refinery outside of New York City or Boston. Oddly enough, there aren't any refineries outside Boston. There aren't any in Massachusetts at all. In fact, there are also none in New York, New Hampshire, Vermont, Maine, Connecticut, or Rhode Island. There are two refineries near New York City, but they're in New Jersey.","There are many gas stations where I live that already have different prices if you pay for cash vs. credit. In addition, some small businesses are doing this as well. My wife bought a birthday cake from a bakery. If you paid with cash, you saved 5%.","Fuel prices are regulated in most countires. The way its regulated differs. Essentially the idea is once the retail prices are up, they are normally kept that level so that a buffer profit is built, now if the fuel prices increase beyond the retail price can still be kept same using the buffer built up.","Don't really know but I can guess. Firstly, everyone thinks the price of gas is too high. You drive to work every day, and gas is basically the only product who's price is advertised from the street! From that perspective. So mentally, I argue, we overvalue an extra 1 percent discount on gas. It's only worth maybe 60 cents a month to me, but worth a lot of other interchance fees for the credit card company. Secondly, gas stations are a prime robbery target. Credit cards mean less cash in the till. And less chance for employees to steal from the till, and less chance of counterfit money. Finally, it's a competitive market. If stations don't accept a card, they'll lose business to elsewhere. There's a gas station on either side of an intersection, and you can always tell which station is a few cents cheaper because it's the one with customers fueling up while the other one is a ghost town. They feel they have to compete on convenience or go under, and the credit card companies recruit you into the game with higher cash back rewards.","Pay attention to nickel-and-dime charges (atm fees, low balance fees, limit on atm transactions per month, charge for human teller transaction, charge for paper statements or tax records). Consider that a financial company will spend on the order of $100-500 to sign up a good customer. Are you getting this in a cash bonus, competitive high interest rate, reasonable other gift, or advertising directed at your eyeballs? A variation in rates less than 1% easily fits into a marketing cost and there doesn't have to be any other magic to it.","From experience, Mastercard and Visa charge vendors about the same (around 2%-5%) while American Express and Diners Club are astonishingly expensive (6%-10%) and you'll find that few small retailers are very comfortable accepting these. The variation comes from the volume of trade that vendors provide. A big retailer will negotiate a very low rate while smaller businesses will be hit with higher charges.","I am not sure but probably it depends upon the cut the credit card company receives from the merchant. For Hotels such as dining etc. the cut could be more. Again, periodically, many merchants join with the card company to launch promotions. It could be part of such promotions. Apart from class of merchants, these points also differ on class of cards e.g a premium card will earn more rewards than a simple classic card.","My cousins bought a gas station, their lives have been shitty ever since. However they dont have a convenience store which is where all the money is at apparently. The father bought it for 600k, land and all. Supposively he thought it was worth over a mil due to the land valuation. The business operations standpoint is that they make minimum wage.","Most of the imports probably come from Canada and Mexico, its probably cheaper to import gasoline from Canada or Mexico in some parts of the country purely due to distance. For instance in far upstate New York its probably cheaper to truck gas from a refinery outside of Montreal than from a refinery outside of New York City or Boston.","Retail gas prices are a pretty poor anecdote for the argument that the minimum wage is too high. Very little labor goes into the production and distribution of gasoline. Even less of it is local. Local minimum wage has almost no effect on the price at the pump.","A day is a long time and the rate is not the same all day. Some sources will report a close price that averages the bid and ask. Some sources will report a volume-weighted average. Some will report the last transaction price. Some will report a time-weighted average. Some will average the highest and lowest prices for the interval. Different marketplaces will also have slightly different prices because different traders are present at each marketplace. Usually, the documentation will explain what method they use and you can choose the source whose method makes the most sense for your application.","First price isn't artificially maintained at a level. When a refining company signs a contract to buy crude from a supplier, it promises to buy at a certain price with options for increase and decrease due to the fluctuating prices in the market. And it buys crude to build up a certain buffer to supply itself for a certain duration, in case of supply problems. As it had bought oil at a higher price, it would be reluctant to lower the prices even if the current crude it buys is at a lower cost. If it buys oil from the open market, it has no other option than to pass on the hike on to the consumers, so a more intense fluctuation in the prices of oil at the point, where you buy it. Some airlines used hedging to take care of the spurts in the price of oil, to mantian their operating margins. And moreover refining and distribution is a very low margin business, so the company has an incentive to sell at a higher cost if required.","\"On top of the given answers, the type of referral will also factor in. When you're up for renewal and go to a comparison site (in the UK: CompareTheMarket, MoneySupermarket, Confused, GoCompare, ... ) and struggle accurately through all their lists of questions, you see that some of the data differs (e.g., not all the same jobs can be entered; if you have had an accident, not all ask whose fault it was and/or don't leave the option \"\"not yet resolved\"\" --possibly forcing you to guess which way it will be adjudicated,-- and/or what the total repair cost was). So as these referrers feed slightly different data to roughly the same set of insurance providers, you will get slightly different quotes on the same providers. And expect your own provider to offer a slightly better quote than you'll get in reality for renewing: The referrer's (one-time) cut has to be still taken off, but they count it as a new client so somebody gets a bonus for that --- you they disregard as a captive client and give what boils down to a loyalty penalty. [Case in point: I had an unresolved car accident, resolved months later in my favour. With all honest data including unresolved claim and its cost and putting my 'accident-free years' factor at 0 instead of 7, my old provider quoted about 8% more than the previous year on comparison sites; but my renewal papers quoted me 290% more, upon telephone enquiry the promised to refund the difference if court found in my favour though they refused to give this in writing. So: No thanks!] Then the other set of referrals they get is from you directly going to their website asking for a quote. They know what type of link you've followed (banner, or google result, etc), they may know some info from your browser's cookies (time spent where) or other tracking service, and from your data they may guess how tech-savvy and shop-wise you are, and scale your offer accordingly. [Comparison-site shoppers are lumped together at a relatively high savvy-level, of course!]. Companies breaking down your data and their own in a particular way can find advantages and hence offer you better terms, as said in the main answer (this is like Arbitration in stock exchanges, ensuring a certain amount of sanity: if there's something to exploit, somebody will, and everybody will follow). It may be that they find a certain group of people maybe more accident-prone but cheaper to deal with (more flexible in repair-times, or easy to bully in accepting shared-fault when they weren't at fault), or they want a certain client (for women, for civil servants, for sporty drivers, for homeowners --- often for cross-selling other insurance services). Or they claim to want pensioners because the company can offer them 'a familiar voice' (same account manager always contacting them) while they're easier to bamboozle and less likely to shop around when offered a rubbish deal. Also, 100% straight comparison of competing offers isn't possible as the fine details of the T&Cs (terms & conditions) would differ, as well as various little pinpricks in the claims handling process. And depreciation of a car, and various ways of dealing with it: You insure it for the buying prices, but two years later it's worth about 40% less on paper --- so in case of total loss, replacing like-for-like will cost you still at least 80% of the value for which you've been insuring it while they'll probably offer you the 100-40= 60%. Mostly because instead of your trusted car you have something unknown that may have hidden defects, or been mistreated and about to die. [Case in point: My 3-y-old dealer-bought car's gearbox died just outside the 6month warranty period, notwithstanding its \"\"150-item inspection you can rely on\"\". In the end the national brand agreed to refund the parts (15% of what I paid for the car) but not the labour (a few hours).] And any car model's value differs (in descending order) from its \"\"forecourt price\"\", \"\"private selling price\"\", \"\"part exchange price\"\", and \"\"auction price\"\". Depending on your ompanies may happily insure you for forecourt price (=what you paid to dealer) but then point out that the value of that car is the theoretical P/X value, i.e., the car without anybody's profit, far less than you've been paying for. [Conversely, if you crash it after insuring below market value, they can pay you your stupidly low figure.]\"","That's not entirely true for Oregon. It's illegal to pump your own gas in Oregon so every gas station has to employ at least one attendant. Don't think it amounts to $0.30 per gallon but it definitely raises the price of gas being forced to pay an adult to complete a task simple enough for a child.","This is not totally not in my wheelhouse, so I'm genuinely asking: Isn't that because gas being purchased on that date has to be purchased at the new high rate, but when selling gas already purchased at the higher old rate has to be sold at the high rate to avoid a loss? Like, given good faith actors on all sides with no particular profit motive, shouldn't we see prices raise quicker than they fall at the pump anyways?","I sell gas to gas stations. Your profit isn't much in gas, it's in the convenience store. So if you're going to do it, focus on your store. Here in the Midwest we have a brand of stations called Quicktrip - everyone loves these gas stations and will go out of their way if they need gas. Because they're very clean and the workers are friendly. Don't build a branded station. Right now branded gas is cheaper than wholesale in a lot of markets, but that's not usually typical. It's better to have options and not be locked into a BP station where you can only buy their gas no matter the price. Additives are BS - it's a commodity. Operating capital will be fairly high. Roughly 7500/gal per truck at say 3.00 cents/gal is about $22,500. In a high traffic area you could be pulling 1 truck per day to keep supply full (this is an assumption based on what we sell to customers). Do some math and that's quite a bit of operating capital, can you finance that? We set credit limits on our customers, but they're not high (think 50-100k for small stations, which is only a couple truck loads). I don't think it's a terrible business to be in - but I would almost rather own the trucks hauling gas to your station and charging on the gallon. Or on the supply side of the equation where gas is more profitable.","I'm in both markets and there are a lot of factors. Distribution costs in NY are ridiculously high. Different states have different generation mixes, access to fuel, different regulatory costs, different taxes, different availability of green/renewable energy as well as different mandates, different types of restructuring (TX is fully restructured; NY was only partially restructured and the market has been a total mess -- they're thinking about going back to a fully-regulated model). For business customers, my biggest pieces of advice are: 1. Energy Audits and, if applicable, reviews of your processes/equipment/whatever to ensure you're not using unnecessary energy or causing unnecessary peaks in demand; 2. Do not sign exclusivity/letter of authorization/power of attorney with a broker -- see what prices they can get you, and then shop around yourself, and if you go through a broker, make sure they tell you as part of the contract how much the supplier is paying them per kWh/therm; 3. Review your usage history (including demand) for at least the past 12 months and then compare to the utility tariff you're being served under -- do anything possible to avoid demand charges and make damn sure you're utility hasn't put you/left you in a demand charge-carrying class if you don't actually qualify for it. I'll be happy to share more if anyone is interested.","This is the damaged goods (https://en.wikipedia.org/wiki/Crippleware) setting in economics. It makes perfect sense from the manufacturing point of view, since is damn expensive to have lines dedicated for different products. I don't know if I agree with it, but it is good business to do so. Is the same principle of paying more to have a better seat in an airplane, is the same service but with better conditions and service.","It's not that simple. Where I live, McDonald's charges $6.19 for a Big Mac combo. The local In-N-Out charges $6.59 for a Double-Double combo. They're pretty damned close in price and I don't think anyone would price discriminate over 40¢. The difference between the two is enormous. In-N-Out makes a great product, the burger and fries are delicious and fresh. Further, In-N-Out is known for treating - and paying - their employees well. They promote from within and becoming a manager is a good job. Thanks to the decent pay, In-N-Out employees tend to be very good and care about the customers. McDonald's is very different. The food is terrible. Flavorless and bland and *very* expensive for what you get. In-N-Out aside, I can go to a local mom'n'pop and get a good meal for under $6. There is no reason for me to go to McDonald's, none. McDonald's isn't such a great employer, either. The employees don't care. I've never been treated badly, but there's no enthusiasm. They are there for the paycheck only. I blame accountants and the business structure. For the record, I am an accountant, so I know what they're up to. McDonald's is a large, public company bent on returning maximum profits to shareholders. So they bring in the cost accountants who are very good at shaving costs down to the absolute minimum. The Big Mac has suffered death by a thousand cuts. No one cut makes it a lousy product, but give the cost accountants enough time and they will make anything mediocre to bad in lots of different ways. In-N-Out is a privately held company. Obviously, they are more interested in making money through selling a quality product and expanding sales. They don't have to worry about shareholders who don't give a fuck and just want short-term profits. They could make more money by turning the cost accountants loose, but they also know that would hurt their business. The difference shows. McDonald's is rarely busy here. At In-N-Out, lines are usually out the door and you can't find an open table. I only go there late at night on weekdays, since that's the only time it isn't slammed. So you have two companies selling a similar product at almost the same price. One is wildly successful and slowly expanding. The other sells a shitty product and thinks that marketing is the problem.","High water table next to a river may be a serious flood risk - and flood insurance on a buried multi thousand gallon tank of gas may be prohibitively expensive. Everything I've read and experienced about gas station is that you don't make money off the gas - as in the margin is almost nill. Also in 10-20 years what percentage of cars on the road will be electric?","Be glad you don't live in the Pacific Northwest. We're still recovering from a refinery shut down that sent our gas prices to $4.30/gallon while the rest of the nation was at $3.50/gallon. Our gas prices are still higher than US average at $3.70/gallon. Some gas stations are still charging $3.90+ here.","\"There absolutely is a specific model that makes this so popular with so many credit card companies, and that model is \"\"per transaction fees\"\". Card companies also receive cost-sharing incentives from certain merchants. There is also a psychological reasoning as an additional incentive. When you want to accept credit cards as a source of payment as a business, you generally have three kinds of fees to pay: monthly/yearly subscription fees, percentage of transaction fee, and per transaction fee. The subscription fees can be waived and sometimes are expressed as a \"\"minimum cost\"\", so the business pays a certain amount whether you actually have people use credit cards or not. Many of these fees don't actually make it to the credit card companies, as they just pay the service providers and middle-men processing companies. The percentage of transaction fee means that the business accepting payment via credit card must pay a percentage usually ranging from 1-3% of the total transactions they accept. So if they get paid $10,000 a month by customers in the form of credit cards, the business pays out $100-300 a month to the credit card processor - a good portion of which will make it back to the credit card issuing company, and is a major source of income for them. The per transaction fee means that every time a transaction is run involving a card, a set fee is incurred by the business (which is commonly anywhere from $0.05 to $0.30 per transaction). If that $10,000 a month business mentioned previously had 10 customers paying $1,000 each at $0.10 a transaction, that's only $1 in fees to the credit card processors/companies. But if instead that business was a grocery store with an average transaction of $40, that's $25 in fees. This system means that if you are a credit card company and want to encourage people to make a specific kind of purchase, you should encourage purchases that people make many times for relatively small amounts of money. In a perfect world you'd want them to buy $1 bottles of water 5 times a day with their credit card. If the card company had 50,000 card holders doing this, at the end of 1 year the company would have $91,250,000 spread across 91,250,000 transactions. The card company might reasonably make $0.05 per transaction and %1 of the purchase total. The Get Rewarded For Drinking More campaign might earn the card company $912,500 in percentage fees and over $4.5 million in transaction fees. Yet the company would only have to pay 3% in rewards from the percentage fees, or $2.7 million, back to customers. If the card company had encouraged using your credit card for large once-yearly purchases, they would actually pay out more money in rewards than they collect in card-use fees. Yet by encouraging people to make small transactions very often the card company earns a nice net-income even if absolutely every customer pays their balance in full, on time, and pays no annual/monthly fees for their card - which obviously does not happen in the real world. No wonder companies try so hard to encourage you to use your card all the time! For card companies to make real money they need you to use your credit card. As discussed above, the more often you use the card the better (for them), and there can be a built-in preference for small repeated transactions. But no matter what the size of transaction, they can't make the big bucks if you don't use the card at all! Selling your personal information isn't as profitable if they don't have in-depth info on you to sell, either. So how do they get you to make that plastic sing? Gas and groceries are a habit. Most people buy one or the other at least once a weak, and a very large number of us make such purchases multiple times a week. Some people even make such purchases multiple times a day! So how do people pay for such transactions? The goal of the card companies is to have you use their product to pay as much as possible. If you pay for something regularly you'll keep that card in your wallet with you, rather than it getting lost in a drawer at home. So the card companies want you to use your card as a matter of habit, too. If you use a card to buy for gas and groceries, why wouldn't you use it for other things too? Lunch, dinner, buying online? If the card company pays out more and makes less for large, less-regular purchases, then the ideal for them is to have you use the card for small regular purchase and yet still have you use the card for larger infrequent purchases even if you get reduced/no rewards. What better way to achieve all these goals than to offer special rewards on gas and groceries? And because it's not a one-time purchase, you aren't so likely to game the system; no getting that special 5% cash-back card, booking your once-per-decade dream vacation, then paying it off and cancelling it soon after - which would actually make the card company lose money on the deal. In the end, credit card companies as a whole have a business model that almost universally prefers customers who use their products regularly and preferably for small amounts a maximum number of times. They want to reduce their expenses (like rewards paid out) while maximizing their revenue. They haven't figured out a better way to do all of this so well as to encourage people to use their cards for gas and groceries - everything else seems like a losing proposition in comparison. The only time this preference differs is when they can avoid paying some or all of the cost of rewards, such as when the merchants themselves honor the rewards in exchange for reduced or zero payment from the card companies. So if you use an airline card that seems to give you 10% back in airline rewards? Well, that's probably a great deal for the card company if the airline provides that reward at their own expense to try to boost business. The card company keeps the transaction-related fees and pays out almost nothing in rewards - the perfect offer (for them)! And this assumes no shenanigans like black-out periods, \"\"not valid with any other offers\"\" rewards like on cars where only a fool pays full MSRP (and sometimes the rewards are tagged in this sort of way, like not valid on sale/clearance items, etc), expiring rewards, the fact that they know not everyone uses their rewards, annual fees that are greater than the rewards you'll actually be obtaining after accounting for all the other issues, etc. And credit card industries are known for their shenanigans!\"","\"> where not even the \"\"ghetto grocery store\"\" or gas-station 7-11 can operate without Bezos' back-end supply software and self-driving delivery fleet. Those stores have some of the highest markup of any place to get groceries. It shouldn't be a surprise that they can't compete.\"","Here in the Philippines, the electricity is owned by single company and they charged a lot of other fees like transmission fee, loss in transmission, etc. i dont understand my bill, all i can see are the add ons to the original amount (i.e. Number of kwh x based rate). The rest of the fees are extra fee. I don't know how they do it, but we cant do anything, we want electricity so we pay. Maybe that ls just how the world is.","It's three and four times what it was just a few years ago. That spike has regularly been blamed on refining capacity. There is a disconnect. Also, you cannot compare with the rest of the world unless you're going to break down cost, taxes, etc.","\"First, is population density. You didn't say where exactly, but for example here in Tampa, Wells Fargo has 25 branches in the area (though that is a bit larger then what I would think of the Tampa area as a local) Second, we can mix in service expectation. I expect that in addition to \"\"good\"\" online service, \"\"great\"\" phone service, \"\"great\"\" email service, that when I have a problem, don't understand something, or want to talk about my options for investing or choosing account types, that I am able to go into a branch. That I can \"\"walk in\"\" and see someone quickly, or schedule an appointment and see some one right away (at my appointment time). Together, these two options means that on a busy day, the nearest Wells Fargo Branch to me has at any one time, 50 - 60 people in it. Smaller branches, of course have less, and larger branches exist. So it just takes that many branches to address the number of people and their expected needs. As to why there are so many different brands/banks Well that's just the USA. We believe in capitalism. We have believed in it much stronger in the past, but banks are the central to capitalism so why shouldn't they serve as an example. At it's core (a very simplistic look) Capitalism and a free market means that we as customers are better served by having lots of different brands fighting for our business. It should drive more consumer desired features (like lower prices, higher interest rates, better fee schedules, etc.) while forcing those brands to operate \"\"better\"\". (Just ignore the bail out, that's a loaded topic) So for some of us, we want a big bank like Wells Fargo, because we want the rates, structure, and service they can provide as a \"\"big bank\"\". For others they want the more personal touch of a \"\"small bank\"\". There are benefits both ways. For example there may be a bank that only allows people with excellent credit to open accounts. That allows they to have lower over all mortgage rates, but means their checking accounts have higher minimums. While the next bank may be more inclusive, and have smaller minimum balances, but as a result charge more for loans. We like our options, and rest assured all those \"\"brands\"\" offer products that have differences that attract customers.\"","Theaters make pennies off the tickets if any money at all. Their profits come from the concession stand. If a theater priced their popcorn 50 cents less than a nearby competing theater the few if any customers that notice and seek those small savings would be far less than the losses due to charging less. They compete to get you there: providing better sound systems, seating, screens -- even taking a loss on tickets with special deals (like Tuesday bargains). Once inside profit is made by customers willing to pay the concession price premium, and sour patch kids for 15 cents more isn't going to be a deal breaker.","\"I'd like to modify the \"\"loss\"\" idea that's been mentioned in the other two answers. I don't think a retail location needs to be losing money to be a candidate for sale. Even if a retail location is not operating at a loss, there may be incentive to sell it off to free up cash for a better-performing line of business. Many large companies have multiple lines of business. I imagine Sunoco makes money a few ways including: refining the gas and other petroleum products, selling those petroleum products, selling gas wholesale to franchised outlets or other large buyers, licensing their brand to franchised outlets, selling gas and convenience items direct to consumers through its own corporate-owned retail outlets, etc. If a company with multiple lines of business sees a better return on investment in certain businesses, it may make sense to sell off assets in an under-performing business in order to free up the capital tied up by that business, and invest the freed-up capital in another business likely to perform better. So, even \"\"money making\"\" assets are sometimes undesirable relative to other, better performing assets. Another case in which it makes sense to sell an asset that is profitable is when the market is over-valuing it. Sell it dear, and buy it back cheap later.\"","Most of the gold prices at international markets are USD denominated. Hence the prices would be same in international markets where large players are buying and selling. However this does not mean that the prices to the individuals in local markets is same. The difference is due to multiple things like cost of physical delivery, warehousing, local taxation, conversion of Local currency to USD etc. So in essence the price of Gold is similar to price of Crude Oil. The price of Oil is more or less same on all the markets exchanges, though there is small difference this is because of the cost of delivery/shipment which is borne by the buyer. However the cost of Oil to retail individual varies from country to country.","\"recently there has been an increase in Companies charging a Credit Card surcharge, the current law does not fix the amount so therefore company's can set there own surcharges, which means you can pay different surcharges at different places. In the \"\"Money\"\" magazine a couple of months ago there was an interesting article that discussed a possible cap that was going to be introduced to cut down on the fluctuations of Credit Card surcharges as some places are generating revenue by abusing the Credit Card surcharge. Something to keep in mind is to ensure when using a Debit card you are not charged the surcharge. some businesses will treat the Debit card the same as a Credit Card.\"","I would say minimal price differences. Stores will need to remain competative, and the difference (if any) will likely be to cover the cost of the transaction that Visa and other card companies charge them.","Generally, if you watch for the detail in the fine print, and stay away from non-FDIC insured investments, there is little difference, so yes, pick the highest you can get. The offered interest rate is influenced by what the banks are trying to accomplish, and how their current and desired customer base thinks. Some banks have customer bases with very conservative behavior, which will stick with them because they trust them no matter what, so a low interest rate is good enough. The disadvantage for the bank is that such customers prefer brick-and-mortar contact, which is expensive for the bank. Or maybe the bank has already more cash than they need, and has no good way to invest it. Other banks might need more cash flow to be able to get stronger in the mortgage market, and their way of getting that is to offer higher interest rates, so new customers come and invest new money (which the bank in turn can then mortgage out). They also may offer higher rates for online handling only. Overall, there are many different ways to make money as a bank, and they diversify into different niches with other focuses, and that comes with offering quite different interest rates.","This has happened to me several times while trying to travel. See a flight listed for one price, go through the process and it ends up being 50-100 more. Not sure which airlines just in general. I dont see how 2 seperate sites can have the same price problem. and what changes in the 5-10 minutes it takes someone to enter their info? do gas and costs go up that much in 10 minutes? Just like extra ticket fees and everything....i just wish companies would start putting the FULL price up front. extra fees and all.","In the EU prices on consumer-focussed sites* are quoted inclusive of VAT. In the USA prices are quoted exclusive of sales tax. Consumer pricing is usually driven at least partly by psychological concerns. Some pricepoints are more appealing to certain types of buyers than others. The Euro vs dollar exchange rate has fluctuated a bit over the years but it's generally averaged somewhere around 1.2 dollars per Euro over the last decade. VAT has varied around 15%-20% in most cases. Put these things together and the same headline price points are generally appropriate in both the USA and the Eurozone. OTOH the Brisith pound has been worth substantially more than the dollar or the Euro. So it makes sense to have a lower headline price in the UK. * B2B focussed sites often quote prices exclusive of VAT, you need to be aware of this when comparing prices.","\"To add on to the other answers, in asking why funds have different price points one might be asking why stocks aren't normalized so a unit price of $196 in one stock can be directly compared to the same price in another stock. While this might not make sense with AAPL vs. GOOG (it would be like comparing apples to oranges, pun intended, not to mention how would two different companies ever come to such an agreement) it does seem like it would make more sense when tracking an index. And in fact less agreement between different funds would be required as some \"\"natural\"\" price points exist such as dividing by 100 (like some S&P funds do). However, there are a couple of reasons why two different funds might price their shares of the same underlying index differently. Demand - If there are a lot of people wanting the issue, more shares might be issued at a lower price. Or, there might be a lot of demand centered on a certain price range. Pricing - shares that are priced higher will find fewer buyers, because it makes it harder to buy round lots (100 shares at $100/share is $10,000 while at $10/share it's only $1000). While not everyone buys stock in lots, it's important if you do anything with (standardized) options on the stock because they are always acting on lots. In addition, even if you don't buy round lots a higher price makes it harder to buy in for a specific amount because each unit share has a greater chance to be further away from your target amount. Conversely, shares that are priced too low will also find fewer buyers, because some holders have minimum price requirements due to low price (e.g. penny) stocks tending to be more speculative and volatile. So, different funds tracking the same index might pick different price points to satisfy demand that is not being filled by other funds selling at a different price point.\"","Chiming in with other answers that incriminate market segmentation attempts, I would like to offer this Seth Godin video where (among other things) he speaks about breakage, the art of making coupon redemption so difficult that most people get it wrong and do not redeem them. Oh, and when comparing/deciding which/whether to buy, I always use the up-front price. Don't want to encourage the wrong behavior.","Cash is king. PIN-based debit transactions are cheap. In terms of credit cards, a regular (ie. not a gold card) with no rewards has the lowest rates. Bigger merchants with lots of card volume likely have better deals that make the differences less pronounced.","I would like to offer a different perspective here. The standard fee for a credit card transaction is typically on the order of 30 cents + 2.5% of the amount (the actual numbers vary, but this is the ballpark). This makes small charges frequently unprofitable for small merchants. Because of this they will often have minimum purchase requirements for credit/debit card payments. The situation changes for large retailers (think Wal-mart, Target, Safeway, Home Depot). I cannot find a citation for this right now, but large retailers are able to negotiate volume discounts from credit card companies (a guy who used to work in finance at Home Depot told me this once). Their transaction fees are MUCH lower than 30 cents + 2.5%. But you get the same reward points on your credit card/debit card regardless of where you swipe it. So my personal philosophy is: large chain - swipe away without guilt for any amount. Small merchant - use cash unless it's hundreds of dollars (and then they may give you a cash discount in that case). And make sure to carry enough cash for such situations. When I was a student, that was about $20 (enough for coffee or lunch at a small place).","The percentage fee often depends on the type of card. Amex and rewards cards like aeroplan cards often charge 2.5-4% whereas cashback cards will charge less. That's why most places (specifically in Canada which is where I'm from) don't take Amex because they charge way too much.","Fort Lauderdale seems to have dozens of bike shops. more and more every year. they're not competing on price. niches galore. even the motorized bike shops are multiplying. it's not price in this area for sure (or you can go to Target if that's all you want is price)","The bigger question in the US is perhaps why the cost per kWh is twice as high in New York as it is in Washington state. It may have quite a bit to do with taxes and regulation compliance and a lot less with natural factors in the market (cost of producing and transmitting power).","There are lots of reasons for the differences in price. Can you go to (a) bank, (b) forex bureau and (c) central bank and post back both bid and offer prices at a given time so we can consider the spread? What you've said above for (a) and (b) are presumably USDGHS offer prices, because they are higher than the (c) central bank price. If a bank or bureau bid price was higher than the central bank offer price then you could buy GHS from the central bank and then sell them to a bureau for a higher price, an almost no risk arbitrage, other than the armoured car to deliver the funds from central bank to bureau. What you've posted is: (a) a bank will sell you 1 USD for 3.4 GHS (b) a bureau will sell you 1 USD for 3.7 GHS (c) we can see the bid/offer for central bank is 3.1949/3.1975 which means the central bank, if you have an account, will sell you 1 USD for 3.1975 GHS. You clearly want to buy USD from the central bank, then the bank, then the bureau. Anyway, the reason for these differences is all to do with liquidity conditions in the local areas, the customer types, and the frequency of orders versus inventory... Think about it. The central bank has the most frequency of orders and the biggest customers so it offers the lower price, then the bank, and then the bureau. I think the bureau is the worst price there... You have to explain further :)","There is plenty of research that shows that companies that have a portfolio of brands within the same category have superior financial returns. The reason is that even for dish soap there are different types of people who want different products. One of the more successful brands for P&G over the past decade has been Gain detergent. It is a mega-brand that competes with tide for people who love scent. The brand has been so successful that there are now dish soaps and other products with the Gain name. There are typically performance differences between the brands. For example trade off performance against a certain type of stain for more scent.","Retail is the operative word. Local retailers don't raise prices because they need to compete with uninhibited e-commerce retailers. I wouldn't be surprised if progressives tried to correct for this by increasing the tax rate on online purchases to offset the e-commerce advantage, which of course would hurt consumers even more.","These two categories ensure you will carry the card in your wallet (since they only work for physical locations), but don't tend to have excessive spending (most people maxing out at $200 or so per month, so $2 for the bonus). You then use the same card for other purchases, because you have it on you, where you only get the 1%. It worked for me, I started carrying the Amazon card when I found out it had a higher percentage for gas purchases. I only use it for gas though.","$6 per gallon, up to 20 gallons. So if gas was $2/gallon, that would be 3 20-gallon fill-ups, or 60 gallons. I guess if today's cost is $2.32, that would be 2 free 20-gallon fill-ups, and the last 20 gallons for $1.36/gallon, or $27. Much cheaper than the $140 it would be without the discounts :)","Oh there is a mark up, store brand items typically have better margins than the name brands. The quality is usually a hair lower compared to the name brand, but basically the same. Canned Green beans for example, might have a slightly more brownish tint and might not be as perfectly uniform in size. They still taste the same and you're probably not going to even notice the small difference.","Summarized article: Recent mishaps causing supply disruptions at 14 California refineries caused wholesale gas prices to reach an all-time high of $4.39 per gallon. Local gas stations increased prices to 30 cents or more per gallon overnight, with some stations charging as much as $5.79 per gallon. Some stations chose not to buy high-priced wholesale gas for fear they wouldn't be able to sell it. While others shut off their pumps after they ran out of the gas they bought at lower wholesale prices. Some of the refinery mishaps include an oil pipeline problem, a power outage at Exxon Mobil Corp's Torrance refinery and a shutdown of the crude distillation unit at Chevron Corp's Richmond refinery. It is unknown when wholesale prices will come down but one solution may be to allow refineries to switch over from the summer blend to the cheaper winter blend earlier than planned. The California Energy Commission is considering the idea but notes an early switch over could impact air quality. The summer blend reduces evaporation of pollutants during warm weather which would be less damaging to air quality in California's current heat wave. * For more summarized news, subscribe to the [/r/SkimThat](http://www.reddit.com/r/SkimThat) subreddit","Some large merchants do not give discounts for cash payments as this does not work out any cheaper for them, vs Credit Card payments. In Credit Card typically fees given to all the 3 parties (Merchant bank, Issuer Bank and Visa) would be around 3%. If cash payment is made, and the amounts are large (say at Walmart / K-Mart they have to deposit such cash at Banks, Have a provision to Storing Cash at Stores, People to count the cash. So essentially they will have to pay for Cash Officer to count, Bigger Safe to store, Transport & Security & Insurance to take Cash to Bank Plus Banks charge around 1% charge for counting the large cash being deposited. This cash would be in local branch where as the operations are centralized and Walmart/K-Mart would need the money in central account, it takes time to get it transferred to a central account, and there is a fee charged by Bank to do this automatically. On the other hand, smaller merchants would like cash as they are operated stand-alone and most of their purchases are also cash. Hence they would tend to give a discount for cash payment if any.","It may seem very simple on its face but you don't know the merchant's agreement. You don't know who is providing the processing equipment. You don't know a lot of things. You know that Visa, Mastercard, Discover, Amex and others have network requirements and agreements. You know that laws have been changed to allow merchant surcharges (previously it was contracts that prohibited surcharges, not laws). That gas station, or that pizza parlor, or any other merchant doesn't have a direct relationship with Visa or Mastercard; it has an agreement with a bank or other processing entity. The issue here, is whom do you even call? And what would you gain? Find out what bank is contracted for that particular equipment and file a complaint that the merchant charged you $0.35? Maybe the merchant agreement allows surcharges up to state and local maximums? You don't know the terms of their agreement. Calling around to figure out what parties are involved to understand the terms of their agreement is a waste of time, like you said you can just go across the street if it's so offensive to you. Or just carry a little cash. If that's not the answer you're looking for, here's one for you: There is no practical recourse.","\"I usually go to a theater closest to me owned by a smaller local company. However, once I ventured to my nearby AMC to see a $28 ticket price! WTF!? I just want to watch a movie. I don't need a handjob or a glass of Dom while I watch. I asked the ticket guy why. He said \"\"it's got Dolby sound and it's the summer I guess\"\". Fuck AMC. I saw the same movie 3 miles away for $9.\"","A lot of stores, especially smaller ones, won't accept card payments under $10.00. They pay a fee for taking cards and for small transactions it is not worth it.","Beware of keeping up with the Joneses. Many of your free-spending neighbors are broke. Basically, the prices of things like what you're noticing will rise as incomes in the area rise. A great example of this can be found in state capitals and college towns, where battalions of government workers or students all make just about the same amount of money and drive prices accordingly. For example, a college town tends to have a tight rental market.","So basically they are the same as most other for profit businesses. The big difference is they offer global variety and easy checkout. If the malls don't have it, Amazon is the place to look. Or is competition no longer good for business?","Yeah I know, but it is only a local monopoly. It would be a silly reason to move, but you could conceivably move a town over and get a different provider. I just mean none of them have a majority share of the total market.","Basic utilities like water and electricity are highly regulated. The price is set by a certain and small amount above cost, which is audited at several layers by government and private entities. I'm just not sure why someone would be so far from reality, I apologize if my response jarred you.","When someone charges, it means that person fix the price you pay. Australia is part of the Indonesian continent. It is an island in the South Pacific ocean. In the price of an item, you include the shipping cost. It is more expensive by plane because the cost of the kerozen is higher than the cost of diesel for ships. Accident can happen, so you have to include in price the cost of the insurance.","I'll address one part of your question: There are other taxes that companies pay as well, such as income tax, but don't charge to the customer as a fee. So, why are gross receipts taxes charged to the customer? Things like income tax can't be passed on to the consumer in a direct way, because there's no fixed relationship between the amount of the tax and the price of an individual product. Income tax is paid on taxable income, which will incorporate deductions for the costs the company incurred to do business. So the final amount of corporate income tax can depend on things unrelated to the price of goods sold, like whether the business decided to repave their parking lot. Gross receipts taxes, by definition, are charged on the total amount of money taken in, so every dollar you spend on an item at the store will be subject to the gross receipts tax, and hence will cost the business 7 cents (or X% where X is the tax rate). This means there is a direct link between the price you pay for an individual item and the tax they pay on that transaction. The same is true for sales taxes, which are also often added at the time of sale. Of course, businesses could roll all of these into the posted price as well. The reason they don't is to get their foot in the door and make the price seem lower: you're more likely to buy something if you see it for the low, low, one-time-only price of $99.99, act now, save big, and then find out you owe an extra $7 at the register than if you saw $107 on the price tag.","You are right, and it's 40 cents per liter, not gallon as I originally wrote. After 60 liters per month, it goes up to 70 cents per liter. It's around 90 cents per liter right now where I am in the US. Like you said, still cheap compared to the rest of the world ($1 per liter in India, $1.90 per liter in Britain).","\"This isn't as rigorous as it should be, but may offer some useful insight into how big and small companies differ operationally. Putting Apple aside, larger companies tend to sell larger volumes of products (even if they're MRI devices, or turbines) relative to what smaller companies can sell (obviously, in absolute terms as well). They are also able to negotiate volume discounts as well as payment terms. This allows them to finance sales through their supply chain. However, their large direct competitors are able to do the same thing as well. Competitive forces then drive prices down. Smaller businesses, without these advantages of scale, tend to have to charge higher margins since they have to pay directly (and, if their clients are large businesses, finance the sale). Small businesses still have higher proportional costs of operation. Sadly, my reference here is a study I performed for the South African Revenue Service about ten years ago, and not available online. However, the time taken by a small business to manage admin, tax, HR is a greater proportion of revenue than for larger companies. If the small business is a start-up with big investment from venture finance, then they could subsidise their selling price, run at a loss and try and gain scale. Funnily enough, there is a fantastic article on this by Joel Spolsky (Ben and Jerry's vs. Amazon) For the average highly-competitive smaller company, the best choice is to chase design/quality/premium markets in order to justify the higher margins they have to charge. And that's what makes Apple interesting as a case study. They were a small company in the presence of giants (Intel, Microsoft, IBM). They were \"\"forced\"\" to concentrate on design and premium markets in order to justify their need for higher margins. It almost didn't work but then they broke through. Now they're in the unique position of having gained scale but are still small enough relative to other electronics manufacturers to continue charging that premium (by volume their sales are still relatively small but their margins make them a giant). This type of variation from market to market makes developing some sort of generalised solution very unlikely but the general requirement holds: that smaller companies must charge higher margins in order to create equivalent profits to larger companies which must gain scale through volume.\"","I think the question relates to the discussion here: http://clarkhoward.com/liveweb/shownotes/2010/10/05/19449/ It was always the case that merchants could discount purchases made with cash. What wasn't allowed is allowing the merchant to charge extra for credit card transactions (presumably to cover the fees the merchants pay). These fees usually carry a flat fee per transaction, plus around 2% of the purchase price. What also wasn't allowed was them to refuse any credit transactions. People could charge a pack of gum, even if the fees put that transaction in the red. What's allowed according to this new development is different levels of discounting for different credit cards. Somewhat related to this discussion is another development that happened this summer: merchants now have the ability to refuse credit card transactions of less than $10. Here's my feeling on all of this. I think we'll see merchants imposing minimum credit transaction amounts before we see them monkeying at the 1-2% level on pricing for different types of credit cards. My feeling is that they'd be wise not to change anything, even though they can. Refusing transactions (or charging more for others) is going to come as a unpleasant shock to enough people that they may take their business elsewhere.","Ah, yes, I forgot about Oregon's and New Jersey's brilliant contributions to the laboratory of democracy. But you're right, that doesn't amount to 30¢ per gallon. Not even close. If an attendant's pay went up $3.00 an hour due to the new minimum, and they service 15 cars per hour, and each car takes 15 gallons, that comes to 1.3¢ per gallon.","You say “there is no reason” as if the reasons they had for initially choosing uniform pricing and pay meant nothing. You sound just like those libertarians who want to get rid of all market regulations because free market is more competitive and healthier. You should NEVER ignore the initial reasons any law or decision is made. That is a recipe for repeating the issues we have already faced. Why go through the same struggle twice?","I don't know why stocks in some industries tend to have lower prices per share than others. It doesn't really matter much. Whether a company has 1,000,0000 shares selling for $100 each, or 10,000,000 shares selling for $10 each, either way the total value is the same. Companies generally like to keep the share price relatively low so that if someone wants to buy a small amount, they can. Like if the price was $10,000 per share, than an investor with less than $10,000 to put in that one stock would be priced out of the market. If it's $10, then if someone wants $10 they can buy one share, and if someone wants $10,000 they can buy 1000 shares. As to why energy stocks are volatile, I can think of several reasons. One, in our current world, energy is highly susceptible to politics. A lot of the world's energy comes from the Middle East, which is a notoriously unstable region. Any time there's conflict there, energy supplies from the region become uncertain. Oil-producing countries may embargo countries that they don't like. A war will, at the very least, interfere with transportation and shipping, and may result in oil wells being destroyed. Etc. Two, energy is consumed when you use it, and most consumers have very limited ability to stockpile. So you're constantly buying the energy you need as you need it. So if demand goes down, it is reflected immediately. Compare this to, say, clothing. Most people expect to keep the same clothes for years, wearing them repeatedly. (Hopefully washing them now and then!) So if for some reason you decided today that you only need three red shirts instead of four, this might not have any immediate impact on your buying. It could be months before you would have bought a new red shirt anyway. There is a tendency for the market to react rather slowly to changes in demand for shirts. But with energy, if you decide you only need to burn 3 gallons of gas per week instead of 4, your consumption goes down immediately, within days. Three, really adding to number two, energy is highly perishable, especially some forms of energy. If a solar power station is capable of producing 10 megawatts but today there is only demand for 9 megawatts, you can't save the unused megawatt for some future time when demand is higher. It's gone. (You can charge a battery with it, but that's pretty limited.) You can pile up coal or store natural gas in a tank until you need it, but you can't save the output of a power plant. Note numbers two and three also apply to food, which is why food production is also very volatile.","Two different takes on an answer; the net-loss concept you mentioned and a core-business concept. If a store is actually a net-loss, and anybody is willing to buy it, it may well make sense to sell it. Depending on your capital value invested, and how much it would take you to make it profitable, it may be a sound business decision to sell the asset. The buyer of the asset is of course expecting for some reason to make it not a net loss for them (perhaps they have other stores in the vicinity and can then share staff or stock somehow). The core-business is a fuzzier concept. Investors seem to go in cycles, like can like well-diversified companies that are resilient to a market downturn in one sector, but then they also like so-called pure-play companies, where you are clear on what you are owning. To try an example (which is likely not the case here), lets say that Sunoco in 5% of its stores had migrated away from a gas-station model to a one-stop-gas-and-repairs model. Therefore they had to have service bays, parts, and trained staff at those locations. These things are expensive, and could be seen as not their area of expertise (selling gas). So as an investor, if I want to own gas stations, I don't want to own a full service garage, so perhaps I invest in somebody else. Once they sell off their non-core assets, they free up capital to do what they know best. It is at least one possible explanation.","I thought this was because credit card companies charge the retailer a fee to accept credit card payments. If you spend $100, the retailer pays $1 (or whatever percentage they have negotiated) to the credit card provider. Handing over $100 cash and paying $1 fee to Visa means a loss to the retailer. The same transaction on $100 worth of product means the loss is accepted out of the profit margin which the retailer accepts to attract custom.","Good point on gym memberships. I've known people who pay $5 per month at the gym but never go because they don't feel like they are wasting too much money. Now compare that with someone who's paying $40 or more, they want to get their money's worth so they go more often.","Depending on what currency the price is quoted in and is originally sold, currency fluctuation can also carry over onto the price in your currency. An example for that would be bitcoin prices which sometimes show heavy ups and downs in one currency, but seem totally stable in another and can be tracked back to changed exchange rates between currencies. Also like others have said, prices on stocks are not actually fixed. You can offer to buy or sell at any price. Only if 2 people want to buy or sell for the same price there will actually be a transaction.","My guess would be for small merchants there could be a small difference. For large merchants, the cash is also at a cost equivalent to the card fees. Check for my other answer at How do credit card companies make profit?","These markets are independent, just like any other stock market. For example, there are stocks on the Milan stock exchange that are also on the New York stock exchange and have different historical prices. Remember, this is all about offer and demand. The Hong Kong stock exchange has the Hong Kong Dollar as its currency, which is anchored to the USD. Also, there is more trade going on, on the Hong Kong stock exchange. As for the answer, I don't know whether these stocks are exactly the same. I guess they should be, but maybe somebody else could answer that.","They make a killing. In Queensland, a state of Australia, they only have one Distributor, Energex, so there is no competition. All power comes from them. As such, the prices are ridiculously high since retailers can't afford to sell it any cheaper than what they bought it for. This company Energex has employees that casually take 3 hour lunch breaks and still earn over 100k a year and they are not even execs. Meanwhile the consumers in that state are going broke from the energy prices.","Lots of places in the US do it. Although the way that they usually phrase it is 'prices reflect a x.x% discount for cash' since most of the credit card companies have an agreement that says you cannot charge a surcharge if someone is using a credit card. So they get around it by giving a discount for cash. effect is the same, but it skirts the letter of the agreement","My guess would be a black American express. Or, the accountants will make them switch out throughout the year to get maximum benefits. Sometimes, 1% maxes out at a certain amount, so they'll use a different CC every quarter or so.","They could have different quotes as there are more than a few pieces here. Are you talking a Real Time Level II quote or just a delayed quote? Delayed quotes could vary as different companies would be using different time points in their data. You aren't specifying exactly what kind of quote from which system are you using here. The key to this question is how much of a pinpoint answer do you want and how prepared are you to pay for that kind of access to the automated trades happening? Remember that there could well be more than a few trades happening each millisecond and thus latency is something to be very careful here, regardless of the exchange as long as we are talking about first-world stock exchanges where there are various automated systems being used for trading. Different market makers is just a possible piece of the equation here. One could have the same market maker but if the timings are different,e.g. if one quote is at 2:30:30 and the other is at 2:30:29 there could be a difference given all the trades processed within that second, thus the question is how well can you get that split second total view of bids and asks for a stock. You want to get all the outstanding orders which could be a non-trivial task.","All institutions, financial or otherwise, seek to maximize profits. In a free market, each bank would price its services to be competitive with the current state of the market. Since the currency conversion fee is generally a small part of the decision as to which bank to choose, banks can be non-competitive in this area. If this is an important consideration for you then you would need to find a bank with a lower conversion fee, but be prepared to have higher fees in other areas. TL;DR: The market bears it.","\"The simplest answer would be: Because they can. Why charge less for something if people will pay more? One example are Apple products. While there the price number is not exactly the same in EUR and USD, they are so close that, effectively, the EUR product is more expensive. Many things go into a price. There might be reasons for products in the EU being more expensive to produce or distribute. Or people in the EU might be in general more willing to pay more for a certain product. In that case, a company would forgo profits when they offered it cheaper. Also, prices are relative. Is the USD price the \"\"correct\"\" one and the exchange rate should dictate what the EUR price is? Or vice versa?\"","I think it depends on how much time I am saving and what I am saving doing. I do not go out of my way to save a few pennies on gas. But If i know that I will be traveling somewhere with cheaper gas anyway I will wait to get there to fill up. But I if I need gas before there I will fill up at the place i stop rather than just getting enough to go to the new location. I heard it best said as being dollar smart instead of dime foolish. Going out of your way for gas like this is dime foolish. On the other hand if you can bundle your trip to the store nearby or other tasks it certianly adds to the value.","> There are some products that people would notice a 1% difference from competitors. Really? I'd think most people are pretty loyal to amazon. They already have their credit card into and account all set up. A 1% price increase doesn't sound like that much at all. Why would I go to all that trouble to save < 5%?","Most larger corporations need to focus on the bottom line to appease their current and prospective investors. It can actually be quite the vicious cycle, and why people would be better off as a whole if we had more mom and pop stores.","Every reward program has to have a funding source. If the card gives you x percent back on all purchases. That means that their business is structured to entice you to pump more transactions through the system. Either their other costs are lower, or the increased business allows them to make more money off of late fees, and interest. If the card has you earn extra points for buying a type of item or from a type of store (home stores improvement in the Spring), they are trying to make sure you use their card for what can be a significant amount of business during a small window of time. Sometimes they cap it by saying 5% cash back at home improvement stores during the spring but only on the first $1500 of purchases. That limits it to $75 maximum. Adding more business for them, makes more money for them. Groceries and gas are a good year round purchase categories. Yes there is some variation depending on the season, and the weather, but overall there is not an annual cliff once the season ends. Gas and groceries account for thousands of dollars a year these are not insignificant categories, for many families are recession proof. If they perceive a value from this type of offer they will change their buying behavior. My local grocery store has a deal with a specific gas station. This means that they made a monetary deal. Because you earn points at the grocery store and spend points at the gas station, the grocery store is paying some compensation to the gas station every time you use points. The gas station must be seeing an increase in business so theoretically they don't get 100% compensation from the grocery store. In cases where credit cards give airline miles, the credit card company buys the miles from the airline at a discount because they know that a significant number of miles will never be used.","Just my two cents. It depend. Since Bayers aspirin is already established and there is no R&D to recoupe. It's easy to sell while newer drug is less well known and vendor need to get their R&D money back and don't forget the cost of business such as filing with FDA. It can added up while generic drug basically just a receipt that anyone can cook up.","You do know that a 42-U.S. gallon barrel of crude oil provides about 45 (not a typo) gallons of petroleum products. One barrel of crude oil, when refined, produces about 19 gallons of finished motor gasoline, and 10 gallons of diesel, as well as other petroleum products. Most petroleum products are used to produce energy. So not all of it is reflected in pump prices.","> General Sales: Virginia - 4.3%; Fairfax County - 1%; plus an additional 0.7% state tax for transportation. At most they'd have to charge the additional 1%, and I'm pretty sure taxes don't work that way. Either you're wrong or your restaurants are defrauding you with fake taxes. Or your local government is failing to put the actual tax rates on their websites.","\"The fee structures are different for PIN-based transactions versus \"\"credit\"\" style transactions. Usually there is a fixed fee (around $0.50) for PIN-based transactions and a varying fixed fee plus a percentage for credit transactions (something like $0.35 + 2.5%). There are also value limits for PIN-based transactions... I believe that you cannot exceed $400 in most places. The signature feature of credit transactions isn't there to protect you, it signifies your agreement to comply with the contract you and the credit card issuer, protecting the merchant from some types of chargeback. Some merchants waive the signature for low dollar value transactions to increase convenience and speed up the lines. All of your other questions are answered elsewhere on this site.\"","Health foods, books, coffee shop...am I supposed to hang out, stop in for five minutes or what? A grocery store and this are not comparable. The prices would be much higher at this place. So what are customers paying a premium for if it’s several different experiences in an area without a lot of demand?"],"string":"[\n \"One factor I haven't seen mentioned is volume. Suppliers will charge a slightly lower price to the station if they buy in full tanker truck loads instead of smaller quantities. Where I am this is probably still the largest factor in price spread with all newer bigger stations being 20-30 cents cheaper than the old small ones (often a repair shop with 2 pumps out front); the only reason it's slowly becoming less pronounced is that the old small stations are steadily closing up as their tanks fail leak inspections because they don't sell enough gas to justify repair and replacement.\",\n \"\\\"I'll echo: many factors. Brand: There are generally two levels of pricing: \\\"\\\"major brand\\\"\\\" and \\\"\\\"discount brand\\\"\\\". You can generally expect the \\\"\\\"discount brand\\\"\\\" to cost about 5-10 cents less per gallon in the same neighborhood as \\\"\\\"major brand\\\"\\\" gas. This is for a number of sub-factors; chief among them is that not all gasolines are created equal. A lot of the major brands (Shell, Texaco, Chevron, BP, Exxon) have proprietary detergents and cleaning agents that the discount brands do not. They're also generally closer to the real octane rating of the gas, have less ethanol (you'll see the sign that says \\\"\\\"contains up to 10% ethanol\\\"\\\"; the bargain brands are right up at that limit while the top-tier brands keep it lower) and have stricter requirements about storage tank maintenance. Anyone who tells you that all gas is the same, send em my way; I tried to save a few bux buying the cheaper stuff and now my car needs an engine overhaul because of fouling causing premature wear. A couple of my co-workers got a fuel system overhaul free from the local supermarket because the storage tank wasn't properly purged, and they got water into their gas tanks. Market Price: Yes, this is of course a factor. Generally, gas prices at the pump rise very quickly when the market price of crude or gasoline goes up, then fall more slowly than the market price, because the margins on gas sales for a C-store are very slim. When prices change, the C-stores lose either way; when prices rise they have to pay more than they got from the last tankful to buy the next one, and when prices fall they don't recoup the cost of their current tank. By quickly increasing the price to match commodities market prices, then gradually lowering them over time even if the market collapses, they mitigate the losses both ways. Overhead: A gas station right next to a highway probably had to pay more for that land, both to buy/lease it and in property taxes. Nicer (newer, cleaner) stations generally have to pay more to stay that way. The higher your operating costs, the more you'll have to charge for your gas. You can usually do so because the nicer station will attract customers willing to pay a few cents more for the nicer facilities. Taxation: Most States charge a tax on gasoline, in addition to a Federal tax on gas. That revenue either goes into the State's general fund, or is earmarked for transportation costs like road maintenance. California's gas prices are sky-high across the state, because they have the highest gas tax. I'm not sure Colorado, Wyoming and Montana have gas taxes at all. Proximity to other stations: No matter what you have to pay for the land and facilities, if there's another station across the street, you have to be within a penny of their price or people will vote with their feet. While \\\"\\\"predatory pricing\\\"\\\" (taking a loss on sales in one area, buffered by profits elsewhere, in order to drive out competition) is technically illegal, you see it all the time in the C-store industry and it is very difficult to prove. This is a primary cause of neighborhood-to-neighborhood changes; a C-store will look around the other stations on their street corner, and the ones down the road a block or two each direction, when determining what they can sell gas for that day. The guy five blocks down has a completely different pool of competing stations. Population Distribution: With a lot of people in a particular area, there's a big \\\"\\\"pie\\\"\\\" of customer dollars for C-stores to compete for. This generally leads to increased prices because the stations don't have to be AS cutthroat; regardless of how good your price is, you have only so many pumps, and at some point people will pay more to use the open pump than wait for the cheaper one. The reverse is true in rural areas; with only two stations in an entire small town, those two stations will become extremely cutthroat. However, rural prices also vary more; with only one station in easy walking distance from where you ran out of gas, they can charge you $6 to fill that gallon gas can if they want, and you'll pay it because the next gas station's another 20 miles down the road and probably has even higher prices. This, along with overhead, is generally why the Rockies states have the lowest average prices; land's cheap and people are scarce in Wyoming. But, the \\\"\\\"price-gouging\\\"\\\" can be seen in the rural Southwest, where there's a LOT of ground to cover between gas stations, and so the \\\"\\\"last chance gas\\\"\\\" along major highways just outside of town, each a nickel to a dime more than the previous station, is a common stereotype. Transportation costs: Prices are higher on the East and West Coasts than in the Gulf States for a very simple reason; the bulk of the U.S. refinery capacity is along the Gulf Coast between Galveston and the Florida border. The further you are from there, the more it costs to get the fuel from the refinery to the gas station, and that cost is reflected at the pump. In fact, the East Coast imports gasoline by tanker even though the United States is now a net exporter of gasoline, because it's cheaper to buy it from foreign sources than it would be to watch it drip through the limited pipeline capacity that exists between the Gulf states and the Eastern Seaboard.\\\"\",\n \"\\\"This is the best tl;dr I could make, [original](http://globalmillennial.org/2017/05/28/gas-station-argument-direct-competition-leads-different-prices/) reduced by 90%. (I'm a bot) ***** > There is a difference between a branded station and an unbranded station. > A branded station will order their gas from their corporate parent - a Chevron station will get their gas from the Chevron rack at their local fuel terminal. > An unbranded/independent station has a much wider range of fuel they can buy, and usually get quotes from multiple fuel marketing companies The station will buy the fuel from the marketer, who transports the fuel from the rack to the station. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6ejaxi/the_gas_station_argument_why_direct_competition/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \\\"\\\"Version 1.65, ~133499 tl;drs so far.\\\"\\\") | [Theory](http://np.reddit.com/r/autotldr/comments/31bfht/theory_autotldr_concept/) | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \\\"\\\"PM's and comments are monitored, constructive feedback is welcome.\\\"\\\") | *Top* *keywords*: **station**^#1 **price**^#2 **fuel**^#3 **more**^#4 **petrol**^#5\\\"\",\n \"There are many factors. Most gas stations price their gas based on what it will cost them to replace it. So when their supplier raises the price that it charges the station the station typically raises its prices proportionality. The suppliers tend to have their own rates. The business needs to make a profit so the business sets the price where it feels it will make the most money. Some stations buy bargain gas. Many people say they find this gas to be just fine. Personally some stations gas seems to make my cars run much worse. I can say that my mileage can vary by as much as 4 miles to the gallon based on where I get my gas. So I pay more to go to those stations that consistently have provided me good gasoline. However higher prices do not necessarily mean better gas. We have a BP just down the street that seems to have bad gas while one about a half a mile away that I prefer because I have never had a bad tank of gas. Both are priced about the same. Also some localities have special tax zones. These are local taxes levied based on the location. We have 4 different zones here in Peoria IL (150k pop). That does not take into account the smaller cities around us.\",\n \"Location, Location, Location. The closer to the highway, the more they can charge. People want to go less than a mile from the exit to get gas. Therefore they save time, but spend more money. That is understandable, so the gas station takes advantage of the situation.\",\n \"\\\"This is known as \\\"\\\"Zone Pricing\\\"\\\" or \\\"\\\"Geographical Pricing\\\"\\\". http://articles.latimes.com/2005/jun/19/business/fi-calprice19 Such price variations may seem odd, but they are not unique to Anaheim. On any given day, in any major U.S. city, a single brand of gasoline will sell for a wide range of prices even when the cost to make and deliver the fuel is the same. The primary culprit is zone pricing, a secret and pervasive oil company strategy to boost profits by charging dealers different amounts for fuel based on traffic volume, station amenities, nearby household incomes, the strength of competitors and other factors. It's a controversial strategy, but the courts have thus far deemed it legal, and the Federal Trade Commission recently said the effect on consumers was ambiguous because some customers got hurt by higher prices while others benefited from lower ones. http://en.wikipedia.org/wiki/Geographical_pricing Zone pricing, as practiced in the gasoline industry in the United States, is the pricing of gasoline based on a complex and secret weighting of factors, such as the number of competing stations, number of vehicles, average traffic flow, population density, and geographic characteristics. This can result in two branded gas stations only a few miles apart selling gasoline at a price differential of as much as $0.50 per gallon. But the short answer is \\\"\\\"because they can\\\"\\\". It's legal, provided that some people are paying less while others are paying more. Essentially the larger, richer audience is subsidizing the product for other areas. It's not terribly different than the way most drugs are priced in the world.\\\"\",\n \"Some of this is demand management. The local BJ's wholesale club sells gas $0.10-0.15/gallon less than the prevailing rate. Typically there are lines of 3-5 cars waiting for a pump during busy periods. People are price-conscious when buying gas, which draws crowds and the retailer actually wants a line -- the whole point of the gas station is to draw traffic to the warehouse club. Other gas stations have the opposite problem -- big crowds lead to fewer people buying food and drinks in the convenience store, which is where the business actually makes its money. They want a steady stream of people. In my area, there is a gas station that is on a busy intersection right off the highway ramp going to the airport. Their problem is that people returning rental cars used to swarm the gas station and cause traffic tie-ups on the road -- a problem averted by marking up the gas $0.30.\",\n \"When I ran a gas station, our price was largely set by our neighbors-- the other gas stations in the area. We couldn't go below the current cost of replacement gas, but other than that we wanted to be at .05 over the average. (We got away with charging more because we were the last station on a major road.) Everybody else did the same thing. Also, we only set prices once a day, early in the morning before the commuter rush. Changing prices while somebody is pumping gas Was Not Done, for fairly obvious reasons. So, you'd get these ripples of price-changing, as one station changed its price, and then all its neighbors would react to that the next day, and then THEIR neighbors would change the day after that, and so on.\",\n \"I only have anecdotal evidence here as members of my family used to own a grocery store / gas station, but they were often time charged much more to have the gasoline delivered to than many gas stations which were just a mile or two away (up to 15% more). Also depending upon the branding of the gas station, they are required to use certain distributors (i.e. if you are an Exxon gas station you can only use a few select vendors) which gave them less control of their final cost. All in all the gasoline often had smaller margins than items in the grocery store, which are already extremely low.\",\n \"\\\"I think the key to this question is to think about how people tick. The underlying assumption in any decision that measures monetary value or other economic principles is that we're rational actors in a global marketplace. Life isn't a ledger or a taxi on a meter. If you have time on your hands or enjoy the act of driving when you run your errands, that diversion to save a dime on gas isn't a net loss, it just is. That may be a different story if you need to get your rental car returned so that you can fly home -- in that case, you're ok with getting hosed by the gas station strategically located between hotels and the airport. Our motivations are deeper than that. Some people get a feeling of satisfaction or security from always getting the \\\"\\\"best deal\\\"\\\". Some folks visit a particular gas station because the clerks are friendly or the coffee is good. Others want to pay more -- they buy \\\"\\\"premium\\\"\\\" gas from Exxon/Mobil because they are premium people who \\\"\\\"buy the best\\\"\\\".\\\"\",\n \"[This article](http://www.factcheck.org/2011/03/who-sells-american-gasoline/) shows that gasoline at any given station is combined in transport or processing; making it impossible to tell if your oil came from a certain company. >While gasoline is sold at about 162,000 retail outlets across the nation, about one-third of these stations are “unbranded” dealers that may sell gasoline of any brand. The remainder of the outlets are “branded” stations, but may not necessarily be selling gasoline produced at that company’s refineries. This is because gasoline from different refineries is often combined for shipment by pipeline, and companies owning service stations in the same area may be purchasing gasoline at the same bulk terminal. In that case, the only difference between the gasoline at station X versus the gasoline at station Y may be the small amount of additives that those companies add to the gasoline before it gets to the pump.\",\n \"Family has owned a gas stations for 10+ years. Gas is a bitch to own and most retailers make about 20¢ a gallon profit not including insurance/repairs. Hard to find gas station pump parts along with the high cost of repairing it if it breaks. It's mainly used to attract customers inside the store because that's where you make the profit.\",\n \"That's the gas station 7/11 and the like. But not the bodegas and other inner-city grocery stores that charge 3x the normal price for (often crappy) bread and eggs because there aren't many competitors when you live out on Avenue Q in Brooklyn, or in Northern, KY but don't have a car.\",\n \"Competition, or actually lack of competition, mostly due to a demand curve that has minimal change due to price. You would buy the equivalent, cheaper option if it was available, but the store has little interest in offering multiple, competing options that would drive their same store revenue down. And the competing stores (Grocery, Department, Drug, Card) have similar overhead costs (floor space, lights, personnel). Most carry the cards for incremental revenue, and observe little advantage to lower price for a card (customers seldom buy more cards due to a lower price). Thus they mark the price to what (most) customers are willing to pay. You may choose to shop the various stores and find the one that has a (slightly) better pricing for cards, and then stop at that store when you want to buy a card. But many cards are sold as an incremental purchase as part of a larger shopping trip (convenience), as the customer combines trips (reduce the time spent shopping, albeit not reducing the money spent).\",\n \"Sinclair, Murphy, Conoco, BP/Phillips, ARC0, Pilot, Flying J, Love’s, RaceTrac, Valero. Theses are only some of the gas stations that don't import. You can choose where your has comes from fact is your too lazy to do a Google search.\",\n \">For instance in far upstate New York its probably cheaper to truck gas from a refinery outside of Montreal than from a refinery outside of New York City or Boston. Oddly enough, there aren't any refineries outside Boston. There aren't any in Massachusetts at all. In fact, there are also none in New York, New Hampshire, Vermont, Maine, Connecticut, or Rhode Island. There are two refineries near New York City, but they're in New Jersey.\",\n \"There are many gas stations where I live that already have different prices if you pay for cash vs. credit. In addition, some small businesses are doing this as well. My wife bought a birthday cake from a bakery. If you paid with cash, you saved 5%.\",\n \"Fuel prices are regulated in most countires. The way its regulated differs. Essentially the idea is once the retail prices are up, they are normally kept that level so that a buffer profit is built, now if the fuel prices increase beyond the retail price can still be kept same using the buffer built up.\",\n \"Don't really know but I can guess. Firstly, everyone thinks the price of gas is too high. You drive to work every day, and gas is basically the only product who's price is advertised from the street! From that perspective. So mentally, I argue, we overvalue an extra 1 percent discount on gas. It's only worth maybe 60 cents a month to me, but worth a lot of other interchance fees for the credit card company. Secondly, gas stations are a prime robbery target. Credit cards mean less cash in the till. And less chance for employees to steal from the till, and less chance of counterfit money. Finally, it's a competitive market. If stations don't accept a card, they'll lose business to elsewhere. There's a gas station on either side of an intersection, and you can always tell which station is a few cents cheaper because it's the one with customers fueling up while the other one is a ghost town. They feel they have to compete on convenience or go under, and the credit card companies recruit you into the game with higher cash back rewards.\",\n \"Pay attention to nickel-and-dime charges (atm fees, low balance fees, limit on atm transactions per month, charge for human teller transaction, charge for paper statements or tax records). Consider that a financial company will spend on the order of $100-500 to sign up a good customer. Are you getting this in a cash bonus, competitive high interest rate, reasonable other gift, or advertising directed at your eyeballs? A variation in rates less than 1% easily fits into a marketing cost and there doesn't have to be any other magic to it.\",\n \"From experience, Mastercard and Visa charge vendors about the same (around 2%-5%) while American Express and Diners Club are astonishingly expensive (6%-10%) and you'll find that few small retailers are very comfortable accepting these. The variation comes from the volume of trade that vendors provide. A big retailer will negotiate a very low rate while smaller businesses will be hit with higher charges.\",\n \"I am not sure but probably it depends upon the cut the credit card company receives from the merchant. For Hotels such as dining etc. the cut could be more. Again, periodically, many merchants join with the card company to launch promotions. It could be part of such promotions. Apart from class of merchants, these points also differ on class of cards e.g a premium card will earn more rewards than a simple classic card.\",\n \"My cousins bought a gas station, their lives have been shitty ever since. However they dont have a convenience store which is where all the money is at apparently. The father bought it for 600k, land and all. Supposively he thought it was worth over a mil due to the land valuation. The business operations standpoint is that they make minimum wage.\",\n \"Most of the imports probably come from Canada and Mexico, its probably cheaper to import gasoline from Canada or Mexico in some parts of the country purely due to distance. For instance in far upstate New York its probably cheaper to truck gas from a refinery outside of Montreal than from a refinery outside of New York City or Boston.\",\n \"Retail gas prices are a pretty poor anecdote for the argument that the minimum wage is too high. Very little labor goes into the production and distribution of gasoline. Even less of it is local. Local minimum wage has almost no effect on the price at the pump.\",\n \"A day is a long time and the rate is not the same all day. Some sources will report a close price that averages the bid and ask. Some sources will report a volume-weighted average. Some will report the last transaction price. Some will report a time-weighted average. Some will average the highest and lowest prices for the interval. Different marketplaces will also have slightly different prices because different traders are present at each marketplace. Usually, the documentation will explain what method they use and you can choose the source whose method makes the most sense for your application.\",\n \"First price isn't artificially maintained at a level. When a refining company signs a contract to buy crude from a supplier, it promises to buy at a certain price with options for increase and decrease due to the fluctuating prices in the market. And it buys crude to build up a certain buffer to supply itself for a certain duration, in case of supply problems. As it had bought oil at a higher price, it would be reluctant to lower the prices even if the current crude it buys is at a lower cost. If it buys oil from the open market, it has no other option than to pass on the hike on to the consumers, so a more intense fluctuation in the prices of oil at the point, where you buy it. Some airlines used hedging to take care of the spurts in the price of oil, to mantian their operating margins. And moreover refining and distribution is a very low margin business, so the company has an incentive to sell at a higher cost if required.\",\n \"\\\"On top of the given answers, the type of referral will also factor in. When you're up for renewal and go to a comparison site (in the UK: CompareTheMarket, MoneySupermarket, Confused, GoCompare, ... ) and struggle accurately through all their lists of questions, you see that some of the data differs (e.g., not all the same jobs can be entered; if you have had an accident, not all ask whose fault it was and/or don't leave the option \\\"\\\"not yet resolved\\\"\\\" --possibly forcing you to guess which way it will be adjudicated,-- and/or what the total repair cost was). So as these referrers feed slightly different data to roughly the same set of insurance providers, you will get slightly different quotes on the same providers. And expect your own provider to offer a slightly better quote than you'll get in reality for renewing: The referrer's (one-time) cut has to be still taken off, but they count it as a new client so somebody gets a bonus for that --- you they disregard as a captive client and give what boils down to a loyalty penalty. [Case in point: I had an unresolved car accident, resolved months later in my favour. With all honest data including unresolved claim and its cost and putting my 'accident-free years' factor at 0 instead of 7, my old provider quoted about 8% more than the previous year on comparison sites; but my renewal papers quoted me 290% more, upon telephone enquiry the promised to refund the difference if court found in my favour though they refused to give this in writing. So: No thanks!] Then the other set of referrals they get is from you directly going to their website asking for a quote. They know what type of link you've followed (banner, or google result, etc), they may know some info from your browser's cookies (time spent where) or other tracking service, and from your data they may guess how tech-savvy and shop-wise you are, and scale your offer accordingly. [Comparison-site shoppers are lumped together at a relatively high savvy-level, of course!]. Companies breaking down your data and their own in a particular way can find advantages and hence offer you better terms, as said in the main answer (this is like Arbitration in stock exchanges, ensuring a certain amount of sanity: if there's something to exploit, somebody will, and everybody will follow). It may be that they find a certain group of people maybe more accident-prone but cheaper to deal with (more flexible in repair-times, or easy to bully in accepting shared-fault when they weren't at fault), or they want a certain client (for women, for civil servants, for sporty drivers, for homeowners --- often for cross-selling other insurance services). Or they claim to want pensioners because the company can offer them 'a familiar voice' (same account manager always contacting them) while they're easier to bamboozle and less likely to shop around when offered a rubbish deal. Also, 100% straight comparison of competing offers isn't possible as the fine details of the T&Cs (terms & conditions) would differ, as well as various little pinpricks in the claims handling process. And depreciation of a car, and various ways of dealing with it: You insure it for the buying prices, but two years later it's worth about 40% less on paper --- so in case of total loss, replacing like-for-like will cost you still at least 80% of the value for which you've been insuring it while they'll probably offer you the 100-40= 60%. Mostly because instead of your trusted car you have something unknown that may have hidden defects, or been mistreated and about to die. [Case in point: My 3-y-old dealer-bought car's gearbox died just outside the 6month warranty period, notwithstanding its \\\"\\\"150-item inspection you can rely on\\\"\\\". In the end the national brand agreed to refund the parts (15% of what I paid for the car) but not the labour (a few hours).] And any car model's value differs (in descending order) from its \\\"\\\"forecourt price\\\"\\\", \\\"\\\"private selling price\\\"\\\", \\\"\\\"part exchange price\\\"\\\", and \\\"\\\"auction price\\\"\\\". Depending on your ompanies may happily insure you for forecourt price (=what you paid to dealer) but then point out that the value of that car is the theoretical P/X value, i.e., the car without anybody's profit, far less than you've been paying for. [Conversely, if you crash it after insuring below market value, they can pay you your stupidly low figure.]\\\"\",\n \"That's not entirely true for Oregon. It's illegal to pump your own gas in Oregon so every gas station has to employ at least one attendant. Don't think it amounts to $0.30 per gallon but it definitely raises the price of gas being forced to pay an adult to complete a task simple enough for a child.\",\n \"This is not totally not in my wheelhouse, so I'm genuinely asking: Isn't that because gas being purchased on that date has to be purchased at the new high rate, but when selling gas already purchased at the higher old rate has to be sold at the high rate to avoid a loss? Like, given good faith actors on all sides with no particular profit motive, shouldn't we see prices raise quicker than they fall at the pump anyways?\",\n \"I sell gas to gas stations. Your profit isn't much in gas, it's in the convenience store. So if you're going to do it, focus on your store. Here in the Midwest we have a brand of stations called Quicktrip - everyone loves these gas stations and will go out of their way if they need gas. Because they're very clean and the workers are friendly. Don't build a branded station. Right now branded gas is cheaper than wholesale in a lot of markets, but that's not usually typical. It's better to have options and not be locked into a BP station where you can only buy their gas no matter the price. Additives are BS - it's a commodity. Operating capital will be fairly high. Roughly 7500/gal per truck at say 3.00 cents/gal is about $22,500. In a high traffic area you could be pulling 1 truck per day to keep supply full (this is an assumption based on what we sell to customers). Do some math and that's quite a bit of operating capital, can you finance that? We set credit limits on our customers, but they're not high (think 50-100k for small stations, which is only a couple truck loads). I don't think it's a terrible business to be in - but I would almost rather own the trucks hauling gas to your station and charging on the gallon. Or on the supply side of the equation where gas is more profitable.\",\n \"I'm in both markets and there are a lot of factors. Distribution costs in NY are ridiculously high. Different states have different generation mixes, access to fuel, different regulatory costs, different taxes, different availability of green/renewable energy as well as different mandates, different types of restructuring (TX is fully restructured; NY was only partially restructured and the market has been a total mess -- they're thinking about going back to a fully-regulated model). For business customers, my biggest pieces of advice are: 1. Energy Audits and, if applicable, reviews of your processes/equipment/whatever to ensure you're not using unnecessary energy or causing unnecessary peaks in demand; 2. Do not sign exclusivity/letter of authorization/power of attorney with a broker -- see what prices they can get you, and then shop around yourself, and if you go through a broker, make sure they tell you as part of the contract how much the supplier is paying them per kWh/therm; 3. Review your usage history (including demand) for at least the past 12 months and then compare to the utility tariff you're being served under -- do anything possible to avoid demand charges and make damn sure you're utility hasn't put you/left you in a demand charge-carrying class if you don't actually qualify for it. I'll be happy to share more if anyone is interested.\",\n \"This is the damaged goods (https://en.wikipedia.org/wiki/Crippleware) setting in economics. It makes perfect sense from the manufacturing point of view, since is damn expensive to have lines dedicated for different products. I don't know if I agree with it, but it is good business to do so. Is the same principle of paying more to have a better seat in an airplane, is the same service but with better conditions and service.\",\n \"It's not that simple. Where I live, McDonald's charges $6.19 for a Big Mac combo. The local In-N-Out charges $6.59 for a Double-Double combo. They're pretty damned close in price and I don't think anyone would price discriminate over 40¢. The difference between the two is enormous. In-N-Out makes a great product, the burger and fries are delicious and fresh. Further, In-N-Out is known for treating - and paying - their employees well. They promote from within and becoming a manager is a good job. Thanks to the decent pay, In-N-Out employees tend to be very good and care about the customers. McDonald's is very different. The food is terrible. Flavorless and bland and *very* expensive for what you get. In-N-Out aside, I can go to a local mom'n'pop and get a good meal for under $6. There is no reason for me to go to McDonald's, none. McDonald's isn't such a great employer, either. The employees don't care. I've never been treated badly, but there's no enthusiasm. They are there for the paycheck only. I blame accountants and the business structure. For the record, I am an accountant, so I know what they're up to. McDonald's is a large, public company bent on returning maximum profits to shareholders. So they bring in the cost accountants who are very good at shaving costs down to the absolute minimum. The Big Mac has suffered death by a thousand cuts. No one cut makes it a lousy product, but give the cost accountants enough time and they will make anything mediocre to bad in lots of different ways. In-N-Out is a privately held company. Obviously, they are more interested in making money through selling a quality product and expanding sales. They don't have to worry about shareholders who don't give a fuck and just want short-term profits. They could make more money by turning the cost accountants loose, but they also know that would hurt their business. The difference shows. McDonald's is rarely busy here. At In-N-Out, lines are usually out the door and you can't find an open table. I only go there late at night on weekdays, since that's the only time it isn't slammed. So you have two companies selling a similar product at almost the same price. One is wildly successful and slowly expanding. The other sells a shitty product and thinks that marketing is the problem.\",\n \"High water table next to a river may be a serious flood risk - and flood insurance on a buried multi thousand gallon tank of gas may be prohibitively expensive. Everything I've read and experienced about gas station is that you don't make money off the gas - as in the margin is almost nill. Also in 10-20 years what percentage of cars on the road will be electric?\",\n \"Be glad you don't live in the Pacific Northwest. We're still recovering from a refinery shut down that sent our gas prices to $4.30/gallon while the rest of the nation was at $3.50/gallon. Our gas prices are still higher than US average at $3.70/gallon. Some gas stations are still charging $3.90+ here.\",\n \"\\\"There absolutely is a specific model that makes this so popular with so many credit card companies, and that model is \\\"\\\"per transaction fees\\\"\\\". Card companies also receive cost-sharing incentives from certain merchants. There is also a psychological reasoning as an additional incentive. When you want to accept credit cards as a source of payment as a business, you generally have three kinds of fees to pay: monthly/yearly subscription fees, percentage of transaction fee, and per transaction fee. The subscription fees can be waived and sometimes are expressed as a \\\"\\\"minimum cost\\\"\\\", so the business pays a certain amount whether you actually have people use credit cards or not. Many of these fees don't actually make it to the credit card companies, as they just pay the service providers and middle-men processing companies. The percentage of transaction fee means that the business accepting payment via credit card must pay a percentage usually ranging from 1-3% of the total transactions they accept. So if they get paid $10,000 a month by customers in the form of credit cards, the business pays out $100-300 a month to the credit card processor - a good portion of which will make it back to the credit card issuing company, and is a major source of income for them. The per transaction fee means that every time a transaction is run involving a card, a set fee is incurred by the business (which is commonly anywhere from $0.05 to $0.30 per transaction). If that $10,000 a month business mentioned previously had 10 customers paying $1,000 each at $0.10 a transaction, that's only $1 in fees to the credit card processors/companies. But if instead that business was a grocery store with an average transaction of $40, that's $25 in fees. This system means that if you are a credit card company and want to encourage people to make a specific kind of purchase, you should encourage purchases that people make many times for relatively small amounts of money. In a perfect world you'd want them to buy $1 bottles of water 5 times a day with their credit card. If the card company had 50,000 card holders doing this, at the end of 1 year the company would have $91,250,000 spread across 91,250,000 transactions. The card company might reasonably make $0.05 per transaction and %1 of the purchase total. The Get Rewarded For Drinking More campaign might earn the card company $912,500 in percentage fees and over $4.5 million in transaction fees. Yet the company would only have to pay 3% in rewards from the percentage fees, or $2.7 million, back to customers. If the card company had encouraged using your credit card for large once-yearly purchases, they would actually pay out more money in rewards than they collect in card-use fees. Yet by encouraging people to make small transactions very often the card company earns a nice net-income even if absolutely every customer pays their balance in full, on time, and pays no annual/monthly fees for their card - which obviously does not happen in the real world. No wonder companies try so hard to encourage you to use your card all the time! For card companies to make real money they need you to use your credit card. As discussed above, the more often you use the card the better (for them), and there can be a built-in preference for small repeated transactions. But no matter what the size of transaction, they can't make the big bucks if you don't use the card at all! Selling your personal information isn't as profitable if they don't have in-depth info on you to sell, either. So how do they get you to make that plastic sing? Gas and groceries are a habit. Most people buy one or the other at least once a weak, and a very large number of us make such purchases multiple times a week. Some people even make such purchases multiple times a day! So how do people pay for such transactions? The goal of the card companies is to have you use their product to pay as much as possible. If you pay for something regularly you'll keep that card in your wallet with you, rather than it getting lost in a drawer at home. So the card companies want you to use your card as a matter of habit, too. If you use a card to buy for gas and groceries, why wouldn't you use it for other things too? Lunch, dinner, buying online? If the card company pays out more and makes less for large, less-regular purchases, then the ideal for them is to have you use the card for small regular purchase and yet still have you use the card for larger infrequent purchases even if you get reduced/no rewards. What better way to achieve all these goals than to offer special rewards on gas and groceries? And because it's not a one-time purchase, you aren't so likely to game the system; no getting that special 5% cash-back card, booking your once-per-decade dream vacation, then paying it off and cancelling it soon after - which would actually make the card company lose money on the deal. In the end, credit card companies as a whole have a business model that almost universally prefers customers who use their products regularly and preferably for small amounts a maximum number of times. They want to reduce their expenses (like rewards paid out) while maximizing their revenue. They haven't figured out a better way to do all of this so well as to encourage people to use their cards for gas and groceries - everything else seems like a losing proposition in comparison. The only time this preference differs is when they can avoid paying some or all of the cost of rewards, such as when the merchants themselves honor the rewards in exchange for reduced or zero payment from the card companies. So if you use an airline card that seems to give you 10% back in airline rewards? Well, that's probably a great deal for the card company if the airline provides that reward at their own expense to try to boost business. The card company keeps the transaction-related fees and pays out almost nothing in rewards - the perfect offer (for them)! And this assumes no shenanigans like black-out periods, \\\"\\\"not valid with any other offers\\\"\\\" rewards like on cars where only a fool pays full MSRP (and sometimes the rewards are tagged in this sort of way, like not valid on sale/clearance items, etc), expiring rewards, the fact that they know not everyone uses their rewards, annual fees that are greater than the rewards you'll actually be obtaining after accounting for all the other issues, etc. And credit card industries are known for their shenanigans!\\\"\",\n \"\\\"> where not even the \\\"\\\"ghetto grocery store\\\"\\\" or gas-station 7-11 can operate without Bezos' back-end supply software and self-driving delivery fleet. Those stores have some of the highest markup of any place to get groceries. It shouldn't be a surprise that they can't compete.\\\"\",\n \"Here in the Philippines, the electricity is owned by single company and they charged a lot of other fees like transmission fee, loss in transmission, etc. i dont understand my bill, all i can see are the add ons to the original amount (i.e. Number of kwh x based rate). The rest of the fees are extra fee. I don't know how they do it, but we cant do anything, we want electricity so we pay. Maybe that ls just how the world is.\",\n \"It's three and four times what it was just a few years ago. That spike has regularly been blamed on refining capacity. There is a disconnect. Also, you cannot compare with the rest of the world unless you're going to break down cost, taxes, etc.\",\n \"\\\"First, is population density. You didn't say where exactly, but for example here in Tampa, Wells Fargo has 25 branches in the area (though that is a bit larger then what I would think of the Tampa area as a local) Second, we can mix in service expectation. I expect that in addition to \\\"\\\"good\\\"\\\" online service, \\\"\\\"great\\\"\\\" phone service, \\\"\\\"great\\\"\\\" email service, that when I have a problem, don't understand something, or want to talk about my options for investing or choosing account types, that I am able to go into a branch. That I can \\\"\\\"walk in\\\"\\\" and see someone quickly, or schedule an appointment and see some one right away (at my appointment time). Together, these two options means that on a busy day, the nearest Wells Fargo Branch to me has at any one time, 50 - 60 people in it. Smaller branches, of course have less, and larger branches exist. So it just takes that many branches to address the number of people and their expected needs. As to why there are so many different brands/banks Well that's just the USA. We believe in capitalism. We have believed in it much stronger in the past, but banks are the central to capitalism so why shouldn't they serve as an example. At it's core (a very simplistic look) Capitalism and a free market means that we as customers are better served by having lots of different brands fighting for our business. It should drive more consumer desired features (like lower prices, higher interest rates, better fee schedules, etc.) while forcing those brands to operate \\\"\\\"better\\\"\\\". (Just ignore the bail out, that's a loaded topic) So for some of us, we want a big bank like Wells Fargo, because we want the rates, structure, and service they can provide as a \\\"\\\"big bank\\\"\\\". For others they want the more personal touch of a \\\"\\\"small bank\\\"\\\". There are benefits both ways. For example there may be a bank that only allows people with excellent credit to open accounts. That allows they to have lower over all mortgage rates, but means their checking accounts have higher minimums. While the next bank may be more inclusive, and have smaller minimum balances, but as a result charge more for loans. We like our options, and rest assured all those \\\"\\\"brands\\\"\\\" offer products that have differences that attract customers.\\\"\",\n \"Theaters make pennies off the tickets if any money at all. Their profits come from the concession stand. If a theater priced their popcorn 50 cents less than a nearby competing theater the few if any customers that notice and seek those small savings would be far less than the losses due to charging less. They compete to get you there: providing better sound systems, seating, screens -- even taking a loss on tickets with special deals (like Tuesday bargains). Once inside profit is made by customers willing to pay the concession price premium, and sour patch kids for 15 cents more isn't going to be a deal breaker.\",\n \"\\\"I'd like to modify the \\\"\\\"loss\\\"\\\" idea that's been mentioned in the other two answers. I don't think a retail location needs to be losing money to be a candidate for sale. Even if a retail location is not operating at a loss, there may be incentive to sell it off to free up cash for a better-performing line of business. Many large companies have multiple lines of business. I imagine Sunoco makes money a few ways including: refining the gas and other petroleum products, selling those petroleum products, selling gas wholesale to franchised outlets or other large buyers, licensing their brand to franchised outlets, selling gas and convenience items direct to consumers through its own corporate-owned retail outlets, etc. If a company with multiple lines of business sees a better return on investment in certain businesses, it may make sense to sell off assets in an under-performing business in order to free up the capital tied up by that business, and invest the freed-up capital in another business likely to perform better. So, even \\\"\\\"money making\\\"\\\" assets are sometimes undesirable relative to other, better performing assets. Another case in which it makes sense to sell an asset that is profitable is when the market is over-valuing it. Sell it dear, and buy it back cheap later.\\\"\",\n \"Most of the gold prices at international markets are USD denominated. Hence the prices would be same in international markets where large players are buying and selling. However this does not mean that the prices to the individuals in local markets is same. The difference is due to multiple things like cost of physical delivery, warehousing, local taxation, conversion of Local currency to USD etc. So in essence the price of Gold is similar to price of Crude Oil. The price of Oil is more or less same on all the markets exchanges, though there is small difference this is because of the cost of delivery/shipment which is borne by the buyer. However the cost of Oil to retail individual varies from country to country.\",\n \"\\\"recently there has been an increase in Companies charging a Credit Card surcharge, the current law does not fix the amount so therefore company's can set there own surcharges, which means you can pay different surcharges at different places. In the \\\"\\\"Money\\\"\\\" magazine a couple of months ago there was an interesting article that discussed a possible cap that was going to be introduced to cut down on the fluctuations of Credit Card surcharges as some places are generating revenue by abusing the Credit Card surcharge. Something to keep in mind is to ensure when using a Debit card you are not charged the surcharge. some businesses will treat the Debit card the same as a Credit Card.\\\"\",\n \"I would say minimal price differences. Stores will need to remain competative, and the difference (if any) will likely be to cover the cost of the transaction that Visa and other card companies charge them.\",\n \"Generally, if you watch for the detail in the fine print, and stay away from non-FDIC insured investments, there is little difference, so yes, pick the highest you can get. The offered interest rate is influenced by what the banks are trying to accomplish, and how their current and desired customer base thinks. Some banks have customer bases with very conservative behavior, which will stick with them because they trust them no matter what, so a low interest rate is good enough. The disadvantage for the bank is that such customers prefer brick-and-mortar contact, which is expensive for the bank. Or maybe the bank has already more cash than they need, and has no good way to invest it. Other banks might need more cash flow to be able to get stronger in the mortgage market, and their way of getting that is to offer higher interest rates, so new customers come and invest new money (which the bank in turn can then mortgage out). They also may offer higher rates for online handling only. Overall, there are many different ways to make money as a bank, and they diversify into different niches with other focuses, and that comes with offering quite different interest rates.\",\n \"This has happened to me several times while trying to travel. See a flight listed for one price, go through the process and it ends up being 50-100 more. Not sure which airlines just in general. I dont see how 2 seperate sites can have the same price problem. and what changes in the 5-10 minutes it takes someone to enter their info? do gas and costs go up that much in 10 minutes? Just like extra ticket fees and everything....i just wish companies would start putting the FULL price up front. extra fees and all.\",\n \"In the EU prices on consumer-focussed sites* are quoted inclusive of VAT. In the USA prices are quoted exclusive of sales tax. Consumer pricing is usually driven at least partly by psychological concerns. Some pricepoints are more appealing to certain types of buyers than others. The Euro vs dollar exchange rate has fluctuated a bit over the years but it's generally averaged somewhere around 1.2 dollars per Euro over the last decade. VAT has varied around 15%-20% in most cases. Put these things together and the same headline price points are generally appropriate in both the USA and the Eurozone. OTOH the Brisith pound has been worth substantially more than the dollar or the Euro. So it makes sense to have a lower headline price in the UK. * B2B focussed sites often quote prices exclusive of VAT, you need to be aware of this when comparing prices.\",\n \"\\\"To add on to the other answers, in asking why funds have different price points one might be asking why stocks aren't normalized so a unit price of $196 in one stock can be directly compared to the same price in another stock. While this might not make sense with AAPL vs. GOOG (it would be like comparing apples to oranges, pun intended, not to mention how would two different companies ever come to such an agreement) it does seem like it would make more sense when tracking an index. And in fact less agreement between different funds would be required as some \\\"\\\"natural\\\"\\\" price points exist such as dividing by 100 (like some S&P funds do). However, there are a couple of reasons why two different funds might price their shares of the same underlying index differently. Demand - If there are a lot of people wanting the issue, more shares might be issued at a lower price. Or, there might be a lot of demand centered on a certain price range. Pricing - shares that are priced higher will find fewer buyers, because it makes it harder to buy round lots (100 shares at $100/share is $10,000 while at $10/share it's only $1000). While not everyone buys stock in lots, it's important if you do anything with (standardized) options on the stock because they are always acting on lots. In addition, even if you don't buy round lots a higher price makes it harder to buy in for a specific amount because each unit share has a greater chance to be further away from your target amount. Conversely, shares that are priced too low will also find fewer buyers, because some holders have minimum price requirements due to low price (e.g. penny) stocks tending to be more speculative and volatile. So, different funds tracking the same index might pick different price points to satisfy demand that is not being filled by other funds selling at a different price point.\\\"\",\n \"Chiming in with other answers that incriminate market segmentation attempts, I would like to offer this Seth Godin video where (among other things) he speaks about breakage, the art of making coupon redemption so difficult that most people get it wrong and do not redeem them. Oh, and when comparing/deciding which/whether to buy, I always use the up-front price. Don't want to encourage the wrong behavior.\",\n \"Cash is king. PIN-based debit transactions are cheap. In terms of credit cards, a regular (ie. not a gold card) with no rewards has the lowest rates. Bigger merchants with lots of card volume likely have better deals that make the differences less pronounced.\",\n \"I would like to offer a different perspective here. The standard fee for a credit card transaction is typically on the order of 30 cents + 2.5% of the amount (the actual numbers vary, but this is the ballpark). This makes small charges frequently unprofitable for small merchants. Because of this they will often have minimum purchase requirements for credit/debit card payments. The situation changes for large retailers (think Wal-mart, Target, Safeway, Home Depot). I cannot find a citation for this right now, but large retailers are able to negotiate volume discounts from credit card companies (a guy who used to work in finance at Home Depot told me this once). Their transaction fees are MUCH lower than 30 cents + 2.5%. But you get the same reward points on your credit card/debit card regardless of where you swipe it. So my personal philosophy is: large chain - swipe away without guilt for any amount. Small merchant - use cash unless it's hundreds of dollars (and then they may give you a cash discount in that case). And make sure to carry enough cash for such situations. When I was a student, that was about $20 (enough for coffee or lunch at a small place).\",\n \"The percentage fee often depends on the type of card. Amex and rewards cards like aeroplan cards often charge 2.5-4% whereas cashback cards will charge less. That's why most places (specifically in Canada which is where I'm from) don't take Amex because they charge way too much.\",\n \"Fort Lauderdale seems to have dozens of bike shops. more and more every year. they're not competing on price. niches galore. even the motorized bike shops are multiplying. it's not price in this area for sure (or you can go to Target if that's all you want is price)\",\n \"The bigger question in the US is perhaps why the cost per kWh is twice as high in New York as it is in Washington state. It may have quite a bit to do with taxes and regulation compliance and a lot less with natural factors in the market (cost of producing and transmitting power).\",\n \"There are lots of reasons for the differences in price. Can you go to (a) bank, (b) forex bureau and (c) central bank and post back both bid and offer prices at a given time so we can consider the spread? What you've said above for (a) and (b) are presumably USDGHS offer prices, because they are higher than the (c) central bank price. If a bank or bureau bid price was higher than the central bank offer price then you could buy GHS from the central bank and then sell them to a bureau for a higher price, an almost no risk arbitrage, other than the armoured car to deliver the funds from central bank to bureau. What you've posted is: (a) a bank will sell you 1 USD for 3.4 GHS (b) a bureau will sell you 1 USD for 3.7 GHS (c) we can see the bid/offer for central bank is 3.1949/3.1975 which means the central bank, if you have an account, will sell you 1 USD for 3.1975 GHS. You clearly want to buy USD from the central bank, then the bank, then the bureau. Anyway, the reason for these differences is all to do with liquidity conditions in the local areas, the customer types, and the frequency of orders versus inventory... Think about it. The central bank has the most frequency of orders and the biggest customers so it offers the lower price, then the bank, and then the bureau. I think the bureau is the worst price there... You have to explain further :)\",\n \"There is plenty of research that shows that companies that have a portfolio of brands within the same category have superior financial returns. The reason is that even for dish soap there are different types of people who want different products. One of the more successful brands for P&G over the past decade has been Gain detergent. It is a mega-brand that competes with tide for people who love scent. The brand has been so successful that there are now dish soaps and other products with the Gain name. There are typically performance differences between the brands. For example trade off performance against a certain type of stain for more scent.\",\n \"Retail is the operative word. Local retailers don't raise prices because they need to compete with uninhibited e-commerce retailers. I wouldn't be surprised if progressives tried to correct for this by increasing the tax rate on online purchases to offset the e-commerce advantage, which of course would hurt consumers even more.\",\n \"These two categories ensure you will carry the card in your wallet (since they only work for physical locations), but don't tend to have excessive spending (most people maxing out at $200 or so per month, so $2 for the bonus). You then use the same card for other purchases, because you have it on you, where you only get the 1%. It worked for me, I started carrying the Amazon card when I found out it had a higher percentage for gas purchases. I only use it for gas though.\",\n \"$6 per gallon, up to 20 gallons. So if gas was $2/gallon, that would be 3 20-gallon fill-ups, or 60 gallons. I guess if today's cost is $2.32, that would be 2 free 20-gallon fill-ups, and the last 20 gallons for $1.36/gallon, or $27. Much cheaper than the $140 it would be without the discounts :)\",\n \"Oh there is a mark up, store brand items typically have better margins than the name brands. The quality is usually a hair lower compared to the name brand, but basically the same. Canned Green beans for example, might have a slightly more brownish tint and might not be as perfectly uniform in size. They still taste the same and you're probably not going to even notice the small difference.\",\n \"Summarized article: Recent mishaps causing supply disruptions at 14 California refineries caused wholesale gas prices to reach an all-time high of $4.39 per gallon. Local gas stations increased prices to 30 cents or more per gallon overnight, with some stations charging as much as $5.79 per gallon. Some stations chose not to buy high-priced wholesale gas for fear they wouldn't be able to sell it. While others shut off their pumps after they ran out of the gas they bought at lower wholesale prices. Some of the refinery mishaps include an oil pipeline problem, a power outage at Exxon Mobil Corp's Torrance refinery and a shutdown of the crude distillation unit at Chevron Corp's Richmond refinery. It is unknown when wholesale prices will come down but one solution may be to allow refineries to switch over from the summer blend to the cheaper winter blend earlier than planned. The California Energy Commission is considering the idea but notes an early switch over could impact air quality. The summer blend reduces evaporation of pollutants during warm weather which would be less damaging to air quality in California's current heat wave. * For more summarized news, subscribe to the [/r/SkimThat](http://www.reddit.com/r/SkimThat) subreddit\",\n \"Some large merchants do not give discounts for cash payments as this does not work out any cheaper for them, vs Credit Card payments. In Credit Card typically fees given to all the 3 parties (Merchant bank, Issuer Bank and Visa) would be around 3%. If cash payment is made, and the amounts are large (say at Walmart / K-Mart they have to deposit such cash at Banks, Have a provision to Storing Cash at Stores, People to count the cash. So essentially they will have to pay for Cash Officer to count, Bigger Safe to store, Transport & Security & Insurance to take Cash to Bank Plus Banks charge around 1% charge for counting the large cash being deposited. This cash would be in local branch where as the operations are centralized and Walmart/K-Mart would need the money in central account, it takes time to get it transferred to a central account, and there is a fee charged by Bank to do this automatically. On the other hand, smaller merchants would like cash as they are operated stand-alone and most of their purchases are also cash. Hence they would tend to give a discount for cash payment if any.\",\n \"It may seem very simple on its face but you don't know the merchant's agreement. You don't know who is providing the processing equipment. You don't know a lot of things. You know that Visa, Mastercard, Discover, Amex and others have network requirements and agreements. You know that laws have been changed to allow merchant surcharges (previously it was contracts that prohibited surcharges, not laws). That gas station, or that pizza parlor, or any other merchant doesn't have a direct relationship with Visa or Mastercard; it has an agreement with a bank or other processing entity. The issue here, is whom do you even call? And what would you gain? Find out what bank is contracted for that particular equipment and file a complaint that the merchant charged you $0.35? Maybe the merchant agreement allows surcharges up to state and local maximums? You don't know the terms of their agreement. Calling around to figure out what parties are involved to understand the terms of their agreement is a waste of time, like you said you can just go across the street if it's so offensive to you. Or just carry a little cash. If that's not the answer you're looking for, here's one for you: There is no practical recourse.\",\n \"\\\"I usually go to a theater closest to me owned by a smaller local company. However, once I ventured to my nearby AMC to see a $28 ticket price! WTF!? I just want to watch a movie. I don't need a handjob or a glass of Dom while I watch. I asked the ticket guy why. He said \\\"\\\"it's got Dolby sound and it's the summer I guess\\\"\\\". Fuck AMC. I saw the same movie 3 miles away for $9.\\\"\",\n \"A lot of stores, especially smaller ones, won't accept card payments under $10.00. They pay a fee for taking cards and for small transactions it is not worth it.\",\n \"Beware of keeping up with the Joneses. Many of your free-spending neighbors are broke. Basically, the prices of things like what you're noticing will rise as incomes in the area rise. A great example of this can be found in state capitals and college towns, where battalions of government workers or students all make just about the same amount of money and drive prices accordingly. For example, a college town tends to have a tight rental market.\",\n \"So basically they are the same as most other for profit businesses. The big difference is they offer global variety and easy checkout. If the malls don't have it, Amazon is the place to look. Or is competition no longer good for business?\",\n \"Yeah I know, but it is only a local monopoly. It would be a silly reason to move, but you could conceivably move a town over and get a different provider. I just mean none of them have a majority share of the total market.\",\n \"Basic utilities like water and electricity are highly regulated. The price is set by a certain and small amount above cost, which is audited at several layers by government and private entities. I'm just not sure why someone would be so far from reality, I apologize if my response jarred you.\",\n \"When someone charges, it means that person fix the price you pay. Australia is part of the Indonesian continent. It is an island in the South Pacific ocean. In the price of an item, you include the shipping cost. It is more expensive by plane because the cost of the kerozen is higher than the cost of diesel for ships. Accident can happen, so you have to include in price the cost of the insurance.\",\n \"I'll address one part of your question: There are other taxes that companies pay as well, such as income tax, but don't charge to the customer as a fee. So, why are gross receipts taxes charged to the customer? Things like income tax can't be passed on to the consumer in a direct way, because there's no fixed relationship between the amount of the tax and the price of an individual product. Income tax is paid on taxable income, which will incorporate deductions for the costs the company incurred to do business. So the final amount of corporate income tax can depend on things unrelated to the price of goods sold, like whether the business decided to repave their parking lot. Gross receipts taxes, by definition, are charged on the total amount of money taken in, so every dollar you spend on an item at the store will be subject to the gross receipts tax, and hence will cost the business 7 cents (or X% where X is the tax rate). This means there is a direct link between the price you pay for an individual item and the tax they pay on that transaction. The same is true for sales taxes, which are also often added at the time of sale. Of course, businesses could roll all of these into the posted price as well. The reason they don't is to get their foot in the door and make the price seem lower: you're more likely to buy something if you see it for the low, low, one-time-only price of $99.99, act now, save big, and then find out you owe an extra $7 at the register than if you saw $107 on the price tag.\",\n \"You are right, and it's 40 cents per liter, not gallon as I originally wrote. After 60 liters per month, it goes up to 70 cents per liter. It's around 90 cents per liter right now where I am in the US. Like you said, still cheap compared to the rest of the world ($1 per liter in India, $1.90 per liter in Britain).\",\n \"\\\"This isn't as rigorous as it should be, but may offer some useful insight into how big and small companies differ operationally. Putting Apple aside, larger companies tend to sell larger volumes of products (even if they're MRI devices, or turbines) relative to what smaller companies can sell (obviously, in absolute terms as well). They are also able to negotiate volume discounts as well as payment terms. This allows them to finance sales through their supply chain. However, their large direct competitors are able to do the same thing as well. Competitive forces then drive prices down. Smaller businesses, without these advantages of scale, tend to have to charge higher margins since they have to pay directly (and, if their clients are large businesses, finance the sale). Small businesses still have higher proportional costs of operation. Sadly, my reference here is a study I performed for the South African Revenue Service about ten years ago, and not available online. However, the time taken by a small business to manage admin, tax, HR is a greater proportion of revenue than for larger companies. If the small business is a start-up with big investment from venture finance, then they could subsidise their selling price, run at a loss and try and gain scale. Funnily enough, there is a fantastic article on this by Joel Spolsky (Ben and Jerry's vs. Amazon) For the average highly-competitive smaller company, the best choice is to chase design/quality/premium markets in order to justify the higher margins they have to charge. And that's what makes Apple interesting as a case study. They were a small company in the presence of giants (Intel, Microsoft, IBM). They were \\\"\\\"forced\\\"\\\" to concentrate on design and premium markets in order to justify their need for higher margins. It almost didn't work but then they broke through. Now they're in the unique position of having gained scale but are still small enough relative to other electronics manufacturers to continue charging that premium (by volume their sales are still relatively small but their margins make them a giant). This type of variation from market to market makes developing some sort of generalised solution very unlikely but the general requirement holds: that smaller companies must charge higher margins in order to create equivalent profits to larger companies which must gain scale through volume.\\\"\",\n \"I think the question relates to the discussion here: http://clarkhoward.com/liveweb/shownotes/2010/10/05/19449/ It was always the case that merchants could discount purchases made with cash. What wasn't allowed is allowing the merchant to charge extra for credit card transactions (presumably to cover the fees the merchants pay). These fees usually carry a flat fee per transaction, plus around 2% of the purchase price. What also wasn't allowed was them to refuse any credit transactions. People could charge a pack of gum, even if the fees put that transaction in the red. What's allowed according to this new development is different levels of discounting for different credit cards. Somewhat related to this discussion is another development that happened this summer: merchants now have the ability to refuse credit card transactions of less than $10. Here's my feeling on all of this. I think we'll see merchants imposing minimum credit transaction amounts before we see them monkeying at the 1-2% level on pricing for different types of credit cards. My feeling is that they'd be wise not to change anything, even though they can. Refusing transactions (or charging more for others) is going to come as a unpleasant shock to enough people that they may take their business elsewhere.\",\n \"Ah, yes, I forgot about Oregon's and New Jersey's brilliant contributions to the laboratory of democracy. But you're right, that doesn't amount to 30¢ per gallon. Not even close. If an attendant's pay went up $3.00 an hour due to the new minimum, and they service 15 cars per hour, and each car takes 15 gallons, that comes to 1.3¢ per gallon.\",\n \"You say “there is no reason” as if the reasons they had for initially choosing uniform pricing and pay meant nothing. You sound just like those libertarians who want to get rid of all market regulations because free market is more competitive and healthier. You should NEVER ignore the initial reasons any law or decision is made. That is a recipe for repeating the issues we have already faced. Why go through the same struggle twice?\",\n \"I don't know why stocks in some industries tend to have lower prices per share than others. It doesn't really matter much. Whether a company has 1,000,0000 shares selling for $100 each, or 10,000,000 shares selling for $10 each, either way the total value is the same. Companies generally like to keep the share price relatively low so that if someone wants to buy a small amount, they can. Like if the price was $10,000 per share, than an investor with less than $10,000 to put in that one stock would be priced out of the market. If it's $10, then if someone wants $10 they can buy one share, and if someone wants $10,000 they can buy 1000 shares. As to why energy stocks are volatile, I can think of several reasons. One, in our current world, energy is highly susceptible to politics. A lot of the world's energy comes from the Middle East, which is a notoriously unstable region. Any time there's conflict there, energy supplies from the region become uncertain. Oil-producing countries may embargo countries that they don't like. A war will, at the very least, interfere with transportation and shipping, and may result in oil wells being destroyed. Etc. Two, energy is consumed when you use it, and most consumers have very limited ability to stockpile. So you're constantly buying the energy you need as you need it. So if demand goes down, it is reflected immediately. Compare this to, say, clothing. Most people expect to keep the same clothes for years, wearing them repeatedly. (Hopefully washing them now and then!) So if for some reason you decided today that you only need three red shirts instead of four, this might not have any immediate impact on your buying. It could be months before you would have bought a new red shirt anyway. There is a tendency for the market to react rather slowly to changes in demand for shirts. But with energy, if you decide you only need to burn 3 gallons of gas per week instead of 4, your consumption goes down immediately, within days. Three, really adding to number two, energy is highly perishable, especially some forms of energy. If a solar power station is capable of producing 10 megawatts but today there is only demand for 9 megawatts, you can't save the unused megawatt for some future time when demand is higher. It's gone. (You can charge a battery with it, but that's pretty limited.) You can pile up coal or store natural gas in a tank until you need it, but you can't save the output of a power plant. Note numbers two and three also apply to food, which is why food production is also very volatile.\",\n \"Two different takes on an answer; the net-loss concept you mentioned and a core-business concept. If a store is actually a net-loss, and anybody is willing to buy it, it may well make sense to sell it. Depending on your capital value invested, and how much it would take you to make it profitable, it may be a sound business decision to sell the asset. The buyer of the asset is of course expecting for some reason to make it not a net loss for them (perhaps they have other stores in the vicinity and can then share staff or stock somehow). The core-business is a fuzzier concept. Investors seem to go in cycles, like can like well-diversified companies that are resilient to a market downturn in one sector, but then they also like so-called pure-play companies, where you are clear on what you are owning. To try an example (which is likely not the case here), lets say that Sunoco in 5% of its stores had migrated away from a gas-station model to a one-stop-gas-and-repairs model. Therefore they had to have service bays, parts, and trained staff at those locations. These things are expensive, and could be seen as not their area of expertise (selling gas). So as an investor, if I want to own gas stations, I don't want to own a full service garage, so perhaps I invest in somebody else. Once they sell off their non-core assets, they free up capital to do what they know best. It is at least one possible explanation.\",\n \"I thought this was because credit card companies charge the retailer a fee to accept credit card payments. If you spend $100, the retailer pays $1 (or whatever percentage they have negotiated) to the credit card provider. Handing over $100 cash and paying $1 fee to Visa means a loss to the retailer. The same transaction on $100 worth of product means the loss is accepted out of the profit margin which the retailer accepts to attract custom.\",\n \"Good point on gym memberships. I've known people who pay $5 per month at the gym but never go because they don't feel like they are wasting too much money. Now compare that with someone who's paying $40 or more, they want to get their money's worth so they go more often.\",\n \"Depending on what currency the price is quoted in and is originally sold, currency fluctuation can also carry over onto the price in your currency. An example for that would be bitcoin prices which sometimes show heavy ups and downs in one currency, but seem totally stable in another and can be tracked back to changed exchange rates between currencies. Also like others have said, prices on stocks are not actually fixed. You can offer to buy or sell at any price. Only if 2 people want to buy or sell for the same price there will actually be a transaction.\",\n \"My guess would be for small merchants there could be a small difference. For large merchants, the cash is also at a cost equivalent to the card fees. Check for my other answer at How do credit card companies make profit?\",\n \"These markets are independent, just like any other stock market. For example, there are stocks on the Milan stock exchange that are also on the New York stock exchange and have different historical prices. Remember, this is all about offer and demand. The Hong Kong stock exchange has the Hong Kong Dollar as its currency, which is anchored to the USD. Also, there is more trade going on, on the Hong Kong stock exchange. As for the answer, I don't know whether these stocks are exactly the same. I guess they should be, but maybe somebody else could answer that.\",\n \"They make a killing. In Queensland, a state of Australia, they only have one Distributor, Energex, so there is no competition. All power comes from them. As such, the prices are ridiculously high since retailers can't afford to sell it any cheaper than what they bought it for. This company Energex has employees that casually take 3 hour lunch breaks and still earn over 100k a year and they are not even execs. Meanwhile the consumers in that state are going broke from the energy prices.\",\n \"Lots of places in the US do it. Although the way that they usually phrase it is 'prices reflect a x.x% discount for cash' since most of the credit card companies have an agreement that says you cannot charge a surcharge if someone is using a credit card. So they get around it by giving a discount for cash. effect is the same, but it skirts the letter of the agreement\",\n \"My guess would be a black American express. Or, the accountants will make them switch out throughout the year to get maximum benefits. Sometimes, 1% maxes out at a certain amount, so they'll use a different CC every quarter or so.\",\n \"They could have different quotes as there are more than a few pieces here. Are you talking a Real Time Level II quote or just a delayed quote? Delayed quotes could vary as different companies would be using different time points in their data. You aren't specifying exactly what kind of quote from which system are you using here. The key to this question is how much of a pinpoint answer do you want and how prepared are you to pay for that kind of access to the automated trades happening? Remember that there could well be more than a few trades happening each millisecond and thus latency is something to be very careful here, regardless of the exchange as long as we are talking about first-world stock exchanges where there are various automated systems being used for trading. Different market makers is just a possible piece of the equation here. One could have the same market maker but if the timings are different,e.g. if one quote is at 2:30:30 and the other is at 2:30:29 there could be a difference given all the trades processed within that second, thus the question is how well can you get that split second total view of bids and asks for a stock. You want to get all the outstanding orders which could be a non-trivial task.\",\n \"All institutions, financial or otherwise, seek to maximize profits. In a free market, each bank would price its services to be competitive with the current state of the market. Since the currency conversion fee is generally a small part of the decision as to which bank to choose, banks can be non-competitive in this area. If this is an important consideration for you then you would need to find a bank with a lower conversion fee, but be prepared to have higher fees in other areas. TL;DR: The market bears it.\",\n \"\\\"The simplest answer would be: Because they can. Why charge less for something if people will pay more? One example are Apple products. While there the price number is not exactly the same in EUR and USD, they are so close that, effectively, the EUR product is more expensive. Many things go into a price. There might be reasons for products in the EU being more expensive to produce or distribute. Or people in the EU might be in general more willing to pay more for a certain product. In that case, a company would forgo profits when they offered it cheaper. Also, prices are relative. Is the USD price the \\\"\\\"correct\\\"\\\" one and the exchange rate should dictate what the EUR price is? Or vice versa?\\\"\",\n \"I think it depends on how much time I am saving and what I am saving doing. I do not go out of my way to save a few pennies on gas. But If i know that I will be traveling somewhere with cheaper gas anyway I will wait to get there to fill up. But I if I need gas before there I will fill up at the place i stop rather than just getting enough to go to the new location. I heard it best said as being dollar smart instead of dime foolish. Going out of your way for gas like this is dime foolish. On the other hand if you can bundle your trip to the store nearby or other tasks it certianly adds to the value.\",\n \"> There are some products that people would notice a 1% difference from competitors. Really? I'd think most people are pretty loyal to amazon. They already have their credit card into and account all set up. A 1% price increase doesn't sound like that much at all. Why would I go to all that trouble to save < 5%?\",\n \"Most larger corporations need to focus on the bottom line to appease their current and prospective investors. It can actually be quite the vicious cycle, and why people would be better off as a whole if we had more mom and pop stores.\",\n \"Every reward program has to have a funding source. If the card gives you x percent back on all purchases. That means that their business is structured to entice you to pump more transactions through the system. Either their other costs are lower, or the increased business allows them to make more money off of late fees, and interest. If the card has you earn extra points for buying a type of item or from a type of store (home stores improvement in the Spring), they are trying to make sure you use their card for what can be a significant amount of business during a small window of time. Sometimes they cap it by saying 5% cash back at home improvement stores during the spring but only on the first $1500 of purchases. That limits it to $75 maximum. Adding more business for them, makes more money for them. Groceries and gas are a good year round purchase categories. Yes there is some variation depending on the season, and the weather, but overall there is not an annual cliff once the season ends. Gas and groceries account for thousands of dollars a year these are not insignificant categories, for many families are recession proof. If they perceive a value from this type of offer they will change their buying behavior. My local grocery store has a deal with a specific gas station. This means that they made a monetary deal. Because you earn points at the grocery store and spend points at the gas station, the grocery store is paying some compensation to the gas station every time you use points. The gas station must be seeing an increase in business so theoretically they don't get 100% compensation from the grocery store. In cases where credit cards give airline miles, the credit card company buys the miles from the airline at a discount because they know that a significant number of miles will never be used.\",\n \"Just my two cents. It depend. Since Bayers aspirin is already established and there is no R&D to recoupe. It's easy to sell while newer drug is less well known and vendor need to get their R&D money back and don't forget the cost of business such as filing with FDA. It can added up while generic drug basically just a receipt that anyone can cook up.\",\n \"You do know that a 42-U.S. gallon barrel of crude oil provides about 45 (not a typo) gallons of petroleum products. One barrel of crude oil, when refined, produces about 19 gallons of finished motor gasoline, and 10 gallons of diesel, as well as other petroleum products. Most petroleum products are used to produce energy. So not all of it is reflected in pump prices.\",\n \"> General Sales: Virginia - 4.3%; Fairfax County - 1%; plus an additional 0.7% state tax for transportation. At most they'd have to charge the additional 1%, and I'm pretty sure taxes don't work that way. Either you're wrong or your restaurants are defrauding you with fake taxes. Or your local government is failing to put the actual tax rates on their websites.\",\n \"\\\"The fee structures are different for PIN-based transactions versus \\\"\\\"credit\\\"\\\" style transactions. Usually there is a fixed fee (around $0.50) for PIN-based transactions and a varying fixed fee plus a percentage for credit transactions (something like $0.35 + 2.5%). There are also value limits for PIN-based transactions... I believe that you cannot exceed $400 in most places. The signature feature of credit transactions isn't there to protect you, it signifies your agreement to comply with the contract you and the credit card issuer, protecting the merchant from some types of chargeback. Some merchants waive the signature for low dollar value transactions to increase convenience and speed up the lines. All of your other questions are answered elsewhere on this site.\\\"\",\n \"Health foods, books, coffee shop...am I supposed to hang out, stop in for five minutes or what? A grocery store and this are not comparable. The prices would be much higher at this place. So what are customers paying a premium for if it’s several different experiences in an area without a lot of demand?\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["\"This is known as \"\"Zone Pricing\"\" or \"\"Geographical Pricing\"\". http://articles.latimes.com/2005/jun/19/business/fi-calprice19 Such price variations may seem odd, but they are not unique to Anaheim. On any given day, in any major U.S. city, a single brand of gasoline will sell for a wide range of prices even when the cost to make and deliver the fuel is the same. The primary culprit is zone pricing, a secret and pervasive oil company strategy to boost profits by charging dealers different amounts for fuel based on traffic volume, station amenities, nearby household incomes, the strength of competitors and other factors. It's a controversial strategy, but the courts have thus far deemed it legal, and the Federal Trade Commission recently said the effect on consumers was ambiguous because some customers got hurt by higher prices while others benefited from lower ones. http://en.wikipedia.org/wiki/Geographical_pricing Zone pricing, as practiced in the gasoline industry in the United States, is the pricing of gasoline based on a complex and secret weighting of factors, such as the number of competing stations, number of vehicles, average traffic flow, population density, and geographic characteristics. This can result in two branded gas stations only a few miles apart selling gasoline at a price differential of as much as $0.50 per gallon. But the short answer is \"\"because they can\"\". It's legal, provided that some people are paying less while others are paying more. Essentially the larger, richer audience is subsidizing the product for other areas. It's not terribly different than the way most drugs are priced in the world.\"","Location, Location, Location. The closer to the highway, the more they can charge. People want to go less than a mile from the exit to get gas. Therefore they save time, but spend more money. That is understandable, so the gas station takes advantage of the situation.","There are many factors. Most gas stations price their gas based on what it will cost them to replace it. So when their supplier raises the price that it charges the station the station typically raises its prices proportionality. The suppliers tend to have their own rates. The business needs to make a profit so the business sets the price where it feels it will make the most money. Some stations buy bargain gas. Many people say they find this gas to be just fine. Personally some stations gas seems to make my cars run much worse. I can say that my mileage can vary by as much as 4 miles to the gallon based on where I get my gas. So I pay more to go to those stations that consistently have provided me good gasoline. However higher prices do not necessarily mean better gas. We have a BP just down the street that seems to have bad gas while one about a half a mile away that I prefer because I have never had a bad tank of gas. Both are priced about the same. Also some localities have special tax zones. These are local taxes levied based on the location. We have 4 different zones here in Peoria IL (150k pop). That does not take into account the smaller cities around us.","I only have anecdotal evidence here as members of my family used to own a grocery store / gas station, but they were often time charged much more to have the gasoline delivered to than many gas stations which were just a mile or two away (up to 15% more). Also depending upon the branding of the gas station, they are required to use certain distributors (i.e. if you are an Exxon gas station you can only use a few select vendors) which gave them less control of their final cost. All in all the gasoline often had smaller margins than items in the grocery store, which are already extremely low.","When I ran a gas station, our price was largely set by our neighbors-- the other gas stations in the area. We couldn't go below the current cost of replacement gas, but other than that we wanted to be at .05 over the average. (We got away with charging more because we were the last station on a major road.) Everybody else did the same thing. Also, we only set prices once a day, early in the morning before the commuter rush. Changing prices while somebody is pumping gas Was Not Done, for fairly obvious reasons. So, you'd get these ripples of price-changing, as one station changed its price, and then all its neighbors would react to that the next day, and then THEIR neighbors would change the day after that, and so on.","One factor I haven't seen mentioned is volume. Suppliers will charge a slightly lower price to the station if they buy in full tanker truck loads instead of smaller quantities. Where I am this is probably still the largest factor in price spread with all newer bigger stations being 20-30 cents cheaper than the old small ones (often a repair shop with 2 pumps out front); the only reason it's slowly becoming less pronounced is that the old small stations are steadily closing up as their tanks fail leak inspections because they don't sell enough gas to justify repair and replacement.","Some of this is demand management. The local BJ's wholesale club sells gas $0.10-0.15/gallon less than the prevailing rate. Typically there are lines of 3-5 cars waiting for a pump during busy periods. People are price-conscious when buying gas, which draws crowds and the retailer actually wants a line -- the whole point of the gas station is to draw traffic to the warehouse club. Other gas stations have the opposite problem -- big crowds lead to fewer people buying food and drinks in the convenience store, which is where the business actually makes its money. They want a steady stream of people. In my area, there is a gas station that is on a busy intersection right off the highway ramp going to the airport. Their problem is that people returning rental cars used to swarm the gas station and cause traffic tie-ups on the road -- a problem averted by marking up the gas $0.30.","\"I'll echo: many factors. Brand: There are generally two levels of pricing: \"\"major brand\"\" and \"\"discount brand\"\". You can generally expect the \"\"discount brand\"\" to cost about 5-10 cents less per gallon in the same neighborhood as \"\"major brand\"\" gas. This is for a number of sub-factors; chief among them is that not all gasolines are created equal. A lot of the major brands (Shell, Texaco, Chevron, BP, Exxon) have proprietary detergents and cleaning agents that the discount brands do not. They're also generally closer to the real octane rating of the gas, have less ethanol (you'll see the sign that says \"\"contains up to 10% ethanol\"\"; the bargain brands are right up at that limit while the top-tier brands keep it lower) and have stricter requirements about storage tank maintenance. Anyone who tells you that all gas is the same, send em my way; I tried to save a few bux buying the cheaper stuff and now my car needs an engine overhaul because of fouling causing premature wear. A couple of my co-workers got a fuel system overhaul free from the local supermarket because the storage tank wasn't properly purged, and they got water into their gas tanks. Market Price: Yes, this is of course a factor. Generally, gas prices at the pump rise very quickly when the market price of crude or gasoline goes up, then fall more slowly than the market price, because the margins on gas sales for a C-store are very slim. When prices change, the C-stores lose either way; when prices rise they have to pay more than they got from the last tankful to buy the next one, and when prices fall they don't recoup the cost of their current tank. By quickly increasing the price to match commodities market prices, then gradually lowering them over time even if the market collapses, they mitigate the losses both ways. Overhead: A gas station right next to a highway probably had to pay more for that land, both to buy/lease it and in property taxes. Nicer (newer, cleaner) stations generally have to pay more to stay that way. The higher your operating costs, the more you'll have to charge for your gas. You can usually do so because the nicer station will attract customers willing to pay a few cents more for the nicer facilities. Taxation: Most States charge a tax on gasoline, in addition to a Federal tax on gas. That revenue either goes into the State's general fund, or is earmarked for transportation costs like road maintenance. California's gas prices are sky-high across the state, because they have the highest gas tax. I'm not sure Colorado, Wyoming and Montana have gas taxes at all. Proximity to other stations: No matter what you have to pay for the land and facilities, if there's another station across the street, you have to be within a penny of their price or people will vote with their feet. While \"\"predatory pricing\"\" (taking a loss on sales in one area, buffered by profits elsewhere, in order to drive out competition) is technically illegal, you see it all the time in the C-store industry and it is very difficult to prove. This is a primary cause of neighborhood-to-neighborhood changes; a C-store will look around the other stations on their street corner, and the ones down the road a block or two each direction, when determining what they can sell gas for that day. The guy five blocks down has a completely different pool of competing stations. Population Distribution: With a lot of people in a particular area, there's a big \"\"pie\"\" of customer dollars for C-stores to compete for. This generally leads to increased prices because the stations don't have to be AS cutthroat; regardless of how good your price is, you have only so many pumps, and at some point people will pay more to use the open pump than wait for the cheaper one. The reverse is true in rural areas; with only two stations in an entire small town, those two stations will become extremely cutthroat. However, rural prices also vary more; with only one station in easy walking distance from where you ran out of gas, they can charge you $6 to fill that gallon gas can if they want, and you'll pay it because the next gas station's another 20 miles down the road and probably has even higher prices. This, along with overhead, is generally why the Rockies states have the lowest average prices; land's cheap and people are scarce in Wyoming. But, the \"\"price-gouging\"\" can be seen in the rural Southwest, where there's a LOT of ground to cover between gas stations, and so the \"\"last chance gas\"\" along major highways just outside of town, each a nickel to a dime more than the previous station, is a common stereotype. Transportation costs: Prices are higher on the East and West Coasts than in the Gulf States for a very simple reason; the bulk of the U.S. refinery capacity is along the Gulf Coast between Galveston and the Florida border. The further you are from there, the more it costs to get the fuel from the refinery to the gas station, and that cost is reflected at the pump. In fact, the East Coast imports gasoline by tanker even though the United States is now a net exporter of gasoline, because it's cheaper to buy it from foreign sources than it would be to watch it drip through the limited pipeline capacity that exists between the Gulf states and the Eastern Seaboard.\""],"string":"[\n \"\\\"This is known as \\\"\\\"Zone Pricing\\\"\\\" or \\\"\\\"Geographical Pricing\\\"\\\". http://articles.latimes.com/2005/jun/19/business/fi-calprice19 Such price variations may seem odd, but they are not unique to Anaheim. On any given day, in any major U.S. city, a single brand of gasoline will sell for a wide range of prices even when the cost to make and deliver the fuel is the same. The primary culprit is zone pricing, a secret and pervasive oil company strategy to boost profits by charging dealers different amounts for fuel based on traffic volume, station amenities, nearby household incomes, the strength of competitors and other factors. It's a controversial strategy, but the courts have thus far deemed it legal, and the Federal Trade Commission recently said the effect on consumers was ambiguous because some customers got hurt by higher prices while others benefited from lower ones. http://en.wikipedia.org/wiki/Geographical_pricing Zone pricing, as practiced in the gasoline industry in the United States, is the pricing of gasoline based on a complex and secret weighting of factors, such as the number of competing stations, number of vehicles, average traffic flow, population density, and geographic characteristics. This can result in two branded gas stations only a few miles apart selling gasoline at a price differential of as much as $0.50 per gallon. But the short answer is \\\"\\\"because they can\\\"\\\". It's legal, provided that some people are paying less while others are paying more. Essentially the larger, richer audience is subsidizing the product for other areas. It's not terribly different than the way most drugs are priced in the world.\\\"\",\n \"Location, Location, Location. The closer to the highway, the more they can charge. People want to go less than a mile from the exit to get gas. Therefore they save time, but spend more money. That is understandable, so the gas station takes advantage of the situation.\",\n \"There are many factors. Most gas stations price their gas based on what it will cost them to replace it. So when their supplier raises the price that it charges the station the station typically raises its prices proportionality. The suppliers tend to have their own rates. The business needs to make a profit so the business sets the price where it feels it will make the most money. Some stations buy bargain gas. Many people say they find this gas to be just fine. Personally some stations gas seems to make my cars run much worse. I can say that my mileage can vary by as much as 4 miles to the gallon based on where I get my gas. So I pay more to go to those stations that consistently have provided me good gasoline. However higher prices do not necessarily mean better gas. We have a BP just down the street that seems to have bad gas while one about a half a mile away that I prefer because I have never had a bad tank of gas. Both are priced about the same. Also some localities have special tax zones. These are local taxes levied based on the location. We have 4 different zones here in Peoria IL (150k pop). That does not take into account the smaller cities around us.\",\n \"I only have anecdotal evidence here as members of my family used to own a grocery store / gas station, but they were often time charged much more to have the gasoline delivered to than many gas stations which were just a mile or two away (up to 15% more). Also depending upon the branding of the gas station, they are required to use certain distributors (i.e. if you are an Exxon gas station you can only use a few select vendors) which gave them less control of their final cost. All in all the gasoline often had smaller margins than items in the grocery store, which are already extremely low.\",\n \"When I ran a gas station, our price was largely set by our neighbors-- the other gas stations in the area. We couldn't go below the current cost of replacement gas, but other than that we wanted to be at .05 over the average. (We got away with charging more because we were the last station on a major road.) Everybody else did the same thing. Also, we only set prices once a day, early in the morning before the commuter rush. Changing prices while somebody is pumping gas Was Not Done, for fairly obvious reasons. So, you'd get these ripples of price-changing, as one station changed its price, and then all its neighbors would react to that the next day, and then THEIR neighbors would change the day after that, and so on.\",\n \"One factor I haven't seen mentioned is volume. Suppliers will charge a slightly lower price to the station if they buy in full tanker truck loads instead of smaller quantities. Where I am this is probably still the largest factor in price spread with all newer bigger stations being 20-30 cents cheaper than the old small ones (often a repair shop with 2 pumps out front); the only reason it's slowly becoming less pronounced is that the old small stations are steadily closing up as their tanks fail leak inspections because they don't sell enough gas to justify repair and replacement.\",\n \"Some of this is demand management. The local BJ's wholesale club sells gas $0.10-0.15/gallon less than the prevailing rate. Typically there are lines of 3-5 cars waiting for a pump during busy periods. People are price-conscious when buying gas, which draws crowds and the retailer actually wants a line -- the whole point of the gas station is to draw traffic to the warehouse club. Other gas stations have the opposite problem -- big crowds lead to fewer people buying food and drinks in the convenience store, which is where the business actually makes its money. They want a steady stream of people. In my area, there is a gas station that is on a busy intersection right off the highway ramp going to the airport. Their problem is that people returning rental cars used to swarm the gas station and cause traffic tie-ups on the road -- a problem averted by marking up the gas $0.30.\",\n \"\\\"I'll echo: many factors. Brand: There are generally two levels of pricing: \\\"\\\"major brand\\\"\\\" and \\\"\\\"discount brand\\\"\\\". You can generally expect the \\\"\\\"discount brand\\\"\\\" to cost about 5-10 cents less per gallon in the same neighborhood as \\\"\\\"major brand\\\"\\\" gas. This is for a number of sub-factors; chief among them is that not all gasolines are created equal. A lot of the major brands (Shell, Texaco, Chevron, BP, Exxon) have proprietary detergents and cleaning agents that the discount brands do not. They're also generally closer to the real octane rating of the gas, have less ethanol (you'll see the sign that says \\\"\\\"contains up to 10% ethanol\\\"\\\"; the bargain brands are right up at that limit while the top-tier brands keep it lower) and have stricter requirements about storage tank maintenance. Anyone who tells you that all gas is the same, send em my way; I tried to save a few bux buying the cheaper stuff and now my car needs an engine overhaul because of fouling causing premature wear. A couple of my co-workers got a fuel system overhaul free from the local supermarket because the storage tank wasn't properly purged, and they got water into their gas tanks. Market Price: Yes, this is of course a factor. Generally, gas prices at the pump rise very quickly when the market price of crude or gasoline goes up, then fall more slowly than the market price, because the margins on gas sales for a C-store are very slim. When prices change, the C-stores lose either way; when prices rise they have to pay more than they got from the last tankful to buy the next one, and when prices fall they don't recoup the cost of their current tank. By quickly increasing the price to match commodities market prices, then gradually lowering them over time even if the market collapses, they mitigate the losses both ways. Overhead: A gas station right next to a highway probably had to pay more for that land, both to buy/lease it and in property taxes. Nicer (newer, cleaner) stations generally have to pay more to stay that way. The higher your operating costs, the more you'll have to charge for your gas. You can usually do so because the nicer station will attract customers willing to pay a few cents more for the nicer facilities. Taxation: Most States charge a tax on gasoline, in addition to a Federal tax on gas. That revenue either goes into the State's general fund, or is earmarked for transportation costs like road maintenance. California's gas prices are sky-high across the state, because they have the highest gas tax. I'm not sure Colorado, Wyoming and Montana have gas taxes at all. Proximity to other stations: No matter what you have to pay for the land and facilities, if there's another station across the street, you have to be within a penny of their price or people will vote with their feet. While \\\"\\\"predatory pricing\\\"\\\" (taking a loss on sales in one area, buffered by profits elsewhere, in order to drive out competition) is technically illegal, you see it all the time in the C-store industry and it is very difficult to prove. This is a primary cause of neighborhood-to-neighborhood changes; a C-store will look around the other stations on their street corner, and the ones down the road a block or two each direction, when determining what they can sell gas for that day. The guy five blocks down has a completely different pool of competing stations. Population Distribution: With a lot of people in a particular area, there's a big \\\"\\\"pie\\\"\\\" of customer dollars for C-stores to compete for. This generally leads to increased prices because the stations don't have to be AS cutthroat; regardless of how good your price is, you have only so many pumps, and at some point people will pay more to use the open pump than wait for the cheaper one. The reverse is true in rural areas; with only two stations in an entire small town, those two stations will become extremely cutthroat. However, rural prices also vary more; with only one station in easy walking distance from where you ran out of gas, they can charge you $6 to fill that gallon gas can if they want, and you'll pay it because the next gas station's another 20 miles down the road and probably has even higher prices. This, along with overhead, is generally why the Rockies states have the lowest average prices; land's cheap and people are scarce in Wyoming. But, the \\\"\\\"price-gouging\\\"\\\" can be seen in the rural Southwest, where there's a LOT of ground to cover between gas stations, and so the \\\"\\\"last chance gas\\\"\\\" along major highways just outside of town, each a nickel to a dime more than the previous station, is a common stereotype. Transportation costs: Prices are higher on the East and West Coasts than in the Gulf States for a very simple reason; the bulk of the U.S. refinery capacity is along the Gulf Coast between Galveston and the Florida border. The further you are from there, the more it costs to get the fuel from the refinery to the gas station, and that cost is reflected at the pump. In fact, the East Coast imports gasoline by tanker even though the United States is now a net exporter of gasoline, because it's cheaper to buy it from foreign sources than it would be to watch it drip through the limited pipeline capacity that exists between the Gulf states and the Eastern Seaboard.\\\"\"\n]","isConversational":false}}},{"rowIdx":74,"cells":{"_id":{"kind":"string","value":"4500"},"query":{"kind":"string","value":"What to ask Warren Buffet at the Berkshire Hathaway shareholder meeting?"},"gt_ids":{"kind":"list like","value":["163048","533623"],"string":"[\n \"163048\",\n \"533623\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1],"string":"[\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["163048","411084","485092","3533","209843","404341","245728","339864","201484","253374","590276","133487","245168","141928","42851","359229","375671","488278","35093","41809","349461","72291","278369","157038","76363","501395","88004","134722","520677","50563","472759","506618","559768","456823","533623","170932","113800","59758","406743","572041","114359","138535","475522","460643","123203","39149","419038","37561","79319","299284","92826","523872","517439","550888","423954","453514","573846","254498","58390","327525","339553","179640","145140","461355","338962","222391","353082","379914","538400","380612","475393","566601","156356","238398","320320","113587","273718","382215","415616","140226","446948","534010","538086","415433","162973","323660","366309","237690","541421","470759","511177","364355","425577","178896","226727","280672","521996","299367","176230","94900"],"string":"[\n \"163048\",\n \"411084\",\n \"485092\",\n \"3533\",\n \"209843\",\n \"404341\",\n \"245728\",\n \"339864\",\n \"201484\",\n \"253374\",\n \"590276\",\n \"133487\",\n \"245168\",\n \"141928\",\n \"42851\",\n \"359229\",\n \"375671\",\n \"488278\",\n \"35093\",\n \"41809\",\n \"349461\",\n \"72291\",\n \"278369\",\n \"157038\",\n \"76363\",\n \"501395\",\n \"88004\",\n \"134722\",\n \"520677\",\n \"50563\",\n \"472759\",\n \"506618\",\n \"559768\",\n \"456823\",\n \"533623\",\n \"170932\",\n \"113800\",\n \"59758\",\n \"406743\",\n \"572041\",\n \"114359\",\n \"138535\",\n \"475522\",\n \"460643\",\n \"123203\",\n \"39149\",\n \"419038\",\n \"37561\",\n \"79319\",\n \"299284\",\n \"92826\",\n \"523872\",\n \"517439\",\n \"550888\",\n \"423954\",\n \"453514\",\n \"573846\",\n \"254498\",\n \"58390\",\n \"327525\",\n \"339553\",\n \"179640\",\n \"145140\",\n \"461355\",\n \"338962\",\n \"222391\",\n \"353082\",\n \"379914\",\n \"538400\",\n \"380612\",\n \"475393\",\n \"566601\",\n \"156356\",\n \"238398\",\n \"320320\",\n \"113587\",\n \"273718\",\n \"382215\",\n \"415616\",\n \"140226\",\n \"446948\",\n \"534010\",\n \"538086\",\n \"415433\",\n \"162973\",\n \"323660\",\n \"366309\",\n \"237690\",\n \"541421\",\n \"470759\",\n \"511177\",\n \"364355\",\n \"425577\",\n \"178896\",\n \"226727\",\n \"280672\",\n \"521996\",\n \"299367\",\n \"176230\",\n \"94900\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["For whatever it's worth, when I went to the meeting a couple of years ago, the question and answer segment is mostly students asking how to pick a stock or what book they should read. I'm sure someone else will ask but it would be interesting to hear their take on the Syrian refugee situation in Europe and how it may impact the EU in general. Or how he/they think the drought in the south western region of the US will impact the national economy, if at all. Like Keshlam says, if YOU don't care about the answer there's really no point to asking the question. The most important thing you can do is listen to what he and Munger have to say. The way they think is interesting and they have great rapport with eachother. It's a great experience and unfortunately I wasn't able to make my schedule work to attend this year. It's almost comical how many cans of Coke Warren will knock out through the day. Another fun thing to do is take the shuttle to the airstrip to check out the NetJets. I wish I had the interest and wherewithal to go when I was 16...","\"Consultant, I commend you for thinking about your financial future at such an early age. Warren Buffet, arguably the most successful investor ever lived, and the best known student of Ben Graham has a very simple advice for non-professional investors: \"\"Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.)\"\" This quote is from his 2013 letter to shareholders. Source: http://www.berkshirehathaway.com/letters/2013ltr.pdf Buffet's annual letters to shareholders are the wealth of useful and practical wisdom for building one's financial future. The logic behind his advice is that most investors cannot consistently pick stock \"\"winners\"\", additionally, they are not able to predict timing of the market; hence, one has to simply stay in the market, and win over in the long run.\"","A couple points, first you don't point out what investors you want to invest with, and second BRK.B does not track anything; it is just a very small slice of his entire holdings BRK.A minus the voting rights. One solid way to go would be to buy BRK.B and also a tech ETF like QQQ, or XLK, ..or both.","\"Warren Buffet isn't using any special sauce. He looks for value and ignores hype, greed, and fear. He buys what he knows and looks for companies that generate cash and/or are available for a discount of their true value. He explains what he looks for in a company and his reasons for buying it. He has said on numerous occasions, \"\"I look for intrinsic value.\"\" (So there's your formula.) Human nature is often irrational and investing seems to bring out the fear and greed. I've always been a bit surprised when people ascribe some sort of sixth sense to Warren Buffet's success. He just works hard and doesn't deviate from a sound strategy. \"\"Be fearful when others are greedy and greedy when others are fearful.\"\" And of course, rule one: \"\"Don't lose money.\"\" It's not a joke. How many people buy high and sell low because of fear and greed? When the market tanks, buy more. Finally, anyone can invest with Buffet without all the work. Just buy a few shares of BRK.A or BRK.B.\"","\"I tell you how I started as an investor: read the writings of probably the best investor of the history and become familiarized with it: Warren Buffett. I highly recommend \"\"The Essays of Warren Buffett\"\", where he provides a wise insight on how a company generates value, and his investment philosophy. You won't regret it! And also, specially in finance, don't follow the advice from people that you don't know, like me.\"","Read Warren Buffett's letters to his shareholders - they are such an interesting read and I guarantee you'll learn more than financial modelling - you will learn how to think about these businesses. Must be what 700-800 pages in total?","I would encourage you to read The Warren Buffett Way. Its a short read and available from most libraries as an audio book. It should address most of the ignorance that your post displays. Short term prices, offered in the market, do not necessarily reflect the future value of a company. In the short term the market is a popularity contest, in the long run prices increases based on the performance of the company. How much free cash flow (and related metrics) does the company generate. You seem way overly concerned with short term price fluctuations and as such you are more speculating. Expecting a 10 bagger in 2-3 years is unrealistic. Has it happened, sure, but it is a rare thing. Most would be happy to have a 2 bagger in that time frame. If I was in your shoes I'd buy the stock, and watch it. Provided management meet my expectations and made good business decisions I would hold it and add to my position as I was able and the market was willing to sell me the company at a good price. It is good to look at index funds as a diversification. Assuming everything goes perfectly, in 2-3 years, you would have an extra 1K dollars. Big deal. How much money could you earn during that time period? Simply by working at a fairly humble job you should be able to earn between 60K and 90K during that time. If you stuck 10% of that income into a savings account you would be far better off (6K to 9K) then if this stock actually does double. Hopefully that gets you thinking. Staring out is about earning and saving/investing. Start building funds that can compound. Very early on, the rate of return (provided it is not negative) is very unimportant. The key is to get money to compound!","A note on the article: I thought this article by Buffet on market level was particularly appropriate now, given the seemingly daily new highs, current level of interest rates (hint: they are incredibly low), and corporate profits (hint: they are incredibly high). If you believe the market will eventually revert to the mean, that implies substandard results over an extended period of time into the future.","Shit article that displays the author has no farming idea of how Warren Buffet operates. The man has metrics that tell him when shares are too expensive. When this happens, he doesn't buy, and dividends can tend to accumulate when you have almost $500 billion in assets (which could just be 2 years of 5% dividend yields). If they are expensive, he won't buy, and money will accumulate. When there is a crash, he buys on the cheap. That how you get 23% of Year-on-year gains for 40 years. The fact that he is not buying does indicate that the market is overvalued, which is consistent with the fact that there is still a substantial amount of QE. The question is: what will happen as the Fed winds it down. They are aiming for a small decrease or leveling out of the stock market. If that happens, and the market stagnates for a couple of years, maybe the metrics will catch up and he will buy again without a crash happening.","\"Despite Buffett's nearly perfect consistent advice over the past few decades, they don't reflect his earliest days. His modern philosophy seemed to solidify in the 1970s. You can see that Buffett's earliest days grew faster, at 29.5 % for those partners willing to take on leverage with Buffett, than the last half century, at 19.7%. Not only is Buffett limited by size, as its quite difficult to squeeze one half trillion USD into sub-billion USD investments, but the economy thus market is far different than it was before the 1980s. He would have to acquire at least 500 billion USD companies outright, and there simply aren't that many available that satisfy all of his modern conditions. The market is much different now than it was when he first started at Graham-Newman because before the 1960s, the economy thus market would collapse and rebound about every few years. This sort of variance can actually help a value investor because a true value investor will abandon investments when valuations are high and go all in when valuations are low. The most extreme example was when he tried to as quietly as possible buy up an insurance company selling for something like a P/E of 1 during one of the collapses. These kinds of opportunities are seldom available anymore, not even during the 2009 collapse. As he became larger, those investments became off limits because it simply wasn't worth his time to find such a high returner if it's only a bare fraction of his wealth. Also, he started to deviate from Benjamin Graham's methods and started to incorporate Philip Fisher's. By the 1970s, his investment philosophy was more or less cemented. He tried to balance Graham's avarice for price with Fisher's for value. All of the commentary that special tax dodges or cheap financing are central to his returns are false. They contributed, but they are ancillary. As one can see by comparing the limited vs general partners, leverage helps enormously, but this is still a tangent. Buffett has undoubtedly built his wealth from the nature of his investments. The exact blueprint can be constructed by reading every word he has published and any quotes he has not disavowed. Simply, he buys the highest quality companies in terms of risk-adjusted growth at the best available prices. Quantitatively, it is a simple strategy to replicate. NFLX was selling very cheaply during the mid-2000s, WDC sells frequently at low valuations, up and coming retailers frequently sell at low valuations, etc. The key to Buffett's method is emotional control and removing the mental block that price equals value; price is cost, value is revenue, and that concept is the hardest for most to imbibe. Quoting from the first link: One sidelight here: it is extraordinary to me that the idea of buying dollar bills for 40 cents takes immediately to people or it doesn't take at all. It's like an inoculation. If it doesn't grab a person right away, I find that you can talk to him for years and show him records, and it doesn't make any difference. They just don't seem able to grasp the concept, simple as it is. A fellow like Rick Guerin, who had no formal education in business, understands immediately the value approach to investing and he's applying it five minutes later. I've never seen anyone who became a gradual convert over a ten-year period to this approach. It doesn't seem to be a matter of IQ or academic training. It's instant recognition, or it is nothing. and I'm convinced that there is much inefficiency in the market. These Graham-and-Doddsville investors have successfully exploited gaps between price and value. When the price of a stock can be influenced by a \"\"herd\"\" on Wall Street with prices set at the margin by the most emotional person, or the greediest person, or the most depressed person, it is hard to argue that the market always prices rationally. In fact, market prices are frequently nonsensical. and finally Success in investing doesn’t correlate with I.Q. once you’re above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing. There is almost no information on any who has helped Buffett internally or even managed Berkshire's investments aside from Louis Simpson. It is unlikely that Buffett has allowed anyone to manage much of Berkshire's investments considering the consistent stream of commentary from him claiming that he nearly does nothing except read annual reports all day to the extent that he may have neglected his family to some degree and that listening to others will more likely hurt performance than help with the most striking example being his father's recommendation that he not open a hedge fund after retiring from Graham-Newman because he believed the market was topping, and he absolutely idolized his father.\"","\"Warren Buffett: 'Investing Advice For You--And My Wife' (And Other Quotes Of The Week): What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit…My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors… Similarly from Will Warren Buffett's investment advice work for you?: Specifically, Buffett wants the trustee of his estate to put 10 percent of his wife's cash inheritance in short-term government bonds and 90 percent in a low-cost S&P index fund - and he tips his hat specifically to Bogle's Vanguard in doing so. Says Buffett: \"\"I believe the trust's long-term results from this policy will be superior to those attained by most investors - whether pension funds, institutions or individuals.\"\"\"","\"You can't get much better advice for a young investor than from Warren Buffet. And his advice for investors young and old, is \"\"Put 10% of the cash in short‑term government bonds, and 90% in a very low‑cost S&P 500 index fund.\"\" Or as he said at a different time, \"\"Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees\"\". You are not going to beat the market. So just save as much money as you can, and invest it in something like a Vanguard no-load, low-cost mutual fund. Picking individual stocks is fun, but treat it as fun. Never put in more money than you would waste on fun. Then any upside is pure gravy.\"","Warren Buffett answered this question very well at the 2009 Berkshire Hathaway annual meeting. He said that it was important to read everything you can about investing. What you will find is that you will have a number of competing ideas in your head. You will need to think these through and find the best way to solve them that fits you. You will mostly learn how to invest through good examples. There are fewer good examples out there than you might think, given how many books there are and how many people get paid to give advice in this area. If you want to see how professional investors actually think about specific investments, over a thousand investment examples can be found at www.valueinvestorsclub.com, just login as a guest. The site is run by Joel Greenblatt (you would benefit from reading his books also), and it will give you a sense of the work that investors put into their research. Good luck.","I would just ask him plain and simple for a shadow opportunity. Just as you said, he has an open door policy and what better way to show it to his employees. And to really hold him to the policy. As for what questions to ask it depends on what you want out of life. This person is at a very high level so they obviously know a good bit, or at least how to achieve that level. One thing I'd say to do is to not make all of your questions about business. Mix it up and ask him some personal things like his hobbies, but nothing to personal. Try to build a relationship with him in what time you have and maybe this will lead to further opportunities.","Have you read is letter? He's saying thanks to the government for basically saving the economy. Warren Buffet was from day 1 a strong supporter of the bailout program. I'm sorry for my ignorance but what ''output'' are you talking about? As I understand you don't just want to establish a basic income but want to change the whole monetary system? And you can't even explain it?","As a corollary to this; the average investor will never know more than the market. Buffett can buy mispriced securities because he runs a multi-billion dollar company dedicated to finding these mispricings. My advice for the common man: 1. Invest in both Stocks (for growth) & Bonds (for wealth preservation) 2. Stocks should be almost exclusively Index Funds That's it. The stock market has a 'random walk with a positive drift' which means that in general, the market will increase in value. Index funds capture this value and will protect you against the inevitable BoA, AIG, Enron, etc. It's fine to invest in index funds with a strategy as well, for instance emerging market ETFs could capture the growth of a particular region. Bear ETFs are attractive if you think the market is going to hit a downturn in the future.","Are you looking for this Warren Buffets Stock Portfolio? Or Berkshire Hathaway Portfolio WFC is near the bottom of the BH portfolio but it seems to be a rather large investment for both.","Well, what I would do would be to read every journalist's article on the subject, every academic paper, and the appropriate chapters from the CFA curriculum. I'd write down everyone's name (authors and those mentioned) and then email call them for advice. I'd try to find out who those players are, what their specific philosophies are, and then find someone i thought was really smart, had an investment philosophy that I agreed with, wasn't a dick, and then I would call them. By the way, Warren Buffett went to Columbia to learn specifically under Ben Graham. Prior to graduation, Buffett said he'd like to work at Graham Newman for free, such was the value of the education. Benjamin Graham told him (Warren), he wasn't worth that much. You or I literally have nothing to offer these guys that they can't get somewhere else (smarts, hard work, etc) for better. I'd be humble, attentive, and humble (did I say that already). There's an intellectual honesty that comes with admitting you don't know anything (but are willing to learn) that is very much important. That's what I would do. Did any of that help?","\"I'm a senior majoring in accounting and management information systems. Here is a question I answered a while back about financial statements and employee retention. In the answer that I provided at the bottom it was to assess a company's ability to pay by use of ratios. Likewise, similar accounting methods need to be understood and implemented when assessing stocks(which is where I believe Mr. Buffet was going with this). As we can see the severity of the questions decreases, but if you can not answer question 3 then you should study accounting principles. So how much is enough just to get started? You will never have enough knowledge to start, period. You will have to continuously be learning, so start sooner than later. However you need neither economics or accounting knowledge if you were to learn technical analysis, many doubt the workings of this technique, but in my experience it is easier to learn and practise. A comment on @Veronica's post. Understanding economics and accounting are fundamental. Analysis, seeing trends, and copying are instinctual human traits that helped us evolve (we are very good at pattern recognition). Taking an intro economic and accounting course at a local community college is an excellent place to start when breaking the mold of pattern-thinking. You have to be critical in understanding what elements move a company's A/R in the statement of cash flows. Read. Literally, don't stop reading. Latest edition of of Kesio's accounting principles? Read it. Cover to cover. Tax policies on Section 874, 222, 534? Read it. Take a class, read a book, ask questions! Good Luck, \"\"Welcome to [the] Science [of Business], you're gonna like it here\"\" - Phil Plait\"","Warren Buffet and Berkshire Hathaway took a 50% loss in each of the last two bear markets. His stock even lost 10% in 2015 when the S&P lost 8%. He doesn't have a track record to support the claim that his stock performs relatively better in a bear market, so perhaps it's best to take his letter with a grain of salt. Edit: As one commenter points out, Mr. Buffett is comparing the book performance of his fund to the market performance of an index. That is an apples to oranges comparison. It's deceptive at best.","Does Coke count as one of his operating businesses though? He's the biggest shareholder but wikipedia says it's around 26%. There are some other huge cash cows in there as well; BNSF Railroad's earnings were like $3.5 billion last year, and Berkshire own 100% of the business.","Assuming this is a public company, i'd recommend reading the analyst calls from the last several quarters. This will give you an idea of what investors, and therefor likely the board and senior leadership, are focused on at a very high level. Youre an intern, so dont feel like you need to blow the doors off, but showing that you are aware of the company's major objectives and asking some thoughtful questions about them is probably a good start.","\"Everything you are doing is fine. Here are a few practical notes in performing this analysis: Find all the primary filing information on EDGAR. For NYSE:MEI, you can use https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000065270&type=10-K&dateb=&owner=exclude&count=40 This is the original 10-K. To evaluate earnings growth you need per share earnings for the past three years and 10,11,12 years ago. You do NOT need diluted earnings (because in the long term share dilution comes out anyway, just like \"\"normalized\"\" earnings). The formula is avg(Y_-1+Y_-2+Y_-3) / is avg(Y_-10+Y_-11+Y_-12) Be careful with the pricing rules you are using, the asset one gets complicated. I recommend NOT using the pricing rules #6 and #7 to select the stock. Instead you can use them to set a maximum price for the stock and then you can compare the current price to your maximum price. I am also working to understand these rules and have cited Graham's rules into a checklist and worksheet to find all companies that meet his criteria. Basically my goal is to bottom feed the deals that Warren Buffett is not interested in. If you are interested to invest time into this project, please see https://docs.google.com/document/d/1vuFmoJDktMYtS64od2HUTV9I351AxvhyjAaC0N3TXrA\"","It is only wise to invest in what you understand (ala Warren Buffet style). Depending on how much money you have, you might see fit to consult a good independent financial advisor instead of seeking advice from this website. A famous quote goes: “Those who say, do not know. Those who know, do not say”","\"No offense but how is it inspiring given it took the socialization of risk markets (bailouts, tens of trillions in liability guarantees, wholesale changes in mark-to-market accounting rules, QE which continues to this day) and undermining of our judicial process (pretending no fraud was truly prosecutable) - all to the outsized benefit of the ultimate insider and anti-competition specialist Buffett? I traded before, during and after the crisis and any of my losses were 100% my own while guys down the Avenue had their bonuses guaranteed by TARP and I am supposed to be inspired? Buffett sure did \"\"bet on America\"\", it just isn't what most people like to think it is.\"","\"Those who say a person should invest in riskier assets when young are those who equate higher returns with higher risk. I would argue that any investment you do not understand is risky and allows you to lose money at a more rapid rate than someone who understands the investment. The way to reduce risk is to learn about what you want to invest in before you invest in it. Learning afterward can be a very expensive proposition, possibly costing you your retirement. Warren Buffet told the story on Bloomberg Radio in late 2013 of how he read everything in his local library on investing as a teenager and when his family moved to Washington he realized he had the entire Library of Congress at his disposal. One of Mr. Buffett's famous quotes when asked why he doesn't invest in the tech sector was: \"\"I don't invest in what I do not understand.\"\". There are several major asset classes: Paper (stocks, bonds, mutual funds, currency), Commodities (silver, gold, oil), Businesses (creation, purchase or partnership as opposed to common stock ownership) and Real Estate (rental properties, flips, land development). Pick one that interests you and learn everything about it that you can before investing. This will allow you to minimize and mitigate risks while increasing the rewards.\"","Ya and they popped because he did, now they're slumping again and he's out with his quick buck. Berkshire is a positive feedback loop these days, anything they choose to invest in will get loads of interest and appreciate in value, making them look like brilliant investors in the process. Not that buffet isn't brilliant, he's clearly proven that over the years, but the Buffet fandom has gone off the rails","Buffet is in a different league from other value investors. He looks for stable companies with no debt and good management. Then he looks to deeply understand the industries of candidate companies, and looks for companies that are not in commodity businesses or sell commodities that can be bought for 25% of the valuation that he believes reflects the true value of the company. Deeply understanding the market is really the key. Consider the Burlington Northern Santa Fe Railroad, which Buffet purchased last year. Railroads benefit from higher oil prices, as they can transport cargo much cheaper than trucks. They also tend to have natural monopolies in the regions they operate in. Buffet bought the railroad just as production of oil and natural gas in North Dakota started picking up. Since pipeline capacity between North Dakota and refineries in Texas/Oklahoma is very limited, the railroad is making alot of money transporting crude.","Buffett is a value investor. His goal is to buy good companies when the market is overly worried and prices them below intrinsic value. When the market is highly priced it is much more difficult for him to find things that he thinks are at an attractive price. When people are very worried and the market has crashed, stocks are then priced below their intrinsic value and he can use the cash he keeps in the company to make attractive purchases. Remember that Buffett is not concerned with the ups and downs of the price of Berkshire Hathaway stock, he is concerned with the economic value of the assets that the company owns. So if all stock prices crash and he can buy things that are at bargain prices, he is happy no matter what Berkshire stock price does in the short run. One consequence of value investing is that because you are buying assets at bargain prices, the total value of your assets drops less in a bear market than the highly priced stuff that drives the major indexes.","What kind of crack are you smoking to think Warren Buffet didn't get to his position by merit... The guy basically invented modern value investing. Sure he's almost senile now but he was a legend back in the day.","What's it like being all the way up on that pedestal without having a clue what you're talking about? Are you dizzy? Do you have to apply extra Sunscreen to your upturned nose? When you read that one Wikipedia article, and 3 Forbes links are you just overwhelmed with the strength you just acquired, or have you felt this Supreme power all along? We have so many questions! Please answer them with vague, nondescript platitudes and more questions please. That would be awesome.","\"There is actually a recent paper that attempted to decompose Buffett's outperformance. I've quoted the abstract below: \"\"Berkshire Hathaway has realized a Sharpe ratio of 0.76, higher than any other stock or mutual fund with a history of more than 30 years, and Berkshire has a significant alpha to traditional risk factors. However, we find that the alpha becomes insignificant when controlling for exposures to Betting-Against-Beta and Quality-Minus-Junk factors. Further, we estimate that Buffett’s leverage is about 1.6-to-1 on average. Buffett’s returns appear to be neither luck nor magic, but, rather, reward for the use of leverage combined with a focus on cheap, safe, quality stocks. Decomposing Berkshires’ portfolio into ownership in publicly traded stocks versus wholly-owned private companies, we find that the former performs the best, suggesting that Buffett’s returns are more due to stock selection than to his effect on management. These results have broad implications for market efficiency and the implementability of academic factors.\"\"\"","\"What you are seeking is termed \"\"Alpha\"\", the mispricing in the market. Specifically, Alpha is the price error when compared to the market return and beta of the stock. Modern portfolio theory suggests that a portfolio with good Alpha will maximize profits for a given risk tolerance. The efficient market hypotheses suggests that Alpha is always zero. The EMH also suggests that taxes, human effort and information propagation delays don't exist (i.e. it is wrong). For someone who is right, the best specific answer to your question is presented Ben Graham's book \"\"The Intelligent Investor\"\" (starting on page 280). And even still, that book is better summarized by Warren Buffet (see Berkshire Hathaway Letters to Shareholders). In a great disservice to the geniuses above it can be summarized much further: closely follow the company to estimate its true earnings potential... and ignore the prices the market is quoting. ADDENDUM: And when you have earnings potential, calculate value with: NPV = sum(each income piece/(1+cost of capital)^time) Update: See http://finance.fortune.cnn.com/2014/02/24/warren-buffett-berkshire-letter/ \"\"When Charlie Munger and I buy stocks...\"\" for these same ideas right from the horse's mouth\"","Here is one for you that hasn't neen answered to date. Why are prices going up in the market while incomes are going down or stagnant? Anybody that knows economic or finance should be able to answer this question or at least give an opinion, Let me preface this as the marlet has been really good to me.","I would be curious how he balanced having two female life partners at once. Not sure I would ask that at the shareholder meeting though ;)","“CEOs who recognize their lack of capital-allocation skills (which not all do) will often try to compensate by turning to their staffs, management consultants, or investment bankers. Charlie and I have frequently observed the consequences of such ‘help.’ On balance, we feel it is more likely to accentuate the capital-allocation problem than to solve it.” -- [Warren Buffet](http://www.fool.com.au/2013/08/28/warren-buffett-sage-for-the-ages/)","\"See Berkshire Hathaway Inc. (BRK-A) (The Class A shares) and it will all be clear to you. IMHO, the quote for the B shares is mistaken, it used earning of A shares, but price of B. strange. Excellent question, welcome to SE. Berkshire Hathaway is a stock that currently trades for nearly US$140,000. This makes it difficult for individual investors to buy or sell these shares. The CEO Warren Buffet chose to reinvest any profits which means no dividends, and never to split the shares, which meant no little liquidity. There was great pressure on him to find a way to make investing in Berkshire Hathaway more accessible. In June '96, the B shares were issued which represented 1/30 of a share of the Class A stock. As even these \"\"Baby Berks\"\" rose in price to pass US$4500 per share, the stock split 50 to 1, and now trade in the US$90's. So, the current ratio is 1500 to 1. The class B shares have 1/10,000 the voting rights of the A. An A share may be swapped for 1500 B shares on request, but not vice-versa.\"","\"If AIG wasn't bailed out by the US Government, Warren Buffet would be the greatest **RICHES** to **RAGS** story ever. I can see why he promotes paying more taxes and is so willing to \"\"betray\"\" his own \"\"class\"\" on behalf of the USGov. It's because he's in the crony capitalist class post AIG bailout and tax dollars are the only reason he isn't greeting people at WalMart.\"","While Warren Buffett is an amazing investor, he does have the benefit of having his working career start around mid-WW2 and ride the baby boomer phenomena afterward. While there were bear blips in the past decades, there never really was much of a bear market outside the 70s energy crisis and inflation of the early 80s that nevertheless still could be leveraged for gains unlike the Great Depression. The question really is, will the next generation be so lucky? Idk, could be but I'm a doubter. He's right in his criticism (I wouldn't bet my retirment on Bitcoin) but the same critique could apply to the US dollar in parts (which admittedly has the fundamental strength as being accepted for US taxes, but as a consequence also severe drawback in being tied to the economic welfare and trust in the US Government). In the end, bitcoin and Warren Buffett are at fundamental odds. Bitcoins is for, among other niches, Currency and Market pessimists (around the world btw and not just US-centric) and Warren Buffet is a product of his time and generally an US-centered optimist.","\"not gonna lie i read a wsj story today that totally informed my opinion. https://www.wsj.com/articles/BT-CO-20170711-708695 At least according to that reporter the last time he raised his bid was in 1999: 'Mr. Buffett originally offered $35 a share for MidAmerican, but after pressure from investment bankers, he raised it to $35.05, he said in the letter. \"\"With that, I explained, they could tell their client they had wrung the last nickel out of me,\"\" he wrote.'\"","Just out of curiosity, what if one of those CEOs told Warren Buffett to 'stick it' could Warren Buffett have them removed or would the CEO's board of directors or whatever mechanism the company has only have that right (I mean, not removal for cause, which I am sure is built in but for purely personal reasons)? Just wondering how autonomous some of these companies are because it seems like a handful of corporations own most of the others.","Important to take note that Buffett is not directly investing in real estate. He bought a lot of stock in a real estate company that owns a lot of real estate (a REIT). Buffett typically buys stocks in companies that have good fundamentals in industries where he sees potential for growth. So indirectly he is betting on real estate, but holding stock in a REIT is much different than owning properties.","Not sure if you missed the point or just pointing out the competitive nature of Buffett. Probably the latter, but I'll explain anyway. 100B in cash lies around doing nothing and gaining no returns so it pulls the overall returns of his fund down. Thats what he doesnt want.","This fortune article is referenced in his either 2003 or 2004 annual report in which he does say that the market will not likely return much in the future and generally talks numbers. I am also a value investor, such that I can be in this environment and believe there is a bit of value in knowing where you think the market is headed but the real value is in underwriting each deal. In long, I agree with you","Berkshire Hathaway's earnings for the last reported quarter were $6.395 billion, which works out to $822 in profit per second, 24 hours a day, seven days a week. This is directly the result of about 50 years of carefully applying the value investing philosophy.","\"Yes, that's true. Excerpt from \"\"The Warren Buffett Way\"\": \"\"In November 2000, Warren Buffett and Berkshire Hathaway paid about $1 billion for Benjamin Moore & Co., the Mercedes of paint companies. Founded in 1883 by the Moore brothers in their Brooklyn basement, Benjamin Moore today is fifth largest paint manufacturer in the United States and has an unmatched reputation for quality. It was reported that Buffett paid a 25 percent premium over the stock’s then current price. On the surface, that might seem to contradict one of Buffett’s iron-clad rules: that he will act only when the price is low enough to constitute a margin of safety. However, we also know that Buffett is not afraid to pay for quality. Even more revealing, the stock price jumped 50 percent to $37.62 per share after the deal was announced. This tells us that either Buffett found yet another company that was undervalued or else that the rest of the investing world was betting on Buffett’s acumen and traded the price up even higher— or both.\"\"\"","\"JoeTaxpayer's answer is dead on... but let me give my own two cents with a little bit of math. Otherwise, I personally find that people talking about diversified portfolios tends to be full of buzzwords. Let's say that Buffett's investments are $10 million. He would like to earn ≥7% this year, or $700,000. He can invest that money in coca-cola//underwear, which might return: Or he can invest in \"\"genius moves\"\" that will make headlines: (like buying huge stakes in Goldman Sachs), which might return: And he makes plays for the long haul based on the expected value of the investments. So if he splits it 50/50... ($5 million/ $5 million), then his expected value is 822,250: By diversifying, he does reduce the expected value of the portfolio... (He is not giving $10 M the chance to turn into $1.5 million or $2 million for him!). The expected value of that shock-and-awe portfolio with all $10 million invested in it is $1.2M. By taking less risk... for less reward... his expected return is lower. But his risk is lower too. Scale this example back up into the $100 million or billion range that Buffett invests in and that extra margin makes the difference. In the context of your original article, the lower-risk 'cake and underwear' investments let Buffett go big on the things that will make 20%+ returns on billions of dollars, without completely destroying his investment capital when things take a turn for the worse.\"","I have a personal theory that due to Warren Buffett having the entire faith and backing of Wall Street, that it definitely plays into his returns. Look at the mortgage originator he sank money into that was truly a terrible business. A whole lot of Wall Street poured money into it right after as well. I don't think he would be as consistent if he were only buying a handful of shares and couldn't influence the entire price as a whole, but I'm not denying historically he's made a lot of good picks.","He owns some giants. I'd bet Coca-Cola is his biggest cash cow. This is a non-story. The revenue naturally follows actual value provided, as opposed to buying and selling shares with the swings of the stock market. Buffet buys and holds, and builds and collects the revenue from his companies, that's been his core philosophy since the beginning.","The advice I have is short and sweet. Be an investor, not a speculator. Adopt the philosophy of Warren Buffet which is the 'buy and hold' philosophy. Avoid individual stocks and buy mutual funds or ETFs. Pick something that pays dividends and reinvest those dividends. Don't become a speculator, meaning avoid the 'buy low, sell high' philosophy. EDIT:For some reason I cannot add a comment, so I am putting my response here. @jad The 'buy low, sell high' approach makes money for the stock broker, not necessarily you. As we learn in the movie Trading Places, each buy or sell creates a commission for the broker. It is those commission expenses that eat away at your nestegg. Just don't sell. If a security is trading at $10 a share and pays $0.25 a share each quarter then you are getting 10% ROI if you buy that security (and if it continues to pay $0.25 a share each quarter). If the price goes up then the ROI for new buyers will go down, but your ROI will still be the same. You will continue to get 10% for as long as you hold that security. A mutual fund buys the individual stocks for you. The value of the fund is only calculated at the end of the day. An ETF is like a mutual fund but the value of the ETF is calculated moment by moment.","What were her/his career aspirations when he was your age? Who were his/her mentors/sponsors and how did they impact his success? What industry changes does he/she anticipate in the next five years? In what ways will technology alter the industry?","\"This is the best tl;dr I could make, [original](https://www.bloomberg.com/amp/view/articles/2017-09-21/bet-with-buffett-not-against-him) reduced by 90%. (I'm a bot) ***** > The first is a New York Post article with the headline, &quot;Warren Buffett wins $1M bet made with hedgie a decade ago&quot;. > Although Seides has admitted defeat, he said he thinks that &quot;Doubling down on a bet with Warren Buffett for the next 10 years would hold greater-than-even odds of victory.&quot; Thus, despite spending $1 million in tuition at the University of Buffett, he failed to learn the expensive lesson that Buffett has offered up to all of us. > Which leads us to Buffett&#039;s motivation in making the bet. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/725pxt/bet_with_buffett_not_against_him/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~215707 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **Buffett**^#1 **bet**^#2 **money**^#3 **year**^#4 **Index**^#5\"","Buffet doesn't strike me as the kind of man who leaves himself vulnerable to technological changes, especially ones that are a part of a greater whole he's acknowledged as imminent. To think that self driving cars are coming, but self driving tractor trailers are not, is foolish. Buffet isn't a foolish man. If/when Tesla Semis take over, Buffet will still find a way to profit from the change.","You have a point about businesses needing to answer legitimate demands, but Buffet is also making a good point. Greatly reducing the influence of private money in politics while increasing the government's ability to even out the incredible income and resource disparities are both necessary to improve the US as a whole.","I've not had a chance to read that yet. I'll be sure to check it out. Buffet may very well gain some kind of real happiness in the pursuit of wealth, but I believe it is the pursuit which gives him joy, not the wealth itself. If you ever run into him, I invite you to ask him. I'll do the same.","Care to support that. I first came to know Buffet in about 1996. No one in history had done what he did for that length of time. He has basically the same track record today, except it's longer. He may have benefitted from some luck. But I think it's equally likely he did what he did in spite of bad luck. The only thing I'm certain he's been lucky at is being born with a unique memory and brain power.","In addition to the GE move, Buffett's firm also added a large share of Synchrony, equalling about $520.7 in value, and a $418.1 million stake in Store Capital. So, they bought one regular sized share? This is Why BI-journalists doesnt work in IB...","To understand his comments about bear-market performance it's important to take them in context. (My research method was Crtl+F: bear; read around the highlights. This is not a complete survey of 60+ years of letters.) In his earlier letters, statements about bull market performance are always made in reference to Buffet's belief that many of BH's current holdings are in undervalued securities. Ex: To the extent possible, therefore, I am attempting to create my own work-outs by acquiring large positions in several undervalued securities. Such a policy should lead to the fulfillment of my earlier forecast – an above average performance in a bear market. It is on this basis that I hope to be judged (p 6; emphasis mine). Similar statements are made throughout the earlier letters, along with this interesting note: In a year when the general market had a substantial advance I would be well satisfied to match the advance of the Averages (p 6). So to your question of why BH fund performance is likely to be better in a bear market than in a bull market, I believe the implicit assertion is that undervalued securities are more resilient in a bear market (presumably because they don't have as far to fall, and are also less likely to be subject to a bubble). Buffet is also explicitly asserting that when facing a choice to either (a) position BH to weather a possible downturn or (b) position BH to enjoy a bullish stock that is outpacing the market, he would choose the former over the later. As to your assertion that he always says this, I can find no reference to bear market's in the letters past 1960.","\"If that's your goal. Watch the entire webinar on warren buffet books by Preston Pysh first for a good intro into stocks bonds etc: https://m.youtube.com/watch?list=PLECECA66C0CE68B1E&v=KfDB9e_cO4k Read Dale Carnegies book \"\"How to Win Friends and Influence People\"\" in order to learn how to communicate to people effectively and create networks. The most important skill in any field you choose to go into. Read \"\"The Everything Store\"\" for essentially an MBA in business. Read \"\"The Intelligent Investor\"\" by Benjamin graham for a bachelors in finance. Then take classes that get you the very best professors in the field of finance, economics, and business at your school and make sure you never stop asking questions. Continue to develop your skills and create good saving & communication habits. And if you want great jobs, get internships. To get internships be involved in as much as you can in campus and take leadership roles (especially when you think you can't handle it) you will grow quickly as a leader and businessman if you do it right. If reading is a bit much for you, try audiobooks. And make sure you enjoy college and surround yourself with ambitious youngsters like yourself. It will help you grow. Enjoy school and be social, make mistakes and do whatever it takes to get a minimum 3.5 GPA (get old tests study groups easy teachers or GPA boosting classes if you need to) Aight that's all I got haha\"","\"Share prices change (or not) when shares are bought and sold. Unless he's sitting on a large percentage of the total shares, the fact that he isn't selling or buying means he's having no effect ar all on the stock price, and unless there's a vote war going on in the annual meeting his few stockholder votes aren't likely to have much effect there either (though there's always the outside chance of his being a tiebreaker). On the other hand, there's nothing inherently wrong with holding shares for a very long time and just taking the dividends (\"\"clipping coupons\"\"). Buy-and-hold is a legitimate strategy. Basically: His reason is wrong, but his action may be right, and you should probably just not ask.\"","\"An investment in knowledge always pays the best interest, as Ben Franklin said. However, this is not a question I can answer for you, as it depends on the opportunities that are specifically available to you as an individual. Sometimes opportunities will knock on your door and you can take advantage, other times you have to create that door to allow opportunities to knock. Maybe you have a friend that is opening a side business, maybe there is a class you can get into at a trivial cost. What I suggest is to start investing just to get into the habit of it, not so much for the returns. Before you do, however, any financial advisor will advise you to begin with a emergency fund, worth about 3-6 months of your expenses for that time. I wanted to hit the ground running and start investing in stocks, but first things first I guess. \"\"Millionaire Next Door\"\" will help you get into a saving mindset, \"\"I will teach you to be rich\"\" is ok, plenty of other books. My advice is keep doing what you're doing, learn to start saving, and once you have obtained an emergency fund of the amount of your choosing, start looking to invest in Index Funds or ETFs through any platform that has LOW FEES!! I use Betterment, but Vanguard is good too, as they allow you to get your feet wet and it's passive. Hope this helps.\"","\"Excellent questions! Asking such questions indicates something special about yourself. The desire to learn and adjust your beliefs will increase your chance of success in your life. I would use a wide variety of authors to increase your education. Myself I prefer Dave Ramsey to Clark Howard, but I think Clark is very good. The first thing you should focus on is learning how to do and live by a budget. Often times, adults will assume that you are on a budget because you are broke. It happens with my friends and my youngest child is older than you. Nothing could be further from the truth. A budget is simply a plan on how you will spend your income so you don't run out of money before you run out of month. Along with budgeting I would also focus on goal setting. This is the type of \"\"investing\"\" you should be doing at your age. For example if your primary goal was to become an engineer, my recommendation is to hold off buying stocks/mutual funds and using your current income to get through school with little or no student loans. Another example might be to open your own HVAC business. Your best bet might be to learn the trade, working for someone else, and take night classes for business management. Most 18 year olds have very little earning power. Your focus at this point should be increasing your income and learning how to manage the income you have. Please keep in mind that most debt is bad. It robs you of your income which is your greatest wealth building tool. Car loans and credit card debt is just plain stupid. Often times a business case can be made for reasonable student loans. However, why not challenge yourself to take none. How much further ahead could you be if you graduate, with a degree, when your peers are strapped with a 40K loan? Keep up the good work and keep asking questions.\"","That is absolute rubbish. Warren Buffet follows simple value and GARP tenants that literally anyone could follow if they had the discipline to do so. I have never once heard of an investment made by Warren Buffet that wasn't rooted in fundamentals and easy to understand. The concept is fairly simple as is the math, buying great companies trading at discounts to what they are worth due to market fluctuations, emotionality, or overreactions to key sectors etc. If I buy ABC corp at $10 knowing it is worth $20, it could go down or trade sideways for FIVE YEARS doing seemingly nothing and then one day catch up with its worth due to any number of factors. In that case, my 100% return which took five years to actualize accounts for an average 20% return per year. Also (and this should be obvious), but diversification is a double edged sword. Every year, hundreds of stocks individually beat the market return. Owning any one of these stocks as your only holding would mean that YOU beat the market. As you buy more stocks and diversify your return will get closer and closer to that of an index or mutual fund. My advice is to stick to fundamentals like value and GARP investing, learn to separate when the market is being silly from when it is responding to a genuine concern, do your own homework and analysis on the stocks you buy, BE PATIENT after buying stock that your analysis gives you confidence in, and don't over diversify. If you do these things, congrats. YOU ARE Warren Buffet.","\"The first article you link clearly refers to Warren Buffet and doesn't, in regard to taxes, refer in any way to Berkshire Hathaway. The second article you link is titled, \"\"Ways Professional Traders Can Save Big At Tax Time.\"\" Berkshire Hathaway is not a firm primarily engaged in trading. It is engaged in investing in companies that it feels offer long-term growth and appreciation. In some cases, their investment is in the entire company; in others, a very large percentage of its total capitalization. Trading, on the other hand, involves buying stocks, bonds, futures, etc. for near-term resale, ideally at a profit. Stock speculation is a risky and complex occupation because the direction of the markets are generally unpredictable and lack transparency. As has been mentioned above, we are confident that Berkshire Hathaway use every technique at its disposal to reduce its tax burden. I am confident, as well, that they spend considerable effort and expense to be certain that they are never discovered making errors in their tax returns.\"","Commonly recommended books: Intelligent Investor - Graham One Up On Wall Street - Lynch The Essays of Warren Buffett : Lessons for Corporate America - Cunningham Graham's book should be mandatory reading for this sub. Lynch's book talks about leveraging your personal expertise to make intelligent investment choices. Cunningham's is a compilation of Warren Buffett's letters to shareholders of BH with some commentary. It covers a wider range of material, but the lessons on corporate governance are very useful when doing valuation.","Two Questions, please feel free to pick either one, or answer both if you want. 1) If tax reform does get passed and corporate & income taxes are reduced/consolidated, what will be 1. the short term effect on the U.S national debt? and 2. The long term effect on the debt, factoring in the obvious (and already priced in) supply side growth potential of the tax cuts? It seems to me that the GOP tea partiers/deficit hawks that rose to political power in 2010-2012 have gone oddly mute on the (probable) increase in the federal debt as a result of both the proposed Trump tax cuts and (subjectively) wasteful budget provisions like Wall funding, deportation enforcement ect... 2) A. What is your best guess of the reaction of U.S & European asset markets (Eq & Bonds) in the event of a war on the Korean peninsula, with both conventional and asymetrical weapons & methods used on North, South Korea as well as U.S ally Japan? I ask because the economic fundamentals of U.S/Western Europe are strong, and am wondering whether an obvious negative market shock (nuclear? war) would be enough to send those respective western economies into recession/financial crisis. B. What will be the geopolitical result? Does China back NK to prevent a immigration crisi/power vacuum or do they side with the UN/U.S and allow military destruction of NK in the event of a NK-started war?","Buffet is able to do many things the average investor cannot do. For example: During the 2008 market crash Buffet purchased 5 Billion on Citi preferred stock (as somewhat of a bail out) that pays 5% Dividend. Then he also received warrants to buy another 700 million shares over the next 10 years where he can buy shares at 5% discount. So right off the bat he is up 5% anytime he buys some of those 700 million shares. http://dealbook.nytimes.com/2011/08/25/buffett-to-invest-5-billion-in-bank-of-america/?_php=true&_type=blogs&_r=0 This is just one of the Buffet deal makings. With his cash you can move markets. He buys, people hear about it, they buy, his positions go up. Put that aside he loans cash, gets interest, buys companies. It is more than just investing in the stock market.","I am a bit at a loss as to how you can read the same book, that inspired Warren Buffet, and take away that trading 600 contracts per month is a way to prosperity. As a fellow engineer I can say with assurance this speculation scheme is doomed to failure. Crossing out the word gamble was a mistake. Instead you should focus on two things. The first is your core business, which is signal processing. Work and strive to be the best you can. Seek out opportunities to increase your income while keeping your costs low. As an engineer you have an opportunity to earn an above average salary with very low costs. Second would be to warehouse some of those earning and let others who are good at other things work for you. You may want to read the Jack Bogle books and seek an asset allocation model. I tend to be more aggressive then he would suggest, but that is a matter of preference. You don't really have the time, when you focus on your core business, to manage 6 trades a month let alone 600. Put your contributions on auto pilot and a surprisingly short time you will have a pile of cash.","Oh god! The title was he closes in on something he doesn't want - More money than any one person, especially someone as famously frugal as Mr Buffet, could spend on a lifetime. Hence, why not do something that would have an incredibly positive impact on an entire generation. Again, I didn't think it was that difficult of a concept.","\"Two main points to answer this in my opinion. First, most people don't start with say half a million dollar to buy all the stocks they need in one shot but rather they accumulate this money gradually. So they must make many Buys in their lifetime. Similarly, most people don't need to withdraw all their investment in one day (and shouldn't do this anyway as it cuts the time of investment). So there will be many Sells. Performing a single buy or sell per year is not efficient since it means you have lots of cash sitting doing nothing. So in this sense, low cost indexing lets you quickly invest your money (and withdraw it when needed after say you retire) without worrying about commission costs each time. The second and most important point to me to answer this is that we should make a very clear distinction between strategy and outcome. Today's stock prices and all the ups and downs of the market are just one possible outcome that materialized from a virtually uncountable number of possible outcomes. It's not too hard to imagine that tomorrow we hear all iPhones explode and Apple stock comes crashing down. Or that in a parallel universe Amazon never takes off and somehow Sears is the king of online commerce. Another item in the \"\"outcome\"\" category is your decisions as a human being of when to buy and sell. If that exploding iPhone event does occur, would you hold on to your stocks? Would you sell and cut your losses? Does the average person make the same decision if they had $1000 invested in Apple alone vs $1M? Index investing offers a low cost strategy that mitigates these uncertainties for the average person. Again here the key is the word \"\"average\"\". Picking a handful of the heavyweight stocks as you mention might give you better returns in 30 years, but it could just as easily give you worse. And the current data suggest the latter is more likely. \"\"Heavyweights\"\" come and go (who were they 30 years ago?) and just like how the other 450 companies may seem right now as dragging down the portfolio, just as easily a handful of them can emerge as the new heavyweights. Guaranteed? No. Possible? Yes. Jack Bogle is simply saying low cost indexing is one of the better strategies for the average person, given the data. But nowhere is it guaranteed that in this lifetime (e.g. next 30 years) will provide the best outcome. Berkshire on the other hand are in the business of chasing maximum outcomes (mid or short term returns). It's two different concepts that shouldn't be mixed together in my opinion.\"","Perhaps something else comes with the bond so it is a convertible security. Buffett's Negative-Interest Issues Sell Well from 2002 would be an example from more than a decade ago: Warren E. Buffett's new negative-interest bonds sold rapidly yesterday, even after the size of the offering was increased to $400 million from $250 million, with a possible offering of another $100 million to cover overallotments. The new Berkshire Hathaway securities, which were underwritten by Goldman, Sachs at the suggestion of Mr. Buffett, Berkshire's chairman and chief executive, pay 3 percent annual interest. But they are coupled with five-year warrants to buy Berkshire stock at $89,585, a 15 percent premium to Berkshire's stock price Tuesday of $77,900. To maintain the warrant, an investor is required to pay 3.75 percent each year. That provides a net negative rate of 0.75 percent.","The steps you outlined are fine by themselves. Step 5, seeking criticism can be less helpful than one may think. See stocktwits.com There are a lot of opposing opinions all of which can be correct over different time-frames. Try and quantify your confidence and develop different strategies for different confidence levels. I was never smart enough or patient with follow through to be a successful value investor. It was very frustrating to watch stocks trade sideways for years before the company's intrinsic value was better reflected in the market. Also, you could make an excellent pick, but a macro change and slump could set you back a year and raise doubts. In my experience portfolio management techniques like asset allocation and dollar-cost-averaging is what made my version of value investing work. Your interest in 10k/10q is something to applaud. Is there something specific about 10k/10q that you do not understand? Context is key, these types of reports are more relevant and understandable when compared to competitors in the same sector. It is good to assess over confidence! It is also good to diversify your knowledge and the effort put into Securities Analysis 6th edition will help with other books in the field. I see a bit of myself in your post, and if you are like me, than subsequent readings, and full mastery of the concepts in 'Securities & Analysis 6th ed.' will lead to over confidence, or a false understanding as there are many factors at play in the market. So many, that even the most scientific approaches to investing can just as equally be described as an 'art'. I'm not aware of the details of your situation, but in general, for you to fully realize the benefits from applying the principals of value investing shared by Graham and more recently Warren Buffett, you must invest on the level that requires use of the consolidation or equity method of accounting, e.g. > 20% ownership. Sure, the same principals used by Buffett can work on a smaller scale, but a small scale investor is best served by wealth accumulation, which can take many forms. Not the addition of instant equity via acquisitions to their consolidated financials. Lastly, to test what you have learned about value investing, and order execution, try the inverse. At least on paper. Short a stock with low value and a high P/E. TWTR may be a good example? Learn what it is like to have your resources at stake, and the anguish of market and security volatility. It would be a lot easier to wait it out as a long-term value investor from a beach house in Santa Barbara :)","What's your opinion of the rising student loan debt? It keeps going up, is that realistic and sustainable? It looks like it could be a possible bubble to me, especially considering private investors take on little risk because the loans cannot be discharged in bankruptcy.","Have tact. Don't outright ask for it but drop all the hints/info for him to add two and two together. If he doesn't offer it to you today, he might tomorrow so don't ask for too much at once (you'll sound pushy and needy) and just appreciate the time to speak with someone successful even if he doesn't offer you a job. During the interview, you'll want to find that right balance between being inquisitive and being stupid. Anything you can Google is probably a stupid question. Anything that asks for his opinion on a topic relevant to his field should be a better option. Career advice and any life advice and stories of how he tackled common problems you're facing are safe options. At least that's my take on how these interviews should work. Easier said than done so keep practicing like you are now. Good luck.","You can never depend ONLY on pension. You must get financial education and invest your money. I recommend you to read The Intelligent Investor by Benjamin Graham...it's the bible of Warren Buffet. Besides, you don't need to be a Billionaire for retiring and be happy. I recommend you to get education in ETFs. I quote The Intelligent Investor by Benjamin Graham p. 131. According to Ibboston Associates, the leading financial research firm, if you had invested $12,000 in the Standard & Poor's 500-stock index at the beginning of september 1929, 10 years later you would have had only $7,223 left. But if you had started with a paltry $100 and simply invested another $100 every single month, then by August 1939, your money would have grown to $15,571! That's the power of disciplined buying-even in the face of the Great Depression and the worst bear market of all time. You are still young to make even bolder investments. But seriously you can never depend ONLY on pension. You won't regret learning how to invest your money, it doesn't matter if it's in the stock market, real state market, whatever market... Knowing what to do with your money is priceless. I hope this helps. Happy profits!","\"My favorite line: \"\"Companies should generate enough profits to justify the price that shareholders are willing to pay for its shares. Once shareholders are no longer willing to pay up for those profits, they should invest that money elsewhere.\"\" This person loses all credibility right here.\"","Any investor can make a bad bet, even Buffett. Even if you have done every bit of research on an investment possible you are exposed to random external events.. acts of god, and outright fraud.","Buffett says the rich aren't taxed enough after he's already made and paid taxes on his income. The real problem is he can put his fortune in a Trust and avoid the inheritance tax. This puts his $75 billion in a non-taxable trust fund, and instead of $40 billion going to the government to pay for job training for the poor, a program he said he supports, it goes into a non-taxable trust. His kids get to sit on the trust board and draw multi-million dollar salaries for dolling out millions to Asian countries. He's a hypocrite and isn't really interested in helping the country that made him rich.","Regarding investing in gold vs. stocks, I don't think I could say it better than Warren Buffett: You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all -- not some -- all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?","\"The best answer here is \"\"maybe, but probably not\"\". A few quick reasons: Its not a bad idea to watch other investors especially those who can move markets but do your own research on an investment first. Your sole reason for investing should not be \"\"Warren did it\"\".\"","Powers makes a good point: trading costs may eat up a significant portion of your ROI. A fee as little as 2% can consume more than 50% of your long-term ROI! A rule of thumb is keep your fees to less than 1%. One way to do that is to buy stock in companies that have a DRIP with a Share Purchase Plan (SPP). Often the SPP allows investors to purchase shares for low fees or free. Once you have the ability to purchase shares for (virtually) free, you can use InvestMete. Roughly, you send more money to the companies whose share prices are near their 52-week low, and less money to those who are near their 52-week high. Getting back to your original question...","I think your best strategy is to learn more about the behavior of what you're investing in. Learn everything you can about it. Specialize in it. The more you study, the more the proper strategy will present itself. Answer the questions you ask in paragraph 3 through your own study.","If you see something that looks like a sales pitch, be skeptical, even if they sound informed, say things which resonate with your concerns and promise to alleviate your problems. Watch out in particular for people who pontificate about matters which are tangentially related to the investment (e.g. populist anti-Wall-Street sentiment). Beware limited-time opportunities, offers, and discounts. I'm specifically talking about your email pitches, Motley Fool. They're shameful. Remember you're allowed to change your mind and go back on something that you've said a few minutes ago. If anyone tries to trick you into agreeing to go along with them by taking what something you've said and manipulating it, or uses logic to demonstrate that you must buy something based on things you've said, tell them you're not comfortable, head for the door and don't look back. Don't be afraid of embarrassment or anything like that. (You can investigate whether your position is in fact logically consistent later.) Run away from anyone who resents or deprecates the notion of a second opinion. Don't ever go along with anything that seems shady: it may be shadier than you know. Some people thought Bernie Maddoff was doing some front-running on the side; turns out it was a Ponzi scheme. (Likewise the Ponzi scheme that devastated Albania's economy was widely suspected of being dirty, but people suspected more of a black-market angle.) Beware of anyone who is promising stability and protection. Insurance companies can sell you products (especially annuities) which can deliver it, but they're very expensive for what you get. Don't buy it unless you seriously need it.","I like the answer given by mikeazo. If paid in cash would you immediately buy the stock of the company? We all want to be the next Steve Jobs (or Woz), but the truth is that a Jobs comes along only once in a lifetime and chances are that you are not him. We have seen this kind of question here before. Search the site for the answers given previously.","\"Buffet could easily take the lead here by starting a company solely dedicated to paying off people's mortgages using his own money. Oh wait he wants government to take away money from his rivals and potential upstarts because he isn't going to put into action anything he is talking about for himself. P.S. Buffet could also very easliy dismantle the shield he is using to shelter the vast bulk of his wealthy in the form of the \"\"non-profit\"\" he and Bill Gates created and simply write debt riddle state governments (of there own doing and design) like Illinois massive checks but again that would require effort and putting HIS money where his mouth is in the long run.\"","\"I don't know really is the best investment strategy. People think that they have to know everything to make money. But realistically, out of the hundreds of thousands of publicly traded securities, you really can only invest in a tiny number of them. Of the course of a week, you literally have more than a million \"\"buy\"\" or \"\"don't buy\"\" decisions, because the prices of those securities fluctuate every day. Simply due to the fact that there are so many securities, you cannot know what everything is going to do. You have to say \"\"I don't know\"\". Also, when you do understand something, it is usually fairly priced. So will you make money on it? \"\"I don't know\"\". Only very rarely will you find something that you actually understand well and it is significantly undervalued. You can be looking at a company a day for two years before you find it. But people get trigger happy. They bet on 51%/49% odds when they should only bet on 90%/10% odds or higher. If you are forced to bet on everything, it makes sense that you bet on everything you believe is greater than 50% chance of winning. But since you cannot bet on everything, you should only bet on the highest quality bets, those with greater than 90% chance of winning. To find such a bet, you may have to shuffle through 100 different companies and only make 2-3 bets. You are looking for something that is at least 2 standard deviations away from the mean. People are not good at doing a lot of work, most of which yields nothing, to find one big payoff. They are wired to only look at the present, so they take the best bet they can see at the moment, which is often barely above 50% (and with any misjudgment, it may actually be well below 50%). And people are not good at understanding compound/geometric growth. You can keep multipling 10% gains (1.10 * 1.10 * 1.10 ...), but that can all be wiped out by multiplying by one zero, which is why taking a 51%/49% bet is so dangerous (even though technically it is an advantageous one). They forget to adjust for the geometric aspect of compounding. A 99%/1% bet is one you should take, but if you are allowed to repeat it and you keep going all-in, you will eventually lose and have $0, which is the same as if you took a single all-in bet that has 0% chance of winning. As Buffett says, if you are only allowed to make 20 investments over a lifetime, you will most likely do better because it prevents you from making many of these mistakes.\"","\"I think this is a bit too simplistic, because you need to keep in mind that Buffet was managing the money as his career. Had he paid the 1% fee he could have \"\"made more money\"\" doing something else. People who hire money managers usually do so because it A. saves them time managing their own portfolios and B. because they don't believe they would do a better job managing it themselves.\"","Thank you for replying. I assumed since I’m the one asking for advice from him I should be leading the conversation with questions mostly. Wondering if you have an examples of what questions. I have some prepared but any extra insight is helpful.","\"My question to you would be \"\"When is the market down?\"\" I know that a lot of people attempt to do this and never get close. With 40 years left to retirement, I would have you consider to just invest in the manner that you are most comfortable and let dollar cost averaging do the rest.\"","A lot of people probably don't agree with him, but Warren Buffett has some great quotes on why he doesn't invest in gold: I will say this about gold. If you took all the gold in the world, it would roughly make a cube 67 feet on a side…Now for that same cube of gold, it would be worth at today’s market prices about $7 trillion dollars – that’s probably about a third of the value of all the stocks in the United States…For $7 trillion dollars…you could have all the farmland in the United States, you could have about seven Exxon Mobils, and you could have a trillion dollars of walking-around money…And if you offered me the choice of looking at some 67 foot cube of gold and looking at it all day, and you know me touching it and fondling it occasionally…Call me crazy, but I’ll take the farmland and the Exxon Mobils. And his classic quote: [Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.","\"I never said Wall Street enjoys paying taxes. But that is only because they are short-sighted and arrogant. If they were to take a step back they would see that a functioning society is more in their interest that a few extra mil and social upheaval. If this is a reasonable argument (not saying it's true, but that it's not immediately or definitively wrong), then we can say that it's not unreasonable for Warren Buffet to hold that idea, which would invalidate your premise. Requiring a level of proof beyond that is absurd and you're just obstructing the conversation, what are we going to do, hack into his brain to find out his \"\"true\"\" thoughts? Just to be clear, I do not think government bureaucracy will solve this problem, and I agree with your analysis of how that would play out. I don't think a solution to these types of problems exists within the state-market paradigm. But at least now we're agreeing that there is a market-failure at work, rather than your previous statement of \"\"it is ridiculous for Bob to think he is entitled to 5 cows if John sells Jim ten thousand heads.\"\" My question then is why do you espouse such simplistic nonsense when you understand that the situation is much more complex? Is it because it is easier and more psychologically comfortable to ignore these injustices than to admit that your model does not have an effective way of dealing with them? > Why do you think this, exactly? Because things like this require collective action or you run into the free rider problem.\"","It comes across as if you don't know much about what he or the firm does. Does he work in wealth management? Someone looking for an assistant likely values organization and interpersonal skills over financial acumen.","What's the answer for the lightbulb question? For the short a put on IBM question, obviously you could answer that you're bullish on the stock, but couldnt you further elaborate by asking for the maturity? I guess you could also talk about option strategies such as covered puts. What's a good answer to that question?","Don't worry about Buffett. I have a feeling this will be like Wells Fargo in the 90s where Buffett will make 1000% his investment by the end of the next decade. You can hate them all you want, but does anybody really think that Bank of America is going away? This is like when BP supposed caused a trillion of dollars in damage, and the market cap fell something like 140 billion. In the end, it's probably only going to cost them $20 billion. Life is already going on for the oil spill. Bank of America will get some more hate for a while. They'll get tons of lawsuits, but they'll probably settle for something like $30 billion (one year's earnings). In two or three years, you'll have a company earning $30 billion that is current valued at $50 billion. It's been 4 years since the bubble burst in 2007. Most of the crappy loans are gone already (either defaulted/written off or if they have been paying for 4 years then they are not really crappy at all). There are 4 years worth of prime loans on the books. In 2007, people assumed the somewhat opaque book of loans (mostly subprime) is worth 100 cents on the dollar. Today, people are assuming that the somewhat opaque book of loans (mostly prime) is worth 0 cents on the dollar. Just look around Reddit and see what people are saying about the banks' financial condition, even though they never read any SEC filings or analyst reports. I think (and apparently Buffett also thinks) that the book is worth something between 0 and 100, likely in the upper end.","Introduce him to the concept of Inflation Risk, and demonstrate that being too conservative with your investments might be a very risky strategy as well.","Dow will not exist in 100 years. AI computer trading will remove all faith in the current system and companies will find new ways to raise equity capital that won't necessarily involve traditional exchanges. Even if exchanges are still strong the concept of the DOW is flimsy even today. I love Warren but he is not tech sophisticated enough to understand the shitstorm that AI will bring to financial markets.","\"Good for you! At your age, you should definitely consider investing some of your hard-earned and un-needed money in stocks with the long-term goal of having your retirement funded. The time horizon that you'd have would be vastly superior to that of millions of others, who will wait until their thirties or even forties to begin investing in stocks, giving your compound interest prospects the extra time anyone needs for a spectacular vertical incline in your later years. Make sure to sign up to automatically re-invest the dividend payouts of your stocks, please. (If you don't already know how being young and investing well in your early years is more powerful than starting out ten to twenty years later, do a little research on \"\"Compound Interest\"\"). Make sure you monitor your investments. Being young means you have time to correct your investments (sell and buy other assets) if the businesses you initially selected are no longer good investments.\"","As an investor you must remember to forgive yourself. However, you must not only forgive but make it up to yourself by putting in the hours of study necessary to ensure that what you are forgiving yourself for will not happen again. Studying (finance, fundamental analysis, statistics, etc.)will also help you to worry less. Once you have put in the hours of study necessary, you can turn to any of a number of still relatively conservative strategies, such as seeking out undervalued blue-chip stocks to purchase or selling covered call options. Good luck.","Let us consider the risks in the investment opportunities: Now, what are the returns in each of the investment: What are the alternatives to these investments, then?","Buy a share - not a penny stock; rather a well known company like Coca-Cola, Kelloggs, Exxon, etc. Follow the company. Understand their business model. See the share price fall and rise. You will learn a lot having your own money at risk."],"string":"[\n \"For whatever it's worth, when I went to the meeting a couple of years ago, the question and answer segment is mostly students asking how to pick a stock or what book they should read. I'm sure someone else will ask but it would be interesting to hear their take on the Syrian refugee situation in Europe and how it may impact the EU in general. Or how he/they think the drought in the south western region of the US will impact the national economy, if at all. Like Keshlam says, if YOU don't care about the answer there's really no point to asking the question. The most important thing you can do is listen to what he and Munger have to say. The way they think is interesting and they have great rapport with eachother. It's a great experience and unfortunately I wasn't able to make my schedule work to attend this year. It's almost comical how many cans of Coke Warren will knock out through the day. Another fun thing to do is take the shuttle to the airstrip to check out the NetJets. I wish I had the interest and wherewithal to go when I was 16...\",\n \"\\\"Consultant, I commend you for thinking about your financial future at such an early age. Warren Buffet, arguably the most successful investor ever lived, and the best known student of Ben Graham has a very simple advice for non-professional investors: \\\"\\\"Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.)\\\"\\\" This quote is from his 2013 letter to shareholders. Source: http://www.berkshirehathaway.com/letters/2013ltr.pdf Buffet's annual letters to shareholders are the wealth of useful and practical wisdom for building one's financial future. The logic behind his advice is that most investors cannot consistently pick stock \\\"\\\"winners\\\"\\\", additionally, they are not able to predict timing of the market; hence, one has to simply stay in the market, and win over in the long run.\\\"\",\n \"A couple points, first you don't point out what investors you want to invest with, and second BRK.B does not track anything; it is just a very small slice of his entire holdings BRK.A minus the voting rights. One solid way to go would be to buy BRK.B and also a tech ETF like QQQ, or XLK, ..or both.\",\n \"\\\"Warren Buffet isn't using any special sauce. He looks for value and ignores hype, greed, and fear. He buys what he knows and looks for companies that generate cash and/or are available for a discount of their true value. He explains what he looks for in a company and his reasons for buying it. He has said on numerous occasions, \\\"\\\"I look for intrinsic value.\\\"\\\" (So there's your formula.) Human nature is often irrational and investing seems to bring out the fear and greed. I've always been a bit surprised when people ascribe some sort of sixth sense to Warren Buffet's success. He just works hard and doesn't deviate from a sound strategy. \\\"\\\"Be fearful when others are greedy and greedy when others are fearful.\\\"\\\" And of course, rule one: \\\"\\\"Don't lose money.\\\"\\\" It's not a joke. How many people buy high and sell low because of fear and greed? When the market tanks, buy more. Finally, anyone can invest with Buffet without all the work. Just buy a few shares of BRK.A or BRK.B.\\\"\",\n \"\\\"I tell you how I started as an investor: read the writings of probably the best investor of the history and become familiarized with it: Warren Buffett. I highly recommend \\\"\\\"The Essays of Warren Buffett\\\"\\\", where he provides a wise insight on how a company generates value, and his investment philosophy. You won't regret it! And also, specially in finance, don't follow the advice from people that you don't know, like me.\\\"\",\n \"Read Warren Buffett's letters to his shareholders - they are such an interesting read and I guarantee you'll learn more than financial modelling - you will learn how to think about these businesses. Must be what 700-800 pages in total?\",\n \"I would encourage you to read The Warren Buffett Way. Its a short read and available from most libraries as an audio book. It should address most of the ignorance that your post displays. Short term prices, offered in the market, do not necessarily reflect the future value of a company. In the short term the market is a popularity contest, in the long run prices increases based on the performance of the company. How much free cash flow (and related metrics) does the company generate. You seem way overly concerned with short term price fluctuations and as such you are more speculating. Expecting a 10 bagger in 2-3 years is unrealistic. Has it happened, sure, but it is a rare thing. Most would be happy to have a 2 bagger in that time frame. If I was in your shoes I'd buy the stock, and watch it. Provided management meet my expectations and made good business decisions I would hold it and add to my position as I was able and the market was willing to sell me the company at a good price. It is good to look at index funds as a diversification. Assuming everything goes perfectly, in 2-3 years, you would have an extra 1K dollars. Big deal. How much money could you earn during that time period? Simply by working at a fairly humble job you should be able to earn between 60K and 90K during that time. If you stuck 10% of that income into a savings account you would be far better off (6K to 9K) then if this stock actually does double. Hopefully that gets you thinking. Staring out is about earning and saving/investing. Start building funds that can compound. Very early on, the rate of return (provided it is not negative) is very unimportant. The key is to get money to compound!\",\n \"A note on the article: I thought this article by Buffet on market level was particularly appropriate now, given the seemingly daily new highs, current level of interest rates (hint: they are incredibly low), and corporate profits (hint: they are incredibly high). If you believe the market will eventually revert to the mean, that implies substandard results over an extended period of time into the future.\",\n \"Shit article that displays the author has no farming idea of how Warren Buffet operates. The man has metrics that tell him when shares are too expensive. When this happens, he doesn't buy, and dividends can tend to accumulate when you have almost $500 billion in assets (which could just be 2 years of 5% dividend yields). If they are expensive, he won't buy, and money will accumulate. When there is a crash, he buys on the cheap. That how you get 23% of Year-on-year gains for 40 years. The fact that he is not buying does indicate that the market is overvalued, which is consistent with the fact that there is still a substantial amount of QE. The question is: what will happen as the Fed winds it down. They are aiming for a small decrease or leveling out of the stock market. If that happens, and the market stagnates for a couple of years, maybe the metrics will catch up and he will buy again without a crash happening.\",\n \"\\\"Despite Buffett's nearly perfect consistent advice over the past few decades, they don't reflect his earliest days. His modern philosophy seemed to solidify in the 1970s. You can see that Buffett's earliest days grew faster, at 29.5 % for those partners willing to take on leverage with Buffett, than the last half century, at 19.7%. Not only is Buffett limited by size, as its quite difficult to squeeze one half trillion USD into sub-billion USD investments, but the economy thus market is far different than it was before the 1980s. He would have to acquire at least 500 billion USD companies outright, and there simply aren't that many available that satisfy all of his modern conditions. The market is much different now than it was when he first started at Graham-Newman because before the 1960s, the economy thus market would collapse and rebound about every few years. This sort of variance can actually help a value investor because a true value investor will abandon investments when valuations are high and go all in when valuations are low. The most extreme example was when he tried to as quietly as possible buy up an insurance company selling for something like a P/E of 1 during one of the collapses. These kinds of opportunities are seldom available anymore, not even during the 2009 collapse. As he became larger, those investments became off limits because it simply wasn't worth his time to find such a high returner if it's only a bare fraction of his wealth. Also, he started to deviate from Benjamin Graham's methods and started to incorporate Philip Fisher's. By the 1970s, his investment philosophy was more or less cemented. He tried to balance Graham's avarice for price with Fisher's for value. All of the commentary that special tax dodges or cheap financing are central to his returns are false. They contributed, but they are ancillary. As one can see by comparing the limited vs general partners, leverage helps enormously, but this is still a tangent. Buffett has undoubtedly built his wealth from the nature of his investments. The exact blueprint can be constructed by reading every word he has published and any quotes he has not disavowed. Simply, he buys the highest quality companies in terms of risk-adjusted growth at the best available prices. Quantitatively, it is a simple strategy to replicate. NFLX was selling very cheaply during the mid-2000s, WDC sells frequently at low valuations, up and coming retailers frequently sell at low valuations, etc. The key to Buffett's method is emotional control and removing the mental block that price equals value; price is cost, value is revenue, and that concept is the hardest for most to imbibe. Quoting from the first link: One sidelight here: it is extraordinary to me that the idea of buying dollar bills for 40 cents takes immediately to people or it doesn't take at all. It's like an inoculation. If it doesn't grab a person right away, I find that you can talk to him for years and show him records, and it doesn't make any difference. They just don't seem able to grasp the concept, simple as it is. A fellow like Rick Guerin, who had no formal education in business, understands immediately the value approach to investing and he's applying it five minutes later. I've never seen anyone who became a gradual convert over a ten-year period to this approach. It doesn't seem to be a matter of IQ or academic training. It's instant recognition, or it is nothing. and I'm convinced that there is much inefficiency in the market. These Graham-and-Doddsville investors have successfully exploited gaps between price and value. When the price of a stock can be influenced by a \\\"\\\"herd\\\"\\\" on Wall Street with prices set at the margin by the most emotional person, or the greediest person, or the most depressed person, it is hard to argue that the market always prices rationally. In fact, market prices are frequently nonsensical. and finally Success in investing doesn’t correlate with I.Q. once you’re above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing. There is almost no information on any who has helped Buffett internally or even managed Berkshire's investments aside from Louis Simpson. It is unlikely that Buffett has allowed anyone to manage much of Berkshire's investments considering the consistent stream of commentary from him claiming that he nearly does nothing except read annual reports all day to the extent that he may have neglected his family to some degree and that listening to others will more likely hurt performance than help with the most striking example being his father's recommendation that he not open a hedge fund after retiring from Graham-Newman because he believed the market was topping, and he absolutely idolized his father.\\\"\",\n \"\\\"Warren Buffett: 'Investing Advice For You--And My Wife' (And Other Quotes Of The Week): What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit…My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors… Similarly from Will Warren Buffett's investment advice work for you?: Specifically, Buffett wants the trustee of his estate to put 10 percent of his wife's cash inheritance in short-term government bonds and 90 percent in a low-cost S&P index fund - and he tips his hat specifically to Bogle's Vanguard in doing so. Says Buffett: \\\"\\\"I believe the trust's long-term results from this policy will be superior to those attained by most investors - whether pension funds, institutions or individuals.\\\"\\\"\\\"\",\n \"\\\"You can't get much better advice for a young investor than from Warren Buffet. And his advice for investors young and old, is \\\"\\\"Put 10% of the cash in short‑term government bonds, and 90% in a very low‑cost S&P 500 index fund.\\\"\\\" Or as he said at a different time, \\\"\\\"Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees\\\"\\\". You are not going to beat the market. So just save as much money as you can, and invest it in something like a Vanguard no-load, low-cost mutual fund. Picking individual stocks is fun, but treat it as fun. Never put in more money than you would waste on fun. Then any upside is pure gravy.\\\"\",\n \"Warren Buffett answered this question very well at the 2009 Berkshire Hathaway annual meeting. He said that it was important to read everything you can about investing. What you will find is that you will have a number of competing ideas in your head. You will need to think these through and find the best way to solve them that fits you. You will mostly learn how to invest through good examples. There are fewer good examples out there than you might think, given how many books there are and how many people get paid to give advice in this area. If you want to see how professional investors actually think about specific investments, over a thousand investment examples can be found at www.valueinvestorsclub.com, just login as a guest. The site is run by Joel Greenblatt (you would benefit from reading his books also), and it will give you a sense of the work that investors put into their research. Good luck.\",\n \"I would just ask him plain and simple for a shadow opportunity. Just as you said, he has an open door policy and what better way to show it to his employees. And to really hold him to the policy. As for what questions to ask it depends on what you want out of life. This person is at a very high level so they obviously know a good bit, or at least how to achieve that level. One thing I'd say to do is to not make all of your questions about business. Mix it up and ask him some personal things like his hobbies, but nothing to personal. Try to build a relationship with him in what time you have and maybe this will lead to further opportunities.\",\n \"Have you read is letter? He's saying thanks to the government for basically saving the economy. Warren Buffet was from day 1 a strong supporter of the bailout program. I'm sorry for my ignorance but what ''output'' are you talking about? As I understand you don't just want to establish a basic income but want to change the whole monetary system? And you can't even explain it?\",\n \"As a corollary to this; the average investor will never know more than the market. Buffett can buy mispriced securities because he runs a multi-billion dollar company dedicated to finding these mispricings. My advice for the common man: 1. Invest in both Stocks (for growth) & Bonds (for wealth preservation) 2. Stocks should be almost exclusively Index Funds That's it. The stock market has a 'random walk with a positive drift' which means that in general, the market will increase in value. Index funds capture this value and will protect you against the inevitable BoA, AIG, Enron, etc. It's fine to invest in index funds with a strategy as well, for instance emerging market ETFs could capture the growth of a particular region. Bear ETFs are attractive if you think the market is going to hit a downturn in the future.\",\n \"Are you looking for this Warren Buffets Stock Portfolio? Or Berkshire Hathaway Portfolio WFC is near the bottom of the BH portfolio but it seems to be a rather large investment for both.\",\n \"Well, what I would do would be to read every journalist's article on the subject, every academic paper, and the appropriate chapters from the CFA curriculum. I'd write down everyone's name (authors and those mentioned) and then email call them for advice. I'd try to find out who those players are, what their specific philosophies are, and then find someone i thought was really smart, had an investment philosophy that I agreed with, wasn't a dick, and then I would call them. By the way, Warren Buffett went to Columbia to learn specifically under Ben Graham. Prior to graduation, Buffett said he'd like to work at Graham Newman for free, such was the value of the education. Benjamin Graham told him (Warren), he wasn't worth that much. You or I literally have nothing to offer these guys that they can't get somewhere else (smarts, hard work, etc) for better. I'd be humble, attentive, and humble (did I say that already). There's an intellectual honesty that comes with admitting you don't know anything (but are willing to learn) that is very much important. That's what I would do. Did any of that help?\",\n \"\\\"I'm a senior majoring in accounting and management information systems. Here is a question I answered a while back about financial statements and employee retention. In the answer that I provided at the bottom it was to assess a company's ability to pay by use of ratios. Likewise, similar accounting methods need to be understood and implemented when assessing stocks(which is where I believe Mr. Buffet was going with this). As we can see the severity of the questions decreases, but if you can not answer question 3 then you should study accounting principles. So how much is enough just to get started? You will never have enough knowledge to start, period. You will have to continuously be learning, so start sooner than later. However you need neither economics or accounting knowledge if you were to learn technical analysis, many doubt the workings of this technique, but in my experience it is easier to learn and practise. A comment on @Veronica's post. Understanding economics and accounting are fundamental. Analysis, seeing trends, and copying are instinctual human traits that helped us evolve (we are very good at pattern recognition). Taking an intro economic and accounting course at a local community college is an excellent place to start when breaking the mold of pattern-thinking. You have to be critical in understanding what elements move a company's A/R in the statement of cash flows. Read. Literally, don't stop reading. Latest edition of of Kesio's accounting principles? Read it. Cover to cover. Tax policies on Section 874, 222, 534? Read it. Take a class, read a book, ask questions! Good Luck, \\\"\\\"Welcome to [the] Science [of Business], you're gonna like it here\\\"\\\" - Phil Plait\\\"\",\n \"Warren Buffet and Berkshire Hathaway took a 50% loss in each of the last two bear markets. His stock even lost 10% in 2015 when the S&P lost 8%. He doesn't have a track record to support the claim that his stock performs relatively better in a bear market, so perhaps it's best to take his letter with a grain of salt. Edit: As one commenter points out, Mr. Buffett is comparing the book performance of his fund to the market performance of an index. That is an apples to oranges comparison. It's deceptive at best.\",\n \"Does Coke count as one of his operating businesses though? He's the biggest shareholder but wikipedia says it's around 26%. There are some other huge cash cows in there as well; BNSF Railroad's earnings were like $3.5 billion last year, and Berkshire own 100% of the business.\",\n \"Assuming this is a public company, i'd recommend reading the analyst calls from the last several quarters. This will give you an idea of what investors, and therefor likely the board and senior leadership, are focused on at a very high level. Youre an intern, so dont feel like you need to blow the doors off, but showing that you are aware of the company's major objectives and asking some thoughtful questions about them is probably a good start.\",\n \"\\\"Everything you are doing is fine. Here are a few practical notes in performing this analysis: Find all the primary filing information on EDGAR. For NYSE:MEI, you can use https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000065270&type=10-K&dateb=&owner=exclude&count=40 This is the original 10-K. To evaluate earnings growth you need per share earnings for the past three years and 10,11,12 years ago. You do NOT need diluted earnings (because in the long term share dilution comes out anyway, just like \\\"\\\"normalized\\\"\\\" earnings). The formula is avg(Y_-1+Y_-2+Y_-3) / is avg(Y_-10+Y_-11+Y_-12) Be careful with the pricing rules you are using, the asset one gets complicated. I recommend NOT using the pricing rules #6 and #7 to select the stock. Instead you can use them to set a maximum price for the stock and then you can compare the current price to your maximum price. I am also working to understand these rules and have cited Graham's rules into a checklist and worksheet to find all companies that meet his criteria. Basically my goal is to bottom feed the deals that Warren Buffett is not interested in. If you are interested to invest time into this project, please see https://docs.google.com/document/d/1vuFmoJDktMYtS64od2HUTV9I351AxvhyjAaC0N3TXrA\\\"\",\n \"It is only wise to invest in what you understand (ala Warren Buffet style). Depending on how much money you have, you might see fit to consult a good independent financial advisor instead of seeking advice from this website. A famous quote goes: “Those who say, do not know. Those who know, do not say”\",\n \"\\\"No offense but how is it inspiring given it took the socialization of risk markets (bailouts, tens of trillions in liability guarantees, wholesale changes in mark-to-market accounting rules, QE which continues to this day) and undermining of our judicial process (pretending no fraud was truly prosecutable) - all to the outsized benefit of the ultimate insider and anti-competition specialist Buffett? I traded before, during and after the crisis and any of my losses were 100% my own while guys down the Avenue had their bonuses guaranteed by TARP and I am supposed to be inspired? Buffett sure did \\\"\\\"bet on America\\\"\\\", it just isn't what most people like to think it is.\\\"\",\n \"\\\"Those who say a person should invest in riskier assets when young are those who equate higher returns with higher risk. I would argue that any investment you do not understand is risky and allows you to lose money at a more rapid rate than someone who understands the investment. The way to reduce risk is to learn about what you want to invest in before you invest in it. Learning afterward can be a very expensive proposition, possibly costing you your retirement. Warren Buffet told the story on Bloomberg Radio in late 2013 of how he read everything in his local library on investing as a teenager and when his family moved to Washington he realized he had the entire Library of Congress at his disposal. One of Mr. Buffett's famous quotes when asked why he doesn't invest in the tech sector was: \\\"\\\"I don't invest in what I do not understand.\\\"\\\". There are several major asset classes: Paper (stocks, bonds, mutual funds, currency), Commodities (silver, gold, oil), Businesses (creation, purchase or partnership as opposed to common stock ownership) and Real Estate (rental properties, flips, land development). Pick one that interests you and learn everything about it that you can before investing. This will allow you to minimize and mitigate risks while increasing the rewards.\\\"\",\n \"Ya and they popped because he did, now they're slumping again and he's out with his quick buck. Berkshire is a positive feedback loop these days, anything they choose to invest in will get loads of interest and appreciate in value, making them look like brilliant investors in the process. Not that buffet isn't brilliant, he's clearly proven that over the years, but the Buffet fandom has gone off the rails\",\n \"Buffet is in a different league from other value investors. He looks for stable companies with no debt and good management. Then he looks to deeply understand the industries of candidate companies, and looks for companies that are not in commodity businesses or sell commodities that can be bought for 25% of the valuation that he believes reflects the true value of the company. Deeply understanding the market is really the key. Consider the Burlington Northern Santa Fe Railroad, which Buffet purchased last year. Railroads benefit from higher oil prices, as they can transport cargo much cheaper than trucks. They also tend to have natural monopolies in the regions they operate in. Buffet bought the railroad just as production of oil and natural gas in North Dakota started picking up. Since pipeline capacity between North Dakota and refineries in Texas/Oklahoma is very limited, the railroad is making alot of money transporting crude.\",\n \"Buffett is a value investor. His goal is to buy good companies when the market is overly worried and prices them below intrinsic value. When the market is highly priced it is much more difficult for him to find things that he thinks are at an attractive price. When people are very worried and the market has crashed, stocks are then priced below their intrinsic value and he can use the cash he keeps in the company to make attractive purchases. Remember that Buffett is not concerned with the ups and downs of the price of Berkshire Hathaway stock, he is concerned with the economic value of the assets that the company owns. So if all stock prices crash and he can buy things that are at bargain prices, he is happy no matter what Berkshire stock price does in the short run. One consequence of value investing is that because you are buying assets at bargain prices, the total value of your assets drops less in a bear market than the highly priced stuff that drives the major indexes.\",\n \"What kind of crack are you smoking to think Warren Buffet didn't get to his position by merit... The guy basically invented modern value investing. Sure he's almost senile now but he was a legend back in the day.\",\n \"What's it like being all the way up on that pedestal without having a clue what you're talking about? Are you dizzy? Do you have to apply extra Sunscreen to your upturned nose? When you read that one Wikipedia article, and 3 Forbes links are you just overwhelmed with the strength you just acquired, or have you felt this Supreme power all along? We have so many questions! Please answer them with vague, nondescript platitudes and more questions please. That would be awesome.\",\n \"\\\"There is actually a recent paper that attempted to decompose Buffett's outperformance. I've quoted the abstract below: \\\"\\\"Berkshire Hathaway has realized a Sharpe ratio of 0.76, higher than any other stock or mutual fund with a history of more than 30 years, and Berkshire has a significant alpha to traditional risk factors. However, we find that the alpha becomes insignificant when controlling for exposures to Betting-Against-Beta and Quality-Minus-Junk factors. Further, we estimate that Buffett’s leverage is about 1.6-to-1 on average. Buffett’s returns appear to be neither luck nor magic, but, rather, reward for the use of leverage combined with a focus on cheap, safe, quality stocks. Decomposing Berkshires’ portfolio into ownership in publicly traded stocks versus wholly-owned private companies, we find that the former performs the best, suggesting that Buffett’s returns are more due to stock selection than to his effect on management. These results have broad implications for market efficiency and the implementability of academic factors.\\\"\\\"\\\"\",\n \"\\\"What you are seeking is termed \\\"\\\"Alpha\\\"\\\", the mispricing in the market. Specifically, Alpha is the price error when compared to the market return and beta of the stock. Modern portfolio theory suggests that a portfolio with good Alpha will maximize profits for a given risk tolerance. The efficient market hypotheses suggests that Alpha is always zero. The EMH also suggests that taxes, human effort and information propagation delays don't exist (i.e. it is wrong). For someone who is right, the best specific answer to your question is presented Ben Graham's book \\\"\\\"The Intelligent Investor\\\"\\\" (starting on page 280). And even still, that book is better summarized by Warren Buffet (see Berkshire Hathaway Letters to Shareholders). In a great disservice to the geniuses above it can be summarized much further: closely follow the company to estimate its true earnings potential... and ignore the prices the market is quoting. ADDENDUM: And when you have earnings potential, calculate value with: NPV = sum(each income piece/(1+cost of capital)^time) Update: See http://finance.fortune.cnn.com/2014/02/24/warren-buffett-berkshire-letter/ \\\"\\\"When Charlie Munger and I buy stocks...\\\"\\\" for these same ideas right from the horse's mouth\\\"\",\n \"Here is one for you that hasn't neen answered to date. Why are prices going up in the market while incomes are going down or stagnant? Anybody that knows economic or finance should be able to answer this question or at least give an opinion, Let me preface this as the marlet has been really good to me.\",\n \"I would be curious how he balanced having two female life partners at once. Not sure I would ask that at the shareholder meeting though ;)\",\n \"“CEOs who recognize their lack of capital-allocation skills (which not all do) will often try to compensate by turning to their staffs, management consultants, or investment bankers. Charlie and I have frequently observed the consequences of such ‘help.’ On balance, we feel it is more likely to accentuate the capital-allocation problem than to solve it.” -- [Warren Buffet](http://www.fool.com.au/2013/08/28/warren-buffett-sage-for-the-ages/)\",\n \"\\\"See Berkshire Hathaway Inc. (BRK-A) (The Class A shares) and it will all be clear to you. IMHO, the quote for the B shares is mistaken, it used earning of A shares, but price of B. strange. Excellent question, welcome to SE. Berkshire Hathaway is a stock that currently trades for nearly US$140,000. This makes it difficult for individual investors to buy or sell these shares. The CEO Warren Buffet chose to reinvest any profits which means no dividends, and never to split the shares, which meant no little liquidity. There was great pressure on him to find a way to make investing in Berkshire Hathaway more accessible. In June '96, the B shares were issued which represented 1/30 of a share of the Class A stock. As even these \\\"\\\"Baby Berks\\\"\\\" rose in price to pass US$4500 per share, the stock split 50 to 1, and now trade in the US$90's. So, the current ratio is 1500 to 1. The class B shares have 1/10,000 the voting rights of the A. An A share may be swapped for 1500 B shares on request, but not vice-versa.\\\"\",\n \"\\\"If AIG wasn't bailed out by the US Government, Warren Buffet would be the greatest **RICHES** to **RAGS** story ever. I can see why he promotes paying more taxes and is so willing to \\\"\\\"betray\\\"\\\" his own \\\"\\\"class\\\"\\\" on behalf of the USGov. It's because he's in the crony capitalist class post AIG bailout and tax dollars are the only reason he isn't greeting people at WalMart.\\\"\",\n \"While Warren Buffett is an amazing investor, he does have the benefit of having his working career start around mid-WW2 and ride the baby boomer phenomena afterward. While there were bear blips in the past decades, there never really was much of a bear market outside the 70s energy crisis and inflation of the early 80s that nevertheless still could be leveraged for gains unlike the Great Depression. The question really is, will the next generation be so lucky? Idk, could be but I'm a doubter. He's right in his criticism (I wouldn't bet my retirment on Bitcoin) but the same critique could apply to the US dollar in parts (which admittedly has the fundamental strength as being accepted for US taxes, but as a consequence also severe drawback in being tied to the economic welfare and trust in the US Government). In the end, bitcoin and Warren Buffett are at fundamental odds. Bitcoins is for, among other niches, Currency and Market pessimists (around the world btw and not just US-centric) and Warren Buffet is a product of his time and generally an US-centered optimist.\",\n \"\\\"not gonna lie i read a wsj story today that totally informed my opinion. https://www.wsj.com/articles/BT-CO-20170711-708695 At least according to that reporter the last time he raised his bid was in 1999: 'Mr. Buffett originally offered $35 a share for MidAmerican, but after pressure from investment bankers, he raised it to $35.05, he said in the letter. \\\"\\\"With that, I explained, they could tell their client they had wrung the last nickel out of me,\\\"\\\" he wrote.'\\\"\",\n \"Just out of curiosity, what if one of those CEOs told Warren Buffett to 'stick it' could Warren Buffett have them removed or would the CEO's board of directors or whatever mechanism the company has only have that right (I mean, not removal for cause, which I am sure is built in but for purely personal reasons)? Just wondering how autonomous some of these companies are because it seems like a handful of corporations own most of the others.\",\n \"Important to take note that Buffett is not directly investing in real estate. He bought a lot of stock in a real estate company that owns a lot of real estate (a REIT). Buffett typically buys stocks in companies that have good fundamentals in industries where he sees potential for growth. So indirectly he is betting on real estate, but holding stock in a REIT is much different than owning properties.\",\n \"Not sure if you missed the point or just pointing out the competitive nature of Buffett. Probably the latter, but I'll explain anyway. 100B in cash lies around doing nothing and gaining no returns so it pulls the overall returns of his fund down. Thats what he doesnt want.\",\n \"This fortune article is referenced in his either 2003 or 2004 annual report in which he does say that the market will not likely return much in the future and generally talks numbers. I am also a value investor, such that I can be in this environment and believe there is a bit of value in knowing where you think the market is headed but the real value is in underwriting each deal. In long, I agree with you\",\n \"Berkshire Hathaway's earnings for the last reported quarter were $6.395 billion, which works out to $822 in profit per second, 24 hours a day, seven days a week. This is directly the result of about 50 years of carefully applying the value investing philosophy.\",\n \"\\\"Yes, that's true. Excerpt from \\\"\\\"The Warren Buffett Way\\\"\\\": \\\"\\\"In November 2000, Warren Buffett and Berkshire Hathaway paid about $1 billion for Benjamin Moore & Co., the Mercedes of paint companies. Founded in 1883 by the Moore brothers in their Brooklyn basement, Benjamin Moore today is fifth largest paint manufacturer in the United States and has an unmatched reputation for quality. It was reported that Buffett paid a 25 percent premium over the stock’s then current price. On the surface, that might seem to contradict one of Buffett’s iron-clad rules: that he will act only when the price is low enough to constitute a margin of safety. However, we also know that Buffett is not afraid to pay for quality. Even more revealing, the stock price jumped 50 percent to $37.62 per share after the deal was announced. This tells us that either Buffett found yet another company that was undervalued or else that the rest of the investing world was betting on Buffett’s acumen and traded the price up even higher— or both.\\\"\\\"\\\"\",\n \"\\\"JoeTaxpayer's answer is dead on... but let me give my own two cents with a little bit of math. Otherwise, I personally find that people talking about diversified portfolios tends to be full of buzzwords. Let's say that Buffett's investments are $10 million. He would like to earn ≥7% this year, or $700,000. He can invest that money in coca-cola//underwear, which might return: Or he can invest in \\\"\\\"genius moves\\\"\\\" that will make headlines: (like buying huge stakes in Goldman Sachs), which might return: And he makes plays for the long haul based on the expected value of the investments. So if he splits it 50/50... ($5 million/ $5 million), then his expected value is 822,250: By diversifying, he does reduce the expected value of the portfolio... (He is not giving $10 M the chance to turn into $1.5 million or $2 million for him!). The expected value of that shock-and-awe portfolio with all $10 million invested in it is $1.2M. By taking less risk... for less reward... his expected return is lower. But his risk is lower too. Scale this example back up into the $100 million or billion range that Buffett invests in and that extra margin makes the difference. In the context of your original article, the lower-risk 'cake and underwear' investments let Buffett go big on the things that will make 20%+ returns on billions of dollars, without completely destroying his investment capital when things take a turn for the worse.\\\"\",\n \"I have a personal theory that due to Warren Buffett having the entire faith and backing of Wall Street, that it definitely plays into his returns. Look at the mortgage originator he sank money into that was truly a terrible business. A whole lot of Wall Street poured money into it right after as well. I don't think he would be as consistent if he were only buying a handful of shares and couldn't influence the entire price as a whole, but I'm not denying historically he's made a lot of good picks.\",\n \"He owns some giants. I'd bet Coca-Cola is his biggest cash cow. This is a non-story. The revenue naturally follows actual value provided, as opposed to buying and selling shares with the swings of the stock market. Buffet buys and holds, and builds and collects the revenue from his companies, that's been his core philosophy since the beginning.\",\n \"The advice I have is short and sweet. Be an investor, not a speculator. Adopt the philosophy of Warren Buffet which is the 'buy and hold' philosophy. Avoid individual stocks and buy mutual funds or ETFs. Pick something that pays dividends and reinvest those dividends. Don't become a speculator, meaning avoid the 'buy low, sell high' philosophy. EDIT:For some reason I cannot add a comment, so I am putting my response here. @jad The 'buy low, sell high' approach makes money for the stock broker, not necessarily you. As we learn in the movie Trading Places, each buy or sell creates a commission for the broker. It is those commission expenses that eat away at your nestegg. Just don't sell. If a security is trading at $10 a share and pays $0.25 a share each quarter then you are getting 10% ROI if you buy that security (and if it continues to pay $0.25 a share each quarter). If the price goes up then the ROI for new buyers will go down, but your ROI will still be the same. You will continue to get 10% for as long as you hold that security. A mutual fund buys the individual stocks for you. The value of the fund is only calculated at the end of the day. An ETF is like a mutual fund but the value of the ETF is calculated moment by moment.\",\n \"What were her/his career aspirations when he was your age? Who were his/her mentors/sponsors and how did they impact his success? What industry changes does he/she anticipate in the next five years? In what ways will technology alter the industry?\",\n \"\\\"This is the best tl;dr I could make, [original](https://www.bloomberg.com/amp/view/articles/2017-09-21/bet-with-buffett-not-against-him) reduced by 90%. (I'm a bot) ***** > The first is a New York Post article with the headline, &quot;Warren Buffett wins $1M bet made with hedgie a decade ago&quot;. > Although Seides has admitted defeat, he said he thinks that &quot;Doubling down on a bet with Warren Buffett for the next 10 years would hold greater-than-even odds of victory.&quot; Thus, despite spending $1 million in tuition at the University of Buffett, he failed to learn the expensive lesson that Buffett has offered up to all of us. > Which leads us to Buffett&#039;s motivation in making the bet. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/725pxt/bet_with_buffett_not_against_him/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \\\"\\\"Version 1.65, ~215707 tl;drs so far.\\\"\\\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \\\"\\\"PM's and comments are monitored, constructive feedback is welcome.\\\"\\\") | *Top* *keywords*: **Buffett**^#1 **bet**^#2 **money**^#3 **year**^#4 **Index**^#5\\\"\",\n \"Buffet doesn't strike me as the kind of man who leaves himself vulnerable to technological changes, especially ones that are a part of a greater whole he's acknowledged as imminent. To think that self driving cars are coming, but self driving tractor trailers are not, is foolish. Buffet isn't a foolish man. If/when Tesla Semis take over, Buffet will still find a way to profit from the change.\",\n \"You have a point about businesses needing to answer legitimate demands, but Buffet is also making a good point. Greatly reducing the influence of private money in politics while increasing the government's ability to even out the incredible income and resource disparities are both necessary to improve the US as a whole.\",\n \"I've not had a chance to read that yet. I'll be sure to check it out. Buffet may very well gain some kind of real happiness in the pursuit of wealth, but I believe it is the pursuit which gives him joy, not the wealth itself. If you ever run into him, I invite you to ask him. I'll do the same.\",\n \"Care to support that. I first came to know Buffet in about 1996. No one in history had done what he did for that length of time. He has basically the same track record today, except it's longer. He may have benefitted from some luck. But I think it's equally likely he did what he did in spite of bad luck. The only thing I'm certain he's been lucky at is being born with a unique memory and brain power.\",\n \"In addition to the GE move, Buffett's firm also added a large share of Synchrony, equalling about $520.7 in value, and a $418.1 million stake in Store Capital. So, they bought one regular sized share? This is Why BI-journalists doesnt work in IB...\",\n \"To understand his comments about bear-market performance it's important to take them in context. (My research method was Crtl+F: bear; read around the highlights. This is not a complete survey of 60+ years of letters.) In his earlier letters, statements about bull market performance are always made in reference to Buffet's belief that many of BH's current holdings are in undervalued securities. Ex: To the extent possible, therefore, I am attempting to create my own work-outs by acquiring large positions in several undervalued securities. Such a policy should lead to the fulfillment of my earlier forecast – an above average performance in a bear market. It is on this basis that I hope to be judged (p 6; emphasis mine). Similar statements are made throughout the earlier letters, along with this interesting note: In a year when the general market had a substantial advance I would be well satisfied to match the advance of the Averages (p 6). So to your question of why BH fund performance is likely to be better in a bear market than in a bull market, I believe the implicit assertion is that undervalued securities are more resilient in a bear market (presumably because they don't have as far to fall, and are also less likely to be subject to a bubble). Buffet is also explicitly asserting that when facing a choice to either (a) position BH to weather a possible downturn or (b) position BH to enjoy a bullish stock that is outpacing the market, he would choose the former over the later. As to your assertion that he always says this, I can find no reference to bear market's in the letters past 1960.\",\n \"\\\"If that's your goal. Watch the entire webinar on warren buffet books by Preston Pysh first for a good intro into stocks bonds etc: https://m.youtube.com/watch?list=PLECECA66C0CE68B1E&v=KfDB9e_cO4k Read Dale Carnegies book \\\"\\\"How to Win Friends and Influence People\\\"\\\" in order to learn how to communicate to people effectively and create networks. The most important skill in any field you choose to go into. Read \\\"\\\"The Everything Store\\\"\\\" for essentially an MBA in business. Read \\\"\\\"The Intelligent Investor\\\"\\\" by Benjamin graham for a bachelors in finance. Then take classes that get you the very best professors in the field of finance, economics, and business at your school and make sure you never stop asking questions. Continue to develop your skills and create good saving & communication habits. And if you want great jobs, get internships. To get internships be involved in as much as you can in campus and take leadership roles (especially when you think you can't handle it) you will grow quickly as a leader and businessman if you do it right. If reading is a bit much for you, try audiobooks. And make sure you enjoy college and surround yourself with ambitious youngsters like yourself. It will help you grow. Enjoy school and be social, make mistakes and do whatever it takes to get a minimum 3.5 GPA (get old tests study groups easy teachers or GPA boosting classes if you need to) Aight that's all I got haha\\\"\",\n \"\\\"Share prices change (or not) when shares are bought and sold. Unless he's sitting on a large percentage of the total shares, the fact that he isn't selling or buying means he's having no effect ar all on the stock price, and unless there's a vote war going on in the annual meeting his few stockholder votes aren't likely to have much effect there either (though there's always the outside chance of his being a tiebreaker). On the other hand, there's nothing inherently wrong with holding shares for a very long time and just taking the dividends (\\\"\\\"clipping coupons\\\"\\\"). Buy-and-hold is a legitimate strategy. Basically: His reason is wrong, but his action may be right, and you should probably just not ask.\\\"\",\n \"\\\"An investment in knowledge always pays the best interest, as Ben Franklin said. However, this is not a question I can answer for you, as it depends on the opportunities that are specifically available to you as an individual. Sometimes opportunities will knock on your door and you can take advantage, other times you have to create that door to allow opportunities to knock. Maybe you have a friend that is opening a side business, maybe there is a class you can get into at a trivial cost. What I suggest is to start investing just to get into the habit of it, not so much for the returns. Before you do, however, any financial advisor will advise you to begin with a emergency fund, worth about 3-6 months of your expenses for that time. I wanted to hit the ground running and start investing in stocks, but first things first I guess. \\\"\\\"Millionaire Next Door\\\"\\\" will help you get into a saving mindset, \\\"\\\"I will teach you to be rich\\\"\\\" is ok, plenty of other books. My advice is keep doing what you're doing, learn to start saving, and once you have obtained an emergency fund of the amount of your choosing, start looking to invest in Index Funds or ETFs through any platform that has LOW FEES!! I use Betterment, but Vanguard is good too, as they allow you to get your feet wet and it's passive. Hope this helps.\\\"\",\n \"\\\"Excellent questions! Asking such questions indicates something special about yourself. The desire to learn and adjust your beliefs will increase your chance of success in your life. I would use a wide variety of authors to increase your education. Myself I prefer Dave Ramsey to Clark Howard, but I think Clark is very good. The first thing you should focus on is learning how to do and live by a budget. Often times, adults will assume that you are on a budget because you are broke. It happens with my friends and my youngest child is older than you. Nothing could be further from the truth. A budget is simply a plan on how you will spend your income so you don't run out of money before you run out of month. Along with budgeting I would also focus on goal setting. This is the type of \\\"\\\"investing\\\"\\\" you should be doing at your age. For example if your primary goal was to become an engineer, my recommendation is to hold off buying stocks/mutual funds and using your current income to get through school with little or no student loans. Another example might be to open your own HVAC business. Your best bet might be to learn the trade, working for someone else, and take night classes for business management. Most 18 year olds have very little earning power. Your focus at this point should be increasing your income and learning how to manage the income you have. Please keep in mind that most debt is bad. It robs you of your income which is your greatest wealth building tool. Car loans and credit card debt is just plain stupid. Often times a business case can be made for reasonable student loans. However, why not challenge yourself to take none. How much further ahead could you be if you graduate, with a degree, when your peers are strapped with a 40K loan? Keep up the good work and keep asking questions.\\\"\",\n \"That is absolute rubbish. Warren Buffet follows simple value and GARP tenants that literally anyone could follow if they had the discipline to do so. I have never once heard of an investment made by Warren Buffet that wasn't rooted in fundamentals and easy to understand. The concept is fairly simple as is the math, buying great companies trading at discounts to what they are worth due to market fluctuations, emotionality, or overreactions to key sectors etc. If I buy ABC corp at $10 knowing it is worth $20, it could go down or trade sideways for FIVE YEARS doing seemingly nothing and then one day catch up with its worth due to any number of factors. In that case, my 100% return which took five years to actualize accounts for an average 20% return per year. Also (and this should be obvious), but diversification is a double edged sword. Every year, hundreds of stocks individually beat the market return. Owning any one of these stocks as your only holding would mean that YOU beat the market. As you buy more stocks and diversify your return will get closer and closer to that of an index or mutual fund. My advice is to stick to fundamentals like value and GARP investing, learn to separate when the market is being silly from when it is responding to a genuine concern, do your own homework and analysis on the stocks you buy, BE PATIENT after buying stock that your analysis gives you confidence in, and don't over diversify. If you do these things, congrats. YOU ARE Warren Buffet.\",\n \"\\\"The first article you link clearly refers to Warren Buffet and doesn't, in regard to taxes, refer in any way to Berkshire Hathaway. The second article you link is titled, \\\"\\\"Ways Professional Traders Can Save Big At Tax Time.\\\"\\\" Berkshire Hathaway is not a firm primarily engaged in trading. It is engaged in investing in companies that it feels offer long-term growth and appreciation. In some cases, their investment is in the entire company; in others, a very large percentage of its total capitalization. Trading, on the other hand, involves buying stocks, bonds, futures, etc. for near-term resale, ideally at a profit. Stock speculation is a risky and complex occupation because the direction of the markets are generally unpredictable and lack transparency. As has been mentioned above, we are confident that Berkshire Hathaway use every technique at its disposal to reduce its tax burden. I am confident, as well, that they spend considerable effort and expense to be certain that they are never discovered making errors in their tax returns.\\\"\",\n \"Commonly recommended books: Intelligent Investor - Graham One Up On Wall Street - Lynch The Essays of Warren Buffett : Lessons for Corporate America - Cunningham Graham's book should be mandatory reading for this sub. Lynch's book talks about leveraging your personal expertise to make intelligent investment choices. Cunningham's is a compilation of Warren Buffett's letters to shareholders of BH with some commentary. It covers a wider range of material, but the lessons on corporate governance are very useful when doing valuation.\",\n \"Two Questions, please feel free to pick either one, or answer both if you want. 1) If tax reform does get passed and corporate & income taxes are reduced/consolidated, what will be 1. the short term effect on the U.S national debt? and 2. The long term effect on the debt, factoring in the obvious (and already priced in) supply side growth potential of the tax cuts? It seems to me that the GOP tea partiers/deficit hawks that rose to political power in 2010-2012 have gone oddly mute on the (probable) increase in the federal debt as a result of both the proposed Trump tax cuts and (subjectively) wasteful budget provisions like Wall funding, deportation enforcement ect... 2) A. What is your best guess of the reaction of U.S & European asset markets (Eq & Bonds) in the event of a war on the Korean peninsula, with both conventional and asymetrical weapons & methods used on North, South Korea as well as U.S ally Japan? I ask because the economic fundamentals of U.S/Western Europe are strong, and am wondering whether an obvious negative market shock (nuclear? war) would be enough to send those respective western economies into recession/financial crisis. B. What will be the geopolitical result? Does China back NK to prevent a immigration crisi/power vacuum or do they side with the UN/U.S and allow military destruction of NK in the event of a NK-started war?\",\n \"Buffet is able to do many things the average investor cannot do. For example: During the 2008 market crash Buffet purchased 5 Billion on Citi preferred stock (as somewhat of a bail out) that pays 5% Dividend. Then he also received warrants to buy another 700 million shares over the next 10 years where he can buy shares at 5% discount. So right off the bat he is up 5% anytime he buys some of those 700 million shares. http://dealbook.nytimes.com/2011/08/25/buffett-to-invest-5-billion-in-bank-of-america/?_php=true&_type=blogs&_r=0 This is just one of the Buffet deal makings. With his cash you can move markets. He buys, people hear about it, they buy, his positions go up. Put that aside he loans cash, gets interest, buys companies. It is more than just investing in the stock market.\",\n \"I am a bit at a loss as to how you can read the same book, that inspired Warren Buffet, and take away that trading 600 contracts per month is a way to prosperity. As a fellow engineer I can say with assurance this speculation scheme is doomed to failure. Crossing out the word gamble was a mistake. Instead you should focus on two things. The first is your core business, which is signal processing. Work and strive to be the best you can. Seek out opportunities to increase your income while keeping your costs low. As an engineer you have an opportunity to earn an above average salary with very low costs. Second would be to warehouse some of those earning and let others who are good at other things work for you. You may want to read the Jack Bogle books and seek an asset allocation model. I tend to be more aggressive then he would suggest, but that is a matter of preference. You don't really have the time, when you focus on your core business, to manage 6 trades a month let alone 600. Put your contributions on auto pilot and a surprisingly short time you will have a pile of cash.\",\n \"Oh god! The title was he closes in on something he doesn't want - More money than any one person, especially someone as famously frugal as Mr Buffet, could spend on a lifetime. Hence, why not do something that would have an incredibly positive impact on an entire generation. Again, I didn't think it was that difficult of a concept.\",\n \"\\\"Two main points to answer this in my opinion. First, most people don't start with say half a million dollar to buy all the stocks they need in one shot but rather they accumulate this money gradually. So they must make many Buys in their lifetime. Similarly, most people don't need to withdraw all their investment in one day (and shouldn't do this anyway as it cuts the time of investment). So there will be many Sells. Performing a single buy or sell per year is not efficient since it means you have lots of cash sitting doing nothing. So in this sense, low cost indexing lets you quickly invest your money (and withdraw it when needed after say you retire) without worrying about commission costs each time. The second and most important point to me to answer this is that we should make a very clear distinction between strategy and outcome. Today's stock prices and all the ups and downs of the market are just one possible outcome that materialized from a virtually uncountable number of possible outcomes. It's not too hard to imagine that tomorrow we hear all iPhones explode and Apple stock comes crashing down. Or that in a parallel universe Amazon never takes off and somehow Sears is the king of online commerce. Another item in the \\\"\\\"outcome\\\"\\\" category is your decisions as a human being of when to buy and sell. If that exploding iPhone event does occur, would you hold on to your stocks? Would you sell and cut your losses? Does the average person make the same decision if they had $1000 invested in Apple alone vs $1M? Index investing offers a low cost strategy that mitigates these uncertainties for the average person. Again here the key is the word \\\"\\\"average\\\"\\\". Picking a handful of the heavyweight stocks as you mention might give you better returns in 30 years, but it could just as easily give you worse. And the current data suggest the latter is more likely. \\\"\\\"Heavyweights\\\"\\\" come and go (who were they 30 years ago?) and just like how the other 450 companies may seem right now as dragging down the portfolio, just as easily a handful of them can emerge as the new heavyweights. Guaranteed? No. Possible? Yes. Jack Bogle is simply saying low cost indexing is one of the better strategies for the average person, given the data. But nowhere is it guaranteed that in this lifetime (e.g. next 30 years) will provide the best outcome. Berkshire on the other hand are in the business of chasing maximum outcomes (mid or short term returns). It's two different concepts that shouldn't be mixed together in my opinion.\\\"\",\n \"Perhaps something else comes with the bond so it is a convertible security. Buffett's Negative-Interest Issues Sell Well from 2002 would be an example from more than a decade ago: Warren E. Buffett's new negative-interest bonds sold rapidly yesterday, even after the size of the offering was increased to $400 million from $250 million, with a possible offering of another $100 million to cover overallotments. The new Berkshire Hathaway securities, which were underwritten by Goldman, Sachs at the suggestion of Mr. Buffett, Berkshire's chairman and chief executive, pay 3 percent annual interest. But they are coupled with five-year warrants to buy Berkshire stock at $89,585, a 15 percent premium to Berkshire's stock price Tuesday of $77,900. To maintain the warrant, an investor is required to pay 3.75 percent each year. That provides a net negative rate of 0.75 percent.\",\n \"The steps you outlined are fine by themselves. Step 5, seeking criticism can be less helpful than one may think. See stocktwits.com There are a lot of opposing opinions all of which can be correct over different time-frames. Try and quantify your confidence and develop different strategies for different confidence levels. I was never smart enough or patient with follow through to be a successful value investor. It was very frustrating to watch stocks trade sideways for years before the company's intrinsic value was better reflected in the market. Also, you could make an excellent pick, but a macro change and slump could set you back a year and raise doubts. In my experience portfolio management techniques like asset allocation and dollar-cost-averaging is what made my version of value investing work. Your interest in 10k/10q is something to applaud. Is there something specific about 10k/10q that you do not understand? Context is key, these types of reports are more relevant and understandable when compared to competitors in the same sector. It is good to assess over confidence! It is also good to diversify your knowledge and the effort put into Securities Analysis 6th edition will help with other books in the field. I see a bit of myself in your post, and if you are like me, than subsequent readings, and full mastery of the concepts in 'Securities & Analysis 6th ed.' will lead to over confidence, or a false understanding as there are many factors at play in the market. So many, that even the most scientific approaches to investing can just as equally be described as an 'art'. I'm not aware of the details of your situation, but in general, for you to fully realize the benefits from applying the principals of value investing shared by Graham and more recently Warren Buffett, you must invest on the level that requires use of the consolidation or equity method of accounting, e.g. > 20% ownership. Sure, the same principals used by Buffett can work on a smaller scale, but a small scale investor is best served by wealth accumulation, which can take many forms. Not the addition of instant equity via acquisitions to their consolidated financials. Lastly, to test what you have learned about value investing, and order execution, try the inverse. At least on paper. Short a stock with low value and a high P/E. TWTR may be a good example? Learn what it is like to have your resources at stake, and the anguish of market and security volatility. It would be a lot easier to wait it out as a long-term value investor from a beach house in Santa Barbara :)\",\n \"What's your opinion of the rising student loan debt? It keeps going up, is that realistic and sustainable? It looks like it could be a possible bubble to me, especially considering private investors take on little risk because the loans cannot be discharged in bankruptcy.\",\n \"Have tact. Don't outright ask for it but drop all the hints/info for him to add two and two together. If he doesn't offer it to you today, he might tomorrow so don't ask for too much at once (you'll sound pushy and needy) and just appreciate the time to speak with someone successful even if he doesn't offer you a job. During the interview, you'll want to find that right balance between being inquisitive and being stupid. Anything you can Google is probably a stupid question. Anything that asks for his opinion on a topic relevant to his field should be a better option. Career advice and any life advice and stories of how he tackled common problems you're facing are safe options. At least that's my take on how these interviews should work. Easier said than done so keep practicing like you are now. Good luck.\",\n \"You can never depend ONLY on pension. You must get financial education and invest your money. I recommend you to read The Intelligent Investor by Benjamin Graham...it's the bible of Warren Buffet. Besides, you don't need to be a Billionaire for retiring and be happy. I recommend you to get education in ETFs. I quote The Intelligent Investor by Benjamin Graham p. 131. According to Ibboston Associates, the leading financial research firm, if you had invested $12,000 in the Standard & Poor's 500-stock index at the beginning of september 1929, 10 years later you would have had only $7,223 left. But if you had started with a paltry $100 and simply invested another $100 every single month, then by August 1939, your money would have grown to $15,571! That's the power of disciplined buying-even in the face of the Great Depression and the worst bear market of all time. You are still young to make even bolder investments. But seriously you can never depend ONLY on pension. You won't regret learning how to invest your money, it doesn't matter if it's in the stock market, real state market, whatever market... Knowing what to do with your money is priceless. I hope this helps. Happy profits!\",\n \"\\\"My favorite line: \\\"\\\"Companies should generate enough profits to justify the price that shareholders are willing to pay for its shares. Once shareholders are no longer willing to pay up for those profits, they should invest that money elsewhere.\\\"\\\" This person loses all credibility right here.\\\"\",\n \"Any investor can make a bad bet, even Buffett. Even if you have done every bit of research on an investment possible you are exposed to random external events.. acts of god, and outright fraud.\",\n \"Buffett says the rich aren't taxed enough after he's already made and paid taxes on his income. The real problem is he can put his fortune in a Trust and avoid the inheritance tax. This puts his $75 billion in a non-taxable trust fund, and instead of $40 billion going to the government to pay for job training for the poor, a program he said he supports, it goes into a non-taxable trust. His kids get to sit on the trust board and draw multi-million dollar salaries for dolling out millions to Asian countries. He's a hypocrite and isn't really interested in helping the country that made him rich.\",\n \"Regarding investing in gold vs. stocks, I don't think I could say it better than Warren Buffett: You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all -- not some -- all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?\",\n \"\\\"The best answer here is \\\"\\\"maybe, but probably not\\\"\\\". A few quick reasons: Its not a bad idea to watch other investors especially those who can move markets but do your own research on an investment first. Your sole reason for investing should not be \\\"\\\"Warren did it\\\"\\\".\\\"\",\n \"Powers makes a good point: trading costs may eat up a significant portion of your ROI. A fee as little as 2% can consume more than 50% of your long-term ROI! A rule of thumb is keep your fees to less than 1%. One way to do that is to buy stock in companies that have a DRIP with a Share Purchase Plan (SPP). Often the SPP allows investors to purchase shares for low fees or free. Once you have the ability to purchase shares for (virtually) free, you can use InvestMete. Roughly, you send more money to the companies whose share prices are near their 52-week low, and less money to those who are near their 52-week high. Getting back to your original question...\",\n \"I think your best strategy is to learn more about the behavior of what you're investing in. Learn everything you can about it. Specialize in it. The more you study, the more the proper strategy will present itself. Answer the questions you ask in paragraph 3 through your own study.\",\n \"If you see something that looks like a sales pitch, be skeptical, even if they sound informed, say things which resonate with your concerns and promise to alleviate your problems. Watch out in particular for people who pontificate about matters which are tangentially related to the investment (e.g. populist anti-Wall-Street sentiment). Beware limited-time opportunities, offers, and discounts. I'm specifically talking about your email pitches, Motley Fool. They're shameful. Remember you're allowed to change your mind and go back on something that you've said a few minutes ago. If anyone tries to trick you into agreeing to go along with them by taking what something you've said and manipulating it, or uses logic to demonstrate that you must buy something based on things you've said, tell them you're not comfortable, head for the door and don't look back. Don't be afraid of embarrassment or anything like that. (You can investigate whether your position is in fact logically consistent later.) Run away from anyone who resents or deprecates the notion of a second opinion. Don't ever go along with anything that seems shady: it may be shadier than you know. Some people thought Bernie Maddoff was doing some front-running on the side; turns out it was a Ponzi scheme. (Likewise the Ponzi scheme that devastated Albania's economy was widely suspected of being dirty, but people suspected more of a black-market angle.) Beware of anyone who is promising stability and protection. Insurance companies can sell you products (especially annuities) which can deliver it, but they're very expensive for what you get. Don't buy it unless you seriously need it.\",\n \"I like the answer given by mikeazo. If paid in cash would you immediately buy the stock of the company? We all want to be the next Steve Jobs (or Woz), but the truth is that a Jobs comes along only once in a lifetime and chances are that you are not him. We have seen this kind of question here before. Search the site for the answers given previously.\",\n \"\\\"Buffet could easily take the lead here by starting a company solely dedicated to paying off people's mortgages using his own money. Oh wait he wants government to take away money from his rivals and potential upstarts because he isn't going to put into action anything he is talking about for himself. P.S. Buffet could also very easliy dismantle the shield he is using to shelter the vast bulk of his wealthy in the form of the \\\"\\\"non-profit\\\"\\\" he and Bill Gates created and simply write debt riddle state governments (of there own doing and design) like Illinois massive checks but again that would require effort and putting HIS money where his mouth is in the long run.\\\"\",\n \"\\\"I don't know really is the best investment strategy. People think that they have to know everything to make money. But realistically, out of the hundreds of thousands of publicly traded securities, you really can only invest in a tiny number of them. Of the course of a week, you literally have more than a million \\\"\\\"buy\\\"\\\" or \\\"\\\"don't buy\\\"\\\" decisions, because the prices of those securities fluctuate every day. Simply due to the fact that there are so many securities, you cannot know what everything is going to do. You have to say \\\"\\\"I don't know\\\"\\\". Also, when you do understand something, it is usually fairly priced. So will you make money on it? \\\"\\\"I don't know\\\"\\\". Only very rarely will you find something that you actually understand well and it is significantly undervalued. You can be looking at a company a day for two years before you find it. But people get trigger happy. They bet on 51%/49% odds when they should only bet on 90%/10% odds or higher. If you are forced to bet on everything, it makes sense that you bet on everything you believe is greater than 50% chance of winning. But since you cannot bet on everything, you should only bet on the highest quality bets, those with greater than 90% chance of winning. To find such a bet, you may have to shuffle through 100 different companies and only make 2-3 bets. You are looking for something that is at least 2 standard deviations away from the mean. People are not good at doing a lot of work, most of which yields nothing, to find one big payoff. They are wired to only look at the present, so they take the best bet they can see at the moment, which is often barely above 50% (and with any misjudgment, it may actually be well below 50%). And people are not good at understanding compound/geometric growth. You can keep multipling 10% gains (1.10 * 1.10 * 1.10 ...), but that can all be wiped out by multiplying by one zero, which is why taking a 51%/49% bet is so dangerous (even though technically it is an advantageous one). They forget to adjust for the geometric aspect of compounding. A 99%/1% bet is one you should take, but if you are allowed to repeat it and you keep going all-in, you will eventually lose and have $0, which is the same as if you took a single all-in bet that has 0% chance of winning. As Buffett says, if you are only allowed to make 20 investments over a lifetime, you will most likely do better because it prevents you from making many of these mistakes.\\\"\",\n \"\\\"I think this is a bit too simplistic, because you need to keep in mind that Buffet was managing the money as his career. Had he paid the 1% fee he could have \\\"\\\"made more money\\\"\\\" doing something else. People who hire money managers usually do so because it A. saves them time managing their own portfolios and B. because they don't believe they would do a better job managing it themselves.\\\"\",\n \"Thank you for replying. I assumed since I’m the one asking for advice from him I should be leading the conversation with questions mostly. Wondering if you have an examples of what questions. I have some prepared but any extra insight is helpful.\",\n \"\\\"My question to you would be \\\"\\\"When is the market down?\\\"\\\" I know that a lot of people attempt to do this and never get close. With 40 years left to retirement, I would have you consider to just invest in the manner that you are most comfortable and let dollar cost averaging do the rest.\\\"\",\n \"A lot of people probably don't agree with him, but Warren Buffett has some great quotes on why he doesn't invest in gold: I will say this about gold. If you took all the gold in the world, it would roughly make a cube 67 feet on a side…Now for that same cube of gold, it would be worth at today’s market prices about $7 trillion dollars – that’s probably about a third of the value of all the stocks in the United States…For $7 trillion dollars…you could have all the farmland in the United States, you could have about seven Exxon Mobils, and you could have a trillion dollars of walking-around money…And if you offered me the choice of looking at some 67 foot cube of gold and looking at it all day, and you know me touching it and fondling it occasionally…Call me crazy, but I’ll take the farmland and the Exxon Mobils. And his classic quote: [Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.\",\n \"\\\"I never said Wall Street enjoys paying taxes. But that is only because they are short-sighted and arrogant. If they were to take a step back they would see that a functioning society is more in their interest that a few extra mil and social upheaval. If this is a reasonable argument (not saying it's true, but that it's not immediately or definitively wrong), then we can say that it's not unreasonable for Warren Buffet to hold that idea, which would invalidate your premise. Requiring a level of proof beyond that is absurd and you're just obstructing the conversation, what are we going to do, hack into his brain to find out his \\\"\\\"true\\\"\\\" thoughts? Just to be clear, I do not think government bureaucracy will solve this problem, and I agree with your analysis of how that would play out. I don't think a solution to these types of problems exists within the state-market paradigm. But at least now we're agreeing that there is a market-failure at work, rather than your previous statement of \\\"\\\"it is ridiculous for Bob to think he is entitled to 5 cows if John sells Jim ten thousand heads.\\\"\\\" My question then is why do you espouse such simplistic nonsense when you understand that the situation is much more complex? Is it because it is easier and more psychologically comfortable to ignore these injustices than to admit that your model does not have an effective way of dealing with them? > Why do you think this, exactly? Because things like this require collective action or you run into the free rider problem.\\\"\",\n \"It comes across as if you don't know much about what he or the firm does. Does he work in wealth management? Someone looking for an assistant likely values organization and interpersonal skills over financial acumen.\",\n \"What's the answer for the lightbulb question? For the short a put on IBM question, obviously you could answer that you're bullish on the stock, but couldnt you further elaborate by asking for the maturity? I guess you could also talk about option strategies such as covered puts. What's a good answer to that question?\",\n \"Don't worry about Buffett. I have a feeling this will be like Wells Fargo in the 90s where Buffett will make 1000% his investment by the end of the next decade. You can hate them all you want, but does anybody really think that Bank of America is going away? This is like when BP supposed caused a trillion of dollars in damage, and the market cap fell something like 140 billion. In the end, it's probably only going to cost them $20 billion. Life is already going on for the oil spill. Bank of America will get some more hate for a while. They'll get tons of lawsuits, but they'll probably settle for something like $30 billion (one year's earnings). In two or three years, you'll have a company earning $30 billion that is current valued at $50 billion. It's been 4 years since the bubble burst in 2007. Most of the crappy loans are gone already (either defaulted/written off or if they have been paying for 4 years then they are not really crappy at all). There are 4 years worth of prime loans on the books. In 2007, people assumed the somewhat opaque book of loans (mostly subprime) is worth 100 cents on the dollar. Today, people are assuming that the somewhat opaque book of loans (mostly prime) is worth 0 cents on the dollar. Just look around Reddit and see what people are saying about the banks' financial condition, even though they never read any SEC filings or analyst reports. I think (and apparently Buffett also thinks) that the book is worth something between 0 and 100, likely in the upper end.\",\n \"Introduce him to the concept of Inflation Risk, and demonstrate that being too conservative with your investments might be a very risky strategy as well.\",\n \"Dow will not exist in 100 years. AI computer trading will remove all faith in the current system and companies will find new ways to raise equity capital that won't necessarily involve traditional exchanges. Even if exchanges are still strong the concept of the DOW is flimsy even today. I love Warren but he is not tech sophisticated enough to understand the shitstorm that AI will bring to financial markets.\",\n \"\\\"Good for you! At your age, you should definitely consider investing some of your hard-earned and un-needed money in stocks with the long-term goal of having your retirement funded. The time horizon that you'd have would be vastly superior to that of millions of others, who will wait until their thirties or even forties to begin investing in stocks, giving your compound interest prospects the extra time anyone needs for a spectacular vertical incline in your later years. Make sure to sign up to automatically re-invest the dividend payouts of your stocks, please. (If you don't already know how being young and investing well in your early years is more powerful than starting out ten to twenty years later, do a little research on \\\"\\\"Compound Interest\\\"\\\"). Make sure you monitor your investments. Being young means you have time to correct your investments (sell and buy other assets) if the businesses you initially selected are no longer good investments.\\\"\",\n \"As an investor you must remember to forgive yourself. However, you must not only forgive but make it up to yourself by putting in the hours of study necessary to ensure that what you are forgiving yourself for will not happen again. Studying (finance, fundamental analysis, statistics, etc.)will also help you to worry less. Once you have put in the hours of study necessary, you can turn to any of a number of still relatively conservative strategies, such as seeking out undervalued blue-chip stocks to purchase or selling covered call options. Good luck.\",\n \"Let us consider the risks in the investment opportunities: Now, what are the returns in each of the investment: What are the alternatives to these investments, then?\",\n \"Buy a share - not a penny stock; rather a well known company like Coca-Cola, Kelloggs, Exxon, etc. Follow the company. Understand their business model. See the share price fall and rise. You will learn a lot having your own money at risk.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["For whatever it's worth, when I went to the meeting a couple of years ago, the question and answer segment is mostly students asking how to pick a stock or what book they should read. I'm sure someone else will ask but it would be interesting to hear their take on the Syrian refugee situation in Europe and how it may impact the EU in general. Or how he/they think the drought in the south western region of the US will impact the national economy, if at all. Like Keshlam says, if YOU don't care about the answer there's really no point to asking the question. The most important thing you can do is listen to what he and Munger have to say. The way they think is interesting and they have great rapport with eachother. It's a great experience and unfortunately I wasn't able to make my schedule work to attend this year. It's almost comical how many cans of Coke Warren will knock out through the day. Another fun thing to do is take the shuttle to the airstrip to check out the NetJets. I wish I had the interest and wherewithal to go when I was 16...","I would be curious how he balanced having two female life partners at once. Not sure I would ask that at the shareholder meeting though ;)"],"string":"[\n \"For whatever it's worth, when I went to the meeting a couple of years ago, the question and answer segment is mostly students asking how to pick a stock or what book they should read. I'm sure someone else will ask but it would be interesting to hear their take on the Syrian refugee situation in Europe and how it may impact the EU in general. Or how he/they think the drought in the south western region of the US will impact the national economy, if at all. Like Keshlam says, if YOU don't care about the answer there's really no point to asking the question. The most important thing you can do is listen to what he and Munger have to say. The way they think is interesting and they have great rapport with eachother. It's a great experience and unfortunately I wasn't able to make my schedule work to attend this year. It's almost comical how many cans of Coke Warren will knock out through the day. Another fun thing to do is take the shuttle to the airstrip to check out the NetJets. I wish I had the interest and wherewithal to go when I was 16...\",\n \"I would be curious how he balanced having two female life partners at once. Not sure I would ask that at the shareholder meeting though ;)\"\n]","isConversational":false}}},{"rowIdx":75,"cells":{"_id":{"kind":"string","value":"604"},"query":{"kind":"string","value":"Is there a dollar amount that, when adding Massachusetts Sales Tax, precisely equals $200?"},"gt_ids":{"kind":"list like","value":["451443","231947","261622"],"string":"[\n \"451443\",\n \"231947\",\n \"261622\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1,1],"string":"[\n 1,\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["451443","261622","436128","521868","547574","218136","134761","398021","227162","114302","170632","483156","148715","214009","576621","177328","273721","242478","321794","284680","126771","120466","383287","86757","231947","506555","272289","470568","451005","584238","110865","87386","551845","123287","477172","415976","187002","19789","343872","156023","257060","85504","414172","363960","190497","548718","590358","459740","90230","140126","364543","105264","394961","46511","12119","147933","278387","184445","482199","546035","392285","134494","409980","63437","265403","60098","69683","17269","500475","318966","512663","152298","224057","246453","123395","299579","292769","452980","496395","82628","286654","235470","298427","213630","46469","358776","556730","589416","444620","431136","577605","74749","149853","123053","68802","175520","432972","282811","363748","113871"],"string":"[\n \"451443\",\n \"261622\",\n \"436128\",\n \"521868\",\n \"547574\",\n \"218136\",\n \"134761\",\n \"398021\",\n \"227162\",\n \"114302\",\n \"170632\",\n \"483156\",\n \"148715\",\n \"214009\",\n \"576621\",\n \"177328\",\n \"273721\",\n \"242478\",\n \"321794\",\n \"284680\",\n \"126771\",\n \"120466\",\n \"383287\",\n \"86757\",\n \"231947\",\n \"506555\",\n \"272289\",\n \"470568\",\n \"451005\",\n \"584238\",\n \"110865\",\n \"87386\",\n \"551845\",\n \"123287\",\n \"477172\",\n \"415976\",\n \"187002\",\n \"19789\",\n \"343872\",\n \"156023\",\n \"257060\",\n \"85504\",\n \"414172\",\n \"363960\",\n \"190497\",\n \"548718\",\n \"590358\",\n \"459740\",\n \"90230\",\n \"140126\",\n \"364543\",\n \"105264\",\n \"394961\",\n \"46511\",\n \"12119\",\n \"147933\",\n \"278387\",\n \"184445\",\n \"482199\",\n \"546035\",\n \"392285\",\n \"134494\",\n \"409980\",\n \"63437\",\n \"265403\",\n \"60098\",\n \"69683\",\n \"17269\",\n \"500475\",\n \"318966\",\n \"512663\",\n \"152298\",\n \"224057\",\n \"246453\",\n \"123395\",\n \"299579\",\n \"292769\",\n \"452980\",\n \"496395\",\n \"82628\",\n \"286654\",\n \"235470\",\n \"298427\",\n \"213630\",\n \"46469\",\n \"358776\",\n \"556730\",\n \"589416\",\n \"444620\",\n \"431136\",\n \"577605\",\n \"74749\",\n \"149853\",\n \"123053\",\n \"68802\",\n \"175520\",\n \"432972\",\n \"282811\",\n \"363748\",\n \"113871\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["No. $188.23 has $11.76 tax = $199.99 $188.24 has $11.77 tax - $200.01 So, unless the based price contained the half cent for $188.235, the register would never show $200.00 even. How does the receipt to customer look?","Yes, it's a simple calculation. (x+0.0625x)=200 or x=200/1.0625 = $188.24 Technically $188.24 plus tax comes to $200.01. I would just eat the extra $0.01.","You should total the items first, to get $3.00, then add the tax, then round up/down accordingly. Your two examples above don't offer this option, even though your second example arrives at the same result. In your first example, a number of items taxed one at a time might result in many .006 results which would round to .01. A long enough list of items would result in an error of many cents depending how many items there are. Totaling first then applying tax results in your saving .004 or losing .005 cents maximum due to rounding. See A Guide to Sales and Use Tax which is a document put out by the Massachusetts Dept of Revenue. In the chart for tax, it shows that $1.09 is taxed at five cents, but at 5%, it would be 5.45. So, at least for this state, I believe I correctly stated the rounding process.","I'd imagine in this extreme edge case it would round down to $0. I can't fathom what makes $10.02 or $153.02 any different from $0.02.","Welcome to the real world. BTW, you have far too rosy a view of this if you think you're only paying 28.5% of your income in taxes. Remember that your employer theoretically pays half your FICA tax. But as far as they're concerned, that's part of the cost of having you as an employee. If FICA was abolished, supply and demand would quickly push salaries up by an amount equal to the FICA tax. So add another 7.65% to your taxes. Plus your employer has to pay unemployment tax (federal unemployment tax is $420 per employee per year, states vary) and workman's compensation tax (no idea how much that is) for the privilege of having you as an employee. You likely pay sales taxes on most everything you buy. I believe sales tax in Massachusetts is 6.25%. Assuming you pay that on only half of what you buy, add another 3% or so. Do you work for a corporation? Between when they sell the fruits of your labor and when they pay you, they have to pay corporate income tax. There are a lot of deductions so that gets complicated, but figure another few percent. Do you drive a car? You're paying gas tax -- 41.9 cents per gallon in MA. Do you smoke or drink alcohol? Extra taxes on those. Travel by plane or stay in a hotel? More special taxes. When you get around to buying a house, you'll pay property taxes on it every year, year after year. For me in Michigan that's another 3% of my income. I understand it's a lot more in Massachusetts. Etc, many other smaller taxes that add up.","Is that normal? Yes. It's in fact pretty low. Just the FICA taxes you pay are ~7.5%, so you're paying ~21% for State and Federal. Pretty reasonable, especially if you live in a high-tax state (which MA is ~5.3% on all income).","As someone who works for a company that deploys POS systems in Canada, I can tell you that your best bet would be to have a configuration option that lets the client decide what to do. If they have a business practice that would allow for a sale total to be $0.01 or $0.02, they should first evaluate their business practice. If you're building a POS system to deploy in Canada, I'm sure you have access to resources (potential clients) who would already know how they would want to handle this. Ask them.","Standard deduction is $6300, and exemption is $4050, totaling $10,350. (For 2016) Twice this for a couple ($20,700). The tax on money just above this is 10%, so the few thousand above will be taxed at a few hundred dollars. Where are you getting the number you showed? Can you edit your question to clarify exactly what you are asking?","\"Grocery food is not subject to sales tax in Maryland, but some food is taxed depending on category or preparation. So you must have had a combination of grocery and taxable foods. One of the cheaper items you purchased was subject to a whopping penny of sales tax. http://taxes.marylandtaxes.com/Individual_Taxes/Taxpayer_Assistance/Individual_Tax_FAQs/Use_Tax_FAQs/q4.shtml In general, food sales are subject to Maryland's 6 percent sales and use tax unless a person operating a substantial grocery or market business sells the food for consumption off the premises and the food is not a taxable prepared food. A grocery or market business is considered to be \"\"substantial\"\" if the sales of grocery or market food items total at least 10 percent of all food sales.\"","\"Massachusets does no such thing. The 5.25% tax is only on realized gains. \"\"Unearned\"\" means \"\"doesn't tie to your trade/business\"\", i.e.: is not gained through your personal performance.\"","Taxes should not be calculated at the item level. Taxes should be aggregated by tax group at the summary level. The right way everywhere is LINE ITEMS SUMMARY PS:If you'd charge at the item level, it would be too easy to circumvent the law by splitting your items or services into 900 items at $0.01 (Which once rounded would mean no tax). This could happen in the banking or plastic pellets industry.","I'd go with 19.99 free shipping if you can. Especially with stuff like Amazon Prime people hate paying for shipping nowadays and they'll just look for your product or something similar where it ships free. If you can take the $2 haircut 19.99 is a much nicer sounding number to people.","\"The $10,400 is in the question, in two pieces. His employer withheld $8000, and her employer withheld $2400. Thus they paid together $10,400 in income taxes, which are deductible if you itemize deductions and choose income taxes over sales taxes (you can deduct one or the other). There's nothing \"\"standard\"\" about the amount, though it is standard to take the income tax deduction (almost always higher than sales tax).\"","I have a very hard time believing you pay 60% of gross. Otherwise, I believe you're right in the way this works: Suppose you make $100k and pay 25% of that in taxes. 100,000 * .25 = 25,000 But if you spend $1,000 pretax, then it's as if you were paid $99,000 99,000 * .25 = $24,750 So the difference is $250. Which is the same as that $1,000 * .25.","\"It sounds like \"\"gross receipt tax\"\" is essentially the same thing most states call \"\"sales tax\"\", which is always handled this way -- prices displayed are pre-tax, tax is added when the final price is calculated. One reason for doing it that way is that most prices result in taxes that involve fractions of pennies, and calculating from the total produces a more accurate result than calculating tax on each item individually. It is theoretically possible to set prices so the numbers come out evenly when tax is added. But that requires that the prices be in fractional cents, potentially to many decimal places. And in fact in some places it is illegal to display (only) the with-tax price. Otherwise I'm sure some stores and restaurants would be willing to deal with the mils and micros, purely on principle or as a marketing gimmick. Since customers have learned to expect sales tax, it really isn't worth the effort to fight it. The closest I've seen has been occasional \"\"we'll pay your sales tax\"\" offers, or statewide sales-tax holidays once a year.\"","\"First of all to answer the basic question \"\"Is one method correct? Might it depend on local laws?\"\" Yes it does depend on local laws. Because ultimately the business will have to file forms with the sate/county/city. These forms are going to ask for the total sales based on the tax category (tax free, x%, y%). Each transaction could have parts that fall into each category. The local taxing authority decides what goes into each category. The local taxing authority also determines how often the business needs to submit the taxes. They can even decide to base the rates used by where the customer lives. A business is not required to charge directly for sales tax. That is why frequently at sporting events, the price on the menu notes that all sales taxes are included. I suppose not directly charging a sales tax makes the monthly calculation harder, but the state will still get their money. Rounding up at the end of the entire transaction is enough to make sure they collect enough taxes, so they don't have to dip into their profits.\"","The US doesn't have a Value Added Tax, which is the one usually refundable upon departing the country... so sales taxes you pay in this country stay in this country and you don't get a refund. Just remember to treat the tax as an implied part of the price. (And be aware that state and local taxes may vary, so the total price may be higher in one place than in another. New York City adds a few percent on top of the state sales tax, for example.) If you aren't sure how much tax would be, don't be afraid to ask.","The rounding should always follow the same rule. If the value ends in .01 or .02 then you round to .00. Doesn't matter if it's 10.01 rounding to 10.00 or 0.01 to 0.00. The decision on what a company wants to do if an invoice total is $0.01 or $0.02 would be up to the company. The POS system should follow the rule and round to $0.00 if the method of payment is cash, but the company has the right to not give things away for free. They can impose a minimum cash invoice amount of $0.05. But you would do this by requiring the customer to add more items to their purchase. You couldn't just round the invoice up to $0.05 and to charge them $0.05 for a $0.01 item It would be similar to companies having a minimum purchase amount when paying by credit card. If their minimum amount is $10.00 and you want to buy something that's $5.00, you either pay cash or add something to your order. They don't just charge you $10.00 for your $5.00 item. I think this would be a extreme edge case where you have an invoice with a total of $0.01 or $0.02, without any discounts, partial payments, etc. If the customer's total was $10.01 and they paid with a $10.00 gift card, the final amount owing of $0.01 would round down to $0.00 and they wouldn't owe any more. If they had paid cash, the total would have rounded to $10.00 anyway. Similarly, if the customer returned an item and bought a new item, or used coupons, and the total owing was $0.01 or $0.02, then you would round down to $0.00 and they wouldn't pay anything. As BobbyScon said, you can implement some options to allow the company to decide how they want to handle this. You could have an option that doesn't allow a sale to be processed if the total amount is less than $0.03 and the sale doesn't include any discounts, returned items, coupons, etc. The option could be to completely block the sale, require a supervisor override, or just display a warning to the cashier. Best bet is to talk to as many of your current or potential clients as you can to see how they would like this edge case handled. For many, it's probably a mute case since they wouldn't have items that have a unit price less than $0.03. Maybe a place like a hardware store that sells individual nuts, bolts, and washers.","\"From Amazon's Site: \"\"If an item is subject to sales tax in the state to which the order is shipped, tax is generally calculated on the total selling price of each individual item.\"\" I'm going to trust a company of this size has this correct. Shipping address.\"","I think it should be free. Why? I had a coupon for 35, I bought something for 35.01 including taxes and total to pay was 0.01, rounded to 0.00. I think it's almost the same scenario.","\"Tax is often calculated per item. Especially in the days of the internet, some items are taxable and some aren't, depending on the item and your nexus. I would recommend calculating and storing tax with each item, to account for these subtle differences. EDIT: Not sure why this was downvoted, if you don't believe me, you can always check with Amazon: http://www.amazon.com/gp/help/customer/display.html/ref=hp_468512_calculated?nodeId=468512#calculated I think they know what they're talking about. FINAL UPDATE: Now, if someone goes to your site, and buys something from your business (in California) and the shipping address for the product is Nevada, then taxes do not have to be collected. If they have a billing address in California, and a shipping address in Nevada, and the goods are shipping to Nevada, you do not have to declare tax. If you have a mixture of tangible (computer, mouse, keyboard) and intangible assets (warranty) in a cart, and the shipping address is in California, you charge tax on the tangible assets, but NOT on the intangible assets. Yes, you can charge tax on the whole order. Yes for most businesses that's \"\"Good enough\"\", but I'm not trying to provide the \"\"good enough\"\" solution, I'm simply telling you how very large businesses run and operate. As I've mentioned, I've done several tax integrations using software called Sabrix (Google if you've not heard of it), and have done those integrations for companies like the BBC and Corbis (owned and operated by Bill Gates). Take it or leave it, but the correct way to charge taxes, especially given the complex tax laws of the US and internationally, is to charge per item. If you just need the \"\"good enough\"\" approach, feel free to calculate it by total. Some additional reading: http://en.wikipedia.org/wiki/Taxation_of_Digital_Goods Another possible federal limitation on Internet taxation is the United States Supreme Court case, Quill Corp. v. North Dakota, 504 U.S. 298 (1992),[6] which held that under the dormant commerce clause, goods purchased through mail order cannot be subject to a state’s sales tax unless the vendor has a substantial nexus with the state levying the tax. In 1997, the federal government decided to limit taxation of Internet activity for a period of time. The Internet Tax Freedom Act (ITFA) prohibits taxes on Internet access, which is defined as a service that allows users access to content, information, email or other services offered over the Internet and may include access to proprietary content, information, and other services as part of a package offered to customers. The Act has exceptions for taxes levied before the statute was written and for sales taxes on online purchases of physical goods.\"","I owned a restaurant for over 5 years. Sales tax was only collected on POST discount price, though every state that collects sales tax may have different laws regarding collection. For example, when a customer used a gift certificate, that did NOT reduce the amount that tax was collected on. Why? Because the restaurant at some point or another collected the full amount of the bill.","The original post's $16 has two errors: Here is the first scenario: . Tax Liability($) on Net . Cash # of Price Paper Realized Value Time: ($) Shares ($/sh) Profits Profits ($) 1. Start with: 100 - n/a - - 100 2. After buy 10@10$/sh: - 10 10 - - 100 3. Before selling: - 10 12 (5) - 115 4. After sell 10@12$/sh: 120 - n/a - (5) 115 5. After buy 12@10$/sh: - 12 10 - (5) 115 6. Before selling: - 12 12 (6) (5) 133 7. After sell 12@12$/sh: 144 - n/a - (11) 133 8. After buy 14@10$/sh: 4 14 10 - (11) 133 9. Before selling: 4 14 12 (7) (11) 154 10.After sell 14@12$/sh: 172 - n/a - (18) 154 At this point, assuming that all of the transactions occurred in the same fiscal year, and the realized profits were subject to a 25% short-term capital gains tax, you would owe $18 in taxes. Yes, this is 25% of $172 - $100.","It would be 0.22 * Rs 5 per share, i.e. Rs 1.1 per share. For 1000 share it would be Rs 1.1 * 1000, i.e. 1100","\"Don't worry about it. The State doesn't care about rounding error. All you need to do is say \"\"We charge our prices with tax included\"\" - you know, like carnivals and movie theaters. Then follow the procedures your state specifies for computing reportable tax. Quite likely it wants your pre-tax sales total for the reporting period. To get that, total up your gross sales that you collected, and divide by (1 + tax rate). Just like DJClayworth says, except do it on total sales instead of per-item. If you need to do the split per-transaction for Quickbooks or something, that's annoying. What Quickbooks says will be pennies off the method I describe above. The state don't care as long as it's just pennies, or in their favor.\"","Don't take it so literally. 100 is close to 98, so if your formula calls for 98, buy 100.","The key question is whether this number includes taxes and insurance. When you get a mortgage in the U.S., the bank wants to be sure that you are paying your property taxes and that you have homeowners insurance. The mortgage is guaranteed by a lien on the house -- if you don't pay, the bank can take your house -- and the bank doesn't want to find out that your house burned down and you didn't bother to get insurance so now they have nothing. So for most mortgages, the bank collects money from the borrower for the taxes and insurance, and then they pay these things. This can also be convenient for the borrower as you are then paying a fixed amount every month rather than being hit with sizeable tax and insurance bills two or three times a year. So to run the numbers: As others point out, mortgage rates in the US today are running 3% to 4%. I just found something that said the average rate today is 3.6%. At that rate, your actual mortgage payment should be about $1,364. Say $1,400 as we're taking approximate numbers. So if the $2,000 per month does NOT include taxes and insurance, it's a bad deal. If it does, then not so bad. You don't say where you live. But in my home town, property taxes on a $300,000 house would be about $4,500 per year. Insurance is probably another $1000 a year. And if you have to get PMI, add another 1/2% to 3/4%, or $1500 to $2250 per year. Add those up and divide by 12 and you get about $600. Note my numbers here are all highly approximate, will vary widely depending on where the house is, so this is just a general ballpark. $1400 + $600 = $2000, just what you were quoted. So if the number is PITI -- principle, interest, taxes, and insurance -- it's about what I'd expect.","Are you sure about this? I mean your premise. I thought tax was based on shipping address. I've made purchases, live, in NY, and had the choice to pay sales tax or to have the item shipped, in effect paying shipping, for real, instead of sales tax. It appears that by buying a loaded cash card you'd accomplish your goal. I've seen such cards go fo $1.50, no fees other than that. To save the sales tax, or pay the tax of the state you're in, it may be worth it. But a NH billing address don't solve this, again, I believe tax is based on ship-to.","The IRS has a calculator for this purpose.","\"the state of New Mexico provides guidance in this exact situation. On page 4: Gross receipts DOES NOT include: Example: When the seller passes tax to the buyer, the seller should separate, or “back out”, that tax from the total income to arrive at \"\"Gross Receipts,\"\" the amount reported in Column D of the CRS-1 Form. (Please see the example on page 48.) and on page 48: How do I separate (“back out”) gross receipts tax from total gross receipts? See the following examples of how to separate the gross receipts tax: 1) To separate (back out) tax from total receipts at the end of the report period, first subtract deductible and exempt receipts, and then divide total receipts including the tax for the report period by one plus the applicable gross receipts tax rate. For example, if your tax rate is 5.5% and your total receipts including tax are $1,055.00 with no deductions or exemptions, divide $1,055.00 by 1.055. The result is your gross receipts excluding tax (to enter in Column D of the CRS-1 Form) or $1,000. 2) If your tax rate is 5.5%, and your total gross receipts including tax are $1,055.00, and included in that figure are $60 in deductions and another $45 in exemptions: a) Subtract $105 (the sum of your deductions and exemptions) from $1,055. The remainder is $950. This figure still includes the tax you have recovered from your buyers. b) Divide $950 by 1.055 (1 plus the 5.5% tax rate). The result is $900.47. c) In Column D enter the sum of $900.47 plus $60 (the amount of deductible receipts)*, or $960.47. This figure is your gross receipts excluding tax.\"","Assuming cell A1 contains the number of trades: will price up to A1=100 at 17 each, and the rest at 14 each. The key is the MAX and MIN. They keep an item from being counted twice. If X would end up negative, MAX(0,x) clamps it to 0. By extension, if X-100 would be negative, MAX(0, X-100) would be 0 -- ie: that number doesn't increase til X>100. When A1=99, MIN(a1,100) == 99, and MAX(0,a1-100) == 0. When A1=100, MIN(a1,100) == 100, and MAX(0,a1-100) == 0. When A1=101, MIN(a1,100) == 100, and MAX(0,a1-100) == 1. Of course, if the 100th item should be $14, then change the 100s to 99s.","To bring more clarity to the issue, Viriato will be entitle to deduct property tax depending upon whether he is claiming standard deduction (which varies on some factors including filling as married or single) or itemized deduction. If he is claiming, itemized deduction Example 1 is correct. Example 2 suffers from another mistake. He can get refund of only income tax portion of $5000 and not $5000.","\"Etiquette or not, it is hurting the seller. The transaction fees have usually minimums, so if the actual transaction is below the minimum - they'll pay larger fee on the transaction (relatively). As an example, assume minimum fee for a debit card swipe is 20 cents, or 2% of the transaction. For a transaction of $10 and above, the fee will be 2% of the transaction. But for $1.67, the fee becomes 12% of the transaction. 6 times more expensive for the seller. Basically, the sale was most likely at a loss for them (they usually have very low margins, especially for a \"\"dollar\"\" store). So take that into account as well.\"","This is taxed as ordinary income. See the IRC Sec 988(a)(1). The exclusion you're talking about (the $200) is in the IRC Sec 988(e)(2), but you'll have to read the Treasury Regulations on this section to see if and how it can apply to you. Since you do this regularly and for profit (i.e.: not a personal transaction), I'd argue that it doesn't apply.","The answer to this question requires looking at the mathematics of the Qualified Dividends and Capital Gains Worksheet (QDCGW). Start with Taxable Income which is the number that appears on Line 43 of Form 1040. This is after the Adjusted Gross Income has been reduced by the Standard Deduction or Itemized Deductions as the case may be, as well as the exemptions claimed. Then, subtract off the Qualified Dividends and the Net Long-Term Capital Gains (reduced by Net Short-Term Capital Losses, if any) to get the non-cap-gains part of the Taxable Income. Assigning somewhat different meanings to the numbers in the OPs' question, let's say that the Taxable Income is $74K of which $10K is Long-Term Capital Gains leaving $64K as the the non-cap-gains taxable income on Line 7 of the QDCGW. Since $64K is smaller than $72.5K (not $73.8K as stated by the OP) and this is a MFJ return, $72.5K - $64K = $8.5K of the long-term capital gains are taxed at 0%. The balance $1.5K is taxed at 15% giving $225 as the tax due on that part. The 64K of non-cap-gains taxable income has a tax of $8711 if I am reading the Tax Tables correctly, and so the total tax due is $8711+225 = $8936. This is as it should be; the non-gains income of $64K was assessed the tax due on it, $8.5K of the cap gains were taxed at 0%, and $1.5K at 15%. There are more complications to be worked out on the QDCGW for high earners who attract the 20% capital gains rate but those are not relevant here.","The price inflation isn't a percentage, it's a fixed amount. If the dealer adds $R to the price of both the trade-in and the purchased car, then everyone ends up with the right amount of money in their pockets. So your formula should be: D + T + R = 0.1 * (P + R)","$6 per gallon, up to 20 gallons. So if gas was $2/gallon, that would be 3 20-gallon fill-ups, or 60 gallons. I guess if today's cost is $2.32, that would be 2 free 20-gallon fill-ups, and the last 20 gallons for $1.36/gallon, or $27. Much cheaper than the $140 it would be without the discounts :)","Australian Goods and Services Tax is charged on the sale amount. Whatever internal accounting you do before billing the customer is of no interest to the Australian Tax Office.","\"To echo part of stannius' response. If it's taxable, there would be tax on $19,999, just a bit less than on $20,000. Your uncle may have a credential, and members here may not, but still he may be mistaken. Or he could be giving you advice on how to skirt the law. The taxability and the $20,000 threshold are unrelated! Trying to 'avoid' the $20,000 is a completely misplaced effort. Gifts from anyone are not taxable to the recipient. So long as nothing is received in return, it's not taxable income to her. In contrast a blogger with a \"\"tip jar\"\" is soliciting money in exchange for advice, entertainment, etc. that's taxable. Donations to individuals, in the circumstance you describe are not income to her, nor are they deductible to the donor. Edit - a fellow blogger (more than that, she's my tax crush) had an article Cancer survivor gets $19,000 tax bill for GoFundMe donations which may render my answer incorrect. Other article on this story suggest that the IRS is notified, but the nature of the transfer needs to be addressed. In my opinion, you should find a new uncle CPA.\"","Another approach, albeit slow: Buy something that's free after rebate. Upsides: Low cost. (Stamps, envelopes) Downside: Slow, hard to get an exact match on the amount of the card.","No, you don't. Rounding errors happen, and if there's no change in the actual tax there's no reason to amend. If all the income was properly reported and the tax was properly calculated - no-one cares if it was rounded up or down on one of the lines. Note for the next time though: Not sure about New York, but Federal taxes are generally rounded to the nearest dollar on each line of the form. So don't calculate cents, just round to the nearest dollar, and be consistent on all of your tax forms. Technically, it is perfectly legal to report cents as well (and people used to when the forms were still filled by hand with pen), but all the automatic tax filing software rounds, so just do that.","I live in MA. Median price value here is $410K. Depending on location a $410K house here can be a ranch from 1950 needing a complete overhaul, a 1970's split level, a 4 bedroom Colonial in Central MA or a condo somewhere close to Boston. These homes are decidedly nothing special, and certainly not where the 1% live. There are plenty of houses that list in the $750s in my town that go on and off the market really quickly, generally purchased by a two-earner family making decent (but not 1%er) money. Think engineers, doctors, sales and marketing execs, managers. Source : https://www.bostonglobe.com/business/2017/07/25/median-home-price-massachusetts-tops-for-first-time/rVsP7BwWZCtKwP9BqZQOKJ/story.html","(12 * 100) * 1.01 = 1212 Assuming the $12 ask can absorb your whole 100 share order.","Most of the time, your tax only reduces by the current marginal rate - meaning you would only reduce your tax by 28% to 25% depending on which part of the bracket you're in. However, in the area around 100k, there are cases where reductions will have more of a marginal effect than that. You'll never reduce it more than 100%, but you can reduce it by 35-40% despite being in the 25% bracket. That is because of certain deductions and credits which phase out beginning around 80k-120k; things like the IRA deduction, the Child Tax Credit, Childcare Tax Credit, and similar. Since many of them phase out in this range, additional dollars cost you your marginal rate (25%) plus the percentage of the credits or deductions which phase out here, which might bring you up another 10% or so.","\"Sales tax and luxury tax is what you will have to pay tax wise, and they are non-refundable (in most cases but the rules vary area to area). This really tripped up some friends of mine I had come from England. The rules are complicated and regional. Sales tax is anywhere from 0% to 10.25% and are not usually applied to raw foods. Luxury taxes are usually state level and only apply to things most people consider a large purchase. Jewelry, cars, houses, etc. Not things your likely to buy. (Small, \"\"normal\"\" jewelry usually doesn't count. Diamond covered flava-flav clock ... probably has a luxury tax.) For sales tax, it can change a lot. Don't be afraid to ask. People ask all the time. It's normal. I personally add 10% to what I buy. Sales tax in my city is 7%, county is 6.5%, state is 6%. So you can get different rates depending on what side of the street you shop on some times. Under normal circumstances you do not get a refund on these taxes. Some states do give refunds. Usually however the trouble of getting that refund isn't worth it unless making a large purchase. You are not exempt from paying sales tax. (Depending on where you go you may get asked). Business are exempt if they are purchasing things to re-sell. Only the end customer pays sales tax. Depending on where you go, online purchases may not be subject to sales tax. Though they might. That, again, depends on city, county, and state laws. Normally, you will have to pay sales tax at the register. It will be calculated into your total, and show as a line item on your receipt. http://3.bp.blogspot.com/-yAvAm2BQ3xs/TudY-lfLDzI/AAAAAAAAAGs/gYG8wJeaohw/s1600/great%2Boutdoors%2Breceipt%2BQR-%2Bbefore%2Band%2Bafter.jpg Also some products have other non-refundable taxes. Rental car taxes, fuel taxes and road taxes are all likely taxes you will have to pay. Areas that have a lot of tourists, usually (but not always) have more of these kinds of taxes. Friendly note. DON'T BUY DVDs HERE! They won't work when you get home. I know you didn't ask but this catches a lot of people. Same for electronics (in many cases, specially optical drives and wireless).\"","If you are using an Excel, the Function PV should be able to easily calculate this. Excel Formulae PV = (Rate,Nper,Pmt,Fv,Type) Where Rate: Rate of return. In this case you can use Inflation or assumed rate that would cost you. Say 3-5%. Note the Rate has to be for Nper. i.e. in Nper if you are counting yearly payments, then rate is yearly, if you are counting as monthly, then the rate should be monthly. NPer: Number of periods. If yearly in your case it would be 20. If Monthly 20*12, if Quarterly 20*4 etc. Pmt: Expected Payments for Nper. If you are saying 20 million over 20 years, it would be 1 million per year. Fv and Type can be blank So assuming a rate of 3%, and yearly payments of 1 million over 20 years. PV = $14,877,474.86 [It would show negative, just ignore the sign]","10% of 20,000 has a way bigger impact on someones quality of life than 10% of 10,000,000. There's a bare minimum you need to have an okay lifestyle, and it scales very quickly until you hit six figures-ish (or whatever the equivalent is for your area in purchasing power).","\"There's one factor the previous posters apparently missed here: You say \"\"self-employment tax\"\"--in other words, at least some of that $16k is from self employment. In a normal employment situation the FICA tax is taken out of your paycheck, it's normally spot on and generally doesn't show up on your tax return. However, for the self-employed it's another matter. You pay the whole 15.3% from the first dollar and this does show up on your tax return. If it's all self employment money you would have about $2.5k in tax from this.\"","The vendor needs to do this using apportionment, according to the VAT rules for mixed supplies: If you make mixed supplies and the individual supplies are not liable to VAT at the same rate then you need to work out the tax value of each supply in order to calculate how much tax is due. If the tax value is based on the total price you charge (see paragraph 7.3) you do this by splitting that price between the supplies. This is called an apportionment ... There is no special method of apportionment ... However, your calculations must be fair and you must be able to justify them. It is usually best to use one of the methods shown in section 32. The section 32 referred to really relates to apportioning use between business and non-business purposes, but it implies that splitting up the total price in proportion to the original prices would probably be fair. So in your example the vendor might split the £5 discount equally between the spoon and the carrycot as they had the same gross cost, and pay VAT as if each had cost £7.50 gross. The vendor could also do it in proportion to their net (pre-VAT) prices and thus apportion a bit more of the discount to the carrycot than the spoon, but as this would lead to them paying slightly more tax overall they probably wouldn't choose to. However, none of this is likely to be too relevant to a consumer, since in the UK prices must be presented as the gross (VAT-inclusive) amounts and so the discounts will also apply to those amounts. It will of course affect how much of the purchase price the vendor ends up paying on to the government and thus might indirectly affect what discounts the vendor is willing to offer.","> General Sales: Virginia - 4.3%; Fairfax County - 1%; plus an additional 0.7% state tax for transportation. At most they'd have to charge the additional 1%, and I'm pretty sure taxes don't work that way. Either you're wrong or your restaurants are defrauding you with fake taxes. Or your local government is failing to put the actual tax rates on their websites.","It depends on if it is a non-refundable deposit, retainer, etc. The remaining $1,500 is not included in that quarter's sales, because you have not yet received it and it is not guaranteed. The question is really if you should count the $500 toward the quarter where it is received, or during the quarter where you invoice. This deposit might be categorized as a liability until you invoice, and there is no sales tax to be calculated until the invoice for the total. I say 'might' because this can vary by state and the type of transaction or business. For example, if someone makes a cash down payment on a lease for a car, some states will require that sales tax be charged on this.","\"Actually, the other answer isn't strictly correct. It's an estimate, giving a lower bound that gets less accurate as income increases. Consider: U.S. income tax is based on a progressive tax system where there are income bracket levels with increasing tax rates. Example: Given U.S. 2009 federal tax rates for an individual filing as \"\"single\"\": Imagine somebody making $100000. Assuming no other credits, deductions, or taxes, then income tax based on the above brackets & rates would be calculated as follows: Meaning the average tax rate for the single individual earning $100,000 is 21.72%. However, a pre-tax deduction from that income actually comes off at the top marginal tax rate. Consider the same calculation but with taxable income reduced to $99,000 instead (i.e. simulating a pre-tax $1000 deduction): That's a difference of $280, which is more than the $217.20 savings that would have been estimated if just using the average tax rate method. Consequently, when trying to determine how much money would be saved by a tax deduction, it makes better sense to estimate using the marginal tax rate, which in this case was 28%. It gets a little trickier if the deduction crosses a bracket boundary. (Left as an exercise to the reader :-) Finally, in the case of the deduction being discussed, it also looks like payroll FICA taxes paid by the employee (Social Security's 6.2%, and Medicare's 1.45%) would be avoided as well; so add that to the marginal tax rate savings. The surest way to know how much would be saved, though, would be to do one's income tax return calculation without the deduction, and then with, and compare the numbers. Tax software can make this very easy to do.\"","\"at $8.50: total profit = $120.00 *basis of stock, not paid in cash, so not included in \"\"total paid\"\" at $8.50: total profit = $75.00\"","Straight line in this example should be just the $2MM per year. I don't think the author of the problem intended you to use anything in the actual tax code like MACRS. I think the goal of the problem is to get you to identify the value of the depreciation tax shield and how the depreciation does affect your cash flow by reducing your taxes, even though depreciation itself is not a cash event.","\"I think the math is wrong. Note that in Scenario #1, you are only out of pocket $1000, while in Scenario #2, you are out of pocket $1250; the contribution and the tax you paid with respect to it. A better concept than tax rate is \"\"Retention Rate\"\". This is the fraction of your money that the Feds let you keep. And Growth Factor is the how much the investment grows. So In Scenario #1, you multiply $1000 by the investment Growth Factor and then by the retirement Retention Rate. And in Scenario #2, you multiply the same $1000 by the current Retention Rate and then by the Growth Factor. Since in your approximation, the two GFs are the same, there is no saving...\"","So I am trying to puzzle out this claim about tax cuts paying for themselves through growth. This means that for every $1 in revenue they forsake in cuts, they expect to get $1 back in revenue elsewhere (like other taxes). So with a high tax burden on something, say 25%, that $1 cut in revenue would need to generate $4 in additional value to pay for itself. I can't think of *anything* where the federal tax burden is actually 25% of the total value. This looks like a pretty clear case of diminishing returns, because the *lower* the tax burden the *higher* the growth needs to be in order to get the money back. If we look at something on the order of sales tax, say 5%, that $1 cut needs to generate $20 in growth. If we flip this around and look at it as an investment, these are the kinds of returns that are reserved for miraculous right-time right-place bets. They are not the kind of returns you can expect to get from groceries and mortgages. Can somebody sanity check me on this?","No no, I didn't forget. 3 times 12 is 36 minus 20 is $16 more. Thank you, I just needed someone to acknowledge that's they were incorrect. How's that get top comment though?! So frustrating. Edit: okay, not top comment anymore but still up there.","No, it's not possible. Even if you had no deduction or credits, your federal tax on $16,604 would be: $9075 @ 10% = $907.50 + $7529 @ 15% = $1129.35 = $2036.85 That assumes you are filing as single. There must be more to the story. Typo in your income numbers? Also, what do you mean by a self-employment tax deduction? Maybe update your question to include a breakdown of everything you entered? Edit: As noted in Loren's answer, it seems that it is indeed possible in at least one case (self-employment taxes).","A minimum purchase quantity just means that you need to round your result up to the nearest 100. In your example it comes out evenly. If we look at an example where it doesn't come out even, you'd round up: And round that up to 700 due to purchase quantities. For a slightly more complex and accurate approach, you'd then evaluate how many of the extras you had to buy due to the minimum purchase quantity would need to be sold: So you'd have to sell 694 of the 700 purchased to break even.","What's funny to me is that the sales tax isn't what gives Amazon better prices. It's that stores have to include their costs on the price that's shown on the shelf. Amazon gets to tell you later that there's a shipping fee, Amazon isn't paying a store staff and rental on store front property. In short Amazon can show the customer a price that is making a decent profit, and still be lower than a retail outlet.","\"Here is the way I would estimate your taxes. Remember that a bi-weekly paycheck means that you get 26 paychecks per year. If the $1000 federal refund is too much for you, you can decrease your withholding to bring your refund down. This can be done by increasing your exemptions claimed on your W-4. See \"\"How can I adjust tax withholding so that I don't get a large Tax Refund?\"\" for more details. However, keep in mind that your state withholding is perfect right now, and if you increase your exemptions, you will likely owe tax to the state, unless you increase your state withholding at the same time.\"","\"Yep. You're single, you're possibly still a dependent on your parent's taxes (in lieu of rent), and you're finally bringing home bacon instead of bacon bits. Welcome to the working world. Let's say your gross salary is the U.S. median of $50,000. With bi-weekly checks (26 a year; common practice) you're getting $1923.08 per paycheck. In the 2013 \"\"Percentage Method\"\" tax tables, here's how your federal withholding is calculated as a single person paid biweekly: Federal taxes are computed piecewise; the amount up to A is taxed at X%, then the amount between A and B is taxed at Y%, so if you make $C, between A and B, the tax is (A*X) + (C-A)*Y. The amount A*X is included in the \"\"base amount\"\" for ease of calculation. Back to our example; let's say you're getting $1923.08 gross wages per check. That puts you in the 25% marginal bracket. You pay the sum of all lesser brackets (which is the \"\"base amount\"\" of the 25% bracket), plus the 25% marginal rate on every dollar that falls within the bracket. That's 191.95 + (1923.08 - 1479) * .25 = 191.95 + (444.08 * .25) = 191.95 + 111.02 = $302.97 per paycheck. The \"\"effective\"\" tax rate on the total amount, as if you were being charged a flat tax, is 15.75%, and this is just for the federal income tax. Add to this MA state income taxes (5.25% flat tax), FICA (aka Medicare; 1.45% flat) and SECA (aka Social Security; 6.2% up to a \"\"wage base\"\" that $50k doesn't even approach), and your effective tax rate on each dollar you earn is 15.75% + 5.25% + 1.45% + 6.2% = 28.65%. This doesn't include any state unemployment taxes that may be withheld separately, but as the rate I come up with is pretty darn close to what you've figured (meaning I slightly overestimated your gross income and thus your effective tax rate), my bet is that SUTA's either employer-paid in MA, or it's just part of MA state income tax. It gets better, at least at the federal level: The amount of your state income taxes is tax-deductible at the federal level if you itemize your deductions. That may not be a factor for you as you'd have to come up with more than $6,100 of other tax-deductible expenses to make itemizing the better option than taking the standard deduction (big-ticket items are mortgage expenses other than principal payments, hospital stays such as for childbirth or major accident, and state and local taxes such as sales, property and income). If you can claim yourself as a dependent (meaning your parents can't), then $150 of each check ($3,900 of your annual salary) is no longer taxed for federal withholding, lowering the amount of money taxed at the 25% marginal rate. You effectively save $37.50 biweekly ($975 annually) in taxes. Get married and file jointly, and your spouse, her personal exemption, and an extra standard deduction amount (if you don't itemize) go on your taxes. The tax rates for married couples filing jointly are also lower; they're currently calculated (or were in 2012) to be the same as if two equal earners were to file separately, so if your spouse doesn't work, your taxes on the single income are calculated at the rates you'd get if you earned half as much. It doesn't work out to half the taxes, but it is a significant \"\"marriage advantage\"\". Have kids, and each one is another little $3,900 tax write-off. It's nowhere near the cost of having or raising the child, but it helps, and having kids isn't about the money. Owning a home, making charitable deductions, having medical expenses, etc are a toss-up. The magic number in 2013 is $12,200 for a married couple, $6,100 for a single person. If your mortgage interest, insurance premiums, property taxes, medical expenditures, charitable donations, any contributions from your take-home pay to a tax-deferred savings account (typically these accounts are paid into by your employer as a \"\"pre-tax deduction\"\" and never show up as taxable income, but you could just as easily move money from your take-home pay into tax-deferred savings) and any other tax-deductible payments add up to more than 12 large, then itemize. If not, take your standard deduction. As a single taxpayer just starting out in life, you probably don't have any of these types of expenditures, certainly not enough to give up the SD. I did the math on my own taxes in 2012, and was surprised at how little the government actually gets of my paycheck when all's said and done. Remember back in the summer of 2012 when everyone was mad at Romney for making millions and only paying an effective income tax rate of 14%, which was compared to the middle class's marginal rate of 25-28%? Well, my family of 3, living on a little more than the median income from one earner (me), taking the married standard deduction, three personal exemptions, and a little extra for student loan interest, paid an effective federal income tax rate of something like 3.5%. Of course, the FICA and SS taxes don't allow any deductions (not even for retirement savings), so add in the 4.2% SS (in 2012) and 1.45% FICA and the full federal gimme was more like 9-10%.\"","In 2012, the standard deduction is $5950 for a single person. Let's assume you are very charitable, and by coincidence you donate exactly $5950 to charity. Everything that falls under itemized deductions would then be deductible. So, if your property tax is $6000, in your example - Other adjustments come into play, including an exemption of $3850, I am just showing the effect of the property tax. The bottom line is that deductions come off income, not off your tax bill. The saving from a deduction is $$ x your tax bracket.","And I assume that is raw numbers, not corrected dollars. Even if it were corrected for official inflation it'd understate the change. Anyone paying attention can tell that inflation is pretty rampant, even if the official figures pretend it's low. Just had to pay $14 for an ordinary decent burger in a bar here, where only a few years ago it would have been $7 or $8 (metro Boston MA).","You can get the number you want pretty easily by plugging some numbers in to a mortgage calculator like this one. Set the PMI and property tax to 0 and set your term to the duration you need. Then plug in numbers until your payment amount equals your monthly budget. Think of yourself as the bank in this process. I started at 1mil over 25 years and that was over my budget so went down to 800k which was under just a bit, and found that you need about 850k based on your numbers.","The dividend is for a quarter of the year, three months. 80 cents is 3.9% of $20.51. Presumably the Div/yield changes as the stock price changes. On Yahoo, they specify that the yield is based on a particular stated date. So it's only the exact number if the stock trades at the price on that date.","While I might have to agree with PiratesSayARRR from below about missing case details, I have to say, your math seems to check out to me. Although the numbers aren't rouded off and pretty, they back out. $22,285.71 generates $334.28 of fees in a month; subtract from that the monthly cost of funds (.003333 x $22285.71)= $74.28... $334.28-74.28 = $260.00. Hate to say it, but maybe they didn't hire you for a different reason?","Whether applying for a job or buying a house, Offer a more specific price like $72,500, which tells them you thought hard about the price. $70K is too 'round' of a number. Additionally, your financial ability/condition can be a factor too. If you have 20% down, and your Realtor assures the seller that your transaction will go down without a hitch, and you'll be approved for a mortgage, they may accept your offer of $72,500 over the other guys $78K offer if [s]he has less desirable finances. Good Luck!","\"Something I found helpful when I learned this, is to just use Excel to expand the series. So start with A1 as \"\"175\"\", then in A2 put \"\"=175+(A1*1.004308)\"\" and paste that same formula down for a few hundred rows. You'll find your answer on A216. Most non-math-centric people don't have an intuitive grasp of how exponents (aka \"\"compounding\"\"... and never mind the natural logarithms this is all derived from) behave; but you can play with the numbers \"\"unrolled\"\" in Excel to get a better idea of how they work. That formula is just applying 0.4308% interest every period (row), and adding in a fresh $175.\"","States have made sales tax more confusing by expanding some categories and shrinking or eliminating other categories. In days of old there were taxes on items, and specific taxes on other small categories such as fuel and cigarets . In many states there were taxes implemented state wide, and in other cases they only applied to a specific city or region. As time went on taxes could be raised to bring in more money for the state or local government, but these tax increase were seen as unfair to the poor. So now the states are modifying and tweaking the tax rates. Some items are tax free, some have a low tax, and some are at the full tax rate. This can get confusing because the type of store can also play a factor. A bag a chips from a grocery store can be treated differently than a bag of chips from a hotdog stand. Some states have also added special taxes on snack foods. In general, purchases they want to encourage (staples from the grocery store) are tax free or low tax, items they don't want to encourage (snacks) are fully taxed. You can also be sure that they will treat luxury items as fully taxed. A new frontier of taxation are ones designed to tax people who don't live there. They have added taxes on restaurants and hotels. Since they are paid by tourists, the people most likely to pay them don't have a voice in setting the rate. States are now wanting to tax services as a way to make up shortfalls in taxing. Don't expect consistency from state to state, or year to year. Oh by the way that penny tax was for something that cost 17 cents or less, unless that item had a lower tax rate. The receipt should clearly identify the taxable items, and their tax level.","would you earn $600 or $1600? You would have $1600, and your earnings would be $600. That's the only answer it could be, since if you start with $1000 from your savings, then it's impossible for you to have also earned that money in the stock market. When you sell, do you keep your original capital, ($1000)? If you own a car which you bought for $1000, and then sell it for $1600, do you keep the original $1000?","As a CPA I can say, without a doubt, you do not owe any federal income tax. However, assuming all of you income was from your business and therefore subject to self-employment tax and you had no healthcare coverage, you would owe: $2,523 in Self-Employment Tax 645 in Healthcare Penalty $3,168 Total Amount You Should Owe. Assuming you have given us the right numbers, $3,300 sounds too high.","There is a 3rd option: take the cash back offer, but get the money from a auto loan from your bank or credit union. The loan will only be for. $22,500 which can still be a better deal than option B. Of course the monthly payment can make it harder to qualify for the mortgage. Using the MS Excel goal seek tool and the pmt() function: will make the total payment equal to 24K. Both numbers are well above the rates charged by my credit union so option C would be cheaper than option B.","\"J - Approaching the answer from the W4 perspective (for calculation purposes) may be more trouble that it's worth. I'd strongly suggest you use tax software, whether it's the 2016 SW or a current year one, on line, to get an estimate of your total tax bill for the year. You can then look at your current run rate of tax paid in to see if you are on track. If you have a large shortfall, you can easily adjust your withholdings. If you are on track to get a large refund, make the adjustment so next year will track better. Note, a withholding allowance is equal to a personal exemption. Some think that \"\"4\"\" means 4 people in the house, but it actually means \"\"don't tax 4 x $4050\"\" as I have $16200 in combined people or tax deductions.\"","The formula you need is: M = (r * PV) / (1 - ((1+r)^(-n))) M = monthly payment ($350) r = interest per period (7.56% / 12) = 0.63% n = number of periods (36 months) PV = present value, or here, your max loan amount given M Therefore: $350 = (0.63% * PV) / (1 - ((1+0.63%)^(-36))) The denominator on the right ends up equal to ~ 0.2025 when you do the math in your calculator. Carry that over to the by multiplying both sides of the equation by 0.2025 This results in $70.82 = 0.63% * PV Divide $70.82 by 0.63% to get PV = $11,242 (roughly). Hope this helps explain it algebraically!!","Your tax return will be due on April 18th of 2017 for the amounts made in 2016. Based on the figures that you have provided, assuming you are 18, and assuming you are a single taxpayer your total tax will be around $2600.00 ($2611.25 to be exact, without additional credits or deductions to AGI accounted for). The $1,234 in fed. inc. tax that you have already paid is considered to be a prepaid by the government. If at year-end you have provided more than you have made the government will refund you the excess (federal tax return).","\"As ApplePie discusses, \"\"tax bracket\"\" without any modifiers refers to a single jurisdiction's marginal tax rate. In your case, this is either your California's \"\"tax bracket\"\" or your Federal \"\"tax bracket\"\" (not including marginal Social Security and Medicare taxes). But if someone says \"\"combined state and federal tax bracket\"\", they probably mean the combination of your state and federal income tax brackets (again, lot including sales taxes, business and occupational taxes, social security taxes, and medicare taxes). The math to combine the state and federal marginal tax rates is a bit tricky, because most people can deduct either their state and local income taxes, or their state and local general sales taxes when computing their income for federal income tax purposes. (The federal \"\"alternative minimum tax\"\" restricts this deduction for some people.) For a single person earning $ 100,000 of salaries and wages in California, whose state income taxes are close to their standard deduction, the calculations for the combined marginal income tax rate look something like this: As mentioned above, this understates the tax bite on marginal \"\"earned income\"\". To find the true marginal rate, we need to add in Social Security taxes, Medicare taxes, sales taxes, and business & occupation taxes. The Social Security and Medicare taxes are sometimes called \"\"self employment taxes\"\". This math omits unemployment insurance and workers' compensation insurance, because those taxes are typically capped well below $ 100,000 per year of income. This math also omits B & O taxes, because this question is California specific. If an employer wishes to increase an employee's pay by $ 1,076.50, the first $ 76.50 will go to the employer's share of Social Security and Medicare taxes. The remaining $ 1,000.00 will be subject to the combined marginal income tax rate discussed above, plus will have $ 76.50 go to the employee's share of Social Security and Medicare taxes. The employee might buy some extra things with some of their extra money, and pay sales tax on them. In 2016, a 9 % sales tax rate was common in California's largest cities. The IRS estimated that (for a single person with no dependents making $ 100,000 per year who did not buy a boat, RV, motor vehicle, or major home construction), about 9 % of their marginal gross income was subject to sales tax.\"","No, the credit company will not remove the $20. Your merchant (the airline) charged in their local currency, the equivalent of $1000. That is also what they refunded. The $20 are yours to keep.","It seems that you are misunderstanding how your taxes are calculated. You seem to be under the impression that once you pass $37,450 annual income, ALL of your income will be taxed at 25%. However, in reality, only the income you earn above that amount will be taxed at 25%. You can use this chart to determine exactly how much federal tax you will pay; As you can see, if you earned, $37,500 in a year, you would only be charged 25% taxes on $50 (and you will pay 15% on the amount between $9226 and $37450, and 10% on the amount from $0 to $9225, which is $5126.25 when summed together).","\"An unmarried person with a total U.S.-sourced earned income under $ 37,000 during the year 2016 is likely to owe: If the original poster is not an \"\"independent contractor\"\", and is not \"\"billing corp-to-corp\"\" then: In summary: References:\"","\"In most jurisdictions, both the goods (raw materials) and the service (class) are being \"\"sold\"\" to the customer, who is the end user and thus the sale is subject to sales tax. So, when your friend charges for the class, that $100 is subject to all applicable sales taxes for the jurisdiction and all parent jurisdictions (usually city, county and state). The teacher should not have to pay sales tax when they buy the flowers from the wholesaler; most jurisdictions charge sales tax on end-user purchases only. However, they are required to have some proof of sales tax exemption for the purchase, which normally comes part and parcel with the DBA or other business entity registration paperwork in most cities/states. Wholesalers deal with non-end-user sales (exempt from sales tax) all the time, but your average Michael's or Hobby Lobby may not be able to deal with this and may have to charge your friend the sales tax at POS. Depending on the jurisdiction, if this happens, your friend may be able to reduce the amount the customer is paying that is subject to sales tax by the pre-tax value of the materials the customer has paid for, which your friend already paid the tax on.\"","how is it double taxation when you didn't start off with that extra $100? it's double taxation if they taxed you on the total amount you pulled out of the market, not the profit you made. explain the math on your last part, please.","$3,679,163.80 I made these assumptions that you did not state: Then using Excel, we find that with a starting point of $3,679,163.80, we can achieve your goal. The formula for Yearly Budget is =G$1*((1.035)^(A3-2012)) and the formula for Money left at year end is =(D4/1.05)+C4 For 2067, enter $0 leftover, and for 2066, enter $397,988.47 leftover. G$1 is $60,000 G$2 is 0.05","How do you know you are playing their cost plus tax? Retailers in the US currently only collect state sales tax on purchasers who are based in the same state they are in. For example, our business is in NY so we charge NY state sales tax. We do not charge sales tax for anyone living in any other state (or country). If your shipping address is in South America, the people you are buying from in the US should not be charging you any tax. You may have to pay customs duties and fees, but these are not sales tax.","Very Interesting Math. Plain and Simple, it saves you $10.00. When 18% goes above $10 you loose the money, you save if it is (18% of the baae bill) is less than $10. This raises few questions: You are forced to give out 18% tips. You may wish to keep it at 10-15%. You have no choice. All thing considered, better to avoid such coupons. They force you to spend money, they force you to spend in a particular way and they force you to give a tip, you may not be inclined to.","If you are just starting out, my tactic would be to go way high and then consider any different play money. So guess $90 and when it comes in at $60, buy a new shirt or go on a date.","I nowhere mentioned equal amount of assets. The point of my argument was wealth disparity. And, unless the rich pay more in taxes; that disparity will grow. Increasing tax from 24.7% to 50% would still leave the wealthy with a mountain of wealth; but, will help contribute greater to the overall economy. What do you think will need to happen in about a decade, when millions of American's are left permanently unemployed by automation?","Any deductable expense will reduce your taxable income not your tax payable. Your Example 1 above is correct and gives you 100% deduction. It is like having a business where your sales are $100,000 and your expenses in making the sales is $40,000. The expenses are your tax deductions and reduce your profits on which you pay tax on to $60,000. If your Example 2 was correct then the situation above would change that you would pay say $30,000 tax on $100,000 sales, then apply your deductions (or expenses) of $40,000 so that you would pay no tax at all and in fact get $10,000 back in your return. In this case the government would not be collecting any taxes but paying out returns to everyone. Your Example 2 is absolutly incorrect.","\"If the IRS changes your return in any way (including math errors) - they send a letter explaining the change and the reasons for it. You should read that letter, it will answer your question (Usually its a CP12 notice). If you didn't receive it - you can call them and ask to resend it (they're unlikely to answer over the phone, but you can try asking). I'm confused by your using the word \"\"estimate\"\". Your tax return is not supposed to be estimate, it supposed to be precise. Why are you considering your tax return \"\"estimate\"\"? If your filed tax return shows refund of $X and you received $X+$180 - then as I said, a letter of explanation from the IRS is due. If you don't know what the refund amount on your return is and you're trying to \"\"estimate\"\" it now - you better get a copy of that return.\"","But how do I bring the initial deposit into the equation? Basically, you can't. Unless you combine two different formulas from Math of Finance into a single expression. The single initial deposit of $1000 will compound for 20 years at 5% compounded annually. The final amount for this part of the deposit will be: V1 = 1000 x (1.05)^20 In addition the series of 20 payments will be an ordinary annuity with a regular payment of $100, with the value on the occasion of the 20th payment given by: So the final total amount in the account at the end of 20 years will be the sum of these two values...","From my perspective I suspect that if the government use the paid price, people will start to buy at very low nominal prices in order to pay less taxes, and will repay the seller by other means.","It’s actually become a problem. To raise taxes above that threshold requires a public vote. My city just raised them with a referendum for the schools. It’s pretty difficult though, and it definitely forces legislators to need the money for something voters want.","Amazon luckily allows you to buy gift cards for virtually any amount, down to even a dollar. Whenever i have some random amount left on a gift card, i just go ahead and buy an Amazon e-gift card with it. FYI - this works only with e-gift cards, not physical ones","How much Federal Capital Gains, NYS Income tax and local tax should I expect to pay? You're going to net about 2.4 millions of dollars. Federal long term capital gains tax is 20% (plus 3.8% medicare), NYS is 8.82%. Does it make sense to investigate the tax benefits of financing the sale for the buyer? Yes. Have your tax adviser check the options for you (financing, instalment, etc), especially if you have no other US-sourced income. Tax treaties are also something your tax adviser should be looking at. Be sure your tax adviser is properly licensed in New York as either EA, CPA or Attorney. Don't do anything without a proper tax advice.","Two ways to solve this. Look at the answer. If the answer says 3 months, then using ceiling for similar questions. You have to act according to the exam conventions, not according to own feelings. Whether or not the answer is reasonable and applicable in real life is out of the question. Ask yourself, did the investment double after 14 years 2 months? i.e. FV >= 2PV. Does a person who ran 99.72 meters in a 100-meter dash counted as touching the finish line?","How about if we lower taxes on the bottom two brackets and increase taxes on the top two brackets? Right now it's 10, 15, 25, 28, 33, and 35 percent. But wouldnt it be better if we change it to 8, 13, 25, 28, 35, 38 percent? The poor are the ones who spends most of their money on sale taxes than compared with any other brackets and the more money the poor have the more they will spend which will lead to more growth in the economy","If it's raising $25 million with a debt to equity ratio of 50% then it's raising $8.33 million of debt and $16.67 million of equity. You've priced it as if it were raising $25 million of debt and $25 million of equity, which would be raising $50 million with a debt to equity ratio of 100%.","With a paypal micropayment he pays 61k (6.1%) (5% of sale price + .05 cents per transaction) With a regular paypal he pays 95k (9.5%) (2.9% of sale price + .30 cents per transaction) In case anybody was wondering what the poster is talking about. Either way he got hosed by using PayPal. Note: I'm working off 220,000 units sold at 1 million dollars (which I know aren't the exact figures).","The trickiest thing is the federal tax. It's typical to withhold 25% federal on this type of event. If your federal marginal rate was already towards the top of that bracket, you'll owe the missing 3% as you enter the 28% bracket. Nothing awful, just be aware.","I would just take $2000 and multiply by your marginal tax rate, weight that between the 5 other people according to their share of the prize money and ask them to give you that. From your question it seems like you all have a good working relationship, I'm sure the other partners would agree to that. I think it's the simplest solution that is also fair and equitable. Basically, you pay the tax on 2000 and they pay you back for their share of the tax. Much easier than trying to pass it through your tax return for 5 separate people for a minimal amount of $'s. In hindsight, the best way to do it would have been to 1099 the person with the lowest marginal tax rate for the year to minimize the total tax paid on the 2000. Probably only would've been a few dollars difference but still the most efficient way to do it."],"string":"[\n \"No. $188.23 has $11.76 tax = $199.99 $188.24 has $11.77 tax - $200.01 So, unless the based price contained the half cent for $188.235, the register would never show $200.00 even. How does the receipt to customer look?\",\n \"Yes, it's a simple calculation. (x+0.0625x)=200 or x=200/1.0625 = $188.24 Technically $188.24 plus tax comes to $200.01. I would just eat the extra $0.01.\",\n \"You should total the items first, to get $3.00, then add the tax, then round up/down accordingly. Your two examples above don't offer this option, even though your second example arrives at the same result. In your first example, a number of items taxed one at a time might result in many .006 results which would round to .01. A long enough list of items would result in an error of many cents depending how many items there are. Totaling first then applying tax results in your saving .004 or losing .005 cents maximum due to rounding. See A Guide to Sales and Use Tax which is a document put out by the Massachusetts Dept of Revenue. In the chart for tax, it shows that $1.09 is taxed at five cents, but at 5%, it would be 5.45. So, at least for this state, I believe I correctly stated the rounding process.\",\n \"I'd imagine in this extreme edge case it would round down to $0. I can't fathom what makes $10.02 or $153.02 any different from $0.02.\",\n \"Welcome to the real world. BTW, you have far too rosy a view of this if you think you're only paying 28.5% of your income in taxes. Remember that your employer theoretically pays half your FICA tax. But as far as they're concerned, that's part of the cost of having you as an employee. If FICA was abolished, supply and demand would quickly push salaries up by an amount equal to the FICA tax. So add another 7.65% to your taxes. Plus your employer has to pay unemployment tax (federal unemployment tax is $420 per employee per year, states vary) and workman's compensation tax (no idea how much that is) for the privilege of having you as an employee. You likely pay sales taxes on most everything you buy. I believe sales tax in Massachusetts is 6.25%. Assuming you pay that on only half of what you buy, add another 3% or so. Do you work for a corporation? Between when they sell the fruits of your labor and when they pay you, they have to pay corporate income tax. There are a lot of deductions so that gets complicated, but figure another few percent. Do you drive a car? You're paying gas tax -- 41.9 cents per gallon in MA. Do you smoke or drink alcohol? Extra taxes on those. Travel by plane or stay in a hotel? More special taxes. When you get around to buying a house, you'll pay property taxes on it every year, year after year. For me in Michigan that's another 3% of my income. I understand it's a lot more in Massachusetts. Etc, many other smaller taxes that add up.\",\n \"Is that normal? Yes. It's in fact pretty low. Just the FICA taxes you pay are ~7.5%, so you're paying ~21% for State and Federal. Pretty reasonable, especially if you live in a high-tax state (which MA is ~5.3% on all income).\",\n \"As someone who works for a company that deploys POS systems in Canada, I can tell you that your best bet would be to have a configuration option that lets the client decide what to do. If they have a business practice that would allow for a sale total to be $0.01 or $0.02, they should first evaluate their business practice. If you're building a POS system to deploy in Canada, I'm sure you have access to resources (potential clients) who would already know how they would want to handle this. Ask them.\",\n \"Standard deduction is $6300, and exemption is $4050, totaling $10,350. (For 2016) Twice this for a couple ($20,700). The tax on money just above this is 10%, so the few thousand above will be taxed at a few hundred dollars. Where are you getting the number you showed? Can you edit your question to clarify exactly what you are asking?\",\n \"\\\"Grocery food is not subject to sales tax in Maryland, but some food is taxed depending on category or preparation. So you must have had a combination of grocery and taxable foods. One of the cheaper items you purchased was subject to a whopping penny of sales tax. http://taxes.marylandtaxes.com/Individual_Taxes/Taxpayer_Assistance/Individual_Tax_FAQs/Use_Tax_FAQs/q4.shtml In general, food sales are subject to Maryland's 6 percent sales and use tax unless a person operating a substantial grocery or market business sells the food for consumption off the premises and the food is not a taxable prepared food. A grocery or market business is considered to be \\\"\\\"substantial\\\"\\\" if the sales of grocery or market food items total at least 10 percent of all food sales.\\\"\",\n \"\\\"Massachusets does no such thing. The 5.25% tax is only on realized gains. \\\"\\\"Unearned\\\"\\\" means \\\"\\\"doesn't tie to your trade/business\\\"\\\", i.e.: is not gained through your personal performance.\\\"\",\n \"Taxes should not be calculated at the item level. Taxes should be aggregated by tax group at the summary level. The right way everywhere is LINE ITEMS SUMMARY PS:If you'd charge at the item level, it would be too easy to circumvent the law by splitting your items or services into 900 items at $0.01 (Which once rounded would mean no tax). This could happen in the banking or plastic pellets industry.\",\n \"I'd go with 19.99 free shipping if you can. Especially with stuff like Amazon Prime people hate paying for shipping nowadays and they'll just look for your product or something similar where it ships free. If you can take the $2 haircut 19.99 is a much nicer sounding number to people.\",\n \"\\\"The $10,400 is in the question, in two pieces. His employer withheld $8000, and her employer withheld $2400. Thus they paid together $10,400 in income taxes, which are deductible if you itemize deductions and choose income taxes over sales taxes (you can deduct one or the other). There's nothing \\\"\\\"standard\\\"\\\" about the amount, though it is standard to take the income tax deduction (almost always higher than sales tax).\\\"\",\n \"I have a very hard time believing you pay 60% of gross. Otherwise, I believe you're right in the way this works: Suppose you make $100k and pay 25% of that in taxes. 100,000 * .25 = 25,000 But if you spend $1,000 pretax, then it's as if you were paid $99,000 99,000 * .25 = $24,750 So the difference is $250. Which is the same as that $1,000 * .25.\",\n \"\\\"It sounds like \\\"\\\"gross receipt tax\\\"\\\" is essentially the same thing most states call \\\"\\\"sales tax\\\"\\\", which is always handled this way -- prices displayed are pre-tax, tax is added when the final price is calculated. One reason for doing it that way is that most prices result in taxes that involve fractions of pennies, and calculating from the total produces a more accurate result than calculating tax on each item individually. It is theoretically possible to set prices so the numbers come out evenly when tax is added. But that requires that the prices be in fractional cents, potentially to many decimal places. And in fact in some places it is illegal to display (only) the with-tax price. Otherwise I'm sure some stores and restaurants would be willing to deal with the mils and micros, purely on principle or as a marketing gimmick. Since customers have learned to expect sales tax, it really isn't worth the effort to fight it. The closest I've seen has been occasional \\\"\\\"we'll pay your sales tax\\\"\\\" offers, or statewide sales-tax holidays once a year.\\\"\",\n \"\\\"First of all to answer the basic question \\\"\\\"Is one method correct? Might it depend on local laws?\\\"\\\" Yes it does depend on local laws. Because ultimately the business will have to file forms with the sate/county/city. These forms are going to ask for the total sales based on the tax category (tax free, x%, y%). Each transaction could have parts that fall into each category. The local taxing authority decides what goes into each category. The local taxing authority also determines how often the business needs to submit the taxes. They can even decide to base the rates used by where the customer lives. A business is not required to charge directly for sales tax. That is why frequently at sporting events, the price on the menu notes that all sales taxes are included. I suppose not directly charging a sales tax makes the monthly calculation harder, but the state will still get their money. Rounding up at the end of the entire transaction is enough to make sure they collect enough taxes, so they don't have to dip into their profits.\\\"\",\n \"The US doesn't have a Value Added Tax, which is the one usually refundable upon departing the country... so sales taxes you pay in this country stay in this country and you don't get a refund. Just remember to treat the tax as an implied part of the price. (And be aware that state and local taxes may vary, so the total price may be higher in one place than in another. New York City adds a few percent on top of the state sales tax, for example.) If you aren't sure how much tax would be, don't be afraid to ask.\",\n \"The rounding should always follow the same rule. If the value ends in .01 or .02 then you round to .00. Doesn't matter if it's 10.01 rounding to 10.00 or 0.01 to 0.00. The decision on what a company wants to do if an invoice total is $0.01 or $0.02 would be up to the company. The POS system should follow the rule and round to $0.00 if the method of payment is cash, but the company has the right to not give things away for free. They can impose a minimum cash invoice amount of $0.05. But you would do this by requiring the customer to add more items to their purchase. You couldn't just round the invoice up to $0.05 and to charge them $0.05 for a $0.01 item It would be similar to companies having a minimum purchase amount when paying by credit card. If their minimum amount is $10.00 and you want to buy something that's $5.00, you either pay cash or add something to your order. They don't just charge you $10.00 for your $5.00 item. I think this would be a extreme edge case where you have an invoice with a total of $0.01 or $0.02, without any discounts, partial payments, etc. If the customer's total was $10.01 and they paid with a $10.00 gift card, the final amount owing of $0.01 would round down to $0.00 and they wouldn't owe any more. If they had paid cash, the total would have rounded to $10.00 anyway. Similarly, if the customer returned an item and bought a new item, or used coupons, and the total owing was $0.01 or $0.02, then you would round down to $0.00 and they wouldn't pay anything. As BobbyScon said, you can implement some options to allow the company to decide how they want to handle this. You could have an option that doesn't allow a sale to be processed if the total amount is less than $0.03 and the sale doesn't include any discounts, returned items, coupons, etc. The option could be to completely block the sale, require a supervisor override, or just display a warning to the cashier. Best bet is to talk to as many of your current or potential clients as you can to see how they would like this edge case handled. For many, it's probably a mute case since they wouldn't have items that have a unit price less than $0.03. Maybe a place like a hardware store that sells individual nuts, bolts, and washers.\",\n \"\\\"From Amazon's Site: \\\"\\\"If an item is subject to sales tax in the state to which the order is shipped, tax is generally calculated on the total selling price of each individual item.\\\"\\\" I'm going to trust a company of this size has this correct. Shipping address.\\\"\",\n \"I think it should be free. Why? I had a coupon for 35, I bought something for 35.01 including taxes and total to pay was 0.01, rounded to 0.00. I think it's almost the same scenario.\",\n \"\\\"Tax is often calculated per item. Especially in the days of the internet, some items are taxable and some aren't, depending on the item and your nexus. I would recommend calculating and storing tax with each item, to account for these subtle differences. EDIT: Not sure why this was downvoted, if you don't believe me, you can always check with Amazon: http://www.amazon.com/gp/help/customer/display.html/ref=hp_468512_calculated?nodeId=468512#calculated I think they know what they're talking about. FINAL UPDATE: Now, if someone goes to your site, and buys something from your business (in California) and the shipping address for the product is Nevada, then taxes do not have to be collected. If they have a billing address in California, and a shipping address in Nevada, and the goods are shipping to Nevada, you do not have to declare tax. If you have a mixture of tangible (computer, mouse, keyboard) and intangible assets (warranty) in a cart, and the shipping address is in California, you charge tax on the tangible assets, but NOT on the intangible assets. Yes, you can charge tax on the whole order. Yes for most businesses that's \\\"\\\"Good enough\\\"\\\", but I'm not trying to provide the \\\"\\\"good enough\\\"\\\" solution, I'm simply telling you how very large businesses run and operate. As I've mentioned, I've done several tax integrations using software called Sabrix (Google if you've not heard of it), and have done those integrations for companies like the BBC and Corbis (owned and operated by Bill Gates). Take it or leave it, but the correct way to charge taxes, especially given the complex tax laws of the US and internationally, is to charge per item. If you just need the \\\"\\\"good enough\\\"\\\" approach, feel free to calculate it by total. Some additional reading: http://en.wikipedia.org/wiki/Taxation_of_Digital_Goods Another possible federal limitation on Internet taxation is the United States Supreme Court case, Quill Corp. v. North Dakota, 504 U.S. 298 (1992),[6] which held that under the dormant commerce clause, goods purchased through mail order cannot be subject to a state’s sales tax unless the vendor has a substantial nexus with the state levying the tax. In 1997, the federal government decided to limit taxation of Internet activity for a period of time. The Internet Tax Freedom Act (ITFA) prohibits taxes on Internet access, which is defined as a service that allows users access to content, information, email or other services offered over the Internet and may include access to proprietary content, information, and other services as part of a package offered to customers. The Act has exceptions for taxes levied before the statute was written and for sales taxes on online purchases of physical goods.\\\"\",\n \"I owned a restaurant for over 5 years. Sales tax was only collected on POST discount price, though every state that collects sales tax may have different laws regarding collection. For example, when a customer used a gift certificate, that did NOT reduce the amount that tax was collected on. Why? Because the restaurant at some point or another collected the full amount of the bill.\",\n \"The original post's $16 has two errors: Here is the first scenario: . Tax Liability($) on Net . Cash # of Price Paper Realized Value Time: ($) Shares ($/sh) Profits Profits ($) 1. Start with: 100 - n/a - - 100 2. After buy 10@10$/sh: - 10 10 - - 100 3. Before selling: - 10 12 (5) - 115 4. After sell 10@12$/sh: 120 - n/a - (5) 115 5. After buy 12@10$/sh: - 12 10 - (5) 115 6. Before selling: - 12 12 (6) (5) 133 7. After sell 12@12$/sh: 144 - n/a - (11) 133 8. After buy 14@10$/sh: 4 14 10 - (11) 133 9. Before selling: 4 14 12 (7) (11) 154 10.After sell 14@12$/sh: 172 - n/a - (18) 154 At this point, assuming that all of the transactions occurred in the same fiscal year, and the realized profits were subject to a 25% short-term capital gains tax, you would owe $18 in taxes. Yes, this is 25% of $172 - $100.\",\n \"It would be 0.22 * Rs 5 per share, i.e. Rs 1.1 per share. For 1000 share it would be Rs 1.1 * 1000, i.e. 1100\",\n \"\\\"Don't worry about it. The State doesn't care about rounding error. All you need to do is say \\\"\\\"We charge our prices with tax included\\\"\\\" - you know, like carnivals and movie theaters. Then follow the procedures your state specifies for computing reportable tax. Quite likely it wants your pre-tax sales total for the reporting period. To get that, total up your gross sales that you collected, and divide by (1 + tax rate). Just like DJClayworth says, except do it on total sales instead of per-item. If you need to do the split per-transaction for Quickbooks or something, that's annoying. What Quickbooks says will be pennies off the method I describe above. The state don't care as long as it's just pennies, or in their favor.\\\"\",\n \"Don't take it so literally. 100 is close to 98, so if your formula calls for 98, buy 100.\",\n \"The key question is whether this number includes taxes and insurance. When you get a mortgage in the U.S., the bank wants to be sure that you are paying your property taxes and that you have homeowners insurance. The mortgage is guaranteed by a lien on the house -- if you don't pay, the bank can take your house -- and the bank doesn't want to find out that your house burned down and you didn't bother to get insurance so now they have nothing. So for most mortgages, the bank collects money from the borrower for the taxes and insurance, and then they pay these things. This can also be convenient for the borrower as you are then paying a fixed amount every month rather than being hit with sizeable tax and insurance bills two or three times a year. So to run the numbers: As others point out, mortgage rates in the US today are running 3% to 4%. I just found something that said the average rate today is 3.6%. At that rate, your actual mortgage payment should be about $1,364. Say $1,400 as we're taking approximate numbers. So if the $2,000 per month does NOT include taxes and insurance, it's a bad deal. If it does, then not so bad. You don't say where you live. But in my home town, property taxes on a $300,000 house would be about $4,500 per year. Insurance is probably another $1000 a year. And if you have to get PMI, add another 1/2% to 3/4%, or $1500 to $2250 per year. Add those up and divide by 12 and you get about $600. Note my numbers here are all highly approximate, will vary widely depending on where the house is, so this is just a general ballpark. $1400 + $600 = $2000, just what you were quoted. So if the number is PITI -- principle, interest, taxes, and insurance -- it's about what I'd expect.\",\n \"Are you sure about this? I mean your premise. I thought tax was based on shipping address. I've made purchases, live, in NY, and had the choice to pay sales tax or to have the item shipped, in effect paying shipping, for real, instead of sales tax. It appears that by buying a loaded cash card you'd accomplish your goal. I've seen such cards go fo $1.50, no fees other than that. To save the sales tax, or pay the tax of the state you're in, it may be worth it. But a NH billing address don't solve this, again, I believe tax is based on ship-to.\",\n \"The IRS has a calculator for this purpose.\",\n \"\\\"the state of New Mexico provides guidance in this exact situation. On page 4: Gross receipts DOES NOT include: Example: When the seller passes tax to the buyer, the seller should separate, or “back out”, that tax from the total income to arrive at \\\"\\\"Gross Receipts,\\\"\\\" the amount reported in Column D of the CRS-1 Form. (Please see the example on page 48.) and on page 48: How do I separate (“back out”) gross receipts tax from total gross receipts? See the following examples of how to separate the gross receipts tax: 1) To separate (back out) tax from total receipts at the end of the report period, first subtract deductible and exempt receipts, and then divide total receipts including the tax for the report period by one plus the applicable gross receipts tax rate. For example, if your tax rate is 5.5% and your total receipts including tax are $1,055.00 with no deductions or exemptions, divide $1,055.00 by 1.055. The result is your gross receipts excluding tax (to enter in Column D of the CRS-1 Form) or $1,000. 2) If your tax rate is 5.5%, and your total gross receipts including tax are $1,055.00, and included in that figure are $60 in deductions and another $45 in exemptions: a) Subtract $105 (the sum of your deductions and exemptions) from $1,055. The remainder is $950. This figure still includes the tax you have recovered from your buyers. b) Divide $950 by 1.055 (1 plus the 5.5% tax rate). The result is $900.47. c) In Column D enter the sum of $900.47 plus $60 (the amount of deductible receipts)*, or $960.47. This figure is your gross receipts excluding tax.\\\"\",\n \"Assuming cell A1 contains the number of trades: will price up to A1=100 at 17 each, and the rest at 14 each. The key is the MAX and MIN. They keep an item from being counted twice. If X would end up negative, MAX(0,x) clamps it to 0. By extension, if X-100 would be negative, MAX(0, X-100) would be 0 -- ie: that number doesn't increase til X>100. When A1=99, MIN(a1,100) == 99, and MAX(0,a1-100) == 0. When A1=100, MIN(a1,100) == 100, and MAX(0,a1-100) == 0. When A1=101, MIN(a1,100) == 100, and MAX(0,a1-100) == 1. Of course, if the 100th item should be $14, then change the 100s to 99s.\",\n \"To bring more clarity to the issue, Viriato will be entitle to deduct property tax depending upon whether he is claiming standard deduction (which varies on some factors including filling as married or single) or itemized deduction. If he is claiming, itemized deduction Example 1 is correct. Example 2 suffers from another mistake. He can get refund of only income tax portion of $5000 and not $5000.\",\n \"\\\"Etiquette or not, it is hurting the seller. The transaction fees have usually minimums, so if the actual transaction is below the minimum - they'll pay larger fee on the transaction (relatively). As an example, assume minimum fee for a debit card swipe is 20 cents, or 2% of the transaction. For a transaction of $10 and above, the fee will be 2% of the transaction. But for $1.67, the fee becomes 12% of the transaction. 6 times more expensive for the seller. Basically, the sale was most likely at a loss for them (they usually have very low margins, especially for a \\\"\\\"dollar\\\"\\\" store). So take that into account as well.\\\"\",\n \"This is taxed as ordinary income. See the IRC Sec 988(a)(1). The exclusion you're talking about (the $200) is in the IRC Sec 988(e)(2), but you'll have to read the Treasury Regulations on this section to see if and how it can apply to you. Since you do this regularly and for profit (i.e.: not a personal transaction), I'd argue that it doesn't apply.\",\n \"The answer to this question requires looking at the mathematics of the Qualified Dividends and Capital Gains Worksheet (QDCGW). Start with Taxable Income which is the number that appears on Line 43 of Form 1040. This is after the Adjusted Gross Income has been reduced by the Standard Deduction or Itemized Deductions as the case may be, as well as the exemptions claimed. Then, subtract off the Qualified Dividends and the Net Long-Term Capital Gains (reduced by Net Short-Term Capital Losses, if any) to get the non-cap-gains part of the Taxable Income. Assigning somewhat different meanings to the numbers in the OPs' question, let's say that the Taxable Income is $74K of which $10K is Long-Term Capital Gains leaving $64K as the the non-cap-gains taxable income on Line 7 of the QDCGW. Since $64K is smaller than $72.5K (not $73.8K as stated by the OP) and this is a MFJ return, $72.5K - $64K = $8.5K of the long-term capital gains are taxed at 0%. The balance $1.5K is taxed at 15% giving $225 as the tax due on that part. The 64K of non-cap-gains taxable income has a tax of $8711 if I am reading the Tax Tables correctly, and so the total tax due is $8711+225 = $8936. This is as it should be; the non-gains income of $64K was assessed the tax due on it, $8.5K of the cap gains were taxed at 0%, and $1.5K at 15%. There are more complications to be worked out on the QDCGW for high earners who attract the 20% capital gains rate but those are not relevant here.\",\n \"The price inflation isn't a percentage, it's a fixed amount. If the dealer adds $R to the price of both the trade-in and the purchased car, then everyone ends up with the right amount of money in their pockets. So your formula should be: D + T + R = 0.1 * (P + R)\",\n \"$6 per gallon, up to 20 gallons. So if gas was $2/gallon, that would be 3 20-gallon fill-ups, or 60 gallons. I guess if today's cost is $2.32, that would be 2 free 20-gallon fill-ups, and the last 20 gallons for $1.36/gallon, or $27. Much cheaper than the $140 it would be without the discounts :)\",\n \"Australian Goods and Services Tax is charged on the sale amount. Whatever internal accounting you do before billing the customer is of no interest to the Australian Tax Office.\",\n \"\\\"To echo part of stannius' response. If it's taxable, there would be tax on $19,999, just a bit less than on $20,000. Your uncle may have a credential, and members here may not, but still he may be mistaken. Or he could be giving you advice on how to skirt the law. The taxability and the $20,000 threshold are unrelated! Trying to 'avoid' the $20,000 is a completely misplaced effort. Gifts from anyone are not taxable to the recipient. So long as nothing is received in return, it's not taxable income to her. In contrast a blogger with a \\\"\\\"tip jar\\\"\\\" is soliciting money in exchange for advice, entertainment, etc. that's taxable. Donations to individuals, in the circumstance you describe are not income to her, nor are they deductible to the donor. Edit - a fellow blogger (more than that, she's my tax crush) had an article Cancer survivor gets $19,000 tax bill for GoFundMe donations which may render my answer incorrect. Other article on this story suggest that the IRS is notified, but the nature of the transfer needs to be addressed. In my opinion, you should find a new uncle CPA.\\\"\",\n \"Another approach, albeit slow: Buy something that's free after rebate. Upsides: Low cost. (Stamps, envelopes) Downside: Slow, hard to get an exact match on the amount of the card.\",\n \"No, you don't. Rounding errors happen, and if there's no change in the actual tax there's no reason to amend. If all the income was properly reported and the tax was properly calculated - no-one cares if it was rounded up or down on one of the lines. Note for the next time though: Not sure about New York, but Federal taxes are generally rounded to the nearest dollar on each line of the form. So don't calculate cents, just round to the nearest dollar, and be consistent on all of your tax forms. Technically, it is perfectly legal to report cents as well (and people used to when the forms were still filled by hand with pen), but all the automatic tax filing software rounds, so just do that.\",\n \"I live in MA. Median price value here is $410K. Depending on location a $410K house here can be a ranch from 1950 needing a complete overhaul, a 1970's split level, a 4 bedroom Colonial in Central MA or a condo somewhere close to Boston. These homes are decidedly nothing special, and certainly not where the 1% live. There are plenty of houses that list in the $750s in my town that go on and off the market really quickly, generally purchased by a two-earner family making decent (but not 1%er) money. Think engineers, doctors, sales and marketing execs, managers. Source : https://www.bostonglobe.com/business/2017/07/25/median-home-price-massachusetts-tops-for-first-time/rVsP7BwWZCtKwP9BqZQOKJ/story.html\",\n \"(12 * 100) * 1.01 = 1212 Assuming the $12 ask can absorb your whole 100 share order.\",\n \"Most of the time, your tax only reduces by the current marginal rate - meaning you would only reduce your tax by 28% to 25% depending on which part of the bracket you're in. However, in the area around 100k, there are cases where reductions will have more of a marginal effect than that. You'll never reduce it more than 100%, but you can reduce it by 35-40% despite being in the 25% bracket. That is because of certain deductions and credits which phase out beginning around 80k-120k; things like the IRA deduction, the Child Tax Credit, Childcare Tax Credit, and similar. Since many of them phase out in this range, additional dollars cost you your marginal rate (25%) plus the percentage of the credits or deductions which phase out here, which might bring you up another 10% or so.\",\n \"\\\"Sales tax and luxury tax is what you will have to pay tax wise, and they are non-refundable (in most cases but the rules vary area to area). This really tripped up some friends of mine I had come from England. The rules are complicated and regional. Sales tax is anywhere from 0% to 10.25% and are not usually applied to raw foods. Luxury taxes are usually state level and only apply to things most people consider a large purchase. Jewelry, cars, houses, etc. Not things your likely to buy. (Small, \\\"\\\"normal\\\"\\\" jewelry usually doesn't count. Diamond covered flava-flav clock ... probably has a luxury tax.) For sales tax, it can change a lot. Don't be afraid to ask. People ask all the time. It's normal. I personally add 10% to what I buy. Sales tax in my city is 7%, county is 6.5%, state is 6%. So you can get different rates depending on what side of the street you shop on some times. Under normal circumstances you do not get a refund on these taxes. Some states do give refunds. Usually however the trouble of getting that refund isn't worth it unless making a large purchase. You are not exempt from paying sales tax. (Depending on where you go you may get asked). Business are exempt if they are purchasing things to re-sell. Only the end customer pays sales tax. Depending on where you go, online purchases may not be subject to sales tax. Though they might. That, again, depends on city, county, and state laws. Normally, you will have to pay sales tax at the register. It will be calculated into your total, and show as a line item on your receipt. http://3.bp.blogspot.com/-yAvAm2BQ3xs/TudY-lfLDzI/AAAAAAAAAGs/gYG8wJeaohw/s1600/great%2Boutdoors%2Breceipt%2BQR-%2Bbefore%2Band%2Bafter.jpg Also some products have other non-refundable taxes. Rental car taxes, fuel taxes and road taxes are all likely taxes you will have to pay. Areas that have a lot of tourists, usually (but not always) have more of these kinds of taxes. Friendly note. DON'T BUY DVDs HERE! They won't work when you get home. I know you didn't ask but this catches a lot of people. Same for electronics (in many cases, specially optical drives and wireless).\\\"\",\n \"If you are using an Excel, the Function PV should be able to easily calculate this. Excel Formulae PV = (Rate,Nper,Pmt,Fv,Type) Where Rate: Rate of return. In this case you can use Inflation or assumed rate that would cost you. Say 3-5%. Note the Rate has to be for Nper. i.e. in Nper if you are counting yearly payments, then rate is yearly, if you are counting as monthly, then the rate should be monthly. NPer: Number of periods. If yearly in your case it would be 20. If Monthly 20*12, if Quarterly 20*4 etc. Pmt: Expected Payments for Nper. If you are saying 20 million over 20 years, it would be 1 million per year. Fv and Type can be blank So assuming a rate of 3%, and yearly payments of 1 million over 20 years. PV = $14,877,474.86 [It would show negative, just ignore the sign]\",\n \"10% of 20,000 has a way bigger impact on someones quality of life than 10% of 10,000,000. There's a bare minimum you need to have an okay lifestyle, and it scales very quickly until you hit six figures-ish (or whatever the equivalent is for your area in purchasing power).\",\n \"\\\"There's one factor the previous posters apparently missed here: You say \\\"\\\"self-employment tax\\\"\\\"--in other words, at least some of that $16k is from self employment. In a normal employment situation the FICA tax is taken out of your paycheck, it's normally spot on and generally doesn't show up on your tax return. However, for the self-employed it's another matter. You pay the whole 15.3% from the first dollar and this does show up on your tax return. If it's all self employment money you would have about $2.5k in tax from this.\\\"\",\n \"The vendor needs to do this using apportionment, according to the VAT rules for mixed supplies: If you make mixed supplies and the individual supplies are not liable to VAT at the same rate then you need to work out the tax value of each supply in order to calculate how much tax is due. If the tax value is based on the total price you charge (see paragraph 7.3) you do this by splitting that price between the supplies. This is called an apportionment ... There is no special method of apportionment ... However, your calculations must be fair and you must be able to justify them. It is usually best to use one of the methods shown in section 32. The section 32 referred to really relates to apportioning use between business and non-business purposes, but it implies that splitting up the total price in proportion to the original prices would probably be fair. So in your example the vendor might split the £5 discount equally between the spoon and the carrycot as they had the same gross cost, and pay VAT as if each had cost £7.50 gross. The vendor could also do it in proportion to their net (pre-VAT) prices and thus apportion a bit more of the discount to the carrycot than the spoon, but as this would lead to them paying slightly more tax overall they probably wouldn't choose to. However, none of this is likely to be too relevant to a consumer, since in the UK prices must be presented as the gross (VAT-inclusive) amounts and so the discounts will also apply to those amounts. It will of course affect how much of the purchase price the vendor ends up paying on to the government and thus might indirectly affect what discounts the vendor is willing to offer.\",\n \"> General Sales: Virginia - 4.3%; Fairfax County - 1%; plus an additional 0.7% state tax for transportation. At most they'd have to charge the additional 1%, and I'm pretty sure taxes don't work that way. Either you're wrong or your restaurants are defrauding you with fake taxes. Or your local government is failing to put the actual tax rates on their websites.\",\n \"It depends on if it is a non-refundable deposit, retainer, etc. The remaining $1,500 is not included in that quarter's sales, because you have not yet received it and it is not guaranteed. The question is really if you should count the $500 toward the quarter where it is received, or during the quarter where you invoice. This deposit might be categorized as a liability until you invoice, and there is no sales tax to be calculated until the invoice for the total. I say 'might' because this can vary by state and the type of transaction or business. For example, if someone makes a cash down payment on a lease for a car, some states will require that sales tax be charged on this.\",\n \"\\\"Actually, the other answer isn't strictly correct. It's an estimate, giving a lower bound that gets less accurate as income increases. Consider: U.S. income tax is based on a progressive tax system where there are income bracket levels with increasing tax rates. Example: Given U.S. 2009 federal tax rates for an individual filing as \\\"\\\"single\\\"\\\": Imagine somebody making $100000. Assuming no other credits, deductions, or taxes, then income tax based on the above brackets & rates would be calculated as follows: Meaning the average tax rate for the single individual earning $100,000 is 21.72%. However, a pre-tax deduction from that income actually comes off at the top marginal tax rate. Consider the same calculation but with taxable income reduced to $99,000 instead (i.e. simulating a pre-tax $1000 deduction): That's a difference of $280, which is more than the $217.20 savings that would have been estimated if just using the average tax rate method. Consequently, when trying to determine how much money would be saved by a tax deduction, it makes better sense to estimate using the marginal tax rate, which in this case was 28%. It gets a little trickier if the deduction crosses a bracket boundary. (Left as an exercise to the reader :-) Finally, in the case of the deduction being discussed, it also looks like payroll FICA taxes paid by the employee (Social Security's 6.2%, and Medicare's 1.45%) would be avoided as well; so add that to the marginal tax rate savings. The surest way to know how much would be saved, though, would be to do one's income tax return calculation without the deduction, and then with, and compare the numbers. Tax software can make this very easy to do.\\\"\",\n \"\\\"at $8.50: total profit = $120.00 *basis of stock, not paid in cash, so not included in \\\"\\\"total paid\\\"\\\" at $8.50: total profit = $75.00\\\"\",\n \"Straight line in this example should be just the $2MM per year. I don't think the author of the problem intended you to use anything in the actual tax code like MACRS. I think the goal of the problem is to get you to identify the value of the depreciation tax shield and how the depreciation does affect your cash flow by reducing your taxes, even though depreciation itself is not a cash event.\",\n \"\\\"I think the math is wrong. Note that in Scenario #1, you are only out of pocket $1000, while in Scenario #2, you are out of pocket $1250; the contribution and the tax you paid with respect to it. A better concept than tax rate is \\\"\\\"Retention Rate\\\"\\\". This is the fraction of your money that the Feds let you keep. And Growth Factor is the how much the investment grows. So In Scenario #1, you multiply $1000 by the investment Growth Factor and then by the retirement Retention Rate. And in Scenario #2, you multiply the same $1000 by the current Retention Rate and then by the Growth Factor. Since in your approximation, the two GFs are the same, there is no saving...\\\"\",\n \"So I am trying to puzzle out this claim about tax cuts paying for themselves through growth. This means that for every $1 in revenue they forsake in cuts, they expect to get $1 back in revenue elsewhere (like other taxes). So with a high tax burden on something, say 25%, that $1 cut in revenue would need to generate $4 in additional value to pay for itself. I can't think of *anything* where the federal tax burden is actually 25% of the total value. This looks like a pretty clear case of diminishing returns, because the *lower* the tax burden the *higher* the growth needs to be in order to get the money back. If we look at something on the order of sales tax, say 5%, that $1 cut needs to generate $20 in growth. If we flip this around and look at it as an investment, these are the kinds of returns that are reserved for miraculous right-time right-place bets. They are not the kind of returns you can expect to get from groceries and mortgages. Can somebody sanity check me on this?\",\n \"No no, I didn't forget. 3 times 12 is 36 minus 20 is $16 more. Thank you, I just needed someone to acknowledge that's they were incorrect. How's that get top comment though?! So frustrating. Edit: okay, not top comment anymore but still up there.\",\n \"No, it's not possible. Even if you had no deduction or credits, your federal tax on $16,604 would be: $9075 @ 10% = $907.50 + $7529 @ 15% = $1129.35 = $2036.85 That assumes you are filing as single. There must be more to the story. Typo in your income numbers? Also, what do you mean by a self-employment tax deduction? Maybe update your question to include a breakdown of everything you entered? Edit: As noted in Loren's answer, it seems that it is indeed possible in at least one case (self-employment taxes).\",\n \"A minimum purchase quantity just means that you need to round your result up to the nearest 100. In your example it comes out evenly. If we look at an example where it doesn't come out even, you'd round up: And round that up to 700 due to purchase quantities. For a slightly more complex and accurate approach, you'd then evaluate how many of the extras you had to buy due to the minimum purchase quantity would need to be sold: So you'd have to sell 694 of the 700 purchased to break even.\",\n \"What's funny to me is that the sales tax isn't what gives Amazon better prices. It's that stores have to include their costs on the price that's shown on the shelf. Amazon gets to tell you later that there's a shipping fee, Amazon isn't paying a store staff and rental on store front property. In short Amazon can show the customer a price that is making a decent profit, and still be lower than a retail outlet.\",\n \"\\\"Here is the way I would estimate your taxes. Remember that a bi-weekly paycheck means that you get 26 paychecks per year. If the $1000 federal refund is too much for you, you can decrease your withholding to bring your refund down. This can be done by increasing your exemptions claimed on your W-4. See \\\"\\\"How can I adjust tax withholding so that I don't get a large Tax Refund?\\\"\\\" for more details. However, keep in mind that your state withholding is perfect right now, and if you increase your exemptions, you will likely owe tax to the state, unless you increase your state withholding at the same time.\\\"\",\n \"\\\"Yep. You're single, you're possibly still a dependent on your parent's taxes (in lieu of rent), and you're finally bringing home bacon instead of bacon bits. Welcome to the working world. Let's say your gross salary is the U.S. median of $50,000. With bi-weekly checks (26 a year; common practice) you're getting $1923.08 per paycheck. In the 2013 \\\"\\\"Percentage Method\\\"\\\" tax tables, here's how your federal withholding is calculated as a single person paid biweekly: Federal taxes are computed piecewise; the amount up to A is taxed at X%, then the amount between A and B is taxed at Y%, so if you make $C, between A and B, the tax is (A*X) + (C-A)*Y. The amount A*X is included in the \\\"\\\"base amount\\\"\\\" for ease of calculation. Back to our example; let's say you're getting $1923.08 gross wages per check. That puts you in the 25% marginal bracket. You pay the sum of all lesser brackets (which is the \\\"\\\"base amount\\\"\\\" of the 25% bracket), plus the 25% marginal rate on every dollar that falls within the bracket. That's 191.95 + (1923.08 - 1479) * .25 = 191.95 + (444.08 * .25) = 191.95 + 111.02 = $302.97 per paycheck. The \\\"\\\"effective\\\"\\\" tax rate on the total amount, as if you were being charged a flat tax, is 15.75%, and this is just for the federal income tax. Add to this MA state income taxes (5.25% flat tax), FICA (aka Medicare; 1.45% flat) and SECA (aka Social Security; 6.2% up to a \\\"\\\"wage base\\\"\\\" that $50k doesn't even approach), and your effective tax rate on each dollar you earn is 15.75% + 5.25% + 1.45% + 6.2% = 28.65%. This doesn't include any state unemployment taxes that may be withheld separately, but as the rate I come up with is pretty darn close to what you've figured (meaning I slightly overestimated your gross income and thus your effective tax rate), my bet is that SUTA's either employer-paid in MA, or it's just part of MA state income tax. It gets better, at least at the federal level: The amount of your state income taxes is tax-deductible at the federal level if you itemize your deductions. That may not be a factor for you as you'd have to come up with more than $6,100 of other tax-deductible expenses to make itemizing the better option than taking the standard deduction (big-ticket items are mortgage expenses other than principal payments, hospital stays such as for childbirth or major accident, and state and local taxes such as sales, property and income). If you can claim yourself as a dependent (meaning your parents can't), then $150 of each check ($3,900 of your annual salary) is no longer taxed for federal withholding, lowering the amount of money taxed at the 25% marginal rate. You effectively save $37.50 biweekly ($975 annually) in taxes. Get married and file jointly, and your spouse, her personal exemption, and an extra standard deduction amount (if you don't itemize) go on your taxes. The tax rates for married couples filing jointly are also lower; they're currently calculated (or were in 2012) to be the same as if two equal earners were to file separately, so if your spouse doesn't work, your taxes on the single income are calculated at the rates you'd get if you earned half as much. It doesn't work out to half the taxes, but it is a significant \\\"\\\"marriage advantage\\\"\\\". Have kids, and each one is another little $3,900 tax write-off. It's nowhere near the cost of having or raising the child, but it helps, and having kids isn't about the money. Owning a home, making charitable deductions, having medical expenses, etc are a toss-up. The magic number in 2013 is $12,200 for a married couple, $6,100 for a single person. If your mortgage interest, insurance premiums, property taxes, medical expenditures, charitable donations, any contributions from your take-home pay to a tax-deferred savings account (typically these accounts are paid into by your employer as a \\\"\\\"pre-tax deduction\\\"\\\" and never show up as taxable income, but you could just as easily move money from your take-home pay into tax-deferred savings) and any other tax-deductible payments add up to more than 12 large, then itemize. If not, take your standard deduction. As a single taxpayer just starting out in life, you probably don't have any of these types of expenditures, certainly not enough to give up the SD. I did the math on my own taxes in 2012, and was surprised at how little the government actually gets of my paycheck when all's said and done. Remember back in the summer of 2012 when everyone was mad at Romney for making millions and only paying an effective income tax rate of 14%, which was compared to the middle class's marginal rate of 25-28%? Well, my family of 3, living on a little more than the median income from one earner (me), taking the married standard deduction, three personal exemptions, and a little extra for student loan interest, paid an effective federal income tax rate of something like 3.5%. Of course, the FICA and SS taxes don't allow any deductions (not even for retirement savings), so add in the 4.2% SS (in 2012) and 1.45% FICA and the full federal gimme was more like 9-10%.\\\"\",\n \"In 2012, the standard deduction is $5950 for a single person. Let's assume you are very charitable, and by coincidence you donate exactly $5950 to charity. Everything that falls under itemized deductions would then be deductible. So, if your property tax is $6000, in your example - Other adjustments come into play, including an exemption of $3850, I am just showing the effect of the property tax. The bottom line is that deductions come off income, not off your tax bill. The saving from a deduction is $$ x your tax bracket.\",\n \"And I assume that is raw numbers, not corrected dollars. Even if it were corrected for official inflation it'd understate the change. Anyone paying attention can tell that inflation is pretty rampant, even if the official figures pretend it's low. Just had to pay $14 for an ordinary decent burger in a bar here, where only a few years ago it would have been $7 or $8 (metro Boston MA).\",\n \"You can get the number you want pretty easily by plugging some numbers in to a mortgage calculator like this one. Set the PMI and property tax to 0 and set your term to the duration you need. Then plug in numbers until your payment amount equals your monthly budget. Think of yourself as the bank in this process. I started at 1mil over 25 years and that was over my budget so went down to 800k which was under just a bit, and found that you need about 850k based on your numbers.\",\n \"The dividend is for a quarter of the year, three months. 80 cents is 3.9% of $20.51. Presumably the Div/yield changes as the stock price changes. On Yahoo, they specify that the yield is based on a particular stated date. So it's only the exact number if the stock trades at the price on that date.\",\n \"While I might have to agree with PiratesSayARRR from below about missing case details, I have to say, your math seems to check out to me. Although the numbers aren't rouded off and pretty, they back out. $22,285.71 generates $334.28 of fees in a month; subtract from that the monthly cost of funds (.003333 x $22285.71)= $74.28... $334.28-74.28 = $260.00. Hate to say it, but maybe they didn't hire you for a different reason?\",\n \"Whether applying for a job or buying a house, Offer a more specific price like $72,500, which tells them you thought hard about the price. $70K is too 'round' of a number. Additionally, your financial ability/condition can be a factor too. If you have 20% down, and your Realtor assures the seller that your transaction will go down without a hitch, and you'll be approved for a mortgage, they may accept your offer of $72,500 over the other guys $78K offer if [s]he has less desirable finances. Good Luck!\",\n \"\\\"Something I found helpful when I learned this, is to just use Excel to expand the series. So start with A1 as \\\"\\\"175\\\"\\\", then in A2 put \\\"\\\"=175+(A1*1.004308)\\\"\\\" and paste that same formula down for a few hundred rows. You'll find your answer on A216. Most non-math-centric people don't have an intuitive grasp of how exponents (aka \\\"\\\"compounding\\\"\\\"... and never mind the natural logarithms this is all derived from) behave; but you can play with the numbers \\\"\\\"unrolled\\\"\\\" in Excel to get a better idea of how they work. That formula is just applying 0.4308% interest every period (row), and adding in a fresh $175.\\\"\",\n \"States have made sales tax more confusing by expanding some categories and shrinking or eliminating other categories. In days of old there were taxes on items, and specific taxes on other small categories such as fuel and cigarets . In many states there were taxes implemented state wide, and in other cases they only applied to a specific city or region. As time went on taxes could be raised to bring in more money for the state or local government, but these tax increase were seen as unfair to the poor. So now the states are modifying and tweaking the tax rates. Some items are tax free, some have a low tax, and some are at the full tax rate. This can get confusing because the type of store can also play a factor. A bag a chips from a grocery store can be treated differently than a bag of chips from a hotdog stand. Some states have also added special taxes on snack foods. In general, purchases they want to encourage (staples from the grocery store) are tax free or low tax, items they don't want to encourage (snacks) are fully taxed. You can also be sure that they will treat luxury items as fully taxed. A new frontier of taxation are ones designed to tax people who don't live there. They have added taxes on restaurants and hotels. Since they are paid by tourists, the people most likely to pay them don't have a voice in setting the rate. States are now wanting to tax services as a way to make up shortfalls in taxing. Don't expect consistency from state to state, or year to year. Oh by the way that penny tax was for something that cost 17 cents or less, unless that item had a lower tax rate. The receipt should clearly identify the taxable items, and their tax level.\",\n \"would you earn $600 or $1600? You would have $1600, and your earnings would be $600. That's the only answer it could be, since if you start with $1000 from your savings, then it's impossible for you to have also earned that money in the stock market. When you sell, do you keep your original capital, ($1000)? If you own a car which you bought for $1000, and then sell it for $1600, do you keep the original $1000?\",\n \"As a CPA I can say, without a doubt, you do not owe any federal income tax. However, assuming all of you income was from your business and therefore subject to self-employment tax and you had no healthcare coverage, you would owe: $2,523 in Self-Employment Tax 645 in Healthcare Penalty $3,168 Total Amount You Should Owe. Assuming you have given us the right numbers, $3,300 sounds too high.\",\n \"There is a 3rd option: take the cash back offer, but get the money from a auto loan from your bank or credit union. The loan will only be for. $22,500 which can still be a better deal than option B. Of course the monthly payment can make it harder to qualify for the mortgage. Using the MS Excel goal seek tool and the pmt() function: will make the total payment equal to 24K. Both numbers are well above the rates charged by my credit union so option C would be cheaper than option B.\",\n \"\\\"J - Approaching the answer from the W4 perspective (for calculation purposes) may be more trouble that it's worth. I'd strongly suggest you use tax software, whether it's the 2016 SW or a current year one, on line, to get an estimate of your total tax bill for the year. You can then look at your current run rate of tax paid in to see if you are on track. If you have a large shortfall, you can easily adjust your withholdings. If you are on track to get a large refund, make the adjustment so next year will track better. Note, a withholding allowance is equal to a personal exemption. Some think that \\\"\\\"4\\\"\\\" means 4 people in the house, but it actually means \\\"\\\"don't tax 4 x $4050\\\"\\\" as I have $16200 in combined people or tax deductions.\\\"\",\n \"The formula you need is: M = (r * PV) / (1 - ((1+r)^(-n))) M = monthly payment ($350) r = interest per period (7.56% / 12) = 0.63% n = number of periods (36 months) PV = present value, or here, your max loan amount given M Therefore: $350 = (0.63% * PV) / (1 - ((1+0.63%)^(-36))) The denominator on the right ends up equal to ~ 0.2025 when you do the math in your calculator. Carry that over to the by multiplying both sides of the equation by 0.2025 This results in $70.82 = 0.63% * PV Divide $70.82 by 0.63% to get PV = $11,242 (roughly). Hope this helps explain it algebraically!!\",\n \"Your tax return will be due on April 18th of 2017 for the amounts made in 2016. Based on the figures that you have provided, assuming you are 18, and assuming you are a single taxpayer your total tax will be around $2600.00 ($2611.25 to be exact, without additional credits or deductions to AGI accounted for). The $1,234 in fed. inc. tax that you have already paid is considered to be a prepaid by the government. If at year-end you have provided more than you have made the government will refund you the excess (federal tax return).\",\n \"\\\"As ApplePie discusses, \\\"\\\"tax bracket\\\"\\\" without any modifiers refers to a single jurisdiction's marginal tax rate. In your case, this is either your California's \\\"\\\"tax bracket\\\"\\\" or your Federal \\\"\\\"tax bracket\\\"\\\" (not including marginal Social Security and Medicare taxes). But if someone says \\\"\\\"combined state and federal tax bracket\\\"\\\", they probably mean the combination of your state and federal income tax brackets (again, lot including sales taxes, business and occupational taxes, social security taxes, and medicare taxes). The math to combine the state and federal marginal tax rates is a bit tricky, because most people can deduct either their state and local income taxes, or their state and local general sales taxes when computing their income for federal income tax purposes. (The federal \\\"\\\"alternative minimum tax\\\"\\\" restricts this deduction for some people.) For a single person earning $ 100,000 of salaries and wages in California, whose state income taxes are close to their standard deduction, the calculations for the combined marginal income tax rate look something like this: As mentioned above, this understates the tax bite on marginal \\\"\\\"earned income\\\"\\\". To find the true marginal rate, we need to add in Social Security taxes, Medicare taxes, sales taxes, and business & occupation taxes. The Social Security and Medicare taxes are sometimes called \\\"\\\"self employment taxes\\\"\\\". This math omits unemployment insurance and workers' compensation insurance, because those taxes are typically capped well below $ 100,000 per year of income. This math also omits B & O taxes, because this question is California specific. If an employer wishes to increase an employee's pay by $ 1,076.50, the first $ 76.50 will go to the employer's share of Social Security and Medicare taxes. The remaining $ 1,000.00 will be subject to the combined marginal income tax rate discussed above, plus will have $ 76.50 go to the employee's share of Social Security and Medicare taxes. The employee might buy some extra things with some of their extra money, and pay sales tax on them. In 2016, a 9 % sales tax rate was common in California's largest cities. The IRS estimated that (for a single person with no dependents making $ 100,000 per year who did not buy a boat, RV, motor vehicle, or major home construction), about 9 % of their marginal gross income was subject to sales tax.\\\"\",\n \"No, the credit company will not remove the $20. Your merchant (the airline) charged in their local currency, the equivalent of $1000. That is also what they refunded. The $20 are yours to keep.\",\n \"It seems that you are misunderstanding how your taxes are calculated. You seem to be under the impression that once you pass $37,450 annual income, ALL of your income will be taxed at 25%. However, in reality, only the income you earn above that amount will be taxed at 25%. You can use this chart to determine exactly how much federal tax you will pay; As you can see, if you earned, $37,500 in a year, you would only be charged 25% taxes on $50 (and you will pay 15% on the amount between $9226 and $37450, and 10% on the amount from $0 to $9225, which is $5126.25 when summed together).\",\n \"\\\"An unmarried person with a total U.S.-sourced earned income under $ 37,000 during the year 2016 is likely to owe: If the original poster is not an \\\"\\\"independent contractor\\\"\\\", and is not \\\"\\\"billing corp-to-corp\\\"\\\" then: In summary: References:\\\"\",\n \"\\\"In most jurisdictions, both the goods (raw materials) and the service (class) are being \\\"\\\"sold\\\"\\\" to the customer, who is the end user and thus the sale is subject to sales tax. So, when your friend charges for the class, that $100 is subject to all applicable sales taxes for the jurisdiction and all parent jurisdictions (usually city, county and state). The teacher should not have to pay sales tax when they buy the flowers from the wholesaler; most jurisdictions charge sales tax on end-user purchases only. However, they are required to have some proof of sales tax exemption for the purchase, which normally comes part and parcel with the DBA or other business entity registration paperwork in most cities/states. Wholesalers deal with non-end-user sales (exempt from sales tax) all the time, but your average Michael's or Hobby Lobby may not be able to deal with this and may have to charge your friend the sales tax at POS. Depending on the jurisdiction, if this happens, your friend may be able to reduce the amount the customer is paying that is subject to sales tax by the pre-tax value of the materials the customer has paid for, which your friend already paid the tax on.\\\"\",\n \"how is it double taxation when you didn't start off with that extra $100? it's double taxation if they taxed you on the total amount you pulled out of the market, not the profit you made. explain the math on your last part, please.\",\n \"$3,679,163.80 I made these assumptions that you did not state: Then using Excel, we find that with a starting point of $3,679,163.80, we can achieve your goal. The formula for Yearly Budget is =G$1*((1.035)^(A3-2012)) and the formula for Money left at year end is =(D4/1.05)+C4 For 2067, enter $0 leftover, and for 2066, enter $397,988.47 leftover. G$1 is $60,000 G$2 is 0.05\",\n \"How do you know you are playing their cost plus tax? Retailers in the US currently only collect state sales tax on purchasers who are based in the same state they are in. For example, our business is in NY so we charge NY state sales tax. We do not charge sales tax for anyone living in any other state (or country). If your shipping address is in South America, the people you are buying from in the US should not be charging you any tax. You may have to pay customs duties and fees, but these are not sales tax.\",\n \"Very Interesting Math. Plain and Simple, it saves you $10.00. When 18% goes above $10 you loose the money, you save if it is (18% of the baae bill) is less than $10. This raises few questions: You are forced to give out 18% tips. You may wish to keep it at 10-15%. You have no choice. All thing considered, better to avoid such coupons. They force you to spend money, they force you to spend in a particular way and they force you to give a tip, you may not be inclined to.\",\n \"If you are just starting out, my tactic would be to go way high and then consider any different play money. So guess $90 and when it comes in at $60, buy a new shirt or go on a date.\",\n \"I nowhere mentioned equal amount of assets. The point of my argument was wealth disparity. And, unless the rich pay more in taxes; that disparity will grow. Increasing tax from 24.7% to 50% would still leave the wealthy with a mountain of wealth; but, will help contribute greater to the overall economy. What do you think will need to happen in about a decade, when millions of American's are left permanently unemployed by automation?\",\n \"Any deductable expense will reduce your taxable income not your tax payable. Your Example 1 above is correct and gives you 100% deduction. It is like having a business where your sales are $100,000 and your expenses in making the sales is $40,000. The expenses are your tax deductions and reduce your profits on which you pay tax on to $60,000. If your Example 2 was correct then the situation above would change that you would pay say $30,000 tax on $100,000 sales, then apply your deductions (or expenses) of $40,000 so that you would pay no tax at all and in fact get $10,000 back in your return. In this case the government would not be collecting any taxes but paying out returns to everyone. Your Example 2 is absolutly incorrect.\",\n \"\\\"If the IRS changes your return in any way (including math errors) - they send a letter explaining the change and the reasons for it. You should read that letter, it will answer your question (Usually its a CP12 notice). If you didn't receive it - you can call them and ask to resend it (they're unlikely to answer over the phone, but you can try asking). I'm confused by your using the word \\\"\\\"estimate\\\"\\\". Your tax return is not supposed to be estimate, it supposed to be precise. Why are you considering your tax return \\\"\\\"estimate\\\"\\\"? If your filed tax return shows refund of $X and you received $X+$180 - then as I said, a letter of explanation from the IRS is due. If you don't know what the refund amount on your return is and you're trying to \\\"\\\"estimate\\\"\\\" it now - you better get a copy of that return.\\\"\",\n \"But how do I bring the initial deposit into the equation? Basically, you can't. Unless you combine two different formulas from Math of Finance into a single expression. The single initial deposit of $1000 will compound for 20 years at 5% compounded annually. The final amount for this part of the deposit will be: V1 = 1000 x (1.05)^20 In addition the series of 20 payments will be an ordinary annuity with a regular payment of $100, with the value on the occasion of the 20th payment given by: So the final total amount in the account at the end of 20 years will be the sum of these two values...\",\n \"From my perspective I suspect that if the government use the paid price, people will start to buy at very low nominal prices in order to pay less taxes, and will repay the seller by other means.\",\n \"It’s actually become a problem. To raise taxes above that threshold requires a public vote. My city just raised them with a referendum for the schools. It’s pretty difficult though, and it definitely forces legislators to need the money for something voters want.\",\n \"Amazon luckily allows you to buy gift cards for virtually any amount, down to even a dollar. Whenever i have some random amount left on a gift card, i just go ahead and buy an Amazon e-gift card with it. FYI - this works only with e-gift cards, not physical ones\",\n \"How much Federal Capital Gains, NYS Income tax and local tax should I expect to pay? You're going to net about 2.4 millions of dollars. Federal long term capital gains tax is 20% (plus 3.8% medicare), NYS is 8.82%. Does it make sense to investigate the tax benefits of financing the sale for the buyer? Yes. Have your tax adviser check the options for you (financing, instalment, etc), especially if you have no other US-sourced income. Tax treaties are also something your tax adviser should be looking at. Be sure your tax adviser is properly licensed in New York as either EA, CPA or Attorney. Don't do anything without a proper tax advice.\",\n \"Two ways to solve this. Look at the answer. If the answer says 3 months, then using ceiling for similar questions. You have to act according to the exam conventions, not according to own feelings. Whether or not the answer is reasonable and applicable in real life is out of the question. Ask yourself, did the investment double after 14 years 2 months? i.e. FV >= 2PV. Does a person who ran 99.72 meters in a 100-meter dash counted as touching the finish line?\",\n \"How about if we lower taxes on the bottom two brackets and increase taxes on the top two brackets? Right now it's 10, 15, 25, 28, 33, and 35 percent. But wouldnt it be better if we change it to 8, 13, 25, 28, 35, 38 percent? The poor are the ones who spends most of their money on sale taxes than compared with any other brackets and the more money the poor have the more they will spend which will lead to more growth in the economy\",\n \"If it's raising $25 million with a debt to equity ratio of 50% then it's raising $8.33 million of debt and $16.67 million of equity. You've priced it as if it were raising $25 million of debt and $25 million of equity, which would be raising $50 million with a debt to equity ratio of 100%.\",\n \"With a paypal micropayment he pays 61k (6.1%) (5% of sale price + .05 cents per transaction) With a regular paypal he pays 95k (9.5%) (2.9% of sale price + .30 cents per transaction) In case anybody was wondering what the poster is talking about. Either way he got hosed by using PayPal. Note: I'm working off 220,000 units sold at 1 million dollars (which I know aren't the exact figures).\",\n \"The trickiest thing is the federal tax. It's typical to withhold 25% federal on this type of event. If your federal marginal rate was already towards the top of that bracket, you'll owe the missing 3% as you enter the 28% bracket. Nothing awful, just be aware.\",\n \"I would just take $2000 and multiply by your marginal tax rate, weight that between the 5 other people according to their share of the prize money and ask them to give you that. From your question it seems like you all have a good working relationship, I'm sure the other partners would agree to that. I think it's the simplest solution that is also fair and equitable. Basically, you pay the tax on 2000 and they pay you back for their share of the tax. Much easier than trying to pass it through your tax return for 5 separate people for a minimal amount of $'s. In hindsight, the best way to do it would have been to 1099 the person with the lowest marginal tax rate for the year to minimize the total tax paid on the 2000. Probably only would've been a few dollars difference but still the most efficient way to do it.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["No. $188.23 has $11.76 tax = $199.99 $188.24 has $11.77 tax - $200.01 So, unless the based price contained the half cent for $188.235, the register would never show $200.00 even. How does the receipt to customer look?","\"Don't worry about it. The State doesn't care about rounding error. All you need to do is say \"\"We charge our prices with tax included\"\" - you know, like carnivals and movie theaters. Then follow the procedures your state specifies for computing reportable tax. Quite likely it wants your pre-tax sales total for the reporting period. To get that, total up your gross sales that you collected, and divide by (1 + tax rate). Just like DJClayworth says, except do it on total sales instead of per-item. If you need to do the split per-transaction for Quickbooks or something, that's annoying. What Quickbooks says will be pennies off the method I describe above. The state don't care as long as it's just pennies, or in their favor.\"","Yes, it's a simple calculation. (x+0.0625x)=200 or x=200/1.0625 = $188.24 Technically $188.24 plus tax comes to $200.01. I would just eat the extra $0.01."],"string":"[\n \"No. $188.23 has $11.76 tax = $199.99 $188.24 has $11.77 tax - $200.01 So, unless the based price contained the half cent for $188.235, the register would never show $200.00 even. How does the receipt to customer look?\",\n \"\\\"Don't worry about it. The State doesn't care about rounding error. All you need to do is say \\\"\\\"We charge our prices with tax included\\\"\\\" - you know, like carnivals and movie theaters. Then follow the procedures your state specifies for computing reportable tax. Quite likely it wants your pre-tax sales total for the reporting period. To get that, total up your gross sales that you collected, and divide by (1 + tax rate). Just like DJClayworth says, except do it on total sales instead of per-item. If you need to do the split per-transaction for Quickbooks or something, that's annoying. What Quickbooks says will be pennies off the method I describe above. The state don't care as long as it's just pennies, or in their favor.\\\"\",\n \"Yes, it's a simple calculation. (x+0.0625x)=200 or x=200/1.0625 = $188.24 Technically $188.24 plus tax comes to $200.01. I would just eat the extra $0.01.\"\n]","isConversational":false}}},{"rowIdx":76,"cells":{"_id":{"kind":"string","value":"2568"},"query":{"kind":"string","value":"How to pay with cash when car shopping?"},"gt_ids":{"kind":"list like","value":["139047","388798","296769","346042","108739","590082","127353"],"string":"[\n \"139047\",\n \"388798\",\n \"296769\",\n \"346042\",\n \"108739\",\n \"590082\",\n \"127353\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1,1,1,1,1,1],"string":"[\n 1,\n 1,\n 1,\n 1,\n 1,\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["346042","296769","78865","175522","108739","9146","139047","388798","214749","269898","258247","355310","451092","301643","280405","514238","150053","27693","154741","557425","590082","420499","305200","487287","157474","115916","417501","361687","19702","584187","348550","466317","116617","395590","233836","157496","239167","428578","316035","389102","123358","44037","537737","224057","241501","126559","64138","127353","108924","166314","283917","84797","321207","357280","453301","167834","408932","221439","572629","170141","304080","498034","167129","214878","337765","130209","287857","527581","580711","183733","147589","556391","58865","440073","292718","450775","133735","301797","277815","376016","391360","131906","374243","572420","125986","374211","23949","144433","260095","260956","539805","421366","509535","302678","524257","337823","234848","170471","580709","484734"],"string":"[\n \"346042\",\n \"296769\",\n \"78865\",\n \"175522\",\n \"108739\",\n \"9146\",\n \"139047\",\n \"388798\",\n \"214749\",\n \"269898\",\n \"258247\",\n \"355310\",\n \"451092\",\n \"301643\",\n \"280405\",\n \"514238\",\n \"150053\",\n \"27693\",\n \"154741\",\n \"557425\",\n \"590082\",\n \"420499\",\n \"305200\",\n \"487287\",\n \"157474\",\n \"115916\",\n \"417501\",\n \"361687\",\n \"19702\",\n \"584187\",\n \"348550\",\n \"466317\",\n \"116617\",\n \"395590\",\n \"233836\",\n \"157496\",\n \"239167\",\n \"428578\",\n \"316035\",\n \"389102\",\n \"123358\",\n \"44037\",\n \"537737\",\n \"224057\",\n \"241501\",\n \"126559\",\n \"64138\",\n \"127353\",\n \"108924\",\n \"166314\",\n \"283917\",\n \"84797\",\n \"321207\",\n \"357280\",\n \"453301\",\n \"167834\",\n \"408932\",\n \"221439\",\n \"572629\",\n \"170141\",\n \"304080\",\n \"498034\",\n \"167129\",\n \"214878\",\n \"337765\",\n \"130209\",\n \"287857\",\n \"527581\",\n \"580711\",\n \"183733\",\n \"147589\",\n \"556391\",\n \"58865\",\n \"440073\",\n \"292718\",\n \"450775\",\n \"133735\",\n \"301797\",\n \"277815\",\n \"376016\",\n \"391360\",\n \"131906\",\n \"374243\",\n \"572420\",\n \"125986\",\n \"374211\",\n \"23949\",\n \"144433\",\n \"260095\",\n \"260956\",\n \"539805\",\n \"421366\",\n \"509535\",\n \"302678\",\n \"524257\",\n \"337823\",\n \"234848\",\n \"170471\",\n \"580709\",\n \"484734\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["When you pay cash for a car, you don't always necessarily need to pay cash. You just aren't using credit or a loan is all. A few options you have are: Obviously no dealer expects anyone to just have the cash laying around for a car worth a few thousand dollars, nor would you bother going to your bank or credit union for the cash. You can simply get a cashier's check made out for the amount. Note that dealers may not accept personal checks as they may bounce. After negotiations at the dealer, you would explain you're paying cash, likely pay a deposit (depending on the price of the car, but $500 would probably be enough. Again, the deposit can be a check or bank deposit), and then come back later on with a cashier's check, or deposit into a bank account. You would be able to do this later that day or within a few days, but since you've purchased a new car you would probably want to return ASAP!","I usually get a cashiers check to cover about 90% - 95% of the expected amount (whatever I think is just below my wet-dream-price), and bring the rest in cash. That doesn't require so much cash to be carried. Alternatively you can write a personal check for the exact reminder, or go to the bank for the reminder after the deal is made - with the majority already paid in a cashiers check nobody would disagree.","I have sold cars before to individuals and always just received cash. I would think as long as the amount is less than $10,000.00 and the buyer is serious they will get there with the cash. Of course there is no possible way to guarantee the cash will not be counterfeit.","I have gotten a letter of credit from my credit union stating the maximum amount I can finance. Of course I don't show the dealer the letter until after we have finalized the deal. I Then return in 3 business days with a cashiers check for the purchase price. In one case since the letter was for an amount greater then the purchase price I was able drive the car off the lot without having to make a deposit. In another case they insisted on a $100 deposit before I drove the car off the lot. I have also had them insist on me applying for their in-house loan, which was cancelled when I returned with the cashiers check. The procedure was similar regardless If I was getting a loan from the credit union, or paying for the car without the use of a loan. The letter didn't say how much was loan, and how much was my money. Unless you know the exact amount, including all taxes and fees,in advance you can't get a check in advance. If you are using a loan the bank/credit Union will want the car title in their name.","You can pay with a cashiers check or personal check. You can even pay cash, or combine payment methods. However, in the USA if you give the dealership $10,000 or more in actual cash, they will be required to fill out a form 8300 with the IRS.","One additional reason to pay with cash rather than financing is that you will be able to completely shut down the dealership from haggling over finance terms and get right to the point of haggling over the cost of the car (which you should always do).","I have in the last few years purchased several used cars from dealers. They have handled it two different ways. They accepted a small check ~$1,000 now, and then gave me three business days to bring the rest as a cashiers check. They also insisted that I submit a application for credit, in case I needed a loan. They accepted a personal check on the spot. Ask them before you drive to the dealer. Of course they would love you to get a loan from them.","You could write a personal check after the final price has been set and you're ready to purchase. Another option would be to get the final price - then walk over to your bank and get a cashier's check.","You need to do the maths exactly. The cost of buying a car in cash and using a loan is not the same. The dealership will often get paid a significant amount of money if you get a loan through them. On the other hand, they may have a hold over you if you need their loan (no cash, and the bank won't give you money). One strategy is that while you discuss the price with the dealer, you indicate that you are going to get a loan through them. And then when you've got the best price for the car, that's when you tell them it's cash. Remember that the car dealer will do what's best for their finances without any consideration of what's good for you, so you are perfectly in your rights to do the same to them.","Cash is very effective at getting a discount when buying from individuals (craigslist, garage sales, estate sales, flea markets, etc.). I'll make an offer, then thumb through the cash while they consider it. There eyes will dart back and forth between my eyes and the cash as they decide whether to take my offer. Car dealers do seem to be very unique. The dealer I bought at recently said that 70% of their deals were cash purchases, JoeTaxpayer's dealer said 1% were cash purchases. I've had good luck negotiating with cash for well-loved cars (under $10K) from both individuals or used dealers. I'm also looking for carpet for my house and the first vendor I went to offered at 5% discount if I paid up front (no financing).","Instead of going to the dealership and not knowing if you will be able to get a loan or what the interest rate might be, go to a local credit union or bank first, before you go car shopping, and talk to them about what you would need for your loan. If you can get approval for a loan first, then you will know how much you can spend, and when it comes time for negotiation with the dealer, he won't be able to confuse you by changing the loan terms during the process. As far as the dealer is concerned, it would be a cash transaction. That having been said, I can't recommend taking a car loan. I, of course, don't know you or your situation, but there are lots of good reasons for buying a less expensive car and doing what you can to pay cash for it. Should you choose to go ahead with the loan, I would suggest that you get the shortest loan length that you can afford, and aim to pay it off early.","In the UK at least, dealers definitely want you to take finance. They get benefits from the bank (which are not insubstantial) for doing this; these benefits translate directly to increased commission and internal rewards for the individual salesman. It's conceivable that the salesman will be less inclined to put himself out for you in any way by sweetening your deal as much as you'd like, if he's not going to get incentives out of it. Indeed, since he's taking a hit on his commission from you paying in cash, it's in his best interests to perhaps be firmer with you during price negotiation. So, will the salesman be frustrated with you if you choose to pay in cash? Yes, absolutely, though this may manifest in different ways. In some cases the dealer will offer to pay off the finance for you allowing you to pay directly in cash while the dealer still gets the bank referral reward, so that everyone wins. This is a behind-the-scenes secret in the industry which is not made public for obvious reasons (it's arguably verging on fraud). If the salesman likes you and trusts you then you may be able to get such an arrangement. If this does not seem likely to occur, I would not go out of my way to disclose that I am planning to pay with cash. That being said, you'll usually be asked very early on whether you are seeking to pay cash or credit (the salesman wants to know for the reasons outlined above) and there is little use lying about it when you're shortly going to have to come clean anyway.","With new cars it's usually the other way around: finance at a low APR or get cash back when you buy it outright. With used cars you usually don't know how much they have invested in the car, so it's more difficult to know how low they're willing to go. Regardless, I do think it's odd that they would knock 2K off the price if you finance with them, but not if you pay cash. The only reason they would do that is if they intend to make at least 2K in interest over the life of the loan, but they have no way of guaranteeing you won't refi. Therefore, I suspect they are bluffing and would probably close the deal if you wrote them a check (or put the cash on the table) for 2K less. However, if they won't budge and will only knock off 2K if you finance, you could finance and pay it off in full a week later. Just make sure they don't have any hidden origination fees or pay-off-early fees.","You know what? Pay cash, but ask for a discount. And something fairly hefty. Don't be afraid to bargain. The discount will be worth more than the interest you'd get on the same amount of money. And if the salesman doesn't give you a decent discount, ask to speak to the manager. And if that doesn't work, try another store. Good luck with it!","The car dealership doesn't care where you get the cash; they care about it becoming their money immediately and with no risk or complications. Any loan or other arrangements you make to raise the cash is Your Problem, not theirs, unless you arrange the loan through them.","\"Yes you tell them. I can say that I pay cash for all my cars and always get cars for lower than the TrueCar low-end. There are basically two steps: go test drive, negotiate fully, leave (unless you are given a mind-blowing offer). This may take you one to many dealerships. It depends on how well you know what car you want and how much a dealership will negotiate. you pick a night that another dealership that specifically has the car you want (or multiple - even better) is open and you go in 30-45 mins before they close. Paying cash is key for this to work. By the time you get to numbers they will be almost closed. Their finance guy might be gone so you will get your salesman and a manager. I will use my last car as an example. Toyota Highlander 2015 with MSRB 32,995. TrueCar at 29,795 with a good deal at 29,400. I simply talked to my sales guy said I would like to walk out with the car tonight. I have already talked to XYZ dealership and they offered me 28,500 - which is already below TrueCar low price. I asked for $27,900. Boom 10 minutes later car bought at 28,100. Cash is king. The sales guy and manager will bite the bullet on profit for ease of sale. Going in late is the key to using the cash. You don't have the finance guys jumping in and you have less people to move through. Also they know they have limited time to deal and if you walk off the lot there is less than 10% chance of you coming back - they want to close. They are making minimal profit but doing minimal work. With cash your sales guy is on your side because you are basically throwing him a couple hundred dollars at the end of a shift (where most would just be sitting around watching TV). Some other tips: be fair. If they would have said 28,300 is our lowest that we can go and that's it. I probably would have still got the car. Dealerships will tell you their lowest price if you are close and you are still below it. since they didn't show me their lowest price I didn't budge much but still budged a bit to show good sport. They brought their invoice number out to show that at 28,100 that they were going to lose $1500 on the car. I made the manager laugh because my response was to bring up KBB and show the used car price for the car, which was minus $2000. So I just said, \"\"Well you lost $1500 but I lose $2000 driving this off the lot.\"\" I then went back to $27,850 to meet in the middle of \"\"losing\"\" money. This actually closed the deal. Anyway don't ever believe any piece of paper they show you with numbers. These dealerships get monthly bonuses on sales and that is a lot of their profit past selling your trade-in. If you actually value your money you would never be trading in a car to a dealer so if you are paying cash, sell your own car or at least take it to a place like CarMax which I don't endorse but better than dealer.\"","I sold my car on Craigslist for 2K and received cash. I bought a car from Craigslist with $4K cash. For larger amounts where the buyer doesn't want to pocket such large quantities of money, meet them at their bank and have the banker do a draw on their account. Hustle that check to your bank and be done.","I'd pay cash. Car loans are amortized, so sometimes you can get upside-down on the loan between 18-30 months because you are pre-paying interest. This can get you into trouble if you get into an accident. Given the low rate and the type of car you're buying, you're probably fine either way.","I've done this, though with a loan company rather than a bank. We agreed on price, drove to the loan company's office (the seller having notified them in advance), I gave them the money, got the title, and they gave the balance to the seller. Important point is that you get the signed-off title from the lienholder.","When I asked this particular question on a car forum recently, I got the following suggestions: When we bought our last car, we met with the seller in the DMV's parking lot as there generally is some police around and paid him cash. Here in NV the plates stay with the PO so you have to get it registered or a movement permit anyway before you can drive the vehicle so this worked out pretty reasonable and safe for both parties.","Ask the dealer to drive to the bank with you, if they really want cash.","You have a good start (estimated max amount you will pay, estimated max down payment, and term) Now go to your bank/credit union and apply for the loan. Get a commitment. They will give you a letter, you may have to ask for it. The letter will say the maximum amount you can pay for the car. This max includes their money and your down payment. The dealer doesn't have to know how much is loan. You also know from the loan commitment exactly how much your monthly payment will be in the worst case. If you have a car you want to trade in, get an written estimate that is good for a week or so. This lets you know how much you can get from selling the car. Now visit the dealer and tell them you don't need a loan, and won't be trading in a car. Don't show them the letter. After all the details of the purchase are concluded, including any rebates and specials, then bring up financing and trade-in. If they can't beat the deal from your bank and the written estimate for the car you are selling, then the deal is done. Now show them the letter and discuss how much down they need today. Then go to the bank for the rest of the money. If they do have a better loan deal or trade in then go with the dealer offer, and keep the letter in your pocket. If you go to the dealer first they will confuse you because they will see the price, interest rate, length of loan, and trade in as one big ball of mud. They will pick the settings that make you happy enough, yet still make them the most money.","The only issue I can see is that the stranger is looking to undervalue their purchase to save money on taxes/registration (if applicable in your state). Buying items with cash such as cars, boats, etc in the used market isn't all that uncommon* - I've done it several times (though not at the 10k mark, more along about half of that). As to the counterfeit issue, there are a couple avenues you can pursue to verify the money is real: *it's the preferred means of payment advocated by some prominent personal financial folks, including Dave Ramsey","Yes, you are correct to go to the credit union first. Get approved for a loan first. Often, upon approval, the credit union will give you a blank check good for any amount up to the limit of the loan. When you buy the car, make it payable to the dealer, write in the amount and sign it. Enjoy the new car!","If they bring cash, meet at your bank to verify. If they want to use cashiers check, meet them at their bank. Large amounts use wires directly to your acct and verify (not only received, but deposited) before handing over the title/keys.","One option is that the buyer brings cash and you together with the buyer go the bank where you have an account and deposit the money there - then the bank checks the cash and once the cash is accepted you no longer care if it was counterfeit. Once money is deposited you handle the keys.","Ideally you would negotiate a car price without ever mentioning: And other factors that affect the price. You and the dealer would then negotiate a true price for the car, followed by the application of rebates, followed by negotiating for the loan if there is to be one. In practice this rarely happens. The sales rep asks point blank what rebates you qualify for (by asking get-to-know-you questions like where you work or if you served in the armed forces - you may not realize that these are do-you-qualify-for-a-rebate questions) before you've even chosen a model. They take that into account right from the beginning, along with whether they'll make a profit lending you money, or have to spend something to subsidize your zero percent loan. However unlike your veteran's status, your loan intentions are changeable. So when you get to the end you can ask if the price could be improved by paying cash. Or you could try putting the negotiated price on a credit card, and when they don't like that, ask for a further discount to stop you from using the credit card and paying cash.","Don't let the tail of credit score wag the dog of prudent financial planning. If you have a sufficient emergency fund in addition to the car cost, then buying the car for cash is to my mind a better plan. But if the car purchase would deplete your emergency fund, then I'd go for the loan. Cash in hand gives you optionality that can be very valuable when things go wrong. And credit will be withdrawn at exactly the most painful moment.","As others have already pointed out, the bank isn't getting your money upfront - the cash goes to the dealer and the bank will be financing you a much smaller amount. They really don't have any incentive to give you a better interest rate, but it never hurts to ask. The more important (and unasked) question is should you do this? Keeping in mind that a loan with good credit could be in the 1.8% range. Average long-term returns in the market are over 3x that, so by paying upfront you're trading the opportunity for 6%+ returns for the ability to save -2% fees.","The amount you are earning in the savings account is insignificant, since you would only have the money in the account for 1 month after purchasing the car. The instant 1.5% cashback (or travel mile reward), on the other hand, can be significant. However, it is not normal for a car dealership to allow you to put $16k on a credit card. The reason is that the fees that the dealer has to pay to process your credit card would be too burdensome. Car dealers have a much smaller profit margin on their sales than a typical retail store, so if the dealer has to pay 3 or 4% of the sales price in credit card fees, it just eats up too much of their profit. If the dealer does allow you to put the entire purchase price on a credit card, be aware that they have already factored in their processing fees into the price. You might be able to get a better than 1.5% discount by offering to pay with cash instead.","I have had it two way now: I got pre-approval from my credit union which just so happened to be one of the bigger vehicle lenders in the metro area. What I found out was that the dealership (which was one of the bigger ones in the metro area) had a computer system that looked up my deal with the credit union. Basically, I signed some contracts and the CU and the dealership did whatever paperwork they needed to without me. I bought a used car and drove it off of the lot that night, and I didn't ever go back (for anything financial) Both my wife and her sister received blank checks that were valid up to a certain amount. In the case of my sister in law, she signed the check, the dealership called to confirm funds and she drove off. In the case of my wife, she ended up negotiating a better deal with dealer finance, but I was assured she only had to sign the check, get it verified and drive the car home.","buy a cashiers check with the cash (a CRT will be nec if over 10 K) and deposit the cashiers check","Possible (unlikely) reasons: But usually, yeah, if you can pay cash, you should.","If you have enough money to buy a car in full, that probably means you have good credit. If you have good credit, car dealerships will often offer 0% loans for either a small period of time, like 12 months, or the entire loan. Taking a 0% loan is obviously more optimal than paying the entire lump sum up front. You can take the money and invest in other things that earn you more than 0%. However, most dealerships offer a rebate OR a 0% loan. Some commenters below claim that the rebate is usually larger than the saved interest, so definitely do the math if you have that option.","Contact the lien holder (the bank) and they'll have a procedure for you. Usually, you complete the transaction at the bank after agreeing on the purchase price: you will cut a check to the bank to pay off the loan, and then write a second check to the seller for whatever extra amount should go to him. The bank will handle the paperwork for transferring the title of the car to your name. Obviously, under no circumstances should you give all the money to the seller in the hopes that he pays off the loan. You need to follow the lender's procedures because they hold the title to the car and must be the ones to transfer it to you. Banks do this type of transaction all the time. Just call them and ask about how to proceed.","From your viewpoint you paying the dealer directly is better. You know that the check went to the dealer, and was used to purchase a car. If you give the check to your friend they may say I can't find the car I want this week, so I will purchase it next week but first let me by groceries and a new suit. I will replace the funds after my next paycheck. Next thing you know they are still short of funds. This might not happen, but it could. From your friends viewpoint getting a check from you allows them to potentially keep your part of the transaction out of view of the dealer/lender. In a mortgage situation the lender will take a look at your bank account to make sure there isn't a hidden loan, but I am not sure they do when they are approving a car loan. What you want to avoid is being a co-signer for the loan. As a co-signer you will be responsible for all payments; and missed payments will hurt your credit score.","Break the transactions into parts. Go to your bank or credit union and get a loan commitment. When applying for loan get the maximum amount they will let you borrow assuming that you will no longer own the first car. Take the car to a dealer and get a written estimate for selling the car. Pick one that gives you an estimate that is good for a week or ten days. You now know a data point for the trade-in value. Finally go to the dealer where you will buy the replacement car. Negotiate the price, tell them you don't need financing and you will not be trading in the car. Get all you can regarding rebates and other special incentives. Once you have a solid in writing commitment, then ask about financing and trade in. If they beat the numbers you have regarding interest rate and trade-in value accept those parts of the deal. But don't let them change anything else. If you keep the bank financing the dealer will usually give you a couple of days to get a check. If you decide to ell the car to the first dealer do so as soon as you pick up the replacement car. If you try to start with the dealer you are buying the car from they will keep adjusting the rate, length of loan, trade-in value, and price until you have no idea if you are getting a good deal.","I had a strange experience buying a new car. They were offering a deal of 0.9% interest on the loan but only if the loan was above a certain amount. Below that amount, the interest rate was something like 3%. Given the amount I was willing to put down, it was cheaper to put less down and get the lower interest rate. So, once you agree to the purchase price, you need to discuss what finance options they offer. You might also check in advance with other loan providers (e.g. your bank) to see what offers they have.","I am a carsalesman. Lets get one thing straight, we are not allowed to give people a better deal just because they pay cash, regardless of what some people say. That can be seen a discrimination as not all people are fortunate enough to have cash available. if anything, finance is better for the dealership, as we get finance commission and the finance company DOES pay us the total amount immidiatly","\"Yes, he can retract the offer - it was a cash-only offer, and if you're financing, it's no longer \"\"cash\"\". Unless, of course, you get the financing through your local bank / credit union, and they hand you a check (like on a personal loan). Then it's still cash. However, the salesman can still retract the offer unless it's in writing because you haven't signed anything yet. The price of financing will always be higher because the dealer doesn't get all their money today. Also, if you finance, you are not paying just the cost of the vehicle, you are paying interest, so your final cost will be higher (unless you were one of the lucky souls who got 0% financing atop employee pricing, and therefore are actually saving money by having a payment).\"","If you buy a car using a loan, the dealer gets benefited by the financing institution by the way of referring fee paid to the dealer by the institution, and that too if the dealer has helped in financing the purchase. Otherwise for the dealer it doesn't matter if one pays in full or through financing. The dealer is paid in full in either cases. Hence the dealer may slightly get disappointed that you are not taking a loan.","\"JohnFX and TTT provide excellent answers. Researching prices others have paid, being up front that you'll go buy a junker car to hold you over if they won't meet your price, and playing a few dealerships off of each other are all great tactics. In addition, I've got a few points about timing your purchase. If you're not desperate for a car, these can really help give you the upper hand in negotiations: Wait until the end of the month. Dealerships and individual salespeople usually have quotas that they're trying to clear, and the month is usually the standard cutoff. The last time I bought a car, the salesman made the mistake of mentioning, \"\"I don't usually work Thursdays, but I'll be in this Thursday.\"\" Thursday was the 31st - I inferred from this information that he hadn't made his quota for the month yet. So I came back on the 31st to negotiate, and managed to hammer out a pretty good deal. Wait until about an hour before the dealership closes to show up and shop. This gives you enough time to not be obvious about the tactic, but you'll definitely be holding them past their normal quitting time if you do much negotiating. The salesman will be a little more inclined to make a deal so he can get home and have dinner. Bonus points if you can wait until a month that ends on a Friday!\"","The answer varies based on your location which you did not mention, but here in Minnesota (USA) I would recommend the following: I have followed the above steps with success and my states Attorney Generals office also recommended a similar process. See the following question for Q&A related to the other side of the transaction: What is the best way to accept payment when selling a used car?","There is a 3rd option: take the cash back offer, but get the money from a auto loan from your bank or credit union. The loan will only be for. $22,500 which can still be a better deal than option B. Of course the monthly payment can make it harder to qualify for the mortgage. Using the MS Excel goal seek tool and the pmt() function: will make the total payment equal to 24K. Both numbers are well above the rates charged by my credit union so option C would be cheaper than option B.","The advice given at this site is to get approved for a loan from your bank or credit union before visiting the dealer. That way you have one data point in hand. You know that your bank will loan w dollars at x rate for y months with a monthly payment of Z. You know what level you have to negotiate to in order to get a better deal from the dealer. The dealership you have visited has said Excludes tax, tag, registration and dealer fees. Must finance through Southeast Toyota Finance with approved credit. The first part is true. Most ads you will see exclude tax, tag, registration. Those amounts are set by the state or local government, and will be added by all dealers after the final price has been negotiated. They will be exactly the same if you make a deal with the dealer across the street. The phrase Must finance through company x is done because they want to make sure the interest and fees for the deal stay in the family. My fear is that the loan will also not be a great deal. They may have a higher rate, or longer term, or hit you with many fee and penalties if you want to pay it off early. Many dealers want to nudge you into financing with them, but the unwillingness to negotiate on price may mean that there is a short term pressure on the dealership to do more deals through Toyota finance. Of course the risk for them is that potential buyers just take their business a few miles down the road to somebody else. If they won't budge from the cash price, you probably want to pick another dealer. If the spread between the two was smaller, it is possible that the loan from your bank at the cash price might still save more money compared to the dealer loan at their quoted price. We can't tell exactly because we don't know the interest rates of the two offers. A couple of notes regarding other dealers. If you are willing to drive a little farther when buying the vehicle, you can still go to the closer dealer for warranty work. If you don't need a new car, you can sometimes find a deal on a car that is only a year or two old at a dealership that sells other types of cars. They got the used car as a trade-in.","There is no rule that says the dealer has to honor that deal, nor is there any that says he/she won't. However, if you are thinking of financing through though the dealership they are likely to honor the deal. They PREFER you finance it. If you finance it through the dealer the salesman just got TWO sales (a car and a loan) and probably gets a commission on both. If you finance it through a third party it makes no difference to the dealer, it is still a cash deal to them because even though you pay off the car loan over years, the bank pays them immediately in full.","\"I would write them a check or give them cash money. There are payment receipt forms available online, you can print one of have them fill it out and sign it. Just google \"\"private party receipt\"\". Money transfer (via bank account or Paypal) is also an option, but in my opinion it's more convenient to meet up and handle it in person. If you want, you can have them meet you at a notary public's office (your local bank branch should have one) and have the receipt notarized. I don't think it's a scam, but make sure you are paying the right person.\"","The very first time I bought a new car I wrote out a personal check for $5000 (this was a looong time ago!). And got a call from the sales person that he had called the bank and was told that I did not have that much money in my checking account! I explained that I had just that day transferred money from savings to checking. The sales person accepted that and there was never a problem after that.","Unless you are getting better than a 2.95% return on that money market account. Pay cash. That's the purely logical way to make the decision. However if it were me I'd pay cash anyway just because I like the idea of not owing money and having the hassle of dealing with a payment every month.","Not long after college in my new job I bought a used car with payments, I have never done that since. I just don't like having a car payment. I have bought every car since then with cash. You should never borrow money to buy a car There are several things that come into play when buying a car. When you are shopping with cash you tend to be more conservative with your purchases look at this Study on Credit card purchases. A Dunn & Bradstreet study found that people spend 12-18% more when using credit cards than when using cash. And McDonald's found that the average transaction rose from $4.50 to $7.00 when customers used plastic instead of cash. I would bet you if you had $27,000 dollars cash in your hand you wouldn't buy that car. You'd find a better deal, and or a cheaper car. When you finance it, it just doesn't seem to hurt as bad. Even though it's worse because now you are paying interest. A new car is just insanity unless you have a high net worth, at least seven figures. Your $27,000 car in 5 years will be worth about $6500. That's like striking a match to $340 dollars a month, you can't afford to lose that much money. Pay Cash If you lose your job, get hurt, or any number of things that can cost you money or reduce your income, it's no problem with a paid for car. They don't repo paid for cars. You have so much more flexibility when you don't have payments. You mention you have 10k in cash, and a $2000 a month positive cash flow. I would find a deal on a 8000 - 9000 car I would not buy from a dealer*. Sell the car you have put that money with the positive cash flow and every other dime you can get at your student loans and any other debt you have, keep renting cheap keep the college lifestyle (broke) until you are completely out of debt. Then I would save for a house. Finally I would read this Dave Ramsey book, if I would have read this at your age, I would literally be a millionaire by now, I'm 37. *Don't buy from a dealer Find a private sale car that you can get a deal on, pay less than Kelly Blue Book. Pay a little money $50 - 75 to have an automotive technician to check it out for you and get a car fax, to make sure there are no major problems. I have worked in the automotive industry for 20 + years and you rarely get a good deal from a dealer. “Everything popular is wrong.” Oscar Wilde","Its not a scam. The car dealership does not care how you pay for the car, just that you pay. If you come to them for a loan they will try and service you. If you come with cash, they will sell you a car and not try to talk you into financing. If you come with a check from another bank, they will happily accept it. I would try to work with Equifax or a local credit union to figure out what is going on. Somehow she probably had her credit frozen. Here are some really good things to mitigate this situation: Oh and make sure you do #1 and forget about financing cars ever again. I mean if you want to build wealth.","\"Talk to your bank first but shop around a bit as well with other reputable lenders in your area. Another option, if you're willing to put down ~84% of the purchase price would be to talk to several dealerships BEFORE you set foot on a single lot. Tell them that you are interested in buying a Versa and that you are willing to pay cash but you are not willing to pay more than $10,200. They won't agree (trust me on that) but they will come down from $13,000. Say \"\"Thanks, I'll call you back.\"\" and call one of the other dealerships on your list and tell them \"\"I just spoke with this dealership and they are willing to sell me the car for [whatever number they gave you].\"\" One of two things will happen, either the dealership will come back with a lower price or they will tell you to go buy the car there. Continue this process until you have one dealership left. I did this with 3 dealerships in 2011 and bought a truck with a $27,000 sticker price for just over $19,000. It took about a week to make all of the calls and I ended up going to a dealership 3 hours away but it was worth it for $8,000.\"","To directly answer your question, the best choice is to pay cash and place the rest on your student loan. This is saving you from paying more interest. To offer some advise, consider purchasing a cheaper car to place more money towards your student loan debt. This will be the best financial decision in the long-term. I suspect the reason you are considering financing this vehicle is that the cash payment feels like a lot. Trust your instinct here. This vehicle sounds like large splurge considering your current debt, and your gut is telling you as much. Be patient. Use your liquid funds to get a more affordable vehicle and attack the debt. That is setting yourself up for financial success.","I've been an F&I Manager at a new car dealership for over ten years, and I can tell you this with absolute certainty, your deal is final. There is no legal obligation for you whatsoever. I see this post is a few weeks old so I am sure by now you already know this to be true, but for future reference in case someone in a similar situation comes across this thread, they too will know. This is a completely different situation to the ones referenced earlier in the comments on being called by the dealer to return the vehicle due to the bank not buying the loan. That only pertains to customers who finance, the dealer is protected there because on isolated occasions, which the dealer hates as much as the customer, trust me, you are approved on contingency that the financing bank will approve your loan. That is an educated guess the finance manager makes based on credit history and past experience with the bank, which he is usually correct on. However there are times, especially late afternoon on Fridays when banks are preparing to close for the weekend the loan officer may not be able to approve you before closing time, in which case the dealer allows you to take the vehicle home until business is back up and running the following Monday. He does this mostly to give you sense of ownership, so you don't go down the street to the next dealership and go home in one of their vehicles. However, there are those few instances for whatever reason the bank decides your credit just isn't strong enough for the rate agreed upon, so the dealer will try everything he can to either change to a different lender, or sell the loan at a higher rate which he has to get you to agree upon. If neither of those two things work, he will request that you return the car. Between the time you sign and the moment a lender agrees to purchase your contract the dealer is the lien holder, and has legal rights to repossession, in all 50 states. Not to mention you will sign a contingency contract before leaving that states you are not yet the owner of the car, probably not in so many simple words though, but it will certainly be in there before they let you take a car before the finalizing contract is signed. Now as far as the situation of the OP, you purchased your car for cash, all documents signed, the car is yours, plain and simple. It doesn't matter what state you are in, if he's cashed the check, whatever. The buyer and seller both signed all documents stating a free and clear transaction. Your business is done in the eyes of the law. Most likely the salesman or finance manager who signed paperwork with you, noticed the error and was hoping to recoup the losses from a young novice buyer. Regardless of the situation, it is extremely unprofessional, and clearly shows that this person is very inexperienced and reflects poorly on management as well for not doing a better job of training their employees. When I started out, I found myself in somewhat similar situations, both times I offered to pay the difference of my mistake, or deduct it from my part of the sale. The General Manager didn't take me up on my offer. He just told me we all make mistakes and to just learn from it. Had I been so unprofessional to call the customer and try to renegotiate terms, I would have without a doubt been fired on the spot.","In general I'd say, yeah, if you can pay cash, pay cash. If you pay cash, then by definition you pay zero interest. If you get a loan, you'll pay interest. Most people get a loan to buy a car because they don't have the cash. Possible reasons not to pay cash when you could: One: Technically you can pay cash, but if you did, you would have little or no reserve for emergencies. Like if the car costs, say, $20,000.00, and you have $20,010.00 in your bank account, then technically you could afford to pay cash, but you probably shouldn't, because you don't want to have just $10 left. What if tomorrow something comes up? Two: Arguably, you have a place to invest money that pays more than the interest on the loan. Like say you can get a car loan for, whatever the going rate is today, say 6%. And you know a place to invest your money that is very safe and almost guaranteed to pay 10%. It would make sense to borrow to buy the car, invest the cash, and then withdraw money from the investment to make the payments on the car. You'd end up 4% ahead. There are a lot of catches to that strategy, though. The biggest is that the more the investment pays, the more likely that it is risky. If you thought the investment would pay 10% but it ends up paying only 4%, then you will lose money by this strategy. Also, there's the psychological element: Many people SAY and fully INTEND to invest their money, but then find other things they want to buy and so spend it instead. If you pay cash, you're committed.","\"It is a legitimate practice. The dealers do get the loan money \"\"up front\"\" because they're not holding the loan themselves; they promptly sell it to someone else or (more commonly) just act as salesmen for a lending institution and take their profit as commission or origination fees. The combined deal is often not a good choice for the consumer, though. Remember that the dealer's goal is to close a sale with maximum profit. If they're offering to drop the price $2k, they either didn't expect to actually get that price in the first place, or expect at least $2k of profit from the loan, or some combination of these. Standard advice is to negotiate price, loan, and trade-in separately. First get the dealer's best price on the car, compare it to other dealer and other cars, and walk away if you don't like their offer. Repeat for the loan, checking the dealer's offer against banks/credit unions available to you. If you have an older car to unload, get quotes for it and consider whether you might do better selling it yourself. ========= Standard unsolicited plug for Consumef Reports' \"\"car facts\"\" service, if you're buying a new car (which isn't usually the best option; late-model used is generally a better value). For a small fee, they can tell you what the dealer's real cost of a car is, after all the hidden incentives and rebates. That lets you negotiate directly on how much profit they need on this sale... and focuses their attention on the fact that the time they spend haggling with you is time they could be using to sell the next one. Simply walking into the dealer with this printout in your hand cuts out a lot of nonsense. The one time I bought new, I basically walked in and said \"\"It's the end of the model year. I'll give you $500 profit to take one of those off your hands before the new ones come in, if you've got one configured the way I want it.\"\" Closed the deal on the spot; the only concession I had to make was on color. It doesn't always work; some salesmen are idiots. In that case you walk away and try another dealer. (I am not affiliated in any way with CU or the automotive or lending industries, except as customer. And, yes, this touch keyboard is typo-prone.)\"","Dealer financing should be ignored until AFTER you have agreed on the price of the car, since otherwise they tack the costs of it back onto the car's purchase price. They aren't offering you a $2500 cash incentive, but adding a $2500 surcharge if you take their financing package -- which means you're actually paying significantly more than 0.9% for that loan! Remember that you can borrow from folks other than the dealer. If you do that, you still get the cash price, since the dealer is getting cash. Check your other options, and calculate the REAL cost of each, before making your decisions. And remember to watch out for introductory/variable rates on loans! Leasing is generally a bad deal unless you intend to sell the car within three years or so.","When getting a car always start with your bank or credit union. They are very likely to offer better loan rate than the dealer. Because you start there you have a data point so you can tell if the dealer is giving you a good rate. Having the loan approved before going to the dealer allows you to negotiate the best deal for the purchase price for the car. When you are negotiating price, length of loan, down payment, and trade in it can get very confusing to determine if the deal is a good one. Sometimes you can also get a bigger rebate or discount because to the dealer you are paying cash. The general advice is that a lease for the average consumer is a bad deal. You are paying for the most expensive months, and at the end of the lease you don't have a car. With a loan you keep the car after you are done paying for it. Another reason to avoid the lease. It allows you to purchase a car that is two or three years old. These are the ones that just came off lease. I am not a car dealer, and I have never needed a work visa, but I think their concern is that there is a greater risk of you not being in the country for the entire period of the lease.","A business could buy the car outright for cash if it so chose, so no, there's no specific limit on the down payment.","\"There are two fundamentally different reasons merchants will give cash discounts. One is that they will not have to pay interchange fees on cash (or pay much lower fees on no-reward debit cards). Gas stations in my home state of NJ already universally offer different cash and credit prices. Costco will not even take Visa and MasterCard credit cards (debit only) for this reason. The second reason, not often talked about but widely known amongst smaller merchants, is that they can fail to declare the sale (or claim a smaller portion of the sale) to the authorities in order to reduce their tax liability. Obviously the larger stores will not risk their jobs for this, but smaller owner-operated (\"\"mom and pop\"\") stores often will. This applies to both reduced sales tax liability and income tax liability. This used to be more limited per sale (but more widespread overall), since tax authorities would look closely for a mismatch between declared income and spending, but with an ever-larger proportion of customers paying by credit card, merchants can take a bigger chunk of their cash sales off the books without drawing too much suspicion. Both of the above are more applicable to TVs than cars, since (1) car salesmen make substantial money from offering financing and (2) all cars must be registered with the state, so alternative records of sales abound. Also, car prices tend to be at or near the credit limit of most cards, so it is not as common to pay for them in this way.\"","http://www.consumerismcommentary.com/buying-house-with-cash/ It looks like you can, but it's a bad idea because you lack protection of a receipt, there's no record of you actually giving the money over, and the money would need to be counted - bill by bill - which increases time and likelihood of error. In general, paying large amounts in cash won't bring up any scrutiny because there's no record. How can the IRS scrutinize something that it can't know about? Of course, if you withdraw 200k from your bank account, or deposit 200k into it then the government would know and it would certainly be flagged as suspicious.","\"This is my opinion as a car nut. It depends on what you want out of a car. For your situation (paying cash, want to keep the car long-term but also save money) I recommend seriously considering a slightly used vehicle, maybe 2 or 3 years old, or a \"\"certified pre-owned vehicle\"\". Reasons: Much less expensive than a brand new car because the first two years have the biggest depreciation hit. Cars come with a 4-year warranty, so a 3 year old car will still be in warranty. Yes, a certified pre-owned car will have a bit of a premium compared to a private-party used car, but the peace of mind of knowing it's in good shape is worth the extra cost considering you want to keep it long term. Consumer Reports will have good advice on the best values in used cars.\"","The car deal makes money 3 ways. If you pay in one lump payment. If the payment is greater than what they paid for the car, plus their expenses, they make a profit. They loan you the money. You make payments over months or years, if the total amount you pay is greater than what they paid for the car, plus their expenses, plus their finance expenses they make money. Of course the money takes years to come in, or they sell your loan to another business to get the money faster but in a smaller amount. You trade in a car and they sell it at a profit. Of course that new transaction could be a lump sum or a loan on the used car... They or course make money if you bring the car back for maintenance, or you buy lots of expensive dealer options. Some dealers wave two deals in front of you: get a 0% interest loan. These tend to be shorter 12 months vs 36,48,60 or even 72 months. The shorter length makes it harder for many to afford. If you can't swing the 12 large payments they offer you at x% loan for y years that keeps the payments in your budget. pay cash and get a rebate. If you take the rebate you can't get the 0% loan. If you take the 0% loan you can't get the rebate. The price you negotiate minus the rebate is enough to make a profit. The key is not letting them know which offer you are interested in. Don't even mention a trade in until the price of the new car has been finalized. Otherwise they will adjust the price, rebate, interest rate, length of loan, and trade-in value to maximize their profit. The suggestion of running the numbers through a spreadsheet is a good one. If you get a loan for 2% from your bank/credit union for 3 years and the rebate from the dealer, it will cost less in total than the 0% loan from the dealer. The key is to get the loan approved by the bank/credit union before meeting with the dealer. The money from the bank looks like cash to the dealer.","If they really want cash, you notify your bank in advance of the amount and have it put in your account, then you both sign the paperwork at the bank and after everything is signed you have the bank hand them the money. Guarding it after that is entirely their problem. Personally, I would consider this a stupid request and tell them to have their lawyer discuss it with my lawyer in the hope they can be talked out of it. As far as where to get the money: Same as for any purchase, find a bank willing to write a mortgage for you on this new house. What you choose to do about the other two houses is an independent question. You can sell one or both, but that may take money so you probably won't finish doing so before needing to pay for the new house. Of course when they do sell you can use the money toward paying down/paying off the new mortgage.","i think and what i understand when a house seller is asking for cash, thats means he is looking for a ready and quick buyer doesn't rely on mortgage and its long process. cash means a certified check for sure, but not physical money in suitcase!","\"I bought a car a few years ago. The salesman had the order, I knew the car I wanted and we had a price agreed on. When I refused the payment plan/loan, his manager came over and did a hard sell. \"\"99% of buyers take the financing\"\" was the best he could do. I told him I was going to be part of the 1%. With rates so low, his 2 or 3% offer was higher than my own cost of money. He went so far as to say that I could just pay it off the first month. Last, instead of accepting a personal check and letting me pick up the car after it cleared, he insisted on a bank check to start the registration process. (This was an example of one dealer, illustrating the point.) In other cases, for a TV, a big box store (e.g. Best Buy) isn't going to deal for cash, but a small privately owned \"\"mom and pop\"\" shop might. The fees they are charged are pretty fixed, they don't pay a higher fee cause I get 2% cash back, vs your mastercard that might offer less.\"","At minimum, put down the sale price less what insurance would pay if you got in an accident when driving home, OR purchase gap insurance. This auto loan calculator is fun to play around with. The larger the down payment, the smaller your monthly payments will be. Don't forget to budget insurance and gas! Insurance on a car you make payments on is more expensive. http://www.bankrate.com/calculators/auto/auto-loan-calculator.aspx A buddy of mine had a string of bad luck and totaled his car a few months after the date of purchase. He learned what it meant to be 'underwater', insurance paid him a few thousand less than the value of his loan. What's worse than having no car, having no car and a loan!","Option 2. Selling the car yourself will give you the best value, especially if you can get its full value. This will cost you time, but will return much better return for your money. Also, I would strongly recommend buying a used car from a private owner (not a dealer), rather than buying a new car. For $14,000 in cash you can probably get a car like a 2013 Ford Fusion that has excellent all-wheel drive and winter handling. A new Fusion, loaded, will cost at least $25,000 from a dealer. If you buy a 2013 car outright from a private owner, you will have NO PAYMENTS and can spend that money on investments and build your wealth.","The most economical way is to save your money, and buy a 1+ year old used car with cash.","\"If there's one reasonably close to you, you could go to a no-haggle dealership. Instead of making you haggle the price downward, they just give a theoretically fixed price that's roughly what the average customer could negotiate down to at a conventional dealer. Then just do your best broken record impression if they still try to sell you dubious addons: \"\"No. No. No. No. No...\"\" The last time I bought a new car (06), a no haggle dealer offered the second best deal I got out of 4 dealerships visited. The one I ended up buying with made an exceptional offer on my trade (comparable to 3rd party sale bluebook value). - My guess is they had a potential customer looking for something like my old car and were hoping to resell it directly instead of flipping it via auction.\"","I'd suggest buying a used car for cash, car loans are a bad idea. I bought my last car a few years ago for $8k off of craigslist, and it is still running great. Make sure you get a car checked out by a mechanic before buying (usually they'll drop it off at a mechanic you want to have take a look, or perhaps just go with you). My general rule is to not take out loans for anything which decreases in value. So a home mortgage would be fine, a car loan is not a great plan. Buy cash, and save for the next purchase. If you buy a decent used Corolla (or other small import car), you can get it for $8k, it will likely last a few years at least. That could end up costing you less than $200 per month total, or less. Much better deal in the long run.","As someone who was just recently a salesman at Honda, I'd recommend buying a Honda instead :). If you really prefer your Toyota, I always found quote-aggregation services (Truecar, I'm blanking on others) very competitive in their pricing. Alternatively, you could email several dealerships requesting a final sale price inclusive of taxes and tags with the make, model, and accessories you'd wish to purchase, and buy the vehicle from them if your local dealership won't match that price. Please keep in mind this is only persuasive to your local dealership if said competitors are in the same market area (nobody will care if you have a quote from out-of-state). As many other commenters noted, you should arrange your own financing. A staple of the sales process is switching a customer to in-house financing, but this occurs when the dealership offers you better terms than you are getting on your own. So allow them the chance to earn the financing, but don't feel obligated to take it if it doesn't make sense fiscally.","Seconding @petebelford's comment: if you are looking to save money, considerr taking the middleman out of the equation and buying directly from a car's previous owner. Even after paying a mechanic to inspect it for you, this is likely to be cheaper.","Your university should have a finance department which can help with payments. Speak with them and tell them you have interest in paying for at least part of your next semester in cash. From here they should be able to tell you the best method for this, though most likely cash/check will suffice. If there is no finance department, or you are still unsure, check with student services for more information.","Buying a car is a very big financial decision. There are three major factors to decide which car to buy: Pick two because you can't have all three. You can either have a reliable car that has cheap running costs but will be expensive to buy or a cheap car that is unreliable. If you are mechanically minded then reliability might not be that important to you. However, if you must get to work on time every day then owning a car that breaks down once every six months might be something you wish to avoid. There are a lot of hidden costs that should be thought about very carefully when considering purchasing a car: In my country, annual car registration costs are around $650. I budget around $1000 for maintenance each year (a major + minor service and some extra repair work). When I factor in an amount for depreciation, that brings the running costs of the car to somewhere between $1500 and $2000 per annum before I've driven it anywhere. Generally I will fill up my car for $50 around once a month (I don't drive too often) which makes my total cost of ownership somewhere around $2500 per annum. When I was driving my car to work daily, the petrol costs were much higher at around $50 per week, which made my TCO somewhere around $4500 p.a. And this is on an extremely reliable, fuel efficient 2006 model car which cost me $18k to purchase. I have no debt on this car. But the car itself is a liability. Any car will be a liability. I understand that petrol prices are ridiculously low in the US and probably registration is lower as well. In this case you will need to adjust your figures and do the maths to work out what your annual cost of ownership will be. There are three alternatives to car ownership to consider which may save you money: Public transportation and car pooling are highly recommended from a financial perspective, though you may not have access to either in your situation. Moving closer to work may also be an option, though for many jobs this may increase your cost of living. If you decide that you do need a car and decide that $2000 is not going to get you the car you feel you need ($2000 usually does not get you much), you will need to decide how to finance the car. You will want to avoid most dealer-based finance deals. Be very wary of any dealer offering interest free finance as they usually have some pretty nasty conditions. Getting a loan from your parents or another family member is usually the best option. Otherwise consider getting a personal loan, which will have a lower interest rate than a credit card or dealer finance. Another option could be to get a credit card on an interest-free promotional deal which you could pay down before the interest kicks in. Be warned though, these deals usually require you to pay off your whole balance before the due date or they will back-charge interest on the whole amount. In short, these are the decisions that you will need to make:","NEVER combine the negotiations for trade-in of an old car and purchase of a new one (and/or financing), if you can avoid doing so. Dealers are very good at trading off one against the other to increase their total profit, and it's harder for you to walk away when you have to discard the whole thing. These are separate transactions, each of which can be done with other parties. Treat them as such.","To give the seller cash at the closing, you will need to borrow the money ahead of time, which means a mortgage is out. A bank will only make a mortgage if they get the deed. Therefore, you will have to borrow a different way, such as through a more-expensive home equity loan.","\"Were you just offered a car loan for 1.4%, or did you sign for a car loan for 1.4%? If you signed, it's too late. If you didn't sign: You should realise that your car loan isn't really 1.4%. Nobody will give you a car loan for less than a mortgage loan. What really happened is that you gave up your chance to get a rebate on the car purchase. A car worth $18,000 will have a price tag of $20,000. You can buy it for cash and haggle the dealer down to $18,000, or you can take that \"\"cheap\"\" 1.4% loan and pay $20,000 for the car. So if at all possible, you would try to get a cheap loan from your bank, possibly through your mortgage, so you can buy the car without taking a loan from the car dealer.\"","You have a few options and sometimes challenges help us improve our situation. First, you can not borrow to buy a car. Reducing the massive depreciation that cars undergo will help you be wealthier. It is hard to find a good use car that you can buy for cash, but it will play out best for your finances in the long run. If your heart is set on borrowing, I would encourage you to go to the bank/credit union where you have your checking account. They will see your history of deposits and may grant you a loan based on that. Also you are likely to get a better deal from the bank than from the car dealer. Thirdly, you can simply go to your employer's HR department and ask them. Surely someone has applied for a loan during the company's history. What did they do for them?","If you have the money to pay cash for the car. Then 0 months will save you the most money. There are of course several caveats. The money for the car has to be in a relatively liquid form. Selling stocks which would trigger taxes may make the pay cash option non-optimal. Paying cash for the car shouldn't leave you car rich but cash poor. Taking all your savings to pay cash would not be a good idea. Note: paying cash doesn't involve taking a wheelbarrow full of bills to the dealer; You can use a a check. If cash is not an option then the longest time period balanced by the rates available is best. If the bank says x percent for 12-23 months, y percent for 24-47 months, Z percent for 48 to... It may be best to take the 47 month loan, because it keeps the middle rate for a long time. You want to lock in the lowest rate you can, for the longest period they allow. The longer period keeps the required minimum monthly payment as low as possible. The lower rate saves you on interest. Remember you generally can pay the loan off sooner by making extra or larger payments. Leasing. Never lease unless you are writing off the monthly lease payment as a business expense. If the choice is monthly lease payments or depreciation for tax purposes the lease can make the most sense. If business taxes aren't involved then leasing only means that you have a complex deal where you finance the most expensive part of the ownership period, you have to watch the mileage for several years, and you may have to pay a large amount at the end of the period for damages and excess miles. Plus many times you don't end up with the car at the end of the lease. In the United States one way to get a good deal if you have to get a loan: take the rebate from the dealer; and the loan from a bank/credit Union. The interest rate at banking institution is a better range of rates and length. Plus you get the dealer cash. Many times the dealer will only give you the 0% interest rate if you pay in 12 months and skip the rebate; where the interest paid to the bank will be less than the rebate.","In the case of a vehicle with a lien, there is a specific place on the title to have a lien holder listed, and the holder of the lien will also hold the title until the lien is cleared. Usually this means you have to pay off the loan when you purchase the vehicle. If that loan is held by a bank, meet the seller at the bank and pay the loan directly with them and have them send the title directly to you when the loan is paid. This usually involves writing up a bill of sale to give to the bank when paying the loan. The only thing you're trying to avoid here is paying cash to the seller--who then keeps the cash without paying the lien holder--who then keeps the title and repossesses the motorcycle. Don't pay the seller if they don't have the title ready to sign over to you.","\"I would actually disagree with MrChrister on this. You can afford yourself the car in this price range paid cash. I don't know how exactly you spend your income, but from my experience, in expensive California, saving $20K a year from $70K income with $800/mo rent is feasible. Having a loan on your credit report which is paid on time and in full will definitely help you rebuilding your credit. Your calculations re the costs of the loan are based on the assumption that you're going to keep the loan for the whole period. Don't do that. See #1 - you can repay this loan much quicker than the 3 years it should originally have been. 6 months of the loan which is then paid off will do marvels to your credit report and credit score. Yes, it is going to cost you some, but in your particular case I would argue that its worth it. You're an adult now, you need credit cards, you'll need a mortgage at some point, you need to rent a place to live - all these require a good credit report. Just waiting, as MrChrister suggests, will help, but much much slower. Having said that, a seller that \"\"cannot discuss the terms over the phone\"\" is most likely a dishonest person. Once you're there and in front of him it is harder for you to verify information, resist signing papers, and negotiating.\"","\"I read a really good tract that my credit union gave me years ago written by a former car salesman about negotiation tactics with car dealers. Wish I could find it again, but I remember a few of the main points. 1) Never negotiate based on the monthly payment amount. Car salesmen love to get you into thinking about the monthly loan payment and often start out by asking what you can afford for a payment. They know that they can essentially charge you whatever they want for the car and make the payments hit your budget by tweaking the loan terms (length, down payment, etc.) 2) (New cars only) Don't negotiate on the price directly. It is extremely hard to compare prices between dealerships because it is very hard to find exactly the same combination of options. Instead negotiate the markup amount over dealer invoice. 3) Negotiate one thing at a time A favorite shell game of car dealers is to get you to negotiate the car price, trade-in price, and financing all at one time. Unless you are a rain-man mathematical genius, don't do it. Doing this makes it easy for them to make concessions on one thing and take them right back somewhere else. (Minus $500 on the new car, plus $200 through an extra half point on financing, etc). 4) Handling the Trade-In 5) 99.9999% of the time the \"\"I forgot to mention\"\" extra items are a ripoff They make huge bonuses for selling this extremely overpriced junk you don't need. 6) Scrutinize everything on the sticker price I've seen car dealers have the balls to add a line item for \"\"Marketing Costs\"\" at around $500, then claim with a straight face that unlike OTHER dealers they are just being upfront about their expenses instead of hiding them in the price of the car. Pure bunk. If you negotiate based on an offset from the invoice instead of sticker price it helps you avoid all this nonsense since the manufacturer most assuredly did not include \"\"Marketing costs\"\" on the dealer invoice. 7) Call Around before closing the deal Car dealers can be a little cranky about this, but they often have an \"\"Internet sales person\"\" assigned to handle this type of deal. Once you know what you want, but before you buy, get the model number and all the codes for the options then call 2-3 dealers and try to get a quote over the phone or e-mail on that exact car. Again, get the quote in terms of markup from dealer invoice price, not sticker price. Going through the Internet sales guy doesn't at all mean you have to buy on the Internet, I still suggest going down to the dealership with the best price and test driving the car in person. The Internet guy is just a sales guy like all the rest of them and will be happy to meet with you and talk through the deal in-person. Update: After recently going through this process again and talking to a bunch of dealers, I have a few things to add: 7a) The price posted on the Internet is often the dealer's bottom line number. Because of sites like AutoTrader and other car marketplaces that let you shop the car across dealerships, they have a lot of incentive to put their rock-bottom prices online where they know people aggressively comparison shop. 7b) Get the price of the car using the stock number from multiple sources (Autotrader, dealer web site, eBay Motors, etc.) and find the lowest price advertised. Then either print or take a screenshot of that price. Dealers sometimes change their prices (up or down) between the time you see it online and when you get to the dealership. I just bought a car where the price went up $1,000 overnight. The sales guy brought up the website and tried to convince me that I was confused. I just pulled up the screenshot on my iPhone and he stopped arguing. I'm not certain, but I got the feeling that there is some kind of bait-switch law that says if you can prove they posted a price they have to honor it. In at least two dealerships they got very contrite and backed away slowly from their bargaining position when I offered proof that they had posted the car at a lower price. 8) The sales guy has ultimate authority on the deal and doesn't need approval Inevitably they will leave the room to \"\"run the deal by my boss/financing guy/mom\"\" This is just a game and negotiating trick to serve two purposes: - To keep you in the dealership longer not shopping at competitors. - So they can good-cop/bad-cop you in the negotiations on price. That is, insult your offer without making you upset at the guy in front of you. - To make it harder for you to walk out of the negotiation and compromise more readily. Let me clarify that last point. They are using a psychological sales trick to make you feel like an ass for wasting the guy's time if you walk out on the deal after sitting in his office all afternoon, especially since he gave you free coffee and sodas. Also, if you have personally invested a lot of time in the deal so far, it makes you feel like you wasted your own time if you don't cross the goal line. As soon as one side of a negotiation forfeits the option to walk away from the deal, the power shifts significantly to the other side. Bottom line: Don't feel guilty about walking out if you can't get the deal you want. Remember, the sales guy is the one that dragged this thing out by playing hide-and-seek with you all day. He wasted your time, not the reverse.\"","As far as ease of sale transaction goes you'll want to pay off the loan and have the title in your name and in your hand at the time of sale. Selling a car private party is difficult enough, the last thing you want is some administrivia clouding your deal. How you go about paying the remaining balance on the car is really up to you. If you can make that happen on a CC without paying an additional fee, that sounds like a good option.","Cash price is $22,500. Financed, it's the same thing (0% interest) but you pay a $1500 fee. 1500/22500 = 6.6%. Basically the APR for your loan is 1.1% per year but you are paying it all upfront. Opportunity cost: If you take the $22,500 you plan to pay for the car and invested it, could you earn more than the $1500 interest on the car loan? According to google, as of today you can get 1 year CD @ 1.25% so yes. It's likely that interest rates will be going up in medium term so you can potentially earn even more. Insurance cost: If you finance you'll have to get comprehensive insurance which could be costly. However, if you are planning to get it anyway (it's a brand new car after all), that's a wash. Which brings me to my main point: Why do you have $90k in a savings account? Even if you are planning to buy a house you should have that money invested in liquid assets earning you interest. Conclusion: Take the cheap money while it's available. You never know when interest rates will go up again.","The buying service your credit union uses is similar to the one my credit union uses. I have used their service several times. There is no direct cost to use the service, though the credit union as a whole might have a fee to join the service. I have used it 4 times over the decades. If you know what make and model you want to purchase, or at least have it narrowed down to just a few choices, you can get an exact price for that make, model, and options. You do this before negotiating a price. You are then issued a certificate. You have to go to a specific salesman at a specific dealership, but near a large city there will be several dealers to pick from. There is no negotiating at the dealership. You still have to deal with a trade in, and the financing option: dealer, credit union, or cash. But it is nice to not have to negotiate on the price. Of course there is nobody to stop you from using the price from the buying service as a goal when visiting a more conveniently located dealership, that is what I did last time. The first couple of times I used the standard credit union financing, and the last time I didn't need a loan. Even if you don't use the buying service, one way to pay for the car is to get the loan from the credit union, but get the rebate from the dealer. Many times if you get the low dealer financing you can't get the rebate. Doing it this way actually saves money. Speaking of rebates see how the buying service addresses them. The big national rebates were still honored during at least one of my purchases. So it turned out to be the buying service price minus $1,000. If your service worked like my experience, the cost to you was a little time to get the price, and a little time in a different dealer to verify that the price was good.","\"So there are a few angles to this. The previous answers are correct in saying that cash is different than financing and, therefore, the dealer can rescind the offer. As for financing, the bank or finance company can give the dealership a \"\"kickback\"\" or charge a \"\"fee\"\" based on the customer's credit score. So everyone saying that the dealers want you to finance....well yes, so long as you have good credit. The dealership will make the most money off of someone with good credit. The bank charges a fee to the dealership for the loan to a customer with bad credit. Use that tactic with good credit...no problem. Use that tactic with bad credit.....problem.\"","I've seen this approach to buying/funding cars described in a couple of different ways over the years. Random thoughts:","\"as a used dealer in subprime sales, finance has to be higher than cash because every finance deal has a lender that takes a percentage \"\"discount\"\" on every deal financed. if you notice a dealer is hesitant to give a price before knowing if cash or finance, because every bit of a cash deal's profit will be taken by a finance company in order to finance the deal and then there's no deal. you might be approved but if you're not willing to pay more for a finance deal, the deal isn't happening if I have $5000 in a car, you want to buy it for $6000 and the finance lender wants to take $1200 as a \"\"buy-fee\"\" leaving me $4800 in the end.\"","I'd be very surprised (but feel free to prove me wrong) if he advised people to pay in physical cash. He probably means to not take out debt. In the world of M&A, the term cash is used a bit differently. You can fund a deal with cash, stock, or a combination of both. However, there are different sources of cash. You can have funds in your bank account, or you can go borrow funds in the debt market. So what this means for this deal is that AMZN shareholders will not be giving up any equity for the acquisition. They will either use cash that is in their bank accounts or go to the debt markets, raise debt, and use the proceeds to pay WFM shareholders. No one shows up with physical cash in either case. It's wired over to the people who will then distribute the money to the shareholders.","You can negotiate a no penalty for early payment loan with dealerships sometimes. Dealerships will often give you a better price on the car when you finance through them vs paying cash, so you negotiate in a 48 month finance, after you've settled on the price THEN you negotiate the no penalty for early payment point. They'll be less likely to try to raise the price after you've already come to an agreement. My dad has SAID he does this when buying cars, but that could just be hearsay and bravado. Has said he will negotiate on the basis of a long term lease, nail down a price then throw that clause in, then pay the car off in the first payment. Disclaimer: it's...um not a great way to do business though if you plan to purchase a new car every 2-3 years from the same dealer. Do it once and you'll have a note in their CRM not to either a) offer price reductions for financing or b) offer no penalty early payment financing.","I am 22 and was asking the same questions at age 18. I first started by getting a small credit card and paying it off before the end of each month. I use this credit card for groceries/gas small expenses. Then when I built up my credit more I then began to look for loans for expensive cars. The first being around 22k, the second around 41k. You may want to look at buying a much cheaper car. I would suggest that you look into starting a small credit card and get into a habit of paying it off every month and paying off your loans. I would suggest saving as much money as possible to buy a car, the less amount of money you need to borrow the better. Having good credit is great, but nobody turns down people who wish to buy with cash.","\"—they will pull your credit report and perform a \"\"hard inquiry\"\" on your file. This means the inquiry will be noted in your credit report and count against you, slightly. This is perfectly normal. Just don't apply too many times too soon or it can begin to add up. They will want proof of your income by asking for recent pay stubs. With this information, your income and your credit profile, they will determine the maximum amount of credit they will lend you and at what interest rate. The better your credit profile, the more money they can lend and the lower the rate. —that you want financed (the price of the car minus your down payment) that is the amount you can apply for and in that case the only factors they will determine are 1) whether or not you will be approved and 2) at what interest rate you will be approved. While interest rates generally follow the direction of the prime rate as dictated by the federal reserve, there are market fluctuations and variances from one lending institution to the next. Further, different institutions will have different criteria in terms of the amount of credit they deem you worthy of. —you know the price of the car. Now determine how much you want to put down and take the difference to a bank or credit union. Or, work directly with the dealer. Dealers often give special deals if you finance through them. A common scenario is: 1) A person goes to the car dealer 2) test drives 3) negotiates the purchase price 4) the salesman works the numbers to determine your monthly payment through their own bank. Pay attention during that last process. This is also where they can gain leverage in the deal and make money through the interest rate by offering longer loan terms to maximize their returns on your loan. It's not necessarily a bad thing, it's just how they have to make their money in the deal. It's good to know so you can form your own analysis of the deal and make sure they don't completely bankrupt you. —is that you can comfortable afford your monthly payment. The car dealers don't really know how much you can afford. They will try to determine to the best they can but only you really know. Don't take more than you can afford. be conservative about it. For example: Think you can only afford $300 a month? Budget it even lower and make yourself only afford $225 a month.\"","\"I somewhat agree to Alex B's post. I was a finance manager for 7 years both prime and sub-prime(special)(in other words bad). The parts he's 100% right on. Hit up you local credit union then your bank. Get your financing done first if you can. Now 690 credit score is one of 3 bureaus, not all banks and lending institutions use all three or the same one. Also the score isn't everything. That could be good or bad. The 2-3% range is normally for the 720+ crowd unless its a manufacture. (GM, Ford, so on) With rates capping out at around 30% depending on state laws. However 690 should not be 19% on a new or late model car. At 690 at 19% you would have be going for a 70,000+ mile 6 year or older car if I had to guess. Assuming you have no BK's and repos. Some times dealerships have to pay banks to get people financed. Its hidden in the cost and they by law are not allowed to tell you about it because it cannot be passed on to you. However the banks don't just fund any crazy amount of money either say like 115% of book and that it. That is where and why they want that big down payment because that is used to off set the finance amount and what you pay. Making the dealership money. and i can go on and on and on... But you should always try to get the funding prior. Your credit union won't charge the hidden fees and they only care about your down payment to see that you are making a commitment. If you are buying used. Save out 1500 for future repairs and tires and such. Don't buy paint protectant and such. If you finance thru the dealership and put less than 20% down DO buy Gap Insurance but thats it. I can go on and on but I won't. Feel free to ask though. And to answer your original only question with not context. \"\"Is there any reason not to put a 35% down payment on a car?\"\" Yes if the money is better served paying off credit cards or long term mortgage, assuming you don't need the write off.\"","You could consider buying a fairly recent used car from CarMax. They have fixed pricing, and you'd save a good amount of money on the car (since cars lose tons of value in their first year or so).","The best thing to do is pay off the car. Adding more variables to a negotiation with a car dealer (in this case, a trade in), is always going to go in their favor. This is why people recommend negotiating a price down first, before ever mentioning to the dealer you want to do a trade in or financing.","sadly, it is illegal in most states to buy a car directly from the manufacturer. as such, most manufacturers do not offer the option even where it is legal. if you really do know exactly what you want (model, color, options, etc.) i recommend you write down your requirements and send it to every dealer in town (via email or fax). include instructions that if they want your business, they are to reply via email (or fax) with a price within 7 days. at least one dealer will reply, and you can deal with whoever has the best price. notes:","Well, it really doesn't make sense to pay for either in cash. For these purchases, unless you're super wealthy, you won't be paying it in full. If you were to pay in full, then I don't see any practical point to withdraw that money in cash.","$3,500 isn't usually enough to make a difference when calculating credit for a car loan. The other factors that you didn't mention are the important factors. How much money do you make? What is your credit score? Do you have balances on credit cards? The only way you can know is to look at your credit score and/or apply. I would generally recommend you buy a 3-4 year old car rather than a new car. With the lower purchase price you can pay it off quickly.","If the discount is only for financed car then their software application should have accepted the payment (electronic transfer ID) from financed bank. In this case the bank should have given the payment on behalf of your son. I believe the dealer know in advance about the paper work and deal they were doing with your son. Financing a car is a big process between dealer and bank."],"string":"[\n \"When you pay cash for a car, you don't always necessarily need to pay cash. You just aren't using credit or a loan is all. A few options you have are: Obviously no dealer expects anyone to just have the cash laying around for a car worth a few thousand dollars, nor would you bother going to your bank or credit union for the cash. You can simply get a cashier's check made out for the amount. Note that dealers may not accept personal checks as they may bounce. After negotiations at the dealer, you would explain you're paying cash, likely pay a deposit (depending on the price of the car, but $500 would probably be enough. Again, the deposit can be a check or bank deposit), and then come back later on with a cashier's check, or deposit into a bank account. You would be able to do this later that day or within a few days, but since you've purchased a new car you would probably want to return ASAP!\",\n \"I usually get a cashiers check to cover about 90% - 95% of the expected amount (whatever I think is just below my wet-dream-price), and bring the rest in cash. That doesn't require so much cash to be carried. Alternatively you can write a personal check for the exact reminder, or go to the bank for the reminder after the deal is made - with the majority already paid in a cashiers check nobody would disagree.\",\n \"I have sold cars before to individuals and always just received cash. I would think as long as the amount is less than $10,000.00 and the buyer is serious they will get there with the cash. Of course there is no possible way to guarantee the cash will not be counterfeit.\",\n \"I have gotten a letter of credit from my credit union stating the maximum amount I can finance. Of course I don't show the dealer the letter until after we have finalized the deal. I Then return in 3 business days with a cashiers check for the purchase price. In one case since the letter was for an amount greater then the purchase price I was able drive the car off the lot without having to make a deposit. In another case they insisted on a $100 deposit before I drove the car off the lot. I have also had them insist on me applying for their in-house loan, which was cancelled when I returned with the cashiers check. The procedure was similar regardless If I was getting a loan from the credit union, or paying for the car without the use of a loan. The letter didn't say how much was loan, and how much was my money. Unless you know the exact amount, including all taxes and fees,in advance you can't get a check in advance. If you are using a loan the bank/credit Union will want the car title in their name.\",\n \"You can pay with a cashiers check or personal check. You can even pay cash, or combine payment methods. However, in the USA if you give the dealership $10,000 or more in actual cash, they will be required to fill out a form 8300 with the IRS.\",\n \"One additional reason to pay with cash rather than financing is that you will be able to completely shut down the dealership from haggling over finance terms and get right to the point of haggling over the cost of the car (which you should always do).\",\n \"I have in the last few years purchased several used cars from dealers. They have handled it two different ways. They accepted a small check ~$1,000 now, and then gave me three business days to bring the rest as a cashiers check. They also insisted that I submit a application for credit, in case I needed a loan. They accepted a personal check on the spot. Ask them before you drive to the dealer. Of course they would love you to get a loan from them.\",\n \"You could write a personal check after the final price has been set and you're ready to purchase. Another option would be to get the final price - then walk over to your bank and get a cashier's check.\",\n \"You need to do the maths exactly. The cost of buying a car in cash and using a loan is not the same. The dealership will often get paid a significant amount of money if you get a loan through them. On the other hand, they may have a hold over you if you need their loan (no cash, and the bank won't give you money). One strategy is that while you discuss the price with the dealer, you indicate that you are going to get a loan through them. And then when you've got the best price for the car, that's when you tell them it's cash. Remember that the car dealer will do what's best for their finances without any consideration of what's good for you, so you are perfectly in your rights to do the same to them.\",\n \"Cash is very effective at getting a discount when buying from individuals (craigslist, garage sales, estate sales, flea markets, etc.). I'll make an offer, then thumb through the cash while they consider it. There eyes will dart back and forth between my eyes and the cash as they decide whether to take my offer. Car dealers do seem to be very unique. The dealer I bought at recently said that 70% of their deals were cash purchases, JoeTaxpayer's dealer said 1% were cash purchases. I've had good luck negotiating with cash for well-loved cars (under $10K) from both individuals or used dealers. I'm also looking for carpet for my house and the first vendor I went to offered at 5% discount if I paid up front (no financing).\",\n \"Instead of going to the dealership and not knowing if you will be able to get a loan or what the interest rate might be, go to a local credit union or bank first, before you go car shopping, and talk to them about what you would need for your loan. If you can get approval for a loan first, then you will know how much you can spend, and when it comes time for negotiation with the dealer, he won't be able to confuse you by changing the loan terms during the process. As far as the dealer is concerned, it would be a cash transaction. That having been said, I can't recommend taking a car loan. I, of course, don't know you or your situation, but there are lots of good reasons for buying a less expensive car and doing what you can to pay cash for it. Should you choose to go ahead with the loan, I would suggest that you get the shortest loan length that you can afford, and aim to pay it off early.\",\n \"In the UK at least, dealers definitely want you to take finance. They get benefits from the bank (which are not insubstantial) for doing this; these benefits translate directly to increased commission and internal rewards for the individual salesman. It's conceivable that the salesman will be less inclined to put himself out for you in any way by sweetening your deal as much as you'd like, if he's not going to get incentives out of it. Indeed, since he's taking a hit on his commission from you paying in cash, it's in his best interests to perhaps be firmer with you during price negotiation. So, will the salesman be frustrated with you if you choose to pay in cash? Yes, absolutely, though this may manifest in different ways. In some cases the dealer will offer to pay off the finance for you allowing you to pay directly in cash while the dealer still gets the bank referral reward, so that everyone wins. This is a behind-the-scenes secret in the industry which is not made public for obvious reasons (it's arguably verging on fraud). If the salesman likes you and trusts you then you may be able to get such an arrangement. If this does not seem likely to occur, I would not go out of my way to disclose that I am planning to pay with cash. That being said, you'll usually be asked very early on whether you are seeking to pay cash or credit (the salesman wants to know for the reasons outlined above) and there is little use lying about it when you're shortly going to have to come clean anyway.\",\n \"With new cars it's usually the other way around: finance at a low APR or get cash back when you buy it outright. With used cars you usually don't know how much they have invested in the car, so it's more difficult to know how low they're willing to go. Regardless, I do think it's odd that they would knock 2K off the price if you finance with them, but not if you pay cash. The only reason they would do that is if they intend to make at least 2K in interest over the life of the loan, but they have no way of guaranteeing you won't refi. Therefore, I suspect they are bluffing and would probably close the deal if you wrote them a check (or put the cash on the table) for 2K less. However, if they won't budge and will only knock off 2K if you finance, you could finance and pay it off in full a week later. Just make sure they don't have any hidden origination fees or pay-off-early fees.\",\n \"You know what? Pay cash, but ask for a discount. And something fairly hefty. Don't be afraid to bargain. The discount will be worth more than the interest you'd get on the same amount of money. And if the salesman doesn't give you a decent discount, ask to speak to the manager. And if that doesn't work, try another store. Good luck with it!\",\n \"The car dealership doesn't care where you get the cash; they care about it becoming their money immediately and with no risk or complications. Any loan or other arrangements you make to raise the cash is Your Problem, not theirs, unless you arrange the loan through them.\",\n \"\\\"Yes you tell them. I can say that I pay cash for all my cars and always get cars for lower than the TrueCar low-end. There are basically two steps: go test drive, negotiate fully, leave (unless you are given a mind-blowing offer). This may take you one to many dealerships. It depends on how well you know what car you want and how much a dealership will negotiate. you pick a night that another dealership that specifically has the car you want (or multiple - even better) is open and you go in 30-45 mins before they close. Paying cash is key for this to work. By the time you get to numbers they will be almost closed. Their finance guy might be gone so you will get your salesman and a manager. I will use my last car as an example. Toyota Highlander 2015 with MSRB 32,995. TrueCar at 29,795 with a good deal at 29,400. I simply talked to my sales guy said I would like to walk out with the car tonight. I have already talked to XYZ dealership and they offered me 28,500 - which is already below TrueCar low price. I asked for $27,900. Boom 10 minutes later car bought at 28,100. Cash is king. The sales guy and manager will bite the bullet on profit for ease of sale. Going in late is the key to using the cash. You don't have the finance guys jumping in and you have less people to move through. Also they know they have limited time to deal and if you walk off the lot there is less than 10% chance of you coming back - they want to close. They are making minimal profit but doing minimal work. With cash your sales guy is on your side because you are basically throwing him a couple hundred dollars at the end of a shift (where most would just be sitting around watching TV). Some other tips: be fair. If they would have said 28,300 is our lowest that we can go and that's it. I probably would have still got the car. Dealerships will tell you their lowest price if you are close and you are still below it. since they didn't show me their lowest price I didn't budge much but still budged a bit to show good sport. They brought their invoice number out to show that at 28,100 that they were going to lose $1500 on the car. I made the manager laugh because my response was to bring up KBB and show the used car price for the car, which was minus $2000. So I just said, \\\"\\\"Well you lost $1500 but I lose $2000 driving this off the lot.\\\"\\\" I then went back to $27,850 to meet in the middle of \\\"\\\"losing\\\"\\\" money. This actually closed the deal. Anyway don't ever believe any piece of paper they show you with numbers. These dealerships get monthly bonuses on sales and that is a lot of their profit past selling your trade-in. If you actually value your money you would never be trading in a car to a dealer so if you are paying cash, sell your own car or at least take it to a place like CarMax which I don't endorse but better than dealer.\\\"\",\n \"I sold my car on Craigslist for 2K and received cash. I bought a car from Craigslist with $4K cash. For larger amounts where the buyer doesn't want to pocket such large quantities of money, meet them at their bank and have the banker do a draw on their account. Hustle that check to your bank and be done.\",\n \"I'd pay cash. Car loans are amortized, so sometimes you can get upside-down on the loan between 18-30 months because you are pre-paying interest. This can get you into trouble if you get into an accident. Given the low rate and the type of car you're buying, you're probably fine either way.\",\n \"I've done this, though with a loan company rather than a bank. We agreed on price, drove to the loan company's office (the seller having notified them in advance), I gave them the money, got the title, and they gave the balance to the seller. Important point is that you get the signed-off title from the lienholder.\",\n \"When I asked this particular question on a car forum recently, I got the following suggestions: When we bought our last car, we met with the seller in the DMV's parking lot as there generally is some police around and paid him cash. Here in NV the plates stay with the PO so you have to get it registered or a movement permit anyway before you can drive the vehicle so this worked out pretty reasonable and safe for both parties.\",\n \"Ask the dealer to drive to the bank with you, if they really want cash.\",\n \"You have a good start (estimated max amount you will pay, estimated max down payment, and term) Now go to your bank/credit union and apply for the loan. Get a commitment. They will give you a letter, you may have to ask for it. The letter will say the maximum amount you can pay for the car. This max includes their money and your down payment. The dealer doesn't have to know how much is loan. You also know from the loan commitment exactly how much your monthly payment will be in the worst case. If you have a car you want to trade in, get an written estimate that is good for a week or so. This lets you know how much you can get from selling the car. Now visit the dealer and tell them you don't need a loan, and won't be trading in a car. Don't show them the letter. After all the details of the purchase are concluded, including any rebates and specials, then bring up financing and trade-in. If they can't beat the deal from your bank and the written estimate for the car you are selling, then the deal is done. Now show them the letter and discuss how much down they need today. Then go to the bank for the rest of the money. If they do have a better loan deal or trade in then go with the dealer offer, and keep the letter in your pocket. If you go to the dealer first they will confuse you because they will see the price, interest rate, length of loan, and trade in as one big ball of mud. They will pick the settings that make you happy enough, yet still make them the most money.\",\n \"The only issue I can see is that the stranger is looking to undervalue their purchase to save money on taxes/registration (if applicable in your state). Buying items with cash such as cars, boats, etc in the used market isn't all that uncommon* - I've done it several times (though not at the 10k mark, more along about half of that). As to the counterfeit issue, there are a couple avenues you can pursue to verify the money is real: *it's the preferred means of payment advocated by some prominent personal financial folks, including Dave Ramsey\",\n \"Yes, you are correct to go to the credit union first. Get approved for a loan first. Often, upon approval, the credit union will give you a blank check good for any amount up to the limit of the loan. When you buy the car, make it payable to the dealer, write in the amount and sign it. Enjoy the new car!\",\n \"If they bring cash, meet at your bank to verify. If they want to use cashiers check, meet them at their bank. Large amounts use wires directly to your acct and verify (not only received, but deposited) before handing over the title/keys.\",\n \"One option is that the buyer brings cash and you together with the buyer go the bank where you have an account and deposit the money there - then the bank checks the cash and once the cash is accepted you no longer care if it was counterfeit. Once money is deposited you handle the keys.\",\n \"Ideally you would negotiate a car price without ever mentioning: And other factors that affect the price. You and the dealer would then negotiate a true price for the car, followed by the application of rebates, followed by negotiating for the loan if there is to be one. In practice this rarely happens. The sales rep asks point blank what rebates you qualify for (by asking get-to-know-you questions like where you work or if you served in the armed forces - you may not realize that these are do-you-qualify-for-a-rebate questions) before you've even chosen a model. They take that into account right from the beginning, along with whether they'll make a profit lending you money, or have to spend something to subsidize your zero percent loan. However unlike your veteran's status, your loan intentions are changeable. So when you get to the end you can ask if the price could be improved by paying cash. Or you could try putting the negotiated price on a credit card, and when they don't like that, ask for a further discount to stop you from using the credit card and paying cash.\",\n \"Don't let the tail of credit score wag the dog of prudent financial planning. If you have a sufficient emergency fund in addition to the car cost, then buying the car for cash is to my mind a better plan. But if the car purchase would deplete your emergency fund, then I'd go for the loan. Cash in hand gives you optionality that can be very valuable when things go wrong. And credit will be withdrawn at exactly the most painful moment.\",\n \"As others have already pointed out, the bank isn't getting your money upfront - the cash goes to the dealer and the bank will be financing you a much smaller amount. They really don't have any incentive to give you a better interest rate, but it never hurts to ask. The more important (and unasked) question is should you do this? Keeping in mind that a loan with good credit could be in the 1.8% range. Average long-term returns in the market are over 3x that, so by paying upfront you're trading the opportunity for 6%+ returns for the ability to save -2% fees.\",\n \"The amount you are earning in the savings account is insignificant, since you would only have the money in the account for 1 month after purchasing the car. The instant 1.5% cashback (or travel mile reward), on the other hand, can be significant. However, it is not normal for a car dealership to allow you to put $16k on a credit card. The reason is that the fees that the dealer has to pay to process your credit card would be too burdensome. Car dealers have a much smaller profit margin on their sales than a typical retail store, so if the dealer has to pay 3 or 4% of the sales price in credit card fees, it just eats up too much of their profit. If the dealer does allow you to put the entire purchase price on a credit card, be aware that they have already factored in their processing fees into the price. You might be able to get a better than 1.5% discount by offering to pay with cash instead.\",\n \"I have had it two way now: I got pre-approval from my credit union which just so happened to be one of the bigger vehicle lenders in the metro area. What I found out was that the dealership (which was one of the bigger ones in the metro area) had a computer system that looked up my deal with the credit union. Basically, I signed some contracts and the CU and the dealership did whatever paperwork they needed to without me. I bought a used car and drove it off of the lot that night, and I didn't ever go back (for anything financial) Both my wife and her sister received blank checks that were valid up to a certain amount. In the case of my sister in law, she signed the check, the dealership called to confirm funds and she drove off. In the case of my wife, she ended up negotiating a better deal with dealer finance, but I was assured she only had to sign the check, get it verified and drive the car home.\",\n \"buy a cashiers check with the cash (a CRT will be nec if over 10 K) and deposit the cashiers check\",\n \"Possible (unlikely) reasons: But usually, yeah, if you can pay cash, you should.\",\n \"If you have enough money to buy a car in full, that probably means you have good credit. If you have good credit, car dealerships will often offer 0% loans for either a small period of time, like 12 months, or the entire loan. Taking a 0% loan is obviously more optimal than paying the entire lump sum up front. You can take the money and invest in other things that earn you more than 0%. However, most dealerships offer a rebate OR a 0% loan. Some commenters below claim that the rebate is usually larger than the saved interest, so definitely do the math if you have that option.\",\n \"Contact the lien holder (the bank) and they'll have a procedure for you. Usually, you complete the transaction at the bank after agreeing on the purchase price: you will cut a check to the bank to pay off the loan, and then write a second check to the seller for whatever extra amount should go to him. The bank will handle the paperwork for transferring the title of the car to your name. Obviously, under no circumstances should you give all the money to the seller in the hopes that he pays off the loan. You need to follow the lender's procedures because they hold the title to the car and must be the ones to transfer it to you. Banks do this type of transaction all the time. Just call them and ask about how to proceed.\",\n \"From your viewpoint you paying the dealer directly is better. You know that the check went to the dealer, and was used to purchase a car. If you give the check to your friend they may say I can't find the car I want this week, so I will purchase it next week but first let me by groceries and a new suit. I will replace the funds after my next paycheck. Next thing you know they are still short of funds. This might not happen, but it could. From your friends viewpoint getting a check from you allows them to potentially keep your part of the transaction out of view of the dealer/lender. In a mortgage situation the lender will take a look at your bank account to make sure there isn't a hidden loan, but I am not sure they do when they are approving a car loan. What you want to avoid is being a co-signer for the loan. As a co-signer you will be responsible for all payments; and missed payments will hurt your credit score.\",\n \"Break the transactions into parts. Go to your bank or credit union and get a loan commitment. When applying for loan get the maximum amount they will let you borrow assuming that you will no longer own the first car. Take the car to a dealer and get a written estimate for selling the car. Pick one that gives you an estimate that is good for a week or ten days. You now know a data point for the trade-in value. Finally go to the dealer where you will buy the replacement car. Negotiate the price, tell them you don't need financing and you will not be trading in the car. Get all you can regarding rebates and other special incentives. Once you have a solid in writing commitment, then ask about financing and trade in. If they beat the numbers you have regarding interest rate and trade-in value accept those parts of the deal. But don't let them change anything else. If you keep the bank financing the dealer will usually give you a couple of days to get a check. If you decide to ell the car to the first dealer do so as soon as you pick up the replacement car. If you try to start with the dealer you are buying the car from they will keep adjusting the rate, length of loan, trade-in value, and price until you have no idea if you are getting a good deal.\",\n \"I had a strange experience buying a new car. They were offering a deal of 0.9% interest on the loan but only if the loan was above a certain amount. Below that amount, the interest rate was something like 3%. Given the amount I was willing to put down, it was cheaper to put less down and get the lower interest rate. So, once you agree to the purchase price, you need to discuss what finance options they offer. You might also check in advance with other loan providers (e.g. your bank) to see what offers they have.\",\n \"I am a carsalesman. Lets get one thing straight, we are not allowed to give people a better deal just because they pay cash, regardless of what some people say. That can be seen a discrimination as not all people are fortunate enough to have cash available. if anything, finance is better for the dealership, as we get finance commission and the finance company DOES pay us the total amount immidiatly\",\n \"\\\"Yes, he can retract the offer - it was a cash-only offer, and if you're financing, it's no longer \\\"\\\"cash\\\"\\\". Unless, of course, you get the financing through your local bank / credit union, and they hand you a check (like on a personal loan). Then it's still cash. However, the salesman can still retract the offer unless it's in writing because you haven't signed anything yet. The price of financing will always be higher because the dealer doesn't get all their money today. Also, if you finance, you are not paying just the cost of the vehicle, you are paying interest, so your final cost will be higher (unless you were one of the lucky souls who got 0% financing atop employee pricing, and therefore are actually saving money by having a payment).\\\"\",\n \"If you buy a car using a loan, the dealer gets benefited by the financing institution by the way of referring fee paid to the dealer by the institution, and that too if the dealer has helped in financing the purchase. Otherwise for the dealer it doesn't matter if one pays in full or through financing. The dealer is paid in full in either cases. Hence the dealer may slightly get disappointed that you are not taking a loan.\",\n \"\\\"JohnFX and TTT provide excellent answers. Researching prices others have paid, being up front that you'll go buy a junker car to hold you over if they won't meet your price, and playing a few dealerships off of each other are all great tactics. In addition, I've got a few points about timing your purchase. If you're not desperate for a car, these can really help give you the upper hand in negotiations: Wait until the end of the month. Dealerships and individual salespeople usually have quotas that they're trying to clear, and the month is usually the standard cutoff. The last time I bought a car, the salesman made the mistake of mentioning, \\\"\\\"I don't usually work Thursdays, but I'll be in this Thursday.\\\"\\\" Thursday was the 31st - I inferred from this information that he hadn't made his quota for the month yet. So I came back on the 31st to negotiate, and managed to hammer out a pretty good deal. Wait until about an hour before the dealership closes to show up and shop. This gives you enough time to not be obvious about the tactic, but you'll definitely be holding them past their normal quitting time if you do much negotiating. The salesman will be a little more inclined to make a deal so he can get home and have dinner. Bonus points if you can wait until a month that ends on a Friday!\\\"\",\n \"The answer varies based on your location which you did not mention, but here in Minnesota (USA) I would recommend the following: I have followed the above steps with success and my states Attorney Generals office also recommended a similar process. See the following question for Q&A related to the other side of the transaction: What is the best way to accept payment when selling a used car?\",\n \"There is a 3rd option: take the cash back offer, but get the money from a auto loan from your bank or credit union. The loan will only be for. $22,500 which can still be a better deal than option B. Of course the monthly payment can make it harder to qualify for the mortgage. Using the MS Excel goal seek tool and the pmt() function: will make the total payment equal to 24K. Both numbers are well above the rates charged by my credit union so option C would be cheaper than option B.\",\n \"The advice given at this site is to get approved for a loan from your bank or credit union before visiting the dealer. That way you have one data point in hand. You know that your bank will loan w dollars at x rate for y months with a monthly payment of Z. You know what level you have to negotiate to in order to get a better deal from the dealer. The dealership you have visited has said Excludes tax, tag, registration and dealer fees. Must finance through Southeast Toyota Finance with approved credit. The first part is true. Most ads you will see exclude tax, tag, registration. Those amounts are set by the state or local government, and will be added by all dealers after the final price has been negotiated. They will be exactly the same if you make a deal with the dealer across the street. The phrase Must finance through company x is done because they want to make sure the interest and fees for the deal stay in the family. My fear is that the loan will also not be a great deal. They may have a higher rate, or longer term, or hit you with many fee and penalties if you want to pay it off early. Many dealers want to nudge you into financing with them, but the unwillingness to negotiate on price may mean that there is a short term pressure on the dealership to do more deals through Toyota finance. Of course the risk for them is that potential buyers just take their business a few miles down the road to somebody else. If they won't budge from the cash price, you probably want to pick another dealer. If the spread between the two was smaller, it is possible that the loan from your bank at the cash price might still save more money compared to the dealer loan at their quoted price. We can't tell exactly because we don't know the interest rates of the two offers. A couple of notes regarding other dealers. If you are willing to drive a little farther when buying the vehicle, you can still go to the closer dealer for warranty work. If you don't need a new car, you can sometimes find a deal on a car that is only a year or two old at a dealership that sells other types of cars. They got the used car as a trade-in.\",\n \"There is no rule that says the dealer has to honor that deal, nor is there any that says he/she won't. However, if you are thinking of financing through though the dealership they are likely to honor the deal. They PREFER you finance it. If you finance it through the dealer the salesman just got TWO sales (a car and a loan) and probably gets a commission on both. If you finance it through a third party it makes no difference to the dealer, it is still a cash deal to them because even though you pay off the car loan over years, the bank pays them immediately in full.\",\n \"\\\"I would write them a check or give them cash money. There are payment receipt forms available online, you can print one of have them fill it out and sign it. Just google \\\"\\\"private party receipt\\\"\\\". Money transfer (via bank account or Paypal) is also an option, but in my opinion it's more convenient to meet up and handle it in person. If you want, you can have them meet you at a notary public's office (your local bank branch should have one) and have the receipt notarized. I don't think it's a scam, but make sure you are paying the right person.\\\"\",\n \"The very first time I bought a new car I wrote out a personal check for $5000 (this was a looong time ago!). And got a call from the sales person that he had called the bank and was told that I did not have that much money in my checking account! I explained that I had just that day transferred money from savings to checking. The sales person accepted that and there was never a problem after that.\",\n \"Unless you are getting better than a 2.95% return on that money market account. Pay cash. That's the purely logical way to make the decision. However if it were me I'd pay cash anyway just because I like the idea of not owing money and having the hassle of dealing with a payment every month.\",\n \"Not long after college in my new job I bought a used car with payments, I have never done that since. I just don't like having a car payment. I have bought every car since then with cash. You should never borrow money to buy a car There are several things that come into play when buying a car. When you are shopping with cash you tend to be more conservative with your purchases look at this Study on Credit card purchases. A Dunn & Bradstreet study found that people spend 12-18% more when using credit cards than when using cash. And McDonald's found that the average transaction rose from $4.50 to $7.00 when customers used plastic instead of cash. I would bet you if you had $27,000 dollars cash in your hand you wouldn't buy that car. You'd find a better deal, and or a cheaper car. When you finance it, it just doesn't seem to hurt as bad. Even though it's worse because now you are paying interest. A new car is just insanity unless you have a high net worth, at least seven figures. Your $27,000 car in 5 years will be worth about $6500. That's like striking a match to $340 dollars a month, you can't afford to lose that much money. Pay Cash If you lose your job, get hurt, or any number of things that can cost you money or reduce your income, it's no problem with a paid for car. They don't repo paid for cars. You have so much more flexibility when you don't have payments. You mention you have 10k in cash, and a $2000 a month positive cash flow. I would find a deal on a 8000 - 9000 car I would not buy from a dealer*. Sell the car you have put that money with the positive cash flow and every other dime you can get at your student loans and any other debt you have, keep renting cheap keep the college lifestyle (broke) until you are completely out of debt. Then I would save for a house. Finally I would read this Dave Ramsey book, if I would have read this at your age, I would literally be a millionaire by now, I'm 37. *Don't buy from a dealer Find a private sale car that you can get a deal on, pay less than Kelly Blue Book. Pay a little money $50 - 75 to have an automotive technician to check it out for you and get a car fax, to make sure there are no major problems. I have worked in the automotive industry for 20 + years and you rarely get a good deal from a dealer. “Everything popular is wrong.” Oscar Wilde\",\n \"Its not a scam. The car dealership does not care how you pay for the car, just that you pay. If you come to them for a loan they will try and service you. If you come with cash, they will sell you a car and not try to talk you into financing. If you come with a check from another bank, they will happily accept it. I would try to work with Equifax or a local credit union to figure out what is going on. Somehow she probably had her credit frozen. Here are some really good things to mitigate this situation: Oh and make sure you do #1 and forget about financing cars ever again. I mean if you want to build wealth.\",\n \"\\\"Talk to your bank first but shop around a bit as well with other reputable lenders in your area. Another option, if you're willing to put down ~84% of the purchase price would be to talk to several dealerships BEFORE you set foot on a single lot. Tell them that you are interested in buying a Versa and that you are willing to pay cash but you are not willing to pay more than $10,200. They won't agree (trust me on that) but they will come down from $13,000. Say \\\"\\\"Thanks, I'll call you back.\\\"\\\" and call one of the other dealerships on your list and tell them \\\"\\\"I just spoke with this dealership and they are willing to sell me the car for [whatever number they gave you].\\\"\\\" One of two things will happen, either the dealership will come back with a lower price or they will tell you to go buy the car there. Continue this process until you have one dealership left. I did this with 3 dealerships in 2011 and bought a truck with a $27,000 sticker price for just over $19,000. It took about a week to make all of the calls and I ended up going to a dealership 3 hours away but it was worth it for $8,000.\\\"\",\n \"To directly answer your question, the best choice is to pay cash and place the rest on your student loan. This is saving you from paying more interest. To offer some advise, consider purchasing a cheaper car to place more money towards your student loan debt. This will be the best financial decision in the long-term. I suspect the reason you are considering financing this vehicle is that the cash payment feels like a lot. Trust your instinct here. This vehicle sounds like large splurge considering your current debt, and your gut is telling you as much. Be patient. Use your liquid funds to get a more affordable vehicle and attack the debt. That is setting yourself up for financial success.\",\n \"I've been an F&I Manager at a new car dealership for over ten years, and I can tell you this with absolute certainty, your deal is final. There is no legal obligation for you whatsoever. I see this post is a few weeks old so I am sure by now you already know this to be true, but for future reference in case someone in a similar situation comes across this thread, they too will know. This is a completely different situation to the ones referenced earlier in the comments on being called by the dealer to return the vehicle due to the bank not buying the loan. That only pertains to customers who finance, the dealer is protected there because on isolated occasions, which the dealer hates as much as the customer, trust me, you are approved on contingency that the financing bank will approve your loan. That is an educated guess the finance manager makes based on credit history and past experience with the bank, which he is usually correct on. However there are times, especially late afternoon on Fridays when banks are preparing to close for the weekend the loan officer may not be able to approve you before closing time, in which case the dealer allows you to take the vehicle home until business is back up and running the following Monday. He does this mostly to give you sense of ownership, so you don't go down the street to the next dealership and go home in one of their vehicles. However, there are those few instances for whatever reason the bank decides your credit just isn't strong enough for the rate agreed upon, so the dealer will try everything he can to either change to a different lender, or sell the loan at a higher rate which he has to get you to agree upon. If neither of those two things work, he will request that you return the car. Between the time you sign and the moment a lender agrees to purchase your contract the dealer is the lien holder, and has legal rights to repossession, in all 50 states. Not to mention you will sign a contingency contract before leaving that states you are not yet the owner of the car, probably not in so many simple words though, but it will certainly be in there before they let you take a car before the finalizing contract is signed. Now as far as the situation of the OP, you purchased your car for cash, all documents signed, the car is yours, plain and simple. It doesn't matter what state you are in, if he's cashed the check, whatever. The buyer and seller both signed all documents stating a free and clear transaction. Your business is done in the eyes of the law. Most likely the salesman or finance manager who signed paperwork with you, noticed the error and was hoping to recoup the losses from a young novice buyer. Regardless of the situation, it is extremely unprofessional, and clearly shows that this person is very inexperienced and reflects poorly on management as well for not doing a better job of training their employees. When I started out, I found myself in somewhat similar situations, both times I offered to pay the difference of my mistake, or deduct it from my part of the sale. The General Manager didn't take me up on my offer. He just told me we all make mistakes and to just learn from it. Had I been so unprofessional to call the customer and try to renegotiate terms, I would have without a doubt been fired on the spot.\",\n \"In general I'd say, yeah, if you can pay cash, pay cash. If you pay cash, then by definition you pay zero interest. If you get a loan, you'll pay interest. Most people get a loan to buy a car because they don't have the cash. Possible reasons not to pay cash when you could: One: Technically you can pay cash, but if you did, you would have little or no reserve for emergencies. Like if the car costs, say, $20,000.00, and you have $20,010.00 in your bank account, then technically you could afford to pay cash, but you probably shouldn't, because you don't want to have just $10 left. What if tomorrow something comes up? Two: Arguably, you have a place to invest money that pays more than the interest on the loan. Like say you can get a car loan for, whatever the going rate is today, say 6%. And you know a place to invest your money that is very safe and almost guaranteed to pay 10%. It would make sense to borrow to buy the car, invest the cash, and then withdraw money from the investment to make the payments on the car. You'd end up 4% ahead. There are a lot of catches to that strategy, though. The biggest is that the more the investment pays, the more likely that it is risky. If you thought the investment would pay 10% but it ends up paying only 4%, then you will lose money by this strategy. Also, there's the psychological element: Many people SAY and fully INTEND to invest their money, but then find other things they want to buy and so spend it instead. If you pay cash, you're committed.\",\n \"\\\"It is a legitimate practice. The dealers do get the loan money \\\"\\\"up front\\\"\\\" because they're not holding the loan themselves; they promptly sell it to someone else or (more commonly) just act as salesmen for a lending institution and take their profit as commission or origination fees. The combined deal is often not a good choice for the consumer, though. Remember that the dealer's goal is to close a sale with maximum profit. If they're offering to drop the price $2k, they either didn't expect to actually get that price in the first place, or expect at least $2k of profit from the loan, or some combination of these. Standard advice is to negotiate price, loan, and trade-in separately. First get the dealer's best price on the car, compare it to other dealer and other cars, and walk away if you don't like their offer. Repeat for the loan, checking the dealer's offer against banks/credit unions available to you. If you have an older car to unload, get quotes for it and consider whether you might do better selling it yourself. ========= Standard unsolicited plug for Consumef Reports' \\\"\\\"car facts\\\"\\\" service, if you're buying a new car (which isn't usually the best option; late-model used is generally a better value). For a small fee, they can tell you what the dealer's real cost of a car is, after all the hidden incentives and rebates. That lets you negotiate directly on how much profit they need on this sale... and focuses their attention on the fact that the time they spend haggling with you is time they could be using to sell the next one. Simply walking into the dealer with this printout in your hand cuts out a lot of nonsense. The one time I bought new, I basically walked in and said \\\"\\\"It's the end of the model year. I'll give you $500 profit to take one of those off your hands before the new ones come in, if you've got one configured the way I want it.\\\"\\\" Closed the deal on the spot; the only concession I had to make was on color. It doesn't always work; some salesmen are idiots. In that case you walk away and try another dealer. (I am not affiliated in any way with CU or the automotive or lending industries, except as customer. And, yes, this touch keyboard is typo-prone.)\\\"\",\n \"Dealer financing should be ignored until AFTER you have agreed on the price of the car, since otherwise they tack the costs of it back onto the car's purchase price. They aren't offering you a $2500 cash incentive, but adding a $2500 surcharge if you take their financing package -- which means you're actually paying significantly more than 0.9% for that loan! Remember that you can borrow from folks other than the dealer. If you do that, you still get the cash price, since the dealer is getting cash. Check your other options, and calculate the REAL cost of each, before making your decisions. And remember to watch out for introductory/variable rates on loans! Leasing is generally a bad deal unless you intend to sell the car within three years or so.\",\n \"When getting a car always start with your bank or credit union. They are very likely to offer better loan rate than the dealer. Because you start there you have a data point so you can tell if the dealer is giving you a good rate. Having the loan approved before going to the dealer allows you to negotiate the best deal for the purchase price for the car. When you are negotiating price, length of loan, down payment, and trade in it can get very confusing to determine if the deal is a good one. Sometimes you can also get a bigger rebate or discount because to the dealer you are paying cash. The general advice is that a lease for the average consumer is a bad deal. You are paying for the most expensive months, and at the end of the lease you don't have a car. With a loan you keep the car after you are done paying for it. Another reason to avoid the lease. It allows you to purchase a car that is two or three years old. These are the ones that just came off lease. I am not a car dealer, and I have never needed a work visa, but I think their concern is that there is a greater risk of you not being in the country for the entire period of the lease.\",\n \"A business could buy the car outright for cash if it so chose, so no, there's no specific limit on the down payment.\",\n \"\\\"There are two fundamentally different reasons merchants will give cash discounts. One is that they will not have to pay interchange fees on cash (or pay much lower fees on no-reward debit cards). Gas stations in my home state of NJ already universally offer different cash and credit prices. Costco will not even take Visa and MasterCard credit cards (debit only) for this reason. The second reason, not often talked about but widely known amongst smaller merchants, is that they can fail to declare the sale (or claim a smaller portion of the sale) to the authorities in order to reduce their tax liability. Obviously the larger stores will not risk their jobs for this, but smaller owner-operated (\\\"\\\"mom and pop\\\"\\\") stores often will. This applies to both reduced sales tax liability and income tax liability. This used to be more limited per sale (but more widespread overall), since tax authorities would look closely for a mismatch between declared income and spending, but with an ever-larger proportion of customers paying by credit card, merchants can take a bigger chunk of their cash sales off the books without drawing too much suspicion. Both of the above are more applicable to TVs than cars, since (1) car salesmen make substantial money from offering financing and (2) all cars must be registered with the state, so alternative records of sales abound. Also, car prices tend to be at or near the credit limit of most cards, so it is not as common to pay for them in this way.\\\"\",\n \"http://www.consumerismcommentary.com/buying-house-with-cash/ It looks like you can, but it's a bad idea because you lack protection of a receipt, there's no record of you actually giving the money over, and the money would need to be counted - bill by bill - which increases time and likelihood of error. In general, paying large amounts in cash won't bring up any scrutiny because there's no record. How can the IRS scrutinize something that it can't know about? Of course, if you withdraw 200k from your bank account, or deposit 200k into it then the government would know and it would certainly be flagged as suspicious.\",\n \"\\\"This is my opinion as a car nut. It depends on what you want out of a car. For your situation (paying cash, want to keep the car long-term but also save money) I recommend seriously considering a slightly used vehicle, maybe 2 or 3 years old, or a \\\"\\\"certified pre-owned vehicle\\\"\\\". Reasons: Much less expensive than a brand new car because the first two years have the biggest depreciation hit. Cars come with a 4-year warranty, so a 3 year old car will still be in warranty. Yes, a certified pre-owned car will have a bit of a premium compared to a private-party used car, but the peace of mind of knowing it's in good shape is worth the extra cost considering you want to keep it long term. Consumer Reports will have good advice on the best values in used cars.\\\"\",\n \"The car deal makes money 3 ways. If you pay in one lump payment. If the payment is greater than what they paid for the car, plus their expenses, they make a profit. They loan you the money. You make payments over months or years, if the total amount you pay is greater than what they paid for the car, plus their expenses, plus their finance expenses they make money. Of course the money takes years to come in, or they sell your loan to another business to get the money faster but in a smaller amount. You trade in a car and they sell it at a profit. Of course that new transaction could be a lump sum or a loan on the used car... They or course make money if you bring the car back for maintenance, or you buy lots of expensive dealer options. Some dealers wave two deals in front of you: get a 0% interest loan. These tend to be shorter 12 months vs 36,48,60 or even 72 months. The shorter length makes it harder for many to afford. If you can't swing the 12 large payments they offer you at x% loan for y years that keeps the payments in your budget. pay cash and get a rebate. If you take the rebate you can't get the 0% loan. If you take the 0% loan you can't get the rebate. The price you negotiate minus the rebate is enough to make a profit. The key is not letting them know which offer you are interested in. Don't even mention a trade in until the price of the new car has been finalized. Otherwise they will adjust the price, rebate, interest rate, length of loan, and trade-in value to maximize their profit. The suggestion of running the numbers through a spreadsheet is a good one. If you get a loan for 2% from your bank/credit union for 3 years and the rebate from the dealer, it will cost less in total than the 0% loan from the dealer. The key is to get the loan approved by the bank/credit union before meeting with the dealer. The money from the bank looks like cash to the dealer.\",\n \"If they really want cash, you notify your bank in advance of the amount and have it put in your account, then you both sign the paperwork at the bank and after everything is signed you have the bank hand them the money. Guarding it after that is entirely their problem. Personally, I would consider this a stupid request and tell them to have their lawyer discuss it with my lawyer in the hope they can be talked out of it. As far as where to get the money: Same as for any purchase, find a bank willing to write a mortgage for you on this new house. What you choose to do about the other two houses is an independent question. You can sell one or both, but that may take money so you probably won't finish doing so before needing to pay for the new house. Of course when they do sell you can use the money toward paying down/paying off the new mortgage.\",\n \"i think and what i understand when a house seller is asking for cash, thats means he is looking for a ready and quick buyer doesn't rely on mortgage and its long process. cash means a certified check for sure, but not physical money in suitcase!\",\n \"\\\"I bought a car a few years ago. The salesman had the order, I knew the car I wanted and we had a price agreed on. When I refused the payment plan/loan, his manager came over and did a hard sell. \\\"\\\"99% of buyers take the financing\\\"\\\" was the best he could do. I told him I was going to be part of the 1%. With rates so low, his 2 or 3% offer was higher than my own cost of money. He went so far as to say that I could just pay it off the first month. Last, instead of accepting a personal check and letting me pick up the car after it cleared, he insisted on a bank check to start the registration process. (This was an example of one dealer, illustrating the point.) In other cases, for a TV, a big box store (e.g. Best Buy) isn't going to deal for cash, but a small privately owned \\\"\\\"mom and pop\\\"\\\" shop might. The fees they are charged are pretty fixed, they don't pay a higher fee cause I get 2% cash back, vs your mastercard that might offer less.\\\"\",\n \"At minimum, put down the sale price less what insurance would pay if you got in an accident when driving home, OR purchase gap insurance. This auto loan calculator is fun to play around with. The larger the down payment, the smaller your monthly payments will be. Don't forget to budget insurance and gas! Insurance on a car you make payments on is more expensive. http://www.bankrate.com/calculators/auto/auto-loan-calculator.aspx A buddy of mine had a string of bad luck and totaled his car a few months after the date of purchase. He learned what it meant to be 'underwater', insurance paid him a few thousand less than the value of his loan. What's worse than having no car, having no car and a loan!\",\n \"Option 2. Selling the car yourself will give you the best value, especially if you can get its full value. This will cost you time, but will return much better return for your money. Also, I would strongly recommend buying a used car from a private owner (not a dealer), rather than buying a new car. For $14,000 in cash you can probably get a car like a 2013 Ford Fusion that has excellent all-wheel drive and winter handling. A new Fusion, loaded, will cost at least $25,000 from a dealer. If you buy a 2013 car outright from a private owner, you will have NO PAYMENTS and can spend that money on investments and build your wealth.\",\n \"The most economical way is to save your money, and buy a 1+ year old used car with cash.\",\n \"\\\"If there's one reasonably close to you, you could go to a no-haggle dealership. Instead of making you haggle the price downward, they just give a theoretically fixed price that's roughly what the average customer could negotiate down to at a conventional dealer. Then just do your best broken record impression if they still try to sell you dubious addons: \\\"\\\"No. No. No. No. No...\\\"\\\" The last time I bought a new car (06), a no haggle dealer offered the second best deal I got out of 4 dealerships visited. The one I ended up buying with made an exceptional offer on my trade (comparable to 3rd party sale bluebook value). - My guess is they had a potential customer looking for something like my old car and were hoping to resell it directly instead of flipping it via auction.\\\"\",\n \"I'd suggest buying a used car for cash, car loans are a bad idea. I bought my last car a few years ago for $8k off of craigslist, and it is still running great. Make sure you get a car checked out by a mechanic before buying (usually they'll drop it off at a mechanic you want to have take a look, or perhaps just go with you). My general rule is to not take out loans for anything which decreases in value. So a home mortgage would be fine, a car loan is not a great plan. Buy cash, and save for the next purchase. If you buy a decent used Corolla (or other small import car), you can get it for $8k, it will likely last a few years at least. That could end up costing you less than $200 per month total, or less. Much better deal in the long run.\",\n \"As someone who was just recently a salesman at Honda, I'd recommend buying a Honda instead :). If you really prefer your Toyota, I always found quote-aggregation services (Truecar, I'm blanking on others) very competitive in their pricing. Alternatively, you could email several dealerships requesting a final sale price inclusive of taxes and tags with the make, model, and accessories you'd wish to purchase, and buy the vehicle from them if your local dealership won't match that price. Please keep in mind this is only persuasive to your local dealership if said competitors are in the same market area (nobody will care if you have a quote from out-of-state). As many other commenters noted, you should arrange your own financing. A staple of the sales process is switching a customer to in-house financing, but this occurs when the dealership offers you better terms than you are getting on your own. So allow them the chance to earn the financing, but don't feel obligated to take it if it doesn't make sense fiscally.\",\n \"Seconding @petebelford's comment: if you are looking to save money, considerr taking the middleman out of the equation and buying directly from a car's previous owner. Even after paying a mechanic to inspect it for you, this is likely to be cheaper.\",\n \"Your university should have a finance department which can help with payments. Speak with them and tell them you have interest in paying for at least part of your next semester in cash. From here they should be able to tell you the best method for this, though most likely cash/check will suffice. If there is no finance department, or you are still unsure, check with student services for more information.\",\n \"Buying a car is a very big financial decision. There are three major factors to decide which car to buy: Pick two because you can't have all three. You can either have a reliable car that has cheap running costs but will be expensive to buy or a cheap car that is unreliable. If you are mechanically minded then reliability might not be that important to you. However, if you must get to work on time every day then owning a car that breaks down once every six months might be something you wish to avoid. There are a lot of hidden costs that should be thought about very carefully when considering purchasing a car: In my country, annual car registration costs are around $650. I budget around $1000 for maintenance each year (a major + minor service and some extra repair work). When I factor in an amount for depreciation, that brings the running costs of the car to somewhere between $1500 and $2000 per annum before I've driven it anywhere. Generally I will fill up my car for $50 around once a month (I don't drive too often) which makes my total cost of ownership somewhere around $2500 per annum. When I was driving my car to work daily, the petrol costs were much higher at around $50 per week, which made my TCO somewhere around $4500 p.a. And this is on an extremely reliable, fuel efficient 2006 model car which cost me $18k to purchase. I have no debt on this car. But the car itself is a liability. Any car will be a liability. I understand that petrol prices are ridiculously low in the US and probably registration is lower as well. In this case you will need to adjust your figures and do the maths to work out what your annual cost of ownership will be. There are three alternatives to car ownership to consider which may save you money: Public transportation and car pooling are highly recommended from a financial perspective, though you may not have access to either in your situation. Moving closer to work may also be an option, though for many jobs this may increase your cost of living. If you decide that you do need a car and decide that $2000 is not going to get you the car you feel you need ($2000 usually does not get you much), you will need to decide how to finance the car. You will want to avoid most dealer-based finance deals. Be very wary of any dealer offering interest free finance as they usually have some pretty nasty conditions. Getting a loan from your parents or another family member is usually the best option. Otherwise consider getting a personal loan, which will have a lower interest rate than a credit card or dealer finance. Another option could be to get a credit card on an interest-free promotional deal which you could pay down before the interest kicks in. Be warned though, these deals usually require you to pay off your whole balance before the due date or they will back-charge interest on the whole amount. In short, these are the decisions that you will need to make:\",\n \"NEVER combine the negotiations for trade-in of an old car and purchase of a new one (and/or financing), if you can avoid doing so. Dealers are very good at trading off one against the other to increase their total profit, and it's harder for you to walk away when you have to discard the whole thing. These are separate transactions, each of which can be done with other parties. Treat them as such.\",\n \"To give the seller cash at the closing, you will need to borrow the money ahead of time, which means a mortgage is out. A bank will only make a mortgage if they get the deed. Therefore, you will have to borrow a different way, such as through a more-expensive home equity loan.\",\n \"\\\"Were you just offered a car loan for 1.4%, or did you sign for a car loan for 1.4%? If you signed, it's too late. If you didn't sign: You should realise that your car loan isn't really 1.4%. Nobody will give you a car loan for less than a mortgage loan. What really happened is that you gave up your chance to get a rebate on the car purchase. A car worth $18,000 will have a price tag of $20,000. You can buy it for cash and haggle the dealer down to $18,000, or you can take that \\\"\\\"cheap\\\"\\\" 1.4% loan and pay $20,000 for the car. So if at all possible, you would try to get a cheap loan from your bank, possibly through your mortgage, so you can buy the car without taking a loan from the car dealer.\\\"\",\n \"You have a few options and sometimes challenges help us improve our situation. First, you can not borrow to buy a car. Reducing the massive depreciation that cars undergo will help you be wealthier. It is hard to find a good use car that you can buy for cash, but it will play out best for your finances in the long run. If your heart is set on borrowing, I would encourage you to go to the bank/credit union where you have your checking account. They will see your history of deposits and may grant you a loan based on that. Also you are likely to get a better deal from the bank than from the car dealer. Thirdly, you can simply go to your employer's HR department and ask them. Surely someone has applied for a loan during the company's history. What did they do for them?\",\n \"If you have the money to pay cash for the car. Then 0 months will save you the most money. There are of course several caveats. The money for the car has to be in a relatively liquid form. Selling stocks which would trigger taxes may make the pay cash option non-optimal. Paying cash for the car shouldn't leave you car rich but cash poor. Taking all your savings to pay cash would not be a good idea. Note: paying cash doesn't involve taking a wheelbarrow full of bills to the dealer; You can use a a check. If cash is not an option then the longest time period balanced by the rates available is best. If the bank says x percent for 12-23 months, y percent for 24-47 months, Z percent for 48 to... It may be best to take the 47 month loan, because it keeps the middle rate for a long time. You want to lock in the lowest rate you can, for the longest period they allow. The longer period keeps the required minimum monthly payment as low as possible. The lower rate saves you on interest. Remember you generally can pay the loan off sooner by making extra or larger payments. Leasing. Never lease unless you are writing off the monthly lease payment as a business expense. If the choice is monthly lease payments or depreciation for tax purposes the lease can make the most sense. If business taxes aren't involved then leasing only means that you have a complex deal where you finance the most expensive part of the ownership period, you have to watch the mileage for several years, and you may have to pay a large amount at the end of the period for damages and excess miles. Plus many times you don't end up with the car at the end of the lease. In the United States one way to get a good deal if you have to get a loan: take the rebate from the dealer; and the loan from a bank/credit Union. The interest rate at banking institution is a better range of rates and length. Plus you get the dealer cash. Many times the dealer will only give you the 0% interest rate if you pay in 12 months and skip the rebate; where the interest paid to the bank will be less than the rebate.\",\n \"In the case of a vehicle with a lien, there is a specific place on the title to have a lien holder listed, and the holder of the lien will also hold the title until the lien is cleared. Usually this means you have to pay off the loan when you purchase the vehicle. If that loan is held by a bank, meet the seller at the bank and pay the loan directly with them and have them send the title directly to you when the loan is paid. This usually involves writing up a bill of sale to give to the bank when paying the loan. The only thing you're trying to avoid here is paying cash to the seller--who then keeps the cash without paying the lien holder--who then keeps the title and repossesses the motorcycle. Don't pay the seller if they don't have the title ready to sign over to you.\",\n \"\\\"I would actually disagree with MrChrister on this. You can afford yourself the car in this price range paid cash. I don't know how exactly you spend your income, but from my experience, in expensive California, saving $20K a year from $70K income with $800/mo rent is feasible. Having a loan on your credit report which is paid on time and in full will definitely help you rebuilding your credit. Your calculations re the costs of the loan are based on the assumption that you're going to keep the loan for the whole period. Don't do that. See #1 - you can repay this loan much quicker than the 3 years it should originally have been. 6 months of the loan which is then paid off will do marvels to your credit report and credit score. Yes, it is going to cost you some, but in your particular case I would argue that its worth it. You're an adult now, you need credit cards, you'll need a mortgage at some point, you need to rent a place to live - all these require a good credit report. Just waiting, as MrChrister suggests, will help, but much much slower. Having said that, a seller that \\\"\\\"cannot discuss the terms over the phone\\\"\\\" is most likely a dishonest person. Once you're there and in front of him it is harder for you to verify information, resist signing papers, and negotiating.\\\"\",\n \"\\\"I read a really good tract that my credit union gave me years ago written by a former car salesman about negotiation tactics with car dealers. Wish I could find it again, but I remember a few of the main points. 1) Never negotiate based on the monthly payment amount. Car salesmen love to get you into thinking about the monthly loan payment and often start out by asking what you can afford for a payment. They know that they can essentially charge you whatever they want for the car and make the payments hit your budget by tweaking the loan terms (length, down payment, etc.) 2) (New cars only) Don't negotiate on the price directly. It is extremely hard to compare prices between dealerships because it is very hard to find exactly the same combination of options. Instead negotiate the markup amount over dealer invoice. 3) Negotiate one thing at a time A favorite shell game of car dealers is to get you to negotiate the car price, trade-in price, and financing all at one time. Unless you are a rain-man mathematical genius, don't do it. Doing this makes it easy for them to make concessions on one thing and take them right back somewhere else. (Minus $500 on the new car, plus $200 through an extra half point on financing, etc). 4) Handling the Trade-In 5) 99.9999% of the time the \\\"\\\"I forgot to mention\\\"\\\" extra items are a ripoff They make huge bonuses for selling this extremely overpriced junk you don't need. 6) Scrutinize everything on the sticker price I've seen car dealers have the balls to add a line item for \\\"\\\"Marketing Costs\\\"\\\" at around $500, then claim with a straight face that unlike OTHER dealers they are just being upfront about their expenses instead of hiding them in the price of the car. Pure bunk. If you negotiate based on an offset from the invoice instead of sticker price it helps you avoid all this nonsense since the manufacturer most assuredly did not include \\\"\\\"Marketing costs\\\"\\\" on the dealer invoice. 7) Call Around before closing the deal Car dealers can be a little cranky about this, but they often have an \\\"\\\"Internet sales person\\\"\\\" assigned to handle this type of deal. Once you know what you want, but before you buy, get the model number and all the codes for the options then call 2-3 dealers and try to get a quote over the phone or e-mail on that exact car. Again, get the quote in terms of markup from dealer invoice price, not sticker price. Going through the Internet sales guy doesn't at all mean you have to buy on the Internet, I still suggest going down to the dealership with the best price and test driving the car in person. The Internet guy is just a sales guy like all the rest of them and will be happy to meet with you and talk through the deal in-person. Update: After recently going through this process again and talking to a bunch of dealers, I have a few things to add: 7a) The price posted on the Internet is often the dealer's bottom line number. Because of sites like AutoTrader and other car marketplaces that let you shop the car across dealerships, they have a lot of incentive to put their rock-bottom prices online where they know people aggressively comparison shop. 7b) Get the price of the car using the stock number from multiple sources (Autotrader, dealer web site, eBay Motors, etc.) and find the lowest price advertised. Then either print or take a screenshot of that price. Dealers sometimes change their prices (up or down) between the time you see it online and when you get to the dealership. I just bought a car where the price went up $1,000 overnight. The sales guy brought up the website and tried to convince me that I was confused. I just pulled up the screenshot on my iPhone and he stopped arguing. I'm not certain, but I got the feeling that there is some kind of bait-switch law that says if you can prove they posted a price they have to honor it. In at least two dealerships they got very contrite and backed away slowly from their bargaining position when I offered proof that they had posted the car at a lower price. 8) The sales guy has ultimate authority on the deal and doesn't need approval Inevitably they will leave the room to \\\"\\\"run the deal by my boss/financing guy/mom\\\"\\\" This is just a game and negotiating trick to serve two purposes: - To keep you in the dealership longer not shopping at competitors. - So they can good-cop/bad-cop you in the negotiations on price. That is, insult your offer without making you upset at the guy in front of you. - To make it harder for you to walk out of the negotiation and compromise more readily. Let me clarify that last point. They are using a psychological sales trick to make you feel like an ass for wasting the guy's time if you walk out on the deal after sitting in his office all afternoon, especially since he gave you free coffee and sodas. Also, if you have personally invested a lot of time in the deal so far, it makes you feel like you wasted your own time if you don't cross the goal line. As soon as one side of a negotiation forfeits the option to walk away from the deal, the power shifts significantly to the other side. Bottom line: Don't feel guilty about walking out if you can't get the deal you want. Remember, the sales guy is the one that dragged this thing out by playing hide-and-seek with you all day. He wasted your time, not the reverse.\\\"\",\n \"As far as ease of sale transaction goes you'll want to pay off the loan and have the title in your name and in your hand at the time of sale. Selling a car private party is difficult enough, the last thing you want is some administrivia clouding your deal. How you go about paying the remaining balance on the car is really up to you. If you can make that happen on a CC without paying an additional fee, that sounds like a good option.\",\n \"Cash price is $22,500. Financed, it's the same thing (0% interest) but you pay a $1500 fee. 1500/22500 = 6.6%. Basically the APR for your loan is 1.1% per year but you are paying it all upfront. Opportunity cost: If you take the $22,500 you plan to pay for the car and invested it, could you earn more than the $1500 interest on the car loan? According to google, as of today you can get 1 year CD @ 1.25% so yes. It's likely that interest rates will be going up in medium term so you can potentially earn even more. Insurance cost: If you finance you'll have to get comprehensive insurance which could be costly. However, if you are planning to get it anyway (it's a brand new car after all), that's a wash. Which brings me to my main point: Why do you have $90k in a savings account? Even if you are planning to buy a house you should have that money invested in liquid assets earning you interest. Conclusion: Take the cheap money while it's available. You never know when interest rates will go up again.\",\n \"The buying service your credit union uses is similar to the one my credit union uses. I have used their service several times. There is no direct cost to use the service, though the credit union as a whole might have a fee to join the service. I have used it 4 times over the decades. If you know what make and model you want to purchase, or at least have it narrowed down to just a few choices, you can get an exact price for that make, model, and options. You do this before negotiating a price. You are then issued a certificate. You have to go to a specific salesman at a specific dealership, but near a large city there will be several dealers to pick from. There is no negotiating at the dealership. You still have to deal with a trade in, and the financing option: dealer, credit union, or cash. But it is nice to not have to negotiate on the price. Of course there is nobody to stop you from using the price from the buying service as a goal when visiting a more conveniently located dealership, that is what I did last time. The first couple of times I used the standard credit union financing, and the last time I didn't need a loan. Even if you don't use the buying service, one way to pay for the car is to get the loan from the credit union, but get the rebate from the dealer. Many times if you get the low dealer financing you can't get the rebate. Doing it this way actually saves money. Speaking of rebates see how the buying service addresses them. The big national rebates were still honored during at least one of my purchases. So it turned out to be the buying service price minus $1,000. If your service worked like my experience, the cost to you was a little time to get the price, and a little time in a different dealer to verify that the price was good.\",\n \"\\\"So there are a few angles to this. The previous answers are correct in saying that cash is different than financing and, therefore, the dealer can rescind the offer. As for financing, the bank or finance company can give the dealership a \\\"\\\"kickback\\\"\\\" or charge a \\\"\\\"fee\\\"\\\" based on the customer's credit score. So everyone saying that the dealers want you to finance....well yes, so long as you have good credit. The dealership will make the most money off of someone with good credit. The bank charges a fee to the dealership for the loan to a customer with bad credit. Use that tactic with good credit...no problem. Use that tactic with bad credit.....problem.\\\"\",\n \"I've seen this approach to buying/funding cars described in a couple of different ways over the years. Random thoughts:\",\n \"\\\"as a used dealer in subprime sales, finance has to be higher than cash because every finance deal has a lender that takes a percentage \\\"\\\"discount\\\"\\\" on every deal financed. if you notice a dealer is hesitant to give a price before knowing if cash or finance, because every bit of a cash deal's profit will be taken by a finance company in order to finance the deal and then there's no deal. you might be approved but if you're not willing to pay more for a finance deal, the deal isn't happening if I have $5000 in a car, you want to buy it for $6000 and the finance lender wants to take $1200 as a \\\"\\\"buy-fee\\\"\\\" leaving me $4800 in the end.\\\"\",\n \"I'd be very surprised (but feel free to prove me wrong) if he advised people to pay in physical cash. He probably means to not take out debt. In the world of M&A, the term cash is used a bit differently. You can fund a deal with cash, stock, or a combination of both. However, there are different sources of cash. You can have funds in your bank account, or you can go borrow funds in the debt market. So what this means for this deal is that AMZN shareholders will not be giving up any equity for the acquisition. They will either use cash that is in their bank accounts or go to the debt markets, raise debt, and use the proceeds to pay WFM shareholders. No one shows up with physical cash in either case. It's wired over to the people who will then distribute the money to the shareholders.\",\n \"You can negotiate a no penalty for early payment loan with dealerships sometimes. Dealerships will often give you a better price on the car when you finance through them vs paying cash, so you negotiate in a 48 month finance, after you've settled on the price THEN you negotiate the no penalty for early payment point. They'll be less likely to try to raise the price after you've already come to an agreement. My dad has SAID he does this when buying cars, but that could just be hearsay and bravado. Has said he will negotiate on the basis of a long term lease, nail down a price then throw that clause in, then pay the car off in the first payment. Disclaimer: it's...um not a great way to do business though if you plan to purchase a new car every 2-3 years from the same dealer. Do it once and you'll have a note in their CRM not to either a) offer price reductions for financing or b) offer no penalty early payment financing.\",\n \"I am 22 and was asking the same questions at age 18. I first started by getting a small credit card and paying it off before the end of each month. I use this credit card for groceries/gas small expenses. Then when I built up my credit more I then began to look for loans for expensive cars. The first being around 22k, the second around 41k. You may want to look at buying a much cheaper car. I would suggest that you look into starting a small credit card and get into a habit of paying it off every month and paying off your loans. I would suggest saving as much money as possible to buy a car, the less amount of money you need to borrow the better. Having good credit is great, but nobody turns down people who wish to buy with cash.\",\n \"\\\"—they will pull your credit report and perform a \\\"\\\"hard inquiry\\\"\\\" on your file. This means the inquiry will be noted in your credit report and count against you, slightly. This is perfectly normal. Just don't apply too many times too soon or it can begin to add up. They will want proof of your income by asking for recent pay stubs. With this information, your income and your credit profile, they will determine the maximum amount of credit they will lend you and at what interest rate. The better your credit profile, the more money they can lend and the lower the rate. —that you want financed (the price of the car minus your down payment) that is the amount you can apply for and in that case the only factors they will determine are 1) whether or not you will be approved and 2) at what interest rate you will be approved. While interest rates generally follow the direction of the prime rate as dictated by the federal reserve, there are market fluctuations and variances from one lending institution to the next. Further, different institutions will have different criteria in terms of the amount of credit they deem you worthy of. —you know the price of the car. Now determine how much you want to put down and take the difference to a bank or credit union. Or, work directly with the dealer. Dealers often give special deals if you finance through them. A common scenario is: 1) A person goes to the car dealer 2) test drives 3) negotiates the purchase price 4) the salesman works the numbers to determine your monthly payment through their own bank. Pay attention during that last process. This is also where they can gain leverage in the deal and make money through the interest rate by offering longer loan terms to maximize their returns on your loan. It's not necessarily a bad thing, it's just how they have to make their money in the deal. It's good to know so you can form your own analysis of the deal and make sure they don't completely bankrupt you. —is that you can comfortable afford your monthly payment. The car dealers don't really know how much you can afford. They will try to determine to the best they can but only you really know. Don't take more than you can afford. be conservative about it. For example: Think you can only afford $300 a month? Budget it even lower and make yourself only afford $225 a month.\\\"\",\n \"\\\"I somewhat agree to Alex B's post. I was a finance manager for 7 years both prime and sub-prime(special)(in other words bad). The parts he's 100% right on. Hit up you local credit union then your bank. Get your financing done first if you can. Now 690 credit score is one of 3 bureaus, not all banks and lending institutions use all three or the same one. Also the score isn't everything. That could be good or bad. The 2-3% range is normally for the 720+ crowd unless its a manufacture. (GM, Ford, so on) With rates capping out at around 30% depending on state laws. However 690 should not be 19% on a new or late model car. At 690 at 19% you would have be going for a 70,000+ mile 6 year or older car if I had to guess. Assuming you have no BK's and repos. Some times dealerships have to pay banks to get people financed. Its hidden in the cost and they by law are not allowed to tell you about it because it cannot be passed on to you. However the banks don't just fund any crazy amount of money either say like 115% of book and that it. That is where and why they want that big down payment because that is used to off set the finance amount and what you pay. Making the dealership money. and i can go on and on and on... But you should always try to get the funding prior. Your credit union won't charge the hidden fees and they only care about your down payment to see that you are making a commitment. If you are buying used. Save out 1500 for future repairs and tires and such. Don't buy paint protectant and such. If you finance thru the dealership and put less than 20% down DO buy Gap Insurance but thats it. I can go on and on but I won't. Feel free to ask though. And to answer your original only question with not context. \\\"\\\"Is there any reason not to put a 35% down payment on a car?\\\"\\\" Yes if the money is better served paying off credit cards or long term mortgage, assuming you don't need the write off.\\\"\",\n \"You could consider buying a fairly recent used car from CarMax. They have fixed pricing, and you'd save a good amount of money on the car (since cars lose tons of value in their first year or so).\",\n \"The best thing to do is pay off the car. Adding more variables to a negotiation with a car dealer (in this case, a trade in), is always going to go in their favor. This is why people recommend negotiating a price down first, before ever mentioning to the dealer you want to do a trade in or financing.\",\n \"sadly, it is illegal in most states to buy a car directly from the manufacturer. as such, most manufacturers do not offer the option even where it is legal. if you really do know exactly what you want (model, color, options, etc.) i recommend you write down your requirements and send it to every dealer in town (via email or fax). include instructions that if they want your business, they are to reply via email (or fax) with a price within 7 days. at least one dealer will reply, and you can deal with whoever has the best price. notes:\",\n \"Well, it really doesn't make sense to pay for either in cash. For these purchases, unless you're super wealthy, you won't be paying it in full. If you were to pay in full, then I don't see any practical point to withdraw that money in cash.\",\n \"$3,500 isn't usually enough to make a difference when calculating credit for a car loan. The other factors that you didn't mention are the important factors. How much money do you make? What is your credit score? Do you have balances on credit cards? The only way you can know is to look at your credit score and/or apply. I would generally recommend you buy a 3-4 year old car rather than a new car. With the lower purchase price you can pay it off quickly.\",\n \"If the discount is only for financed car then their software application should have accepted the payment (electronic transfer ID) from financed bank. In this case the bank should have given the payment on behalf of your son. I believe the dealer know in advance about the paper work and deal they were doing with your son. Financing a car is a big process between dealer and bank.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["I have in the last few years purchased several used cars from dealers. They have handled it two different ways. They accepted a small check ~$1,000 now, and then gave me three business days to bring the rest as a cashiers check. They also insisted that I submit a application for credit, in case I needed a loan. They accepted a personal check on the spot. Ask them before you drive to the dealer. Of course they would love you to get a loan from them.","You could write a personal check after the final price has been set and you're ready to purchase. Another option would be to get the final price - then walk over to your bank and get a cashier's check.","I usually get a cashiers check to cover about 90% - 95% of the expected amount (whatever I think is just below my wet-dream-price), and bring the rest in cash. That doesn't require so much cash to be carried. Alternatively you can write a personal check for the exact reminder, or go to the bank for the reminder after the deal is made - with the majority already paid in a cashiers check nobody would disagree.","When you pay cash for a car, you don't always necessarily need to pay cash. You just aren't using credit or a loan is all. A few options you have are: Obviously no dealer expects anyone to just have the cash laying around for a car worth a few thousand dollars, nor would you bother going to your bank or credit union for the cash. You can simply get a cashier's check made out for the amount. Note that dealers may not accept personal checks as they may bounce. After negotiations at the dealer, you would explain you're paying cash, likely pay a deposit (depending on the price of the car, but $500 would probably be enough. Again, the deposit can be a check or bank deposit), and then come back later on with a cashier's check, or deposit into a bank account. You would be able to do this later that day or within a few days, but since you've purchased a new car you would probably want to return ASAP!","You can pay with a cashiers check or personal check. You can even pay cash, or combine payment methods. However, in the USA if you give the dealership $10,000 or more in actual cash, they will be required to fill out a form 8300 with the IRS.","Ask the dealer to drive to the bank with you, if they really want cash.","The very first time I bought a new car I wrote out a personal check for $5000 (this was a looong time ago!). And got a call from the sales person that he had called the bank and was told that I did not have that much money in my checking account! I explained that I had just that day transferred money from savings to checking. The sales person accepted that and there was never a problem after that."],"string":"[\n \"I have in the last few years purchased several used cars from dealers. They have handled it two different ways. They accepted a small check ~$1,000 now, and then gave me three business days to bring the rest as a cashiers check. They also insisted that I submit a application for credit, in case I needed a loan. They accepted a personal check on the spot. Ask them before you drive to the dealer. Of course they would love you to get a loan from them.\",\n \"You could write a personal check after the final price has been set and you're ready to purchase. Another option would be to get the final price - then walk over to your bank and get a cashier's check.\",\n \"I usually get a cashiers check to cover about 90% - 95% of the expected amount (whatever I think is just below my wet-dream-price), and bring the rest in cash. That doesn't require so much cash to be carried. Alternatively you can write a personal check for the exact reminder, or go to the bank for the reminder after the deal is made - with the majority already paid in a cashiers check nobody would disagree.\",\n \"When you pay cash for a car, you don't always necessarily need to pay cash. You just aren't using credit or a loan is all. A few options you have are: Obviously no dealer expects anyone to just have the cash laying around for a car worth a few thousand dollars, nor would you bother going to your bank or credit union for the cash. You can simply get a cashier's check made out for the amount. Note that dealers may not accept personal checks as they may bounce. After negotiations at the dealer, you would explain you're paying cash, likely pay a deposit (depending on the price of the car, but $500 would probably be enough. Again, the deposit can be a check or bank deposit), and then come back later on with a cashier's check, or deposit into a bank account. You would be able to do this later that day or within a few days, but since you've purchased a new car you would probably want to return ASAP!\",\n \"You can pay with a cashiers check or personal check. You can even pay cash, or combine payment methods. However, in the USA if you give the dealership $10,000 or more in actual cash, they will be required to fill out a form 8300 with the IRS.\",\n \"Ask the dealer to drive to the bank with you, if they really want cash.\",\n \"The very first time I bought a new car I wrote out a personal check for $5000 (this was a looong time ago!). And got a call from the sales person that he had called the bank and was told that I did not have that much money in my checking account! I explained that I had just that day transferred money from savings to checking. The sales person accepted that and there was never a problem after that.\"\n]","isConversational":false}}},{"rowIdx":77,"cells":{"_id":{"kind":"string","value":"5228"},"query":{"kind":"string","value":"How does the bank/IRS know whether a bank transfer over $14k is a gift or loan repayment?"},"gt_ids":{"kind":"list like","value":["232451"],"string":"[\n \"232451\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1],"string":"[\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["214934","117661","141331","232451","344398","557801","512621","574060","131774","37133","99102","343744","32455","395907","544992","140571","344335","232322","524752","299101","214755","261280","278528","445690","293653","287999","131595","466943","159741","553205","454951","120312","304407","36832","36341","86273","318474","553328","216741","430696","365907","130208","78912","147999","424468","164392","220887","194136","464204","385102","47216","365847","445680","505611","485507","133548","427119","36481","183800","240232","516260","193766","272173","153968","157712","199789","28160","463207","152753","224167","422436","510232","348107","521249","481902","70697","242359","148204","4457","106024","5940","167869","327651","534607","116030","30610","530879","75017","555097","184905","300969","125776","167781","427270","179291","103176","151311","485398","592133","294614"],"string":"[\n \"214934\",\n \"117661\",\n \"141331\",\n \"232451\",\n \"344398\",\n \"557801\",\n \"512621\",\n \"574060\",\n \"131774\",\n \"37133\",\n \"99102\",\n \"343744\",\n \"32455\",\n \"395907\",\n \"544992\",\n \"140571\",\n \"344335\",\n \"232322\",\n \"524752\",\n \"299101\",\n \"214755\",\n \"261280\",\n \"278528\",\n \"445690\",\n \"293653\",\n \"287999\",\n \"131595\",\n \"466943\",\n \"159741\",\n \"553205\",\n \"454951\",\n \"120312\",\n \"304407\",\n \"36832\",\n \"36341\",\n \"86273\",\n \"318474\",\n \"553328\",\n \"216741\",\n \"430696\",\n \"365907\",\n \"130208\",\n \"78912\",\n \"147999\",\n \"424468\",\n \"164392\",\n \"220887\",\n \"194136\",\n \"464204\",\n \"385102\",\n \"47216\",\n \"365847\",\n \"445680\",\n \"505611\",\n \"485507\",\n \"133548\",\n \"427119\",\n \"36481\",\n \"183800\",\n \"240232\",\n \"516260\",\n \"193766\",\n \"272173\",\n \"153968\",\n \"157712\",\n \"199789\",\n \"28160\",\n \"463207\",\n \"152753\",\n \"224167\",\n \"422436\",\n \"510232\",\n \"348107\",\n \"521249\",\n \"481902\",\n \"70697\",\n \"242359\",\n \"148204\",\n \"4457\",\n \"106024\",\n \"5940\",\n \"167869\",\n \"327651\",\n \"534607\",\n \"116030\",\n \"30610\",\n \"530879\",\n \"75017\",\n \"555097\",\n \"184905\",\n \"300969\",\n \"125776\",\n \"167781\",\n \"427270\",\n \"179291\",\n \"103176\",\n \"151311\",\n \"485398\",\n \"592133\",\n \"294614\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["The difference is whether or not you have a contract that stipulates the payment plan, interest, and late payment penalties. If you have one then the IRS treats the transaction as a load/loan servicing. If not the IRS sees the money transfer as a gift.","You are using interchangeably borrow/loan and gift. They are very different. For the mortgage company, they would prefer that the money from friends and family be a gift. If it is a loan, then you have an obligation to pay it back. If they see money added to your bank accounts in the months just before getting the loan, they will ask for the source of the money. Anything you claim as a gift will be required to be documented by you and the person making the gift. You don't want to lie about it, and have the other person lie about it. They will make you sign documents, if they catch you in a lie you can lose the loan, or be prosecuted for fraud. If the money from friends and family is a loan, the payments for the loan will impact the amount of money you can borrow. From the view of the IRS the gift tax only comes into play if during one calendar year a person makes a gift to somebody else of 14,000 or more. There are two points related to this. It is person-to-person. So if your dad gives you 14K, and your mom gives you 14K, and your dad gives your wife 14k and your mom gives your wife 14K; everything is fine. So two people can give 2 people 56K in one year. Please use separate checks to make it clear to the IRS. If somebody gives a gift above the exclusion limit for the year, they will have to complete IRS form 709. This essentially removes the excess amount from their life time exclusion, in other words from their estate. Nothing to worry about from the IRS. The bank wants to see the documentation. Also you are not a charity, so they can't claim it as a donation. Why do you have 6,000 in cash sitting around. The mortgage company will want an explanation for all large deposits so you better have a good explanation. From the IRS FAQ on Gift Taxes: What can be excluded from gifts? The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts. Number 3 on the list is the one you care about.","In principle, the US taxes both income and gifts. Simply thinking good thoughts is not necessarily sufficient to avoid filing or payment obligations. Giving somebody money with no repayment date, no interest, and no enforceable note looks an awful lot like either income or a gift. A loan normally has interest, money sitting in a savings account is insured, and other investments generally have an expected return. Why would somebody give a loan with no interest, with only flexible or informal payment expectations, in a way where it has neither deposit insurance nor any expectation of net returns? That looks a lot like a gift - at the very least, a gift of the time value and the default risk. The IRS definitely polices loan rates. The latest release is Revenue Ruling 2014-13. The AFR is useful for tax concepts such as Original Issue Discount (when issuers sell low-interest or no-interest bonds or loans at less than face value, attempting to recharacterize interest income as return of principal), various grantor trusts (e.g. GRATs), and so forth. It's a simple way for the IRS to link to market rates of interest. Documentation and sufficient interest, as well as clear payment schedule (and maybe call or demand rights) make it a bona fide loan. There is no real way for the IRS to distinguish between an informal arrangement and a post-hoc lie to conceal a gift. Moreover, an undocumented loan is generally difficult to enforce, so it looks less like a true loan. The lender declares the interest payments as income on his Form 1040, line 8a and if necessary Schedule B.","You don't need to file or do anything. The bank will report all transfers over 10 000, but chances are slim that it will even be looked at, if you don't do this every week. Worst case, someone will ask you about the source, and you tell them exactly what you wrote above (I had multiple international transfers over 60k and nobody ever asked). You said you paid his tuition, and he is now paying you back, so in case someone asks, you should be able to produce the documentation on the tuition payment - a bill, or your bank statement showing you paid it; and the amount should be matching, so you have proof. Note that if he pays you interest, it is taxable income. You are obligated to list it on your next tax filing.","\"Question is, what do we need to do as far as the IRS is concerned? I mean we'll get the money from them and pay it back less than two months later. You're probably worried about the gift tax. Since you're a couple, the maximum exclusion amount is calculated like this: The reason the Pg multiplier stands separate is that gift splitting does require form 709 filed even if no tax is due, unless they actually write separate checks for their respective portions. So the math shows that you and your wife can get at least $28K from anyone without the need of gift tax to be paid or gift tax return to be filed. You can get up to $56K from your parents, but the gift splitting may need to be documented on form 709. Since you're in fact talking about a loan you're going to repay, you'll need to document it (with a note and everything), and document the repayment. If interest is being paid - your parents must declare it on their tax return for the year, obviously. In this case, if the loan is properly documented, repaid and the interest is declared, the IRS won't even bother claiming it was a gift. Even if there's no real interest, it shouldn't be an issue (the IRS might assign some \"\"deemed\"\" interest at their rates that would be considered a gift, but assuming no other gift transactions between you exist for the year the amount would be miniscule and way below the $14K exclusion level). Of course, as with any tax concern, you get here what you paid for. For a proper advice talk to a tax adviser (EA/CPA) licensed in your State.\"","Writing a promissory note will be sufficient. Presumably the money will be transferred on or near the date that the loan is signed, and the repayments will follow the pattern prescribed in the note. The IRS is only skeptical of family loans if there is no documentation to support the claim.","Gift tax is not an issue here. If a U.S. Person were to receive the wire transfer for me, and then immediately transfer the money to me This is a classic money laundering/scamming technique. You and your friend may end up talking to the FBI, not the IRS.","\"Context: My parents overseas (Japan) sent me a little over $100,000 to cover an expensive tuition payment and moderate living expenses in 2014. They are not US residents, Green card holders or citizens. They did not remit the tuition payment directly to the school. I am a resident (for tax). This is enough to answer yes. That's basically the set of requirements for filing: you received >$100K from a non-US person and you yourself are a US person. You have to report it, and unless it is taxable income - it is a gift. Taxable income is reported on the form 1040, gifts are reported on the form 3520. The fact that in Japan it is not considered a gift is irrelevant. Gift tax laws vary between countries, some (many) don't have gift taxes at all. But the reporting requirement is based on the US law and the US definition of \"\"gift\"\". As I said above, if it is not a gift per the US law, then it is taxable income (and then you report all of it regardless of the amount and pay taxes). Had they paid directly to the institution, you wouldn't need to count it as income/gift to you because you didn't actually receive the money (so no income) and it went directly to cover your qualified education expenses (so no gift), but this is not the case in your situation. Whether or not this will be reported by the IRS back to Japan - I don't know, but it was probably already reported to the authorities in Japan by the banks through which the transfers went through. As to whether it will trigger an audit - doesn't really matter. It was, most likely, reported to the IRS already by the receiving banks in the US, so not reporting it on your tax return (either as income or on form 3520) may indeed raise some flags.\"","The lifetime limit would be very peculiar. The question for the IRS is, whether this is a gift of some sorts, which is why they become interested at some point. In the US, you as the giftor would have to pay the taxes. The bank might inquire too, due to money laundering issues. The bank will anyhow report transactions above a certain size to the IRS. As long as you are sending money to yourself, you should be fine, as this is clearly not a gift. If you send it to 3rd person, then this is either for a service, in this case you need a bill or is a gift, in which case you require to pay gift taxes.","\"withdraw in cash - bank reports it to IRS no matter what. Would this affect my tax filing in the coming year? No, and no. The bank doesn't report to the IRS. In the US - the bank will probably report to FinCEN. It has nothing to do with your tax return. withdraw in check - bank does not seem to report it. Is this correct? Doesn't have to. Still might, if they think it is a suspicious/irregular activity. wire-transfer to another person's account - would this always be slapped with a \"\"gift tax\"\"? If this is a gift it would. Regardless of how you transfer the money. Is it? Answers to your follow up questions: In the US, what documents do we need to prepare in case our large sum withdraw from the bank triggers a flag in relevant government (local and/or federal) divisions and they decide to investigate? Depending on what the investigators request. FinCEN would investigate money laundering, the IRS would investigate tax evasion, the FBI would investigate terrorism sponsorship, etc. Depending on who's investigating and what the suspicions are - different documents may be required. But the bottom line is that you should be able to explain the source of the funds and the destination. For example \"\"I found $1M in cash and sent it to some drug lord because he's such a good friend of mine\"\" will probably not fly. Does the (local/federal) government care if we stash our money (in cash or check) under our mattress, if we purchase foreign properties (taxable? documents needed for proof?), or if we give it away (to individuals or organizations - individual: a gift tax, organization: tax waivable) ? The government cares about taxes, and illegal activities. Stashing money under a mattress is not illegal, but earning cash and not paying income tax on it usually is. In many cases money stashed under the mattress was obtained illegally and/or income taxes were not paid. It seems that no matter what we do (except spreading thin our assets to multiple accounts in multiple banks), the government will always be notified of any large bank transaction and we would be forever flagged since. Is this correct ? Yes, reportable transactions will be reported. Also spreading around in multiple accounts/transactions to avoid reporting is called \"\"structuring\"\" and is on its own a crime. This is for cash/cash equivalent transactions only, of course. Not sure about the \"\"forever flagged since\"\", that part is probably sourced in your imagination.\"","Since your question is very particular on the details, I'm assuming you did your research. Unfortunately you won't get a better answer here than what you've found on the Internet already. This is not a clear-cut situation as the situation you're describing has been a source to some confusion. Mainly, the question is whether the US bank account is a tangible asset or not. To the best of my knowledge, this has not yet been settled, so I suggest going to a professional tax adviser (EA/CPA licensed in the US) who'd advise you the best course of action. I think it would be safer to transfer the money directly from the foreign account to the US beneficiary (although even then, if the IRS decides to start digging, it may claim that you're essentially disguising a transfer from a US account, so I suggest talking to a professional before doing anything). In any case, the US recipient will need to report the gift (if it is $100K or more) using the form 3520 with his/her tax return.","My brother is worried as in US a transaction of more than 10K can be flagged by IRS. Transactions may be flagged to IRS or any other regulators as required. If the intent is correct, there is nothing wrong, your Brother would have to establish that it was for legit reason. Will it be safe to transfer through wire to wire Transfer or is there any other alternatives All legit transfer mechanism would have the same reporting regulation. There is no one better than other method. As stated earlier, if the purpose is bonafide, there shouldn't be anything to worry about.","\"I read up on it and saw that the IRS can \"\"charge\"\" the loan provider on interest even if the loan provider doesn't charge interest, but this is normally mitigated by the 0% interest being considered a gift and as long as it's below X amount your fine. Yes, this sums it up. X is the amount of the gift exemption, the $14K. However, you must differ between loan with no interest and loan with no paying back. With loan with no interest you're still giving a statutory gift of the IRS mandated minimum interest. However, the principal is expected to be repaid to you and you must show that this expectation is reasonably fulfilled. If you cannot (i.e.: you gave a \"\"loan\"\" with no intention of it being paid back), then the IRS will recharacterize the whole amount as the gift, and you'll be on the hook for gift tax for the amounts above the exemption. What defines a loan vs a gift in terms of the IRS, is it simply that the loan will be paid back, or is it only considered a loan if a promisary note is made? As I said - you must be able to show that the loan is indeed a loan, even if it is with no interest. I.e.: it is being repaid, it is treated as a loan by all parties, and is not an attempt to evade gift tax. Promissory note is not a must, but will definitely be helpful in showing that. But without the de-facto repayment of the loan, it will be hard to argue that it is not a gift, even if you have a promissory note. That means, you should make a loan in such a way that the borrower will (begin) repaying it reasonably soon, so that you can show payment schedule being followed and money moving back to you. Reasonably soon is not of course defined in a statute, so do consult with a EA/CPA licensed in your state on how to structure the loan so that it will not appear as an attempt to evade the gift tax. Are there any limits on how big a loan can be? No, but keep in mind that even with statutory interest charges (published by the IRS monthly, see the link), with large enough loan you can exceed the gift tax exemption. Also, keep in mind that interest is taxable income to you. Even if you gift it back (i.e.: the statutory interest).\"","You're getting confused between several different things. 10K - cash transactions over $10,000 are reported to FinCEN under BSA. This is to prevent money laundering. IRS - IRS wants to see your tax return with all your income reported there. They don't see your bank deposits unless they audit you. 1 and 2 are not related at all.","As a gift, the responsibility lays with the giver to file a 709 with their taxes for gifting to a single entity (barring certain exclusions) an amount over $14,000 within the (2017) tax year. https://www.irs.gov/pub/irs-pdf/i709.pdf If this person is a foreign entity from outside the country, you might need to provide in your tax filing a form 3520 https://www.irs.gov/businesses/gifts-from-foreign-person The reporting limits are: more than $100,000 from a foreign estate or non-resident alien, or more than $15,102 from a foreign company. If you don't know who/where the money came from i.e. cash, it would be considered found money and fall under income (not a gift).","\"The IRS gets notified when you: (Note this is not a comprehensive list) As littadv mentioned, banks are required to send a CTR for any transactions over $10,000. They also are obligated to file a SAR (Suspicious Activity Report) for transactions deemed \"\"suspicious\"\" by bank policy. These filings are primarily for law enforcement purposes. The IRS may or may not have access to this information. The IRS isn't all-seeing or all-knowing. But -- In the event of an audit, checks do provide a paper trail documenting the origins of your deposits. So if you fail to report income from an \"\"off the books\"\" job, or do not fully report self-employment income, deposit records could be used against you. You are particularly vulnerable to this if you are in a profession where \"\"off the books\"\" transactions are routine -- plumbers, auto repair, vending machines, etc. At the end of the day, give Caesar his due, and you'll have alot less to worry about.\"","Taxes Yes. You haven't indicated why the transfer is being made. If it is without any reason, it would attract a Gift Tax. legal liability It would definitely be investigated to see if Money Laundering or any other illegal activities is happening. If things are in order you have nothing to worry. charges Normally none. Your Bank can confirm better. friend of mine Are you sure he is a friend and this is not some kind of scam ... it typically starts of with you will get huge money and then calls like its stuck with RBI you need to paysome one to fast track or any such stories to get money out of you.","\"you have 2 concerns: the lender and the irs. either way you should be fine the lender just wants to know that you have no legal claim to the property or other compensation. simply signing a gift declaration should clear that up, making this a \"\"gift\"\" from their perspective. they probably have some standard form you can sign. otherwise, just a simple note that says \"\"i, so-and-so, gave whats-er-name x$ on the y of june, 20## as a gift, with no expectation of repayment\"\". then, only way you could get charged with \"\"fraud\"\" is if you seek compensation for this \"\"gift\"\" in the future. even then, the bank would probably have to find out about the compensation and complain pretty strongly to get a prosecutor interested in a small dollar misrepresentation case with little or no provable intent. a bigger concern is the bank being uncomfortable with the future renter also giving a gift. that just \"\"smells weird\"\". and bankers hate anything weird. it probably won't prevent the mortgage from getting approved, but it might delay the underwriters a few days while the wring their hands about it. the irs is a bit more complicated. they tend to be the \"\"heads we win, tails you lose\"\" types. assuming they consider this a gift, then you are fine, since it is under the annual gift exclusion (~14k$ these days); you don't even have to tell them about it. however, if she gives you a large financial gift in the near future, they may decide to interpret those two events as a single transaction turning this into a no interest loan. even then, you should be fine since the irs generally doesn't care about loans under 100k$ with \"\"missing\"\" interest under 1k$/yr. since this is a small loan and interest rates are so low, you have no worries. further irs reading on gift loans: https://www.law.cornell.edu/uscode/text/26/7872\"","The banks are required to file Currency Transaction Reports (CTR) to the IRS for aggregate transfers of over $10k. They file Suspicious Activity Reports for suspicious activity with an aggregate value of over $5,000 to the US Treasury. You're probably ok for what you're doing provided you aren't doing to regularly, but I would consider looking into alternate means of transferring funds such as a check to avoid the appearance of impropriety. Also, you should be able to call your bank to do a one time ACH transfer for up to $100k with minimal fees.","Banks worry that the large gift might be a loan that is ultimately expected to be repaid. If so, that affects the cash flow of the recipient, and makes it more difficult to make the mortgage payments to the bank. In some cases, of course, it is an informal loan: Dad advances a large $X to son to use as a downpayent, but does not charge interest and the expectation is that the money will be returned in smaller chunks as and when the son can afford to repay Dad. In some cases, Dad truly means it as a gift, but son feels an obligation to repay the money, if not explicitly, then by paying for the first few months of Dad's nursing home stay, etc. So, banks like to have an explicit document such as a copy of a letter from Dad saying that this money is a gift, and some assurance that this is on the up and up. If the amount is larger than the maximum gift that can be given each year without having to file a gift tax return, then some assurance that a gift tax return will be filed is helpful. Mentioning this in the letter is good: it indicates that there are no secret handshakes or secret agreements to the effect that this is in fact a loan, with or without regular repayments.","Anything over a $10,000 deposit is reported to the IRS. I'm not sure if you need to fill out a form or if the bank does it automatically. As long as it's legit I don't see that there would be any issues. The worst that would happen is somebody would have to talk to the IRS and explain that it was their money and not a gift of some sort. Edit it is reported to the FinCEN not the IRS https://www.ffiec.gov/bsa_aml_infobase/pages_manual/OLM_017.htm","No. You don't need to pay the IRS before such a transfer – though you'll need to fill out certain paperwork to report the money transfer to authorities if it exceeds a threshold amount. If the money is income, you'll need to declare it on your income tax return and then pay the taxes due. If it is a gift, other rules apply and tax may be due. Do proper due diligence and consult with a trusted tax professional. However: Please see the comments above – this sounds like a potential scam.","You say that you inherited the money from your mother, and are now paying these people using money that is already yours. Because of that, the money is considered a gift from you to them, and the fact that you are doing it in accordance with your mother's wishes doesn't change that. For it to be considered a bequest from your mother's estate directly to these beneficiaries, it would have had to be handled via the regular by-the-book inheritance procedure and been given to them directly rather than bequeathed to you with informal instructions to pass it on to them. If one gives another person more than $14K in any calendar year, there is the potential gift tax issue to address. I'll explain why it's more a matter of 'addressing' than 'paying', as there are a number of legal ways around this. Form 709 is what you'll use. In the end, you'll report the gifts over $14K but no tax will be due as they'll simply go against your lifetime gifting allowance, currently $5.49M per person. Note, 2 ways to avoid even this obligation. If you have a spouse, you have a combined $28K/yr gifting (per recipient) with no reporting required. Similarly, if the recipient has a spouse, you can gift them $14K. i.e. couple to couple can gift $56K/yr. Last, why not just gift $14K before December, and in January, give the second installment? If I had money coming in separate from a will, I'd be happy that you honored a verbal request, and wouldn't be so greedy as to expect you to risk a dime of your own finances to transfer the funds immediately.","US bank deposits over $10K only need to be reported to FinCEN (Financial Crimes Enforcement Network- a bureau of the US Department of Treasury) if the deposits are made in cash or other money instruments where the source cannot be traced (money orders, traveler checks, etc). Regular checks and wires don't need to be reported because there is a clear bank trail of where the money came from. If your family member is giving you money personally (not from a business) from a bank account which is outside of the US, then you only need to report it if the amount is over $100K. Note, you would need to report that regardless of whether the money was deposited into your US bank account, or paid directly to your credit cards on your behalf, and there are stiff penalties if you play games to try to avoid reporting requirements. Neither deposit method would trigger any taxable income for the scenario you described.","After transferring, do we need to file any forms to IRS regarding money transfer? Not immediately. Do we need to file any forms in US as part of tax returns for this transfer? In case the recipient and the sender are not the same person, the recipient must attach form 3520A to his/her tax return. If you are transferring between your own accounts - you're good to go. However, this NRE account must have been reported on your FBAR and form 8938 attached to your tax return. Do we need to inform my local bank in USA regarding the transfer in advance? You probably want to confirm the transfer instructions with them (SWIFT instructions, routing info, etc).","Should we have to prepare any documents or deed or we simply asked our son to send on line a scanned copy on simple paper signed by him to declare that this amt is given as gift which is gifted to us through this cheque number/date/bank etc? Depending on amount, if few thousands don't bother. If few lacs get it on a simple plain paper, if in crores, get a proper gift deed executed. There is no tax for you. My son wants to remit some money in his mother's account jointly with me(father). It is very much clear that it will be tax free in india being a gift but how will this amt be treated as gift in the eyes of income tax people? Should we have to prepare any documents or deed or we simply asked our son to send on line a scanned copy on simple paper signed by him to declare that this amt is given as gift which is gifted to us through this cheque number/date/bank etc? Whether our son shows that amt as gift in his yearly return or not. what are the implications to his tax return due to gifted As your son is US citizen, he can only gift USD 14,000 to you and equal amount to your mother in a year. Similarly your daughter in law can give you both 14000 each. If it is more, he has to pay taxes or claim it against life time exemption of 1 million (?) USD","In THEORY, you don't have to pay income tax in such a situation. In actual fact, the transaction looks suspicious because the money went into your account. Presumably, the money should have gone OUT of your account in equal amount. Having allowed all this to happen, what you need to do is to DOCUMENT this activity ASAP. The first thing to do is to retain the paperwork showing the sending of the funds to the third party. The second thing to do is to ask your friend for a letter dated TODAY (don't use an earlier date) as to why the money was delivered into your account, and corroborating the fact that it was sent to the third party. Then if the IRS comes calling, you will have documentation to prove your point and protect yourself.","There is not any fraud involved. Anybody can gift money to another person.","They don't track checks at all. If you make a cash transaction for an amount that exceeds the reporting limit (circa $10K), then a Currency Transaction Report will be filed with the US Department of the Treasury (not IRS, but close) about it. This is to detect and prevent money laundering.","The liabilities are the same regardless of the route, besides tax evasion schemes such as handing the money to her as cash. Taxes will run up to half of the amount. The best routes are: Western union, moneygram, and similar services- about 2k You are allowed to gift 14k tax free. You can increase this amount by sending to multiple trusted people. See here. https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Planning-and-Checklists/The-Gift-Tax-Made-Simple/INF12127.html The gifter pay taxes, the giftee does not- unless the gifter fails to pay. Let me know which route you prefer. If you do a bank transfer then you will have to work that out with your bank. If you chose to do a wire transfer, yes. Yes, if it's no more than about $2000.","\"Does the money lending between us need to be reported in our tax reports? No. Will he be taxed more because of lending the money to me? Yes. Will I be taxed more because of borrowing the money from him? No. How shall we report it so as to minimize our taxes? You cannot. What is reported on your tax returns is the income. A loan is not an income, so nothing gets reported. However, when you repay the loan, assuming it has interest, the lender has income: the interest. Interest income is reported on schedule B of the regular (1040/1040A) tax return (or, in the case of non-resident for tax purposes, on line 9 of 1040NR). It is taxed as ordinary income, and since you're both foreigners - the lender should look into the treaty provisions that might be relevant. Generally it is not exempt from taxable income based on treaty exemptions for students (which is only for earned income), but there might be other rules in the treaty regarding interest income. If there's no (fair market or higher) interest, then there's \"\"assumed\"\" interest at the IRS mandated rates, which is considered a gift. If it amounts to more than the yearly gift exemption, the lender may be liable for gift tax (depending on the lender's and your status, and again - see treaties). \"\"Loan\"\" without an obligation to repay and without actual repaying will also be considered a gift for tax purposes. If the lender has no intentions of having the loan repaid (i.e.: making a gift), it will be better to pay your tuition bills instead of actually giving you the money: tuition is exempt from gift tax. Talk to a CPA/EA licensed in your state for a proper tax advice on this issue.\"","Like for example I use transferwise to send $x to my dad's account in India, would it show my name as the depositor ? That would depend from bank to bank, it may or may not show your name. Would it be considered as income for my dad ? Assuming your parents are Indian Residents for tax purposes. No. It would be considered as Gift. Gifts between father and son are tax free in India and there is no limit. Any special care/precaution to take before using such services ? Not really. Just to be safe, keep a copy of the transfer instruction / details of debit to you account etc, so that if there is enquiry you have all the data handy. Edit: Clarifying the comment, if you are Resident Alien in US for tax purposes, you would be liable to Gift Tax [Not your parents as they are Indian Residents and would follow Indian tax rules]. As per IRS the liability of Gift tax is on Donor subject to limit of $14000 per year per Donee. So you and your wife can gift your father and mother $14000 each. i.e. $56000 each year. Anything more will be taxable or can be reduced from the overall estate limit.","(a) you give away your money - gift tax The person who receives the gift doesn't owe any tax. If you give it out in small amounts, there will be no gift tax. It could have tax and Estate issues for you depending on the size of the gift, the timing, and how much you give away in total. Of course if you give it away to a charity you could deduct the gift. (b) you loan someone some money - tax free?? It there is a loan, and and you collect interest; you will have to declare that interest as income. The IRS will expect that you charge a reasonable rate, otherwise the interest could be considered a gift. Not sure what a reasonable rate is with savings account earning 0.1% per year. (c) you pay back the debt you owe - tax free ?? tax deductible ?? The borrower can't deduct the interest they pay, unless it is a mortgage on the main home, or a business loan. I will admit that there may be a few other narrow categories of loans that would make it deductible for the borrower. If the loan/gift is for the down payment on a house, the lender for the rest of the mortgage will want to make sure that the gift/loan nature is correctly documented. The need to fully understand the obligations of the homeowner. If it is a loan between family members the IRS may want to see the paperwork surrounding a loan, to make sure it isn't really a gift. They don't look kindly on loans that are never paid back and no interest collected.","\"I recently received a wire of more than $150K into one of my accounts. (Both sender and receiver accounts are US banking institutions.) My bank never contacted me to ask any questions. However, on my statement I noticed a charge called \"\"Analysis Service Charge\"\". I called the bank to ask them about this charge and was informed it was due to internal analysis for the wire transfer. They did this behind the scenes without needing to contact me. I can only assume that their \"\"analysis\"\" did not turn up anything suspicious, and if it had, perhaps they would have contacted me. I wouldn't worry about it even if you do receive a phone call and they ask a few questions. I'd advise to be completely honest; if you aren't doing anything wrong, you shouldn't have anything to worry about. Most likely they'd be calling you just to make sure you actually know about it and were expecting the money.\"","The purpose of the transfer determines the taxability. If this is happening to frequent, it is advisable to keep proper records of the transaction so that if there is an enquiry from Tax authorities you can explain. Unless you explain the why the transfer is being made, I have put out some broad categories.","\"See \"\"Structuring transactions to evade reporting requirement prohibited.\"\" You absolutely run the risk of the accusation of structuring. One can move money via check, direct transfer, etc, all day long, from account to account, and not have a reporting issue. But, cash deposits have a reporting requirement (by the bank) if $10K or over. Very simple, you deposit $5000 today, and $5000 tomorrow. That's structuring, and illegal. Let me offer a pre-emptive \"\"I don't know what frequency of $10000/X deposits triggers this rule. But, like the Supreme Court's, \"\"We have trouble defining porn, but we know it when we see it. And we're happy to have these cases brought to us,\"\" structuring is similarly not 100% definable, else one would shift a bit right.\"\" You did not ask, but your friend runs the risk of gift tax issues, as he's not filing the forms to acknowledge once he's over $14,000.\"","I can't speak to New Zealand law, but under US law, it's not a gift, so there is no tax. But there are some practical considerations. How good a relationship do you have with the banks on each end of the transfer? Transfers in the neighborhood of USD$10,000 are automatically considered suspicious and the banks are required to take extra steps to ensure you are not laundering the proceeds of criminal activity, funding terrorism, evading taxes, etc. You will have to fill out quite a bit of paperwork.","\"I am neither a lawyer nor a tax accountant, and if you're dealing with serious money I suggest you consult a professional. But my understanding is: If you make a loan at zero interest or at below-market rates, the IRS will consider the difference between the interest that you do charge and the market rate to be a gift. That is, if someone could get a loan from a bank and he'd pay $1000 in interest for the year, but instead you loan him the money as a friend interest free, than as far as the IRS is concerned you have given him a $1000 gift, and you could potentially have to pay gift tax. Or they might \"\"impute\"\" the interest to you and tax you on $1000 of additional income. If you have no agreement on repayment terms, if it's all, \"\"Hey Joe, just pay me back when you can\"\", then the IRS is likely to consider the entire \"\"loan\"\" to be a gift. There's an annual exclusion on gifts -- I think it's now $13,000 -- so if you loan your buddy fifty bucks to tide him over until next pay day, the IRS isn't going to get involved in that. They're worried about more serious money. And yes, the IRS does \"\"police loan rates\"\". The IRS examines exact numbers for all sorts of things. If, say, you go on a 100-mile overnight business trip, and the company gives you $10,000 for travel expenses, the IRS is likely to say that this is not a tax-deductible travel expense at all but a sham to hide part of your salary from taxes. Or if you donate a pair of old socks to charity and declare a $500 charitable contribution deduction, the IRS will say that that is not a realistic value for a pair of old socks and disallow the deduction. Etc. A small discrepancy from market rates can be justified for any number of reasons. If the book value of a used car is $5000 and you sell it to your neighbor for $4900, the IRS is unlikely to question it, there are any number of legitimate business reasons why you had to give a discount to make the sale. But if you sell it to him for $50, they may declare that this is not a sale but a gift. Etc.\"","\"If I understand you correctly, your logic goes wrong right at the beginning. It sounds like you think one could avoid the income tax that would otherwise be owed to the US because of earning the money that was sent as a gift. That's not normally true. From the IRS's Gift Tax FAQ: May I deduct gifts on my income tax return? Making a gift or leaving your estate to your heirs does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions). So the person who sends $10k to their parents doesn't pay any less income tax than if they had kept the $10k in the US, or had just send the $10k overseas directly to their own bank account. Gifting and re-gifting didn't accomplish anything from the point of view of IRS taxes. You may have been confused by the \"\"annual exclusion\"\" that's mentioned on that same page. This exclusion is an exclusion for the gift tax. This is a separate tax on gifts, usually paid by the person who gives the gift. If it weren't for the exclusion, one would pay taxes twice on the money sent to their parents: first, when the money is earned, and then again when the gift is given. The exclusion helps avoid this second tax.\"","From my reading of the wikipedia page (CRT), this only happens if you deposit or withdraw currency, not checks. The idea behind this is that checks, ACH, etc. leave paper trails that can be tracked. Cash doesn't, so it gets this extra level of scrutiny. If yu get a cashiers check or a money order to pay a bill, I don't think a CRT is created. If you withdraw $15,000 to buy a car in cash (1 stack of $100 bills), then a CRT would be generated. It still isn't a problem, as long as you can show a bill of sale showing where the money went (or came from, if you are the seller). The IRS has a FAQ about this. It says (taken from several spots at that page): Cash is money. It is currency and coins of the United States and any other country. A cashier’s check, bank draft, traveler’s check, or money order with a face amount of more than $10,000 is not treated as cash and a business does not have to file Form 8300 when it receives them. These items are not defined as cash because, if they were bought with currency, the bank or other financial institution that issued them must file a Currency Transaction Report. The exception to this is if you are buying something with a resale value of more than $10k with a check, money order, etc of less than $10k.","You do not need to report gifts from US residents (US citizens/green card holders/tax residents due to length of stay) since filing gift tax return is their responsibility. In case of foreigners you need to report gifts in excess of $100K. In any case, transfers between spouses are exempt from gift tax.","\"I'm not certain about international transfers, but that amount is large enough that it could be subject to gift tax. https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Gift-Taxes Note that the threshold for this tax is \"\"per person, per person\"\". For example, if you gave your father $12,5k, and gave your mother $12.5k, and your wife gave them each the same amounts, each of those gifts is small enough to be within the $14,000 exclusion and you and your wife would owe no gift tax. If you aren't married, you might want to spread this gift over two years to stay under that threshold.\"","Not by you. Your bank might have to fill some reports for the IRS, but for the customer, nothing needs to be done. As long as the money is not income from illegal activity you don't need to worry about it.","To answer the last question first: there are no tax consequences to you. If your family member is married (or has a joint owner of the funds), and so are you, each of them can give each of you the $14K annual gift, which would be $56K. The remainder of the $70K would be subject to either (1) Gift Tax for the tax year in which it was given, or (2) applied to the lifetime exclusion. Either way would require filing a form with the IRS.","I do not think banks have an obligation to report any deposits to the IRS, however, they probably have an obligation to report deposits exceeding certain threshold amounts to FinCEN. At least that's how it works in Canada, and we're known to model our Big Brother-style activities after our neighbour to the South.","\"You should be aware that the IRS considers all gifts of cash or cash equivalents from an employer (the partnership in this case) to an employee (your husband in this case) to be wages, regardless of what the transfer is called by either party, or how it is transferred. I'd strongly recommend that you review IRS publications 535 and 15-B, which are linked in my response to the question that littleadv referred to above. I would also recommend speaking with a lawyer, as in this case, you have knowledge of the income and would not be able to claim an \"\"innocent spouse\"\" provision if he is convicted of tax evasion/fraud. Good luck.\"","Actually banks aren't required to (and don't) report on 8300 because they already report $10k+ cash transactions to FinCEN as a Currency Transaction Report (CTR), which is substantively similar; see the first item under Exceptions in the second column of page 3 of the actual form. Yes, 8300 is for businesses, that's why the form title is '... Received In A Trade Or Business'. You did not receive the money as part of a trade or business, and it's not taxable income to you, so you aren't required to report receiving it. Your tenses are unclear, but assuming you haven't deposited yet, when you do the bank will confirm your identity and file their CTR. It is extremely unlikely the government will investigate you for a single transaction close to $10k -- they're after whales and killer sharks, not minnows (metaphorically) -- but if they do, when they do, you simply explain where the money came from. The IRS abuses were with respect to people (mostly small businesses) that made numerous cash deposits slightly under $10k, which can be (but in the abuse cases actually was not) an attempt to avoid reporting, which is called 'structuring'. As long as you cooperate with the bank's required reporting and don't avoid it, you are fine.","In the US, gift tax always falls on the donor, never the recipient, and gifts are not taxable income to the recipient. The IRS could raise questions if there is an employer-employee relationship between donor and recipient; your employer cannot give you money or property (e.g. a Rolex watch) or benefits (e.g. a house to live in rent-free) and claim that it is a gift, so that you do not have to pay income tax on that money. But, your parents need to be careful; that $14K per person is the exemption for the whole year and once they give you that, anything extra (birthday present, Christmas present etc) is subject to gift tax (for them) though you can still enjoy your gifts without any tax issue.","It is taxable to your brother (assuming he's a US tax resident). Transfer of any amount over $14k per year to any single person (other than spouse) triggers gift tax liability.","Let's define better the situation and then analyze it: Start with: End with: Process: So B has the same amount of money, just in a different bank account, but A and C changed states. A now doesn't have money, and C does, as the result of the transaction between A, B and C. The gift tax issue I see is the transfer of money from A (you) to C (your brother). If you're a US tax resident then you have $14K exemption from gift tax per person per year. £20K is more than that, so it will be subject to the tax. The fact that a third person was involved as an intermediary is irrelevant - for the purpose of gift tax there's no distinction between using a bank for transfers or a private party. Keep in mind that paying tuition directly to the institution on behalf of your brother may help you mitigate your gift tax liability - tuition payment made on behalf of your brother is exempt from gift tax. But it has to be made directly to the institution, it cannot pass through your brother.","No, the IRS doesn't care about your transfers.","\"I'm not familiar with the law and taxes in India but can provide guidance based on general accounting and tax principles. You are right that receiving money as a loan is not income and isn't liable to income tax. Therefore i suggest you actually formalise this loan through a written contract with your friend. The contract should include all the usual elements of a loan: amount, interest (even if preferential or zero), principal, term, consequences of default and currency of loan. You can then simply state the purpose of transfer as \"\"Personal Loan Agreement\"\". If you have such a document and are questioned by tax authorities you can easily show that the inward remittance is from a loan and should therefore be treated like any commercial loan for tax purposes. As long as you disclose the debt in your tax return (if required in India) and your friend discloses any interest received as income i think you'll be above board and won't be liable for any income tax. To make sure, you might be better off having a quick consultation with an accountant or tax specialist in India to advise you and draft the loan agreement.\"","From an India Tax perspective, someone may add the US aspect; As you have given your Father-In-Law [FIL] some money, and do not have loan documents, the amount your FIL has repaid will be treated as GIFT to you. Gift Tax by Father-In-Law to Son-in-Law is 100% tax free and there is no limit of amount. The funds can be got into NRO account and not in NRE account. There is limit of USD 125,000 that can be reptriated outside India. Refer the RBI Q&A 56","This will probably require some explanation from you on the source of the money and the reasons for the transaction. Cash transactions over $10k will be reported by the bank (in this case) on a CTR report to FinCEN. Keep in mind, mere breaking the transaction into multiple smaller ones in order to avoid the CTR is on its own a criminal offense. Just deposit what you want to deposit, and report what's needed to be reported. Note that if you're a US tax resident - these foreign bank accounts must have been reported already to FinCEN via FBAR, if not - you should expect a very nasty audit with the IRS.","Banks in the US have to report deposits of more than $10,000, so they'll contact you to complete form 8300 or something. It should not be a problem, though, if you specify that it's someone else's money, not your income.","As Stan's answer recommends, don't give them the money; make the checks payable to the credit-card company or the bank that issued the student loan so that those debts get repaid for sure, or else you run the risk of that money also going the way of all flesh and the debt remaining untouched. Next, file a gift tax return (Form 709, which is not filed along with Form 1040; all 709s go to one IRS office as described in the instructions), saying that you gave your son and daughter-in-law gifts of $20K each (say) and that you want to have $12K (excess of each gift over and above the annual exclusion of $14K per recipient) count against your combined lifetime estate tax and gift tax exclusion (which is currently over $5M). So, no gift tax needs to be paid. (As JoeTaxpayer's comment points out, if you are married and your spouse is willing to join in this, then as much as $56K can be given without anyone having to file Form 709). Then, change your will to reduce your son's and daughter-in-law's inheritance by $40K. If and when they return the money (as a gift to you), change your will back by removing the reduction. If the repayment is is a lump sum, the gift tax return stratagem can be used by your son and daughter-in-law while if they pay back over two years, no gift tax return need be filed. So., that's it. No interest to be paid by anybody, no gift taxes to be paid by anybody, no income to be reported on any tax return, etc. This will work unless you have serious concerns about reducing your combined lifetime estate tax and gift tax exclusion by $12K, and if you do, you can afford to hire plenty of lawyers to advise you on better strategies.","There's no tax on wire transfer, but it would be easier on everyone if he would wire himself from his own account. Withdrawing money, depositing to your account and then wiring back to him may raise some flags with FinCEN and IRS with questions about money laundering or gift taxes. Why do you want to complicate things?","a) He can loan you the money tax free he can even give you and your wife 29k a year tax free. Many people do a loan for lets say 100k and then they forgive the load 14.5k a year to avoid the taxes. b) Yes when they see that deposit they will give you a hard time potentially. I got a hard time for my Real Estate tax refund. c) Just putting stress on the family potentially.","http://www.irs.gov/publications/p950/ar02.html Gift tax is owed by the giver, not the recipient. So my first guess is that you can make the transfer in your home country, and as the givers will not be subject to US tax, it won't apply at all. You can then transfer the money into the US freely. In any case, there's a lifetime exemption of 1mn USD. So, unless non-US persons don't get the exemption, I can't see the tax being a problem anyway unless there are going to be several more such transfers.","assuming you are in the USA, i would recommend making this a gift. you can gift someone up to 14k$ per year without paying a gift tax. additionally, you can gift someone up to 5430k$, but it is a one-time deal (tied to inheritance tax). you can have a general expectation with the giftee that they will return the money with some interest on some schedule. you can even write that payment schedule down. but for legal, tax and personal relationship reasons, you should both consider all these payments gifts. if you think failure to repay will put a strain on your relationship, then you shouldn't make the loan. if not, then the payments in both directions really are gifts. as a gift, legal documentation can be really minimal. really, only the gifter has to document anything, and that is just on their tax return. even then, i think it is only necessary if you exceed the 14k$ annual gift limit. i would however recommend documenting any interest rates or payment schedules for personal reasons. being a gift, these numbers are just guidelines, but at least you won't find yourself arguing about whether or not the guidelines are being met. depending on how large the amounts involved are, you might want to spread the load over several people to stay under that annual limit. but the limit is per tax year, so you could do half now and half in january.","I have read from lot of places that transferring funds from NRO to NRE is possible given correct documents are provided. Yes this is correct. The key document 15CB establishes that you have paid taxes that were due before money is transferred from the NRO account to the NRE account and/or are repatriated. Here is what I am simply doing- Steps 3 & 4 more so the step 4 can be seen as new income. So the source of the funds is originally from NRE account. However, the CA feels that since my withdrawal and deposit mechanism in NRO is cash, I might be subject to questioning. Is there any issues in doing the above? The CA is right. The Cash Withdrawal and Cash Deposit has broken the link between the money withdrawn and the money deposited. It could easily be the case that the Cash Withdrawals were spent on expenses and the Cash Deposit is new (taxable) income to you. This new income needs to be declared and the taxes paid. If you Uncle is a close relative (the exact relationships that are called close relatives are defined by law), the return of the money can be declared to be a gift from your Uncle to you and no taxes are due from you on the money. If the funds are large, it is advised to have a gift deed. It is not a simple matter of creating a gift deed stating that your Uncle has given you a gift; your Uncle has to show how he acquired so many assets that he gave you some money as a gift and whether appropriate taxes were paid by him. If your Uncle is not a close relative, he can still gift you up to Rs 50,000 per year without you having to pay any income tax on the money received, but again, a gift deed would be needed to account for the cash deposits. In short, keep speaking to your CA. He will advise you on the best course of action. Related Question Transfering money from NRE account in India to family member","I won't think so. Too much trouble for the compliance and internal audit team. Unless you are moving money from Russia, Iran or those non-FATCA countries.","Assuming you are Indian Citizen / Resident for Tax purposes. Your friend in US Citizen / Resident for tax purposes. As you are borrowing these funds and returning, this would NOT be treated as Gift but as Loan. Ensure that you have the right documentation in place. There is no tax when you receive the funds/loan or rebate when you pay back the loan. From India FEMA (Foreign Exchange Management Act) point of view, if you take loan from friends, you cannot by default repatriate funds. You have to take special permission to repatriate the funds out of India.","\"As an investment opportunity: NO. As a friendly assist with money you don't mind ever getting back, legal depending on amount. A few years back I was in the housing market myself and researching interest rates and mortgages. For one property I was very interested in, I would need about $4K extra in liquid cash to complete the down-payment. A pair of options I saw were a \"\"combo loan\"\" 15yr 4% interest for the house, 1yr 8% interest for the $4K. Alternately, the \"\"bank of mom and dad\"\" could offer the 4K loan for a much lower rate. The giftable limit where reporting is not required was $12,000 at the time I did the review. IRS requires personal loans to be counted as having interest at the commercial rate. Thus an interest free loan of $10K with commercial interest rate of 1% (for easy math) would be counted as a gift of $10,100 for that calendar year. Disclaimer: Ultimately, I did not use this approach and did not have it subjected to a legal review.\"","I am a US citizen and I want to transfer some amount 10 lakhs+ to my brother from my NRE account in India to his account. My brother is going to purchase something for his business. He is going to return my amount after 3-4 Months From the description it looks like you would like to loan to your brother on repatriation basis. Yes this is allowed. See the RBI Guide here and here for more details. There are some conditions; (iv) Scheme for raising loans from NRIs on repatriation basis Borrowings not exceeding US$ 2,50,000 or its equivalent in foreign exchange by an individual resident in India from his close relatives resident outside India, subject to the conditions that - a) the loan is free of interest; b) the minimum maturity period of the loan is seven years; c) The amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debit to the NRE/FCNR account of the non-resident lender; d) The loan is utilised for the borrower's personal purposes or for carrying on his normal business activity but not for carrying on agricultural/plantation activities, purchase of immovable property or shares/debentures/bonds issued by companies in India or for re-lending. Although it is mentioned as Seven years, this is revised to one year. Since he cannot deposit into my NRE account I guess he has to deposit it into my NRO account. A repatriate-able loan as above can be deposited into NRE Account. Is there any illegality here doing such transaction? No. Please ensure proper paper work to show this as loan and document the money trail. Also once I get my money in NRO account do I need to pay taxes in India on the money he deposited? This question does not arise.","The money was sent from my US bank to my father in India Your father can receive unlimited amount of money as GIFT from you. There is no tax implication on this transaction. Related question After 3 years, my father received a note from the income tax dept. asking him to pay income taxes. Possibly because the income does not match and there maybe high value transactions. This should be replied preferably with the help of CA. Now, the CA is asking him to pay tax in the money I transferred. Is that correct? This is incorrect. Please change the CA and get someone competent. If not, what should I or he do in this case? Get guidance from another CA. Your father can establish that this was convenience and show evidence of transfer from you [need bank statements from your bank and Indian bank]. Property registration payments receipts, etc. Or he can also show this as Gift. If required get a gift deed created.","Your mother can give you $14k and your wife $14k (every year) without creating a gift-tax filing requirement, anything in excess of that and she will have to file form 709 with her tax return, but she will not have gift tax liability on her end unless her lifetime gift tax exemption (currently $5.49M) has been exhausted. As the recipients of the gift, you have no tax liability or reporting requirement. So the easiest method would be for her to write you and your wife each checks for $14k. Since it's almost the end of the year, she could give you the extra $2k next year if needed, that smaller amount would not likely need to 'season' for loan approval. Since you mentioned only your mother, I assumed it's just her, but if your mother is married, both her and her spouse could each give you and your wife $14k without creating a filing requirement, so up to $56k in gifts from one couple to another, or $28k from one party to a couple. It doesn't have to be a spouse, that's just the typical scenario.","In short getting funds converted outside of the Banking channel is illegal in India as Foreign Exchange is still regulated. If you show only a credit from your friend's NRE account to your NRO account [note it can't be your NRE account], it would be treated as GIFT and taxed accordingly, else you would have to show it as loan and pay back. You may show the payback in USD. But then there is a limit of Fx every individual can get converted/repatriate out of India and there is a purpose of remittance, all these complicate this further.","Am I right to worry about both of these? Of course. Who carries $75K in cash for no good reason? Your friend got the cash from somewhere, didn't he? If its legit - there's paper trail to show. Same for your parents. If you/they can show the legit paper trail - there's nothing to worry about, the hassle, at worse, is a couple of letters to the IRS. If the money is not legit (your friend is selling crack to the kids in the hood and your parents robbed a 7/11 to give you the money, for example) - there may be problems.","Generally, a one time thing is considered a gift. For the donor this is obviously not a deductible expense, except for some specific cases (for example promotional gifts under $25 to vendors can be deducted, if you're a business, or charitable contributions to a recognized charity). However, if this is a regular practice - that would not be considered as a gift, but rather as a tax fraud, a criminal offense. Being attentive I would like to make a little gift or give some little (<100$) amount of money (cash/wire/online) for that Why? Generally, gift is exempt from income if no services were provided and the gift was made in good faith. In the situation you describe this doesn't hold. When the gift is exempt from income to the receiver - the donor pays the tax (in this case, below exemption the tax is zero). If the gift is not exempt from income to the receiver - it is no longer a gift and the receiver is paying income taxes, not the donor. The situation you describe is a classic tax evasion scheme. If someone does it consistently and regularly (as a receiver, donor, or both) - he would likely end up in jail.","\"You're right about your suspicions. I'm not a professional (I suggest you talk to a real one, a one with CPA, EA or Attorney credentials and license in your State), but I would be very cautious in this case. The IRS will look at all the facts and circumstances to make a claim, but my guess would be that the initial claim would be for this to be taxable income for your husband. He'd have to prove it to be otherwise. It does seem to be related to his performance, and I doubt that had they not known him through his employment, they'd give him such a gift. I may be wrong. So may be an IRS Revenue Officer. But I'd bet he'd think the same. Did they give \"\"gifts\"\" like that to anyone else? If they did - was it to other employees or they gave similar gifts to all their friends and family? Did those who gave your husband a gift file a gift tax return? Had they paid the gift tax? Were they principles in the partnership or they were limited partners (i.e.: not the ones with authority to make any decision)? Was your husband instrumental in making their extraordinary profit, or his job was not related to the profits these people made? These questions are inquiring about the facts and circumstances of the transaction. Based on what he can find out, and other potential information, your husband will have to decide whether he can reasonably claim that it was a gift. Beware: unreasonable claims lead to equally unreasonable penalties and charges. IRS and your State will definitely want to know more about this transaction, its not an amount to slide under the radar. This is not a matter where you can rely on a free opinions written by amateurs who don't know the whole story. You (or, rather, your husband) are highly encouraged to hire a paid professional - a CPA, EA (enrolled agent) or tax attorney with enough experience in fighting gift vs income characterization issues against the IRS (and the State, don't forget your State). An experienced professional may be able to identify something in the facts and the circumstances of the situation that would lead to reducing the tax bill or shifting it to the partners, but it is not something you do on your own.\"","Keep in mind that lenders will consider the terms of any loans you have when determining your ability to pay back the mortgage. They'll want to see paperwork, or if you claim it is a gift they will require a letter to that effect from your relative. Obviously, this could effect your ability to qualify for a loan.","It's a gift if there are no strings attached. If you are rationalizing it to try to make it a gift for tax or any other purpose when there really is a connection between the transactions, or when you expect any kind of value or benefit in return for it, then it's not a gift... don't make it one and don't call it one. That would indeed likely be fraud. Play be the rules and sleep easy, is how I like to live.","Banks do not report transactions within accounts except as required by law, usually as part of anti-money-laundering efforts. Generally those involve tracking large cash transactions. As far as large payments go, there are two reasons they might be reported to the government: taxes, and criminal investigations. For tax purposes, if the payment is considered a salary or wage (that is, you are an employee of the company and the payment is for your time working there), then the company paying you is responsible for reporting the wage and withholding applicable taxes from your salary. If you are considered an independent contract employee, then you yourself will be responsible for reporting the income to the IRS and paying the applicable taxes yourself. In the second case, unless you are already under investigation, I wouldn't worry about it. Banks are very touchy about financial records being kept private, and won't release them without a subpoena. One caveat is that this is under US law. Banks which maintain branches in multiple countries must, of course, comply with all local laws in the jurisdiction where they do business. The take away from this is that Bank of America is unlikely to report a single deposit of $75,000 into your account to anyone on their own. If it is a paper check being deposited they will probably place a hold on it to make sure it clears, but that is all.","In 2015 there's a $5.43M (That's million, as in 6 zeros) estate exemption. Even though it's $14K per year with no paperwork required, if you go over this, a bit of paperwork will let you tap your lifetime exemption. There's no tax consequence from this. The Applicable Federal Rate is the minimum rate that must be charged for this to be considered a loan and not a gift. DJ's answer is correct, otherwise, and is worth knowing as there are circumstances where the strategy is applicable. If the OP were a high net worth client trying to save his estate tax exemption, this (Dj's) strategy works just fine.","Are you planning on paying your son back? If so, this is a loan from him. If not, it is a gift. Both have possible and different tax implications. For example, gifts above $14,000 ($28,000 if your son is married) per calendar year may be subject to a gift tax. If it is a loan, the IRS has rules about the interest rate you must pay him and taxes get more complicated if it is too low (or zero). Edit: Notice that if you are also married, I believe your son and his wife can give $14k each to each of you and your spouse. If the house is in her name as well you may be able to pay as much as $56K without the gift tax. Notice that this is a yearly amount, so if this was December you could get $56k in December and $56K in January.","Bank-to-Bank wire transfer would be the best option. Dollar is going up nowadays, so if he brought the money not so long ago he might even earn the cost of the transfers back through the difference of the exchange rates. Re the IRS - they don't care. Same goes to the Israeli Tax Authority. What you and your friend need to show, if asked, is the paper trail. I.e.: if he brought you the $10K in cash - that may be an issue unless he kept all the receipts for getting it. But for such a low amount you can always resort to claiming it is a gift from you, in this case.","Are you actually supporting both your mother and father? Is the account joint? Is your mother aware of the gift and has control over the money same as your father? If you cannot answer (and provide support) yes to all these questions, then I doubt you could make such a claim. If the fact that the bank account is only in your father's name is a mere technicality for whatever reason, and the money is in fact intended, controlled by and benefits both of your parents, then I believe you can. See more details about gift tax in the IRS publication 950.","From WePay (GoFundMe's payment processor) support. I received only gifts and donations. Will I receive a Form 1099-K? As of 2015, the IRS has clarified that WePay is not required to send a Form 1099-K with respect to payments that are made solely as gifts or donations. The purpose of Form 1099-K is to report payments for the provision of goods or services, which may be subject to tax. Gifts and donations typically are not reported as income by recipients, so it is not necessary to send them a Form 1099-K. https://support.wepay.com/hc/en-us/articles/203609483-Tax-Reporting","As the funds are Gift received from your parents, and your tax residency is US, as per US gift tax, there is no tax due from you for these funds.","\"Yes, your privacy is invaded, that's the law in many jurisdictions. The goal is to make money laundering and financing Evil Things harder. That's why banks are required to request proof for every money transfer larger than a specific sum. This is only a minor issue most of the time. You will have some kind of agreement with that Money Management company and this agreement (or a copy of it) will serve as a proof of your lawful reason to transfer money. It works just like that - you get to the bank and say you want to initiate a money transfer, the clerk asks you to show the \"\"proof\"\", you give them your agreement or a bill that requests you to pay or whatever else document you may have that proves that you're bound by some kind of contract with the recipient of money. The clerk then makes a copy of the \"\"proof\"\" and it stays in the bank to back the transfer until it is completed. The copy is then stored for some time and later destroyed - that's up to how the bank handles documents.\"","There's a difference between your street level drug dealer sending you sales proceeds of $20,000 in $5,000 increments to avoid sending you $10,000 or $20,000 at once to avoid the scrutiny of a government agency that might not be thrilled with your business venture, and a tire shop paying a wholesaler $5,000 each time funds are available up to the amount owed of $20,000. The former is illegal for a few reasons, and the latter is business as usual.","\"Appears to be a hypothetical question and not really worth answering but... Must it be explained.. no, not until audited. It's saying that for everything reported on a tax return, people have to include an explanation for everything, which you do not, unless you want to make some type of 'disclosure' which is a different matter. Must it be reported.. Yes, based on info presented. All income is taxable unless \"\"specifically exempted\"\" per the US Tax code or court cases. Gift vs Found Income... it's not 'found' income as someone gave (gifted) the money to him. Generally, gifts received are not taxable and don't have to be reported.\"","In the US, the bank is legally required to report any cash transactions over 10k$ to the government. This normally has no consequences, and you will never hear about it. No need to worry about it. If the amount is very high, or you do it repeatedly, or the government has other (pre-existing) reasons to look at your finances sharply, they might ask you where the money came from and what you did with it, but your explanation is perfectly fine (assuming it is true). The idea is to catch money-launderers that try to get large illegal cash incomes into the banking system. Classic example is the drug lord who makes a million a month in cash from selling drugs, and needs to get this million into the banks (as you can't buy houses or luxury cars or yachts with cash without getting FBI attention right away).","if the deposit earned interest, you could be liable for taxes on the interest earned. If it ended up in a checking account, then you will not be liable for any taxes since checking accounts do not earn interest anyway. Your bank may inquire about where these transfers are coming from and question the legality of it.","I'm not familiar with US tax law in particular, but the general principle around the world tends to be that interest-free or low-interest loans are taxed as gifts of the difference between a commercial interest charge and the actual interest charged. You could also forgive ($13,000 - waived interest) of the loan each year. Also, remember that there's a lifetime exemption (covering inheritance as well) of $1,000,000 which can be used for any amounts over the $13,000.","Most definitely all wire transfer above a significant amount would be flagged as a suspicious transaction. Nevertheless, as long you provide the Final beneficiary information (name and account number), the bank will process the remittance.","\"Your Spidey senses are good. A good friend would not put you in such a position. It's simple, to skirt some issue (we'll get to that in a second) you are being asked to lie. All for a 15% return on your $$$$. <<< How much is that? You can easily lend him the money, and have a better paper trail. But the bank is not going to like that, and requires this money from friends or family to be a gift. I've heard mortgage guys at the bank say \"\"It's just a formality, we need this paperwork to sell the loan to the investors.\"\" These bankers belong in jail, or at least fired and barred from the industry. They broke the economy in 2008, and should be stopped from doing it again.\"","Making a payment of any amount is usually legal, although of course the specific circumstances matter, and I'm not qualified to give legal advice. Just had to throw in that disclaimer not because I think there's a problem here, but because it is impossible to give a definite answer to a legal question in a specific situation on Stack Exchange. But the government will be involved. There are two parts to that. First, as part of anti-money-laundering laws, banks have to report all transactions above a certain limit; I believe $10k. When you use a check or similar to pay, that happens pretty much automatically. When making a cash payment, you may have to fill out some forms. An secondly, Edward Snowden revealed that the government also tapped into banking networks, so pretty much every transaction is recorded, even if it is not reportable.","First, the recipient is not responsible for any gift tax, the giver pays the tax. The gift is not taxable income to the recipient and so the recipient does not pay any income tax on the gift either. More than that, and they tap into their lifetime exclusion, currently (2015) $5.43M. All that's needed is a simple form. More convoluted, would be to lend you the full amount and then forgive $14,000 per year. Unnescesary paperwork, in my opinion.","There are no US taxes for receiving a gift (you). There may be US taxes for giving a gift (the gift tax), for your parents, but if they are nonresidents and the money they are giving was not situated in the US, then they do not have US gift tax. You have to report a gift from a foreign person if it exceeds $100,000.","You normally wouldn't pay income taxes on money that isn't income. Transferring money or withdrawing it from a bank isn't an income generating event. I think it is very doubtful that you would need to claim that on income tax forms.","If the money is a gift the lender will make everybody acknowledge that the money is a gift. They will not care if the gift triggers tax forms for the giver. Signing the gift forms specifying it is a gift when it isn't a gift is fraud, and there are penalties attached to that. If it is a loan that will not erase the PMI requirement. Because the lender for the main part of the mortgage will want to protect their investment. Related to other impacts.","I understand $14k/yr $5.4M max This isn't the right way to say it. Your dad has a $5.4 million estate tax exclusion that can be used for gift tax. In addition to that (not instead or as part of), he and his wife each have a $14k/year gift tax exclusion. So if you aren't paying for two years from today, you actually have three years of gift tax exclusion: 2017; 2018; 2019. So that's 3 * 2 * $14k = $84k that he (and his wife) can give you without using any of the estate tax exclusion. But I give my cousin/dad $430k from the mortgage According to this, you don't want your dad to give you any money. You want to pay the entire $430k. In that case, don't file gift tax forms. He's not giving you money. He's loaning you money. I agree with the others. The cleanest solution is for your cousin to loan you money to buy the house from your dad. Pay a lawyer (or have your cousin/dad do it) so that it's legally written as a mortgage and you can get your interest deduction. You start paying off the loan in two years. Until then, interest accrues. So instead of a $430k debt, you'd owe something like $470k. Maybe more if your cousin pays the property taxes as well. Your cousin is out $430k plus possibly property taxes, but apparently he can afford that. You have a house and a mortgage. Your dad has money to buy his Florida house. Note that if your dad wanted to give you money, he could. He could collect $346k from you (borrowed from your cousin) and give you $28k equity immediately and then two more payments in 2018 and 2019. But that assumes that $346k is enough for him to buy his Florida house. If not, just do the mortgage. He can give you money by check which you can send to your cousin if he wants to do that.","It depends a lot on the specific country and its laws, but generally the receiver needs to be able to proof on request that Not every payment you get is taxable income; if you owned it before, that is typically easy to verify. Note that gifts (donations are gifts) are taxable income in most countries once they are above a certain limit. In practice, law and tax authorities seldom look at that if there is no other reason to check you out, or if the amounts are not several millions at least.","As far as I know (I am not a tax professional or IFA!) there would be no tax implications or other burden on the recipient of the loan under UK law, even if it ended up being treated as a gift rather than a loan. There are no clauses about money being in the account for 90 days in UK housing transactions, however under money laundering rules your brother's solicitor might need sight of loan agreements to verify where the funds came from (I think it would depend on whether you paid the money to your brother direct, in which case there would be no problem, or if you paid it direct to the solicitor for the purchase). What Canadian law might say about capital gains / inheritance tax (if the Canadian IRS did decide the loan counted as a gift) I have no idea.","Part of 'consideration', I imagine, would be the obligation of either party to follow through on an agreement, not only fair market value. Look at the thought experiment from the opposite perspective. If you did not pay him $150 (maybe just $50 or even $0), would you be breaking a contractual obligation to him? If he left after 2 hours because he forgot about a family event and did not finish your move, would he be breaking a contractual obligation to you even if you gave him $150? It seems it can be considered a gift (Update: in all cases) There was no agreement of what either party viewed as full consideration in a mutual exchange. To put it another way: From your examples, there is no evidence that the performance of either party hinged on receiving mutual consideration from the other. More Updates from comments: Patterns Matter Similarly to how the IRS may determine W2 employee vs independent contractor, patterns do matter. If your friend has a pattern of helping people move in exchange for tens of thousands of dollars in gifts every year, the IRS would view that in a different light. A waitress/waiter has a pattern of accepting 'gifts' of tips in exchange for good service as a part of their established job duties. If you gifted your friend with $150/week when they watched your kids every Monday-Wednesday, that would be different. You are establishing a pattern, and I would suggest you may be establishing mutual consideration. In that case, consult a professional if you are worried. Amounts Matter This is why the gift tax exemption was created. The IRS does not care about the amounts in question here. It is too much of a burden to track and account for transactions that are this questionable and this small. You gift your friend with a $20k car? Now you need to pay attention. Consult your CPA. You gift your friend $1k for helping build your new deck? The IRS does not care. Intent Matters Even in the first case, it is not necessarily true that your friend considers $150 to be mutual consideration for his services. Would he open a business where he offers that rate to the general public? I doubt it. He intends to gift you services out of his own free will, not because there will be an equitable exchange of value. The intent of both parties is to give a gift. There is no evidence that would suggest otherwise to the IRS, it seems, even if they cared in the first place.","You're not going to pay any tax. You can receive the money with gratitude and treat your in-laws nicely. Your in-laws will be liable for gift tax. They should be filling and filing the form 709. The end result may be, depending on their past gifts, that they will actually pay no money but instead use the lifetime exemption which is correlated with the estate tax. In other words, this gift will reduce their estate tax exemption. If the overall wealth they expect to have by the time they die is less than $5M (+something, the current level of the estate tax exemption), this translates to having pay no tax whatsoever. The form 709 must be filed, regardless, and a copy of it kept for future tracking purposes.","\"As a general proposition, no, you do not need to report money transfers into the US. If a transaction exceeds $10,000 then the bank must report it anyway. Note that \"\"structuring\"\" your transactions to avoid a $10,000 deposit is illegal, so be careful if you are moving lots of money. As a general rule, no, transferring your own individual money from a foreign account to a US account does not incur taxes. Only lawyers are authorized to practice law in the US. They should generally be bar licensed in the state of practice. Certified public accountants can assist you with tax preparation and return positions, though tax lawyers may be necessary for some situations or for formal tax opinions. Be sure to use an experienced advisor to file your tax returns and information reporting.\"","Unless there is a compelling reason to do so, like reducing interest charges, IMO you shouldn't do this. The fact that the bank teller or a computer files a CTR doesn't imply that you are doing something improper -- it is simply a regulation that banks are required to adhere to. Millions of CTRs are probably filled out over the course of the year. It doesn't add more time to your transaction, nor does it impact your tax or other liability. Learning about this stuff can instill a sense of paranoia. Don't fall victim to that -- these are measures in place to make it more difficult to dodge taxation and launder money."],"string":"[\n \"The difference is whether or not you have a contract that stipulates the payment plan, interest, and late payment penalties. If you have one then the IRS treats the transaction as a load/loan servicing. If not the IRS sees the money transfer as a gift.\",\n \"You are using interchangeably borrow/loan and gift. They are very different. For the mortgage company, they would prefer that the money from friends and family be a gift. If it is a loan, then you have an obligation to pay it back. If they see money added to your bank accounts in the months just before getting the loan, they will ask for the source of the money. Anything you claim as a gift will be required to be documented by you and the person making the gift. You don't want to lie about it, and have the other person lie about it. They will make you sign documents, if they catch you in a lie you can lose the loan, or be prosecuted for fraud. If the money from friends and family is a loan, the payments for the loan will impact the amount of money you can borrow. From the view of the IRS the gift tax only comes into play if during one calendar year a person makes a gift to somebody else of 14,000 or more. There are two points related to this. It is person-to-person. So if your dad gives you 14K, and your mom gives you 14K, and your dad gives your wife 14k and your mom gives your wife 14K; everything is fine. So two people can give 2 people 56K in one year. Please use separate checks to make it clear to the IRS. If somebody gives a gift above the exclusion limit for the year, they will have to complete IRS form 709. This essentially removes the excess amount from their life time exclusion, in other words from their estate. Nothing to worry about from the IRS. The bank wants to see the documentation. Also you are not a charity, so they can't claim it as a donation. Why do you have 6,000 in cash sitting around. The mortgage company will want an explanation for all large deposits so you better have a good explanation. From the IRS FAQ on Gift Taxes: What can be excluded from gifts? The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts. Number 3 on the list is the one you care about.\",\n \"In principle, the US taxes both income and gifts. Simply thinking good thoughts is not necessarily sufficient to avoid filing or payment obligations. Giving somebody money with no repayment date, no interest, and no enforceable note looks an awful lot like either income or a gift. A loan normally has interest, money sitting in a savings account is insured, and other investments generally have an expected return. Why would somebody give a loan with no interest, with only flexible or informal payment expectations, in a way where it has neither deposit insurance nor any expectation of net returns? That looks a lot like a gift - at the very least, a gift of the time value and the default risk. The IRS definitely polices loan rates. The latest release is Revenue Ruling 2014-13. The AFR is useful for tax concepts such as Original Issue Discount (when issuers sell low-interest or no-interest bonds or loans at less than face value, attempting to recharacterize interest income as return of principal), various grantor trusts (e.g. GRATs), and so forth. It's a simple way for the IRS to link to market rates of interest. Documentation and sufficient interest, as well as clear payment schedule (and maybe call or demand rights) make it a bona fide loan. There is no real way for the IRS to distinguish between an informal arrangement and a post-hoc lie to conceal a gift. Moreover, an undocumented loan is generally difficult to enforce, so it looks less like a true loan. The lender declares the interest payments as income on his Form 1040, line 8a and if necessary Schedule B.\",\n \"You don't need to file or do anything. The bank will report all transfers over 10 000, but chances are slim that it will even be looked at, if you don't do this every week. Worst case, someone will ask you about the source, and you tell them exactly what you wrote above (I had multiple international transfers over 60k and nobody ever asked). You said you paid his tuition, and he is now paying you back, so in case someone asks, you should be able to produce the documentation on the tuition payment - a bill, or your bank statement showing you paid it; and the amount should be matching, so you have proof. Note that if he pays you interest, it is taxable income. You are obligated to list it on your next tax filing.\",\n \"\\\"Question is, what do we need to do as far as the IRS is concerned? I mean we'll get the money from them and pay it back less than two months later. You're probably worried about the gift tax. Since you're a couple, the maximum exclusion amount is calculated like this: The reason the Pg multiplier stands separate is that gift splitting does require form 709 filed even if no tax is due, unless they actually write separate checks for their respective portions. So the math shows that you and your wife can get at least $28K from anyone without the need of gift tax to be paid or gift tax return to be filed. You can get up to $56K from your parents, but the gift splitting may need to be documented on form 709. Since you're in fact talking about a loan you're going to repay, you'll need to document it (with a note and everything), and document the repayment. If interest is being paid - your parents must declare it on their tax return for the year, obviously. In this case, if the loan is properly documented, repaid and the interest is declared, the IRS won't even bother claiming it was a gift. Even if there's no real interest, it shouldn't be an issue (the IRS might assign some \\\"\\\"deemed\\\"\\\" interest at their rates that would be considered a gift, but assuming no other gift transactions between you exist for the year the amount would be miniscule and way below the $14K exclusion level). Of course, as with any tax concern, you get here what you paid for. For a proper advice talk to a tax adviser (EA/CPA) licensed in your State.\\\"\",\n \"Writing a promissory note will be sufficient. Presumably the money will be transferred on or near the date that the loan is signed, and the repayments will follow the pattern prescribed in the note. The IRS is only skeptical of family loans if there is no documentation to support the claim.\",\n \"Gift tax is not an issue here. If a U.S. Person were to receive the wire transfer for me, and then immediately transfer the money to me This is a classic money laundering/scamming technique. You and your friend may end up talking to the FBI, not the IRS.\",\n \"\\\"Context: My parents overseas (Japan) sent me a little over $100,000 to cover an expensive tuition payment and moderate living expenses in 2014. They are not US residents, Green card holders or citizens. They did not remit the tuition payment directly to the school. I am a resident (for tax). This is enough to answer yes. That's basically the set of requirements for filing: you received >$100K from a non-US person and you yourself are a US person. You have to report it, and unless it is taxable income - it is a gift. Taxable income is reported on the form 1040, gifts are reported on the form 3520. The fact that in Japan it is not considered a gift is irrelevant. Gift tax laws vary between countries, some (many) don't have gift taxes at all. But the reporting requirement is based on the US law and the US definition of \\\"\\\"gift\\\"\\\". As I said above, if it is not a gift per the US law, then it is taxable income (and then you report all of it regardless of the amount and pay taxes). Had they paid directly to the institution, you wouldn't need to count it as income/gift to you because you didn't actually receive the money (so no income) and it went directly to cover your qualified education expenses (so no gift), but this is not the case in your situation. Whether or not this will be reported by the IRS back to Japan - I don't know, but it was probably already reported to the authorities in Japan by the banks through which the transfers went through. As to whether it will trigger an audit - doesn't really matter. It was, most likely, reported to the IRS already by the receiving banks in the US, so not reporting it on your tax return (either as income or on form 3520) may indeed raise some flags.\\\"\",\n \"The lifetime limit would be very peculiar. The question for the IRS is, whether this is a gift of some sorts, which is why they become interested at some point. In the US, you as the giftor would have to pay the taxes. The bank might inquire too, due to money laundering issues. The bank will anyhow report transactions above a certain size to the IRS. As long as you are sending money to yourself, you should be fine, as this is clearly not a gift. If you send it to 3rd person, then this is either for a service, in this case you need a bill or is a gift, in which case you require to pay gift taxes.\",\n \"\\\"withdraw in cash - bank reports it to IRS no matter what. Would this affect my tax filing in the coming year? No, and no. The bank doesn't report to the IRS. In the US - the bank will probably report to FinCEN. It has nothing to do with your tax return. withdraw in check - bank does not seem to report it. Is this correct? Doesn't have to. Still might, if they think it is a suspicious/irregular activity. wire-transfer to another person's account - would this always be slapped with a \\\"\\\"gift tax\\\"\\\"? If this is a gift it would. Regardless of how you transfer the money. Is it? Answers to your follow up questions: In the US, what documents do we need to prepare in case our large sum withdraw from the bank triggers a flag in relevant government (local and/or federal) divisions and they decide to investigate? Depending on what the investigators request. FinCEN would investigate money laundering, the IRS would investigate tax evasion, the FBI would investigate terrorism sponsorship, etc. Depending on who's investigating and what the suspicions are - different documents may be required. But the bottom line is that you should be able to explain the source of the funds and the destination. For example \\\"\\\"I found $1M in cash and sent it to some drug lord because he's such a good friend of mine\\\"\\\" will probably not fly. Does the (local/federal) government care if we stash our money (in cash or check) under our mattress, if we purchase foreign properties (taxable? documents needed for proof?), or if we give it away (to individuals or organizations - individual: a gift tax, organization: tax waivable) ? The government cares about taxes, and illegal activities. Stashing money under a mattress is not illegal, but earning cash and not paying income tax on it usually is. In many cases money stashed under the mattress was obtained illegally and/or income taxes were not paid. It seems that no matter what we do (except spreading thin our assets to multiple accounts in multiple banks), the government will always be notified of any large bank transaction and we would be forever flagged since. Is this correct ? Yes, reportable transactions will be reported. Also spreading around in multiple accounts/transactions to avoid reporting is called \\\"\\\"structuring\\\"\\\" and is on its own a crime. This is for cash/cash equivalent transactions only, of course. Not sure about the \\\"\\\"forever flagged since\\\"\\\", that part is probably sourced in your imagination.\\\"\",\n \"Since your question is very particular on the details, I'm assuming you did your research. Unfortunately you won't get a better answer here than what you've found on the Internet already. This is not a clear-cut situation as the situation you're describing has been a source to some confusion. Mainly, the question is whether the US bank account is a tangible asset or not. To the best of my knowledge, this has not yet been settled, so I suggest going to a professional tax adviser (EA/CPA licensed in the US) who'd advise you the best course of action. I think it would be safer to transfer the money directly from the foreign account to the US beneficiary (although even then, if the IRS decides to start digging, it may claim that you're essentially disguising a transfer from a US account, so I suggest talking to a professional before doing anything). In any case, the US recipient will need to report the gift (if it is $100K or more) using the form 3520 with his/her tax return.\",\n \"My brother is worried as in US a transaction of more than 10K can be flagged by IRS. Transactions may be flagged to IRS or any other regulators as required. If the intent is correct, there is nothing wrong, your Brother would have to establish that it was for legit reason. Will it be safe to transfer through wire to wire Transfer or is there any other alternatives All legit transfer mechanism would have the same reporting regulation. There is no one better than other method. As stated earlier, if the purpose is bonafide, there shouldn't be anything to worry about.\",\n \"\\\"I read up on it and saw that the IRS can \\\"\\\"charge\\\"\\\" the loan provider on interest even if the loan provider doesn't charge interest, but this is normally mitigated by the 0% interest being considered a gift and as long as it's below X amount your fine. Yes, this sums it up. X is the amount of the gift exemption, the $14K. However, you must differ between loan with no interest and loan with no paying back. With loan with no interest you're still giving a statutory gift of the IRS mandated minimum interest. However, the principal is expected to be repaid to you and you must show that this expectation is reasonably fulfilled. If you cannot (i.e.: you gave a \\\"\\\"loan\\\"\\\" with no intention of it being paid back), then the IRS will recharacterize the whole amount as the gift, and you'll be on the hook for gift tax for the amounts above the exemption. What defines a loan vs a gift in terms of the IRS, is it simply that the loan will be paid back, or is it only considered a loan if a promisary note is made? As I said - you must be able to show that the loan is indeed a loan, even if it is with no interest. I.e.: it is being repaid, it is treated as a loan by all parties, and is not an attempt to evade gift tax. Promissory note is not a must, but will definitely be helpful in showing that. But without the de-facto repayment of the loan, it will be hard to argue that it is not a gift, even if you have a promissory note. That means, you should make a loan in such a way that the borrower will (begin) repaying it reasonably soon, so that you can show payment schedule being followed and money moving back to you. Reasonably soon is not of course defined in a statute, so do consult with a EA/CPA licensed in your state on how to structure the loan so that it will not appear as an attempt to evade the gift tax. Are there any limits on how big a loan can be? No, but keep in mind that even with statutory interest charges (published by the IRS monthly, see the link), with large enough loan you can exceed the gift tax exemption. Also, keep in mind that interest is taxable income to you. Even if you gift it back (i.e.: the statutory interest).\\\"\",\n \"You're getting confused between several different things. 10K - cash transactions over $10,000 are reported to FinCEN under BSA. This is to prevent money laundering. IRS - IRS wants to see your tax return with all your income reported there. They don't see your bank deposits unless they audit you. 1 and 2 are not related at all.\",\n \"As a gift, the responsibility lays with the giver to file a 709 with their taxes for gifting to a single entity (barring certain exclusions) an amount over $14,000 within the (2017) tax year. https://www.irs.gov/pub/irs-pdf/i709.pdf If this person is a foreign entity from outside the country, you might need to provide in your tax filing a form 3520 https://www.irs.gov/businesses/gifts-from-foreign-person The reporting limits are: more than $100,000 from a foreign estate or non-resident alien, or more than $15,102 from a foreign company. If you don't know who/where the money came from i.e. cash, it would be considered found money and fall under income (not a gift).\",\n \"\\\"The IRS gets notified when you: (Note this is not a comprehensive list) As littadv mentioned, banks are required to send a CTR for any transactions over $10,000. They also are obligated to file a SAR (Suspicious Activity Report) for transactions deemed \\\"\\\"suspicious\\\"\\\" by bank policy. These filings are primarily for law enforcement purposes. The IRS may or may not have access to this information. The IRS isn't all-seeing or all-knowing. But -- In the event of an audit, checks do provide a paper trail documenting the origins of your deposits. So if you fail to report income from an \\\"\\\"off the books\\\"\\\" job, or do not fully report self-employment income, deposit records could be used against you. You are particularly vulnerable to this if you are in a profession where \\\"\\\"off the books\\\"\\\" transactions are routine -- plumbers, auto repair, vending machines, etc. At the end of the day, give Caesar his due, and you'll have alot less to worry about.\\\"\",\n \"Taxes Yes. You haven't indicated why the transfer is being made. If it is without any reason, it would attract a Gift Tax. legal liability It would definitely be investigated to see if Money Laundering or any other illegal activities is happening. If things are in order you have nothing to worry. charges Normally none. Your Bank can confirm better. friend of mine Are you sure he is a friend and this is not some kind of scam ... it typically starts of with you will get huge money and then calls like its stuck with RBI you need to paysome one to fast track or any such stories to get money out of you.\",\n \"\\\"you have 2 concerns: the lender and the irs. either way you should be fine the lender just wants to know that you have no legal claim to the property or other compensation. simply signing a gift declaration should clear that up, making this a \\\"\\\"gift\\\"\\\" from their perspective. they probably have some standard form you can sign. otherwise, just a simple note that says \\\"\\\"i, so-and-so, gave whats-er-name x$ on the y of june, 20## as a gift, with no expectation of repayment\\\"\\\". then, only way you could get charged with \\\"\\\"fraud\\\"\\\" is if you seek compensation for this \\\"\\\"gift\\\"\\\" in the future. even then, the bank would probably have to find out about the compensation and complain pretty strongly to get a prosecutor interested in a small dollar misrepresentation case with little or no provable intent. a bigger concern is the bank being uncomfortable with the future renter also giving a gift. that just \\\"\\\"smells weird\\\"\\\". and bankers hate anything weird. it probably won't prevent the mortgage from getting approved, but it might delay the underwriters a few days while the wring their hands about it. the irs is a bit more complicated. they tend to be the \\\"\\\"heads we win, tails you lose\\\"\\\" types. assuming they consider this a gift, then you are fine, since it is under the annual gift exclusion (~14k$ these days); you don't even have to tell them about it. however, if she gives you a large financial gift in the near future, they may decide to interpret those two events as a single transaction turning this into a no interest loan. even then, you should be fine since the irs generally doesn't care about loans under 100k$ with \\\"\\\"missing\\\"\\\" interest under 1k$/yr. since this is a small loan and interest rates are so low, you have no worries. further irs reading on gift loans: https://www.law.cornell.edu/uscode/text/26/7872\\\"\",\n \"The banks are required to file Currency Transaction Reports (CTR) to the IRS for aggregate transfers of over $10k. They file Suspicious Activity Reports for suspicious activity with an aggregate value of over $5,000 to the US Treasury. You're probably ok for what you're doing provided you aren't doing to regularly, but I would consider looking into alternate means of transferring funds such as a check to avoid the appearance of impropriety. Also, you should be able to call your bank to do a one time ACH transfer for up to $100k with minimal fees.\",\n \"Banks worry that the large gift might be a loan that is ultimately expected to be repaid. If so, that affects the cash flow of the recipient, and makes it more difficult to make the mortgage payments to the bank. In some cases, of course, it is an informal loan: Dad advances a large $X to son to use as a downpayent, but does not charge interest and the expectation is that the money will be returned in smaller chunks as and when the son can afford to repay Dad. In some cases, Dad truly means it as a gift, but son feels an obligation to repay the money, if not explicitly, then by paying for the first few months of Dad's nursing home stay, etc. So, banks like to have an explicit document such as a copy of a letter from Dad saying that this money is a gift, and some assurance that this is on the up and up. If the amount is larger than the maximum gift that can be given each year without having to file a gift tax return, then some assurance that a gift tax return will be filed is helpful. Mentioning this in the letter is good: it indicates that there are no secret handshakes or secret agreements to the effect that this is in fact a loan, with or without regular repayments.\",\n \"Anything over a $10,000 deposit is reported to the IRS. I'm not sure if you need to fill out a form or if the bank does it automatically. As long as it's legit I don't see that there would be any issues. The worst that would happen is somebody would have to talk to the IRS and explain that it was their money and not a gift of some sort. Edit it is reported to the FinCEN not the IRS https://www.ffiec.gov/bsa_aml_infobase/pages_manual/OLM_017.htm\",\n \"No. You don't need to pay the IRS before such a transfer – though you'll need to fill out certain paperwork to report the money transfer to authorities if it exceeds a threshold amount. If the money is income, you'll need to declare it on your income tax return and then pay the taxes due. If it is a gift, other rules apply and tax may be due. Do proper due diligence and consult with a trusted tax professional. However: Please see the comments above – this sounds like a potential scam.\",\n \"You say that you inherited the money from your mother, and are now paying these people using money that is already yours. Because of that, the money is considered a gift from you to them, and the fact that you are doing it in accordance with your mother's wishes doesn't change that. For it to be considered a bequest from your mother's estate directly to these beneficiaries, it would have had to be handled via the regular by-the-book inheritance procedure and been given to them directly rather than bequeathed to you with informal instructions to pass it on to them. If one gives another person more than $14K in any calendar year, there is the potential gift tax issue to address. I'll explain why it's more a matter of 'addressing' than 'paying', as there are a number of legal ways around this. Form 709 is what you'll use. In the end, you'll report the gifts over $14K but no tax will be due as they'll simply go against your lifetime gifting allowance, currently $5.49M per person. Note, 2 ways to avoid even this obligation. If you have a spouse, you have a combined $28K/yr gifting (per recipient) with no reporting required. Similarly, if the recipient has a spouse, you can gift them $14K. i.e. couple to couple can gift $56K/yr. Last, why not just gift $14K before December, and in January, give the second installment? If I had money coming in separate from a will, I'd be happy that you honored a verbal request, and wouldn't be so greedy as to expect you to risk a dime of your own finances to transfer the funds immediately.\",\n \"US bank deposits over $10K only need to be reported to FinCEN (Financial Crimes Enforcement Network- a bureau of the US Department of Treasury) if the deposits are made in cash or other money instruments where the source cannot be traced (money orders, traveler checks, etc). Regular checks and wires don't need to be reported because there is a clear bank trail of where the money came from. If your family member is giving you money personally (not from a business) from a bank account which is outside of the US, then you only need to report it if the amount is over $100K. Note, you would need to report that regardless of whether the money was deposited into your US bank account, or paid directly to your credit cards on your behalf, and there are stiff penalties if you play games to try to avoid reporting requirements. Neither deposit method would trigger any taxable income for the scenario you described.\",\n \"After transferring, do we need to file any forms to IRS regarding money transfer? Not immediately. Do we need to file any forms in US as part of tax returns for this transfer? In case the recipient and the sender are not the same person, the recipient must attach form 3520A to his/her tax return. If you are transferring between your own accounts - you're good to go. However, this NRE account must have been reported on your FBAR and form 8938 attached to your tax return. Do we need to inform my local bank in USA regarding the transfer in advance? You probably want to confirm the transfer instructions with them (SWIFT instructions, routing info, etc).\",\n \"Should we have to prepare any documents or deed or we simply asked our son to send on line a scanned copy on simple paper signed by him to declare that this amt is given as gift which is gifted to us through this cheque number/date/bank etc? Depending on amount, if few thousands don't bother. If few lacs get it on a simple plain paper, if in crores, get a proper gift deed executed. There is no tax for you. My son wants to remit some money in his mother's account jointly with me(father). It is very much clear that it will be tax free in india being a gift but how will this amt be treated as gift in the eyes of income tax people? Should we have to prepare any documents or deed or we simply asked our son to send on line a scanned copy on simple paper signed by him to declare that this amt is given as gift which is gifted to us through this cheque number/date/bank etc? Whether our son shows that amt as gift in his yearly return or not. what are the implications to his tax return due to gifted As your son is US citizen, he can only gift USD 14,000 to you and equal amount to your mother in a year. Similarly your daughter in law can give you both 14000 each. If it is more, he has to pay taxes or claim it against life time exemption of 1 million (?) USD\",\n \"In THEORY, you don't have to pay income tax in such a situation. In actual fact, the transaction looks suspicious because the money went into your account. Presumably, the money should have gone OUT of your account in equal amount. Having allowed all this to happen, what you need to do is to DOCUMENT this activity ASAP. The first thing to do is to retain the paperwork showing the sending of the funds to the third party. The second thing to do is to ask your friend for a letter dated TODAY (don't use an earlier date) as to why the money was delivered into your account, and corroborating the fact that it was sent to the third party. Then if the IRS comes calling, you will have documentation to prove your point and protect yourself.\",\n \"There is not any fraud involved. Anybody can gift money to another person.\",\n \"They don't track checks at all. If you make a cash transaction for an amount that exceeds the reporting limit (circa $10K), then a Currency Transaction Report will be filed with the US Department of the Treasury (not IRS, but close) about it. This is to detect and prevent money laundering.\",\n \"The liabilities are the same regardless of the route, besides tax evasion schemes such as handing the money to her as cash. Taxes will run up to half of the amount. The best routes are: Western union, moneygram, and similar services- about 2k You are allowed to gift 14k tax free. You can increase this amount by sending to multiple trusted people. See here. https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Planning-and-Checklists/The-Gift-Tax-Made-Simple/INF12127.html The gifter pay taxes, the giftee does not- unless the gifter fails to pay. Let me know which route you prefer. If you do a bank transfer then you will have to work that out with your bank. If you chose to do a wire transfer, yes. Yes, if it's no more than about $2000.\",\n \"\\\"Does the money lending between us need to be reported in our tax reports? No. Will he be taxed more because of lending the money to me? Yes. Will I be taxed more because of borrowing the money from him? No. How shall we report it so as to minimize our taxes? You cannot. What is reported on your tax returns is the income. A loan is not an income, so nothing gets reported. However, when you repay the loan, assuming it has interest, the lender has income: the interest. Interest income is reported on schedule B of the regular (1040/1040A) tax return (or, in the case of non-resident for tax purposes, on line 9 of 1040NR). It is taxed as ordinary income, and since you're both foreigners - the lender should look into the treaty provisions that might be relevant. Generally it is not exempt from taxable income based on treaty exemptions for students (which is only for earned income), but there might be other rules in the treaty regarding interest income. If there's no (fair market or higher) interest, then there's \\\"\\\"assumed\\\"\\\" interest at the IRS mandated rates, which is considered a gift. If it amounts to more than the yearly gift exemption, the lender may be liable for gift tax (depending on the lender's and your status, and again - see treaties). \\\"\\\"Loan\\\"\\\" without an obligation to repay and without actual repaying will also be considered a gift for tax purposes. If the lender has no intentions of having the loan repaid (i.e.: making a gift), it will be better to pay your tuition bills instead of actually giving you the money: tuition is exempt from gift tax. Talk to a CPA/EA licensed in your state for a proper tax advice on this issue.\\\"\",\n \"Like for example I use transferwise to send $x to my dad's account in India, would it show my name as the depositor ? That would depend from bank to bank, it may or may not show your name. Would it be considered as income for my dad ? Assuming your parents are Indian Residents for tax purposes. No. It would be considered as Gift. Gifts between father and son are tax free in India and there is no limit. Any special care/precaution to take before using such services ? Not really. Just to be safe, keep a copy of the transfer instruction / details of debit to you account etc, so that if there is enquiry you have all the data handy. Edit: Clarifying the comment, if you are Resident Alien in US for tax purposes, you would be liable to Gift Tax [Not your parents as they are Indian Residents and would follow Indian tax rules]. As per IRS the liability of Gift tax is on Donor subject to limit of $14000 per year per Donee. So you and your wife can gift your father and mother $14000 each. i.e. $56000 each year. Anything more will be taxable or can be reduced from the overall estate limit.\",\n \"(a) you give away your money - gift tax The person who receives the gift doesn't owe any tax. If you give it out in small amounts, there will be no gift tax. It could have tax and Estate issues for you depending on the size of the gift, the timing, and how much you give away in total. Of course if you give it away to a charity you could deduct the gift. (b) you loan someone some money - tax free?? It there is a loan, and and you collect interest; you will have to declare that interest as income. The IRS will expect that you charge a reasonable rate, otherwise the interest could be considered a gift. Not sure what a reasonable rate is with savings account earning 0.1% per year. (c) you pay back the debt you owe - tax free ?? tax deductible ?? The borrower can't deduct the interest they pay, unless it is a mortgage on the main home, or a business loan. I will admit that there may be a few other narrow categories of loans that would make it deductible for the borrower. If the loan/gift is for the down payment on a house, the lender for the rest of the mortgage will want to make sure that the gift/loan nature is correctly documented. The need to fully understand the obligations of the homeowner. If it is a loan between family members the IRS may want to see the paperwork surrounding a loan, to make sure it isn't really a gift. They don't look kindly on loans that are never paid back and no interest collected.\",\n \"\\\"I recently received a wire of more than $150K into one of my accounts. (Both sender and receiver accounts are US banking institutions.) My bank never contacted me to ask any questions. However, on my statement I noticed a charge called \\\"\\\"Analysis Service Charge\\\"\\\". I called the bank to ask them about this charge and was informed it was due to internal analysis for the wire transfer. They did this behind the scenes without needing to contact me. I can only assume that their \\\"\\\"analysis\\\"\\\" did not turn up anything suspicious, and if it had, perhaps they would have contacted me. I wouldn't worry about it even if you do receive a phone call and they ask a few questions. I'd advise to be completely honest; if you aren't doing anything wrong, you shouldn't have anything to worry about. Most likely they'd be calling you just to make sure you actually know about it and were expecting the money.\\\"\",\n \"The purpose of the transfer determines the taxability. If this is happening to frequent, it is advisable to keep proper records of the transaction so that if there is an enquiry from Tax authorities you can explain. Unless you explain the why the transfer is being made, I have put out some broad categories.\",\n \"\\\"See \\\"\\\"Structuring transactions to evade reporting requirement prohibited.\\\"\\\" You absolutely run the risk of the accusation of structuring. One can move money via check, direct transfer, etc, all day long, from account to account, and not have a reporting issue. But, cash deposits have a reporting requirement (by the bank) if $10K or over. Very simple, you deposit $5000 today, and $5000 tomorrow. That's structuring, and illegal. Let me offer a pre-emptive \\\"\\\"I don't know what frequency of $10000/X deposits triggers this rule. But, like the Supreme Court's, \\\"\\\"We have trouble defining porn, but we know it when we see it. And we're happy to have these cases brought to us,\\\"\\\" structuring is similarly not 100% definable, else one would shift a bit right.\\\"\\\" You did not ask, but your friend runs the risk of gift tax issues, as he's not filing the forms to acknowledge once he's over $14,000.\\\"\",\n \"I can't speak to New Zealand law, but under US law, it's not a gift, so there is no tax. But there are some practical considerations. How good a relationship do you have with the banks on each end of the transfer? Transfers in the neighborhood of USD$10,000 are automatically considered suspicious and the banks are required to take extra steps to ensure you are not laundering the proceeds of criminal activity, funding terrorism, evading taxes, etc. You will have to fill out quite a bit of paperwork.\",\n \"\\\"I am neither a lawyer nor a tax accountant, and if you're dealing with serious money I suggest you consult a professional. But my understanding is: If you make a loan at zero interest or at below-market rates, the IRS will consider the difference between the interest that you do charge and the market rate to be a gift. That is, if someone could get a loan from a bank and he'd pay $1000 in interest for the year, but instead you loan him the money as a friend interest free, than as far as the IRS is concerned you have given him a $1000 gift, and you could potentially have to pay gift tax. Or they might \\\"\\\"impute\\\"\\\" the interest to you and tax you on $1000 of additional income. If you have no agreement on repayment terms, if it's all, \\\"\\\"Hey Joe, just pay me back when you can\\\"\\\", then the IRS is likely to consider the entire \\\"\\\"loan\\\"\\\" to be a gift. There's an annual exclusion on gifts -- I think it's now $13,000 -- so if you loan your buddy fifty bucks to tide him over until next pay day, the IRS isn't going to get involved in that. They're worried about more serious money. And yes, the IRS does \\\"\\\"police loan rates\\\"\\\". The IRS examines exact numbers for all sorts of things. If, say, you go on a 100-mile overnight business trip, and the company gives you $10,000 for travel expenses, the IRS is likely to say that this is not a tax-deductible travel expense at all but a sham to hide part of your salary from taxes. Or if you donate a pair of old socks to charity and declare a $500 charitable contribution deduction, the IRS will say that that is not a realistic value for a pair of old socks and disallow the deduction. Etc. A small discrepancy from market rates can be justified for any number of reasons. If the book value of a used car is $5000 and you sell it to your neighbor for $4900, the IRS is unlikely to question it, there are any number of legitimate business reasons why you had to give a discount to make the sale. But if you sell it to him for $50, they may declare that this is not a sale but a gift. Etc.\\\"\",\n \"\\\"If I understand you correctly, your logic goes wrong right at the beginning. It sounds like you think one could avoid the income tax that would otherwise be owed to the US because of earning the money that was sent as a gift. That's not normally true. From the IRS's Gift Tax FAQ: May I deduct gifts on my income tax return? Making a gift or leaving your estate to your heirs does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions). So the person who sends $10k to their parents doesn't pay any less income tax than if they had kept the $10k in the US, or had just send the $10k overseas directly to their own bank account. Gifting and re-gifting didn't accomplish anything from the point of view of IRS taxes. You may have been confused by the \\\"\\\"annual exclusion\\\"\\\" that's mentioned on that same page. This exclusion is an exclusion for the gift tax. This is a separate tax on gifts, usually paid by the person who gives the gift. If it weren't for the exclusion, one would pay taxes twice on the money sent to their parents: first, when the money is earned, and then again when the gift is given. The exclusion helps avoid this second tax.\\\"\",\n \"From my reading of the wikipedia page (CRT), this only happens if you deposit or withdraw currency, not checks. The idea behind this is that checks, ACH, etc. leave paper trails that can be tracked. Cash doesn't, so it gets this extra level of scrutiny. If yu get a cashiers check or a money order to pay a bill, I don't think a CRT is created. If you withdraw $15,000 to buy a car in cash (1 stack of $100 bills), then a CRT would be generated. It still isn't a problem, as long as you can show a bill of sale showing where the money went (or came from, if you are the seller). The IRS has a FAQ about this. It says (taken from several spots at that page): Cash is money. It is currency and coins of the United States and any other country. A cashier’s check, bank draft, traveler’s check, or money order with a face amount of more than $10,000 is not treated as cash and a business does not have to file Form 8300 when it receives them. These items are not defined as cash because, if they were bought with currency, the bank or other financial institution that issued them must file a Currency Transaction Report. The exception to this is if you are buying something with a resale value of more than $10k with a check, money order, etc of less than $10k.\",\n \"You do not need to report gifts from US residents (US citizens/green card holders/tax residents due to length of stay) since filing gift tax return is their responsibility. In case of foreigners you need to report gifts in excess of $100K. In any case, transfers between spouses are exempt from gift tax.\",\n \"\\\"I'm not certain about international transfers, but that amount is large enough that it could be subject to gift tax. https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Gift-Taxes Note that the threshold for this tax is \\\"\\\"per person, per person\\\"\\\". For example, if you gave your father $12,5k, and gave your mother $12.5k, and your wife gave them each the same amounts, each of those gifts is small enough to be within the $14,000 exclusion and you and your wife would owe no gift tax. If you aren't married, you might want to spread this gift over two years to stay under that threshold.\\\"\",\n \"Not by you. Your bank might have to fill some reports for the IRS, but for the customer, nothing needs to be done. As long as the money is not income from illegal activity you don't need to worry about it.\",\n \"To answer the last question first: there are no tax consequences to you. If your family member is married (or has a joint owner of the funds), and so are you, each of them can give each of you the $14K annual gift, which would be $56K. The remainder of the $70K would be subject to either (1) Gift Tax for the tax year in which it was given, or (2) applied to the lifetime exclusion. Either way would require filing a form with the IRS.\",\n \"I do not think banks have an obligation to report any deposits to the IRS, however, they probably have an obligation to report deposits exceeding certain threshold amounts to FinCEN. At least that's how it works in Canada, and we're known to model our Big Brother-style activities after our neighbour to the South.\",\n \"\\\"You should be aware that the IRS considers all gifts of cash or cash equivalents from an employer (the partnership in this case) to an employee (your husband in this case) to be wages, regardless of what the transfer is called by either party, or how it is transferred. I'd strongly recommend that you review IRS publications 535 and 15-B, which are linked in my response to the question that littleadv referred to above. I would also recommend speaking with a lawyer, as in this case, you have knowledge of the income and would not be able to claim an \\\"\\\"innocent spouse\\\"\\\" provision if he is convicted of tax evasion/fraud. Good luck.\\\"\",\n \"Actually banks aren't required to (and don't) report on 8300 because they already report $10k+ cash transactions to FinCEN as a Currency Transaction Report (CTR), which is substantively similar; see the first item under Exceptions in the second column of page 3 of the actual form. Yes, 8300 is for businesses, that's why the form title is '... Received In A Trade Or Business'. You did not receive the money as part of a trade or business, and it's not taxable income to you, so you aren't required to report receiving it. Your tenses are unclear, but assuming you haven't deposited yet, when you do the bank will confirm your identity and file their CTR. It is extremely unlikely the government will investigate you for a single transaction close to $10k -- they're after whales and killer sharks, not minnows (metaphorically) -- but if they do, when they do, you simply explain where the money came from. The IRS abuses were with respect to people (mostly small businesses) that made numerous cash deposits slightly under $10k, which can be (but in the abuse cases actually was not) an attempt to avoid reporting, which is called 'structuring'. As long as you cooperate with the bank's required reporting and don't avoid it, you are fine.\",\n \"In the US, gift tax always falls on the donor, never the recipient, and gifts are not taxable income to the recipient. The IRS could raise questions if there is an employer-employee relationship between donor and recipient; your employer cannot give you money or property (e.g. a Rolex watch) or benefits (e.g. a house to live in rent-free) and claim that it is a gift, so that you do not have to pay income tax on that money. But, your parents need to be careful; that $14K per person is the exemption for the whole year and once they give you that, anything extra (birthday present, Christmas present etc) is subject to gift tax (for them) though you can still enjoy your gifts without any tax issue.\",\n \"It is taxable to your brother (assuming he's a US tax resident). Transfer of any amount over $14k per year to any single person (other than spouse) triggers gift tax liability.\",\n \"Let's define better the situation and then analyze it: Start with: End with: Process: So B has the same amount of money, just in a different bank account, but A and C changed states. A now doesn't have money, and C does, as the result of the transaction between A, B and C. The gift tax issue I see is the transfer of money from A (you) to C (your brother). If you're a US tax resident then you have $14K exemption from gift tax per person per year. £20K is more than that, so it will be subject to the tax. The fact that a third person was involved as an intermediary is irrelevant - for the purpose of gift tax there's no distinction between using a bank for transfers or a private party. Keep in mind that paying tuition directly to the institution on behalf of your brother may help you mitigate your gift tax liability - tuition payment made on behalf of your brother is exempt from gift tax. But it has to be made directly to the institution, it cannot pass through your brother.\",\n \"No, the IRS doesn't care about your transfers.\",\n \"\\\"I'm not familiar with the law and taxes in India but can provide guidance based on general accounting and tax principles. You are right that receiving money as a loan is not income and isn't liable to income tax. Therefore i suggest you actually formalise this loan through a written contract with your friend. The contract should include all the usual elements of a loan: amount, interest (even if preferential or zero), principal, term, consequences of default and currency of loan. You can then simply state the purpose of transfer as \\\"\\\"Personal Loan Agreement\\\"\\\". If you have such a document and are questioned by tax authorities you can easily show that the inward remittance is from a loan and should therefore be treated like any commercial loan for tax purposes. As long as you disclose the debt in your tax return (if required in India) and your friend discloses any interest received as income i think you'll be above board and won't be liable for any income tax. To make sure, you might be better off having a quick consultation with an accountant or tax specialist in India to advise you and draft the loan agreement.\\\"\",\n \"From an India Tax perspective, someone may add the US aspect; As you have given your Father-In-Law [FIL] some money, and do not have loan documents, the amount your FIL has repaid will be treated as GIFT to you. Gift Tax by Father-In-Law to Son-in-Law is 100% tax free and there is no limit of amount. The funds can be got into NRO account and not in NRE account. There is limit of USD 125,000 that can be reptriated outside India. Refer the RBI Q&A 56\",\n \"This will probably require some explanation from you on the source of the money and the reasons for the transaction. Cash transactions over $10k will be reported by the bank (in this case) on a CTR report to FinCEN. Keep in mind, mere breaking the transaction into multiple smaller ones in order to avoid the CTR is on its own a criminal offense. Just deposit what you want to deposit, and report what's needed to be reported. Note that if you're a US tax resident - these foreign bank accounts must have been reported already to FinCEN via FBAR, if not - you should expect a very nasty audit with the IRS.\",\n \"Banks in the US have to report deposits of more than $10,000, so they'll contact you to complete form 8300 or something. It should not be a problem, though, if you specify that it's someone else's money, not your income.\",\n \"As Stan's answer recommends, don't give them the money; make the checks payable to the credit-card company or the bank that issued the student loan so that those debts get repaid for sure, or else you run the risk of that money also going the way of all flesh and the debt remaining untouched. Next, file a gift tax return (Form 709, which is not filed along with Form 1040; all 709s go to one IRS office as described in the instructions), saying that you gave your son and daughter-in-law gifts of $20K each (say) and that you want to have $12K (excess of each gift over and above the annual exclusion of $14K per recipient) count against your combined lifetime estate tax and gift tax exclusion (which is currently over $5M). So, no gift tax needs to be paid. (As JoeTaxpayer's comment points out, if you are married and your spouse is willing to join in this, then as much as $56K can be given without anyone having to file Form 709). Then, change your will to reduce your son's and daughter-in-law's inheritance by $40K. If and when they return the money (as a gift to you), change your will back by removing the reduction. If the repayment is is a lump sum, the gift tax return stratagem can be used by your son and daughter-in-law while if they pay back over two years, no gift tax return need be filed. So., that's it. No interest to be paid by anybody, no gift taxes to be paid by anybody, no income to be reported on any tax return, etc. This will work unless you have serious concerns about reducing your combined lifetime estate tax and gift tax exclusion by $12K, and if you do, you can afford to hire plenty of lawyers to advise you on better strategies.\",\n \"There's no tax on wire transfer, but it would be easier on everyone if he would wire himself from his own account. Withdrawing money, depositing to your account and then wiring back to him may raise some flags with FinCEN and IRS with questions about money laundering or gift taxes. Why do you want to complicate things?\",\n \"a) He can loan you the money tax free he can even give you and your wife 29k a year tax free. Many people do a loan for lets say 100k and then they forgive the load 14.5k a year to avoid the taxes. b) Yes when they see that deposit they will give you a hard time potentially. I got a hard time for my Real Estate tax refund. c) Just putting stress on the family potentially.\",\n \"http://www.irs.gov/publications/p950/ar02.html Gift tax is owed by the giver, not the recipient. So my first guess is that you can make the transfer in your home country, and as the givers will not be subject to US tax, it won't apply at all. You can then transfer the money into the US freely. In any case, there's a lifetime exemption of 1mn USD. So, unless non-US persons don't get the exemption, I can't see the tax being a problem anyway unless there are going to be several more such transfers.\",\n \"assuming you are in the USA, i would recommend making this a gift. you can gift someone up to 14k$ per year without paying a gift tax. additionally, you can gift someone up to 5430k$, but it is a one-time deal (tied to inheritance tax). you can have a general expectation with the giftee that they will return the money with some interest on some schedule. you can even write that payment schedule down. but for legal, tax and personal relationship reasons, you should both consider all these payments gifts. if you think failure to repay will put a strain on your relationship, then you shouldn't make the loan. if not, then the payments in both directions really are gifts. as a gift, legal documentation can be really minimal. really, only the gifter has to document anything, and that is just on their tax return. even then, i think it is only necessary if you exceed the 14k$ annual gift limit. i would however recommend documenting any interest rates or payment schedules for personal reasons. being a gift, these numbers are just guidelines, but at least you won't find yourself arguing about whether or not the guidelines are being met. depending on how large the amounts involved are, you might want to spread the load over several people to stay under that annual limit. but the limit is per tax year, so you could do half now and half in january.\",\n \"I have read from lot of places that transferring funds from NRO to NRE is possible given correct documents are provided. Yes this is correct. The key document 15CB establishes that you have paid taxes that were due before money is transferred from the NRO account to the NRE account and/or are repatriated. Here is what I am simply doing- Steps 3 & 4 more so the step 4 can be seen as new income. So the source of the funds is originally from NRE account. However, the CA feels that since my withdrawal and deposit mechanism in NRO is cash, I might be subject to questioning. Is there any issues in doing the above? The CA is right. The Cash Withdrawal and Cash Deposit has broken the link between the money withdrawn and the money deposited. It could easily be the case that the Cash Withdrawals were spent on expenses and the Cash Deposit is new (taxable) income to you. This new income needs to be declared and the taxes paid. If you Uncle is a close relative (the exact relationships that are called close relatives are defined by law), the return of the money can be declared to be a gift from your Uncle to you and no taxes are due from you on the money. If the funds are large, it is advised to have a gift deed. It is not a simple matter of creating a gift deed stating that your Uncle has given you a gift; your Uncle has to show how he acquired so many assets that he gave you some money as a gift and whether appropriate taxes were paid by him. If your Uncle is not a close relative, he can still gift you up to Rs 50,000 per year without you having to pay any income tax on the money received, but again, a gift deed would be needed to account for the cash deposits. In short, keep speaking to your CA. He will advise you on the best course of action. Related Question Transfering money from NRE account in India to family member\",\n \"I won't think so. Too much trouble for the compliance and internal audit team. Unless you are moving money from Russia, Iran or those non-FATCA countries.\",\n \"Assuming you are Indian Citizen / Resident for Tax purposes. Your friend in US Citizen / Resident for tax purposes. As you are borrowing these funds and returning, this would NOT be treated as Gift but as Loan. Ensure that you have the right documentation in place. There is no tax when you receive the funds/loan or rebate when you pay back the loan. From India FEMA (Foreign Exchange Management Act) point of view, if you take loan from friends, you cannot by default repatriate funds. You have to take special permission to repatriate the funds out of India.\",\n \"\\\"As an investment opportunity: NO. As a friendly assist with money you don't mind ever getting back, legal depending on amount. A few years back I was in the housing market myself and researching interest rates and mortgages. For one property I was very interested in, I would need about $4K extra in liquid cash to complete the down-payment. A pair of options I saw were a \\\"\\\"combo loan\\\"\\\" 15yr 4% interest for the house, 1yr 8% interest for the $4K. Alternately, the \\\"\\\"bank of mom and dad\\\"\\\" could offer the 4K loan for a much lower rate. The giftable limit where reporting is not required was $12,000 at the time I did the review. IRS requires personal loans to be counted as having interest at the commercial rate. Thus an interest free loan of $10K with commercial interest rate of 1% (for easy math) would be counted as a gift of $10,100 for that calendar year. Disclaimer: Ultimately, I did not use this approach and did not have it subjected to a legal review.\\\"\",\n \"I am a US citizen and I want to transfer some amount 10 lakhs+ to my brother from my NRE account in India to his account. My brother is going to purchase something for his business. He is going to return my amount after 3-4 Months From the description it looks like you would like to loan to your brother on repatriation basis. Yes this is allowed. See the RBI Guide here and here for more details. There are some conditions; (iv) Scheme for raising loans from NRIs on repatriation basis Borrowings not exceeding US$ 2,50,000 or its equivalent in foreign exchange by an individual resident in India from his close relatives resident outside India, subject to the conditions that - a) the loan is free of interest; b) the minimum maturity period of the loan is seven years; c) The amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debit to the NRE/FCNR account of the non-resident lender; d) The loan is utilised for the borrower's personal purposes or for carrying on his normal business activity but not for carrying on agricultural/plantation activities, purchase of immovable property or shares/debentures/bonds issued by companies in India or for re-lending. Although it is mentioned as Seven years, this is revised to one year. Since he cannot deposit into my NRE account I guess he has to deposit it into my NRO account. A repatriate-able loan as above can be deposited into NRE Account. Is there any illegality here doing such transaction? No. Please ensure proper paper work to show this as loan and document the money trail. Also once I get my money in NRO account do I need to pay taxes in India on the money he deposited? This question does not arise.\",\n \"The money was sent from my US bank to my father in India Your father can receive unlimited amount of money as GIFT from you. There is no tax implication on this transaction. Related question After 3 years, my father received a note from the income tax dept. asking him to pay income taxes. Possibly because the income does not match and there maybe high value transactions. This should be replied preferably with the help of CA. Now, the CA is asking him to pay tax in the money I transferred. Is that correct? This is incorrect. Please change the CA and get someone competent. If not, what should I or he do in this case? Get guidance from another CA. Your father can establish that this was convenience and show evidence of transfer from you [need bank statements from your bank and Indian bank]. Property registration payments receipts, etc. Or he can also show this as Gift. If required get a gift deed created.\",\n \"Your mother can give you $14k and your wife $14k (every year) without creating a gift-tax filing requirement, anything in excess of that and she will have to file form 709 with her tax return, but she will not have gift tax liability on her end unless her lifetime gift tax exemption (currently $5.49M) has been exhausted. As the recipients of the gift, you have no tax liability or reporting requirement. So the easiest method would be for her to write you and your wife each checks for $14k. Since it's almost the end of the year, she could give you the extra $2k next year if needed, that smaller amount would not likely need to 'season' for loan approval. Since you mentioned only your mother, I assumed it's just her, but if your mother is married, both her and her spouse could each give you and your wife $14k without creating a filing requirement, so up to $56k in gifts from one couple to another, or $28k from one party to a couple. It doesn't have to be a spouse, that's just the typical scenario.\",\n \"In short getting funds converted outside of the Banking channel is illegal in India as Foreign Exchange is still regulated. If you show only a credit from your friend's NRE account to your NRO account [note it can't be your NRE account], it would be treated as GIFT and taxed accordingly, else you would have to show it as loan and pay back. You may show the payback in USD. But then there is a limit of Fx every individual can get converted/repatriate out of India and there is a purpose of remittance, all these complicate this further.\",\n \"Am I right to worry about both of these? Of course. Who carries $75K in cash for no good reason? Your friend got the cash from somewhere, didn't he? If its legit - there's paper trail to show. Same for your parents. If you/they can show the legit paper trail - there's nothing to worry about, the hassle, at worse, is a couple of letters to the IRS. If the money is not legit (your friend is selling crack to the kids in the hood and your parents robbed a 7/11 to give you the money, for example) - there may be problems.\",\n \"Generally, a one time thing is considered a gift. For the donor this is obviously not a deductible expense, except for some specific cases (for example promotional gifts under $25 to vendors can be deducted, if you're a business, or charitable contributions to a recognized charity). However, if this is a regular practice - that would not be considered as a gift, but rather as a tax fraud, a criminal offense. Being attentive I would like to make a little gift or give some little (<100$) amount of money (cash/wire/online) for that Why? Generally, gift is exempt from income if no services were provided and the gift was made in good faith. In the situation you describe this doesn't hold. When the gift is exempt from income to the receiver - the donor pays the tax (in this case, below exemption the tax is zero). If the gift is not exempt from income to the receiver - it is no longer a gift and the receiver is paying income taxes, not the donor. The situation you describe is a classic tax evasion scheme. If someone does it consistently and regularly (as a receiver, donor, or both) - he would likely end up in jail.\",\n \"\\\"You're right about your suspicions. I'm not a professional (I suggest you talk to a real one, a one with CPA, EA or Attorney credentials and license in your State), but I would be very cautious in this case. The IRS will look at all the facts and circumstances to make a claim, but my guess would be that the initial claim would be for this to be taxable income for your husband. He'd have to prove it to be otherwise. It does seem to be related to his performance, and I doubt that had they not known him through his employment, they'd give him such a gift. I may be wrong. So may be an IRS Revenue Officer. But I'd bet he'd think the same. Did they give \\\"\\\"gifts\\\"\\\" like that to anyone else? If they did - was it to other employees or they gave similar gifts to all their friends and family? Did those who gave your husband a gift file a gift tax return? Had they paid the gift tax? Were they principles in the partnership or they were limited partners (i.e.: not the ones with authority to make any decision)? Was your husband instrumental in making their extraordinary profit, or his job was not related to the profits these people made? These questions are inquiring about the facts and circumstances of the transaction. Based on what he can find out, and other potential information, your husband will have to decide whether he can reasonably claim that it was a gift. Beware: unreasonable claims lead to equally unreasonable penalties and charges. IRS and your State will definitely want to know more about this transaction, its not an amount to slide under the radar. This is not a matter where you can rely on a free opinions written by amateurs who don't know the whole story. You (or, rather, your husband) are highly encouraged to hire a paid professional - a CPA, EA (enrolled agent) or tax attorney with enough experience in fighting gift vs income characterization issues against the IRS (and the State, don't forget your State). An experienced professional may be able to identify something in the facts and the circumstances of the situation that would lead to reducing the tax bill or shifting it to the partners, but it is not something you do on your own.\\\"\",\n \"Keep in mind that lenders will consider the terms of any loans you have when determining your ability to pay back the mortgage. They'll want to see paperwork, or if you claim it is a gift they will require a letter to that effect from your relative. Obviously, this could effect your ability to qualify for a loan.\",\n \"It's a gift if there are no strings attached. If you are rationalizing it to try to make it a gift for tax or any other purpose when there really is a connection between the transactions, or when you expect any kind of value or benefit in return for it, then it's not a gift... don't make it one and don't call it one. That would indeed likely be fraud. Play be the rules and sleep easy, is how I like to live.\",\n \"Banks do not report transactions within accounts except as required by law, usually as part of anti-money-laundering efforts. Generally those involve tracking large cash transactions. As far as large payments go, there are two reasons they might be reported to the government: taxes, and criminal investigations. For tax purposes, if the payment is considered a salary or wage (that is, you are an employee of the company and the payment is for your time working there), then the company paying you is responsible for reporting the wage and withholding applicable taxes from your salary. If you are considered an independent contract employee, then you yourself will be responsible for reporting the income to the IRS and paying the applicable taxes yourself. In the second case, unless you are already under investigation, I wouldn't worry about it. Banks are very touchy about financial records being kept private, and won't release them without a subpoena. One caveat is that this is under US law. Banks which maintain branches in multiple countries must, of course, comply with all local laws in the jurisdiction where they do business. The take away from this is that Bank of America is unlikely to report a single deposit of $75,000 into your account to anyone on their own. If it is a paper check being deposited they will probably place a hold on it to make sure it clears, but that is all.\",\n \"In 2015 there's a $5.43M (That's million, as in 6 zeros) estate exemption. Even though it's $14K per year with no paperwork required, if you go over this, a bit of paperwork will let you tap your lifetime exemption. There's no tax consequence from this. The Applicable Federal Rate is the minimum rate that must be charged for this to be considered a loan and not a gift. DJ's answer is correct, otherwise, and is worth knowing as there are circumstances where the strategy is applicable. If the OP were a high net worth client trying to save his estate tax exemption, this (Dj's) strategy works just fine.\",\n \"Are you planning on paying your son back? If so, this is a loan from him. If not, it is a gift. Both have possible and different tax implications. For example, gifts above $14,000 ($28,000 if your son is married) per calendar year may be subject to a gift tax. If it is a loan, the IRS has rules about the interest rate you must pay him and taxes get more complicated if it is too low (or zero). Edit: Notice that if you are also married, I believe your son and his wife can give $14k each to each of you and your spouse. If the house is in her name as well you may be able to pay as much as $56K without the gift tax. Notice that this is a yearly amount, so if this was December you could get $56k in December and $56K in January.\",\n \"Bank-to-Bank wire transfer would be the best option. Dollar is going up nowadays, so if he brought the money not so long ago he might even earn the cost of the transfers back through the difference of the exchange rates. Re the IRS - they don't care. Same goes to the Israeli Tax Authority. What you and your friend need to show, if asked, is the paper trail. I.e.: if he brought you the $10K in cash - that may be an issue unless he kept all the receipts for getting it. But for such a low amount you can always resort to claiming it is a gift from you, in this case.\",\n \"Are you actually supporting both your mother and father? Is the account joint? Is your mother aware of the gift and has control over the money same as your father? If you cannot answer (and provide support) yes to all these questions, then I doubt you could make such a claim. If the fact that the bank account is only in your father's name is a mere technicality for whatever reason, and the money is in fact intended, controlled by and benefits both of your parents, then I believe you can. See more details about gift tax in the IRS publication 950.\",\n \"From WePay (GoFundMe's payment processor) support. I received only gifts and donations. Will I receive a Form 1099-K? As of 2015, the IRS has clarified that WePay is not required to send a Form 1099-K with respect to payments that are made solely as gifts or donations. The purpose of Form 1099-K is to report payments for the provision of goods or services, which may be subject to tax. Gifts and donations typically are not reported as income by recipients, so it is not necessary to send them a Form 1099-K. https://support.wepay.com/hc/en-us/articles/203609483-Tax-Reporting\",\n \"As the funds are Gift received from your parents, and your tax residency is US, as per US gift tax, there is no tax due from you for these funds.\",\n \"\\\"Yes, your privacy is invaded, that's the law in many jurisdictions. The goal is to make money laundering and financing Evil Things harder. That's why banks are required to request proof for every money transfer larger than a specific sum. This is only a minor issue most of the time. You will have some kind of agreement with that Money Management company and this agreement (or a copy of it) will serve as a proof of your lawful reason to transfer money. It works just like that - you get to the bank and say you want to initiate a money transfer, the clerk asks you to show the \\\"\\\"proof\\\"\\\", you give them your agreement or a bill that requests you to pay or whatever else document you may have that proves that you're bound by some kind of contract with the recipient of money. The clerk then makes a copy of the \\\"\\\"proof\\\"\\\" and it stays in the bank to back the transfer until it is completed. The copy is then stored for some time and later destroyed - that's up to how the bank handles documents.\\\"\",\n \"There's a difference between your street level drug dealer sending you sales proceeds of $20,000 in $5,000 increments to avoid sending you $10,000 or $20,000 at once to avoid the scrutiny of a government agency that might not be thrilled with your business venture, and a tire shop paying a wholesaler $5,000 each time funds are available up to the amount owed of $20,000. The former is illegal for a few reasons, and the latter is business as usual.\",\n \"\\\"Appears to be a hypothetical question and not really worth answering but... Must it be explained.. no, not until audited. It's saying that for everything reported on a tax return, people have to include an explanation for everything, which you do not, unless you want to make some type of 'disclosure' which is a different matter. Must it be reported.. Yes, based on info presented. All income is taxable unless \\\"\\\"specifically exempted\\\"\\\" per the US Tax code or court cases. Gift vs Found Income... it's not 'found' income as someone gave (gifted) the money to him. Generally, gifts received are not taxable and don't have to be reported.\\\"\",\n \"In the US, the bank is legally required to report any cash transactions over 10k$ to the government. This normally has no consequences, and you will never hear about it. No need to worry about it. If the amount is very high, or you do it repeatedly, or the government has other (pre-existing) reasons to look at your finances sharply, they might ask you where the money came from and what you did with it, but your explanation is perfectly fine (assuming it is true). The idea is to catch money-launderers that try to get large illegal cash incomes into the banking system. Classic example is the drug lord who makes a million a month in cash from selling drugs, and needs to get this million into the banks (as you can't buy houses or luxury cars or yachts with cash without getting FBI attention right away).\",\n \"if the deposit earned interest, you could be liable for taxes on the interest earned. If it ended up in a checking account, then you will not be liable for any taxes since checking accounts do not earn interest anyway. Your bank may inquire about where these transfers are coming from and question the legality of it.\",\n \"I'm not familiar with US tax law in particular, but the general principle around the world tends to be that interest-free or low-interest loans are taxed as gifts of the difference between a commercial interest charge and the actual interest charged. You could also forgive ($13,000 - waived interest) of the loan each year. Also, remember that there's a lifetime exemption (covering inheritance as well) of $1,000,000 which can be used for any amounts over the $13,000.\",\n \"Most definitely all wire transfer above a significant amount would be flagged as a suspicious transaction. Nevertheless, as long you provide the Final beneficiary information (name and account number), the bank will process the remittance.\",\n \"\\\"Your Spidey senses are good. A good friend would not put you in such a position. It's simple, to skirt some issue (we'll get to that in a second) you are being asked to lie. All for a 15% return on your $$$$. <<< How much is that? You can easily lend him the money, and have a better paper trail. But the bank is not going to like that, and requires this money from friends or family to be a gift. I've heard mortgage guys at the bank say \\\"\\\"It's just a formality, we need this paperwork to sell the loan to the investors.\\\"\\\" These bankers belong in jail, or at least fired and barred from the industry. They broke the economy in 2008, and should be stopped from doing it again.\\\"\",\n \"Making a payment of any amount is usually legal, although of course the specific circumstances matter, and I'm not qualified to give legal advice. Just had to throw in that disclaimer not because I think there's a problem here, but because it is impossible to give a definite answer to a legal question in a specific situation on Stack Exchange. But the government will be involved. There are two parts to that. First, as part of anti-money-laundering laws, banks have to report all transactions above a certain limit; I believe $10k. When you use a check or similar to pay, that happens pretty much automatically. When making a cash payment, you may have to fill out some forms. An secondly, Edward Snowden revealed that the government also tapped into banking networks, so pretty much every transaction is recorded, even if it is not reportable.\",\n \"First, the recipient is not responsible for any gift tax, the giver pays the tax. The gift is not taxable income to the recipient and so the recipient does not pay any income tax on the gift either. More than that, and they tap into their lifetime exclusion, currently (2015) $5.43M. All that's needed is a simple form. More convoluted, would be to lend you the full amount and then forgive $14,000 per year. Unnescesary paperwork, in my opinion.\",\n \"There are no US taxes for receiving a gift (you). There may be US taxes for giving a gift (the gift tax), for your parents, but if they are nonresidents and the money they are giving was not situated in the US, then they do not have US gift tax. You have to report a gift from a foreign person if it exceeds $100,000.\",\n \"You normally wouldn't pay income taxes on money that isn't income. Transferring money or withdrawing it from a bank isn't an income generating event. I think it is very doubtful that you would need to claim that on income tax forms.\",\n \"If the money is a gift the lender will make everybody acknowledge that the money is a gift. They will not care if the gift triggers tax forms for the giver. Signing the gift forms specifying it is a gift when it isn't a gift is fraud, and there are penalties attached to that. If it is a loan that will not erase the PMI requirement. Because the lender for the main part of the mortgage will want to protect their investment. Related to other impacts.\",\n \"I understand $14k/yr $5.4M max This isn't the right way to say it. Your dad has a $5.4 million estate tax exclusion that can be used for gift tax. In addition to that (not instead or as part of), he and his wife each have a $14k/year gift tax exclusion. So if you aren't paying for two years from today, you actually have three years of gift tax exclusion: 2017; 2018; 2019. So that's 3 * 2 * $14k = $84k that he (and his wife) can give you without using any of the estate tax exclusion. But I give my cousin/dad $430k from the mortgage According to this, you don't want your dad to give you any money. You want to pay the entire $430k. In that case, don't file gift tax forms. He's not giving you money. He's loaning you money. I agree with the others. The cleanest solution is for your cousin to loan you money to buy the house from your dad. Pay a lawyer (or have your cousin/dad do it) so that it's legally written as a mortgage and you can get your interest deduction. You start paying off the loan in two years. Until then, interest accrues. So instead of a $430k debt, you'd owe something like $470k. Maybe more if your cousin pays the property taxes as well. Your cousin is out $430k plus possibly property taxes, but apparently he can afford that. You have a house and a mortgage. Your dad has money to buy his Florida house. Note that if your dad wanted to give you money, he could. He could collect $346k from you (borrowed from your cousin) and give you $28k equity immediately and then two more payments in 2018 and 2019. But that assumes that $346k is enough for him to buy his Florida house. If not, just do the mortgage. He can give you money by check which you can send to your cousin if he wants to do that.\",\n \"It depends a lot on the specific country and its laws, but generally the receiver needs to be able to proof on request that Not every payment you get is taxable income; if you owned it before, that is typically easy to verify. Note that gifts (donations are gifts) are taxable income in most countries once they are above a certain limit. In practice, law and tax authorities seldom look at that if there is no other reason to check you out, or if the amounts are not several millions at least.\",\n \"As far as I know (I am not a tax professional or IFA!) there would be no tax implications or other burden on the recipient of the loan under UK law, even if it ended up being treated as a gift rather than a loan. There are no clauses about money being in the account for 90 days in UK housing transactions, however under money laundering rules your brother's solicitor might need sight of loan agreements to verify where the funds came from (I think it would depend on whether you paid the money to your brother direct, in which case there would be no problem, or if you paid it direct to the solicitor for the purchase). What Canadian law might say about capital gains / inheritance tax (if the Canadian IRS did decide the loan counted as a gift) I have no idea.\",\n \"Part of 'consideration', I imagine, would be the obligation of either party to follow through on an agreement, not only fair market value. Look at the thought experiment from the opposite perspective. If you did not pay him $150 (maybe just $50 or even $0), would you be breaking a contractual obligation to him? If he left after 2 hours because he forgot about a family event and did not finish your move, would he be breaking a contractual obligation to you even if you gave him $150? It seems it can be considered a gift (Update: in all cases) There was no agreement of what either party viewed as full consideration in a mutual exchange. To put it another way: From your examples, there is no evidence that the performance of either party hinged on receiving mutual consideration from the other. More Updates from comments: Patterns Matter Similarly to how the IRS may determine W2 employee vs independent contractor, patterns do matter. If your friend has a pattern of helping people move in exchange for tens of thousands of dollars in gifts every year, the IRS would view that in a different light. A waitress/waiter has a pattern of accepting 'gifts' of tips in exchange for good service as a part of their established job duties. If you gifted your friend with $150/week when they watched your kids every Monday-Wednesday, that would be different. You are establishing a pattern, and I would suggest you may be establishing mutual consideration. In that case, consult a professional if you are worried. Amounts Matter This is why the gift tax exemption was created. The IRS does not care about the amounts in question here. It is too much of a burden to track and account for transactions that are this questionable and this small. You gift your friend with a $20k car? Now you need to pay attention. Consult your CPA. You gift your friend $1k for helping build your new deck? The IRS does not care. Intent Matters Even in the first case, it is not necessarily true that your friend considers $150 to be mutual consideration for his services. Would he open a business where he offers that rate to the general public? I doubt it. He intends to gift you services out of his own free will, not because there will be an equitable exchange of value. The intent of both parties is to give a gift. There is no evidence that would suggest otherwise to the IRS, it seems, even if they cared in the first place.\",\n \"You're not going to pay any tax. You can receive the money with gratitude and treat your in-laws nicely. Your in-laws will be liable for gift tax. They should be filling and filing the form 709. The end result may be, depending on their past gifts, that they will actually pay no money but instead use the lifetime exemption which is correlated with the estate tax. In other words, this gift will reduce their estate tax exemption. If the overall wealth they expect to have by the time they die is less than $5M (+something, the current level of the estate tax exemption), this translates to having pay no tax whatsoever. The form 709 must be filed, regardless, and a copy of it kept for future tracking purposes.\",\n \"\\\"As a general proposition, no, you do not need to report money transfers into the US. If a transaction exceeds $10,000 then the bank must report it anyway. Note that \\\"\\\"structuring\\\"\\\" your transactions to avoid a $10,000 deposit is illegal, so be careful if you are moving lots of money. As a general rule, no, transferring your own individual money from a foreign account to a US account does not incur taxes. Only lawyers are authorized to practice law in the US. They should generally be bar licensed in the state of practice. Certified public accountants can assist you with tax preparation and return positions, though tax lawyers may be necessary for some situations or for formal tax opinions. Be sure to use an experienced advisor to file your tax returns and information reporting.\\\"\",\n \"Unless there is a compelling reason to do so, like reducing interest charges, IMO you shouldn't do this. The fact that the bank teller or a computer files a CTR doesn't imply that you are doing something improper -- it is simply a regulation that banks are required to adhere to. Millions of CTRs are probably filled out over the course of the year. It doesn't add more time to your transaction, nor does it impact your tax or other liability. Learning about this stuff can instill a sense of paranoia. Don't fall victim to that -- these are measures in place to make it more difficult to dodge taxation and launder money.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["You don't need to file or do anything. The bank will report all transfers over 10 000, but chances are slim that it will even be looked at, if you don't do this every week. Worst case, someone will ask you about the source, and you tell them exactly what you wrote above (I had multiple international transfers over 60k and nobody ever asked). You said you paid his tuition, and he is now paying you back, so in case someone asks, you should be able to produce the documentation on the tuition payment - a bill, or your bank statement showing you paid it; and the amount should be matching, so you have proof. Note that if he pays you interest, it is taxable income. You are obligated to list it on your next tax filing."],"string":"[\n \"You don't need to file or do anything. The bank will report all transfers over 10 000, but chances are slim that it will even be looked at, if you don't do this every week. Worst case, someone will ask you about the source, and you tell them exactly what you wrote above (I had multiple international transfers over 60k and nobody ever asked). You said you paid his tuition, and he is now paying you back, so in case someone asks, you should be able to produce the documentation on the tuition payment - a bill, or your bank statement showing you paid it; and the amount should be matching, so you have proof. Note that if he pays you interest, it is taxable income. You are obligated to list it on your next tax filing.\"\n]","isConversational":false}}},{"rowIdx":78,"cells":{"_id":{"kind":"string","value":"5763"},"query":{"kind":"string","value":"What is the best way to get a “rough” home appraisal prior to starting the refinance process?"},"gt_ids":{"kind":"list like","value":["89964","515361","462019"],"string":"[\n \"89964\",\n \"515361\",\n \"462019\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1,1],"string":"[\n 1,\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["89964","218144","366591","326214","115111","462019","515361","446646","129439","446137","396540","116548","375792","563380","292447","108511","545341","181200","77232","11572","114428","519633","329504","20054","581033","232944","565868","422770","540929","75127","358137","299536","38712","221431","215647","359433","455952","306855","386437","44855","265403","32576","412142","61623","188756","254152","489479","344186","331255","497927","570318","243203","67379","351285","309077","157164","510219","66993","546187","368504","320953","64887","283141","26051","335222","421586","357921","565762","586647","354434","60088","549513","384185","58855","88770","26655","201968","251466","384709","51728","230297","324874","248578","570415","582340","365262","422084","222476","110400","569409","96666","400931","309588","596272","230724","336170","194017","284818","175693","402362"],"string":"[\n \"89964\",\n \"218144\",\n \"366591\",\n \"326214\",\n \"115111\",\n \"462019\",\n \"515361\",\n \"446646\",\n \"129439\",\n \"446137\",\n \"396540\",\n \"116548\",\n \"375792\",\n \"563380\",\n \"292447\",\n \"108511\",\n \"545341\",\n \"181200\",\n \"77232\",\n \"11572\",\n \"114428\",\n \"519633\",\n \"329504\",\n \"20054\",\n \"581033\",\n \"232944\",\n \"565868\",\n \"422770\",\n \"540929\",\n \"75127\",\n \"358137\",\n \"299536\",\n \"38712\",\n \"221431\",\n \"215647\",\n \"359433\",\n \"455952\",\n \"306855\",\n \"386437\",\n \"44855\",\n \"265403\",\n \"32576\",\n \"412142\",\n \"61623\",\n \"188756\",\n \"254152\",\n \"489479\",\n \"344186\",\n \"331255\",\n \"497927\",\n \"570318\",\n \"243203\",\n \"67379\",\n \"351285\",\n \"309077\",\n \"157164\",\n \"510219\",\n \"66993\",\n \"546187\",\n \"368504\",\n \"320953\",\n \"64887\",\n \"283141\",\n \"26051\",\n \"335222\",\n \"421586\",\n \"357921\",\n \"565762\",\n \"586647\",\n \"354434\",\n \"60088\",\n \"549513\",\n \"384185\",\n \"58855\",\n \"88770\",\n \"26655\",\n \"201968\",\n \"251466\",\n \"384709\",\n \"51728\",\n \"230297\",\n \"324874\",\n \"248578\",\n \"570415\",\n \"582340\",\n \"365262\",\n \"422084\",\n \"222476\",\n \"110400\",\n \"569409\",\n \"96666\",\n \"400931\",\n \"309588\",\n \"596272\",\n \"230724\",\n \"336170\",\n \"194017\",\n \"284818\",\n \"175693\",\n \"402362\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["\"It's extremely easy to get a rough valuation of your home. Just phone a real estate agent. Virtually any real estate agent will come and value your home free. Even if you say outright \"\"I'm not considering selling, I just want a valuation\"\" they will probably do it, because for them getting contacts of people who might one day want to sell their home is all-important. Even if a few turn you down, some will do it. You might say that an agent isn't going to be as accurate as an appraiser, and you are right. There is also an expectation that they will evaluate higher than the real value, to persuaade you to sell. That probably isn't a big issue, and it's something you can compensate for. And even an appraiser is going to be based somewhat on speculation. You might try to do this calculation yourself, but an agent has access to the actual sale prices of nearby houses - you can't get that information. You only have access to the asking prices. And did I mention they will do it for free?\"","\"You can get a \"\"drive-by\"\" appraisal or an assessment from a local real estate agent. This obviously will give you a less precise and not as reliable information as a full appraisal, but will be significantly cheaper.\"","I wouldn't personally spend any money on an appraisal. Spend some time yourself looking at Zillow.com and maybe Realtor.com and other sites to review recent sales in your specific area. Not the houses a mile away. Try to find comparables to yours. The key factor is dollars per square foot. See if the trend over the last couple of years is upwards or downwards in dollars per square foot of living area. If it's downwards, I wouldn't invest for sure.","\"I would not trust Zillow for an appraisal. The numbers I see on there vary a lot from real prices. I'm not sure I'd get a full appraisal either, as that means you \"\"know\"\" the value of the house and may be obliged to reveal it. I'd ask for the loan amount and see what the previous owner says.\"","\"You can shop for a mortgage rate without actually submitting a mortgage application. Unfortunately, the U.S. Government has made it illegal for the banks to give you a \"\"good faith estimate\"\" of the mortgage cost and terms without submitting a mortgage application. On the other hand, government regulations make the \"\"good faith estimates\"\" somewhat misleading. (For one thing, they rarely are good for estimating how much money you will need to \"\"bring to the closing table\"\".) My understanding is that in the United States, multiple credit checks within a two-week period while shopping for a mortgage are combined to ding your credit rating only once. You need the following information to shop for a mortgage: A realistic \"\"appraisal value\"\". Unless your market is going up quickly, a fair purchase price is usually close enough. Your expected loan amount (which you or a banker can estimate based on your down payment and likely closing costs). Your middle credit score, for purposes of mortgage applications. (If you have a co-borrower, such as a spouse, many banks use the lower of the two persons' middle credit score). The annual property tax cost for the property, taking into account the new purchase price. The annual cost of homeowners' insurance. The annual cost of homeowners' association dues. Your minimum monthly payments on all debt. Banks tend to round up the minimum payments. Also, banks care whether any of that debt is secured by real estate. Your monthly income. Banks usually include just the amount for which you can show that you are currently in the job, with regular paychecks and tax withholding, and that you have been in similar jobs (or training for such jobs) for the last two full years. Banks usually subtract out any business losses that show up on tax returns. There are special rules for alimony and child support payments. The loan terms you want, such as a 15-year fixed rate or 30-year fixed rate. The amount of points you are willing to pay. Many banks are willing to lower your \"\"note rate\"\" by 0.125% if you pay 0.5% up-front. The pros and cons of paying points is a good topic for another question. Whether you want a so-called \"\"no-fee\"\" or \"\"no-closing cost\"\" loan. These loans cost less up-front, but have a higher \"\"note rate\"\". Unless you ask for a \"\"no-fee\"\" or \"\"no-closing cost\"\" loan, most banks have similar charges for things like: So the big differences are usually in: As discussed above, you can come up with a simple number for (roughly) comparing fixed-rate mortgage loan offers. Take the loan origination (and similar) fees, and divide them by the loan amount. Divide that percentage by 4. Add that percentage to the \"\"note rate\"\" for a loan with \"\"no points\"\". Use that last adjusted note rate to compare offers. (This method works because you have the choice of using up-front savings to pay \"\"points\"\" to lower the \"\"note rate\"\".) Notice that once you have your middle credit score, you can ask other lenders to estimate the information above without actually submitting another loan application. Because the mortgage market fluctuates, you should compare rates on the same morning of the same day. You might want to check with three lenders, to see if your real estate agent's friend is competitive:\"","If you're willing to pay a fee, you can probably just get a commercial appraiser to give you a valuation. In Australia I think it's around $100-200.","I see your remarks regarding Zillow, but would add a question. Why not look only for recent sales? If you find homes similar to yours with recent sales, that's similar to how the appraisers do it. I've refinanced many times and each time, I looked at sales within three miles of my house. I hit the appraised price very close in my estimate, high or low compared to Zillow, but used transaction data from there.just my thought. I chose a random neighborhood, and this was the first house I clicked. The main view shows last sale date, so I'd obviously suggest the OP look for more recent ones. If turnover is that low in his neighborhood, I understand, but the comment that transactions aren't listed is factually incorrect. I'd like my 2pts back. :)","Definitely don't borrow from your 401K. If you quit or get laid off, you have to repay the whole amount back immediately, plus you are borrowing from your opportunity cost. The stock market should be good at least through the end of this year. As one of the commentators already stated, have you calculated your net savings by reducing the interest rate? You will be paying closing costs and not all of these are deductible (only the points are). When calculating the savings, you have to ask yourself how long you will be hanging on the property? Are you likely to be long term landlords, or do you have any ideas on selling in the near future? You can reduce the cost and principal by throwing the equivalent of one to two extra mortgage payments a year to get the repayment period down significantly (by years). In this way, you are not married to a higher payment (as you would be if you refinanced to a 15 year term). I would tend to go with a) eat the appraisal cost, not refinance, and b) throw extra money towards principal to get the term of the loan to be reduced.","Keep in mind, there are times that house is in such bad shape that it's going to need 6 months of renovations, in which case you might ask the town if they are willing to reappraise a lower value until the work is completed. Keep in mind, you'll get a new appraisal when permitted (I mean pulling a permit from the town) work is done. I finished my basement and the town was eager to send the appraiser over even before work was fully complete.","If you can deal with phone calls instead of a face to face meeting, for the average person with an average refinance online tools just offer another way to shop for deals. For new mortgages, I think having a person you can meet face to face will avoid problems, but for just a simple refi, online is one of the places you should check. Compete your current mortgage company, your bank (hopefully credit union), a local broker or two and the online places. The more competition you have, the more power you have in making a good choice.","There are deals out there which allow refinancing up to 125% of appraised value so long as you have a solid payment history. You need to research banks in your area working with HARP funded mortgages. An alternate method is to find a bank that will finance 80% of the current value at 4% and the rest as a HELOC. The rate will be higher on the equity line, but the average rate will be better and you can pay the line off faster.","If you get somewhat of a discount appraisal you're probably not going to save much money, and given the (probable) size of your investment you might as well pay the extra money. You'll learn something about the market or investment anyway. Maybe it will open you up to some new ideas like trying to flip the property or pulling out some equity to go after more properties.","Zoopla may not always accurately reflect the market price. Your best bet is to get a quote for local registered) letting agents. That way you know you are close to the real market value. Also, these quotes may come into handy if you have a mortgage on the property. Since most banks will require you to provide proof of rent figures you are projecting by sending in official quotes. Hope this helps..","I second the suggestions for your local credit union and asking co-workers who might also be in the process of a home purchase. Additionally, you want to educate yourself as much as possible so that you can ask questions about the calculations responsible for the differences. I got different values starting from the various online automatic quotes all the way through to the GFE and it was not obvious to me. You can also sign-up for free workshops for first time home buyers, though most of the material will be a breeze it helps you get worksheets going and lists going for documentation that you need to gather. You might want to start at the HUD site and explore. Especially the Borrower's Rights. The cost booklet was very helpful for me to interpret the GFE, but honestly I didn't appreciate it the first time it was handed to me. Finally, you might meet qualifications to take advantage of FHA programs; the waitlists discourage everyone including the loan brokers, but you want to at least be aware of programs that can help.","Check out the property websites to get an idea of how much, the property in question, could yield as rent. Most give a range and you can get a good idea of it. Just one example from zoopla. Likewise you can refer mouseprice or rightmove and get yourself an idea. Property websites do a lot of data crunching to do an update, but their figure is only a guide.","\"The usual rule of thumb is that you should start considering refinance when you can lower the effective interest rate by 1% or more. If you're now paying 4.7% this would mean you should be looking for loans at 3.7% or better to find something that's really worth considering. One exception is if the bank is willing to do an \"\"in-place refinance\"\", with no closing costs and no points. Sometimes banks will offer this as a way of retaining customers who would otherwise be tempted to refinance elsewhere. You should still shop around before accepting this kind of offer, to make sure it really is your best option. Most banks offer calculators on their websites that will let you compare your current mortgage to a hypothetical new one. Feed the numbers in, and it can tell you what the difference in payment size will be, how long you need to keep the house before the savings have paid for the closing costs, and what the actual savings will be if you sell the house in any given year (or total savings if you don't sell until after the mortgage is paid off). Remember that In addition to closing costs there are amortization effects. In the early stages of a standard mortgage your money is mostly paying interest; the amount paying down the principal increases over the life of the loan. That's another of the reasons you need to run the calculator; refinancing resets that clock.\"","This may not be entirely scientific, but as a landlord my usual approach is just to do a search for rental properties on Craigslist for comparable homes in the neighborhood. There are all kinds of formulas professional property managers use, but in the end these listings are the ones you are going to be competing with for tenants. Also, it isn't super accurate, but online services like Zillow.com can give you some numbers for rental houses that include those that aren't currently advertising.","\"You most definitely can appeal the county's appraisal of your property. How to do so, and your odds of success will vary widely by your location, but I have successfully appealed the valuation on one of my rental properties. I asked my realtor to provide me with recent sales of comparable homes in the neighborhood & provided them along with my appeal as evidence of what I felt a reasonable valuation should be. One of three things will happen: 1) Your appeal will be accepted, 2) It will be denied, or 3) you will be asked to come in & plea your case in front of the county assessor. In my case, the county accepted my appeal without needing to testify. Look around your county assessor's website ... you will probably be able to find the form necessary for filing an appeal. If not, give them a call & they'll tell you the procedure. The county generally uses a simplistic statistical model to do their valuations. Little to no human time is spent reviewing your home's value, so it's quite possible for their valuation to be unreasonable. An appeal can take a bit of time & paperwork, but can definitely be worth the effort if the county's valuation is way off. Hope this helps! @mhoran_psprep Your point is well taken that in practice the relationship between sales prices & tax assessments is a bit more tenuous. The waters get muddy when property values have a large swing (like the past 5 years). When tax assessor's started seeing large drops in property values during the recession (and consequent drops in their budgets), I'm sure there was considerable pressure to prevent wholesale decreases in tax valuations. It's politically easier to \"\"prop-up\"\" falling valuations than to raise tax rates. However, the fact remains that the models that assessors use in determining property values are based on sales history - thus, I believe (and have found) that recent sales can be a persuasive piece of evidence in a property tax assessment appeal.\"","Start with the bank where you have your checking and savings account. They can streamline some of the paperwork, because they can see how much you make, and have access to several years worth of bank statement. Legitimate mortgage companies do publish their rates. But there is no guarantee that you will qualify for the best rate without them knowing your credit score, salary, and down payment information. There is no way to know that you have the best rate because of the time lag involved. You will pick the best one you can work with, but the rates can change every day. Even when you lock in the rates, other companies can drift lower. Once you have started down the application process you will reach a point where switching companies will cost you time and money. Once you decide to purchase a house, the contract usually only gives you a few weeks to prove that you have financing in place. Therefore you will have to start the process before deciding on the house. Some advance work is needed to give you an idea of the maximum monthly payment you can afford, which will then based on the rate and down payment determine the maximum house you can buy. I have had good luck with my credit union, but there is no guarantee that yours will be competitive. Keep in mind that while rates are very important, some people also value customer service, and also like that the mortgage won't be sold to out of town investors.","Start with the list of mortgage companies approved to work in your area. There are 80 within 10 miles of my house, and more than 100 in my county. Pick ones you know because they are established businesses in your area, region, or even nationally. A good place to start might be with your current lender. The risk you seem to be worried about is a scam or a trick. In the recent past the scams were ones where the home owner didn't understand teaser rates, and the risk of interest only and pick-your-payment loans. The simpler the bells and whistles, the less likely you are to be embarking on a risky transaction. It can't hurt to ask an organization like the BBB or neighbors, but realize that many people loved their exotic mortgage until the moment it blew up in their face. So for 5 years your neighbor would have raved about their new mortgage until they discovered how underwater they were. Regarding how smoothy the transaction is accomplished, is hard to predict. There is great variation in the quality of the loan officers, so a great company can have rookie employees. Unless you can get a recommendation for a specific employee it is hard know if your loan officer is going to give great service. When getting a mortgage for a purchase, the biggest risk is getting a mortgage that results in a payment you can't afford. This is less of a risk with a refinance because you already have a mortgage and monthly payment. But keep in mind some of the monthly savings is due to stretching out the payments for another 30 years. Know what you are trying to do with the refinance because the streamlined ones cant be used for cash out.","If you have good credit, you already know the rate -- the bank has it posted in the window. If you don't have good credit, tell the loan officer your score. Don't have them run your credit until you know that you're interested in that bank. Running an application or prequal kicks off the sales process, which gets very annoying very quickly if you are dealing with multiple banks. A few pointers: You're looking for a plain vanilla 30 year loan, so avoid mortgage brokers -- they are just another middleman who is tacking on a cost. Brokers are great when you need more exotic loans. Always, always stay away from mortgage brokers (or inspectors or especially lawyers) recommended by realtors.","You said the tax assessor gave you an appraised value, but I think you mean assessed value. This article YOUR HOME; Market vs. Appraisal: What's the Real Value? explains the differences pretty well.","\"There is no guarantee improvements will raise the appraised value. You also don't want your property tax appraisal to go up if you can avoid it. Since you are talking on the order of $10k I'll assume you're only a few thousand dollars more from getting to 20%. That said, any schemes you might come up with like refinancing or second line of credit will probably cost more in fees than they are worth, unless you can get a much nicer interest rate. Figure out how long you plan to stay there, Evaluate your options (do nothing, principal reduction, refinance for 30, 15, or even an ARM) and figure out your bottom line by comparing everything in a spreadsheet One more thing: if you do pay a substantial amount of extra principal, you can ask the lender to \"\"rebalance\"\" which will correct the minimum monthly payment to your remaining term. This will likely incur a fee, but could be helpful in an emergency\"","See the Mortgage Professor's calculators (#3). Go to bankrate and look up rates so you know what to punch in to those calculators.","If you've been in your house for a few years (and have built some equity up) and the market is active in your area, online is probably fine. The local banks will be better if it's not obvious to someone in Bangor, ME that your neighborhood in San Diego is worth substantially more than the crappy area 2 miles away. I've had 3 mortgages, one from a regional bank, one from a broker-sourced national mortgage company and another from a local bank. The bigger banks had better statements and were easier to do stuff with online. The smaller bank has been a better overall value, because the closing costs were low and they waived some customary fees. In my case, the national mortgage company had a better APR, but my time horizon for staying in the house made the smaller bank (which had a competitive APR, about a half point higher than the lowest advertised) a better value due to much lower up-front costs.","It may be possible to get more cash than you currently have. For example, If you have $200,000, you could buy a distressed property for $150,000, spend $50,000 on renovations, get it appraised for $300,000 and then cash out refi $240,000 (keeping 20% equity to avoid MIPs) to invest. This would be analogous to flipping a house for yourself. Normally flippers buy a house for cheap, then sell it to someone else for way more than their total outlay in purchase + improvements. The only difference here is there's no 3rd party - you stay in the house and essentially buy it from yourself with the mortgage.","My question is... how is this new value determined? Does it go off of the tax appraised value? The tax assessors values are based on broad averages and are not very useful in determining actual home value. The most defensible valuation outside of a sale is a professional appraisal, real-estate agents may or may not give you reasonable estimates, but their opinions are less valuable than that of a professional appraiser. Additionally, agents hoping to land you as a client (even if you tell them you're not trying to sell) could be motivated to over-estimate. In many instances a few opinions from agents will be good enough, but if there is any contention a professional appraisal will be better. Should you, prior to your death, get an independent appraiser to appraise the value of the property and include that assessment of the properties value with the will or something? The real-estate market fluctuates too much to make having an appraisal done prior to your death a practical approach in most circumstances. You could make arrangements so that an appraisal would be scheduled after your death. Here's a good resource on the topic: Estimating the Value of Inherited Real Estate","Run the numbers in advance. Understand what are the current rates for an additional 2nd mortgage, what are the rates for a brand new mortgage that will cover the additional funds. Understand what they are for another lender. Estimate the amount of paperwork involved in each option (new first, new 2nd, and new lender). Ask the what are the options they can offer you. Because you have estimated the costs in money and time for the different options, you can evaluate the offer they make. What they offer you can range from everything you want to nothing you would accept. What they offer will depend on several factors: Do they care to keep you as a customer?; Do they expect you to walk away?; are they trying to get rid of mortgages like the one you have?; Can they make more money with the plan they are offering you? You will be interested in the upfront costs, the monthly costs, and the amount of time required for the process to be completed.","Check with you local bank where you have an account. Sometimes they can offer a discount that results in a good rate. I just refinanced a month ago with Bank Of America and their rates were very competitive. What set them aside from the rest was their low closing fees. Otherwise I would shop around on bankrate.com and it will show you results of both local and online mortgage brokers. It will list the rates and expected fees. The also list an average national rate so you can compare the rate you are considering and see if there could be a better deal elsewhere.","The question is whether the assessment is in line with surrounding homes. If my 1500 sq ft house on 1/4 acre is assessed far higher than a similar sized house/land nearby, I'd have a case. +/- 10% can be for age/quality, but 25% or more, I'd investigate. mhoran is right, values for different purposes need not align. A start would be to use a service like Zillow which offers property tax information, as well as house sizes. Let us know what you discover. Welcome to Money.SE","why not ask a fee only financial adviser? Contact a local adviser and ask how much they will charge to work through the process. The options aren't as complex as they seem. The general idea is to first figure out what you can afford each month. This is a generally straight forward calculation. Then figure out the costs that are specific to your area, e.g property taxes. Figure out how much of a down payment /closing costs you can gather. Then start with your local bank or credit union. The number of options for mortgages will not be as complex if you already know how much you can afford and how much cash you can bring to the transaction. A simple table can be easily created based on what you can afford each month, how much cash you have, and the rates currently available. The bank will have a way to estimate the costs of each option as part of the required disclosures. Another source of good info can be a highly regarded local real estate agent. Focus on one that will represent you as a purchaser. They want you to be able to buy a house. While they do have a bias, they want a commission, most of it is eliminated if you know how much you can afford before you meet with them. They will know all the government programs that can make the monthly costs or closing costs cheaper.","I can probably rent the house out for about $1,600. If sell now I can get 180k at the most. My mortgage will be $1,800 with tax and insurance. If I use the 180k to pay off the house, I can refinance the loan for a lower interest rate too. I think I know what I want to do but just need a second opinion. Thanks btw","\"The first red-flag here is that an appraisal was not performed on an as-is basis - and if it could not be done, you should be told why. Getting an appraisal on an after-improvement basis only makes sense if you are proposing to perform such improvements and want that factored in as a basis of the loan. It seems very bizarre to me that a mortgage lender would do this without any explanation at all. The only way this makes sense is if the lender is only offering you a loan with specific underwriting guidelines on house quality (common with for instance VA-loans and how they require the roof be of a certain maximum age - among dozens of other requirements, and many loan products have their own standards). This should have been disclosed to you during the process, but one can certainly never assume anyone will do their job properly - or it may have only mentioned in some small print as part of pounds of paper products you may have been offered or made to sign already. The bank criteria is \"\"reasonable\"\" to the extent that generally mortgage companies are allowed to set underwriting criteria about the current condition of the house. It doesn't need to be reasonable to you personally, or any of us - it's to protect lender profits by aiding their risk models. Your plans and preferences don't even factor in to their guidelines. Not all criteria are on a a sliding scale, so it doesn't necessarily matter how well you meet their other standards. You are of course correct that paying for thousands of dollars in improvements on a house you don't own is lunacy, and the fact that this was suggested may on it's own suggest you should cut your losses now and seek out a different lender. Given the lender being uncooperative, the only reason to stick with it seems to be the sunk cost of the appraisal you've already paid for. I'd suggest you specifically ask them why they did not perform an as-is appraisal, and listen to the answer (if you can get one). You can try to contact the appraiser directly as well with this question, and ask if you can have the appraisal strictly as-is without having a new appraisal. They might be helpful, they might not. As for taking the appraisal with you to a new bank, you might be able to do this - or you might not. It is strictly up to each lender to set criteria for appraisals they accept, but I've certainly known of people re-using an appraisal done sufficiently recently in this way. It's a possibility that you will need to write off the $800 as an \"\"education expense\"\", but it's certainly worth trying to see if you can salvage it and take it with you - you'll just have to ask each potential lender, as I've heard it go both ways. It's not a crazy or super-rare request - lenders backing out based on appraisal results should be absolutely normal to anyone in the finance business. To do this, you can just state plainly the situation. You paid for an appraisal and the previous lender fell through, and so you would like to know if they would be able to accept that and provide you with a loan without having to buy a whole new appraisal. This would also be a good time to talk about condition requirements, in that you want a loan on an as-is basic for a house that is inhabitable but needs cosmetic repair, and you plan to do this in cash on your own time after the purchase closes. Some lenders will be happy to do this at below 75%-80% LTV, and some absolutely do not want to make this type of loan because the house isn't in perfect condition and that's just what their lending criteria is right now. Based on description alone, I don't think you really should need to go into alternate plans like buy cash and then get a home equity loan to get cash out, special rehab packages, etc. So I'd encourage you to try a more straight-forward option of a different lender, as well as trying to get a straight answer on their odd choice of appraisal order that you paid for, before trying anything more exotic or totally changing your purchase/finance plans.\"","As per my comments, I think this is up to you and how much work you want to put forth. I do not feel it is trivial to provide documentation even with 90% of it will be the same among lenders. See this question: First answer, third and fourth paragraphs. You need to go as far as understanding the total cost of the loan, you probably need a good faith estimate. I would also compare a minimum of three lenders.","There is no relationship between the government appraisal and the mortgage appraisal. The loan appraisal is done by a lender to determine if the property value is in agreement with the loan amount. The government appraisal is done to determine how much to charge you in taxes. They use the values of residences and commercial property to get their operating budget each year. They also set the rate to generate the amount of income money they need. If they cut all appraisals in half, they would just double the rate. In some jurisdictions the government appraises every year, in other places every three years. Some only when the property is sold. In some jurisdictions the maximum increase or decrease in government appraisal is set by law. But then they reset after the house is sold. That being said. Use this time to review the appraisal from the government. They may have facts wrong. They may think you have a pool, or more bedrooms or a garage, when you don't. Some jurisdictions use an automated process, others do a more detailed/individual process. If there was a mistake ten years ago with the description it will never get caught unless you complain. Check with the governemnt website for how to appeal. Some have windows of opportunity for an appeal.","\"In the first years of a loan, most of what you're paying is interest, so my guess is that this is a bad idea. But there are lots of mortgage calculators offered for free on the web (your bank's website may have one) so I'd suggest that you spend some time running actual numbers before deciding. Reminder: Most renovations do NOT pay for themselves in increased sales price, not least because you'll lose the buyers who don't like what you've done but would have been happy to renovate it themselves to their own tastes. Unless there is something which will actively impair your ability to sell the house, you should usually renovate when you plan to stay there for a while and take your returns in enjoying the house more, NOT on the way out. (There's been some recent discussion of this over in Home Improvement, pointing out that the changes which return more than they cost are usually simple things like refreshing the paint, \"\"staging\"\" the house so it looks lived in but not cluttered, replacing damaged blinds, washing windows, putting out a few more flowers, and so on.)\"","Applying for a mortgage is a bit of paperwork, but not too bad of an experience. Rates are pretty tight, if one lender were more that 1/4% lower than another, they'd be inundated with applications. Above a certain credit score, you get the 'best' rate, a search will show you the rates offered in your area. If you are a first time buyer, there are mortgages that might benefit you. If you are a vet (for non-native English readers, a veteran who served in the US armed forces, not a veterinarian, who is an animal doctor) there are mortgages that offer low-to-no down payment with attractive rates. Yes, avoid PMI, it's a crazy penalty on your overall expense of home purchase. If banks qualify you for different amounts, it shouldn't be a huge difference, a few percent variation. But, the standard ratios are pretty liberal even today, and getting the most you'd qualify for is probably too much. Using the standard 28/36% ratios, a bank will qualify you for 4X your income as a loan. e.g you make $50K, they'll lend you $200K. This is a bit too much in my opinion. If you come up short, you are really looking to borrow too much, and should probably wait. If you owe a bit on loans, it should squeeze in between those two ratios, 28/36. But I wouldn't borrow on a credit line to add to the purchase, that's asking for trouble.","A good way to find the rates of rental prices is to look what other landlords are charging for similar properties in your area. The proper investigation of property rental market should be make by using property listing platforms. The other method is online rent calculator. There are a bunch of them on the Web. Briefly speaking, the rent calculator uses industry data to look at the typical rent you might expect from a property in a post code. Remember that the rent you charge has to be at least equal to the cost of your monthly mortgage bill. When you’re deciding what to charge, don’t forget to factor in an estimate of repair costs, taxes, homeowners association fees and insurance.","If the cash flow information is complete, the valuation can be determined with relative accuracy and precision. Assuming the monthly rent is correct, the annual revenue is $1,600 per year, $250/mo * 12 months - $1,400/year in taxes. Real estate is best valued as a perpetuity where P is the price, i is the income, and r is the rate of interest. Theoreticians would suggest that the best available rate of interest would be the risk free rate, a 30 year Treasury rate ~3.5%, but the competition can't get these rates, so it is probably unrealistic. Anways, aassuming no expenses, the value of the property is $1,600 / 0.035 at most, $45,714.29. This is the general formula, and it should definitely be adjusted for expenses and a more realistic interest rate. Now, with a better understanding of interest rates and expenses, this will predict the most likely market value; however, it should be known that whatever interest rate is applied to the formula will be the most likely rate of return received from the investment. A Graham-Buffett value investor would suggest using a valuation no less than 15% since to a value investor, there's no point in bidding unless if the profits can be above average, ~7.5%. With a 15% interest rate and no expenses, $1,600 / .15, is $10,666.67. On average, it is unlikely that a bid this low will be successful; nevertheless, if multiple bids are placed using this similar methodology, by the law of small numbers, it is likely to hit the lottery on at most one bid.","Also, does anyone know of any books on doing this sort of thing, i.e. renting out half of your home to a tenant and living in the ret? Head down to your local library. Mine has a state guide for renters and another one for landlords. There will likely be a lot of Nolo Press books around there too. You can also research the property tax on a lot; many counties run an arcGIS server that will tell you who owns a given property, what the assessed value is and the total tax bill, etc.","You can get the number you want pretty easily by plugging some numbers in to a mortgage calculator like this one. Set the PMI and property tax to 0 and set your term to the duration you need. Then plug in numbers until your payment amount equals your monthly budget. Think of yourself as the bank in this process. I started at 1mil over 25 years and that was over my budget so went down to 800k which was under just a bit, and found that you need about 850k based on your numbers.","In regards to the legal recourse, no there is none. Also, despite your frustrations with Citi, it may not be their fault. Mortgage companies are now forced to select appraisers (essentially at random) through 3rd party Appraisal Resource Companies (ARCs). This randomization mandate from the government was issued in order to combat fraud, but it is really causing more trouble for homeowners because it took away appraiser accountability. Basically, there's nothing we can do to fire an appraiser anymore. I've had appraiser do terrible jobs, just blatantly wrong, and have gone the distance with the dispute process only to find they won't change the value. My favorite real-life example came from an appraiser who got the bedroom count wrong (4 instead of 5); yet he took pictures of 5 bedrooms. The one he excluded he stated it shouldn't count because it didn't have a closet. Problem is, it DID have a closet. I had the homeowner take pictures of all of the closets in his house, and send them in. He still refused to change the count. After close to 2 months of the dispute process, the ARC came in and changed the count, but did not chagne the value, stating that the room count didn't increase the sqft, and there would be no adjustment in value. I was floored. The only solution we had was to wait for the appraisal to expire, then order it again; which we did. The new appraiser got the count right, and surprisingly (not really), it came in at the right value... In regards to the value necessary to avoid MI, they are likely using 80%, but it's not based on your current balance vs the value, it's based on the new loan amount (which will include costs, prepaids, skipped mortgage payments, etc) vs the value. Here are your options: Get a new appraisal. If you are confident the value is wrong, go somewhere else and get a new appraisal. Restructure the loan. Any competent Loan Officer would have noticed that you are very close to 80%, and should have offer you the option of splitting the mortgage into a 1st and 2nd loan. Keeping the first loan at 80%, and taking out a 2nd for the difference would avoid MI. Best Regards, Jared Newton","One thing I would look into is getting a fixed rate home equity loan for a short term. Not a line of credit, but a home equity loan. The main benefit is they typically offer no closing costs. You can get a very low rate provided you move the loan into first position (replace your current mortgage). I know someone who got a 7 year fixed Home Equity Loan, from Regions Bank, for 2.62% no closing costs.","You need to determine for the taxing jurisdiction when the next tax appraisal will be done. In some cases the appraisal is done every year, or two, or three. In other cases it is also done when the property is sold. The county tax office website should contain this information. They will also have information on how to appeal. Most jurisdictions do have a way of looking up not only the rates but the value of the property in question. You will also be interested in determining if the tax value of the property is lower due to local/state laws that limit the growth in value from one assessment to another. A sale of the property could trigger a catchup for the value. It is possible that the degraded value of the home has already been factored into the assessment. It is also possible that it hasn't. Keep in mind that taxes in some jurisdictions can be more complicated because there is also a town/city/county component, and some places that also breakout other items on the tax bill like storm water management, schools, pest spraying. These other items can be based on value, square footage of the lot, or a flat amount. You should get a local opinion on the likelihood of a successful appeal, and how much adjustment you would be able to get. Depending on the sale date and the due date for the taxes, you may be forced to pay the higher tax rate for a while until either the next re-appraisal or the next appeal window. Note: the fact that it is being auctioned may mean that what you pay for the house may be immaterial because the tax authorities could determine that the motivation to sell quickly could have depressed the value. This type of sale will not impact the value of other houses and can't be used as a basis for determining the value of other properties.","Its a huuuuuuuuuuuge topic, and to answer your question in full will require a book, with a small booklet of legal advice attached to it. I'm not going to write it here, but I'll give you some very specific points to start your research with: ARM/Baloon - big NO NO. Don't touch that. Get rid of those you have any way you can, and then never ever do it again. That's the kind of crap that got us into the housing bubble mess to begin with. Especially with the rates as low as now, the only future with ARM/Baloon is that you're going to pay more, way more, than your initial period payments. Rates - the rates now are very low. They were even lower 12-24 months ago, but are still extremely low. Make sure you get a fixed rate loan, in order to lock these rates in for the remainder of the loan. Any ARM loan will have higher rates in the future. So go with FIXED RATE. Period - fixed rate loans are given for periods up to 30 years. The shorter the period, the lower the rate. However, at the level they're now, you're practically getting money for free (the APR is comparable to the inflation) even for 30 yr/fixed loans. PMI - private mortgage insurance - since you don't have much equity, the lender is likely to require you paying PMI. This is a significant amount of money you pay until you have at least 20% equity. It changes from lender to lender, so shop around and compare. Government assistance - that's what the broker was referring to. There were programs allowing people refinance even under-water mortgages. Check what programs are still available in your area. Some banks will not refinance with less than 20% equity, but some government assistance programs may help you get a loan even if you don't have enough equity. Closing fees and points - that's the money out of your pocket. Shop around, these vary wildly. Generally, Credit Unions, being non-profits, are cheaper on this item specifically, while comparable to big banks on everything else.","First of all, think of anyone you know in your circle locally who may have gotten a mortgage recently. Ask him, her, or them for a recommendation on what brokers they found helpful and most of all priced competitively. Second of all, you may consider asking a real estate agent. Note that this is generally discouraged because agents sometimes (and sometimes justifiably) get a bad reputation for doing anything to get themselves the highest commission possible, and so folks want to keep the lender from knowing the agent. Yet if you have a reputable, trustworthy agent, he or she can point you to a reputable, trustworthy broker who has been quoting your agent's other clients great rates. Third of all, make sure to check out the rates at places you might not expect - for example, any credit unions you or your spouse might have access to. Credit unions often offer very competitive rates and fees. After you have 2-3 brokers lined up, visit them all within a short amount of time (edit courtesy of the below comments, which show that 2 weeks has been quoted but that it may be less). The reason to visit them close together is that in the pre-approval process you will be getting your credit hard pulled, which means that your score will be dinged a bit. Visiting them all close together tells the bureaus to count all the hits as one new potential credit line instead of a couple or several, and so your score gets dinged less. Ask about rates, fees (they are required by law to give you what is called a Good Faith Estimate of their final fees), if pre-payment of the loan is allowed (required to re-finance or for paying off early), alternative schedules (such as bi-weekly or what a 20 year mortgage rate might be), the amortization schedule for your preferred loan, and ask for references from past clients. Pick a broker not only who has the best rates but also who appears able to be responsive if you need something quickly in order to close on a great deal.","When evaluating a refinance, you need to figure out the payback time. Refinancing costs money in closing costs. The payback time is the time it takes to recover the closing costs with the amount of money you are saving in interest. For example, if the closing costs are $2,000, your payback time is 2 years if it takes 2 years to save that amount in interest with the new interest rate vs. the old one. To estimate this, look at the difference in interest rate between your mortgage and the new one, and your mortgage balance. For example, let's say that you have $100,000 left on your mortgage, and the new rate is 1% lower than your current rate. In one year, you will save roughly $1,000 in interest. If your closing costs are $2,000, then your payback time is somewhere around 2 years. If you plan on staying in this house longer than the payback time, then it is beneficial to refinance. There are mortgage refinance calculators online that will calculate payback time more precisely. One thing to watch out for: when you refinance, if you expand the term of your mortgage, you might end up paying more interest over the long term, even though your rate is less and your monthly payment is less. For example, let's say you currently have 8 years left on a 15-year mortgage. If you refinance to a new 15-year mortgage, your monthly payment will go down, but if you only pay the new minimum payment for the next 15 years, you could end up paying more in interest than if you had just continued with your old mortgage for the next 8 years. To avoid this, refinance to a new mortgage with a term close to what you have left on your current mortgage. If you can't do that, continue paying whatever your current monthly payment is after you refinance, and you'll pay your new mortgage early and save on interest.","There are multiple ways of determining the value of an inherited property. If you aren't planning on selling it, then the best way would be to have a real estate agent do a comp on the property (or multiple real estate agents).","Streamline refinance is the way to go. You don't have to stay with the same bank to do so either. The big advantage of the streamline is the original appraisal is used for the refinance, so as long as you didn't have negative amortization(impossible in FHA anyways), you're good to go. It will be much less paperwork and looser credit standards. The ONLY downside is that upfront and monthly FHA mortgage insurance ticked up from where it was 2 years ago. If you're under a 80% LTV however you won't have to worry about it.","The bank I work with would be more inclined to expand an existing HELOC rather than write a new one. I think that would be your best bet if you decide to continue borrowing against your home. Consider that your own income would have to support the repayment of these larger homes. If it is, why didn't you buy a larger home to begin with? As far as increasing the appraisal, you don't usually get one dollar of increased appraisal for each dollar you spend on improvements unless you have a rundown house in a nice neighborhood; part of the appraisal comes from a comparison with the appraisals of the other homes nearby. Eventually you get close enough to par with the other houses that anyone looking for something more expensive will often choose a different neighborhood entirely. Update: To your edit that mentions the original lender will cap the amount you can borrow, you can take additional secondary mortgages/HELOCs, but the interest rate is usually higher because it is not the first mortgage. I don't generally recommend it, but the option is there.","I'm not sure about your first two options. But given your situation, a variant of option three seems possible. That way you don't have to throw away your appraisal, although it's possible that you'll need to get some kind of addendum related to the repairs. You also don't have your liquid money tied up long term. You just need to float it for a month or two while the repairs are being done. The bank should be able to preapprove you for the loan. Note that you might be better off without the loan. You'll have to pay interest on the loan and there's extra red tape. I'd just prefer not to tie up so much money in this property. I don't understand this. With a loan, you are even more tied up. Anything you do, you have to work with the bank. Sure, you have $80k more cash available with the loan, but it doesn't sound like you need it. With the loan, the bank makes the profit. If you buy in cash, you lose your interest from the cash, but you save paying the interest on the loan. In general, the interest rate on the loan will be higher than the return on the cash equivalent. A fourth option would be to pay the $15k up front as earnest money. The seller does the repairs through your chosen contractor. You pay the remaining $12.5k for the downpayment and buy the house with the loan. This is a more complicated purchase contract though, so cash might be a better option. You can easily evaluate the difficulty of the second option. Call a different bank and ask. If you explain the situation, they'll let you know if they can use the existing appraisal or not. Also consider asking the appraiser if there are specific banks that will accept the appraisal. That might be quicker than randomly choosing banks. It may be that your current bank just isn't used to investment properties. Requiring the previous owner to do repairs prior to sale is very common in residential properties. It sounds like the loan officer is trying to use the rules for residential for your investment purchase. A different bank may be more inclined to work with you for your actual purchase.","Shop around a bit. You can probably do better than $5k. See this calculator to decide if your payoff period will happen before you think you'll move. If you're at 8% now it may come sooner than you think -- especially if you can lower that closing cost estimate and still get a good rate.","The PMI rate is calculated at the time your mortgage is underwritten to be terminated at the point where you have 20% equity in your home. It is calculated based off of default risks based on your current equity value at the time of the loan. So if you got your mortgage before the banking crisis those risk charts have changed dramatically and not in your favor. So lets say you have a 100k home which you put 10k down so you have a mortgage of 90k. Since you have accumulated an additional 5k equity so payoff value is now 85k. If you refinance your mortgage and the home values in your area have dropped 15% you now are borrowing 100% of the value of your home. So you have higher risk from being at 100% as opposed to 90%. And the PMI is for the 20% of equity you do not have that the bank can not expect to recover. So when you originally bought the house your PMI pay out was 10k. At 85K value and 100% borrowed the PMI payout will be closer to 18k. While you may still be able to sell your home for the original value when they do the refinance calculations they use what your area has trended. If that is the case you maybe be able get an actual appraisal to use but that will come out of your pocket. *Disclaimer: These are simplifications of how the whole complex process works if you call the banker they can explain exactly why, show you the numbers, and help you understand your specific circumstances. *","In the US, for most mortgages: The rules for how you compute LTV vary. Usually it's based with current value. With FHA loans, you cannot have the property re-assessed -- LTV is based on the original loan amortization. Note that in the wake of the housing crisis, assessors have suddenly become very conservative with valuations, so be prepared to fight over the valuation.","Yes, banks still offer combo loans, but it is going to depend on the appraised value of your home. Typically lenders will allow you to finance up to 80% loan to value on the first mortgage (conforming loan amount) and 95% combined loan to value on a HELOC. I would start by checking with your local credit union or bank branch. They have more competitive rates and can be more flexible with loan amount and appraised value guidelines.","Better for r/personalfinance . But having some exposure to the real estate industry, you are most likely over priced. Although you say that market is slow where you are, if you desperately need the money, you may have to sell at a bit of a loss.","I recognize you are probably somewhere in the middle of various steps here... but I'd start and go through one-by-one in a disciplined way. That helps to cut through the overwhelming torrent of information that's out there. Here is my start at a general checklist: others can feel free to edit it or add their input. How 'much' house would you like to buy in terms of $$$ and bedrooms/sq ft. You can start pretty general here, but the idea is to figure out if you can actually afford a brand new 4bd/3ba 2,500 sq ft house (upwards of $500K in your neck of the woods according to trulia.com). Or maybe with your current resources you'll be looking at something like a townhome that is more entry-level but still yours. Some might recommend that this is a good time to talk to any significant others/whomevers and understand/manage expectations. My wife usually cares a lot about schools at this stage, but I think it's too early. Just ballpark whether you're looking at a $500K house, a $300K house, or a $200K townhome. How much house can you afford in terms of monthly payments only... (not considering other costs like utilities yet). Looking around at calculators like this one from bankrate.com can help you figure this out. Set the interest rate @ 5%, 30-year loan, and change the 'mortgage amount' until you have something that is about 80%-90% of what you currently pay in rent each month. I'll get to 'why' to undershoot your rent payment later. Crap... can't afford my dream house... If you don't have the down payment to make the numbers work (remember that this doesn't even include closing costs yet), there are other loan options like FHA loans that can go as low as about 5% down payment. The math would be the same but you replace 0.8 with 0.95. Then, look at your personal budget. Come up with general estimates of what you currently bring in and spend each month overall. Just ballpark it... Next, figure what you currently spend towards housing in particular. Whether you are paying for it or your landlord is paying for it, someone pays for a lot of different things for housing. For now, my list would include (1) Rent, (2) Mortgage Payment, (3) Electricity, (4) Gas, (5) Sewer, (6) Water, (7) Trash, (8) Other utilities... TV/Internet/Phone, (9) Property Insurance, (10) Renter's Insurance, and (11) Property Taxes. I would put it into a table in Excel somewhere that has 3 columns... The first has the labels, the second will have what you spend now, and the third will have what you might spend on each one as a homeowner. If you pay it now, put it in the second column. If your landlord pays it right now, leave it out as that's included in your rent payment. Obviously each cell won't be filled in. Fill in the rest of the third column. You won't pay rent anymore, but you will have a mortgage payment. You probably have a good estimate of any electricity bills, etc that you currently pay, but those may be slightly higher in a house vs. a condo or an apartment. As for things like sewer, water, trash or other 'community' utilities, my bet would be that your landlord pays for those. If you need a good estimate ask around with some co-workers or friends that own their own places. They would also be a good resource for property insurance estimates... shooting from the hip I would say about $100/month based on this website. (I'm not affiliated). The real 'ouch' is going to be property tax rates. Based on the data from this website, your county is about 9% of property value. So add that into the third column as well. Can you really afford a house? round 2 Now... add up the third column and see how that monthly expense amount on housing compares against your current monthly budget. If it's over, you don't have to give up, but you should just understand how much your decision to purchase a house will strain your budget. Also, you should use this information to look again at 'how much house can you afford.' Now, do some more research. If you need to get a revised loan amount based on the FHA loan decision, then use the bankrate calculator to find out what the monthly payment is for a 95% loan against your target price. But remember that an FHA loan will also carry PMI that is extra on top of your monthly payment. Or, if you need to revise your mortgage payment downwards (or upwards) change the loan amount accordingly. Once you've got the numbers set, look for properties that fit. This way you can have a meaningful discussion with yourself or other stakeholders about what you can afford. As far as arranging financing... a realtor will be able and willing to point you in the right direction for obtaining funding, etc. And at that point you can just check anything you're offered by shopping interest rates, etc against what the internet has to say. Feel free to ask us, too... it's hard to give much better direction without more specifics.","\"Go on a website that has real estate listings. Find similar homes in the same neighborhood and list out the prices. Once you have prices, pick out two with different prices and call the realtor of the more expensive listing. Tell that realtor about the other listing and ask why their listing is more expensive. Compare their answer to the home that you are considering buying. For example, they may say that their house has a newly remodeled kitchen. Does the house you are considering have a newly remodeled kitchen? If so, then use the higher priced listing and throw out the cheaper one. If not, use the cheap listing and throw out the expensive one. Or they might say that the expensive house is in a better location than the cheaper house. Further away from traffic. Easier to get to the highway or public transportation. If so, ask how the location compares to the house you are actually considering. The realtor will tell you if the listings are comparable. When I talk about \"\"similar homes,\"\" I mean homes that are similar in square footage, number of bedrooms, and number of bathrooms. Generally real estate sites will allow you to search by all of these as well as location. After all this, the potential seller may still turn you down. If he really wanted to sell, he'd have suggested a price. He may just be seeing if you're willing to overpay. If so, he could turn down an otherwise reasonable offer. How much he is willing to take is up to him. Note that this would all be easier if you just bought a house the normal way. Then the realtors would do the comparables portion of the work. You might be able to find a realtor or appraiser who would do the work for a set fee. Perhaps your bank would help you with that, as they have to appraise the property to offer a mortgage. You asked if you can buy out a mortgaged house with a mortgage. Yes, you can. That's a pretty normal occurrence. Normally the realtors would make all the necessary arrangements. I'm guessing that a title transfer company could handle that.\"","\"If I have a house that its market value went from $100k to $140k can I get HELOC $40K? Maybe - the amount that you can borrow depends on the market value of the house, so if you already have $100k borrowed against it, it will be tough to borrow another $40k without paying a higher interest rate, since there is a real risk that the value will decrease and you will be underwater. Can I again ask for HELOC after I finish the renovation in order to do more renovation and maybe try to end up renovating the house so its value raises up to $500k? I doubt you can just \"\"renovate\"\" a house and increase its market value from $140k to $500K. Much of a house's value is determined by its location, and you can quickly outgrow a neighborhood. If you put $360k in improvements in a neighborhood where other homes are selling for $140k you will not realize nearly that amount in actual market value. People that buy $500k houses generally want to be in an area where other homes are worth around the same amount. If you want to to a major renovation (such as an addition) I would instead shop around for a Home Improvement Loan. The main difference is that you can use the expected value of the house after improvements to determine the loan balance, instead of using the current value. Once the renovations are complete, you roll it and the existing mortgage into a new mortgage, which will likely be cheaper than a mortgage + HELOC. The problem is that the cost of the improvements is generally more than the increase in market value. It also helps you make a wise decision, versus taking out a $40k HELOC and spending it all on renovations, only to find out that the increase in market value is only $10k and you're now underwater. So in your case, talk to a contractor to plan out what you want to do, which will tell you how much it will cost. Then talk to a realtor to determine what the market value with those improvements will be, which will tell you how much you can borrow. It's highly likely that you will need to pay some out-of-pocket to make up the difference, but it depends on what the improvements are and what comparable homes sell for.\"","Have you looked at conventional financing rather than VA? VA loans are not a great deal. Conventional tends to be the best, and FHA being better than VA. While your rate looks very competitive, it looks like there will be a .5% fee for a refinance on top of other closing costs. If I have the numbers correct, you are looking to finance about 120K, and the house is worth about 140K. Given your salary and equity, you should have no problem getting a conventional loan assuming good enough credit. While the 30 year is tempting, the thing I hate about it is that you will be 78 when the home is paid off. Are you intending on working that long? Also you are restarting the clock on your mortgage. Presumably you have paid on it for a number of years, and now you will start that long journey over. If you were to take the 15 year how much would go to retirement? You claim that the $320 in savings will go toward retirement if you take the 30 year, but could you save any if you took the 15 year? All in all I would rate your plan a B-. It is a plan that will allow you to retire with dignity, and is not based on crazy assumptions. Your success comes in the execution. Will you actually put the $320 into retirement, or will the needs of the kids come before that? A strict budget is really a key component with a stay at home spouse. The A+ plan would be to get the 15 year, and put about $650 toward retirement each month. Its tough to do, but what sacrifices can you make to get there? Can you move your plan a bit closer to the ideal plan? One thing you have not addressed is how you will handle college for the kids. While in the process of long term planning, you might want to get on the same page with your wife on what you will offer the kids for help with college. A viable plan is to pay their room and board, have them work, and for them to pay their own tuition to community college. They are responsible for their own spending money and transportation. Thank you for your service.","Make sure you shop around and ask a lot of places for a good faith estimate. Last I knew, the good faith document is the same everywhere and long form that makes it easy enough to compare the hard numbers from place to place. I have gotten several estimates for various scenarios and I have had them hand written and printed. (I discounted the hand written ones because that broker seemed pretty disorganized in general) Learn the terms online, and start comparing. Use the good faiths as a negotiation tool to get lower rates or lower costs from other brokers. See how accurate the person is at listening to you and filling out the paperwork. See how responsive they are to you when you call with questions and want some changes. Check with at least four places. The more places you shop, the better idea you will have of what fees are high and what interest rates are low. I might pay a higher fee to get a lower interest rate, so there are lots of trade offs to consider.","The particular Virginia improve the look of refinance is certainly one the most effective options for all those those who have Virtual assistant financial loans on his or her homes. These kind of Veterans administration remortgage assists them gain a large amount of rewards that could ease the load of coughing up up the financial products they've taken on their properties. The Virtual assistant financial products as opposed to some other mortgage loans don't require any complicated processes just like house appraisal to find out the present appreciated of your ex house or any other processes just like looking at if the man or woman satisfies the financing conditions or any other treatments. These loans help it become extremely comfy for on support men to obtain their house refinanced which has a far better rate of interest.","\"At this stage, I would think about education. You can attend open houses, and often times real estate agents and bankers put on seminars for first time home buyers. Borrow books from the library and I would watch some HGTV. Many of the shows are entertaining and quite educational. Secondly you may want to get your finances in order. Make and stick to a budget. Start building a down payment and emergency fund. Pay down consumer debt/student loans. Picking up side work or overtime will help. You will look far more attractive to a lender if you go in with a large down payment and an emergency fund then someone with better credit scores and 100% financing. That is if the lender does manual underwriting. If not, then use a different lender. Once you get a budget figured out, how much of a down payment and emergency fund you need, and how much consumer debt to pay off, you can then predict when you will hit your goals. Then you will know when you are ready to buy. If it seems too far off, cut spending and work more if it is that important to you! You can make a prioritized list about what is most important features to you and your wife. I would wait on doing this until after you view some homes. Open houses are a great way to do this, but be careful not to get \"\"house fever\"\" and rush into a decision. You will get some encouragement to do so by the selling agents. After viewing some homes, and developing your list you can get an idea as of what the home will cost. This will further refine your budget, goals, and timeline. I think that is a lot of work to start.\"","Our mortgage provider actually took the initiative to send us a refinance package with no closing costs to us and nothing added to the note; took us from a 30-year-fixed ~6.5% note to a 15-year-fixed ~5% note, and dropped the monthly payment in the process. You might talk to your existing lender to see if they would do something like that for you; it gives them a chance to keep your business, and it cuts your costs.","Both are close, but two notes - amiable or not, I'd rather have a deal that ends now, and nothing is hanging over my head to get or pay money on a future sale. 401(k) money is usually pre-tax, so releasing me from $10K of home equity is of more value than the $10K in a 401(k) that would net me $7K or so. As I commented to Joe, I'd focus on valuation. If your house is similar to those in the neighborhood, you might easily value it. If unique, the valuation may be tough. I'd spend a bit on an appraiser or two.","Don't steal from the 401k. If you take the money out, you'll pay 28% in taxes and 10% in penalties -- only getting $12,960 out. Before you do anything, consult an online refi calculator to make sure you'll be in the house beyond the break-even point. With the numbers you've given and some reasonable guesses I made, it looks like you'll break even within a year. If your new employer's plan allows for loans, roll it into the new plan. Based on what you say you're putting in, you should be able to take a loan out of about $15-20k, which would get you to your LTV goal. Before you do this, calculate: and make sure you will comfortably be able to handle all of the payments. Make sure you're aware of the loan terms on your 401k loan. Understand the penalties associated with failing to make timely payments. Finally, beware of sinking all of your liquid cash into this -- how will you handle an emergency that comes up soon after closing on the new loan before you have a chance to rebuild your emergency fund?","To search sold homes in your neighborhood and run a current market analysis (CMA) to get an idea of what your home will sell for register for a free listingbook account with SearchSocalRealEstate.com to gain free, unlimited access to the official MLS database.","It might be worth talking to a mortgage broker, even if you don't actually end up doing business with them. Upfront Mortgage Brokers explained Finding an upfront broker near you In a nutshell, upfront brokers disclose what they are paid for their services openly and transparently. Many brokers don't, and you can't be too careful. But a consultation should be free. An experienced broker can help you to navigate the pros and cons mentioned by the other responders. Personally, I would never do business with a broker who can't/won't show me a rate sheet on the day of the lock. That's my personal acid test. You might be surprised by what the broker has to say regarding your situation. That was my experience, anyway.","\"Your headline question \"\"How do you find best mortgage without damaging credit score?\"\" has a simple answer. If you have all your ducks in a row, and know what you are doing, you will get qualified. If you are like a recent client of mine, low FICO, low downpayment, random income, you might have issues. If your self-prequalification is good, you are in control, go find the best rate/ total cost, no need to put in multiple applications. If, for some reason you do, FICO sees that you are shopping for a single loan, and you are not dinged.\"","If you're refinancing a conforming (Fannie Mae or Freddie Mac) mortgage, don't go with an FHA. Try a HARP refinance, which won't increase your mortgage insurance even if your home has lost value. HARP also limits the risk-based pricing adjustments that can be charged, so your rate should be very competitive. With an FHA mortgage, even once you get the loan-to-value ratio down to 80 percent, you still have mortgage insurance for several years, plus the upfront costs. In your case, I think it's a bad deal.","When evaluating a refinance, it all comes down to the payback. Refinancing costs money in closing costs. There are different reasons for refinancing, and they all have different methods for calculating payback. One reason to finance is to get a lower interest rate. When determining the payback time, you calculate how long it would take to recover your closing costs with the amount you save in interest. For example, if the closing costs are $2,000, your payback time is 2 years if it takes 2 years to save that amount in interest with the new interest rate vs. the old one. The longer you hold the mortgage after you refinance, the more money you save in interest with the new rate. Generally, it doesn't pay to refinance to a lower rate right before you sell, because you aren't holding the mortgage long enough to see the interest savings. You seem to be 3 years away from selling, so you might be able to see some savings here in the next three years. A second reason people refinance is to lower their monthly payment if they are having trouble paying it. I see you are considering switching from a 15 year to a 30 year; is one of your goals to reduce your monthly payment? By refinancing to a 30 year, you'll be paying a lot of interest in your first few years of payments, extending the payback time of your lower interest rate. A third reason people refinance is to pull cash out of their equity. This applies to you as well. Since you are planning on using it to remodel the home you are trying to sell, you have to ask yourself if the renovations you are planning will payoff in the increased sale price of your home. Often, renovations don't increase the value of their home as much as they cost. You do renovations because you will enjoy living in the renovated home, and you get some of your money back when you sell. But sometimes you can increase the value of your home by enough to cover the cost of the renovation. Talk to a real estate agent in your area to get their advice on how much the renovations you are talking about will increase the value of your home.","I agree with the others that pulling the money out of your 401(k) is not the best idea due to the taxes and penalties. But I also think that a 401(k) loan is not a good option either. Somehow life happens, and the time when you can least afford to repay the loan (just after losing your job) will be the time when you have to repay the loan or pay the taxes and penalties. There's just too much risk there. You also lose the compounding gains you'd get from the investment, and it's likely not worth sacrificing your future retirement for this. It's probably worth finding out how close you are to having your house appraise out for a successful re-fi. Without that information, you're just guessing. Depending on how close you are, you pile up as much cash as you can over the next few months to try to pay down the mortgage enough to qualify for the re-fi. As you're doing this, if home values start coming up in your area, you'll have that going for you as well. It might even be worth suspending your 401(k) contributions for a short while to give you more cash to put towards the re-fi goal.","You don't say what the time remaining on the current mortgage is, nor the expense of the refi. There are a number of traps when doing the math. Say you have 10 years left on a 6% mortgage, $200K balance. I offer you a 4% 30 year. No cost at all. A good-intentioned person would do some math as follows: Please look at this carefully. 6% vs 4%. But you're out of pocket far more on the 4% loan. ?? Which is better? The problem is that the comparison isn't apples to apples. What did I do? I took the remaining term and new rate. You see, so long as there are no prepayment penalties, this is the math to calculate the savings. Here, about $195/mo. That $195/mo is how you judge if the cost is worth it or the break-even time. $2000? Well, 10 months, then you are ahead. If you disclose the time remaining, I am happy to edit the answer to reflect your numbers, I'm just sharing the correct process for analysis. Disclosure - I recently did my last (?) refi to a 15yr fixed 3.5%. The bank let the HELOC stay. It's 2.5%, and rarely used.","\"Be careful that pride is not getting in the way of making a good decision. As it stands now what difference does it make to have 200K worth of debt and a 200K house or 225K of debt and a 250K house? Sure you would have a 25K higher net worth, but is that really important? Some may even argue that such an increase is not real as equity in primary residence might not be a good indication of wealth. While there is nothing wrong with sitting down with a banker, most are likely to see your scheme as dubious. Home improvements rarely have a 100% ROI and almost never have a 200% ROI, I'd say you'd be pretty lucky to get a 65% ROI. That is not to say they will deny you. The banks are in the business of lending money, and have the goal of taking as much of your hard earned paycheck as possible. They are always looking to \"\"sheer the sheep\"\". Why not take a more systematic approach to improving your home? Save up and pay cash as these don't seem to cause significant discomfort. With that size budget and some elbow grease you can probably get these all done in three years. So in three years you'll have about 192K in debt and a home worth 250K or more.\"","The exact answers depend on what you're going to do and what you started with and what your local market is like ... But a bit of websearching (and/or asking a good general contractor) will yield a table of typical improvement in sale price from various renovations. One thing you'll discover is that unless you are staring with something almost unsellable, few if any if thgem return more than you paid for them; getting back 85% is exceptionally good. A possible exception is energy-saving measures; basic air-seaking and attic insulation improvements pay back their cost relatively quickly, and solar can do so if you have a decent site for that -- and these are often subsidized in one way or another by government or utilities. For most things, thoiugh, the real answer is to ask yourself what would make the house better for you and your family, and what that would be worth to you. If you can get it done for less than that, go for it. It's a good idea to put together as complete a list vas possible before starting, since some will be considerably less expensive if done in the right order or at the same time. (Redo your roofing before installing rooftop solar panels, if possible; as one example.) Then prioritize thiose by what will improve your enjoyment of the house most. You'll probably get better specific advice over in the Home Improvement area of Stack Exchange.","\"even though they're only asking for 1/2 the money and have excellent credit that the mortgage company may not lend it to them if I'm over priced Yes. If the house's value, as determined by the appraisal, is less than the sale price, the bank will not finance the loan. Appraisals and the appraisal process have become much tighter since the Frannie and Freddie debacle. This fact is true regardless of amounts or credit history. Though this is happens somewhat rarely; typically if a seller and buyer agree to a price, this price is a reasonable value -- after all, that is nearly the definition of \"\"market value\"\". So, yes, it is true (and always true, for any financed purchase), but that shouldn't really affect your decision. If you try to sell for more than the appraisal, you will just lower the price to the appraised amount.\"","\"When you refinance, there is cost (guess: around $2000-$3000) to cover lawyers, paperwork, surveys, deed insurance, etc. etc. etc. Someone has to pay that cost, and in the end it will be you. Even if you get a \"\"no points no cost\"\" loan, the cost is going to be hidden in the interest rate. That's the way transactions with knowledgeable companies works: they do business because they benefit (profit) from it. The expectation is that what they need is different from what you need, so that each of you benefits. But, when it's a primarily cash transaction, you can't both end up with more money. So, unless value will be created somewhere else from the process (and don't include the +cash, because that ends up tacked onto the principle), this seems like paying for financial entertainment, and there are better ways to do that.\"","For what its worth, I recently closed on a 30 year refinance mortage with an agent I found through Zillow. The lender has a perfect 5/5 reputation score, whose office was located within 5 miles of my house, and as suggested by justkt on MrChrister's response, I checked out the business on the better business bureau and its online presence prior to going forward with the bank. The process was relatively painless, and the APR and closing costs were less than my previous loan with a federal credit union which I've used in the past. I can't say if the bank I'll be using going forward is as good as the one I've used in the past, but overall I'm quite happy with it. I never met the individual in person but this saved both of us a fair amount of time honestly.","I would ignore the bank completely when they use gross income. Decide, based upon your current living situation, what your MAX limit on a monthly payment is. Then from that determine the size and cost of the house you can buy. My husband and I decided on a $2000 monthly payment max, but also agreed $1500 was more reasonable. When using those numbers in the calculators it is way less than when using gross income. When we used our gross pay the calculators all said we could afford double what we were looking for. Since they don't know what our take home pay is (after all the deductions including 401k, healthcare, etc), the estimates on gross income are way higher than what we can comfortably afford. Set a budget based on your current living situation and what you want your future to look like. Do you want to scrimp and coupon clip or would you rather live comfortably in a smaller home? Do the online calculators based on take home pay and on gross pay to get a sense of the range you could be looking at.","What do I need to know if I'm unemployed and need to take out a home loan to finance a litigious divorce? Which companies are best to shop around at? How do I present my self and situation? What harms or hurts my chances of getting a home loan? Is this the same hung as refinancing a house? Is there a website or article you can recommend about this?","\"tl;dr: Your best course of action is probably to do a soft pull (check your own credit) and provide that to the lender for an unofficial pre-approval to get the ball rolling. The long of it: The loan officer is mostly correct, and I have recent personal evidence that corroborates that. A few months ago I looked into refinancing a mortgage on a rental property, and I allowed 3 different lenders to do a hard inquiry within 1 week of each other. I saw all 3 inquires appear on reports from each of the 3 credit bureaus (EQ/TU/EX), but it was only counted as a single inquiry in my score factors. But as you have suggested, this breaks down when you know that you won't be purchasing right away, because then you will have multiple hard inquiries at least a few months apart which could possibly have a (minor) negative impact on your score. However minor it is, you might as well try to avoid it if you can. I have played around with the simulator on myfico.com, and have found inquiries to have the following effect on your credit score using the FICO Score 8 model: With one inquiry, your scores will adjust as such: Two inquiries: Three inquiries: Here's a helpful quote from the simulator notes: \"\"Credit inquiries remain on your credit report for 2 years, but FICO Scores only consider credit inquiries from the past 12 months.\"\" Of course, take that with a grain of salt, as myfico provides the following disclaimer: The Simulator is provided for informational purposes only and should not be expected to provide accurate predictions in all situations. Consequently, we make no promise or guarantee with regard to the Simulator. Having said all that, in your situation, if you know with certainty that you will not be purchasing right away, then I would recommend doing a soft pull to get your scores now (check your credit yourself), and see if the lender will use those numbers to estimate your pre-approval. One possible downside of this is the lender may not be able to give you an official pre-approval letter based on your soft pull. I wouldn't worry too much about that though since if you are suddenly ready to purchase you could just tell them to go ahead with the hard pull so they can furnish an official pre-approval letter. Interesting Side Note: Last month I applied for a new mortgage and my score was about 40 points lower than it was 3 months ago. At first I thought this was due to my recent refinancing of property and the credit inquiries that came along with it, but then I noticed that one of my business credit cards had recently accrued a high balance. It just so happens that this particular business CC reports to my personal credit report (most likely in error but I never bothered to do anything about it). I immediately paid that CC off in full, and checked my credit 20 days later after it had reported, and my score shot back up by over 30 points. I called my lender and instructed them to re-pull my credit (hard inquiry), which they did, and this pushed me back up into the best mortgage rate category. Yes, I purposely requested another hard pull, but it shouldn't affect my score since it was within 45 days, and that maneuver will save me thousands in the long run.\"","Pre-qualification is only a step above what you can do with a rate/payment calculator. They don't check your credit history and credit score; they don't ask for verification of your income; or verify that you have reported your debts correctly. They also don't guarantee the interest rate. But if you answer truthfully, and completely, and nothing else changes you have an idea of how much you can afford factoring in the down payment, and estimates of other fees, taxes and insurance. You can get pre-quaified by multiple lenders; then base your decision on rates and fees. You want to get pre-approved. They do everything to approve you. You can even lock in a rate. You want to finalize on one lender at that point because you will incur some fees getting to that point. Then knowing the maximum amount you can borrow including all the payments, taxes, insurance and fees; you can make an offer on a house. Once the contract is accepted you have a few days to get the appraisal and the final approval documents from the lender. They will only loan you the minimum of what you are pre-approved for and the appraisal minus down-payment. Also don't go with the lender recommended by the real estate agent or builder; they are probably getting a kick-back based on the amount of business they funnel to that company.","\"There are basically two ways to get value out of an appreciating asset such as a home: (a) Sell it and take the profit. In the case of a home, you presumably still have to live somewhere, so unless you buy a cheaper home to replace it, this doesn't get you anywhere. If you can get another house that is just as nice and in just as nice a location -- whatever you consider \"\"nice\"\" to be -- than this sounds like a winning option. If it means moving to a less desirable home, then you are getting the cash but losing the nice home. You'll have to decide if it's worth it. (b) Use it as collateral for a loan. In this case, that means a second mortgage, home equity loan, or a home equity line of credit. But this can be dangerous. House prices are very volatile these days. If the value of the house falls, you could be stuck with debts greater than your assets. In my humble opinion, you should be very careful about doing this. Borrowing against your house to send the kids to college or pay for your spouse's life-saving operation may be reasonable. Borrowing against your house to go on a fancy vacation is almost surely a bad idea. The vacation will be over within a couple of weeks, but you could be paying off the debt for decades.\"","\"So either scenario has about $10K upfront costs (either realtor/selling expenses or fixing up for rental). Furthermore, I'm sure that the buyers would want you to fix all these things anyway, or reduce the price accordingly, but let's ignore this. Let's also ignore the remaining mortgage, since it looks like you can comfortably pay it off. Assuming 10% property management and 10% average vacancy (check your market), and rental price at $1000 - you end up with these numbers: I took very conservative estimates both on the rent (lower than you expect) and the maintenance expense (although on average over the years ,since you need to have some reserves, this is probably quite reasonable). You end up with 2.7% ROI, which is not a lot for a rental. The rule of thumb your wife mentioned (1% of cash equity) is indeed usually for ROI of leveraged rental purchase. However, if rental prices in your area are rising, as it sounds like they are, you may end up there quite soon anyway. The downside is that the money is locked in. If you're confident in your ability to rent and are not loosing the tax benefit of selling since it sounds like you've not appreciated, you may take out some cash through a cash-out refi. To keep cash-flow near-0, you need to cash out so that the payments would be at or less than the $3200/year (i.e.: $266/month). That would make about $50K at 30/yr fixed 5% loan. What's best is up to you to decide, of course. Check whether \"\"you can always sell\"\" holds for you. I.e.: how stable is the market, what happens if one or two large employers disappear, etc.\"","\"I had the same thing happen to my house. I bought it in 2011 for 137,000, which was the same as the FHA appraised value (because FHA won't guarantee a loan for more than their appraiser thinks its worth). January of last year, I get the letter from the tax office and see that my house has been assessed at only 122,000. I was shocked too, until I read a similar document that Phil told you to read. The short of it is, no matter what the tax assessor calls their calculation, it is an assessment. It was mass-produced along with everyone else's in your neighborhood by looking at its specs on paper (acreage, house square footage, age, beds/baths) and by driving by your home to see its general condition. The fact that your lawn may be less well-kept than the last time they drove by could have affected the decision a little. It's very unlikely to have been a major determinant of the assessment. The assessment value affects taxes, and taxes only. It is, in most states, a matter of public record, and so it could be used by a potential buyer to negotiate a lower price. However, everyone in the housing business knows that the assessed value is not the market value, and the buyer's agent will be encouraging their client to make a more realistic bid. This \"\"assessed value\"\" is not an \"\"appraisal value\"\". An appraisal is done by someone actually walking into and through your home, inspecting the general condition inside and out, to try to make a fair evaluation of what the home is actually worth. That number is almost always going to be more than the assessment value, because it takes into account all the amenities of the home; the current fixtures, the well-kept (or recently-replaced) flooring, the energy-efficient HVAC and hot water system, etc etc. It also takes into account recent comparables; what have other houses, with the same general statistics, the same amenities, relatively close in location, sold for recently? That will still generally be different from the true market value of the home. That value is nothing more or less than what a potential buyer will pay to have it at the time you decide to sell it, and that in turn depends 100% on your potential buyers' myriad situations. Someone may lowball even the assessed value because they're looking for a deal and hoping you're desperate; you just reject the offer. Someone may be looking at comparables indicating the house is maybe overpriced by $10k. You can counter and try to come to an agreement. Or, your potential buyer could work five minutes from your house, and be willing to pay at or above your asking price because the next best possibility is another 10 miles away. Since you aren't looking to sell the home, none of this matters, except to determine any escrow payments you might be making towards property taxes. Just keep making your mortgage payment, and don't worry about it. If you really wanted to, you could petition the state for a second opinion, but you think the value should be higher; if they agree with you, they'll raise the assessed value and you'll pay more in taxes. Why in the world would you want to do that?\"","Add a few more cells to your header that list the interest paid in in the next 3 to 4 years on your current mortgage. Use the cumulative interest function from your spreadsheet program. In the main body of your spreadsheet, add columns that summarize the total cost over 3-4 years for each loan. Add columns that list the interest cost, total cost of interest + refi cost, and the difference between that approach and the interest costs from your current loan. Add 6 columns total: a set for 3 years and a set for 4. Something like this: Repeat that 3 year block off to the right and plug in the 4 year numbers. You requested that we factor in a 3.5% penalty against the money that goes to the discount fee. You could do that by adding a column that calculates this, like Joe described in his answer. Add that 3.5% accrual into the total calculation above, which in turn will knock down the amount of savings for each refi loan. PS: How are you going to earn 3.5% over 48 months?","sheegaon's reply looks fine to me, a HELOC can usually be set up for a minimal ($50?) fee, and is currently a pretty low rate, mine is 2.5%. If this doesn't appeal to you, my other suggestion is a 401(k) loan. While this is usually a last resort and 'not' recommended, a short term use may make sense. The rate is low, and you can pay in back in full after moving into the new house.","\"Generally it is not recommended that you do anything potentially short-term deleterious to your credit during the process of seeking a mortgage loan - such as opening a new account, closing old accounts, running up balances, or otherwise applying for any kind of loan (people often get carried away and apply for loans to cover furniture and appliances for the new home they haven't bought yet). You are usually OK to do things that have at least a short-term positive effect, like paying down debt. But refinancing - which would require applying for a non-home loan - is exactly the sort of hard-pull that can drop your credit rating. It is not generally advised. The exception to this is would be if you have an especially unusual situation with an existing loan (like your car), that is causing a deal-breaking situation with your home loan. This would for example be having a car payment so high that it violates maximum Debt-to-Income ratios (DTI). If your monthly debt payments are more than 43% of your monthly income, for instance, you will generally be unable to obtain a \"\"qualified mortgage\"\", and over 28-36% will disqualify you from some lenders and low-cost mortgage options. The reason this is unusual is that you would have to have a bizarrely terrible existing loan, which could somehow be refinanced without increasing your debt while simultaneously providing a monthly savings so dramatic that it would shift your DTI from \"\"unacceptable\"\" to \"\"acceptable\"\". It's possible, but most simple consumer loan refis just don't give that kind of savings. In most cases you should just \"\"sit tight\"\" and avoid any new loans or refinances while you seek a home purchase. If you want to be sure, you'll need to figure out your DTI ratio (which I recommend anyway) and see where you would be before and after a car refinance. If this would produce a big swing, maybe talk with some mortgage loan professionals who are familiar with lending criteria and ask for their opinion as to whether the change would be worth it. 9 times out of 10, you should wait until after your loan is closed and the home is yours before you try to refinance your car. However I would only warn you that if you think your house + car payment is too much for you to comfortably afford, I'd strongly recommend you seriously reconsider your budget, current car ownership, and house purchasing plans. You might find that after the house purchase the car refi isn't available either, or fine print means it wouldn't provide the savings you thought it would. Don't buy now hoping an uncertain cost-saving measure will work out later.\"","It seems you understand the risks, it seems like a fine enough idea. Hopefully it works out for you. However, you may want to talk to a few local banks about getting a short term home equity loan. I know someone who was able to do this getting a very low rate for 7 years. At the time of the loan, the prevailing rate for a 15 year was 3.25, but they were able to get the HEL at 2.6 fixed. There was no closing costs. The best part about it was the payment was not that much more. While going from ~1200 to ~1800 is a 50% increase it was not that much in dollars in relationship to his household income. Note that I did not say Home Equity Line of Credit, which are vairable rates and amount borrowed.","\"Chris, this is an arbitrage question with a twist: you cannot treat the location you want to live objectively. For example, why not SoCal instead of Texas? Yes, SoCal's expensive but what if you account for the weather? This question is very interesting for me personally: something I am going to focus on myself, soon, as well. To the question at hand: it's very hard to get a close estimate of the price from a single source, say, a website. The cost of a house is always negotiable and there's no sticker price, and there begins your problems. However, there are some publicly available information which websites aggregate, see: http://www.city-data.com/ Also, some heuristics might help: Rent is at-least as expensive as the monthly mortgage, (property) taxes, HOA fees, etc. Smart people have told me this, and this also makes sense to me as the landlord is in this business to make some money after all. However, there are also other hidden costs of home ownership that I am not aware of in details (and which I craftily sidestepped in my \"\"etc\"\" above) that could put a rental to be \"\"cheaper\"\". One example that comes to mind is you as a tenant get to complain if the washer-dryer misbehaves and demand the landlord get you a new one (see how you wouldn't make a sound were you to own it however) Such a website to gauge rentals: http://www.rentometer.com/ Houses cost more where the median income is more. Again, you cannot be objective about this because smart people like to live around smart people (and pay for the privilege). Turn again to http://www.city-data.com/ to get this information Better weather is more expensive than not so good weather. In the article you linked, notice the ratio of homes in California. Yes, I know of people who sold off their family ranches in Vancouver and Seattle to buy homes in Orange Country. In short, there is a lot of information you would have to gather from multiple sources, and even then never be sure that you did your best! This also includes arbitrage, as you would like to \"\"come out ahead\"\" and while you are doing your research (and paying your rent), you want to invest your \"\"savings\"\" in instruments where you earn more than what you would have saved in a mortgage, etc. I would very much like to be refuted on every point and my answer be edited and \"\"made better\"\" as I need the same answers as you do :-D Feel free to comment, edit your question etc and I will act on feedback and help both of us (and future readers) out!\"","You could look into refinancing with a bank or credit union. But to weed out options quickly, use a service like LendingTree, which can vet multiple options for you a whole lot more quickly than you could probably do yourself. (I don't work for, or get any benefit from LendingTree.) Whatever you do, try to do all the applying within a short span of time, as to not negatively affect your credit score (read here) by creating extraneous inquiries. Then again, if your credit sucks, you might not qualify for a re-fi. If you are turned down, make your payments on time for six months or so, and try again.","Do I need to pay for an inspection, or am I likely to save enough money from skipping it to cover potential problems that they would have caught? A home inspection costs hundreds of dollars. The average is $315. Inspections regularly catch things that cost tens of thousands of dollars to fix, e.g. a new roof or a cracked foundation. You also might find that a home inspection is required for your mortgage. do I need a realtor, or can I do their job myself? Unless you are a licensed realtor or you buy directly from a seller without a realtor, the fee (charged to the seller) will be the same regardless of whether you have a realtor. The seller's realtor will share the fee with your realtor if you have one. So you can do the work yourself (perhaps not as well), but you won't save money by doing so. If you have a lot of flexibility in when you purchase, you could look for especially cheap properties with motivated sellers. Arrange financing ahead of time (before you find a house), so you can close quickly. Some sellers will give you a discounted price to finish the sale quickly. Even small savings on the price of a house will outweigh most savings on closing costs.","Taking the help of experts is the best possible offer that an individual can look forward to. In that case calculating the current mortgage interest rates in MN becomes more important. Best home refinancing company, MN offers you the scope to deal with mortgage calculators. These are modern and tech savvy tools that take into consideration various factors related to the same.","These are your options: Unfortunately this will not be a quick process. You should note that until a potential lender goes through a detailed review of your finances you have only been pre-qualified. This is not as good as pre-approved. With pre-qualified they are basing the determination on what you told them, not what you can prove. Because you are aware of your short period of continuous employment you are best to be completely honest with a potential lender. That way you don't run into problems 30 days down the road when they realize the issue. The home seller will not be happy; and there was time and money wasted on down payments, credit checks, home inspections, and appraisals. In the US in most markets while there is a significant risk that a particular house will not be available in 5 months, there is a very slight risk that a neighborhood will not be available in 5 months.","Probably the most accurate way is to just fill out your tax forms using numbers extrapolated from your current paycheck. If you don't typically itemize your deductions, you should be able to get pretty close.","\"Paying for a good home inspection, from a person you choose. Mine was $500 and the guy gave me a nice print out with a bunch of little problems that I knew had to be fixed. It was easy to determine my fix-up cost, which was separate from my \"\"I want to change this\"\" cost. He was working for me, not the agents or the seller, so I felt more trusting of his advice. If you end up shopping hard and looking seriously at several houses, you might end up paying this more than once. (A bad report would be a good contingency for cancelling your offer.)\"","To get the factors you want, start with a complete amortization calculator and a tax deduction calculator, filling in values for your down payment, purchase price, tax rates, and mortgage rate. If you are talking about a specific property, you should be able to get taxes for the current year, and perhaps using historical values estimate taxes going out. Some calculators will include PMI (which you should avoid like the plague in an actual purchase). Given some preliminary data, you can calculate your insurance. So once you have your PITI (principal, interest, tax, and insurance) monthly payment and tax deduction, you can calculate how much you spend a month on the house minus the deduction. To estimate maintenance costs, you could either figure out about what you'd need to replace in the given time you plan to stay put and use a rough estimate on what it is. You can also use some rough estimates like this (1% of the property value yearly!) or this (moving the number up to a whopping 2%). Don't forget closing costs as a buyer and seller. You can find estimates for these as well, and they are a function of the purchase price (usually around 2%). So to figure out how much it costs you to live in a house for X months, you can do So your total cost is Total Return Is: You can adjust that total return for inflation using this calculator to get your total return adjusted for inflation. If projecting into the future, you can try a formula found here. To figure out the return on your investment, use So to figure out the total return adjusted you need for a given ROI, find","You sound like you're in enviable shape. This is good. Look for deals. There are tons of people in over their heads (unlike yourself) and they'll be foreclosed on if they don't get out. You're in a position to buy from a distressed seller. Assuming your credit rating is good, you can get a good loan for the balance. Time is on your side. Don't rush. Look for a great deal. My feeling is that the deals will only get better for the next year or two.","It seems like you are asking two different questions, one is, how do I know if I can afford a house? The other is, how do I know what type of mortage to get? The first question is fairly simple to answer, there's plenty of calculators out there that will tell you what you can afford, but rule of thumb is 30% of income can goto housing. Now what type of mortgage to get can be much more confusing, because the mortgage industry makes money off of these confusing products. The best thing to do in my opionion in situations like this is to keep it simple. You need to be careful buying a house. So much money is changing hands and there are so many parasites involved in the transaction I would be extremely wary of anybody who is going to tell you what mortgage to get. I've never heard of a fee only independent mortgage broker, and if I found one that claimed to be I wouldn't believe him. I would just ignore all the exotic non-conforming products and just answer one simple question. Are you the type of person that buys an insurance policy or that likes to self insure? If you like insurance, get a 30 year fixed mortgage. If you like to self insure, get a 7 year ARM. The average lenghth someone owns a house is 7 years, plus in 7 years time, it might not adjust up, and even if it does, you can just accelerate your payments and pay it off quickly (this is the self insurance part of it). If you're like me, I'm willing to pay an extra .5% for the 30 year so that my payment never changes and I'm never forced to move (which is admitedly extremely unlikely, but I like the safety). I don't like 15 year term loans because rates are so low, you can get way better returns in the stock market right now, so why pay off sooner then you need to. Heck, if I had a paid off house right now I'd refi into a 30 year and invest the money. In summary, pick 30 year or ARM, then just shop around to find the lowest rate (which is extremely easy).","You’re asking for a loan value that’s equal to 20% of your income. You need to calculate all bills that you pay and see what you have left over. If your current bills are more than 65-70% of your income you’ll have a tough time getting a loan."],"string":"[\n \"\\\"It's extremely easy to get a rough valuation of your home. Just phone a real estate agent. Virtually any real estate agent will come and value your home free. Even if you say outright \\\"\\\"I'm not considering selling, I just want a valuation\\\"\\\" they will probably do it, because for them getting contacts of people who might one day want to sell their home is all-important. Even if a few turn you down, some will do it. You might say that an agent isn't going to be as accurate as an appraiser, and you are right. There is also an expectation that they will evaluate higher than the real value, to persuaade you to sell. That probably isn't a big issue, and it's something you can compensate for. And even an appraiser is going to be based somewhat on speculation. You might try to do this calculation yourself, but an agent has access to the actual sale prices of nearby houses - you can't get that information. You only have access to the asking prices. And did I mention they will do it for free?\\\"\",\n \"\\\"You can get a \\\"\\\"drive-by\\\"\\\" appraisal or an assessment from a local real estate agent. This obviously will give you a less precise and not as reliable information as a full appraisal, but will be significantly cheaper.\\\"\",\n \"I wouldn't personally spend any money on an appraisal. Spend some time yourself looking at Zillow.com and maybe Realtor.com and other sites to review recent sales in your specific area. Not the houses a mile away. Try to find comparables to yours. The key factor is dollars per square foot. See if the trend over the last couple of years is upwards or downwards in dollars per square foot of living area. If it's downwards, I wouldn't invest for sure.\",\n \"\\\"I would not trust Zillow for an appraisal. The numbers I see on there vary a lot from real prices. I'm not sure I'd get a full appraisal either, as that means you \\\"\\\"know\\\"\\\" the value of the house and may be obliged to reveal it. I'd ask for the loan amount and see what the previous owner says.\\\"\",\n \"\\\"You can shop for a mortgage rate without actually submitting a mortgage application. Unfortunately, the U.S. Government has made it illegal for the banks to give you a \\\"\\\"good faith estimate\\\"\\\" of the mortgage cost and terms without submitting a mortgage application. On the other hand, government regulations make the \\\"\\\"good faith estimates\\\"\\\" somewhat misleading. (For one thing, they rarely are good for estimating how much money you will need to \\\"\\\"bring to the closing table\\\"\\\".) My understanding is that in the United States, multiple credit checks within a two-week period while shopping for a mortgage are combined to ding your credit rating only once. You need the following information to shop for a mortgage: A realistic \\\"\\\"appraisal value\\\"\\\". Unless your market is going up quickly, a fair purchase price is usually close enough. Your expected loan amount (which you or a banker can estimate based on your down payment and likely closing costs). Your middle credit score, for purposes of mortgage applications. (If you have a co-borrower, such as a spouse, many banks use the lower of the two persons' middle credit score). The annual property tax cost for the property, taking into account the new purchase price. The annual cost of homeowners' insurance. The annual cost of homeowners' association dues. Your minimum monthly payments on all debt. Banks tend to round up the minimum payments. Also, banks care whether any of that debt is secured by real estate. Your monthly income. Banks usually include just the amount for which you can show that you are currently in the job, with regular paychecks and tax withholding, and that you have been in similar jobs (or training for such jobs) for the last two full years. Banks usually subtract out any business losses that show up on tax returns. There are special rules for alimony and child support payments. The loan terms you want, such as a 15-year fixed rate or 30-year fixed rate. The amount of points you are willing to pay. Many banks are willing to lower your \\\"\\\"note rate\\\"\\\" by 0.125% if you pay 0.5% up-front. The pros and cons of paying points is a good topic for another question. Whether you want a so-called \\\"\\\"no-fee\\\"\\\" or \\\"\\\"no-closing cost\\\"\\\" loan. These loans cost less up-front, but have a higher \\\"\\\"note rate\\\"\\\". Unless you ask for a \\\"\\\"no-fee\\\"\\\" or \\\"\\\"no-closing cost\\\"\\\" loan, most banks have similar charges for things like: So the big differences are usually in: As discussed above, you can come up with a simple number for (roughly) comparing fixed-rate mortgage loan offers. Take the loan origination (and similar) fees, and divide them by the loan amount. Divide that percentage by 4. Add that percentage to the \\\"\\\"note rate\\\"\\\" for a loan with \\\"\\\"no points\\\"\\\". Use that last adjusted note rate to compare offers. (This method works because you have the choice of using up-front savings to pay \\\"\\\"points\\\"\\\" to lower the \\\"\\\"note rate\\\"\\\".) Notice that once you have your middle credit score, you can ask other lenders to estimate the information above without actually submitting another loan application. Because the mortgage market fluctuates, you should compare rates on the same morning of the same day. You might want to check with three lenders, to see if your real estate agent's friend is competitive:\\\"\",\n \"If you're willing to pay a fee, you can probably just get a commercial appraiser to give you a valuation. In Australia I think it's around $100-200.\",\n \"I see your remarks regarding Zillow, but would add a question. Why not look only for recent sales? If you find homes similar to yours with recent sales, that's similar to how the appraisers do it. I've refinanced many times and each time, I looked at sales within three miles of my house. I hit the appraised price very close in my estimate, high or low compared to Zillow, but used transaction data from there.just my thought. I chose a random neighborhood, and this was the first house I clicked. The main view shows last sale date, so I'd obviously suggest the OP look for more recent ones. If turnover is that low in his neighborhood, I understand, but the comment that transactions aren't listed is factually incorrect. I'd like my 2pts back. :)\",\n \"Definitely don't borrow from your 401K. If you quit or get laid off, you have to repay the whole amount back immediately, plus you are borrowing from your opportunity cost. The stock market should be good at least through the end of this year. As one of the commentators already stated, have you calculated your net savings by reducing the interest rate? You will be paying closing costs and not all of these are deductible (only the points are). When calculating the savings, you have to ask yourself how long you will be hanging on the property? Are you likely to be long term landlords, or do you have any ideas on selling in the near future? You can reduce the cost and principal by throwing the equivalent of one to two extra mortgage payments a year to get the repayment period down significantly (by years). In this way, you are not married to a higher payment (as you would be if you refinanced to a 15 year term). I would tend to go with a) eat the appraisal cost, not refinance, and b) throw extra money towards principal to get the term of the loan to be reduced.\",\n \"Keep in mind, there are times that house is in such bad shape that it's going to need 6 months of renovations, in which case you might ask the town if they are willing to reappraise a lower value until the work is completed. Keep in mind, you'll get a new appraisal when permitted (I mean pulling a permit from the town) work is done. I finished my basement and the town was eager to send the appraiser over even before work was fully complete.\",\n \"If you can deal with phone calls instead of a face to face meeting, for the average person with an average refinance online tools just offer another way to shop for deals. For new mortgages, I think having a person you can meet face to face will avoid problems, but for just a simple refi, online is one of the places you should check. Compete your current mortgage company, your bank (hopefully credit union), a local broker or two and the online places. The more competition you have, the more power you have in making a good choice.\",\n \"There are deals out there which allow refinancing up to 125% of appraised value so long as you have a solid payment history. You need to research banks in your area working with HARP funded mortgages. An alternate method is to find a bank that will finance 80% of the current value at 4% and the rest as a HELOC. The rate will be higher on the equity line, but the average rate will be better and you can pay the line off faster.\",\n \"If you get somewhat of a discount appraisal you're probably not going to save much money, and given the (probable) size of your investment you might as well pay the extra money. You'll learn something about the market or investment anyway. Maybe it will open you up to some new ideas like trying to flip the property or pulling out some equity to go after more properties.\",\n \"Zoopla may not always accurately reflect the market price. Your best bet is to get a quote for local registered) letting agents. That way you know you are close to the real market value. Also, these quotes may come into handy if you have a mortgage on the property. Since most banks will require you to provide proof of rent figures you are projecting by sending in official quotes. Hope this helps..\",\n \"I second the suggestions for your local credit union and asking co-workers who might also be in the process of a home purchase. Additionally, you want to educate yourself as much as possible so that you can ask questions about the calculations responsible for the differences. I got different values starting from the various online automatic quotes all the way through to the GFE and it was not obvious to me. You can also sign-up for free workshops for first time home buyers, though most of the material will be a breeze it helps you get worksheets going and lists going for documentation that you need to gather. You might want to start at the HUD site and explore. Especially the Borrower's Rights. The cost booklet was very helpful for me to interpret the GFE, but honestly I didn't appreciate it the first time it was handed to me. Finally, you might meet qualifications to take advantage of FHA programs; the waitlists discourage everyone including the loan brokers, but you want to at least be aware of programs that can help.\",\n \"Check out the property websites to get an idea of how much, the property in question, could yield as rent. Most give a range and you can get a good idea of it. Just one example from zoopla. Likewise you can refer mouseprice or rightmove and get yourself an idea. Property websites do a lot of data crunching to do an update, but their figure is only a guide.\",\n \"\\\"The usual rule of thumb is that you should start considering refinance when you can lower the effective interest rate by 1% or more. If you're now paying 4.7% this would mean you should be looking for loans at 3.7% or better to find something that's really worth considering. One exception is if the bank is willing to do an \\\"\\\"in-place refinance\\\"\\\", with no closing costs and no points. Sometimes banks will offer this as a way of retaining customers who would otherwise be tempted to refinance elsewhere. You should still shop around before accepting this kind of offer, to make sure it really is your best option. Most banks offer calculators on their websites that will let you compare your current mortgage to a hypothetical new one. Feed the numbers in, and it can tell you what the difference in payment size will be, how long you need to keep the house before the savings have paid for the closing costs, and what the actual savings will be if you sell the house in any given year (or total savings if you don't sell until after the mortgage is paid off). Remember that In addition to closing costs there are amortization effects. In the early stages of a standard mortgage your money is mostly paying interest; the amount paying down the principal increases over the life of the loan. That's another of the reasons you need to run the calculator; refinancing resets that clock.\\\"\",\n \"This may not be entirely scientific, but as a landlord my usual approach is just to do a search for rental properties on Craigslist for comparable homes in the neighborhood. There are all kinds of formulas professional property managers use, but in the end these listings are the ones you are going to be competing with for tenants. Also, it isn't super accurate, but online services like Zillow.com can give you some numbers for rental houses that include those that aren't currently advertising.\",\n \"\\\"You most definitely can appeal the county's appraisal of your property. How to do so, and your odds of success will vary widely by your location, but I have successfully appealed the valuation on one of my rental properties. I asked my realtor to provide me with recent sales of comparable homes in the neighborhood & provided them along with my appeal as evidence of what I felt a reasonable valuation should be. One of three things will happen: 1) Your appeal will be accepted, 2) It will be denied, or 3) you will be asked to come in & plea your case in front of the county assessor. In my case, the county accepted my appeal without needing to testify. Look around your county assessor's website ... you will probably be able to find the form necessary for filing an appeal. If not, give them a call & they'll tell you the procedure. The county generally uses a simplistic statistical model to do their valuations. Little to no human time is spent reviewing your home's value, so it's quite possible for their valuation to be unreasonable. An appeal can take a bit of time & paperwork, but can definitely be worth the effort if the county's valuation is way off. Hope this helps! @mhoran_psprep Your point is well taken that in practice the relationship between sales prices & tax assessments is a bit more tenuous. The waters get muddy when property values have a large swing (like the past 5 years). When tax assessor's started seeing large drops in property values during the recession (and consequent drops in their budgets), I'm sure there was considerable pressure to prevent wholesale decreases in tax valuations. It's politically easier to \\\"\\\"prop-up\\\"\\\" falling valuations than to raise tax rates. However, the fact remains that the models that assessors use in determining property values are based on sales history - thus, I believe (and have found) that recent sales can be a persuasive piece of evidence in a property tax assessment appeal.\\\"\",\n \"Start with the bank where you have your checking and savings account. They can streamline some of the paperwork, because they can see how much you make, and have access to several years worth of bank statement. Legitimate mortgage companies do publish their rates. But there is no guarantee that you will qualify for the best rate without them knowing your credit score, salary, and down payment information. There is no way to know that you have the best rate because of the time lag involved. You will pick the best one you can work with, but the rates can change every day. Even when you lock in the rates, other companies can drift lower. Once you have started down the application process you will reach a point where switching companies will cost you time and money. Once you decide to purchase a house, the contract usually only gives you a few weeks to prove that you have financing in place. Therefore you will have to start the process before deciding on the house. Some advance work is needed to give you an idea of the maximum monthly payment you can afford, which will then based on the rate and down payment determine the maximum house you can buy. I have had good luck with my credit union, but there is no guarantee that yours will be competitive. Keep in mind that while rates are very important, some people also value customer service, and also like that the mortgage won't be sold to out of town investors.\",\n \"Start with the list of mortgage companies approved to work in your area. There are 80 within 10 miles of my house, and more than 100 in my county. Pick ones you know because they are established businesses in your area, region, or even nationally. A good place to start might be with your current lender. The risk you seem to be worried about is a scam or a trick. In the recent past the scams were ones where the home owner didn't understand teaser rates, and the risk of interest only and pick-your-payment loans. The simpler the bells and whistles, the less likely you are to be embarking on a risky transaction. It can't hurt to ask an organization like the BBB or neighbors, but realize that many people loved their exotic mortgage until the moment it blew up in their face. So for 5 years your neighbor would have raved about their new mortgage until they discovered how underwater they were. Regarding how smoothy the transaction is accomplished, is hard to predict. There is great variation in the quality of the loan officers, so a great company can have rookie employees. Unless you can get a recommendation for a specific employee it is hard know if your loan officer is going to give great service. When getting a mortgage for a purchase, the biggest risk is getting a mortgage that results in a payment you can't afford. This is less of a risk with a refinance because you already have a mortgage and monthly payment. But keep in mind some of the monthly savings is due to stretching out the payments for another 30 years. Know what you are trying to do with the refinance because the streamlined ones cant be used for cash out.\",\n \"If you have good credit, you already know the rate -- the bank has it posted in the window. If you don't have good credit, tell the loan officer your score. Don't have them run your credit until you know that you're interested in that bank. Running an application or prequal kicks off the sales process, which gets very annoying very quickly if you are dealing with multiple banks. A few pointers: You're looking for a plain vanilla 30 year loan, so avoid mortgage brokers -- they are just another middleman who is tacking on a cost. Brokers are great when you need more exotic loans. Always, always stay away from mortgage brokers (or inspectors or especially lawyers) recommended by realtors.\",\n \"You said the tax assessor gave you an appraised value, but I think you mean assessed value. This article YOUR HOME; Market vs. Appraisal: What's the Real Value? explains the differences pretty well.\",\n \"\\\"There is no guarantee improvements will raise the appraised value. You also don't want your property tax appraisal to go up if you can avoid it. Since you are talking on the order of $10k I'll assume you're only a few thousand dollars more from getting to 20%. That said, any schemes you might come up with like refinancing or second line of credit will probably cost more in fees than they are worth, unless you can get a much nicer interest rate. Figure out how long you plan to stay there, Evaluate your options (do nothing, principal reduction, refinance for 30, 15, or even an ARM) and figure out your bottom line by comparing everything in a spreadsheet One more thing: if you do pay a substantial amount of extra principal, you can ask the lender to \\\"\\\"rebalance\\\"\\\" which will correct the minimum monthly payment to your remaining term. This will likely incur a fee, but could be helpful in an emergency\\\"\",\n \"See the Mortgage Professor's calculators (#3). Go to bankrate and look up rates so you know what to punch in to those calculators.\",\n \"If you've been in your house for a few years (and have built some equity up) and the market is active in your area, online is probably fine. The local banks will be better if it's not obvious to someone in Bangor, ME that your neighborhood in San Diego is worth substantially more than the crappy area 2 miles away. I've had 3 mortgages, one from a regional bank, one from a broker-sourced national mortgage company and another from a local bank. The bigger banks had better statements and were easier to do stuff with online. The smaller bank has been a better overall value, because the closing costs were low and they waived some customary fees. In my case, the national mortgage company had a better APR, but my time horizon for staying in the house made the smaller bank (which had a competitive APR, about a half point higher than the lowest advertised) a better value due to much lower up-front costs.\",\n \"It may be possible to get more cash than you currently have. For example, If you have $200,000, you could buy a distressed property for $150,000, spend $50,000 on renovations, get it appraised for $300,000 and then cash out refi $240,000 (keeping 20% equity to avoid MIPs) to invest. This would be analogous to flipping a house for yourself. Normally flippers buy a house for cheap, then sell it to someone else for way more than their total outlay in purchase + improvements. The only difference here is there's no 3rd party - you stay in the house and essentially buy it from yourself with the mortgage.\",\n \"My question is... how is this new value determined? Does it go off of the tax appraised value? The tax assessors values are based on broad averages and are not very useful in determining actual home value. The most defensible valuation outside of a sale is a professional appraisal, real-estate agents may or may not give you reasonable estimates, but their opinions are less valuable than that of a professional appraiser. Additionally, agents hoping to land you as a client (even if you tell them you're not trying to sell) could be motivated to over-estimate. In many instances a few opinions from agents will be good enough, but if there is any contention a professional appraisal will be better. Should you, prior to your death, get an independent appraiser to appraise the value of the property and include that assessment of the properties value with the will or something? The real-estate market fluctuates too much to make having an appraisal done prior to your death a practical approach in most circumstances. You could make arrangements so that an appraisal would be scheduled after your death. Here's a good resource on the topic: Estimating the Value of Inherited Real Estate\",\n \"Run the numbers in advance. Understand what are the current rates for an additional 2nd mortgage, what are the rates for a brand new mortgage that will cover the additional funds. Understand what they are for another lender. Estimate the amount of paperwork involved in each option (new first, new 2nd, and new lender). Ask the what are the options they can offer you. Because you have estimated the costs in money and time for the different options, you can evaluate the offer they make. What they offer you can range from everything you want to nothing you would accept. What they offer will depend on several factors: Do they care to keep you as a customer?; Do they expect you to walk away?; are they trying to get rid of mortgages like the one you have?; Can they make more money with the plan they are offering you? You will be interested in the upfront costs, the monthly costs, and the amount of time required for the process to be completed.\",\n \"Check with you local bank where you have an account. Sometimes they can offer a discount that results in a good rate. I just refinanced a month ago with Bank Of America and their rates were very competitive. What set them aside from the rest was their low closing fees. Otherwise I would shop around on bankrate.com and it will show you results of both local and online mortgage brokers. It will list the rates and expected fees. The also list an average national rate so you can compare the rate you are considering and see if there could be a better deal elsewhere.\",\n \"The question is whether the assessment is in line with surrounding homes. If my 1500 sq ft house on 1/4 acre is assessed far higher than a similar sized house/land nearby, I'd have a case. +/- 10% can be for age/quality, but 25% or more, I'd investigate. mhoran is right, values for different purposes need not align. A start would be to use a service like Zillow which offers property tax information, as well as house sizes. Let us know what you discover. Welcome to Money.SE\",\n \"why not ask a fee only financial adviser? Contact a local adviser and ask how much they will charge to work through the process. The options aren't as complex as they seem. The general idea is to first figure out what you can afford each month. This is a generally straight forward calculation. Then figure out the costs that are specific to your area, e.g property taxes. Figure out how much of a down payment /closing costs you can gather. Then start with your local bank or credit union. The number of options for mortgages will not be as complex if you already know how much you can afford and how much cash you can bring to the transaction. A simple table can be easily created based on what you can afford each month, how much cash you have, and the rates currently available. The bank will have a way to estimate the costs of each option as part of the required disclosures. Another source of good info can be a highly regarded local real estate agent. Focus on one that will represent you as a purchaser. They want you to be able to buy a house. While they do have a bias, they want a commission, most of it is eliminated if you know how much you can afford before you meet with them. They will know all the government programs that can make the monthly costs or closing costs cheaper.\",\n \"I can probably rent the house out for about $1,600. If sell now I can get 180k at the most. My mortgage will be $1,800 with tax and insurance. If I use the 180k to pay off the house, I can refinance the loan for a lower interest rate too. I think I know what I want to do but just need a second opinion. Thanks btw\",\n \"\\\"The first red-flag here is that an appraisal was not performed on an as-is basis - and if it could not be done, you should be told why. Getting an appraisal on an after-improvement basis only makes sense if you are proposing to perform such improvements and want that factored in as a basis of the loan. It seems very bizarre to me that a mortgage lender would do this without any explanation at all. The only way this makes sense is if the lender is only offering you a loan with specific underwriting guidelines on house quality (common with for instance VA-loans and how they require the roof be of a certain maximum age - among dozens of other requirements, and many loan products have their own standards). This should have been disclosed to you during the process, but one can certainly never assume anyone will do their job properly - or it may have only mentioned in some small print as part of pounds of paper products you may have been offered or made to sign already. The bank criteria is \\\"\\\"reasonable\\\"\\\" to the extent that generally mortgage companies are allowed to set underwriting criteria about the current condition of the house. It doesn't need to be reasonable to you personally, or any of us - it's to protect lender profits by aiding their risk models. Your plans and preferences don't even factor in to their guidelines. Not all criteria are on a a sliding scale, so it doesn't necessarily matter how well you meet their other standards. You are of course correct that paying for thousands of dollars in improvements on a house you don't own is lunacy, and the fact that this was suggested may on it's own suggest you should cut your losses now and seek out a different lender. Given the lender being uncooperative, the only reason to stick with it seems to be the sunk cost of the appraisal you've already paid for. I'd suggest you specifically ask them why they did not perform an as-is appraisal, and listen to the answer (if you can get one). You can try to contact the appraiser directly as well with this question, and ask if you can have the appraisal strictly as-is without having a new appraisal. They might be helpful, they might not. As for taking the appraisal with you to a new bank, you might be able to do this - or you might not. It is strictly up to each lender to set criteria for appraisals they accept, but I've certainly known of people re-using an appraisal done sufficiently recently in this way. It's a possibility that you will need to write off the $800 as an \\\"\\\"education expense\\\"\\\", but it's certainly worth trying to see if you can salvage it and take it with you - you'll just have to ask each potential lender, as I've heard it go both ways. It's not a crazy or super-rare request - lenders backing out based on appraisal results should be absolutely normal to anyone in the finance business. To do this, you can just state plainly the situation. You paid for an appraisal and the previous lender fell through, and so you would like to know if they would be able to accept that and provide you with a loan without having to buy a whole new appraisal. This would also be a good time to talk about condition requirements, in that you want a loan on an as-is basic for a house that is inhabitable but needs cosmetic repair, and you plan to do this in cash on your own time after the purchase closes. Some lenders will be happy to do this at below 75%-80% LTV, and some absolutely do not want to make this type of loan because the house isn't in perfect condition and that's just what their lending criteria is right now. Based on description alone, I don't think you really should need to go into alternate plans like buy cash and then get a home equity loan to get cash out, special rehab packages, etc. So I'd encourage you to try a more straight-forward option of a different lender, as well as trying to get a straight answer on their odd choice of appraisal order that you paid for, before trying anything more exotic or totally changing your purchase/finance plans.\\\"\",\n \"As per my comments, I think this is up to you and how much work you want to put forth. I do not feel it is trivial to provide documentation even with 90% of it will be the same among lenders. See this question: First answer, third and fourth paragraphs. You need to go as far as understanding the total cost of the loan, you probably need a good faith estimate. I would also compare a minimum of three lenders.\",\n \"There is no relationship between the government appraisal and the mortgage appraisal. The loan appraisal is done by a lender to determine if the property value is in agreement with the loan amount. The government appraisal is done to determine how much to charge you in taxes. They use the values of residences and commercial property to get their operating budget each year. They also set the rate to generate the amount of income money they need. If they cut all appraisals in half, they would just double the rate. In some jurisdictions the government appraises every year, in other places every three years. Some only when the property is sold. In some jurisdictions the maximum increase or decrease in government appraisal is set by law. But then they reset after the house is sold. That being said. Use this time to review the appraisal from the government. They may have facts wrong. They may think you have a pool, or more bedrooms or a garage, when you don't. Some jurisdictions use an automated process, others do a more detailed/individual process. If there was a mistake ten years ago with the description it will never get caught unless you complain. Check with the governemnt website for how to appeal. Some have windows of opportunity for an appeal.\",\n \"\\\"In the first years of a loan, most of what you're paying is interest, so my guess is that this is a bad idea. But there are lots of mortgage calculators offered for free on the web (your bank's website may have one) so I'd suggest that you spend some time running actual numbers before deciding. Reminder: Most renovations do NOT pay for themselves in increased sales price, not least because you'll lose the buyers who don't like what you've done but would have been happy to renovate it themselves to their own tastes. Unless there is something which will actively impair your ability to sell the house, you should usually renovate when you plan to stay there for a while and take your returns in enjoying the house more, NOT on the way out. (There's been some recent discussion of this over in Home Improvement, pointing out that the changes which return more than they cost are usually simple things like refreshing the paint, \\\"\\\"staging\\\"\\\" the house so it looks lived in but not cluttered, replacing damaged blinds, washing windows, putting out a few more flowers, and so on.)\\\"\",\n \"Applying for a mortgage is a bit of paperwork, but not too bad of an experience. Rates are pretty tight, if one lender were more that 1/4% lower than another, they'd be inundated with applications. Above a certain credit score, you get the 'best' rate, a search will show you the rates offered in your area. If you are a first time buyer, there are mortgages that might benefit you. If you are a vet (for non-native English readers, a veteran who served in the US armed forces, not a veterinarian, who is an animal doctor) there are mortgages that offer low-to-no down payment with attractive rates. Yes, avoid PMI, it's a crazy penalty on your overall expense of home purchase. If banks qualify you for different amounts, it shouldn't be a huge difference, a few percent variation. But, the standard ratios are pretty liberal even today, and getting the most you'd qualify for is probably too much. Using the standard 28/36% ratios, a bank will qualify you for 4X your income as a loan. e.g you make $50K, they'll lend you $200K. This is a bit too much in my opinion. If you come up short, you are really looking to borrow too much, and should probably wait. If you owe a bit on loans, it should squeeze in between those two ratios, 28/36. But I wouldn't borrow on a credit line to add to the purchase, that's asking for trouble.\",\n \"A good way to find the rates of rental prices is to look what other landlords are charging for similar properties in your area. The proper investigation of property rental market should be make by using property listing platforms. The other method is online rent calculator. There are a bunch of them on the Web. Briefly speaking, the rent calculator uses industry data to look at the typical rent you might expect from a property in a post code. Remember that the rent you charge has to be at least equal to the cost of your monthly mortgage bill. When you’re deciding what to charge, don’t forget to factor in an estimate of repair costs, taxes, homeowners association fees and insurance.\",\n \"If the cash flow information is complete, the valuation can be determined with relative accuracy and precision. Assuming the monthly rent is correct, the annual revenue is $1,600 per year, $250/mo * 12 months - $1,400/year in taxes. Real estate is best valued as a perpetuity where P is the price, i is the income, and r is the rate of interest. Theoreticians would suggest that the best available rate of interest would be the risk free rate, a 30 year Treasury rate ~3.5%, but the competition can't get these rates, so it is probably unrealistic. Anways, aassuming no expenses, the value of the property is $1,600 / 0.035 at most, $45,714.29. This is the general formula, and it should definitely be adjusted for expenses and a more realistic interest rate. Now, with a better understanding of interest rates and expenses, this will predict the most likely market value; however, it should be known that whatever interest rate is applied to the formula will be the most likely rate of return received from the investment. A Graham-Buffett value investor would suggest using a valuation no less than 15% since to a value investor, there's no point in bidding unless if the profits can be above average, ~7.5%. With a 15% interest rate and no expenses, $1,600 / .15, is $10,666.67. On average, it is unlikely that a bid this low will be successful; nevertheless, if multiple bids are placed using this similar methodology, by the law of small numbers, it is likely to hit the lottery on at most one bid.\",\n \"Also, does anyone know of any books on doing this sort of thing, i.e. renting out half of your home to a tenant and living in the ret? Head down to your local library. Mine has a state guide for renters and another one for landlords. There will likely be a lot of Nolo Press books around there too. You can also research the property tax on a lot; many counties run an arcGIS server that will tell you who owns a given property, what the assessed value is and the total tax bill, etc.\",\n \"You can get the number you want pretty easily by plugging some numbers in to a mortgage calculator like this one. Set the PMI and property tax to 0 and set your term to the duration you need. Then plug in numbers until your payment amount equals your monthly budget. Think of yourself as the bank in this process. I started at 1mil over 25 years and that was over my budget so went down to 800k which was under just a bit, and found that you need about 850k based on your numbers.\",\n \"In regards to the legal recourse, no there is none. Also, despite your frustrations with Citi, it may not be their fault. Mortgage companies are now forced to select appraisers (essentially at random) through 3rd party Appraisal Resource Companies (ARCs). This randomization mandate from the government was issued in order to combat fraud, but it is really causing more trouble for homeowners because it took away appraiser accountability. Basically, there's nothing we can do to fire an appraiser anymore. I've had appraiser do terrible jobs, just blatantly wrong, and have gone the distance with the dispute process only to find they won't change the value. My favorite real-life example came from an appraiser who got the bedroom count wrong (4 instead of 5); yet he took pictures of 5 bedrooms. The one he excluded he stated it shouldn't count because it didn't have a closet. Problem is, it DID have a closet. I had the homeowner take pictures of all of the closets in his house, and send them in. He still refused to change the count. After close to 2 months of the dispute process, the ARC came in and changed the count, but did not chagne the value, stating that the room count didn't increase the sqft, and there would be no adjustment in value. I was floored. The only solution we had was to wait for the appraisal to expire, then order it again; which we did. The new appraiser got the count right, and surprisingly (not really), it came in at the right value... In regards to the value necessary to avoid MI, they are likely using 80%, but it's not based on your current balance vs the value, it's based on the new loan amount (which will include costs, prepaids, skipped mortgage payments, etc) vs the value. Here are your options: Get a new appraisal. If you are confident the value is wrong, go somewhere else and get a new appraisal. Restructure the loan. Any competent Loan Officer would have noticed that you are very close to 80%, and should have offer you the option of splitting the mortgage into a 1st and 2nd loan. Keeping the first loan at 80%, and taking out a 2nd for the difference would avoid MI. Best Regards, Jared Newton\",\n \"One thing I would look into is getting a fixed rate home equity loan for a short term. Not a line of credit, but a home equity loan. The main benefit is they typically offer no closing costs. You can get a very low rate provided you move the loan into first position (replace your current mortgage). I know someone who got a 7 year fixed Home Equity Loan, from Regions Bank, for 2.62% no closing costs.\",\n \"You need to determine for the taxing jurisdiction when the next tax appraisal will be done. In some cases the appraisal is done every year, or two, or three. In other cases it is also done when the property is sold. The county tax office website should contain this information. They will also have information on how to appeal. Most jurisdictions do have a way of looking up not only the rates but the value of the property in question. You will also be interested in determining if the tax value of the property is lower due to local/state laws that limit the growth in value from one assessment to another. A sale of the property could trigger a catchup for the value. It is possible that the degraded value of the home has already been factored into the assessment. It is also possible that it hasn't. Keep in mind that taxes in some jurisdictions can be more complicated because there is also a town/city/county component, and some places that also breakout other items on the tax bill like storm water management, schools, pest spraying. These other items can be based on value, square footage of the lot, or a flat amount. You should get a local opinion on the likelihood of a successful appeal, and how much adjustment you would be able to get. Depending on the sale date and the due date for the taxes, you may be forced to pay the higher tax rate for a while until either the next re-appraisal or the next appeal window. Note: the fact that it is being auctioned may mean that what you pay for the house may be immaterial because the tax authorities could determine that the motivation to sell quickly could have depressed the value. This type of sale will not impact the value of other houses and can't be used as a basis for determining the value of other properties.\",\n \"Its a huuuuuuuuuuuge topic, and to answer your question in full will require a book, with a small booklet of legal advice attached to it. I'm not going to write it here, but I'll give you some very specific points to start your research with: ARM/Baloon - big NO NO. Don't touch that. Get rid of those you have any way you can, and then never ever do it again. That's the kind of crap that got us into the housing bubble mess to begin with. Especially with the rates as low as now, the only future with ARM/Baloon is that you're going to pay more, way more, than your initial period payments. Rates - the rates now are very low. They were even lower 12-24 months ago, but are still extremely low. Make sure you get a fixed rate loan, in order to lock these rates in for the remainder of the loan. Any ARM loan will have higher rates in the future. So go with FIXED RATE. Period - fixed rate loans are given for periods up to 30 years. The shorter the period, the lower the rate. However, at the level they're now, you're practically getting money for free (the APR is comparable to the inflation) even for 30 yr/fixed loans. PMI - private mortgage insurance - since you don't have much equity, the lender is likely to require you paying PMI. This is a significant amount of money you pay until you have at least 20% equity. It changes from lender to lender, so shop around and compare. Government assistance - that's what the broker was referring to. There were programs allowing people refinance even under-water mortgages. Check what programs are still available in your area. Some banks will not refinance with less than 20% equity, but some government assistance programs may help you get a loan even if you don't have enough equity. Closing fees and points - that's the money out of your pocket. Shop around, these vary wildly. Generally, Credit Unions, being non-profits, are cheaper on this item specifically, while comparable to big banks on everything else.\",\n \"First of all, think of anyone you know in your circle locally who may have gotten a mortgage recently. Ask him, her, or them for a recommendation on what brokers they found helpful and most of all priced competitively. Second of all, you may consider asking a real estate agent. Note that this is generally discouraged because agents sometimes (and sometimes justifiably) get a bad reputation for doing anything to get themselves the highest commission possible, and so folks want to keep the lender from knowing the agent. Yet if you have a reputable, trustworthy agent, he or she can point you to a reputable, trustworthy broker who has been quoting your agent's other clients great rates. Third of all, make sure to check out the rates at places you might not expect - for example, any credit unions you or your spouse might have access to. Credit unions often offer very competitive rates and fees. After you have 2-3 brokers lined up, visit them all within a short amount of time (edit courtesy of the below comments, which show that 2 weeks has been quoted but that it may be less). The reason to visit them close together is that in the pre-approval process you will be getting your credit hard pulled, which means that your score will be dinged a bit. Visiting them all close together tells the bureaus to count all the hits as one new potential credit line instead of a couple or several, and so your score gets dinged less. Ask about rates, fees (they are required by law to give you what is called a Good Faith Estimate of their final fees), if pre-payment of the loan is allowed (required to re-finance or for paying off early), alternative schedules (such as bi-weekly or what a 20 year mortgage rate might be), the amortization schedule for your preferred loan, and ask for references from past clients. Pick a broker not only who has the best rates but also who appears able to be responsive if you need something quickly in order to close on a great deal.\",\n \"When evaluating a refinance, you need to figure out the payback time. Refinancing costs money in closing costs. The payback time is the time it takes to recover the closing costs with the amount of money you are saving in interest. For example, if the closing costs are $2,000, your payback time is 2 years if it takes 2 years to save that amount in interest with the new interest rate vs. the old one. To estimate this, look at the difference in interest rate between your mortgage and the new one, and your mortgage balance. For example, let's say that you have $100,000 left on your mortgage, and the new rate is 1% lower than your current rate. In one year, you will save roughly $1,000 in interest. If your closing costs are $2,000, then your payback time is somewhere around 2 years. If you plan on staying in this house longer than the payback time, then it is beneficial to refinance. There are mortgage refinance calculators online that will calculate payback time more precisely. One thing to watch out for: when you refinance, if you expand the term of your mortgage, you might end up paying more interest over the long term, even though your rate is less and your monthly payment is less. For example, let's say you currently have 8 years left on a 15-year mortgage. If you refinance to a new 15-year mortgage, your monthly payment will go down, but if you only pay the new minimum payment for the next 15 years, you could end up paying more in interest than if you had just continued with your old mortgage for the next 8 years. To avoid this, refinance to a new mortgage with a term close to what you have left on your current mortgage. If you can't do that, continue paying whatever your current monthly payment is after you refinance, and you'll pay your new mortgage early and save on interest.\",\n \"There are multiple ways of determining the value of an inherited property. If you aren't planning on selling it, then the best way would be to have a real estate agent do a comp on the property (or multiple real estate agents).\",\n \"Streamline refinance is the way to go. You don't have to stay with the same bank to do so either. The big advantage of the streamline is the original appraisal is used for the refinance, so as long as you didn't have negative amortization(impossible in FHA anyways), you're good to go. It will be much less paperwork and looser credit standards. The ONLY downside is that upfront and monthly FHA mortgage insurance ticked up from where it was 2 years ago. If you're under a 80% LTV however you won't have to worry about it.\",\n \"The bank I work with would be more inclined to expand an existing HELOC rather than write a new one. I think that would be your best bet if you decide to continue borrowing against your home. Consider that your own income would have to support the repayment of these larger homes. If it is, why didn't you buy a larger home to begin with? As far as increasing the appraisal, you don't usually get one dollar of increased appraisal for each dollar you spend on improvements unless you have a rundown house in a nice neighborhood; part of the appraisal comes from a comparison with the appraisals of the other homes nearby. Eventually you get close enough to par with the other houses that anyone looking for something more expensive will often choose a different neighborhood entirely. Update: To your edit that mentions the original lender will cap the amount you can borrow, you can take additional secondary mortgages/HELOCs, but the interest rate is usually higher because it is not the first mortgage. I don't generally recommend it, but the option is there.\",\n \"I'm not sure about your first two options. But given your situation, a variant of option three seems possible. That way you don't have to throw away your appraisal, although it's possible that you'll need to get some kind of addendum related to the repairs. You also don't have your liquid money tied up long term. You just need to float it for a month or two while the repairs are being done. The bank should be able to preapprove you for the loan. Note that you might be better off without the loan. You'll have to pay interest on the loan and there's extra red tape. I'd just prefer not to tie up so much money in this property. I don't understand this. With a loan, you are even more tied up. Anything you do, you have to work with the bank. Sure, you have $80k more cash available with the loan, but it doesn't sound like you need it. With the loan, the bank makes the profit. If you buy in cash, you lose your interest from the cash, but you save paying the interest on the loan. In general, the interest rate on the loan will be higher than the return on the cash equivalent. A fourth option would be to pay the $15k up front as earnest money. The seller does the repairs through your chosen contractor. You pay the remaining $12.5k for the downpayment and buy the house with the loan. This is a more complicated purchase contract though, so cash might be a better option. You can easily evaluate the difficulty of the second option. Call a different bank and ask. If you explain the situation, they'll let you know if they can use the existing appraisal or not. Also consider asking the appraiser if there are specific banks that will accept the appraisal. That might be quicker than randomly choosing banks. It may be that your current bank just isn't used to investment properties. Requiring the previous owner to do repairs prior to sale is very common in residential properties. It sounds like the loan officer is trying to use the rules for residential for your investment purchase. A different bank may be more inclined to work with you for your actual purchase.\",\n \"Shop around a bit. You can probably do better than $5k. See this calculator to decide if your payoff period will happen before you think you'll move. If you're at 8% now it may come sooner than you think -- especially if you can lower that closing cost estimate and still get a good rate.\",\n \"The PMI rate is calculated at the time your mortgage is underwritten to be terminated at the point where you have 20% equity in your home. It is calculated based off of default risks based on your current equity value at the time of the loan. So if you got your mortgage before the banking crisis those risk charts have changed dramatically and not in your favor. So lets say you have a 100k home which you put 10k down so you have a mortgage of 90k. Since you have accumulated an additional 5k equity so payoff value is now 85k. If you refinance your mortgage and the home values in your area have dropped 15% you now are borrowing 100% of the value of your home. So you have higher risk from being at 100% as opposed to 90%. And the PMI is for the 20% of equity you do not have that the bank can not expect to recover. So when you originally bought the house your PMI pay out was 10k. At 85K value and 100% borrowed the PMI payout will be closer to 18k. While you may still be able to sell your home for the original value when they do the refinance calculations they use what your area has trended. If that is the case you maybe be able get an actual appraisal to use but that will come out of your pocket. *Disclaimer: These are simplifications of how the whole complex process works if you call the banker they can explain exactly why, show you the numbers, and help you understand your specific circumstances. *\",\n \"In the US, for most mortgages: The rules for how you compute LTV vary. Usually it's based with current value. With FHA loans, you cannot have the property re-assessed -- LTV is based on the original loan amortization. Note that in the wake of the housing crisis, assessors have suddenly become very conservative with valuations, so be prepared to fight over the valuation.\",\n \"Yes, banks still offer combo loans, but it is going to depend on the appraised value of your home. Typically lenders will allow you to finance up to 80% loan to value on the first mortgage (conforming loan amount) and 95% combined loan to value on a HELOC. I would start by checking with your local credit union or bank branch. They have more competitive rates and can be more flexible with loan amount and appraised value guidelines.\",\n \"Better for r/personalfinance . But having some exposure to the real estate industry, you are most likely over priced. Although you say that market is slow where you are, if you desperately need the money, you may have to sell at a bit of a loss.\",\n \"I recognize you are probably somewhere in the middle of various steps here... but I'd start and go through one-by-one in a disciplined way. That helps to cut through the overwhelming torrent of information that's out there. Here is my start at a general checklist: others can feel free to edit it or add their input. How 'much' house would you like to buy in terms of $$$ and bedrooms/sq ft. You can start pretty general here, but the idea is to figure out if you can actually afford a brand new 4bd/3ba 2,500 sq ft house (upwards of $500K in your neck of the woods according to trulia.com). Or maybe with your current resources you'll be looking at something like a townhome that is more entry-level but still yours. Some might recommend that this is a good time to talk to any significant others/whomevers and understand/manage expectations. My wife usually cares a lot about schools at this stage, but I think it's too early. Just ballpark whether you're looking at a $500K house, a $300K house, or a $200K townhome. How much house can you afford in terms of monthly payments only... (not considering other costs like utilities yet). Looking around at calculators like this one from bankrate.com can help you figure this out. Set the interest rate @ 5%, 30-year loan, and change the 'mortgage amount' until you have something that is about 80%-90% of what you currently pay in rent each month. I'll get to 'why' to undershoot your rent payment later. Crap... can't afford my dream house... If you don't have the down payment to make the numbers work (remember that this doesn't even include closing costs yet), there are other loan options like FHA loans that can go as low as about 5% down payment. The math would be the same but you replace 0.8 with 0.95. Then, look at your personal budget. Come up with general estimates of what you currently bring in and spend each month overall. Just ballpark it... Next, figure what you currently spend towards housing in particular. Whether you are paying for it or your landlord is paying for it, someone pays for a lot of different things for housing. For now, my list would include (1) Rent, (2) Mortgage Payment, (3) Electricity, (4) Gas, (5) Sewer, (6) Water, (7) Trash, (8) Other utilities... TV/Internet/Phone, (9) Property Insurance, (10) Renter's Insurance, and (11) Property Taxes. I would put it into a table in Excel somewhere that has 3 columns... The first has the labels, the second will have what you spend now, and the third will have what you might spend on each one as a homeowner. If you pay it now, put it in the second column. If your landlord pays it right now, leave it out as that's included in your rent payment. Obviously each cell won't be filled in. Fill in the rest of the third column. You won't pay rent anymore, but you will have a mortgage payment. You probably have a good estimate of any electricity bills, etc that you currently pay, but those may be slightly higher in a house vs. a condo or an apartment. As for things like sewer, water, trash or other 'community' utilities, my bet would be that your landlord pays for those. If you need a good estimate ask around with some co-workers or friends that own their own places. They would also be a good resource for property insurance estimates... shooting from the hip I would say about $100/month based on this website. (I'm not affiliated). The real 'ouch' is going to be property tax rates. Based on the data from this website, your county is about 9% of property value. So add that into the third column as well. Can you really afford a house? round 2 Now... add up the third column and see how that monthly expense amount on housing compares against your current monthly budget. If it's over, you don't have to give up, but you should just understand how much your decision to purchase a house will strain your budget. Also, you should use this information to look again at 'how much house can you afford.' Now, do some more research. If you need to get a revised loan amount based on the FHA loan decision, then use the bankrate calculator to find out what the monthly payment is for a 95% loan against your target price. But remember that an FHA loan will also carry PMI that is extra on top of your monthly payment. Or, if you need to revise your mortgage payment downwards (or upwards) change the loan amount accordingly. Once you've got the numbers set, look for properties that fit. This way you can have a meaningful discussion with yourself or other stakeholders about what you can afford. As far as arranging financing... a realtor will be able and willing to point you in the right direction for obtaining funding, etc. And at that point you can just check anything you're offered by shopping interest rates, etc against what the internet has to say. Feel free to ask us, too... it's hard to give much better direction without more specifics.\",\n \"\\\"Go on a website that has real estate listings. Find similar homes in the same neighborhood and list out the prices. Once you have prices, pick out two with different prices and call the realtor of the more expensive listing. Tell that realtor about the other listing and ask why their listing is more expensive. Compare their answer to the home that you are considering buying. For example, they may say that their house has a newly remodeled kitchen. Does the house you are considering have a newly remodeled kitchen? If so, then use the higher priced listing and throw out the cheaper one. If not, use the cheap listing and throw out the expensive one. Or they might say that the expensive house is in a better location than the cheaper house. Further away from traffic. Easier to get to the highway or public transportation. If so, ask how the location compares to the house you are actually considering. The realtor will tell you if the listings are comparable. When I talk about \\\"\\\"similar homes,\\\"\\\" I mean homes that are similar in square footage, number of bedrooms, and number of bathrooms. Generally real estate sites will allow you to search by all of these as well as location. After all this, the potential seller may still turn you down. If he really wanted to sell, he'd have suggested a price. He may just be seeing if you're willing to overpay. If so, he could turn down an otherwise reasonable offer. How much he is willing to take is up to him. Note that this would all be easier if you just bought a house the normal way. Then the realtors would do the comparables portion of the work. You might be able to find a realtor or appraiser who would do the work for a set fee. Perhaps your bank would help you with that, as they have to appraise the property to offer a mortgage. You asked if you can buy out a mortgaged house with a mortgage. Yes, you can. That's a pretty normal occurrence. Normally the realtors would make all the necessary arrangements. I'm guessing that a title transfer company could handle that.\\\"\",\n \"\\\"If I have a house that its market value went from $100k to $140k can I get HELOC $40K? Maybe - the amount that you can borrow depends on the market value of the house, so if you already have $100k borrowed against it, it will be tough to borrow another $40k without paying a higher interest rate, since there is a real risk that the value will decrease and you will be underwater. Can I again ask for HELOC after I finish the renovation in order to do more renovation and maybe try to end up renovating the house so its value raises up to $500k? I doubt you can just \\\"\\\"renovate\\\"\\\" a house and increase its market value from $140k to $500K. Much of a house's value is determined by its location, and you can quickly outgrow a neighborhood. If you put $360k in improvements in a neighborhood where other homes are selling for $140k you will not realize nearly that amount in actual market value. People that buy $500k houses generally want to be in an area where other homes are worth around the same amount. If you want to to a major renovation (such as an addition) I would instead shop around for a Home Improvement Loan. The main difference is that you can use the expected value of the house after improvements to determine the loan balance, instead of using the current value. Once the renovations are complete, you roll it and the existing mortgage into a new mortgage, which will likely be cheaper than a mortgage + HELOC. The problem is that the cost of the improvements is generally more than the increase in market value. It also helps you make a wise decision, versus taking out a $40k HELOC and spending it all on renovations, only to find out that the increase in market value is only $10k and you're now underwater. So in your case, talk to a contractor to plan out what you want to do, which will tell you how much it will cost. Then talk to a realtor to determine what the market value with those improvements will be, which will tell you how much you can borrow. It's highly likely that you will need to pay some out-of-pocket to make up the difference, but it depends on what the improvements are and what comparable homes sell for.\\\"\",\n \"Have you looked at conventional financing rather than VA? VA loans are not a great deal. Conventional tends to be the best, and FHA being better than VA. While your rate looks very competitive, it looks like there will be a .5% fee for a refinance on top of other closing costs. If I have the numbers correct, you are looking to finance about 120K, and the house is worth about 140K. Given your salary and equity, you should have no problem getting a conventional loan assuming good enough credit. While the 30 year is tempting, the thing I hate about it is that you will be 78 when the home is paid off. Are you intending on working that long? Also you are restarting the clock on your mortgage. Presumably you have paid on it for a number of years, and now you will start that long journey over. If you were to take the 15 year how much would go to retirement? You claim that the $320 in savings will go toward retirement if you take the 30 year, but could you save any if you took the 15 year? All in all I would rate your plan a B-. It is a plan that will allow you to retire with dignity, and is not based on crazy assumptions. Your success comes in the execution. Will you actually put the $320 into retirement, or will the needs of the kids come before that? A strict budget is really a key component with a stay at home spouse. The A+ plan would be to get the 15 year, and put about $650 toward retirement each month. Its tough to do, but what sacrifices can you make to get there? Can you move your plan a bit closer to the ideal plan? One thing you have not addressed is how you will handle college for the kids. While in the process of long term planning, you might want to get on the same page with your wife on what you will offer the kids for help with college. A viable plan is to pay their room and board, have them work, and for them to pay their own tuition to community college. They are responsible for their own spending money and transportation. Thank you for your service.\",\n \"Make sure you shop around and ask a lot of places for a good faith estimate. Last I knew, the good faith document is the same everywhere and long form that makes it easy enough to compare the hard numbers from place to place. I have gotten several estimates for various scenarios and I have had them hand written and printed. (I discounted the hand written ones because that broker seemed pretty disorganized in general) Learn the terms online, and start comparing. Use the good faiths as a negotiation tool to get lower rates or lower costs from other brokers. See how accurate the person is at listening to you and filling out the paperwork. See how responsive they are to you when you call with questions and want some changes. Check with at least four places. The more places you shop, the better idea you will have of what fees are high and what interest rates are low. I might pay a higher fee to get a lower interest rate, so there are lots of trade offs to consider.\",\n \"The particular Virginia improve the look of refinance is certainly one the most effective options for all those those who have Virtual assistant financial loans on his or her homes. These kind of Veterans administration remortgage assists them gain a large amount of rewards that could ease the load of coughing up up the financial products they've taken on their properties. The Virtual assistant financial products as opposed to some other mortgage loans don't require any complicated processes just like house appraisal to find out the present appreciated of your ex house or any other processes just like looking at if the man or woman satisfies the financing conditions or any other treatments. These loans help it become extremely comfy for on support men to obtain their house refinanced which has a far better rate of interest.\",\n \"\\\"At this stage, I would think about education. You can attend open houses, and often times real estate agents and bankers put on seminars for first time home buyers. Borrow books from the library and I would watch some HGTV. Many of the shows are entertaining and quite educational. Secondly you may want to get your finances in order. Make and stick to a budget. Start building a down payment and emergency fund. Pay down consumer debt/student loans. Picking up side work or overtime will help. You will look far more attractive to a lender if you go in with a large down payment and an emergency fund then someone with better credit scores and 100% financing. That is if the lender does manual underwriting. If not, then use a different lender. Once you get a budget figured out, how much of a down payment and emergency fund you need, and how much consumer debt to pay off, you can then predict when you will hit your goals. Then you will know when you are ready to buy. If it seems too far off, cut spending and work more if it is that important to you! You can make a prioritized list about what is most important features to you and your wife. I would wait on doing this until after you view some homes. Open houses are a great way to do this, but be careful not to get \\\"\\\"house fever\\\"\\\" and rush into a decision. You will get some encouragement to do so by the selling agents. After viewing some homes, and developing your list you can get an idea as of what the home will cost. This will further refine your budget, goals, and timeline. I think that is a lot of work to start.\\\"\",\n \"Our mortgage provider actually took the initiative to send us a refinance package with no closing costs to us and nothing added to the note; took us from a 30-year-fixed ~6.5% note to a 15-year-fixed ~5% note, and dropped the monthly payment in the process. You might talk to your existing lender to see if they would do something like that for you; it gives them a chance to keep your business, and it cuts your costs.\",\n \"Both are close, but two notes - amiable or not, I'd rather have a deal that ends now, and nothing is hanging over my head to get or pay money on a future sale. 401(k) money is usually pre-tax, so releasing me from $10K of home equity is of more value than the $10K in a 401(k) that would net me $7K or so. As I commented to Joe, I'd focus on valuation. If your house is similar to those in the neighborhood, you might easily value it. If unique, the valuation may be tough. I'd spend a bit on an appraiser or two.\",\n \"Don't steal from the 401k. If you take the money out, you'll pay 28% in taxes and 10% in penalties -- only getting $12,960 out. Before you do anything, consult an online refi calculator to make sure you'll be in the house beyond the break-even point. With the numbers you've given and some reasonable guesses I made, it looks like you'll break even within a year. If your new employer's plan allows for loans, roll it into the new plan. Based on what you say you're putting in, you should be able to take a loan out of about $15-20k, which would get you to your LTV goal. Before you do this, calculate: and make sure you will comfortably be able to handle all of the payments. Make sure you're aware of the loan terms on your 401k loan. Understand the penalties associated with failing to make timely payments. Finally, beware of sinking all of your liquid cash into this -- how will you handle an emergency that comes up soon after closing on the new loan before you have a chance to rebuild your emergency fund?\",\n \"To search sold homes in your neighborhood and run a current market analysis (CMA) to get an idea of what your home will sell for register for a free listingbook account with SearchSocalRealEstate.com to gain free, unlimited access to the official MLS database.\",\n \"It might be worth talking to a mortgage broker, even if you don't actually end up doing business with them. Upfront Mortgage Brokers explained Finding an upfront broker near you In a nutshell, upfront brokers disclose what they are paid for their services openly and transparently. Many brokers don't, and you can't be too careful. But a consultation should be free. An experienced broker can help you to navigate the pros and cons mentioned by the other responders. Personally, I would never do business with a broker who can't/won't show me a rate sheet on the day of the lock. That's my personal acid test. You might be surprised by what the broker has to say regarding your situation. That was my experience, anyway.\",\n \"\\\"Your headline question \\\"\\\"How do you find best mortgage without damaging credit score?\\\"\\\" has a simple answer. If you have all your ducks in a row, and know what you are doing, you will get qualified. If you are like a recent client of mine, low FICO, low downpayment, random income, you might have issues. If your self-prequalification is good, you are in control, go find the best rate/ total cost, no need to put in multiple applications. If, for some reason you do, FICO sees that you are shopping for a single loan, and you are not dinged.\\\"\",\n \"If you're refinancing a conforming (Fannie Mae or Freddie Mac) mortgage, don't go with an FHA. Try a HARP refinance, which won't increase your mortgage insurance even if your home has lost value. HARP also limits the risk-based pricing adjustments that can be charged, so your rate should be very competitive. With an FHA mortgage, even once you get the loan-to-value ratio down to 80 percent, you still have mortgage insurance for several years, plus the upfront costs. In your case, I think it's a bad deal.\",\n \"When evaluating a refinance, it all comes down to the payback. Refinancing costs money in closing costs. There are different reasons for refinancing, and they all have different methods for calculating payback. One reason to finance is to get a lower interest rate. When determining the payback time, you calculate how long it would take to recover your closing costs with the amount you save in interest. For example, if the closing costs are $2,000, your payback time is 2 years if it takes 2 years to save that amount in interest with the new interest rate vs. the old one. The longer you hold the mortgage after you refinance, the more money you save in interest with the new rate. Generally, it doesn't pay to refinance to a lower rate right before you sell, because you aren't holding the mortgage long enough to see the interest savings. You seem to be 3 years away from selling, so you might be able to see some savings here in the next three years. A second reason people refinance is to lower their monthly payment if they are having trouble paying it. I see you are considering switching from a 15 year to a 30 year; is one of your goals to reduce your monthly payment? By refinancing to a 30 year, you'll be paying a lot of interest in your first few years of payments, extending the payback time of your lower interest rate. A third reason people refinance is to pull cash out of their equity. This applies to you as well. Since you are planning on using it to remodel the home you are trying to sell, you have to ask yourself if the renovations you are planning will payoff in the increased sale price of your home. Often, renovations don't increase the value of their home as much as they cost. You do renovations because you will enjoy living in the renovated home, and you get some of your money back when you sell. But sometimes you can increase the value of your home by enough to cover the cost of the renovation. Talk to a real estate agent in your area to get their advice on how much the renovations you are talking about will increase the value of your home.\",\n \"I agree with the others that pulling the money out of your 401(k) is not the best idea due to the taxes and penalties. But I also think that a 401(k) loan is not a good option either. Somehow life happens, and the time when you can least afford to repay the loan (just after losing your job) will be the time when you have to repay the loan or pay the taxes and penalties. There's just too much risk there. You also lose the compounding gains you'd get from the investment, and it's likely not worth sacrificing your future retirement for this. It's probably worth finding out how close you are to having your house appraise out for a successful re-fi. Without that information, you're just guessing. Depending on how close you are, you pile up as much cash as you can over the next few months to try to pay down the mortgage enough to qualify for the re-fi. As you're doing this, if home values start coming up in your area, you'll have that going for you as well. It might even be worth suspending your 401(k) contributions for a short while to give you more cash to put towards the re-fi goal.\",\n \"You don't say what the time remaining on the current mortgage is, nor the expense of the refi. There are a number of traps when doing the math. Say you have 10 years left on a 6% mortgage, $200K balance. I offer you a 4% 30 year. No cost at all. A good-intentioned person would do some math as follows: Please look at this carefully. 6% vs 4%. But you're out of pocket far more on the 4% loan. ?? Which is better? The problem is that the comparison isn't apples to apples. What did I do? I took the remaining term and new rate. You see, so long as there are no prepayment penalties, this is the math to calculate the savings. Here, about $195/mo. That $195/mo is how you judge if the cost is worth it or the break-even time. $2000? Well, 10 months, then you are ahead. If you disclose the time remaining, I am happy to edit the answer to reflect your numbers, I'm just sharing the correct process for analysis. Disclosure - I recently did my last (?) refi to a 15yr fixed 3.5%. The bank let the HELOC stay. It's 2.5%, and rarely used.\",\n \"\\\"Be careful that pride is not getting in the way of making a good decision. As it stands now what difference does it make to have 200K worth of debt and a 200K house or 225K of debt and a 250K house? Sure you would have a 25K higher net worth, but is that really important? Some may even argue that such an increase is not real as equity in primary residence might not be a good indication of wealth. While there is nothing wrong with sitting down with a banker, most are likely to see your scheme as dubious. Home improvements rarely have a 100% ROI and almost never have a 200% ROI, I'd say you'd be pretty lucky to get a 65% ROI. That is not to say they will deny you. The banks are in the business of lending money, and have the goal of taking as much of your hard earned paycheck as possible. They are always looking to \\\"\\\"sheer the sheep\\\"\\\". Why not take a more systematic approach to improving your home? Save up and pay cash as these don't seem to cause significant discomfort. With that size budget and some elbow grease you can probably get these all done in three years. So in three years you'll have about 192K in debt and a home worth 250K or more.\\\"\",\n \"The exact answers depend on what you're going to do and what you started with and what your local market is like ... But a bit of websearching (and/or asking a good general contractor) will yield a table of typical improvement in sale price from various renovations. One thing you'll discover is that unless you are staring with something almost unsellable, few if any if thgem return more than you paid for them; getting back 85% is exceptionally good. A possible exception is energy-saving measures; basic air-seaking and attic insulation improvements pay back their cost relatively quickly, and solar can do so if you have a decent site for that -- and these are often subsidized in one way or another by government or utilities. For most things, thoiugh, the real answer is to ask yourself what would make the house better for you and your family, and what that would be worth to you. If you can get it done for less than that, go for it. It's a good idea to put together as complete a list vas possible before starting, since some will be considerably less expensive if done in the right order or at the same time. (Redo your roofing before installing rooftop solar panels, if possible; as one example.) Then prioritize thiose by what will improve your enjoyment of the house most. You'll probably get better specific advice over in the Home Improvement area of Stack Exchange.\",\n \"\\\"even though they're only asking for 1/2 the money and have excellent credit that the mortgage company may not lend it to them if I'm over priced Yes. If the house's value, as determined by the appraisal, is less than the sale price, the bank will not finance the loan. Appraisals and the appraisal process have become much tighter since the Frannie and Freddie debacle. This fact is true regardless of amounts or credit history. Though this is happens somewhat rarely; typically if a seller and buyer agree to a price, this price is a reasonable value -- after all, that is nearly the definition of \\\"\\\"market value\\\"\\\". So, yes, it is true (and always true, for any financed purchase), but that shouldn't really affect your decision. If you try to sell for more than the appraisal, you will just lower the price to the appraised amount.\\\"\",\n \"\\\"When you refinance, there is cost (guess: around $2000-$3000) to cover lawyers, paperwork, surveys, deed insurance, etc. etc. etc. Someone has to pay that cost, and in the end it will be you. Even if you get a \\\"\\\"no points no cost\\\"\\\" loan, the cost is going to be hidden in the interest rate. That's the way transactions with knowledgeable companies works: they do business because they benefit (profit) from it. The expectation is that what they need is different from what you need, so that each of you benefits. But, when it's a primarily cash transaction, you can't both end up with more money. So, unless value will be created somewhere else from the process (and don't include the +cash, because that ends up tacked onto the principle), this seems like paying for financial entertainment, and there are better ways to do that.\\\"\",\n \"For what its worth, I recently closed on a 30 year refinance mortage with an agent I found through Zillow. The lender has a perfect 5/5 reputation score, whose office was located within 5 miles of my house, and as suggested by justkt on MrChrister's response, I checked out the business on the better business bureau and its online presence prior to going forward with the bank. The process was relatively painless, and the APR and closing costs were less than my previous loan with a federal credit union which I've used in the past. I can't say if the bank I'll be using going forward is as good as the one I've used in the past, but overall I'm quite happy with it. I never met the individual in person but this saved both of us a fair amount of time honestly.\",\n \"I would ignore the bank completely when they use gross income. Decide, based upon your current living situation, what your MAX limit on a monthly payment is. Then from that determine the size and cost of the house you can buy. My husband and I decided on a $2000 monthly payment max, but also agreed $1500 was more reasonable. When using those numbers in the calculators it is way less than when using gross income. When we used our gross pay the calculators all said we could afford double what we were looking for. Since they don't know what our take home pay is (after all the deductions including 401k, healthcare, etc), the estimates on gross income are way higher than what we can comfortably afford. Set a budget based on your current living situation and what you want your future to look like. Do you want to scrimp and coupon clip or would you rather live comfortably in a smaller home? Do the online calculators based on take home pay and on gross pay to get a sense of the range you could be looking at.\",\n \"What do I need to know if I'm unemployed and need to take out a home loan to finance a litigious divorce? Which companies are best to shop around at? How do I present my self and situation? What harms or hurts my chances of getting a home loan? Is this the same hung as refinancing a house? Is there a website or article you can recommend about this?\",\n \"\\\"tl;dr: Your best course of action is probably to do a soft pull (check your own credit) and provide that to the lender for an unofficial pre-approval to get the ball rolling. The long of it: The loan officer is mostly correct, and I have recent personal evidence that corroborates that. A few months ago I looked into refinancing a mortgage on a rental property, and I allowed 3 different lenders to do a hard inquiry within 1 week of each other. I saw all 3 inquires appear on reports from each of the 3 credit bureaus (EQ/TU/EX), but it was only counted as a single inquiry in my score factors. But as you have suggested, this breaks down when you know that you won't be purchasing right away, because then you will have multiple hard inquiries at least a few months apart which could possibly have a (minor) negative impact on your score. However minor it is, you might as well try to avoid it if you can. I have played around with the simulator on myfico.com, and have found inquiries to have the following effect on your credit score using the FICO Score 8 model: With one inquiry, your scores will adjust as such: Two inquiries: Three inquiries: Here's a helpful quote from the simulator notes: \\\"\\\"Credit inquiries remain on your credit report for 2 years, but FICO Scores only consider credit inquiries from the past 12 months.\\\"\\\" Of course, take that with a grain of salt, as myfico provides the following disclaimer: The Simulator is provided for informational purposes only and should not be expected to provide accurate predictions in all situations. Consequently, we make no promise or guarantee with regard to the Simulator. Having said all that, in your situation, if you know with certainty that you will not be purchasing right away, then I would recommend doing a soft pull to get your scores now (check your credit yourself), and see if the lender will use those numbers to estimate your pre-approval. One possible downside of this is the lender may not be able to give you an official pre-approval letter based on your soft pull. I wouldn't worry too much about that though since if you are suddenly ready to purchase you could just tell them to go ahead with the hard pull so they can furnish an official pre-approval letter. Interesting Side Note: Last month I applied for a new mortgage and my score was about 40 points lower than it was 3 months ago. At first I thought this was due to my recent refinancing of property and the credit inquiries that came along with it, but then I noticed that one of my business credit cards had recently accrued a high balance. It just so happens that this particular business CC reports to my personal credit report (most likely in error but I never bothered to do anything about it). I immediately paid that CC off in full, and checked my credit 20 days later after it had reported, and my score shot back up by over 30 points. I called my lender and instructed them to re-pull my credit (hard inquiry), which they did, and this pushed me back up into the best mortgage rate category. Yes, I purposely requested another hard pull, but it shouldn't affect my score since it was within 45 days, and that maneuver will save me thousands in the long run.\\\"\",\n \"Pre-qualification is only a step above what you can do with a rate/payment calculator. They don't check your credit history and credit score; they don't ask for verification of your income; or verify that you have reported your debts correctly. They also don't guarantee the interest rate. But if you answer truthfully, and completely, and nothing else changes you have an idea of how much you can afford factoring in the down payment, and estimates of other fees, taxes and insurance. You can get pre-quaified by multiple lenders; then base your decision on rates and fees. You want to get pre-approved. They do everything to approve you. You can even lock in a rate. You want to finalize on one lender at that point because you will incur some fees getting to that point. Then knowing the maximum amount you can borrow including all the payments, taxes, insurance and fees; you can make an offer on a house. Once the contract is accepted you have a few days to get the appraisal and the final approval documents from the lender. They will only loan you the minimum of what you are pre-approved for and the appraisal minus down-payment. Also don't go with the lender recommended by the real estate agent or builder; they are probably getting a kick-back based on the amount of business they funnel to that company.\",\n \"\\\"There are basically two ways to get value out of an appreciating asset such as a home: (a) Sell it and take the profit. In the case of a home, you presumably still have to live somewhere, so unless you buy a cheaper home to replace it, this doesn't get you anywhere. If you can get another house that is just as nice and in just as nice a location -- whatever you consider \\\"\\\"nice\\\"\\\" to be -- than this sounds like a winning option. If it means moving to a less desirable home, then you are getting the cash but losing the nice home. You'll have to decide if it's worth it. (b) Use it as collateral for a loan. In this case, that means a second mortgage, home equity loan, or a home equity line of credit. But this can be dangerous. House prices are very volatile these days. If the value of the house falls, you could be stuck with debts greater than your assets. In my humble opinion, you should be very careful about doing this. Borrowing against your house to send the kids to college or pay for your spouse's life-saving operation may be reasonable. Borrowing against your house to go on a fancy vacation is almost surely a bad idea. The vacation will be over within a couple of weeks, but you could be paying off the debt for decades.\\\"\",\n \"\\\"So either scenario has about $10K upfront costs (either realtor/selling expenses or fixing up for rental). Furthermore, I'm sure that the buyers would want you to fix all these things anyway, or reduce the price accordingly, but let's ignore this. Let's also ignore the remaining mortgage, since it looks like you can comfortably pay it off. Assuming 10% property management and 10% average vacancy (check your market), and rental price at $1000 - you end up with these numbers: I took very conservative estimates both on the rent (lower than you expect) and the maintenance expense (although on average over the years ,since you need to have some reserves, this is probably quite reasonable). You end up with 2.7% ROI, which is not a lot for a rental. The rule of thumb your wife mentioned (1% of cash equity) is indeed usually for ROI of leveraged rental purchase. However, if rental prices in your area are rising, as it sounds like they are, you may end up there quite soon anyway. The downside is that the money is locked in. If you're confident in your ability to rent and are not loosing the tax benefit of selling since it sounds like you've not appreciated, you may take out some cash through a cash-out refi. To keep cash-flow near-0, you need to cash out so that the payments would be at or less than the $3200/year (i.e.: $266/month). That would make about $50K at 30/yr fixed 5% loan. What's best is up to you to decide, of course. Check whether \\\"\\\"you can always sell\\\"\\\" holds for you. I.e.: how stable is the market, what happens if one or two large employers disappear, etc.\\\"\",\n \"\\\"I had the same thing happen to my house. I bought it in 2011 for 137,000, which was the same as the FHA appraised value (because FHA won't guarantee a loan for more than their appraiser thinks its worth). January of last year, I get the letter from the tax office and see that my house has been assessed at only 122,000. I was shocked too, until I read a similar document that Phil told you to read. The short of it is, no matter what the tax assessor calls their calculation, it is an assessment. It was mass-produced along with everyone else's in your neighborhood by looking at its specs on paper (acreage, house square footage, age, beds/baths) and by driving by your home to see its general condition. The fact that your lawn may be less well-kept than the last time they drove by could have affected the decision a little. It's very unlikely to have been a major determinant of the assessment. The assessment value affects taxes, and taxes only. It is, in most states, a matter of public record, and so it could be used by a potential buyer to negotiate a lower price. However, everyone in the housing business knows that the assessed value is not the market value, and the buyer's agent will be encouraging their client to make a more realistic bid. This \\\"\\\"assessed value\\\"\\\" is not an \\\"\\\"appraisal value\\\"\\\". An appraisal is done by someone actually walking into and through your home, inspecting the general condition inside and out, to try to make a fair evaluation of what the home is actually worth. That number is almost always going to be more than the assessment value, because it takes into account all the amenities of the home; the current fixtures, the well-kept (or recently-replaced) flooring, the energy-efficient HVAC and hot water system, etc etc. It also takes into account recent comparables; what have other houses, with the same general statistics, the same amenities, relatively close in location, sold for recently? That will still generally be different from the true market value of the home. That value is nothing more or less than what a potential buyer will pay to have it at the time you decide to sell it, and that in turn depends 100% on your potential buyers' myriad situations. Someone may lowball even the assessed value because they're looking for a deal and hoping you're desperate; you just reject the offer. Someone may be looking at comparables indicating the house is maybe overpriced by $10k. You can counter and try to come to an agreement. Or, your potential buyer could work five minutes from your house, and be willing to pay at or above your asking price because the next best possibility is another 10 miles away. Since you aren't looking to sell the home, none of this matters, except to determine any escrow payments you might be making towards property taxes. Just keep making your mortgage payment, and don't worry about it. If you really wanted to, you could petition the state for a second opinion, but you think the value should be higher; if they agree with you, they'll raise the assessed value and you'll pay more in taxes. Why in the world would you want to do that?\\\"\",\n \"Add a few more cells to your header that list the interest paid in in the next 3 to 4 years on your current mortgage. Use the cumulative interest function from your spreadsheet program. In the main body of your spreadsheet, add columns that summarize the total cost over 3-4 years for each loan. Add columns that list the interest cost, total cost of interest + refi cost, and the difference between that approach and the interest costs from your current loan. Add 6 columns total: a set for 3 years and a set for 4. Something like this: Repeat that 3 year block off to the right and plug in the 4 year numbers. You requested that we factor in a 3.5% penalty against the money that goes to the discount fee. You could do that by adding a column that calculates this, like Joe described in his answer. Add that 3.5% accrual into the total calculation above, which in turn will knock down the amount of savings for each refi loan. PS: How are you going to earn 3.5% over 48 months?\",\n \"sheegaon's reply looks fine to me, a HELOC can usually be set up for a minimal ($50?) fee, and is currently a pretty low rate, mine is 2.5%. If this doesn't appeal to you, my other suggestion is a 401(k) loan. While this is usually a last resort and 'not' recommended, a short term use may make sense. The rate is low, and you can pay in back in full after moving into the new house.\",\n \"\\\"Generally it is not recommended that you do anything potentially short-term deleterious to your credit during the process of seeking a mortgage loan - such as opening a new account, closing old accounts, running up balances, or otherwise applying for any kind of loan (people often get carried away and apply for loans to cover furniture and appliances for the new home they haven't bought yet). You are usually OK to do things that have at least a short-term positive effect, like paying down debt. But refinancing - which would require applying for a non-home loan - is exactly the sort of hard-pull that can drop your credit rating. It is not generally advised. The exception to this is would be if you have an especially unusual situation with an existing loan (like your car), that is causing a deal-breaking situation with your home loan. This would for example be having a car payment so high that it violates maximum Debt-to-Income ratios (DTI). If your monthly debt payments are more than 43% of your monthly income, for instance, you will generally be unable to obtain a \\\"\\\"qualified mortgage\\\"\\\", and over 28-36% will disqualify you from some lenders and low-cost mortgage options. The reason this is unusual is that you would have to have a bizarrely terrible existing loan, which could somehow be refinanced without increasing your debt while simultaneously providing a monthly savings so dramatic that it would shift your DTI from \\\"\\\"unacceptable\\\"\\\" to \\\"\\\"acceptable\\\"\\\". It's possible, but most simple consumer loan refis just don't give that kind of savings. In most cases you should just \\\"\\\"sit tight\\\"\\\" and avoid any new loans or refinances while you seek a home purchase. If you want to be sure, you'll need to figure out your DTI ratio (which I recommend anyway) and see where you would be before and after a car refinance. If this would produce a big swing, maybe talk with some mortgage loan professionals who are familiar with lending criteria and ask for their opinion as to whether the change would be worth it. 9 times out of 10, you should wait until after your loan is closed and the home is yours before you try to refinance your car. However I would only warn you that if you think your house + car payment is too much for you to comfortably afford, I'd strongly recommend you seriously reconsider your budget, current car ownership, and house purchasing plans. You might find that after the house purchase the car refi isn't available either, or fine print means it wouldn't provide the savings you thought it would. Don't buy now hoping an uncertain cost-saving measure will work out later.\\\"\",\n \"It seems you understand the risks, it seems like a fine enough idea. Hopefully it works out for you. However, you may want to talk to a few local banks about getting a short term home equity loan. I know someone who was able to do this getting a very low rate for 7 years. At the time of the loan, the prevailing rate for a 15 year was 3.25, but they were able to get the HEL at 2.6 fixed. There was no closing costs. The best part about it was the payment was not that much more. While going from ~1200 to ~1800 is a 50% increase it was not that much in dollars in relationship to his household income. Note that I did not say Home Equity Line of Credit, which are vairable rates and amount borrowed.\",\n \"\\\"Chris, this is an arbitrage question with a twist: you cannot treat the location you want to live objectively. For example, why not SoCal instead of Texas? Yes, SoCal's expensive but what if you account for the weather? This question is very interesting for me personally: something I am going to focus on myself, soon, as well. To the question at hand: it's very hard to get a close estimate of the price from a single source, say, a website. The cost of a house is always negotiable and there's no sticker price, and there begins your problems. However, there are some publicly available information which websites aggregate, see: http://www.city-data.com/ Also, some heuristics might help: Rent is at-least as expensive as the monthly mortgage, (property) taxes, HOA fees, etc. Smart people have told me this, and this also makes sense to me as the landlord is in this business to make some money after all. However, there are also other hidden costs of home ownership that I am not aware of in details (and which I craftily sidestepped in my \\\"\\\"etc\\\"\\\" above) that could put a rental to be \\\"\\\"cheaper\\\"\\\". One example that comes to mind is you as a tenant get to complain if the washer-dryer misbehaves and demand the landlord get you a new one (see how you wouldn't make a sound were you to own it however) Such a website to gauge rentals: http://www.rentometer.com/ Houses cost more where the median income is more. Again, you cannot be objective about this because smart people like to live around smart people (and pay for the privilege). Turn again to http://www.city-data.com/ to get this information Better weather is more expensive than not so good weather. In the article you linked, notice the ratio of homes in California. Yes, I know of people who sold off their family ranches in Vancouver and Seattle to buy homes in Orange Country. In short, there is a lot of information you would have to gather from multiple sources, and even then never be sure that you did your best! This also includes arbitrage, as you would like to \\\"\\\"come out ahead\\\"\\\" and while you are doing your research (and paying your rent), you want to invest your \\\"\\\"savings\\\"\\\" in instruments where you earn more than what you would have saved in a mortgage, etc. I would very much like to be refuted on every point and my answer be edited and \\\"\\\"made better\\\"\\\" as I need the same answers as you do :-D Feel free to comment, edit your question etc and I will act on feedback and help both of us (and future readers) out!\\\"\",\n \"You could look into refinancing with a bank or credit union. But to weed out options quickly, use a service like LendingTree, which can vet multiple options for you a whole lot more quickly than you could probably do yourself. (I don't work for, or get any benefit from LendingTree.) Whatever you do, try to do all the applying within a short span of time, as to not negatively affect your credit score (read here) by creating extraneous inquiries. Then again, if your credit sucks, you might not qualify for a re-fi. If you are turned down, make your payments on time for six months or so, and try again.\",\n \"Do I need to pay for an inspection, or am I likely to save enough money from skipping it to cover potential problems that they would have caught? A home inspection costs hundreds of dollars. The average is $315. Inspections regularly catch things that cost tens of thousands of dollars to fix, e.g. a new roof or a cracked foundation. You also might find that a home inspection is required for your mortgage. do I need a realtor, or can I do their job myself? Unless you are a licensed realtor or you buy directly from a seller without a realtor, the fee (charged to the seller) will be the same regardless of whether you have a realtor. The seller's realtor will share the fee with your realtor if you have one. So you can do the work yourself (perhaps not as well), but you won't save money by doing so. If you have a lot of flexibility in when you purchase, you could look for especially cheap properties with motivated sellers. Arrange financing ahead of time (before you find a house), so you can close quickly. Some sellers will give you a discounted price to finish the sale quickly. Even small savings on the price of a house will outweigh most savings on closing costs.\",\n \"Taking the help of experts is the best possible offer that an individual can look forward to. In that case calculating the current mortgage interest rates in MN becomes more important. Best home refinancing company, MN offers you the scope to deal with mortgage calculators. These are modern and tech savvy tools that take into consideration various factors related to the same.\",\n \"These are your options: Unfortunately this will not be a quick process. You should note that until a potential lender goes through a detailed review of your finances you have only been pre-qualified. This is not as good as pre-approved. With pre-qualified they are basing the determination on what you told them, not what you can prove. Because you are aware of your short period of continuous employment you are best to be completely honest with a potential lender. That way you don't run into problems 30 days down the road when they realize the issue. The home seller will not be happy; and there was time and money wasted on down payments, credit checks, home inspections, and appraisals. In the US in most markets while there is a significant risk that a particular house will not be available in 5 months, there is a very slight risk that a neighborhood will not be available in 5 months.\",\n \"Probably the most accurate way is to just fill out your tax forms using numbers extrapolated from your current paycheck. If you don't typically itemize your deductions, you should be able to get pretty close.\",\n \"\\\"Paying for a good home inspection, from a person you choose. Mine was $500 and the guy gave me a nice print out with a bunch of little problems that I knew had to be fixed. It was easy to determine my fix-up cost, which was separate from my \\\"\\\"I want to change this\\\"\\\" cost. He was working for me, not the agents or the seller, so I felt more trusting of his advice. If you end up shopping hard and looking seriously at several houses, you might end up paying this more than once. (A bad report would be a good contingency for cancelling your offer.)\\\"\",\n \"To get the factors you want, start with a complete amortization calculator and a tax deduction calculator, filling in values for your down payment, purchase price, tax rates, and mortgage rate. If you are talking about a specific property, you should be able to get taxes for the current year, and perhaps using historical values estimate taxes going out. Some calculators will include PMI (which you should avoid like the plague in an actual purchase). Given some preliminary data, you can calculate your insurance. So once you have your PITI (principal, interest, tax, and insurance) monthly payment and tax deduction, you can calculate how much you spend a month on the house minus the deduction. To estimate maintenance costs, you could either figure out about what you'd need to replace in the given time you plan to stay put and use a rough estimate on what it is. You can also use some rough estimates like this (1% of the property value yearly!) or this (moving the number up to a whopping 2%). Don't forget closing costs as a buyer and seller. You can find estimates for these as well, and they are a function of the purchase price (usually around 2%). So to figure out how much it costs you to live in a house for X months, you can do So your total cost is Total Return Is: You can adjust that total return for inflation using this calculator to get your total return adjusted for inflation. If projecting into the future, you can try a formula found here. To figure out the return on your investment, use So to figure out the total return adjusted you need for a given ROI, find\",\n \"You sound like you're in enviable shape. This is good. Look for deals. There are tons of people in over their heads (unlike yourself) and they'll be foreclosed on if they don't get out. You're in a position to buy from a distressed seller. Assuming your credit rating is good, you can get a good loan for the balance. Time is on your side. Don't rush. Look for a great deal. My feeling is that the deals will only get better for the next year or two.\",\n \"It seems like you are asking two different questions, one is, how do I know if I can afford a house? The other is, how do I know what type of mortage to get? The first question is fairly simple to answer, there's plenty of calculators out there that will tell you what you can afford, but rule of thumb is 30% of income can goto housing. Now what type of mortgage to get can be much more confusing, because the mortgage industry makes money off of these confusing products. The best thing to do in my opionion in situations like this is to keep it simple. You need to be careful buying a house. So much money is changing hands and there are so many parasites involved in the transaction I would be extremely wary of anybody who is going to tell you what mortgage to get. I've never heard of a fee only independent mortgage broker, and if I found one that claimed to be I wouldn't believe him. I would just ignore all the exotic non-conforming products and just answer one simple question. Are you the type of person that buys an insurance policy or that likes to self insure? If you like insurance, get a 30 year fixed mortgage. If you like to self insure, get a 7 year ARM. The average lenghth someone owns a house is 7 years, plus in 7 years time, it might not adjust up, and even if it does, you can just accelerate your payments and pay it off quickly (this is the self insurance part of it). If you're like me, I'm willing to pay an extra .5% for the 30 year so that my payment never changes and I'm never forced to move (which is admitedly extremely unlikely, but I like the safety). I don't like 15 year term loans because rates are so low, you can get way better returns in the stock market right now, so why pay off sooner then you need to. Heck, if I had a paid off house right now I'd refi into a 30 year and invest the money. In summary, pick 30 year or ARM, then just shop around to find the lowest rate (which is extremely easy).\",\n \"You’re asking for a loan value that’s equal to 20% of your income. You need to calculate all bills that you pay and see what you have left over. If your current bills are more than 65-70% of your income you’ll have a tough time getting a loan.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["\"It's extremely easy to get a rough valuation of your home. Just phone a real estate agent. Virtually any real estate agent will come and value your home free. Even if you say outright \"\"I'm not considering selling, I just want a valuation\"\" they will probably do it, because for them getting contacts of people who might one day want to sell their home is all-important. Even if a few turn you down, some will do it. You might say that an agent isn't going to be as accurate as an appraiser, and you are right. There is also an expectation that they will evaluate higher than the real value, to persuaade you to sell. That probably isn't a big issue, and it's something you can compensate for. And even an appraiser is going to be based somewhat on speculation. You might try to do this calculation yourself, but an agent has access to the actual sale prices of nearby houses - you can't get that information. You only have access to the asking prices. And did I mention they will do it for free?\"","I see your remarks regarding Zillow, but would add a question. Why not look only for recent sales? If you find homes similar to yours with recent sales, that's similar to how the appraisers do it. I've refinanced many times and each time, I looked at sales within three miles of my house. I hit the appraised price very close in my estimate, high or low compared to Zillow, but used transaction data from there.just my thought. I chose a random neighborhood, and this was the first house I clicked. The main view shows last sale date, so I'd obviously suggest the OP look for more recent ones. If turnover is that low in his neighborhood, I understand, but the comment that transactions aren't listed is factually incorrect. I'd like my 2pts back. :)","If you're willing to pay a fee, you can probably just get a commercial appraiser to give you a valuation. In Australia I think it's around $100-200."],"string":"[\n \"\\\"It's extremely easy to get a rough valuation of your home. Just phone a real estate agent. Virtually any real estate agent will come and value your home free. Even if you say outright \\\"\\\"I'm not considering selling, I just want a valuation\\\"\\\" they will probably do it, because for them getting contacts of people who might one day want to sell their home is all-important. Even if a few turn you down, some will do it. You might say that an agent isn't going to be as accurate as an appraiser, and you are right. There is also an expectation that they will evaluate higher than the real value, to persuaade you to sell. That probably isn't a big issue, and it's something you can compensate for. And even an appraiser is going to be based somewhat on speculation. You might try to do this calculation yourself, but an agent has access to the actual sale prices of nearby houses - you can't get that information. You only have access to the asking prices. And did I mention they will do it for free?\\\"\",\n \"I see your remarks regarding Zillow, but would add a question. Why not look only for recent sales? If you find homes similar to yours with recent sales, that's similar to how the appraisers do it. I've refinanced many times and each time, I looked at sales within three miles of my house. I hit the appraised price very close in my estimate, high or low compared to Zillow, but used transaction data from there.just my thought. I chose a random neighborhood, and this was the first house I clicked. The main view shows last sale date, so I'd obviously suggest the OP look for more recent ones. If turnover is that low in his neighborhood, I understand, but the comment that transactions aren't listed is factually incorrect. I'd like my 2pts back. :)\",\n \"If you're willing to pay a fee, you can probably just get a commercial appraiser to give you a valuation. In Australia I think it's around $100-200.\"\n]","isConversational":false}}},{"rowIdx":79,"cells":{"_id":{"kind":"string","value":"6131"},"query":{"kind":"string","value":"Is it ever a good idea to close credit cards?"},"gt_ids":{"kind":"list like","value":["326094","365263","218088","252534","381720","235452","170204","416679","334111","2460","368806","258465"],"string":"[\n \"326094\",\n \"365263\",\n \"218088\",\n \"252534\",\n \"381720\",\n \"235452\",\n \"170204\",\n \"416679\",\n \"334111\",\n \"2460\",\n \"368806\",\n \"258465\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1,1,1,1,1,1,1,1,1,1,1],"string":"[\n 1,\n 1,\n 1,\n 1,\n 1,\n 1,\n 1,\n 1,\n 1,\n 1,\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["326094","334111","252534","368806","391384","258465","596081","365263","35625","218088","12247","339030","336659","464296","538110","331332","116243","544781","577221","268142","533288","557237","99449","99810","235452","400202","483018","592379","562378","416679","365651","142536","580818","591714","143596","390598","88637","254968","448614","145220","486419","479827","470024","137414","201982","381720","496080","277003","61968","336908","240042","312618","452121","444748","251701","472336","389221","321027","59786","162589","51959","579472","38938","1766","534472","26695","251643","417301","273528","370496","266659","407547","450372","504293","424304","352451","300660","379932","170204","409910","179181","508510","58304","113651","583142","422139","165619","481810","79049","333391","375780","98381","344386","278699","417785","592670","475270","92157","454308","89888"],"string":"[\n \"326094\",\n \"334111\",\n \"252534\",\n \"368806\",\n \"391384\",\n \"258465\",\n \"596081\",\n \"365263\",\n \"35625\",\n \"218088\",\n \"12247\",\n \"339030\",\n \"336659\",\n \"464296\",\n \"538110\",\n \"331332\",\n \"116243\",\n \"544781\",\n \"577221\",\n \"268142\",\n \"533288\",\n \"557237\",\n \"99449\",\n \"99810\",\n \"235452\",\n \"400202\",\n \"483018\",\n \"592379\",\n \"562378\",\n \"416679\",\n \"365651\",\n \"142536\",\n \"580818\",\n \"591714\",\n \"143596\",\n \"390598\",\n \"88637\",\n \"254968\",\n \"448614\",\n \"145220\",\n \"486419\",\n \"479827\",\n \"470024\",\n \"137414\",\n \"201982\",\n \"381720\",\n \"496080\",\n \"277003\",\n \"61968\",\n \"336908\",\n \"240042\",\n \"312618\",\n \"452121\",\n \"444748\",\n \"251701\",\n \"472336\",\n \"389221\",\n \"321027\",\n \"59786\",\n \"162589\",\n \"51959\",\n \"579472\",\n \"38938\",\n \"1766\",\n \"534472\",\n \"26695\",\n \"251643\",\n \"417301\",\n \"273528\",\n \"370496\",\n \"266659\",\n \"407547\",\n \"450372\",\n \"504293\",\n \"424304\",\n \"352451\",\n \"300660\",\n \"379932\",\n \"170204\",\n \"409910\",\n \"179181\",\n \"508510\",\n \"58304\",\n \"113651\",\n \"583142\",\n \"422139\",\n \"165619\",\n \"481810\",\n \"79049\",\n \"333391\",\n \"375780\",\n \"98381\",\n \"344386\",\n \"278699\",\n \"417785\",\n \"592670\",\n \"475270\",\n \"92157\",\n \"454308\",\n \"89888\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["\"Yes, it can be a good idea to close unused credit cards. I am going to give some reasons why it can be a good idea to close unused accounts, and then I will talk about why it is NOT necessarily a bad idea. Why it can be a good idea to close unused accounts \"\"I'd like to close the cards.\"\" That is reason enough. Simplifying your financial life is a good thing. Fewer accounts let you focus your energy on the accounts that you actually use. Unused accounts still need to be monitored for fraud. You mentioned that you have high credit card balances that you are carrying. This may indicate that you have trouble using credit responsibly, and having more credit available to you might be a temptation for you. If these unused cards have annual fees, keeping them open will cost money. Unused cards sometimes get closed by the bank due to inactivity. As a result, the advice often given is that, in addition to not closing them, you are supposed to charge something to it every month. This, of course, takes more of your time and energy to worry about, as well as giving you another monthly bill to pay. Why it is NOT necessarily a bad idea to close unused accounts Other answers will tell you that it may hurt your credit score for two reasons: it would increase your utilization and lower your average account age. Before we talk about the validity of these two points, we need to discuss the importance of the credit score. Depending on what your credit score currently is, these actions may have minimal impact on your life. If you are in the mid 700's or higher, your score is excellent, and closing these cards will likely not impact anything for you in a significant way. If you aren't that high in your score yet, do you have an immediate need for a high score? Are you planning on getting more credit cards, or take out any more loans? I would suggest that, since you have credit card debt, you shouldn't be taking out any new loans until you get that cleaned up. So your score in the mean time is not very important. Are you currently working on eliminating this credit card debt? If so, your utilization number will improve, even after you close these accounts, when you get those paid off. Utilization has only a temporary effect on your score; when your utilization improves, your score improves immediately. Your average account age may or may not improve when you close these accounts, depending on how old they are compared to the accounts you are leaving open. However, the impact of this might not be as much as you think. I realize that this advice is different from other answers, or other things that you may read online. But in my own life, I do a lot of things that are supposedly bad for the credit score: I only have two credit cards, ages 2.5 and 1.5 years. (I closed my other cards when I got these.) My typical monthly utilization is around 25% on these cards, although I pay off the balance in full each month, never paying interest. I have no car loan anymore, and my mortgage is only 4 months old. No other debt. Despite those \"\"terrible\"\" credit practices, my credit score is very high. Conclusion Make your payments on time, get out of debt, and your score will be fine. Don't keep unwanted accounts open just because someone told you that you should.\"","\"The only good reason I find to close cards are: it's a card with an annual fee that you don't need. No point bleeding money each year. churning rewards. Open card to get bonus promotion such as \"\"spend $500 in first 3 months, get $200 bonus\"\". Close card and open a year later to do that same bonus again if available. Many cards don't allow you to do this. making room for newer cards at the same bank. Example, you have 5 Chase Cards and you want to apply for a 6th. Chase says you have maximized your credit they will extend you. You close one of your existing cards to get that new card. I have seen that many banks allow you to shift over some over your existing available credit to your new card without having to close them.\"","In my own case, my credit score went up drastically after I closed cards. It did go down a bit (like 10 points) in the short term. Within 6 months, however, I did see significant gains. This would include closing the American Express card that I had for like 10 years. According much of what I read, you should never close a AMEX card. I did and it did not hurt me. What helps all this is that my utilization is zero.","\"I'd say close them if they have fees, if you're worried about fraud or if you're going to be tempted to use them. It may have an affect on your credit rating, but it shouldn't hurt you seriously. Having too many cards gives you the \"\"opportunity\"\" to overspend, which obviously isn't good.\"","\"You should never close a credit card account unless it has an annual fee or you are overspending on it. Open lines of credit - even un-utilized ones - have a positive effect on your credit score. First of all, they increase your total credit which helps your score. Second of all, they are always \"\"paid on-time\"\" which is another benefit. Finally, they increase the length of your credit history. You can keep unused credit cards forever in your drawer. They are rarely closed due to inactivity and cost you nothing. However, if your card has an annual fee, you should close it. The potential loss to your credit score is unlikely to offset the annual fee.\"","You mentioned you have a bunch of credit cards with no balance, while others have fairly high balances I would not recommend you to close the 0 balance credit cards if they have lower APR. You can transfer the balance to those cards with lower APR. Now, if those 0 balance cards do not have lower APR, closing them will reduce my overall balance and hurt my credit rating and that is true, assume that you mean overall credit line instead of overall balance. But to my understanding, if you keep the payments good and on time, that effect is only temporary, and therefore you can definitely close them. Don't forget, paying off your balance can also lower your utilization rate and therefore increase your credit ratings, and you can focus more on that instead. Also larger number of accounts with amounts owed can indicate higher risk of over-extension, therefore you should pay off your low balance accounts first, and do not open new credit accounts until you have paid off the current balance.","\"I found a good article on cnnmoney.com that touches on this titled \"\"5 Ways to Destroy your Credit\"\". One of these \"\"ways\"\", it says, is closing your credit cards. The article cited one expert who says, Since part of your score is based on the length of time certain lines of credit have been open, closing out that 10-year old credit card could take a bite out of your credit score... It's negative because it's taking away a reference to a positive credit history.\"","It is an issue of both utilization and average age of accounts. If your cards with $0 balances on them are: A) newer cards than the ones you are carrying balances on and you don't want them B) much lower limit cards than the ones you are carrying balances on then you can raise your score by closing them, as the utilization change won't be a large factor and you can raise the average age of your open accounts.","\"Two factors that positively your credit score are the number of open accounts you have in good standing, and the average age of the accounts. The more accounts you have in good standing, the more likely you seem to pay back what you borrow from new creditors. The older the average age of the accounts, the more you seem like an experienced borrower who has had many years of successful credit activity. Closing them would lower the total number of accounts in good standing you have, and would also likely lower the average account age (unless you've recently opened them). To \"\"simplify the number of cards you have\"\", pick the one or two you would consider cancelling (worst rewards/benefits, highest yearly fee, etc.) and just don't keep them in your wallet anymore. You don't have to worry about paying them off every month (because you don't buy anything with them) and you still get the credit score benefits of having the accounts open.\"","In your specific case, I would leave them open unless you have a specific reason for wanting to close them - particularly, unless you feel closing them is necessary for you to not misuse them. The impact on the credit score is not why I say this, though. Much more important are the two competing real factors: My suggestion would be to take the cards and put them in your file cabinet, or whatever would cause you to not use them. In fact, you could even cut them up but not close the accounts - I had an account open that I didn't possess a physical card for several years for and didn't use at all, and it stayed open (though it's not guaranteed they'll keep it open for you if you never use it). In an emergency you could then ask them to send you a new copy of the card very easily. But, keep them, just in case you need them. Once you have paid off your balances on your balance-carrying cards, then you should consider closing some of them. Keep enough to be able to live for ~4-6 months (a similar amount to the ideal rainy day fund in savings, basically) and then close others, particularly if you can do so in a way that keeps your average account age reasonably stable.","You want to have 2-4 credit cards, with a credit utilization ratio below 30%. If you only have 2 cards, closing 1 would reduce your credit diversity and thus lower your credit score. You also want at least 2 years credit history, so closing an older credit card may shorten your credit history, again lowering your credit score. You want to keep around at least 1-2 older cards, even if they are not the best. You have 4 cards: But having 2-4 cards (you have 4) means you can add a 5th, and then cancel one down to 4, or cancel one down to 3 and then add a 4th, for little net effect. Still, there will be effect, as you have decreased the age of your credit, and you have opened new credit (always a ding to your score). Do you have installment loans (cars), you mention a new mortgage, so you need to wait about 3 months after the most recent credit activity to let the effects of that change settle. You want both spouses to have separate credit cards, and that will increase the total available to 4-8. That would allow you to increase the number of benefits available.","I disagree with the reply. Your both impressions are correct. - Do not close old credit cards because they keep your credit rating high (fico score) - Also low utilization that credit cards report to credit rating companies, improves your rating.","Except for the fact that canceling credit cards will hurt your credit, either by increasing your utilization ratio or decreasing the length of your credit lines if you cancel the oldest card, which makes it that much harder to get the good interest rates available on other loans.","Credit Score is rather misleading, each provider of credit uses their own system to decide if they wish to lend to you. They will also not tell you how the combine all the factoring together. Closing unused account is good, as it reduced the risk of identity theft and you have less paperwork to deal with. It looks good if a company that knows you will agrees to give you more credit, as clearly they think you are a good risk. Having more total credit allowed on account is bad, as you may use it and not be able to pay all your bills. Using all your credit is bad, as it looks like you are not in control. Using a “pay day lender” is VERY bad, as only people that are out of control do so. Credit cards should be used for short term credit paying them off in full most months, but it is OK to take advantage of some interest free credit.","Assuming you don't plan on continuing to use the card frequently, the best advice I've heard is to leave them open unless they have an annual fee. Also, leaving it open with a zero balance doesn't help your credit score as much as using it a few times a year (even for small amounts) because it will eventually shift to an inactive state that is less positive for your credit score.","Its actually a good thing. The #1 factor to your credit score is your credit utilization. So if you don't spend money unwisely and they don't have any annual fee I would keep them and use them each twice a year to keep them in your credit mix.","Your credit score is definitely affected by the age of your credit accounts, so if you frequently close one card and open another new one, you're adversely affecting the overall average age of accounts. This is something to consider and whether it is worth what you're trying to achieve. Sometimes, if you're a good customer and are insistent enough, you can simply call your credit card company and use the threat of closing your account in favor of another card that offers something attractive to get your current bank to sweeten its incentives to keep your business. I know many people who've done this with real success, and they spare themselves the hassle of obtaining a new card and suffering the short term consequences on their credit report. This might be an avenue worth trying before you just close the account and move on. I hope this helps. Good luck!","The old underwriting standards were 28% home debt to income ratio and 33% consumer debt to income ratio. Consumer debt is calculated based on minimum payments. Now, most models are revised upwards... I believe 33/38 is more common today. As long as you are current on the accounts, closing credit or store revolving accounts will have little or no bearing. Just leave them dormant... there is no positive result from closing accounts that have no balance. Having low or no balances has NO negative impact on your credit score. Low balances are NOT red flags to lenders. Period. Here's a quote from Fair Issac: It's just not true that you can have too much available credit. That by itself is never a negative with the score. Sometimes the things you do to get too much can be a problem, such as opening a bunch of new accounts, but for the most part, that's just kind of an old wives' tale. The major drivers of credit scoring are: To improve your prospects for getting a mortgage, you should be reducing your spending and focusing 60/40 on saving for a down payment and paying down that $15k credit card, respectively. Having cash for a down payment is critical to your buying power, as zero-down loans aren't widely available in 2011, and a large downpayment will allow you to eliminate or reduce the time you are paying PMI. PMI reduces your buying power, and is a big waste of money.","First off, congratulations on taking care of your finances and paying off your cards! Takes a lot of discipline. If your next oldest card is just a year apart, you can safely close this card.","You're right to keep the oldest one. That's an asset to your credit rating. Since you're already responsible with your credit, a dip in your credit rating doesn't really matter unless you're looking for another loan, like a mortgage. I personally like the cash-back rewards because they're the most flexible, so you have a good thing going with that card. Do those reward cards give you perks on all of your purchases? If they do, then look carefully to see if you can do noticeably better with another card. If not, it may not really be worth it. Regarding cancelling one of the cards, I wouldn't, and here's why. Your cards can get compromised, and sometimes more than one gets compromised at the same time. I was glad that I had three cards, because two of them got hit the same day. Hence, having three cards hit on the same day is possible, and you'll be glad that you have the fourth.","Closing the card will be fine. The consequences are related to your available credit and actual/potential utilization. If you have less total credit, any credit you actually use will be a greater percentage of your total credit, manipulating your score downwards more greatly. The next consequence will be related to the age of your credit history, which is an average of your credit lines. This seems negligible and also beneficial for you, since your credit history is so young to begin with.","Closing your oldest revolving account will lower your average age of accounts and hurt your score. No ifs, ands, or buts. The amount it drops is hard to tell, and it may only be a few points if your other cards are fairly old as well. While the FICO scoring algorithm is proprietary and hard to predict, you can use the official FICO Simulator to estimate the impact. Based on the information you provided (5+ cards, oldest card 5 years), your estimate is 750-800. Performing the same estimate and only changing the number of cards and age (2-4 cards, oldest card 2-4 years), the score estimate drops to 735-785. Both of these estimates assume you have 9% or less utilization. You can probably estimate that your score will drop at least 15 points. However, it may not matter to you whether your score is maximized. Once you get above a certain FICO score, it doesn't matter. For example, I recently refinanced a vehicle and asked the loan officer about their lowest APR, and found out that they required a 780 FICO for it. Kind of like the difference between getting a 91 or a 99 in a class, an A is an A. Some other factors you may want to consider before you make your choice:","If you want to close the card, close it. The impact on your credit score will be minimal, if any, and the impact on your life will likely be even less. First, as you noted, the history from your card does not disappear when you close the card; it will stay on your credit report for as long as 10 years. By that time, you'll have many years of on-time payments from your other cards, and the loss of this one card won't be significant. Because the card has a low credit limit, it won't have much effect on your credit utilization numbers, either. Finally, your credit score might just be high enough that a small drop will have no impact on your financial life whatsoever. In my opinion, hanging onto a credit card you don't want just to try to attain some type of high score is pointless. Close the card.","Close the account. The age doesn't outweigh the fact that you have to pay for the card. It would be one thing if the credit line was a couple thousand but showing the credit bureaus that you are staying away from the $425.00 doesn't really make them think you are any more trustworthy with your available credit. Utilization matters when you are staying away from much larger chunks of your available credit (across all cards).","There's no harm in keeping them open. Like you said, closing the lines will potentially hurt your utilization. The extent of that impact will depend on your particular situation. There are situations where closing a line will have no actual impact on your utilization. If you have 100k of open credit and a debt load of $2k, if you close a $10k line you won't really have an issue because your utilization is 2% and closing the line will take you to 2.2%.","\"If you look around online and read about credit scores, you'll find all kinds of information about what you should do to maximize your credit score. However, in my opinion, it just isn't worth rearranging your life just to try to achieve some arbitrary score. If you pay your bills on time and are regularly using a credit card, your score will take care of itself. Yes, you can cut up the card you don't like and keep the credit card account open. The bank may close your account at some point in the future because of a lack of activity, but if they do, don't worry about it. You have other accounts that you are using. Personally, I don't like having open credit accounts that I'm not using; I close accounts when I'm done with them. I realize that it goes against everything that you will read, but my score is very high and my oldest open credit card account is 2 years old. Don't let them scare you into credit activity that you don't want just to try to \"\"win\"\" at the credit score.\"","Hits to your credit rating for canceling one of the newer cards will be a small hit for a few months. You do have some options. I also believe that a person with good credit should have multiple cards: I like having a cash back card for the majority of our transactions. Unfortunately that card isn't accepted everywhere, so I have two other cards with broad market coverage to make sure we always have an option if the vendor doesn't take the main card. Also having multiple cards makes sure that if there is an issue with one card you are never caught without a card. One time the main card was rejected by a gas station because my wife just used the same account to buy gas across town. When we got home their was a fraud alert message on our phone.","\"FICO SCORING http://www.pbs.org/wgbh/pages/frontline/shows/credit/art/chart_fico.gif This is from the PBS Frontline show \"\"Secret History of the Credit Card.\"\" Getting rid of one card won't immediately trash your score, nor will it be by the full impact (15%) of credit history. If there's no fee, I'd buy gas once per quarter with it. If there is a fee, I'd check my FICO score and if I can afford to lose 20 or so points for a time, I'd go for it.\"","The number that really matters in this situation is your age of your longest account. Opening a new account is a good idea, but closing an old one may have an impact on your score if you have no other active accounts. If you have another card, or an overdraft line of credit or a car loan that is 4 or 5 years old, you won't see a big impact. I'd suggest calling the card company and asking them to waive the fee. They usually will. In the meantime, I would recommending having one card from each of the major networks. (MC, Visa, Discover, Amex) so you don't run into this again. Just don't open them all at once.","I'm not sure if someone else answered already in the same manner I will. I can't guarantee for sure if it's the same in the U.S.A. (it might since major credit cards companies like Visa/MC/AMEX are American companies) but in Canada having/keeping unused CC is a disadvantage because of the following: Banks and financing companies look more at the total amount of credit available to you than at how much purchases you have on your cards. Ex: Let's say that you have the following: - Visa cc with $10,000 limit and $2000 worth of purchases (made more than 30 days ago) on it. - Mastercard cc with $10,000 limit as well and $1000 worth of purchases (less than 30 days old) - A major retail store cc with $2000 limit and $0 balance. Hypothetical situation: You want a bank loan to do some expensive house repairs and are looking for a lower interest rate than what your cc can offer. The bank will not care about the amount on the cards. They will add-up all the limits of your cc and treat your loan request as if ALL your cards were filled to their respective limit. So in this case: they will consider you as being right now in debt of $10K+$10K+$2K = $22,000 instead of only $3000 and they might: 1. refuse you the loan 2. grant it only if you transfer all purchases on a single card and cancel all the others. 3. Once the $3000 is transferred on one of the cards (and the others cancelled), they can require that you reduce the limit of that card. Hope this helps!","You should. The impact on the credit score is small, and probably not worth the money of the annual fee. I would only change that if you plan to get a mortgage or car loan the next month - then wait until afterwards.","Problems with your plan (in no particular order) there is a limit, once they have decided that you have enough credit they won't offer any more. If the economy changes (like it did in 2008) they can reduce the limit on existing accounts. If you don't use them, they may decide to close them. Using existing cards will encourage the bank to increase the limit on that card. opening cards can make some lenders nervous. Having a new card close to when you are applying for a mortgage or a car loan can make them less likely to lend you the max. You have to decide: Are you trying to buildup your credit limit? or your credit score?","Please do not conflate number of credit cards with amount of debt. Consider two scenarios, The latter scenario yields much better credit scoring. Many recommendation sources suggest the following, Although your credit score seems very important, it is only important when you have financial interactions (such as applying for credit or services) where the other party makes decisions based upon the score. You should only obtain loans and credit when you want and it makes sense based upon your needs; choosing to live your life to serve credit scoring agencies may not be your happy place.","The two factors that will hurt you the most is the age of the credit account, and your available credit to debt ratio. Removing an older account takes that account out of the equation of calculating your overall credit score, which can hurt significantly, especially if that is the only, or one of just a couple, of open credit lines you have available. Reducing your available credit will make your current debt look bigger than what it was before you closed your account. Going over a certain percentage for your debt to available credit can make you look less favorable to lenders. [As stated above, closing a credit card does remove it from the credit utilization calculation which can raise your debt/credit ratio. It does not, however; affect the average age of credit cards. Even closed accounts stay on your credit report for ten years and are credited toward average age of cards. When the closed credit card falls off your report, only then, will the average age of credit cards be recalculated.] And may I suggest getting your free credit report from https://www.annualcreditreport.com . It's the only place considered 'official' to receive your free annual credit report as told by the FTC. Going to other 3rd party sites to pull your credit report can risk your information being traded or sold. EDIT: To answer your second point, there are numerous factors that banks and creditors will consider depending on the type of card you're applying for. The heavier the personal rewards (cash back, flyer miles, discounts, etc.) the bigger the stipulation. Some factors to consider are your income to debt ratio, income to available credit ratio, number of revolving lines of credit, debt to available credit ratio, available credit to debt ratio, and whether or not you have sufficient equity and/or assets to cover both your debt and available credit. They want to make sure that if you go crazy and max out all of your lines of credit, that you are capable of paying it all back in a sufficient amount of time. In other words, your volatility as a debt-consumer.","\"Your total debt is equal to your total non-credit debt (student loans, car loans) + your total available credit. This is the truth of the \"\"low balance\"\" fear from lenders that you had heard about. Your credit utilization is across all of your cards. So if you have two cards, both with 15K limits and one is maxed out and one is empty, that is 50% utilization. If you have both cards with 7.5K balances, that is also 50% utilization. For the 8 cards that are paid off and still open, after you buy a house, I'd close any cards you aren't using. Not everyone will agree with this. If possible, I would close the 8 cards now and pay off the 15K balance before buying a house. If it's hard to pay it off now, it will be harder when you have a mortgage and home maintenance costs. If you want to buy the house before you pay off all of your credit card debt, I'd still close the 8 cards that are already paid off and pay down your last card to 4K (or less) to get under 25% utilization. The credit rating bureaus do not publish exactly how a different utilization rate of credit will affect your score, but it is known that lower utilization will improve your score. FICO calls this \"\"Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)\"\" Also, the longevity of your credit history is based on type of account (credit cards, car loans, etc.) so if you keep one credit card open, you still keep your long \"\"history\"\" with credit cards on your credit report. FICO calls this \"\"Time since accounts opened, by specific type of account\"\"\"","Since recent changes to credit scoring (July 2017) it may not be necassary to do this, as more emphasis is placed on having a timely payment history and less emphasis is placed on having a low credit utilization ratio. Using what’s known as trended data is the biggest change. The phrase means credit scores will take into account the trajectory of a borrower’s debts on a month-to-month basis. In fact, having a low credit utilization ratio may even negatively effect you (if your available credit line value is high): ... VantageScore will now mark a borrower negatively for having excessively large credit card limits, on the theory that the person could run up a high credit card debt quickly. Those who have prime credit scores may be hurt the most, since they are most likely to have multiple cards open. But those who like to play the credit card rewards program points game could be affected as well. source","Clark Howard suggests you hop your cards. Get your new card now and when you have it, dump the card with the high fees. The age of your accounts has some impact on your credit rating, but unless you have a major purchase coming up and your score is teetering, I would take the score hit to save money on the card.","Cancelled cards don't fall off the system for a long time, up to ten years. Card terms change, with notice of course, but it can happen at any time. I had a card with a crazy perk, 5% back in Apple Gift cards. This was pre-iPod days, but it was great to get a new computer every two years for free. But it was short lived. Three years into it, the cards were changed, a no-perk card from the bank. That is now my oldest account, and it goes unused. Instead of holding cards like this, I wish I had flipped it to a different card years ago. Ideally, your mix of cards should provide value to you, and if they all do, then when one perk goes away, it's time to refresh that card. This is a snapshot from my report at CreditKarma. (Disclosure, I like these guys, I've met their PR folk. I have no business relationship with them) Elsewhere on the page it's noted that average card age is a 'medium impact' item. I am 50, but I use the strategy above to keep the cards working for me. My current score is 784, so this B on the report isn't hurting too much. The tens of thousands I've saved in mortgage interest by being a serial refinancer was worth the hit on account age, as was the credit card with a 10% rebate for 90 days, the 'newest account' you see in the snapshot. In the end, the score manipulation is a bit of a game. And some of it is counter-intuitive. Your score can take a minor hit for actions that would seem responsible, but your goal should be to have the right mix of cards, and the lowest interest (long term) loans.","it is better for your credit score to pay them down over time. This is a myth. Will it make much of a difference? You are paying additional interest even though you have the means to pay off the cards completely. Credit score is a dynamic number and it really only matters if you are looking to make a big purchase (vehicle, home), or perhaps auto insurance or employment. Pay off your credit cards, consolidate your debt, and buy yourself a beer with the money you will be saving. :)","If you've got the money to pay off your credit cards, do it. Today, if possible. There is no need to pay another penny of interest to them. They may or may not cancel your cards. That is up to them. We can't know what will trigger an individual bank to cancel your card. The answers you got on your other question offer some speculation on why some banks might cancel, but this is not something banks reveal. Anything you do on your own to try to keep the cards open is just a guess, and may or may not succeed. But ask yourself: why do you want to keep these cards? Is it for the convenience of the card? I agree that credit cards (paid in full monthly) are convenient, but when they start costing you money, they aren't worth it anymore, in my opinion. Debit cards have most of the same conveniences of credit cards, and are free. If it is for emergencies, I recommend instead building up an emergency cash fund. That way, if an emergency arises, you won't be forced to borrow money at high credit card interest rates. If the reason you want to hang on to the credit card is so you can spend more than you have, then you will find yourself in the same situation again. If I were you, I would pay off the cards ASAP. If the banks cancel your cards, just switch to a debit card and be thankful that you are no longer continuously leaking money to the banks.","\"You don't need to have a bunch of credit cards lying around; just a couple is fine. Get a \"\"rewards\"\" card (without annual fee) that pays you back for use, and use it regularly to buy groceries, for example. Pay it off promptly each month, using the rewards, if you like, to reduce the amount you have to send in. Or you can use the rewards for other purchases; some merchants offer $25 worth of merchandise for $20 in rewards. It used to be the case that you could negotiate a discount for paying cash rather than use a credit card, but that is a lot harder to do now, in many cases because credit-card company contracts with merchants prohibit this practice. Also, merchants often prefer credit cards rather than cash because money-handling is an issue (pay for an armored car to come pick up the day's receipts, or risk getting mugged on the way to the bank, possible burglaries if you leave the money overnight in the store, daily balancing of cash-register trays, etc.) So, not being in debt and being rich enough to not need to be in debt are laudable goals, and you have my best wishes that you will reach them soon, but getting rid of all your credit cards as a part of not being in debt may be more trouble than it is worth. Keep a couple, pay them off promptly, and if you are concerned about being in debt, you can time your charges so that you are in debt at most 2 or 3 days each month.\"","I once called Amex to cancel a card with an annual fee. Instead, they were able to give me a different card with no fee. They were happy to do it. Of course, Amex has fantastic customer service, while Capital One is not known for it. But, its worth a five minute call, and you will retain your good score.","The biggest reason that they are a bad idea is just because every credit application hurts your credit score, as does having too many cards. In addition, every new card is a greater risk of identity theft.","\"The weird thing is that if you use the credit impact simulators with the credit monitoring services, they show that the impact of paying your credit cards off completely is more negative than carrying a small balance, which doesn't make a great deal of sense, one would think. From what I can gather, the rationale is that carrying a small balance shows you making payments over time, as opposed to having a zero balance. This doesn't quite compute with me, but I don't truly understand the inner workings of the scoring models. To confirm this, I used simulators with both TransUnion and Experian, and both showed this. I know that it's easy to find people on both sides of this argument, so I can't say which is the best option (certainly whichever side someone falls on is the one they'll argue is the right one! chuckle). In all fairness, your best tool is time. The effects of your prior bad decisions will lessen over time as they move further away in your history and then disappear altogether. Obtaining a credit card just because you think you need one is not a compelling argument, by any means. If you can't rationalize reasons why you need it then maybe you should question the wisdom of such a decision. If you don't have a particular need for better credit right now, why be in a hurry to take on debt? Whatever the formulas are for calculating credit scores, the specific details are a pretty closely-guarded secret (they're proprietary for starters, plus it theoretically prevents people from \"\"gaming the system\"\" for a better score), but if you do enough research online, you can get a pretty good sense of how they work in general. Whatever you do with your credit should be in line with your overall financial goals. If you want to remain debt-free (at least for now) then having a credit card you can't otherwise justify a need for just introduces temptations which could prove tough to resist (\"\"wants\"\" quickly turn into \"\"needs\"\" when you can put it on a card you pay later), then you're right back in the same place you were earlier in your life. Instead of trying to figure out the \"\"best strategy\"\" for a credit card, first ask yourself how necessary it is to you right now in light of your financial objectives, then go from there. I hope this helps. Good luck!\"","Take the consolidation loan and pay it off. Don't close the card. Opening a new account will have no bearing on your mortgage a year or two down the road. Keep paying on time -- that will make a big difference! JohnFX's suggestion to open a new card and do a transfer is a great idea if you have good credit. Just read the fine print -- most cards charge a 3-5% transfer fee and some cards accrue interest if you don't pay within the promotional period.","There is also security aspect. By reducing the number of active credit/debit cards, one significantly reduces the surface of attack. There is smaller chance of getting one of your card information stolen and misused (cf Target data leaks and others).","Your plan will work to increase your total credit capacity (good for your credit score) and reduce your utilization (also good). As mentioned, you will need to be careful to use these cards periodically or they will get closed, but it will work. The question is whether this will help you or not. In addition to credit capacity and utilization, your credit score looks at things like These factors may hurt you as you continue to open accounts. You can easily get to the stage where your score is not benefitting much from increased capacity and it is getting hurt a lot by pulls and low average age. BTW you are correct that closing accounts generally hurts your score. It probably reduces average age, may reduce maximum age, reduces your capacity, and increases your utilization.","If you're looking for cause-effect, applying for another card won't matter at all if you're not paying any interest, or not looking to get another installment loan for which the rate you get depends on your credit rating. If you are looking to get another installment loan, then having more credit at your disposal might hurt a small amount. I wouldn't want to cancel your oldest card. The GEMB card looks like a good candidate if you want to cancel because you're not using it, and it's a relatively new card.","\"It depends on your definition of \"\"inactive\"\". If you have credit cards open and do not use them at all for a period of time, some lenders will not update your usage to the credit bureaus while some will close your account in which will definitely hurt your credit score. But since you use your card once in a while and pay them off, you should be good. Lenders like to see some activity rather than no activity. If there are great offers out there by credit card companies, then why not take advantage of them? The only downside may be the annual fees if there is any but with your credit score, it implies you are financially responsible so there should be no 'compelling financial reason' to not open more cards. In fact, the number of credit accounts you have open can play a role on your score. Essentially the more the better. According to Credit Karma, 0-5 credit accounts is very poor, 6-10 is poor, 11-20 is good, 21+ is excellent.\"","A credit card can be a long running line of credit that will help to boost your FICO score. However if you have student loans, a mortgage, or car payments those will work just as well. If you ever get to the point where you don't have any recent lines of credit, this may eventually end up hurting your score, but until then you really don't need any extras.","You don't need to use an open line of credit to help your credit score. You didn't ask this, but another option is to not cut up the card and keep the account open, even if you don't use it. I mention this because sometimes when you are calling in or setting up an online account to service the card, you may need to have the expiration date and CVV code on hand. This has burned me a few times as I had to hunt around for a card I rarely ever use. That being said, if you are worried that you might use the card if you know it's there, then sure, cut it up.","\"There are two factors in your credit score that may be affected. The first is payment history. Lenders like to see that you pay your bills, which is the most straightforward part of credit scores IMO. If you've actually been paying your bills on time, though, then this should still be fine. The second factor is the average age of your open accounts. Longer is considered better here because it means you have a history of paying your bills, and you aren't applying for a bunch of credit recently (in which case you may be taking on too much and will have difficulties paying them). If this card is closed, then it will no longer count for this calculation. If you don't have any other open credit accounts, then that means as soon as you open another one, your average age will be one day, and it will take a long time to get it to \"\"good\"\" levels; if you have other matured accounts, then those will balance out any new accounts so you don't get hit as much. Incidentally, this is one of the reasons why it's good to get cards without yearly fees, because you can keep them open for a long time even if you switch to using a different card primarily.\"","One rule of thumb is that having regular activity on at least three different revolving accounts will improve your score: I agree that it may not be a great idea to have too many open credit accounts (Trade Lines) reporting on your credit report but if you don’t have enough active accounts, it will prevent you from being approved for a home mortgage. Both Conventional (Fannie Mae and Freddie Mac) mortgage loans and Government loans (such as FHA and VA) require that you have a minimum number of reporting trade lines that are active or have been active within the most recent 24 month period of time. An example of meeting the mortgage loan requirement is having a revolving account (credit card) that has been reporting activity for the past 24 months plus 2 other trade lines that have had activity reported for 12 months each, both within the past 24 months.","\"I answered a similar question, How will going from 75% Credit Utilization to 0% Credit Utilization affect my credit score?, in which I show a graph of how utilization impacts your score. In another answer to Should I keep a credit card open to maintain my credit score?, I discuss the makeup of your score. From your own view at Credit Karma, you can see that age of accounts will help your score, so now is the time to get the right cards and stay with them. My background is technology (electrical engineer) and MBA with a concentration in finance. I'm not a Psychology major. If one is undisciplined, credit can destroy them. If one is disciplined, and pays in full each month, credit is a tool. The quoting of billionaires is a bit disingenuous. I've seen people get turned away at hotels for lack of a credit card. $1000 in cash would not get them into a $200/night room. Yes, a debit card can be used, but the rental car and hotel \"\"reserve\"\" a large amount on the card, so if you don't have a high balance, you may be out of town and out of luck. I'll quote another oft-quoted guru: \"\"no one gets rich on credit card rewards.\"\" No, but I'm on track to pay for my 13 year old's last semester in college with the rewards from a card that goes right into her account. It will be great to make that withdrawal and not need to take the funds from anywhere else. The card has no fee, and I've not paid them a dime in interest. By the way, with 1-20% utilization ideal, you want your total available credit to be 5X the highest monthly balance you'd every hit. Last - when you have a choice between 2% cash reward, and the cash discount Kevin manages, take the discount, obviously.\"","If the card has no annual fee, you can keep it for as long as you like and you will never get charged. I advise you to GoPaperless so you stop getting the $0 bills every month. Many cards have the fee waived for the first year. If you have such a card, you should make sure to cancel it when you stop using it, or when the fee waiver expires.","Check out /r/personalfinance for more detailed advice. Not sure your question. Yes, cancelling it will cause it to disappear from your credit report. Apply for your own card right now (a free rewards one ideally) if your credit it good enough and you have a job. Never pay interest and keep that card and your credit will naturally head to 720+ with no negative marks over time.","I've got a card that I've had for about 25 years now. The only time they charged me interest I showed it was their goof (the automatic payment failed because of their mistake) and they haven't cancelled it. No annual fee, a bit of cash back. The only cards I've ever had an issuer close are ones I didn't use.","The difference in interest is not a huge factor in your decision. It's about $2 per month. Personally I would go ahead and knock one out since it's one less to worry about. Then I would cancel the account and cut that card up so you are not tempted to use it again. To address the comments... Cutting up the card is NOT the ultimate solution. The solution is to stop borrowing money... Get on a strict budget, live on less than what you bring home, and throw everything you can at this high-interest debt. The destroying of the card is partly symbolic - it's a gesture to indicate that you're not going to use credit cards at all, or at least until they can be used responsibly, not paying a DIME of interest. It's analogous to a recovering alcoholic pouring out bottles of booze. Sure you can easily get more, but it's a commitment to changing your attitude and behavior. Yes leaving the card open will reduce utilization and improve (or not hurt) credit score - but if the goal is to stop borrowing money and pay off the other card, then once that is achieved, your credit score will be significantly improved, and the cancelling of the first card will not matter. The card (really both cards) should never, ever be used again.","pay off one of the cards completely. there are several reasons why:","Closed accounts are used when calculating Average Age of Accounts (AAoA) by FICO. They will drop off your report 7 years after their closure, at which time your AAoA will decrease and most likely lower your credit score. Keeping your oldest card with an annual fee (AF) is a tough question. Since the exact calculations are a secret, it's hard to quantify the value of that card. Keep in mind that if you do decide to close it now (or right before the next AF) it will continue to count for the next 7 years. What you can do is the following: Assume you won't be applying for any new cards in the next 7 years. Look at all your current accounts and calculate the AAoA of all of them that would still be on your report 7 years from now. Calculate it with and without your oldest card. The difference will show you the effect closing the card today will have. There is a potential way to raise your AAoA depending on if you have an AMEX card. AMEX reports all accounts as being open from your original 'member since' date. If your oldest AMEX (ever, not necessarily still open) is older than your AAoA, opening a new AMEX will actually raise your average. age of accounts is 15% of your score. note that some websites that calculate your AAoA for you (like creditkarma) don't count closed accounts, but since FICO does the age those websites generate should be ignored.","\"I would not call this a \"\"good\"\" idea. But I wouldn't necessarily call it a bad idea either. Before you even consider it, you need to do a little bit of soul searching. If there is ANY chance that having multiple credit cards could entice you to spend more than you otherwise would, then this is definitely a bad idea. Avoiding temptation is the key to preventing regrettable actions (in all aspects of life). Psychoanalysis aside, let's take a mathematical approach to the question. I believe your conclusion is correct if you add some qualifiers to it: A few years from now, then your credit score will probably be higher than if you just had 1 credit card. Here are some other things to consider: And, saving the best for last: As for the hard inquiries, they should only have an effect on your credit score for 1 year (though they can be seen on your report for 2 years). Final thought: if you decide to do this (and I personally don't recommend it), I would keep the number of applications smaller (3-5 instead of 10-15). I also would only choose cards that have no annual fee. Try to choose 1 card that has 1-2% cash back and make that your regular card.\"","\"Several events will always result in a reduction of your score, including: These will show up in the short term, but I don't think it's worth $40 per year in perpetuity to avoid this. These aren't serious \"\"black marks\"\" in the same category as missing payments, carrying too much debt, or foreclosures/evictions, etc. These effects are designed to signal issuers when someone acquires a large amount of credit in a very short period of time, which may indicate a greater risk. If your credit is good and you are using your other cards responsibly, closing the card (given the annual fee) would not cause me great concern if it were me. Since you are so much better of a risk than you likely were in college, you can also call Capital One, ask to speak with a supervisor, and ask them to drop the fee and increase your credit limit. They should be able to easily verify that you meet the requirements for other types of preferred cards they offer, and they should be willing to offer you improved terms rather than losing your business. It is very possible they simply haven't re-evaluated your risk since you initially applied. Also, remember that these types of effects determine only a portion of your overall score. Activity is also a major component. Rather than leaving an unused card open for history and debt-to-limit purposes only, I would also recommend having some minimum level of activity, such as an automatic bill payment, on each card you carry. The effect of using your cards over time will have a significant positive effect on your score. Best of luck!\"","\"I would aim for 10% or less, because I believe 30% is where you start to get dinged on your credit score. No one will know for sure, as there are many models, but 30% is brought up by radio host Clark Howard pretty often. Close annual fee cards or one store only cards. Normally I would suggest \"\"leap-frogging\"\" your credit cards so that as you open a new one with no fees, you then close another that does have fees. However I do not think opening lines of credit with an upcoming home purchase is a good idea. It will reflect negatively that you are opening credit all over then place. I would shoot for such a low percent to make sure that the time it takes for reporting to happen will happen. Also, as you gear up to buy a house, make sure your credit report is clean looking with all of these balances and cards you are considering closing.\"","Bank A only care about the credit limit at Bank B when determining the maximum amount of credit they will grant you. In theory you might be able to convince them that by cancelling the other card they should increase the limit on their card. Of course since you owe too much money to do a balance transfer before the cancelling of a card you will need them increase the limit first. They will have to decide if your income, credit usage history, credit core, and age of your account with them justifies the increase. I don't think you have a good plan for using the increased debt, it is way to risky. But if you have enough income to save 3K a month you might be a good candidate for a higher credit limit.","No. I have several that I haven't used in a year or so (legacy of the time when they gave you money to sign up :-)), and credit rating's something over 800 last I checked.","You can't ask insurers to use a particular score -- they have a state-approved underwriting model that they must follow consistently. Insurance companies make money by not paying claims, and poor credit score (including limit access to credit) increases the probability that you will file a small claim. Why? If you get into a minor accident (say $750 of damage) and have a $500 deductible, you are much less likely to file a claim to get $250 if you have access to a cash or credit lines to make the repairs yourself. If you feel that you are going to be penalized for closing credit card accounts, the solution is simple -- don't close them. Other than an event where you need to sever a relationship with a co-owner of an account (ie, you break up with your significant other, dissolve a business, etc) or avoid paying an annual fee, there is no advantage to you closing a revolving credit account, ever. If you cannot control your spending, throw the card in the shredder. Eventually, the credit card company will close your account for inactivity, which affects your credit to a lesser degree. (The big exception is if you carry sufficient balances on other cards, your credit utilization ratio goes up materially.)","According to Clark Howard you should use your cards every 6 months to keep them in your active credit score mix.","You should not open bank accounts just to get additional credit cards. You should be careful about carrying too many credit cards and incurring too much debt as you could find yourself in a situation whereby you may not be able to pay off your monthly interest, much less the principal balance. Credit cards are not insurance. With many years of experience under my belt I can tell you that the best approach is to live within (or below) your means and avoid carrying a balance on credit cards. I carry only one credit card (really a charge card) and I pay off the balance every month. Treat a credit card as a 30 day interest free loan and pay your balance off in full every month...as you progress through life you will save yourself a lot of heartache (and money) if you take this approach.","\"Unless you have a history of over-using credit (i.e. you've gotten yourself into debt trouble), then I think that the banker is giving you bad advice in telling you to get your own credit limit reduced. Having more credit available to you that is left unused will make your utilization ratio lower, which is generally better for your credit score, according to this article on CreditKarma.com. The \"\"sweet spot\"\" seems to be 1-20% utilization of your total credit. (But remember, this is only one factor in your credit score, and not even the biggest-- having a long history of on-time payments counts the most.) My own personal experience seems to bear this out. I have two major credit cards that I use. One card has a high credit limit (high for me anyway) and I use it for just about everything that I buy-- groceries, gas, durable goods, services, you name it. The other card has a limit that is about 1/3 of the first, and I use it for a few recurring bills and occasional purchases where they don't take the first card. I also have a couple of department store cards that I use rather infrequently (typically 1 purchase every 3 months or so). At the end of each month, when the respective statements post, each card has a balance that is 15% or less of the credit limit on that card. I pay off the entire balance on each card each month, and the cycle repeats. I have never been late on a payment, and my credit history for all of these cards goes back 10 years. My credit score is nearly as high as it can go. If having unused credit were a detriment, I would expect my score to be much lower. So, no, having \"\"too much credit available\"\" is not going to hurt you, unless you are not using it at all, or are tempted to abuse it (use too much). The key is to use common sense. Have a small number of cards, keep them active, spend within your means so you can pay off the balance in full after the statement posts, and never be late on your payments. That's all it takes to have good credit.\"","You have little chance of getting it deleted. I have the same situation, I closed mine in 2006, and the login still works. Keep the paperwork that you closed it (or print a PDF of the site showing so), and forget about it. If someone is trying to cheat, re-opening it should be the same difficulty as making a new one in your name, so it is not really an additional risk. You could also set the username and password both to a long random string, and not keep them. That soft-forces you to never login again. Note that it will also stay on your credit record for some years (but that's not a bad thing, as it is not in default; in the contrary). The only negative is that if you apply for credit, you might be ashamed of people seeing you ever having had a Sears or Macy's card or so.","If you are planning to get new cards, it is probably best to open the accounts as soon as possible to start establishing a history of good credit use. You might also wish to open multiple accounts so that future lines will have less of an impact on your average age of open credit lines. Since you will probably have higher interest rates it is also advisable never to carry a balance on any of your newly acquired cards. This will prevent a recurrence of the problems you are now trying to recover from.","\"I'm the contrarian on this forum. Since you asked a \"\"should I ...\"\" question, I'm free to answer \"\"No, you shouldn't increase your limit. Instead, you should close it out\"\". A credit card is a money pump - it pumps money from your account to the bank's profit margins. When I look at my furniture and the bank's furniture, I know exactly who needs my money more (hint: it's not the bank). Credit cards change people's spending patterns. In my first day of training as a Sears salesman, the use of the card was drummed into our heads. People purchase on average 25% more when they use a card than when they pay cash. That's good if you're a retailer or the lender (at that time Sears was both), but no good if you're a consumer. Build up a $1,000 emergency fund (for emergencies only, not \"\"I need a quick latte because I stayed up too late last night\"\"), then savings for 6 to 12 months living expenses. Close and cut up the credit card. Save up and pay cash for everything except possibly your house mortgage. If you have that much cash in the bank, the bankers will be as willing to talk to you as if you had an 800+ score. I have lived both with and without debt. Life without debt is well worth the short term sacrifice early on.\"","Much money is made by creditors on the transaction value of a client in addition to interest value. Knowing that, I pay off all my cards every month, have never made a late payment, and get a number of offers every year for reward type cards. Don't ever be worried about paying off your card in full, just be sure you're using your card and that you pay on time, every time.","This is a good idea, but it will barely affect your credit score at all. Credit cards, while a good tool to use for giving a minor boost to your credit score and for purchasing things while also building up rewards with those purchases, aren't very good for building credit. This is because when banks calculate your credit report, they look at your long-term credit history, and weigh larger, longer-term debt much higher than short-term debt that you pay off right away. While having your credit card is better than nothing, it's a relatively small drop in the pond when it comes to credit. I would still recommend getting a credit card though - it will, if you haven't already started paying off a debt like a student or car loan, give you a credit identity and rewards depending on the credit card you choose. But if you do, do not ever let yourself fall into delinquency. Failing to pay off loans will damage your credit score. So if you do plan to get a credit card, it is much better to do as you've said and pay it all off as soon as possible. Edit: In addition to the above, using a credit card has the added benefit of having greater security over Debit cards, and ensures that your own money won't be stolen (though you will still have to report a fraudulent charge).","I have a fair number of cards floating around some reasons I have opened multiple accounts. I am not saying that it is for everyone but there are valid scenarios where multiple credit cards can make sense.","I never give advice but I will now because you are getting poor advice. I run between 820 and 835 for a FICO score and have for years. I have a Discover, AMEX, VISA and MC. I have over 200,000 dollars of credit and I never EVER pay interest. I pay off the cards every month. So, does it matter how much credit you have or can you have too much? NO! Bank of America gave me 40,000 dollars credit and I don't even have an account with them except the card. Banks like people who pay their bills on time. Well, the computers at the banks do. LOL...DON'T be afraid of asking for more credit. Your score may drop for two months but that is it. Good luck with your money","Go where your money is treated best. If you can lower your APR, great. It should help a little bit with getting a mortgage if you can reduce your payment. Your debt-to-income ratio would go down.","Technically, yes but, in practice, no. I use a card for everything and pay it off every month. Sometimes, several times a month depending on how the month is going. In the last 10 years, I've paid a total of $8 in interest because I legitimately forgot to pay my balance before the statement came out when I was out of town. I wasn't late, I just didn't beat the statement and had a small interest charge that I couldn't successfully argue off. In the same time period, I've had one card cancelled at the banks request. The reason was that I hadn't used it in two years so they cancelled me. I never pay annual fees, I get cards with great rewards programs and I (almost) never pay interest. If your bank cancels your card because you're too responsible, find a better bank.","Assuming that a person has good financial discipline and is generally responsible with spending, I think that having a few hundred or thousand dollars extra of available credit is usually worth more to that person for the choice/flexibility it provides in unforeseen circumstance, versus the relatively minor hit that could be taken to their credit score.","In addition to the already good answers: I am assuming you are playing a long game and have no specific need for a high credit score in the next couple of years. This list is just good practice that will raise you score.","Credit scores are designed to reflect your ability to make payments on time. As long as you're not closing your old credit card account, you will only see a minimal impact on your score. See estimated credit score breakdowns below:","If you hadn't done it already cut up the cards. Don't close the accounts because it could hurt your credit score even more. Switching some or all of the CC debt onto low rate cards, or a debt consolidation loan is a way that some people use to reduce their credit card payments. The biggest risk is that you become less aggressive with the loan payback. If you were planning on paying $800 in minimum payments,plus $200 extra each month; then still pay $1000 with the new loan and remaining credit cards. Another risk is that you start overusing the credit card again, because you have available credit on the card that was paid off with the loan. The third risk, which you haven't proposed, occurs when people switch unsecured credit card dept, to a secured 2nd mortgage debt. This then puts the family home at risk.","I have to second what the poster said above me. The person at the dealership is outright lying to you, and I really don't know where the misconception comes from. I work in finance and specialize in credit. Credit is your ability to repay. Simple as that. To lenders, constant carrying a balance on your credit cards looks like your don't have the ability/discipline to repay your debt and will look bad in the future if you are ever trying to borrow more.","You should pay things off every month. You don't want to be paying 10%-25% interest if you don't have to. If you regularly use you card, the credit agencies can't tell the difference. The way it works is that every month, they send the credit agencies your current balance and if you paid the last bill on time. There is nothing that indicates if this is a standing balance, or if you charged all of it since the last payment. Any business that you legitimately owe a debt to can report that to the credit agencies. Not all of them do. This includes utilities, cell phone companies, landlords, etc. If any of them report overdue items it will show up on your credit report, and your credit card company can use that to raise you interest rate. Some cards will automatically raise you credit limit. They are basically looking to make money fro you. If you often charge near the limit, and pay the minimum balance each month, they may raise your limit to get you to charge more, and pay more interest. You can also call them and ask. They have some internal rules to decide if, based on your history with them and your credit history, if you are a good risk.","Closing a credit card decreases your total available balance, which can have a small negative effect if that credit card is a significant portion of your available credit. If it is not, then it likely will have little impact on your credit in that department. However, the case you explained - get a card, use it for a short while, then dump it - won't have much long-term impact to your available credit, since you will end up with the same amount as you started. The second factor will be the average age of accounts. This will affect you both in the short and long term, if you've had accounts open for a fairly long time, but won't impact you much if your credit history is fairly short. Even closed accounts affect the Average Age of Accounts for FICO scores (but not for some other scoring methods such as VantageScore). If you have only one other account, and it was 10 years old, then opening and closing this decreases your average age of accounts from 10 to 5 years - a significant hit which will not go away for years (10+ years in some cases, though usually 7 years). This will lower your score some. If you have had a lot of accounts, though (including things like mortgage, student loan, etc.), this won't have as significant of an impact, and if you had a short history in the first place, it won't hurt you much either. The third factor will be the hard credit pull. That will have a small negative impact for around six months; so don't do this just before getting a mortgage, but mostly this won't be a significant impactor for you.","The banks will love you as you pay your debts on time; although they make interest money on people that don't pay full on time, they lose money on those who never pay. In overall, you will be their preferred customer. Also, they make a more than enough money on you using your credit cards, you are basically a nearly risk-free money making machine for them. Aside from those arguments, as a 'proof of concept': I do the same thing for 10+ years and have ~840 rating. You can't get much better.","The length of time you have established credit does improve your credit score in the long run. As long as you can avoid paying interest, you might see if you can get a card with cash back rewards. I have one from Citi that sends me a $50 check every so often when I have enough rewards built up.","This strategy will have long lasting effects since negative items can persist for many years, making financing a home difficult, the primary source of household credit. It is also very risky. You can play hard, but then the creditor may choose you to be the one that they make an example out of by suing you for a judgement that allows them to empty your accounts and garnish your wages. If you have no record of late payments, or they are old and/or few, your credit score will quickly shoot up if you pay down to 10% of the balance, keep the cards, and maintain that balance rate. This strategy will have them begging you to take on more credit with offers of lower interest rates. The less credit you take on, the more they'll throw at you, and when it comes time to purchase a home, more home can be bought because your interest rates will be lower.","Yes, it is a very good idea to start your credit history early. It sounds like you have a good understanding of the appropriate use of credit, as a substitute for cash rather than a supplement to income. As long as you keep your expenses under control and pay off your card each month, I see no problems with the idea. Try to find a card with no annual fees, a low interest rate if possible (which will be difficult at your age), and with some form of rewards such as cash back. Look for a reputable issuing bank, and keep the account open even after you get a new card down the road. Your credit score is positively correlated with having an account open for a long time, having a good credit usage to credit limit ratio, and having accounts in good standing and paid on time.","You are on the right path. Especially for the fact that you are paying the highest rate card with highest priority. As long as your credit score will not stop you from getting the credit union loan, this is a great idea. It will turn the highest rate card(s) into something more reasonable and let you continue to attack principal instead of mostly paying interest.","\"Paying off a loan early isn't a bad thing. Having a credit card for 6 months and then closing it is probably unneeded; pay it off and then keep it as an emergency card. The key is debt:available credit ratio. Look at this article for example which explains the different elements; the only one you're affecting here is the second, your debt load. If you're not planning on asking for another loan in the next six months, none of this really matters - assuming you are paying it off for sure, in six months, your debt will be gone and your credit score recovered from any hit it takes (and if you get a $1500 credit card and only put $300 on it, it might actually improve your credit). But having an open $1500 credit card with a 0 balance will probably improve your credit rating, unless you have a really high amount of available credit. It will improve your debt/credit ratio (ie, total $ you owe divided by total $ you could put on your CCs/revolving credit). This is all aside from the \"\"is it a good idea to borrow money for a 3 month vacation before starting working\"\", which the answer is \"\"Well, not exactly\"\". That's not from a credit perspective, just from a living within your means perspective. If you have a firm job that will easily pay off the vacation, it's probably not a bad thing, but definitely a certain number of people will take this and end up in 'spending bad habits' that last their life. Be aware of that, and if you're just loaning yourself money from the future, make sure you understand the terms of that loan... and are certain you can pay it off.\"","Credit card companies are businesses. Businesses will make any decision that makes them money. So does it make them money to cancel your account? It's a simple cost-benefit analysis: you having an account with them will probably give them some benefit for very little cost to them. The only real cost associated with an open account is someone who uses the card but doesn't pay, but they're pretty sure you won't be doing that.","Remember, the card company gets a percentage at the time of purchase, as well as any interest you let them collect from you. Yes, they're still making a profit on our accounts, and they can always hope that at some point we'll run up a high enough bill to be willing to pay some interest. They may kill completely inactive cards, since they need a bit of income to pay for processing the account. But if you're actively using it, they aren't very likely to tell you to go away (though they may change which plan(s) they offer you).","Nobody outside of the credit scoring agencies know exactly what goes into the scoring formula. That said, I don't think there is any evidence that keeping a fixed loan (car or mortgage) open is necessary to keep its effect on your score. It doesn't improve your utilization ratio like an open revolving credit line would. And depending on the exact details of how your specific lender reports the loan, it might appear detrimental to your debt-to-income ratio. I would simply pay it off.","If the rate is the same, then clearing one card to zero does have one advantage: getting your grace period back. Generally when you owe money on your credit card, and you make a new purchase that new purchase get charged interest starting on day one. But if you are not carrying a balance, in other words you pay off the charges every month, then new purchases aren't charged until you fail to pay the balance by the due date. That grace period can be 25 to 55 days depending where you are in the billing cycle. Having one clean card will allow you to use that card when you have no other choice. Lets say you have an emergency car repair while away from home. You don't have $500 in cash so you put it on the clean card. When you get home you know that you can pay the bill and not have been charged interest.","No. Credit scores are primarily built by doing the following: To build credit, get a few major credit cards and a couple of store cards. Use one of them to make routine purchases like gas and groceries. Pay them on time every month. You're good to go. I would hate to sell stocks to pay off a loan -- try finding a better loan. If you financed through the dealer, try joining a credit union and see if you can get a better rate.","\"At no point is it ever a good idea to \"\"stop making payments to show them [you] mean business\"\". When you signed up for the credit card account, you agreed to pay what you charged, and any applicable interested accrued on the accounts. You are legally responsible for that debt, and you can be sued, if they are so inclined. Many times, settlement agencies are employed because a risk assessment operator (or whatever they're called at your cc company) calculated that they are currently financially better off settling for a reduced balance than attempting to chase you for the full amount. As soon as the terms of your refinance hits your credit history, that changes. To reiterate and make it clear: This is a very dangerous approach to breaking credit card debt, and I would not advise that anybody proceed with it. EDIT: If you offer 50% of the balance in a lump sum payment, they decline, and you continue with non-payment, they have reason to believe that you are financially capable of making payments, and are much more likely to seek legal action.\"","Unless you can have your savings earning more than the transfer fees, you should just pay the credit cards off before the interest free period ends. Also, there is the difficulty in finding new cards offering 0% interest continuously. You are better off paying off all your bad debt as soon as possible, start saving and investing, instead of wasting your time and energy trying to find new offers of 0% for your transfers before it expires. Rule of Thumb: Get rid of your Bad Debts as soon as possible; Keep your Good Debts as long as possible (as long as you can afford them).","\"My wife and I have Gap, Kohl's and Amazon cards. They each give extra benefits when using them at their stores, and usually 1% cash back at other places, although we don't use the Gap or Kohl's anywhere else. We don't carry a balance, so as mentioned, the rate doesn't matter. And they are so spread out when we've gotten them (Kohl's for a good 3 years, Amazon about 2 months ago) that I don't expect any issues for credit checks. In fact I just got approved for a mortgage loan, way more than what I know I can really afford. In my mind, credit cards are a bad idea when you use them as \"\"real\"\" credit. If they are used more like a debit card (spending money that you have), its like a loan (you don't have to pay it off til later), and you get paid for it (whether in cash or merchandise).\"","The Fair Credit Reporting Act (FCRA) says that account history will stay on your credit report as a closed account for 7 years, and then it will drop off, just like any other bad or good mark on your credit (aside from bankruptcies which stay on reports for 10 years, and can be asked about for the rest of your life). The presence of a new credit card will do more to lower your score in the short term than closing an old credit card. On a related note, reporting a card as lost or stolen can also show up as a different, closed account, even if you keep the same account open with the creditor."],"string":"[\n \"\\\"Yes, it can be a good idea to close unused credit cards. I am going to give some reasons why it can be a good idea to close unused accounts, and then I will talk about why it is NOT necessarily a bad idea. Why it can be a good idea to close unused accounts \\\"\\\"I'd like to close the cards.\\\"\\\" That is reason enough. Simplifying your financial life is a good thing. Fewer accounts let you focus your energy on the accounts that you actually use. Unused accounts still need to be monitored for fraud. You mentioned that you have high credit card balances that you are carrying. This may indicate that you have trouble using credit responsibly, and having more credit available to you might be a temptation for you. If these unused cards have annual fees, keeping them open will cost money. Unused cards sometimes get closed by the bank due to inactivity. As a result, the advice often given is that, in addition to not closing them, you are supposed to charge something to it every month. This, of course, takes more of your time and energy to worry about, as well as giving you another monthly bill to pay. Why it is NOT necessarily a bad idea to close unused accounts Other answers will tell you that it may hurt your credit score for two reasons: it would increase your utilization and lower your average account age. Before we talk about the validity of these two points, we need to discuss the importance of the credit score. Depending on what your credit score currently is, these actions may have minimal impact on your life. If you are in the mid 700's or higher, your score is excellent, and closing these cards will likely not impact anything for you in a significant way. If you aren't that high in your score yet, do you have an immediate need for a high score? Are you planning on getting more credit cards, or take out any more loans? I would suggest that, since you have credit card debt, you shouldn't be taking out any new loans until you get that cleaned up. So your score in the mean time is not very important. Are you currently working on eliminating this credit card debt? If so, your utilization number will improve, even after you close these accounts, when you get those paid off. Utilization has only a temporary effect on your score; when your utilization improves, your score improves immediately. Your average account age may or may not improve when you close these accounts, depending on how old they are compared to the accounts you are leaving open. However, the impact of this might not be as much as you think. I realize that this advice is different from other answers, or other things that you may read online. But in my own life, I do a lot of things that are supposedly bad for the credit score: I only have two credit cards, ages 2.5 and 1.5 years. (I closed my other cards when I got these.) My typical monthly utilization is around 25% on these cards, although I pay off the balance in full each month, never paying interest. I have no car loan anymore, and my mortgage is only 4 months old. No other debt. Despite those \\\"\\\"terrible\\\"\\\" credit practices, my credit score is very high. Conclusion Make your payments on time, get out of debt, and your score will be fine. Don't keep unwanted accounts open just because someone told you that you should.\\\"\",\n \"\\\"The only good reason I find to close cards are: it's a card with an annual fee that you don't need. No point bleeding money each year. churning rewards. Open card to get bonus promotion such as \\\"\\\"spend $500 in first 3 months, get $200 bonus\\\"\\\". Close card and open a year later to do that same bonus again if available. Many cards don't allow you to do this. making room for newer cards at the same bank. Example, you have 5 Chase Cards and you want to apply for a 6th. Chase says you have maximized your credit they will extend you. You close one of your existing cards to get that new card. I have seen that many banks allow you to shift over some over your existing available credit to your new card without having to close them.\\\"\",\n \"In my own case, my credit score went up drastically after I closed cards. It did go down a bit (like 10 points) in the short term. Within 6 months, however, I did see significant gains. This would include closing the American Express card that I had for like 10 years. According much of what I read, you should never close a AMEX card. I did and it did not hurt me. What helps all this is that my utilization is zero.\",\n \"\\\"I'd say close them if they have fees, if you're worried about fraud or if you're going to be tempted to use them. It may have an affect on your credit rating, but it shouldn't hurt you seriously. Having too many cards gives you the \\\"\\\"opportunity\\\"\\\" to overspend, which obviously isn't good.\\\"\",\n \"\\\"You should never close a credit card account unless it has an annual fee or you are overspending on it. Open lines of credit - even un-utilized ones - have a positive effect on your credit score. First of all, they increase your total credit which helps your score. Second of all, they are always \\\"\\\"paid on-time\\\"\\\" which is another benefit. Finally, they increase the length of your credit history. You can keep unused credit cards forever in your drawer. They are rarely closed due to inactivity and cost you nothing. However, if your card has an annual fee, you should close it. The potential loss to your credit score is unlikely to offset the annual fee.\\\"\",\n \"You mentioned you have a bunch of credit cards with no balance, while others have fairly high balances I would not recommend you to close the 0 balance credit cards if they have lower APR. You can transfer the balance to those cards with lower APR. Now, if those 0 balance cards do not have lower APR, closing them will reduce my overall balance and hurt my credit rating and that is true, assume that you mean overall credit line instead of overall balance. But to my understanding, if you keep the payments good and on time, that effect is only temporary, and therefore you can definitely close them. Don't forget, paying off your balance can also lower your utilization rate and therefore increase your credit ratings, and you can focus more on that instead. Also larger number of accounts with amounts owed can indicate higher risk of over-extension, therefore you should pay off your low balance accounts first, and do not open new credit accounts until you have paid off the current balance.\",\n \"\\\"I found a good article on cnnmoney.com that touches on this titled \\\"\\\"5 Ways to Destroy your Credit\\\"\\\". One of these \\\"\\\"ways\\\"\\\", it says, is closing your credit cards. The article cited one expert who says, Since part of your score is based on the length of time certain lines of credit have been open, closing out that 10-year old credit card could take a bite out of your credit score... It's negative because it's taking away a reference to a positive credit history.\\\"\",\n \"It is an issue of both utilization and average age of accounts. If your cards with $0 balances on them are: A) newer cards than the ones you are carrying balances on and you don't want them B) much lower limit cards than the ones you are carrying balances on then you can raise your score by closing them, as the utilization change won't be a large factor and you can raise the average age of your open accounts.\",\n \"\\\"Two factors that positively your credit score are the number of open accounts you have in good standing, and the average age of the accounts. The more accounts you have in good standing, the more likely you seem to pay back what you borrow from new creditors. The older the average age of the accounts, the more you seem like an experienced borrower who has had many years of successful credit activity. Closing them would lower the total number of accounts in good standing you have, and would also likely lower the average account age (unless you've recently opened them). To \\\"\\\"simplify the number of cards you have\\\"\\\", pick the one or two you would consider cancelling (worst rewards/benefits, highest yearly fee, etc.) and just don't keep them in your wallet anymore. You don't have to worry about paying them off every month (because you don't buy anything with them) and you still get the credit score benefits of having the accounts open.\\\"\",\n \"In your specific case, I would leave them open unless you have a specific reason for wanting to close them - particularly, unless you feel closing them is necessary for you to not misuse them. The impact on the credit score is not why I say this, though. Much more important are the two competing real factors: My suggestion would be to take the cards and put them in your file cabinet, or whatever would cause you to not use them. In fact, you could even cut them up but not close the accounts - I had an account open that I didn't possess a physical card for several years for and didn't use at all, and it stayed open (though it's not guaranteed they'll keep it open for you if you never use it). In an emergency you could then ask them to send you a new copy of the card very easily. But, keep them, just in case you need them. Once you have paid off your balances on your balance-carrying cards, then you should consider closing some of them. Keep enough to be able to live for ~4-6 months (a similar amount to the ideal rainy day fund in savings, basically) and then close others, particularly if you can do so in a way that keeps your average account age reasonably stable.\",\n \"You want to have 2-4 credit cards, with a credit utilization ratio below 30%. If you only have 2 cards, closing 1 would reduce your credit diversity and thus lower your credit score. You also want at least 2 years credit history, so closing an older credit card may shorten your credit history, again lowering your credit score. You want to keep around at least 1-2 older cards, even if they are not the best. You have 4 cards: But having 2-4 cards (you have 4) means you can add a 5th, and then cancel one down to 4, or cancel one down to 3 and then add a 4th, for little net effect. Still, there will be effect, as you have decreased the age of your credit, and you have opened new credit (always a ding to your score). Do you have installment loans (cars), you mention a new mortgage, so you need to wait about 3 months after the most recent credit activity to let the effects of that change settle. You want both spouses to have separate credit cards, and that will increase the total available to 4-8. That would allow you to increase the number of benefits available.\",\n \"I disagree with the reply. Your both impressions are correct. - Do not close old credit cards because they keep your credit rating high (fico score) - Also low utilization that credit cards report to credit rating companies, improves your rating.\",\n \"Except for the fact that canceling credit cards will hurt your credit, either by increasing your utilization ratio or decreasing the length of your credit lines if you cancel the oldest card, which makes it that much harder to get the good interest rates available on other loans.\",\n \"Credit Score is rather misleading, each provider of credit uses their own system to decide if they wish to lend to you. They will also not tell you how the combine all the factoring together. Closing unused account is good, as it reduced the risk of identity theft and you have less paperwork to deal with. It looks good if a company that knows you will agrees to give you more credit, as clearly they think you are a good risk. Having more total credit allowed on account is bad, as you may use it and not be able to pay all your bills. Using all your credit is bad, as it looks like you are not in control. Using a “pay day lender” is VERY bad, as only people that are out of control do so. Credit cards should be used for short term credit paying them off in full most months, but it is OK to take advantage of some interest free credit.\",\n \"Assuming you don't plan on continuing to use the card frequently, the best advice I've heard is to leave them open unless they have an annual fee. Also, leaving it open with a zero balance doesn't help your credit score as much as using it a few times a year (even for small amounts) because it will eventually shift to an inactive state that is less positive for your credit score.\",\n \"Its actually a good thing. The #1 factor to your credit score is your credit utilization. So if you don't spend money unwisely and they don't have any annual fee I would keep them and use them each twice a year to keep them in your credit mix.\",\n \"Your credit score is definitely affected by the age of your credit accounts, so if you frequently close one card and open another new one, you're adversely affecting the overall average age of accounts. This is something to consider and whether it is worth what you're trying to achieve. Sometimes, if you're a good customer and are insistent enough, you can simply call your credit card company and use the threat of closing your account in favor of another card that offers something attractive to get your current bank to sweeten its incentives to keep your business. I know many people who've done this with real success, and they spare themselves the hassle of obtaining a new card and suffering the short term consequences on their credit report. This might be an avenue worth trying before you just close the account and move on. I hope this helps. Good luck!\",\n \"The old underwriting standards were 28% home debt to income ratio and 33% consumer debt to income ratio. Consumer debt is calculated based on minimum payments. Now, most models are revised upwards... I believe 33/38 is more common today. As long as you are current on the accounts, closing credit or store revolving accounts will have little or no bearing. Just leave them dormant... there is no positive result from closing accounts that have no balance. Having low or no balances has NO negative impact on your credit score. Low balances are NOT red flags to lenders. Period. Here's a quote from Fair Issac: It's just not true that you can have too much available credit. That by itself is never a negative with the score. Sometimes the things you do to get too much can be a problem, such as opening a bunch of new accounts, but for the most part, that's just kind of an old wives' tale. The major drivers of credit scoring are: To improve your prospects for getting a mortgage, you should be reducing your spending and focusing 60/40 on saving for a down payment and paying down that $15k credit card, respectively. Having cash for a down payment is critical to your buying power, as zero-down loans aren't widely available in 2011, and a large downpayment will allow you to eliminate or reduce the time you are paying PMI. PMI reduces your buying power, and is a big waste of money.\",\n \"First off, congratulations on taking care of your finances and paying off your cards! Takes a lot of discipline. If your next oldest card is just a year apart, you can safely close this card.\",\n \"You're right to keep the oldest one. That's an asset to your credit rating. Since you're already responsible with your credit, a dip in your credit rating doesn't really matter unless you're looking for another loan, like a mortgage. I personally like the cash-back rewards because they're the most flexible, so you have a good thing going with that card. Do those reward cards give you perks on all of your purchases? If they do, then look carefully to see if you can do noticeably better with another card. If not, it may not really be worth it. Regarding cancelling one of the cards, I wouldn't, and here's why. Your cards can get compromised, and sometimes more than one gets compromised at the same time. I was glad that I had three cards, because two of them got hit the same day. Hence, having three cards hit on the same day is possible, and you'll be glad that you have the fourth.\",\n \"Closing the card will be fine. The consequences are related to your available credit and actual/potential utilization. If you have less total credit, any credit you actually use will be a greater percentage of your total credit, manipulating your score downwards more greatly. The next consequence will be related to the age of your credit history, which is an average of your credit lines. This seems negligible and also beneficial for you, since your credit history is so young to begin with.\",\n \"Closing your oldest revolving account will lower your average age of accounts and hurt your score. No ifs, ands, or buts. The amount it drops is hard to tell, and it may only be a few points if your other cards are fairly old as well. While the FICO scoring algorithm is proprietary and hard to predict, you can use the official FICO Simulator to estimate the impact. Based on the information you provided (5+ cards, oldest card 5 years), your estimate is 750-800. Performing the same estimate and only changing the number of cards and age (2-4 cards, oldest card 2-4 years), the score estimate drops to 735-785. Both of these estimates assume you have 9% or less utilization. You can probably estimate that your score will drop at least 15 points. However, it may not matter to you whether your score is maximized. Once you get above a certain FICO score, it doesn't matter. For example, I recently refinanced a vehicle and asked the loan officer about their lowest APR, and found out that they required a 780 FICO for it. Kind of like the difference between getting a 91 or a 99 in a class, an A is an A. Some other factors you may want to consider before you make your choice:\",\n \"If you want to close the card, close it. The impact on your credit score will be minimal, if any, and the impact on your life will likely be even less. First, as you noted, the history from your card does not disappear when you close the card; it will stay on your credit report for as long as 10 years. By that time, you'll have many years of on-time payments from your other cards, and the loss of this one card won't be significant. Because the card has a low credit limit, it won't have much effect on your credit utilization numbers, either. Finally, your credit score might just be high enough that a small drop will have no impact on your financial life whatsoever. In my opinion, hanging onto a credit card you don't want just to try to attain some type of high score is pointless. Close the card.\",\n \"Close the account. The age doesn't outweigh the fact that you have to pay for the card. It would be one thing if the credit line was a couple thousand but showing the credit bureaus that you are staying away from the $425.00 doesn't really make them think you are any more trustworthy with your available credit. Utilization matters when you are staying away from much larger chunks of your available credit (across all cards).\",\n \"There's no harm in keeping them open. Like you said, closing the lines will potentially hurt your utilization. The extent of that impact will depend on your particular situation. There are situations where closing a line will have no actual impact on your utilization. If you have 100k of open credit and a debt load of $2k, if you close a $10k line you won't really have an issue because your utilization is 2% and closing the line will take you to 2.2%.\",\n \"\\\"If you look around online and read about credit scores, you'll find all kinds of information about what you should do to maximize your credit score. However, in my opinion, it just isn't worth rearranging your life just to try to achieve some arbitrary score. If you pay your bills on time and are regularly using a credit card, your score will take care of itself. Yes, you can cut up the card you don't like and keep the credit card account open. The bank may close your account at some point in the future because of a lack of activity, but if they do, don't worry about it. You have other accounts that you are using. Personally, I don't like having open credit accounts that I'm not using; I close accounts when I'm done with them. I realize that it goes against everything that you will read, but my score is very high and my oldest open credit card account is 2 years old. Don't let them scare you into credit activity that you don't want just to try to \\\"\\\"win\\\"\\\" at the credit score.\\\"\",\n \"Hits to your credit rating for canceling one of the newer cards will be a small hit for a few months. You do have some options. I also believe that a person with good credit should have multiple cards: I like having a cash back card for the majority of our transactions. Unfortunately that card isn't accepted everywhere, so I have two other cards with broad market coverage to make sure we always have an option if the vendor doesn't take the main card. Also having multiple cards makes sure that if there is an issue with one card you are never caught without a card. One time the main card was rejected by a gas station because my wife just used the same account to buy gas across town. When we got home their was a fraud alert message on our phone.\",\n \"\\\"FICO SCORING http://www.pbs.org/wgbh/pages/frontline/shows/credit/art/chart_fico.gif This is from the PBS Frontline show \\\"\\\"Secret History of the Credit Card.\\\"\\\" Getting rid of one card won't immediately trash your score, nor will it be by the full impact (15%) of credit history. If there's no fee, I'd buy gas once per quarter with it. If there is a fee, I'd check my FICO score and if I can afford to lose 20 or so points for a time, I'd go for it.\\\"\",\n \"The number that really matters in this situation is your age of your longest account. Opening a new account is a good idea, but closing an old one may have an impact on your score if you have no other active accounts. If you have another card, or an overdraft line of credit or a car loan that is 4 or 5 years old, you won't see a big impact. I'd suggest calling the card company and asking them to waive the fee. They usually will. In the meantime, I would recommending having one card from each of the major networks. (MC, Visa, Discover, Amex) so you don't run into this again. Just don't open them all at once.\",\n \"I'm not sure if someone else answered already in the same manner I will. I can't guarantee for sure if it's the same in the U.S.A. (it might since major credit cards companies like Visa/MC/AMEX are American companies) but in Canada having/keeping unused CC is a disadvantage because of the following: Banks and financing companies look more at the total amount of credit available to you than at how much purchases you have on your cards. Ex: Let's say that you have the following: - Visa cc with $10,000 limit and $2000 worth of purchases (made more than 30 days ago) on it. - Mastercard cc with $10,000 limit as well and $1000 worth of purchases (less than 30 days old) - A major retail store cc with $2000 limit and $0 balance. Hypothetical situation: You want a bank loan to do some expensive house repairs and are looking for a lower interest rate than what your cc can offer. The bank will not care about the amount on the cards. They will add-up all the limits of your cc and treat your loan request as if ALL your cards were filled to their respective limit. So in this case: they will consider you as being right now in debt of $10K+$10K+$2K = $22,000 instead of only $3000 and they might: 1. refuse you the loan 2. grant it only if you transfer all purchases on a single card and cancel all the others. 3. Once the $3000 is transferred on one of the cards (and the others cancelled), they can require that you reduce the limit of that card. Hope this helps!\",\n \"You should. The impact on the credit score is small, and probably not worth the money of the annual fee. I would only change that if you plan to get a mortgage or car loan the next month - then wait until afterwards.\",\n \"Problems with your plan (in no particular order) there is a limit, once they have decided that you have enough credit they won't offer any more. If the economy changes (like it did in 2008) they can reduce the limit on existing accounts. If you don't use them, they may decide to close them. Using existing cards will encourage the bank to increase the limit on that card. opening cards can make some lenders nervous. Having a new card close to when you are applying for a mortgage or a car loan can make them less likely to lend you the max. You have to decide: Are you trying to buildup your credit limit? or your credit score?\",\n \"Please do not conflate number of credit cards with amount of debt. Consider two scenarios, The latter scenario yields much better credit scoring. Many recommendation sources suggest the following, Although your credit score seems very important, it is only important when you have financial interactions (such as applying for credit or services) where the other party makes decisions based upon the score. You should only obtain loans and credit when you want and it makes sense based upon your needs; choosing to live your life to serve credit scoring agencies may not be your happy place.\",\n \"The two factors that will hurt you the most is the age of the credit account, and your available credit to debt ratio. Removing an older account takes that account out of the equation of calculating your overall credit score, which can hurt significantly, especially if that is the only, or one of just a couple, of open credit lines you have available. Reducing your available credit will make your current debt look bigger than what it was before you closed your account. Going over a certain percentage for your debt to available credit can make you look less favorable to lenders. [As stated above, closing a credit card does remove it from the credit utilization calculation which can raise your debt/credit ratio. It does not, however; affect the average age of credit cards. Even closed accounts stay on your credit report for ten years and are credited toward average age of cards. When the closed credit card falls off your report, only then, will the average age of credit cards be recalculated.] And may I suggest getting your free credit report from https://www.annualcreditreport.com . It's the only place considered 'official' to receive your free annual credit report as told by the FTC. Going to other 3rd party sites to pull your credit report can risk your information being traded or sold. EDIT: To answer your second point, there are numerous factors that banks and creditors will consider depending on the type of card you're applying for. The heavier the personal rewards (cash back, flyer miles, discounts, etc.) the bigger the stipulation. Some factors to consider are your income to debt ratio, income to available credit ratio, number of revolving lines of credit, debt to available credit ratio, available credit to debt ratio, and whether or not you have sufficient equity and/or assets to cover both your debt and available credit. They want to make sure that if you go crazy and max out all of your lines of credit, that you are capable of paying it all back in a sufficient amount of time. In other words, your volatility as a debt-consumer.\",\n \"\\\"Your total debt is equal to your total non-credit debt (student loans, car loans) + your total available credit. This is the truth of the \\\"\\\"low balance\\\"\\\" fear from lenders that you had heard about. Your credit utilization is across all of your cards. So if you have two cards, both with 15K limits and one is maxed out and one is empty, that is 50% utilization. If you have both cards with 7.5K balances, that is also 50% utilization. For the 8 cards that are paid off and still open, after you buy a house, I'd close any cards you aren't using. Not everyone will agree with this. If possible, I would close the 8 cards now and pay off the 15K balance before buying a house. If it's hard to pay it off now, it will be harder when you have a mortgage and home maintenance costs. If you want to buy the house before you pay off all of your credit card debt, I'd still close the 8 cards that are already paid off and pay down your last card to 4K (or less) to get under 25% utilization. The credit rating bureaus do not publish exactly how a different utilization rate of credit will affect your score, but it is known that lower utilization will improve your score. FICO calls this \\\"\\\"Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)\\\"\\\" Also, the longevity of your credit history is based on type of account (credit cards, car loans, etc.) so if you keep one credit card open, you still keep your long \\\"\\\"history\\\"\\\" with credit cards on your credit report. FICO calls this \\\"\\\"Time since accounts opened, by specific type of account\\\"\\\"\\\"\",\n \"Since recent changes to credit scoring (July 2017) it may not be necassary to do this, as more emphasis is placed on having a timely payment history and less emphasis is placed on having a low credit utilization ratio. Using what’s known as trended data is the biggest change. The phrase means credit scores will take into account the trajectory of a borrower’s debts on a month-to-month basis. In fact, having a low credit utilization ratio may even negatively effect you (if your available credit line value is high): ... VantageScore will now mark a borrower negatively for having excessively large credit card limits, on the theory that the person could run up a high credit card debt quickly. Those who have prime credit scores may be hurt the most, since they are most likely to have multiple cards open. But those who like to play the credit card rewards program points game could be affected as well. source\",\n \"Clark Howard suggests you hop your cards. Get your new card now and when you have it, dump the card with the high fees. The age of your accounts has some impact on your credit rating, but unless you have a major purchase coming up and your score is teetering, I would take the score hit to save money on the card.\",\n \"Cancelled cards don't fall off the system for a long time, up to ten years. Card terms change, with notice of course, but it can happen at any time. I had a card with a crazy perk, 5% back in Apple Gift cards. This was pre-iPod days, but it was great to get a new computer every two years for free. But it was short lived. Three years into it, the cards were changed, a no-perk card from the bank. That is now my oldest account, and it goes unused. Instead of holding cards like this, I wish I had flipped it to a different card years ago. Ideally, your mix of cards should provide value to you, and if they all do, then when one perk goes away, it's time to refresh that card. This is a snapshot from my report at CreditKarma. (Disclosure, I like these guys, I've met their PR folk. I have no business relationship with them) Elsewhere on the page it's noted that average card age is a 'medium impact' item. I am 50, but I use the strategy above to keep the cards working for me. My current score is 784, so this B on the report isn't hurting too much. The tens of thousands I've saved in mortgage interest by being a serial refinancer was worth the hit on account age, as was the credit card with a 10% rebate for 90 days, the 'newest account' you see in the snapshot. In the end, the score manipulation is a bit of a game. And some of it is counter-intuitive. Your score can take a minor hit for actions that would seem responsible, but your goal should be to have the right mix of cards, and the lowest interest (long term) loans.\",\n \"it is better for your credit score to pay them down over time. This is a myth. Will it make much of a difference? You are paying additional interest even though you have the means to pay off the cards completely. Credit score is a dynamic number and it really only matters if you are looking to make a big purchase (vehicle, home), or perhaps auto insurance or employment. Pay off your credit cards, consolidate your debt, and buy yourself a beer with the money you will be saving. :)\",\n \"If you've got the money to pay off your credit cards, do it. Today, if possible. There is no need to pay another penny of interest to them. They may or may not cancel your cards. That is up to them. We can't know what will trigger an individual bank to cancel your card. The answers you got on your other question offer some speculation on why some banks might cancel, but this is not something banks reveal. Anything you do on your own to try to keep the cards open is just a guess, and may or may not succeed. But ask yourself: why do you want to keep these cards? Is it for the convenience of the card? I agree that credit cards (paid in full monthly) are convenient, but when they start costing you money, they aren't worth it anymore, in my opinion. Debit cards have most of the same conveniences of credit cards, and are free. If it is for emergencies, I recommend instead building up an emergency cash fund. That way, if an emergency arises, you won't be forced to borrow money at high credit card interest rates. If the reason you want to hang on to the credit card is so you can spend more than you have, then you will find yourself in the same situation again. If I were you, I would pay off the cards ASAP. If the banks cancel your cards, just switch to a debit card and be thankful that you are no longer continuously leaking money to the banks.\",\n \"\\\"You don't need to have a bunch of credit cards lying around; just a couple is fine. Get a \\\"\\\"rewards\\\"\\\" card (without annual fee) that pays you back for use, and use it regularly to buy groceries, for example. Pay it off promptly each month, using the rewards, if you like, to reduce the amount you have to send in. Or you can use the rewards for other purchases; some merchants offer $25 worth of merchandise for $20 in rewards. It used to be the case that you could negotiate a discount for paying cash rather than use a credit card, but that is a lot harder to do now, in many cases because credit-card company contracts with merchants prohibit this practice. Also, merchants often prefer credit cards rather than cash because money-handling is an issue (pay for an armored car to come pick up the day's receipts, or risk getting mugged on the way to the bank, possible burglaries if you leave the money overnight in the store, daily balancing of cash-register trays, etc.) So, not being in debt and being rich enough to not need to be in debt are laudable goals, and you have my best wishes that you will reach them soon, but getting rid of all your credit cards as a part of not being in debt may be more trouble than it is worth. Keep a couple, pay them off promptly, and if you are concerned about being in debt, you can time your charges so that you are in debt at most 2 or 3 days each month.\\\"\",\n \"I once called Amex to cancel a card with an annual fee. Instead, they were able to give me a different card with no fee. They were happy to do it. Of course, Amex has fantastic customer service, while Capital One is not known for it. But, its worth a five minute call, and you will retain your good score.\",\n \"The biggest reason that they are a bad idea is just because every credit application hurts your credit score, as does having too many cards. In addition, every new card is a greater risk of identity theft.\",\n \"\\\"The weird thing is that if you use the credit impact simulators with the credit monitoring services, they show that the impact of paying your credit cards off completely is more negative than carrying a small balance, which doesn't make a great deal of sense, one would think. From what I can gather, the rationale is that carrying a small balance shows you making payments over time, as opposed to having a zero balance. This doesn't quite compute with me, but I don't truly understand the inner workings of the scoring models. To confirm this, I used simulators with both TransUnion and Experian, and both showed this. I know that it's easy to find people on both sides of this argument, so I can't say which is the best option (certainly whichever side someone falls on is the one they'll argue is the right one! chuckle). In all fairness, your best tool is time. The effects of your prior bad decisions will lessen over time as they move further away in your history and then disappear altogether. Obtaining a credit card just because you think you need one is not a compelling argument, by any means. If you can't rationalize reasons why you need it then maybe you should question the wisdom of such a decision. If you don't have a particular need for better credit right now, why be in a hurry to take on debt? Whatever the formulas are for calculating credit scores, the specific details are a pretty closely-guarded secret (they're proprietary for starters, plus it theoretically prevents people from \\\"\\\"gaming the system\\\"\\\" for a better score), but if you do enough research online, you can get a pretty good sense of how they work in general. Whatever you do with your credit should be in line with your overall financial goals. If you want to remain debt-free (at least for now) then having a credit card you can't otherwise justify a need for just introduces temptations which could prove tough to resist (\\\"\\\"wants\\\"\\\" quickly turn into \\\"\\\"needs\\\"\\\" when you can put it on a card you pay later), then you're right back in the same place you were earlier in your life. Instead of trying to figure out the \\\"\\\"best strategy\\\"\\\" for a credit card, first ask yourself how necessary it is to you right now in light of your financial objectives, then go from there. I hope this helps. Good luck!\\\"\",\n \"Take the consolidation loan and pay it off. Don't close the card. Opening a new account will have no bearing on your mortgage a year or two down the road. Keep paying on time -- that will make a big difference! JohnFX's suggestion to open a new card and do a transfer is a great idea if you have good credit. Just read the fine print -- most cards charge a 3-5% transfer fee and some cards accrue interest if you don't pay within the promotional period.\",\n \"There is also security aspect. By reducing the number of active credit/debit cards, one significantly reduces the surface of attack. There is smaller chance of getting one of your card information stolen and misused (cf Target data leaks and others).\",\n \"Your plan will work to increase your total credit capacity (good for your credit score) and reduce your utilization (also good). As mentioned, you will need to be careful to use these cards periodically or they will get closed, but it will work. The question is whether this will help you or not. In addition to credit capacity and utilization, your credit score looks at things like These factors may hurt you as you continue to open accounts. You can easily get to the stage where your score is not benefitting much from increased capacity and it is getting hurt a lot by pulls and low average age. BTW you are correct that closing accounts generally hurts your score. It probably reduces average age, may reduce maximum age, reduces your capacity, and increases your utilization.\",\n \"If you're looking for cause-effect, applying for another card won't matter at all if you're not paying any interest, or not looking to get another installment loan for which the rate you get depends on your credit rating. If you are looking to get another installment loan, then having more credit at your disposal might hurt a small amount. I wouldn't want to cancel your oldest card. The GEMB card looks like a good candidate if you want to cancel because you're not using it, and it's a relatively new card.\",\n \"\\\"It depends on your definition of \\\"\\\"inactive\\\"\\\". If you have credit cards open and do not use them at all for a period of time, some lenders will not update your usage to the credit bureaus while some will close your account in which will definitely hurt your credit score. But since you use your card once in a while and pay them off, you should be good. Lenders like to see some activity rather than no activity. If there are great offers out there by credit card companies, then why not take advantage of them? The only downside may be the annual fees if there is any but with your credit score, it implies you are financially responsible so there should be no 'compelling financial reason' to not open more cards. In fact, the number of credit accounts you have open can play a role on your score. Essentially the more the better. According to Credit Karma, 0-5 credit accounts is very poor, 6-10 is poor, 11-20 is good, 21+ is excellent.\\\"\",\n \"A credit card can be a long running line of credit that will help to boost your FICO score. However if you have student loans, a mortgage, or car payments those will work just as well. If you ever get to the point where you don't have any recent lines of credit, this may eventually end up hurting your score, but until then you really don't need any extras.\",\n \"You don't need to use an open line of credit to help your credit score. You didn't ask this, but another option is to not cut up the card and keep the account open, even if you don't use it. I mention this because sometimes when you are calling in or setting up an online account to service the card, you may need to have the expiration date and CVV code on hand. This has burned me a few times as I had to hunt around for a card I rarely ever use. That being said, if you are worried that you might use the card if you know it's there, then sure, cut it up.\",\n \"\\\"There are two factors in your credit score that may be affected. The first is payment history. Lenders like to see that you pay your bills, which is the most straightforward part of credit scores IMO. If you've actually been paying your bills on time, though, then this should still be fine. The second factor is the average age of your open accounts. Longer is considered better here because it means you have a history of paying your bills, and you aren't applying for a bunch of credit recently (in which case you may be taking on too much and will have difficulties paying them). If this card is closed, then it will no longer count for this calculation. If you don't have any other open credit accounts, then that means as soon as you open another one, your average age will be one day, and it will take a long time to get it to \\\"\\\"good\\\"\\\" levels; if you have other matured accounts, then those will balance out any new accounts so you don't get hit as much. Incidentally, this is one of the reasons why it's good to get cards without yearly fees, because you can keep them open for a long time even if you switch to using a different card primarily.\\\"\",\n \"One rule of thumb is that having regular activity on at least three different revolving accounts will improve your score: I agree that it may not be a great idea to have too many open credit accounts (Trade Lines) reporting on your credit report but if you don’t have enough active accounts, it will prevent you from being approved for a home mortgage. Both Conventional (Fannie Mae and Freddie Mac) mortgage loans and Government loans (such as FHA and VA) require that you have a minimum number of reporting trade lines that are active or have been active within the most recent 24 month period of time. An example of meeting the mortgage loan requirement is having a revolving account (credit card) that has been reporting activity for the past 24 months plus 2 other trade lines that have had activity reported for 12 months each, both within the past 24 months.\",\n \"\\\"I answered a similar question, How will going from 75% Credit Utilization to 0% Credit Utilization affect my credit score?, in which I show a graph of how utilization impacts your score. In another answer to Should I keep a credit card open to maintain my credit score?, I discuss the makeup of your score. From your own view at Credit Karma, you can see that age of accounts will help your score, so now is the time to get the right cards and stay with them. My background is technology (electrical engineer) and MBA with a concentration in finance. I'm not a Psychology major. If one is undisciplined, credit can destroy them. If one is disciplined, and pays in full each month, credit is a tool. The quoting of billionaires is a bit disingenuous. I've seen people get turned away at hotels for lack of a credit card. $1000 in cash would not get them into a $200/night room. Yes, a debit card can be used, but the rental car and hotel \\\"\\\"reserve\\\"\\\" a large amount on the card, so if you don't have a high balance, you may be out of town and out of luck. I'll quote another oft-quoted guru: \\\"\\\"no one gets rich on credit card rewards.\\\"\\\" No, but I'm on track to pay for my 13 year old's last semester in college with the rewards from a card that goes right into her account. It will be great to make that withdrawal and not need to take the funds from anywhere else. The card has no fee, and I've not paid them a dime in interest. By the way, with 1-20% utilization ideal, you want your total available credit to be 5X the highest monthly balance you'd every hit. Last - when you have a choice between 2% cash reward, and the cash discount Kevin manages, take the discount, obviously.\\\"\",\n \"If the card has no annual fee, you can keep it for as long as you like and you will never get charged. I advise you to GoPaperless so you stop getting the $0 bills every month. Many cards have the fee waived for the first year. If you have such a card, you should make sure to cancel it when you stop using it, or when the fee waiver expires.\",\n \"Check out /r/personalfinance for more detailed advice. Not sure your question. Yes, cancelling it will cause it to disappear from your credit report. Apply for your own card right now (a free rewards one ideally) if your credit it good enough and you have a job. Never pay interest and keep that card and your credit will naturally head to 720+ with no negative marks over time.\",\n \"I've got a card that I've had for about 25 years now. The only time they charged me interest I showed it was their goof (the automatic payment failed because of their mistake) and they haven't cancelled it. No annual fee, a bit of cash back. The only cards I've ever had an issuer close are ones I didn't use.\",\n \"The difference in interest is not a huge factor in your decision. It's about $2 per month. Personally I would go ahead and knock one out since it's one less to worry about. Then I would cancel the account and cut that card up so you are not tempted to use it again. To address the comments... Cutting up the card is NOT the ultimate solution. The solution is to stop borrowing money... Get on a strict budget, live on less than what you bring home, and throw everything you can at this high-interest debt. The destroying of the card is partly symbolic - it's a gesture to indicate that you're not going to use credit cards at all, or at least until they can be used responsibly, not paying a DIME of interest. It's analogous to a recovering alcoholic pouring out bottles of booze. Sure you can easily get more, but it's a commitment to changing your attitude and behavior. Yes leaving the card open will reduce utilization and improve (or not hurt) credit score - but if the goal is to stop borrowing money and pay off the other card, then once that is achieved, your credit score will be significantly improved, and the cancelling of the first card will not matter. The card (really both cards) should never, ever be used again.\",\n \"pay off one of the cards completely. there are several reasons why:\",\n \"Closed accounts are used when calculating Average Age of Accounts (AAoA) by FICO. They will drop off your report 7 years after their closure, at which time your AAoA will decrease and most likely lower your credit score. Keeping your oldest card with an annual fee (AF) is a tough question. Since the exact calculations are a secret, it's hard to quantify the value of that card. Keep in mind that if you do decide to close it now (or right before the next AF) it will continue to count for the next 7 years. What you can do is the following: Assume you won't be applying for any new cards in the next 7 years. Look at all your current accounts and calculate the AAoA of all of them that would still be on your report 7 years from now. Calculate it with and without your oldest card. The difference will show you the effect closing the card today will have. There is a potential way to raise your AAoA depending on if you have an AMEX card. AMEX reports all accounts as being open from your original 'member since' date. If your oldest AMEX (ever, not necessarily still open) is older than your AAoA, opening a new AMEX will actually raise your average. age of accounts is 15% of your score. note that some websites that calculate your AAoA for you (like creditkarma) don't count closed accounts, but since FICO does the age those websites generate should be ignored.\",\n \"\\\"I would not call this a \\\"\\\"good\\\"\\\" idea. But I wouldn't necessarily call it a bad idea either. Before you even consider it, you need to do a little bit of soul searching. If there is ANY chance that having multiple credit cards could entice you to spend more than you otherwise would, then this is definitely a bad idea. Avoiding temptation is the key to preventing regrettable actions (in all aspects of life). Psychoanalysis aside, let's take a mathematical approach to the question. I believe your conclusion is correct if you add some qualifiers to it: A few years from now, then your credit score will probably be higher than if you just had 1 credit card. Here are some other things to consider: And, saving the best for last: As for the hard inquiries, they should only have an effect on your credit score for 1 year (though they can be seen on your report for 2 years). Final thought: if you decide to do this (and I personally don't recommend it), I would keep the number of applications smaller (3-5 instead of 10-15). I also would only choose cards that have no annual fee. Try to choose 1 card that has 1-2% cash back and make that your regular card.\\\"\",\n \"\\\"Several events will always result in a reduction of your score, including: These will show up in the short term, but I don't think it's worth $40 per year in perpetuity to avoid this. These aren't serious \\\"\\\"black marks\\\"\\\" in the same category as missing payments, carrying too much debt, or foreclosures/evictions, etc. These effects are designed to signal issuers when someone acquires a large amount of credit in a very short period of time, which may indicate a greater risk. If your credit is good and you are using your other cards responsibly, closing the card (given the annual fee) would not cause me great concern if it were me. Since you are so much better of a risk than you likely were in college, you can also call Capital One, ask to speak with a supervisor, and ask them to drop the fee and increase your credit limit. They should be able to easily verify that you meet the requirements for other types of preferred cards they offer, and they should be willing to offer you improved terms rather than losing your business. It is very possible they simply haven't re-evaluated your risk since you initially applied. Also, remember that these types of effects determine only a portion of your overall score. Activity is also a major component. Rather than leaving an unused card open for history and debt-to-limit purposes only, I would also recommend having some minimum level of activity, such as an automatic bill payment, on each card you carry. The effect of using your cards over time will have a significant positive effect on your score. Best of luck!\\\"\",\n \"\\\"I would aim for 10% or less, because I believe 30% is where you start to get dinged on your credit score. No one will know for sure, as there are many models, but 30% is brought up by radio host Clark Howard pretty often. Close annual fee cards or one store only cards. Normally I would suggest \\\"\\\"leap-frogging\\\"\\\" your credit cards so that as you open a new one with no fees, you then close another that does have fees. However I do not think opening lines of credit with an upcoming home purchase is a good idea. It will reflect negatively that you are opening credit all over then place. I would shoot for such a low percent to make sure that the time it takes for reporting to happen will happen. Also, as you gear up to buy a house, make sure your credit report is clean looking with all of these balances and cards you are considering closing.\\\"\",\n \"Bank A only care about the credit limit at Bank B when determining the maximum amount of credit they will grant you. In theory you might be able to convince them that by cancelling the other card they should increase the limit on their card. Of course since you owe too much money to do a balance transfer before the cancelling of a card you will need them increase the limit first. They will have to decide if your income, credit usage history, credit core, and age of your account with them justifies the increase. I don't think you have a good plan for using the increased debt, it is way to risky. But if you have enough income to save 3K a month you might be a good candidate for a higher credit limit.\",\n \"No. I have several that I haven't used in a year or so (legacy of the time when they gave you money to sign up :-)), and credit rating's something over 800 last I checked.\",\n \"You can't ask insurers to use a particular score -- they have a state-approved underwriting model that they must follow consistently. Insurance companies make money by not paying claims, and poor credit score (including limit access to credit) increases the probability that you will file a small claim. Why? If you get into a minor accident (say $750 of damage) and have a $500 deductible, you are much less likely to file a claim to get $250 if you have access to a cash or credit lines to make the repairs yourself. If you feel that you are going to be penalized for closing credit card accounts, the solution is simple -- don't close them. Other than an event where you need to sever a relationship with a co-owner of an account (ie, you break up with your significant other, dissolve a business, etc) or avoid paying an annual fee, there is no advantage to you closing a revolving credit account, ever. If you cannot control your spending, throw the card in the shredder. Eventually, the credit card company will close your account for inactivity, which affects your credit to a lesser degree. (The big exception is if you carry sufficient balances on other cards, your credit utilization ratio goes up materially.)\",\n \"According to Clark Howard you should use your cards every 6 months to keep them in your active credit score mix.\",\n \"You should not open bank accounts just to get additional credit cards. You should be careful about carrying too many credit cards and incurring too much debt as you could find yourself in a situation whereby you may not be able to pay off your monthly interest, much less the principal balance. Credit cards are not insurance. With many years of experience under my belt I can tell you that the best approach is to live within (or below) your means and avoid carrying a balance on credit cards. I carry only one credit card (really a charge card) and I pay off the balance every month. Treat a credit card as a 30 day interest free loan and pay your balance off in full every month...as you progress through life you will save yourself a lot of heartache (and money) if you take this approach.\",\n \"\\\"Unless you have a history of over-using credit (i.e. you've gotten yourself into debt trouble), then I think that the banker is giving you bad advice in telling you to get your own credit limit reduced. Having more credit available to you that is left unused will make your utilization ratio lower, which is generally better for your credit score, according to this article on CreditKarma.com. The \\\"\\\"sweet spot\\\"\\\" seems to be 1-20% utilization of your total credit. (But remember, this is only one factor in your credit score, and not even the biggest-- having a long history of on-time payments counts the most.) My own personal experience seems to bear this out. I have two major credit cards that I use. One card has a high credit limit (high for me anyway) and I use it for just about everything that I buy-- groceries, gas, durable goods, services, you name it. The other card has a limit that is about 1/3 of the first, and I use it for a few recurring bills and occasional purchases where they don't take the first card. I also have a couple of department store cards that I use rather infrequently (typically 1 purchase every 3 months or so). At the end of each month, when the respective statements post, each card has a balance that is 15% or less of the credit limit on that card. I pay off the entire balance on each card each month, and the cycle repeats. I have never been late on a payment, and my credit history for all of these cards goes back 10 years. My credit score is nearly as high as it can go. If having unused credit were a detriment, I would expect my score to be much lower. So, no, having \\\"\\\"too much credit available\\\"\\\" is not going to hurt you, unless you are not using it at all, or are tempted to abuse it (use too much). The key is to use common sense. Have a small number of cards, keep them active, spend within your means so you can pay off the balance in full after the statement posts, and never be late on your payments. That's all it takes to have good credit.\\\"\",\n \"You have little chance of getting it deleted. I have the same situation, I closed mine in 2006, and the login still works. Keep the paperwork that you closed it (or print a PDF of the site showing so), and forget about it. If someone is trying to cheat, re-opening it should be the same difficulty as making a new one in your name, so it is not really an additional risk. You could also set the username and password both to a long random string, and not keep them. That soft-forces you to never login again. Note that it will also stay on your credit record for some years (but that's not a bad thing, as it is not in default; in the contrary). The only negative is that if you apply for credit, you might be ashamed of people seeing you ever having had a Sears or Macy's card or so.\",\n \"If you are planning to get new cards, it is probably best to open the accounts as soon as possible to start establishing a history of good credit use. You might also wish to open multiple accounts so that future lines will have less of an impact on your average age of open credit lines. Since you will probably have higher interest rates it is also advisable never to carry a balance on any of your newly acquired cards. This will prevent a recurrence of the problems you are now trying to recover from.\",\n \"\\\"I'm the contrarian on this forum. Since you asked a \\\"\\\"should I ...\\\"\\\" question, I'm free to answer \\\"\\\"No, you shouldn't increase your limit. Instead, you should close it out\\\"\\\". A credit card is a money pump - it pumps money from your account to the bank's profit margins. When I look at my furniture and the bank's furniture, I know exactly who needs my money more (hint: it's not the bank). Credit cards change people's spending patterns. In my first day of training as a Sears salesman, the use of the card was drummed into our heads. People purchase on average 25% more when they use a card than when they pay cash. That's good if you're a retailer or the lender (at that time Sears was both), but no good if you're a consumer. Build up a $1,000 emergency fund (for emergencies only, not \\\"\\\"I need a quick latte because I stayed up too late last night\\\"\\\"), then savings for 6 to 12 months living expenses. Close and cut up the credit card. Save up and pay cash for everything except possibly your house mortgage. If you have that much cash in the bank, the bankers will be as willing to talk to you as if you had an 800+ score. I have lived both with and without debt. Life without debt is well worth the short term sacrifice early on.\\\"\",\n \"Much money is made by creditors on the transaction value of a client in addition to interest value. Knowing that, I pay off all my cards every month, have never made a late payment, and get a number of offers every year for reward type cards. Don't ever be worried about paying off your card in full, just be sure you're using your card and that you pay on time, every time.\",\n \"This is a good idea, but it will barely affect your credit score at all. Credit cards, while a good tool to use for giving a minor boost to your credit score and for purchasing things while also building up rewards with those purchases, aren't very good for building credit. This is because when banks calculate your credit report, they look at your long-term credit history, and weigh larger, longer-term debt much higher than short-term debt that you pay off right away. While having your credit card is better than nothing, it's a relatively small drop in the pond when it comes to credit. I would still recommend getting a credit card though - it will, if you haven't already started paying off a debt like a student or car loan, give you a credit identity and rewards depending on the credit card you choose. But if you do, do not ever let yourself fall into delinquency. Failing to pay off loans will damage your credit score. So if you do plan to get a credit card, it is much better to do as you've said and pay it all off as soon as possible. Edit: In addition to the above, using a credit card has the added benefit of having greater security over Debit cards, and ensures that your own money won't be stolen (though you will still have to report a fraudulent charge).\",\n \"I have a fair number of cards floating around some reasons I have opened multiple accounts. I am not saying that it is for everyone but there are valid scenarios where multiple credit cards can make sense.\",\n \"I never give advice but I will now because you are getting poor advice. I run between 820 and 835 for a FICO score and have for years. I have a Discover, AMEX, VISA and MC. I have over 200,000 dollars of credit and I never EVER pay interest. I pay off the cards every month. So, does it matter how much credit you have or can you have too much? NO! Bank of America gave me 40,000 dollars credit and I don't even have an account with them except the card. Banks like people who pay their bills on time. Well, the computers at the banks do. LOL...DON'T be afraid of asking for more credit. Your score may drop for two months but that is it. Good luck with your money\",\n \"Go where your money is treated best. If you can lower your APR, great. It should help a little bit with getting a mortgage if you can reduce your payment. Your debt-to-income ratio would go down.\",\n \"Technically, yes but, in practice, no. I use a card for everything and pay it off every month. Sometimes, several times a month depending on how the month is going. In the last 10 years, I've paid a total of $8 in interest because I legitimately forgot to pay my balance before the statement came out when I was out of town. I wasn't late, I just didn't beat the statement and had a small interest charge that I couldn't successfully argue off. In the same time period, I've had one card cancelled at the banks request. The reason was that I hadn't used it in two years so they cancelled me. I never pay annual fees, I get cards with great rewards programs and I (almost) never pay interest. If your bank cancels your card because you're too responsible, find a better bank.\",\n \"Assuming that a person has good financial discipline and is generally responsible with spending, I think that having a few hundred or thousand dollars extra of available credit is usually worth more to that person for the choice/flexibility it provides in unforeseen circumstance, versus the relatively minor hit that could be taken to their credit score.\",\n \"In addition to the already good answers: I am assuming you are playing a long game and have no specific need for a high credit score in the next couple of years. This list is just good practice that will raise you score.\",\n \"Credit scores are designed to reflect your ability to make payments on time. As long as you're not closing your old credit card account, you will only see a minimal impact on your score. See estimated credit score breakdowns below:\",\n \"If you hadn't done it already cut up the cards. Don't close the accounts because it could hurt your credit score even more. Switching some or all of the CC debt onto low rate cards, or a debt consolidation loan is a way that some people use to reduce their credit card payments. The biggest risk is that you become less aggressive with the loan payback. If you were planning on paying $800 in minimum payments,plus $200 extra each month; then still pay $1000 with the new loan and remaining credit cards. Another risk is that you start overusing the credit card again, because you have available credit on the card that was paid off with the loan. The third risk, which you haven't proposed, occurs when people switch unsecured credit card dept, to a secured 2nd mortgage debt. This then puts the family home at risk.\",\n \"I have to second what the poster said above me. The person at the dealership is outright lying to you, and I really don't know where the misconception comes from. I work in finance and specialize in credit. Credit is your ability to repay. Simple as that. To lenders, constant carrying a balance on your credit cards looks like your don't have the ability/discipline to repay your debt and will look bad in the future if you are ever trying to borrow more.\",\n \"You should pay things off every month. You don't want to be paying 10%-25% interest if you don't have to. If you regularly use you card, the credit agencies can't tell the difference. The way it works is that every month, they send the credit agencies your current balance and if you paid the last bill on time. There is nothing that indicates if this is a standing balance, or if you charged all of it since the last payment. Any business that you legitimately owe a debt to can report that to the credit agencies. Not all of them do. This includes utilities, cell phone companies, landlords, etc. If any of them report overdue items it will show up on your credit report, and your credit card company can use that to raise you interest rate. Some cards will automatically raise you credit limit. They are basically looking to make money fro you. If you often charge near the limit, and pay the minimum balance each month, they may raise your limit to get you to charge more, and pay more interest. You can also call them and ask. They have some internal rules to decide if, based on your history with them and your credit history, if you are a good risk.\",\n \"Closing a credit card decreases your total available balance, which can have a small negative effect if that credit card is a significant portion of your available credit. If it is not, then it likely will have little impact on your credit in that department. However, the case you explained - get a card, use it for a short while, then dump it - won't have much long-term impact to your available credit, since you will end up with the same amount as you started. The second factor will be the average age of accounts. This will affect you both in the short and long term, if you've had accounts open for a fairly long time, but won't impact you much if your credit history is fairly short. Even closed accounts affect the Average Age of Accounts for FICO scores (but not for some other scoring methods such as VantageScore). If you have only one other account, and it was 10 years old, then opening and closing this decreases your average age of accounts from 10 to 5 years - a significant hit which will not go away for years (10+ years in some cases, though usually 7 years). This will lower your score some. If you have had a lot of accounts, though (including things like mortgage, student loan, etc.), this won't have as significant of an impact, and if you had a short history in the first place, it won't hurt you much either. The third factor will be the hard credit pull. That will have a small negative impact for around six months; so don't do this just before getting a mortgage, but mostly this won't be a significant impactor for you.\",\n \"The banks will love you as you pay your debts on time; although they make interest money on people that don't pay full on time, they lose money on those who never pay. In overall, you will be their preferred customer. Also, they make a more than enough money on you using your credit cards, you are basically a nearly risk-free money making machine for them. Aside from those arguments, as a 'proof of concept': I do the same thing for 10+ years and have ~840 rating. You can't get much better.\",\n \"The length of time you have established credit does improve your credit score in the long run. As long as you can avoid paying interest, you might see if you can get a card with cash back rewards. I have one from Citi that sends me a $50 check every so often when I have enough rewards built up.\",\n \"This strategy will have long lasting effects since negative items can persist for many years, making financing a home difficult, the primary source of household credit. It is also very risky. You can play hard, but then the creditor may choose you to be the one that they make an example out of by suing you for a judgement that allows them to empty your accounts and garnish your wages. If you have no record of late payments, or they are old and/or few, your credit score will quickly shoot up if you pay down to 10% of the balance, keep the cards, and maintain that balance rate. This strategy will have them begging you to take on more credit with offers of lower interest rates. The less credit you take on, the more they'll throw at you, and when it comes time to purchase a home, more home can be bought because your interest rates will be lower.\",\n \"Yes, it is a very good idea to start your credit history early. It sounds like you have a good understanding of the appropriate use of credit, as a substitute for cash rather than a supplement to income. As long as you keep your expenses under control and pay off your card each month, I see no problems with the idea. Try to find a card with no annual fees, a low interest rate if possible (which will be difficult at your age), and with some form of rewards such as cash back. Look for a reputable issuing bank, and keep the account open even after you get a new card down the road. Your credit score is positively correlated with having an account open for a long time, having a good credit usage to credit limit ratio, and having accounts in good standing and paid on time.\",\n \"You are on the right path. Especially for the fact that you are paying the highest rate card with highest priority. As long as your credit score will not stop you from getting the credit union loan, this is a great idea. It will turn the highest rate card(s) into something more reasonable and let you continue to attack principal instead of mostly paying interest.\",\n \"\\\"Paying off a loan early isn't a bad thing. Having a credit card for 6 months and then closing it is probably unneeded; pay it off and then keep it as an emergency card. The key is debt:available credit ratio. Look at this article for example which explains the different elements; the only one you're affecting here is the second, your debt load. If you're not planning on asking for another loan in the next six months, none of this really matters - assuming you are paying it off for sure, in six months, your debt will be gone and your credit score recovered from any hit it takes (and if you get a $1500 credit card and only put $300 on it, it might actually improve your credit). But having an open $1500 credit card with a 0 balance will probably improve your credit rating, unless you have a really high amount of available credit. It will improve your debt/credit ratio (ie, total $ you owe divided by total $ you could put on your CCs/revolving credit). This is all aside from the \\\"\\\"is it a good idea to borrow money for a 3 month vacation before starting working\\\"\\\", which the answer is \\\"\\\"Well, not exactly\\\"\\\". That's not from a credit perspective, just from a living within your means perspective. If you have a firm job that will easily pay off the vacation, it's probably not a bad thing, but definitely a certain number of people will take this and end up in 'spending bad habits' that last their life. Be aware of that, and if you're just loaning yourself money from the future, make sure you understand the terms of that loan... and are certain you can pay it off.\\\"\",\n \"Credit card companies are businesses. Businesses will make any decision that makes them money. So does it make them money to cancel your account? It's a simple cost-benefit analysis: you having an account with them will probably give them some benefit for very little cost to them. The only real cost associated with an open account is someone who uses the card but doesn't pay, but they're pretty sure you won't be doing that.\",\n \"Remember, the card company gets a percentage at the time of purchase, as well as any interest you let them collect from you. Yes, they're still making a profit on our accounts, and they can always hope that at some point we'll run up a high enough bill to be willing to pay some interest. They may kill completely inactive cards, since they need a bit of income to pay for processing the account. But if you're actively using it, they aren't very likely to tell you to go away (though they may change which plan(s) they offer you).\",\n \"Nobody outside of the credit scoring agencies know exactly what goes into the scoring formula. That said, I don't think there is any evidence that keeping a fixed loan (car or mortgage) open is necessary to keep its effect on your score. It doesn't improve your utilization ratio like an open revolving credit line would. And depending on the exact details of how your specific lender reports the loan, it might appear detrimental to your debt-to-income ratio. I would simply pay it off.\",\n \"If the rate is the same, then clearing one card to zero does have one advantage: getting your grace period back. Generally when you owe money on your credit card, and you make a new purchase that new purchase get charged interest starting on day one. But if you are not carrying a balance, in other words you pay off the charges every month, then new purchases aren't charged until you fail to pay the balance by the due date. That grace period can be 25 to 55 days depending where you are in the billing cycle. Having one clean card will allow you to use that card when you have no other choice. Lets say you have an emergency car repair while away from home. You don't have $500 in cash so you put it on the clean card. When you get home you know that you can pay the bill and not have been charged interest.\",\n \"No. Credit scores are primarily built by doing the following: To build credit, get a few major credit cards and a couple of store cards. Use one of them to make routine purchases like gas and groceries. Pay them on time every month. You're good to go. I would hate to sell stocks to pay off a loan -- try finding a better loan. If you financed through the dealer, try joining a credit union and see if you can get a better rate.\",\n \"\\\"At no point is it ever a good idea to \\\"\\\"stop making payments to show them [you] mean business\\\"\\\". When you signed up for the credit card account, you agreed to pay what you charged, and any applicable interested accrued on the accounts. You are legally responsible for that debt, and you can be sued, if they are so inclined. Many times, settlement agencies are employed because a risk assessment operator (or whatever they're called at your cc company) calculated that they are currently financially better off settling for a reduced balance than attempting to chase you for the full amount. As soon as the terms of your refinance hits your credit history, that changes. To reiterate and make it clear: This is a very dangerous approach to breaking credit card debt, and I would not advise that anybody proceed with it. EDIT: If you offer 50% of the balance in a lump sum payment, they decline, and you continue with non-payment, they have reason to believe that you are financially capable of making payments, and are much more likely to seek legal action.\\\"\",\n \"Unless you can have your savings earning more than the transfer fees, you should just pay the credit cards off before the interest free period ends. Also, there is the difficulty in finding new cards offering 0% interest continuously. You are better off paying off all your bad debt as soon as possible, start saving and investing, instead of wasting your time and energy trying to find new offers of 0% for your transfers before it expires. Rule of Thumb: Get rid of your Bad Debts as soon as possible; Keep your Good Debts as long as possible (as long as you can afford them).\",\n \"\\\"My wife and I have Gap, Kohl's and Amazon cards. They each give extra benefits when using them at their stores, and usually 1% cash back at other places, although we don't use the Gap or Kohl's anywhere else. We don't carry a balance, so as mentioned, the rate doesn't matter. And they are so spread out when we've gotten them (Kohl's for a good 3 years, Amazon about 2 months ago) that I don't expect any issues for credit checks. In fact I just got approved for a mortgage loan, way more than what I know I can really afford. In my mind, credit cards are a bad idea when you use them as \\\"\\\"real\\\"\\\" credit. If they are used more like a debit card (spending money that you have), its like a loan (you don't have to pay it off til later), and you get paid for it (whether in cash or merchandise).\\\"\",\n \"The Fair Credit Reporting Act (FCRA) says that account history will stay on your credit report as a closed account for 7 years, and then it will drop off, just like any other bad or good mark on your credit (aside from bankruptcies which stay on reports for 10 years, and can be asked about for the rest of your life). The presence of a new credit card will do more to lower your score in the short term than closing an old credit card. On a related note, reporting a card as lost or stolen can also show up as a different, closed account, even if you keep the same account open with the creditor.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["\"Yes, it can be a good idea to close unused credit cards. I am going to give some reasons why it can be a good idea to close unused accounts, and then I will talk about why it is NOT necessarily a bad idea. Why it can be a good idea to close unused accounts \"\"I'd like to close the cards.\"\" That is reason enough. Simplifying your financial life is a good thing. Fewer accounts let you focus your energy on the accounts that you actually use. Unused accounts still need to be monitored for fraud. You mentioned that you have high credit card balances that you are carrying. This may indicate that you have trouble using credit responsibly, and having more credit available to you might be a temptation for you. If these unused cards have annual fees, keeping them open will cost money. Unused cards sometimes get closed by the bank due to inactivity. As a result, the advice often given is that, in addition to not closing them, you are supposed to charge something to it every month. This, of course, takes more of your time and energy to worry about, as well as giving you another monthly bill to pay. Why it is NOT necessarily a bad idea to close unused accounts Other answers will tell you that it may hurt your credit score for two reasons: it would increase your utilization and lower your average account age. Before we talk about the validity of these two points, we need to discuss the importance of the credit score. Depending on what your credit score currently is, these actions may have minimal impact on your life. If you are in the mid 700's or higher, your score is excellent, and closing these cards will likely not impact anything for you in a significant way. If you aren't that high in your score yet, do you have an immediate need for a high score? Are you planning on getting more credit cards, or take out any more loans? I would suggest that, since you have credit card debt, you shouldn't be taking out any new loans until you get that cleaned up. So your score in the mean time is not very important. Are you currently working on eliminating this credit card debt? If so, your utilization number will improve, even after you close these accounts, when you get those paid off. Utilization has only a temporary effect on your score; when your utilization improves, your score improves immediately. Your average account age may or may not improve when you close these accounts, depending on how old they are compared to the accounts you are leaving open. However, the impact of this might not be as much as you think. I realize that this advice is different from other answers, or other things that you may read online. But in my own life, I do a lot of things that are supposedly bad for the credit score: I only have two credit cards, ages 2.5 and 1.5 years. (I closed my other cards when I got these.) My typical monthly utilization is around 25% on these cards, although I pay off the balance in full each month, never paying interest. I have no car loan anymore, and my mortgage is only 4 months old. No other debt. Despite those \"\"terrible\"\" credit practices, my credit score is very high. Conclusion Make your payments on time, get out of debt, and your score will be fine. Don't keep unwanted accounts open just because someone told you that you should.\"","It is an issue of both utilization and average age of accounts. If your cards with $0 balances on them are: A) newer cards than the ones you are carrying balances on and you don't want them B) much lower limit cards than the ones you are carrying balances on then you can raise your score by closing them, as the utilization change won't be a large factor and you can raise the average age of your open accounts.","In your specific case, I would leave them open unless you have a specific reason for wanting to close them - particularly, unless you feel closing them is necessary for you to not misuse them. The impact on the credit score is not why I say this, though. Much more important are the two competing real factors: My suggestion would be to take the cards and put them in your file cabinet, or whatever would cause you to not use them. In fact, you could even cut them up but not close the accounts - I had an account open that I didn't possess a physical card for several years for and didn't use at all, and it stayed open (though it's not guaranteed they'll keep it open for you if you never use it). In an emergency you could then ask them to send you a new copy of the card very easily. But, keep them, just in case you need them. Once you have paid off your balances on your balance-carrying cards, then you should consider closing some of them. Keep enough to be able to live for ~4-6 months (a similar amount to the ideal rainy day fund in savings, basically) and then close others, particularly if you can do so in a way that keeps your average account age reasonably stable.","In my own case, my credit score went up drastically after I closed cards. It did go down a bit (like 10 points) in the short term. Within 6 months, however, I did see significant gains. This would include closing the American Express card that I had for like 10 years. According much of what I read, you should never close a AMEX card. I did and it did not hurt me. What helps all this is that my utilization is zero.","There is also security aspect. By reducing the number of active credit/debit cards, one significantly reduces the surface of attack. There is smaller chance of getting one of your card information stolen and misused (cf Target data leaks and others).","There's no harm in keeping them open. Like you said, closing the lines will potentially hurt your utilization. The extent of that impact will depend on your particular situation. There are situations where closing a line will have no actual impact on your utilization. If you have 100k of open credit and a debt load of $2k, if you close a $10k line you won't really have an issue because your utilization is 2% and closing the line will take you to 2.2%.","Assuming that a person has good financial discipline and is generally responsible with spending, I think that having a few hundred or thousand dollars extra of available credit is usually worth more to that person for the choice/flexibility it provides in unforeseen circumstance, versus the relatively minor hit that could be taken to their credit score.","I'm not sure if someone else answered already in the same manner I will. I can't guarantee for sure if it's the same in the U.S.A. (it might since major credit cards companies like Visa/MC/AMEX are American companies) but in Canada having/keeping unused CC is a disadvantage because of the following: Banks and financing companies look more at the total amount of credit available to you than at how much purchases you have on your cards. Ex: Let's say that you have the following: - Visa cc with $10,000 limit and $2000 worth of purchases (made more than 30 days ago) on it. - Mastercard cc with $10,000 limit as well and $1000 worth of purchases (less than 30 days old) - A major retail store cc with $2000 limit and $0 balance. Hypothetical situation: You want a bank loan to do some expensive house repairs and are looking for a lower interest rate than what your cc can offer. The bank will not care about the amount on the cards. They will add-up all the limits of your cc and treat your loan request as if ALL your cards were filled to their respective limit. So in this case: they will consider you as being right now in debt of $10K+$10K+$2K = $22,000 instead of only $3000 and they might: 1. refuse you the loan 2. grant it only if you transfer all purchases on a single card and cancel all the others. 3. Once the $3000 is transferred on one of the cards (and the others cancelled), they can require that you reduce the limit of that card. Hope this helps!","\"The only good reason I find to close cards are: it's a card with an annual fee that you don't need. No point bleeding money each year. churning rewards. Open card to get bonus promotion such as \"\"spend $500 in first 3 months, get $200 bonus\"\". Close card and open a year later to do that same bonus again if available. Many cards don't allow you to do this. making room for newer cards at the same bank. Example, you have 5 Chase Cards and you want to apply for a 6th. Chase says you have maximized your credit they will extend you. You close one of your existing cards to get that new card. I have seen that many banks allow you to shift over some over your existing available credit to your new card without having to close them.\"","Credit scoring has changed recently and the answer to this question will have slightly changed. While most points made here are true: But now (as of July 2017) it is possible having a large available credit balance can negatively effect your credit score directly: ... VantageScore will now mark a borrower negatively for having excessively large credit card limits, on the theory that the person could run up a high credit card debt quickly. Those who have prime credit scores may be hurt the most, since they are most likely to have multiple cards open. But those who like to play the credit card rewards program points game could be affected as well. source","\"I'd say close them if they have fees, if you're worried about fraud or if you're going to be tempted to use them. It may have an affect on your credit rating, but it shouldn't hurt you seriously. Having too many cards gives you the \"\"opportunity\"\" to overspend, which obviously isn't good.\"","You mentioned you have a bunch of credit cards with no balance, while others have fairly high balances I would not recommend you to close the 0 balance credit cards if they have lower APR. You can transfer the balance to those cards with lower APR. Now, if those 0 balance cards do not have lower APR, closing them will reduce my overall balance and hurt my credit rating and that is true, assume that you mean overall credit line instead of overall balance. But to my understanding, if you keep the payments good and on time, that effect is only temporary, and therefore you can definitely close them. Don't forget, paying off your balance can also lower your utilization rate and therefore increase your credit ratings, and you can focus more on that instead. Also larger number of accounts with amounts owed can indicate higher risk of over-extension, therefore you should pay off your low balance accounts first, and do not open new credit accounts until you have paid off the current balance."],"string":"[\n \"\\\"Yes, it can be a good idea to close unused credit cards. I am going to give some reasons why it can be a good idea to close unused accounts, and then I will talk about why it is NOT necessarily a bad idea. Why it can be a good idea to close unused accounts \\\"\\\"I'd like to close the cards.\\\"\\\" That is reason enough. Simplifying your financial life is a good thing. Fewer accounts let you focus your energy on the accounts that you actually use. Unused accounts still need to be monitored for fraud. You mentioned that you have high credit card balances that you are carrying. This may indicate that you have trouble using credit responsibly, and having more credit available to you might be a temptation for you. If these unused cards have annual fees, keeping them open will cost money. Unused cards sometimes get closed by the bank due to inactivity. As a result, the advice often given is that, in addition to not closing them, you are supposed to charge something to it every month. This, of course, takes more of your time and energy to worry about, as well as giving you another monthly bill to pay. Why it is NOT necessarily a bad idea to close unused accounts Other answers will tell you that it may hurt your credit score for two reasons: it would increase your utilization and lower your average account age. Before we talk about the validity of these two points, we need to discuss the importance of the credit score. Depending on what your credit score currently is, these actions may have minimal impact on your life. If you are in the mid 700's or higher, your score is excellent, and closing these cards will likely not impact anything for you in a significant way. If you aren't that high in your score yet, do you have an immediate need for a high score? Are you planning on getting more credit cards, or take out any more loans? I would suggest that, since you have credit card debt, you shouldn't be taking out any new loans until you get that cleaned up. So your score in the mean time is not very important. Are you currently working on eliminating this credit card debt? If so, your utilization number will improve, even after you close these accounts, when you get those paid off. Utilization has only a temporary effect on your score; when your utilization improves, your score improves immediately. Your average account age may or may not improve when you close these accounts, depending on how old they are compared to the accounts you are leaving open. However, the impact of this might not be as much as you think. I realize that this advice is different from other answers, or other things that you may read online. But in my own life, I do a lot of things that are supposedly bad for the credit score: I only have two credit cards, ages 2.5 and 1.5 years. (I closed my other cards when I got these.) My typical monthly utilization is around 25% on these cards, although I pay off the balance in full each month, never paying interest. I have no car loan anymore, and my mortgage is only 4 months old. No other debt. Despite those \\\"\\\"terrible\\\"\\\" credit practices, my credit score is very high. Conclusion Make your payments on time, get out of debt, and your score will be fine. Don't keep unwanted accounts open just because someone told you that you should.\\\"\",\n \"It is an issue of both utilization and average age of accounts. If your cards with $0 balances on them are: A) newer cards than the ones you are carrying balances on and you don't want them B) much lower limit cards than the ones you are carrying balances on then you can raise your score by closing them, as the utilization change won't be a large factor and you can raise the average age of your open accounts.\",\n \"In your specific case, I would leave them open unless you have a specific reason for wanting to close them - particularly, unless you feel closing them is necessary for you to not misuse them. The impact on the credit score is not why I say this, though. Much more important are the two competing real factors: My suggestion would be to take the cards and put them in your file cabinet, or whatever would cause you to not use them. In fact, you could even cut them up but not close the accounts - I had an account open that I didn't possess a physical card for several years for and didn't use at all, and it stayed open (though it's not guaranteed they'll keep it open for you if you never use it). In an emergency you could then ask them to send you a new copy of the card very easily. But, keep them, just in case you need them. Once you have paid off your balances on your balance-carrying cards, then you should consider closing some of them. Keep enough to be able to live for ~4-6 months (a similar amount to the ideal rainy day fund in savings, basically) and then close others, particularly if you can do so in a way that keeps your average account age reasonably stable.\",\n \"In my own case, my credit score went up drastically after I closed cards. It did go down a bit (like 10 points) in the short term. Within 6 months, however, I did see significant gains. This would include closing the American Express card that I had for like 10 years. According much of what I read, you should never close a AMEX card. I did and it did not hurt me. What helps all this is that my utilization is zero.\",\n \"There is also security aspect. By reducing the number of active credit/debit cards, one significantly reduces the surface of attack. There is smaller chance of getting one of your card information stolen and misused (cf Target data leaks and others).\",\n \"There's no harm in keeping them open. Like you said, closing the lines will potentially hurt your utilization. The extent of that impact will depend on your particular situation. There are situations where closing a line will have no actual impact on your utilization. If you have 100k of open credit and a debt load of $2k, if you close a $10k line you won't really have an issue because your utilization is 2% and closing the line will take you to 2.2%.\",\n \"Assuming that a person has good financial discipline and is generally responsible with spending, I think that having a few hundred or thousand dollars extra of available credit is usually worth more to that person for the choice/flexibility it provides in unforeseen circumstance, versus the relatively minor hit that could be taken to their credit score.\",\n \"I'm not sure if someone else answered already in the same manner I will. I can't guarantee for sure if it's the same in the U.S.A. (it might since major credit cards companies like Visa/MC/AMEX are American companies) but in Canada having/keeping unused CC is a disadvantage because of the following: Banks and financing companies look more at the total amount of credit available to you than at how much purchases you have on your cards. Ex: Let's say that you have the following: - Visa cc with $10,000 limit and $2000 worth of purchases (made more than 30 days ago) on it. - Mastercard cc with $10,000 limit as well and $1000 worth of purchases (less than 30 days old) - A major retail store cc with $2000 limit and $0 balance. Hypothetical situation: You want a bank loan to do some expensive house repairs and are looking for a lower interest rate than what your cc can offer. The bank will not care about the amount on the cards. They will add-up all the limits of your cc and treat your loan request as if ALL your cards were filled to their respective limit. So in this case: they will consider you as being right now in debt of $10K+$10K+$2K = $22,000 instead of only $3000 and they might: 1. refuse you the loan 2. grant it only if you transfer all purchases on a single card and cancel all the others. 3. Once the $3000 is transferred on one of the cards (and the others cancelled), they can require that you reduce the limit of that card. Hope this helps!\",\n \"\\\"The only good reason I find to close cards are: it's a card with an annual fee that you don't need. No point bleeding money each year. churning rewards. Open card to get bonus promotion such as \\\"\\\"spend $500 in first 3 months, get $200 bonus\\\"\\\". Close card and open a year later to do that same bonus again if available. Many cards don't allow you to do this. making room for newer cards at the same bank. Example, you have 5 Chase Cards and you want to apply for a 6th. Chase says you have maximized your credit they will extend you. You close one of your existing cards to get that new card. I have seen that many banks allow you to shift over some over your existing available credit to your new card without having to close them.\\\"\",\n \"Credit scoring has changed recently and the answer to this question will have slightly changed. While most points made here are true: But now (as of July 2017) it is possible having a large available credit balance can negatively effect your credit score directly: ... VantageScore will now mark a borrower negatively for having excessively large credit card limits, on the theory that the person could run up a high credit card debt quickly. Those who have prime credit scores may be hurt the most, since they are most likely to have multiple cards open. But those who like to play the credit card rewards program points game could be affected as well. source\",\n \"\\\"I'd say close them if they have fees, if you're worried about fraud or if you're going to be tempted to use them. It may have an affect on your credit rating, but it shouldn't hurt you seriously. Having too many cards gives you the \\\"\\\"opportunity\\\"\\\" to overspend, which obviously isn't good.\\\"\",\n \"You mentioned you have a bunch of credit cards with no balance, while others have fairly high balances I would not recommend you to close the 0 balance credit cards if they have lower APR. You can transfer the balance to those cards with lower APR. Now, if those 0 balance cards do not have lower APR, closing them will reduce my overall balance and hurt my credit rating and that is true, assume that you mean overall credit line instead of overall balance. But to my understanding, if you keep the payments good and on time, that effect is only temporary, and therefore you can definitely close them. Don't forget, paying off your balance can also lower your utilization rate and therefore increase your credit ratings, and you can focus more on that instead. Also larger number of accounts with amounts owed can indicate higher risk of over-extension, therefore you should pay off your low balance accounts first, and do not open new credit accounts until you have paid off the current balance.\"\n]","isConversational":false}}},{"rowIdx":80,"cells":{"_id":{"kind":"string","value":"5549"},"query":{"kind":"string","value":"Pros / cons of being more involved with IRA investments [duplicate]"},"gt_ids":{"kind":"list like","value":["286227","309361"],"string":"[\n \"286227\",\n \"309361\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1],"string":"[\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["429106","546150","348927","69005","324066","561636","576008","336394","430931","484825","439402","222082","370193","12488","238360","484683","41417","87260","530425","445198","408994","400356","231012","364131","97805","466626","141939","101578","587727","238500","276333","309200","271504","81148","595042","277","71299","199544","396852","53100","5602","534795","240651","315286","134300","505362","125168","461084","443903","74041","382894","493461","170916","148661","371886","327509","90294","329736","299690","258658","52080","18449","65567","181624","110465","70702","32009","346474","576263","573935","340131","105468","43974","89868","163834","347651","299703","481209","403103","508185","506302","508219","135823","240975","162562","270818","521095","455698","101490","39071","299176","389202","488673","330743","450558","34986","111350","287781","461592","195515"],"string":"[\n \"429106\",\n \"546150\",\n \"348927\",\n \"69005\",\n \"324066\",\n \"561636\",\n \"576008\",\n \"336394\",\n \"430931\",\n \"484825\",\n \"439402\",\n \"222082\",\n \"370193\",\n \"12488\",\n \"238360\",\n \"484683\",\n \"41417\",\n \"87260\",\n \"530425\",\n \"445198\",\n \"408994\",\n \"400356\",\n \"231012\",\n \"364131\",\n \"97805\",\n \"466626\",\n \"141939\",\n \"101578\",\n \"587727\",\n \"238500\",\n \"276333\",\n \"309200\",\n \"271504\",\n \"81148\",\n \"595042\",\n \"277\",\n \"71299\",\n \"199544\",\n \"396852\",\n \"53100\",\n \"5602\",\n \"534795\",\n \"240651\",\n \"315286\",\n \"134300\",\n \"505362\",\n \"125168\",\n \"461084\",\n \"443903\",\n \"74041\",\n \"382894\",\n \"493461\",\n \"170916\",\n \"148661\",\n \"371886\",\n \"327509\",\n \"90294\",\n \"329736\",\n \"299690\",\n \"258658\",\n \"52080\",\n \"18449\",\n \"65567\",\n \"181624\",\n \"110465\",\n \"70702\",\n \"32009\",\n \"346474\",\n \"576263\",\n \"573935\",\n \"340131\",\n \"105468\",\n \"43974\",\n \"89868\",\n \"163834\",\n \"347651\",\n \"299703\",\n \"481209\",\n \"403103\",\n \"508185\",\n \"506302\",\n \"508219\",\n \"135823\",\n \"240975\",\n \"162562\",\n \"270818\",\n \"521095\",\n \"455698\",\n \"101490\",\n \"39071\",\n \"299176\",\n \"389202\",\n \"488673\",\n \"330743\",\n \"450558\",\n \"34986\",\n \"111350\",\n \"287781\",\n \"461592\",\n \"195515\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["Our company does a lot of research on the self-directed IRA industry. We also provide financial advice in this area. In short, we have seen a lot in this industry. You mentioned custodian fees. This can be a sore spot for many investors. However, not all custodians are expensive, you should do your research before choosing the best one. Here is a list of custodians to help with your research Here are some of the more common pros and cons that we see. Pros: 1) You can invest in virtually anything that is considered an investment. This is great if your expertise is in an area that cannot be easily invested in with traditional securities, such as horses, private company stock, tax liens and more. 2) Control- you have greater control over your investments. If you invest in GE, it is likely that you will not have much say in the running of their business. However, if you invest in a rental property, you will have a lot of control over how the investment should operate. 3) Invest in what you know. Peter lynch was fond of saying this phrase. Not everyone wants to invest in the stock market. Many people won't touch it because they are not familiar with it. Self-directed IRAs allow you to invest in assets like real estate that you know well. Cons: 1) many alternative investments are illiquid. This can present a problem if you need to access your capital for withdrawals. 2) Prohibited transactions- This is a new area for many investors who are unfamiliar with how self-directed IRAs work 3) Higher fees- in many cases, the fees associated with self-directed IRA custodians and administrators can be higher. 4) questionable investment sponsors tend to target self-directed IRA owners for fraudulent investments. The SEC put out a good PDF about the risks of fraud with self-directed IRAs. Self Directed IRAs are not the right solution for everyone, but they can help certain investors focus on the areas they know well.","I have managed two IRA accounts; one I inherited from my wife's 401K and my own's 457B. I managed actively my wife's 401 at Tradestation which doesn't restrict on Options except level 5 as naked puts and calls. I moved half of my 457B funds to TDAmeritrade, the only broker authorized by my employer, to open a Self Directed account. However, my 457 plan disallows me from using a Cash-secured Puts, only Covered Calls. For those who does not know investing, I resent the contention that participants to these IRAs should not be messing around with their IRA funds. For years, I left my 401k/457B funds with my current fund custodian, Great West Financial. I checked it's current values once or twice a year. These last years, the market dived in the last 2 quarters of 2015 and another dive early January and February of 2016. I lost a total of $40K leaving my portfolio with my current custodian choosing all 30 products they offer, 90% of them are ETFs and the rest are bonds. If you don't know investing, better leave it with the pros - right? But no one can predict the future of the market. Even the pros are at the mercy of the market. So, I you know how to invest and choose your stocks, I don't think your plan administrator has to limit you on how you manage your funds. For example, if you are not allowed to place a Cash-Secured Puts and you just Buy the stocks or EFT at market or even limit order, you buy the securities at their market value. If you sell a Cash-secured puts against the stocks/ETF you are interested in buying, you will receive a credit in fraction of a dollar in a specific time frame. In average, your cost to owning a stock/ETF is lesser if you buy it at market or even a limit order. Most of the participants of the IRA funds rely too much on their portfolio manager because they don't know how to manage. If you try to educate yourself at a minimum, you will have a good understanding of how your IRA funds are tied up to the market. If you know how to trade in bear market compared to bull market, then you are good at managing your investments. When I started contributing to my employer's deferred comp account (457B) as a public employee, I have no idea of how my portfolio works. Year after year as I looked at my investment, I was happy because it continued to grow. Without scrutinizing how much it grew yearly, and my regular payroll contribution, I am happy even it only grew 2% per year. And at this age that I am ready to retire at 60, I started taking investment classes and attended pre-retirement seminars. Then I knew that it was not totally a good decision to leave your retirement funds in the hands of the portfolio manager since they don't really care if it tanked out on some years as long at overall it grew to a meager 1%-4% because they managers are pretty conservative on picking the equities they invest. You can generalize that maybe 90% of IRA investors don't know about investing and have poor decision making actions which securities/ETF to buy and hold. For those who would like to remain as one, that is fine. But for those who spent time and money to study and know how to invest, I don't think the plan manager can limit the participants ability to manage their own portfolio especially if the funds have no matching from the employer like mine. All I can say to all who have IRA or any retirement accounts, educate yourself early because if you leave it all to your portfolio managers, you lost a lot. Don't believe much in what those commercial fund managers also show in their presentation just to move your funds for them to manage. Be proactive. If you start learning how to invest now when you are young, JUST DO IT!","The main advantage and disadvantage I can see in a scenario like this are - how savvy and good an investor are you? It's a good way to create below-market average returns if you're not that good at investing and returns way above market average if you are...","Even Gold lost 1/2 of it's value between 1980 and 2000. You would not have fared well if you retired during that period heavily invested in Gold. http://www.usagold.com/reference/prices/history.html You said yourself that one can not foresee what the future will bring. At least IRA's force you to into dollar cost averaging, whereas if your money was outside of a retirement account, you might be tempted to speculate. -Ralph Winters","\"You could end up with nothing, yes. I imagine those that worked at Enron years ago if their 401(k) was all in company stock would have ended up with nothing to give an example here. However, more likely is for you to end up with less than you thought as you see other choices as being better that with the benefit of hindsight you wish you had made different choices. The strategies will vary as some people will want something similar to a \"\"set it and forget it\"\" kind of investment and there may be fund choices where a fund has a targeted retirement date some years out into the future. These can be useful for people that don't want to do a lot of research and spend time deciding amongst various choices. Other people may prefer something a bit more active. In this case, you have to determine how much work do you want to do, do you want to review fund reviews on places like Morningstar, and do periodic reviews of your investments, etc. What works best for you is for you to resolve for yourself. As for risks, here are a few possible categories: Time - How many hours a week do you want to spend on this? How much time learning this do you want to do in the beginning? While this does apply to everyone, you have to figure out for yourself how much of a cost do you want to take here. Volatility - Some investments may fluctuate in value and this can cause issues for some people as it may change more than they would like. For example, if you invest rather aggressively, there may be times where you could have a -50% return in a year and that isn't really acceptable to some people. Inflation - Similarly to those investments that vary wildly there is also the risk that with time, prices generally rise and thus there is something to be said for the purchasing power of your investment. If you want to consider this in more detail consider what $1,000,000 would have bought 30 years ago compared to now. Currency risk - Some investments may be in other currencies and thus there is a risk of how different denominations may impact a return. Fees - How much do your fund's charge in the form of annual expense ratio? Are you aware of the charges being taken to manage your money here?\"","You're misunderstanding the concept of retirement savings. IRA distributions are taxed, in their entirety, as ordinary income. If you withdraw before the retirement age, additional 10% penalty is added. Investment income has preferential treatment - long term capital gains and qualified dividends are taxed at lower rates than ordinary income. However, IRA contributions are tax deductible. I.e.: you don't pay taxes on the amounts contributed to the IRA when you earned the money, only when you withdraw. In the mean time, the money is growing, tax free, based on your investments. Anything inside the IRA is tax free, including dividends, distributions (from funds to your IRA, not from IRA to you), capital gains, etc. This is very powerful, when taking into account the compounding effect of reinvesting your dividends/sale proceeds without taking a chunk out for taxes. Consider you make an investment in a fund that appreciated 100% in half a year. You cash out to reinvest in something less volatile to lock the gains. In a regular account - you pay taxes when you sell, based on your brackets. In the IRA you reinvest all of your sale proceeds. That would be ~25-35% more of the gains to reinvest and continue working for you! However, if you decide to withdraw - you pay ordinary rate taxes on the whole amount. If you would invest in a single fund for 30 years in a regular account - you'd pay 20% capital gains tax (on the appreciation, not the dividends). In the IRA, if you invest in the same fund for the same period - you'll pay your ordinary income rates. However, the benefit of reinvesting dividends tax-free softens the blow somewhat, but that's much harder to quantify. Bottom line: if you want to plan for retirement - plan for retirment. Otherwise - IRA is not an investment vehicle. Also consider Roth IRA/conversions. Roth IRA has the benefit of tax free distributions at retirement. If your current tax bracket is at 20%, for example, contributing $5K to Roth IRA instead of a traditional will cost you $1K of taxes now, but will save you all the taxes during the retirement (for the distributions from the Roth IRA). It may be very much worth your while, especially if you can contribute directly to Roth IRA (there are some income limitations and phaseouts). You can withdraw contributions (but not earnings) from Roth IRA - something you cannot do with a traditional IRA.","Buying the right shares gives higher return. Buying the wrong ones gives worse return, possibly negative. The usual recommendation, even if you have a pro advising you, is to diversify most of your investments to reduce the risk, even though that may reduce the possible gain. A mutual fund is diversification-in-a-can. It requires little to no active maintenance. Yes, you pay a management fee, but you aren't paying per-transaction fees every time you adjust your holdings, and the management costs can be quite reasonable if you pick the right funds; minimal in the case of computer-managed (index) funds. If you actively enjoy playing with stocks and bonds and are willing/able to accept your failures and less-than-great choices as part of the game, and if you can convince yourself that you will do better this way, go for it. For those of us who just want to deposit out money, watch it grow, and maybe rebalance once a year if that, index funds are a perfectly good choice. I spend at least 8 hours a day working for my money; the rest of the time, I want my money to work for me. Risk and reward tend to be proportional to each other; when they aren't, market prices tend to move to correct that. You need to decide how much risk you're comfortable with, and how much time and effort and money you're willing to spend managing that risk. Personally, I am perfectly happy with the better-than-market-rate-of-return I'm getting, and I don't have any conviction that I could do better if I was more involved. Your milage will vary. If folks didn't disagree, there wouldn't be a market.","The main restrictions you see with IRA's involve contributions, and not the actual investments themselves. I would be indifferent to having a single investment across multiple accounts. It might be a bit trickier to manage, especially if your strategy involves some specific asset allocation. Other than account management though, there's no big issue.","Specifically on the subject of maxing out your 401k, there are several downsides: The employer match usually only applies to the first 6%. Some employers offer no match at all. You listed the match as a pro, but I think it should be pointed out that you can usually get this benefit without maxing out your plan. The investment options are limited. Usually there is at least one fund available from all the common investment classes, but these may not be your preferred funds if you were able to choose for yourself. Fees can be very high. If you are working for a small to medium size company, the fees for each fund will often be higher than for the same funds in a plan offered by a large company. Fees are usually related to the dollar amount of assets under management. Each person has a different tax situation, so if you are single and making 6 figures, you might still be in the 25% bracket even after maxing out your 401k, but the same person filing jointly with a spouse that makes less could get down to the 15% bracket with a smaller contribution. I meet my retirement savings goals without maxing out the 401k. As long as the amount is above the employer match amount, my second priority is to funnel as much money as possible in to my IRA (because I get lower fees and better investment options from Vanguard).","Older folk might wish to let the dividends and cap gains be paid in cash, and use that cash towards their RMDs (required distributions). If you are investing in mutual funds and wish to keep adding to the funds you've selected, the reinvestment is a simple way to avoid having to visit the account and make a new purchase. In other words, you invest $5500, buy the fund, and X years from now, you simply have more shares of the fund but no cash o worry about. The pro is as mentioned, and the con is really for the 70-1/2+ people who will need to take their RMDs. (Although even they can take the RMD in kind, as fund shares)","Once upon a time, money rolled over from a 401k or 403b plan into an IRA could not be rolled into another 401k or 403b unless the IRA account was properly titled as a Rollover IRA (instead of Traditional IRA - Roth IRAs were still in the future) and the money kept separate (not commingled) with contributions to Traditional IRAs. Much of that has fallen by the way side as the rules have become more relaxed. Also the desire to roll over money into a 401k plan at one's new job has decreased too -- far too many employer-sponsored retirement plans have large management fees and the investments are rarely the best available: one can generally do better keeping ex-401k money outside a new 401k, though of course new contributions from salary earned at the new employer perforce must be put into the employer's 401k. While consolidating one's IRA accounts at one brokerage or one fund family certainly saves on the paperwork, it is worth keeping in mind that putting all one's eggs in one basket might not be the best idea, especially for those concerned that an employee might, like Matilda, take me money and run Venezuela. Another issue is that while one may have diversified investments at the brokerage or fund family, the entire IRA must have the same set of beneficiaries: one cannot leave the money invested in GM stock (or Fund A) to one person and the money invested in Ford stock (or Fund B) to another if one so desires. Thinking far ahead into the future, if one is interested in making charitable bequests, it is the best strategy tax-wise to make these bequests from tax-deferred monies rather than from post-tax money. Since IRAs pass outside the will, one can keep separate IRA accounts with different companies, with, say, the Vanguard IRA having primary beneficiary United Way and the Fidelity IRA having primary beneficiary the American Cancer Society, etc. to achieve the appropriate charitable bequests.","There are a few things to consider. The answers others gave here are correct, but I'll offer some reasons you may not want to roll to an IRA:","I stopped trading in my IRA and gave it pro to manage it. He beats SP500 that i could never do.","easier access to your money That can be a disadvantage for some people. Based on the number of people who tap their 401K for non-retirement reasons, or just cash it in when they change jobs; making it painful to use before retirement age does keep some people from spending it too early. They need to be able to compartmentalize the funds in order to understand the difference between funds spending, saving and investing for retirement. Roth 401K One advantage that the 401K may have is that you can in many plans invest the funds in a Roth 401K. This allows you to go beyond the Roth IRA limits. You are currently investing the maximum amount in your Roth IRA, so this could be a big advantage.","The investments offered in 401K are usually limited to a selection of mutual funds offered by a 401K provider. The 401K providers and the mutual funds charge fees. The mutual fund industry has a lobbying group that will push for increased 401K contributions to direct money into their mutual funds to collect fees. The top 401 K provider in 2005 was fidelity. It managed $337 billion in 401Ks of which $334 billion was directed into mutual funds. Although I would have to use some of the same providers to open an IRA, I would not have to invest in the providers' mutual funds when I open an IRA. I can buy a stock and hold onto it for 10, 20, 50 years inside of my IRA. Thus, the only fee the investment company would collect from me would be from when I purchased the stock and when I sold the stock. Not nearly as profitable as mutual fund fees.","You bring up a valid concern. IRAs are good retirement instruments as long as the rules don't change. History has shown that governments can change the rules regarding retirement accounts. As long as you have some of your retirement assets outside of an IRA I think IRAs are good ways to save for retirement. It's not possible to withdraw the money before retirement without penalty. Also, you will be penalized if you do not withdraw enough when you do retire.","\"1) Usually, the choice between Traditional vs. Roth is whether you believe that your tax rate will be higher or lower in the future than it is now. Your income is probably in the 25% bracket now. It's hard to say whether that should be considered \"\"high\"\" or \"\"low\"\". Some people advocate Roth only for 15% bracket; but your income would probably go into higher brackets in the future, so Roth may be preferable from this point of view. Roth IRA also has another advantage that the principal of contributions can be taken out at any time without tax or penalty, so it can serve as an emergency fund just as well as money in taxable accounts. Given that you may not have a lot of money saved up right now, this is useful. 2) In a sense, it's nice to have a mix of Traditional and Roth when you withdraw to hedge against uncertainty in future tax rates and have the option of choosing whichever one is advantageous to withdraw when you need to withdraw. That said, you will likely have many years of access to a 401k and high income in your future working years, in which you can contribute to a Traditional 401k (or if no access to 401k, then Traditional IRA), so a mix will almost certainly happen even if you go all Roth IRA now. 3) I think that depends on you, whether you are a hands-on or hands-off kind of investor.\"","All other things being equal, you might be better off contributing to a IRA that is a brokerage account. You will have lots of flexibility in your investments and there would probably not be fees for the account itself. You might incur commissions for trading and/or owning mutual funds that are charged by the funds themselves. You won't be able to borrow from an IRA, as opposed to a 401K. IMHO, that is a good thing. Are you suggesting that you would withdraw early from a retirement account? You'd probably be better off not doing that. Assuming a large salary, you would be paying 43% to withdraw your money early. Would you accept a loan at 43% interest? You are probably better off not putting the money in in the first place to accomplish your goals, then withdrawing it early. Most people opt for a 401K for two reasons. The company match and ease of investment make a compelling argument. Keep in mind if a 401K is available to you, regardless if you particpate, you start phasing out your IRA deduction at 60K a year (single) or 96K (married). Given your huge salary comments I imagine an IRA would not be an option in your scenario. Given that, if you leave a job, you can roll your 401K balance into a trading account.","\"You are overthinking it. Yes there is overlap between them, and you want to understand how much overlap there is so you don't end up with a concentration in one area when you were trying to avoid it. Pick two, put your money in those two; and then put your new money into those two until you want to expand into other funds. The advantage of having the money in an IRA held by a single fund family, is that moving some or all of the money from one Mutual fund/ETF to another is painless. The fact it is a retirement account means that selling a fund to move the money doesn't trigger taxes. The fact that you have about $10,000 for the IRA means that hopefully you have decades left before you need the money and that this $10,00 is just the start. You are not committed to these investment choices. With periodic re-balancing the allocations you make now will be adjusted over the decades. One potential issue. You said: \"\"I'm saving right not but haven't actually opened the account.\"\" I take it to mean that you have money in a Roth TRA account but it isn't invested into a stock fund, or that you have the money ready to go in a regular bank account and will be making a 2015 contribution into the actual IRA before tax day this year, and the 2016 contribution either at the same time or soon after. If it is the second case make sure you get the money for 2015 into the IRA before the deadline.\"","Pro: - Faces less redemption pressure and hence the Fund Manager can focus more on long term gains rather than immediate gains. - Works well in emerging markets. - Less churn out in case the market falls sharply, there by making more money in long run. Cons: - No additional money to invest/take advantage of market situation. - Less liquid for investor as he is locked in for a period.","Unfortunately, that's a call only you can make and whichever route you choose comes with advantages and disadvantages. If you manage your money directly, you may significantly reduce costs (assuming that you don't frequently trade index funds or you use a brokerage like RobinHood) and take advantage of market returns if the indexes perform well. On the other hand, if the market experiences some bad years, a professional might (and this is a huge might) have more self-discipline and prevent a panic sell, or know how to allocate accordingly both before and after a rise or fall (keep in mind, investors often get too greedy for their own good, like they tend to panic at the wrong time). As an example of why this might is important: one family member of mine trusted a professional to do this and they failed; they bought in a rising market and sold in a falling market. To avoid the above example, if you do go with the professional service, the best course of action is to look at their track record; if they're new, you might be better on your own. Since I assume this one or more professionals at the company, testing to see what they've recommended over the years might help you evaluate if they're offering you a good choice. Finally, depending on how much money you have, you could always do what Scott Adams did: he took a portion of his own money and managed it himself and tested how well he did vs. how well his professional team did (if I recall, I believe he came out ahead of his professional team). With two decades left, that may help guide you the rest of the way, even through retirement.","\"Your funds are in a retirement account. Withdrawals from your IRA will be penalized if you withdraw before you turn 59.5 years old, and you appear to be decades away from that age. The general advice I would give you is to pick a \"\"target year fund\"\" that targets the year you turn 59.5. The stock market is more volatile, but its average gains will protect you from inflation just eating your funds. Bonds are in counterpoint to your stocks - more stable, and protecting you from the chance that stocks dip right before you want to withdraw. Target year funds start with higher amounts of stock, and gradually rebalance towards bonds over time. Thus, you take your market risks earlier while you can benefit from the market's gains, and then have stability when you actually would want to retire and depend on the savings.\"","I'd hazard that Jim is mostly worried that people are getting ripped off by high employer 401(k) fund fees. A lot of employers offer funds with fees over 1% a year. This sounds low-ish if you don't realize that the real (inflation-adjusted) return for the fund will probably average out to about 4%, so it's really something like a quarter of your earnings gone. With an IRA, you don't have to do that. You can get an IRA provider which offers good, cheap index funds and the like (cough Vanguard cough). Fund fees will probably be closer to 0.1%-ish. HOWEVER. The maximum IRA contribution in 2013 will be $5,500. The maximum for a 401(k) contribution will be $17,500. That extra capacity is enough to recommend a 401(k) over an IRA for many people. These people may be best served by putting money into the 401(k) and then rolling it over into a rollover IRA when they change jobs. Also, certain people have retirement plans which offer them good cheap index funds. These people probably don't need to worry quite as much. Finally, having two accounts is more complicated. Please contact someone who knows more about taxes than I am to figure out what limitations apply for contributing to both IRAs and 401(k)s in the same year.","As I stated in my comment on @JCotton's answer, the only way you benefit by putting your money in an IRA or other tax-deferred vehicle is if you expect to have a lower tax rate when you withdraw than when you put the money in. If you look at @JCotton's numbers and remember to pay taxes when you withdraw the money in 30 years, you will see that both situations - paying taxes now or 30 years from now - give you the exact same dollar amount if the tax rates are the same at both points in time. So if you put money in an IRA, you're betting on the fact that the government will not substantially raise interest rates by then, and/or that you will be in a lower tax bracket. To me, the only valid reasons to invest in an IRA or 401K are the following: However, you should also consider the major downside that the money is locked away and, at best, inconvenient to access when you need it. At worst, you have to pay taxes and penalties if you ever withdraw that money. If you are a financially responsible person, I think you're generally better off keeping your money outside of an IRA or 401K, with the exception of making sure to get all of your employer's matching contributions.","If your employer does not offer contribution matching, and you don't like the range of investment options provided by the company 401k, then you probably are better off investing in your own IRA instead. In an IRA held at a bank or brokerage, you can invest in multiple stocks or funds and move money around within the IRA pretty freely in most cases. If your company is doing well and is actually sharing profit into the 401k, you might consider leaving your 5% contribution to the 401k where it is and put the other 5% you are planning to contribute into a new IRA of your own. This straddles the risk of you losing money if your company 401k tanks (or profit sharing dries up) and your missing out on profit sharing if it continues to pay well.","\"Couple points: 1) Since the Roth is after tax, you can effectively contribute more than you could with the Traditional IRA before hitting the limits. So in your example, if you had extra money you wanted to invest in an IRA, you could invest up to $1,750 more into the Roth but only $500 more into the Traditional (current limits are $5,500 per year for single filers under 50). Your example assumes that you have exactly $3,750 in spare money looking for an IRA home. 2) The contributions (but not earnings) can be withdrawn from the Roth at any time, penalty and tax free. 3) The tax rate \"\"lock-in\"\" can be significant, especially early on when you are at a relatively low tax bracket, say 15%, but expect to be higher at retirement. 4) Traditional IRAs and 401(k) are taxed as ordinary income, so you go through the tax brackets. Even if the marginal rate is 25%, the effective rate may be lower. If you have a Roth, conceivably you could reduce the amount you need to withdrawal from the Trad IRA/401(k) to reduce the effective tax rate on those (of course subject to minimum distributions and all that). This is more an argument to have a mix of pre- and post-tax retirement accounts than strictly a pro-Roth reason.\"","In addition to the other answers, which cover the risks of what is essentially leveraged investing, I'd like to point out that the 2.6% penalty is a flat rate. If you are responsible for withholding your own taxes then you are paying tax four times a year. So any underpayment on your first quarterly tax payment will have much more time to accrue in the stock market than your last payment, although each underpayment will be penalized by the 2.6%. It may make sense for someone to make full payments on later payments but underpay on earlier ones.","First you need to distinguish between short-term and long-term capital gains. In an IRA you can use investment strategies that incur short-term capital gains without being taxed as ordinary income. As mentioned in a comment above, with a Roth IRA, you can invest now at your low income tax rates and withdraw all gains without incurring any taxes at retirement time. You can also pull out your contributions penalty free before retirement age (59 1/2) if you've had the account for more than 5 years. You only pay taxes and penalties on the earnings. You can also make withdrawals for education expenses and you have one lifetime exclusion of $10,000 for a down-payment on a house.","\"IRAs have huge tax-advantages. You'll pay taxes when you liquidate gold and silver. While volatile, \"\"the stock market has never produced a loss during any rolling 15-year period (1926-2009)\"\" [PDF]. This is perhaps the most convincing article for retirement accounts over at I Will Teach You To Be Rich. An IRA is just a container for your money and you may invest the money however you like (cash, stocks, funds, etc). A typical investment is the purchase of stocks, bonds, and/or funds containing either or both. Stocks may pay dividends and bonds pay yields. Transactions of these things trigger capital gains (or losses). This happens if you sell or if the fund manager sells pieces of the fund to buy something in its place (i.e. transactions happen without your decision and high turnover can result in huge capital gains). In a taxable account you will pay taxes on dividends and capital gains. In an IRA you don't ever pay taxes on dividends and capital gains. Over the life of the IRA (30+ years) this can be a huge ton of savings. A traditional IRA is funded with pre-tax money and you only pay tax on the withdrawal. Therefore you get more money upfront to invest and more money compounds into greater amounts faster. A Roth IRA you fund with after-tax dollars, but your withdrawals are tax free. Traditional versus Roth comparison calculator. Here are a bunch more IRA and 401k calculators. Take a look at the IRA tax savings for various amounts compared to the same money in a taxable account. Compounding over time will make you rich and there's your reason for starting young. Increases in the value of gold and silver will never touch compounded gains. So tax savings are a huge reason to stash your money in an IRA. You trade liquidity (having to wait until age 59.5) for a heck of a lot more money. Though isn't it nice to be assured that you will have money when you retire? If you aren't going to earn it then, you'll have to earn it now. If you are going to earn it now, you may as well put it in a place that earns you even more. A traditional IRA has penalties for withdrawing before retirement age. With a Roth you can withdraw the principal at anytime without penalty as long as the account has been open 5 years. A traditional IRA requires you take out a certain amount once you reach retirement. A Roth doesn't, which means you can leave money in the account to grow even more. A Roth can be passed on to a spouse after death, and after the spouse's death onto another beneficiary. more on IRA Required Minimum Distributions.\"","What is the best option to start with? and I am not sure about my goals right now but I do want to have a major retirement account without changing it for a long time That is a loaded question. Your goals should be set up first, else what is stopping you from playing the mega millions lottery to earn the retirement amount instantly. If you have the time and resources, you should try doing it yourself. It helps you learn and at a latter stage if you don't have the time to manage it yourself, you can find an adviser who does it for you. To find a good adviser or find a fund who/which can help you achieve your monetary goals you will need to understand the details, how it works and other stuff, behind it. When you are thrown terms at your face by somebody, you should be able to join the dots and get a picture for yourself. Many a rich men have lost their money to unscrupulous people i.e. Bernie Madoff. So knowing helps a lot and then you can ask questions or find for yourself to calm yourself i.e. ditch the fund or adviser, when you see red flags. It also makes you not to be too greedy, when somebody paints you a picture of great returns, because then your well oiled mind would start questioning the rationale behind such investments. Have a look at Warren Buffet. He is an investor and you can follow how he does his investing. It is simple but very difficult to follow. Investing through my bank I would prefer to stay away from them, because their main service is banking and not allowing people to trade. I would first compare the services provided by a bank to TD Ameritrade, or any firm providing trading services. The thing is, as you mentioned in the question, you have to go through a specific process of calling him to change your portfolio, which shouldn't be a condition. What might happen is, if he is getting some benefits out of the arrangement(get it clarified in the first place if you intend to go through them), from the side of the fund, he might try to dissuade you from doing so to protect his stream of income. And what if he is on a holiday or you cannot get hold of him. Secondly from your question, it seems you aren't that investing literate. So it is very easy to get you confused by jargon and making you do what he gets the maximum benefit out of it, rather than which benefits you more. I ain't saying he is doing so but that could be a possibility too, so you have consider that angle too. The pro is that setting up an account through them might be much easier than directly going to a provider. But the best point doing it yourself is, you will learn and there is nothing which tops that. You don't want somebody else managing your money, however knowledgeable they maybe i.e. Anthony Bolton.","Indeed, there's no short term/long term issue trading inside the IRA, and in fact, no reporting. If you have a large IRA balance and trade 100 (for example) times per year, there's no reporting at all. As you note, long term gains outside the IRA are treated favorably in the tax code (as of now, 2012) but that's subject to change. Also to consider, The worst thing I did was to buy Apple in my IRA. A huge gain that will be taxed as ordinary income when I withdraw it. Had this been in my regular account, I could sell and pay the long term cap gain rate this year. Last, there's no concept of Wash sale in one's IRA, as there's no taking a loss for shares sold below cost. (To clarify, trading solely within an IRA won't trigger wash sale rules. A realized loss in a taxable account, combined with a purchase inside an IRA can trigger the wash sale rule if the stock is purchased inside the IRA 30 days before or after the sale at a loss. Thank you, Dilip, for the comment.) Aside from the warnings of trading too much or running afoul of frequency restrictions, your observation is correct.","A terrific resource is this article. To summarize the points given: PROS: CONS: There is no generic yes or no answer as to whether you ought to max out your 401(k)s. If you are a sophisticated investor, then saving the income for investing could be a better alternative. Long term capital gains are taxed at 15% in the US, so if you buy and hold on to good companies that reinvest their earnings, then the share price keeps going up and you'll save a lot of money that would go in taxes. If you're not a very good investor, however, then 401(k)s make a lot of sense. If you're going to end up setting up some asset allocation and buying ETFs and rebalancing or having a manager rebalance for you every year or so, then you might as well take the 401(k) option and lower your taxable income. Point #1 is simply wrong, because companies that reinvest earnings and growing for a long time are essentially creating tax-free gains for you, which is even better than tax-deferred gains. Nonetheless, most people have neither the time nor the interest to research companies and for them, the 401(k) makes more sense.","In your entire question, the only time you mention that this is an investment inside an IRA is when you say Every quarter, six months, whatever Id have to rebalance my IRA while Vanguard would do this for the fund of funds without me needing to. Within an IRA, there are no tax implications to the rebalancing. But if this investment were not inside an IRA, then the rebalancing done by you will have tax implications. In particular, any gains realized when you sell shares in one fund and buy shares in another fund during the rebalancing process are subject to income tax. Similarly, losses also might be realized (and will affect your taxes). However, if you are invested in a fund of funds, there are no capital gains (or capital losses) when re-balancing is done; you have gains or losses only when you sell shares of the fund of funds for a price different than the price you paid for them.","Your assumptions are flawed or miss crucial details. An employer sponsored 401k typically limits the choices of investments, whereas an IRA typically gives you self directed investment choices at a brokerage house or through a bank account. You are correct in noticing that you are limited in making your own pre-tax contributions to a traditional IRA in many circumstances when you also have an employer sponsored 401k, but you miss the massive benefit you have: You can rollover unlimited amounts from a traditional 401k to a traditional IRA. This is a benefit that far exceeds the capabilities of someone without a traditional 401k who is subject to the IRA contribution limits. Your rollover capabilities completely gets around any statutory contribution limit. You can contribution, at time of writing, $18,000 annually to a 401k from salary deferrals and an additional $35,000 from employer contributions for a maximum of $53,000 annually and roll that same $53,000 into an IRA if you so desired. That is a factor. This should be counterweighed with the borrowing capabilities of a 401k, which vastly exceeds an IRA again. The main rebuttal to your assumptions is that you are not necessarily paying taxes to fund an IRA.","\"One \"\"con\"\" I have not yet seen mentioned: retirement accounts are generally protected from creditors in a bankruptcy. There are limits and exceptions, Roth has a 1.2 million dollar limit and can be split by a divorce QDRO for instance. Link Since it seems you have no income this year, you may may be raiding your IRA for living expenses. If there is a chance you may declare bankruptcy in the next year or so, consider doing that first and raid the IRA for seed money after.\"","My super fund and I would say many other funds give you one free switch of strategies per year. Some suggest you should change from high growth option to a more balance option once you are say about 10 to 15 years from retirement, and then change to a more capital guaranteed option a few years from retirement. This is a more passive approach and has benefits as well as disadvantages. The benefit is that there is not much work involved, you just change your investment option based on your life stage, 2 to 3 times during your lifetime. This allows you to take more risk when you are young to aim for higher returns, take a balanced approach with moderate risk and returns during the middle part of your working life, and take less risk with lower returns (above inflation) during the latter part of your working life. A possible disadvantage of this strategy is you may be in the higher risk/ higher growth option during a market correction and then change to a more balanced option just when the market starts to pick up again. So your funds will be hit with large losses whilst the market is in retreat and just when things look to be getting better you change to a more balanced portfolio and miss out on the big gains. A second more active approach would be to track the market and change investment option as the market changes. One approach which shouldn't take much time is to track the index such as the ASX200 (if you investment option is mainly invested in the Australian stock market) with a 200 day Simple Moving Average (SMA). The concept is that if the index crosses above the 200 day SMA the market is bullish and if it crosses below it is bearish. See the chart below: This strategy will work well when the market is trending up or down but not very well when the market is going sideways, as you will be changing from aggressive to balanced and back too often. Possibly a more appropriate option would be a combination of the two. Use the first passive approach to change investment option from aggressive to balanced to capital guaranteed with your life stages, however use the second active approach to time the change. For example, if you were say in your late 40s now and were looking to change from aggressive to balanced in the near future, you could wait until the ASX200 crosses below the 200 day SMA before making the change. This way you could capture the majority of the uptrend (which could go on for years) before changing from the high growth/aggressive option to the balanced option. If you where after more control over your superannuation assets another option open to you is to start a SMSF, however I would recommend having at least $300K to $400K in assets before starting a SMSF, or else the annual costs would be too high as a percentage of your total super assets.","As your question appears in the second half, so will my answer. Like you, I will provide some background. I remember buying gasoline for $1.759 per gallon. I am so old that I remember buying gasoline for $0.759 per gallon. I recently paid $2.759 per gallon. You claim that your relative is not getting a very good return. Some would suggest that, at $2.759 per gallon, I am not getting a very good price on gasoline. Rates, yields, returns and the price of gas are not what they once were. It is actually difficult to get a pretty bad return relative to the current market. I suspect your relative is no longer getting what he used to get but he is getting a fair return. About record keeping. Your Uncle Sam benefits at your expense when you keep poor records. There are substantial penalties for failing to report everything. Most high school graduates can manage one checking account, one savings account, several charge cards and about 20 CDs and stocks at different institutions with little more than the following: a) a wall calendar b) a shoe box and c) a stack of 3 by 5 cards. Don't misplace the shoe box. If you can use a spreadsheet, it is even easier. Backup your data. There are a several reasons why you shouldn't consolidate all his cash and put it in a single mutual fund account and then put together a mix of investments that work well for him. - you are doing it backwards 1st put together a mix of investments that work well for him 2nd consolidate the assets. Your phrasing suggests a general lack of understanding - most CDs have penalties for early withdrawal. - while you enjoy managing your 401K in a single online account, your older relative might not be as comfortable with a lack of paper statements (see shoe box above) Let me tell you a little about my 401K. x% blue chip, y% small cap, z% bonds, w% foreign stock. Once a quarter, I change my current contribution to re-balance current value towards my target percentages. Every 30 months or so, I consider changing my asset allocation. The allocation considers my age, my spouses age, our childrens ages, my risk tolerance and my intermediate view of the markets. Your mileage my vary. to recap","Is that basically it? Trading off between withdrawing-anytime vs paying-capital-gain-tax? No. Another significant factor is dividends. In an IRA they incur no immediate tax and can be reinvested. This causes the account value to compound over the years. Historically, this compounding of dividends provides about half of the total return on investments. In a non-IRA account you have to pay taxes each year on all dividends received, whether you reinvest them or not. So outside of an IRA you have a tax drag on both capital gains and dividends.","One possible downside is contribution limit. The 401K contribution limit is $18,000 for 2016, which is more than three times the limit for IRA contributions ($5,500).","\"That's a lot of manual checking-in to see if everything is performing the way you \"\"want\"\". Not to insult your intelligence, but that is not your job, and doing that on a monthly basis is going to eat a lot of time. Plus, most 401(k) programs have lockout periods wherein changes can't be made without incurring additional fees (related to distributions, etc). And if you're checking that often, you are [likely] losing the benefits of investing in mutual funds to start with. If you have the stomach to handle the risk, go for the high-risk investment vehicles early in your career - you can afford a 30% drop this year if you then make 105%, 15%, or 50% back each of the next 5. If, on the other hand, you're in your mid-career, switch to more conservative management tactics.\"","You're losing money. And a lot of it. Consider this: the inflation is 2-4% a year (officially, depending on your spending pattern your own rate might be quite higher). You earn about 1/2%. I.e.: You're losing 3% a year. Guaranteed. You can do much better without any additional risk. 0.1% on savings account? Why not 0.9%? On-line savings account (Ally, CapitalOne-360, American Express, E*Trade, etc) give much higher rates than what you have. Current Ally rates are 0.9% on a regular savings account. 9 times more than what you have, with no additional risk: its a FDIC insured deposit. You can get a slightly higher rate with CDs (0.97% at the same bank for 12 months deposit). IRA - why is it in CD's? Its the longest term investment you have, that's where you can and should take risks, to maximize your compounding returns. Not doing that is actually more risky to you because you're guaranteeing compounding loss, of the said 3% a year. On average, more volatile stock investments have shown to be not losing money over periods of decades, even if they do lose money over shorter periods. Rental - if you can buy a property that you would pay the same amount of money for as for a comparable rental - you should definitely buy. Your debt will be secured by the property, and since you're paying the same amount or less - you're earning the equity. There's no risk here, just benefits, which again you chose to forgo. In the worst case if you default and walk away from the property you lost exactly (or less) what you would have paid for a rental anyway. 14 years old car may be cheaper than 4 years old to buy, but consider the maintenance, licensing and repairs - will it not some up to more than the difference? In my experience - it is likely to. Bottom line - you think you're risk averse, but you're exactly the opposite of that.","401Ks and IRAs are types of retirement accounts. They have rules regarding maximum amount of investments per year; who can invest; destructibility; and the tax treatment of the growth. Stock, bonds, mutual funds, ETFs are all types of investments that can exist either inside or outside of the retirement account. Some 401Ks restrict the type of investments you can have, others allow you to own almost anything. Any investment is a risk, and there is no guarantee that it will grow. Look around the site for beginning investment advice. You should start with the 401K offered by your company especially if they have matching funds. That is free money. Many suggest you invest enough to get the match, then invest with an IRA. Look into IRAs because under US tax law you can still make a 2013 investment up until tax day 2014. Take the time before tax day to decide on Roth or Regular IRA. The more exotic investments take more time to understand and should not be a concern until you have laid out your basic retirement accounts.","First of all an IRA is a type of account that says nothing about how your money is invested. It seems like you are trying to compare an IRA with a market ETF (like Vanguard Total Market Admiral VTSAX), but the reality is that you can have both. Depending on your IRA some of the investment options may be limited, but you will probably be able to find some version of a passive fund following an index you are interested in. The IRA account is tax advantaged, but you may invest the money in your IRA in an ETF. As for how often a non-IRA account is taxed and how much, that depends on how often you sell. If you park your money in an ETF and do not sell, the IRS will not claim any taxes from it. The taxable event happens when you sell. But if you gain $1000 in a year and a day and you decide to sell, you will owe $150 (assuming 15% capital gains tax), bringing your earnings down to $850. If your investments go poorly and you lose money, there will be no capital gains tax to pay.","Advantages of Gold IRA (regardless of where you're holding it): Disadvantages of Gold IRA: Instead, you can invest in trust funds like SLV (The ETF for silver) or GLD in your regular brokerage IRA. These funds negotiate their prices of storage, are relatively liquid, and shield you from the dangers of owning physical metal while providing opportunity to invest in it at market prices.","Let me throw in one more variable to consider. Company 401K plans typically have MUCH higher fees than you are likely to get if you shop around on your own as long as you don't go with a high dollar broker. You won't see these fees on your statements typically, which I think is criminal, but they are hidden in the prices of the funds you are buying in the 401K. If you don't believe me, get the quotes for a fund from the 401K company's web-site then look up the same fund on a site like MSMoney. The share prices won't match and you will be angry until you come to terms with it. So if you have a choice of money in a personal retirement account versus a 401K always go with your own account... UNLESS: or","I currently do not have an IRA (other than a rollover IRA from my 401k from a previous employer) The source is irrelevant. You have an IRA. The reason to keep contributing is that at some point, you might transfer the pretax dollars into a 401(k) and the post tax dollars can be converted to Roth. Other than the above, investing in a standard brokerage account (a non-retirement account) has its positives. Gains can see long term cap gain treatment, and the assets see a step-up in basis when you die.","If you have the cash on hand to pay the tax on the amount you are transferring I recommend moving to a Roth IRA An IRA is tax-deferred. You put in pretax contributions in to an IRA, and you are taxed on that money (your contributions and interest earned) when you withdraw it at retirement, age 59 1/2. The idea being that you will be taking less out per year in your retirement years, putting you into a lower tax bracket. The major problem is most people draw out as much or more a year in their retirement years than when they were working. A Roth IRA grows tax free You put after tax contributions into a Roth IRA, you have paid taxes on the contributions, and you are never taxed on the growth. When you draw the money out at retirement you don't pay any income taxes on that money. Let me give you an example: For this example we will use the following information for both scenario: We will invest $400 per month for a total of $4800. The current maximum is $5000 if you are under 50 years old $400 dollars after taxes is $300 Invest $300 a month, at age 65 you have 3,529,432 You owe no taxes on this money, it doesn't matter how much you take out a year. $400 dollars a month is taken pretax out of your paycheck. Invest $400 per month, at age 65 you have $4,705,909 You owe taxes of 25% as you draw that out for at total tax of 1,176,477 4,705,909 - 1,176,477 = 3,529,432 cash in your pocket The problem is if you draw out more than $82,400 (current 2010 filing single) per year you will be pushed to a higher tax bracket and take more of your money away. If you decide to buy a vacation home and you take out $250,000 to pay for it, that's counted as income for that year any you will be in the 33% tax bracket. Even if you can keep yourself to a low income the government forces your hand and makes you draw out more money at age 70, based on their tables, forcing you into a higher tax bracket","Why shouldn't I just keep my money in the savings account and earn the same amount (both accounts have the same APY in this case)? I will assume that you are transferring money from your savings account into a Traditional IRA and deducting the contribution from your income. While you may think that the money that is being transferred is yours already -- it is sitting in your savings account, for Pete's sake! -- you are deducting that amount in getting to your taxable income, and so you are effectively contributing it from current income and not paying taxes on the amount contributed. So, consider the same amount of money sitting in your savings account versus the same amount of money sitting in your Traditional IRA account. While you will earn the same amount of interest in both accounts, you will have to pay taxes each year on the interest earned in the savings account. You might choose, as most people do, to not take money out of the savings account to pay theses taxes but just pay them from ready cash/checking account/current income etc., or these taxes might just reduce the refund that you will getting from the IRS and your State income tax authority, but in either case, you have paid taxes on the interest earned in your non-IRA savings account, and of course, long ago, you also paid taxes on the original amount in the non-IRA savings account. So, if you take any money out of the non-IRA savings account, you don't pay any taxes on the amount withdrawn except possibly for the interest earned from January 1 till the date of withdrawal (which you are paying from ready cash). On the other hand, consider the Traditional IRA. The original deposit was not taxed in the sense that you got a deduction (reduced tax or increased refund) when you made the contribution. The annual interest earned was not taxed each year either. So when you make a qualified withdrawal (after age 59.5 or by meeting one of the other exceptions allowing withdrawal before age 59.5), you are taking money on which you have not paid any taxes at all, and the IRS wants its cut. The money withdrawn is taxable income to you. Furthermore, the money withdrawn is not eligible for any kind of favorable treatment such as having it count as qualified dividends or as long-term capital gains even if your IRA was invested in stocks and the money in the account is all qualified dividends or long-term capital gains. If you make an unqualified withdrawal, you owe a penalty (technically named an excise tax) in addition to income tax on the amount withdrawn. If you are investing in a Roth IRA, you will not be getting a deduction when you make the contribution, and qualified withdrawals are completely tax-free, and so the answer is completely different from the above.","Advantage of cash: You can spend the money without having to pay any fees or taxes to get it out. Disadvantage: When inflation is greater than zero, which it has been for many decades, your cash is continually losing value. Advantages of an IRA (Roth or classic): Your money will usually grow as the investments return a profit. You get special tax benefits. Disadvantages: There's risk -- you may lose money. There are tax penalties for withdrawing the money before retirement. In general, you should only put money in an IRA if you expect to leave it there until you retire. Or at least, for a long time. Whole life is a combination of a life insurance policy and an investment. Advantages: Combines insurance and investment into one convenient monthly payment. Disadvantages: The investment portion typically has lower returns than you could get elsewhere. If you have no need for life insurance -- if you're not supporting anyone or you're confidant they could get along without you or you don't like them and don't care what happens to them when you're gone or whatever -- then there's no point buying life insurance, whole or term. You're paying for a product that you don't need. It's pretty common advice to tell people that instead of buying a whole life policy, they should buy a term policy with the same coverage, and then invest the difference in the premium. For example, if you were considering getting a $100,000 whole life policy that costs $50 per month (just making up numbers, of course it depends on your age, health, etc), and you see you could get a $100,000 term life policy for $30 per month, you will almost certainly do better in the long run to buy the $30 term policy and put the other $20 into investments. The catch to this plan is that there are usually transaction costs to investing. Even a discount broker like Ameritrade or Scott Trade charges around $10 per transaction. So if you tried to invest $20 each month, you'd lose half of it to transaction fees. Which means that in practice, you'd have to save that money up until you had at least a few hundred. And at that point many people find other things always seem to come up to spend the money on, so that while they start out with every intention of investing this money, they don't.","Ben Miller's answer is very thorough, and I up voted it. I believe that the ability to rebalance without tax implications is very import, but there are two aspects of the question that were not covered: The 401K in many cases comes with a company match. Putting enough money into the fund each year to maximize the match, give you free money that is not available in the non-retirement accounts. The presence of that match is to encourage employees to contribute: even if they are tying up their funds until retirement age; and they are into a plan with only a handful of investment options; and they may have higher expenses in the 401K. The question also had a concern about the annual limits for the 401K (18,000) and the IRA (5,500). The use of a retirement account doesn't in any way limit your ability to invest in non-retirement accounts. You can choose to invest from 0 to 23,500 in the retirement accounts and from 0 to unlimited into the non-retirement accounts. Double those amounts if you are married.","I'll add this to others: Having non-deductible portion in your IRA requires additional tax forms to be attached to your tax return, and tracking. If you plan to have long-term investments in your non-deductible IRA (such as, say, target funds or long-term stock positions that you expect to hold till retirement) it may be better to keep them in a non-IRA account. This is because the income tax on the withdrawals from the IRA is at ordinary rates, and from the regular investment account is at capital gains rate. While the rates can definitely change, traditionally capital gains rates are significantly lower than the ordinary income bracket rates. So generally I think that having non-deductible IRA deposits is only useful if you're planning a ROTH conversion in a near future.","\"Besides what others have mentioned, another thing to watch out for is the tax withholding on withdrawal. If it's a Traditional IRA, they will probably withhold a certain percentage on non-qualified withdrawals. I am not sure if you can ask them not to withhold. I don't remember the percentage, and it varies by state, but let's assume it is 20%. That means that you only receive 80% of the withdrawal amount when you take it out. However, when you deposit the money to complete the \"\"rollover\"\", you need to give them 100% of the withdrawal. That means (assuming the 20% withholding) you need to fork out cash equal to 125% of what you received in cash, within 60 days! That's like several hundred percent APR and hard to meet unless you are certain of receiving a large payment within the time period. And if you forget about this, and you just deposit the same amount that you received (80% of the withdrawal), the remainder (20% of the withdrawal) will count as an early withdrawal, with all the taxes and penalty. So what happens to the 20% withheld that you never received but had to pay anyway? Well, the government has it. It will count as tax paid on your tax return, so it will increase your refund/decrease the amount you owe, but that means you are out that money until tax time! (Unless you decrease the withholding on your salary in the rest of the year to compensate.) If it's a Roth IRA withdrawal on the contribution, there is generally no withholding, so you don't have to worry about the above. (But there is no penalty on withdrawal of Roth IRA contribution anyway.)\"","If you don't pull the money out of an IRA or 401(k) until you hit retirement age, there are no tax consequences at all. No matter how you invest or ignore it, it won't affect your return. Same for a Roth IRA, unless you move money out of the account before age 59 ½ it's essentially invisible to the IRS. (Because some of a Roth has already had taxes paid, the rules are more complicated if you do pull out the money, whereas the others are just a straight tax penalty with few exceptions.)","The benefits of pooling your money with others: The drawbacks of pooling your money with others: Practically Speaking - I say go for it. You stand to gain a lot of knowledge about how money works without having too much on the line. Good luck!","The matching funds are free money, so it is a very good idea to take that money off the table. Look at it as free 100% return: you deposit $1000, your employer matches that $1000, you now have $2000 in your 401(k). (Obviously, I'm keeping things simple. Vesting schedules mean that the employer match isn't yours to keep immediately, but rather after some time; usually in chunks.) Beyond the employer match, you need to consider what is available for investment in a 401(k). Typically, your options are more limited then in an IRA. The cost of the 401(k) should be considered, as it isn't trivial for most. (The specifics will of course vary, but in large IRA accounts are cheaper.) So, it's about the opportunity costs. Up to the employer match, it doesn't matter as much that your investment choices are more limited in a 401(k), because you're getting 100% return just on the matching funds. Once that is exhausted, you have more opportunity for returns, due to having more options available to you, by going with an account that provides more choices. The overall principle here is that you have to look at the whole picture. This is similar to the notion that you should pay-down your high interest debt before investing, because from the perspective of investing the interest you're paying represent a loss, or negative return on investment, since money is going out of your accounts. Specific to your question, you have to consider the various types of investment vehicles available to you. It is not just about 401(k) and IRA accounts. You may also consider a straight brokerage account, a savings account, CDs, etc. The costs and returns that you can typically expect are your guides through the available choices.","I think it comes down to whether you are happy with the investment choices in the 401k. If you are, there is no reason not to invest there. Additionally, it doesn't have to be an either-or choice. You can invest up to the maximum in both accounts. BTW, congratulations on thinking about retirement at your age. I wish I had been in a position to do that.","For what it's worth -- and I realize this isn't directly an answer to the question -- one of the advantages of sticking with mutual funds, beyond their being inherently diversified, is that it removes a lot of the temptation to try to time the market. When you need money, you sell shares in such a way that it maintains your preferred investment ratio, and simply don't worry about which stocks are actually involved. (I've gotten 15% APR this year across all my investments, for absolutely minimal effort. That's quite good enough for me.)","Another minor reason not to rollover would be to avoid the pro-rata taxes when doing a backdoor Roth IRA contribution.","\"As other people have indicated, traditional IRAs are tax deductable for a particular year. Please note, though, that traditional IRAs are tax deferred (not tax-free) accounts, meaning that you'll have to pay taxes on any money you take out later regardless of why you're making the withdrawal. (A lot of people mistakenly call them tax free, which they're not). There is no such thing as a \"\"tax-free\"\" retirement account. Really, in terms of Roth vs. Traditional IRAs, it's \"\"pay now or pay later.\"\" With the exception of special circumstances like this, I recommend investing exclusively in Roth IRAs for money that you expect to grow much (or that you expect to produce substantial income over time). Just to add a few thoughts on what to actually invest in once you open your IRA, I strongly agree with the advice that you invest mostly in low-cost mutual funds or index funds. The advantage of an open-ended mutual fund is that it's easier to purchase them in odd increments and you may be able to avoid at least some purchase fees, whereas with an ETF you have to buy in multiples of that day's asking price. For example, if you were investing $500 and the ETF costs $200 per share, you could only purchase 2 shares, leaving $100 uninvested (minus whatever fee your broker charged for the purchase). The advantage of an ETF is that it's easy to buy or sell quickly. Usually, when you add money to a mutual fund, it'll take a few days for it to hit your account, and when you want to sell it'll similarly take a few days for you to get your money; when I buy an ETF the transaction can occur almost instantly. The fees can also be lower (if the ETF is just a passive index fund). Also, there's a risk with open-ended mutual funds that if too many people pull money out at once the managers could be forced to sell stocks at an unfavorable price.\"","There is a process called a backdoor IRA. You now have effectively made a Roth IRA contribution in a year where technically you aren't eligible. You do not have to pay taxes on earnings with a Roth IRA. You are limited to the normal annual contribution to the IRA (Roth or traditional). If you don't convert your traditional IRA contribution to a Roth IRA, then you are right. That gains nothing except enhanced protection in bankruptcy. Only do this if you are taking advantage of the Roth rollover. I'm ignoring rolling over a 401k into an IRA, as that doesn't increase the amount you can contribute. This does. You can contribute the full $18,000 to the 401k and still make a full contribution to the backdoor IRA. This is the tax advantaged form of an IRA. This avoids double taxation. Let's assume that your investment can go into something with a 5% annual return and you pay a 25% tax rate (doesn't matter as it drops out). You are going to invest for thirty years and then withdraw. You initially have $1000 before taxes. With a regular investment: You now have $2867.74. With a pre-tax IRA. You now have $3241.45 (it is not an accident that this is almost the same as the amount before the capital gains tax in the example without an IRA). You avoided the $373.72 capital gains tax. Even though you paid a lot more tax, you paid it out of the gains from investing the original $250 that you would have paid in tax. This helps you even more if the capital gains tax goes up in the future. Or if your tax bracket changes. If you currently are in the 25% bracket but retire in the 15% bracket, these numbers will get even better in your favor. If you currently are in the 15% bracket and worry that you might retire in the 25% bracket, consider a Roth instead. It also avoids double taxation but its single taxation is at your current rate rather than your future rate.","\"This may be more of a comment than an answer, but it's too long for a comment. Perhaps the Stackexchange Gods will forgive my impudence. That said: Even with the tax penalties, it can be to your advantage to put money into a \"\"retirement\"\" account and withdraw it before retirement. The trick is: Is the amount of the tax penalty more than the benefit of untaxed compound growth? For example, just to make up some numbers: Suppose you have $1000 of gross income to invest. You are considering whether to invest in an ordinary, non-tax favored account, or a classic IRA. Either way you will get 10% returns. Your tax rate, both when you put the money in and when you take it out, is 15%. There is a 10% tax penalty for early withdrawal. With an ordinary account you will pay 15% tax off the top, so you are only investing $850. Then each year 15% of your returns are paid in taxes, so your net return is 8.5%. But when you withdraw the money there are no additional taxes. With an IRA you do not pay any taxes up front, so you can invest the entire $1000. You collect 10% each year with no taxes. When you withdraw, you pay 15% plus the 10% penalty equals 25%. So after 5 years, the ordinary account would yield $850 x 1.085^5 = $1504. The IRA would yield $1000 x 1.1^5 x 0.75 = $1208. The tax penalty hurts. You are better to use the ordinary account. But if you could leave your money in for 25 years, then the ordinary account would yield $850 x 1.085^25 = $7687. The IRA would yield $1000 x 1.1^25 x 0.75 = $8126. The IRA, even with the tax penalty, is better. Of course my numbers are just made up. What your tax bracket is, what returns you get, and how long you think you might leave the money in the investment, all vary.\"","\"It's all about access to capital: You can borrow against 401ks up to an extent. You can borrow against CDs outside of tax sheltered retirement plans. You can't borrow against an IRA, although there is a situation with a very small time frame that would still be state sanctioned with no tax penalties. I wouldn't recommend it. Annuities come with penalties. I've looked at many possibilities of accessing retirement capital without penalty, and 401k's offer that ability, but its also good to just have savings accounts and investments that are not tax-deferred. Borrowing against 401k pros: http://www.ehow.com/how_2075551_borrow-money-from-401k.html cons: http://www.investopedia.com/articles/retirement/06/eightreasons401k.asp#axzz29TtJPoXO Outside of your general expenses and play money, money you put toward - say... - a house should be non-tax deferred. Because if you like borrowing, you can always borrow against the house, or any property. The root of the problem is liquidity and access to capital, understanding those fundamental concepts will answer most questions. \"\"Am I liquid? Yes/No\"\" \"\"Can I be liquid without losing money? Yes/No\"\" As usual, more is more, adjust your priorities accordingly.\"","If you have just started an IRA (presumably with a contribution for 2012), you likely have $5000 in it, or $10,000 if you made a full contribution for 2013 as well. At this time, I would recommend putting it all in a single low-cost mutual fund. Typically, mutual funds that track an index such as the S&P 500 Index have lower costs (annual expense fees) than actively managed funds, and most investment companies offer such mutual funds, with Fidelity, Vanguard, Schwab, to name a few, having very low expenses even among index funds. Later, when you have more money in the account, you can consider diversifying into more funds, buying stocks and bonds, investing in ETFs, etc. Incidentally, if you are just starting out and your Roth IRA is essentially your first investment experience, be aware that you do not need a brokerage account for your Roth IRA until you have more money in the account to invest and specifically want to buy individual stocks and bonds instead of just mutual funds. If you opened a brokerage account for your Roth IRA, close it and transfer the Roth IRA to your choice of mutual fund company; else you will be paying annual fees to the brokerage for maintaining your account, inactivity fees since you won't be doing any trading, etc. The easiest way to do this is to go to the mutual fund company web site and tell them that you want to transfer your IRA to them (not roll over your IRA to them) and they will take care of all the paper work and collecting your money from the brokerage (ditto if your Roth IRA is with a bank or another mutual fund company). Then close your brokerage account.","There's no one answer. You need to weigh the fees and quality of investment options on the one side against the slowly vesting employer contribution and tax benefits of 401k contributions in excess of IRA limits.","\"Consider that there are some low-probability, high-impact risk factors involved with property management. For example, an old house has lead paint and may have illegal modifications, unknown to you, that pose some hazard. All of your \"\"pros\"\" are logical, and the cons are relatively minor. Just consult an attorney to look for potential landmines.\"","\"This is not a direct answer to your question, but you might want to consider whether you want to have a financial planner at all. Would a large mutual fund company or brokerage serve your needs better than a bank? You are still quite young and so have been contributing to IRAs for only a few years. Also, the wording in your question suggests that your IRA investments have not done spectacularly well, and so it is reasonable to infer that your IRA is not a large amount, or at least not as large as what it would be 30 years from now. At this level of investment, it would be difficult for you to find a financial planner who spends all that much time looking after your interests. That you should get away from your current planner, presumably a mid-level employee in what is typically called the trust division of the bank, is a given. But, to go to another bank (or even to a different employee in the same bank), where you will also likely be nudged towards investing your IRA in CDs, annuities, and a few mutual funds with substantial sales charges and substantial annual expense fees, might just take you from the frying pan into the fire. You might want to consider transferring your IRA to a large mutual fund company and investing it in something simple like one of their low-cost (meaning small annual expense ratio) index funds. The Couch Potato portfolio suggests equal amounts invested in a no-load S&P 500 Index fund and a no-load Bond Index fund, or a 75%-25% split favoring the stock index fund (in view of your age and the fact that the IRA should be a long-term investment). But the point is, you can open an IRA account, have the money transferred from your IRA account with the bank, and make the investments on-line all by yourself instead of having a financial advisor do it on your behalf and charge you a fee for doing so (not to mention possibly screwing it up.) You can set up Automated Investment too; the mutual fund company will gladly withdraw money from your checking account and invest it in whatever fund(s) you choose. All this is not complicated at all. If you would like to follow the Couch Potato strategy and rebalance your portfolio once a year, you can do it by yourself too. If you want to invest in funds other than the S&P 500 Index fund, etc. most mutual fund companies offer a \"\"portfolio analysis\"\" and advice for a fee (and the fee is usually waived when the assets increase above certain levels - varies from company to company). You could thus have a portfolio analysis done each year, and hopefully it will be free after a few more years. Indeed, at that level, you also typically get one person assigned as your advisor, just as you have with a bank. Once you get the recommendations, you can choose to follow them or not, but you have control over how and where your IRA assets are invested. Over the years, as your IRA assets grow, you can branch out into investments other than \"\"staid\"\" index funds, but right now, having a financial planner for your IRA might not be worth it. Later, when you have more assets, by all means if you want to explore investing in specific stocks with a brokerage instead of sticking to mutual funds only but this might also mean phone calls urging you to sell Stock A right now, or buy hot Stock B today etc. So, one way of improving your interactions and have a better experience with your new financial planner is to not have a planner at all for a few years and do some of the work yourself.\"","\"So many complicated answers for a straight forward question. First to this point \"\"I am failing to see why would a person get an IRA, instead of just putting the same amount of money into a mutual fund...\"\" An IRA can be invested in a mutual fund. The IRA benefit over standard mutual fund is pre-tax contribution lowering your current tax liability. The advantage of an IRA over a 401k is control. Your employer controls where the 401k is invested, you control where your IRA is invested. Often employers have a very small number of options, because this keeps their costs with the brokerage low. 401k is AMAZING if you have employer matched contributions. Use them to the maximum your employer will match. After that OWN your IRA. Control is key when it comes to your money. On IRA's. Buy ROTH first. Contribute the calendar maximum. Then get a traditional. The benefit of ROTH is that you already paid taxes on the contribution so your withdrawal is not taxed AND they do not tax the interest earned like they do on a standard mutual fund.\"","I'm looking for ways to geared to save for retirement, not general investment. Many mutual fund companies offer a range of target retirement funds for different retirement dates (usually in increments of 5 years). These are funds of funds, that is, a Target 2040 Fund, say, will be invested in five or six different stock and bond mutual funds offered by the same company. Over the years and as the target date approaches closer, the investment mix will change from extra weight given to stock mutual funds towards extra weight being given to bond mutual funds. The disadvantage to these funds is that the Target Fund charges its own expense ratio over and above the expense ratios charged by the mutual funds it invests in: you could do the same investments yourself (or pick your own mix and weighting of various funds) and save the extra expense ratio. However, over the years, as the Target Fund changes its mix, withdrawing money from the stock mutual funds and investing the proceeds into bond mutual funds, you do not have to pay taxes on the profits generated by these transactions except insofar as some part of the profits become distributions from the Target Fund itself. If you were doing the same transactions outside the Target Fund, you would be liable for taxes on the profits when you withdrew money from a stock fund and invested the proceeds into the bond fund.","\"Does your current 401(k) have low fees and good investment choices? If so you might be able to \"\"roll-in\"\" your rollover IRA to your 401(k), then do a backdoor Roth IRA contribution. A Roth IRA would be far more useful than a non-deductible traditional IRA.\"","There is nothing wrong with self directed IRA's the problem is that most of the assets they specialize in are better done in other ways. Real estate is already extremely tax advantaged in the US. Buying inside a Traditional IRA would turn longterm capital gains (currently 15%) into ordinary income taxed at your tax rate when you withdraw this may be a plus or minus, but it is more likely than not that your ordinary income tax rate is higher. You also can't do the live in each house for 2 years before selling plan to eliminate capital gains taxes (250k individual 500k married couple). The final problem is that you are going to have problems getting a mortgage (it won't be a conforming loan) and will likely have to pay cash for any real estate purchased inside your IRA. Foreign real estate is similar to above except you have additional tax complexities. The key to the ownership in a business is that there are limits on who can control the business (you and maybe your family can't control the business). If you are experienced doing angel investing this might be a viable option (assuming you have a really big IRA you want to gamble with). If you want to speculate on precious metals you will probably be better offer using ETF's in a more traditional brokerage account (lower transactions costs more liquidity).","You may want to move money between your investments within the plan, rebalancing money to maintain your diversification. You don't have to deal with the details if selling and buying, just tell them how much to move where. Many plans offer investments that automatically rebalance for you such as Target Date accounts. You may be able to select one of those and just ignore the 401k until retirement, or at most rebalance even less often. Look at what's offered, look at what it costs as fees, run the numbers and decide whether you can do better.","\"One reason is that you can trade in the IRA without incurring incremental taxes along the way. This may be especially important if you intend to shift your portfolio allocation as you approach retirement. For instance, gradually selling stocks and buying bonds can incur taxes if you do it in a taxable account (if you do it while you have other income and thus may face capital gains taxes). Also, if you have mutual funds in a taxable account, they may distribute capital gains to you that you'll owe taxes on, but holding the funds in an IRA will shield you from that. There are also some other side benefits to IRAs because they are considered to \"\"not count\"\" for certain purposes when determining what you're worth. For instance, if you go bankrupt, you could be forced to sell assets in taxable accounts to pay your creditors, whereas IRAs are protected in many cases. Likewise, if you try to get financial aid to pay for college for your kids, money in an IRA won't be counted among your assets in determining your aid eligibility, potentially giving your kids access to more aid money. Finally, an especially prominent benefit is, paradoxically, the early withdrawal penalty. For many people, part of the purpose of an IRA is to \"\"lock away\"\" their money and prevent themselves from accessing it until retirement. Early withdrawal penalties provide a concrete consequence that psychologically deters them from raiding their retirement savings willy-nilly.\"","Have you considered a self-directed IRA to invest, rather than the stock market or publicly traded assets? Your IRA can actually own direct title to real estate, loan money via secured or unsecured promissory notes much like a hard money loan or invest into shares of an entity that invests in real estate. The only nuance is that the IRA holder is responsible for finding and deciding upon the investment vehicle. Just an option outside of the normal parameters, if you have an existing IRA or old 401(k) or other qualified plan, this might be an option for you.","There are 3 account types your question discusses and each has its good/bad points. The above is a snapshot of these account types. IRAs have income restrictions that may disallow a deduction on the traditional, or any deposit to Roth, etc. If this does not address your question, please comment, and I'll edit for better clarity.","In addition to George Marian's excellent advice, I'll add that if you're hitting the limits on IRA contributions, then you'd go back to your 401(k). So, put enough into your 401(k) to get the match, then max out IRA contributions to give you access to more and better investment options, then go back to your 401(k) until you top that out as well, assuming you have that much available to invest for retirement.","You are young, and therefore have a very long time horizon for investing. Absolutely nothing you do should involve paying any attention to your investments more than once a year (if that). First off, you can only deposit money in an IRA (of whatever kind) if you have taxable income. If you don't, you can still invest, just without the tax benefits of a Roth. My suggestion would be to open an account with a discount brokerage (Schwab, Fidelity, eTrade, etc). The advantage of a brokerage IRA is that you can invest in whatever you want within the account. Then, either buy an S&P 500 or total market index fund within the account, or buy an index-based ETF (like a mutual fund, but trades like a stock). The latter might be better, since many mutual funds have minimum limits, which ETFs do not. Set the account up to reinvest the dividends automatically--S&P 500 yields will far outstrip current savings account yields--and sit back and do nothing for the next 40 or 50 years. Well, except for continuing to make annual contributions to the account, which you should continue to invest in pretty much the same thing until you have enough money (and experience and knowledge) to diversify into bond funds/international funds/individual stocks, etc. Disclaimer: I am not a financial planner. I just manage my own money, and this strategy has mostly kept me from stressing too badly over the last few years of market turmoil.","I'd listen to the person who doesn't want tax deferral. S/he is wise. I'd do it in a taxable account. Talk about the investments all you want, pool your knowledge, but invest privately and separately. Pay your taxes and be done with them.","Yes. Of course, you still need to take into the account the trade costs (fees paid to the broker), these are not going anywhere. Basically what it means is that you don't have to worry about long/short holding period within the IRA, they're all the same. It doesn't mean that long term trading is better or worse to have outside the scope of IRA, it just means that the concept doesn't exist inside.","The primary advantage of an IRA or 401k is you get taxed effectively one time on the money (when you contribute for Roth, or when you withdraw for Traditional), whereas you get taxed effectively multiple times on some of the money in a taxable account (on all the money when you contribute, plus on the earnings part when you withdraw). Of course, you have to be able to withdraw without penalty for it to be optimally advantageous. And you said you want to retire decades early, so that is probably not retirement age. However, withdrawing early does not necessarily mean you have a penalty. For example: you can withdraw contributions to a Roth IRA at any time without tax or penalty; Roth 401k can be rolled over into Roth IRA; other types of accounts can be converted to Roth IRA and the principal of the conversion can be withdrawn after 5 years without penalty.","The other issue you could run into is that each deferred account is going to be subject to its own RMD's (Required Minimum Distributions) when you've retired or hit 70.5 years of age. Roth's don't generally care about RMD's at first, but are still subject to them once the person that created the Roth has passed. Having fewer accounts will simplify the RMD stuff, but that's really only a factor in terms of being forced to sell 'something' in each account in order to make the RMD. Other than that, it's just a matter of remembering to check each account if you come to a decision that it's time to liquidate holdings in a given security, lest you sell some but forget about the rest of it in another account. (and perhaps as Chris pointed out, maybe having to pay fee's on each account for the sale) Where this really can come into play is if you choose to load up each individual account with a given kind of investment, instead of spreading them across the accounts. In that case RMD's could force you into selling something that is currently 'down' when you want to hold onto it, because that is your only choice in order to meet RMD's for account X. So if you have multiple accounts, it's a good idea to not 'silo' particular vehicles into a single account, but spread similar ivestments across multiple accounts, so you always have the choice in each account of what to sell in order to meet an RMD. If you have fewer accounts, it's thus a lot easier to avoid the siloing effect","2%? I would put in just what it takes to share in the profit sharing, not a dime more. My S&P fund cost is .02% (edited, as it dropped to .02 since original post), 1/100 of the cost of most funds you list. Doesn't take too many years of this fee to negate the potential tax savings, and not many more to make this a real loser.","\"Basically, the idea of an IRA is that the money is earned by you and would normally be taxed at the individual rate, but the government is allowing you to avoid paying the taxes on it now by instead putting it in the account. This \"\"tax deferral\"\" encourages retirement savings by reducing your current taxable income (providing a short-term \"\"carrot\"\"). However, the government will want their cut; specifically, when you begin withdrawing from that account, the principal which wasn't taxed when you put it in will be taxed at the current individual rate when you take it out. When you think about it, that's only fair; you didn't pay taxes on it when it came out of your paycheck, so you should pay that tax once you're withdrawing it to live on. Here's the rub; the interest is also taxed at the individual rate. At the time, that was a good thing; the capital gains rate in 1976 (when the Regular IRA was established) was 35%, the highest it's ever been. Now, that's not looking so good because the current cap gains rate is only 15%. However, these rates rise and fall, cap gains more than individual rates, and so by contributing to a Traditional IRA you simplify your tax bill; the principal and interest is taxed at the individual rate as if you were still making a paycheck. A Roth IRA is basically the government trying to get money now by giving up money later. You pay the marginal individual rate on the contributions as you earn them (it becomes a \"\"post-tax deduction\"\") but then that money is completely yours, and the kicker is that the government won't tax the interest on it if you don't withdraw it before retirement age. This makes Roths very attractive to retirement investors as a hedge against higher overall tax rates later in life. If you think that, for any reason, you'll be paying more taxes in 30 years than you would be paying for the same money now, you should be investing in a Roth. A normal (non-IRA) investment account, at first, seems to be the worst of both worlds; you pay individual tax on all earned wages that you invest, then capital gains on the money your investment earns (stock gains and dividends, bond interest, etc) whenever you cash out. However, a traditional account has the most flexibility; you can keep your money in and take your money out on a timeline you choose. This means you can react both to market moves AND to tax changes; when a conservative administration slashes tax rates on capital gains, you can cash out, pay that low rate on the money you made from your account, and then the money's yours to spend or to reinvest. You can, if you're market- and tax-savvy, use all three of these instruments to your overall advantage. When tax rates are high now, contribute to a traditional IRA, and then withdraw the money during your retirement in times where individual tax rates are low. When tax rates are low (like right now), max out your Roth contributions, and use that money after retirement when tax rates are high. Use a regular investment account as an overage to Roth contributions when taxes are low; contribute when the individual rate is low, then capitalize and reinvest during times when capital gains taxes are low (perhaps replacing a paycheck deduction in annual contributions to a Roth, or you can simply fold it back into the investment account). This isn't as good as a Roth but is better than a Traditional; by capitalizing at an advantageous time, you turn interest earned into principal invested and pay a low tax on it at that time to avoid a higher tax later. However, the market and the tax structure have to coincide to make ordinary investing pay off; you may have bought in in the early 90s, taking advantage of the lowest individual rates since the Great Depression. While now, capital gains taxes are the lowest they've ever been, if you cash out you may not be realizing much of a gain in the first place.\"","\"Those advantages you've described (tax treatment and employee match) are what you receive in exchange for \"\"locking up\"\" the money. Ultimately it's a personal choice of whether that tradeoff makes sense for you situation (I'll echo the response that the real answer to your question is planning). Roth options (either 401K or IRA) may be good compromises for you, since you can withdraw those contributions (but not the earnings) without any penalty, since you've already paid taxes on them. Another avenue to explore may be a self-directed IRA or a Solo 401(k), depending on your circumstances and eligibility. In both cases, there are plan providers that structure the plan to allow you to use the money to invest in things besides traditional stocks, bonds, and mutual funds (often referred to as \"\"checkbook control\"\" accounts). They are very commonly used among Real Estate investors (this thread from BiggerPockets has quite a bit of info). You'd want to consult with an accountant or financial adviser before going down that path.\"","First, you should diversify your portfolio. If your entire portfolio is in the Roth IRA, then you should eventually diversify that. However, if you have an IRA and a 401k, then it's perfectly fine for the IRA to be in a single fund. For example, I used my IRA to buy a riskier REIT that my 401k doesn't support. Second, if you only have a small amount currently invested, e.g. $5500, it may make sense to put everything in a single fund until you have enough to get past the low balance fees. It's not uncommon for funds to charge lower fees to someone who has $8000, $10,000, or $12,000 invested. Note that if you deposit $10,000 and the fund loses money, they'll usually charge you the rate for less than $10,000. So try to exceed the minimum with a decent cushion. A balanced fund may make sense as a first fund. That way they handle the diversification for you. A targeted fund is a special kind of balanced fund that changes the balance over time. Some have reported that targeted funds charge higher fees. Commissions on those higher fees may explain why your bank wants you to buy. I personally don't like the asset mixes that I've seen from targeted funds. They often change the stock/bond ratio, which is not really correct. The stock/bond ratio should stay the same. It's the securities (stocks and bonds) to monetary equivalents that should change, and that only starting five to ten years before retirement. Prior to that the only reason to put money into monetary equivalents is to provide time to pick the right securities fund. Retirees should maintain about a five year cushion in monetary equivalents so as not to be forced to sell into a bad market. Long term, I'd prefer low-load index funds. A bond fund and two or three stock funds. You might want to build your balance first though. It doesn't really make sense to have a separate fund until you have enough money to get the best fees. 70-75% stocks and 25-30% bonds (should add to 100%, e.g. 73% and 27%). Balance annually when you make your new deposit.","People ... are nearly twice as likely to ... feel confident Great, confidence is amazing. That and $5 will buy you a cup of coffee. 44% [who hired a pro] have $100K or more [vs.] 9% of DIYers There's no way to examine these numbers without a link to the source, but it stands to reason that if you have a plan that you're sticking to you'll save more money than if you are just investing haphazardly. It's too bad that we can't see what the returns are for those using a pro vs. DIYers. That would be much more valuable than an arbitrary dollar level. Unfortunately $100K isn't really that much money if you live in the US, so it's an irrelevant talking point. The real question is whether investment knowledge is readily available to the masses or if having a person who specializes in finance is required to make good decisions about investment. I think the fact that the conventional wisdom prefers index funds to actively managed funds demonstrates that investment professionals are less useful than they might have been even a decade or two ago. If money should be spent on professional advice, it's probably better spent on CPAs or other tax professionals who can help optimize your investments for tax efficiency, though even that is now available as more common knowledge.","\"You seem to be treating your Roth IRA as a sort of savings account for use in emergency situations. I would use a savings account for savings as withdrawing money from an IRA will have penalties under various circumstances (more than contributions, Roth IRA less than 5 years old, more than $10k for a down payment). Also, you mention folding your IRA into your 401k so that it will \"\"grow faster\"\". However, this will not have that effect. Imagine you have $30k in an IRA and $100k in a 401k and you are averaging a return of 8% / year on each. This will be identical to having a single 401k with $130k and an 8% / year return. This is not one of your questions, but employer matches are not counted in the 401k contribution limit. If your 22% calculation of your salary includes the match to reach the max contribution, you can still contribute more.\"","\"The major pros tend to be: The major cons tend to be: Being in California, you've got state income tax to worry about as well. It might be worth using some of that extra cash to hire someone who knows what they're doing to handle your taxes the first year, at least. I've always maxed mine out, because it's always seemed like a solid way to make a few extra dollars. If you can live without the money in your regular paycheck, it's always seemed that the rewards outweighed the risks. I've also always immediately sold the stock, since I usually feel like being employed at the company is enough \"\"eggs in that basket\"\" without holding investments in the same company. (NB: I've participated in several of these ESPP programs at large international US-based software companies, so this is from my personal experience. You should carefully review the terms of your ESPP before signing up, and I'm a software engineer and not a financial advisor.)\"","\"Your are mixing multiple questions with assertions which may or may not be true. So I'll take a stab at this, comment if it doesn't make sense to you. To answer the question in the title, you invest in an IRA because you want to save money to allow you to retire. The government provides you with tax incentives that make an IRA an excellent vehicle to do this. The rules regarding IRA tax treatment provide disincentives, through tax penalties, for withdrawing money before retirement. This topic is covered dozens of times, so search around for more detail. Regarding your desire to invest in items with high \"\"intrinsic\"\" value, I would argue that gold and silver are not good vehicles for doing this. Intrinsic value doesn't mean what you want it to mean in this context -- gold and silver are commodities, whose prices fluctuate dramatically. If you want to grow money for retirement over a long period, of time, you should be invested in diversified collection of investments, and precious metals should be a relatively small part of your portfolio.\"","I'm in a similar situation as I have a consulting business in addition to my regular IT job. I called the company who has my IRA to ask about setting up the Individual 401k and also mentioned that I contribute to my employer's 401k plan. The rep was glad I brought this up because he said the IRS has a limit on how much you can contribute to BOTH plans. For me it would be $24K max (myAge >= 50; If you are younger than 50, then the limit might be lower). He said the IRS penalties can be steep if you exceed the limit. I don't know if this is an issue for you, but it's something you need to consider. Be sure to ask your brokerage firm before you start the process.","If you are working for a small company, the expense ratios on the funds in the 401k account are likely much higher than you can get with a similar IRA. Depending on your income, whether you are married and want to contribute to a spouse's IRA, your limit on what can be contributed to an IRA may vary, but the compelling reason to contribute to a 401k is that the contribution limit is higher ($17,500 vs $5,500 for people on the lower end of the income scale) so you may need to contribute to a 401k to meet your retirement savings goals.","The key thing to consider in a question like this is, What return am I getting on my investment versus what interest am I paying on the loan? If the investment returns more than what you're paying on the loan, than it makes sense to keep the investment and pay off the loan with other income. If the investment returns less, than it makes sense to cash it out to pay off the loan. One complicating factor is taxes. In the case of an IRA, you're not paying taxes on the profits. You do pay a tax penalty for an early withdrawal. Those are both factors that tend to make keeping the money in the IRA more desirable. And of course, if the choice is between keeping your investment and defaulting on the loan, you probably want to close out the investment. I don't know what return you're getting on your IRA, but it's probably more than 6.8%. I'd have to check but I think my retirement funds got over 20% last year. If you're not getting 6.8%, you might want to investigate switching to another investment fund. I'm sure there's a lot I don't know about your situation, but I'd think that keeping the IRA would be a better plan. If you can't add to it for some time well you get these debts paid off, well, that's how it is.","The first question is essentially asking for specific investment advice which is off-topic per the FAQ, but I'll take a stab at #2 and #3 (2) If my 401k doesn't change before I leave my job (not planned in the near future), I should roll it over into my Roth IRA after I leave due to these high expense ratios, correct? My advice is that you should roll over a 401K into an IRA the first chance you get (usually when you leave the job). 401K plans are NOTORIOUS for high expense ratios and why leave your money in a plan where you have a limited choice of investments anyway versus a self-directed IRA where you can invest in anything you want? (3) Should I still max contribute with these horrible expense ratios? If they are providing a match, yes. Even with the expense ratios it is hard to beat the immediate return of an employer match. If they aren't matching, the answer is still probably yes for a few reasons: You already are maxing out your ability to contribute to sheltered accounts, so assuming you still want to sock away that money for retirement, the tax benefits are still valuable and probably offset the expense ratios. Although you seem to be an exception, it is hard for most people to be disciplined enough to put money in a retirement account after they have it in their hands (versus auto-deduction from paychecks).","If your employer matches a percentage of your contributions, then you should try to max out your plan. Once you have completed maxing out your 401k, you may want to open up an IRA for several reasons: will your 401k be enough to sustain your lifestyle in retirement? Your IRA allows you to save even more for retirement. you can invest in all sorts of stuff through your IRA that might not be available in your plan. you can withdraw the principal from your IRA, usually after five years. This serves as another form of savings. IRAs have some asset protection in the event of bankruptcy. A normal savings or investment account usually does not offer such protection.","There are fund of funds,e.g. life cycle funds or target retirement funds, that could cover a lot of these with an initial investment that one could invest into for a few years and then after building up a balance large enough, then it may make sense to switch to having more control.","I had some extra money, so I opened American express saving account. At the time which was offering .80%, now .90%. I put most of the money in the saving account. The remainder of my money in a investment account at my local bank. I was in touch once a week with investment, I learned allot how the stock market worked and tax deferment(401k, IRA, IRA Roth). My suggestion is to do test run and see if you like it. Side note, NOT ALL investment are created equal.","When you look at managed funds the expense ratios are always high. They have the expense of analyzing the market, deciding where to invest, and then tracking the new investments. The lowest expenses are with the passive investments. What you have noticed is exactly what you expect. Now if you want to invest in active funds that throw off dividends and capital gains, the 401K is the perfect place to do it, because that income will not be immediately taxable. If the money is in a Roth 401K it is even better because that income will never be taxed.","If you want to 'offset' current (2016) income, only deductible contribution to a traditional IRA does that. You can make nondeductible contributions to a trad IRA, and there are cases where that makes sense for the future and cases where it doesn't, but it doesn't give you a deduction now. Similarly a Roth IRA has possible advantages and disadvantages, but it does not have a deduction now. Currently he maximum is $5500 per person ($6500 if over age 50, but you aren't) which with two accounts (barely) covers your $10k. To be eligible to make this deductible traditional contribution, you must have earned income (employment or self-employment, but NOT the distribution from another IRA) at least the amount you want to contribute NOT have combined income (specifically MAGI, Modified Adjusted Gross Income) exceeding the phaseout limit (starts at $96,000 for married-joint) IF you were covered during the year (either you or your spouse) by an employer retirement plan (look at box 13 on your W-2's). With whom. Pretty much any bank, brokerage, or mutual fund family can handle IRAs. (To be technical, the bank's holding company will have an investment arm -- to you it will usually look like one operation with one name and logo, one office, one customer service department, one website etc, but the investment part must be legally separate from the insured banking part so you may notice a different name on your legal and tax forms.) If you are satisified with the custodian of the inherited IRA you already have, you might just stay with them -- they may not need as much paperwork, you don't need to meet and get comfortable with new people, you don't need to learn a new website. But if they sold you an annuity at your age -- as opposed to you inheriting an already annuitized IRA -- I'd want a lot of details before trusting they are acting in your best interests; most annuities sold to IRA holders are poor deals. In what. Since you want only moderate risk at least to start, and also since you are starting with a relatively small amount where minimum investments, expenses and fees can make more of an impact on your results, I would go with one or a few broad (= lower risk) index (= lower cost) fund(s). Every major fund familly also offers at least a few 'balanced' funds which give you a mixture of stocks and bonds, and sometimes some 'alternatives', in one fund. Remember this is not committing you forever; any reasonable custodian will allow you to move or spread to more-adventurous (but not wild and crazy) investments, which may be better for you in future years when you have some more money in the account and some more time to ponder your goals and options and comfort level.","Considering the combined accounts you're contributing $100 per month and they want $100 per year to administer them... that's 8.3% of your contributions gone to fees each year. To me, that's a definite no. Without getting in to bad mouthing the adviser for even making the suggestion, the scale of your account doesn't warrant a fee that high. Fees are very meaningful to the little fish investors. There are LOADS of IRA account providers. With that level of competition, there are several that have very reasonable account minimums, no annual maintenance fees, and a suite of no fee, no load, no commission, low expense ratio funds to choose from. Schwab, Fidelity and Vanguard come to mind. I know Schwab is running a big ad campaign right now as it's reduced some of it's already low expense ratios. If I were you, yes I would move the account because you can even get rid of the $10/year/account fee. But, no, I would not move it to a higher fee situation. In my opinion on a $3,600 account + $1,200 per year in contributions, you don't need advise. You need a good broad market low fee index fund, and enough discipline to understand that retirement is 25 years away so you keep contributing even when news is bad and the market is going down. In 10 years maybe talk to an adviser. Using the S&P500 index daily close historical data from calendar year 2016, considering first of the month monthly deposits and a starting balance of $3,600, you would come out at the end of the year with about $5,294. That's $494 in gain on your total contributions of $4,800. They'd take $100, that's about 20% of your gain. Compared to a no fee account with a reasonable expense ratio of 0.1% the fee would be just $5.30. Bearing in mind also that your $100 per year account will probably be invested in funds that also have an expense ratio fee structure further zapping gains. Further, you lose the compounding effect of the $100 fee over time which adds up to a significant of retirement funds considering a 25 year period. If all you did was put that $100 fee in to a 1% savings account each year for 25 years you'd end up with $2,850. (Considering the average 7% return of the S&P you'd have $6,964 on just your $100 per year fees) This is why you should be so vigilant about fees.","(To be clear, IRA accounts are just wrappers, and can contain a large variety of investments. I'm restricting myself to the usual setup of investment in the stock market.) So, let's say you have $5000 in savings, as an emergency fund. Of the top of my head, putting some of it into a Roth IRA could backfire in the following ways: The basic principle here is that the stock market is not a good place for storing your emergency cash, which needs to be secured against loss and immediately accessible. Once you're happy with your level of emergency cash, however, tax-advantaged investment accounts are a reasonable next step.","Comparing retirement savings to ordinary investment is not an apples-to-apples comparison - retirement savings are savings for retirement - if you want to invest in things now and live off of (or reinvest) those earnings, then retirement accounts are not the right vehicle. That said, here are some benefits of the main types of retirement accounts: Benefits of a 401(k): Benefits of a tratitional IRA: Benefits of a ROTH 401(k): Benefits of a ROTH IRA: (the benefits above are not exhaustive, there are other benefits such as using a ROTH IRA for higher ed. expenses, etc. but those are the highlights) If you have a plan for how you hope to use the money now rather than later does it make sense to hold onto it? If your plan is meant to provide income at retirement, and earns returns higher than the returns plus matches and tax benefits you get from retirement accounts, then yes, it may make more sense, but those benefits are generally very hard to beat. Plus, having the money locked away in an account that is painful to tap can be a good thing - you're less tempted to use that money for foolish decisions (which everyone makes at some point)."],"string":"[\n \"Our company does a lot of research on the self-directed IRA industry. We also provide financial advice in this area. In short, we have seen a lot in this industry. You mentioned custodian fees. This can be a sore spot for many investors. However, not all custodians are expensive, you should do your research before choosing the best one. Here is a list of custodians to help with your research Here are some of the more common pros and cons that we see. Pros: 1) You can invest in virtually anything that is considered an investment. This is great if your expertise is in an area that cannot be easily invested in with traditional securities, such as horses, private company stock, tax liens and more. 2) Control- you have greater control over your investments. If you invest in GE, it is likely that you will not have much say in the running of their business. However, if you invest in a rental property, you will have a lot of control over how the investment should operate. 3) Invest in what you know. Peter lynch was fond of saying this phrase. Not everyone wants to invest in the stock market. Many people won't touch it because they are not familiar with it. Self-directed IRAs allow you to invest in assets like real estate that you know well. Cons: 1) many alternative investments are illiquid. This can present a problem if you need to access your capital for withdrawals. 2) Prohibited transactions- This is a new area for many investors who are unfamiliar with how self-directed IRAs work 3) Higher fees- in many cases, the fees associated with self-directed IRA custodians and administrators can be higher. 4) questionable investment sponsors tend to target self-directed IRA owners for fraudulent investments. The SEC put out a good PDF about the risks of fraud with self-directed IRAs. Self Directed IRAs are not the right solution for everyone, but they can help certain investors focus on the areas they know well.\",\n \"I have managed two IRA accounts; one I inherited from my wife's 401K and my own's 457B. I managed actively my wife's 401 at Tradestation which doesn't restrict on Options except level 5 as naked puts and calls. I moved half of my 457B funds to TDAmeritrade, the only broker authorized by my employer, to open a Self Directed account. However, my 457 plan disallows me from using a Cash-secured Puts, only Covered Calls. For those who does not know investing, I resent the contention that participants to these IRAs should not be messing around with their IRA funds. For years, I left my 401k/457B funds with my current fund custodian, Great West Financial. I checked it's current values once or twice a year. These last years, the market dived in the last 2 quarters of 2015 and another dive early January and February of 2016. I lost a total of $40K leaving my portfolio with my current custodian choosing all 30 products they offer, 90% of them are ETFs and the rest are bonds. If you don't know investing, better leave it with the pros - right? But no one can predict the future of the market. Even the pros are at the mercy of the market. So, I you know how to invest and choose your stocks, I don't think your plan administrator has to limit you on how you manage your funds. For example, if you are not allowed to place a Cash-Secured Puts and you just Buy the stocks or EFT at market or even limit order, you buy the securities at their market value. If you sell a Cash-secured puts against the stocks/ETF you are interested in buying, you will receive a credit in fraction of a dollar in a specific time frame. In average, your cost to owning a stock/ETF is lesser if you buy it at market or even a limit order. Most of the participants of the IRA funds rely too much on their portfolio manager because they don't know how to manage. If you try to educate yourself at a minimum, you will have a good understanding of how your IRA funds are tied up to the market. If you know how to trade in bear market compared to bull market, then you are good at managing your investments. When I started contributing to my employer's deferred comp account (457B) as a public employee, I have no idea of how my portfolio works. Year after year as I looked at my investment, I was happy because it continued to grow. Without scrutinizing how much it grew yearly, and my regular payroll contribution, I am happy even it only grew 2% per year. And at this age that I am ready to retire at 60, I started taking investment classes and attended pre-retirement seminars. Then I knew that it was not totally a good decision to leave your retirement funds in the hands of the portfolio manager since they don't really care if it tanked out on some years as long at overall it grew to a meager 1%-4% because they managers are pretty conservative on picking the equities they invest. You can generalize that maybe 90% of IRA investors don't know about investing and have poor decision making actions which securities/ETF to buy and hold. For those who would like to remain as one, that is fine. But for those who spent time and money to study and know how to invest, I don't think the plan manager can limit the participants ability to manage their own portfolio especially if the funds have no matching from the employer like mine. All I can say to all who have IRA or any retirement accounts, educate yourself early because if you leave it all to your portfolio managers, you lost a lot. Don't believe much in what those commercial fund managers also show in their presentation just to move your funds for them to manage. Be proactive. If you start learning how to invest now when you are young, JUST DO IT!\",\n \"The main advantage and disadvantage I can see in a scenario like this are - how savvy and good an investor are you? It's a good way to create below-market average returns if you're not that good at investing and returns way above market average if you are...\",\n \"Even Gold lost 1/2 of it's value between 1980 and 2000. You would not have fared well if you retired during that period heavily invested in Gold. http://www.usagold.com/reference/prices/history.html You said yourself that one can not foresee what the future will bring. At least IRA's force you to into dollar cost averaging, whereas if your money was outside of a retirement account, you might be tempted to speculate. -Ralph Winters\",\n \"\\\"You could end up with nothing, yes. I imagine those that worked at Enron years ago if their 401(k) was all in company stock would have ended up with nothing to give an example here. However, more likely is for you to end up with less than you thought as you see other choices as being better that with the benefit of hindsight you wish you had made different choices. The strategies will vary as some people will want something similar to a \\\"\\\"set it and forget it\\\"\\\" kind of investment and there may be fund choices where a fund has a targeted retirement date some years out into the future. These can be useful for people that don't want to do a lot of research and spend time deciding amongst various choices. Other people may prefer something a bit more active. In this case, you have to determine how much work do you want to do, do you want to review fund reviews on places like Morningstar, and do periodic reviews of your investments, etc. What works best for you is for you to resolve for yourself. As for risks, here are a few possible categories: Time - How many hours a week do you want to spend on this? How much time learning this do you want to do in the beginning? While this does apply to everyone, you have to figure out for yourself how much of a cost do you want to take here. Volatility - Some investments may fluctuate in value and this can cause issues for some people as it may change more than they would like. For example, if you invest rather aggressively, there may be times where you could have a -50% return in a year and that isn't really acceptable to some people. Inflation - Similarly to those investments that vary wildly there is also the risk that with time, prices generally rise and thus there is something to be said for the purchasing power of your investment. If you want to consider this in more detail consider what $1,000,000 would have bought 30 years ago compared to now. Currency risk - Some investments may be in other currencies and thus there is a risk of how different denominations may impact a return. Fees - How much do your fund's charge in the form of annual expense ratio? Are you aware of the charges being taken to manage your money here?\\\"\",\n \"You're misunderstanding the concept of retirement savings. IRA distributions are taxed, in their entirety, as ordinary income. If you withdraw before the retirement age, additional 10% penalty is added. Investment income has preferential treatment - long term capital gains and qualified dividends are taxed at lower rates than ordinary income. However, IRA contributions are tax deductible. I.e.: you don't pay taxes on the amounts contributed to the IRA when you earned the money, only when you withdraw. In the mean time, the money is growing, tax free, based on your investments. Anything inside the IRA is tax free, including dividends, distributions (from funds to your IRA, not from IRA to you), capital gains, etc. This is very powerful, when taking into account the compounding effect of reinvesting your dividends/sale proceeds without taking a chunk out for taxes. Consider you make an investment in a fund that appreciated 100% in half a year. You cash out to reinvest in something less volatile to lock the gains. In a regular account - you pay taxes when you sell, based on your brackets. In the IRA you reinvest all of your sale proceeds. That would be ~25-35% more of the gains to reinvest and continue working for you! However, if you decide to withdraw - you pay ordinary rate taxes on the whole amount. If you would invest in a single fund for 30 years in a regular account - you'd pay 20% capital gains tax (on the appreciation, not the dividends). In the IRA, if you invest in the same fund for the same period - you'll pay your ordinary income rates. However, the benefit of reinvesting dividends tax-free softens the blow somewhat, but that's much harder to quantify. Bottom line: if you want to plan for retirement - plan for retirment. Otherwise - IRA is not an investment vehicle. Also consider Roth IRA/conversions. Roth IRA has the benefit of tax free distributions at retirement. If your current tax bracket is at 20%, for example, contributing $5K to Roth IRA instead of a traditional will cost you $1K of taxes now, but will save you all the taxes during the retirement (for the distributions from the Roth IRA). It may be very much worth your while, especially if you can contribute directly to Roth IRA (there are some income limitations and phaseouts). You can withdraw contributions (but not earnings) from Roth IRA - something you cannot do with a traditional IRA.\",\n \"Buying the right shares gives higher return. Buying the wrong ones gives worse return, possibly negative. The usual recommendation, even if you have a pro advising you, is to diversify most of your investments to reduce the risk, even though that may reduce the possible gain. A mutual fund is diversification-in-a-can. It requires little to no active maintenance. Yes, you pay a management fee, but you aren't paying per-transaction fees every time you adjust your holdings, and the management costs can be quite reasonable if you pick the right funds; minimal in the case of computer-managed (index) funds. If you actively enjoy playing with stocks and bonds and are willing/able to accept your failures and less-than-great choices as part of the game, and if you can convince yourself that you will do better this way, go for it. For those of us who just want to deposit out money, watch it grow, and maybe rebalance once a year if that, index funds are a perfectly good choice. I spend at least 8 hours a day working for my money; the rest of the time, I want my money to work for me. Risk and reward tend to be proportional to each other; when they aren't, market prices tend to move to correct that. You need to decide how much risk you're comfortable with, and how much time and effort and money you're willing to spend managing that risk. Personally, I am perfectly happy with the better-than-market-rate-of-return I'm getting, and I don't have any conviction that I could do better if I was more involved. Your milage will vary. If folks didn't disagree, there wouldn't be a market.\",\n \"The main restrictions you see with IRA's involve contributions, and not the actual investments themselves. I would be indifferent to having a single investment across multiple accounts. It might be a bit trickier to manage, especially if your strategy involves some specific asset allocation. Other than account management though, there's no big issue.\",\n \"Specifically on the subject of maxing out your 401k, there are several downsides: The employer match usually only applies to the first 6%. Some employers offer no match at all. You listed the match as a pro, but I think it should be pointed out that you can usually get this benefit without maxing out your plan. The investment options are limited. Usually there is at least one fund available from all the common investment classes, but these may not be your preferred funds if you were able to choose for yourself. Fees can be very high. If you are working for a small to medium size company, the fees for each fund will often be higher than for the same funds in a plan offered by a large company. Fees are usually related to the dollar amount of assets under management. Each person has a different tax situation, so if you are single and making 6 figures, you might still be in the 25% bracket even after maxing out your 401k, but the same person filing jointly with a spouse that makes less could get down to the 15% bracket with a smaller contribution. I meet my retirement savings goals without maxing out the 401k. As long as the amount is above the employer match amount, my second priority is to funnel as much money as possible in to my IRA (because I get lower fees and better investment options from Vanguard).\",\n \"Older folk might wish to let the dividends and cap gains be paid in cash, and use that cash towards their RMDs (required distributions). If you are investing in mutual funds and wish to keep adding to the funds you've selected, the reinvestment is a simple way to avoid having to visit the account and make a new purchase. In other words, you invest $5500, buy the fund, and X years from now, you simply have more shares of the fund but no cash o worry about. The pro is as mentioned, and the con is really for the 70-1/2+ people who will need to take their RMDs. (Although even they can take the RMD in kind, as fund shares)\",\n \"Once upon a time, money rolled over from a 401k or 403b plan into an IRA could not be rolled into another 401k or 403b unless the IRA account was properly titled as a Rollover IRA (instead of Traditional IRA - Roth IRAs were still in the future) and the money kept separate (not commingled) with contributions to Traditional IRAs. Much of that has fallen by the way side as the rules have become more relaxed. Also the desire to roll over money into a 401k plan at one's new job has decreased too -- far too many employer-sponsored retirement plans have large management fees and the investments are rarely the best available: one can generally do better keeping ex-401k money outside a new 401k, though of course new contributions from salary earned at the new employer perforce must be put into the employer's 401k. While consolidating one's IRA accounts at one brokerage or one fund family certainly saves on the paperwork, it is worth keeping in mind that putting all one's eggs in one basket might not be the best idea, especially for those concerned that an employee might, like Matilda, take me money and run Venezuela. Another issue is that while one may have diversified investments at the brokerage or fund family, the entire IRA must have the same set of beneficiaries: one cannot leave the money invested in GM stock (or Fund A) to one person and the money invested in Ford stock (or Fund B) to another if one so desires. Thinking far ahead into the future, if one is interested in making charitable bequests, it is the best strategy tax-wise to make these bequests from tax-deferred monies rather than from post-tax money. Since IRAs pass outside the will, one can keep separate IRA accounts with different companies, with, say, the Vanguard IRA having primary beneficiary United Way and the Fidelity IRA having primary beneficiary the American Cancer Society, etc. to achieve the appropriate charitable bequests.\",\n \"There are a few things to consider. The answers others gave here are correct, but I'll offer some reasons you may not want to roll to an IRA:\",\n \"I stopped trading in my IRA and gave it pro to manage it. He beats SP500 that i could never do.\",\n \"easier access to your money That can be a disadvantage for some people. Based on the number of people who tap their 401K for non-retirement reasons, or just cash it in when they change jobs; making it painful to use before retirement age does keep some people from spending it too early. They need to be able to compartmentalize the funds in order to understand the difference between funds spending, saving and investing for retirement. Roth 401K One advantage that the 401K may have is that you can in many plans invest the funds in a Roth 401K. This allows you to go beyond the Roth IRA limits. You are currently investing the maximum amount in your Roth IRA, so this could be a big advantage.\",\n \"The investments offered in 401K are usually limited to a selection of mutual funds offered by a 401K provider. The 401K providers and the mutual funds charge fees. The mutual fund industry has a lobbying group that will push for increased 401K contributions to direct money into their mutual funds to collect fees. The top 401 K provider in 2005 was fidelity. It managed $337 billion in 401Ks of which $334 billion was directed into mutual funds. Although I would have to use some of the same providers to open an IRA, I would not have to invest in the providers' mutual funds when I open an IRA. I can buy a stock and hold onto it for 10, 20, 50 years inside of my IRA. Thus, the only fee the investment company would collect from me would be from when I purchased the stock and when I sold the stock. Not nearly as profitable as mutual fund fees.\",\n \"You bring up a valid concern. IRAs are good retirement instruments as long as the rules don't change. History has shown that governments can change the rules regarding retirement accounts. As long as you have some of your retirement assets outside of an IRA I think IRAs are good ways to save for retirement. It's not possible to withdraw the money before retirement without penalty. Also, you will be penalized if you do not withdraw enough when you do retire.\",\n \"\\\"1) Usually, the choice between Traditional vs. Roth is whether you believe that your tax rate will be higher or lower in the future than it is now. Your income is probably in the 25% bracket now. It's hard to say whether that should be considered \\\"\\\"high\\\"\\\" or \\\"\\\"low\\\"\\\". Some people advocate Roth only for 15% bracket; but your income would probably go into higher brackets in the future, so Roth may be preferable from this point of view. Roth IRA also has another advantage that the principal of contributions can be taken out at any time without tax or penalty, so it can serve as an emergency fund just as well as money in taxable accounts. Given that you may not have a lot of money saved up right now, this is useful. 2) In a sense, it's nice to have a mix of Traditional and Roth when you withdraw to hedge against uncertainty in future tax rates and have the option of choosing whichever one is advantageous to withdraw when you need to withdraw. That said, you will likely have many years of access to a 401k and high income in your future working years, in which you can contribute to a Traditional 401k (or if no access to 401k, then Traditional IRA), so a mix will almost certainly happen even if you go all Roth IRA now. 3) I think that depends on you, whether you are a hands-on or hands-off kind of investor.\\\"\",\n \"All other things being equal, you might be better off contributing to a IRA that is a brokerage account. You will have lots of flexibility in your investments and there would probably not be fees for the account itself. You might incur commissions for trading and/or owning mutual funds that are charged by the funds themselves. You won't be able to borrow from an IRA, as opposed to a 401K. IMHO, that is a good thing. Are you suggesting that you would withdraw early from a retirement account? You'd probably be better off not doing that. Assuming a large salary, you would be paying 43% to withdraw your money early. Would you accept a loan at 43% interest? You are probably better off not putting the money in in the first place to accomplish your goals, then withdrawing it early. Most people opt for a 401K for two reasons. The company match and ease of investment make a compelling argument. Keep in mind if a 401K is available to you, regardless if you particpate, you start phasing out your IRA deduction at 60K a year (single) or 96K (married). Given your huge salary comments I imagine an IRA would not be an option in your scenario. Given that, if you leave a job, you can roll your 401K balance into a trading account.\",\n \"\\\"You are overthinking it. Yes there is overlap between them, and you want to understand how much overlap there is so you don't end up with a concentration in one area when you were trying to avoid it. Pick two, put your money in those two; and then put your new money into those two until you want to expand into other funds. The advantage of having the money in an IRA held by a single fund family, is that moving some or all of the money from one Mutual fund/ETF to another is painless. The fact it is a retirement account means that selling a fund to move the money doesn't trigger taxes. The fact that you have about $10,000 for the IRA means that hopefully you have decades left before you need the money and that this $10,00 is just the start. You are not committed to these investment choices. With periodic re-balancing the allocations you make now will be adjusted over the decades. One potential issue. You said: \\\"\\\"I'm saving right not but haven't actually opened the account.\\\"\\\" I take it to mean that you have money in a Roth TRA account but it isn't invested into a stock fund, or that you have the money ready to go in a regular bank account and will be making a 2015 contribution into the actual IRA before tax day this year, and the 2016 contribution either at the same time or soon after. If it is the second case make sure you get the money for 2015 into the IRA before the deadline.\\\"\",\n \"Pro: - Faces less redemption pressure and hence the Fund Manager can focus more on long term gains rather than immediate gains. - Works well in emerging markets. - Less churn out in case the market falls sharply, there by making more money in long run. Cons: - No additional money to invest/take advantage of market situation. - Less liquid for investor as he is locked in for a period.\",\n \"Unfortunately, that's a call only you can make and whichever route you choose comes with advantages and disadvantages. If you manage your money directly, you may significantly reduce costs (assuming that you don't frequently trade index funds or you use a brokerage like RobinHood) and take advantage of market returns if the indexes perform well. On the other hand, if the market experiences some bad years, a professional might (and this is a huge might) have more self-discipline and prevent a panic sell, or know how to allocate accordingly both before and after a rise or fall (keep in mind, investors often get too greedy for their own good, like they tend to panic at the wrong time). As an example of why this might is important: one family member of mine trusted a professional to do this and they failed; they bought in a rising market and sold in a falling market. To avoid the above example, if you do go with the professional service, the best course of action is to look at their track record; if they're new, you might be better on your own. Since I assume this one or more professionals at the company, testing to see what they've recommended over the years might help you evaluate if they're offering you a good choice. Finally, depending on how much money you have, you could always do what Scott Adams did: he took a portion of his own money and managed it himself and tested how well he did vs. how well his professional team did (if I recall, I believe he came out ahead of his professional team). With two decades left, that may help guide you the rest of the way, even through retirement.\",\n \"\\\"Your funds are in a retirement account. Withdrawals from your IRA will be penalized if you withdraw before you turn 59.5 years old, and you appear to be decades away from that age. The general advice I would give you is to pick a \\\"\\\"target year fund\\\"\\\" that targets the year you turn 59.5. The stock market is more volatile, but its average gains will protect you from inflation just eating your funds. Bonds are in counterpoint to your stocks - more stable, and protecting you from the chance that stocks dip right before you want to withdraw. Target year funds start with higher amounts of stock, and gradually rebalance towards bonds over time. Thus, you take your market risks earlier while you can benefit from the market's gains, and then have stability when you actually would want to retire and depend on the savings.\\\"\",\n \"I'd hazard that Jim is mostly worried that people are getting ripped off by high employer 401(k) fund fees. A lot of employers offer funds with fees over 1% a year. This sounds low-ish if you don't realize that the real (inflation-adjusted) return for the fund will probably average out to about 4%, so it's really something like a quarter of your earnings gone. With an IRA, you don't have to do that. You can get an IRA provider which offers good, cheap index funds and the like (cough Vanguard cough). Fund fees will probably be closer to 0.1%-ish. HOWEVER. The maximum IRA contribution in 2013 will be $5,500. The maximum for a 401(k) contribution will be $17,500. That extra capacity is enough to recommend a 401(k) over an IRA for many people. These people may be best served by putting money into the 401(k) and then rolling it over into a rollover IRA when they change jobs. Also, certain people have retirement plans which offer them good cheap index funds. These people probably don't need to worry quite as much. Finally, having two accounts is more complicated. Please contact someone who knows more about taxes than I am to figure out what limitations apply for contributing to both IRAs and 401(k)s in the same year.\",\n \"As I stated in my comment on @JCotton's answer, the only way you benefit by putting your money in an IRA or other tax-deferred vehicle is if you expect to have a lower tax rate when you withdraw than when you put the money in. If you look at @JCotton's numbers and remember to pay taxes when you withdraw the money in 30 years, you will see that both situations - paying taxes now or 30 years from now - give you the exact same dollar amount if the tax rates are the same at both points in time. So if you put money in an IRA, you're betting on the fact that the government will not substantially raise interest rates by then, and/or that you will be in a lower tax bracket. To me, the only valid reasons to invest in an IRA or 401K are the following: However, you should also consider the major downside that the money is locked away and, at best, inconvenient to access when you need it. At worst, you have to pay taxes and penalties if you ever withdraw that money. If you are a financially responsible person, I think you're generally better off keeping your money outside of an IRA or 401K, with the exception of making sure to get all of your employer's matching contributions.\",\n \"If your employer does not offer contribution matching, and you don't like the range of investment options provided by the company 401k, then you probably are better off investing in your own IRA instead. In an IRA held at a bank or brokerage, you can invest in multiple stocks or funds and move money around within the IRA pretty freely in most cases. If your company is doing well and is actually sharing profit into the 401k, you might consider leaving your 5% contribution to the 401k where it is and put the other 5% you are planning to contribute into a new IRA of your own. This straddles the risk of you losing money if your company 401k tanks (or profit sharing dries up) and your missing out on profit sharing if it continues to pay well.\",\n \"\\\"Couple points: 1) Since the Roth is after tax, you can effectively contribute more than you could with the Traditional IRA before hitting the limits. So in your example, if you had extra money you wanted to invest in an IRA, you could invest up to $1,750 more into the Roth but only $500 more into the Traditional (current limits are $5,500 per year for single filers under 50). Your example assumes that you have exactly $3,750 in spare money looking for an IRA home. 2) The contributions (but not earnings) can be withdrawn from the Roth at any time, penalty and tax free. 3) The tax rate \\\"\\\"lock-in\\\"\\\" can be significant, especially early on when you are at a relatively low tax bracket, say 15%, but expect to be higher at retirement. 4) Traditional IRAs and 401(k) are taxed as ordinary income, so you go through the tax brackets. Even if the marginal rate is 25%, the effective rate may be lower. If you have a Roth, conceivably you could reduce the amount you need to withdrawal from the Trad IRA/401(k) to reduce the effective tax rate on those (of course subject to minimum distributions and all that). This is more an argument to have a mix of pre- and post-tax retirement accounts than strictly a pro-Roth reason.\\\"\",\n \"In addition to the other answers, which cover the risks of what is essentially leveraged investing, I'd like to point out that the 2.6% penalty is a flat rate. If you are responsible for withholding your own taxes then you are paying tax four times a year. So any underpayment on your first quarterly tax payment will have much more time to accrue in the stock market than your last payment, although each underpayment will be penalized by the 2.6%. It may make sense for someone to make full payments on later payments but underpay on earlier ones.\",\n \"First you need to distinguish between short-term and long-term capital gains. In an IRA you can use investment strategies that incur short-term capital gains without being taxed as ordinary income. As mentioned in a comment above, with a Roth IRA, you can invest now at your low income tax rates and withdraw all gains without incurring any taxes at retirement time. You can also pull out your contributions penalty free before retirement age (59 1/2) if you've had the account for more than 5 years. You only pay taxes and penalties on the earnings. You can also make withdrawals for education expenses and you have one lifetime exclusion of $10,000 for a down-payment on a house.\",\n \"\\\"IRAs have huge tax-advantages. You'll pay taxes when you liquidate gold and silver. While volatile, \\\"\\\"the stock market has never produced a loss during any rolling 15-year period (1926-2009)\\\"\\\" [PDF]. This is perhaps the most convincing article for retirement accounts over at I Will Teach You To Be Rich. An IRA is just a container for your money and you may invest the money however you like (cash, stocks, funds, etc). A typical investment is the purchase of stocks, bonds, and/or funds containing either or both. Stocks may pay dividends and bonds pay yields. Transactions of these things trigger capital gains (or losses). This happens if you sell or if the fund manager sells pieces of the fund to buy something in its place (i.e. transactions happen without your decision and high turnover can result in huge capital gains). In a taxable account you will pay taxes on dividends and capital gains. In an IRA you don't ever pay taxes on dividends and capital gains. Over the life of the IRA (30+ years) this can be a huge ton of savings. A traditional IRA is funded with pre-tax money and you only pay tax on the withdrawal. Therefore you get more money upfront to invest and more money compounds into greater amounts faster. A Roth IRA you fund with after-tax dollars, but your withdrawals are tax free. Traditional versus Roth comparison calculator. Here are a bunch more IRA and 401k calculators. Take a look at the IRA tax savings for various amounts compared to the same money in a taxable account. Compounding over time will make you rich and there's your reason for starting young. Increases in the value of gold and silver will never touch compounded gains. So tax savings are a huge reason to stash your money in an IRA. You trade liquidity (having to wait until age 59.5) for a heck of a lot more money. Though isn't it nice to be assured that you will have money when you retire? If you aren't going to earn it then, you'll have to earn it now. If you are going to earn it now, you may as well put it in a place that earns you even more. A traditional IRA has penalties for withdrawing before retirement age. With a Roth you can withdraw the principal at anytime without penalty as long as the account has been open 5 years. A traditional IRA requires you take out a certain amount once you reach retirement. A Roth doesn't, which means you can leave money in the account to grow even more. A Roth can be passed on to a spouse after death, and after the spouse's death onto another beneficiary. more on IRA Required Minimum Distributions.\\\"\",\n \"What is the best option to start with? and I am not sure about my goals right now but I do want to have a major retirement account without changing it for a long time That is a loaded question. Your goals should be set up first, else what is stopping you from playing the mega millions lottery to earn the retirement amount instantly. If you have the time and resources, you should try doing it yourself. It helps you learn and at a latter stage if you don't have the time to manage it yourself, you can find an adviser who does it for you. To find a good adviser or find a fund who/which can help you achieve your monetary goals you will need to understand the details, how it works and other stuff, behind it. When you are thrown terms at your face by somebody, you should be able to join the dots and get a picture for yourself. Many a rich men have lost their money to unscrupulous people i.e. Bernie Madoff. So knowing helps a lot and then you can ask questions or find for yourself to calm yourself i.e. ditch the fund or adviser, when you see red flags. It also makes you not to be too greedy, when somebody paints you a picture of great returns, because then your well oiled mind would start questioning the rationale behind such investments. Have a look at Warren Buffet. He is an investor and you can follow how he does his investing. It is simple but very difficult to follow. Investing through my bank I would prefer to stay away from them, because their main service is banking and not allowing people to trade. I would first compare the services provided by a bank to TD Ameritrade, or any firm providing trading services. The thing is, as you mentioned in the question, you have to go through a specific process of calling him to change your portfolio, which shouldn't be a condition. What might happen is, if he is getting some benefits out of the arrangement(get it clarified in the first place if you intend to go through them), from the side of the fund, he might try to dissuade you from doing so to protect his stream of income. And what if he is on a holiday or you cannot get hold of him. Secondly from your question, it seems you aren't that investing literate. So it is very easy to get you confused by jargon and making you do what he gets the maximum benefit out of it, rather than which benefits you more. I ain't saying he is doing so but that could be a possibility too, so you have consider that angle too. The pro is that setting up an account through them might be much easier than directly going to a provider. But the best point doing it yourself is, you will learn and there is nothing which tops that. You don't want somebody else managing your money, however knowledgeable they maybe i.e. Anthony Bolton.\",\n \"Indeed, there's no short term/long term issue trading inside the IRA, and in fact, no reporting. If you have a large IRA balance and trade 100 (for example) times per year, there's no reporting at all. As you note, long term gains outside the IRA are treated favorably in the tax code (as of now, 2012) but that's subject to change. Also to consider, The worst thing I did was to buy Apple in my IRA. A huge gain that will be taxed as ordinary income when I withdraw it. Had this been in my regular account, I could sell and pay the long term cap gain rate this year. Last, there's no concept of Wash sale in one's IRA, as there's no taking a loss for shares sold below cost. (To clarify, trading solely within an IRA won't trigger wash sale rules. A realized loss in a taxable account, combined with a purchase inside an IRA can trigger the wash sale rule if the stock is purchased inside the IRA 30 days before or after the sale at a loss. Thank you, Dilip, for the comment.) Aside from the warnings of trading too much or running afoul of frequency restrictions, your observation is correct.\",\n \"A terrific resource is this article. To summarize the points given: PROS: CONS: There is no generic yes or no answer as to whether you ought to max out your 401(k)s. If you are a sophisticated investor, then saving the income for investing could be a better alternative. Long term capital gains are taxed at 15% in the US, so if you buy and hold on to good companies that reinvest their earnings, then the share price keeps going up and you'll save a lot of money that would go in taxes. If you're not a very good investor, however, then 401(k)s make a lot of sense. If you're going to end up setting up some asset allocation and buying ETFs and rebalancing or having a manager rebalance for you every year or so, then you might as well take the 401(k) option and lower your taxable income. Point #1 is simply wrong, because companies that reinvest earnings and growing for a long time are essentially creating tax-free gains for you, which is even better than tax-deferred gains. Nonetheless, most people have neither the time nor the interest to research companies and for them, the 401(k) makes more sense.\",\n \"In your entire question, the only time you mention that this is an investment inside an IRA is when you say Every quarter, six months, whatever Id have to rebalance my IRA while Vanguard would do this for the fund of funds without me needing to. Within an IRA, there are no tax implications to the rebalancing. But if this investment were not inside an IRA, then the rebalancing done by you will have tax implications. In particular, any gains realized when you sell shares in one fund and buy shares in another fund during the rebalancing process are subject to income tax. Similarly, losses also might be realized (and will affect your taxes). However, if you are invested in a fund of funds, there are no capital gains (or capital losses) when re-balancing is done; you have gains or losses only when you sell shares of the fund of funds for a price different than the price you paid for them.\",\n \"Your assumptions are flawed or miss crucial details. An employer sponsored 401k typically limits the choices of investments, whereas an IRA typically gives you self directed investment choices at a brokerage house or through a bank account. You are correct in noticing that you are limited in making your own pre-tax contributions to a traditional IRA in many circumstances when you also have an employer sponsored 401k, but you miss the massive benefit you have: You can rollover unlimited amounts from a traditional 401k to a traditional IRA. This is a benefit that far exceeds the capabilities of someone without a traditional 401k who is subject to the IRA contribution limits. Your rollover capabilities completely gets around any statutory contribution limit. You can contribution, at time of writing, $18,000 annually to a 401k from salary deferrals and an additional $35,000 from employer contributions for a maximum of $53,000 annually and roll that same $53,000 into an IRA if you so desired. That is a factor. This should be counterweighed with the borrowing capabilities of a 401k, which vastly exceeds an IRA again. The main rebuttal to your assumptions is that you are not necessarily paying taxes to fund an IRA.\",\n \"\\\"One \\\"\\\"con\\\"\\\" I have not yet seen mentioned: retirement accounts are generally protected from creditors in a bankruptcy. There are limits and exceptions, Roth has a 1.2 million dollar limit and can be split by a divorce QDRO for instance. Link Since it seems you have no income this year, you may may be raiding your IRA for living expenses. If there is a chance you may declare bankruptcy in the next year or so, consider doing that first and raid the IRA for seed money after.\\\"\",\n \"My super fund and I would say many other funds give you one free switch of strategies per year. Some suggest you should change from high growth option to a more balance option once you are say about 10 to 15 years from retirement, and then change to a more capital guaranteed option a few years from retirement. This is a more passive approach and has benefits as well as disadvantages. The benefit is that there is not much work involved, you just change your investment option based on your life stage, 2 to 3 times during your lifetime. This allows you to take more risk when you are young to aim for higher returns, take a balanced approach with moderate risk and returns during the middle part of your working life, and take less risk with lower returns (above inflation) during the latter part of your working life. A possible disadvantage of this strategy is you may be in the higher risk/ higher growth option during a market correction and then change to a more balanced option just when the market starts to pick up again. So your funds will be hit with large losses whilst the market is in retreat and just when things look to be getting better you change to a more balanced portfolio and miss out on the big gains. A second more active approach would be to track the market and change investment option as the market changes. One approach which shouldn't take much time is to track the index such as the ASX200 (if you investment option is mainly invested in the Australian stock market) with a 200 day Simple Moving Average (SMA). The concept is that if the index crosses above the 200 day SMA the market is bullish and if it crosses below it is bearish. See the chart below: This strategy will work well when the market is trending up or down but not very well when the market is going sideways, as you will be changing from aggressive to balanced and back too often. Possibly a more appropriate option would be a combination of the two. Use the first passive approach to change investment option from aggressive to balanced to capital guaranteed with your life stages, however use the second active approach to time the change. For example, if you were say in your late 40s now and were looking to change from aggressive to balanced in the near future, you could wait until the ASX200 crosses below the 200 day SMA before making the change. This way you could capture the majority of the uptrend (which could go on for years) before changing from the high growth/aggressive option to the balanced option. If you where after more control over your superannuation assets another option open to you is to start a SMSF, however I would recommend having at least $300K to $400K in assets before starting a SMSF, or else the annual costs would be too high as a percentage of your total super assets.\",\n \"As your question appears in the second half, so will my answer. Like you, I will provide some background. I remember buying gasoline for $1.759 per gallon. I am so old that I remember buying gasoline for $0.759 per gallon. I recently paid $2.759 per gallon. You claim that your relative is not getting a very good return. Some would suggest that, at $2.759 per gallon, I am not getting a very good price on gasoline. Rates, yields, returns and the price of gas are not what they once were. It is actually difficult to get a pretty bad return relative to the current market. I suspect your relative is no longer getting what he used to get but he is getting a fair return. About record keeping. Your Uncle Sam benefits at your expense when you keep poor records. There are substantial penalties for failing to report everything. Most high school graduates can manage one checking account, one savings account, several charge cards and about 20 CDs and stocks at different institutions with little more than the following: a) a wall calendar b) a shoe box and c) a stack of 3 by 5 cards. Don't misplace the shoe box. If you can use a spreadsheet, it is even easier. Backup your data. There are a several reasons why you shouldn't consolidate all his cash and put it in a single mutual fund account and then put together a mix of investments that work well for him. - you are doing it backwards 1st put together a mix of investments that work well for him 2nd consolidate the assets. Your phrasing suggests a general lack of understanding - most CDs have penalties for early withdrawal. - while you enjoy managing your 401K in a single online account, your older relative might not be as comfortable with a lack of paper statements (see shoe box above) Let me tell you a little about my 401K. x% blue chip, y% small cap, z% bonds, w% foreign stock. Once a quarter, I change my current contribution to re-balance current value towards my target percentages. Every 30 months or so, I consider changing my asset allocation. The allocation considers my age, my spouses age, our childrens ages, my risk tolerance and my intermediate view of the markets. Your mileage my vary. to recap\",\n \"Is that basically it? Trading off between withdrawing-anytime vs paying-capital-gain-tax? No. Another significant factor is dividends. In an IRA they incur no immediate tax and can be reinvested. This causes the account value to compound over the years. Historically, this compounding of dividends provides about half of the total return on investments. In a non-IRA account you have to pay taxes each year on all dividends received, whether you reinvest them or not. So outside of an IRA you have a tax drag on both capital gains and dividends.\",\n \"One possible downside is contribution limit. The 401K contribution limit is $18,000 for 2016, which is more than three times the limit for IRA contributions ($5,500).\",\n \"\\\"That's a lot of manual checking-in to see if everything is performing the way you \\\"\\\"want\\\"\\\". Not to insult your intelligence, but that is not your job, and doing that on a monthly basis is going to eat a lot of time. Plus, most 401(k) programs have lockout periods wherein changes can't be made without incurring additional fees (related to distributions, etc). And if you're checking that often, you are [likely] losing the benefits of investing in mutual funds to start with. If you have the stomach to handle the risk, go for the high-risk investment vehicles early in your career - you can afford a 30% drop this year if you then make 105%, 15%, or 50% back each of the next 5. If, on the other hand, you're in your mid-career, switch to more conservative management tactics.\\\"\",\n \"You're losing money. And a lot of it. Consider this: the inflation is 2-4% a year (officially, depending on your spending pattern your own rate might be quite higher). You earn about 1/2%. I.e.: You're losing 3% a year. Guaranteed. You can do much better without any additional risk. 0.1% on savings account? Why not 0.9%? On-line savings account (Ally, CapitalOne-360, American Express, E*Trade, etc) give much higher rates than what you have. Current Ally rates are 0.9% on a regular savings account. 9 times more than what you have, with no additional risk: its a FDIC insured deposit. You can get a slightly higher rate with CDs (0.97% at the same bank for 12 months deposit). IRA - why is it in CD's? Its the longest term investment you have, that's where you can and should take risks, to maximize your compounding returns. Not doing that is actually more risky to you because you're guaranteeing compounding loss, of the said 3% a year. On average, more volatile stock investments have shown to be not losing money over periods of decades, even if they do lose money over shorter periods. Rental - if you can buy a property that you would pay the same amount of money for as for a comparable rental - you should definitely buy. Your debt will be secured by the property, and since you're paying the same amount or less - you're earning the equity. There's no risk here, just benefits, which again you chose to forgo. In the worst case if you default and walk away from the property you lost exactly (or less) what you would have paid for a rental anyway. 14 years old car may be cheaper than 4 years old to buy, but consider the maintenance, licensing and repairs - will it not some up to more than the difference? In my experience - it is likely to. Bottom line - you think you're risk averse, but you're exactly the opposite of that.\",\n \"401Ks and IRAs are types of retirement accounts. They have rules regarding maximum amount of investments per year; who can invest; destructibility; and the tax treatment of the growth. Stock, bonds, mutual funds, ETFs are all types of investments that can exist either inside or outside of the retirement account. Some 401Ks restrict the type of investments you can have, others allow you to own almost anything. Any investment is a risk, and there is no guarantee that it will grow. Look around the site for beginning investment advice. You should start with the 401K offered by your company especially if they have matching funds. That is free money. Many suggest you invest enough to get the match, then invest with an IRA. Look into IRAs because under US tax law you can still make a 2013 investment up until tax day 2014. Take the time before tax day to decide on Roth or Regular IRA. The more exotic investments take more time to understand and should not be a concern until you have laid out your basic retirement accounts.\",\n \"First of all an IRA is a type of account that says nothing about how your money is invested. It seems like you are trying to compare an IRA with a market ETF (like Vanguard Total Market Admiral VTSAX), but the reality is that you can have both. Depending on your IRA some of the investment options may be limited, but you will probably be able to find some version of a passive fund following an index you are interested in. The IRA account is tax advantaged, but you may invest the money in your IRA in an ETF. As for how often a non-IRA account is taxed and how much, that depends on how often you sell. If you park your money in an ETF and do not sell, the IRS will not claim any taxes from it. The taxable event happens when you sell. But if you gain $1000 in a year and a day and you decide to sell, you will owe $150 (assuming 15% capital gains tax), bringing your earnings down to $850. If your investments go poorly and you lose money, there will be no capital gains tax to pay.\",\n \"Advantages of Gold IRA (regardless of where you're holding it): Disadvantages of Gold IRA: Instead, you can invest in trust funds like SLV (The ETF for silver) or GLD in your regular brokerage IRA. These funds negotiate their prices of storage, are relatively liquid, and shield you from the dangers of owning physical metal while providing opportunity to invest in it at market prices.\",\n \"Let me throw in one more variable to consider. Company 401K plans typically have MUCH higher fees than you are likely to get if you shop around on your own as long as you don't go with a high dollar broker. You won't see these fees on your statements typically, which I think is criminal, but they are hidden in the prices of the funds you are buying in the 401K. If you don't believe me, get the quotes for a fund from the 401K company's web-site then look up the same fund on a site like MSMoney. The share prices won't match and you will be angry until you come to terms with it. So if you have a choice of money in a personal retirement account versus a 401K always go with your own account... UNLESS: or\",\n \"I currently do not have an IRA (other than a rollover IRA from my 401k from a previous employer) The source is irrelevant. You have an IRA. The reason to keep contributing is that at some point, you might transfer the pretax dollars into a 401(k) and the post tax dollars can be converted to Roth. Other than the above, investing in a standard brokerage account (a non-retirement account) has its positives. Gains can see long term cap gain treatment, and the assets see a step-up in basis when you die.\",\n \"If you have the cash on hand to pay the tax on the amount you are transferring I recommend moving to a Roth IRA An IRA is tax-deferred. You put in pretax contributions in to an IRA, and you are taxed on that money (your contributions and interest earned) when you withdraw it at retirement, age 59 1/2. The idea being that you will be taking less out per year in your retirement years, putting you into a lower tax bracket. The major problem is most people draw out as much or more a year in their retirement years than when they were working. A Roth IRA grows tax free You put after tax contributions into a Roth IRA, you have paid taxes on the contributions, and you are never taxed on the growth. When you draw the money out at retirement you don't pay any income taxes on that money. Let me give you an example: For this example we will use the following information for both scenario: We will invest $400 per month for a total of $4800. The current maximum is $5000 if you are under 50 years old $400 dollars after taxes is $300 Invest $300 a month, at age 65 you have 3,529,432 You owe no taxes on this money, it doesn't matter how much you take out a year. $400 dollars a month is taken pretax out of your paycheck. Invest $400 per month, at age 65 you have $4,705,909 You owe taxes of 25% as you draw that out for at total tax of 1,176,477 4,705,909 - 1,176,477 = 3,529,432 cash in your pocket The problem is if you draw out more than $82,400 (current 2010 filing single) per year you will be pushed to a higher tax bracket and take more of your money away. If you decide to buy a vacation home and you take out $250,000 to pay for it, that's counted as income for that year any you will be in the 33% tax bracket. Even if you can keep yourself to a low income the government forces your hand and makes you draw out more money at age 70, based on their tables, forcing you into a higher tax bracket\",\n \"Why shouldn't I just keep my money in the savings account and earn the same amount (both accounts have the same APY in this case)? I will assume that you are transferring money from your savings account into a Traditional IRA and deducting the contribution from your income. While you may think that the money that is being transferred is yours already -- it is sitting in your savings account, for Pete's sake! -- you are deducting that amount in getting to your taxable income, and so you are effectively contributing it from current income and not paying taxes on the amount contributed. So, consider the same amount of money sitting in your savings account versus the same amount of money sitting in your Traditional IRA account. While you will earn the same amount of interest in both accounts, you will have to pay taxes each year on the interest earned in the savings account. You might choose, as most people do, to not take money out of the savings account to pay theses taxes but just pay them from ready cash/checking account/current income etc., or these taxes might just reduce the refund that you will getting from the IRS and your State income tax authority, but in either case, you have paid taxes on the interest earned in your non-IRA savings account, and of course, long ago, you also paid taxes on the original amount in the non-IRA savings account. So, if you take any money out of the non-IRA savings account, you don't pay any taxes on the amount withdrawn except possibly for the interest earned from January 1 till the date of withdrawal (which you are paying from ready cash). On the other hand, consider the Traditional IRA. The original deposit was not taxed in the sense that you got a deduction (reduced tax or increased refund) when you made the contribution. The annual interest earned was not taxed each year either. So when you make a qualified withdrawal (after age 59.5 or by meeting one of the other exceptions allowing withdrawal before age 59.5), you are taking money on which you have not paid any taxes at all, and the IRS wants its cut. The money withdrawn is taxable income to you. Furthermore, the money withdrawn is not eligible for any kind of favorable treatment such as having it count as qualified dividends or as long-term capital gains even if your IRA was invested in stocks and the money in the account is all qualified dividends or long-term capital gains. If you make an unqualified withdrawal, you owe a penalty (technically named an excise tax) in addition to income tax on the amount withdrawn. If you are investing in a Roth IRA, you will not be getting a deduction when you make the contribution, and qualified withdrawals are completely tax-free, and so the answer is completely different from the above.\",\n \"Advantage of cash: You can spend the money without having to pay any fees or taxes to get it out. Disadvantage: When inflation is greater than zero, which it has been for many decades, your cash is continually losing value. Advantages of an IRA (Roth or classic): Your money will usually grow as the investments return a profit. You get special tax benefits. Disadvantages: There's risk -- you may lose money. There are tax penalties for withdrawing the money before retirement. In general, you should only put money in an IRA if you expect to leave it there until you retire. Or at least, for a long time. Whole life is a combination of a life insurance policy and an investment. Advantages: Combines insurance and investment into one convenient monthly payment. Disadvantages: The investment portion typically has lower returns than you could get elsewhere. If you have no need for life insurance -- if you're not supporting anyone or you're confidant they could get along without you or you don't like them and don't care what happens to them when you're gone or whatever -- then there's no point buying life insurance, whole or term. You're paying for a product that you don't need. It's pretty common advice to tell people that instead of buying a whole life policy, they should buy a term policy with the same coverage, and then invest the difference in the premium. For example, if you were considering getting a $100,000 whole life policy that costs $50 per month (just making up numbers, of course it depends on your age, health, etc), and you see you could get a $100,000 term life policy for $30 per month, you will almost certainly do better in the long run to buy the $30 term policy and put the other $20 into investments. The catch to this plan is that there are usually transaction costs to investing. Even a discount broker like Ameritrade or Scott Trade charges around $10 per transaction. So if you tried to invest $20 each month, you'd lose half of it to transaction fees. Which means that in practice, you'd have to save that money up until you had at least a few hundred. And at that point many people find other things always seem to come up to spend the money on, so that while they start out with every intention of investing this money, they don't.\",\n \"Ben Miller's answer is very thorough, and I up voted it. I believe that the ability to rebalance without tax implications is very import, but there are two aspects of the question that were not covered: The 401K in many cases comes with a company match. Putting enough money into the fund each year to maximize the match, give you free money that is not available in the non-retirement accounts. The presence of that match is to encourage employees to contribute: even if they are tying up their funds until retirement age; and they are into a plan with only a handful of investment options; and they may have higher expenses in the 401K. The question also had a concern about the annual limits for the 401K (18,000) and the IRA (5,500). The use of a retirement account doesn't in any way limit your ability to invest in non-retirement accounts. You can choose to invest from 0 to 23,500 in the retirement accounts and from 0 to unlimited into the non-retirement accounts. Double those amounts if you are married.\",\n \"I'll add this to others: Having non-deductible portion in your IRA requires additional tax forms to be attached to your tax return, and tracking. If you plan to have long-term investments in your non-deductible IRA (such as, say, target funds or long-term stock positions that you expect to hold till retirement) it may be better to keep them in a non-IRA account. This is because the income tax on the withdrawals from the IRA is at ordinary rates, and from the regular investment account is at capital gains rate. While the rates can definitely change, traditionally capital gains rates are significantly lower than the ordinary income bracket rates. So generally I think that having non-deductible IRA deposits is only useful if you're planning a ROTH conversion in a near future.\",\n \"\\\"Besides what others have mentioned, another thing to watch out for is the tax withholding on withdrawal. If it's a Traditional IRA, they will probably withhold a certain percentage on non-qualified withdrawals. I am not sure if you can ask them not to withhold. I don't remember the percentage, and it varies by state, but let's assume it is 20%. That means that you only receive 80% of the withdrawal amount when you take it out. However, when you deposit the money to complete the \\\"\\\"rollover\\\"\\\", you need to give them 100% of the withdrawal. That means (assuming the 20% withholding) you need to fork out cash equal to 125% of what you received in cash, within 60 days! That's like several hundred percent APR and hard to meet unless you are certain of receiving a large payment within the time period. And if you forget about this, and you just deposit the same amount that you received (80% of the withdrawal), the remainder (20% of the withdrawal) will count as an early withdrawal, with all the taxes and penalty. So what happens to the 20% withheld that you never received but had to pay anyway? Well, the government has it. It will count as tax paid on your tax return, so it will increase your refund/decrease the amount you owe, but that means you are out that money until tax time! (Unless you decrease the withholding on your salary in the rest of the year to compensate.) If it's a Roth IRA withdrawal on the contribution, there is generally no withholding, so you don't have to worry about the above. (But there is no penalty on withdrawal of Roth IRA contribution anyway.)\\\"\",\n \"If you don't pull the money out of an IRA or 401(k) until you hit retirement age, there are no tax consequences at all. No matter how you invest or ignore it, it won't affect your return. Same for a Roth IRA, unless you move money out of the account before age 59 ½ it's essentially invisible to the IRS. (Because some of a Roth has already had taxes paid, the rules are more complicated if you do pull out the money, whereas the others are just a straight tax penalty with few exceptions.)\",\n \"The benefits of pooling your money with others: The drawbacks of pooling your money with others: Practically Speaking - I say go for it. You stand to gain a lot of knowledge about how money works without having too much on the line. Good luck!\",\n \"The matching funds are free money, so it is a very good idea to take that money off the table. Look at it as free 100% return: you deposit $1000, your employer matches that $1000, you now have $2000 in your 401(k). (Obviously, I'm keeping things simple. Vesting schedules mean that the employer match isn't yours to keep immediately, but rather after some time; usually in chunks.) Beyond the employer match, you need to consider what is available for investment in a 401(k). Typically, your options are more limited then in an IRA. The cost of the 401(k) should be considered, as it isn't trivial for most. (The specifics will of course vary, but in large IRA accounts are cheaper.) So, it's about the opportunity costs. Up to the employer match, it doesn't matter as much that your investment choices are more limited in a 401(k), because you're getting 100% return just on the matching funds. Once that is exhausted, you have more opportunity for returns, due to having more options available to you, by going with an account that provides more choices. The overall principle here is that you have to look at the whole picture. This is similar to the notion that you should pay-down your high interest debt before investing, because from the perspective of investing the interest you're paying represent a loss, or negative return on investment, since money is going out of your accounts. Specific to your question, you have to consider the various types of investment vehicles available to you. It is not just about 401(k) and IRA accounts. You may also consider a straight brokerage account, a savings account, CDs, etc. The costs and returns that you can typically expect are your guides through the available choices.\",\n \"I think it comes down to whether you are happy with the investment choices in the 401k. If you are, there is no reason not to invest there. Additionally, it doesn't have to be an either-or choice. You can invest up to the maximum in both accounts. BTW, congratulations on thinking about retirement at your age. I wish I had been in a position to do that.\",\n \"For what it's worth -- and I realize this isn't directly an answer to the question -- one of the advantages of sticking with mutual funds, beyond their being inherently diversified, is that it removes a lot of the temptation to try to time the market. When you need money, you sell shares in such a way that it maintains your preferred investment ratio, and simply don't worry about which stocks are actually involved. (I've gotten 15% APR this year across all my investments, for absolutely minimal effort. That's quite good enough for me.)\",\n \"Another minor reason not to rollover would be to avoid the pro-rata taxes when doing a backdoor Roth IRA contribution.\",\n \"\\\"As other people have indicated, traditional IRAs are tax deductable for a particular year. Please note, though, that traditional IRAs are tax deferred (not tax-free) accounts, meaning that you'll have to pay taxes on any money you take out later regardless of why you're making the withdrawal. (A lot of people mistakenly call them tax free, which they're not). There is no such thing as a \\\"\\\"tax-free\\\"\\\" retirement account. Really, in terms of Roth vs. Traditional IRAs, it's \\\"\\\"pay now or pay later.\\\"\\\" With the exception of special circumstances like this, I recommend investing exclusively in Roth IRAs for money that you expect to grow much (or that you expect to produce substantial income over time). Just to add a few thoughts on what to actually invest in once you open your IRA, I strongly agree with the advice that you invest mostly in low-cost mutual funds or index funds. The advantage of an open-ended mutual fund is that it's easier to purchase them in odd increments and you may be able to avoid at least some purchase fees, whereas with an ETF you have to buy in multiples of that day's asking price. For example, if you were investing $500 and the ETF costs $200 per share, you could only purchase 2 shares, leaving $100 uninvested (minus whatever fee your broker charged for the purchase). The advantage of an ETF is that it's easy to buy or sell quickly. Usually, when you add money to a mutual fund, it'll take a few days for it to hit your account, and when you want to sell it'll similarly take a few days for you to get your money; when I buy an ETF the transaction can occur almost instantly. The fees can also be lower (if the ETF is just a passive index fund). Also, there's a risk with open-ended mutual funds that if too many people pull money out at once the managers could be forced to sell stocks at an unfavorable price.\\\"\",\n \"There is a process called a backdoor IRA. You now have effectively made a Roth IRA contribution in a year where technically you aren't eligible. You do not have to pay taxes on earnings with a Roth IRA. You are limited to the normal annual contribution to the IRA (Roth or traditional). If you don't convert your traditional IRA contribution to a Roth IRA, then you are right. That gains nothing except enhanced protection in bankruptcy. Only do this if you are taking advantage of the Roth rollover. I'm ignoring rolling over a 401k into an IRA, as that doesn't increase the amount you can contribute. This does. You can contribute the full $18,000 to the 401k and still make a full contribution to the backdoor IRA. This is the tax advantaged form of an IRA. This avoids double taxation. Let's assume that your investment can go into something with a 5% annual return and you pay a 25% tax rate (doesn't matter as it drops out). You are going to invest for thirty years and then withdraw. You initially have $1000 before taxes. With a regular investment: You now have $2867.74. With a pre-tax IRA. You now have $3241.45 (it is not an accident that this is almost the same as the amount before the capital gains tax in the example without an IRA). You avoided the $373.72 capital gains tax. Even though you paid a lot more tax, you paid it out of the gains from investing the original $250 that you would have paid in tax. This helps you even more if the capital gains tax goes up in the future. Or if your tax bracket changes. If you currently are in the 25% bracket but retire in the 15% bracket, these numbers will get even better in your favor. If you currently are in the 15% bracket and worry that you might retire in the 25% bracket, consider a Roth instead. It also avoids double taxation but its single taxation is at your current rate rather than your future rate.\",\n \"\\\"This may be more of a comment than an answer, but it's too long for a comment. Perhaps the Stackexchange Gods will forgive my impudence. That said: Even with the tax penalties, it can be to your advantage to put money into a \\\"\\\"retirement\\\"\\\" account and withdraw it before retirement. The trick is: Is the amount of the tax penalty more than the benefit of untaxed compound growth? For example, just to make up some numbers: Suppose you have $1000 of gross income to invest. You are considering whether to invest in an ordinary, non-tax favored account, or a classic IRA. Either way you will get 10% returns. Your tax rate, both when you put the money in and when you take it out, is 15%. There is a 10% tax penalty for early withdrawal. With an ordinary account you will pay 15% tax off the top, so you are only investing $850. Then each year 15% of your returns are paid in taxes, so your net return is 8.5%. But when you withdraw the money there are no additional taxes. With an IRA you do not pay any taxes up front, so you can invest the entire $1000. You collect 10% each year with no taxes. When you withdraw, you pay 15% plus the 10% penalty equals 25%. So after 5 years, the ordinary account would yield $850 x 1.085^5 = $1504. The IRA would yield $1000 x 1.1^5 x 0.75 = $1208. The tax penalty hurts. You are better to use the ordinary account. But if you could leave your money in for 25 years, then the ordinary account would yield $850 x 1.085^25 = $7687. The IRA would yield $1000 x 1.1^25 x 0.75 = $8126. The IRA, even with the tax penalty, is better. Of course my numbers are just made up. What your tax bracket is, what returns you get, and how long you think you might leave the money in the investment, all vary.\\\"\",\n \"\\\"It's all about access to capital: You can borrow against 401ks up to an extent. You can borrow against CDs outside of tax sheltered retirement plans. You can't borrow against an IRA, although there is a situation with a very small time frame that would still be state sanctioned with no tax penalties. I wouldn't recommend it. Annuities come with penalties. I've looked at many possibilities of accessing retirement capital without penalty, and 401k's offer that ability, but its also good to just have savings accounts and investments that are not tax-deferred. Borrowing against 401k pros: http://www.ehow.com/how_2075551_borrow-money-from-401k.html cons: http://www.investopedia.com/articles/retirement/06/eightreasons401k.asp#axzz29TtJPoXO Outside of your general expenses and play money, money you put toward - say... - a house should be non-tax deferred. Because if you like borrowing, you can always borrow against the house, or any property. The root of the problem is liquidity and access to capital, understanding those fundamental concepts will answer most questions. \\\"\\\"Am I liquid? Yes/No\\\"\\\" \\\"\\\"Can I be liquid without losing money? Yes/No\\\"\\\" As usual, more is more, adjust your priorities accordingly.\\\"\",\n \"If you have just started an IRA (presumably with a contribution for 2012), you likely have $5000 in it, or $10,000 if you made a full contribution for 2013 as well. At this time, I would recommend putting it all in a single low-cost mutual fund. Typically, mutual funds that track an index such as the S&P 500 Index have lower costs (annual expense fees) than actively managed funds, and most investment companies offer such mutual funds, with Fidelity, Vanguard, Schwab, to name a few, having very low expenses even among index funds. Later, when you have more money in the account, you can consider diversifying into more funds, buying stocks and bonds, investing in ETFs, etc. Incidentally, if you are just starting out and your Roth IRA is essentially your first investment experience, be aware that you do not need a brokerage account for your Roth IRA until you have more money in the account to invest and specifically want to buy individual stocks and bonds instead of just mutual funds. If you opened a brokerage account for your Roth IRA, close it and transfer the Roth IRA to your choice of mutual fund company; else you will be paying annual fees to the brokerage for maintaining your account, inactivity fees since you won't be doing any trading, etc. The easiest way to do this is to go to the mutual fund company web site and tell them that you want to transfer your IRA to them (not roll over your IRA to them) and they will take care of all the paper work and collecting your money from the brokerage (ditto if your Roth IRA is with a bank or another mutual fund company). Then close your brokerage account.\",\n \"There's no one answer. You need to weigh the fees and quality of investment options on the one side against the slowly vesting employer contribution and tax benefits of 401k contributions in excess of IRA limits.\",\n \"\\\"Consider that there are some low-probability, high-impact risk factors involved with property management. For example, an old house has lead paint and may have illegal modifications, unknown to you, that pose some hazard. All of your \\\"\\\"pros\\\"\\\" are logical, and the cons are relatively minor. Just consult an attorney to look for potential landmines.\\\"\",\n \"\\\"This is not a direct answer to your question, but you might want to consider whether you want to have a financial planner at all. Would a large mutual fund company or brokerage serve your needs better than a bank? You are still quite young and so have been contributing to IRAs for only a few years. Also, the wording in your question suggests that your IRA investments have not done spectacularly well, and so it is reasonable to infer that your IRA is not a large amount, or at least not as large as what it would be 30 years from now. At this level of investment, it would be difficult for you to find a financial planner who spends all that much time looking after your interests. That you should get away from your current planner, presumably a mid-level employee in what is typically called the trust division of the bank, is a given. But, to go to another bank (or even to a different employee in the same bank), where you will also likely be nudged towards investing your IRA in CDs, annuities, and a few mutual funds with substantial sales charges and substantial annual expense fees, might just take you from the frying pan into the fire. You might want to consider transferring your IRA to a large mutual fund company and investing it in something simple like one of their low-cost (meaning small annual expense ratio) index funds. The Couch Potato portfolio suggests equal amounts invested in a no-load S&P 500 Index fund and a no-load Bond Index fund, or a 75%-25% split favoring the stock index fund (in view of your age and the fact that the IRA should be a long-term investment). But the point is, you can open an IRA account, have the money transferred from your IRA account with the bank, and make the investments on-line all by yourself instead of having a financial advisor do it on your behalf and charge you a fee for doing so (not to mention possibly screwing it up.) You can set up Automated Investment too; the mutual fund company will gladly withdraw money from your checking account and invest it in whatever fund(s) you choose. All this is not complicated at all. If you would like to follow the Couch Potato strategy and rebalance your portfolio once a year, you can do it by yourself too. If you want to invest in funds other than the S&P 500 Index fund, etc. most mutual fund companies offer a \\\"\\\"portfolio analysis\\\"\\\" and advice for a fee (and the fee is usually waived when the assets increase above certain levels - varies from company to company). You could thus have a portfolio analysis done each year, and hopefully it will be free after a few more years. Indeed, at that level, you also typically get one person assigned as your advisor, just as you have with a bank. Once you get the recommendations, you can choose to follow them or not, but you have control over how and where your IRA assets are invested. Over the years, as your IRA assets grow, you can branch out into investments other than \\\"\\\"staid\\\"\\\" index funds, but right now, having a financial planner for your IRA might not be worth it. Later, when you have more assets, by all means if you want to explore investing in specific stocks with a brokerage instead of sticking to mutual funds only but this might also mean phone calls urging you to sell Stock A right now, or buy hot Stock B today etc. So, one way of improving your interactions and have a better experience with your new financial planner is to not have a planner at all for a few years and do some of the work yourself.\\\"\",\n \"\\\"So many complicated answers for a straight forward question. First to this point \\\"\\\"I am failing to see why would a person get an IRA, instead of just putting the same amount of money into a mutual fund...\\\"\\\" An IRA can be invested in a mutual fund. The IRA benefit over standard mutual fund is pre-tax contribution lowering your current tax liability. The advantage of an IRA over a 401k is control. Your employer controls where the 401k is invested, you control where your IRA is invested. Often employers have a very small number of options, because this keeps their costs with the brokerage low. 401k is AMAZING if you have employer matched contributions. Use them to the maximum your employer will match. After that OWN your IRA. Control is key when it comes to your money. On IRA's. Buy ROTH first. Contribute the calendar maximum. Then get a traditional. The benefit of ROTH is that you already paid taxes on the contribution so your withdrawal is not taxed AND they do not tax the interest earned like they do on a standard mutual fund.\\\"\",\n \"I'm looking for ways to geared to save for retirement, not general investment. Many mutual fund companies offer a range of target retirement funds for different retirement dates (usually in increments of 5 years). These are funds of funds, that is, a Target 2040 Fund, say, will be invested in five or six different stock and bond mutual funds offered by the same company. Over the years and as the target date approaches closer, the investment mix will change from extra weight given to stock mutual funds towards extra weight being given to bond mutual funds. The disadvantage to these funds is that the Target Fund charges its own expense ratio over and above the expense ratios charged by the mutual funds it invests in: you could do the same investments yourself (or pick your own mix and weighting of various funds) and save the extra expense ratio. However, over the years, as the Target Fund changes its mix, withdrawing money from the stock mutual funds and investing the proceeds into bond mutual funds, you do not have to pay taxes on the profits generated by these transactions except insofar as some part of the profits become distributions from the Target Fund itself. If you were doing the same transactions outside the Target Fund, you would be liable for taxes on the profits when you withdrew money from a stock fund and invested the proceeds into the bond fund.\",\n \"\\\"Does your current 401(k) have low fees and good investment choices? If so you might be able to \\\"\\\"roll-in\\\"\\\" your rollover IRA to your 401(k), then do a backdoor Roth IRA contribution. A Roth IRA would be far more useful than a non-deductible traditional IRA.\\\"\",\n \"There is nothing wrong with self directed IRA's the problem is that most of the assets they specialize in are better done in other ways. Real estate is already extremely tax advantaged in the US. Buying inside a Traditional IRA would turn longterm capital gains (currently 15%) into ordinary income taxed at your tax rate when you withdraw this may be a plus or minus, but it is more likely than not that your ordinary income tax rate is higher. You also can't do the live in each house for 2 years before selling plan to eliminate capital gains taxes (250k individual 500k married couple). The final problem is that you are going to have problems getting a mortgage (it won't be a conforming loan) and will likely have to pay cash for any real estate purchased inside your IRA. Foreign real estate is similar to above except you have additional tax complexities. The key to the ownership in a business is that there are limits on who can control the business (you and maybe your family can't control the business). If you are experienced doing angel investing this might be a viable option (assuming you have a really big IRA you want to gamble with). If you want to speculate on precious metals you will probably be better offer using ETF's in a more traditional brokerage account (lower transactions costs more liquidity).\",\n \"You may want to move money between your investments within the plan, rebalancing money to maintain your diversification. You don't have to deal with the details if selling and buying, just tell them how much to move where. Many plans offer investments that automatically rebalance for you such as Target Date accounts. You may be able to select one of those and just ignore the 401k until retirement, or at most rebalance even less often. Look at what's offered, look at what it costs as fees, run the numbers and decide whether you can do better.\",\n \"\\\"One reason is that you can trade in the IRA without incurring incremental taxes along the way. This may be especially important if you intend to shift your portfolio allocation as you approach retirement. For instance, gradually selling stocks and buying bonds can incur taxes if you do it in a taxable account (if you do it while you have other income and thus may face capital gains taxes). Also, if you have mutual funds in a taxable account, they may distribute capital gains to you that you'll owe taxes on, but holding the funds in an IRA will shield you from that. There are also some other side benefits to IRAs because they are considered to \\\"\\\"not count\\\"\\\" for certain purposes when determining what you're worth. For instance, if you go bankrupt, you could be forced to sell assets in taxable accounts to pay your creditors, whereas IRAs are protected in many cases. Likewise, if you try to get financial aid to pay for college for your kids, money in an IRA won't be counted among your assets in determining your aid eligibility, potentially giving your kids access to more aid money. Finally, an especially prominent benefit is, paradoxically, the early withdrawal penalty. For many people, part of the purpose of an IRA is to \\\"\\\"lock away\\\"\\\" their money and prevent themselves from accessing it until retirement. Early withdrawal penalties provide a concrete consequence that psychologically deters them from raiding their retirement savings willy-nilly.\\\"\",\n \"Have you considered a self-directed IRA to invest, rather than the stock market or publicly traded assets? Your IRA can actually own direct title to real estate, loan money via secured or unsecured promissory notes much like a hard money loan or invest into shares of an entity that invests in real estate. The only nuance is that the IRA holder is responsible for finding and deciding upon the investment vehicle. Just an option outside of the normal parameters, if you have an existing IRA or old 401(k) or other qualified plan, this might be an option for you.\",\n \"There are 3 account types your question discusses and each has its good/bad points. The above is a snapshot of these account types. IRAs have income restrictions that may disallow a deduction on the traditional, or any deposit to Roth, etc. If this does not address your question, please comment, and I'll edit for better clarity.\",\n \"In addition to George Marian's excellent advice, I'll add that if you're hitting the limits on IRA contributions, then you'd go back to your 401(k). So, put enough into your 401(k) to get the match, then max out IRA contributions to give you access to more and better investment options, then go back to your 401(k) until you top that out as well, assuming you have that much available to invest for retirement.\",\n \"You are young, and therefore have a very long time horizon for investing. Absolutely nothing you do should involve paying any attention to your investments more than once a year (if that). First off, you can only deposit money in an IRA (of whatever kind) if you have taxable income. If you don't, you can still invest, just without the tax benefits of a Roth. My suggestion would be to open an account with a discount brokerage (Schwab, Fidelity, eTrade, etc). The advantage of a brokerage IRA is that you can invest in whatever you want within the account. Then, either buy an S&P 500 or total market index fund within the account, or buy an index-based ETF (like a mutual fund, but trades like a stock). The latter might be better, since many mutual funds have minimum limits, which ETFs do not. Set the account up to reinvest the dividends automatically--S&P 500 yields will far outstrip current savings account yields--and sit back and do nothing for the next 40 or 50 years. Well, except for continuing to make annual contributions to the account, which you should continue to invest in pretty much the same thing until you have enough money (and experience and knowledge) to diversify into bond funds/international funds/individual stocks, etc. Disclaimer: I am not a financial planner. I just manage my own money, and this strategy has mostly kept me from stressing too badly over the last few years of market turmoil.\",\n \"I'd listen to the person who doesn't want tax deferral. S/he is wise. I'd do it in a taxable account. Talk about the investments all you want, pool your knowledge, but invest privately and separately. Pay your taxes and be done with them.\",\n \"Yes. Of course, you still need to take into the account the trade costs (fees paid to the broker), these are not going anywhere. Basically what it means is that you don't have to worry about long/short holding period within the IRA, they're all the same. It doesn't mean that long term trading is better or worse to have outside the scope of IRA, it just means that the concept doesn't exist inside.\",\n \"The primary advantage of an IRA or 401k is you get taxed effectively one time on the money (when you contribute for Roth, or when you withdraw for Traditional), whereas you get taxed effectively multiple times on some of the money in a taxable account (on all the money when you contribute, plus on the earnings part when you withdraw). Of course, you have to be able to withdraw without penalty for it to be optimally advantageous. And you said you want to retire decades early, so that is probably not retirement age. However, withdrawing early does not necessarily mean you have a penalty. For example: you can withdraw contributions to a Roth IRA at any time without tax or penalty; Roth 401k can be rolled over into Roth IRA; other types of accounts can be converted to Roth IRA and the principal of the conversion can be withdrawn after 5 years without penalty.\",\n \"The other issue you could run into is that each deferred account is going to be subject to its own RMD's (Required Minimum Distributions) when you've retired or hit 70.5 years of age. Roth's don't generally care about RMD's at first, but are still subject to them once the person that created the Roth has passed. Having fewer accounts will simplify the RMD stuff, but that's really only a factor in terms of being forced to sell 'something' in each account in order to make the RMD. Other than that, it's just a matter of remembering to check each account if you come to a decision that it's time to liquidate holdings in a given security, lest you sell some but forget about the rest of it in another account. (and perhaps as Chris pointed out, maybe having to pay fee's on each account for the sale) Where this really can come into play is if you choose to load up each individual account with a given kind of investment, instead of spreading them across the accounts. In that case RMD's could force you into selling something that is currently 'down' when you want to hold onto it, because that is your only choice in order to meet RMD's for account X. So if you have multiple accounts, it's a good idea to not 'silo' particular vehicles into a single account, but spread similar ivestments across multiple accounts, so you always have the choice in each account of what to sell in order to meet an RMD. If you have fewer accounts, it's thus a lot easier to avoid the siloing effect\",\n \"2%? I would put in just what it takes to share in the profit sharing, not a dime more. My S&P fund cost is .02% (edited, as it dropped to .02 since original post), 1/100 of the cost of most funds you list. Doesn't take too many years of this fee to negate the potential tax savings, and not many more to make this a real loser.\",\n \"\\\"Basically, the idea of an IRA is that the money is earned by you and would normally be taxed at the individual rate, but the government is allowing you to avoid paying the taxes on it now by instead putting it in the account. This \\\"\\\"tax deferral\\\"\\\" encourages retirement savings by reducing your current taxable income (providing a short-term \\\"\\\"carrot\\\"\\\"). However, the government will want their cut; specifically, when you begin withdrawing from that account, the principal which wasn't taxed when you put it in will be taxed at the current individual rate when you take it out. When you think about it, that's only fair; you didn't pay taxes on it when it came out of your paycheck, so you should pay that tax once you're withdrawing it to live on. Here's the rub; the interest is also taxed at the individual rate. At the time, that was a good thing; the capital gains rate in 1976 (when the Regular IRA was established) was 35%, the highest it's ever been. Now, that's not looking so good because the current cap gains rate is only 15%. However, these rates rise and fall, cap gains more than individual rates, and so by contributing to a Traditional IRA you simplify your tax bill; the principal and interest is taxed at the individual rate as if you were still making a paycheck. A Roth IRA is basically the government trying to get money now by giving up money later. You pay the marginal individual rate on the contributions as you earn them (it becomes a \\\"\\\"post-tax deduction\\\"\\\") but then that money is completely yours, and the kicker is that the government won't tax the interest on it if you don't withdraw it before retirement age. This makes Roths very attractive to retirement investors as a hedge against higher overall tax rates later in life. If you think that, for any reason, you'll be paying more taxes in 30 years than you would be paying for the same money now, you should be investing in a Roth. A normal (non-IRA) investment account, at first, seems to be the worst of both worlds; you pay individual tax on all earned wages that you invest, then capital gains on the money your investment earns (stock gains and dividends, bond interest, etc) whenever you cash out. However, a traditional account has the most flexibility; you can keep your money in and take your money out on a timeline you choose. This means you can react both to market moves AND to tax changes; when a conservative administration slashes tax rates on capital gains, you can cash out, pay that low rate on the money you made from your account, and then the money's yours to spend or to reinvest. You can, if you're market- and tax-savvy, use all three of these instruments to your overall advantage. When tax rates are high now, contribute to a traditional IRA, and then withdraw the money during your retirement in times where individual tax rates are low. When tax rates are low (like right now), max out your Roth contributions, and use that money after retirement when tax rates are high. Use a regular investment account as an overage to Roth contributions when taxes are low; contribute when the individual rate is low, then capitalize and reinvest during times when capital gains taxes are low (perhaps replacing a paycheck deduction in annual contributions to a Roth, or you can simply fold it back into the investment account). This isn't as good as a Roth but is better than a Traditional; by capitalizing at an advantageous time, you turn interest earned into principal invested and pay a low tax on it at that time to avoid a higher tax later. However, the market and the tax structure have to coincide to make ordinary investing pay off; you may have bought in in the early 90s, taking advantage of the lowest individual rates since the Great Depression. While now, capital gains taxes are the lowest they've ever been, if you cash out you may not be realizing much of a gain in the first place.\\\"\",\n \"\\\"Those advantages you've described (tax treatment and employee match) are what you receive in exchange for \\\"\\\"locking up\\\"\\\" the money. Ultimately it's a personal choice of whether that tradeoff makes sense for you situation (I'll echo the response that the real answer to your question is planning). Roth options (either 401K or IRA) may be good compromises for you, since you can withdraw those contributions (but not the earnings) without any penalty, since you've already paid taxes on them. Another avenue to explore may be a self-directed IRA or a Solo 401(k), depending on your circumstances and eligibility. In both cases, there are plan providers that structure the plan to allow you to use the money to invest in things besides traditional stocks, bonds, and mutual funds (often referred to as \\\"\\\"checkbook control\\\"\\\" accounts). They are very commonly used among Real Estate investors (this thread from BiggerPockets has quite a bit of info). You'd want to consult with an accountant or financial adviser before going down that path.\\\"\",\n \"First, you should diversify your portfolio. If your entire portfolio is in the Roth IRA, then you should eventually diversify that. However, if you have an IRA and a 401k, then it's perfectly fine for the IRA to be in a single fund. For example, I used my IRA to buy a riskier REIT that my 401k doesn't support. Second, if you only have a small amount currently invested, e.g. $5500, it may make sense to put everything in a single fund until you have enough to get past the low balance fees. It's not uncommon for funds to charge lower fees to someone who has $8000, $10,000, or $12,000 invested. Note that if you deposit $10,000 and the fund loses money, they'll usually charge you the rate for less than $10,000. So try to exceed the minimum with a decent cushion. A balanced fund may make sense as a first fund. That way they handle the diversification for you. A targeted fund is a special kind of balanced fund that changes the balance over time. Some have reported that targeted funds charge higher fees. Commissions on those higher fees may explain why your bank wants you to buy. I personally don't like the asset mixes that I've seen from targeted funds. They often change the stock/bond ratio, which is not really correct. The stock/bond ratio should stay the same. It's the securities (stocks and bonds) to monetary equivalents that should change, and that only starting five to ten years before retirement. Prior to that the only reason to put money into monetary equivalents is to provide time to pick the right securities fund. Retirees should maintain about a five year cushion in monetary equivalents so as not to be forced to sell into a bad market. Long term, I'd prefer low-load index funds. A bond fund and two or three stock funds. You might want to build your balance first though. It doesn't really make sense to have a separate fund until you have enough money to get the best fees. 70-75% stocks and 25-30% bonds (should add to 100%, e.g. 73% and 27%). Balance annually when you make your new deposit.\",\n \"People ... are nearly twice as likely to ... feel confident Great, confidence is amazing. That and $5 will buy you a cup of coffee. 44% [who hired a pro] have $100K or more [vs.] 9% of DIYers There's no way to examine these numbers without a link to the source, but it stands to reason that if you have a plan that you're sticking to you'll save more money than if you are just investing haphazardly. It's too bad that we can't see what the returns are for those using a pro vs. DIYers. That would be much more valuable than an arbitrary dollar level. Unfortunately $100K isn't really that much money if you live in the US, so it's an irrelevant talking point. The real question is whether investment knowledge is readily available to the masses or if having a person who specializes in finance is required to make good decisions about investment. I think the fact that the conventional wisdom prefers index funds to actively managed funds demonstrates that investment professionals are less useful than they might have been even a decade or two ago. If money should be spent on professional advice, it's probably better spent on CPAs or other tax professionals who can help optimize your investments for tax efficiency, though even that is now available as more common knowledge.\",\n \"\\\"You seem to be treating your Roth IRA as a sort of savings account for use in emergency situations. I would use a savings account for savings as withdrawing money from an IRA will have penalties under various circumstances (more than contributions, Roth IRA less than 5 years old, more than $10k for a down payment). Also, you mention folding your IRA into your 401k so that it will \\\"\\\"grow faster\\\"\\\". However, this will not have that effect. Imagine you have $30k in an IRA and $100k in a 401k and you are averaging a return of 8% / year on each. This will be identical to having a single 401k with $130k and an 8% / year return. This is not one of your questions, but employer matches are not counted in the 401k contribution limit. If your 22% calculation of your salary includes the match to reach the max contribution, you can still contribute more.\\\"\",\n \"\\\"The major pros tend to be: The major cons tend to be: Being in California, you've got state income tax to worry about as well. It might be worth using some of that extra cash to hire someone who knows what they're doing to handle your taxes the first year, at least. I've always maxed mine out, because it's always seemed like a solid way to make a few extra dollars. If you can live without the money in your regular paycheck, it's always seemed that the rewards outweighed the risks. I've also always immediately sold the stock, since I usually feel like being employed at the company is enough \\\"\\\"eggs in that basket\\\"\\\" without holding investments in the same company. (NB: I've participated in several of these ESPP programs at large international US-based software companies, so this is from my personal experience. You should carefully review the terms of your ESPP before signing up, and I'm a software engineer and not a financial advisor.)\\\"\",\n \"\\\"Your are mixing multiple questions with assertions which may or may not be true. So I'll take a stab at this, comment if it doesn't make sense to you. To answer the question in the title, you invest in an IRA because you want to save money to allow you to retire. The government provides you with tax incentives that make an IRA an excellent vehicle to do this. The rules regarding IRA tax treatment provide disincentives, through tax penalties, for withdrawing money before retirement. This topic is covered dozens of times, so search around for more detail. Regarding your desire to invest in items with high \\\"\\\"intrinsic\\\"\\\" value, I would argue that gold and silver are not good vehicles for doing this. Intrinsic value doesn't mean what you want it to mean in this context -- gold and silver are commodities, whose prices fluctuate dramatically. If you want to grow money for retirement over a long period, of time, you should be invested in diversified collection of investments, and precious metals should be a relatively small part of your portfolio.\\\"\",\n \"I'm in a similar situation as I have a consulting business in addition to my regular IT job. I called the company who has my IRA to ask about setting up the Individual 401k and also mentioned that I contribute to my employer's 401k plan. The rep was glad I brought this up because he said the IRS has a limit on how much you can contribute to BOTH plans. For me it would be $24K max (myAge >= 50; If you are younger than 50, then the limit might be lower). He said the IRS penalties can be steep if you exceed the limit. I don't know if this is an issue for you, but it's something you need to consider. Be sure to ask your brokerage firm before you start the process.\",\n \"If you are working for a small company, the expense ratios on the funds in the 401k account are likely much higher than you can get with a similar IRA. Depending on your income, whether you are married and want to contribute to a spouse's IRA, your limit on what can be contributed to an IRA may vary, but the compelling reason to contribute to a 401k is that the contribution limit is higher ($17,500 vs $5,500 for people on the lower end of the income scale) so you may need to contribute to a 401k to meet your retirement savings goals.\",\n \"The key thing to consider in a question like this is, What return am I getting on my investment versus what interest am I paying on the loan? If the investment returns more than what you're paying on the loan, than it makes sense to keep the investment and pay off the loan with other income. If the investment returns less, than it makes sense to cash it out to pay off the loan. One complicating factor is taxes. In the case of an IRA, you're not paying taxes on the profits. You do pay a tax penalty for an early withdrawal. Those are both factors that tend to make keeping the money in the IRA more desirable. And of course, if the choice is between keeping your investment and defaulting on the loan, you probably want to close out the investment. I don't know what return you're getting on your IRA, but it's probably more than 6.8%. I'd have to check but I think my retirement funds got over 20% last year. If you're not getting 6.8%, you might want to investigate switching to another investment fund. I'm sure there's a lot I don't know about your situation, but I'd think that keeping the IRA would be a better plan. If you can't add to it for some time well you get these debts paid off, well, that's how it is.\",\n \"The first question is essentially asking for specific investment advice which is off-topic per the FAQ, but I'll take a stab at #2 and #3 (2) If my 401k doesn't change before I leave my job (not planned in the near future), I should roll it over into my Roth IRA after I leave due to these high expense ratios, correct? My advice is that you should roll over a 401K into an IRA the first chance you get (usually when you leave the job). 401K plans are NOTORIOUS for high expense ratios and why leave your money in a plan where you have a limited choice of investments anyway versus a self-directed IRA where you can invest in anything you want? (3) Should I still max contribute with these horrible expense ratios? If they are providing a match, yes. Even with the expense ratios it is hard to beat the immediate return of an employer match. If they aren't matching, the answer is still probably yes for a few reasons: You already are maxing out your ability to contribute to sheltered accounts, so assuming you still want to sock away that money for retirement, the tax benefits are still valuable and probably offset the expense ratios. Although you seem to be an exception, it is hard for most people to be disciplined enough to put money in a retirement account after they have it in their hands (versus auto-deduction from paychecks).\",\n \"If your employer matches a percentage of your contributions, then you should try to max out your plan. Once you have completed maxing out your 401k, you may want to open up an IRA for several reasons: will your 401k be enough to sustain your lifestyle in retirement? Your IRA allows you to save even more for retirement. you can invest in all sorts of stuff through your IRA that might not be available in your plan. you can withdraw the principal from your IRA, usually after five years. This serves as another form of savings. IRAs have some asset protection in the event of bankruptcy. A normal savings or investment account usually does not offer such protection.\",\n \"There are fund of funds,e.g. life cycle funds or target retirement funds, that could cover a lot of these with an initial investment that one could invest into for a few years and then after building up a balance large enough, then it may make sense to switch to having more control.\",\n \"I had some extra money, so I opened American express saving account. At the time which was offering .80%, now .90%. I put most of the money in the saving account. The remainder of my money in a investment account at my local bank. I was in touch once a week with investment, I learned allot how the stock market worked and tax deferment(401k, IRA, IRA Roth). My suggestion is to do test run and see if you like it. Side note, NOT ALL investment are created equal.\",\n \"When you look at managed funds the expense ratios are always high. They have the expense of analyzing the market, deciding where to invest, and then tracking the new investments. The lowest expenses are with the passive investments. What you have noticed is exactly what you expect. Now if you want to invest in active funds that throw off dividends and capital gains, the 401K is the perfect place to do it, because that income will not be immediately taxable. If the money is in a Roth 401K it is even better because that income will never be taxed.\",\n \"If you want to 'offset' current (2016) income, only deductible contribution to a traditional IRA does that. You can make nondeductible contributions to a trad IRA, and there are cases where that makes sense for the future and cases where it doesn't, but it doesn't give you a deduction now. Similarly a Roth IRA has possible advantages and disadvantages, but it does not have a deduction now. Currently he maximum is $5500 per person ($6500 if over age 50, but you aren't) which with two accounts (barely) covers your $10k. To be eligible to make this deductible traditional contribution, you must have earned income (employment or self-employment, but NOT the distribution from another IRA) at least the amount you want to contribute NOT have combined income (specifically MAGI, Modified Adjusted Gross Income) exceeding the phaseout limit (starts at $96,000 for married-joint) IF you were covered during the year (either you or your spouse) by an employer retirement plan (look at box 13 on your W-2's). With whom. Pretty much any bank, brokerage, or mutual fund family can handle IRAs. (To be technical, the bank's holding company will have an investment arm -- to you it will usually look like one operation with one name and logo, one office, one customer service department, one website etc, but the investment part must be legally separate from the insured banking part so you may notice a different name on your legal and tax forms.) If you are satisified with the custodian of the inherited IRA you already have, you might just stay with them -- they may not need as much paperwork, you don't need to meet and get comfortable with new people, you don't need to learn a new website. But if they sold you an annuity at your age -- as opposed to you inheriting an already annuitized IRA -- I'd want a lot of details before trusting they are acting in your best interests; most annuities sold to IRA holders are poor deals. In what. Since you want only moderate risk at least to start, and also since you are starting with a relatively small amount where minimum investments, expenses and fees can make more of an impact on your results, I would go with one or a few broad (= lower risk) index (= lower cost) fund(s). Every major fund familly also offers at least a few 'balanced' funds which give you a mixture of stocks and bonds, and sometimes some 'alternatives', in one fund. Remember this is not committing you forever; any reasonable custodian will allow you to move or spread to more-adventurous (but not wild and crazy) investments, which may be better for you in future years when you have some more money in the account and some more time to ponder your goals and options and comfort level.\",\n \"Considering the combined accounts you're contributing $100 per month and they want $100 per year to administer them... that's 8.3% of your contributions gone to fees each year. To me, that's a definite no. Without getting in to bad mouthing the adviser for even making the suggestion, the scale of your account doesn't warrant a fee that high. Fees are very meaningful to the little fish investors. There are LOADS of IRA account providers. With that level of competition, there are several that have very reasonable account minimums, no annual maintenance fees, and a suite of no fee, no load, no commission, low expense ratio funds to choose from. Schwab, Fidelity and Vanguard come to mind. I know Schwab is running a big ad campaign right now as it's reduced some of it's already low expense ratios. If I were you, yes I would move the account because you can even get rid of the $10/year/account fee. But, no, I would not move it to a higher fee situation. In my opinion on a $3,600 account + $1,200 per year in contributions, you don't need advise. You need a good broad market low fee index fund, and enough discipline to understand that retirement is 25 years away so you keep contributing even when news is bad and the market is going down. In 10 years maybe talk to an adviser. Using the S&P500 index daily close historical data from calendar year 2016, considering first of the month monthly deposits and a starting balance of $3,600, you would come out at the end of the year with about $5,294. That's $494 in gain on your total contributions of $4,800. They'd take $100, that's about 20% of your gain. Compared to a no fee account with a reasonable expense ratio of 0.1% the fee would be just $5.30. Bearing in mind also that your $100 per year account will probably be invested in funds that also have an expense ratio fee structure further zapping gains. Further, you lose the compounding effect of the $100 fee over time which adds up to a significant of retirement funds considering a 25 year period. If all you did was put that $100 fee in to a 1% savings account each year for 25 years you'd end up with $2,850. (Considering the average 7% return of the S&P you'd have $6,964 on just your $100 per year fees) This is why you should be so vigilant about fees.\",\n \"(To be clear, IRA accounts are just wrappers, and can contain a large variety of investments. I'm restricting myself to the usual setup of investment in the stock market.) So, let's say you have $5000 in savings, as an emergency fund. Of the top of my head, putting some of it into a Roth IRA could backfire in the following ways: The basic principle here is that the stock market is not a good place for storing your emergency cash, which needs to be secured against loss and immediately accessible. Once you're happy with your level of emergency cash, however, tax-advantaged investment accounts are a reasonable next step.\",\n \"Comparing retirement savings to ordinary investment is not an apples-to-apples comparison - retirement savings are savings for retirement - if you want to invest in things now and live off of (or reinvest) those earnings, then retirement accounts are not the right vehicle. That said, here are some benefits of the main types of retirement accounts: Benefits of a 401(k): Benefits of a tratitional IRA: Benefits of a ROTH 401(k): Benefits of a ROTH IRA: (the benefits above are not exhaustive, there are other benefits such as using a ROTH IRA for higher ed. expenses, etc. but those are the highlights) If you have a plan for how you hope to use the money now rather than later does it make sense to hold onto it? If your plan is meant to provide income at retirement, and earns returns higher than the returns plus matches and tax benefits you get from retirement accounts, then yes, it may make more sense, but those benefits are generally very hard to beat. Plus, having the money locked away in an account that is painful to tap can be a good thing - you're less tempted to use that money for foolish decisions (which everyone makes at some point).\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["diversifying; but isn't that what mutual funds already do? They diversify and reduce stock-specific risk by moving from individual stocks to many stocks, but you can diversify even further by selecting different fund types (e.g. large-cal, small-cap, fixed- income (bond) funds, international, etc.). Your target-date fund probably includes a few different types already, and will automatically reallocate to less risky investments as you get close to the target date. I would look at the fees of different types of funds, and compare them to the historical returns of those funds. You can also use things like morningstar and other ratings as guides, but they are generally very large buckets and may not be much help distinguishing between individual funds. So to answer the question, yes you can diversify further - and probably get better returns (and lower fees) that a target-date fund. The question is - is it worth your time and effort to do so? You're obviously comfortable investing for the long-term, so you might get some benefit by spending a little time looking for different funds to increase your diversification. Note that ETFs don't really diversify any differently than mutual funds, they are just a different mechanism to invest in funds, and allow different trading strategies (trading during the day, derivatives, selling short, etc.).","Let’s compare your target fund, FFFFX to a well-known ETF, SPY; SPDR S&P 500 ETF. Source: Yahoo Finance The difference in performance over a longer time-frame is significant, You can and should carefully research better funds in order to improve performance. FULL DISCLOSURE: My own IRA is at Fidelity. Less than 10% of my IRA is in Fidelity mutual funds. None is in FFFFX."],"string":"[\n \"diversifying; but isn't that what mutual funds already do? They diversify and reduce stock-specific risk by moving from individual stocks to many stocks, but you can diversify even further by selecting different fund types (e.g. large-cal, small-cap, fixed- income (bond) funds, international, etc.). Your target-date fund probably includes a few different types already, and will automatically reallocate to less risky investments as you get close to the target date. I would look at the fees of different types of funds, and compare them to the historical returns of those funds. You can also use things like morningstar and other ratings as guides, but they are generally very large buckets and may not be much help distinguishing between individual funds. So to answer the question, yes you can diversify further - and probably get better returns (and lower fees) that a target-date fund. The question is - is it worth your time and effort to do so? You're obviously comfortable investing for the long-term, so you might get some benefit by spending a little time looking for different funds to increase your diversification. Note that ETFs don't really diversify any differently than mutual funds, they are just a different mechanism to invest in funds, and allow different trading strategies (trading during the day, derivatives, selling short, etc.).\",\n \"Let’s compare your target fund, FFFFX to a well-known ETF, SPY; SPDR S&P 500 ETF. Source: Yahoo Finance The difference in performance over a longer time-frame is significant, You can and should carefully research better funds in order to improve performance. FULL DISCLOSURE: My own IRA is at Fidelity. Less than 10% of my IRA is in Fidelity mutual funds. None is in FFFFX.\"\n]","isConversational":false}}},{"rowIdx":81,"cells":{"_id":{"kind":"string","value":"4640"},"query":{"kind":"string","value":"What can my relatives do to minimize their out of pocket expenses on their fathers estate"},"gt_ids":{"kind":"list like","value":["322314","101369","540539"],"string":"[\n \"322314\",\n \"101369\",\n \"540539\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1,1],"string":"[\n 1,\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["531665","295142","322314","521803","278528","138983","478966","295246","438874","180146","422994","565428","144965","232329","244733","522619","17633","173865","427270","335808","581509","292324","525386","36481","84819","351502","99151","264029","381861","303382","175200","133548","414394","222030","372808","47016","147999","205865","566383","276073","534280","112987","267206","90572","451588","375708","466138","65702","421652","124108","204943","6334","324337","444654","123368","278025","415104","481902","588197","75476","539475","186487","598547","91838","559484","96015","340842","463219","485398","212091","125454","382255","182065","367785","166826","504382","538353","487975","387906","17347","274901","565868","395152","259897","275581","385231","156187","540539","4495","219421","115888","444365","529435","431101","183800","394842","102155","183877","444172","236863"],"string":"[\n \"531665\",\n \"295142\",\n \"322314\",\n \"521803\",\n \"278528\",\n \"138983\",\n \"478966\",\n \"295246\",\n \"438874\",\n \"180146\",\n \"422994\",\n \"565428\",\n \"144965\",\n \"232329\",\n \"244733\",\n \"522619\",\n \"17633\",\n \"173865\",\n \"427270\",\n \"335808\",\n \"581509\",\n \"292324\",\n \"525386\",\n \"36481\",\n \"84819\",\n \"351502\",\n \"99151\",\n \"264029\",\n \"381861\",\n \"303382\",\n \"175200\",\n \"133548\",\n \"414394\",\n \"222030\",\n \"372808\",\n \"47016\",\n \"147999\",\n \"205865\",\n \"566383\",\n \"276073\",\n \"534280\",\n \"112987\",\n \"267206\",\n \"90572\",\n \"451588\",\n \"375708\",\n \"466138\",\n \"65702\",\n \"421652\",\n \"124108\",\n \"204943\",\n \"6334\",\n \"324337\",\n \"444654\",\n \"123368\",\n \"278025\",\n \"415104\",\n \"481902\",\n \"588197\",\n \"75476\",\n \"539475\",\n \"186487\",\n \"598547\",\n \"91838\",\n \"559484\",\n \"96015\",\n \"340842\",\n \"463219\",\n \"485398\",\n \"212091\",\n \"125454\",\n \"382255\",\n \"182065\",\n \"367785\",\n \"166826\",\n \"504382\",\n \"538353\",\n \"487975\",\n \"387906\",\n \"17347\",\n \"274901\",\n \"565868\",\n \"395152\",\n \"259897\",\n \"275581\",\n \"385231\",\n \"156187\",\n \"540539\",\n \"4495\",\n \"219421\",\n \"115888\",\n \"444365\",\n \"529435\",\n \"431101\",\n \"183800\",\n \"394842\",\n \"102155\",\n \"183877\",\n \"444172\",\n \"236863\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["Consider consulting a fee-only Certified Financial Planner. It will be worth the money to have your game-plan looked at by somebody who is trained and experienced in such matters, helping you avoid big mistakes and making the right decision for your personal situation. It should cost only a relatively small percentage of the overall inheritance.","\"**What you need to know about [estate planning](http://money.cnn.com/magazines/moneymag/money101/lesson21/), including why you may need a will and assigning a power of attorney.** **1. No matter your net worth, it's important to have a basic estate plan in place.** Such a plan ensures that your family and financial goals are met after you die. **2. An estate plan has several elements.** They include: a will; assignment of power of attorney; and a living will or health-care proxy (medical power of attorney). For some people, a trust may also make sense. When putting together a plan, you must be mindful of both [federal and state laws](http://corlisslawgroup.com/) governing estates. **3. Taking inventory of your assets is a good place to start.** Your assets include your investments, retirement savings, insurance policies, and real estate or business interests. Ask yourself three questions: Whom do you want to inherit your assets? Whom do you want handling your financial affairs if you're ever incapacitated? Whom do you want making medical decisions for you if you become unable to make them for yourself? **4. Everybody needs a will.** A will tells the world exactly where you want your assets distributed when you die. It's also the best place to name guardians for your children. Dying without a will -- also known as dying \"\"intestate\"\" -- can be costly to your heirs and leaves you no say over who gets your assets. Even if you have a trust, you still need a will to take care of any holdings outside of that trust when you die. **5. Trusts aren't just for the wealthy.** Trusts are legal mechanisms that let you put conditions on how and when your assets will be distributed upon your death. They also allow you to reduce your estate and gift taxes and to distribute assets to your heirs without the cost, delay and publicity of probate court, which administers wills. Some also offer greater protection of your assets from creditors and lawsuits. **6. Discussing your estate plans with your heirs may prevent disputes or confusion.** Inheritance can be a loaded issue. By being clear about your intentions, you help dispel potential conflicts after you're gone. **7. The federal estate tax exemption -- the amount you may leave to heirs free of federal tax -- is now set permanently at $5 million indexed for inflation.** In 2013, estates under $5.25 million are exempt from the tax. Amounts above that are taxed up to a top rate of 40%. **8. You may leave an unlimited amount of money to your spouse tax-free, but this isn't always the best tactic.** By leaving all your assets to your spouse, you don't use your estate tax exemption and instead increase your surviving spouse's taxable estate. That means your children are likely to pay more in estate taxes if your spouse leaves them the money when he or she dies. Plus, it defers the tough decisions about the distribution of your assets until your spouse's death. **9. There are two easy ways to give gifts tax-free and reduce your estate.** You may give up to $14,000 a year to an individual (or $28,000 if you're married and giving the gift with your spouse). You may also pay an unlimited amount of medical and education bills for someone if you pay the expenses directly to the institutions where they were incurred. **10. There are ways to give charitable gifts that keep on giving.** If you donate to a charitable gift fund or community foundation, your investment grows tax-free and you can select the charities to which contributions are given both before and after you die.\"","\"Also the will stipulated that the house cannot be sold as long as one of my wife's aunts (not the same one who supposedly took the file cabinet) is alive. This is a turkey of a provision, particularly if she is not living in the house. It essentially renders the house, which is mortgaged, valueless. You'd have to put money into it to maintain the mortgage until she dies and you can sell it. The way that I see it, you have four options: Crack that provision in the will. You'd need to hire a lawyer for that. It may not be possible. Abandon the house. It's currently owned by the estate, so leave it in the estate. Distribute any goods and investments, but let the bank foreclose on the house. You don't get any value from the house, but you don't lose anything either. Your father's credit rating will take a posthumous hit that it can afford. You may need to talk to a lawyer here as well, but this is going to be a standard problem. Explore a reverse mortgage. They may be able to accommodate the weird provision with the aunt and manage the property while giving a payout. Or maybe not. It doesn't hurt to ask. Find a property manager in Philadelphia and have them rent out the house for you. Google gave some results on \"\"find property management company Philadelphia\"\" and you might be able to do better while in Philadelphia to get rid of his stuff. Again, I'd leave the house on the estate, as you are blocked from selling. A lawyer might need to put it in a trust or something to make that work (if the estate has to be closed in a certain time period). Pay the mortgage out of the rent. If there's extra left over, you can either pay down the mortgage faster or distribute it. Note that the rent may not support the mortgage. If not, then option four is not practical. However, in that case, the house is unlikely to be worth much net of the mortgage anyway. Let the bank have it (option two). If the aunt needs to move into the house, then you can give up the rental income. She can either pay the mortgage (possibly by renting rooms) or allow foreclosure. A reverse mortgage might also help in that situation. It's worth noting that three of the options involve a lawyer. Consulting one to help choose among the options might be constructive. You may be able to find a law firm with offices in both Florida and Pennsylvania. It's currently winter. Someone should check on the house to make sure that the heat is running and the pipes aren't freezing. If you can't do anything with it now, consider winterizing by turning off the water and draining the pipes. Turn the heat down to something reasonable and unplug the refrigerator (throw out the food first). Note that the kind of heat matters. You may need to buy oil or pay a gas bill in addition to electricity.\"","\"TLDR: There are no to few monetary downsides. The process of settling an estate is called probate. Creditors can make claims against the estate, and assets should stand to pay any debts. If more debts are owed then assets, the beneficiaries are not held liable. Final expenses are usually the first amount paid out in full. So if the estate only contains enough assets to pay final expenses, then the creditors receive nothing. Usually creditors are paid pro-rated if there is not enough to cover debts. For the record, the probate process is greatly simplified if one has a will. Get a will if you don't have one. Life insurance is a bit different though. It passes directly to the beneficiaries and depending on the state could be untouchable by creditors. The same thing could also happen with retirements accounts. With 401K accounts, you could take some of it out, and pay tax on that. You could also roll it into your own account. Property receives a really good benefit. While it does pass through probate the cost basis of real estate is reestablished at the time of death. So if grandpa bought a house for 30K in the 40's, and it is now worth 120K. You inherit a 120K piece of property and when you sell you use 120K as your cost basis not 30K. Any estate taxes are typically paid by the state, not technically the heirs. If there is a 5% estate tax and they are to inherit 100K, they will only receive 95K. They will not receive 100K then be expected to be paid 5K. \"\"Electrically\"\" the same, but a large difference in responsibility. The biggest downside is if you have a will fight on your hands. If someone disputes the validity of the will that can incur a lot of legal fees. For small estates, it may not be worth the fight. The next is if any assets do go through probate. The process is lengthy and depending on the executor, they could reduce the size of the estate for charging for their time.\"","You say that you inherited the money from your mother, and are now paying these people using money that is already yours. Because of that, the money is considered a gift from you to them, and the fact that you are doing it in accordance with your mother's wishes doesn't change that. For it to be considered a bequest from your mother's estate directly to these beneficiaries, it would have had to be handled via the regular by-the-book inheritance procedure and been given to them directly rather than bequeathed to you with informal instructions to pass it on to them. If one gives another person more than $14K in any calendar year, there is the potential gift tax issue to address. I'll explain why it's more a matter of 'addressing' than 'paying', as there are a number of legal ways around this. Form 709 is what you'll use. In the end, you'll report the gifts over $14K but no tax will be due as they'll simply go against your lifetime gifting allowance, currently $5.49M per person. Note, 2 ways to avoid even this obligation. If you have a spouse, you have a combined $28K/yr gifting (per recipient) with no reporting required. Similarly, if the recipient has a spouse, you can gift them $14K. i.e. couple to couple can gift $56K/yr. Last, why not just gift $14K before December, and in January, give the second installment? If I had money coming in separate from a will, I'd be happy that you honored a verbal request, and wouldn't be so greedy as to expect you to risk a dime of your own finances to transfer the funds immediately.","You need to keep in mind that there's an exemption amount of more than $5M (five million) dollars for estate tax. Unless you used all of it for gifts during your life time, it will more than cover all of your $70K estate, so there's no need in any additional planning. As to Roth vs Traditional IRA - if you want to leave something to your siblings, leave them the Roth. Why would you give the taxable income to your siblings when you can give them the nontaxable one? Charities are tax exempt anyway.","There are two different possible taxes based on various scenarios proposed by the OP or the lawyer who drew up the OP's father's will or the OP's mother. First, there is the estate tax which is paid by the estate of the deceased, and the heirs get what is left. Most estates in the US pay no estate tax whatsoever because most estates are smaller than $5.4M lifetime gift and estate tax exemption. But, for the record, even though IRAs pass from owner to beneficiary independent of whatever the will might say about the disposition of the IRAs, the value of the deceased's IRAs is part of the estate, and if the estate is large enough that estate tax is due and there is not enough money in the rest of the estate to pay the estate tax (e.g. most of the estate value is IRA money and there are no other investments, just a bank account with a small balance), then the executor of the will can petition the probate court to claw back some of the IRA money from the IRA beneficiaries to pay the estate tax due. Second, there is income tax that the estate must pay on income received from the estate's assets, e.g. mutual fund dividends paid between the date of death and the distribution of the assets to the beneficiaries, or income from cashing in IRAs that have the estate as the beneficiary. Now, most of OP's father's estate is in IRAs which have the OP's mother as the primary beneficiary and there are no named secondary beneficiaries. Thus, by default, the estate is the IRA beneficiary should the OP's mother disclaim the IRAs as the lawyer has suggested. As @JoeTaxpayer says in a comment, if the OP's mother disclaims the IRA, then the estate must distribute all the IRA assets to the three beneficiaries by December 31 of the year in which the fifth anniversary of the death occurs. If the estate decides to do this by itself, then the distribution from the IRA to the estate is taxable income to the estate (best avoided if possible because of the high tax rates on trusts). What is commonly done is that before December 31 of the year following the year in which the death occurred, the estate (as the beneficiary) informs the IRA Custodian that the estate's beneficiaries are the surviving spouse (50%), and the two children (25% each) and requests the IRA custodian to divide the IRA assets accordingly and let each beneficiary be responsible for meeting the requirements of the 5-year rule for his/her share. Any assets not distributed in timely fashion are subject to a 50% excise tax as penalty each year until such time as these monies are actually withdrawn explicitly from the IRA (that is, the excise tax is not deducted from the remaining IRA assets; the beneficiary has to pay the excise tax out of pocket). As far as the IRS is concerned, there are no yearly distribution requirements to be met but the IRA Custodial Agreement might have its own rules, and so Publication 590b recommends discussing the distribution requirements for the 5-year rule with the IRA Custodian. The money distributed from the IRA is taxable income to the recipients. In particular, the children cannot roll the money over into another IRA so as to avoid immediate taxation; the spouse might be able to roll over the money into another IRA, but I am not sure about this; Publication 590b is very confusing on this point. All this is assuming that the deceased passed away before well before his 70.5th birthday so that there are no issues with RMDs (the interactions of all the rules in this case is an even bigger can of worms that I will leave to someone else to explicate). On the other hand, if the OP's mother does not disclaim the IRAs, then she, as the surviving spouse, has the option of treating the inherited IRAs as her own IRAs, and she could then name her two children as the beneficiaries of the inherited IRAs when she passes away. Of course, by the same token, she could opt to make someone else the beneficiary (e.g, her children from a previous marriage) or change her mind at any later time and make someone else the beneficiary (e.g. if she remarries, or becomes very fond of the person taking care of her in a nursing home and decides to leave all her assets to this person instead of her children, etc). But even if such disinheritances are unlikely and the children are perfectly happy to wait to inherit till Mom passes away, as JoeTaxpayer points out, by not disclaiming the IRAs, the OP's mother can delay taking distributions from the IRAs till age 70.5, etc. which is also a good option to have. The worst scenario is for the OP's mother to not disclaim the IRAs, cash them in right away (huge income tax whack on her) or at least 50% of them, and gift the OP and his sibling half of what she withdrew (or possibly after taking into account what she had to pay in income tax on the distribution). Gift tax need not be paid by the OP's mother if she files Form 709 and reduces her lifetime combined gift and estate tax exemption, and the OP and his sibling don't owe any tax (income or otherwise) on the gift amount. But, all that money has changed from tax-deferred assets to ordinary assets, and any additional earnings on these assets in the future will be taxable income. So, unless the OP and his sibling need the cash right away (pay off credit card debt, make a downpayment on a house, etc), this is not a good idea at all.","First off, very sorry for your loss. I lost my father a few years ago and I know it can be tough. My father also had a lot of credit card debt. They attempted to collect the debt from my mother, who was no longer on the account (for over a decade). It was just an attempt to recoup as much money as they could before dealing with a probate court. As others have said, it depends on your state law. You will want to talk to a lawyer, figure out who is going to be the executor of the estate, and determine the next steps in starting to settle debts that your father had. If you want to take possession of the house, then you will likely need to work with the executor and perhaps purchase the house from the estate (which would then use the money to pay off debts).","A more recent article on inheritance taxes than the one cited by @JohnBensin says that Maryland does not charge inheritance tax on inheritances received from parents (and other close relatives as well). Thus, there is no inheritance tax due to Maryland on your inheritance, and of course, estate tax (both Federal and State) is imposed on the estate and payable by the estate, and thus should have been taken into account by the executor before determining the amount to be divided among the children. If the executor screwed up on this point, some of the inheritance may have to be returned to the estate so that the estate can pay the taxes due, or be paid directly to the Federal Government and/or the State of Maryland on behalf of the estate. Some part of the inheritance might be taxable income to you if it came in the form of an Inherited IRA on which Federal (and possibly State) taxes have to paid on the (taxable part of) any distribution from the IRA including the Required Minimum Distribution that must be made from the IRA each year. (There is also a 50% penalty for not taking at least the RMD each year). Note that the value of the IRA is not taxable income in the year of inheritance, just the money taken as a distribution. Some people liquidate the IRA within 5 years, as used to be required for non-spouse inheritors under earlier tax law, and thus end up paying a lot more income tax than they would have to pay if they went the RMD route. If your uncle took the help of a lawyer in winding up your father's estate, you are probably OK in that all the rules were likely followed, but if it was a do-it-yourself job (or you don't trust your uncle not to screw it up anyway!), then, as John Bensin has already told you, you should certainly consult a tax professional in Maryland to make sure you don't run afoul of tax authorities.","As long as the relative in the UK is not a US citizen and isn't considered domiciled in the US, there will be no estate taxes imposed by the US. You can see a much lengthier explanation on this subject here. The summary is that as a US citizen or resident, you can't circumvent estate taxes by moving yourself or your money abroad, but a relative who genuinely doesn't have US ties (other than inheritors located in the US) will be covered through applicable tax treaties (the UK does have an applicable tax treaty and applicable estate taxes as Ganesh points out).","\"Get a will completed ASAP. It sounds like you are not doing a standard inheritance, so you will want to have it down in writing. If money is an issue, I would research were you can get a will done for cheap, but I would avoid doing a \"\"fill out the form yourself\"\" kind of a thing given that this is non-standard.\"","\"Debts do not inherit to the children. You are absolutely not liable for your parent's debt, in any way whatsoever. ** Collection agents will lie about this; tricking you is their job, and your job is to tell them Heck no, do I look like an idiot? When a person dies, all their personal assets (and debts) go to a fictitious entity called the Estate. This is a holder for the person's assets until they can be dispositioned finally. The estate is managed by a living person, sometimes a company (law firm), called an Executor. Similar to a corporation which is shutting down business, the Executor's job is to act on behalf of the Estate, and in the Estate's best interest (not his own). For instance he can't decide, in his capacity as executor, to give all the estate's money to himself. He has to loyally and selflessly follow state law and any living-trust or wills that may be in place. This role is not for everyone. You can't just decide \"\"la la la, I'm going to live in their house now\"\", that is squatting. The house is an asset and someone inherited that, as dictated by will, trust or state law. That has to be worked out legally. Once they inherit the house, you have to negotiate with them about living there. If you want to live there now, negotiate to rent the house from the estate. This is an efficient way to funnel money into the estate for what I discuss later.** The Estate has assets, and it has debts. Some debts extinguish on the death of the natural person, e.g. student loans, depending on the contract and state law. Did you know corporations are considered a \"\"person\"\"? (that's what Citizens United was all about.) So are estates - both are fictitious persons. The executor can act like a person in that sense. If you have unsecured debt, how can a creditor motivate you to pay? They can annoy and harass you. They can burn your credit rating. Or they can sue you and try to take your assets - but suing is also expensive for them. This is not widely understood, but anyone at any time can go to their creditors and say \"\"Hey creditor, I'm not gonna pay you $10,000. Tough buffaloes. You can sue me, good luck with that. Or, I'll make you a deal. I'll offer you $2000 to settle this debt. What say you? And you'll get one of two answers. Either \"\"OK\"\" or \"\"Nice try, let's try $7000.\"\" If the latter, you start into the cycle of haggling, \"\"3000.\"\" \"\"6000.\"\" \"\"4000.\"\" \"\"5000. \"\"Split the difference, $4500.\"\" \"\"OK.\"\" This is always a one-time, lump sum, one-shot payoff, never partial payments. Creditors will try to convince you to make partial payments. Don't do it. Anyone can do that at any time. Why don't living people do this every day? How about an Estate? Estates are fictitious persons, they don't have a \"\"morality\"\", they have a fiduciary duty. Do they plan on borrowing any more money? Nope. Their credit rating is already 0. They owe no loyalty to USBank. Actually, the executor's fiduciary duty is to get the most possible money for the assets, and settle the debts for the least. So I argue it's unethical to fail to haggle down this debt. If an executor is \"\"not a haggler\"\" or has a moral issue with shortchanging creditors, he is shortchanging the heirs, and he can be sued for that personally - because he has a fiduciary duty to the heirs, not Chase Bank. Like I say, the job is not for everyone. The estate should also make sure to check the paperwork for any other way to escape the debt: does it extinguish on death? Is the debt time-barred? Can they really prove it's valid? Etc. It's not personal, it's business. The estate should not make monthly payments (no credit rating to protect) and should not pay one dime to a creditor except for a one-shot final settlement. Is it secured debt? Let them take the asset. (unless an heir really wants it). When a person dies with a lot of unsecured debt, it's often the case that they don't have a lot of cash lying around. The estate must sell off assets to raise the cash to settle with the creditors. Now here's where things get ugly with the house. ** The estate should try to raise money any other way, but it may have to sell the house to pay the creditors. For the people who would otherwise inherit the house, it may be in their best interest to pay off that debt. Check with lawyers in your area, but it may also be possible for the estate to take a mortgage on the house, use the mortgage cash to pay off the estate's debts (still haggle!), and then bequeath the house-and-mortgage to the heirs. The mortgage lender would have to be on-board with all of this. Then, the heirs would owe the mortgage. Good chance it would be a small mortgage on a big equity, e.g. a $20,000 mortgage on a $100,000 house. Banks love those.\"","\"You are opening up a large can of worms with how you are doing this. In very positive years, you'll have taxes based on your income, potential Alternative Minimum Tax (AMT), etc. Each of the family members may be in a lower bracket, perhaps even needing to pay zero on capital gains. Even if you are 100% honest, if you are subject to a lawsuit, these funds are all in your name, and you'd be in a tough situation explaining to a court that these assets aren't \"\"really\"\" yours, but belong to family. And last, the movement of large chunks of money needs to be accounted for, and can easily run afoul of gifting rules. As mhoran stated, a Power of Attorney (POA) avoids this. When my father-in-law passed, I took over my mother-in-law's finances, via POA. I sign in to my brokerage account, and her accounts are there. I can trade, deal with her Individual Retirement Account (IRA) Required Minimum Distributions (RMDs) each year, and issue checks to her long term care facility. It's all under her social security number - our money isn't intermingled.\"","If your sister paid rent, she was a tenant. There are laws to protect tenants, but those depend on what country, state, and city you live in. In most places in the US (maybe all), she was owed more than 2 days notice. Normally, the local housing authority could help her figure out what her rights are, but since this already happened, they may not be able to do much (depends on the local laws). It's worth asking them anyway. I don't know how partial ownership of the property would affect things if your sister was a partial owner. If the 30 year old will was the most recent document, then that's how the estate will be distributed. There are no laws in the US requiring a will to be fair. An executor's role is to carry out the will. Being an executor does not mean one can choose to unilaterally sell the property in the estate without permission of other heirs. You'll need to speak with a lawyer if you think they're breaking the will by selling property that you have partial ownership of. But since the sale is already done, reversing it would be slow and probably very expensive in legal fees. If it's a small estate, you'll have to judge whether a lawyer is worth the money and the family's animosity. Also, if the estate had debt, debt must be paid before property is distributed to the heirs, so that could also change what your sisters had to do. I'd suggest first asking your sisters to tell you about what they've done to execute the will, and what they do in the future.","\"First, when a debt collector says, \"\"It's to your advantage to give me money now\"\", I'd take that with a grain of salt. My ex-wife declared bankruptcy and when debt collectors couldn't find her, they somehow tracked me down and told me that I should tell her that it would be to her advantage to pay off this debt before the bankruptcy went through. That was total nonsense of course. The whole point of bankruptcy is to not have to pay the debt. Why would you pay it just before it was wiped off the books? (Now that I think of it, I'm surprised that they didn't tell me that I should pay her debts.) As others have noted, this would be controlled by state law. But in general, when someone dies any debts are payed from the assets of the estate, and then whatever is left goes to the heirs. If nothing is left or the debts exceed the assets, then the heirs get nothing, but they don't have to pay somebody else's debts. I don't see how you could \"\"put the house under your name\"\". If he left the house to you in his will, then after any debts are settled in accordance with state law, the house would transfer to you. But you can't just decide to put the house in your name outside of the legal inheritance process. If you could, then people could undermine a will at any time by just deciding to take an asset left to someone else and \"\"put it in their name\"\". Or as in this case, people could undermine the rights of creditors by transferring all assets to themselves before debts were paid. Even if there's some provision in your state for changing the name on a deed prior to probate to facilitate getting mortgages and taxes paid or whatever, I would be quite surprised if this allowed you to shelter assets from legitimate creditors. It would be a gaping loophole in inheritance law. Frankly, if your father's debts are more than the value of his assets, including the value of the house, I suspect you will not be able to keep the house. It will be sold to pay off the creditors. I would certainly talk to a lawyer about this as there might be some provision in the law that you can take advantage of. I'll gladly yield on this point to anyone with specific knowledge of New Jersey inheritance law.\"","\"The Trustee has allowed me to act as his \"\"agent\"\", continuing to pay bills, and take care of much of the administrative affairs for my mother's estate since I did all of it for years before she passed away. I was not paid for any of this work. ... The expenses were more than $30K last year, and there is still a punch list to go this year. The trust should reimburse your expenses and deduct them on the trust tax return. Since the Trust owned the property in 2015, and I will receive ownership this month, can last year's expenses incurred for the Trust be deducted again future income for my property this year? Not exactly. The trust will file its own tax return and will report the income/loss attributed to the beneficiaries per the trust rules. What is attributed to you will flow to your Schedule E. From there you own it and if it is a passive activity where the loss is limited - you can carry it forward and offset with future gain. The trustee will have to deal with all the paperwork. Do 1099-misc forms need to be filed for the contractors who worked to get it ready for rental? It is my understanding that since 2010 (and before 2010) landlords who are not in real-estate trade or business are not required to send out 1099. But it won't hurt if you do, also. In any case - for all of these issues you should talk to a tax adviser (EA/CPA licensed in your State).\"","There can be Federal estate tax as well as State estate tax due on an estate, but it is not of direct concern to you. Estate taxes are paid by the estate of the decedent, not by the beneficiaries, and so you do not owe any estate tax. As a matter of fact, most estates in the US do not pay Federal estate tax at all because only the amount that exceeds the Federal exemption ($5.5M) is taxable, and most estates are smaller. State estate taxes might be a different matter because while many states exempt exactly what the Federal Government does, others exempt different (usually smaller) amounts. But in any case, estate taxes are not of concern to you except insofar as what you inherit is reduced because the estate had to pay estate tax before distributing the inheritances. As JoeTaxpayer's answer says more succinctly, what you inherit is net of estate tax, if any. What you receive as an inheritance is not taxable income to you either. If you receive stock shares or other property, your basis is the value of the property when you inherit it. Thus, if you sell at a later time, you will have to pay taxes only on the increase in the value of the property from the time you inherit it. The increase in value from the time the decedent acquired the property till the date of death is not taxable income to you. Exceptions to all these favorable rules to you is the treatment of Traditional IRAs, 401ks, pension plans etc that you inherit that contain money on which the decedent never paid income tax. Distributions from such inherited accounts are (mostly) taxable income to you; any part of post-tax money such as nondeductible contributions to Traditional IRAs that is included in the distribution is tax-free. Annuities present another source of complications. For annuities within IRAs, even the IRS throws up its hands at explaining things to mere mortals who are foolhardy enough to delve into Pub 950, saying in effect, talk to your tax advisor. For other annuities, questions arise such as is this a tax-deferred annuity and whether it was purchased with pre-tax money or with post-tax money, etc. One thing that you should check out is whether it is beneficial to take a lump sum distribution or just collect the money as it is distributed in monthly, quarterly, semi-annual, or annual payments. Annuities in particular have heavy surrender charges if they are terminated early and the money taken as a lump sum instead of over time as the insurance company issuing the annuity had planned on happening. So, taking a lump sum would mean more income tax immediately due not just on the lump sum but because the increase in AGI might reduce deductions for medical expenses as well as reduce the overall amount of itemized deductions that can be claimed, increase taxability of social security benefits, etc. You say that you have these angles sussed out, and so I will merely re-iterate Beware the surrender charges.","\"From the UK side, the estate may be liable to \"\"inheritance tax\"\" depending on its size - but this will be paid by the estate itself before any payment is made to you, so if the estate makes a payment to you, the whole of it is yours to keep. The tax thresholds are a bit complicated and due to become more so, but at a minimum any estate under £325,000 will be exempt. If your spouse died first without using their entire allowance, or for deaths after 6th April 2017 where a family home is being left to direct descendants, the allowance is higher. Anything above the threshold is subject to 40% tax, which will be paid be the person dealing with the estate before they can distribute anything else.\"","I understand $14k/yr $5.4M max This isn't the right way to say it. Your dad has a $5.4 million estate tax exclusion that can be used for gift tax. In addition to that (not instead or as part of), he and his wife each have a $14k/year gift tax exclusion. So if you aren't paying for two years from today, you actually have three years of gift tax exclusion: 2017; 2018; 2019. So that's 3 * 2 * $14k = $84k that he (and his wife) can give you without using any of the estate tax exclusion. But I give my cousin/dad $430k from the mortgage According to this, you don't want your dad to give you any money. You want to pay the entire $430k. In that case, don't file gift tax forms. He's not giving you money. He's loaning you money. I agree with the others. The cleanest solution is for your cousin to loan you money to buy the house from your dad. Pay a lawyer (or have your cousin/dad do it) so that it's legally written as a mortgage and you can get your interest deduction. You start paying off the loan in two years. Until then, interest accrues. So instead of a $430k debt, you'd owe something like $470k. Maybe more if your cousin pays the property taxes as well. Your cousin is out $430k plus possibly property taxes, but apparently he can afford that. You have a house and a mortgage. Your dad has money to buy his Florida house. Note that if your dad wanted to give you money, he could. He could collect $346k from you (borrowed from your cousin) and give you $28k equity immediately and then two more payments in 2018 and 2019. But that assumes that $346k is enough for him to buy his Florida house. If not, just do the mortgage. He can give you money by check which you can send to your cousin if he wants to do that.","My family members, particularly my aunt (his daughter), are telling me that when my grandpa dies they are taking my car. Bring this up with Grandpa. If this is what he wants to have happen, then help him make it happen before you finish paying $12,000 on a car worth only $6,000. Let the Aunt and other relatives deal with the remaining $12,000. If that isn't what he wants to have happen, then work out how you and he can legally make sure that what he wants to have happen actually happens. If the Aunt or others bring it up, make sure they understand that you still owe $12,000 on the car, and if they get the car they also get the loan. If they refuse to pay the loan then make sure they know you will cooperate with the bank when they attempt to repossess the car - up to and including providing them with keys and location. This will hurt your credit, and you will be on the hook for the remaining portion of the loan, but you at least won't have to deal with all of it - they'll sell it at auction and your loan amount will fall a little. But the best course of action is to work with Grandpa, and make sure that he understands the family's threats, how that will affect you since you're on the loan, and what options you'd like to pursue.","In the US, an opposite-sex spouse who is a citizen as well, can receive an unlimited inheritance with no tax due from the estate. IRAs and retirement accounts which were pretax accounts, are inherited by a spouse who can then either treat the accounts as her own, i.e. even co-mingle with current IRAs, or treat as inherited IRA, and begin RMDs. In which case tax is due to the extent the money wasn't already taxed. I see the edits above. No tax should have been due. Mom can gift the kids up to $14,000 per year per kid with no paperwork at all. And another $14K to the kid's spouses or grandchildren. Above this number, a form 709 is used to tap into the lifetime exclusion. As it stands now, it's unclear why any tax would have been due in the first place.","\"Yes, an estate plan can be very important. Estate planning - typically attempts to eliminate uncertainties over the administration of a probate and maximize the value of the estate by reducing taxes and other expenses. Guardians are often designated for minor children and beneficiaries in incapacity. In general, your \"\"estate\"\" includes all of your assets, less all debt, plus death benefits from all life insurance policies not held in an irrevocable trust. The biggest reason to have an estate plan is to make sure that your personal values about both medical and personal finance financial matters are honored in the event that death or incapacity prevents you from acting for yourself. In addition, tax minimization is a further and very important goal of estate planning for persons with taxable estates. To create an estate plan for yourself or update an existing plan, you will most likely need the services of an estate planning attorney. When you consult with an estate planning attorney, the attorney considers how you want assets distributed to heirs, what taxes might your estate be liable for and whether there are tax-minimization strategies that would be appropriate and appealing; what your preferences and values are with respect to the management of medical and financial affairs in the event of incapacity; and any complicating family issues. To deal with these issues, your attorney will need full and accurate information about you, including: When an estate plan is created, be sure you understand what the attorney is saying. Estate planning ideas can be confusing. It is also appropriate and expected for you to ask about the attorney's fee for any legal service. Some articles and resources: Get ahead of your estate planning Estate Planning by CBA\"","You're driving a car worth about $6000 which has a $12,000 loan against it. You're driving around in a nett debt of $6000. The best thing your grandfather could do for you, if possible, is to take your name off both the title and the loan, refinancing the car in his name only. If possible while still letting you drive the car. When he dies, you will be out of a car, but also out of a $12,000 debt which I'm sure you could do without. Okay, the best thing your grandfather could do, from your wallet's point of view, is paying off the loan for you and then taking his name off the title.","a) He can loan you the money tax free he can even give you and your wife 29k a year tax free. Many people do a loan for lets say 100k and then they forgive the load 14.5k a year to avoid the taxes. b) Yes when they see that deposit they will give you a hard time potentially. I got a hard time for my Real Estate tax refund. c) Just putting stress on the family potentially.","As noted above, this is likely going to need (several) lawyers to straighten out. I am not a lawyer, but I think one should be retained ASAP. However, in the meantime: The authorized user should not be making any charges. Continuing to do so at this point may be a criminal offense. For the protection of any other heirs, this should be brought to the attention of the credit card issuer and law enforcement authorities. As it stands, the account holder's estate will be liable for the full debt, and the authorized user's estate would be untouched. Of course, all this could change if other heirs challenge the estate and file civil suits, in which case it's likely that both estates will be eaten up with legal fees anyway.","You have asked this question but provide very little information. As others have stated, what country are you in? Was there a will or any other agreement? Basically any estate will go to the beneficiaries once all debtors have been paid off. How this is done will largely depend on which country/state/region you are in and what documentation was in place at the time of death. You might want to check out this website for details on passing away without a will: http://www.nolo.com/legal-encyclopedia/how-estate-settled-if-theres-32442.html","If your father is still able to make financial decisions and sign contracts, I see a better option. Have your father borrow against his equity to finance the renovation. Example: the house is worth 400 now. He can borrow 100 against that. He spends it on the addition, making the house worth 500, with the same 400 of equity as before. (In some cases, spending 100 might add 150 to the house value, but let's assume here the increase is just what was spent.) When he dies, the mortgage has to be repaid. If he has no other money (that the two of you would otherwise split) then the mortgage has to be repaid by the two of you putting in cash. So you pay your brother 250 (half the new total value of the house) but he gives 50 of that to the bank for the mortgage. You also give 50 of your own money to the bank for the mortgage. Net result: your brother has 200 (the same as if he had inherited half the unimproved house), and you have a 500 house after paying out 300. Your gain is also the same as if the house was unimproved. Now if the house went up 150 by spending 100, or went up 60 by spending 100, you and your brother would also be sharing this profit or loss. If you don't want that to happen, you will need a different agreement. The advantage of the approach I'm suggesting is you just need one appraisal after your father dies. Not accounted for in this is that you lived (without paying rent) in your father's house for some time, and that you worked (without being paid) as a caregiver to your father for that time. Some families might think those two things balanced, others might feel you need to be compensated for caring for him, and others that you need to compensate the others for your benefit of living in the large house. Be sure to discuss this with your brother so that you agree in advance whether a plan is fair or not.","Don't pay it, see a lawyer. Given your comment, it will depend on the jurisdiction on the passing of the house and the presence of a will or lack thereof. In some states all the assets will be inherited by your mom. Debts cannot be inherited; however, assets can be made to stand for debts. This is a tricky situation that is state dependent. In the end, with few assets and large credit card debt, the credit card companies are often left without payment. I would not pay the debt unless your lawyer specifically told you to do so. Sorry for your loss.","It is possible for him to get a loan against the house as long as the deeding all takes place at the same time as the loan is closing. Basically you and your brother will both have paperwork to sign, and the title company will not send out checks until the loan funds from the mortgage company. For that deeding to take place, the estate will generally have to be fully settled. That can take time, but you might wish to retain a lawyer to be certain your interests are completely protected. Many people feel like getting legal representation will strain family relationships, but I find the opposite to be true. They often grease the wheels and get the process finished quickly and fairly which ultimately reduces such strain. I would view it as a good sign if he is paying off large debts, because that means he will be in a better position to take a mortgage to pay you your share, but that assumes he is acting in good faith.","I just went through this and life insurance money generally does not go into Probate. However, since there was no beneficiary, you will have to ask the probate court. I would advise you not to spend any of the money yet. Make a meeting with the probate court in the county where they lived. You will need the death certificate and the will. If you do not have a will, the estate generally does not need to go into probate. But if it does, then they will definitely let you know what to do with the insurance money. Just make sure you use the estate accounts to pay off all of his debts before you distribute the left over money. The entire process should take an absolute minimum of 6 months.","@foreverBroke - Ok, here are the questions - Is mom's house paid for in full? If there's any mortgage, is it current? If not, what are the numbers? Is it underwater, i.e. owe more that it's worth? Will the tax department talk to you and negotiate? Maybe let you make payments over time? If you have that kind of cash flow, the slower payment may keep you from killing your savings. We don't know your age. I do know that the early years savings, often around the first 8-12 years, are the funds that turn into half your final retirement savings due to compounding. Obviously, this a tough time emotionally, what I don't want is for you to make a financial move that is a temporary fix. Not knowing the rest of the story limits my answer. If my mom needed my help I'd want to understand the whole picture. Not that I'm a fan, but have you considered a reverse mortgage? It may be a way to keep the house but give up the equity, or some of it, on her moving out or passing.","As Stan's answer recommends, don't give them the money; make the checks payable to the credit-card company or the bank that issued the student loan so that those debts get repaid for sure, or else you run the risk of that money also going the way of all flesh and the debt remaining untouched. Next, file a gift tax return (Form 709, which is not filed along with Form 1040; all 709s go to one IRS office as described in the instructions), saying that you gave your son and daughter-in-law gifts of $20K each (say) and that you want to have $12K (excess of each gift over and above the annual exclusion of $14K per recipient) count against your combined lifetime estate tax and gift tax exclusion (which is currently over $5M). So, no gift tax needs to be paid. (As JoeTaxpayer's comment points out, if you are married and your spouse is willing to join in this, then as much as $56K can be given without anyone having to file Form 709). Then, change your will to reduce your son's and daughter-in-law's inheritance by $40K. If and when they return the money (as a gift to you), change your will back by removing the reduction. If the repayment is is a lump sum, the gift tax return stratagem can be used by your son and daughter-in-law while if they pay back over two years, no gift tax return need be filed. So., that's it. No interest to be paid by anybody, no gift taxes to be paid by anybody, no income to be reported on any tax return, etc. This will work unless you have serious concerns about reducing your combined lifetime estate tax and gift tax exclusion by $12K, and if you do, you can afford to hire plenty of lawyers to advise you on better strategies.","There are two different tax returns you'll be doing: one is for her, until the day of her death. The other is for the estate. The personal one you could probably do on your own, it's nothing different from the one for a living person, except for the cut-off date in the middle of the year. The estate tax return may be a bit more nuanced, since it is a trust return and not an individual return, and is done under a different set of rules. I'd suggest talking to a tax professional who'd help you. Your estate executioner should be doing the estate tax return (or hiring someone to do it). Sorry for your loss.","Maryland is one of only two states (as of the writing of that article) that collects both inheritance tax and estate tax. These are two different issues, and it's important to differentiate between them sufficiently. I can't provide you a definitive answer, so consult a tax professional in Maryland for specific details to make sure you don't run afoul of tax authorities. This blog has a nice summary of the differences, as of 2012: The estate tax is assessable if more than one million dollars passes at death. The total dollar value of the property determines whether there is an estate tax. The inheritance tax is not dependent upon the value of the estate, as even very small estates can have inheritance tax imposed. Inheritance tax is assessed on property given to a person who is further removed in relationship than a sibling. Thus, for example, a 10% tax will be assessed on property passing to a cousin, niece, nephew or friend. Another section of the page states, as an example: If you give someone $10,000 in cash, the inheritance tax will simply reduce the amount inherited – in this case to $9,000. There are several other exemptions to the inheritance tax in addition to the immediate family exception discussed above: Property that passes from a decedent to or for the use of a grandparent, parent, spouse, child or other lineal descendant, spouse of a child or other lineal descendant, stepparent, stepchild, brother or sister of the decedent, or a corporation if all of its stockholders consist of the surviving spouse, parents, stepparents, stepchildren, brothers, sisters, and lineal descendants of the decedent and spouses of the lineal descendants. Putting this information together makes me think that the inheritance wouldn't be taxable in your case because it's a cash inheritance from an immediate family member, so it qualifies for one of the exemptions. Since I'm not a tax professional, however, I can't say that for sure. Hopefully these pages will give you enough of a foundation for when you talk to a professional.","You can perfectly well manage their wealth without transferring their money into your account first. Just make them open their own account on their name then ask them for credentials and then manage their money from within their own account. That way everyone will be taxed according to their wealth (which is probably advantageous but you probably have to help them with the paperwork) and it is clear at every time what belongs to whom and your relatives can at every time access their wealth. These are big advantages (for them). This keeps you at the role of an adviser (a very active one though) which should have almost zero legal ramifications for you unless you try to deceive your relatives. You may want to shift wealth between accounts to minimize tax burdens, but that comes at the risk that should the family relations get worse this might result in anger. You could open up a registered society, all members getting shares and voting rights, making you the CEO, but that should be a lot of paperwork and maybe only a good idea for large amounts of money. If you decide to transfer money between accounts of different persons this is like a gift. It might invoke a gift tax in your area. All in all, I strongly advise you to make them all open up their own accounts and then just operate the accounts and manage their wealth in their name. Sell it to them as the solution that retains them maximum ownership.","\"Assuming United States; rules may be wildly different elsewhere... The \"\"family loan\"\" trick essentially lets you amortize a gift over multiple years of gift allowance and hopefully dodge gift tax, at the cost of having to pay income tax on the interest you must charge on the loan. The main advantage is that it lets you transfer all the money up front, rather than in $17,000-a-year-per-person-per-person chunks. Let's take the normal case first. Any one person can give any one person up to a specified amount (currently $17k, I believe,) without incurring gift tax. Note that this is counted per person, not per household; you and your spouse could each give $17k per year to each of your son and his spouse under this rule, adding up to $68k per year total. The family loan dodge consists of making them a loan of the money at the mandated minimum interest rate to make it a legal loan (something like 0.3% APR last time I looked), setting the repayment schedule so their payments each year including interest come out to less than you can gift them with tax-free, and then making that gift by paying (yourself) those payments on their behalf. You do need to pay income tax on the portion of those payments that represents interest income, but at that low rate this is a minor cost for the convenience. You'd also want to set up your will to cover what happens if you die with them still owing money on the loan. And this, I believe, is where you will really need expert advice if you go this route, to minimize the government's cut at that time. There may be better answers. If you are talking about this much money, you owe it to yourself to purchase expert advice from someone who has training and experience n this area, rather than taking free advice from the Internet that is likely to cost you much more in the long run. This is a situation where you can't afford not to hire a pro. (For example, I have no idea how trusts might or might not fit your needs.)\"","To answer the last question first: there are no tax consequences to you. If your family member is married (or has a joint owner of the funds), and so are you, each of them can give each of you the $14K annual gift, which would be $56K. The remainder of the $70K would be subject to either (1) Gift Tax for the tax year in which it was given, or (2) applied to the lifetime exclusion. Either way would require filing a form with the IRS.","Sorry for your loss. I am not a lawyer and this isn;t legal advice -- which I am not licensed to give. But I've had to deal with some debt situations of my own. I think the worst case scenario is the creditor can get a judgment, but that won't be against you unless you were a co-signor. The collectors are going to prey on your decency to make you feel like you should pay it, but you are under no legal obligation to do so. If they file in court and then win a judgment, they may be able to collect on the assets of the estate. You mention no money but you mention a house. That is an asset with value, and putting it in your name isn't going to do much. You should see a lawyer on this, because it seems logical that they could collect on the value of the house at the time of the death, and even if it was willed to you it can still be attacked to pay the debt. Here is a good write-up on NJ death and debt and whether it can be inherited by the adult children: https://www.atrbklaw.com/bankruptcy-resources/83-articles/103-can-you-inherit-your-dead-parent-s-debts","\"The page you linked shows \"\"Federal changes eliminated Florida's estate tax after December 31, 2004\"\" but no, estates are settled by the decedent's executor in the decedent's state. You receive an inheritance net of estate tax if any was due.\"","First, the basis is what was paid for the house along with any documented upgrades, any improvements not consider maintenance. Any gain from that point is taxable. This is the issue with gifting a house before one passes. It's an awful mistake. The fact that there was a mortgage doesn't come into play here nor does the $15K given away. Your question is great, and the only missing piece is what the house cost. Keep in mind, depending on the state, you MIL may have gotten a step-up on the passing of her husband. On a very personal note - my grandparents bough a family house. 4 apartments. 1938 at a cost of $4000. My grandmother transferred 1/2 share to my father well before she died. And before my father's death it was put into my mother's name. Now that she's in her last years, I explained that since moved it to my sister's name already, there's no step up in basis. This share is now worth over $600,000, and after 4 deaths, no step up. When my sister sells, she will have a gain on nearly 100% of the sale price. In my opinion, there's a special place in hell for lawyers that quit claim property like this. For a bit of paperwork, the house could have been put into a trust to avoid probate, avoid being an asset for medicaid, and still get the step up. Even a $2000 cost for a good lawyer to set up a trust would yield a return of nearly $100,000 in taxes avoided. (And as my sister's keeper, I'd have paid the $2,000 myself, no issue that she gets the house. She needs it, I don't. And when the money's gone, I'm all she has anyway.)","Owing money to family members can create serious problems. Taking out a purchase-money mortgage to pay your sister for her share is the best way to avoid future friction and, possibly, outright alienation.","I strongly doubt that being executor will make the assets of the estate vulnerable to a suit against him personally. The estate is it's own separate legal entity with its own TIN. Only creditors against the estate itself can make claims against it and after all creditors are paid, then the balance is distributed in accordance with the terms of the will. Unless he has commingled assets and treated estate assets as his own, the legal separation should be quite strong. Whether his personal assets are at risk, remember that the opposition will likely overstate their case to try to scare him into settling. If the business was organized as an LLP or LLC, his personal assets should be pretty safe. If it was a sole proprietorship, he has occasion to worry.","\"The text of the Uniform Transfers to Minors Act states (Section 14, paragraph a): A custodian may deliver or pay to the minor or expend for the minor's benefit so much of the custodial property as the custodian considers advisable for the use and benefit of the minor, without court order and without regard to (i) the duty or ability of the custodian personally or of any other person to support the minor, or (ii) any other income or property of the minor which may be applicable or available for that purpose. Unfortunately, it is pretty hard to make the case that giving the money to her siblings is for the \"\"use and benefit\"\" of your daughter. However, when your daughter reaches the age of maturity, any money left in the UTMA account becomes hers. She, at that time, could give money to her siblings, if she chooses. Perhaps you and your father could talk to her about your father's wishes for this money, and that would show her that she should do so at that time. If you don't follow these rules, then your daughter or your father could sue you at any point in the future.\"","The creditors will not be able to go after his father's estate (assuming the father had nothing to do with the business), but at some point, the estate will be divided up. At that point, any money or assets that your husband inherits will be fair game, as they are now your husband's money or assets. I want to be clear; it's nothing to do with your husband being executor (or co-executor) of the estate. This does not contradict zeta-band's earlier answer; Zeta-band is talking about the estate before it is divided up, I'm just pointing out that there may be issues after it is divided up.","You don't get any tax benefit. When you are helping a relative or a friend in such situations the income is just gone. The only way to get around this is if you contribute to a charity, and they give it to your mom. You can then deduct the contributions to that charity. However, the IRS has cracked down on such situations and it probably is not worth pursuing. By the recent tax rules, that charity can use those contributions in which every way they choose, they cannot guarantee they go to your mom. Given that you are closed to your allowed exclusion (14K for 2017), I would work to keep your number under that. If you are married, you each get that exclusion so you can give up to 28K. I can't really speak to the reduction of benefits part as I am knowledgeable and more details on the type of transfer payments she receives would be germane to the discussion.","If you have no need for the money. Donate it. Spend the next few years determining what charities make sense and then when the wills are settled, then make those donations. You should get advice how how to best do that, there can be some limitations and complications. Sometimes the source of the money/property makes it more complicated. The form of the inheritance can also make a difference. You could even setup a charitable trust to spread the donations out over year or decade. You could even make it so that you can live off the interest until you die, and then the rest goes to the charity. Note: just because they have no other children, there is no guarantee that you will receive the money/property. They, at any time, could write a will and cut you out of some, most , or all of the wealth.","How did the house pass to them? Was it held in Trust? Were they both jointly listed on the deed? If no to both, then the house should have gone into probate..assuming this is going on in the US...where the probate court would reassign ownership. Until this happens the house cannot be sold and is formally owned by the estate. I agree with the former post suggesting you find an estate attorney in the area to see if this dispute can be amicably settled. Tying it up in litigation will be EXPENSIVE and take a great deal of time","\"Securities and ETFs are also subjected to Estate Tax. Some ways: Draft a \"\"Transfer on Death\"\" instruction to the broker, that triggers a transfer to an account in the beneficiary's name, in most cases avoiding probate. If the broker does not support it, find another broker. Give your brokerage and bank password/token to your beneficiary. Have him transfer out holdings within hours of death. Create a Trust, that survives even after death of an individual. P.S. ETF is treated as Stock (a company that owns other companies), regardless of the nature of the holdings. P.S.2 Above suggestions are only applicable to nonresident alien of the US.\"","First, if it is in any way a joint account, the debt usually goes to the surviving person. Assets in joint accounts usually have their own instructions on how to disperse the assets; for example, full joint bank accounts usually immediately go to the other name on the account and never become part of the estate. Non-cash assets will likely need to be converted to cash and a fair market valuation shown to the probate court, unless the debts can be paid without using them and they can be transferred to next of kin. If, after that, the deceased has any assets at all, there is usually (varies by state) a legally defined order in which debtor types must be paid. This is handled by probating the estate. There is a period during which you publish a death notice and then wait for debt claims and bills to arrive. Then pay as many as possible based on the priority, and inform the others the holder is deceased and the estate is empty. This sometimes needs to be approved by a judge if the assets are less than the debts. Then disperse remaining assets to next of kin. If there are no assets held by just the deceased, as you get bills you just send a certified copy of the death certificate, tell them there is no estate, then forget about them. A lawyer can really help in determining which need to be paid and to work through probate, which is not simple or cheap. But also note that you can negotiate and sometimes get them to accept less, if there are assets. When my mother died, the doctors treating her zeroed her accounts; the hospitals accepted a much reduced total, but the credit cards wanted 100%.","In the end you, your dad, and your brother should come to an agreement so there's no surprises or unfulfilled expectations, but here's my opinion: If you can afford to make the additions now: I would offer to pay fully for the addition, with the understanding that the additional value that it generates is yours. That keeps everything in your name, and should be fair since you pay for the expense and someday reap the benefit. If you can't afford to make the additions now: I see two options: have your brother buy your father's house, giving you half of the proceeds, and use those proceeds to make the addition as above, or split the cost of the addition and have some sort of contract drawn up promising to reimburse him (with the amount of the reimbursement very clear, like XXX dollars plus accrued interest at Y% annually) as a condition to selling the house. One other part you didn't mention is any compensation you get for keeping your father at your house. What compensation (if any) you get is not as important as making sure that the three of you all agree on what is fair. In any case, clear, honest communication and full agreement is key. There is a very real risk that when your father's estate is settled that there will be disputes over what the agreement was and who it entitled to what. Having everything in writing may sound cold, but it keeps everyone on the same page.","You're crazy to cash out your Roth or take on 401k loan, as that is addressing a short-term problem without doing anything about the longer-term issue. Just don't do it. Through no fault of her own, your mom is insolvent. It happens to people all of the time, and the solution is chapter 7 bankruptcy. The only thing that I would do with my money in this situation is help her with bankruptcy attorney fees if needed, and maybe bid on it at auction, if the house in in good shape.","There is no federal inheritance tax. The federal estate tax, currently, exempts the first 5.49 million (US citizen spouses even avoid this). Current law also does a stepped up basis on inherited assets which were bought with after tax money. Example: Dad bought a house years ago for 100k. He dies and leaves it to JJ along with other assets worth $100k (well below the federal estate tax level). JJ sells the house for $400k which was its market value on the day dad died. He gets to keep the entire $400k. Note: Current government wants to eliminate the estate tax AND the stepped up basis. In above case, JJ will now have $300k gains on the house sale and will pay income tax on that! He will end up with much less that $400k.","Potentially they could setup a trust for themselves and their heirs, donate the land to the trust. It might be able to go into the trust using the current 'on the books' value of the land (what the county/state are basing taxes on), then the trust can negotiate with the natural gas folks for the mineral rights An idea to bounce off your expert anyway.","A revocable trust? Else the title would be his...vs recieving a gift that large. Make it a business investment like a holding company. And use the trust as agreement to shares.","You cannot. Even if your children actually have that money - your fiduciary duty is to them, not to yourself. You cannot gift away money they own for your own purposes. They have to want to gift it away, since it belongs to them. I doubt they do, or they should. Since you have to have their best interests in mind - you shouldn't allow them gift away such amounts even if they're willing to. Doing otherwise will be a criminal act on your behalf (embezzlement/breach of fiduciary duty). Do talk to an attorney of course, since I'm not. But that is my understanding of things. If your kids don't actually have the money, then they can obviously not gift it, so claiming that they did would be a tax fraud.","\"First, I'm really sorry to hear about your mother. My wife was recently diagnosed with Stage 4 cancer, so I know that there is a possibility that your mind is in \"\"survival\"\" mode, trying to preserve as much as you can in the way of things that you can effect (that's how I've been feeling recently). Having a loved one with cancer is really tough because there is absolutely, positively nothing tangible that you can do to change the fact that they have cancer. You will have to ask yourself some questions: How important is it that your mom can stay in her house? Moving could add some unneeded stress. How may years have you been contributing to your 401k? If you have 30 years left, you could have enough time to recover some of your losses from reducing the amount of money you have given up for your mom. Will your mom be able to pay you back for paying the taxes over time, or would this be a 'gift'? Have her doctors told her that she \"\"... has N months left...\"\"? What is the next step after you are able to pay her taxes and save the house? Someone close to me recently told me that \"\"There is no point in trying to save for someone for the future, if you can't sustain them until they get to that future. What will happen to your mom if she loses her house? Will it make it easier or harder for her to recover if she can stay? To paraphrase someone famous, \"\"you can't take a loan out for your retirement, but you could take a loan out for this event.\"\" At any rate, good luck. My thoughts are with you and your mother.\"","He doesn't have to follow through on this, but he could tell this sister that he will stop making mortgage payments, which will result in foreclosure and sale at lower price than might be realized by a voluntary sale. Translation: the house will sold, sis. Do you want to maximize your share of the proceeds? And, as I said in a comment above: I hope that he is keeping careful records of mortgage an utility payments, as he might (should) be entitled to a refund from the proceeds of an eventual sale (possibly adjusted by the fair rent value of the time which he spent living there)","In 2015 there's a $5.43M (That's million, as in 6 zeros) estate exemption. Even though it's $14K per year with no paperwork required, if you go over this, a bit of paperwork will let you tap your lifetime exemption. There's no tax consequence from this. The Applicable Federal Rate is the minimum rate that must be charged for this to be considered a loan and not a gift. DJ's answer is correct, otherwise, and is worth knowing as there are circumstances where the strategy is applicable. If the OP were a high net worth client trying to save his estate tax exemption, this (Dj's) strategy works just fine.","I think you've made a perfectly valid suggestion, and, if your son is struggling somewhat financially now, one that may be very welcome. If you agree to forgive the debt at this time in lieu of a similar amount forgone in future inheritance, it will eliminate the never ending interest-only payments, free up $200+ a month for you son on a tight budget, and improve your own credit score once you pay off the credit line. It's also, in my opinion, a good idea to be open about this in advance with your other children heirs so that everyone will understand what is expected during the eventual probate. My paternal grandfather was the recipient of a great deal of financial largess from his wealthy mother during her life, and it was fully understood by him, her, and his siblings, that in exchange he would not share in her estate when she passed. He didn't, there were no problems, and he and his siblings stayed close for the rest of their lives.","I am not going to discuss legality, because with family members you are able to give a lot of guidance and assistance without running into legal issues. The biggest problem is that when they transfer the funds to you and you invest the money, all the tax rates and tax limits are determined by your situation; plus you have more investments than you should have so you hit those limits and brackets quicker. For example: In the United states a person can put $5,500 or $6,500 into a IRA or Roth IRA each year. If you combine the funds for three with your funds then you are giving up three quarters of the amount that you can invest in that type of account. The decision regarding Roth or not depends on age and income level. But now their decision is related to what is best based on your situation. The ability to even deduct IRA deposits would be based on your situation. Of course for taxable accounts the tax rate is determined by your income, not theirs. If they want you to have the ability to make investment decisions for them, then power of attorney is the way to go. The money is deposited in their name, and all the rules and tax rates are determined by their situation. You make sure they have all the information they need to login and review the accounts, but you make the all the moves within and between accounts.","To be honest, if it's a home all of you share you should try and save the home for your parents. your 26, you will have plenty of time to make 30k again. Having a home headquarters will bring some security to the family. Not only that your parents are old now, it could be hard for them to get another home. They have sacrificed for you, so maybe you should sacrifice for them? Thank god i have no family.","Sorry, but I think you really do need an attorney here. This is the kind of minefield where knowing all the precedents and edge cases can make a huge difference in what you can or can't do, and a misplaced comma can make or break your case. Note that AT BEST you could sell your own interest in the house -- owning the note does not mean owning the property, it only means that they issued the note on the strength of your share of the property. And a half-interest in a single family house has little value outside the family, except to sell it to whoever owns the other half. Which is probably the best answer: Sell your half to your Aunt, if she can afford to buy it. She then gets sole control of the house, and you get the money you seem to need right now, and everyone in the family is much less stressed.","does your sister agree to sell her share of the house? Will you live in the house or rent it out? In Australia if you rent out the house you can claim on expenses such as interest deductions, advertising cost, advertising to get tenants in, maintenance cost, water & sewerage supply charge, Land tax, stamp duty, council rates. A percentage of these expenses can be used to reduce your gross income and therefore reduces your tax liability (called negative gearing). Not sure how other countries handle investment properties. If you plan to live in the house and not rent it out and you have spare cash to buy outright then do so. You don't want to be in debt to the bank","It looks to me like this is a 'call an attorney' situation, which is always a good idea in situations like this (family legal disputes). But, some information. First off, if your family is going to take the car, you certainly won't need to make payments on it any more at that point, in my opinion. If the will goes through probate (which is the only way they'd really be able to take it), the probate judge should either leave you with the car and the payments, or neither (presumably requiring the family to pay off the loan and settle your interest in the car). Since the car has negative net value, it seems unlikely that the probate judge would take the car away from you, but who knows. Either way, if they do take the car away from you, they'll be doing you a service: you have a $6,000 car that you owe $12,000 on. Let them, and walk away and buy another car for $6,000. Second, I'm not sure they would be allowed to in any event. See the Illinois DMV page on correcting titles in the case of a deceased owner; Illinois I believe is a joint tenancy state, meaning that once one owner dies, the other just gets the car (and the loan, though the loan documents would cover that). Unless you had an explicit agreement with your grandfather, anyway. From that page: Joint Ownership A title in the names of two or more persons is considered to be in joint tenancy. Upon the death of one of them, the surviving joint tenant(s) becomes the owner(s) of the vehicle by law. Third, your grandfather can fix all of this fairly easily by mentioning the disposition of the car and loan in his will, if he's still mentally competent and wishes to do so. If he transfers his ownership of the car to you in the will, it seems like that would be that (though again, it's not clear that the ownership wouldn't just be yours anyway). Finally, I am not a lawyer, and I am not your lawyer, so do not construe any of the text of this post as legal advice; contact a lawyer.","As regards Inheritance Tax if your parents are abroad the question must be asked about their Domicile status as non doms are generally only subject to IHT on assets situated in the UK.","If the house is titled to the estate, neither of you own the house and it cannot be mortgaged. Executor of the will is supposed to provide to you and to the probate court periodic reports as to what is going on. Check them up and talk to your probate lawyer.","First of all, I am sorry for your loss. At this time, worrying about money is probably the least of your concerns. It might be tempting to try to pay off all your debts at once, and while that would be satisfying, it would be a poor investment of your inheritance. When you have debt, you have to think about how much that debt is costing you to keep open. Since you have 0%APR on your student loan, it does not make sense to pay any more than the minimum payments. You may want to look into getting a personal loan to pay off your other personal debts. The interest rates for a loan will probably be much less than what you are paying currently. This will allow you to put a payment plan together that is affordable. You can also use your inheritance as collateral for the loan. Getting a loan will most likely give you a better credit rating as well. You may also be tempted to get a brand new sports car, but that would also not be a good idea at all. You should shop for a vehicle based on your current income, and not your savings. I believe you can get the same rates for an auto loan for a car up to 3 years old as a brand new car. It would be worth your while to shop for a quality used car from a reputable dealer. If it is a certified used car, you can usually carry the rest of the new car warranty. The biggest return on investment you have now is your employer sponsored 401(k) account. Find out how long it takes for you to become fully vested. Being vested means that you can leave your job and keep all of your employer contributions. If possible, max out, or at least contribute as much as you can afford to that fund to get employee matching. You should also stick with your job until you become fully vested. The money you have in retirement accounts does you no good when you are young. There is a significant penalty for early withdrawal, and that age is currently 59 1/2. Doing the math, it would be around 2052 when you would be able to have access to that money. You should hold onto a certain amount of your money and keep it in a higher interest rate savings account, or a money market account. You say that your living situation will change in the next year as well. Take full advantage of living as cheaply as you can. Don't make any unnecessary purchases, try to brown bag it to lunch instead of eating out, etc. Save as much as you can and put it into a savings account. You can use that money to put a down payment on a house, or for the security and first month's rent. Try not to spend any money from your savings, and try to support yourself as best as you can from your income. Make a budget for yourself and figure out how much you can spend every month. Don't factor in your savings into it. Your savings should be treated as an emergency fund. Since you have just completed school, and this is your first big job out of college, your income will most likely improve with time. It might make sense to job hop a few times to find the right position. You are much more likely to get a higher salary by changing jobs and employers than you are staying in the same one for your entire career. This generally is true, even if you are promoted at the by the same employer. If you do leave your current job, you would lose what your employer contributed if you are not vested. Even if that happened, you would still keep the portion that you contributed.","My understanding is that when you die, the stocks are sold and then the money is given to the beneficiary or the stock is repurchased in the beneficiaries name. This is wrong, and the conclusion you draw from michael's otherwise correct answer follows your false assumption. You seem to understand the Estate Tax federal threshold. Jersey would have its own, and I have no idea how it works there. If the decedent happened to trade in the tax year prior to passing, normal tax rules apply. Now, if the executor chooses to sell off and liquidate the estate to cash, there's no further taxable gain, a $5M portfolio can have millions in long term gain, but the step up basis pretty much negates all of it. If that's the case, the beneficiaries aren't likely to repurchase those shares, in fact, they might not even know what the list of stocks was, unless they sifted through the asset list. But, that sale was unnecessary, assets can be divvied up and distributed in-kind, each beneficiary getting their fraction of the number of shares of each stock. And then your share of the $5M has a stepped up basis, meaning if you sell that day, your gains are near zero. You might owe a few dollars for whatever the share move in the time passing between the step up date and date you sell. I hope that clarifies your misunderstanding. By the way, the IRS is just an intermediary. It's congress that writes the laws, including the tangled web of tax code. The IRS is the moral equivalent of a great customer service team working for a company we don't care for.","You're not going to pay any tax. You can receive the money with gratitude and treat your in-laws nicely. Your in-laws will be liable for gift tax. They should be filling and filing the form 709. The end result may be, depending on their past gifts, that they will actually pay no money but instead use the lifetime exemption which is correlated with the estate tax. In other words, this gift will reduce their estate tax exemption. If the overall wealth they expect to have by the time they die is less than $5M (+something, the current level of the estate tax exemption), this translates to having pay no tax whatsoever. The form 709 must be filed, regardless, and a copy of it kept for future tracking purposes.","Since you aren't contributing enough to count your parent as a dependent, there is no tax benefit to you for helping them. Gift tax is paid by the giver when total gifts to an individual exceed $14k/year and the lifetime exclusion of $5.49M has been exceeded. If your annual gifts exceed $14k (subject to change, as is the lifetime exclusion amount) then you have to file Form 709 with your return, but you will not pay gift tax unless you've both exhausted the lifetime exclusion and gift over $14k/year. If you pay medical bills directly, that amount does not count toward the $14k/year limit, so you could likely assist in excess of $14k/year and still avoid having to file the extra form. Most assistance programs are income-based, and gifts do not count toward income, but you'll want to check on the specific requirements for programs they are enrolled in.","They may be able to transfer the land to a charitable remainder trust, which then enters into the transaction and pays them an income stream over their lifetime -- but definitely hire a professional before you attempt to do this.","First the good news: based on the time involved, and the amount of potential profits; you will not owe any tax on the sale of the house no matter which option you pick. Now the details. When determining if there are any capital gains the IRS cares about the difference between the sale price and the purchase price. The amount of the loan, the final balance of the loan, or the lack of loan don't factor into the calculation. To complicate matters the government does factor into the equation any improvements you have made to the house (like a new deck) and the cost of buying and selling the house (real estate agents). If a single person has less than 250K in capital gains and has used the house as their main residence for 2 of the the previous 5 years their tax is zero. For a couple the tax free gain is $500K. For your situation since the sale price is less than $250K, the capital gains will also be less than $250K. You do have one potential area of concern. If the house is worth significantly more than $150K, the government could claim that the difference between what you charged your parents and what you could have charged was a gift. Assuming that there are no other factors that you didn't include in the original question it would appear that you will not face any taxes. Regarding your two options, neither will impact the taxes. Though draining your savings or investments could make it difficult to meet an emergency during the time between the sending of the $95K to the mortgage company and the closing on the deal with your parents. If the money came from retirement account it could have an even greater impact on your taxes and retirement situation.","Sorry for your loss. If the insurance money is now in an account under your names, you can might be able to withdraw the money. You should put a country tag and state tag on your question. EDIT: my initial response might incorrect -- see comments below. This is going to be state speficic and the amounts may be relevant. Best to seek professional advice!","Term life insurance makes sense if you will have a need for money if someone dies. If you (and your brothers) do not have enough money currently for a proper burial for your father, then you might consider term insurance to cover this. If you already have the money to cover this (or can save for it in a short amount of time), then you are better off financially to not purchase the insurance. Estimate what you think it will cost for a burial, then determine if you have this money available to you. If you already do, then don't purchase the insurance. If you do not have this money available to you, then you can look into a term life insurance policy on your father. You definitely do not want a whole life insurance policy. This will cost many more times what a term policy costs. A term policy is a policy with an expiration date. For example, let's say that you determine that you will need $10,000 when your father dies for the funeral and burial. You could get a 10-year policy on your father for $10,000. Over the next 10 years, besides paying your premiums, save up $10,000 ($1,000 each year) in some type of savings/investing account. Hopefully, your father will still be around 10 years from now, and you won't need the insurance policy anymore, because you will have saved enough to cover the costs when the time comes. Doing this will almost always cost you less than getting a whole life policy, which never expires, but has much higher premiums. There are also 20-year term policies, which will cost more, but will give you more time to save up your fund. The costs for these policies depend on your father's age, so get a quote for both and decide what will work for you.","\"It's never too early to start estate planning, and if you already have a family, getting your personal affairs in order is a must. The sooner you start planning, the more prepared you will be for life's unexpected twists and turns. The following tips, aimed at those under 40, can help you approach and simplify the estate planning process: Start now, regardless of net worth. [Estate planning](http://money.usnews.com/money/personal-finance/articles/2013/09/19/estate-planning-tips-for-people-under-40) is a crucial process for everyone, regardless of wealth level, says Marc Henn, a certified financial planner and president of Harvest Financial Advisors. \"\"Many people will say, 'Well, I don't have a lot of assets, therefore I don't need an estate plan,'\"\" he says. \"\"Maybe you only have debt, but it still applies. If you want the people around you to appropriately deal with your finances, a plan is still just as important.\"\" This is especially true if you are responsible for financially dependent individuals, such as young children. \"\"The less you have, the more important every bit you've got is to you and the people you care about,\"\" says Lawrence Lehmann, a partner at Lehmann, Norman and Marcus L.C. in New Orleans. \"\"If you don't have much money, you really can't afford to make a mistake.\"\" Have the \"\"what if?\"\" conversation with friends and family. Before jumping into the estate planning process, it's important to establish exactly what you want, and need, to happen after you die and relay those wishes to those around you. \"\"We find that the best transitions and financial transfers happen when all family members are involved in the [decision making](http://corlisslawgroup.com),\"\" says John Sweeney, executive vice president of retirement and investing strategies at Fidelity Investments. \"\"This way, after a loved one is gone, no one is squabbling over a couch or going, 'Why did person A get more than person B?' If wishes are laid out clearly while the individual is living, they can share the rationale behind the decisions.\"\" Focus on the basic estate plan components. Experts say life insurance, a will, a living will and a durable power of attorney are all important aspects of an estate plan that should be established at the start of the planning process. In the event of an untimely death, life insurance can replace lost earnings, which can be especially beneficial for younger individuals, says Bill Kirchick, a partner with Bingham McCutchen law firm in Boston. \"\"Young people can't afford to die,\"\" he says. \"\"They are going to lose a source of income if something happens to a young couple and they haven't had enough time to accumulate wealth from earnings to put aside in savings or a retirement plan.\"\" Also, the earlier you take out a life insurance policy, the more likely you are to be approved for reduced rates compared to older individuals. Utilize estate planning professionals. To draft these basic estate plans, experts recommend carefully selecting a team of professionals who will educate you and draft what you need based on your individual situation. \"\"Don't feel like you have to jump at the first person whose name is given to you,\"\" Kirchick says. \"\"I think that people should interview two or more attorneys, accountants, trust officers, financial advisors and so on.\"\" According to financial planning experts, the average initial cost for the legal drafting of a will, living will and durable power of attorney documentation is between $500 and $1,200, depending on the family size and location. Continue to review your plan over time. Finally, your estate plan should never be a \"\"one and done thing,\"\" according to Henn. \"\"Every five to seven years, the documents should be readdressed to adapt to significant life events, tax law changes or even the addition of more children,\"\" he says. It is also important to keep tabs on your insurance policies and investments, as they all tie into the estate plan and can fluctuate based on the economic environment. If you have to make revisions, Henn says it will cost as much as it did to create the documents in the first place.\"","You don't need to submit a K-1 form to anyone, but you will need to transcribe various entries on the K-1 form that you will receive onto the appropriate lines on your tax return. Broadly speaking, assets received as a bequest from someone are not taxable income to you but any money that was received by your grandmother's estate between the time of death and the time of distribution of the assets (e.g. interest, mutual fund distributions paid in cash, etc) might be passed on to you in full instead of the estate paying income tax on this income and sending you only the remainder. If so, this other money would be taxable income to you. The good news is that if the estate trust distributions include stock, your basis for the stock is the value as of the date of death (nitpickers: I am aware that the estate is allowed to pick a different date for the valuation but I am trying to keep it simple here). That is, if the stock has appreciated, your grandmother never paid capital gains on those unrealized capital gains, and you don't have to pay tax on those capital gains either; your basis is the appreciated value and if and when you sell the stock, you pay tax only on the gain, if any, between the day that Grandma passed away and the day you sell the stock.","How much debt do you have? Do you have a mortgage? Car loans? At the very least depending on your state 25k will be subtracted So you're left with 75k Let me know so we can make that money work for you","She is very wrong. If the IRA is a traditional, i.e. A pretax IRA (not a Roth), all withdrawals are subject to tax at one's marginal rate. Read that to mean that a large sum can easily push her into higher brackets than normal. If it stayed with her, she'd take smaller withdrawals and be able to throttle her tax impact. Once she takes it all out, and gifts it to you, no gift tax is due, but there's form 709, where it's declared, and counts against her $5.5M lifetime estate exemption. There are a few things in the world of finance that offend me as much as lawyer malpractice, going into an area they are ignorant of.","I would like to bring up some slightly different points than the ones raised in the excellent answers from JoeTaxpayer and littleadv. The estate can be the beneficiary of an IRA -- indeed, as has been pointed out, this is the default beneficiary if the owner does not specify a beneficiary -- but a testamentary trust cannot be the designated beneficiary of an IRA. A testamentary trust that meets the requirements laid out on page 36 of Publication 590 is essentially a pass-through entity that takes distributions from the IRA and passes them on to the beneficiaries. For the case being considered here of minor beneficiaries, the distributions from the IRA that pass through the trust must be sent to the legal guardians (or other custodians) of the minors' UTMA accounts, and said guardians must invest these sums for the benefit of the minors and hand the monies over when the minors reach adulthood. Minors are not responsible for their support, and so these monies cannot be used by the legal guardian for oaying the minors' living expenses except as provided for in the UTMA regulations. When the minors become adults, they get all the accumulated value on their UTMA accounts, and can start taking the RMDs personally after that, and blowing them on motorcycles if they wish. Thus, the advantage of the testamentary trust is essentially that it lets the trustee of the trust to decide how much money (over and above the RMD) gets distributed each year. The minors and soon-to-be young adults cannot take the entire IRA in a lump sum etc but must abide by the testamentary trustee's ideas of whether extra money (over and above the RMD) should be taken out in any given year. How much discretion is allowed to the trustee is also something to be thought through carefully. But at least the RMD must be taken from the IRA and distributed to the minors' UTMA accounts (or to the persons as they reach adulthood) each year. Regardless of whether the Traditional IRA goes to beneficiaries directly or through a testamentary trust, its value (as of the date of death) is still included in the estate, and estate tax might be due. However, beneficiaries can deduct the portion of estate tax paid by the estate from the income tax that they have to pay on the IRA withdrawals. Estate planning is very tricky business, and even lawyers very competent in estate and trust issues fall far short in their understanding of tax law, especially income tax law.","A simple rule of tax is , It doesn't matter where u live or your residence when it comes to income accruing in India . As far as i know , You will need to find out the purchase prices of the inherited land and calculate the index value . Then pay tax on the capital profit (Not sure , I guess its 20%) Example : Original value is 100,000 and the index value is 1,500,000 so the profit will be 650,000 . You pay 20% of the 650k only . For paying minimum tax (Tax saving) There are few sections which gives exemption like purchase some bonds or purchase a house . Its best if you ask a chartered accountant , For this simple case he shouldn't charge much. He should have updated knowledge of the situation and guide you better .","Sit down with professional with knowledge about eldercare issues. Know how your options regarding the property ownership can impact the services they qualify for. Even making a change in ownership can impact their eligibility for certain programs. Some of which can reach back to events in the recent past. Also if you own it but she will get some of the profits when you sell, she could still be considered an owner, which can impact eligibility for programs. This is in addition to the issues with the lender, the IRS, and your estate.","My question is... how is this new value determined? Does it go off of the tax appraised value? The tax assessors values are based on broad averages and are not very useful in determining actual home value. The most defensible valuation outside of a sale is a professional appraisal, real-estate agents may or may not give you reasonable estimates, but their opinions are less valuable than that of a professional appraiser. Additionally, agents hoping to land you as a client (even if you tell them you're not trying to sell) could be motivated to over-estimate. In many instances a few opinions from agents will be good enough, but if there is any contention a professional appraisal will be better. Should you, prior to your death, get an independent appraiser to appraise the value of the property and include that assessment of the properties value with the will or something? The real-estate market fluctuates too much to make having an appraisal done prior to your death a practical approach in most circumstances. You could make arrangements so that an appraisal would be scheduled after your death. Here's a good resource on the topic: Estimating the Value of Inherited Real Estate","Sorry for your loss. Like others have said Debts cannot be inherited period (in the US). However, assets sometimes can be made to stand for debts. In most cases, credit card debt has no collateral and thus the credit card companies will often either sell the debt to a debt collector or collections agency, sue you for it, or write it off. Collecting often takes a lot of time and money, thus usually the credit card companies just sell the debt, to a debt collector who tries to get you to pay up before the statute of limitations runs out. That said, some credit card companies will sue the debtor to obtain a judgement, but many don't. In your case, I wouldn't tell them of your loss, let em do their homework, and waste time. Don't give them any info,and consult with a lawyer regarding your father's estate and whether his credit card will even matter. Often, unscrupulous debt collectors will say illegal things (per the FDCPA) to pressure anyone related to the debtor to pay. Don't cave in. Make sure you know your rights, and record all interactions/calls you have with them. You can sue them back for any FDCPA infractions, some attorneys might even take up such a case on contingency, i.e they get a portion of the FDCPA damages you collect. Don't pay even a penny. This often will extend or reset the statute of limitations time for the debt to be collectable. i.e Ex: If in your state, the statute of limitations for credit card debt is 3 years, and you pay them $0.01 on year 2, you just bought them 3 more years to be able to collect. TL;DR: IANAL, most credit card debt has no collateral so don't pay or give any info to the debt collectors. Anytime you pay it extends the statute of limitations. Consult an attorney for the estate matters, and if the debt collectors get too aggressive, and record their calls, and sue them back!","It goes to the beneficiaries, not necessarily the heirs. Taxation is a bit complicated and depends also on the plan requirements, the new owners' decisions, and the last status of the deceased owner. You should really talk to a tax adviser with the specific details to get a reliable answer that would address your situation. You should also ask about State inheritance taxes for the deceased and the beneficiaries' states. Here's the NOLO article on the issue.","TL; DR version: What you propose to do might not save you taxes, and may well be illegal. Since you mention your wife, I assume that the Inherited IRA has been inherited from someone other than your spouse; your mother, maybe, who passed away in Fall 2015 as mentioned in your other question (cf. the comment by Ben Miller above)? If so, you must take (at least) the Required Minimum Distribution (RMD) from the Inherited IRA each year and pay taxes on the distribution. What the RMD is depends on how old the Owner of the IRA was when the Owner passed away, but in most cases, it works out to be the RMD for you, the Beneficiary, considered to be a Single Person (see Publication 590b, available on the IRS web site for details). So, Have you taken the (at least) the RMD amount for 2016 from this Inherited IRA? If not, you will owe a 50% penalty of the difference between the amount withdrawn and the RMD amount. No, it is not a typo; the penalty (it is called an excise tax) is indeed 50%. Assuming that the total amount that you have taken as a Distribution from the Inherited IRA during 2016 is the RMD for 2016 plus possibly some extra amount $X, then that amount is included in your taxable income for that year. You cannot rollover any part of the total amount distributed into your own IRA and thereby avoid taxation on the money. Note that it does not matter whether you will be rolling over the money into an existing IRA in your name or will be establishing a new rollover IRA account in your name with the money: the prohibition applies to both ways of handling the matter. If you wish, you can roll over up to $X (the amount over and above the RMD) into a new Inherited IRA account titled exactly the same as the existing Inherited IRA account with a different custodian. If you choose to do so, then the amount that you roll over into the new Inherited IRA account will not included in your taxable income for 2016. To my mind, there is no point to doing such a rollover unless you are unhappy with the current custodian of your Inherited IRA, but the option is included for completeness. Note that the RMD amount cannot be rolled over in this fashion; only the excess over the RMD. If you don't really need to spend the money distributed from your Inherited IRA for your household expenses (your opening statement that your income for 2016 is low might make this unlikely), and (i) you and/or your spouse received compensation (earned income such as wages, salary, self-employment income, commissions for sales, nontaxable combat pay for US Military Personnel, etc) in 2016, and (ii) you were not 70.5 years of age by December 2016, then you and your wife can make contributions to existing IRAs in your names or establish new IRAs in your names. The amount that can be contributed for each IRA is limited to the smaller of $5500 ($6500 for people over 50) and that person's compensation for 2016, but if a joint tax return is filed for 2016, then both can make contributions to their IRAs as long as the sum of the amounts contributed to the IRAs does not exceed the total compensation reported on the joint return. The deadline for making such IRA contributions is the due date for your 2016 Federal income tax return. Since your income for 2016 is less than $98K, you can deduct the entire IRA contribution even if you or your wife are covered by an employer plan such as a 401(k) plan. Thus, your taxable income will be reduced by the IRA contributions (up to a maximum of $11K (or $12 K or $13K depending on ages)) and this can offset the increase in taxable income due to the distribution from the Inherited IRA. Since money is fungible, isn't this last bullet point achieving the same result as rolling over the entire $9.6K (including the RMD) into an IRA in your name, the very thing that the first bullet point above says cannot be done? The answer is that it really isn't the same result and differs from what you wanted to do in several different ways. First, the $9.6K is being put into IRAs for two different people (you and your wife) and not just you alone. Should there, God forbid, be an end to the marriage, that part of your inheritance is gone. Second, you might not even be entitled to make contributions to IRAs (no compensation, or over 70.5 years old in 2016) which would make the whole thing moot. Third, the amount that can be contributed to an IRA is limited to $5500/$6500 for each person. While this does not affect the present case, if the distribution had been $15K instead of $9.6K, not all of that money could be contributed to IRAs for you and your wife. Finally, the contribution to a Traditional IRA might be non-deductible for income tax purposes because the Adjusted Gross Income is too high; once again, not an issue for you for 2016 but something to keep in mind for future years. In contrast, rollovers from one IRA into another IRA (both titled the same) can be in any amount, and they can be done at any time regardless of whether there is compensation for that year or not or what the Adjusted Gross Income is or whether there is coverage by a 401(k) plan. There are no tax consequences to rollovers unless the rollover is from a Traditional IRA to a Roth IRA in which case, the distribution is included in taxable income for that year. What is prohibited is taking the entire amount of the $9.6K distribution from an Inherited IRA and rolling it over into your existing IRA (or establishing a Rollover IRA in your name with that $9.6K); ditto for some money going into your IRA and some into your wife's IRA. I expect that any IRA custodian will likely refuse to allow you to carry out such a rollover transaction but will be glad to accept 2016 contributions (in amounts of up to $5500/$6500) from you into existing IRAs or open a new IRA for you. The custodian will not ask whether you have compensation for 2016 or not (but will check your age!); it is your responsibility to ensure that you do not contribute more than the compensation etc. Incidentally, subject to the $5500/6500 maximum limit, you can (if you choose to do so) contribute the entire amount of your compensation to an IRA, not just the take-home pay amount (which will be smaller than your compensation because of withholding for Social Security and Medicare tax, State and Federal income tax, etc).","From an India gift-tax point of view, you can receive unlimited funds from close relatives. So if you are getting this from your Father's Brother or Mother's Brother; then it is not taxable. It is a good idea to document this if the amount is large. It serves as record for future. This can be a simple piece of paper or something that's type on Notarized document.","Pretend it was a gift all along, be happy that you could help out your family when they needed it and remember your lesson for the future.","\"Sure, it's irresponsible for an executor to take actions which endanger the estate. But what about passivity or inaction? Put it another way. Is it the obligation of the executor to avoid making revenue for the estate? Think about it - what a silly idea! Consider a 12-unit apartment building full of rent paying tenants. A tenant gives notice and leaves. So do 4 more. With only 7/12 tenants, the building stops being a revenue center and becomes a massive money pit. Is that acceptable? Heck no! Realistically this will be managed by a property management company, and of course they'll seek new tenants, not stopping merely because the owner died. This situation is not different; the same fiscal logic applies. The counter-argument is usually along the lines of \"\"stuff might happen if you rent it out\"\"... true. But the stuff that happens to abandoned houses is much worse, and much more likely: squatters, teen \"\"urban explorers\"\", pot growers, copper thieves, winter pipe freeze flooding and wrecking interiors, etc. Don't take my word on it -- ask your insurer for the cost of insuring an abandoned house vs. a rented one. Renting brings a chunk of cash that comes in from tenants - $12,000/year on a $1000/mo. rental. And that will barely pay the bills if you have a young mortgage on a freshly purchased house at recent market rates. But on an old mortgage, renting is like printing money. That money propagates first to the estate (presumably it is holding back a \"\"fix the roof\"\" emergency fund), and then to the beneficiaries. It means getting annual checks from the estate, instead of constantly being dunned for another repair. But I don't care about making revenue (outside of putting back a kitty to replace the roof). Even if it was net zero, it means the maintenance is being done. This being the point. It is keeping the house in good repair, occupied, insured, and professionally managed -- fit and ready for the bequest's purpose: occupancy of an aunt. What's the alternative? Move an aunt into a house that's been 10 years abandoned? Realistically the heirs are going to get tired/bored of maintaining the place at a total cash loss, maintenance will slip, and you'll be moving them into a neglected house with some serious issues. That betrays the bequest, and it's not fair to the aunts. Rental is a very responsible thing to do. The executor shouldn't fail to do it merely out of passivity. If you decide not to do it, there needs to be a viable alternative to funding the home's decent upkeep. (I don't think there is one). Excluding a revenue-producing asset from the economy is an expensive thing to do.\"","Up to RS50,000 is exempt from gift taxes. In the US, if one provides more than half the expenses for a relative, they may be a dependent. I don't know the India rules.","No tax consequences to you. Tax consequences to your sister. From your comment: My sister is single, but my wife and I have a son. So we can avail $14000 x3 = $42000 without the need to report it. The remainder ($70000-$42000) = $28000 will be reported against the lifetime exclusion by my sister on her return. Per my understanding, the $28000 is also not subject to any gift tax It is subject to gift tax, and she must submit gift tax return (form 709) to the IRS. On that return she can choose to apply part of the lifetime exemption and reduce the lifetime limit, or pay the tax and keep the lifetime limit. If she applies the exemption, she needs to keep track of it, so that it could be properly applied next time, or when she passes away. The lifetime exemption is in fact intended for the estate tax. But people can chose and apply it to gifts during lifetime and reduce the exemption for estate. This is something of consequence to take into account. Yearly $14K cap is not related to the lifetime exemption and is for gifts per donor per donee. Breaking the gift into several occasions over several years helps reducing the tax burden on the donor without touching the lifetime exclusion and affecting the estate tax. But if you don't have the time...","If a person owes someone money, he can be sued for it, and forced to pay via court order. It is completely irrelevant who that person owes money to (here: a not specified 'estate'), and irrelevant what source they get money from (here: life insurance payout). What makes you think there is any special combination that allows the owing person to not pay their debt? If it would exist, everybody would use it to get out of his debt.","\"A direct gift to a person is never deductible. The kind relative was confusing this with a charitable gift. Which if to a qualified charity can be deducted as part of your itemized deductions. But there, the $14K doesn't enter the equation. But, if your wife is a dog lover, you can donate to the ASPCA, and give her a note saying \"\"in your honor I donated $14K to the ASPCA.\"\" That's a deduction.\"","\"This forum is not intended to be a discussion group, but I would like to add a different perspective, especially for @MrChrister, on @littleadv's rhetorical question \"\"... estates are after-tax money, i.e.: income tax has been paid on them, yet the government taxes them again. Why?\"\" For the cash in an estate, yes, that is after-tax money, but consider other assets such as stocks and real estate. Suppose a rich man bought stock in a small computer start-up company at $10 a share about 35 years ago, and that stock is now worth $500 a share. The man dies and his will bequeaths the shares to his son. According to US tax law, the son's basis in the shares is $500 per share, that is, if the son sells the shares, his capital gains are computed as if he had purchased the shares for $500 each. The son pays no taxes on the inheritance he receives. The deceased father's last income tax return (filed by the executor of the father's will) does not list the $490/share gain as a capital gain since the father did not sell the stock (the gain is what is called an unrealized gain), and so there is no income tax due from the father on the $490/share. Now, if there is no estate tax whatsoever, the father's estate tax return pays no tax on that gain of $490 per share either. Would this be considered an equitable system? Should the government not tax the gain at all? It is worth noting that it would be possible for a government to eliminate estate taxes entirely, but instead have tax laws that say that unrealized gains on the deceased's property would be taxed (as capital gains) on the deceased's final tax return.\"","\"If the account is really only in your father's name and not even \"\"in trust\"\" for you, then you can't touch it, I'm afraid. And taking your family to small-claims court is something of a nuclear option. Hiitting sympathetic family members for a loan may be the best course here;. Anything you do to try to force cooperation is likely to be a \"\"nuclear option\"\" as far as getting back on peaceable terms with your family goes. If you must resort to that, i'd suggest asking whether the local department of youth services, or s religious figure or someone else your father respects, could persuade him to cooperate. He might be more willing to listen to someone else.\"","http://www.irs.gov/publications/p950/ar02.html Gift tax is owed by the giver, not the recipient. So my first guess is that you can make the transfer in your home country, and as the givers will not be subject to US tax, it won't apply at all. You can then transfer the money into the US freely. In any case, there's a lifetime exemption of 1mn USD. So, unless non-US persons don't get the exemption, I can't see the tax being a problem anyway unless there are going to be several more such transfers.","This sounds like my dad in so many ways. Rather than ask questions and listen to vagueness (or lies) from your dad, I suggest you ask to see financial, tax, and legal documentation. Maybe speak to the accountant, lawyer, bank official - whomever - to see where checks were written, transfers, etc. I'm really sorry you are in this situation, but there needs to be a major family meeting immediately. Good Luck.","The house becomes an asset belonging to the estate of Alice. The debt also goes with the estate. The executor of the will should arrange for the debt to be paid off as part of sorting out the estate - they can't just hand out all the assets and leave nothing to pay off the debts. This could be done by selling the house. But in practice, the executor and the mortgage lender may both be happy if Bob takes out a mortgage, uses that to pay the debt, then inherits the house.","If your sister refuses to discuss the matter, I can't imagine how you'll resolve it without going to court. I'd guess that ultimately a judge would say that if you can't all agree on what to do, that the property must be sold and the money distributed between you. As others here have said, you really want to get a lawyer.","You've already counted the cost. It will cost your family ~$10,000 per month until your father dies, or until there's no money left, to enable him to pretend that he is a successful business owner. I'd ask him when he thinks business is going to pick up again. He may be honest with himself. Or, ask him to consider what will happen if he outlives the money that's going out the door. Ask him if he would like to be bankrupt on top of needing to close his business. (I don't view asking those questions as being unloving, by the way.)","IANAL, nor am I a financial professional. However, I've just looked into this because of a relative's death, and I have minor children. I am in the US. First, a named beneficiary on many accounts means that any proceeds are kept out of the estate and do not have to go through probate. That usually means that they're available much more quickly. Second, a beneficiary statement trumps a will. The account may pay out long before a will is even filed with the probate court. Third, you can name a trust as the beneficiary. In this case, because you want to make sure the money goes to your children, that's likely your best option."],"string":"[\n \"Consider consulting a fee-only Certified Financial Planner. It will be worth the money to have your game-plan looked at by somebody who is trained and experienced in such matters, helping you avoid big mistakes and making the right decision for your personal situation. It should cost only a relatively small percentage of the overall inheritance.\",\n \"\\\"**What you need to know about [estate planning](http://money.cnn.com/magazines/moneymag/money101/lesson21/), including why you may need a will and assigning a power of attorney.** **1. No matter your net worth, it's important to have a basic estate plan in place.** Such a plan ensures that your family and financial goals are met after you die. **2. An estate plan has several elements.** They include: a will; assignment of power of attorney; and a living will or health-care proxy (medical power of attorney). For some people, a trust may also make sense. When putting together a plan, you must be mindful of both [federal and state laws](http://corlisslawgroup.com/) governing estates. **3. Taking inventory of your assets is a good place to start.** Your assets include your investments, retirement savings, insurance policies, and real estate or business interests. Ask yourself three questions: Whom do you want to inherit your assets? Whom do you want handling your financial affairs if you're ever incapacitated? Whom do you want making medical decisions for you if you become unable to make them for yourself? **4. Everybody needs a will.** A will tells the world exactly where you want your assets distributed when you die. It's also the best place to name guardians for your children. Dying without a will -- also known as dying \\\"\\\"intestate\\\"\\\" -- can be costly to your heirs and leaves you no say over who gets your assets. Even if you have a trust, you still need a will to take care of any holdings outside of that trust when you die. **5. Trusts aren't just for the wealthy.** Trusts are legal mechanisms that let you put conditions on how and when your assets will be distributed upon your death. They also allow you to reduce your estate and gift taxes and to distribute assets to your heirs without the cost, delay and publicity of probate court, which administers wills. Some also offer greater protection of your assets from creditors and lawsuits. **6. Discussing your estate plans with your heirs may prevent disputes or confusion.** Inheritance can be a loaded issue. By being clear about your intentions, you help dispel potential conflicts after you're gone. **7. The federal estate tax exemption -- the amount you may leave to heirs free of federal tax -- is now set permanently at $5 million indexed for inflation.** In 2013, estates under $5.25 million are exempt from the tax. Amounts above that are taxed up to a top rate of 40%. **8. You may leave an unlimited amount of money to your spouse tax-free, but this isn't always the best tactic.** By leaving all your assets to your spouse, you don't use your estate tax exemption and instead increase your surviving spouse's taxable estate. That means your children are likely to pay more in estate taxes if your spouse leaves them the money when he or she dies. Plus, it defers the tough decisions about the distribution of your assets until your spouse's death. **9. There are two easy ways to give gifts tax-free and reduce your estate.** You may give up to $14,000 a year to an individual (or $28,000 if you're married and giving the gift with your spouse). You may also pay an unlimited amount of medical and education bills for someone if you pay the expenses directly to the institutions where they were incurred. **10. There are ways to give charitable gifts that keep on giving.** If you donate to a charitable gift fund or community foundation, your investment grows tax-free and you can select the charities to which contributions are given both before and after you die.\\\"\",\n \"\\\"Also the will stipulated that the house cannot be sold as long as one of my wife's aunts (not the same one who supposedly took the file cabinet) is alive. This is a turkey of a provision, particularly if she is not living in the house. It essentially renders the house, which is mortgaged, valueless. You'd have to put money into it to maintain the mortgage until she dies and you can sell it. The way that I see it, you have four options: Crack that provision in the will. You'd need to hire a lawyer for that. It may not be possible. Abandon the house. It's currently owned by the estate, so leave it in the estate. Distribute any goods and investments, but let the bank foreclose on the house. You don't get any value from the house, but you don't lose anything either. Your father's credit rating will take a posthumous hit that it can afford. You may need to talk to a lawyer here as well, but this is going to be a standard problem. Explore a reverse mortgage. They may be able to accommodate the weird provision with the aunt and manage the property while giving a payout. Or maybe not. It doesn't hurt to ask. Find a property manager in Philadelphia and have them rent out the house for you. Google gave some results on \\\"\\\"find property management company Philadelphia\\\"\\\" and you might be able to do better while in Philadelphia to get rid of his stuff. Again, I'd leave the house on the estate, as you are blocked from selling. A lawyer might need to put it in a trust or something to make that work (if the estate has to be closed in a certain time period). Pay the mortgage out of the rent. If there's extra left over, you can either pay down the mortgage faster or distribute it. Note that the rent may not support the mortgage. If not, then option four is not practical. However, in that case, the house is unlikely to be worth much net of the mortgage anyway. Let the bank have it (option two). If the aunt needs to move into the house, then you can give up the rental income. She can either pay the mortgage (possibly by renting rooms) or allow foreclosure. A reverse mortgage might also help in that situation. It's worth noting that three of the options involve a lawyer. Consulting one to help choose among the options might be constructive. You may be able to find a law firm with offices in both Florida and Pennsylvania. It's currently winter. Someone should check on the house to make sure that the heat is running and the pipes aren't freezing. If you can't do anything with it now, consider winterizing by turning off the water and draining the pipes. Turn the heat down to something reasonable and unplug the refrigerator (throw out the food first). Note that the kind of heat matters. You may need to buy oil or pay a gas bill in addition to electricity.\\\"\",\n \"\\\"TLDR: There are no to few monetary downsides. The process of settling an estate is called probate. Creditors can make claims against the estate, and assets should stand to pay any debts. If more debts are owed then assets, the beneficiaries are not held liable. Final expenses are usually the first amount paid out in full. So if the estate only contains enough assets to pay final expenses, then the creditors receive nothing. Usually creditors are paid pro-rated if there is not enough to cover debts. For the record, the probate process is greatly simplified if one has a will. Get a will if you don't have one. Life insurance is a bit different though. It passes directly to the beneficiaries and depending on the state could be untouchable by creditors. The same thing could also happen with retirements accounts. With 401K accounts, you could take some of it out, and pay tax on that. You could also roll it into your own account. Property receives a really good benefit. While it does pass through probate the cost basis of real estate is reestablished at the time of death. So if grandpa bought a house for 30K in the 40's, and it is now worth 120K. You inherit a 120K piece of property and when you sell you use 120K as your cost basis not 30K. Any estate taxes are typically paid by the state, not technically the heirs. If there is a 5% estate tax and they are to inherit 100K, they will only receive 95K. They will not receive 100K then be expected to be paid 5K. \\\"\\\"Electrically\\\"\\\" the same, but a large difference in responsibility. The biggest downside is if you have a will fight on your hands. If someone disputes the validity of the will that can incur a lot of legal fees. For small estates, it may not be worth the fight. The next is if any assets do go through probate. The process is lengthy and depending on the executor, they could reduce the size of the estate for charging for their time.\\\"\",\n \"You say that you inherited the money from your mother, and are now paying these people using money that is already yours. Because of that, the money is considered a gift from you to them, and the fact that you are doing it in accordance with your mother's wishes doesn't change that. For it to be considered a bequest from your mother's estate directly to these beneficiaries, it would have had to be handled via the regular by-the-book inheritance procedure and been given to them directly rather than bequeathed to you with informal instructions to pass it on to them. If one gives another person more than $14K in any calendar year, there is the potential gift tax issue to address. I'll explain why it's more a matter of 'addressing' than 'paying', as there are a number of legal ways around this. Form 709 is what you'll use. In the end, you'll report the gifts over $14K but no tax will be due as they'll simply go against your lifetime gifting allowance, currently $5.49M per person. Note, 2 ways to avoid even this obligation. If you have a spouse, you have a combined $28K/yr gifting (per recipient) with no reporting required. Similarly, if the recipient has a spouse, you can gift them $14K. i.e. couple to couple can gift $56K/yr. Last, why not just gift $14K before December, and in January, give the second installment? If I had money coming in separate from a will, I'd be happy that you honored a verbal request, and wouldn't be so greedy as to expect you to risk a dime of your own finances to transfer the funds immediately.\",\n \"You need to keep in mind that there's an exemption amount of more than $5M (five million) dollars for estate tax. Unless you used all of it for gifts during your life time, it will more than cover all of your $70K estate, so there's no need in any additional planning. As to Roth vs Traditional IRA - if you want to leave something to your siblings, leave them the Roth. Why would you give the taxable income to your siblings when you can give them the nontaxable one? Charities are tax exempt anyway.\",\n \"There are two different possible taxes based on various scenarios proposed by the OP or the lawyer who drew up the OP's father's will or the OP's mother. First, there is the estate tax which is paid by the estate of the deceased, and the heirs get what is left. Most estates in the US pay no estate tax whatsoever because most estates are smaller than $5.4M lifetime gift and estate tax exemption. But, for the record, even though IRAs pass from owner to beneficiary independent of whatever the will might say about the disposition of the IRAs, the value of the deceased's IRAs is part of the estate, and if the estate is large enough that estate tax is due and there is not enough money in the rest of the estate to pay the estate tax (e.g. most of the estate value is IRA money and there are no other investments, just a bank account with a small balance), then the executor of the will can petition the probate court to claw back some of the IRA money from the IRA beneficiaries to pay the estate tax due. Second, there is income tax that the estate must pay on income received from the estate's assets, e.g. mutual fund dividends paid between the date of death and the distribution of the assets to the beneficiaries, or income from cashing in IRAs that have the estate as the beneficiary. Now, most of OP's father's estate is in IRAs which have the OP's mother as the primary beneficiary and there are no named secondary beneficiaries. Thus, by default, the estate is the IRA beneficiary should the OP's mother disclaim the IRAs as the lawyer has suggested. As @JoeTaxpayer says in a comment, if the OP's mother disclaims the IRA, then the estate must distribute all the IRA assets to the three beneficiaries by December 31 of the year in which the fifth anniversary of the death occurs. If the estate decides to do this by itself, then the distribution from the IRA to the estate is taxable income to the estate (best avoided if possible because of the high tax rates on trusts). What is commonly done is that before December 31 of the year following the year in which the death occurred, the estate (as the beneficiary) informs the IRA Custodian that the estate's beneficiaries are the surviving spouse (50%), and the two children (25% each) and requests the IRA custodian to divide the IRA assets accordingly and let each beneficiary be responsible for meeting the requirements of the 5-year rule for his/her share. Any assets not distributed in timely fashion are subject to a 50% excise tax as penalty each year until such time as these monies are actually withdrawn explicitly from the IRA (that is, the excise tax is not deducted from the remaining IRA assets; the beneficiary has to pay the excise tax out of pocket). As far as the IRS is concerned, there are no yearly distribution requirements to be met but the IRA Custodial Agreement might have its own rules, and so Publication 590b recommends discussing the distribution requirements for the 5-year rule with the IRA Custodian. The money distributed from the IRA is taxable income to the recipients. In particular, the children cannot roll the money over into another IRA so as to avoid immediate taxation; the spouse might be able to roll over the money into another IRA, but I am not sure about this; Publication 590b is very confusing on this point. All this is assuming that the deceased passed away before well before his 70.5th birthday so that there are no issues with RMDs (the interactions of all the rules in this case is an even bigger can of worms that I will leave to someone else to explicate). On the other hand, if the OP's mother does not disclaim the IRAs, then she, as the surviving spouse, has the option of treating the inherited IRAs as her own IRAs, and she could then name her two children as the beneficiaries of the inherited IRAs when she passes away. Of course, by the same token, she could opt to make someone else the beneficiary (e.g, her children from a previous marriage) or change her mind at any later time and make someone else the beneficiary (e.g. if she remarries, or becomes very fond of the person taking care of her in a nursing home and decides to leave all her assets to this person instead of her children, etc). But even if such disinheritances are unlikely and the children are perfectly happy to wait to inherit till Mom passes away, as JoeTaxpayer points out, by not disclaiming the IRAs, the OP's mother can delay taking distributions from the IRAs till age 70.5, etc. which is also a good option to have. The worst scenario is for the OP's mother to not disclaim the IRAs, cash them in right away (huge income tax whack on her) or at least 50% of them, and gift the OP and his sibling half of what she withdrew (or possibly after taking into account what she had to pay in income tax on the distribution). Gift tax need not be paid by the OP's mother if she files Form 709 and reduces her lifetime combined gift and estate tax exemption, and the OP and his sibling don't owe any tax (income or otherwise) on the gift amount. But, all that money has changed from tax-deferred assets to ordinary assets, and any additional earnings on these assets in the future will be taxable income. So, unless the OP and his sibling need the cash right away (pay off credit card debt, make a downpayment on a house, etc), this is not a good idea at all.\",\n \"First off, very sorry for your loss. I lost my father a few years ago and I know it can be tough. My father also had a lot of credit card debt. They attempted to collect the debt from my mother, who was no longer on the account (for over a decade). It was just an attempt to recoup as much money as they could before dealing with a probate court. As others have said, it depends on your state law. You will want to talk to a lawyer, figure out who is going to be the executor of the estate, and determine the next steps in starting to settle debts that your father had. If you want to take possession of the house, then you will likely need to work with the executor and perhaps purchase the house from the estate (which would then use the money to pay off debts).\",\n \"A more recent article on inheritance taxes than the one cited by @JohnBensin says that Maryland does not charge inheritance tax on inheritances received from parents (and other close relatives as well). Thus, there is no inheritance tax due to Maryland on your inheritance, and of course, estate tax (both Federal and State) is imposed on the estate and payable by the estate, and thus should have been taken into account by the executor before determining the amount to be divided among the children. If the executor screwed up on this point, some of the inheritance may have to be returned to the estate so that the estate can pay the taxes due, or be paid directly to the Federal Government and/or the State of Maryland on behalf of the estate. Some part of the inheritance might be taxable income to you if it came in the form of an Inherited IRA on which Federal (and possibly State) taxes have to paid on the (taxable part of) any distribution from the IRA including the Required Minimum Distribution that must be made from the IRA each year. (There is also a 50% penalty for not taking at least the RMD each year). Note that the value of the IRA is not taxable income in the year of inheritance, just the money taken as a distribution. Some people liquidate the IRA within 5 years, as used to be required for non-spouse inheritors under earlier tax law, and thus end up paying a lot more income tax than they would have to pay if they went the RMD route. If your uncle took the help of a lawyer in winding up your father's estate, you are probably OK in that all the rules were likely followed, but if it was a do-it-yourself job (or you don't trust your uncle not to screw it up anyway!), then, as John Bensin has already told you, you should certainly consult a tax professional in Maryland to make sure you don't run afoul of tax authorities.\",\n \"As long as the relative in the UK is not a US citizen and isn't considered domiciled in the US, there will be no estate taxes imposed by the US. You can see a much lengthier explanation on this subject here. The summary is that as a US citizen or resident, you can't circumvent estate taxes by moving yourself or your money abroad, but a relative who genuinely doesn't have US ties (other than inheritors located in the US) will be covered through applicable tax treaties (the UK does have an applicable tax treaty and applicable estate taxes as Ganesh points out).\",\n \"\\\"Get a will completed ASAP. It sounds like you are not doing a standard inheritance, so you will want to have it down in writing. If money is an issue, I would research were you can get a will done for cheap, but I would avoid doing a \\\"\\\"fill out the form yourself\\\"\\\" kind of a thing given that this is non-standard.\\\"\",\n \"\\\"Debts do not inherit to the children. You are absolutely not liable for your parent's debt, in any way whatsoever. ** Collection agents will lie about this; tricking you is their job, and your job is to tell them Heck no, do I look like an idiot? When a person dies, all their personal assets (and debts) go to a fictitious entity called the Estate. This is a holder for the person's assets until they can be dispositioned finally. The estate is managed by a living person, sometimes a company (law firm), called an Executor. Similar to a corporation which is shutting down business, the Executor's job is to act on behalf of the Estate, and in the Estate's best interest (not his own). For instance he can't decide, in his capacity as executor, to give all the estate's money to himself. He has to loyally and selflessly follow state law and any living-trust or wills that may be in place. This role is not for everyone. You can't just decide \\\"\\\"la la la, I'm going to live in their house now\\\"\\\", that is squatting. The house is an asset and someone inherited that, as dictated by will, trust or state law. That has to be worked out legally. Once they inherit the house, you have to negotiate with them about living there. If you want to live there now, negotiate to rent the house from the estate. This is an efficient way to funnel money into the estate for what I discuss later.** The Estate has assets, and it has debts. Some debts extinguish on the death of the natural person, e.g. student loans, depending on the contract and state law. Did you know corporations are considered a \\\"\\\"person\\\"\\\"? (that's what Citizens United was all about.) So are estates - both are fictitious persons. The executor can act like a person in that sense. If you have unsecured debt, how can a creditor motivate you to pay? They can annoy and harass you. They can burn your credit rating. Or they can sue you and try to take your assets - but suing is also expensive for them. This is not widely understood, but anyone at any time can go to their creditors and say \\\"\\\"Hey creditor, I'm not gonna pay you $10,000. Tough buffaloes. You can sue me, good luck with that. Or, I'll make you a deal. I'll offer you $2000 to settle this debt. What say you? And you'll get one of two answers. Either \\\"\\\"OK\\\"\\\" or \\\"\\\"Nice try, let's try $7000.\\\"\\\" If the latter, you start into the cycle of haggling, \\\"\\\"3000.\\\"\\\" \\\"\\\"6000.\\\"\\\" \\\"\\\"4000.\\\"\\\" \\\"\\\"5000. \\\"\\\"Split the difference, $4500.\\\"\\\" \\\"\\\"OK.\\\"\\\" This is always a one-time, lump sum, one-shot payoff, never partial payments. Creditors will try to convince you to make partial payments. Don't do it. Anyone can do that at any time. Why don't living people do this every day? How about an Estate? Estates are fictitious persons, they don't have a \\\"\\\"morality\\\"\\\", they have a fiduciary duty. Do they plan on borrowing any more money? Nope. Their credit rating is already 0. They owe no loyalty to USBank. Actually, the executor's fiduciary duty is to get the most possible money for the assets, and settle the debts for the least. So I argue it's unethical to fail to haggle down this debt. If an executor is \\\"\\\"not a haggler\\\"\\\" or has a moral issue with shortchanging creditors, he is shortchanging the heirs, and he can be sued for that personally - because he has a fiduciary duty to the heirs, not Chase Bank. Like I say, the job is not for everyone. The estate should also make sure to check the paperwork for any other way to escape the debt: does it extinguish on death? Is the debt time-barred? Can they really prove it's valid? Etc. It's not personal, it's business. The estate should not make monthly payments (no credit rating to protect) and should not pay one dime to a creditor except for a one-shot final settlement. Is it secured debt? Let them take the asset. (unless an heir really wants it). When a person dies with a lot of unsecured debt, it's often the case that they don't have a lot of cash lying around. The estate must sell off assets to raise the cash to settle with the creditors. Now here's where things get ugly with the house. ** The estate should try to raise money any other way, but it may have to sell the house to pay the creditors. For the people who would otherwise inherit the house, it may be in their best interest to pay off that debt. Check with lawyers in your area, but it may also be possible for the estate to take a mortgage on the house, use the mortgage cash to pay off the estate's debts (still haggle!), and then bequeath the house-and-mortgage to the heirs. The mortgage lender would have to be on-board with all of this. Then, the heirs would owe the mortgage. Good chance it would be a small mortgage on a big equity, e.g. a $20,000 mortgage on a $100,000 house. Banks love those.\\\"\",\n \"\\\"You are opening up a large can of worms with how you are doing this. In very positive years, you'll have taxes based on your income, potential Alternative Minimum Tax (AMT), etc. Each of the family members may be in a lower bracket, perhaps even needing to pay zero on capital gains. Even if you are 100% honest, if you are subject to a lawsuit, these funds are all in your name, and you'd be in a tough situation explaining to a court that these assets aren't \\\"\\\"really\\\"\\\" yours, but belong to family. And last, the movement of large chunks of money needs to be accounted for, and can easily run afoul of gifting rules. As mhoran stated, a Power of Attorney (POA) avoids this. When my father-in-law passed, I took over my mother-in-law's finances, via POA. I sign in to my brokerage account, and her accounts are there. I can trade, deal with her Individual Retirement Account (IRA) Required Minimum Distributions (RMDs) each year, and issue checks to her long term care facility. It's all under her social security number - our money isn't intermingled.\\\"\",\n \"If your sister paid rent, she was a tenant. There are laws to protect tenants, but those depend on what country, state, and city you live in. In most places in the US (maybe all), she was owed more than 2 days notice. Normally, the local housing authority could help her figure out what her rights are, but since this already happened, they may not be able to do much (depends on the local laws). It's worth asking them anyway. I don't know how partial ownership of the property would affect things if your sister was a partial owner. If the 30 year old will was the most recent document, then that's how the estate will be distributed. There are no laws in the US requiring a will to be fair. An executor's role is to carry out the will. Being an executor does not mean one can choose to unilaterally sell the property in the estate without permission of other heirs. You'll need to speak with a lawyer if you think they're breaking the will by selling property that you have partial ownership of. But since the sale is already done, reversing it would be slow and probably very expensive in legal fees. If it's a small estate, you'll have to judge whether a lawyer is worth the money and the family's animosity. Also, if the estate had debt, debt must be paid before property is distributed to the heirs, so that could also change what your sisters had to do. I'd suggest first asking your sisters to tell you about what they've done to execute the will, and what they do in the future.\",\n \"\\\"First, when a debt collector says, \\\"\\\"It's to your advantage to give me money now\\\"\\\", I'd take that with a grain of salt. My ex-wife declared bankruptcy and when debt collectors couldn't find her, they somehow tracked me down and told me that I should tell her that it would be to her advantage to pay off this debt before the bankruptcy went through. That was total nonsense of course. The whole point of bankruptcy is to not have to pay the debt. Why would you pay it just before it was wiped off the books? (Now that I think of it, I'm surprised that they didn't tell me that I should pay her debts.) As others have noted, this would be controlled by state law. But in general, when someone dies any debts are payed from the assets of the estate, and then whatever is left goes to the heirs. If nothing is left or the debts exceed the assets, then the heirs get nothing, but they don't have to pay somebody else's debts. I don't see how you could \\\"\\\"put the house under your name\\\"\\\". If he left the house to you in his will, then after any debts are settled in accordance with state law, the house would transfer to you. But you can't just decide to put the house in your name outside of the legal inheritance process. If you could, then people could undermine a will at any time by just deciding to take an asset left to someone else and \\\"\\\"put it in their name\\\"\\\". Or as in this case, people could undermine the rights of creditors by transferring all assets to themselves before debts were paid. Even if there's some provision in your state for changing the name on a deed prior to probate to facilitate getting mortgages and taxes paid or whatever, I would be quite surprised if this allowed you to shelter assets from legitimate creditors. It would be a gaping loophole in inheritance law. Frankly, if your father's debts are more than the value of his assets, including the value of the house, I suspect you will not be able to keep the house. It will be sold to pay off the creditors. I would certainly talk to a lawyer about this as there might be some provision in the law that you can take advantage of. I'll gladly yield on this point to anyone with specific knowledge of New Jersey inheritance law.\\\"\",\n \"\\\"The Trustee has allowed me to act as his \\\"\\\"agent\\\"\\\", continuing to pay bills, and take care of much of the administrative affairs for my mother's estate since I did all of it for years before she passed away. I was not paid for any of this work. ... The expenses were more than $30K last year, and there is still a punch list to go this year. The trust should reimburse your expenses and deduct them on the trust tax return. Since the Trust owned the property in 2015, and I will receive ownership this month, can last year's expenses incurred for the Trust be deducted again future income for my property this year? Not exactly. The trust will file its own tax return and will report the income/loss attributed to the beneficiaries per the trust rules. What is attributed to you will flow to your Schedule E. From there you own it and if it is a passive activity where the loss is limited - you can carry it forward and offset with future gain. The trustee will have to deal with all the paperwork. Do 1099-misc forms need to be filed for the contractors who worked to get it ready for rental? It is my understanding that since 2010 (and before 2010) landlords who are not in real-estate trade or business are not required to send out 1099. But it won't hurt if you do, also. In any case - for all of these issues you should talk to a tax adviser (EA/CPA licensed in your State).\\\"\",\n \"There can be Federal estate tax as well as State estate tax due on an estate, but it is not of direct concern to you. Estate taxes are paid by the estate of the decedent, not by the beneficiaries, and so you do not owe any estate tax. As a matter of fact, most estates in the US do not pay Federal estate tax at all because only the amount that exceeds the Federal exemption ($5.5M) is taxable, and most estates are smaller. State estate taxes might be a different matter because while many states exempt exactly what the Federal Government does, others exempt different (usually smaller) amounts. But in any case, estate taxes are not of concern to you except insofar as what you inherit is reduced because the estate had to pay estate tax before distributing the inheritances. As JoeTaxpayer's answer says more succinctly, what you inherit is net of estate tax, if any. What you receive as an inheritance is not taxable income to you either. If you receive stock shares or other property, your basis is the value of the property when you inherit it. Thus, if you sell at a later time, you will have to pay taxes only on the increase in the value of the property from the time you inherit it. The increase in value from the time the decedent acquired the property till the date of death is not taxable income to you. Exceptions to all these favorable rules to you is the treatment of Traditional IRAs, 401ks, pension plans etc that you inherit that contain money on which the decedent never paid income tax. Distributions from such inherited accounts are (mostly) taxable income to you; any part of post-tax money such as nondeductible contributions to Traditional IRAs that is included in the distribution is tax-free. Annuities present another source of complications. For annuities within IRAs, even the IRS throws up its hands at explaining things to mere mortals who are foolhardy enough to delve into Pub 950, saying in effect, talk to your tax advisor. For other annuities, questions arise such as is this a tax-deferred annuity and whether it was purchased with pre-tax money or with post-tax money, etc. One thing that you should check out is whether it is beneficial to take a lump sum distribution or just collect the money as it is distributed in monthly, quarterly, semi-annual, or annual payments. Annuities in particular have heavy surrender charges if they are terminated early and the money taken as a lump sum instead of over time as the insurance company issuing the annuity had planned on happening. So, taking a lump sum would mean more income tax immediately due not just on the lump sum but because the increase in AGI might reduce deductions for medical expenses as well as reduce the overall amount of itemized deductions that can be claimed, increase taxability of social security benefits, etc. You say that you have these angles sussed out, and so I will merely re-iterate Beware the surrender charges.\",\n \"\\\"From the UK side, the estate may be liable to \\\"\\\"inheritance tax\\\"\\\" depending on its size - but this will be paid by the estate itself before any payment is made to you, so if the estate makes a payment to you, the whole of it is yours to keep. The tax thresholds are a bit complicated and due to become more so, but at a minimum any estate under £325,000 will be exempt. If your spouse died first without using their entire allowance, or for deaths after 6th April 2017 where a family home is being left to direct descendants, the allowance is higher. Anything above the threshold is subject to 40% tax, which will be paid be the person dealing with the estate before they can distribute anything else.\\\"\",\n \"I understand $14k/yr $5.4M max This isn't the right way to say it. Your dad has a $5.4 million estate tax exclusion that can be used for gift tax. In addition to that (not instead or as part of), he and his wife each have a $14k/year gift tax exclusion. So if you aren't paying for two years from today, you actually have three years of gift tax exclusion: 2017; 2018; 2019. So that's 3 * 2 * $14k = $84k that he (and his wife) can give you without using any of the estate tax exclusion. But I give my cousin/dad $430k from the mortgage According to this, you don't want your dad to give you any money. You want to pay the entire $430k. In that case, don't file gift tax forms. He's not giving you money. He's loaning you money. I agree with the others. The cleanest solution is for your cousin to loan you money to buy the house from your dad. Pay a lawyer (or have your cousin/dad do it) so that it's legally written as a mortgage and you can get your interest deduction. You start paying off the loan in two years. Until then, interest accrues. So instead of a $430k debt, you'd owe something like $470k. Maybe more if your cousin pays the property taxes as well. Your cousin is out $430k plus possibly property taxes, but apparently he can afford that. You have a house and a mortgage. Your dad has money to buy his Florida house. Note that if your dad wanted to give you money, he could. He could collect $346k from you (borrowed from your cousin) and give you $28k equity immediately and then two more payments in 2018 and 2019. But that assumes that $346k is enough for him to buy his Florida house. If not, just do the mortgage. He can give you money by check which you can send to your cousin if he wants to do that.\",\n \"My family members, particularly my aunt (his daughter), are telling me that when my grandpa dies they are taking my car. Bring this up with Grandpa. If this is what he wants to have happen, then help him make it happen before you finish paying $12,000 on a car worth only $6,000. Let the Aunt and other relatives deal with the remaining $12,000. If that isn't what he wants to have happen, then work out how you and he can legally make sure that what he wants to have happen actually happens. If the Aunt or others bring it up, make sure they understand that you still owe $12,000 on the car, and if they get the car they also get the loan. If they refuse to pay the loan then make sure they know you will cooperate with the bank when they attempt to repossess the car - up to and including providing them with keys and location. This will hurt your credit, and you will be on the hook for the remaining portion of the loan, but you at least won't have to deal with all of it - they'll sell it at auction and your loan amount will fall a little. But the best course of action is to work with Grandpa, and make sure that he understands the family's threats, how that will affect you since you're on the loan, and what options you'd like to pursue.\",\n \"In the US, an opposite-sex spouse who is a citizen as well, can receive an unlimited inheritance with no tax due from the estate. IRAs and retirement accounts which were pretax accounts, are inherited by a spouse who can then either treat the accounts as her own, i.e. even co-mingle with current IRAs, or treat as inherited IRA, and begin RMDs. In which case tax is due to the extent the money wasn't already taxed. I see the edits above. No tax should have been due. Mom can gift the kids up to $14,000 per year per kid with no paperwork at all. And another $14K to the kid's spouses or grandchildren. Above this number, a form 709 is used to tap into the lifetime exclusion. As it stands now, it's unclear why any tax would have been due in the first place.\",\n \"\\\"Yes, an estate plan can be very important. Estate planning - typically attempts to eliminate uncertainties over the administration of a probate and maximize the value of the estate by reducing taxes and other expenses. Guardians are often designated for minor children and beneficiaries in incapacity. In general, your \\\"\\\"estate\\\"\\\" includes all of your assets, less all debt, plus death benefits from all life insurance policies not held in an irrevocable trust. The biggest reason to have an estate plan is to make sure that your personal values about both medical and personal finance financial matters are honored in the event that death or incapacity prevents you from acting for yourself. In addition, tax minimization is a further and very important goal of estate planning for persons with taxable estates. To create an estate plan for yourself or update an existing plan, you will most likely need the services of an estate planning attorney. When you consult with an estate planning attorney, the attorney considers how you want assets distributed to heirs, what taxes might your estate be liable for and whether there are tax-minimization strategies that would be appropriate and appealing; what your preferences and values are with respect to the management of medical and financial affairs in the event of incapacity; and any complicating family issues. To deal with these issues, your attorney will need full and accurate information about you, including: When an estate plan is created, be sure you understand what the attorney is saying. Estate planning ideas can be confusing. It is also appropriate and expected for you to ask about the attorney's fee for any legal service. Some articles and resources: Get ahead of your estate planning Estate Planning by CBA\\\"\",\n \"You're driving a car worth about $6000 which has a $12,000 loan against it. You're driving around in a nett debt of $6000. The best thing your grandfather could do for you, if possible, is to take your name off both the title and the loan, refinancing the car in his name only. If possible while still letting you drive the car. When he dies, you will be out of a car, but also out of a $12,000 debt which I'm sure you could do without. Okay, the best thing your grandfather could do, from your wallet's point of view, is paying off the loan for you and then taking his name off the title.\",\n \"a) He can loan you the money tax free he can even give you and your wife 29k a year tax free. Many people do a loan for lets say 100k and then they forgive the load 14.5k a year to avoid the taxes. b) Yes when they see that deposit they will give you a hard time potentially. I got a hard time for my Real Estate tax refund. c) Just putting stress on the family potentially.\",\n \"As noted above, this is likely going to need (several) lawyers to straighten out. I am not a lawyer, but I think one should be retained ASAP. However, in the meantime: The authorized user should not be making any charges. Continuing to do so at this point may be a criminal offense. For the protection of any other heirs, this should be brought to the attention of the credit card issuer and law enforcement authorities. As it stands, the account holder's estate will be liable for the full debt, and the authorized user's estate would be untouched. Of course, all this could change if other heirs challenge the estate and file civil suits, in which case it's likely that both estates will be eaten up with legal fees anyway.\",\n \"You have asked this question but provide very little information. As others have stated, what country are you in? Was there a will or any other agreement? Basically any estate will go to the beneficiaries once all debtors have been paid off. How this is done will largely depend on which country/state/region you are in and what documentation was in place at the time of death. You might want to check out this website for details on passing away without a will: http://www.nolo.com/legal-encyclopedia/how-estate-settled-if-theres-32442.html\",\n \"If your father is still able to make financial decisions and sign contracts, I see a better option. Have your father borrow against his equity to finance the renovation. Example: the house is worth 400 now. He can borrow 100 against that. He spends it on the addition, making the house worth 500, with the same 400 of equity as before. (In some cases, spending 100 might add 150 to the house value, but let's assume here the increase is just what was spent.) When he dies, the mortgage has to be repaid. If he has no other money (that the two of you would otherwise split) then the mortgage has to be repaid by the two of you putting in cash. So you pay your brother 250 (half the new total value of the house) but he gives 50 of that to the bank for the mortgage. You also give 50 of your own money to the bank for the mortgage. Net result: your brother has 200 (the same as if he had inherited half the unimproved house), and you have a 500 house after paying out 300. Your gain is also the same as if the house was unimproved. Now if the house went up 150 by spending 100, or went up 60 by spending 100, you and your brother would also be sharing this profit or loss. If you don't want that to happen, you will need a different agreement. The advantage of the approach I'm suggesting is you just need one appraisal after your father dies. Not accounted for in this is that you lived (without paying rent) in your father's house for some time, and that you worked (without being paid) as a caregiver to your father for that time. Some families might think those two things balanced, others might feel you need to be compensated for caring for him, and others that you need to compensate the others for your benefit of living in the large house. Be sure to discuss this with your brother so that you agree in advance whether a plan is fair or not.\",\n \"Don't pay it, see a lawyer. Given your comment, it will depend on the jurisdiction on the passing of the house and the presence of a will or lack thereof. In some states all the assets will be inherited by your mom. Debts cannot be inherited; however, assets can be made to stand for debts. This is a tricky situation that is state dependent. In the end, with few assets and large credit card debt, the credit card companies are often left without payment. I would not pay the debt unless your lawyer specifically told you to do so. Sorry for your loss.\",\n \"It is possible for him to get a loan against the house as long as the deeding all takes place at the same time as the loan is closing. Basically you and your brother will both have paperwork to sign, and the title company will not send out checks until the loan funds from the mortgage company. For that deeding to take place, the estate will generally have to be fully settled. That can take time, but you might wish to retain a lawyer to be certain your interests are completely protected. Many people feel like getting legal representation will strain family relationships, but I find the opposite to be true. They often grease the wheels and get the process finished quickly and fairly which ultimately reduces such strain. I would view it as a good sign if he is paying off large debts, because that means he will be in a better position to take a mortgage to pay you your share, but that assumes he is acting in good faith.\",\n \"I just went through this and life insurance money generally does not go into Probate. However, since there was no beneficiary, you will have to ask the probate court. I would advise you not to spend any of the money yet. Make a meeting with the probate court in the county where they lived. You will need the death certificate and the will. If you do not have a will, the estate generally does not need to go into probate. But if it does, then they will definitely let you know what to do with the insurance money. Just make sure you use the estate accounts to pay off all of his debts before you distribute the left over money. The entire process should take an absolute minimum of 6 months.\",\n \"@foreverBroke - Ok, here are the questions - Is mom's house paid for in full? If there's any mortgage, is it current? If not, what are the numbers? Is it underwater, i.e. owe more that it's worth? Will the tax department talk to you and negotiate? Maybe let you make payments over time? If you have that kind of cash flow, the slower payment may keep you from killing your savings. We don't know your age. I do know that the early years savings, often around the first 8-12 years, are the funds that turn into half your final retirement savings due to compounding. Obviously, this a tough time emotionally, what I don't want is for you to make a financial move that is a temporary fix. Not knowing the rest of the story limits my answer. If my mom needed my help I'd want to understand the whole picture. Not that I'm a fan, but have you considered a reverse mortgage? It may be a way to keep the house but give up the equity, or some of it, on her moving out or passing.\",\n \"As Stan's answer recommends, don't give them the money; make the checks payable to the credit-card company or the bank that issued the student loan so that those debts get repaid for sure, or else you run the risk of that money also going the way of all flesh and the debt remaining untouched. Next, file a gift tax return (Form 709, which is not filed along with Form 1040; all 709s go to one IRS office as described in the instructions), saying that you gave your son and daughter-in-law gifts of $20K each (say) and that you want to have $12K (excess of each gift over and above the annual exclusion of $14K per recipient) count against your combined lifetime estate tax and gift tax exclusion (which is currently over $5M). So, no gift tax needs to be paid. (As JoeTaxpayer's comment points out, if you are married and your spouse is willing to join in this, then as much as $56K can be given without anyone having to file Form 709). Then, change your will to reduce your son's and daughter-in-law's inheritance by $40K. If and when they return the money (as a gift to you), change your will back by removing the reduction. If the repayment is is a lump sum, the gift tax return stratagem can be used by your son and daughter-in-law while if they pay back over two years, no gift tax return need be filed. So., that's it. No interest to be paid by anybody, no gift taxes to be paid by anybody, no income to be reported on any tax return, etc. This will work unless you have serious concerns about reducing your combined lifetime estate tax and gift tax exclusion by $12K, and if you do, you can afford to hire plenty of lawyers to advise you on better strategies.\",\n \"There are two different tax returns you'll be doing: one is for her, until the day of her death. The other is for the estate. The personal one you could probably do on your own, it's nothing different from the one for a living person, except for the cut-off date in the middle of the year. The estate tax return may be a bit more nuanced, since it is a trust return and not an individual return, and is done under a different set of rules. I'd suggest talking to a tax professional who'd help you. Your estate executioner should be doing the estate tax return (or hiring someone to do it). Sorry for your loss.\",\n \"Maryland is one of only two states (as of the writing of that article) that collects both inheritance tax and estate tax. These are two different issues, and it's important to differentiate between them sufficiently. I can't provide you a definitive answer, so consult a tax professional in Maryland for specific details to make sure you don't run afoul of tax authorities. This blog has a nice summary of the differences, as of 2012: The estate tax is assessable if more than one million dollars passes at death. The total dollar value of the property determines whether there is an estate tax. The inheritance tax is not dependent upon the value of the estate, as even very small estates can have inheritance tax imposed. Inheritance tax is assessed on property given to a person who is further removed in relationship than a sibling. Thus, for example, a 10% tax will be assessed on property passing to a cousin, niece, nephew or friend. Another section of the page states, as an example: If you give someone $10,000 in cash, the inheritance tax will simply reduce the amount inherited – in this case to $9,000. There are several other exemptions to the inheritance tax in addition to the immediate family exception discussed above: Property that passes from a decedent to or for the use of a grandparent, parent, spouse, child or other lineal descendant, spouse of a child or other lineal descendant, stepparent, stepchild, brother or sister of the decedent, or a corporation if all of its stockholders consist of the surviving spouse, parents, stepparents, stepchildren, brothers, sisters, and lineal descendants of the decedent and spouses of the lineal descendants. Putting this information together makes me think that the inheritance wouldn't be taxable in your case because it's a cash inheritance from an immediate family member, so it qualifies for one of the exemptions. Since I'm not a tax professional, however, I can't say that for sure. Hopefully these pages will give you enough of a foundation for when you talk to a professional.\",\n \"You can perfectly well manage their wealth without transferring their money into your account first. Just make them open their own account on their name then ask them for credentials and then manage their money from within their own account. That way everyone will be taxed according to their wealth (which is probably advantageous but you probably have to help them with the paperwork) and it is clear at every time what belongs to whom and your relatives can at every time access their wealth. These are big advantages (for them). This keeps you at the role of an adviser (a very active one though) which should have almost zero legal ramifications for you unless you try to deceive your relatives. You may want to shift wealth between accounts to minimize tax burdens, but that comes at the risk that should the family relations get worse this might result in anger. You could open up a registered society, all members getting shares and voting rights, making you the CEO, but that should be a lot of paperwork and maybe only a good idea for large amounts of money. If you decide to transfer money between accounts of different persons this is like a gift. It might invoke a gift tax in your area. All in all, I strongly advise you to make them all open up their own accounts and then just operate the accounts and manage their wealth in their name. Sell it to them as the solution that retains them maximum ownership.\",\n \"\\\"Assuming United States; rules may be wildly different elsewhere... The \\\"\\\"family loan\\\"\\\" trick essentially lets you amortize a gift over multiple years of gift allowance and hopefully dodge gift tax, at the cost of having to pay income tax on the interest you must charge on the loan. The main advantage is that it lets you transfer all the money up front, rather than in $17,000-a-year-per-person-per-person chunks. Let's take the normal case first. Any one person can give any one person up to a specified amount (currently $17k, I believe,) without incurring gift tax. Note that this is counted per person, not per household; you and your spouse could each give $17k per year to each of your son and his spouse under this rule, adding up to $68k per year total. The family loan dodge consists of making them a loan of the money at the mandated minimum interest rate to make it a legal loan (something like 0.3% APR last time I looked), setting the repayment schedule so their payments each year including interest come out to less than you can gift them with tax-free, and then making that gift by paying (yourself) those payments on their behalf. You do need to pay income tax on the portion of those payments that represents interest income, but at that low rate this is a minor cost for the convenience. You'd also want to set up your will to cover what happens if you die with them still owing money on the loan. And this, I believe, is where you will really need expert advice if you go this route, to minimize the government's cut at that time. There may be better answers. If you are talking about this much money, you owe it to yourself to purchase expert advice from someone who has training and experience n this area, rather than taking free advice from the Internet that is likely to cost you much more in the long run. This is a situation where you can't afford not to hire a pro. (For example, I have no idea how trusts might or might not fit your needs.)\\\"\",\n \"To answer the last question first: there are no tax consequences to you. If your family member is married (or has a joint owner of the funds), and so are you, each of them can give each of you the $14K annual gift, which would be $56K. The remainder of the $70K would be subject to either (1) Gift Tax for the tax year in which it was given, or (2) applied to the lifetime exclusion. Either way would require filing a form with the IRS.\",\n \"Sorry for your loss. I am not a lawyer and this isn;t legal advice -- which I am not licensed to give. But I've had to deal with some debt situations of my own. I think the worst case scenario is the creditor can get a judgment, but that won't be against you unless you were a co-signor. The collectors are going to prey on your decency to make you feel like you should pay it, but you are under no legal obligation to do so. If they file in court and then win a judgment, they may be able to collect on the assets of the estate. You mention no money but you mention a house. That is an asset with value, and putting it in your name isn't going to do much. You should see a lawyer on this, because it seems logical that they could collect on the value of the house at the time of the death, and even if it was willed to you it can still be attacked to pay the debt. Here is a good write-up on NJ death and debt and whether it can be inherited by the adult children: https://www.atrbklaw.com/bankruptcy-resources/83-articles/103-can-you-inherit-your-dead-parent-s-debts\",\n \"\\\"The page you linked shows \\\"\\\"Federal changes eliminated Florida's estate tax after December 31, 2004\\\"\\\" but no, estates are settled by the decedent's executor in the decedent's state. You receive an inheritance net of estate tax if any was due.\\\"\",\n \"First, the basis is what was paid for the house along with any documented upgrades, any improvements not consider maintenance. Any gain from that point is taxable. This is the issue with gifting a house before one passes. It's an awful mistake. The fact that there was a mortgage doesn't come into play here nor does the $15K given away. Your question is great, and the only missing piece is what the house cost. Keep in mind, depending on the state, you MIL may have gotten a step-up on the passing of her husband. On a very personal note - my grandparents bough a family house. 4 apartments. 1938 at a cost of $4000. My grandmother transferred 1/2 share to my father well before she died. And before my father's death it was put into my mother's name. Now that she's in her last years, I explained that since moved it to my sister's name already, there's no step up in basis. This share is now worth over $600,000, and after 4 deaths, no step up. When my sister sells, she will have a gain on nearly 100% of the sale price. In my opinion, there's a special place in hell for lawyers that quit claim property like this. For a bit of paperwork, the house could have been put into a trust to avoid probate, avoid being an asset for medicaid, and still get the step up. Even a $2000 cost for a good lawyer to set up a trust would yield a return of nearly $100,000 in taxes avoided. (And as my sister's keeper, I'd have paid the $2,000 myself, no issue that she gets the house. She needs it, I don't. And when the money's gone, I'm all she has anyway.)\",\n \"Owing money to family members can create serious problems. Taking out a purchase-money mortgage to pay your sister for her share is the best way to avoid future friction and, possibly, outright alienation.\",\n \"I strongly doubt that being executor will make the assets of the estate vulnerable to a suit against him personally. The estate is it's own separate legal entity with its own TIN. Only creditors against the estate itself can make claims against it and after all creditors are paid, then the balance is distributed in accordance with the terms of the will. Unless he has commingled assets and treated estate assets as his own, the legal separation should be quite strong. Whether his personal assets are at risk, remember that the opposition will likely overstate their case to try to scare him into settling. If the business was organized as an LLP or LLC, his personal assets should be pretty safe. If it was a sole proprietorship, he has occasion to worry.\",\n \"\\\"The text of the Uniform Transfers to Minors Act states (Section 14, paragraph a): A custodian may deliver or pay to the minor or expend for the minor's benefit so much of the custodial property as the custodian considers advisable for the use and benefit of the minor, without court order and without regard to (i) the duty or ability of the custodian personally or of any other person to support the minor, or (ii) any other income or property of the minor which may be applicable or available for that purpose. Unfortunately, it is pretty hard to make the case that giving the money to her siblings is for the \\\"\\\"use and benefit\\\"\\\" of your daughter. However, when your daughter reaches the age of maturity, any money left in the UTMA account becomes hers. She, at that time, could give money to her siblings, if she chooses. Perhaps you and your father could talk to her about your father's wishes for this money, and that would show her that she should do so at that time. If you don't follow these rules, then your daughter or your father could sue you at any point in the future.\\\"\",\n \"The creditors will not be able to go after his father's estate (assuming the father had nothing to do with the business), but at some point, the estate will be divided up. At that point, any money or assets that your husband inherits will be fair game, as they are now your husband's money or assets. I want to be clear; it's nothing to do with your husband being executor (or co-executor) of the estate. This does not contradict zeta-band's earlier answer; Zeta-band is talking about the estate before it is divided up, I'm just pointing out that there may be issues after it is divided up.\",\n \"You don't get any tax benefit. When you are helping a relative or a friend in such situations the income is just gone. The only way to get around this is if you contribute to a charity, and they give it to your mom. You can then deduct the contributions to that charity. However, the IRS has cracked down on such situations and it probably is not worth pursuing. By the recent tax rules, that charity can use those contributions in which every way they choose, they cannot guarantee they go to your mom. Given that you are closed to your allowed exclusion (14K for 2017), I would work to keep your number under that. If you are married, you each get that exclusion so you can give up to 28K. I can't really speak to the reduction of benefits part as I am knowledgeable and more details on the type of transfer payments she receives would be germane to the discussion.\",\n \"If you have no need for the money. Donate it. Spend the next few years determining what charities make sense and then when the wills are settled, then make those donations. You should get advice how how to best do that, there can be some limitations and complications. Sometimes the source of the money/property makes it more complicated. The form of the inheritance can also make a difference. You could even setup a charitable trust to spread the donations out over year or decade. You could even make it so that you can live off the interest until you die, and then the rest goes to the charity. Note: just because they have no other children, there is no guarantee that you will receive the money/property. They, at any time, could write a will and cut you out of some, most , or all of the wealth.\",\n \"How did the house pass to them? Was it held in Trust? Were they both jointly listed on the deed? If no to both, then the house should have gone into probate..assuming this is going on in the US...where the probate court would reassign ownership. Until this happens the house cannot be sold and is formally owned by the estate. I agree with the former post suggesting you find an estate attorney in the area to see if this dispute can be amicably settled. Tying it up in litigation will be EXPENSIVE and take a great deal of time\",\n \"\\\"Securities and ETFs are also subjected to Estate Tax. Some ways: Draft a \\\"\\\"Transfer on Death\\\"\\\" instruction to the broker, that triggers a transfer to an account in the beneficiary's name, in most cases avoiding probate. If the broker does not support it, find another broker. Give your brokerage and bank password/token to your beneficiary. Have him transfer out holdings within hours of death. Create a Trust, that survives even after death of an individual. P.S. ETF is treated as Stock (a company that owns other companies), regardless of the nature of the holdings. P.S.2 Above suggestions are only applicable to nonresident alien of the US.\\\"\",\n \"First, if it is in any way a joint account, the debt usually goes to the surviving person. Assets in joint accounts usually have their own instructions on how to disperse the assets; for example, full joint bank accounts usually immediately go to the other name on the account and never become part of the estate. Non-cash assets will likely need to be converted to cash and a fair market valuation shown to the probate court, unless the debts can be paid without using them and they can be transferred to next of kin. If, after that, the deceased has any assets at all, there is usually (varies by state) a legally defined order in which debtor types must be paid. This is handled by probating the estate. There is a period during which you publish a death notice and then wait for debt claims and bills to arrive. Then pay as many as possible based on the priority, and inform the others the holder is deceased and the estate is empty. This sometimes needs to be approved by a judge if the assets are less than the debts. Then disperse remaining assets to next of kin. If there are no assets held by just the deceased, as you get bills you just send a certified copy of the death certificate, tell them there is no estate, then forget about them. A lawyer can really help in determining which need to be paid and to work through probate, which is not simple or cheap. But also note that you can negotiate and sometimes get them to accept less, if there are assets. When my mother died, the doctors treating her zeroed her accounts; the hospitals accepted a much reduced total, but the credit cards wanted 100%.\",\n \"In the end you, your dad, and your brother should come to an agreement so there's no surprises or unfulfilled expectations, but here's my opinion: If you can afford to make the additions now: I would offer to pay fully for the addition, with the understanding that the additional value that it generates is yours. That keeps everything in your name, and should be fair since you pay for the expense and someday reap the benefit. If you can't afford to make the additions now: I see two options: have your brother buy your father's house, giving you half of the proceeds, and use those proceeds to make the addition as above, or split the cost of the addition and have some sort of contract drawn up promising to reimburse him (with the amount of the reimbursement very clear, like XXX dollars plus accrued interest at Y% annually) as a condition to selling the house. One other part you didn't mention is any compensation you get for keeping your father at your house. What compensation (if any) you get is not as important as making sure that the three of you all agree on what is fair. In any case, clear, honest communication and full agreement is key. There is a very real risk that when your father's estate is settled that there will be disputes over what the agreement was and who it entitled to what. Having everything in writing may sound cold, but it keeps everyone on the same page.\",\n \"You're crazy to cash out your Roth or take on 401k loan, as that is addressing a short-term problem without doing anything about the longer-term issue. Just don't do it. Through no fault of her own, your mom is insolvent. It happens to people all of the time, and the solution is chapter 7 bankruptcy. The only thing that I would do with my money in this situation is help her with bankruptcy attorney fees if needed, and maybe bid on it at auction, if the house in in good shape.\",\n \"There is no federal inheritance tax. The federal estate tax, currently, exempts the first 5.49 million (US citizen spouses even avoid this). Current law also does a stepped up basis on inherited assets which were bought with after tax money. Example: Dad bought a house years ago for 100k. He dies and leaves it to JJ along with other assets worth $100k (well below the federal estate tax level). JJ sells the house for $400k which was its market value on the day dad died. He gets to keep the entire $400k. Note: Current government wants to eliminate the estate tax AND the stepped up basis. In above case, JJ will now have $300k gains on the house sale and will pay income tax on that! He will end up with much less that $400k.\",\n \"Potentially they could setup a trust for themselves and their heirs, donate the land to the trust. It might be able to go into the trust using the current 'on the books' value of the land (what the county/state are basing taxes on), then the trust can negotiate with the natural gas folks for the mineral rights An idea to bounce off your expert anyway.\",\n \"A revocable trust? Else the title would be his...vs recieving a gift that large. Make it a business investment like a holding company. And use the trust as agreement to shares.\",\n \"You cannot. Even if your children actually have that money - your fiduciary duty is to them, not to yourself. You cannot gift away money they own for your own purposes. They have to want to gift it away, since it belongs to them. I doubt they do, or they should. Since you have to have their best interests in mind - you shouldn't allow them gift away such amounts even if they're willing to. Doing otherwise will be a criminal act on your behalf (embezzlement/breach of fiduciary duty). Do talk to an attorney of course, since I'm not. But that is my understanding of things. If your kids don't actually have the money, then they can obviously not gift it, so claiming that they did would be a tax fraud.\",\n \"\\\"First, I'm really sorry to hear about your mother. My wife was recently diagnosed with Stage 4 cancer, so I know that there is a possibility that your mind is in \\\"\\\"survival\\\"\\\" mode, trying to preserve as much as you can in the way of things that you can effect (that's how I've been feeling recently). Having a loved one with cancer is really tough because there is absolutely, positively nothing tangible that you can do to change the fact that they have cancer. You will have to ask yourself some questions: How important is it that your mom can stay in her house? Moving could add some unneeded stress. How may years have you been contributing to your 401k? If you have 30 years left, you could have enough time to recover some of your losses from reducing the amount of money you have given up for your mom. Will your mom be able to pay you back for paying the taxes over time, or would this be a 'gift'? Have her doctors told her that she \\\"\\\"... has N months left...\\\"\\\"? What is the next step after you are able to pay her taxes and save the house? Someone close to me recently told me that \\\"\\\"There is no point in trying to save for someone for the future, if you can't sustain them until they get to that future. What will happen to your mom if she loses her house? Will it make it easier or harder for her to recover if she can stay? To paraphrase someone famous, \\\"\\\"you can't take a loan out for your retirement, but you could take a loan out for this event.\\\"\\\" At any rate, good luck. My thoughts are with you and your mother.\\\"\",\n \"He doesn't have to follow through on this, but he could tell this sister that he will stop making mortgage payments, which will result in foreclosure and sale at lower price than might be realized by a voluntary sale. Translation: the house will sold, sis. Do you want to maximize your share of the proceeds? And, as I said in a comment above: I hope that he is keeping careful records of mortgage an utility payments, as he might (should) be entitled to a refund from the proceeds of an eventual sale (possibly adjusted by the fair rent value of the time which he spent living there)\",\n \"In 2015 there's a $5.43M (That's million, as in 6 zeros) estate exemption. Even though it's $14K per year with no paperwork required, if you go over this, a bit of paperwork will let you tap your lifetime exemption. There's no tax consequence from this. The Applicable Federal Rate is the minimum rate that must be charged for this to be considered a loan and not a gift. DJ's answer is correct, otherwise, and is worth knowing as there are circumstances where the strategy is applicable. If the OP were a high net worth client trying to save his estate tax exemption, this (Dj's) strategy works just fine.\",\n \"I think you've made a perfectly valid suggestion, and, if your son is struggling somewhat financially now, one that may be very welcome. If you agree to forgive the debt at this time in lieu of a similar amount forgone in future inheritance, it will eliminate the never ending interest-only payments, free up $200+ a month for you son on a tight budget, and improve your own credit score once you pay off the credit line. It's also, in my opinion, a good idea to be open about this in advance with your other children heirs so that everyone will understand what is expected during the eventual probate. My paternal grandfather was the recipient of a great deal of financial largess from his wealthy mother during her life, and it was fully understood by him, her, and his siblings, that in exchange he would not share in her estate when she passed. He didn't, there were no problems, and he and his siblings stayed close for the rest of their lives.\",\n \"I am not going to discuss legality, because with family members you are able to give a lot of guidance and assistance without running into legal issues. The biggest problem is that when they transfer the funds to you and you invest the money, all the tax rates and tax limits are determined by your situation; plus you have more investments than you should have so you hit those limits and brackets quicker. For example: In the United states a person can put $5,500 or $6,500 into a IRA or Roth IRA each year. If you combine the funds for three with your funds then you are giving up three quarters of the amount that you can invest in that type of account. The decision regarding Roth or not depends on age and income level. But now their decision is related to what is best based on your situation. The ability to even deduct IRA deposits would be based on your situation. Of course for taxable accounts the tax rate is determined by your income, not theirs. If they want you to have the ability to make investment decisions for them, then power of attorney is the way to go. The money is deposited in their name, and all the rules and tax rates are determined by their situation. You make sure they have all the information they need to login and review the accounts, but you make the all the moves within and between accounts.\",\n \"To be honest, if it's a home all of you share you should try and save the home for your parents. your 26, you will have plenty of time to make 30k again. Having a home headquarters will bring some security to the family. Not only that your parents are old now, it could be hard for them to get another home. They have sacrificed for you, so maybe you should sacrifice for them? Thank god i have no family.\",\n \"Sorry, but I think you really do need an attorney here. This is the kind of minefield where knowing all the precedents and edge cases can make a huge difference in what you can or can't do, and a misplaced comma can make or break your case. Note that AT BEST you could sell your own interest in the house -- owning the note does not mean owning the property, it only means that they issued the note on the strength of your share of the property. And a half-interest in a single family house has little value outside the family, except to sell it to whoever owns the other half. Which is probably the best answer: Sell your half to your Aunt, if she can afford to buy it. She then gets sole control of the house, and you get the money you seem to need right now, and everyone in the family is much less stressed.\",\n \"does your sister agree to sell her share of the house? Will you live in the house or rent it out? In Australia if you rent out the house you can claim on expenses such as interest deductions, advertising cost, advertising to get tenants in, maintenance cost, water & sewerage supply charge, Land tax, stamp duty, council rates. A percentage of these expenses can be used to reduce your gross income and therefore reduces your tax liability (called negative gearing). Not sure how other countries handle investment properties. If you plan to live in the house and not rent it out and you have spare cash to buy outright then do so. You don't want to be in debt to the bank\",\n \"It looks to me like this is a 'call an attorney' situation, which is always a good idea in situations like this (family legal disputes). But, some information. First off, if your family is going to take the car, you certainly won't need to make payments on it any more at that point, in my opinion. If the will goes through probate (which is the only way they'd really be able to take it), the probate judge should either leave you with the car and the payments, or neither (presumably requiring the family to pay off the loan and settle your interest in the car). Since the car has negative net value, it seems unlikely that the probate judge would take the car away from you, but who knows. Either way, if they do take the car away from you, they'll be doing you a service: you have a $6,000 car that you owe $12,000 on. Let them, and walk away and buy another car for $6,000. Second, I'm not sure they would be allowed to in any event. See the Illinois DMV page on correcting titles in the case of a deceased owner; Illinois I believe is a joint tenancy state, meaning that once one owner dies, the other just gets the car (and the loan, though the loan documents would cover that). Unless you had an explicit agreement with your grandfather, anyway. From that page: Joint Ownership A title in the names of two or more persons is considered to be in joint tenancy. Upon the death of one of them, the surviving joint tenant(s) becomes the owner(s) of the vehicle by law. Third, your grandfather can fix all of this fairly easily by mentioning the disposition of the car and loan in his will, if he's still mentally competent and wishes to do so. If he transfers his ownership of the car to you in the will, it seems like that would be that (though again, it's not clear that the ownership wouldn't just be yours anyway). Finally, I am not a lawyer, and I am not your lawyer, so do not construe any of the text of this post as legal advice; contact a lawyer.\",\n \"As regards Inheritance Tax if your parents are abroad the question must be asked about their Domicile status as non doms are generally only subject to IHT on assets situated in the UK.\",\n \"If the house is titled to the estate, neither of you own the house and it cannot be mortgaged. Executor of the will is supposed to provide to you and to the probate court periodic reports as to what is going on. Check them up and talk to your probate lawyer.\",\n \"First of all, I am sorry for your loss. At this time, worrying about money is probably the least of your concerns. It might be tempting to try to pay off all your debts at once, and while that would be satisfying, it would be a poor investment of your inheritance. When you have debt, you have to think about how much that debt is costing you to keep open. Since you have 0%APR on your student loan, it does not make sense to pay any more than the minimum payments. You may want to look into getting a personal loan to pay off your other personal debts. The interest rates for a loan will probably be much less than what you are paying currently. This will allow you to put a payment plan together that is affordable. You can also use your inheritance as collateral for the loan. Getting a loan will most likely give you a better credit rating as well. You may also be tempted to get a brand new sports car, but that would also not be a good idea at all. You should shop for a vehicle based on your current income, and not your savings. I believe you can get the same rates for an auto loan for a car up to 3 years old as a brand new car. It would be worth your while to shop for a quality used car from a reputable dealer. If it is a certified used car, you can usually carry the rest of the new car warranty. The biggest return on investment you have now is your employer sponsored 401(k) account. Find out how long it takes for you to become fully vested. Being vested means that you can leave your job and keep all of your employer contributions. If possible, max out, or at least contribute as much as you can afford to that fund to get employee matching. You should also stick with your job until you become fully vested. The money you have in retirement accounts does you no good when you are young. There is a significant penalty for early withdrawal, and that age is currently 59 1/2. Doing the math, it would be around 2052 when you would be able to have access to that money. You should hold onto a certain amount of your money and keep it in a higher interest rate savings account, or a money market account. You say that your living situation will change in the next year as well. Take full advantage of living as cheaply as you can. Don't make any unnecessary purchases, try to brown bag it to lunch instead of eating out, etc. Save as much as you can and put it into a savings account. You can use that money to put a down payment on a house, or for the security and first month's rent. Try not to spend any money from your savings, and try to support yourself as best as you can from your income. Make a budget for yourself and figure out how much you can spend every month. Don't factor in your savings into it. Your savings should be treated as an emergency fund. Since you have just completed school, and this is your first big job out of college, your income will most likely improve with time. It might make sense to job hop a few times to find the right position. You are much more likely to get a higher salary by changing jobs and employers than you are staying in the same one for your entire career. This generally is true, even if you are promoted at the by the same employer. If you do leave your current job, you would lose what your employer contributed if you are not vested. Even if that happened, you would still keep the portion that you contributed.\",\n \"My understanding is that when you die, the stocks are sold and then the money is given to the beneficiary or the stock is repurchased in the beneficiaries name. This is wrong, and the conclusion you draw from michael's otherwise correct answer follows your false assumption. You seem to understand the Estate Tax federal threshold. Jersey would have its own, and I have no idea how it works there. If the decedent happened to trade in the tax year prior to passing, normal tax rules apply. Now, if the executor chooses to sell off and liquidate the estate to cash, there's no further taxable gain, a $5M portfolio can have millions in long term gain, but the step up basis pretty much negates all of it. If that's the case, the beneficiaries aren't likely to repurchase those shares, in fact, they might not even know what the list of stocks was, unless they sifted through the asset list. But, that sale was unnecessary, assets can be divvied up and distributed in-kind, each beneficiary getting their fraction of the number of shares of each stock. And then your share of the $5M has a stepped up basis, meaning if you sell that day, your gains are near zero. You might owe a few dollars for whatever the share move in the time passing between the step up date and date you sell. I hope that clarifies your misunderstanding. By the way, the IRS is just an intermediary. It's congress that writes the laws, including the tangled web of tax code. The IRS is the moral equivalent of a great customer service team working for a company we don't care for.\",\n \"You're not going to pay any tax. You can receive the money with gratitude and treat your in-laws nicely. Your in-laws will be liable for gift tax. They should be filling and filing the form 709. The end result may be, depending on their past gifts, that they will actually pay no money but instead use the lifetime exemption which is correlated with the estate tax. In other words, this gift will reduce their estate tax exemption. If the overall wealth they expect to have by the time they die is less than $5M (+something, the current level of the estate tax exemption), this translates to having pay no tax whatsoever. The form 709 must be filed, regardless, and a copy of it kept for future tracking purposes.\",\n \"Since you aren't contributing enough to count your parent as a dependent, there is no tax benefit to you for helping them. Gift tax is paid by the giver when total gifts to an individual exceed $14k/year and the lifetime exclusion of $5.49M has been exceeded. If your annual gifts exceed $14k (subject to change, as is the lifetime exclusion amount) then you have to file Form 709 with your return, but you will not pay gift tax unless you've both exhausted the lifetime exclusion and gift over $14k/year. If you pay medical bills directly, that amount does not count toward the $14k/year limit, so you could likely assist in excess of $14k/year and still avoid having to file the extra form. Most assistance programs are income-based, and gifts do not count toward income, but you'll want to check on the specific requirements for programs they are enrolled in.\",\n \"They may be able to transfer the land to a charitable remainder trust, which then enters into the transaction and pays them an income stream over their lifetime -- but definitely hire a professional before you attempt to do this.\",\n \"First the good news: based on the time involved, and the amount of potential profits; you will not owe any tax on the sale of the house no matter which option you pick. Now the details. When determining if there are any capital gains the IRS cares about the difference between the sale price and the purchase price. The amount of the loan, the final balance of the loan, or the lack of loan don't factor into the calculation. To complicate matters the government does factor into the equation any improvements you have made to the house (like a new deck) and the cost of buying and selling the house (real estate agents). If a single person has less than 250K in capital gains and has used the house as their main residence for 2 of the the previous 5 years their tax is zero. For a couple the tax free gain is $500K. For your situation since the sale price is less than $250K, the capital gains will also be less than $250K. You do have one potential area of concern. If the house is worth significantly more than $150K, the government could claim that the difference between what you charged your parents and what you could have charged was a gift. Assuming that there are no other factors that you didn't include in the original question it would appear that you will not face any taxes. Regarding your two options, neither will impact the taxes. Though draining your savings or investments could make it difficult to meet an emergency during the time between the sending of the $95K to the mortgage company and the closing on the deal with your parents. If the money came from retirement account it could have an even greater impact on your taxes and retirement situation.\",\n \"Sorry for your loss. If the insurance money is now in an account under your names, you can might be able to withdraw the money. You should put a country tag and state tag on your question. EDIT: my initial response might incorrect -- see comments below. This is going to be state speficic and the amounts may be relevant. Best to seek professional advice!\",\n \"Term life insurance makes sense if you will have a need for money if someone dies. If you (and your brothers) do not have enough money currently for a proper burial for your father, then you might consider term insurance to cover this. If you already have the money to cover this (or can save for it in a short amount of time), then you are better off financially to not purchase the insurance. Estimate what you think it will cost for a burial, then determine if you have this money available to you. If you already do, then don't purchase the insurance. If you do not have this money available to you, then you can look into a term life insurance policy on your father. You definitely do not want a whole life insurance policy. This will cost many more times what a term policy costs. A term policy is a policy with an expiration date. For example, let's say that you determine that you will need $10,000 when your father dies for the funeral and burial. You could get a 10-year policy on your father for $10,000. Over the next 10 years, besides paying your premiums, save up $10,000 ($1,000 each year) in some type of savings/investing account. Hopefully, your father will still be around 10 years from now, and you won't need the insurance policy anymore, because you will have saved enough to cover the costs when the time comes. Doing this will almost always cost you less than getting a whole life policy, which never expires, but has much higher premiums. There are also 20-year term policies, which will cost more, but will give you more time to save up your fund. The costs for these policies depend on your father's age, so get a quote for both and decide what will work for you.\",\n \"\\\"It's never too early to start estate planning, and if you already have a family, getting your personal affairs in order is a must. The sooner you start planning, the more prepared you will be for life's unexpected twists and turns. The following tips, aimed at those under 40, can help you approach and simplify the estate planning process: Start now, regardless of net worth. [Estate planning](http://money.usnews.com/money/personal-finance/articles/2013/09/19/estate-planning-tips-for-people-under-40) is a crucial process for everyone, regardless of wealth level, says Marc Henn, a certified financial planner and president of Harvest Financial Advisors. \\\"\\\"Many people will say, 'Well, I don't have a lot of assets, therefore I don't need an estate plan,'\\\"\\\" he says. \\\"\\\"Maybe you only have debt, but it still applies. If you want the people around you to appropriately deal with your finances, a plan is still just as important.\\\"\\\" This is especially true if you are responsible for financially dependent individuals, such as young children. \\\"\\\"The less you have, the more important every bit you've got is to you and the people you care about,\\\"\\\" says Lawrence Lehmann, a partner at Lehmann, Norman and Marcus L.C. in New Orleans. \\\"\\\"If you don't have much money, you really can't afford to make a mistake.\\\"\\\" Have the \\\"\\\"what if?\\\"\\\" conversation with friends and family. Before jumping into the estate planning process, it's important to establish exactly what you want, and need, to happen after you die and relay those wishes to those around you. \\\"\\\"We find that the best transitions and financial transfers happen when all family members are involved in the [decision making](http://corlisslawgroup.com),\\\"\\\" says John Sweeney, executive vice president of retirement and investing strategies at Fidelity Investments. \\\"\\\"This way, after a loved one is gone, no one is squabbling over a couch or going, 'Why did person A get more than person B?' If wishes are laid out clearly while the individual is living, they can share the rationale behind the decisions.\\\"\\\" Focus on the basic estate plan components. Experts say life insurance, a will, a living will and a durable power of attorney are all important aspects of an estate plan that should be established at the start of the planning process. In the event of an untimely death, life insurance can replace lost earnings, which can be especially beneficial for younger individuals, says Bill Kirchick, a partner with Bingham McCutchen law firm in Boston. \\\"\\\"Young people can't afford to die,\\\"\\\" he says. \\\"\\\"They are going to lose a source of income if something happens to a young couple and they haven't had enough time to accumulate wealth from earnings to put aside in savings or a retirement plan.\\\"\\\" Also, the earlier you take out a life insurance policy, the more likely you are to be approved for reduced rates compared to older individuals. Utilize estate planning professionals. To draft these basic estate plans, experts recommend carefully selecting a team of professionals who will educate you and draft what you need based on your individual situation. \\\"\\\"Don't feel like you have to jump at the first person whose name is given to you,\\\"\\\" Kirchick says. \\\"\\\"I think that people should interview two or more attorneys, accountants, trust officers, financial advisors and so on.\\\"\\\" According to financial planning experts, the average initial cost for the legal drafting of a will, living will and durable power of attorney documentation is between $500 and $1,200, depending on the family size and location. Continue to review your plan over time. Finally, your estate plan should never be a \\\"\\\"one and done thing,\\\"\\\" according to Henn. \\\"\\\"Every five to seven years, the documents should be readdressed to adapt to significant life events, tax law changes or even the addition of more children,\\\"\\\" he says. It is also important to keep tabs on your insurance policies and investments, as they all tie into the estate plan and can fluctuate based on the economic environment. If you have to make revisions, Henn says it will cost as much as it did to create the documents in the first place.\\\"\",\n \"You don't need to submit a K-1 form to anyone, but you will need to transcribe various entries on the K-1 form that you will receive onto the appropriate lines on your tax return. Broadly speaking, assets received as a bequest from someone are not taxable income to you but any money that was received by your grandmother's estate between the time of death and the time of distribution of the assets (e.g. interest, mutual fund distributions paid in cash, etc) might be passed on to you in full instead of the estate paying income tax on this income and sending you only the remainder. If so, this other money would be taxable income to you. The good news is that if the estate trust distributions include stock, your basis for the stock is the value as of the date of death (nitpickers: I am aware that the estate is allowed to pick a different date for the valuation but I am trying to keep it simple here). That is, if the stock has appreciated, your grandmother never paid capital gains on those unrealized capital gains, and you don't have to pay tax on those capital gains either; your basis is the appreciated value and if and when you sell the stock, you pay tax only on the gain, if any, between the day that Grandma passed away and the day you sell the stock.\",\n \"How much debt do you have? Do you have a mortgage? Car loans? At the very least depending on your state 25k will be subtracted So you're left with 75k Let me know so we can make that money work for you\",\n \"She is very wrong. If the IRA is a traditional, i.e. A pretax IRA (not a Roth), all withdrawals are subject to tax at one's marginal rate. Read that to mean that a large sum can easily push her into higher brackets than normal. If it stayed with her, she'd take smaller withdrawals and be able to throttle her tax impact. Once she takes it all out, and gifts it to you, no gift tax is due, but there's form 709, where it's declared, and counts against her $5.5M lifetime estate exemption. There are a few things in the world of finance that offend me as much as lawyer malpractice, going into an area they are ignorant of.\",\n \"I would like to bring up some slightly different points than the ones raised in the excellent answers from JoeTaxpayer and littleadv. The estate can be the beneficiary of an IRA -- indeed, as has been pointed out, this is the default beneficiary if the owner does not specify a beneficiary -- but a testamentary trust cannot be the designated beneficiary of an IRA. A testamentary trust that meets the requirements laid out on page 36 of Publication 590 is essentially a pass-through entity that takes distributions from the IRA and passes them on to the beneficiaries. For the case being considered here of minor beneficiaries, the distributions from the IRA that pass through the trust must be sent to the legal guardians (or other custodians) of the minors' UTMA accounts, and said guardians must invest these sums for the benefit of the minors and hand the monies over when the minors reach adulthood. Minors are not responsible for their support, and so these monies cannot be used by the legal guardian for oaying the minors' living expenses except as provided for in the UTMA regulations. When the minors become adults, they get all the accumulated value on their UTMA accounts, and can start taking the RMDs personally after that, and blowing them on motorcycles if they wish. Thus, the advantage of the testamentary trust is essentially that it lets the trustee of the trust to decide how much money (over and above the RMD) gets distributed each year. The minors and soon-to-be young adults cannot take the entire IRA in a lump sum etc but must abide by the testamentary trustee's ideas of whether extra money (over and above the RMD) should be taken out in any given year. How much discretion is allowed to the trustee is also something to be thought through carefully. But at least the RMD must be taken from the IRA and distributed to the minors' UTMA accounts (or to the persons as they reach adulthood) each year. Regardless of whether the Traditional IRA goes to beneficiaries directly or through a testamentary trust, its value (as of the date of death) is still included in the estate, and estate tax might be due. However, beneficiaries can deduct the portion of estate tax paid by the estate from the income tax that they have to pay on the IRA withdrawals. Estate planning is very tricky business, and even lawyers very competent in estate and trust issues fall far short in their understanding of tax law, especially income tax law.\",\n \"A simple rule of tax is , It doesn't matter where u live or your residence when it comes to income accruing in India . As far as i know , You will need to find out the purchase prices of the inherited land and calculate the index value . Then pay tax on the capital profit (Not sure , I guess its 20%) Example : Original value is 100,000 and the index value is 1,500,000 so the profit will be 650,000 . You pay 20% of the 650k only . For paying minimum tax (Tax saving) There are few sections which gives exemption like purchase some bonds or purchase a house . Its best if you ask a chartered accountant , For this simple case he shouldn't charge much. He should have updated knowledge of the situation and guide you better .\",\n \"Sit down with professional with knowledge about eldercare issues. Know how your options regarding the property ownership can impact the services they qualify for. Even making a change in ownership can impact their eligibility for certain programs. Some of which can reach back to events in the recent past. Also if you own it but she will get some of the profits when you sell, she could still be considered an owner, which can impact eligibility for programs. This is in addition to the issues with the lender, the IRS, and your estate.\",\n \"My question is... how is this new value determined? Does it go off of the tax appraised value? The tax assessors values are based on broad averages and are not very useful in determining actual home value. The most defensible valuation outside of a sale is a professional appraisal, real-estate agents may or may not give you reasonable estimates, but their opinions are less valuable than that of a professional appraiser. Additionally, agents hoping to land you as a client (even if you tell them you're not trying to sell) could be motivated to over-estimate. In many instances a few opinions from agents will be good enough, but if there is any contention a professional appraisal will be better. Should you, prior to your death, get an independent appraiser to appraise the value of the property and include that assessment of the properties value with the will or something? The real-estate market fluctuates too much to make having an appraisal done prior to your death a practical approach in most circumstances. You could make arrangements so that an appraisal would be scheduled after your death. Here's a good resource on the topic: Estimating the Value of Inherited Real Estate\",\n \"Sorry for your loss. Like others have said Debts cannot be inherited period (in the US). However, assets sometimes can be made to stand for debts. In most cases, credit card debt has no collateral and thus the credit card companies will often either sell the debt to a debt collector or collections agency, sue you for it, or write it off. Collecting often takes a lot of time and money, thus usually the credit card companies just sell the debt, to a debt collector who tries to get you to pay up before the statute of limitations runs out. That said, some credit card companies will sue the debtor to obtain a judgement, but many don't. In your case, I wouldn't tell them of your loss, let em do their homework, and waste time. Don't give them any info,and consult with a lawyer regarding your father's estate and whether his credit card will even matter. Often, unscrupulous debt collectors will say illegal things (per the FDCPA) to pressure anyone related to the debtor to pay. Don't cave in. Make sure you know your rights, and record all interactions/calls you have with them. You can sue them back for any FDCPA infractions, some attorneys might even take up such a case on contingency, i.e they get a portion of the FDCPA damages you collect. Don't pay even a penny. This often will extend or reset the statute of limitations time for the debt to be collectable. i.e Ex: If in your state, the statute of limitations for credit card debt is 3 years, and you pay them $0.01 on year 2, you just bought them 3 more years to be able to collect. TL;DR: IANAL, most credit card debt has no collateral so don't pay or give any info to the debt collectors. Anytime you pay it extends the statute of limitations. Consult an attorney for the estate matters, and if the debt collectors get too aggressive, and record their calls, and sue them back!\",\n \"It goes to the beneficiaries, not necessarily the heirs. Taxation is a bit complicated and depends also on the plan requirements, the new owners' decisions, and the last status of the deceased owner. You should really talk to a tax adviser with the specific details to get a reliable answer that would address your situation. You should also ask about State inheritance taxes for the deceased and the beneficiaries' states. Here's the NOLO article on the issue.\",\n \"TL; DR version: What you propose to do might not save you taxes, and may well be illegal. Since you mention your wife, I assume that the Inherited IRA has been inherited from someone other than your spouse; your mother, maybe, who passed away in Fall 2015 as mentioned in your other question (cf. the comment by Ben Miller above)? If so, you must take (at least) the Required Minimum Distribution (RMD) from the Inherited IRA each year and pay taxes on the distribution. What the RMD is depends on how old the Owner of the IRA was when the Owner passed away, but in most cases, it works out to be the RMD for you, the Beneficiary, considered to be a Single Person (see Publication 590b, available on the IRS web site for details). So, Have you taken the (at least) the RMD amount for 2016 from this Inherited IRA? If not, you will owe a 50% penalty of the difference between the amount withdrawn and the RMD amount. No, it is not a typo; the penalty (it is called an excise tax) is indeed 50%. Assuming that the total amount that you have taken as a Distribution from the Inherited IRA during 2016 is the RMD for 2016 plus possibly some extra amount $X, then that amount is included in your taxable income for that year. You cannot rollover any part of the total amount distributed into your own IRA and thereby avoid taxation on the money. Note that it does not matter whether you will be rolling over the money into an existing IRA in your name or will be establishing a new rollover IRA account in your name with the money: the prohibition applies to both ways of handling the matter. If you wish, you can roll over up to $X (the amount over and above the RMD) into a new Inherited IRA account titled exactly the same as the existing Inherited IRA account with a different custodian. If you choose to do so, then the amount that you roll over into the new Inherited IRA account will not included in your taxable income for 2016. To my mind, there is no point to doing such a rollover unless you are unhappy with the current custodian of your Inherited IRA, but the option is included for completeness. Note that the RMD amount cannot be rolled over in this fashion; only the excess over the RMD. If you don't really need to spend the money distributed from your Inherited IRA for your household expenses (your opening statement that your income for 2016 is low might make this unlikely), and (i) you and/or your spouse received compensation (earned income such as wages, salary, self-employment income, commissions for sales, nontaxable combat pay for US Military Personnel, etc) in 2016, and (ii) you were not 70.5 years of age by December 2016, then you and your wife can make contributions to existing IRAs in your names or establish new IRAs in your names. The amount that can be contributed for each IRA is limited to the smaller of $5500 ($6500 for people over 50) and that person's compensation for 2016, but if a joint tax return is filed for 2016, then both can make contributions to their IRAs as long as the sum of the amounts contributed to the IRAs does not exceed the total compensation reported on the joint return. The deadline for making such IRA contributions is the due date for your 2016 Federal income tax return. Since your income for 2016 is less than $98K, you can deduct the entire IRA contribution even if you or your wife are covered by an employer plan such as a 401(k) plan. Thus, your taxable income will be reduced by the IRA contributions (up to a maximum of $11K (or $12 K or $13K depending on ages)) and this can offset the increase in taxable income due to the distribution from the Inherited IRA. Since money is fungible, isn't this last bullet point achieving the same result as rolling over the entire $9.6K (including the RMD) into an IRA in your name, the very thing that the first bullet point above says cannot be done? The answer is that it really isn't the same result and differs from what you wanted to do in several different ways. First, the $9.6K is being put into IRAs for two different people (you and your wife) and not just you alone. Should there, God forbid, be an end to the marriage, that part of your inheritance is gone. Second, you might not even be entitled to make contributions to IRAs (no compensation, or over 70.5 years old in 2016) which would make the whole thing moot. Third, the amount that can be contributed to an IRA is limited to $5500/$6500 for each person. While this does not affect the present case, if the distribution had been $15K instead of $9.6K, not all of that money could be contributed to IRAs for you and your wife. Finally, the contribution to a Traditional IRA might be non-deductible for income tax purposes because the Adjusted Gross Income is too high; once again, not an issue for you for 2016 but something to keep in mind for future years. In contrast, rollovers from one IRA into another IRA (both titled the same) can be in any amount, and they can be done at any time regardless of whether there is compensation for that year or not or what the Adjusted Gross Income is or whether there is coverage by a 401(k) plan. There are no tax consequences to rollovers unless the rollover is from a Traditional IRA to a Roth IRA in which case, the distribution is included in taxable income for that year. What is prohibited is taking the entire amount of the $9.6K distribution from an Inherited IRA and rolling it over into your existing IRA (or establishing a Rollover IRA in your name with that $9.6K); ditto for some money going into your IRA and some into your wife's IRA. I expect that any IRA custodian will likely refuse to allow you to carry out such a rollover transaction but will be glad to accept 2016 contributions (in amounts of up to $5500/$6500) from you into existing IRAs or open a new IRA for you. The custodian will not ask whether you have compensation for 2016 or not (but will check your age!); it is your responsibility to ensure that you do not contribute more than the compensation etc. Incidentally, subject to the $5500/6500 maximum limit, you can (if you choose to do so) contribute the entire amount of your compensation to an IRA, not just the take-home pay amount (which will be smaller than your compensation because of withholding for Social Security and Medicare tax, State and Federal income tax, etc).\",\n \"From an India gift-tax point of view, you can receive unlimited funds from close relatives. So if you are getting this from your Father's Brother or Mother's Brother; then it is not taxable. It is a good idea to document this if the amount is large. It serves as record for future. This can be a simple piece of paper or something that's type on Notarized document.\",\n \"Pretend it was a gift all along, be happy that you could help out your family when they needed it and remember your lesson for the future.\",\n \"\\\"Sure, it's irresponsible for an executor to take actions which endanger the estate. But what about passivity or inaction? Put it another way. Is it the obligation of the executor to avoid making revenue for the estate? Think about it - what a silly idea! Consider a 12-unit apartment building full of rent paying tenants. A tenant gives notice and leaves. So do 4 more. With only 7/12 tenants, the building stops being a revenue center and becomes a massive money pit. Is that acceptable? Heck no! Realistically this will be managed by a property management company, and of course they'll seek new tenants, not stopping merely because the owner died. This situation is not different; the same fiscal logic applies. The counter-argument is usually along the lines of \\\"\\\"stuff might happen if you rent it out\\\"\\\"... true. But the stuff that happens to abandoned houses is much worse, and much more likely: squatters, teen \\\"\\\"urban explorers\\\"\\\", pot growers, copper thieves, winter pipe freeze flooding and wrecking interiors, etc. Don't take my word on it -- ask your insurer for the cost of insuring an abandoned house vs. a rented one. Renting brings a chunk of cash that comes in from tenants - $12,000/year on a $1000/mo. rental. And that will barely pay the bills if you have a young mortgage on a freshly purchased house at recent market rates. But on an old mortgage, renting is like printing money. That money propagates first to the estate (presumably it is holding back a \\\"\\\"fix the roof\\\"\\\" emergency fund), and then to the beneficiaries. It means getting annual checks from the estate, instead of constantly being dunned for another repair. But I don't care about making revenue (outside of putting back a kitty to replace the roof). Even if it was net zero, it means the maintenance is being done. This being the point. It is keeping the house in good repair, occupied, insured, and professionally managed -- fit and ready for the bequest's purpose: occupancy of an aunt. What's the alternative? Move an aunt into a house that's been 10 years abandoned? Realistically the heirs are going to get tired/bored of maintaining the place at a total cash loss, maintenance will slip, and you'll be moving them into a neglected house with some serious issues. That betrays the bequest, and it's not fair to the aunts. Rental is a very responsible thing to do. The executor shouldn't fail to do it merely out of passivity. If you decide not to do it, there needs to be a viable alternative to funding the home's decent upkeep. (I don't think there is one). Excluding a revenue-producing asset from the economy is an expensive thing to do.\\\"\",\n \"Up to RS50,000 is exempt from gift taxes. In the US, if one provides more than half the expenses for a relative, they may be a dependent. I don't know the India rules.\",\n \"No tax consequences to you. Tax consequences to your sister. From your comment: My sister is single, but my wife and I have a son. So we can avail $14000 x3 = $42000 without the need to report it. The remainder ($70000-$42000) = $28000 will be reported against the lifetime exclusion by my sister on her return. Per my understanding, the $28000 is also not subject to any gift tax It is subject to gift tax, and she must submit gift tax return (form 709) to the IRS. On that return she can choose to apply part of the lifetime exemption and reduce the lifetime limit, or pay the tax and keep the lifetime limit. If she applies the exemption, she needs to keep track of it, so that it could be properly applied next time, or when she passes away. The lifetime exemption is in fact intended for the estate tax. But people can chose and apply it to gifts during lifetime and reduce the exemption for estate. This is something of consequence to take into account. Yearly $14K cap is not related to the lifetime exemption and is for gifts per donor per donee. Breaking the gift into several occasions over several years helps reducing the tax burden on the donor without touching the lifetime exclusion and affecting the estate tax. But if you don't have the time...\",\n \"If a person owes someone money, he can be sued for it, and forced to pay via court order. It is completely irrelevant who that person owes money to (here: a not specified 'estate'), and irrelevant what source they get money from (here: life insurance payout). What makes you think there is any special combination that allows the owing person to not pay their debt? If it would exist, everybody would use it to get out of his debt.\",\n \"\\\"A direct gift to a person is never deductible. The kind relative was confusing this with a charitable gift. Which if to a qualified charity can be deducted as part of your itemized deductions. But there, the $14K doesn't enter the equation. But, if your wife is a dog lover, you can donate to the ASPCA, and give her a note saying \\\"\\\"in your honor I donated $14K to the ASPCA.\\\"\\\" That's a deduction.\\\"\",\n \"\\\"This forum is not intended to be a discussion group, but I would like to add a different perspective, especially for @MrChrister, on @littleadv's rhetorical question \\\"\\\"... estates are after-tax money, i.e.: income tax has been paid on them, yet the government taxes them again. Why?\\\"\\\" For the cash in an estate, yes, that is after-tax money, but consider other assets such as stocks and real estate. Suppose a rich man bought stock in a small computer start-up company at $10 a share about 35 years ago, and that stock is now worth $500 a share. The man dies and his will bequeaths the shares to his son. According to US tax law, the son's basis in the shares is $500 per share, that is, if the son sells the shares, his capital gains are computed as if he had purchased the shares for $500 each. The son pays no taxes on the inheritance he receives. The deceased father's last income tax return (filed by the executor of the father's will) does not list the $490/share gain as a capital gain since the father did not sell the stock (the gain is what is called an unrealized gain), and so there is no income tax due from the father on the $490/share. Now, if there is no estate tax whatsoever, the father's estate tax return pays no tax on that gain of $490 per share either. Would this be considered an equitable system? Should the government not tax the gain at all? It is worth noting that it would be possible for a government to eliminate estate taxes entirely, but instead have tax laws that say that unrealized gains on the deceased's property would be taxed (as capital gains) on the deceased's final tax return.\\\"\",\n \"\\\"If the account is really only in your father's name and not even \\\"\\\"in trust\\\"\\\" for you, then you can't touch it, I'm afraid. And taking your family to small-claims court is something of a nuclear option. Hiitting sympathetic family members for a loan may be the best course here;. Anything you do to try to force cooperation is likely to be a \\\"\\\"nuclear option\\\"\\\" as far as getting back on peaceable terms with your family goes. If you must resort to that, i'd suggest asking whether the local department of youth services, or s religious figure or someone else your father respects, could persuade him to cooperate. He might be more willing to listen to someone else.\\\"\",\n \"http://www.irs.gov/publications/p950/ar02.html Gift tax is owed by the giver, not the recipient. So my first guess is that you can make the transfer in your home country, and as the givers will not be subject to US tax, it won't apply at all. You can then transfer the money into the US freely. In any case, there's a lifetime exemption of 1mn USD. So, unless non-US persons don't get the exemption, I can't see the tax being a problem anyway unless there are going to be several more such transfers.\",\n \"This sounds like my dad in so many ways. Rather than ask questions and listen to vagueness (or lies) from your dad, I suggest you ask to see financial, tax, and legal documentation. Maybe speak to the accountant, lawyer, bank official - whomever - to see where checks were written, transfers, etc. I'm really sorry you are in this situation, but there needs to be a major family meeting immediately. Good Luck.\",\n \"The house becomes an asset belonging to the estate of Alice. The debt also goes with the estate. The executor of the will should arrange for the debt to be paid off as part of sorting out the estate - they can't just hand out all the assets and leave nothing to pay off the debts. This could be done by selling the house. But in practice, the executor and the mortgage lender may both be happy if Bob takes out a mortgage, uses that to pay the debt, then inherits the house.\",\n \"If your sister refuses to discuss the matter, I can't imagine how you'll resolve it without going to court. I'd guess that ultimately a judge would say that if you can't all agree on what to do, that the property must be sold and the money distributed between you. As others here have said, you really want to get a lawyer.\",\n \"You've already counted the cost. It will cost your family ~$10,000 per month until your father dies, or until there's no money left, to enable him to pretend that he is a successful business owner. I'd ask him when he thinks business is going to pick up again. He may be honest with himself. Or, ask him to consider what will happen if he outlives the money that's going out the door. Ask him if he would like to be bankrupt on top of needing to close his business. (I don't view asking those questions as being unloving, by the way.)\",\n \"IANAL, nor am I a financial professional. However, I've just looked into this because of a relative's death, and I have minor children. I am in the US. First, a named beneficiary on many accounts means that any proceeds are kept out of the estate and do not have to go through probate. That usually means that they're available much more quickly. Second, a beneficiary statement trumps a will. The account may pay out long before a will is even filed with the probate court. Third, you can name a trust as the beneficiary. In this case, because you want to make sure the money goes to your children, that's likely your best option.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["\"Also the will stipulated that the house cannot be sold as long as one of my wife's aunts (not the same one who supposedly took the file cabinet) is alive. This is a turkey of a provision, particularly if she is not living in the house. It essentially renders the house, which is mortgaged, valueless. You'd have to put money into it to maintain the mortgage until she dies and you can sell it. The way that I see it, you have four options: Crack that provision in the will. You'd need to hire a lawyer for that. It may not be possible. Abandon the house. It's currently owned by the estate, so leave it in the estate. Distribute any goods and investments, but let the bank foreclose on the house. You don't get any value from the house, but you don't lose anything either. Your father's credit rating will take a posthumous hit that it can afford. You may need to talk to a lawyer here as well, but this is going to be a standard problem. Explore a reverse mortgage. They may be able to accommodate the weird provision with the aunt and manage the property while giving a payout. Or maybe not. It doesn't hurt to ask. Find a property manager in Philadelphia and have them rent out the house for you. Google gave some results on \"\"find property management company Philadelphia\"\" and you might be able to do better while in Philadelphia to get rid of his stuff. Again, I'd leave the house on the estate, as you are blocked from selling. A lawyer might need to put it in a trust or something to make that work (if the estate has to be closed in a certain time period). Pay the mortgage out of the rent. If there's extra left over, you can either pay down the mortgage faster or distribute it. Note that the rent may not support the mortgage. If not, then option four is not practical. However, in that case, the house is unlikely to be worth much net of the mortgage anyway. Let the bank have it (option two). If the aunt needs to move into the house, then you can give up the rental income. She can either pay the mortgage (possibly by renting rooms) or allow foreclosure. A reverse mortgage might also help in that situation. It's worth noting that three of the options involve a lawyer. Consulting one to help choose among the options might be constructive. You may be able to find a law firm with offices in both Florida and Pennsylvania. It's currently winter. Someone should check on the house to make sure that the heat is running and the pipes aren't freezing. If you can't do anything with it now, consider winterizing by turning off the water and draining the pipes. Turn the heat down to something reasonable and unplug the refrigerator (throw out the food first). Note that the kind of heat matters. You may need to buy oil or pay a gas bill in addition to electricity.\"","Consider contracting with a property management company to lease and maintain the house until it can be sold. Rent on the property should cover the mortgage, property taxes, etc. The property management company can handle maintenance and the tenant would be responsible for utilities.","\"Sure, it's irresponsible for an executor to take actions which endanger the estate. But what about passivity or inaction? Put it another way. Is it the obligation of the executor to avoid making revenue for the estate? Think about it - what a silly idea! Consider a 12-unit apartment building full of rent paying tenants. A tenant gives notice and leaves. So do 4 more. With only 7/12 tenants, the building stops being a revenue center and becomes a massive money pit. Is that acceptable? Heck no! Realistically this will be managed by a property management company, and of course they'll seek new tenants, not stopping merely because the owner died. This situation is not different; the same fiscal logic applies. The counter-argument is usually along the lines of \"\"stuff might happen if you rent it out\"\"... true. But the stuff that happens to abandoned houses is much worse, and much more likely: squatters, teen \"\"urban explorers\"\", pot growers, copper thieves, winter pipe freeze flooding and wrecking interiors, etc. Don't take my word on it -- ask your insurer for the cost of insuring an abandoned house vs. a rented one. Renting brings a chunk of cash that comes in from tenants - $12,000/year on a $1000/mo. rental. And that will barely pay the bills if you have a young mortgage on a freshly purchased house at recent market rates. But on an old mortgage, renting is like printing money. That money propagates first to the estate (presumably it is holding back a \"\"fix the roof\"\" emergency fund), and then to the beneficiaries. It means getting annual checks from the estate, instead of constantly being dunned for another repair. But I don't care about making revenue (outside of putting back a kitty to replace the roof). Even if it was net zero, it means the maintenance is being done. This being the point. It is keeping the house in good repair, occupied, insured, and professionally managed -- fit and ready for the bequest's purpose: occupancy of an aunt. What's the alternative? Move an aunt into a house that's been 10 years abandoned? Realistically the heirs are going to get tired/bored of maintaining the place at a total cash loss, maintenance will slip, and you'll be moving them into a neglected house with some serious issues. That betrays the bequest, and it's not fair to the aunts. Rental is a very responsible thing to do. The executor shouldn't fail to do it merely out of passivity. If you decide not to do it, there needs to be a viable alternative to funding the home's decent upkeep. (I don't think there is one). Excluding a revenue-producing asset from the economy is an expensive thing to do.\""],"string":"[\n \"\\\"Also the will stipulated that the house cannot be sold as long as one of my wife's aunts (not the same one who supposedly took the file cabinet) is alive. This is a turkey of a provision, particularly if she is not living in the house. It essentially renders the house, which is mortgaged, valueless. You'd have to put money into it to maintain the mortgage until she dies and you can sell it. The way that I see it, you have four options: Crack that provision in the will. You'd need to hire a lawyer for that. It may not be possible. Abandon the house. It's currently owned by the estate, so leave it in the estate. Distribute any goods and investments, but let the bank foreclose on the house. You don't get any value from the house, but you don't lose anything either. Your father's credit rating will take a posthumous hit that it can afford. You may need to talk to a lawyer here as well, but this is going to be a standard problem. Explore a reverse mortgage. They may be able to accommodate the weird provision with the aunt and manage the property while giving a payout. Or maybe not. It doesn't hurt to ask. Find a property manager in Philadelphia and have them rent out the house for you. Google gave some results on \\\"\\\"find property management company Philadelphia\\\"\\\" and you might be able to do better while in Philadelphia to get rid of his stuff. Again, I'd leave the house on the estate, as you are blocked from selling. A lawyer might need to put it in a trust or something to make that work (if the estate has to be closed in a certain time period). Pay the mortgage out of the rent. If there's extra left over, you can either pay down the mortgage faster or distribute it. Note that the rent may not support the mortgage. If not, then option four is not practical. However, in that case, the house is unlikely to be worth much net of the mortgage anyway. Let the bank have it (option two). If the aunt needs to move into the house, then you can give up the rental income. She can either pay the mortgage (possibly by renting rooms) or allow foreclosure. A reverse mortgage might also help in that situation. It's worth noting that three of the options involve a lawyer. Consulting one to help choose among the options might be constructive. You may be able to find a law firm with offices in both Florida and Pennsylvania. It's currently winter. Someone should check on the house to make sure that the heat is running and the pipes aren't freezing. If you can't do anything with it now, consider winterizing by turning off the water and draining the pipes. Turn the heat down to something reasonable and unplug the refrigerator (throw out the food first). Note that the kind of heat matters. You may need to buy oil or pay a gas bill in addition to electricity.\\\"\",\n \"Consider contracting with a property management company to lease and maintain the house until it can be sold. Rent on the property should cover the mortgage, property taxes, etc. The property management company can handle maintenance and the tenant would be responsible for utilities.\",\n \"\\\"Sure, it's irresponsible for an executor to take actions which endanger the estate. But what about passivity or inaction? Put it another way. Is it the obligation of the executor to avoid making revenue for the estate? Think about it - what a silly idea! Consider a 12-unit apartment building full of rent paying tenants. A tenant gives notice and leaves. So do 4 more. With only 7/12 tenants, the building stops being a revenue center and becomes a massive money pit. Is that acceptable? Heck no! Realistically this will be managed by a property management company, and of course they'll seek new tenants, not stopping merely because the owner died. This situation is not different; the same fiscal logic applies. The counter-argument is usually along the lines of \\\"\\\"stuff might happen if you rent it out\\\"\\\"... true. But the stuff that happens to abandoned houses is much worse, and much more likely: squatters, teen \\\"\\\"urban explorers\\\"\\\", pot growers, copper thieves, winter pipe freeze flooding and wrecking interiors, etc. Don't take my word on it -- ask your insurer for the cost of insuring an abandoned house vs. a rented one. Renting brings a chunk of cash that comes in from tenants - $12,000/year on a $1000/mo. rental. And that will barely pay the bills if you have a young mortgage on a freshly purchased house at recent market rates. But on an old mortgage, renting is like printing money. That money propagates first to the estate (presumably it is holding back a \\\"\\\"fix the roof\\\"\\\" emergency fund), and then to the beneficiaries. It means getting annual checks from the estate, instead of constantly being dunned for another repair. But I don't care about making revenue (outside of putting back a kitty to replace the roof). Even if it was net zero, it means the maintenance is being done. This being the point. It is keeping the house in good repair, occupied, insured, and professionally managed -- fit and ready for the bequest's purpose: occupancy of an aunt. What's the alternative? Move an aunt into a house that's been 10 years abandoned? Realistically the heirs are going to get tired/bored of maintaining the place at a total cash loss, maintenance will slip, and you'll be moving them into a neglected house with some serious issues. That betrays the bequest, and it's not fair to the aunts. Rental is a very responsible thing to do. The executor shouldn't fail to do it merely out of passivity. If you decide not to do it, there needs to be a viable alternative to funding the home's decent upkeep. (I don't think there is one). Excluding a revenue-producing asset from the economy is an expensive thing to do.\\\"\"\n]","isConversational":false}}},{"rowIdx":82,"cells":{"_id":{"kind":"string","value":"3115"},"query":{"kind":"string","value":"How can I live outside of the rat race of American life with 300k?"},"gt_ids":{"kind":"list like","value":["129364","183869","234950","389028","233562","316794"],"string":"[\n \"129364\",\n \"183869\",\n \"234950\",\n \"389028\",\n \"233562\",\n \"316794\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1,1,1,1,1],"string":"[\n 1,\n 1,\n 1,\n 1,\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["233562","129364","267892","575876","389028","259227","544573","149357","44241","152478","363681","540621","584531","174272","33912","585494","29519","47184","183869","207914","316515","505082","519923","333059","343206","328770","548758","282663","204171","162633","419851","44574","112499","117827","234950","238852","434395","163946","329005","45956","220072","118532","172778","593377","80157","426476","121160","50355","65835","243413","554706","498640","577582","6245","470681","155374","102395","502150","474714","150066","193280","296969","42088","487348","138367","121589","422946","430014","353081","374266","395471","368843","356145","366961","271818","63054","412641","520597","336950","34939","320320","530498","444707","157219","432065","581204","257757","575929","76257","282442","150044","61936","62655","519534","411773","569738","115118","145870","274738","568629"],"string":"[\n \"233562\",\n \"129364\",\n \"267892\",\n \"575876\",\n \"389028\",\n \"259227\",\n \"544573\",\n \"149357\",\n \"44241\",\n \"152478\",\n \"363681\",\n \"540621\",\n \"584531\",\n \"174272\",\n \"33912\",\n \"585494\",\n \"29519\",\n \"47184\",\n \"183869\",\n \"207914\",\n \"316515\",\n \"505082\",\n \"519923\",\n \"333059\",\n \"343206\",\n \"328770\",\n \"548758\",\n \"282663\",\n \"204171\",\n \"162633\",\n \"419851\",\n \"44574\",\n \"112499\",\n \"117827\",\n \"234950\",\n \"238852\",\n \"434395\",\n \"163946\",\n \"329005\",\n \"45956\",\n \"220072\",\n \"118532\",\n \"172778\",\n \"593377\",\n \"80157\",\n \"426476\",\n \"121160\",\n \"50355\",\n \"65835\",\n \"243413\",\n \"554706\",\n \"498640\",\n \"577582\",\n \"6245\",\n \"470681\",\n \"155374\",\n \"102395\",\n \"502150\",\n \"474714\",\n \"150066\",\n \"193280\",\n \"296969\",\n \"42088\",\n \"487348\",\n \"138367\",\n \"121589\",\n \"422946\",\n \"430014\",\n \"353081\",\n \"374266\",\n \"395471\",\n \"368843\",\n \"356145\",\n \"366961\",\n \"271818\",\n \"63054\",\n \"412641\",\n \"520597\",\n \"336950\",\n \"34939\",\n \"320320\",\n \"530498\",\n \"444707\",\n \"157219\",\n \"432065\",\n \"581204\",\n \"257757\",\n \"575929\",\n \"76257\",\n \"282442\",\n \"150044\",\n \"61936\",\n \"62655\",\n \"519534\",\n \"411773\",\n \"569738\",\n \"115118\",\n \"145870\",\n \"274738\",\n \"568629\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["\"the short answer: yes. The long answer depends on what you mean by modest living. As others have noted, living off a $300k principle involves risks, but the entire future has risk. By \"\"getting out of the rat race\"\" I hope you don't mean become a slug on the couch. Peruse mr. Money Mustache at https://www.mrmoneymustache.com/. One can live very frugally yet very well in some parts of the US.\"","\"So my read on the question is \"\"How do I invest 300k such that it earns me a 'living wage' without the ongoing grind inherent in most formal employment?\"\" Reading the other answers to date it looks like most of them are thinking in terms of investment accounts and trying to live off of the earnings from such. I wanted to throw out a couple of alternative choices that may be worth considering... The first is real-estate investing. $300k should allow you to pick up 2 or 3 single family dwellings with little or no mortgage. Turning them into rentals placed with a good property management company should easily pay their expenses and provide a consistent income with minimal effort/attention from you. Similar story with buying into multifamily housing or commercial real-estate. Your key concern here is picking the right market in which to buy and finding a reputable manager to handle the day to day issues on your behalf. Note that you are not overly concerned with the potential resale value of the property(s), but the probable rental income they can generate, these are separate concerns that may not align with each other. Second is buying/founding a business that has a general manager other than yourself. Franchise ownership may be a potential option for you under the circumstances. The key concern here is picking the business, location, and manager that make you comfortable in terms of the risk involved. You need the place to make enough money to pay for itself and the salary of everyone working there, with enough left over for you to live on. Sounds easy enough, but not so much in practice. Generally you can expect at least a few years of being hands on and watching things very closely to make sure it is going the way you want it to. Finding a mentor who has done this type of transition before to walk you through it would be strongly advised. So would preparing yourself for a failure or two before you work out the exact combination of factors that work for you.\"","This is a meaningless question without additional parameters. You certainly can live on $30k if you live a spartan life in a low cost of living place. What could change... You want to live in a US city? Have kids? Send those kids to college? Save money? Go out to eat? Travel? Buy your own health care instead of being on your parents insurance? etc. etc. etc.","Market rate of return averages about 8% annually (sometimes more, sometimes less or negative). To get 30k monthly -- even taking that as pretax -- you're talking about 360k yearly. Divide that by 0.08 and you need to have savings of 4.5 million--- and really you should double that for safety.. Tl;dr: forget it. Added thought: If you really have $20k/month coming in, you really have no business asking the Internet for advice. Hire a professional financial advisor (not a broker, someone who is paid a flat fee for their expertise and has no incentives to give you less-than-optimal advice). . The money they will save/make for you will more than pay for their hire.","Even with a good investment strategy, you cannot expect more than 8-10% per year in average. Reducing this by a 3% inflation ratio leaves you with 5 - 7%, which means 15k$ - 21k$. Consider seriously if you could live from that amount as annual income, longterm. If you think so, there is a second hurdle - the words in average. A good year could increase your capital a bit, but a bad year can devastate it, and you would not have the time to wait for the good years to average it out. For example, if your second year gives you a 10% loss, and you still draw 15k$ (and inflation eats another 3%), you have only 247k$ left effectively, and future years will have to go with 12k$ - 17k$. Imagine a second bad year. As a consequence, you either need to be prepared to go back to work in that situation (tough after being without job for years), or you can live on less to begin with: if you can make it on 10k$ to begin with (and do, even in good years), you have a pretty good chance to get through your life with it. Note that 'make it with x' always includes taxes, health care, etc. - nothing is free. I think it's possible, as people live on 10k$ a year. But you need to be sure you can trust yourself to stay within the limit and not give in and spent more - not easy for many people.","\"To summarize your starting situation: You want to: Possible paths: No small business Get a job. Invest the 300K in safe liquid investments then move the maximum amount each year into your retirement accounts. Depending on which company you work for that could include 401K (Regular or Roth), deductible IRA, Roth IRA. The amount of money you can transfer is a function of the options they give you, how much they match, and the amount of income you earn. For the 401K you will invest from your paycheck, but pull an equal amount from the remainder of the 300K. If you are married you can use the same procedure for your spouse's account. You current income funds any vacations or splurges, because you will not need to put additional funds into your retirement plan. By your late 30's the 300K will now be fully invested in retirement account. Unfortunately you can't touch much of it without paying penalties until you are closer to age 60. Each year before semi-retirement, you will have to invest some of your salary into non-retirement accounts to cushion you between age 40 and age 60. Invest/start a business: Take a chunk of the 300K, and decide that in X years you will use it to start a small business. This chunk of money must be liquid and invested safely so that you can use it when you want to. You also don't want to invest it in investments that have a risk of loss. Take the remaining funds and invest it as described in the no small business section. You will completely convert funds to retirement funds earlier because of a smaller starting amount. Hopefully the small business creates enough income to allow you to continue to fund retirement or semi-retirement. But it might not. Comment regarding 5 year \"\"rules\"\": Roth IRA: you have to remain invested in the Roth IRA for 5 years otherwise your withdrawal is penalized. Investing in stocks: If your time horizon is short, then stocks are too volatile. If it drops just before you need the money, it might not recover in time. Final Advice: Get a financial adviser that will lay out a complete plan for a fixed fee. They will discuss investment options, types not particular funds. They will also explain the tax implications of investing in various retirement accounts, and how that will impact your semi-retirement plans. Review the plan every few years as tax laws change.\"","Plenty of folks earn $300k/year from salary alone, and keep in mind this is household income. If you and your spouse are both educated and have a well paying jobs it's not all that difficult to hit that mark.","\"While I can appreciate you're coming from a strongly held philosophy, I disagree strongly with it. I do not have any 401k or IRA I don't like that you need to rely on government and keep the money there forever. A 401k and an IRA allows you to work within the IRS rules to allow your gains to grow tax free. Additionally, traditional 401ks and IRAs allow you to deduct income from your taxes, meaning you pay less taxes. Missing out on these benefits because the rules that established them were created by the IRS is very very misguided. Do you refuse to drive a car because you philosophically disagree with speed limits? I am planning on spending 20k on a new car (paying cash) Paying cash for a new car when you can very likely finance it for under 2% means you are loosing the opportunity to invest that money which can conservatively expect 4% returns annually if invested. Additionally, using dealership financing can often be additional leverage to negotiate a lower purchase price. If for some reason, you have bad credit or are unable to secure a loan for under 4%, paying cash might be reasonable. The best thing you have going for you is your low monthly expenses. That is commendable. If early retirement is your goal, you should consider housing expenses as a part of your overall plan, but I would strongly suggest you start investing that money in stocks instead of a single house, especially when you can rent for such a low rate. A 3 fund portfolio is a classic and simple way to get a diverse portfolio that should see returns in good years and stability in bad years. You can read more about them here: http://www.bogleheads.org/wiki/Three-fund_portfolio You should never invest in individual stocks. People make lots of money to professionally guess what stocks will do better than others, and they are still very often wrong. You should purchase what are sometimes called \"\"stocks\"\" but are really very large funds that contain an assortment of stocks blended together. You should also purchase \"\"bonds\"\", which again are not individual bonds, but a blend of the entire bond market. If you want to be very aggressive in your portfolio, go with 100-80% Stocks, the remainder in Bonds. If you are nearing retirement, you should be the inverse, 100-80% bonds, the remainder stocks. The rule of thumb is that you need 25 times your yearly expenses (including taxes, but minus pension or social security income) invested before you can retire. Since you'll be retiring before age 65, you wont be getting social security, and will need to provide your own health insurance.\"","Yep you could do this if you lived in a certain area (small town, midwest, etc) and had a decent job. You couldn't pull this off in any of the major employing cities that everyone moves to like Seattle, D.C; L.A; etc.","Then: (do these in whatever order) 35 is not mid-life. You're on the tail end of the age to get started on retirement planning. Being single, relatively young, and a great income level, you are ideally situated to consider FIRE'ing yourself. (Financial Independent, Retire Early). The basic idea is to invest a large chunk of your income and establish your comfort level balancing frugality and comfort. There's a table on one of the FIRE websites that shows a graph between % of income saved and the number of years it takes to save enough to be financially independent. If you can go over 50% savings, you can get down to about 10 years. In this case, financially independent is where you can live on a safe percentage of withdrawal from your savings without depleting the savings. At that point, you no longer need to work for a paycheck. You would only do so to extend the savings, increase the safe withdraw rate, or because you want to do something that makes you feel productive.","130k in LA? That's not life-changing or anything. Do the usual: save money, buy used cars, cheapest rent you can live with, etc. If it was me, I'd be researching the local housing market. Save cash until you find a deal you like. Work the numbers, do your homework. You're the finance guy - you should know what a good deal looks like.","my wife and I own a 2 br/2 bath house on .25 acres in western MA. We were able to refinance it and now pay about $400 a month in mortgage, and another $350 in taxes each month. Insurance is $50. We grow our own produce during the spring/summer/fall and put up a lot of canned stuff and whatnot in October. We don't eat much meat. I make about $20k/yr teaching music. Our 2 year old doesn't go to daycare. I care for him during the day and pay a babysitter in the evening while I teach. My wife is a cook and earns slightly more than me. Our combined income is about $42k/year. We have savings, investments and no debt. We do not use credit cards. We don't shop for the latest gadgets and gizmos. We look for bargains wherever possible, we go without and we do a lot of barter. See it is possible to do it. It takes hard work and creativity","One strategy to consider is a well-diversified index fund of equities. These have historically averaged 7-8% real growth. So withdrawing 3% or 4% yearly under that growth should allow you to withdraw 30+ years with little risk of drawing down all your capital. As a bonus you're savings target would come down from $10 million to $2.5 million to a little under $3.5 million.","We are FAR FAR better off than the majority. That is COMPLETELY true. But the point is that this does not made 300k$ easily, despite being far far far ahead of most. That's the crazy part -- the income disparity. (P.s., where we live 400k$ gets you the shittiest house in town. You could get a tiny condo for 250k$ too)","There isn't any place you can put $300 and turn it into significant passive income. What you need to do instead is manage the active (work) income that you have so that your money goes farther, freeing income up for reducing debt and investing. Investing $300 one time won't add up to much, but investing $100 a month will turn into wealth over time. Making a monthly budget is the key to managing your income. In the process, you'll find out where your income is going, and you can be intentional about how much you want to spend on different things in your life. You can allocate some of your income to paying down debt and investing, which is what you need to do to get ahead. For some general guidelines on what to do with your money first, read this question: Oversimplify it for me: the correct order of investing. For more specifics on creating a budget, eliminating debt, and building wealth, I recommend the book The Total Money Makeover by Dave Ramsey.","\"Pay off the credit cards. From now on, pay off the credit cards monthly. Under no circumstances should you borrow money. You have net worth but no external income. Borrowing is useless to you. $200,000 in two bank accounts, because if one bank collapses, you want to have a spare while you wait for the government to pay off the guarantee. Keep $50,000 in checking and another $50k in savings. The remainder put into CDs. Don't expect interest income beyond inflation. Real interest rates (after inflation) are often slightly negative. People ask why you might keep money in the bank rather than stocks/bonds. The problem is that stocks/bonds don't always maintain their value, much less go up. The bank money won't gain, but it won't suddenly lose half its value either. It can easily take five years after a stock market crash for the market to recover. You don't want to be withdrawing from losses. Some people have suggested more bonds and fewer stocks. But putting some of the money in the bank is better than bonds. Bonds sometimes lose money, like stocks. Instead, park some of the money in the bank and pick a more aggressive stock/bond mixture. That way you're never desperate for money, and you can survive market dips. And the stock/bond part of the investment will return more at 70/30 than 60/40. $700,000 in stock mutual funds. $300,000 in bond mutual funds. Look for broad indexes rather than high returns. You need this to grow by the inflation rate just to keep even. That's $20,000 to $30,000 a year. Keep the balance between 70/30 and 75/25. You can move half the excess beyond inflation to your bank accounts. That's the money you have to spend each year. Don't withdraw money if you aren't keeping up with inflation. Don't try to time the market. Much better informed people with better resources will be trying to do that and failing. Play the odds instead. Keep to a consistent strategy and let the market come back to you. If you chase it, you are likely to lose money. If you don't spend money this year, you can save it for next year. Anything beyond $200,000 in the bank accounts is available for spending. In an emergency you may have to draw down the $200,000. Be careful. It's not as big a cushion as it seems, because you don't have an external income to replace it. I live in southern California but would like to move overseas after establishing stable investments. I am not the type of person that would invest in McDonald's, but would consider other less evil franchises (maybe?). These are contradictory goals, as stated. A franchise (meaning a local business of a national brand) is not a \"\"stable investment\"\". A franchise is something that you actively manage. At minimum, you have to hire someone to run the franchise. And as a general rule, they aren't as turnkey as they promise. How do you pick a good manager? How will you tell if they know how the business works? Particularly if you don't know. How will you tell that they are honest and won't just embezzle your money? Or more honestly, give you too much of the business revenues such that the business is not sustainable? Or spend so much on the business that you can't recover it as revenue? Some have suggested that you meant brand or stock rather than franchise. If so, you can ignore the last few paragraphs. I would be careful about making moral judgments about companies. McDonald's pays its workers too little. Google invades privacy. Exxon is bad for the environment. Chase collects fees from people desperate for money. Tesla relies on government subsidies. Every successful company has some way in which it can be considered \"\"evil\"\". And unsuccessful companies are evil in that they go out of business, leaving workers, customers, and investors (i.e. you!) in the lurch. Regardless, you should invest in broad index funds rather than individual stocks. If college is out of the question, then so should be stock investing. It's at least as much work and needs to be maintained. In terms of living overseas, dip your toe in first. Rent a small place for a few months. Find out how much it costs to live there. Remember to leave money for bigger expenses. You should be able to live on $20,000 or $25,000 a year now. Then you can plan on spending $35,000 a year to do it for real (including odd expenses that don't happen every month). Make sure that you have health insurance arranged. Eventually you may buy a place. If you can find one that you can afford for something like $100,000. Note that $100,000 would be low in California but sufficient even in many places in the US. Think rural, like the South or Midwest. And of course that would be more money in many countries in South America, Africa, or southern Asia. Even southern and eastern Europe might be possible. You might even pay a bit more and rent part of the property. In the US, this would be a duplex or a bed and breakfast. They may use different terms elsewhere. Given your health, do you need a maid/cook? That would lean towards something like a bed and breakfast, where the same person can clean for both you and the guests. Same with cooking, although that might be a second person (or more). Hire a bookkeeper/accountant first, as you'll want help evaluating potential purchases. Keep the business small enough that you can actively monitor it. Part of the problem here is that a million dollars sounds like a lot of money but isn't. You aren't rich. This is about bare minimum for surviving with a middle class lifestyle in the United States and other first world countries. You can't live like a tourist. It's true that many places overseas are cheaper. But many aren't (including much of Europe, Japan, Australia, New Zealand, etc.). And the ones that aren't may surprise you. And you also may find that some of the things that you personally want or need to buy are expensive elsewhere. Dabble first and commit slowly; be sure first. Include rarer things like travel in your expenses. Long term, there will be currency rate worries overseas. If you move permanently, you should certainly move your bank accounts there relatively soon (perhaps keep part of one in the US for emergencies that may bring you back). And move your investments as well. Your return may actually improve, although some of that is likely to be eaten up by inflation. A 10% return in a country with 12% inflation is a negative real return. Try to balance your investments by where your money gets spent. If you are eating imported food, put some of the investment in the place from which you are importing. That way, if exchange rates push your food costs up, they will likely increase your investments at the same time. If you are buying stuff online from US vendors and having it shipped to you, keep some of your investments in the US for the same reason. Make currency fluctuations work with you rather than against you. I don't know what your circumstances are in terms of health. If you can work, you probably should. Given twenty years, your million could grow to enough to live off securely. As is, you would be in trouble with another stock market crash. You'd have to live off the bank account money while you waited for your stocks and bonds to recover.\"","No, but it's not crazy out of reach of the salaries you listed, either. Heck, you even made a provision for $250k. And it's certainly over the $100k threshold. But sure, if all you are is a worker bee you're not going to make that. As long as you're quoting developer salaries, you're not going to make that. The question is where you go after being a developer, if you ever move past that. And yeah, there's a big difference in the number of people that make 100 vs 300.","Establish good saving and spending habits. Build up your savings so that when you do buy a car, you can pay cash. Make spending decisions, especially for housing, transportation and entertainment, that allow you to save a substantial portion of your income. The goal is to get yourself to a place where you have enough net worth that the return on your assets is greater than the amount you can earn by working. (BTW, this is basically what I did. I put my two sons through top colleges on my dime and retired six years ago at the age of 56).","\"The title of your question is quite different then the content. The term \"\"Rat Race\"\" was coined in the 70's and refers to the endless cycle of working hard to consume more. Fortunately it is very easy not to participate in the cycle and probably will lead to more happiness. Just because one \"\"works\"\" does not mean they are participating in the \"\"rat race\"\", and I would recommend the following: When I think of \"\"rat race\"\" I picture a a bumper-to-bumper freeway of people struggling to get to work. For others it might be different, but that kind of rat race is easily avoided by the multitude of remote work opportunities. Some jobs allow you to work anywhere in the world. Avoiding the rugged consumerism also helps avoid the feelings of being a rat on the wheel. Sure one can like nice things, but do we have to have everything that Madison Ave is trying to sell us? No. Pick some nice things and pay cash. Debt, especially consumer debt, causes a person (in effect) to work for a bank. Avoiding debt will remove those feelings. Saving and investing also helps avoid those feelings. There is profound satisfaction in watching ones account balances grow. Once you see that your investment earnings can outpace your expenses, and then your salary you really feel like you are getting ahead. Above all else giving is a paramount and often overlooked part of a person's financial life. It causes one to be humble and recognize that most people, in this world, are less fortunate that us. It avoids runaway provide that justifies purchases that we cannot afford. So yea you can avoid the \"\"Rat Race\"\" and still work.\"","Since you mentioned moving, you can buy real state very cheap here in Mexico that will give you income monthly. I will tell you some numbers in case you're interested. Now to investments: you can buy houses for rent, and prices are as follows: Average house $25k which will give about $220 monthly of income. Let's say you buy 20 of these that would be $4400 USD monthly. Now you have a very high standard here and you will never have to work again, and each year the income will increase about 2% and you still have $576k left.","\"Whatever you do, you need to be saving a lot more to have a good chance at retirement at a reasonable age. With a combined salary of $150,000, I'd recommend: In total, that's $47,000/year in tax advantaged accounts, plus whatever you put into taxable accounts. Your $150,000 yearly income, less $90,000/year in savings is still an income of $60,000. People live comfortably and raise families on a lot less. Consider how fortunate you are. You could retire in 10 years, if you wanted, by increasing your savings and decreasing your expenses. Seriously, I'm speaking from first-hand experience. If you stay on your present course (saving $2,000/mo), at a 7% real return, you'll need about 37 years to accumulate $3,800,000 (in today's dollars), which is enough to: Even if those student loans are forgiven, that only knocks off about 2 years. If you are in your late 30s now, there's a decent chance you'll be dead before you retire. As for buying a house or not, this depends a lot on your personal circumstance and how the rental market in your city compares. In your decision, don't forget to consider: Renting is not necessarily throwing money away any more than buying a house is. If you take out a mortgage, you'll be \"\"throwing away\"\" a lot of money anyway. Look for a \"\"loan amortization calculator\"\" to see how much goes to interest versus principal. For a $500,000 loan at a 3.5% rate, you will be paying approximately $1400 per month in interest versus only $800 towards the principal. When you deduct insurance, taxes, maintenance, etc from that $800, you may find you are still throwing away most of your monthly payment on interest and expenses you wouldn't have if you rented. The money you do \"\"save\"\", after interest and expenses, isn't really saved. Housing markets go up and down, but on average, over the long term, they go up just enough to keep up with inflation, meaning a 0% real return. If renting means less cash out of pocket per month, you can put that extra cash towards investments that yield a much higher return. Sure, you may need to continue making rental payments in perpetuity, but you can save enough extra money to pay for the rental in investment income. Again, it depends considerably on how the housing and rental markets compare where you live. Popular cities (San Francisco, New York, Paris, etc.) tend to favor renting. Unpopular cities (Detroit, St. Louis) and rural areas tend to favor buying. Further reading: Mr. Money Mustache: Rent vs. Buy: If You Have to Ask, You Should Probably Rent\"","Debt will ruin any plans. I guess that the interest on the credit cards is about $450 a month or about $5,500 per year and the school loans is about $6,000 a year. Get a an Excel spread sheet going and start tracking your expensed. Learn to make a amortization spread sheet for all debts, and any future debts that you are thinking about. If you want a family soon plan on one income for a period of time. If you buy a house plan on paying it off while you are working. Then the house payment becomes spendable money during retirement. A cheaper house can be upgraded in the right neighborhood with an excellent appreciation in value. Money put into excellent collectibles and kept for 20 years or more is private and off the radar income no taxes when sold. STUDY STUDY LEARN LEARN","I'm pretty sure this isn't a /r/personalfinance question. Sounds like you have that on lock. You are asking some existential questions. Maybe find a way to travel or vacation for a month. Don't sacrifice what you have worked for in a temporary feeling of doing the wrong thing.","If you are looking to begin living off the money now, then Dheer's answer is correct - it is not possible. However, if you are looking to grow that money (and potentially additional money added at later dates), then you could make this work. 250 a month corresponds to 3000 per year. A first approximation is that you will need a diversified portfolio of 20-25x that amount (60k-75k) to get the required return. This approximation is based on the rule of thumb for how much life insurance to buy. Therefore you need to determine how to grow the 4k you currently have into 60-75k. These numbers, however, are not adjusted for inflation. In the US I would like put the long term inflation adjust diversified market return at 4% per year (your money doubles about every 18 years). So your best approach if you have time is a diversified portfolio with rebalancing and adding additional money each year.","Look through the related questions. Make sure you fund the max your tax advantaged retirement funds will take this year. Use the 30k to backstop any shortfalls. Invest the rest in a brokerage account. In and out of your tax advantaged accounts, try to invest in index funds. Your feeling that paying someone to manage your investments might not be the best use is shared by many. jlcollinsnh is a financial independence blogger. He, and many others, recommend the Vanguard Total Stock Market Index Admiral Shares. I have not heard of a lower expense ratio (0.05%). Search for financial independence and FIRE (Financial Independence Retire Early). Use your windfall to set yourself on that road, and you will be less likely to sit where I am 25 years from now wishing you had done things differently. Edit: Your attitude should be that the earliest money in your portfolio is in there the longest, and earns the most. Starting with a big windfall puts you years ahead of where you'd normally be. If you set your goal to retire at 40, that money will be worth significantly more in 20 years. (4x what you start with, assuming 7% average yearly return).","\"This may be a great idea, or a very bad one, or it may simply not be applicable to you, depending on your personal circumstances and interests. The general idea is to avoid passive investments such as stocks and bonds, because they tend to grow by \"\"only\"\" a few percent per year. Instead, invest in things where you will be actively involved in some form. With those, much higher investment returns are common (but also the risk is higher, and you may be tied down and have to limit the traveling you want to do). So here are a few different ways to do that: Get a college degree, but only if you are interested in the field, and it ends up paying you well. If you aren't interested in the field, you won't land the $100k+ jobs later. And if you study early-childhood education, you may love the job, but it won't pay enough to make it a good investment. Of course, it also has to fit with your life plans, but that might be easier than it seems. You want to travel. Have you thought about anthropology, marine biology or archeology? Pick a reputable, hard-to-get-into, academic school rather than a vocation-oriented oe, and make sure that they have at least some research program. That's one way to distinguish between the for-profit schools (who tend to be very expensive and land you in low-paying jobs), and schools that actually lead to a well-paying future. Or if your interest runs more in a different direction: start a business. Your best bet might be to buy a franchise. Many of the fast-food chains, such as McDonalds, will let you buy as long as you have around $300k net worth. Most franchises also require that you are qualified. It may often make sense to buy not just one franchised store, but several in an area. You can increase your income (and your risk) by getting a loan - you can probably buy at least $5 million worth of franchises with your \"\"seed money\"\". BTW, I'm only using McDonalds as an example. Well-known fast food franchises used to be money-making machines, but their popularity may well have peaked. There are franchises in all kinds of industries, though. Some tend to be very short-term (there is a franchise based on selling customer's stuff on ebay), while others can be very long-lived (many real-estate brokerages are actually franchises). Do be careful which ones you buy. Some can be a \"\"license to print money\"\" while others may fail, and there are some fraudsters in the franchising market, out to separate you from your money. Advantage over investing in stocks and bonds: if you choose well, your return on investment can be much higher. That's generally true for any business that you get personally involved in. If you do well, you may well end up retiring a multimillionaire. Drawback: you will be exposed to considerable risk. The investment will be a major chunk of your net worth, and you may have to put all your eggs in none basket. If your business fails, you may lose everything. A third option (but only if you have a real interest in it!): get a commercial driver's license and buy an 18-wheeler truck. I hear that owner-operators can easily make well over $100k, and that's with having to pay off a bank loan. But if you don't love trucker culture, it is likely not worth doing. Overall, you probably get the idea: the principle is to use your funds as seed money to launch something profitable and secure, as well as enjoyable for you.\"","Investing it in what? Unless you're putting it into an account that lets you avoid taxes on the income, your $100k becomes about $74k after federal income taxes. If you take $50k of that and invest it, you're now at $24k. You're living a very barebones life at that point.","Make sure the financial adviser is fee only. This means the person gets paid a set fee instead of a commission. The commission based adviser will put you in a financial instrument that can charge upwards of 5%, so he would get $900k for hooking you as a client. You can go to finra.org to find a good one. Read books a variety of books so you know about finanical matters. Credit is not advisable if you have as much money as you do. You have already won the race, no need to take risks.","Your Money or Your Life is a great book on this topic.","Even if you could get it with no major hassle, $100,000 is just not that much money. In a cheap third world country, as an expat you're looking at spending about $800-$2000/month, plus unexpected expenses. Locals live on less, but very few of us would be happy with the lifestyle of a Honduran or Thai farmer. Your 100k will last 4-10 years. This is hardly a great deal considering you're cutting off ties back home and almost becoming a fugitive. With USD going down the drain (e.g. in Thailand it went down 25% in 3 years), this period would probably be even shorter. Of course, you could work in the new country, but if you do then you don't need 100k to start with. The initial amount may improve your security, but from that standpoint being able to go back and work in your home country is worth more.","\"Neat points but with regards to your first point there is no car financing to \"\"pay off\"\" unless you take on debt. And few Americans have or can easily accumulate the cash in hand to buy a $15K-30K vehicle. Sure, you can definitely live without debt, but buying a home, a car or making other sizable purchases is not possible under such circumstances unless you make a greater than average salary and are remarkably frugal, including an affordable, tenable living situation.\"","\"I agree with Grade 'Eh' Bacon's answer, but there are a couple of ideas that are relevant to your particular situation: If I were you, I would invest at least half of the cash in growth ETFs because you're young enough that market variability doesn't affect you and long term growth is important. The rest should be invested in safer investments (value and dividend ETFs, bonds, cash) so that you have something to live off in the near term. You said you wanted to invest ethically. The keyword to search is \"\"socially responsible ETFs\"\". There are many, and if this is important to you, you'll have to read their prospectus to find one that matches your ethics. Since you're American, the way I understand it, you need to file taxes on income; selling stocks at a gain is income. You want to make sure that as your stocks appreciate, you sell some every year and immediately rebuy them so that you pay a small tax bill every year rather than one huge tax bill 20 years from now. Claiming about $20600 of capital gains every year would be tax free assuming you are not earning any other money. I would claim a bit more in years where you make a lot. You can mitigate your long term capital gains tax exposure by opening a Roth IRA and maxing that out. Capital gains in the Roth IRA are not taxable. Even if you don't have income from working, you can have some income if you invest in stocks that pay dividends, which would allow you to contribute to a Roth IRA. You should figure where you're going to be living because you will want to minimize the currency risk of having your money in USD while you're living abroad. If the exchange rate were to change by a lot, you might find yourself a lot poorer. There are various hedging strategies, but the easiest one is to invest some of your money in securities of the country you'll be living in. You should look into how you'll be converting money into the foreign currency. There are sometimes way of minimizing the spread when converting large amounts of money, e.g., Norbert's gambit. Shaving off 1.5% when exchanging $100k saves $1500.\"","Let Go App...good way to find awesome deals on furniture. Depending on climate find a nice bike, pretty easy way to get around & low maintenance costs compared to a car ( i.e. insurance, gas, repairs). Then depending on whether your work offers matching 401k programs, max that out or find a good index fund & consistently build that emergency fund. Chill for 10-15 years & enjoy the benefits of compounding interest my friend.","\"The topic you are apparently describing is \"\"safe withdrawal rates\"\", more here. Please, note that the asset allocation is crucial decision with your rates. If you continue to keep a lot in cash, you cannot withdraw too much money \"\"to live and to travel\"\" because the expected return from cash is too low in the long run. In contrast, if you moved to more sensible decision like 30% bonds and 70% world portfolio -- the rates will me a lot different. As you are 30 years old, you could pessimist suppose to live next 100 years -- then your possible withdrawal rates would be much lower than let say over 50 years. Anyway besides deciding asset allocation, you need to estimate the time over which you need your assets. You have currently 24% in liquid cash and 12% in bonds but wait you use the word \"\"variety of funds\"\" with about 150k USD, what are they? Do you have any short-term bonds or TIPS as inflation hedge? Do you miss small and value? What is your sector allocation between small-med-large and value-blend-growth? If you are risk-averse, you could add some value small. Read the site, it does much better job than any question-answer site can do (the link above).\"","\"An endowment is a large chunk of capital (i.e. money) held by a university or other nonprofit. It is meant to hold its value forever against inflation, and invested to generate income: from interest, dividends and appreciation. They seem like a contradiction: closely scrutinized by Boards of Directors, managed to a high and accountable standard, closely regulated -- and yet, invested aggressively for growth: ignoring short-term volatility to get the highest growth long-term. The law, UPMIFA (P for Prudent), requires growth investment, and says taking up to 7% of current value per year is prudent, even in down times when total value is shrinking. On average, this lets the endowment grow with inflation. 7% is the high end of \"\"prudent\"\". An endowment is watched, and the taken income is adjusted to keep the endowment healthy. 5% is very safe, assuming the endowment must pace inflation until the heat death of the universe. If you plan to die someday, drawing an extra 1-2% is appropriate. There you go. Invest like a university endowment, and count on up to 7% per year of income. That's $21,000 a year. There'll be taxes, but the long-term capital gain rate at $21,000/year is pretty low. That's pretty tight, but possible if your idea of entertaining is Netflix. It would work very effectively for #VanLife, or the British version, living on a Narrowboat.\"","$100K is not a lot for my $335K house (now appraised at $389K after 2 years...wtf), with Taxes close to $11500 per year. I'm paying 30K per year JUST for the house+escrow. Now factor in utilities, food, cars, insurance, healthcare, etc.","With a 1/4 million you should be looking at staying fully invested and doing income draw down you can safely take 3 or 4 % Basing your retirement income 100% on cash investments is very risky I can remember when inflation hit 15% in the UK and it has been at similar levels in the usa around 14% in 79.","Good news! It will be enough if you make the most important decision after retirement; that is, the decision to live within your means. With $220,000 per year in 2015 resources, will you live in the same size home in the same location as you do now? Or will you downsize a bit and move to a town with more reasonably priced homes and lower taxes? Apply the same thinking to all of your expenses. In my opinion, making the decision to live within your means is the biggest decision you can make going into retirement.","\"The golden rule is \"\"Pay yourself first.\"\" This means that you should have some form of savings plan set up, preferably a monthly automatic withdrawal that comes out the day after your pay is deposited. 10% is a reasonable number to start with. You are in a wonderful situation because you are thinking about this 10-15 years before most of us do. Use this to your advantage. You are also in a good situation if you can defer the purchase of the house (assuming prices don't rise drastically in the next few years -- which they might.) If your home situation is acceptable, then sit down with the parents and present a plan. Something along the lines of: I'd like to move out and start my life. However, it would be advantageous to stay here for a few years to build up a down payment and reserve. I'm happy to help out with expenses, but do need a couple years of rent-free support to get started. Then go into monk mode for one year. It's doable, and you can save a lot of cash. Then you're on the road to freedom.\"","You are kicking butt and taking names, especially compared to most people in your age bracket. I wish I'd had the opportunity (and the sense) to live rent-free and max out my 401(k) when I was 23. Keep doing what you're doing and you'll be able to pull off a Mr. Money Mustache style retirement. I think you might have misunderstood the question and answer nature of this site. Typically, questions aren't laden with answers, explanations, and suggestions; it should just be the question! You can always ask the question and answer it yourself down below, as some SEers do. To answer your questions towards the end of the post: Good luck, and again, keep doing what you're doing!","\"I suggest that you think in terms of \"\"financial independence\"\" rather than retirement. You do not need to retire in the stereotypical sense of playing golf and moving to Florida. If you reach a point where your \"\"day job\"\" does not need to pay your bills, you open up more options for what you can do. I am not saying to wait until retirement to do something you love. I am saying that lower salary requirements open up more options.\"","Keep it simple, three fund portfolio... Just because you have a lot of money doesn't mean you have to consult an advisor. Post your situation to boggleheads forum. And yes, don't get a mortgage if you can afford to pay in cash.","The amount of money you have should be enough for you to live a safe but somewhat restricted life if you never worked again - but it could set you up for just about any sort of financial goal (short of island buying) if you do just about any amount of work. The basic math for some financial rules of thumb to keep in mind: If your money is invested in very low-risk ways, such as a money market fund, you might earn, say, 3% in interest every year. That's $36k. But, if you withdraw that $36k every year, then every year you have the same principal amount invested. And a dollar tomorrow can't buy as much as a dollar today, because of inflation. If we assume for simplicity that inflation is 1% every year, then you need to contribute an additional $12k to your principal balance every year, just so that it has the same buying power next year. This leaves you with a net $24k of interest income that you can freely spend every year, for the rest of your life, without ever touching your principal balance. If your money is invested more broadly, including equity investments [stocks], you might earn, say, 7% every year. Some years you might lose money on your investments, and would need to draw down your principal balance to pay your bills. Some years you might do quite well - but would need to remain conservative and not withdraw your 'excess' earnings every year, because you will need that 'excess' to make up for the bad years. This would leave you with about $74k of income every year before inflation, and about $62k after inflation. But, you would be taking on more risk by doing this. If you work enough to pay your daily bills, and leave your investments alone to earn 7% on average annually, then in just 10 years your money would have doubled to ~ $2.4 Million dollars. This assumes that you never save another penny, and spend everything you make. It's a level of financial security that means you could retire at a drop of the hat. And if don't start working for 20 years [which you might need to do if you spend in excess of your means and your money dries up], then the same will not be true - starting work at 45 with no savings would put you at a much greater disadvantage for financial security. Every year that you work enough to pay your bills before 'retirement' could increase your nest egg by 7% [though again, there is risk here], but only if you do it now, while you have a nest egg to invest. Now in terms of what you should do with that money, you need to ask yourself: what are your financial goals? You should think about this long and hard (and renew that discussion with yourself periodically, as your goals will change over time). You say university isn't an option - but what other ways might you want to 'invest in yourself'? Would you want to go on 'sabbatical'-type learning trips? Take a trade or learn a skill? Start a business? Do you want to live in the same place for 30 years [and thus maybe you should lock-down your housing costs by buying a house] or do you want to travel around the world, never staying in the same place twice [in which case you will need to figure out how to live cheaply and flexibly, without signing unnecessary leases]. If you want to live in the middle of nowhere eating ramen noodles and watching tv, you could do that without lifting a finger ever again. But every other financial goal you might have should be factored into your budget and work plan. And because you do have such a large degree of financial security, you have a lot of options that could be very appealing - every low paying but desirable/hard-to-get job is open to you. You can pursue your interests, even if they barely pay minimum wage, and doing so may help you ease into your new life easier than simply retiring at such a young age [when most of your peers will be heavy into their careers]. So, that is my strongest piece of advice - work now, while you're young and have motivation, so that you can dial back later. This will be much easier than the other way around. As for where you should invest your money in, look on this site for investing questions, and ultimately with that amount of money - I suggest you hire a paid advisor, who works based on an hourly consultation fee, rather than a % management fee. They can give you much more directed advice than the internet (though you should learn it yourself as well, because that will give you the best piece of mind that you aren't being taken advantage of).","Good idea. That is enough money to never work again, if a life is well planned. A person does not need more than that, to have a happy and lengthy life, doing what they love. I retired at 47 with less than this.","Congratulations on making it at minimum you are close to a 2 millionaire if I understand your numbers correctly. Here is what I would do if I woke up in your shoes: 1) Take some time. Budget some money and time. Go live abroad, take hang gliding lessons or become scuba certified. Something like that. The only thing I really dislike about your situation is that your wife may be precluded on going with you due to her business concerns. During this time dream, plan and decide what you want your life to look like. You seem to understand that you won't be happy doing nothing for a really long time. Its not a big deal if you blow 50K or so doing this. Take the wife to Paris, go visit the Galapagos Islands. 2) You are going to have to become wise about investing. I'd put close to one million in stock based mutual funds. That may sound scary, and you might seek others out to help you with this transition. I feel like that your time spent in your business may have precluded you delving into this area of knowledge. For now, you may just want to stick it all in interest bearing accounts, and slowly invest the money. Don't invest in things you don't understand, and you have to be on the look out for the next Bernie Madoff. 3) Its hard to speak to your desire to downsize your home. You could probably buy a nice ranch in Nevada from the sale of your home if that is what you desire, but you may kind of hate something like that. 4) Could you start more of a boutique business? Not one that occupies all of your time, but one that takes 20-40 hours per week. Something that interests you, not something that is overly a chore. Perhaps you can consult in the field that your former business was in. You most certainly have a lot of intelligent things to say. 5) Be generous. Find worthwhile charities to give time and money to. Congratulations again. Take some time to dream, and then make those things happen. Edit: You may need to make new friends. Actually wealthy people are a very small segment of the population and are out numbered by people who act wealthy. Its going to be hard, but you need to find people that have a certain level of wealth but are also don't make you uncomfortable with their level of spending (either high or low).","Yeah, even then. Maybe a bit more, depending on travel. I'd have a fully-paid for house. If taxes are absurd on the property I might need to bump up the number. Vehicles, fully paid for. Machine tools, heavy-duty sewing gear, firearms & hunting/camping gear, most of the tooling needed to produce anything I need, a well-equipped kitchen, and land with some livestock, woodlot, farm, and orchard. Power from wind/solar with a backup genset & link to the grid as a last resort, wells for water. As I said: Initial cost would be high, but after that my cost of living would be damned low. Hell, I'd probably spend more on books than food.","You should invest your money. To figure out what rate of return you need, use this equation: (How Much Money You Want Per Year) / (Total Amount of Cash You Have) = (Annualized Interest Rate) If we plug in the amount of annualized interest you can expect to safely get while not managing your money personally, 2% by my estimate, we get X / 1.2m = 0.02%; X=24K/year A measly $24,000 / year. Many people say that you can get 10, 12, even 30% return on your investment. I won't speculate on if this is true, but I will guarantee that you cannot get those returns simply by handing your money over to a money manager. So your options are, 1) Earn a guaranteed $24,000 and earn the rest you need to live by working 2) Learn to invest your money (and then do so intelligently) and earn enough to live off the interest To learn how to invest your money, read Beating the Street, by Peter Lynch. https://www.amazon.ca/Beating-Street-Peter-Lynch/dp/0671891634 Good luck!","I really think /r/personalfinance would be a better platform for this, there's people there who deal with this all the time. I would repost this question there with the additional information; 1. Your age 2. Your savings, including IRAs/401ks 3. Total amount of all debt, including credit card and student loans 4. Your income 5. Your future plans (plans to retire? to which country? back to school?) 6. Your family situation (married / unmarried, kids / no kids) All of these things impact any financial decisions you might have, that's why personal financial advisors exist.","\"Consider property taxes (school, municipal, county, etc.) summing to 10% of the property value. So each year, another .02N is removed. Assume the property value rises with inflation. Allow for a 5% after inflation return on a 70/30 stock bond mix for N. After inflation return. Let's assume a 20% rate. And let's bump the .05N after inflation to .07N before inflation. Inflation is still taxable. Result Drop in value of investment funds due to purchase. Return after inflation. After-inflation return minus property taxes. Taxes are on the return including inflation, so we'll assume .06N and a 20% rate (may be lower than that, but better safe than sorry). Amount left. If no property, you would have .036N to live on after taxes. But with the property, that drops to .008N. Given the constraints of the problem, .008N could be anywhere from $8k to $80k. So if we ignore housing, can you live on $8k a year? If so, then no problem. If not, then you need to constrain N more or make do with less house. On the bright side, you don't have to pay rent out of the .008N. You still need housing out of the .036N without the house. These formulas should be considered examples. I don't know how much your property taxes might be. Nor do I know how much you'll pay in taxes. Heck, I don't know that you'll average a 5% return after inflation. You may have to put some of the money into cash equivalents with negligible return. But this should allow you to research more what your situation really is. If we set returns to 3.5% after inflation and 2.4% after inflation and taxes, that changes the numbers slightly but importantly. The \"\"no house\"\" number becomes .024N. The \"\"with house\"\" number becomes So that's $24,000 (which needs to include rent) versus -$800 (no rent needed). There is not enough money in that plan to have any remainder to live on in the \"\"with house\"\" option. Given the constraints for N and these assumptions about returns, you would be $800 to $8000 short every year. This continues to assume that property taxes are 10% of the property value annually. Lower property taxes would of course make this better. Higher property taxes would be even less feasible. When comparing to people with homes, remember the option of selling the home. If you sell your .2N home for .2N and buy a .08N condo instead, that's not just .12N more that is invested. You'll also have less tied up with property taxes. It's a lot easier to live on $20k than $8k. Or do a reverse mortgage where the lender pays the property taxes. You'll get some more savings up front, have a place to live while you're alive, and save money annually. There are options with a house that you don't have without one.\"","Hey, I'm majoring in a worthless field and do not expect to make much money. I've learned to find solace in the simple luxuries such as, heating,car ownership, food, warm food, meat,being able to exercise, have freedom,etc... I'm trying to figure out what the minimum annual salary I can live on is. For example right now I'm in college and it costs $30,000 a year but I'm living *very* comfortably. Why and how will this change in the future? Renting an apartment and supporting only myself, why can't I live comfortably on $30,000 in the future?","Having more money than you know what to do with is a good problem to have. :) Congratulations on your early retirement! I'd say this is a good time to start learning about investing, because nobody will look after your money as well as you will. Fund managers and financial advisers may mean well, but they are just salespeople, paid commissions to promote their employers' products. Not that there's anything wrong with that; it's just that their interests are not aligned with yours. They get paid the same, whether you make or lose money. If you want to live off your investments you must invest in your financial education.","\"You're right to seek passive income and since you're already looking for it, you probably already know some of the reasons to why it is important. Do you live in the United States? If so I'd strongly recommend purchasing your primary residence and then maybe investment properties if you like owning your own home. The US tax and banking structure is set up to favor this move in more ways than I can count. So, SAVE, SAVE, SAVE then beg, borrow and steal to get the down payment, rent rooms to friends or random people to afford the payments, buy a fixer upper in an up and coming neighborhood. The US is rife with these in all price ranges. If you're working 56 hrs a week, you've got the work ethic. So if you can't afford it it's probably because you're spending all your money on other stuff. If you want to do this, it will take some effort, smarts, and savings. You will have to trim back the mochas, vacations, dinners out, etc, etc etc. Let your friends do that stuff and rent from you. Your life will get continually easier. If you have already trimmed back all the discretionary spending and still can't make it then you need to earn more money. Doing either and both of these things will absolutely change your whole economic life and future. So in summary I'd offer these Ranked Priorities: 1) Learn to Save (unless you always want to have to work for someone else) 2) Increase your income capability (since your most valuable asset is YOU) 3) Buy and hold real estate (because the game is rigged to favor passive income) I'm 38, never earned a six figure salary, made some good purchases when I was 25-30 and work is \"\"optional\"\" for me now.\"","Make sure you are hitting the actual max of the 401k. Most think it is 18K, but that is the amount you can contribute into either pre-tax or roth. On top of this, you can also contribute using an after-tax contribution (treated differently from Roth). Total amounts up to 54k (since you are under 50). One thing I would look into for ways to beat interest rates in bank accounts and CDs is Municipal Bond funds, given your high income. I have seen some earning almost 6% tax-free YTD. These also give you liquidity. Definitely keep your 3 mo salary in the bank, but once you get over that while maxing out your 401k, this is a pretty good way to make your money work for you, without crushing you come tax time. Building that muni bond fund account gradually, you can eventually use that account to pay for things like car payments, mortgage, rent, vacation, etc. Just be sure if you go with a mutual fund, that you are aware of any surrender charge schedules. I have seen this done with C Shares, where you can withdraw your investment without penalty after 1 year. Let me know if this is unclear or you would like any additional information. Best of luck!","Your plan won't work. Working 40 hours a week at federal minimum wage (currently $7.25 / hr) for 52 weeks is an annual income of just over $15,000. Even assuming you can reliably get a return of 15% (which you definitely can't), you'd need to start with $100,000 of assets to earn this poverty income. Assuming a more reasonable 7% bumps the required assets up to over $200,000, and even then you're dead the first time you need to make withdrawals after a mistake or after a major market downturn. As a fellow math Ph.D. student, I know your pain. I, too, struggled for a while with boredom in an earlier career, but it's possible to make it work. I think the secret is to find a job that's engaging enough that your mind can't wander too much at work, and set aside some hobby time to work on interesting projects. You likely have some marketable skills that can work for you outside of academia, if you look for them, to allow you to find an interesting job. I think there's not much you can do besides trying not to get fired from your next McJob until you can find something more interesting. There's no magic money-for-nothing in the stock market.","how much did you make? how much do you make now? i think as long as people make about a certain amount (say $100k in Los ANgeles, NYC, San Francisco or London) then life is ok. About that amount money is just useless.","I'm confused why you think you need a $450k house. That seems extremely high in today's market except perhaps in certain major urban locations. If you're going to live in suburbia or a smaller town/city, you should be able to find a nice 3br house for well under $300k. Before you rule out buying a house, I'd spend some time researching the real estate listings in your area, foreclosures, properties owned by bankruptcy court, etc. - you might be surprised to find a great home for as low as $150-200k. Of course if you live in a place where what I'm saying is completely off-base, please disregard my answer.","You should be trying to save 10% of your income from an early age. You can live well now and enjoy life within your means now, instead of trying to keep up with the Jones. Do you need to live in a larger house (when you can't really afford it) because it is more comfortable or because you want to show it off in front of your family and friends? You can live and enjoy life and eat well now and still save enough to have a comfortable retirement, just spend your money now on the things you enjoy, not things you see others enjoying.","\"The biggest and primary question is how much money you want to live on within retirement. The lower this is, the more options you have available. You will find that while initially complex, it doesn't take much planning to take complete advantage of the tax system if you are intending to retire early. Are there any other investment accounts that are geared towards retirement or long term investing and have some perk associated with them (tax deferred, tax exempt) but do not have an age restriction when money can be withdrawn? I'm going to answer this with some potential alternatives. The US tax system currently is great for people wanting to early retire. If you can save significant money you can optimize your taxes so much over your lifetime! If you retire early and have money invested in a Roth IRA or a traditional 401k, that money can't be touched without penalty until you're 55/59. (Let's ignore Roth contributions that can technically be withdrawn) Ok, the 401k myth. The \"\"I'm hosed if I put money into it since it's stuck\"\" perspective isn't true for a variety of reasons. If you retire early you get a long amount of time to take advantage of retirement accounts. One way is to primarily contribute to pretax 401k during working years. After retiring, begin converting this at a very low tax rate. You can convert money in a traditional IRA whenever you want to be Roth. You just pay your marginal tax rate which.... for an early retiree might be 0%. Then after 5 years - you now have a chunk of principle that has become Roth principle - and can be withdrawn whenever. Let's imagine you retire at 40 with 100k in your 401k (pretax). For 5 years, you convert $20k (assuming married). Because we get $20k between exemptions/deduction it means you pay $0 taxes every year while converting $20k of your pretax IRA to Roth. Or if you have kids, even more. After 5 years you now can withdraw that 20k/year 100% tax free since it has become principle. This is only a good idea when you are retired early because you are able to fill up all your \"\"free\"\" income for tax conversions. When you are working you would be paying your marginal rate. But your marginal rate in retirement is... 0%. Related thread on a forum you might enjoy. This is sometimes called a Roth pipeline. Basically: assuming you have no income while retired early you can fairly simply convert traditional IRA money into Roth principle. This is then accessible to you well before the 55/59 age but you get the full benefit of the pretax money. But let's pretend you don't want to do that. You need the money (and tax benefit!) now! How beneficial is it to do traditional 401ks? Imagine you live in a state/city where you are paying 25% marginal tax rate. If your expected marginal rate in your early retirement is 10-15% you are still better off putting money into your 401k and just paying the 10% penalty on an early withdrawal. In many cases, for high earners, this can actually still be a tax benefit overall. The point is this: just because you have to \"\"work\"\" to get money out of a 401k early does NOT mean you lose the tax benefits of it. In fact, current tax code really does let an early retiree have their cake and eat it too when it comes to the Roth/traditional 401k/IRA question. Are you limited to a generic taxable brokerage account? Currently, a huge perk for those with small incomes is that long term capital gains are taxed based on your current federal tax bracket. If your federal marginal rate is 15% or less you will pay nothing for long term capital gains, until this income pushes you into the 25% federal bracket. This might change, but right now means you can capture many capital gains without paying taxes on them. This is huge for early retirees who can manipulate income. You can have significant \"\"income\"\" and not pay taxes on it. You can also stack this with before mentioned Roth conversions. Convert traditional IRA money until you would begin owing any federal taxes, then capture long term capital gains until you would pay tax on those. Combined this can represent a huge amount of money per year. So littleadv mentioned HSAs but.. for an early retiree they can be ridiculously good. What this means is you can invest the maximum into your HSA for 10 years, let it grow 100% tax free, and save all your medical receipts/etc. Then in 10 years start withdrawing that money. While it sucks healthcare costs so much in America, you might as well take advantage of the tax opportunities to make it suck slightly less. There are many online communities dedicated to learning and optimizing their lives in order to achieve early retirement. The question you are asking can be answered superficially in the above, but for a comprehensive plan you might want other resources. Some you might enjoy:\"","while not stated, if you have any debt at all, use the $3000 to pay it off. That's the best investment in the short term. No risk and guaranteed reward. College can invite all sorts of unexpected expenses and opportunities, so stay liquid, protect working capital.",">Wife and I made $160K last year and saved $65k still living very nicely and taking international vacations. Assuming that youre from the US you would have to live outside of a major metropolitan area to have such a low cost of living.","I'm talking about household income. $300k is a huge amount of money for a single person to make, but $150k is certainly doable for most doctors/lawyers/engineers. If your spouse is also a high earner that will help put over the 1% threshold.","if you have 30k to invest use some of it to hire someone because the returns you'd get with some sort of professional would probably make up for what your paying them in comparison to doing it on your own. although if you're really against it then like mjvcaj said, ETF's would probably be a good idea.","$100,000 is a fuckton of income unless you're convinced that you have to live in a $600,000 house, drive a $40,000 SUV, use a $600 smartphone with a $150/month data plan, and drink $4 cups of coffee every day just to get by.","Wow, everyone tells you different investment strategies. You have all your life ahead of you. Your main focus should not be getting the best return rate, but ensuring your existence. Who cares if you get 7% if you'll lose all in the next market crash and stand on the street with no education, no job and nothing to fall back on? I would go a completely different route in your place: The best advise given above was to not consider this as an option to never work again. It's not enough money for that, unless you want to live poorly and always be afraid that the next financial crises wipes you out completely.","Drawing down from a nest egg is predominately dealing with 3 issues: The much used withdrawal amount used to not deplete your principal is 4%. Some may argue this is too much or not enough but it is regarded as a standard amount. Seeing that you have $500k you can pull about $20k per year using this drawdown percentage. If you can live on $20k then you are set. If not you should build up this nest egg.","To answer your precise question, your plans are not at all misguided, and are in fact very reasonable. You are clearly financially very comfortable, and from the tone of your post it sounds like you value security and simplicity over maximizing your investment return over the coming years. If money was the most important thing to you then you would stay shackled to your high paying jobs. @JoeTaxpayer's answer has some great information for a person who is interested in maximizing their investment return. If you followed that advice, you might increase your return on investments by up to 1%/year (I'm just throwing a ball park number out there). So your choice is simple. Peace of mind on one hand and perhaps 1% additional return on investments on the other hand.","You are young so you have time on your side. This allows you to invest in more aggressive investments. I would do the following 1) Contribute at least what your company is willing to match on your 401k, if your company offers a Roth 401k use that instead of the normal 401k (When this becomes available to you) 2) Open a Roth IRA Contribute the maximum to this account ~$5500/year 3) Live below your means, setup a budget and try and save/invest a minimum of 50% of your salary, do not get used to spending more money. With each bonus or salary increase a minimum of 75% of it should go toward your savings/investment. This will keep you from rapidly increasing your spending budget. 3) Invest in real estate (this could be its own post). Being young and not too far out of college you have probably been moving every year and have not accumulated so much stuff that it makes moving difficult. I would utilize your FHA loan slot to buy a multifamily property (2-4 Units) for your first property using only 3.5% down payment (you can put more down if you like). Learn how to analyze properties first and find a great Realtor/Mentor. Then I would continue as a NOMAD investor. Where you move every year into a new owner occupied property and turn the previous into a rental. This allows you to put 3-5% down payment of properties that you would otherwise have to put 20-25% and since you are young you can afford the risk. You should check out this article/website as it is very informative and can show you the returns that you could earn. Young Professional Nomad Good luck I am in a very similar situation","\"My basic rule I tell everyone who will listen is to always live like you're a college student - if you could make it on $20k a year, when you get your first \"\"real\"\" job at $40k (eg), put all the rest into savings to start (401(k), IRA, etc). Gradually increase your lifestyle expenses after you hit major savings goals (3+ month emergency fund, house down payment, etc). Any time you get a raise, start by socking it all into your employer's 401(k) or similar. And repeat the above advice.\"","\"With 40% of your take-home available, you have a golden opportunity here. Actually two, and the second builds out easily from the first. Golden Opportunity # 1: Layoff Immunity Ok, not really immunity. Most people don't think of themselves getting laid off, and don't prepare. Of course it may not happen to you, but it can. It's happened to me twice. The layoff itself is an emotional burden (getting rejected is hard), but then you're suddenly faced with a gut-wrenching, \"\"how am I gonna pay the rent????\"\" If you have no savings, it's terrifying. Put yourself in that spot. Imagine that tomorrow, you're out of a job. For how many months could you pay your expenses with the money you have? Three months? One? Not even that? How about shooting for 12 months? It's really, really comforting to be able to say: \"\"I don't have to worry about it for a year\"\". 12 months saved up gives you emotional and financial stability, and it gives you options -- you don't have to take the first job that comes along. Now, saving 12 months of expenses is huge. But, you're in the wonderful spot where you can save 40% of your income. It would only take 2.5 years to save up a year's worth of income! But, actually, it's better than that. Because your 12-month Layoff Immunity fund doesn't have to include the amount for retirement, or taxes, or that 40% we're talking about. Your expenses are less than 60% of take-home -- you'd only need 12 months of that. So, you could have a fully funded 12-Month Layoff Immunity Fund only in a year and a half! Golden Opportunity #2: Freedom Fund Do you like your Job? Would you still do it, if you didn't need the money? If so, great. But if not, why not get yourself into a position where you don't need it? That is, build up enough money from saving and investing to where you can pay your expenses - forever - from your investments. The number to keep in mind is 25. Figure out your annual expenses, and multiply it by 25. That's the amount you'd need to never need a job again. (That works out to a 4% withdrawal rate, adjusting for inflation every year, with a low risk of running out of money. It's a rule of thumb, but smart people doing a lot of math worked it out.) Here you keep saving and investing that 40% in solid mutual funds in a regular, taxable account. Between your savings and the compounding returns off the investments, you could easily have a fully funded \"\"Freedom Fund\"\" by the time you're 50. In fact, by 45 isn't unreasonable. It could be even better. If you live in that high-rent area because of the job, and wouldn't mind living were the rents are lower once you quit, your target amount would be lower. Between that, working dedicatedly toward this goal, and maybe a little luck, you might even be able to do this by age 40. Final Thoughts There are other things you could put that money toward, like a house, of course. The key take-away here, is to save it, and invest it. You're in a unique position of being able to do that with 40% of your income. That's fabulous! But don't think it's the norm. Most people can't save that much, and, once you lose the ability to save that much, it's very difficult to get it back. Expenses creep in, lifestyle \"\"wants\"\" become \"\"needs\"\", and so on. If you get into the habit of spending it, it's very difficult to shrink your lifestyle back down - down to what right now you're perfectly comfortable with. So, spend some time figuring out what you want out of life -- and in the mean time, sock that 40% away.\"","It's important to have both long term goals and milestones along the way. In an article I wrote about saving 15% of one's income, I offered the following table: This table shows savings starting at age 20 (young, I know, so shift 2 years out) and ending at 60 with 18-1/2 year's of income saved due to investment returns. The 18-1/2 results in 74% of one's income replaced at retirement if we follow the 4% rule. One can adjust this number, assuming Social Security will replace 30%, and that spending will go down in retirement, you might need to save less than this shows. What's important is that as a starting point, it shows 2X income saved by age 30. Perhaps 1X is more reasonable. You are at just over .5X and proposing to spend nearly half of that on a single purchase. Financial independence means to somehow create an income you can live on without the need to work. There are many ways to do it, but it usually starts with a high saving rate. Your numbers suggest a good income now, but maybe this is only recently, else you'd have over $200K in the bank. I suggest you read all you can about investments and the types of retirement accounts, including 401(k) (if you have that available to you), IRA, and Roth IRA. The details you offer don't allow me to get much more specific than this.","Congratulations on getting started in life! John Malloy's (American) research suggests that you should take some time to get used to living on your own, make some friends, and settle into your community. During this time, you can build up an emergency fund. If/when the stock markets do not seem to be in a bear market, you can follow user3771352's advice to buy stock ETFs. Do you hope to get married and have children in the next few years? If so, you should budget time and money for activities where you make new friends (both men and women). Malloy points out that many Americans meet their spouses through women's networks of friends.","So you can earn $60-75 and your BF $55? You are in your 20's (based on your below comment about being 3 years into your career) with a combined income of 6 figures. That's fantastic. No kids, no accumulated cruft and you make a crap ton of money. An average house in the best school district where I live would run you about $300,000. You should be able to afford that, easily, before you are 30. Not sure why you seem to be down on your situation.","It depends on where you live and what your situation is. If you're a born and bred New Yorker who thinks that White Plains, NY is a stop on the way to Canada, than you're ok. If you're a single person living in downtown Boston, you may want to err on the side of spending less. You may find yourself in a situation in a few short years where you significant other has a job in the suburbs and the prospect of sending your child to a city school is not appealing.","\"In most parts of the US, even the more expensive parts, a $100k income can afford the rent or mortgage on a reasonably safe* 2-3 bedroom home within an hour commute of your work, plus the means to commute, plus health insurance, plus retirement savings, plus at least some discretionary income (i.e., choice between living in a nicer neighborhood, eating out more often, buying brand-name apparel, etc). In some places, $100k affords a very comfortable lifestyle, with plenty of savings. A lot of people who live in or around big, expensive cities think it is outrageous that their $100k income doesn't get them a designer apartment, a wardrobe full of fitted suits, eating out twice a week, two overseas vacations per year, etc. They confuse not having a Hollywood lifestyle, with being poor. Those are some of the most obnoxious people in the world. *because this post is sure to draw the ire of some privileged people who think that \"\"reasonably safe\"\" means top 5%, I will offer the definition of \"\"reasonably safe\"\" as one of the top three quintiles of US zip codes with lowest violent crime rates per capita.\"","You can. Almost anybody (barring medical issues) can, the drudgery will be intense and utterly soul sucking. Sure fire formula: Spend very little, save everything and put down down payments on rental houses. It will eventually get you millions even if everything goes very wrong after 30 years. It should work out into the millions somewhere between 15-25 years.","I’m going to suggest something your parents may be reluctant to say: “Grow up and get out.” A man living in a van down by the river, making minimum wage, with $0 in savings has achieved something you have still failed to achieve: adulthood. This, I believe, is more important than a man’s income or net worth. So please join us adults Bryan. I think you’ll enjoy it. Yes, your savings may take a hit but you will gain the respect that comes with being an adult. I think it is worth it.","I live in Upstate NY. It's a great, reasonable cost place to live -- provided that you have a job. In NYC, there are probably a few hundred jobs with duties similar to mine in a 45-minute radius. Upstate, there may be 5-6.","Lets assume you put the max of 5000 per year in a Roth IRA. You have your home and all other debt paid off, and your investment earns 10%, a few points below the market average. You will have $822,470 at 65, 1005K at 67 that you can draw on tax free. It is a fairly tidy sum and should keep you from working as the greeter in WalMart. This kind of return should be expected from most mutual funds, and you could invest some time in reading about how to pick good returning funds. An index fund, which shadows a market index, should have that kind of return. And yes that is 10% per year. In investing it is about momentum. I too write software for a living, and would suggest you should be able to contribute about double that amount and still be comfortable. That would set you up for a pretty comfortable post-work life style. You understand the value of building passive income. Traditionally that is accomplished through dividends of reliable companies, but are now accomplished a variety of ways. Keep in mind the way you are asking this question opens you to many scams.","The usual, but controversial, answer to this question is a 4% withdrawal rate. This means a net worth of ($5000 * 12 months ) / 4%, i.e., $1,500,000 If you want to play with the numbers, based on historical data, you can use the FIRECalc simulator.","\"I have an idea. Keep saving what you are and think \"\"Early Retirement\"\". Work for 20 years, then do whatever you want 40 hours a week. If your satisfied with your current lifestyle, start thinking of your bigger long term financial goals and when you want to accomplish them by. Maybe you can accomplish these sooner than you think. Saving to buy a house/property? Investment portfolio? Want to travel all over the world? Family planning/kids? I am sure you will figure out how you would want to spend it.\"","You can never depend ONLY on pension. You must get financial education and invest your money. I recommend you to read The Intelligent Investor by Benjamin Graham...it's the bible of Warren Buffet. Besides, you don't need to be a Billionaire for retiring and be happy. I recommend you to get education in ETFs. I quote The Intelligent Investor by Benjamin Graham p. 131. According to Ibboston Associates, the leading financial research firm, if you had invested $12,000 in the Standard & Poor's 500-stock index at the beginning of september 1929, 10 years later you would have had only $7,223 left. But if you had started with a paltry $100 and simply invested another $100 every single month, then by August 1939, your money would have grown to $15,571! That's the power of disciplined buying-even in the face of the Great Depression and the worst bear market of all time. You are still young to make even bolder investments. But seriously you can never depend ONLY on pension. You won't regret learning how to invest your money, it doesn't matter if it's in the stock market, real state market, whatever market... Knowing what to do with your money is priceless. I hope this helps. Happy profits!","\"With a healthy income its quite possible to contribute too much into 401Ks/IRAs. For example, if your retired today and had 3 million or so, how much more would you need? Would an extra million materially change your life? Would it make you happier if you invested that extra in some rental properties or perhaps a business like a sandwich or ice cream shop where you have more direct control? This kind of discussion is possible as you indicate that you have taken care of your life financially. It seems at odds with the negative press describing the woefully condition of the standard person's finances. These articles ignore a very simple fact: its because of bad behavior. You, on the contrary, have behaved well and are in the process of reaping rewards. This is where I feel your \"\"mental gymnastics\"\" originates. Looking to engage in the rental market is no different then buying a franchise. You are opening a business of your own. You'll have to educate yourself and are likely to make a few mistakes that will cause you to write checks to solve. Your goal is to minimize those mistakes. After all, what do you know about the rental home business? I am guessing not much. Educate yourself. Read and spend some money on taking knowledgeable people out for coffee. In the end you should understand that although a poor decision may cost you money you cannot really make a bad decision. Lets say you do buy a rental property, things go south, you sell for a loss, etc.... In the end the \"\"butchers bill\"\" is 50K or so. Will that materially change your life? Probably not. The worst case is perhaps you have to work a year or two beyond the anticipated retirement age to make up that money. No big deal.\"","How about a slightly different approach. Invest in a duplex or trip/quadplex. Live in one unit, rent out the rest. Chances are you'll end up either paying nothing in total, or even making money as your tenants pay your bills for you. Depends a lot on your area and your willingness to deal with the crap of tenants, but have a look into it. You'll be surprised what you can buy in your area and the types of people you might end up living with you...","\"Read \"\"Stop Acting Rich\"\" by Dr Thomas Stanley. I'm concerned that even before you've earned your first paycheck you want a flashy car. $4800/yr on $63K/yr income is just about half what I'd recommend to someone who starts working. 10% is the minimum, if and only if, the employer matches 5, for a total 15% saved. Do it in a pretax account and when you go back to grad school convert to Roth.\"","I'm assuming you are buying bond mutual funds or bond etfs here, not the actual bonds directly. There are a significant variety of different types of bond funds, reflecting the sort of bonds they invest in. For example, you can invest in risky, non-commercial grade bonds, also known as junk bonds. Or you can invest in short-term bonds, which are much safer but return much less. There's no such thing as the 'average bond'. So, let's go for somewhere in the middle. Let's go for 3% return, after fees. Now, it's fairly simple math. You want $3,000 a month, or $36,000 a year. To generate that sort of return, you'd need to invest $1,200,000. If we are more optimistic, we could go for a 4% return, after fees. That reduces your investment to $900,000. Note that it would almost certainly not make sense to invest all that money in bonds. Instead, you'd want to invest in a mix of stocks and bonds. This could likely reduce your risk while increasing your expected return.","The question regarding your snapshot is fine, but the real question is what are you doing to improve your situation? As John offered, one bit of guidance suggests you have a full year's gross earnings as a saving target. In my opinion, that's on the low side, and 2X should be the goal by 35. I suggest you look back, and see if you can account for every dollar for the prior 6-12 months. This exercise isn't for the purpose of criticizing your restaurant spending, or cost of clothes, but to just bring it to light. Often, there's some low hanging fruit in this type of budgeting exercise, spending that you didn't realize was so high. I'd also look carefully at your debt. What rate is the mortgage and the student loans? By understanding the loans' rates, terms, and tax status (e.g. whether any is a deduction) you can best choose the way to pay it off. If the rates are low enough you might consider funding your 401(k) accounts a bit more and slow down the loan payments. It seems that in your 30's you have a negative net worth, but your true asset is your education and future earning potential. From a high level view, you make $180K. Taking $50K off the top (which after taxes gives you $30K) to pay your student loan, you are still earning $130K, putting you at or near top 10% of families in this country. This should be enough to afford that mortgage, and still live a nice life. In the end there are three paths, earn more (why does hubby earn half what you do, in the same field?), spend less, or reallocate current budget by changing how you are handling that debt.","You can get an investment manager through firms like Fidelity or E*Trade to manage your account. It won't be someone dedicated exclusively to you, but you're in the range where they'd take you as a managed account customer. Another option would be to get a financial planner (CFP or something) help you to identify your needs and figure out what your investments portfolio should look like. This is not a whole lot of money, but is definitely enough to have an early retirement if managed and invested properly.","Deposit $3,500 each month in a brokerage account and invest that money across a handful of diversified index funds. Rebalance those investments every quarter. The hard part is coming up with $3,500 each month; this is where your budget comes in.","I live in one of the highest cost of living areas in my country. For the cost of less than half the down payment my spouse and I have saved up for a house we could easily buy a home in most of the lower cost of living areas (and several homes in, say, Detroit). As for the rest of your question, though, we've chosen not to live that way. Because, like all high cost of living areas, ours is near a city there are more free and inexpensive things to do than you would think at first. While others in our area think a great time is pre-gaming drinks at a nice bar, an expensive restaurant, then some more drinks we've taught ourselves how to make great meals from scratch using sale and inexpensive ingredients from the grocery store and often do that on weekends, topped off by a movie from the redbox that we promptly return the next day. We have chosen friends who will hang out with us over potluck dinners and board games instead of out on the town. On weekend days we visit free museums, do hikes, wander around revitalized downtown strips, or play at the local parks. Our groceries, as I mentioned, are sale items or use coupons and we go for less expensive meats and produce. We visit our local farmer's market for fun, not to buy the expensive produce. We might find ourselves wandering through the mall to window shop, but when it comes time to actually buy clothing or goods for the apartment we shop around for up to months to find a good deal. Plenty of our friends have money enough to spend, and the most debt they are usually wallowing in is a big car payment, no consumer debt. At the same time I have trouble imagining some of them buying a house any time soon, because they simply can't be saving all that much (since I know their incomes). They may eventually be able to afford a condo and ride rising housing prices to a townhome and then a house - it's what lots of people do around here, loosing buckets money in realtor fees and closing costs along the way. Even with these choices, it's hard to view my friends as selfish knowing that most of them give around 10% of their income to charity. There are probably plenty of people around here swimming in debt (somebody recently asked in a Q&A with the local paper editors how she could stop going to the city's most expensive restaurants and start living within her means when she only liked expensive places), but lots of folks can stretch themselves and afford to get by while wasting a lot of money. It's not what my spouse and I have chosen to do, because we want to be able to live very responsibly and plan for a rainy day, but the longer you live with and around the money that tends to permeate high cost of living areas, the more it will seem normal to you. Also, if it's really $1000/mo for a 2 br. apartment, your cost of living is still lower than mine is. If I were you I wouldn't try to acclimate myself to the spendy habits of your surroundings. Instead I'd find friends who are frugal and work on maintaining your good financial habits. If you ever want one of those $4, $5, or $6K (plus!) houses, you're going to need them.","To answer your question, Retirement Revolution may fit the bill to some extent. I'd also like to address some of the indirect assumptions that were made in your bullet points. I'm convinced that the best way to overcome this is not simply to hold down a good job with COLAs every year, max out your IRA accounts and 401(k)s, invest another 10-20% on top, and live off of the savings and whatever Social Security decides to pay you. Instead, the trick is to not retire -- to make a transition into an income-producing activity that can be done in the typical retirement years, hopefully one that is closer to one's calling (i.e., more fulfilling). This takes time, not money. If people just shut off the TV and spent the time building up a side business that has a high passive component, they'd stand a much better chance of not outliving their money.",">Hourly rates aside Really? The guy who defines success by the $ they make doesn't want to compare hourly rates? Ok, let's compare standard of living. My buddy lives in Thailand at the moment. He travels around but has been there about 6 months. He has a passive income of $55k derived from rental units here in the US, his blog, and online business. He works about 5 hours a week. He rents a beach house for $450/month and his expenses are about $20/day to live quite well eating out every meal, working out, etc. That $55k is about 15x the local median wage. Your $500k in the US is about 10x the average wage in the US and if you live in an expensive city like NYC, DC, or SF then it's much less. You work 80 hours a week and he works 5 and has a higher relative standard of living. Who is more succesful? >I'd rather have the half mill annually I'm sorry you never learned that we should work to live, not live to work. Its truly sad.","Sure! Started working since I was 12, used that money to buy a car, and was working full time starting at 15 years old. By 17 had two full time jobs and banked all that money, besides buying a car. At 18 fulfilled my dream and was hired as a police officer. Did the academy for 6 months, saving all of that money to buy a trailer to live in for cheap. Max out pay for my department was 5 years, so by 23 years old I was making 68,000 a year. With overtime and details included( I basically worked anytime I could, 8 hour shift with either an 8 hour detail or double shift) usually kept one day off, working my other day off. My take home for the year after taxes was somewhere around 90k give or take, with my living expenses barely passing 25k a year. Banked all that money for years. When I hit 25ish I got together with my now wife, also an officer making the same amount. She also received about 300k from a settlement. So with both of our salaries plus money invested since I was about 14, annual take home was about 200k. Saved for 2 more years and at 28, used the 300k to buy a house and pay off any vehicles and credit card debt. Paid cash for the house so no mortgage, no car payments, just utilities and taxes for the year. With the budget set we were able to retire living just like we were. There is a lot more to it but that's the quick summary!","\"It all depends on what your financial goals are when you are ready. You sound like you could be ready today if you wanted to be. The steps that I would take are. Create a monthly draft budget. This doesn't have to be something hard and fast, just a gague of what your living expenses would be compared to your after-tax salary. Make sure there would be room for \"\"fun\"\" money. a. Consider adding a new car fund line item to this budget, and deducting that amount from your paycheck starting now so that you can save for the car. Based on the most realistic estimate that you can make, you'll get a good idea if you want to spend the money it takes to move out alone now or later. You'll also see the price for various levels of rentals in your area (renting a single family home, townhouse, condo, apartment, living in a rented room or basement, sharing a place with friends, etc) and know some of the costs of setting up for yourself. Since you're looking at the real estate market, you may want to do a cost comparison of renting versus buying. I've found the New York Times interactive graphic on this is excellent. If you are looking to buy, make sure to research the hidden costs of buying thoroughly before taking this step. To answer your last question, if you have the cash you should consider upping your 401K investment (or using Roth or regular IRA). Make sure you are investing enough to get your full employer match, if your employer offers one, and then get as close as you can to government maximum contribution limits. Compound interest is a big deal when you are 23.\"","Consider a single person with a net worth of N where N is between one and ten million dollars. has no source of income other than his investments How much dividends and interest do your investments return every year? At 5%, a US$10M investment returns $500K/annum. Assuming you have no tax shelters, you'd pay about $50% (fed and state) income tax. https://budgeting.thenest.com/much-income-should-spent-mortgage-10138.html A prudent income multiplier for home ownership is 3x gross income. Thus, you should be able to comfortably afford a $1.5M house. Of course, huge CC debt load, ginormous property taxes and the (full) 5 car garage needed to maintain your status with the Joneses will rapidly eat into that $500K.","\"I would suggest you do three things: If you do all three of these, the time will come when \"\"2 months off to go to Italy this winter and ride bikes through wine country\"\" is something you both want to do, can afford to do, and have arranged your lives to make it feasible. Or whatever wow-cool thing you might dream of. Buying a vacation property. Renovating an old house. The time may also come when you can take a chance on no income for 6 months to start a business that will give you more flexibility about when and where you work. Or when you can switch from working for a pay cheque to volunteering somewhere all day every day. You (as a couple) will have the freedom to make those kinds of decisions if you have that safety net of long term savings, as long as you also have a strong and happy relationship because you didn't spend 40 years arguing about money and whether or not you can afford things.\"","You could easily move to Nashville TN. Enough jobs, low cost of living and high median wages. But no you insist on living in all of these trendy places and complain life is so hard and expensive. You americans really don't understand how fucking entitled you are. If you have ever endured poverty you'd understand what I'm talking about. But you insist that a life without traveling and smartphones is miserable. You americans are nothing but a bunch of privileged pigs. The sooner the likes like you die off the better. America should be in the hands of those willing to work and look for opportunities, not for those waiting to get them handed.","\"For what it's worth, the distribution I'm currently using is roughly ... with about 2/3 of the money sitting in my 401(k). I should note that this is actually considered a moderately aggressive position. I need to phone my advisor (NOT a broker, so they aren't biased toward things which are more profitable for them) and check whether I've gotten close enough to retirement that I should readjust those numbers. Could I do better? Maybe, at higher risk and higher fees that would be likely to eat most of the improved returns. Or by spending far more time micromanaging my money than I have any interest in. I've validated this distribution using the various stochastic models and it seems to work well enough that I'm generally content with it. (As I noted in a comment elsewhere, many of us will want to get up into this range before we retire -- I figure that if I hit $1.8M I can probably sustain my lifestyle solely on the income, despite expected inflation, and thus be safely covered for life -- so this isn't all that huge a chunk of cash by today's standards. Cue Daffy Duck: \"\"I'm rich! I'm wealthy! I'm comfortably well off!\"\" -- $2M, these days, is \"\"comfortably well off.\"\")\"","Two to three years? That is one long gestation period! :^) Welcome. Congratulations on taking savings into your own hands, you are a winner for taking responsibility for your, and your family's life. If I was you my first priority would be to pay off your car and never buy one on time again. Or you could sell it and buy something with cash if that would be easier. It is tremendous that you are thinking and planning. You are already ahead of most people. Are you working on your basement as you have time/money like when work might be slow? If so great idea.","Or you could flip houses. i'm not sure where you live but hwere im from its not uncommon to buy a house for 5k or a duplex for 8k. put about 4k into it and charge about 600 rent. or put 4k into the 8k, thats 12k sell it for 20. if it takes a year that's a 66% return on your investment in one year. and its small risk. also, if it doesnt sell, youre still renting it out with month to month or 3-6 month leases.","Wow! First, congratulations! You are both making great money. You should be able to reach your goals. Are we on the right track ? Are we doing any mistakes which we could have avoided ? Please advice if there is something that we should focus more into ! I would prioritize as follows: Get on the same page. My first red flag is that you are listing your assets separately. You and your wife own property together and are raising your daughter together. The first thing is to both be on the same page with your combined income and assets. This is critical. Set specific goals for the future. Dreaming and big-picture life planning will be the foundation for building a detailed plan for reaching your goals. You will see more progress with more sacrifice. If you both are not equally excited about the goals, you will not both be equally willing to sacrifice lifestyle now. You have the income now to be able to set yourselves up to do whatever you want in 10 years, if you can agree on what you want. Hire a financial planner you trust. Interview people, ask someone who is where you want to be in 10 years. You need someone with experience that can guide you through these questions and understands how to manage your income stream. Start saving for retirement in tax-advantaged accounts. This should be as much as 10%-15% of your income combined, so $30k-$45k per year. You need to start diversifying your investments. Real estate is great, but I would never recommend it as this large a percentage of net worth. Start saving for your child's education. Hard to say what you need here, since I don't know your goals. A financial planner should assist you with this. Get rid of your debt. Out of your $2.1M of rental real estate and land, you have $1.4M of debt. It will be difficult to start a business with that much additional debt. It will also put stress on your retirement that you don't need. You are taking on lots of risk here. I would sell all but maybe one of the properties and let it cash flow. This will free up cash to start investing for retirement or future business too. Buy more rental in the future with cash only. You have plenty of income to do it this way, and you will be setting yourself up for a great future. At this point you can continue to pile funds into any/all your investments, with the goal of using the funds to start a business or to live on. If all your investments are tied up in real estate, you wont have anything to draw on if needed for a business opportunity. You need to weigh this out in your goal and planning. What should we do to prepare for a comfortable retirement and safety You cannot plan for or see all scenarios. However, good planning will give you more options and more choices. Investing driven by fear will set you up for failure. Spend less than you make. Be patient. Be generous. Cheers!"],"string":"[\n \"\\\"the short answer: yes. The long answer depends on what you mean by modest living. As others have noted, living off a $300k principle involves risks, but the entire future has risk. By \\\"\\\"getting out of the rat race\\\"\\\" I hope you don't mean become a slug on the couch. Peruse mr. Money Mustache at https://www.mrmoneymustache.com/. One can live very frugally yet very well in some parts of the US.\\\"\",\n \"\\\"So my read on the question is \\\"\\\"How do I invest 300k such that it earns me a 'living wage' without the ongoing grind inherent in most formal employment?\\\"\\\" Reading the other answers to date it looks like most of them are thinking in terms of investment accounts and trying to live off of the earnings from such. I wanted to throw out a couple of alternative choices that may be worth considering... The first is real-estate investing. $300k should allow you to pick up 2 or 3 single family dwellings with little or no mortgage. Turning them into rentals placed with a good property management company should easily pay their expenses and provide a consistent income with minimal effort/attention from you. Similar story with buying into multifamily housing or commercial real-estate. Your key concern here is picking the right market in which to buy and finding a reputable manager to handle the day to day issues on your behalf. Note that you are not overly concerned with the potential resale value of the property(s), but the probable rental income they can generate, these are separate concerns that may not align with each other. Second is buying/founding a business that has a general manager other than yourself. Franchise ownership may be a potential option for you under the circumstances. The key concern here is picking the business, location, and manager that make you comfortable in terms of the risk involved. You need the place to make enough money to pay for itself and the salary of everyone working there, with enough left over for you to live on. Sounds easy enough, but not so much in practice. Generally you can expect at least a few years of being hands on and watching things very closely to make sure it is going the way you want it to. Finding a mentor who has done this type of transition before to walk you through it would be strongly advised. So would preparing yourself for a failure or two before you work out the exact combination of factors that work for you.\\\"\",\n \"This is a meaningless question without additional parameters. You certainly can live on $30k if you live a spartan life in a low cost of living place. What could change... You want to live in a US city? Have kids? Send those kids to college? Save money? Go out to eat? Travel? Buy your own health care instead of being on your parents insurance? etc. etc. etc.\",\n \"Market rate of return averages about 8% annually (sometimes more, sometimes less or negative). To get 30k monthly -- even taking that as pretax -- you're talking about 360k yearly. Divide that by 0.08 and you need to have savings of 4.5 million--- and really you should double that for safety.. Tl;dr: forget it. Added thought: If you really have $20k/month coming in, you really have no business asking the Internet for advice. Hire a professional financial advisor (not a broker, someone who is paid a flat fee for their expertise and has no incentives to give you less-than-optimal advice). . The money they will save/make for you will more than pay for their hire.\",\n \"Even with a good investment strategy, you cannot expect more than 8-10% per year in average. Reducing this by a 3% inflation ratio leaves you with 5 - 7%, which means 15k$ - 21k$. Consider seriously if you could live from that amount as annual income, longterm. If you think so, there is a second hurdle - the words in average. A good year could increase your capital a bit, but a bad year can devastate it, and you would not have the time to wait for the good years to average it out. For example, if your second year gives you a 10% loss, and you still draw 15k$ (and inflation eats another 3%), you have only 247k$ left effectively, and future years will have to go with 12k$ - 17k$. Imagine a second bad year. As a consequence, you either need to be prepared to go back to work in that situation (tough after being without job for years), or you can live on less to begin with: if you can make it on 10k$ to begin with (and do, even in good years), you have a pretty good chance to get through your life with it. Note that 'make it with x' always includes taxes, health care, etc. - nothing is free. I think it's possible, as people live on 10k$ a year. But you need to be sure you can trust yourself to stay within the limit and not give in and spent more - not easy for many people.\",\n \"\\\"To summarize your starting situation: You want to: Possible paths: No small business Get a job. Invest the 300K in safe liquid investments then move the maximum amount each year into your retirement accounts. Depending on which company you work for that could include 401K (Regular or Roth), deductible IRA, Roth IRA. The amount of money you can transfer is a function of the options they give you, how much they match, and the amount of income you earn. For the 401K you will invest from your paycheck, but pull an equal amount from the remainder of the 300K. If you are married you can use the same procedure for your spouse's account. You current income funds any vacations or splurges, because you will not need to put additional funds into your retirement plan. By your late 30's the 300K will now be fully invested in retirement account. Unfortunately you can't touch much of it without paying penalties until you are closer to age 60. Each year before semi-retirement, you will have to invest some of your salary into non-retirement accounts to cushion you between age 40 and age 60. Invest/start a business: Take a chunk of the 300K, and decide that in X years you will use it to start a small business. This chunk of money must be liquid and invested safely so that you can use it when you want to. You also don't want to invest it in investments that have a risk of loss. Take the remaining funds and invest it as described in the no small business section. You will completely convert funds to retirement funds earlier because of a smaller starting amount. Hopefully the small business creates enough income to allow you to continue to fund retirement or semi-retirement. But it might not. Comment regarding 5 year \\\"\\\"rules\\\"\\\": Roth IRA: you have to remain invested in the Roth IRA for 5 years otherwise your withdrawal is penalized. Investing in stocks: If your time horizon is short, then stocks are too volatile. If it drops just before you need the money, it might not recover in time. Final Advice: Get a financial adviser that will lay out a complete plan for a fixed fee. They will discuss investment options, types not particular funds. They will also explain the tax implications of investing in various retirement accounts, and how that will impact your semi-retirement plans. Review the plan every few years as tax laws change.\\\"\",\n \"Plenty of folks earn $300k/year from salary alone, and keep in mind this is household income. If you and your spouse are both educated and have a well paying jobs it's not all that difficult to hit that mark.\",\n \"\\\"While I can appreciate you're coming from a strongly held philosophy, I disagree strongly with it. I do not have any 401k or IRA I don't like that you need to rely on government and keep the money there forever. A 401k and an IRA allows you to work within the IRS rules to allow your gains to grow tax free. Additionally, traditional 401ks and IRAs allow you to deduct income from your taxes, meaning you pay less taxes. Missing out on these benefits because the rules that established them were created by the IRS is very very misguided. Do you refuse to drive a car because you philosophically disagree with speed limits? I am planning on spending 20k on a new car (paying cash) Paying cash for a new car when you can very likely finance it for under 2% means you are loosing the opportunity to invest that money which can conservatively expect 4% returns annually if invested. Additionally, using dealership financing can often be additional leverage to negotiate a lower purchase price. If for some reason, you have bad credit or are unable to secure a loan for under 4%, paying cash might be reasonable. The best thing you have going for you is your low monthly expenses. That is commendable. If early retirement is your goal, you should consider housing expenses as a part of your overall plan, but I would strongly suggest you start investing that money in stocks instead of a single house, especially when you can rent for such a low rate. A 3 fund portfolio is a classic and simple way to get a diverse portfolio that should see returns in good years and stability in bad years. You can read more about them here: http://www.bogleheads.org/wiki/Three-fund_portfolio You should never invest in individual stocks. People make lots of money to professionally guess what stocks will do better than others, and they are still very often wrong. You should purchase what are sometimes called \\\"\\\"stocks\\\"\\\" but are really very large funds that contain an assortment of stocks blended together. You should also purchase \\\"\\\"bonds\\\"\\\", which again are not individual bonds, but a blend of the entire bond market. If you want to be very aggressive in your portfolio, go with 100-80% Stocks, the remainder in Bonds. If you are nearing retirement, you should be the inverse, 100-80% bonds, the remainder stocks. The rule of thumb is that you need 25 times your yearly expenses (including taxes, but minus pension or social security income) invested before you can retire. Since you'll be retiring before age 65, you wont be getting social security, and will need to provide your own health insurance.\\\"\",\n \"Yep you could do this if you lived in a certain area (small town, midwest, etc) and had a decent job. You couldn't pull this off in any of the major employing cities that everyone moves to like Seattle, D.C; L.A; etc.\",\n \"Then: (do these in whatever order) 35 is not mid-life. You're on the tail end of the age to get started on retirement planning. Being single, relatively young, and a great income level, you are ideally situated to consider FIRE'ing yourself. (Financial Independent, Retire Early). The basic idea is to invest a large chunk of your income and establish your comfort level balancing frugality and comfort. There's a table on one of the FIRE websites that shows a graph between % of income saved and the number of years it takes to save enough to be financially independent. If you can go over 50% savings, you can get down to about 10 years. In this case, financially independent is where you can live on a safe percentage of withdrawal from your savings without depleting the savings. At that point, you no longer need to work for a paycheck. You would only do so to extend the savings, increase the safe withdraw rate, or because you want to do something that makes you feel productive.\",\n \"130k in LA? That's not life-changing or anything. Do the usual: save money, buy used cars, cheapest rent you can live with, etc. If it was me, I'd be researching the local housing market. Save cash until you find a deal you like. Work the numbers, do your homework. You're the finance guy - you should know what a good deal looks like.\",\n \"my wife and I own a 2 br/2 bath house on .25 acres in western MA. We were able to refinance it and now pay about $400 a month in mortgage, and another $350 in taxes each month. Insurance is $50. We grow our own produce during the spring/summer/fall and put up a lot of canned stuff and whatnot in October. We don't eat much meat. I make about $20k/yr teaching music. Our 2 year old doesn't go to daycare. I care for him during the day and pay a babysitter in the evening while I teach. My wife is a cook and earns slightly more than me. Our combined income is about $42k/year. We have savings, investments and no debt. We do not use credit cards. We don't shop for the latest gadgets and gizmos. We look for bargains wherever possible, we go without and we do a lot of barter. See it is possible to do it. It takes hard work and creativity\",\n \"One strategy to consider is a well-diversified index fund of equities. These have historically averaged 7-8% real growth. So withdrawing 3% or 4% yearly under that growth should allow you to withdraw 30+ years with little risk of drawing down all your capital. As a bonus you're savings target would come down from $10 million to $2.5 million to a little under $3.5 million.\",\n \"We are FAR FAR better off than the majority. That is COMPLETELY true. But the point is that this does not made 300k$ easily, despite being far far far ahead of most. That's the crazy part -- the income disparity. (P.s., where we live 400k$ gets you the shittiest house in town. You could get a tiny condo for 250k$ too)\",\n \"There isn't any place you can put $300 and turn it into significant passive income. What you need to do instead is manage the active (work) income that you have so that your money goes farther, freeing income up for reducing debt and investing. Investing $300 one time won't add up to much, but investing $100 a month will turn into wealth over time. Making a monthly budget is the key to managing your income. In the process, you'll find out where your income is going, and you can be intentional about how much you want to spend on different things in your life. You can allocate some of your income to paying down debt and investing, which is what you need to do to get ahead. For some general guidelines on what to do with your money first, read this question: Oversimplify it for me: the correct order of investing. For more specifics on creating a budget, eliminating debt, and building wealth, I recommend the book The Total Money Makeover by Dave Ramsey.\",\n \"\\\"Pay off the credit cards. From now on, pay off the credit cards monthly. Under no circumstances should you borrow money. You have net worth but no external income. Borrowing is useless to you. $200,000 in two bank accounts, because if one bank collapses, you want to have a spare while you wait for the government to pay off the guarantee. Keep $50,000 in checking and another $50k in savings. The remainder put into CDs. Don't expect interest income beyond inflation. Real interest rates (after inflation) are often slightly negative. People ask why you might keep money in the bank rather than stocks/bonds. The problem is that stocks/bonds don't always maintain their value, much less go up. The bank money won't gain, but it won't suddenly lose half its value either. It can easily take five years after a stock market crash for the market to recover. You don't want to be withdrawing from losses. Some people have suggested more bonds and fewer stocks. But putting some of the money in the bank is better than bonds. Bonds sometimes lose money, like stocks. Instead, park some of the money in the bank and pick a more aggressive stock/bond mixture. That way you're never desperate for money, and you can survive market dips. And the stock/bond part of the investment will return more at 70/30 than 60/40. $700,000 in stock mutual funds. $300,000 in bond mutual funds. Look for broad indexes rather than high returns. You need this to grow by the inflation rate just to keep even. That's $20,000 to $30,000 a year. Keep the balance between 70/30 and 75/25. You can move half the excess beyond inflation to your bank accounts. That's the money you have to spend each year. Don't withdraw money if you aren't keeping up with inflation. Don't try to time the market. Much better informed people with better resources will be trying to do that and failing. Play the odds instead. Keep to a consistent strategy and let the market come back to you. If you chase it, you are likely to lose money. If you don't spend money this year, you can save it for next year. Anything beyond $200,000 in the bank accounts is available for spending. In an emergency you may have to draw down the $200,000. Be careful. It's not as big a cushion as it seems, because you don't have an external income to replace it. I live in southern California but would like to move overseas after establishing stable investments. I am not the type of person that would invest in McDonald's, but would consider other less evil franchises (maybe?). These are contradictory goals, as stated. A franchise (meaning a local business of a national brand) is not a \\\"\\\"stable investment\\\"\\\". A franchise is something that you actively manage. At minimum, you have to hire someone to run the franchise. And as a general rule, they aren't as turnkey as they promise. How do you pick a good manager? How will you tell if they know how the business works? Particularly if you don't know. How will you tell that they are honest and won't just embezzle your money? Or more honestly, give you too much of the business revenues such that the business is not sustainable? Or spend so much on the business that you can't recover it as revenue? Some have suggested that you meant brand or stock rather than franchise. If so, you can ignore the last few paragraphs. I would be careful about making moral judgments about companies. McDonald's pays its workers too little. Google invades privacy. Exxon is bad for the environment. Chase collects fees from people desperate for money. Tesla relies on government subsidies. Every successful company has some way in which it can be considered \\\"\\\"evil\\\"\\\". And unsuccessful companies are evil in that they go out of business, leaving workers, customers, and investors (i.e. you!) in the lurch. Regardless, you should invest in broad index funds rather than individual stocks. If college is out of the question, then so should be stock investing. It's at least as much work and needs to be maintained. In terms of living overseas, dip your toe in first. Rent a small place for a few months. Find out how much it costs to live there. Remember to leave money for bigger expenses. You should be able to live on $20,000 or $25,000 a year now. Then you can plan on spending $35,000 a year to do it for real (including odd expenses that don't happen every month). Make sure that you have health insurance arranged. Eventually you may buy a place. If you can find one that you can afford for something like $100,000. Note that $100,000 would be low in California but sufficient even in many places in the US. Think rural, like the South or Midwest. And of course that would be more money in many countries in South America, Africa, or southern Asia. Even southern and eastern Europe might be possible. You might even pay a bit more and rent part of the property. In the US, this would be a duplex or a bed and breakfast. They may use different terms elsewhere. Given your health, do you need a maid/cook? That would lean towards something like a bed and breakfast, where the same person can clean for both you and the guests. Same with cooking, although that might be a second person (or more). Hire a bookkeeper/accountant first, as you'll want help evaluating potential purchases. Keep the business small enough that you can actively monitor it. Part of the problem here is that a million dollars sounds like a lot of money but isn't. You aren't rich. This is about bare minimum for surviving with a middle class lifestyle in the United States and other first world countries. You can't live like a tourist. It's true that many places overseas are cheaper. But many aren't (including much of Europe, Japan, Australia, New Zealand, etc.). And the ones that aren't may surprise you. And you also may find that some of the things that you personally want or need to buy are expensive elsewhere. Dabble first and commit slowly; be sure first. Include rarer things like travel in your expenses. Long term, there will be currency rate worries overseas. If you move permanently, you should certainly move your bank accounts there relatively soon (perhaps keep part of one in the US for emergencies that may bring you back). And move your investments as well. Your return may actually improve, although some of that is likely to be eaten up by inflation. A 10% return in a country with 12% inflation is a negative real return. Try to balance your investments by where your money gets spent. If you are eating imported food, put some of the investment in the place from which you are importing. That way, if exchange rates push your food costs up, they will likely increase your investments at the same time. If you are buying stuff online from US vendors and having it shipped to you, keep some of your investments in the US for the same reason. Make currency fluctuations work with you rather than against you. I don't know what your circumstances are in terms of health. If you can work, you probably should. Given twenty years, your million could grow to enough to live off securely. As is, you would be in trouble with another stock market crash. You'd have to live off the bank account money while you waited for your stocks and bonds to recover.\\\"\",\n \"No, but it's not crazy out of reach of the salaries you listed, either. Heck, you even made a provision for $250k. And it's certainly over the $100k threshold. But sure, if all you are is a worker bee you're not going to make that. As long as you're quoting developer salaries, you're not going to make that. The question is where you go after being a developer, if you ever move past that. And yeah, there's a big difference in the number of people that make 100 vs 300.\",\n \"Establish good saving and spending habits. Build up your savings so that when you do buy a car, you can pay cash. Make spending decisions, especially for housing, transportation and entertainment, that allow you to save a substantial portion of your income. The goal is to get yourself to a place where you have enough net worth that the return on your assets is greater than the amount you can earn by working. (BTW, this is basically what I did. I put my two sons through top colleges on my dime and retired six years ago at the age of 56).\",\n \"\\\"The title of your question is quite different then the content. The term \\\"\\\"Rat Race\\\"\\\" was coined in the 70's and refers to the endless cycle of working hard to consume more. Fortunately it is very easy not to participate in the cycle and probably will lead to more happiness. Just because one \\\"\\\"works\\\"\\\" does not mean they are participating in the \\\"\\\"rat race\\\"\\\", and I would recommend the following: When I think of \\\"\\\"rat race\\\"\\\" I picture a a bumper-to-bumper freeway of people struggling to get to work. For others it might be different, but that kind of rat race is easily avoided by the multitude of remote work opportunities. Some jobs allow you to work anywhere in the world. Avoiding the rugged consumerism also helps avoid the feelings of being a rat on the wheel. Sure one can like nice things, but do we have to have everything that Madison Ave is trying to sell us? No. Pick some nice things and pay cash. Debt, especially consumer debt, causes a person (in effect) to work for a bank. Avoiding debt will remove those feelings. Saving and investing also helps avoid those feelings. There is profound satisfaction in watching ones account balances grow. Once you see that your investment earnings can outpace your expenses, and then your salary you really feel like you are getting ahead. Above all else giving is a paramount and often overlooked part of a person's financial life. It causes one to be humble and recognize that most people, in this world, are less fortunate that us. It avoids runaway provide that justifies purchases that we cannot afford. So yea you can avoid the \\\"\\\"Rat Race\\\"\\\" and still work.\\\"\",\n \"Since you mentioned moving, you can buy real state very cheap here in Mexico that will give you income monthly. I will tell you some numbers in case you're interested. Now to investments: you can buy houses for rent, and prices are as follows: Average house $25k which will give about $220 monthly of income. Let's say you buy 20 of these that would be $4400 USD monthly. Now you have a very high standard here and you will never have to work again, and each year the income will increase about 2% and you still have $576k left.\",\n \"\\\"Whatever you do, you need to be saving a lot more to have a good chance at retirement at a reasonable age. With a combined salary of $150,000, I'd recommend: In total, that's $47,000/year in tax advantaged accounts, plus whatever you put into taxable accounts. Your $150,000 yearly income, less $90,000/year in savings is still an income of $60,000. People live comfortably and raise families on a lot less. Consider how fortunate you are. You could retire in 10 years, if you wanted, by increasing your savings and decreasing your expenses. Seriously, I'm speaking from first-hand experience. If you stay on your present course (saving $2,000/mo), at a 7% real return, you'll need about 37 years to accumulate $3,800,000 (in today's dollars), which is enough to: Even if those student loans are forgiven, that only knocks off about 2 years. If you are in your late 30s now, there's a decent chance you'll be dead before you retire. As for buying a house or not, this depends a lot on your personal circumstance and how the rental market in your city compares. In your decision, don't forget to consider: Renting is not necessarily throwing money away any more than buying a house is. If you take out a mortgage, you'll be \\\"\\\"throwing away\\\"\\\" a lot of money anyway. Look for a \\\"\\\"loan amortization calculator\\\"\\\" to see how much goes to interest versus principal. For a $500,000 loan at a 3.5% rate, you will be paying approximately $1400 per month in interest versus only $800 towards the principal. When you deduct insurance, taxes, maintenance, etc from that $800, you may find you are still throwing away most of your monthly payment on interest and expenses you wouldn't have if you rented. The money you do \\\"\\\"save\\\"\\\", after interest and expenses, isn't really saved. Housing markets go up and down, but on average, over the long term, they go up just enough to keep up with inflation, meaning a 0% real return. If renting means less cash out of pocket per month, you can put that extra cash towards investments that yield a much higher return. Sure, you may need to continue making rental payments in perpetuity, but you can save enough extra money to pay for the rental in investment income. Again, it depends considerably on how the housing and rental markets compare where you live. Popular cities (San Francisco, New York, Paris, etc.) tend to favor renting. Unpopular cities (Detroit, St. Louis) and rural areas tend to favor buying. Further reading: Mr. Money Mustache: Rent vs. Buy: If You Have to Ask, You Should Probably Rent\\\"\",\n \"Debt will ruin any plans. I guess that the interest on the credit cards is about $450 a month or about $5,500 per year and the school loans is about $6,000 a year. Get a an Excel spread sheet going and start tracking your expensed. Learn to make a amortization spread sheet for all debts, and any future debts that you are thinking about. If you want a family soon plan on one income for a period of time. If you buy a house plan on paying it off while you are working. Then the house payment becomes spendable money during retirement. A cheaper house can be upgraded in the right neighborhood with an excellent appreciation in value. Money put into excellent collectibles and kept for 20 years or more is private and off the radar income no taxes when sold. STUDY STUDY LEARN LEARN\",\n \"I'm pretty sure this isn't a /r/personalfinance question. Sounds like you have that on lock. You are asking some existential questions. Maybe find a way to travel or vacation for a month. Don't sacrifice what you have worked for in a temporary feeling of doing the wrong thing.\",\n \"If you are looking to begin living off the money now, then Dheer's answer is correct - it is not possible. However, if you are looking to grow that money (and potentially additional money added at later dates), then you could make this work. 250 a month corresponds to 3000 per year. A first approximation is that you will need a diversified portfolio of 20-25x that amount (60k-75k) to get the required return. This approximation is based on the rule of thumb for how much life insurance to buy. Therefore you need to determine how to grow the 4k you currently have into 60-75k. These numbers, however, are not adjusted for inflation. In the US I would like put the long term inflation adjust diversified market return at 4% per year (your money doubles about every 18 years). So your best approach if you have time is a diversified portfolio with rebalancing and adding additional money each year.\",\n \"Look through the related questions. Make sure you fund the max your tax advantaged retirement funds will take this year. Use the 30k to backstop any shortfalls. Invest the rest in a brokerage account. In and out of your tax advantaged accounts, try to invest in index funds. Your feeling that paying someone to manage your investments might not be the best use is shared by many. jlcollinsnh is a financial independence blogger. He, and many others, recommend the Vanguard Total Stock Market Index Admiral Shares. I have not heard of a lower expense ratio (0.05%). Search for financial independence and FIRE (Financial Independence Retire Early). Use your windfall to set yourself on that road, and you will be less likely to sit where I am 25 years from now wishing you had done things differently. Edit: Your attitude should be that the earliest money in your portfolio is in there the longest, and earns the most. Starting with a big windfall puts you years ahead of where you'd normally be. If you set your goal to retire at 40, that money will be worth significantly more in 20 years. (4x what you start with, assuming 7% average yearly return).\",\n \"\\\"This may be a great idea, or a very bad one, or it may simply not be applicable to you, depending on your personal circumstances and interests. The general idea is to avoid passive investments such as stocks and bonds, because they tend to grow by \\\"\\\"only\\\"\\\" a few percent per year. Instead, invest in things where you will be actively involved in some form. With those, much higher investment returns are common (but also the risk is higher, and you may be tied down and have to limit the traveling you want to do). So here are a few different ways to do that: Get a college degree, but only if you are interested in the field, and it ends up paying you well. If you aren't interested in the field, you won't land the $100k+ jobs later. And if you study early-childhood education, you may love the job, but it won't pay enough to make it a good investment. Of course, it also has to fit with your life plans, but that might be easier than it seems. You want to travel. Have you thought about anthropology, marine biology or archeology? Pick a reputable, hard-to-get-into, academic school rather than a vocation-oriented oe, and make sure that they have at least some research program. That's one way to distinguish between the for-profit schools (who tend to be very expensive and land you in low-paying jobs), and schools that actually lead to a well-paying future. Or if your interest runs more in a different direction: start a business. Your best bet might be to buy a franchise. Many of the fast-food chains, such as McDonalds, will let you buy as long as you have around $300k net worth. Most franchises also require that you are qualified. It may often make sense to buy not just one franchised store, but several in an area. You can increase your income (and your risk) by getting a loan - you can probably buy at least $5 million worth of franchises with your \\\"\\\"seed money\\\"\\\". BTW, I'm only using McDonalds as an example. Well-known fast food franchises used to be money-making machines, but their popularity may well have peaked. There are franchises in all kinds of industries, though. Some tend to be very short-term (there is a franchise based on selling customer's stuff on ebay), while others can be very long-lived (many real-estate brokerages are actually franchises). Do be careful which ones you buy. Some can be a \\\"\\\"license to print money\\\"\\\" while others may fail, and there are some fraudsters in the franchising market, out to separate you from your money. Advantage over investing in stocks and bonds: if you choose well, your return on investment can be much higher. That's generally true for any business that you get personally involved in. If you do well, you may well end up retiring a multimillionaire. Drawback: you will be exposed to considerable risk. The investment will be a major chunk of your net worth, and you may have to put all your eggs in none basket. If your business fails, you may lose everything. A third option (but only if you have a real interest in it!): get a commercial driver's license and buy an 18-wheeler truck. I hear that owner-operators can easily make well over $100k, and that's with having to pay off a bank loan. But if you don't love trucker culture, it is likely not worth doing. Overall, you probably get the idea: the principle is to use your funds as seed money to launch something profitable and secure, as well as enjoyable for you.\\\"\",\n \"Investing it in what? Unless you're putting it into an account that lets you avoid taxes on the income, your $100k becomes about $74k after federal income taxes. If you take $50k of that and invest it, you're now at $24k. You're living a very barebones life at that point.\",\n \"Make sure the financial adviser is fee only. This means the person gets paid a set fee instead of a commission. The commission based adviser will put you in a financial instrument that can charge upwards of 5%, so he would get $900k for hooking you as a client. You can go to finra.org to find a good one. Read books a variety of books so you know about finanical matters. Credit is not advisable if you have as much money as you do. You have already won the race, no need to take risks.\",\n \"Your Money or Your Life is a great book on this topic.\",\n \"Even if you could get it with no major hassle, $100,000 is just not that much money. In a cheap third world country, as an expat you're looking at spending about $800-$2000/month, plus unexpected expenses. Locals live on less, but very few of us would be happy with the lifestyle of a Honduran or Thai farmer. Your 100k will last 4-10 years. This is hardly a great deal considering you're cutting off ties back home and almost becoming a fugitive. With USD going down the drain (e.g. in Thailand it went down 25% in 3 years), this period would probably be even shorter. Of course, you could work in the new country, but if you do then you don't need 100k to start with. The initial amount may improve your security, but from that standpoint being able to go back and work in your home country is worth more.\",\n \"\\\"Neat points but with regards to your first point there is no car financing to \\\"\\\"pay off\\\"\\\" unless you take on debt. And few Americans have or can easily accumulate the cash in hand to buy a $15K-30K vehicle. Sure, you can definitely live without debt, but buying a home, a car or making other sizable purchases is not possible under such circumstances unless you make a greater than average salary and are remarkably frugal, including an affordable, tenable living situation.\\\"\",\n \"\\\"I agree with Grade 'Eh' Bacon's answer, but there are a couple of ideas that are relevant to your particular situation: If I were you, I would invest at least half of the cash in growth ETFs because you're young enough that market variability doesn't affect you and long term growth is important. The rest should be invested in safer investments (value and dividend ETFs, bonds, cash) so that you have something to live off in the near term. You said you wanted to invest ethically. The keyword to search is \\\"\\\"socially responsible ETFs\\\"\\\". There are many, and if this is important to you, you'll have to read their prospectus to find one that matches your ethics. Since you're American, the way I understand it, you need to file taxes on income; selling stocks at a gain is income. You want to make sure that as your stocks appreciate, you sell some every year and immediately rebuy them so that you pay a small tax bill every year rather than one huge tax bill 20 years from now. Claiming about $20600 of capital gains every year would be tax free assuming you are not earning any other money. I would claim a bit more in years where you make a lot. You can mitigate your long term capital gains tax exposure by opening a Roth IRA and maxing that out. Capital gains in the Roth IRA are not taxable. Even if you don't have income from working, you can have some income if you invest in stocks that pay dividends, which would allow you to contribute to a Roth IRA. You should figure where you're going to be living because you will want to minimize the currency risk of having your money in USD while you're living abroad. If the exchange rate were to change by a lot, you might find yourself a lot poorer. There are various hedging strategies, but the easiest one is to invest some of your money in securities of the country you'll be living in. You should look into how you'll be converting money into the foreign currency. There are sometimes way of minimizing the spread when converting large amounts of money, e.g., Norbert's gambit. Shaving off 1.5% when exchanging $100k saves $1500.\\\"\",\n \"Let Go App...good way to find awesome deals on furniture. Depending on climate find a nice bike, pretty easy way to get around & low maintenance costs compared to a car ( i.e. insurance, gas, repairs). Then depending on whether your work offers matching 401k programs, max that out or find a good index fund & consistently build that emergency fund. Chill for 10-15 years & enjoy the benefits of compounding interest my friend.\",\n \"\\\"The topic you are apparently describing is \\\"\\\"safe withdrawal rates\\\"\\\", more here. Please, note that the asset allocation is crucial decision with your rates. If you continue to keep a lot in cash, you cannot withdraw too much money \\\"\\\"to live and to travel\\\"\\\" because the expected return from cash is too low in the long run. In contrast, if you moved to more sensible decision like 30% bonds and 70% world portfolio -- the rates will me a lot different. As you are 30 years old, you could pessimist suppose to live next 100 years -- then your possible withdrawal rates would be much lower than let say over 50 years. Anyway besides deciding asset allocation, you need to estimate the time over which you need your assets. You have currently 24% in liquid cash and 12% in bonds but wait you use the word \\\"\\\"variety of funds\\\"\\\" with about 150k USD, what are they? Do you have any short-term bonds or TIPS as inflation hedge? Do you miss small and value? What is your sector allocation between small-med-large and value-blend-growth? If you are risk-averse, you could add some value small. Read the site, it does much better job than any question-answer site can do (the link above).\\\"\",\n \"\\\"An endowment is a large chunk of capital (i.e. money) held by a university or other nonprofit. It is meant to hold its value forever against inflation, and invested to generate income: from interest, dividends and appreciation. They seem like a contradiction: closely scrutinized by Boards of Directors, managed to a high and accountable standard, closely regulated -- and yet, invested aggressively for growth: ignoring short-term volatility to get the highest growth long-term. The law, UPMIFA (P for Prudent), requires growth investment, and says taking up to 7% of current value per year is prudent, even in down times when total value is shrinking. On average, this lets the endowment grow with inflation. 7% is the high end of \\\"\\\"prudent\\\"\\\". An endowment is watched, and the taken income is adjusted to keep the endowment healthy. 5% is very safe, assuming the endowment must pace inflation until the heat death of the universe. If you plan to die someday, drawing an extra 1-2% is appropriate. There you go. Invest like a university endowment, and count on up to 7% per year of income. That's $21,000 a year. There'll be taxes, but the long-term capital gain rate at $21,000/year is pretty low. That's pretty tight, but possible if your idea of entertaining is Netflix. It would work very effectively for #VanLife, or the British version, living on a Narrowboat.\\\"\",\n \"$100K is not a lot for my $335K house (now appraised at $389K after 2 years...wtf), with Taxes close to $11500 per year. I'm paying 30K per year JUST for the house+escrow. Now factor in utilities, food, cars, insurance, healthcare, etc.\",\n \"With a 1/4 million you should be looking at staying fully invested and doing income draw down you can safely take 3 or 4 % Basing your retirement income 100% on cash investments is very risky I can remember when inflation hit 15% in the UK and it has been at similar levels in the usa around 14% in 79.\",\n \"Good news! It will be enough if you make the most important decision after retirement; that is, the decision to live within your means. With $220,000 per year in 2015 resources, will you live in the same size home in the same location as you do now? Or will you downsize a bit and move to a town with more reasonably priced homes and lower taxes? Apply the same thinking to all of your expenses. In my opinion, making the decision to live within your means is the biggest decision you can make going into retirement.\",\n \"\\\"The golden rule is \\\"\\\"Pay yourself first.\\\"\\\" This means that you should have some form of savings plan set up, preferably a monthly automatic withdrawal that comes out the day after your pay is deposited. 10% is a reasonable number to start with. You are in a wonderful situation because you are thinking about this 10-15 years before most of us do. Use this to your advantage. You are also in a good situation if you can defer the purchase of the house (assuming prices don't rise drastically in the next few years -- which they might.) If your home situation is acceptable, then sit down with the parents and present a plan. Something along the lines of: I'd like to move out and start my life. However, it would be advantageous to stay here for a few years to build up a down payment and reserve. I'm happy to help out with expenses, but do need a couple years of rent-free support to get started. Then go into monk mode for one year. It's doable, and you can save a lot of cash. Then you're on the road to freedom.\\\"\",\n \"You are kicking butt and taking names, especially compared to most people in your age bracket. I wish I'd had the opportunity (and the sense) to live rent-free and max out my 401(k) when I was 23. Keep doing what you're doing and you'll be able to pull off a Mr. Money Mustache style retirement. I think you might have misunderstood the question and answer nature of this site. Typically, questions aren't laden with answers, explanations, and suggestions; it should just be the question! You can always ask the question and answer it yourself down below, as some SEers do. To answer your questions towards the end of the post: Good luck, and again, keep doing what you're doing!\",\n \"\\\"I suggest that you think in terms of \\\"\\\"financial independence\\\"\\\" rather than retirement. You do not need to retire in the stereotypical sense of playing golf and moving to Florida. If you reach a point where your \\\"\\\"day job\\\"\\\" does not need to pay your bills, you open up more options for what you can do. I am not saying to wait until retirement to do something you love. I am saying that lower salary requirements open up more options.\\\"\",\n \"Keep it simple, three fund portfolio... Just because you have a lot of money doesn't mean you have to consult an advisor. Post your situation to boggleheads forum. And yes, don't get a mortgage if you can afford to pay in cash.\",\n \"The amount of money you have should be enough for you to live a safe but somewhat restricted life if you never worked again - but it could set you up for just about any sort of financial goal (short of island buying) if you do just about any amount of work. The basic math for some financial rules of thumb to keep in mind: If your money is invested in very low-risk ways, such as a money market fund, you might earn, say, 3% in interest every year. That's $36k. But, if you withdraw that $36k every year, then every year you have the same principal amount invested. And a dollar tomorrow can't buy as much as a dollar today, because of inflation. If we assume for simplicity that inflation is 1% every year, then you need to contribute an additional $12k to your principal balance every year, just so that it has the same buying power next year. This leaves you with a net $24k of interest income that you can freely spend every year, for the rest of your life, without ever touching your principal balance. If your money is invested more broadly, including equity investments [stocks], you might earn, say, 7% every year. Some years you might lose money on your investments, and would need to draw down your principal balance to pay your bills. Some years you might do quite well - but would need to remain conservative and not withdraw your 'excess' earnings every year, because you will need that 'excess' to make up for the bad years. This would leave you with about $74k of income every year before inflation, and about $62k after inflation. But, you would be taking on more risk by doing this. If you work enough to pay your daily bills, and leave your investments alone to earn 7% on average annually, then in just 10 years your money would have doubled to ~ $2.4 Million dollars. This assumes that you never save another penny, and spend everything you make. It's a level of financial security that means you could retire at a drop of the hat. And if don't start working for 20 years [which you might need to do if you spend in excess of your means and your money dries up], then the same will not be true - starting work at 45 with no savings would put you at a much greater disadvantage for financial security. Every year that you work enough to pay your bills before 'retirement' could increase your nest egg by 7% [though again, there is risk here], but only if you do it now, while you have a nest egg to invest. Now in terms of what you should do with that money, you need to ask yourself: what are your financial goals? You should think about this long and hard (and renew that discussion with yourself periodically, as your goals will change over time). You say university isn't an option - but what other ways might you want to 'invest in yourself'? Would you want to go on 'sabbatical'-type learning trips? Take a trade or learn a skill? Start a business? Do you want to live in the same place for 30 years [and thus maybe you should lock-down your housing costs by buying a house] or do you want to travel around the world, never staying in the same place twice [in which case you will need to figure out how to live cheaply and flexibly, without signing unnecessary leases]. If you want to live in the middle of nowhere eating ramen noodles and watching tv, you could do that without lifting a finger ever again. But every other financial goal you might have should be factored into your budget and work plan. And because you do have such a large degree of financial security, you have a lot of options that could be very appealing - every low paying but desirable/hard-to-get job is open to you. You can pursue your interests, even if they barely pay minimum wage, and doing so may help you ease into your new life easier than simply retiring at such a young age [when most of your peers will be heavy into their careers]. So, that is my strongest piece of advice - work now, while you're young and have motivation, so that you can dial back later. This will be much easier than the other way around. As for where you should invest your money in, look on this site for investing questions, and ultimately with that amount of money - I suggest you hire a paid advisor, who works based on an hourly consultation fee, rather than a % management fee. They can give you much more directed advice than the internet (though you should learn it yourself as well, because that will give you the best piece of mind that you aren't being taken advantage of).\",\n \"Good idea. That is enough money to never work again, if a life is well planned. A person does not need more than that, to have a happy and lengthy life, doing what they love. I retired at 47 with less than this.\",\n \"Congratulations on making it at minimum you are close to a 2 millionaire if I understand your numbers correctly. Here is what I would do if I woke up in your shoes: 1) Take some time. Budget some money and time. Go live abroad, take hang gliding lessons or become scuba certified. Something like that. The only thing I really dislike about your situation is that your wife may be precluded on going with you due to her business concerns. During this time dream, plan and decide what you want your life to look like. You seem to understand that you won't be happy doing nothing for a really long time. Its not a big deal if you blow 50K or so doing this. Take the wife to Paris, go visit the Galapagos Islands. 2) You are going to have to become wise about investing. I'd put close to one million in stock based mutual funds. That may sound scary, and you might seek others out to help you with this transition. I feel like that your time spent in your business may have precluded you delving into this area of knowledge. For now, you may just want to stick it all in interest bearing accounts, and slowly invest the money. Don't invest in things you don't understand, and you have to be on the look out for the next Bernie Madoff. 3) Its hard to speak to your desire to downsize your home. You could probably buy a nice ranch in Nevada from the sale of your home if that is what you desire, but you may kind of hate something like that. 4) Could you start more of a boutique business? Not one that occupies all of your time, but one that takes 20-40 hours per week. Something that interests you, not something that is overly a chore. Perhaps you can consult in the field that your former business was in. You most certainly have a lot of intelligent things to say. 5) Be generous. Find worthwhile charities to give time and money to. Congratulations again. Take some time to dream, and then make those things happen. Edit: You may need to make new friends. Actually wealthy people are a very small segment of the population and are out numbered by people who act wealthy. Its going to be hard, but you need to find people that have a certain level of wealth but are also don't make you uncomfortable with their level of spending (either high or low).\",\n \"Yeah, even then. Maybe a bit more, depending on travel. I'd have a fully-paid for house. If taxes are absurd on the property I might need to bump up the number. Vehicles, fully paid for. Machine tools, heavy-duty sewing gear, firearms & hunting/camping gear, most of the tooling needed to produce anything I need, a well-equipped kitchen, and land with some livestock, woodlot, farm, and orchard. Power from wind/solar with a backup genset & link to the grid as a last resort, wells for water. As I said: Initial cost would be high, but after that my cost of living would be damned low. Hell, I'd probably spend more on books than food.\",\n \"You should invest your money. To figure out what rate of return you need, use this equation: (How Much Money You Want Per Year) / (Total Amount of Cash You Have) = (Annualized Interest Rate) If we plug in the amount of annualized interest you can expect to safely get while not managing your money personally, 2% by my estimate, we get X / 1.2m = 0.02%; X=24K/year A measly $24,000 / year. Many people say that you can get 10, 12, even 30% return on your investment. I won't speculate on if this is true, but I will guarantee that you cannot get those returns simply by handing your money over to a money manager. So your options are, 1) Earn a guaranteed $24,000 and earn the rest you need to live by working 2) Learn to invest your money (and then do so intelligently) and earn enough to live off the interest To learn how to invest your money, read Beating the Street, by Peter Lynch. https://www.amazon.ca/Beating-Street-Peter-Lynch/dp/0671891634 Good luck!\",\n \"I really think /r/personalfinance would be a better platform for this, there's people there who deal with this all the time. I would repost this question there with the additional information; 1. Your age 2. Your savings, including IRAs/401ks 3. Total amount of all debt, including credit card and student loans 4. Your income 5. Your future plans (plans to retire? to which country? back to school?) 6. Your family situation (married / unmarried, kids / no kids) All of these things impact any financial decisions you might have, that's why personal financial advisors exist.\",\n \"\\\"Consider property taxes (school, municipal, county, etc.) summing to 10% of the property value. So each year, another .02N is removed. Assume the property value rises with inflation. Allow for a 5% after inflation return on a 70/30 stock bond mix for N. After inflation return. Let's assume a 20% rate. And let's bump the .05N after inflation to .07N before inflation. Inflation is still taxable. Result Drop in value of investment funds due to purchase. Return after inflation. After-inflation return minus property taxes. Taxes are on the return including inflation, so we'll assume .06N and a 20% rate (may be lower than that, but better safe than sorry). Amount left. If no property, you would have .036N to live on after taxes. But with the property, that drops to .008N. Given the constraints of the problem, .008N could be anywhere from $8k to $80k. So if we ignore housing, can you live on $8k a year? If so, then no problem. If not, then you need to constrain N more or make do with less house. On the bright side, you don't have to pay rent out of the .008N. You still need housing out of the .036N without the house. These formulas should be considered examples. I don't know how much your property taxes might be. Nor do I know how much you'll pay in taxes. Heck, I don't know that you'll average a 5% return after inflation. You may have to put some of the money into cash equivalents with negligible return. But this should allow you to research more what your situation really is. If we set returns to 3.5% after inflation and 2.4% after inflation and taxes, that changes the numbers slightly but importantly. The \\\"\\\"no house\\\"\\\" number becomes .024N. The \\\"\\\"with house\\\"\\\" number becomes So that's $24,000 (which needs to include rent) versus -$800 (no rent needed). There is not enough money in that plan to have any remainder to live on in the \\\"\\\"with house\\\"\\\" option. Given the constraints for N and these assumptions about returns, you would be $800 to $8000 short every year. This continues to assume that property taxes are 10% of the property value annually. Lower property taxes would of course make this better. Higher property taxes would be even less feasible. When comparing to people with homes, remember the option of selling the home. If you sell your .2N home for .2N and buy a .08N condo instead, that's not just .12N more that is invested. You'll also have less tied up with property taxes. It's a lot easier to live on $20k than $8k. Or do a reverse mortgage where the lender pays the property taxes. You'll get some more savings up front, have a place to live while you're alive, and save money annually. There are options with a house that you don't have without one.\\\"\",\n \"Hey, I'm majoring in a worthless field and do not expect to make much money. I've learned to find solace in the simple luxuries such as, heating,car ownership, food, warm food, meat,being able to exercise, have freedom,etc... I'm trying to figure out what the minimum annual salary I can live on is. For example right now I'm in college and it costs $30,000 a year but I'm living *very* comfortably. Why and how will this change in the future? Renting an apartment and supporting only myself, why can't I live comfortably on $30,000 in the future?\",\n \"Having more money than you know what to do with is a good problem to have. :) Congratulations on your early retirement! I'd say this is a good time to start learning about investing, because nobody will look after your money as well as you will. Fund managers and financial advisers may mean well, but they are just salespeople, paid commissions to promote their employers' products. Not that there's anything wrong with that; it's just that their interests are not aligned with yours. They get paid the same, whether you make or lose money. If you want to live off your investments you must invest in your financial education.\",\n \"\\\"You're right to seek passive income and since you're already looking for it, you probably already know some of the reasons to why it is important. Do you live in the United States? If so I'd strongly recommend purchasing your primary residence and then maybe investment properties if you like owning your own home. The US tax and banking structure is set up to favor this move in more ways than I can count. So, SAVE, SAVE, SAVE then beg, borrow and steal to get the down payment, rent rooms to friends or random people to afford the payments, buy a fixer upper in an up and coming neighborhood. The US is rife with these in all price ranges. If you're working 56 hrs a week, you've got the work ethic. So if you can't afford it it's probably because you're spending all your money on other stuff. If you want to do this, it will take some effort, smarts, and savings. You will have to trim back the mochas, vacations, dinners out, etc, etc etc. Let your friends do that stuff and rent from you. Your life will get continually easier. If you have already trimmed back all the discretionary spending and still can't make it then you need to earn more money. Doing either and both of these things will absolutely change your whole economic life and future. So in summary I'd offer these Ranked Priorities: 1) Learn to Save (unless you always want to have to work for someone else) 2) Increase your income capability (since your most valuable asset is YOU) 3) Buy and hold real estate (because the game is rigged to favor passive income) I'm 38, never earned a six figure salary, made some good purchases when I was 25-30 and work is \\\"\\\"optional\\\"\\\" for me now.\\\"\",\n \"Make sure you are hitting the actual max of the 401k. Most think it is 18K, but that is the amount you can contribute into either pre-tax or roth. On top of this, you can also contribute using an after-tax contribution (treated differently from Roth). Total amounts up to 54k (since you are under 50). One thing I would look into for ways to beat interest rates in bank accounts and CDs is Municipal Bond funds, given your high income. I have seen some earning almost 6% tax-free YTD. These also give you liquidity. Definitely keep your 3 mo salary in the bank, but once you get over that while maxing out your 401k, this is a pretty good way to make your money work for you, without crushing you come tax time. Building that muni bond fund account gradually, you can eventually use that account to pay for things like car payments, mortgage, rent, vacation, etc. Just be sure if you go with a mutual fund, that you are aware of any surrender charge schedules. I have seen this done with C Shares, where you can withdraw your investment without penalty after 1 year. Let me know if this is unclear or you would like any additional information. Best of luck!\",\n \"Your plan won't work. Working 40 hours a week at federal minimum wage (currently $7.25 / hr) for 52 weeks is an annual income of just over $15,000. Even assuming you can reliably get a return of 15% (which you definitely can't), you'd need to start with $100,000 of assets to earn this poverty income. Assuming a more reasonable 7% bumps the required assets up to over $200,000, and even then you're dead the first time you need to make withdrawals after a mistake or after a major market downturn. As a fellow math Ph.D. student, I know your pain. I, too, struggled for a while with boredom in an earlier career, but it's possible to make it work. I think the secret is to find a job that's engaging enough that your mind can't wander too much at work, and set aside some hobby time to work on interesting projects. You likely have some marketable skills that can work for you outside of academia, if you look for them, to allow you to find an interesting job. I think there's not much you can do besides trying not to get fired from your next McJob until you can find something more interesting. There's no magic money-for-nothing in the stock market.\",\n \"how much did you make? how much do you make now? i think as long as people make about a certain amount (say $100k in Los ANgeles, NYC, San Francisco or London) then life is ok. About that amount money is just useless.\",\n \"I'm confused why you think you need a $450k house. That seems extremely high in today's market except perhaps in certain major urban locations. If you're going to live in suburbia or a smaller town/city, you should be able to find a nice 3br house for well under $300k. Before you rule out buying a house, I'd spend some time researching the real estate listings in your area, foreclosures, properties owned by bankruptcy court, etc. - you might be surprised to find a great home for as low as $150-200k. Of course if you live in a place where what I'm saying is completely off-base, please disregard my answer.\",\n \"You should be trying to save 10% of your income from an early age. You can live well now and enjoy life within your means now, instead of trying to keep up with the Jones. Do you need to live in a larger house (when you can't really afford it) because it is more comfortable or because you want to show it off in front of your family and friends? You can live and enjoy life and eat well now and still save enough to have a comfortable retirement, just spend your money now on the things you enjoy, not things you see others enjoying.\",\n \"\\\"The biggest and primary question is how much money you want to live on within retirement. The lower this is, the more options you have available. You will find that while initially complex, it doesn't take much planning to take complete advantage of the tax system if you are intending to retire early. Are there any other investment accounts that are geared towards retirement or long term investing and have some perk associated with them (tax deferred, tax exempt) but do not have an age restriction when money can be withdrawn? I'm going to answer this with some potential alternatives. The US tax system currently is great for people wanting to early retire. If you can save significant money you can optimize your taxes so much over your lifetime! If you retire early and have money invested in a Roth IRA or a traditional 401k, that money can't be touched without penalty until you're 55/59. (Let's ignore Roth contributions that can technically be withdrawn) Ok, the 401k myth. The \\\"\\\"I'm hosed if I put money into it since it's stuck\\\"\\\" perspective isn't true for a variety of reasons. If you retire early you get a long amount of time to take advantage of retirement accounts. One way is to primarily contribute to pretax 401k during working years. After retiring, begin converting this at a very low tax rate. You can convert money in a traditional IRA whenever you want to be Roth. You just pay your marginal tax rate which.... for an early retiree might be 0%. Then after 5 years - you now have a chunk of principle that has become Roth principle - and can be withdrawn whenever. Let's imagine you retire at 40 with 100k in your 401k (pretax). For 5 years, you convert $20k (assuming married). Because we get $20k between exemptions/deduction it means you pay $0 taxes every year while converting $20k of your pretax IRA to Roth. Or if you have kids, even more. After 5 years you now can withdraw that 20k/year 100% tax free since it has become principle. This is only a good idea when you are retired early because you are able to fill up all your \\\"\\\"free\\\"\\\" income for tax conversions. When you are working you would be paying your marginal rate. But your marginal rate in retirement is... 0%. Related thread on a forum you might enjoy. This is sometimes called a Roth pipeline. Basically: assuming you have no income while retired early you can fairly simply convert traditional IRA money into Roth principle. This is then accessible to you well before the 55/59 age but you get the full benefit of the pretax money. But let's pretend you don't want to do that. You need the money (and tax benefit!) now! How beneficial is it to do traditional 401ks? Imagine you live in a state/city where you are paying 25% marginal tax rate. If your expected marginal rate in your early retirement is 10-15% you are still better off putting money into your 401k and just paying the 10% penalty on an early withdrawal. In many cases, for high earners, this can actually still be a tax benefit overall. The point is this: just because you have to \\\"\\\"work\\\"\\\" to get money out of a 401k early does NOT mean you lose the tax benefits of it. In fact, current tax code really does let an early retiree have their cake and eat it too when it comes to the Roth/traditional 401k/IRA question. Are you limited to a generic taxable brokerage account? Currently, a huge perk for those with small incomes is that long term capital gains are taxed based on your current federal tax bracket. If your federal marginal rate is 15% or less you will pay nothing for long term capital gains, until this income pushes you into the 25% federal bracket. This might change, but right now means you can capture many capital gains without paying taxes on them. This is huge for early retirees who can manipulate income. You can have significant \\\"\\\"income\\\"\\\" and not pay taxes on it. You can also stack this with before mentioned Roth conversions. Convert traditional IRA money until you would begin owing any federal taxes, then capture long term capital gains until you would pay tax on those. Combined this can represent a huge amount of money per year. So littleadv mentioned HSAs but.. for an early retiree they can be ridiculously good. What this means is you can invest the maximum into your HSA for 10 years, let it grow 100% tax free, and save all your medical receipts/etc. Then in 10 years start withdrawing that money. While it sucks healthcare costs so much in America, you might as well take advantage of the tax opportunities to make it suck slightly less. There are many online communities dedicated to learning and optimizing their lives in order to achieve early retirement. The question you are asking can be answered superficially in the above, but for a comprehensive plan you might want other resources. Some you might enjoy:\\\"\",\n \"while not stated, if you have any debt at all, use the $3000 to pay it off. That's the best investment in the short term. No risk and guaranteed reward. College can invite all sorts of unexpected expenses and opportunities, so stay liquid, protect working capital.\",\n \">Wife and I made $160K last year and saved $65k still living very nicely and taking international vacations. Assuming that youre from the US you would have to live outside of a major metropolitan area to have such a low cost of living.\",\n \"I'm talking about household income. $300k is a huge amount of money for a single person to make, but $150k is certainly doable for most doctors/lawyers/engineers. If your spouse is also a high earner that will help put over the 1% threshold.\",\n \"if you have 30k to invest use some of it to hire someone because the returns you'd get with some sort of professional would probably make up for what your paying them in comparison to doing it on your own. although if you're really against it then like mjvcaj said, ETF's would probably be a good idea.\",\n \"$100,000 is a fuckton of income unless you're convinced that you have to live in a $600,000 house, drive a $40,000 SUV, use a $600 smartphone with a $150/month data plan, and drink $4 cups of coffee every day just to get by.\",\n \"Wow, everyone tells you different investment strategies. You have all your life ahead of you. Your main focus should not be getting the best return rate, but ensuring your existence. Who cares if you get 7% if you'll lose all in the next market crash and stand on the street with no education, no job and nothing to fall back on? I would go a completely different route in your place: The best advise given above was to not consider this as an option to never work again. It's not enough money for that, unless you want to live poorly and always be afraid that the next financial crises wipes you out completely.\",\n \"Drawing down from a nest egg is predominately dealing with 3 issues: The much used withdrawal amount used to not deplete your principal is 4%. Some may argue this is too much or not enough but it is regarded as a standard amount. Seeing that you have $500k you can pull about $20k per year using this drawdown percentage. If you can live on $20k then you are set. If not you should build up this nest egg.\",\n \"To answer your precise question, your plans are not at all misguided, and are in fact very reasonable. You are clearly financially very comfortable, and from the tone of your post it sounds like you value security and simplicity over maximizing your investment return over the coming years. If money was the most important thing to you then you would stay shackled to your high paying jobs. @JoeTaxpayer's answer has some great information for a person who is interested in maximizing their investment return. If you followed that advice, you might increase your return on investments by up to 1%/year (I'm just throwing a ball park number out there). So your choice is simple. Peace of mind on one hand and perhaps 1% additional return on investments on the other hand.\",\n \"You are young so you have time on your side. This allows you to invest in more aggressive investments. I would do the following 1) Contribute at least what your company is willing to match on your 401k, if your company offers a Roth 401k use that instead of the normal 401k (When this becomes available to you) 2) Open a Roth IRA Contribute the maximum to this account ~$5500/year 3) Live below your means, setup a budget and try and save/invest a minimum of 50% of your salary, do not get used to spending more money. With each bonus or salary increase a minimum of 75% of it should go toward your savings/investment. This will keep you from rapidly increasing your spending budget. 3) Invest in real estate (this could be its own post). Being young and not too far out of college you have probably been moving every year and have not accumulated so much stuff that it makes moving difficult. I would utilize your FHA loan slot to buy a multifamily property (2-4 Units) for your first property using only 3.5% down payment (you can put more down if you like). Learn how to analyze properties first and find a great Realtor/Mentor. Then I would continue as a NOMAD investor. Where you move every year into a new owner occupied property and turn the previous into a rental. This allows you to put 3-5% down payment of properties that you would otherwise have to put 20-25% and since you are young you can afford the risk. You should check out this article/website as it is very informative and can show you the returns that you could earn. Young Professional Nomad Good luck I am in a very similar situation\",\n \"\\\"My basic rule I tell everyone who will listen is to always live like you're a college student - if you could make it on $20k a year, when you get your first \\\"\\\"real\\\"\\\" job at $40k (eg), put all the rest into savings to start (401(k), IRA, etc). Gradually increase your lifestyle expenses after you hit major savings goals (3+ month emergency fund, house down payment, etc). Any time you get a raise, start by socking it all into your employer's 401(k) or similar. And repeat the above advice.\\\"\",\n \"\\\"With 40% of your take-home available, you have a golden opportunity here. Actually two, and the second builds out easily from the first. Golden Opportunity # 1: Layoff Immunity Ok, not really immunity. Most people don't think of themselves getting laid off, and don't prepare. Of course it may not happen to you, but it can. It's happened to me twice. The layoff itself is an emotional burden (getting rejected is hard), but then you're suddenly faced with a gut-wrenching, \\\"\\\"how am I gonna pay the rent????\\\"\\\" If you have no savings, it's terrifying. Put yourself in that spot. Imagine that tomorrow, you're out of a job. For how many months could you pay your expenses with the money you have? Three months? One? Not even that? How about shooting for 12 months? It's really, really comforting to be able to say: \\\"\\\"I don't have to worry about it for a year\\\"\\\". 12 months saved up gives you emotional and financial stability, and it gives you options -- you don't have to take the first job that comes along. Now, saving 12 months of expenses is huge. But, you're in the wonderful spot where you can save 40% of your income. It would only take 2.5 years to save up a year's worth of income! But, actually, it's better than that. Because your 12-month Layoff Immunity fund doesn't have to include the amount for retirement, or taxes, or that 40% we're talking about. Your expenses are less than 60% of take-home -- you'd only need 12 months of that. So, you could have a fully funded 12-Month Layoff Immunity Fund only in a year and a half! Golden Opportunity #2: Freedom Fund Do you like your Job? Would you still do it, if you didn't need the money? If so, great. But if not, why not get yourself into a position where you don't need it? That is, build up enough money from saving and investing to where you can pay your expenses - forever - from your investments. The number to keep in mind is 25. Figure out your annual expenses, and multiply it by 25. That's the amount you'd need to never need a job again. (That works out to a 4% withdrawal rate, adjusting for inflation every year, with a low risk of running out of money. It's a rule of thumb, but smart people doing a lot of math worked it out.) Here you keep saving and investing that 40% in solid mutual funds in a regular, taxable account. Between your savings and the compounding returns off the investments, you could easily have a fully funded \\\"\\\"Freedom Fund\\\"\\\" by the time you're 50. In fact, by 45 isn't unreasonable. It could be even better. If you live in that high-rent area because of the job, and wouldn't mind living were the rents are lower once you quit, your target amount would be lower. Between that, working dedicatedly toward this goal, and maybe a little luck, you might even be able to do this by age 40. Final Thoughts There are other things you could put that money toward, like a house, of course. The key take-away here, is to save it, and invest it. You're in a unique position of being able to do that with 40% of your income. That's fabulous! But don't think it's the norm. Most people can't save that much, and, once you lose the ability to save that much, it's very difficult to get it back. Expenses creep in, lifestyle \\\"\\\"wants\\\"\\\" become \\\"\\\"needs\\\"\\\", and so on. If you get into the habit of spending it, it's very difficult to shrink your lifestyle back down - down to what right now you're perfectly comfortable with. So, spend some time figuring out what you want out of life -- and in the mean time, sock that 40% away.\\\"\",\n \"It's important to have both long term goals and milestones along the way. In an article I wrote about saving 15% of one's income, I offered the following table: This table shows savings starting at age 20 (young, I know, so shift 2 years out) and ending at 60 with 18-1/2 year's of income saved due to investment returns. The 18-1/2 results in 74% of one's income replaced at retirement if we follow the 4% rule. One can adjust this number, assuming Social Security will replace 30%, and that spending will go down in retirement, you might need to save less than this shows. What's important is that as a starting point, it shows 2X income saved by age 30. Perhaps 1X is more reasonable. You are at just over .5X and proposing to spend nearly half of that on a single purchase. Financial independence means to somehow create an income you can live on without the need to work. There are many ways to do it, but it usually starts with a high saving rate. Your numbers suggest a good income now, but maybe this is only recently, else you'd have over $200K in the bank. I suggest you read all you can about investments and the types of retirement accounts, including 401(k) (if you have that available to you), IRA, and Roth IRA. The details you offer don't allow me to get much more specific than this.\",\n \"Congratulations on getting started in life! John Malloy's (American) research suggests that you should take some time to get used to living on your own, make some friends, and settle into your community. During this time, you can build up an emergency fund. If/when the stock markets do not seem to be in a bear market, you can follow user3771352's advice to buy stock ETFs. Do you hope to get married and have children in the next few years? If so, you should budget time and money for activities where you make new friends (both men and women). Malloy points out that many Americans meet their spouses through women's networks of friends.\",\n \"So you can earn $60-75 and your BF $55? You are in your 20's (based on your below comment about being 3 years into your career) with a combined income of 6 figures. That's fantastic. No kids, no accumulated cruft and you make a crap ton of money. An average house in the best school district where I live would run you about $300,000. You should be able to afford that, easily, before you are 30. Not sure why you seem to be down on your situation.\",\n \"It depends on where you live and what your situation is. If you're a born and bred New Yorker who thinks that White Plains, NY is a stop on the way to Canada, than you're ok. If you're a single person living in downtown Boston, you may want to err on the side of spending less. You may find yourself in a situation in a few short years where you significant other has a job in the suburbs and the prospect of sending your child to a city school is not appealing.\",\n \"\\\"In most parts of the US, even the more expensive parts, a $100k income can afford the rent or mortgage on a reasonably safe* 2-3 bedroom home within an hour commute of your work, plus the means to commute, plus health insurance, plus retirement savings, plus at least some discretionary income (i.e., choice between living in a nicer neighborhood, eating out more often, buying brand-name apparel, etc). In some places, $100k affords a very comfortable lifestyle, with plenty of savings. A lot of people who live in or around big, expensive cities think it is outrageous that their $100k income doesn't get them a designer apartment, a wardrobe full of fitted suits, eating out twice a week, two overseas vacations per year, etc. They confuse not having a Hollywood lifestyle, with being poor. Those are some of the most obnoxious people in the world. *because this post is sure to draw the ire of some privileged people who think that \\\"\\\"reasonably safe\\\"\\\" means top 5%, I will offer the definition of \\\"\\\"reasonably safe\\\"\\\" as one of the top three quintiles of US zip codes with lowest violent crime rates per capita.\\\"\",\n \"You can. Almost anybody (barring medical issues) can, the drudgery will be intense and utterly soul sucking. Sure fire formula: Spend very little, save everything and put down down payments on rental houses. It will eventually get you millions even if everything goes very wrong after 30 years. It should work out into the millions somewhere between 15-25 years.\",\n \"I’m going to suggest something your parents may be reluctant to say: “Grow up and get out.” A man living in a van down by the river, making minimum wage, with $0 in savings has achieved something you have still failed to achieve: adulthood. This, I believe, is more important than a man’s income or net worth. So please join us adults Bryan. I think you’ll enjoy it. Yes, your savings may take a hit but you will gain the respect that comes with being an adult. I think it is worth it.\",\n \"I live in Upstate NY. It's a great, reasonable cost place to live -- provided that you have a job. In NYC, there are probably a few hundred jobs with duties similar to mine in a 45-minute radius. Upstate, there may be 5-6.\",\n \"Lets assume you put the max of 5000 per year in a Roth IRA. You have your home and all other debt paid off, and your investment earns 10%, a few points below the market average. You will have $822,470 at 65, 1005K at 67 that you can draw on tax free. It is a fairly tidy sum and should keep you from working as the greeter in WalMart. This kind of return should be expected from most mutual funds, and you could invest some time in reading about how to pick good returning funds. An index fund, which shadows a market index, should have that kind of return. And yes that is 10% per year. In investing it is about momentum. I too write software for a living, and would suggest you should be able to contribute about double that amount and still be comfortable. That would set you up for a pretty comfortable post-work life style. You understand the value of building passive income. Traditionally that is accomplished through dividends of reliable companies, but are now accomplished a variety of ways. Keep in mind the way you are asking this question opens you to many scams.\",\n \"The usual, but controversial, answer to this question is a 4% withdrawal rate. This means a net worth of ($5000 * 12 months ) / 4%, i.e., $1,500,000 If you want to play with the numbers, based on historical data, you can use the FIRECalc simulator.\",\n \"\\\"I have an idea. Keep saving what you are and think \\\"\\\"Early Retirement\\\"\\\". Work for 20 years, then do whatever you want 40 hours a week. If your satisfied with your current lifestyle, start thinking of your bigger long term financial goals and when you want to accomplish them by. Maybe you can accomplish these sooner than you think. Saving to buy a house/property? Investment portfolio? Want to travel all over the world? Family planning/kids? I am sure you will figure out how you would want to spend it.\\\"\",\n \"You can never depend ONLY on pension. You must get financial education and invest your money. I recommend you to read The Intelligent Investor by Benjamin Graham...it's the bible of Warren Buffet. Besides, you don't need to be a Billionaire for retiring and be happy. I recommend you to get education in ETFs. I quote The Intelligent Investor by Benjamin Graham p. 131. According to Ibboston Associates, the leading financial research firm, if you had invested $12,000 in the Standard & Poor's 500-stock index at the beginning of september 1929, 10 years later you would have had only $7,223 left. But if you had started with a paltry $100 and simply invested another $100 every single month, then by August 1939, your money would have grown to $15,571! That's the power of disciplined buying-even in the face of the Great Depression and the worst bear market of all time. You are still young to make even bolder investments. But seriously you can never depend ONLY on pension. You won't regret learning how to invest your money, it doesn't matter if it's in the stock market, real state market, whatever market... Knowing what to do with your money is priceless. I hope this helps. Happy profits!\",\n \"\\\"With a healthy income its quite possible to contribute too much into 401Ks/IRAs. For example, if your retired today and had 3 million or so, how much more would you need? Would an extra million materially change your life? Would it make you happier if you invested that extra in some rental properties or perhaps a business like a sandwich or ice cream shop where you have more direct control? This kind of discussion is possible as you indicate that you have taken care of your life financially. It seems at odds with the negative press describing the woefully condition of the standard person's finances. These articles ignore a very simple fact: its because of bad behavior. You, on the contrary, have behaved well and are in the process of reaping rewards. This is where I feel your \\\"\\\"mental gymnastics\\\"\\\" originates. Looking to engage in the rental market is no different then buying a franchise. You are opening a business of your own. You'll have to educate yourself and are likely to make a few mistakes that will cause you to write checks to solve. Your goal is to minimize those mistakes. After all, what do you know about the rental home business? I am guessing not much. Educate yourself. Read and spend some money on taking knowledgeable people out for coffee. In the end you should understand that although a poor decision may cost you money you cannot really make a bad decision. Lets say you do buy a rental property, things go south, you sell for a loss, etc.... In the end the \\\"\\\"butchers bill\\\"\\\" is 50K or so. Will that materially change your life? Probably not. The worst case is perhaps you have to work a year or two beyond the anticipated retirement age to make up that money. No big deal.\\\"\",\n \"How about a slightly different approach. Invest in a duplex or trip/quadplex. Live in one unit, rent out the rest. Chances are you'll end up either paying nothing in total, or even making money as your tenants pay your bills for you. Depends a lot on your area and your willingness to deal with the crap of tenants, but have a look into it. You'll be surprised what you can buy in your area and the types of people you might end up living with you...\",\n \"\\\"Read \\\"\\\"Stop Acting Rich\\\"\\\" by Dr Thomas Stanley. I'm concerned that even before you've earned your first paycheck you want a flashy car. $4800/yr on $63K/yr income is just about half what I'd recommend to someone who starts working. 10% is the minimum, if and only if, the employer matches 5, for a total 15% saved. Do it in a pretax account and when you go back to grad school convert to Roth.\\\"\",\n \"I'm assuming you are buying bond mutual funds or bond etfs here, not the actual bonds directly. There are a significant variety of different types of bond funds, reflecting the sort of bonds they invest in. For example, you can invest in risky, non-commercial grade bonds, also known as junk bonds. Or you can invest in short-term bonds, which are much safer but return much less. There's no such thing as the 'average bond'. So, let's go for somewhere in the middle. Let's go for 3% return, after fees. Now, it's fairly simple math. You want $3,000 a month, or $36,000 a year. To generate that sort of return, you'd need to invest $1,200,000. If we are more optimistic, we could go for a 4% return, after fees. That reduces your investment to $900,000. Note that it would almost certainly not make sense to invest all that money in bonds. Instead, you'd want to invest in a mix of stocks and bonds. This could likely reduce your risk while increasing your expected return.\",\n \"The question regarding your snapshot is fine, but the real question is what are you doing to improve your situation? As John offered, one bit of guidance suggests you have a full year's gross earnings as a saving target. In my opinion, that's on the low side, and 2X should be the goal by 35. I suggest you look back, and see if you can account for every dollar for the prior 6-12 months. This exercise isn't for the purpose of criticizing your restaurant spending, or cost of clothes, but to just bring it to light. Often, there's some low hanging fruit in this type of budgeting exercise, spending that you didn't realize was so high. I'd also look carefully at your debt. What rate is the mortgage and the student loans? By understanding the loans' rates, terms, and tax status (e.g. whether any is a deduction) you can best choose the way to pay it off. If the rates are low enough you might consider funding your 401(k) accounts a bit more and slow down the loan payments. It seems that in your 30's you have a negative net worth, but your true asset is your education and future earning potential. From a high level view, you make $180K. Taking $50K off the top (which after taxes gives you $30K) to pay your student loan, you are still earning $130K, putting you at or near top 10% of families in this country. This should be enough to afford that mortgage, and still live a nice life. In the end there are three paths, earn more (why does hubby earn half what you do, in the same field?), spend less, or reallocate current budget by changing how you are handling that debt.\",\n \"You can get an investment manager through firms like Fidelity or E*Trade to manage your account. It won't be someone dedicated exclusively to you, but you're in the range where they'd take you as a managed account customer. Another option would be to get a financial planner (CFP or something) help you to identify your needs and figure out what your investments portfolio should look like. This is not a whole lot of money, but is definitely enough to have an early retirement if managed and invested properly.\",\n \"Deposit $3,500 each month in a brokerage account and invest that money across a handful of diversified index funds. Rebalance those investments every quarter. The hard part is coming up with $3,500 each month; this is where your budget comes in.\",\n \"I live in one of the highest cost of living areas in my country. For the cost of less than half the down payment my spouse and I have saved up for a house we could easily buy a home in most of the lower cost of living areas (and several homes in, say, Detroit). As for the rest of your question, though, we've chosen not to live that way. Because, like all high cost of living areas, ours is near a city there are more free and inexpensive things to do than you would think at first. While others in our area think a great time is pre-gaming drinks at a nice bar, an expensive restaurant, then some more drinks we've taught ourselves how to make great meals from scratch using sale and inexpensive ingredients from the grocery store and often do that on weekends, topped off by a movie from the redbox that we promptly return the next day. We have chosen friends who will hang out with us over potluck dinners and board games instead of out on the town. On weekend days we visit free museums, do hikes, wander around revitalized downtown strips, or play at the local parks. Our groceries, as I mentioned, are sale items or use coupons and we go for less expensive meats and produce. We visit our local farmer's market for fun, not to buy the expensive produce. We might find ourselves wandering through the mall to window shop, but when it comes time to actually buy clothing or goods for the apartment we shop around for up to months to find a good deal. Plenty of our friends have money enough to spend, and the most debt they are usually wallowing in is a big car payment, no consumer debt. At the same time I have trouble imagining some of them buying a house any time soon, because they simply can't be saving all that much (since I know their incomes). They may eventually be able to afford a condo and ride rising housing prices to a townhome and then a house - it's what lots of people do around here, loosing buckets money in realtor fees and closing costs along the way. Even with these choices, it's hard to view my friends as selfish knowing that most of them give around 10% of their income to charity. There are probably plenty of people around here swimming in debt (somebody recently asked in a Q&A with the local paper editors how she could stop going to the city's most expensive restaurants and start living within her means when she only liked expensive places), but lots of folks can stretch themselves and afford to get by while wasting a lot of money. It's not what my spouse and I have chosen to do, because we want to be able to live very responsibly and plan for a rainy day, but the longer you live with and around the money that tends to permeate high cost of living areas, the more it will seem normal to you. Also, if it's really $1000/mo for a 2 br. apartment, your cost of living is still lower than mine is. If I were you I wouldn't try to acclimate myself to the spendy habits of your surroundings. Instead I'd find friends who are frugal and work on maintaining your good financial habits. If you ever want one of those $4, $5, or $6K (plus!) houses, you're going to need them.\",\n \"To answer your question, Retirement Revolution may fit the bill to some extent. I'd also like to address some of the indirect assumptions that were made in your bullet points. I'm convinced that the best way to overcome this is not simply to hold down a good job with COLAs every year, max out your IRA accounts and 401(k)s, invest another 10-20% on top, and live off of the savings and whatever Social Security decides to pay you. Instead, the trick is to not retire -- to make a transition into an income-producing activity that can be done in the typical retirement years, hopefully one that is closer to one's calling (i.e., more fulfilling). This takes time, not money. If people just shut off the TV and spent the time building up a side business that has a high passive component, they'd stand a much better chance of not outliving their money.\",\n \">Hourly rates aside Really? The guy who defines success by the $ they make doesn't want to compare hourly rates? Ok, let's compare standard of living. My buddy lives in Thailand at the moment. He travels around but has been there about 6 months. He has a passive income of $55k derived from rental units here in the US, his blog, and online business. He works about 5 hours a week. He rents a beach house for $450/month and his expenses are about $20/day to live quite well eating out every meal, working out, etc. That $55k is about 15x the local median wage. Your $500k in the US is about 10x the average wage in the US and if you live in an expensive city like NYC, DC, or SF then it's much less. You work 80 hours a week and he works 5 and has a higher relative standard of living. Who is more succesful? >I'd rather have the half mill annually I'm sorry you never learned that we should work to live, not live to work. Its truly sad.\",\n \"Sure! Started working since I was 12, used that money to buy a car, and was working full time starting at 15 years old. By 17 had two full time jobs and banked all that money, besides buying a car. At 18 fulfilled my dream and was hired as a police officer. Did the academy for 6 months, saving all of that money to buy a trailer to live in for cheap. Max out pay for my department was 5 years, so by 23 years old I was making 68,000 a year. With overtime and details included( I basically worked anytime I could, 8 hour shift with either an 8 hour detail or double shift) usually kept one day off, working my other day off. My take home for the year after taxes was somewhere around 90k give or take, with my living expenses barely passing 25k a year. Banked all that money for years. When I hit 25ish I got together with my now wife, also an officer making the same amount. She also received about 300k from a settlement. So with both of our salaries plus money invested since I was about 14, annual take home was about 200k. Saved for 2 more years and at 28, used the 300k to buy a house and pay off any vehicles and credit card debt. Paid cash for the house so no mortgage, no car payments, just utilities and taxes for the year. With the budget set we were able to retire living just like we were. There is a lot more to it but that's the quick summary!\",\n \"\\\"It all depends on what your financial goals are when you are ready. You sound like you could be ready today if you wanted to be. The steps that I would take are. Create a monthly draft budget. This doesn't have to be something hard and fast, just a gague of what your living expenses would be compared to your after-tax salary. Make sure there would be room for \\\"\\\"fun\\\"\\\" money. a. Consider adding a new car fund line item to this budget, and deducting that amount from your paycheck starting now so that you can save for the car. Based on the most realistic estimate that you can make, you'll get a good idea if you want to spend the money it takes to move out alone now or later. You'll also see the price for various levels of rentals in your area (renting a single family home, townhouse, condo, apartment, living in a rented room or basement, sharing a place with friends, etc) and know some of the costs of setting up for yourself. Since you're looking at the real estate market, you may want to do a cost comparison of renting versus buying. I've found the New York Times interactive graphic on this is excellent. If you are looking to buy, make sure to research the hidden costs of buying thoroughly before taking this step. To answer your last question, if you have the cash you should consider upping your 401K investment (or using Roth or regular IRA). Make sure you are investing enough to get your full employer match, if your employer offers one, and then get as close as you can to government maximum contribution limits. Compound interest is a big deal when you are 23.\\\"\",\n \"Consider a single person with a net worth of N where N is between one and ten million dollars. has no source of income other than his investments How much dividends and interest do your investments return every year? At 5%, a US$10M investment returns $500K/annum. Assuming you have no tax shelters, you'd pay about $50% (fed and state) income tax. https://budgeting.thenest.com/much-income-should-spent-mortgage-10138.html A prudent income multiplier for home ownership is 3x gross income. Thus, you should be able to comfortably afford a $1.5M house. Of course, huge CC debt load, ginormous property taxes and the (full) 5 car garage needed to maintain your status with the Joneses will rapidly eat into that $500K.\",\n \"\\\"I would suggest you do three things: If you do all three of these, the time will come when \\\"\\\"2 months off to go to Italy this winter and ride bikes through wine country\\\"\\\" is something you both want to do, can afford to do, and have arranged your lives to make it feasible. Or whatever wow-cool thing you might dream of. Buying a vacation property. Renovating an old house. The time may also come when you can take a chance on no income for 6 months to start a business that will give you more flexibility about when and where you work. Or when you can switch from working for a pay cheque to volunteering somewhere all day every day. You (as a couple) will have the freedom to make those kinds of decisions if you have that safety net of long term savings, as long as you also have a strong and happy relationship because you didn't spend 40 years arguing about money and whether or not you can afford things.\\\"\",\n \"You could easily move to Nashville TN. Enough jobs, low cost of living and high median wages. But no you insist on living in all of these trendy places and complain life is so hard and expensive. You americans really don't understand how fucking entitled you are. If you have ever endured poverty you'd understand what I'm talking about. But you insist that a life without traveling and smartphones is miserable. You americans are nothing but a bunch of privileged pigs. The sooner the likes like you die off the better. America should be in the hands of those willing to work and look for opportunities, not for those waiting to get them handed.\",\n \"\\\"For what it's worth, the distribution I'm currently using is roughly ... with about 2/3 of the money sitting in my 401(k). I should note that this is actually considered a moderately aggressive position. I need to phone my advisor (NOT a broker, so they aren't biased toward things which are more profitable for them) and check whether I've gotten close enough to retirement that I should readjust those numbers. Could I do better? Maybe, at higher risk and higher fees that would be likely to eat most of the improved returns. Or by spending far more time micromanaging my money than I have any interest in. I've validated this distribution using the various stochastic models and it seems to work well enough that I'm generally content with it. (As I noted in a comment elsewhere, many of us will want to get up into this range before we retire -- I figure that if I hit $1.8M I can probably sustain my lifestyle solely on the income, despite expected inflation, and thus be safely covered for life -- so this isn't all that huge a chunk of cash by today's standards. Cue Daffy Duck: \\\"\\\"I'm rich! I'm wealthy! I'm comfortably well off!\\\"\\\" -- $2M, these days, is \\\"\\\"comfortably well off.\\\"\\\")\\\"\",\n \"Two to three years? That is one long gestation period! :^) Welcome. Congratulations on taking savings into your own hands, you are a winner for taking responsibility for your, and your family's life. If I was you my first priority would be to pay off your car and never buy one on time again. Or you could sell it and buy something with cash if that would be easier. It is tremendous that you are thinking and planning. You are already ahead of most people. Are you working on your basement as you have time/money like when work might be slow? If so great idea.\",\n \"Or you could flip houses. i'm not sure where you live but hwere im from its not uncommon to buy a house for 5k or a duplex for 8k. put about 4k into it and charge about 600 rent. or put 4k into the 8k, thats 12k sell it for 20. if it takes a year that's a 66% return on your investment in one year. and its small risk. also, if it doesnt sell, youre still renting it out with month to month or 3-6 month leases.\",\n \"Wow! First, congratulations! You are both making great money. You should be able to reach your goals. Are we on the right track ? Are we doing any mistakes which we could have avoided ? Please advice if there is something that we should focus more into ! I would prioritize as follows: Get on the same page. My first red flag is that you are listing your assets separately. You and your wife own property together and are raising your daughter together. The first thing is to both be on the same page with your combined income and assets. This is critical. Set specific goals for the future. Dreaming and big-picture life planning will be the foundation for building a detailed plan for reaching your goals. You will see more progress with more sacrifice. If you both are not equally excited about the goals, you will not both be equally willing to sacrifice lifestyle now. You have the income now to be able to set yourselves up to do whatever you want in 10 years, if you can agree on what you want. Hire a financial planner you trust. Interview people, ask someone who is where you want to be in 10 years. You need someone with experience that can guide you through these questions and understands how to manage your income stream. Start saving for retirement in tax-advantaged accounts. This should be as much as 10%-15% of your income combined, so $30k-$45k per year. You need to start diversifying your investments. Real estate is great, but I would never recommend it as this large a percentage of net worth. Start saving for your child's education. Hard to say what you need here, since I don't know your goals. A financial planner should assist you with this. Get rid of your debt. Out of your $2.1M of rental real estate and land, you have $1.4M of debt. It will be difficult to start a business with that much additional debt. It will also put stress on your retirement that you don't need. You are taking on lots of risk here. I would sell all but maybe one of the properties and let it cash flow. This will free up cash to start investing for retirement or future business too. Buy more rental in the future with cash only. You have plenty of income to do it this way, and you will be setting yourself up for a great future. At this point you can continue to pile funds into any/all your investments, with the goal of using the funds to start a business or to live on. If all your investments are tied up in real estate, you wont have anything to draw on if needed for a business opportunity. You need to weigh this out in your goal and planning. What should we do to prepare for a comfortable retirement and safety You cannot plan for or see all scenarios. However, good planning will give you more options and more choices. Investing driven by fear will set you up for failure. Spend less than you make. Be patient. Be generous. Cheers!\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["\"So my read on the question is \"\"How do I invest 300k such that it earns me a 'living wage' without the ongoing grind inherent in most formal employment?\"\" Reading the other answers to date it looks like most of them are thinking in terms of investment accounts and trying to live off of the earnings from such. I wanted to throw out a couple of alternative choices that may be worth considering... The first is real-estate investing. $300k should allow you to pick up 2 or 3 single family dwellings with little or no mortgage. Turning them into rentals placed with a good property management company should easily pay their expenses and provide a consistent income with minimal effort/attention from you. Similar story with buying into multifamily housing or commercial real-estate. Your key concern here is picking the right market in which to buy and finding a reputable manager to handle the day to day issues on your behalf. Note that you are not overly concerned with the potential resale value of the property(s), but the probable rental income they can generate, these are separate concerns that may not align with each other. Second is buying/founding a business that has a general manager other than yourself. Franchise ownership may be a potential option for you under the circumstances. The key concern here is picking the business, location, and manager that make you comfortable in terms of the risk involved. You need the place to make enough money to pay for itself and the salary of everyone working there, with enough left over for you to live on. Sounds easy enough, but not so much in practice. Generally you can expect at least a few years of being hands on and watching things very closely to make sure it is going the way you want it to. Finding a mentor who has done this type of transition before to walk you through it would be strongly advised. So would preparing yourself for a failure or two before you work out the exact combination of factors that work for you.\"","\"The title of your question is quite different then the content. The term \"\"Rat Race\"\" was coined in the 70's and refers to the endless cycle of working hard to consume more. Fortunately it is very easy not to participate in the cycle and probably will lead to more happiness. Just because one \"\"works\"\" does not mean they are participating in the \"\"rat race\"\", and I would recommend the following: When I think of \"\"rat race\"\" I picture a a bumper-to-bumper freeway of people struggling to get to work. For others it might be different, but that kind of rat race is easily avoided by the multitude of remote work opportunities. Some jobs allow you to work anywhere in the world. Avoiding the rugged consumerism also helps avoid the feelings of being a rat on the wheel. Sure one can like nice things, but do we have to have everything that Madison Ave is trying to sell us? No. Pick some nice things and pay cash. Debt, especially consumer debt, causes a person (in effect) to work for a bank. Avoiding debt will remove those feelings. Saving and investing also helps avoid those feelings. There is profound satisfaction in watching ones account balances grow. Once you see that your investment earnings can outpace your expenses, and then your salary you really feel like you are getting ahead. Above all else giving is a paramount and often overlooked part of a person's financial life. It causes one to be humble and recognize that most people, in this world, are less fortunate that us. It avoids runaway provide that justifies purchases that we cannot afford. So yea you can avoid the \"\"Rat Race\"\" and still work.\"","\"An endowment is a large chunk of capital (i.e. money) held by a university or other nonprofit. It is meant to hold its value forever against inflation, and invested to generate income: from interest, dividends and appreciation. They seem like a contradiction: closely scrutinized by Boards of Directors, managed to a high and accountable standard, closely regulated -- and yet, invested aggressively for growth: ignoring short-term volatility to get the highest growth long-term. The law, UPMIFA (P for Prudent), requires growth investment, and says taking up to 7% of current value per year is prudent, even in down times when total value is shrinking. On average, this lets the endowment grow with inflation. 7% is the high end of \"\"prudent\"\". An endowment is watched, and the taken income is adjusted to keep the endowment healthy. 5% is very safe, assuming the endowment must pace inflation until the heat death of the universe. If you plan to die someday, drawing an extra 1-2% is appropriate. There you go. Invest like a university endowment, and count on up to 7% per year of income. That's $21,000 a year. There'll be taxes, but the long-term capital gain rate at $21,000/year is pretty low. That's pretty tight, but possible if your idea of entertaining is Netflix. It would work very effectively for #VanLife, or the British version, living on a Narrowboat.\"","Even with a good investment strategy, you cannot expect more than 8-10% per year in average. Reducing this by a 3% inflation ratio leaves you with 5 - 7%, which means 15k$ - 21k$. Consider seriously if you could live from that amount as annual income, longterm. If you think so, there is a second hurdle - the words in average. A good year could increase your capital a bit, but a bad year can devastate it, and you would not have the time to wait for the good years to average it out. For example, if your second year gives you a 10% loss, and you still draw 15k$ (and inflation eats another 3%), you have only 247k$ left effectively, and future years will have to go with 12k$ - 17k$. Imagine a second bad year. As a consequence, you either need to be prepared to go back to work in that situation (tough after being without job for years), or you can live on less to begin with: if you can make it on 10k$ to begin with (and do, even in good years), you have a pretty good chance to get through your life with it. Note that 'make it with x' always includes taxes, health care, etc. - nothing is free. I think it's possible, as people live on 10k$ a year. But you need to be sure you can trust yourself to stay within the limit and not give in and spent more - not easy for many people.","\"the short answer: yes. The long answer depends on what you mean by modest living. As others have noted, living off a $300k principle involves risks, but the entire future has risk. By \"\"getting out of the rat race\"\" I hope you don't mean become a slug on the couch. Peruse mr. Money Mustache at https://www.mrmoneymustache.com/. One can live very frugally yet very well in some parts of the US.\"","\"Consider buying a legal \"\"mother daughter\"\" property, rent out the top part, and live in the \"\"mother\"\" component.\""],"string":"[\n \"\\\"So my read on the question is \\\"\\\"How do I invest 300k such that it earns me a 'living wage' without the ongoing grind inherent in most formal employment?\\\"\\\" Reading the other answers to date it looks like most of them are thinking in terms of investment accounts and trying to live off of the earnings from such. I wanted to throw out a couple of alternative choices that may be worth considering... The first is real-estate investing. $300k should allow you to pick up 2 or 3 single family dwellings with little or no mortgage. Turning them into rentals placed with a good property management company should easily pay their expenses and provide a consistent income with minimal effort/attention from you. Similar story with buying into multifamily housing or commercial real-estate. Your key concern here is picking the right market in which to buy and finding a reputable manager to handle the day to day issues on your behalf. Note that you are not overly concerned with the potential resale value of the property(s), but the probable rental income they can generate, these are separate concerns that may not align with each other. Second is buying/founding a business that has a general manager other than yourself. Franchise ownership may be a potential option for you under the circumstances. The key concern here is picking the business, location, and manager that make you comfortable in terms of the risk involved. You need the place to make enough money to pay for itself and the salary of everyone working there, with enough left over for you to live on. Sounds easy enough, but not so much in practice. Generally you can expect at least a few years of being hands on and watching things very closely to make sure it is going the way you want it to. Finding a mentor who has done this type of transition before to walk you through it would be strongly advised. So would preparing yourself for a failure or two before you work out the exact combination of factors that work for you.\\\"\",\n \"\\\"The title of your question is quite different then the content. The term \\\"\\\"Rat Race\\\"\\\" was coined in the 70's and refers to the endless cycle of working hard to consume more. Fortunately it is very easy not to participate in the cycle and probably will lead to more happiness. Just because one \\\"\\\"works\\\"\\\" does not mean they are participating in the \\\"\\\"rat race\\\"\\\", and I would recommend the following: When I think of \\\"\\\"rat race\\\"\\\" I picture a a bumper-to-bumper freeway of people struggling to get to work. For others it might be different, but that kind of rat race is easily avoided by the multitude of remote work opportunities. Some jobs allow you to work anywhere in the world. Avoiding the rugged consumerism also helps avoid the feelings of being a rat on the wheel. Sure one can like nice things, but do we have to have everything that Madison Ave is trying to sell us? No. Pick some nice things and pay cash. Debt, especially consumer debt, causes a person (in effect) to work for a bank. Avoiding debt will remove those feelings. Saving and investing also helps avoid those feelings. There is profound satisfaction in watching ones account balances grow. Once you see that your investment earnings can outpace your expenses, and then your salary you really feel like you are getting ahead. Above all else giving is a paramount and often overlooked part of a person's financial life. It causes one to be humble and recognize that most people, in this world, are less fortunate that us. It avoids runaway provide that justifies purchases that we cannot afford. So yea you can avoid the \\\"\\\"Rat Race\\\"\\\" and still work.\\\"\",\n \"\\\"An endowment is a large chunk of capital (i.e. money) held by a university or other nonprofit. It is meant to hold its value forever against inflation, and invested to generate income: from interest, dividends and appreciation. They seem like a contradiction: closely scrutinized by Boards of Directors, managed to a high and accountable standard, closely regulated -- and yet, invested aggressively for growth: ignoring short-term volatility to get the highest growth long-term. The law, UPMIFA (P for Prudent), requires growth investment, and says taking up to 7% of current value per year is prudent, even in down times when total value is shrinking. On average, this lets the endowment grow with inflation. 7% is the high end of \\\"\\\"prudent\\\"\\\". An endowment is watched, and the taken income is adjusted to keep the endowment healthy. 5% is very safe, assuming the endowment must pace inflation until the heat death of the universe. If you plan to die someday, drawing an extra 1-2% is appropriate. There you go. Invest like a university endowment, and count on up to 7% per year of income. That's $21,000 a year. There'll be taxes, but the long-term capital gain rate at $21,000/year is pretty low. That's pretty tight, but possible if your idea of entertaining is Netflix. It would work very effectively for #VanLife, or the British version, living on a Narrowboat.\\\"\",\n \"Even with a good investment strategy, you cannot expect more than 8-10% per year in average. Reducing this by a 3% inflation ratio leaves you with 5 - 7%, which means 15k$ - 21k$. Consider seriously if you could live from that amount as annual income, longterm. If you think so, there is a second hurdle - the words in average. A good year could increase your capital a bit, but a bad year can devastate it, and you would not have the time to wait for the good years to average it out. For example, if your second year gives you a 10% loss, and you still draw 15k$ (and inflation eats another 3%), you have only 247k$ left effectively, and future years will have to go with 12k$ - 17k$. Imagine a second bad year. As a consequence, you either need to be prepared to go back to work in that situation (tough after being without job for years), or you can live on less to begin with: if you can make it on 10k$ to begin with (and do, even in good years), you have a pretty good chance to get through your life with it. Note that 'make it with x' always includes taxes, health care, etc. - nothing is free. I think it's possible, as people live on 10k$ a year. But you need to be sure you can trust yourself to stay within the limit and not give in and spent more - not easy for many people.\",\n \"\\\"the short answer: yes. The long answer depends on what you mean by modest living. As others have noted, living off a $300k principle involves risks, but the entire future has risk. By \\\"\\\"getting out of the rat race\\\"\\\" I hope you don't mean become a slug on the couch. Peruse mr. Money Mustache at https://www.mrmoneymustache.com/. One can live very frugally yet very well in some parts of the US.\\\"\",\n \"\\\"Consider buying a legal \\\"\\\"mother daughter\\\"\\\" property, rent out the top part, and live in the \\\"\\\"mother\\\"\\\" component.\\\"\"\n]","isConversational":false}}},{"rowIdx":83,"cells":{"_id":{"kind":"string","value":"9961"},"query":{"kind":"string","value":"Employer rollover from 403b to 401k?"},"gt_ids":{"kind":"list like","value":["21311"],"string":"[\n \"21311\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1],"string":"[\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["104134","529845","387876","72402","89202","217661","63532","192627","510615","183856","21311","551545","335991","168890","361037","272789","122114","399917","490867","195687","516777","74583","217310","323464","179606","581973","291578","224434","329497","67220","392894","355373","308380","92941","526271","8276","127664","357555","553576","217557","352757","4181","426189","195366","528522","125973","456526","424766","577837","64459","13275","42537","119883","475748","567255","505943","398520","111603","483268","262322","226547","344526","231928","99921","254280","401498","187975","244084","24404","591168","482121","117158","599790","495062","175252","388028","470267","34959","372474","61153","518379","332605","567410","304780","348090","468841","385251","149004","266173","6471","134187","302619","79888","555821","292937","267825","388021","463007","129784","547218"],"string":"[\n \"104134\",\n \"529845\",\n \"387876\",\n \"72402\",\n \"89202\",\n \"217661\",\n \"63532\",\n \"192627\",\n \"510615\",\n \"183856\",\n \"21311\",\n \"551545\",\n \"335991\",\n \"168890\",\n \"361037\",\n \"272789\",\n \"122114\",\n \"399917\",\n \"490867\",\n \"195687\",\n \"516777\",\n \"74583\",\n \"217310\",\n \"323464\",\n \"179606\",\n \"581973\",\n \"291578\",\n \"224434\",\n \"329497\",\n \"67220\",\n \"392894\",\n \"355373\",\n \"308380\",\n \"92941\",\n \"526271\",\n \"8276\",\n \"127664\",\n \"357555\",\n \"553576\",\n \"217557\",\n \"352757\",\n \"4181\",\n \"426189\",\n \"195366\",\n \"528522\",\n \"125973\",\n \"456526\",\n \"424766\",\n \"577837\",\n \"64459\",\n \"13275\",\n \"42537\",\n \"119883\",\n \"475748\",\n \"567255\",\n \"505943\",\n \"398520\",\n \"111603\",\n \"483268\",\n \"262322\",\n \"226547\",\n \"344526\",\n \"231928\",\n \"99921\",\n \"254280\",\n \"401498\",\n \"187975\",\n \"244084\",\n \"24404\",\n \"591168\",\n \"482121\",\n \"117158\",\n \"599790\",\n \"495062\",\n \"175252\",\n \"388028\",\n \"470267\",\n \"34959\",\n \"372474\",\n \"61153\",\n \"518379\",\n \"332605\",\n \"567410\",\n \"304780\",\n \"348090\",\n \"468841\",\n \"385251\",\n \"149004\",\n \"266173\",\n \"6471\",\n \"134187\",\n \"302619\",\n \"79888\",\n \"555821\",\n \"292937\",\n \"267825\",\n \"388021\",\n \"463007\",\n \"129784\",\n \"547218\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["\"You can move money from a 403b to a 401k plan, but the question you should ask yourself is whether it is a wise decision. Unless there are specific reasons for wanting to invest in your new employer's 401k (e.g. you can buy your employer's stock at discounted rates within the 401k, and this is a good investment according to your friends, neighbors, and brothers-in-law), you would be much better off moving the 403b money into an IRA, where you have many more choices for investment and usually can manage to find investments with lower investment costs (e.g. mutual fund fees) than in a typical employer's 401k plan. On the other hand, 401k assets are better protected than IRA assets in case you are sued and a court finds you to be liable for damages; the plaintiff cannot come after the 401k assets if you cannot pay. To answer the question of \"\"how?\"\", you need to talk to the HR people at your current employer to make sure that they are willing to accept a roll-over from another tax-deferred plan (not all plans are agreeable to do this) and get any paperwork from them, especially making sure that you find out where the check is to be sent, and to whom it should be payable. Then, talk to your previous employer's HR people and tell them that you want to roll over your 403b money into the 401k plan of your new employer, fill out the paperwork, make sure they know to whom to cut the check to, and where it is to be sent etc. In my personal experience, I was sent the check payable to the custodian of my new (IRA) account, and I had to send it on to the custodian; my 403b people refused to send the check directly to the new custodian. The following January, you will receive a 1099-R form from your 403b plan showing the amount transferred to the new custodian, with hopefully the correct code letter indicating that the money was rolled over into another tax-deferred account.\"","Everything here is yours and can be rolled into your new plan or IRA. You can generally move your 403(b) assets into your traditional IRA or into your new employer's plans, assuming your new employer's plan allowing incoming roll overs. You can probably roll your pension out as well. Actually, the right person to ask about this is the company with whom you have your IRA. The easiest and best way to get assets from one tax-sheltered account to another is by contacting the company you want to roll INTO and having them take care of everything for you.","You need to check with your employer. It is called an in-service rollover and it is up to your employer on whether or not it is allowed. There are a lot of articles on it but I would still talk to a professional before making the decision. And there are some new laws in place that put at least some responsibility on your employer to provide a 401k with reasonable options and fees. http://www.latimes.com/business/la-fi-court-edison-401k-fees-20150519-story.html We'll see if it has legs.","No, the situation is not different, the roll-over rules are the same. It won't be taxable (as opposed to traditional to Roth roll-over), but other than that it's the same. Whether the 401k allows rolling over or not while you're still employed - you have to check with the plan administrator (ask your payroll/HR for details). Usually, the deferred compensation cannot be rolled over out of the 401k while you're still employed.","For this rollover, there are no restrictions of age/income/etc. You need to know - the transfer must be direct, i.e. if you get a physical check, it should be payable not to you, but to the new custodian (broker) for your benefit. Direct is preferable and faster. The assets may not be transferable 'in kind.' This phrase simply means that you may move the value, but if the assets are not shares that are held by the public, but special 401(k) class shares, they must be liquidated before moving, and moved as cash. This is a risk people with large accounts take should the market move dramatically during the time they are liquidated, and why, for them, I suggest doing it piecemeal.","No that is not a rollover. Many employees have experienced a change of management companies. Sometimes these switches are due to a merger, an acquisition, or just to save money. It is understandable that the old employer would like to see you transfer your funds to either your new employer, or roll them over into a IRA/Roth IRA. So it is not unexpected that they will take this opportunity to nudge you. The thing that congress was trying to prevent were serial rollovers of IRAs. These people would use the 60 day window to have in essence a loan. Some would do this multiple times a year; always making sure they replaced the money in time. The IRA One-Rollover-Per-Year Rule Beginning in 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own (Announcement 2014-15 and Announcement 2014-32). The limit will apply by aggregating all of an individual’s IRAs, including SEP and SIMPLE IRAs as well as traditional and Roth IRAs, effectively treating them as one IRA for purposes of the limit. Direct transfers of IRA money are not limited This change won’t affect your ability to transfer funds from one IRA trustee directly to another, because this type of transfer isn’t a rollover (Revenue Ruling 78-406, 1978-2 C.B. 157). The one-rollover-per-year rule of Internal Revenue Code Section 408(d)(3)(B) applies only to rollovers. Note that the law doesn't mention 401K/403B or the federal TSP. When the 401K changes management companies that is not a rollover.","You cannot roll over your 401k money in an employer's 401k plan into an IRA (of any kind) while you are still employed by that employer. The only way you can start on the conversion before you retire (as Craig W suggests) is to change employers and start rolling over money in the previous employer's 401k into your Roth IRA while possibly contributing to the 401k plan of your new employer. Since the amount rolled over is extra taxable income (that is, in addition to your wages from your new job), you may end up paying more tax (or at higher rates) than you expect.","You can't roll it over to a Roth IRA without tax penalties. The best thing to do is roll it to an IRA that isn't tied to work at all. Second best is to roll it into your new employer's 401k. The reason that an IRA makes sense is that it gives you the same tax savings as a 401k, but it allows you to remain in control of the money regardless of your employment status.","Adding to justkt's answer. The big difference to you during the rollover is that moving the money to a Roth IRA, unless it was a Roth 401K, is going to require you pay a lot of taxes on the money you move. I'd suggest not doing that without guidance from a financial advisor.","Once you roll the money from the 401K into a rollover IRA don't mix it with new funds. The money from the 401K will be treated differently depending on if the funds are pre-tax, post-tax, Roth, or matching. (Yes, Post-tax and Roth are not the same thing). In the future an employer may allow you to roll IRA or 401K money into their program. They don't have to allow it, and they can put restrictions on the types of money they will accept.","\"403b plans are used by school districts, colleges and universities, nonprofit hospitals, charitable foundations and the like for their employees while 401k plans are used by most everybody else. I would suspect that a school district etc can use a 401k plan instead of a 403b plan if it chooses to do so, but the reverse direction is most likely forbidden: a (for-profit) company cannot use a 403b plan. One difference between a 403b plan and a 401k plan is that the employer can choose to offer, and the employee can choose to purchase, stock in the company inside the 401k plan. This option obviously is not available to charities etc. which don't issue stock. Your comment that the 403b plan invests solely in (variable) annuities suggests that the plan administrator is an insurance company and that the employer is moving to more \"\"modern\"\" version that allows investments in mutual funds and the like. Forty years ago, my 403b plan was like that; the only investment choice was an annuity, but some time in the 1980s, the investment choices were broadened to include mutual funds (possibly because the 1986 Tax Reform Act changed the rules governing 403b plans). So, are you sure that your employer is changing from a 403b plan to a 401k plan, or is it just a change of 403b plan administrator from the insurance company to another administrator who offers investment choices other than an annuity? Note, of course, that insurance companies have changed their options too. For example, TIAA (the Teachers' Insurance and Annuity Association) which was the 403b plan administrator for many schools and colleges became TIAA/CREF (College Retirement Equities Fund) where the CREF mutual funds actually were pretty good investments.\"","401(k)'s can be rolled over into IRAs. You can roll all of your former company 401(k)'s into a single IRA, managed by whatever company you like. Many employers will not let you transfer money out of your 401(k) while you're still a current employee, though, so you may be stuck with the 401(k) used by your current company until you leave. You'll have to check with your 401(k) administrator to be sure. You won't incur any taxes as long as you execute the rollovers properly. The best way to do it is to coordinate the transfer directly between your old 401(k) and your new IRA, so the check is never sent directly to you.","I would always suggest rolling over 401(k) plans to traditional IRAs when possible. Particularly, assuming there is enough money in them that you can get a fee-free account at somewhere like Fidelity or Vanguard. This is for a couple of reasons. First off, it opens up your investment choices significantly and can allow you significantly reduced expenses related to the account. You may be able to find a superior offering from Vanguard or Fidelity to what your employer's 401(k) plan allows; typically they only allow a small selection of funds to choose from. You also may be able to reduce the overhead fees, as many 401(k) plans charge you an administrative fee for being in the plan separate from the funds' costs. Second, it allows you to condense 401(k)s over time; each time you change employers, you can rollover your 401(k) to your regular IRA and not have to deal with a bunch of different accounts with different passwords and such. Even if they're all at the same provider, odds are you will have to use separate accounts. Third, it avoids issues if your employer goes out of business. While 401(k) plans are generally fully funded (particularly for former employers who you don't have match or vesting concerns with), it can be a pain sometimes when the plan is terminated to access your funds - they may be locked for months while the bankruptcy court works things out. Finally, employers sometimes make it expensive for you to stay in - particularly if you do have a very small amount. Don't assume you're allowed to stay in the former employer's 401(k) plan fee-free; the plan will have specific instructions for what to do if you change employers, and it may include being required to leave the plan - or more often, it could increase the fees associated with the plan if you stay in. Getting out sometimes will save you significantly, even with a low-cost plan.","Companies usually have a minimum account balance required to keep a 401k for former employees. You will have to check whether $10k is sufficient to keep your funds in your former employer's 401k. If you are below their threshold, you will have to move your money. One option is to rollover into the new employer's 401k. You can rollover a 401k into a traditional IRA account that is independent of your employer. A traditional IRA has the same tax benefits as a 401k; it grows tax-free until you withdraw money from the account. Companies that offer IRAs include Vanguard, Fidelity, TIAA. Many companies have significant overhead costs in the their 401k management. It may be better for you to rollover your money into an IRA to save on these costs. I am not knowledgeable about loaning from retirement accounts, so I cannot help with that.","When you pick a company for your IRA, they should have information about rolling over funds from another IRA or a 401K. They will be able to walk you through the process. There shouldn't be a fee for doing this. They want your money to be invested in their funds. Once your money is in their hands they are able to generate their profits. You will want to do a direct transfer. Some employers will work with the investment companies and send the funds directly to the IRA. Others will insist on sending a check to you. The company that will have your IRA should give you exact specifications for the check so that you won't have to cash it. The check will be payable to you or the IRA account. The IRA company will have all the details. Decide if you will be converting non-Roth to Roth, before doing the rollover.","For reporting purposes, most IRA firms prefer that you roll the 401(k) funds into a Rollover or Traditional IRA and then convert to the ROTH from there. The mid-air conversions (401(k) directly into a ROTH) can get tricky when you go to do your taxes the following year if the 1099 form from the releasing custodian and the 5498 form from the accepting custodian have different numbers due to the conversion amount and taxes withheld if any.","\"Good question. And it depends a bit on your current plan, your future income, and the plan you are moving too. Mostly you want to roll out of your existing 401K. There will likely be a fee, and your investment choices are limited. You will want to do a direct transfer, and going with a quality company such as Fidelity or Vanguard. Both of those have zero fees for accounts and pretty good customer service. However, if your future income is likely to be high there is something else to consider. If you are over the limits do a ROTH, and are considering doing a \"\"Backdoor ROTH\"\" a key success for this strategy is keeping your roll over IRA balance low (or zero). So you may want to either leave the 401K where it is, or roll it to your new 401K plan. In that case you will have to call the two 401K custodians, and select the best choice as far as fees and fund choice.\"","Every plan administrator has their own procedures for rollovers. In any case, you would start by browsing their website or calling them seeking information on rollover. You will need to arrange it with both your current and prior administrators. Usually the administrator will send the money directly to your current plan provider, keeping you out of the chain and minimizing any risks of tax complications. It may happen, though, that they have to send the check to you. In that case you will have a limited amount of time to provide it to your current plan.","Having gone though this type of event a few times it won't be a problem. On a specific date they will freeze your accounts. Then they will transfer the funds from custodian X to custodian Y. It should only take a day or two, and they will work it around the paydays so that by the time the next paycheck is released everything is established in the new custodian. Long before the switch over they will announce the investment options in the new company. They will provide descriptions of the options, and a default mapping: S&P 500 old company to S&P 500 new company, International fund old company to international fund new company... If you do nothing then on the switchover they will execute the mapped switches. If you want to take this an an opportunity to rebalance, you can make the changes to the funds you invest in prior to the switch or after the switch. How you contributions are invested will follow the same mapping rules, but the percentage of income won't change. Again you can change how you want to invest your contributions or matching funds by altering the contribution forms, but if you don't do anything they will just follow the mapping procedures they have defined. Loans terms shouldn't change. Company stock will not be impacted. The only hiccup that I would worry about is if the old custodian had a way for you to transfer funds into any fund in their family, or to purchase any individual stock. The question would be does the new custodian have the same options. If you have more questions ask HR or look on the company benefits website. All your funds will be moved to the new company, and none of these transfers will be a taxable event. Edit February 2014: based on this question: What are the laws or rules on 401(k) loans and switching providers? I reviewed the documents for the most recent change (February 2014). The documents from the employer and the new 401K company say: there are no changes to the loan balances, terms, and payment amounts. Although there is a 2 week window when no new loans can be created. All employees received notice 60 days prior to the switchover regarding new investments options, blackout periods.","You could check with the new 401k provider to see if they allow rollover-in contributions. You can likely take the exact amount of the rollover check that was put in the IRA and put it in the new 401k and then take a loan. Loan amount is calculated as 1/2 vested balance less any outstanding loans or $50k, whichever is less. Hopefully this helps...","I rolled mine over from the company I was at into my own brokerage house. You can't roll them into a Roth IRA, so I needed to setup a traditional IRA. There is paperwork your old jobs can provide you. I had to put in some mailing addresses, some account numbers and turn them in. My broker received it, I chose what I wanted to invest it in and that was that. No tax penalty or early withdrawal penalty. The key to avoiding penalties is to have your past employers send the money directly to another retirement fund, not send a check to you.","I agree with harmanjd – best to roll it over to an IRA. Not only does that afford you better control of your money as pointed out already, but: If you choose your IRA provider wisely, you can get an account that provides you with a much wider array of investing choices, including funds and ETFs that charge much lower fees than what you would have had access to in an employer 401(k) plan. But here's one thing to consider first: Do you hold any of your previous employer's stock in your old 401(k)? There are special rules you might want to be aware of. See this article at Marketwatch: If your 401(k) includes your company's stock, a rollover may be a bad move. Additional Resource:","You'll want to roll the 401k over to a specifically designated rollover IRA. Rollover IRAs differ from an ordinary IRA account because they have NO contribution limit per year. Also Rolling over a 401k to a Roth IRA has consequences. There won't be a penalty but you will have to pay taxes on the amount being rolled over. The choice of Roth or Traditional IRA depends on your current tax situation as well as your expected taxes at retirement. Typically if you are in a low tax bracket and expect to be in a higher tax bracket at retirement a Roth IRA is suggested as withdrawals are tax free. With a rollover conversion you will have to evaluate whether paying taxes now outweighs the potential benefits of tax free withdrawals when you retire.","You can do this with no problem. What you want is a direct transfer style of rollover. This is simply where the money is transferred from your 401(k) custodian directly to your new IRA custodian. This will ensure there are no taxes or penalties on the balance. The key is that the money is moving directly to the new account without you having direct access to the balance. This keeps the money out of your hands in the eyes of the IRS. The process should look something like this: A few notes:","If you really want to use the money roll it over to the new companies 401k and then take a 401k loan out for whatever the expense is. (Assuming the retirement plan allows them.) Generally 401k loans are frowned upon for all sorts of reasons however if the alternative is to just flat out withdraw the money it is a slightly better solution.","I've rolled mine over into IRAs, and once you have one rollover account you can roll further 401ks into it-- I've done that.","\"Rolling an old 401k into a new 401k is generally only for ease of management. For example, how many bank accounts do you really want? As long as the funds are reasonably allocated I've found it can be a useful \"\"mind game\"\" to leave it separate. Sometimes it's desirable to ignore an account and let it grow, and it is a nice surprise when finally adding all the account balances together. In other words, I keep thinking I've got X (the amount of my biggest or current 401k), which affects/helps my habits and desire to save. When I add them all together I'm shocked to find out I've got Y (the total of all accounts). Personally, I've had big paperwork problems transferring an old 403b (same type process as 401k) even when I had an adviser helping me move it. In the end it was worth moving it, because I'm having the adviser manage it. I'm actually writing this answer specifically because I recently moved a big 401k into a Traditional IRA. A rep from the brokerage, representing my previous employer, kept calling me to find out how they could help (I didn't brush him off). I found that using an IRA provided me with the opportunity to do self-guided investments in funds or even individual stocks, well beyond the limited selection of the old company's 401k. It was useful/interesting to me to invest in low-fee vehicles such as index funds (ie: the Buffett recommendation), and I'll find some stocks as well. Oh and when the old company 401k has certain funds being discontinued, I didn't want to notice the mandated changes years later. So, I'd suggest you consider management and flexibility of the 401k or equivalent, and any of your special personal circumstances/goals. If you end up with a few retirement accounts, I suggest you use an account aggregating website to see or follow your net worth. I know many who, based on various concerns and their portfolio, find an acceptable website to use.\"","My answer would be yes. In addition, I'm not sure that anything requires you to roll your current 401(k) into a new one if you don't like the investment options. Keeping existing funds in your current 401(k) if you like their investment options might make sense for you (though they obviously wouldn't be adding funds once you're no longer an employee). As for the terms of the potential new 401(k), the matching percentage and vesting schedule match what I've seen at past employers. My current employer offers the same terms, but there's no vesting schedule.","You are right; Rollover is a process, and not an account type; the result is a Traditional IRA. There is no such thing as a 'Rollover IRA Account'. Rolling a 401(k) over to a Traditional IRA makes sense if a) you have to, because you leave the employer the 401(k) is with; b) because you Traditional IRA is cheaper or more flexible or in other ways 'better' for you, or c) if your next step is a backdoor rollover to a Roth IRA. Most of the time, it doesn't make sense, because employer 401(k) are often better and cheaper. Of course, for the investment company where you roll it too, it makes a lot of sense, because they get your money, so they recommend it. But that's only good for them, not for you. Of course you can roll into an existing account, if you want to roll. Making a new account has no advantage. I cannot imagine any IRA custodian wouldn't take rollovers; they would shoot themselves in the foot by that. What can happen - and you should consider this - that your IRA only accepts cash, and does not allow to transfer the shares you have in the 401(k). That means you have to sell and then re-buy, and you might lose a lot in fees there.","rollover funds only mean the funds one was foolish enough to first roll into this 401(k). With no matching, and need for cash, I'd stop depositing to that account. But, from details you gave, you can't withdraw that money.","You can probably roll it over into the new company's 401k too, so just talk to your HR rep there. I set up a separate Vangard IRA so when I changejobs or anything, I just dump my investments into that account and don't have to worry about keep track of them all over the place.","The simplest thing is to transfer to your current account. You'll have the ability to borrow (assuming employer allows) 50% of the balance if you need to, and one less account to worry about. Transferring to an IRA is the other common choice. This offers the ability to convert to a Roth IRA and to invest any way you choose. The 401(k) options may be limited. Without more details, it's tough to decide. For example, if you are in the 15% bracket, the Roth conversion can be a great idea. And the 401(k) might be not so great, just deposit to the match, and then use the IRA. For example.","It depends how you do it. If you roll it from your 401k directly to a Roth then you will have to pay the taxes. The contributions to the 401k are tax deferred. Meaning you do not owe taxes on the money until you collect it. Roth contributions are post tax but the gains are not taxed so long as they are disbursed under acceptable conditions according to the regulations. If you roll it directly from the 401k to a regular tax deferred IRA you should be able to do that with out penalties or taxes. You will still have to pay the taxes at disbursement. If you have the money disbursed to you directly then you will have to pay the penalties, fees, and taxes. Your contributions to an IRA will then be subject to limitations based on the IRA. It will literally be exactly like you are taking money from your pocket to invest in the IRA. Your company should give you the option of a rollover check. This check will be made out to you but it will not be able to be deposited in a regular account or cashed. It will only be redeemable for deposit into a retirement account that meets the regulatory requirements of the 401k rollover criteria. I believe the check I received a few years ago was only good for 60 days. I recall that after 60 days that check was void and I would receive a standard disbursement and would be subject to fees and penalties. I am not sure if that was the policy of T.Rowe Price or if that is part of the regulation.","Former pension/retirement/401(k) administrator here. 1. If you don't want to bother with maintaining your own investments, you can 'roll-over' your existing 401(k) into *your new company's 401(k) plan*. Then you will choose your investments in the new plan, you will be 100% vested in 'rollover account'. 2. If you want control over your own investments (recommended!) you can roll over your existing 401(k) into an IRA (Individual Retirement Account). Then *your entire account* will go into your new IRA. 3. You can take part, or all, of your existing account as cash, paid directly to you. Note that this will trigger *20% mandatory Federal Withholding* on whatever goes straight to you. So some of your money is going to the IRS.","Rather than rolling the 401(k) to a new employer's plan, you should roll it into a traditional IRA. You get more options for the money, there's no limit on how much you can roll over, and you have more control over the money. If you do a direct rollover, there's no taxes or penalties involved. I'd recommend against taking any money out of the 401(k). With the numbers you give above, it's like borrowing money at 31.5% interest, which is pretty high, and you're sacrificing your future retirement. If you leave that money alone to grow with compounding, you'll have a lot more when you retire. If you're not familiar with the concept of compound interest, it's worth reading up on - the numbers will blow you away. At the very least, if you desperately need to get $3000 out of it, take out just enough to net $3000 after taxes and penalties (not quite $4400 using the numbers you give) and do a rollover with the rest. At least that way, you're keeping more in the IRA (just over $8600, vs the $5000 in your proposed scenario). Overall, I really recommend you find a way to accomplish your goals without touching your retirement savings.","No. Your deposits should not have been accepted in the first place. No legit rollover opportunity exists. Related - Can excess 401K contributions returned with 1099-R be rolled over to a Traditional IRA?","\"Your employment status is not 100% clear from the question. Normally, consultants are sole-proprietors or LLC's and are paid with 1099's. They take care of their own taxes, often with schedule C, and they sometimes can but generally do not use \"\"employer\"\" company 401(k). If this is your situation, you can contact any provider you want and set up your own solo 401(k), which will have great investment options and no fees. I do this, through Fidelity. If you are paid with a W2, you are not a consultant. You are an employee and must use your employer's 401(k). Figure out what you are. If you are a consultant, open a solo 401(k) at the provider of your choice. Make sure beforehand that they allow incoming rollovers. Roll all of your previous 401(k)s and IRA's into it. When you have moved your 401(k) to a better provider, you won't be paying any extra fees, but you will not recoup any fees your original provider charged. I'm not sure why you mention a Roth IRA. If you try to roll your 401(k) into a Roth instead of a traditional IRA or 401(k), be aware that you will be taxed on everything you roll. ---- Edit: a little info about IRA's in response to your comment ---- Tax advantaged retirement accounts come in two flavors: one is managed by your company and the money is taken out of your paycheck. This is usually a 401(k) or 403(b). You can contribute up to $18K per year and your company can also contribute to it. The other flavor is an IRA. You can contribute $5,500 per year to this for you and $5,500 for your spouse. These are outside of your company and you make the deposits yourself. You choose your own provider, so competition has driven prices way down. You can have both a 401(k) and an IRA and contribute the max to both (though at high incomes you lose the ability to deduct IRA contributions). These accounts are tax advantaged because you only pay taxes once. With a regular brokerage account, you pay income tax in the year in which you earn money, then you pay tax every year on dividends and any capital gains that have been realized by selling. There are two types of tax-advantaged accounts: Traditional IRA or Traditional 401(k). You do not pay income tax on this money in the year you earn it, nor do you pay capital gains tax. Instead you pay tax only in the year in which you take the money out (in retirement). Roth IRA or Roth 401(k). You do pay income tax on money on this money in the year in which you earn it. But then you don't pay tax on any gains or withdrawals ever again. When you leave your job (and sometimes at other times) you can move your money out of a 401(k) into your IRA, where you can do a better job managing it. You can also move money from your IRA into a 401(k) if your 401(k) provider will allow you to. Whether traditional or Roth is better depends on your tax rate now and your tax rate at retirement. However, if you choose to move money from a traditional account into a Roth account, you must pay tax on it in that year as if it was income because traditional and Roth accounts are taxed at different times. For that reason, if you are just trying to move money out of your 401(k) to save on fees, the logical place to put it is in a traditional IRA. Moving money from a traditional to a Roth may make sense, for example, if your tax rate is temporarily low this year, but that would be a separate decision from the one you are looking at. You can always roll your traditional IRA into a Roth later if that does become the case. Otherwise, there's no reason to think your traditional 401(k) should be rolled into a Roth IRA according to what you have described.\"","If you plan to continue contributing to a 401(k) and are no longer self-employed, then you need to start a new 401(k) at your new business. You can't contribute to the old one any more. About the money in the old one, you have a few options. If both 401(k) plans have good investment options and low fees, then there's little reason to think one of these strategies is better than the other. If, like me, at least one of your 401(k) providers has very few available funds and those funds have high expense ratios, then it's a good idea to move your money where the investments are best. As a rule, IRA's are better than 401(k) plans because most IRA's will allow you to invest in practically anything you want while most 401(k) plans only allow you to invest in the funds that have taken your company's HR people to the best lobster dinners or went to the same school as them. Most organizations do an absolutely horrible job at selecting a reasonable set of funds because the decision-makers generally have no finance background and no incentive to do a good job. For that reason I like IRA's. Of course, some solo 401(k) plans are also very good so just leaving it where it is may be best for you. This has the added advantage of being ready to go if you end up self-employed again at some point.","Don’t do anything that causes taxes or penalties, beyond that it’s entirely personal choice and other posters have already done a great job enumerating then. I recently switched jobs in June and rolled over a 401k from my old company to new company and the third party managing the account at the new company was much more professional and walked me through all the required steps and paperwork.","You generally cant roll funds from a 401k with a company you're still employed with. Some companies allow it depending on the custodial agreement but it's rare. Generally you need to wait until retirement or separation to roll funds out of a 401k.","\"I highly doubt this was a mistake. In the event of a corporate merger/buyout, changes to employee 401(k) plans are usually hashed out as part of the M&A agreement. The choices made in the agreement depend on numerous factors, so it may be difficult to predict what happens to your plan in situations like this. A quick online search reveals a few articles, e.g. this one from expertplan.com, that list the three most common consequences for retirement plans: It sounds like the company that purchased your employer agreed to immediately vest employees in employer 401(k) contributions as part of the purchase agreement. Without knowing the details of the merger/buyout, I can't say this for sure, but this sounds like a plausible way to keep employees of the purchased company content. Rather than roll it over, does it make sense to wait for that company to be purchased, in the hopes that a similar \"\"mistake\"\" occurs? Since this doesn't sound like a mistake, but rather a part of the buyout agreement, I don't think it's something you should count on in the future. It may be very likely, or it could be a relatively rare occurrence that happened to be part of this purchase agreement. I don't believe the Employee Retirement Income Security Act regulates what can or can't be done to your 401(k) in a buyout, except that the company is required to inform you of any changes (and obviously, the new 401(k) plan must conform to ERISA as well).\"","\"As other responders said, you can certainly roll over multiple 401(k) into a single account. An added benefit of such rollover (besides the ease of tracking) is that you can shop around for your Rollover IRA provider and find the one that gives you the specific mutual funds that you want to invest in, the lowest expenses, etc. - in short, find the best fit to your priorities. There are also \"\"lemon\"\" 401(k) plans and if you are in one of them, get out! And rollover is the way out. There is also one possibility to keep an eye on as it happens rarely, but it does happen - rolling a 401(k) over into another 401(k). I've done it once when I started a job at a company that had a great 401(k) with a good selection of low-cost mutual funds. I rolled the 401(k) from one previous job in to this 401(k) to take advantage of it. At the same time I kept a Rollover IRA, combining the 401(k) from all other jobs; it had more investment options and provided some flexibility.\"","Yes you can rollover as many different 401ks into a single IRA account. I have done it personally and it really cuts down on the overhead of keeping up with lots of different accounts. Your brokerage or mutual fund company should be able to help you with it. If you are using a company that just gives you forms and those forms don't mention an easy way to combine. Then I suggest rolling over one 401k first then once that's finished you can rollover the other 401k into that same account.","AFAIK, individual 401k accounts are supposed to be funded from self-employment earnings, not from rollovers from 401k plans of previous employers. So, check with your accountant before making opening an individual 401k account and getting your previous 401k plan to re-issue the checks to be payable to your individual 401k account. You might also want to ask about whether loans are permitted from individual 401k accounts (my guess is they are not because the possibility of abuse of the privilege is too high since the employer and employee are the same individual). In any case, loans against 401k plans are generally not a good idea, and many people on this forum have blogged about this matter.","From your first link: IRS.gov: IRA One-Rollover-Per-Year-Rule IRA One-Rollover-Per-Year Rule Beginning in 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own (Announcement 2014-15 and Announcement 2014-32). The limit will apply by aggregating all of an individual’s IRAs, including SEP and SIMPLE IRAs as well as traditional and Roth IRAs, effectively treating them as one IRA for purposes of the limit. They are limiting your ability to roll over money from an IRA to an IRA. You are looking to go from a 401K to an IRA. That is fine. The idea was that some people were taking all money from their IRA, using it for almost 60 days, then putting it back into an IRA. Thus getting a sort of short term loan. They could do this multiple times in a year. The direct trustee-to-trustee transfer are exempt from the once per year rule because the money is never in your possession. Moving money from a 401K/403b/TSP plan from your former employer to an IRA or Roth IRA is fine, and isn't limited to once per year.","You can't rollover a 401k directly into a Roth IRA. What you can do is rollover a 401k into a traditional IRA, and then convert some or all of the money to a Roth IRA. This is independent of any contributions made to a traditional or Roth IRA.","\"You're confusing between \"\"individual\"\" 401k (they're called \"\"Solo-401k\"\" and are intended for self-employed), and Individual Retirement Account (IRA). You can't open a solo-401k without being self employed. You can open an IRA and roll over money from your old 401k to it. You cannot get a loan from IRA. You can ask the 401k plan manager to reissue the checks to the new trust, shouldn't be a problem. Make sure the checks are issued to the trust, not to you, to avoid withholding and tax complications. This is what is called a \"\"direct\"\" rollover. You might be able to roll the money over to the 401k of your new employer, it is not always allowed and you should check. You can probably then take a loan from that 401k. However, it diminishes the value of your retirement savings and you should only do it if you have no other choice (being evicted from your home, your children are starving, can't pay for your chemo, etc... this kind of disasters). Otherwise, I'd suggest rolling over to IRA, investing in funds with significantly lower fees (Vanguard target retirements funds for example, or index funds/ETF's), and reassessing your spending and budgeting habits so that you won't need loans from your 401k. Re companies - ETrade is nice, consider also Scottrade, TDAmeriTrade, Vanguard, Fidelity, Sharebuilder, and may be others. These are all discount brokers with relatively low fees, but each has its own set of \"\"no-fee\"\" funds.\"","\"You can rollover money from a 401(k) to Traditional IRA and back to a 401(k). There are likely account closure fees associated with this, so it's not completely free. As long as you're rolling from one tax deferred account to another there are no penalties. The IRS has a handy chart showing what accounts can roll where. Note, starting next year, you can only do one IRA rollover per year. The IRS has additional general information on retirement account rollovers. One additional comment - on the concept of your money being \"\"locked\"\" into an IRA. Generally you have far more options with an IRA than a 401(k). If you go with a large, low cost provider like Vanguard you're likely to be much better off than in a small company 401(k) that only offers costly funds that are likely selected primarily to benefit the administrator of the plan. Choose your IRA provider and the investments with them wisely, and leave that money there for a very long time.\"","You can't get a loan from an IRA. You cannot get a loan from your 401(k) plan with your previous employer; 401(k) plans do not give loans to ex-employees, only current employees. Thus, if you want to have the flexibility of getting a loan from the money in the 401(k) plan with your ex-employer, your only option is to roll it over into the 401(k) plan of your current employer. But be aware of the negatives in doing so, some of which are discussed in the answers to Why would you not want to rollover a previous employer's 401(k) when changing jobs?.","You can also roll money from prior 401ks into current 401ks. Call the administrator of the 401k you prefer (i.e., Fidelity/Schwab, whoever the financial institution is). Explain you don't work there anymore and ask if you can roll money into it. Some plans allow this and some don't. So either, 1) You can roll all your prior 401ks into your current 401k. 2) You might be able to roll all prior 401ks into the prior 401k of your choice if they will accept contributions after you've left. You can't move the amount in your current employer's 401k until you separate or hit a certain age. 3) Like mentioned above, you can roll all prior 401ks into an IRA at any financial institution that will let you set up an IRA. Process: -Call the financial institutions you want to move the money from. Tell them you want a direct rollover. Have them write the check to the financial institution you are rolling into with your name mentioned but not the beneficiary (i.e., check written to Schwab FBO: John Doe account #12345) Tax implications: -If you are rolling from a pre-tax 401k to a pre-tax 401k or IRA, and the money goes directly from institution to institution, you are not liable for taxes. You can also roll from a Roth type (already taxed) account into another Roth type account with no tax implications. If they write a check to YOU and you don't put the money in an IRA or 401k within 60 days you will pay ~20% tax and a 10% early withdrawal penalty. That's why it's best to transfer from institution to institution. 401k vs IRA: -This is a personal decision. You could move all your prior 401ks into an IRA you set up for yourself. Generally the limitations of a 401k are the lack of funds to invest in that fit your retirement strategy, or high expense ratios. Be sure to investigate the fees you would pay for trades in an IRA (401k are almost always free) and the expense ratio for funds in your 401k vs funds you might invest in at a broker for your IRA. Best of both: -You can roll all your 401ks into a single 401k and still set up an IRA or Roth IRA (if your income qualifies) that you can contribute to separately. This could give you flexibility in fund choices if your 401k fees tend to be cheaper while keeping the bulk of your nest egg in low cost mutual funds through an employer account. Last advice: Even if you don't like the options in your current 401k, make sure you are contributing at least enough to get any employer match.","I've changed jobs several times and I chose to rollover my 401k from the previous employer into an IRA instead of the new employer's 401k plan. The biggest reason not to rollover the 401k into the new employer's 401k plan was due to the limited investments offered by 401k plans. I found it better to roll the 401k into an IRA where I can invest in any stock or fund.","The simplest way to consolidate the funds your old 401(k) plans is by doing what's called a Direct Rollover (whereby the funds go directly into the new plan and skips you completely) from each of the old plans into either an IRA that you establish with a provider of your choice or even into your current employer's 401(k) plan if that is available. That way, the funds are in one central account and available to invest. Plus it eliminates the mandatory 20% withholding if the rollover is indirect and is sent to you first before the deposit into the new plan. It is important to bear in mind that you have 60 calendar days from the date of distribution to get the full amount into the new plan and a rollover is considered a tax reportable, but not necessarily a taxable event provided you deposit the funds within the time frame allotted.","\"Almost all companies in the US have changed from formal pension programs to 401k plans, and most companies that still have pension programs don't allow new employees to enroll in the new program; only the previous participants who are vested in the pension plan will get benefits while new employees get enrolled in the 401k plan. If this is the case with your prospective employer, then demanding that you be allowed to enroll in the pension plan is likely to be futile; in fact, the likely response may well be \"\"Here is our offer. Take it or leave it\"\" or \"\"We are withdrawing the offer we made\"\" especially if you are in a field where there are plenty of other people who could do the job instead of you. So be sure that you understand what your worth is to the company and how much leverage you have before starting to make counter-offers. With regard to money that you might have vested in your current employer's pension plan, your options are to leave it there until you retire and start getting a pension (generally not advisable in these parlous times when the company might not even exist by then), roll it over into an IRA or into your new employer's 401k plan. This last is the only matter that concerns your prospective employer and where you might need to ask; the new employer's 401k plan might not be structured to accept rollovers. If the money in your current employer's retirement plan is in a pension plan, what is paid out for rolling over might be different (and smaller) than what has been credited to you thus far. For example, my (State Government) pension plan credited 8% interest per annum on the amounts I contributed but this was fake money because had I resigned and withdrawn the pension contributions (for the purpose of rolling over into an IRA or even just taking it as cash), I would have received only my contributions plus only 4.5% interest per annum. The 8% interest credited is available only for the purpose of the purchase of an immediate annuity upon retirement; it is not something that is portable to a new plan, and if I want a lump-sum payout upon retirement instead of a pension in the form of an annuity, it would be the 4.5% rate again...\"","Adapted from an answer to a somewhat different question. Generally, 401k plans have larger annual expenses and provide for poorer investment choices than are available to you if you roll over your 401k investments into an IRA. So, unless you have specific reasons for wanting to continue to leave your money in the 401k plan (e.g. you have access to investments that are not available to nonparticipants and you think those investments are where you want your money to be), roll over your 401k assets into an IRA. But I don't think that is the case here. If you had a Traditional 401k, the assets will roll over into a Traditional IRA; if it was a Roth 401k, into a Roth IRA. If you had started a little earlier, you could have considered considered converting part or all of your Traditional IRA into a Roth IRA (assuming that your 2012 taxable income will be smaller this year because you have quit your job). Of course, this may still hold true in 2013 as well. As to which custodian to choose for your Rollover IRA, I recommend investing in a low-cost index mutual fund such as VFINX which tracks the S&P 500 Index. Then, do not look at how that fund is doing for the next thirty years. This will save you from the common error made by many investors when they pull out at the first downturn and thus end up buying high and selling low. Also, do not chase after exchange-traded mutual funds or ETFs (as many will likely recommend) until you have acquired more savvy or interest in investing than you are currently exhibiting. Not knowing which company stock you have, it is hard to make a recommendation about selling or holding on. But since you are glad to have quit your job, you might want to consider making a clean break and selling the shares that you own in your ex-employer's company. Keep the $35K (less the $12K that you will use to pay off the student loan) as your emergency fund. Pay off your student loan right away since you have the cash to do it.","It sounds like the two best options would be to roll it over into a traditional IRA or roll it over into your new 401(k). If there isn't much money in your SIMPLE IRA, it might make more sense to just roll it over into your 401(k) so you have fewer retirement accounts to keep track of. However, if you do have a significant amount of money in the SIMPLE IRA then you may wish to take advantage of the greater freedom in investment options that IRAs offer over most 401(k) plans. Keep in mind the 2-year rule for SIMPLE IRAs. You will face tax penalties if you roll it and it hasn't yet been 2 years since the SIMPLE IRA was opened.","As to the rollover question. Only rollover to a ROTH if you have other funds you can use to pay the taxes you will be hit with if you do that. DO NOT pay the taxes out of the funds in the 401k. If you don't have a way to pay the taxes, then roll it to a traditional IRA. You never want to pay the government any taxes 'early' and you don't want to reduce the balance. beyond that, A lot depends on how long you figure you will be with that company. If it's only a few years, or if you and other employees can make enough of a fuss that they move the fund to someplace decent (any of the big no-load companies such as Vanguard would be a better custodian), then I'd go ahead and max it out. If you figure to be there for a long while, and it looks like someone is in bed with the custodian and there's no way it will be changed, then maybe look to max out a Roth IRA instead.","Don’t take the cash deposit whatever you do. This is a retirement savings vehicle after all and you want to keep this money designated as such. You have 3 options: 1) Rollover the old 401k to the new 401k. Once Your new plan is setup you can call who ever runs that plan and ask them how to get started. It will require you filling out a form with the old 401k provider and they’ll transfer the balance of your account directly to the new 401k. 2) Rollover the old 401k to a Traditional IRA. This involves opening a new traditional IRA if you don’t already have one (I assume you don’t). Vanguard is a reddit favorite and I can vouch for them as Well. Other shops like Fidelity and Schwab are also good but since Vanguard is very low cost and has great service it’s usually a good choice especially for beginners. 3) Convert the old 401k to a ROTH IRA. This is essentially the same as Step 2, the difference is you’ll owe taxes on the balance you convert. Why would you voluntarily want to pay taxes f you can avoid them with options 1 or 2? The beauty of the ROTH is you only pay taxes on the money you contribute to the ROTH, then it grows tax free and when you’re retired you get to withdraw it tax free as well. (The money contained in a 401k or a traditional IRA is taxed when you withdraw in retirement). My $.02. 401k accounts typically have higher fees than IRAs, even if they own the same mutual funds the expense ratios are usually more in the 401k. The last 2 times I’ve changed jobs I’ve converted the 401k money into my ROTH IRA. If it’s a small sum of money and/or you can afford to pay the taxes on the money I’d suggest doing the same. You can read up heavily on the pros/cons of ROTH vs Traditional but My personal strategy is to have 2 “buckets” or money when I retire (some in ROTH and some in Traditional). I can withdraw as much money from the Traditional account until I Max out the lowest Tax bracket and then pull any other money I need from the ROTH accounts that are tax free.This allows you to keep taxes fairly low in retirement. If you don’t have a ROTH now this is a great way to start one.","Does the 457(b) plan allow for the rollover of other retirement funds into it? And do you have very specific reasons for wanting to roll over your SEP-IRA into the 457(b) plan instead of into some other IRA plan with a different custodian? For example, if you already have a Traditional IRA, is there any reason why your SEP-IRA should not be rolled over into the Traditional IRA? With regard to the question about separate accounts, once upon a time, rolling over money from an employment retirement plan (e.g. 401k) into a Traditional IRA required establishing a separate account called a Rollover Traditional IRA so that the rolled-over money (and the earnings thereon) were not commingled with standard traditional IRA money resulting from personal contributions). This was so that the account owner had the option of rolling over the separately kept money into a new employer's retirement plan (if such a rollover was permitted by the new 401k plan). If one did not want to ever roll over money into a new employer plan, one had to write a letter to the custodian telling them that commingling was OK; you never wanted to put that money into another 401k plan. The law changed some time later and the concept of Rollover IRAs holding non-commingled funds has disappeared. With that as prologue, my answer to your question is that perhaps the law did not change with respect to 457(b) plans, and so the money that you want to rollover into the 457(b) plan needs to be kept separate and not commingled with your contributions via payroll deduction to the 457(b) plan (in case you want to ever roll over the SEP-IRA money into another SEP-IRA). Hence, separate accounts are needed: one to hold your SEP-IRA money and one to hold your contributions via payroll deductions.","The time horizon for your 401K/IRA is essentially the same, and it doesn't stop at the day you retire. On the day you do the rollover you will be transferring your funds into similar investments. S&P500 index to S&P 500 index; 20xx retirement date to 20xx retirement date; small cap to small cap... If your vested portion is worth X $'s when the funds are sold, that is the amount that will be transferred to the IRA custodian or the custodian for the new employer. Use the transfer to make any rebalancing adjustments that you want to make. But with as much as a year before you leave the company if you need to rebalance now, then do that irrespective of your leaving. Cash is what is transferred, not the individual stock or mutual fund shares. Only move your funds into a money market account with your current 401K if that makes the most sense for your retirement plan. Also keep in mind unless the amount in the 401K is very small you don't have to do this on your last day of work. Even if you are putting the funds in a IRA wait until you have started with the new company and so can define all your buckets based on the options in the new company.","\"Assuming you are below retirement age, you typically cannot roll money from a Roth IRA into a 401k nor transfer money out of a 401k until you leave the company. Your best bet is to leave your exising roth ira separate from your 401k. A good strategy for retirement accounts is whenever able (typically when you switch jobs) roll your 401k into a \"\"rollover IRA\"\" (not a roth). Then you can manage your investments with more options than the 5-20 funds provided in the 401k. I would recommend against rolling funds into a 401k because of the lack of options in most 401k plans. Also, 401k is pre-tax and Roth is post-tax. Pre and post tax investments don't mix before withdrawal unless you do a conversion of some kind.\"","\"The biggest reason why one might want to leave 401k money invested in an ex-employer's plan is that the plan offers some superior investment opportunities that are not available elsewhere, e.g. some mutual funds that are not open to individual investors such as S&P index funds for institutional investors (these have expense ratios even smaller than the already low expense ratios of good S&P index funds) or \"\"hot\"\" funds that are (usually temporarily) closed to new investors, etc. The biggest reason to roll over 401k money from an ex-employer's plan to the 401k plan of a new employer is essentially the same: the new employer's plan offers superior investment opportunities that are not available elsewhere. Of course, the new employer's 401k plan must accept such roll overs. I do not believe that it is a requirement that a 401k plan must accept rollovers, but rather an option that a plan can be set up to allow for or not. Another reason to roll over 401k money from one plan to another (rather than into an IRA) is to keep it safe from creditors. If you are sued and found liable for damages in a court proceeding, the plaintiff can come after IRA assets but not after 401k money. Also, you can take a loan from the 401k money (subject to various rules about how much can be borrowed, payment requirements etc) which you cannot from an IRA. That being said, the benefits of keeping 401k money as 401k money must be weighed against the usually higher administrative costs and usually poorer and more limited choices of investment opportunities available in most 401k plans as Muro has said already.\"","Rolling a 401(k) to an IRA should be your default best option. Rolling a 401(k) to another 401(k) is rarely the best option, but that does happen. I've done it once when I started a job at a company that had a great 401(k) with a good selection of low-cost mutual funds. I rolled the 401(k) from one previous job in to this 401(k) to take advantage of it. In all other cases, I rolled 401(k)s from previous jobs to my Rollover IRA, which gave me the most freedom of investment options. Finally, with 401(k)-to-Roth IRA rollovers, it's important to decouple two concepts so you can analyze it as a sum of two transactions:","You should never roll a 401(k) to a Roth IRA. If the intention is to do so, you are better off rolling to a traditional IRA, and then converting. (Per the comment below, I should add - if the 401(k) contained post tax money, this portion rolls to a Roth, not a Tradition IRA. You then have the exercise of converting/recharacterizing just the TIRA money, as the Roth stands aside) This preserves the ability to recharacterize back to a traditional IRA. You might wish to do this if: The answers so far are great, but I'll add what I see missing -","\"What ever you convert from the 401(k) will be subject to tax. The bigger issue is that there's no \"\"do over\"\" no ability to recharacterize the conversion if when you do your taxes, you realize you need to undo some. I'd suggest transferring from the 401(k) to the traditional IRA first and then convert, just bring aware of the prorata taxation that will be due.\"","\"The instructions do specifically mention them, but not as exclusive plans. Pension and annuity payments include distributions from 401(k), 403(b), and governmental 457(b) plans. The instructions also mention this: An eligible retirement plan is a governmental plan that is a qualified trust or a section 403(a), 403(b), or 457(b) plan. 414(h) plans are \"\"qualified\"\" plans. Employee contribution to a 414(h) plan is qualified under 403(b). Report it there and mark it as \"\"Rollover\"\". Talk to a licensed (EA/CPA licensed in your state) professional when in doubt.\"","You can do a trustee to trustee exchange. You will need to contact both companies to coordinate the paperwork. As long as both accounts are the same type (traditional\\Roth) you are fine. You can also do a rollover where you have the check but there are some limitations and deadlines which are avoided by the trustee to trustee exchange. For example the IRS limits the number of rollovers to one a year. You can have multiple accounts of the same type. The annual contribution limits can be split across accounts. Rollovers and transfers are not part of annual contribution limits.","There is no segregation of amounts that you have in Rollover (Traditional) IRAs when it comes to figuring out how much of your basis is being converted from your Traditional IRA into a Roth IRA. So, yes, you will lose the benefit of being able to make nondeductible contributions to your Traditional IRA each year and rolling them over into a Roth IRA without tax consequences. Since your 401k amount may be substantially more than the $5K basis you create each year, converting the 401k amount into a Traditional IRA will mean that most of the money converted to the Roth IRA is pre-tax money, and so you end up paying tax on most of the converted amount.","\"Yes. Two years after your first contribution to the SIMPLE IRA, you can roll it to a traditional IRA. You can still contribute \"\"pre-tax\"\", but the mechanism will be slightly different, since with an employer plan the contribution was automatically deducted from your paycheck. With an individual plan, you make the contributions yourself and then get a tax deduction when you file. Since contributions to traditional and Roth IRAs combined are capped at $5,500 if you're under 50, some sort of employer-sponsored plan might be better from a contribution standpoint. If your institution offers some sort of plan other than a 401(k), you might still want to roll to a traditional IRA, since you will have much more flexibility in the investments you choose. On the flip side, if that thought is overwhelming, having a smaller set of options might be better for your peace of mind.\"","For the rollover, you should probably talk to the recipient manager. This would be your broker or whomever (your new employer if rolling into another 401k). They should be able to update you on progress and let you know if you need to do anything. In a comment, you say I could be putting in money but instead im lossing. There is no requirement that an IRA have 401k money in it. Just put the money in without the existing money. Eventually the rollover will complete and add that money to whatever you contribute to the IRA. The rollover should not affect your future contributions in any way.","\"You have a few options: Option #1 - Leave the money where it is If your balance is over $5k - you should be able to leave the money in your former-employer's 401(k). The money will stay there and continue to be invested in the funds that you elect to invest in. You should at the very least be receiving quarterly statements for the account. Even better - you should have access to some type of an online account where you can transfer your investments, rebalance your account, conform to target, etc. If you do not have online account access than I'm sure you can still transfer investments and make trades via a paper form. Just reach out to the 401(k) TPA or Recordkeeper that administers your plan. Their contact info is on the quarterly statements you should be receiving. Option #2 - Rollover the money into your current employer's 401(k) plan. This is the option that I tend to recommend the most. Roll the money over into your current employer's 401(k) plan - this way all the money is in the same place and is invested in the funds that you elect. Let's say you wanted to transfer your investments to a new fund lineup. Right now - you have to fill out the paperwork or go through the online process twice (for both accounts). Moving the money to your current-employer's plan and having all the money in the same place eliminates this redundancy, and allows you to make one simple transfer of all your assets. Option #3 - Roll the money from your former-employer's plan into an IRA. This is a cool option, because now you have a new IRA with a new set of dollar limits. You can roll the money into a separate IRA - and contribute an additional $5,500 (or $6,500 if you are 50+ years of age). So this is cool because it gives you a chance to save even more for retirement. Many IRA companies give you a \"\"sign on bonus\"\" where if you rollover your former-employers 401(k)...they will give you a bonus (typically a few hundred bucks - but hey its free money!). Other things to note: Take a look at your plan document from your former-employer's 401(k) plan. Take a look at the fees. Compare the fees to your current-employer's plan. There could be a chance that the fees from your former-employer's plan are much higher than your current-employer. So this would just be yet another reason to move the money to your current-employer's plan. Don't forget you most likely have a financial advisor that oversees your current-employer's 401(k) plan. This financial advisor also probably takes fees from your account. So use his services! You are probably already paying for it! Talk to your HR at your employer and ask who the investment advisor is. Call the advisor and set up an appointment to talk about your retirement and financial goals. Ask him for his advice - its always nice talking to someone with experience face to face. Good luck with everything!\"","\"I don't think there's a rule -- (I can't comment) but Brick cited IRS rules...but IMO Brick missed one thing -- @ashur668 is not looking for a distribution, but is looking for a rollover. My best guess: that this part of the ruleset is not well defined, and your (and my) employer have chosen to interpret any withdrawl as a \"\"distribution\"\", even if better characterized a rollover. A few months ago, I went so far as to explore if I could use a loophole -- my company had just gone through a merger; I was hoping I could rollover some or maybe all of my 401k to my IRA (I remember now, it would have been everything before starting roth 401k contributions). My company asserted this was not permitted, and further asserted that the rumors I had heard were mistaken that when we went through a company spin-off a few years before, that nobody under 59 1/2 was permitted to roll over. I did a quick search and found IRS topic 413 As far as I can tell, this topic is silent on the matter at hand. Topic 413 referred me to IRS Publication 575, where I started looking at the section on rollovers. I read some of it then got bored. Note that we're one step removed -- we are reading IRS publications and interpretations of IRS rules. I don't know that anybody here has read the actual tax law. There may be something in there that prevents companies from rolling over before 59 1/2 that is not well codified in IRS publications.\"","It is typically very easy to roll a 401(k) into an IRA. Companies that provide IRA's are very experienced with it, and I would expect that they will take your calls from overseas. You will likely be able to do it over the internet without using a phone at all. Just open an IRA with any brokerage company (Scottrade, Vanguard, Fidelity, Schwab, Ameritrade, etc.) and follow instructions to roll your 401(k) into it. Most likely they will need your signature, but usually a scan of a form you have filled out will do. Be sure to have information on your 401(k) provider, including your account number there, on hand. These companies are all very reputable and this is not a difficult transaction. There's really no downside to rolling into an IRA. 401(k) plans usually have more limited options and/or worse fee structures and are frequently harder to work with, as you have observed.","I doubt that there is an arrangement with any country that would allow you to transfer money out of a 401(k) and roll it over to another country that isn't governed by US Tax Laws without taking a distribution. The US government won't let you pull out like that without taking its cut. There may be, but I'd be surprised. Check around in the appropriate venues. If you're making a distribution that incurs penalties, then that's what you're doing. If you can do so without incurring penalties, then great for you, just deposit into the vehicle of your choice in your country.","As others mentioned, I am not sure what you mean by stating that your 401K was rolled over to a money market account. Assuming that it was rolled over to an IRA account, you can roll it over to another IRA account with a financial institution of your choice (either a brokerage or a bank.) Alternatively, you can withdraw these funds, but since you are under 59.5 years old, you would have to cough up 10% penalty to IRS for this unqualified withdrawal. Therefore, I would strongly recommend for you to wait till you reach this eligible age. Other qualified (penalty-free) withdrawals are: purchase of the first home, college tuition, medical insurance premiums for unemployed individuals, disability, and medical expenses exceeding 7.5% of your Adjusted Gross Income. I would assume that your 401K was a Traditional 401K account (before tax contributions), and not ROTH 401K, so yo would also have to pay taxes upon withdrawing funds whether you do it now or after you are 59.5 y.o.","My advice would be to invest in the 401k with the same type of funds you'd purchase when you rollover to your IRA. They are both retirement accounts. If the stock market tanks, your 401k balance will be low but you'll also be purchasing stocks at a much cheaper price when you establish your roth. You should create an asset allocation based on your age, not on the type of retirement account you have. One question to consider: When you do become a student, you'll likely be a in lower tax bracket. Can you contribute pre-tax dollars and then rollover to a ROTH in the year that you're a student?","Should I convert the 401K of my old company to Traditional IRA and start investing in that instead of investing in the new employer 401K plan with high fees? Regarding the 401K funds from the previous employer, you can: Future investments: Roll overs don't have limits, but new investments do.","Direct roll-overs / trustee to trustee transfers are typically initiated by the receiving institution. Therefore you need to work with Vanguard. They will have a form in which you provide them with your fidelity account info and they will then contact Fidelity and initiate the transfer. Do not take the option of being sent a check made out to you by Fidelity (an indirect rollover). There are too many ways to muck up and get hit with penalties if you are the middleman in the process. I believe in most, if not all, cases the IRS now requires a 20% withholding on indirect 401k rollovers. This is because too many times people would initiate a roll over but not complete it either at all or within the allowed 60 day window and then come tax time be unable to pay the tax and penalty on the distribution. The tricky part of that withholding is that you still have to deposit that amount into the new account otherwise it becomes a distribution subject to tax and penalties (and that means coming up with the money from other accounts). So in summary talk to Vanguard and set up an institution to institution transfer. They souls make this very easy as they want your money. And do not do any kind of rollover where you come into personal possession of the money. If the check is made out to Vanguard but sent to you to resend to Vanguard that should not be an issue as that is still a trustee to trustee transfer. Fidelity may have a minor account closer fee that will be deducted from the value of the account before it is sent.","Obviously, her new employer won't know how much was contributed from the old job, so this won't work this year. Obviously the new employer would. They will not deposit anything, unless you tell them how much you have deposited already. Somehow tell the new employer how much was contributed by her last employeer, so they can stop deducting at the right time. I'm not sure if this is even possible. Why isn't it possible? I've been in a similar situation, the employer had a form to fill on this matter as part of the paperwork for the payroll, right between the direct deposit forms and the 401K contributions form. By the way, another thing to take a look at when switching jobs is the Social Security tax. I wrote about it here.","ok if you haven't rolled in the 401k assets yet, you're fine and should put them into a traditional. if your earnings + roth conversions will put you at or below your anticipated tax bracket during retirement, then the roth conversion might make sense. in some cases, employers will give you a roth 401k option, but you are right that it's not the default.","\"You can definitely open an IRA and roll the money over. I suggest instead of trying opening online calling the institution and asking what would be the procedure in your specific case. If not, I will have to cash out my 401K. Who do I contact to find out if my country has some sort of deal with the US in regards to taxes? I would of course prefer to not pay the penalty (20 % federal + 10 % state tax), and instead reinvest the money in a retirement fund in my country. US embassies some times have listings of tax advisers who work with US expats in the countries they cover. You can check for such a list on the website of your local US embassy. These people will be able to answer this question. However it is highly unlikely that you'll be able to avoid the tax and penalty in the US in this scenario. It is not likely that you could \"\"roll-over\"\" into a foreign retirement fund (from your country's laws perspective), but maybe your country has some solution for this.\"","I would check to see what the fee schedule is on your previous employer's 401k. Depending on how it was setup, the quarterly/annual maintenance fee may be lower/higher than your current employer. Another reason to rollover/not-rollover is that selection of funds available is better than the other plan. And of course always consider rolling over your old plan into a standard custodial rollover IRA where the management company gives you a selection of investment options. At least look at the fees and expense ratios of your prior employer's plan and see if anything reaches a threshold of what you consider actionable and worth your time. Note: removed reference to self directed IRA as vehicle is more complicated account type allowing for more than just stocks, bonds, and mutual funds. Not for your typical retail investor.","Yes, that's exactly what you can/should do. The only question is whether the 401(k) has good investment choices and low fees, if so, go for it.","Since its such a small amount, they may require you to move it. A common cutoff is $5k, but it varies from plan to plan. I would roll it over into an IRA. The problem with withdrawing it is that opportunity to save is gone. Especially for IRAs, which have a low maximum contribution, its hard to make it up in the future.","\"In the case of Fidelity, the answer is \"\"no.\"\" Although when you leave your employer and roll over the account to an IRA, leaving it with Fidelity allowed me to keep money in those closed funds. My Roth IRA was not able/allowed to buy those funds.\"","If you roll your funds from a 401k to an individual Vanguard account it will be in an IRA. Some people talk about IRA loans, but what is happening is that you are given a check for the value of the IRA and you have 60 days to deposit that full amount in another qualified account before being assessed a distribution penalty. The IRS also has rules to prohibit you from making several back-to-back rollovers to try to float the money for longer than 60 days.","You should be able to take a loan out on the 401(k). You can't do a roll-over unless you leave your job. If your 401(k) is that bad, you should consider maxing out your IRA contributions first and putting the rest into your 401(k) - so if you're putting away about 7k a year, lower your withholding to 1500 and put 5500 into an IRA.","I would not recommend borrowing your 401(k) money to buy a house for two reasons: When you borrow money from your 401(k), it is no longer invested. Yes, you pay yourself interest, but you miss out on the investment gains for the life of the loan. If you leave your job, the loan is due in full shortly thereafter. If you do not pay it back, you are hit with taxes and penalties. If I were you, I would roll it over into an IRA for the reasons you mentioned.","You should try to take out other loans sufficient to pay off your 401(k) loan if you can. Maybe you can take out a home equity loan? You can also ask your bank about unsecured loans. You should also check the rules for your new employer's 401(k), if you're rolling over your 401(k). There's a small possibility that you could take out another loan right now and apply it to the previous loan balance. Or if you need to wait, you could use it to help pay off any temporary loans that were needed to avoid the distribution penalty.","You can take the old 401k and convert it to an IRA just about anywhere. No accountant required. Borrowing against the IRA/401k is a very stopgap measure, be sure you know what you are getting into. A distribution from it is a 10% penalty before age 59.5.","Do not take the cash! You might be able to leave the money with the large company. Ask the HR people at the company. If you are satisfied with their work, no sense leaving if you don't have to. I have coworkers that have 401K all over from all the buyouts the company went through. If you don't want to leave it behind, do a rollover into your own account with a low cost carrier. (Vanguard, Fidelity and Charles Schwab are popular) Whoever you choose for your own account can help you rollover the funds without penalty. (Schwab helped me over the phone, it was pretty simple) More about rolling over a Roth 401K","Take The 20k and transfer it to the new employer 401k. You then can take a loan and accomplish the same thing. By the time you pay the tax and 10% penalty, that withdrawal will be worth just over half. The same half you can borrow out, pay yourself the interest and not lose out on 50 years of growth.","It doesn't make a difference if you will be keeping it in the 401K or transferring it to an IRA, it is still retirement money that you plan on investing for decades. Pre-Enron many employees invested significant amounts of their retirement funds with the employer. One of the risks was that if a single stock was down at the wrong time, you were hurt if you needed to sell. If you are going from an S&P 500 in the 401K to an S&P 500 in the IRA, it doesn't matter if the the market is up or down, the two funds will be pretty much in synch.","This is called an in-plan Roth conversion and is discussed by the IRS here. If your 401(k) has a Roth option then it likely also has a provision to convert pre-tax dollars, but you'll have to check with the administrator to be sure. They could also potentially limit the type of money that can be converted. But most likely you should be able to convert any amount you want, and since it's all pre-tax (your contributions, employer matching, and earnings), it doesn't really matter which money is converted because it's all equivalent. One caveat is you won't able to convert any employer matching that hasn't fully vested.","\"All things being equal, a defined benefit pension is far better than an IRA or a 401(k). Think about it this way - let's say you can have a guaranteed $100 a month*, or the chance at $100 a month. Which is better? Now, obviously, your tolerance for risk is the difference - but this is the beauty of a defined benefit plan. Your employer is picking up the risk. Assuming that the pool of investments is about the same (which unless if their funds are tremendously under performing they are), the question is, who takes the risk - you or them? Especially if you are moving into a new position, having a defined benefit plan is like having a risk-free asset in your portfolio. It increases your safety. The only reason to roll this over into a 401(k) or IRA is if your expected value (risk * payout) is better. A worked example. If half the time you would earn more than $100 and half the time less, then you could imagine the two as being equally good. Only if you really love risk would you take that chance. In reality, only half the investments out there will \"\"beat\"\" the average, and as such, you actually have less than a 50/50 shot of beating a DB - unless if there are really low returns to it. More likely, I suspect you are over-estimating your ability to get a higher return.\"","A rollover IRA is a traditional IRA. Your rollover contributions are not taxed and rollover or counted against your annual limit, which is income dependent. A Roth IRA is one where your contributions will be taxed going into the IRA. Note that there are adjusted gross income maximums for contribution to a Roth IRA (see here), and as far as I can tell those income maximums also determine whether or not you can rollover to a Roth IRA.","If you're current employer who is running the 401k says no you can't. You may be able to get a loan against those assets, that's more common. However, this post will be down voted to oblivion because you want r/personalfinance . This isn't the sub for this question.","Post-86 After tax contributions to a 401k are after tax. The earnings on that money is taxable, but not the contributions. This means: You'll have $15,000 in the 401k and $10,000 is considered after-tax and $5,000 is considered pre-tax. The after-tax portion can be converted to a Roth IRA without paying taxes or penalties. New in September 2014 The IRS has made substantial changes that now enable this to happen. You can request a distribution from your 401k provider where they divide the money into pre-tax and after-tax funds. In my example, you'd get a check for $10,000 that you could send to a Roth IRA and a check for $5,000 you could add to a traditional Roll-over IRA. Neither of those would be taxable events and you'd end with a Roth IRA with $10K and a Traditional, Rollover IRA with $5K in it. Notes:","I don't know about keeping different rollover IRAs separate. But I know that there is a reason to keep rollover IRAs separate from other traditional IRAs -- if you want to roll them back into a 401(k) in the future, some 401(k)s only allow funds that were rolled over from a 401(k) originally.","Okay thanks, let's hope it's a relatively painless process to correct my mistake! Really odd that my 401(k)s are traditional, I was so sure they weren't. Maybe it's better then to open up a traditional IRA alongside the Roth, use that for rollovers, and just kick a few bucks into the Roth on occasion?","The general advise is to contribute to the 401K up to the match limit. Then put money into a Roth IRA. Then put the rest into the 401K above the match. Yes you can have an IRA and a 401K. You can even have Roth and non-Roth versions. You do have to watch the limits, and exclusions, but there is nothing stopping you from contributing to multiple types in one year. Over a long career you may find your self with all the possible types of accounts. When you re-qualify for the company 401K, there is no need to roll over the IRA money into the 401K. Just keep the IRA."],"string":"[\n \"\\\"You can move money from a 403b to a 401k plan, but the question you should ask yourself is whether it is a wise decision. Unless there are specific reasons for wanting to invest in your new employer's 401k (e.g. you can buy your employer's stock at discounted rates within the 401k, and this is a good investment according to your friends, neighbors, and brothers-in-law), you would be much better off moving the 403b money into an IRA, where you have many more choices for investment and usually can manage to find investments with lower investment costs (e.g. mutual fund fees) than in a typical employer's 401k plan. On the other hand, 401k assets are better protected than IRA assets in case you are sued and a court finds you to be liable for damages; the plaintiff cannot come after the 401k assets if you cannot pay. To answer the question of \\\"\\\"how?\\\"\\\", you need to talk to the HR people at your current employer to make sure that they are willing to accept a roll-over from another tax-deferred plan (not all plans are agreeable to do this) and get any paperwork from them, especially making sure that you find out where the check is to be sent, and to whom it should be payable. Then, talk to your previous employer's HR people and tell them that you want to roll over your 403b money into the 401k plan of your new employer, fill out the paperwork, make sure they know to whom to cut the check to, and where it is to be sent etc. In my personal experience, I was sent the check payable to the custodian of my new (IRA) account, and I had to send it on to the custodian; my 403b people refused to send the check directly to the new custodian. The following January, you will receive a 1099-R form from your 403b plan showing the amount transferred to the new custodian, with hopefully the correct code letter indicating that the money was rolled over into another tax-deferred account.\\\"\",\n \"Everything here is yours and can be rolled into your new plan or IRA. You can generally move your 403(b) assets into your traditional IRA or into your new employer's plans, assuming your new employer's plan allowing incoming roll overs. You can probably roll your pension out as well. Actually, the right person to ask about this is the company with whom you have your IRA. The easiest and best way to get assets from one tax-sheltered account to another is by contacting the company you want to roll INTO and having them take care of everything for you.\",\n \"You need to check with your employer. It is called an in-service rollover and it is up to your employer on whether or not it is allowed. There are a lot of articles on it but I would still talk to a professional before making the decision. And there are some new laws in place that put at least some responsibility on your employer to provide a 401k with reasonable options and fees. http://www.latimes.com/business/la-fi-court-edison-401k-fees-20150519-story.html We'll see if it has legs.\",\n \"No, the situation is not different, the roll-over rules are the same. It won't be taxable (as opposed to traditional to Roth roll-over), but other than that it's the same. Whether the 401k allows rolling over or not while you're still employed - you have to check with the plan administrator (ask your payroll/HR for details). Usually, the deferred compensation cannot be rolled over out of the 401k while you're still employed.\",\n \"For this rollover, there are no restrictions of age/income/etc. You need to know - the transfer must be direct, i.e. if you get a physical check, it should be payable not to you, but to the new custodian (broker) for your benefit. Direct is preferable and faster. The assets may not be transferable 'in kind.' This phrase simply means that you may move the value, but if the assets are not shares that are held by the public, but special 401(k) class shares, they must be liquidated before moving, and moved as cash. This is a risk people with large accounts take should the market move dramatically during the time they are liquidated, and why, for them, I suggest doing it piecemeal.\",\n \"No that is not a rollover. Many employees have experienced a change of management companies. Sometimes these switches are due to a merger, an acquisition, or just to save money. It is understandable that the old employer would like to see you transfer your funds to either your new employer, or roll them over into a IRA/Roth IRA. So it is not unexpected that they will take this opportunity to nudge you. The thing that congress was trying to prevent were serial rollovers of IRAs. These people would use the 60 day window to have in essence a loan. Some would do this multiple times a year; always making sure they replaced the money in time. The IRA One-Rollover-Per-Year Rule Beginning in 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own (Announcement 2014-15 and Announcement 2014-32). The limit will apply by aggregating all of an individual’s IRAs, including SEP and SIMPLE IRAs as well as traditional and Roth IRAs, effectively treating them as one IRA for purposes of the limit. Direct transfers of IRA money are not limited This change won’t affect your ability to transfer funds from one IRA trustee directly to another, because this type of transfer isn’t a rollover (Revenue Ruling 78-406, 1978-2 C.B. 157). The one-rollover-per-year rule of Internal Revenue Code Section 408(d)(3)(B) applies only to rollovers. Note that the law doesn't mention 401K/403B or the federal TSP. When the 401K changes management companies that is not a rollover.\",\n \"You cannot roll over your 401k money in an employer's 401k plan into an IRA (of any kind) while you are still employed by that employer. The only way you can start on the conversion before you retire (as Craig W suggests) is to change employers and start rolling over money in the previous employer's 401k into your Roth IRA while possibly contributing to the 401k plan of your new employer. Since the amount rolled over is extra taxable income (that is, in addition to your wages from your new job), you may end up paying more tax (or at higher rates) than you expect.\",\n \"You can't roll it over to a Roth IRA without tax penalties. The best thing to do is roll it to an IRA that isn't tied to work at all. Second best is to roll it into your new employer's 401k. The reason that an IRA makes sense is that it gives you the same tax savings as a 401k, but it allows you to remain in control of the money regardless of your employment status.\",\n \"Adding to justkt's answer. The big difference to you during the rollover is that moving the money to a Roth IRA, unless it was a Roth 401K, is going to require you pay a lot of taxes on the money you move. I'd suggest not doing that without guidance from a financial advisor.\",\n \"Once you roll the money from the 401K into a rollover IRA don't mix it with new funds. The money from the 401K will be treated differently depending on if the funds are pre-tax, post-tax, Roth, or matching. (Yes, Post-tax and Roth are not the same thing). In the future an employer may allow you to roll IRA or 401K money into their program. They don't have to allow it, and they can put restrictions on the types of money they will accept.\",\n \"\\\"403b plans are used by school districts, colleges and universities, nonprofit hospitals, charitable foundations and the like for their employees while 401k plans are used by most everybody else. I would suspect that a school district etc can use a 401k plan instead of a 403b plan if it chooses to do so, but the reverse direction is most likely forbidden: a (for-profit) company cannot use a 403b plan. One difference between a 403b plan and a 401k plan is that the employer can choose to offer, and the employee can choose to purchase, stock in the company inside the 401k plan. This option obviously is not available to charities etc. which don't issue stock. Your comment that the 403b plan invests solely in (variable) annuities suggests that the plan administrator is an insurance company and that the employer is moving to more \\\"\\\"modern\\\"\\\" version that allows investments in mutual funds and the like. Forty years ago, my 403b plan was like that; the only investment choice was an annuity, but some time in the 1980s, the investment choices were broadened to include mutual funds (possibly because the 1986 Tax Reform Act changed the rules governing 403b plans). So, are you sure that your employer is changing from a 403b plan to a 401k plan, or is it just a change of 403b plan administrator from the insurance company to another administrator who offers investment choices other than an annuity? Note, of course, that insurance companies have changed their options too. For example, TIAA (the Teachers' Insurance and Annuity Association) which was the 403b plan administrator for many schools and colleges became TIAA/CREF (College Retirement Equities Fund) where the CREF mutual funds actually were pretty good investments.\\\"\",\n \"401(k)'s can be rolled over into IRAs. You can roll all of your former company 401(k)'s into a single IRA, managed by whatever company you like. Many employers will not let you transfer money out of your 401(k) while you're still a current employee, though, so you may be stuck with the 401(k) used by your current company until you leave. You'll have to check with your 401(k) administrator to be sure. You won't incur any taxes as long as you execute the rollovers properly. The best way to do it is to coordinate the transfer directly between your old 401(k) and your new IRA, so the check is never sent directly to you.\",\n \"I would always suggest rolling over 401(k) plans to traditional IRAs when possible. Particularly, assuming there is enough money in them that you can get a fee-free account at somewhere like Fidelity or Vanguard. This is for a couple of reasons. First off, it opens up your investment choices significantly and can allow you significantly reduced expenses related to the account. You may be able to find a superior offering from Vanguard or Fidelity to what your employer's 401(k) plan allows; typically they only allow a small selection of funds to choose from. You also may be able to reduce the overhead fees, as many 401(k) plans charge you an administrative fee for being in the plan separate from the funds' costs. Second, it allows you to condense 401(k)s over time; each time you change employers, you can rollover your 401(k) to your regular IRA and not have to deal with a bunch of different accounts with different passwords and such. Even if they're all at the same provider, odds are you will have to use separate accounts. Third, it avoids issues if your employer goes out of business. While 401(k) plans are generally fully funded (particularly for former employers who you don't have match or vesting concerns with), it can be a pain sometimes when the plan is terminated to access your funds - they may be locked for months while the bankruptcy court works things out. Finally, employers sometimes make it expensive for you to stay in - particularly if you do have a very small amount. Don't assume you're allowed to stay in the former employer's 401(k) plan fee-free; the plan will have specific instructions for what to do if you change employers, and it may include being required to leave the plan - or more often, it could increase the fees associated with the plan if you stay in. Getting out sometimes will save you significantly, even with a low-cost plan.\",\n \"Companies usually have a minimum account balance required to keep a 401k for former employees. You will have to check whether $10k is sufficient to keep your funds in your former employer's 401k. If you are below their threshold, you will have to move your money. One option is to rollover into the new employer's 401k. You can rollover a 401k into a traditional IRA account that is independent of your employer. A traditional IRA has the same tax benefits as a 401k; it grows tax-free until you withdraw money from the account. Companies that offer IRAs include Vanguard, Fidelity, TIAA. Many companies have significant overhead costs in the their 401k management. It may be better for you to rollover your money into an IRA to save on these costs. I am not knowledgeable about loaning from retirement accounts, so I cannot help with that.\",\n \"When you pick a company for your IRA, they should have information about rolling over funds from another IRA or a 401K. They will be able to walk you through the process. There shouldn't be a fee for doing this. They want your money to be invested in their funds. Once your money is in their hands they are able to generate their profits. You will want to do a direct transfer. Some employers will work with the investment companies and send the funds directly to the IRA. Others will insist on sending a check to you. The company that will have your IRA should give you exact specifications for the check so that you won't have to cash it. The check will be payable to you or the IRA account. The IRA company will have all the details. Decide if you will be converting non-Roth to Roth, before doing the rollover.\",\n \"For reporting purposes, most IRA firms prefer that you roll the 401(k) funds into a Rollover or Traditional IRA and then convert to the ROTH from there. The mid-air conversions (401(k) directly into a ROTH) can get tricky when you go to do your taxes the following year if the 1099 form from the releasing custodian and the 5498 form from the accepting custodian have different numbers due to the conversion amount and taxes withheld if any.\",\n \"\\\"Good question. And it depends a bit on your current plan, your future income, and the plan you are moving too. Mostly you want to roll out of your existing 401K. There will likely be a fee, and your investment choices are limited. You will want to do a direct transfer, and going with a quality company such as Fidelity or Vanguard. Both of those have zero fees for accounts and pretty good customer service. However, if your future income is likely to be high there is something else to consider. If you are over the limits do a ROTH, and are considering doing a \\\"\\\"Backdoor ROTH\\\"\\\" a key success for this strategy is keeping your roll over IRA balance low (or zero). So you may want to either leave the 401K where it is, or roll it to your new 401K plan. In that case you will have to call the two 401K custodians, and select the best choice as far as fees and fund choice.\\\"\",\n \"Every plan administrator has their own procedures for rollovers. In any case, you would start by browsing their website or calling them seeking information on rollover. You will need to arrange it with both your current and prior administrators. Usually the administrator will send the money directly to your current plan provider, keeping you out of the chain and minimizing any risks of tax complications. It may happen, though, that they have to send the check to you. In that case you will have a limited amount of time to provide it to your current plan.\",\n \"Having gone though this type of event a few times it won't be a problem. On a specific date they will freeze your accounts. Then they will transfer the funds from custodian X to custodian Y. It should only take a day or two, and they will work it around the paydays so that by the time the next paycheck is released everything is established in the new custodian. Long before the switch over they will announce the investment options in the new company. They will provide descriptions of the options, and a default mapping: S&P 500 old company to S&P 500 new company, International fund old company to international fund new company... If you do nothing then on the switchover they will execute the mapped switches. If you want to take this an an opportunity to rebalance, you can make the changes to the funds you invest in prior to the switch or after the switch. How you contributions are invested will follow the same mapping rules, but the percentage of income won't change. Again you can change how you want to invest your contributions or matching funds by altering the contribution forms, but if you don't do anything they will just follow the mapping procedures they have defined. Loans terms shouldn't change. Company stock will not be impacted. The only hiccup that I would worry about is if the old custodian had a way for you to transfer funds into any fund in their family, or to purchase any individual stock. The question would be does the new custodian have the same options. If you have more questions ask HR or look on the company benefits website. All your funds will be moved to the new company, and none of these transfers will be a taxable event. Edit February 2014: based on this question: What are the laws or rules on 401(k) loans and switching providers? I reviewed the documents for the most recent change (February 2014). The documents from the employer and the new 401K company say: there are no changes to the loan balances, terms, and payment amounts. Although there is a 2 week window when no new loans can be created. All employees received notice 60 days prior to the switchover regarding new investments options, blackout periods.\",\n \"You could check with the new 401k provider to see if they allow rollover-in contributions. You can likely take the exact amount of the rollover check that was put in the IRA and put it in the new 401k and then take a loan. Loan amount is calculated as 1/2 vested balance less any outstanding loans or $50k, whichever is less. Hopefully this helps...\",\n \"I rolled mine over from the company I was at into my own brokerage house. You can't roll them into a Roth IRA, so I needed to setup a traditional IRA. There is paperwork your old jobs can provide you. I had to put in some mailing addresses, some account numbers and turn them in. My broker received it, I chose what I wanted to invest it in and that was that. No tax penalty or early withdrawal penalty. The key to avoiding penalties is to have your past employers send the money directly to another retirement fund, not send a check to you.\",\n \"I agree with harmanjd – best to roll it over to an IRA. Not only does that afford you better control of your money as pointed out already, but: If you choose your IRA provider wisely, you can get an account that provides you with a much wider array of investing choices, including funds and ETFs that charge much lower fees than what you would have had access to in an employer 401(k) plan. But here's one thing to consider first: Do you hold any of your previous employer's stock in your old 401(k)? There are special rules you might want to be aware of. See this article at Marketwatch: If your 401(k) includes your company's stock, a rollover may be a bad move. Additional Resource:\",\n \"You'll want to roll the 401k over to a specifically designated rollover IRA. Rollover IRAs differ from an ordinary IRA account because they have NO contribution limit per year. Also Rolling over a 401k to a Roth IRA has consequences. There won't be a penalty but you will have to pay taxes on the amount being rolled over. The choice of Roth or Traditional IRA depends on your current tax situation as well as your expected taxes at retirement. Typically if you are in a low tax bracket and expect to be in a higher tax bracket at retirement a Roth IRA is suggested as withdrawals are tax free. With a rollover conversion you will have to evaluate whether paying taxes now outweighs the potential benefits of tax free withdrawals when you retire.\",\n \"You can do this with no problem. What you want is a direct transfer style of rollover. This is simply where the money is transferred from your 401(k) custodian directly to your new IRA custodian. This will ensure there are no taxes or penalties on the balance. The key is that the money is moving directly to the new account without you having direct access to the balance. This keeps the money out of your hands in the eyes of the IRS. The process should look something like this: A few notes:\",\n \"If you really want to use the money roll it over to the new companies 401k and then take a 401k loan out for whatever the expense is. (Assuming the retirement plan allows them.) Generally 401k loans are frowned upon for all sorts of reasons however if the alternative is to just flat out withdraw the money it is a slightly better solution.\",\n \"I've rolled mine over into IRAs, and once you have one rollover account you can roll further 401ks into it-- I've done that.\",\n \"\\\"Rolling an old 401k into a new 401k is generally only for ease of management. For example, how many bank accounts do you really want? As long as the funds are reasonably allocated I've found it can be a useful \\\"\\\"mind game\\\"\\\" to leave it separate. Sometimes it's desirable to ignore an account and let it grow, and it is a nice surprise when finally adding all the account balances together. In other words, I keep thinking I've got X (the amount of my biggest or current 401k), which affects/helps my habits and desire to save. When I add them all together I'm shocked to find out I've got Y (the total of all accounts). Personally, I've had big paperwork problems transferring an old 403b (same type process as 401k) even when I had an adviser helping me move it. In the end it was worth moving it, because I'm having the adviser manage it. I'm actually writing this answer specifically because I recently moved a big 401k into a Traditional IRA. A rep from the brokerage, representing my previous employer, kept calling me to find out how they could help (I didn't brush him off). I found that using an IRA provided me with the opportunity to do self-guided investments in funds or even individual stocks, well beyond the limited selection of the old company's 401k. It was useful/interesting to me to invest in low-fee vehicles such as index funds (ie: the Buffett recommendation), and I'll find some stocks as well. Oh and when the old company 401k has certain funds being discontinued, I didn't want to notice the mandated changes years later. So, I'd suggest you consider management and flexibility of the 401k or equivalent, and any of your special personal circumstances/goals. If you end up with a few retirement accounts, I suggest you use an account aggregating website to see or follow your net worth. I know many who, based on various concerns and their portfolio, find an acceptable website to use.\\\"\",\n \"My answer would be yes. In addition, I'm not sure that anything requires you to roll your current 401(k) into a new one if you don't like the investment options. Keeping existing funds in your current 401(k) if you like their investment options might make sense for you (though they obviously wouldn't be adding funds once you're no longer an employee). As for the terms of the potential new 401(k), the matching percentage and vesting schedule match what I've seen at past employers. My current employer offers the same terms, but there's no vesting schedule.\",\n \"You are right; Rollover is a process, and not an account type; the result is a Traditional IRA. There is no such thing as a 'Rollover IRA Account'. Rolling a 401(k) over to a Traditional IRA makes sense if a) you have to, because you leave the employer the 401(k) is with; b) because you Traditional IRA is cheaper or more flexible or in other ways 'better' for you, or c) if your next step is a backdoor rollover to a Roth IRA. Most of the time, it doesn't make sense, because employer 401(k) are often better and cheaper. Of course, for the investment company where you roll it too, it makes a lot of sense, because they get your money, so they recommend it. But that's only good for them, not for you. Of course you can roll into an existing account, if you want to roll. Making a new account has no advantage. I cannot imagine any IRA custodian wouldn't take rollovers; they would shoot themselves in the foot by that. What can happen - and you should consider this - that your IRA only accepts cash, and does not allow to transfer the shares you have in the 401(k). That means you have to sell and then re-buy, and you might lose a lot in fees there.\",\n \"rollover funds only mean the funds one was foolish enough to first roll into this 401(k). With no matching, and need for cash, I'd stop depositing to that account. But, from details you gave, you can't withdraw that money.\",\n \"You can probably roll it over into the new company's 401k too, so just talk to your HR rep there. I set up a separate Vangard IRA so when I changejobs or anything, I just dump my investments into that account and don't have to worry about keep track of them all over the place.\",\n \"The simplest thing is to transfer to your current account. You'll have the ability to borrow (assuming employer allows) 50% of the balance if you need to, and one less account to worry about. Transferring to an IRA is the other common choice. This offers the ability to convert to a Roth IRA and to invest any way you choose. The 401(k) options may be limited. Without more details, it's tough to decide. For example, if you are in the 15% bracket, the Roth conversion can be a great idea. And the 401(k) might be not so great, just deposit to the match, and then use the IRA. For example.\",\n \"It depends how you do it. If you roll it from your 401k directly to a Roth then you will have to pay the taxes. The contributions to the 401k are tax deferred. Meaning you do not owe taxes on the money until you collect it. Roth contributions are post tax but the gains are not taxed so long as they are disbursed under acceptable conditions according to the regulations. If you roll it directly from the 401k to a regular tax deferred IRA you should be able to do that with out penalties or taxes. You will still have to pay the taxes at disbursement. If you have the money disbursed to you directly then you will have to pay the penalties, fees, and taxes. Your contributions to an IRA will then be subject to limitations based on the IRA. It will literally be exactly like you are taking money from your pocket to invest in the IRA. Your company should give you the option of a rollover check. This check will be made out to you but it will not be able to be deposited in a regular account or cashed. It will only be redeemable for deposit into a retirement account that meets the regulatory requirements of the 401k rollover criteria. I believe the check I received a few years ago was only good for 60 days. I recall that after 60 days that check was void and I would receive a standard disbursement and would be subject to fees and penalties. I am not sure if that was the policy of T.Rowe Price or if that is part of the regulation.\",\n \"Former pension/retirement/401(k) administrator here. 1. If you don't want to bother with maintaining your own investments, you can 'roll-over' your existing 401(k) into *your new company's 401(k) plan*. Then you will choose your investments in the new plan, you will be 100% vested in 'rollover account'. 2. If you want control over your own investments (recommended!) you can roll over your existing 401(k) into an IRA (Individual Retirement Account). Then *your entire account* will go into your new IRA. 3. You can take part, or all, of your existing account as cash, paid directly to you. Note that this will trigger *20% mandatory Federal Withholding* on whatever goes straight to you. So some of your money is going to the IRS.\",\n \"Rather than rolling the 401(k) to a new employer's plan, you should roll it into a traditional IRA. You get more options for the money, there's no limit on how much you can roll over, and you have more control over the money. If you do a direct rollover, there's no taxes or penalties involved. I'd recommend against taking any money out of the 401(k). With the numbers you give above, it's like borrowing money at 31.5% interest, which is pretty high, and you're sacrificing your future retirement. If you leave that money alone to grow with compounding, you'll have a lot more when you retire. If you're not familiar with the concept of compound interest, it's worth reading up on - the numbers will blow you away. At the very least, if you desperately need to get $3000 out of it, take out just enough to net $3000 after taxes and penalties (not quite $4400 using the numbers you give) and do a rollover with the rest. At least that way, you're keeping more in the IRA (just over $8600, vs the $5000 in your proposed scenario). Overall, I really recommend you find a way to accomplish your goals without touching your retirement savings.\",\n \"No. Your deposits should not have been accepted in the first place. No legit rollover opportunity exists. Related - Can excess 401K contributions returned with 1099-R be rolled over to a Traditional IRA?\",\n \"\\\"Your employment status is not 100% clear from the question. Normally, consultants are sole-proprietors or LLC's and are paid with 1099's. They take care of their own taxes, often with schedule C, and they sometimes can but generally do not use \\\"\\\"employer\\\"\\\" company 401(k). If this is your situation, you can contact any provider you want and set up your own solo 401(k), which will have great investment options and no fees. I do this, through Fidelity. If you are paid with a W2, you are not a consultant. You are an employee and must use your employer's 401(k). Figure out what you are. If you are a consultant, open a solo 401(k) at the provider of your choice. Make sure beforehand that they allow incoming rollovers. Roll all of your previous 401(k)s and IRA's into it. When you have moved your 401(k) to a better provider, you won't be paying any extra fees, but you will not recoup any fees your original provider charged. I'm not sure why you mention a Roth IRA. If you try to roll your 401(k) into a Roth instead of a traditional IRA or 401(k), be aware that you will be taxed on everything you roll. ---- Edit: a little info about IRA's in response to your comment ---- Tax advantaged retirement accounts come in two flavors: one is managed by your company and the money is taken out of your paycheck. This is usually a 401(k) or 403(b). You can contribute up to $18K per year and your company can also contribute to it. The other flavor is an IRA. You can contribute $5,500 per year to this for you and $5,500 for your spouse. These are outside of your company and you make the deposits yourself. You choose your own provider, so competition has driven prices way down. You can have both a 401(k) and an IRA and contribute the max to both (though at high incomes you lose the ability to deduct IRA contributions). These accounts are tax advantaged because you only pay taxes once. With a regular brokerage account, you pay income tax in the year in which you earn money, then you pay tax every year on dividends and any capital gains that have been realized by selling. There are two types of tax-advantaged accounts: Traditional IRA or Traditional 401(k). You do not pay income tax on this money in the year you earn it, nor do you pay capital gains tax. Instead you pay tax only in the year in which you take the money out (in retirement). Roth IRA or Roth 401(k). You do pay income tax on money on this money in the year in which you earn it. But then you don't pay tax on any gains or withdrawals ever again. When you leave your job (and sometimes at other times) you can move your money out of a 401(k) into your IRA, where you can do a better job managing it. You can also move money from your IRA into a 401(k) if your 401(k) provider will allow you to. Whether traditional or Roth is better depends on your tax rate now and your tax rate at retirement. However, if you choose to move money from a traditional account into a Roth account, you must pay tax on it in that year as if it was income because traditional and Roth accounts are taxed at different times. For that reason, if you are just trying to move money out of your 401(k) to save on fees, the logical place to put it is in a traditional IRA. Moving money from a traditional to a Roth may make sense, for example, if your tax rate is temporarily low this year, but that would be a separate decision from the one you are looking at. You can always roll your traditional IRA into a Roth later if that does become the case. Otherwise, there's no reason to think your traditional 401(k) should be rolled into a Roth IRA according to what you have described.\\\"\",\n \"If you plan to continue contributing to a 401(k) and are no longer self-employed, then you need to start a new 401(k) at your new business. You can't contribute to the old one any more. About the money in the old one, you have a few options. If both 401(k) plans have good investment options and low fees, then there's little reason to think one of these strategies is better than the other. If, like me, at least one of your 401(k) providers has very few available funds and those funds have high expense ratios, then it's a good idea to move your money where the investments are best. As a rule, IRA's are better than 401(k) plans because most IRA's will allow you to invest in practically anything you want while most 401(k) plans only allow you to invest in the funds that have taken your company's HR people to the best lobster dinners or went to the same school as them. Most organizations do an absolutely horrible job at selecting a reasonable set of funds because the decision-makers generally have no finance background and no incentive to do a good job. For that reason I like IRA's. Of course, some solo 401(k) plans are also very good so just leaving it where it is may be best for you. This has the added advantage of being ready to go if you end up self-employed again at some point.\",\n \"Don’t do anything that causes taxes or penalties, beyond that it’s entirely personal choice and other posters have already done a great job enumerating then. I recently switched jobs in June and rolled over a 401k from my old company to new company and the third party managing the account at the new company was much more professional and walked me through all the required steps and paperwork.\",\n \"You generally cant roll funds from a 401k with a company you're still employed with. Some companies allow it depending on the custodial agreement but it's rare. Generally you need to wait until retirement or separation to roll funds out of a 401k.\",\n \"\\\"I highly doubt this was a mistake. In the event of a corporate merger/buyout, changes to employee 401(k) plans are usually hashed out as part of the M&A agreement. The choices made in the agreement depend on numerous factors, so it may be difficult to predict what happens to your plan in situations like this. A quick online search reveals a few articles, e.g. this one from expertplan.com, that list the three most common consequences for retirement plans: It sounds like the company that purchased your employer agreed to immediately vest employees in employer 401(k) contributions as part of the purchase agreement. Without knowing the details of the merger/buyout, I can't say this for sure, but this sounds like a plausible way to keep employees of the purchased company content. Rather than roll it over, does it make sense to wait for that company to be purchased, in the hopes that a similar \\\"\\\"mistake\\\"\\\" occurs? Since this doesn't sound like a mistake, but rather a part of the buyout agreement, I don't think it's something you should count on in the future. It may be very likely, or it could be a relatively rare occurrence that happened to be part of this purchase agreement. I don't believe the Employee Retirement Income Security Act regulates what can or can't be done to your 401(k) in a buyout, except that the company is required to inform you of any changes (and obviously, the new 401(k) plan must conform to ERISA as well).\\\"\",\n \"\\\"As other responders said, you can certainly roll over multiple 401(k) into a single account. An added benefit of such rollover (besides the ease of tracking) is that you can shop around for your Rollover IRA provider and find the one that gives you the specific mutual funds that you want to invest in, the lowest expenses, etc. - in short, find the best fit to your priorities. There are also \\\"\\\"lemon\\\"\\\" 401(k) plans and if you are in one of them, get out! And rollover is the way out. There is also one possibility to keep an eye on as it happens rarely, but it does happen - rolling a 401(k) over into another 401(k). I've done it once when I started a job at a company that had a great 401(k) with a good selection of low-cost mutual funds. I rolled the 401(k) from one previous job in to this 401(k) to take advantage of it. At the same time I kept a Rollover IRA, combining the 401(k) from all other jobs; it had more investment options and provided some flexibility.\\\"\",\n \"Yes you can rollover as many different 401ks into a single IRA account. I have done it personally and it really cuts down on the overhead of keeping up with lots of different accounts. Your brokerage or mutual fund company should be able to help you with it. If you are using a company that just gives you forms and those forms don't mention an easy way to combine. Then I suggest rolling over one 401k first then once that's finished you can rollover the other 401k into that same account.\",\n \"AFAIK, individual 401k accounts are supposed to be funded from self-employment earnings, not from rollovers from 401k plans of previous employers. So, check with your accountant before making opening an individual 401k account and getting your previous 401k plan to re-issue the checks to be payable to your individual 401k account. You might also want to ask about whether loans are permitted from individual 401k accounts (my guess is they are not because the possibility of abuse of the privilege is too high since the employer and employee are the same individual). In any case, loans against 401k plans are generally not a good idea, and many people on this forum have blogged about this matter.\",\n \"From your first link: IRS.gov: IRA One-Rollover-Per-Year-Rule IRA One-Rollover-Per-Year Rule Beginning in 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own (Announcement 2014-15 and Announcement 2014-32). The limit will apply by aggregating all of an individual’s IRAs, including SEP and SIMPLE IRAs as well as traditional and Roth IRAs, effectively treating them as one IRA for purposes of the limit. They are limiting your ability to roll over money from an IRA to an IRA. You are looking to go from a 401K to an IRA. That is fine. The idea was that some people were taking all money from their IRA, using it for almost 60 days, then putting it back into an IRA. Thus getting a sort of short term loan. They could do this multiple times in a year. The direct trustee-to-trustee transfer are exempt from the once per year rule because the money is never in your possession. Moving money from a 401K/403b/TSP plan from your former employer to an IRA or Roth IRA is fine, and isn't limited to once per year.\",\n \"You can't rollover a 401k directly into a Roth IRA. What you can do is rollover a 401k into a traditional IRA, and then convert some or all of the money to a Roth IRA. This is independent of any contributions made to a traditional or Roth IRA.\",\n \"\\\"You're confusing between \\\"\\\"individual\\\"\\\" 401k (they're called \\\"\\\"Solo-401k\\\"\\\" and are intended for self-employed), and Individual Retirement Account (IRA). You can't open a solo-401k without being self employed. You can open an IRA and roll over money from your old 401k to it. You cannot get a loan from IRA. You can ask the 401k plan manager to reissue the checks to the new trust, shouldn't be a problem. Make sure the checks are issued to the trust, not to you, to avoid withholding and tax complications. This is what is called a \\\"\\\"direct\\\"\\\" rollover. You might be able to roll the money over to the 401k of your new employer, it is not always allowed and you should check. You can probably then take a loan from that 401k. However, it diminishes the value of your retirement savings and you should only do it if you have no other choice (being evicted from your home, your children are starving, can't pay for your chemo, etc... this kind of disasters). Otherwise, I'd suggest rolling over to IRA, investing in funds with significantly lower fees (Vanguard target retirements funds for example, or index funds/ETF's), and reassessing your spending and budgeting habits so that you won't need loans from your 401k. Re companies - ETrade is nice, consider also Scottrade, TDAmeriTrade, Vanguard, Fidelity, Sharebuilder, and may be others. These are all discount brokers with relatively low fees, but each has its own set of \\\"\\\"no-fee\\\"\\\" funds.\\\"\",\n \"\\\"You can rollover money from a 401(k) to Traditional IRA and back to a 401(k). There are likely account closure fees associated with this, so it's not completely free. As long as you're rolling from one tax deferred account to another there are no penalties. The IRS has a handy chart showing what accounts can roll where. Note, starting next year, you can only do one IRA rollover per year. The IRS has additional general information on retirement account rollovers. One additional comment - on the concept of your money being \\\"\\\"locked\\\"\\\" into an IRA. Generally you have far more options with an IRA than a 401(k). If you go with a large, low cost provider like Vanguard you're likely to be much better off than in a small company 401(k) that only offers costly funds that are likely selected primarily to benefit the administrator of the plan. Choose your IRA provider and the investments with them wisely, and leave that money there for a very long time.\\\"\",\n \"You can't get a loan from an IRA. You cannot get a loan from your 401(k) plan with your previous employer; 401(k) plans do not give loans to ex-employees, only current employees. Thus, if you want to have the flexibility of getting a loan from the money in the 401(k) plan with your ex-employer, your only option is to roll it over into the 401(k) plan of your current employer. But be aware of the negatives in doing so, some of which are discussed in the answers to Why would you not want to rollover a previous employer's 401(k) when changing jobs?.\",\n \"You can also roll money from prior 401ks into current 401ks. Call the administrator of the 401k you prefer (i.e., Fidelity/Schwab, whoever the financial institution is). Explain you don't work there anymore and ask if you can roll money into it. Some plans allow this and some don't. So either, 1) You can roll all your prior 401ks into your current 401k. 2) You might be able to roll all prior 401ks into the prior 401k of your choice if they will accept contributions after you've left. You can't move the amount in your current employer's 401k until you separate or hit a certain age. 3) Like mentioned above, you can roll all prior 401ks into an IRA at any financial institution that will let you set up an IRA. Process: -Call the financial institutions you want to move the money from. Tell them you want a direct rollover. Have them write the check to the financial institution you are rolling into with your name mentioned but not the beneficiary (i.e., check written to Schwab FBO: John Doe account #12345) Tax implications: -If you are rolling from a pre-tax 401k to a pre-tax 401k or IRA, and the money goes directly from institution to institution, you are not liable for taxes. You can also roll from a Roth type (already taxed) account into another Roth type account with no tax implications. If they write a check to YOU and you don't put the money in an IRA or 401k within 60 days you will pay ~20% tax and a 10% early withdrawal penalty. That's why it's best to transfer from institution to institution. 401k vs IRA: -This is a personal decision. You could move all your prior 401ks into an IRA you set up for yourself. Generally the limitations of a 401k are the lack of funds to invest in that fit your retirement strategy, or high expense ratios. Be sure to investigate the fees you would pay for trades in an IRA (401k are almost always free) and the expense ratio for funds in your 401k vs funds you might invest in at a broker for your IRA. Best of both: -You can roll all your 401ks into a single 401k and still set up an IRA or Roth IRA (if your income qualifies) that you can contribute to separately. This could give you flexibility in fund choices if your 401k fees tend to be cheaper while keeping the bulk of your nest egg in low cost mutual funds through an employer account. Last advice: Even if you don't like the options in your current 401k, make sure you are contributing at least enough to get any employer match.\",\n \"I've changed jobs several times and I chose to rollover my 401k from the previous employer into an IRA instead of the new employer's 401k plan. The biggest reason not to rollover the 401k into the new employer's 401k plan was due to the limited investments offered by 401k plans. I found it better to roll the 401k into an IRA where I can invest in any stock or fund.\",\n \"The simplest way to consolidate the funds your old 401(k) plans is by doing what's called a Direct Rollover (whereby the funds go directly into the new plan and skips you completely) from each of the old plans into either an IRA that you establish with a provider of your choice or even into your current employer's 401(k) plan if that is available. That way, the funds are in one central account and available to invest. Plus it eliminates the mandatory 20% withholding if the rollover is indirect and is sent to you first before the deposit into the new plan. It is important to bear in mind that you have 60 calendar days from the date of distribution to get the full amount into the new plan and a rollover is considered a tax reportable, but not necessarily a taxable event provided you deposit the funds within the time frame allotted.\",\n \"\\\"Almost all companies in the US have changed from formal pension programs to 401k plans, and most companies that still have pension programs don't allow new employees to enroll in the new program; only the previous participants who are vested in the pension plan will get benefits while new employees get enrolled in the 401k plan. If this is the case with your prospective employer, then demanding that you be allowed to enroll in the pension plan is likely to be futile; in fact, the likely response may well be \\\"\\\"Here is our offer. Take it or leave it\\\"\\\" or \\\"\\\"We are withdrawing the offer we made\\\"\\\" especially if you are in a field where there are plenty of other people who could do the job instead of you. So be sure that you understand what your worth is to the company and how much leverage you have before starting to make counter-offers. With regard to money that you might have vested in your current employer's pension plan, your options are to leave it there until you retire and start getting a pension (generally not advisable in these parlous times when the company might not even exist by then), roll it over into an IRA or into your new employer's 401k plan. This last is the only matter that concerns your prospective employer and where you might need to ask; the new employer's 401k plan might not be structured to accept rollovers. If the money in your current employer's retirement plan is in a pension plan, what is paid out for rolling over might be different (and smaller) than what has been credited to you thus far. For example, my (State Government) pension plan credited 8% interest per annum on the amounts I contributed but this was fake money because had I resigned and withdrawn the pension contributions (for the purpose of rolling over into an IRA or even just taking it as cash), I would have received only my contributions plus only 4.5% interest per annum. The 8% interest credited is available only for the purpose of the purchase of an immediate annuity upon retirement; it is not something that is portable to a new plan, and if I want a lump-sum payout upon retirement instead of a pension in the form of an annuity, it would be the 4.5% rate again...\\\"\",\n \"Adapted from an answer to a somewhat different question. Generally, 401k plans have larger annual expenses and provide for poorer investment choices than are available to you if you roll over your 401k investments into an IRA. So, unless you have specific reasons for wanting to continue to leave your money in the 401k plan (e.g. you have access to investments that are not available to nonparticipants and you think those investments are where you want your money to be), roll over your 401k assets into an IRA. But I don't think that is the case here. If you had a Traditional 401k, the assets will roll over into a Traditional IRA; if it was a Roth 401k, into a Roth IRA. If you had started a little earlier, you could have considered considered converting part or all of your Traditional IRA into a Roth IRA (assuming that your 2012 taxable income will be smaller this year because you have quit your job). Of course, this may still hold true in 2013 as well. As to which custodian to choose for your Rollover IRA, I recommend investing in a low-cost index mutual fund such as VFINX which tracks the S&P 500 Index. Then, do not look at how that fund is doing for the next thirty years. This will save you from the common error made by many investors when they pull out at the first downturn and thus end up buying high and selling low. Also, do not chase after exchange-traded mutual funds or ETFs (as many will likely recommend) until you have acquired more savvy or interest in investing than you are currently exhibiting. Not knowing which company stock you have, it is hard to make a recommendation about selling or holding on. But since you are glad to have quit your job, you might want to consider making a clean break and selling the shares that you own in your ex-employer's company. Keep the $35K (less the $12K that you will use to pay off the student loan) as your emergency fund. Pay off your student loan right away since you have the cash to do it.\",\n \"It sounds like the two best options would be to roll it over into a traditional IRA or roll it over into your new 401(k). If there isn't much money in your SIMPLE IRA, it might make more sense to just roll it over into your 401(k) so you have fewer retirement accounts to keep track of. However, if you do have a significant amount of money in the SIMPLE IRA then you may wish to take advantage of the greater freedom in investment options that IRAs offer over most 401(k) plans. Keep in mind the 2-year rule for SIMPLE IRAs. You will face tax penalties if you roll it and it hasn't yet been 2 years since the SIMPLE IRA was opened.\",\n \"As to the rollover question. Only rollover to a ROTH if you have other funds you can use to pay the taxes you will be hit with if you do that. DO NOT pay the taxes out of the funds in the 401k. If you don't have a way to pay the taxes, then roll it to a traditional IRA. You never want to pay the government any taxes 'early' and you don't want to reduce the balance. beyond that, A lot depends on how long you figure you will be with that company. If it's only a few years, or if you and other employees can make enough of a fuss that they move the fund to someplace decent (any of the big no-load companies such as Vanguard would be a better custodian), then I'd go ahead and max it out. If you figure to be there for a long while, and it looks like someone is in bed with the custodian and there's no way it will be changed, then maybe look to max out a Roth IRA instead.\",\n \"Don’t take the cash deposit whatever you do. This is a retirement savings vehicle after all and you want to keep this money designated as such. You have 3 options: 1) Rollover the old 401k to the new 401k. Once Your new plan is setup you can call who ever runs that plan and ask them how to get started. It will require you filling out a form with the old 401k provider and they’ll transfer the balance of your account directly to the new 401k. 2) Rollover the old 401k to a Traditional IRA. This involves opening a new traditional IRA if you don’t already have one (I assume you don’t). Vanguard is a reddit favorite and I can vouch for them as Well. Other shops like Fidelity and Schwab are also good but since Vanguard is very low cost and has great service it’s usually a good choice especially for beginners. 3) Convert the old 401k to a ROTH IRA. This is essentially the same as Step 2, the difference is you’ll owe taxes on the balance you convert. Why would you voluntarily want to pay taxes f you can avoid them with options 1 or 2? The beauty of the ROTH is you only pay taxes on the money you contribute to the ROTH, then it grows tax free and when you’re retired you get to withdraw it tax free as well. (The money contained in a 401k or a traditional IRA is taxed when you withdraw in retirement). My $.02. 401k accounts typically have higher fees than IRAs, even if they own the same mutual funds the expense ratios are usually more in the 401k. The last 2 times I’ve changed jobs I’ve converted the 401k money into my ROTH IRA. If it’s a small sum of money and/or you can afford to pay the taxes on the money I’d suggest doing the same. You can read up heavily on the pros/cons of ROTH vs Traditional but My personal strategy is to have 2 “buckets” or money when I retire (some in ROTH and some in Traditional). I can withdraw as much money from the Traditional account until I Max out the lowest Tax bracket and then pull any other money I need from the ROTH accounts that are tax free.This allows you to keep taxes fairly low in retirement. If you don’t have a ROTH now this is a great way to start one.\",\n \"Does the 457(b) plan allow for the rollover of other retirement funds into it? And do you have very specific reasons for wanting to roll over your SEP-IRA into the 457(b) plan instead of into some other IRA plan with a different custodian? For example, if you already have a Traditional IRA, is there any reason why your SEP-IRA should not be rolled over into the Traditional IRA? With regard to the question about separate accounts, once upon a time, rolling over money from an employment retirement plan (e.g. 401k) into a Traditional IRA required establishing a separate account called a Rollover Traditional IRA so that the rolled-over money (and the earnings thereon) were not commingled with standard traditional IRA money resulting from personal contributions). This was so that the account owner had the option of rolling over the separately kept money into a new employer's retirement plan (if such a rollover was permitted by the new 401k plan). If one did not want to ever roll over money into a new employer plan, one had to write a letter to the custodian telling them that commingling was OK; you never wanted to put that money into another 401k plan. The law changed some time later and the concept of Rollover IRAs holding non-commingled funds has disappeared. With that as prologue, my answer to your question is that perhaps the law did not change with respect to 457(b) plans, and so the money that you want to rollover into the 457(b) plan needs to be kept separate and not commingled with your contributions via payroll deduction to the 457(b) plan (in case you want to ever roll over the SEP-IRA money into another SEP-IRA). Hence, separate accounts are needed: one to hold your SEP-IRA money and one to hold your contributions via payroll deductions.\",\n \"The time horizon for your 401K/IRA is essentially the same, and it doesn't stop at the day you retire. On the day you do the rollover you will be transferring your funds into similar investments. S&P500 index to S&P 500 index; 20xx retirement date to 20xx retirement date; small cap to small cap... If your vested portion is worth X $'s when the funds are sold, that is the amount that will be transferred to the IRA custodian or the custodian for the new employer. Use the transfer to make any rebalancing adjustments that you want to make. But with as much as a year before you leave the company if you need to rebalance now, then do that irrespective of your leaving. Cash is what is transferred, not the individual stock or mutual fund shares. Only move your funds into a money market account with your current 401K if that makes the most sense for your retirement plan. Also keep in mind unless the amount in the 401K is very small you don't have to do this on your last day of work. Even if you are putting the funds in a IRA wait until you have started with the new company and so can define all your buckets based on the options in the new company.\",\n \"\\\"Assuming you are below retirement age, you typically cannot roll money from a Roth IRA into a 401k nor transfer money out of a 401k until you leave the company. Your best bet is to leave your exising roth ira separate from your 401k. A good strategy for retirement accounts is whenever able (typically when you switch jobs) roll your 401k into a \\\"\\\"rollover IRA\\\"\\\" (not a roth). Then you can manage your investments with more options than the 5-20 funds provided in the 401k. I would recommend against rolling funds into a 401k because of the lack of options in most 401k plans. Also, 401k is pre-tax and Roth is post-tax. Pre and post tax investments don't mix before withdrawal unless you do a conversion of some kind.\\\"\",\n \"\\\"The biggest reason why one might want to leave 401k money invested in an ex-employer's plan is that the plan offers some superior investment opportunities that are not available elsewhere, e.g. some mutual funds that are not open to individual investors such as S&P index funds for institutional investors (these have expense ratios even smaller than the already low expense ratios of good S&P index funds) or \\\"\\\"hot\\\"\\\" funds that are (usually temporarily) closed to new investors, etc. The biggest reason to roll over 401k money from an ex-employer's plan to the 401k plan of a new employer is essentially the same: the new employer's plan offers superior investment opportunities that are not available elsewhere. Of course, the new employer's 401k plan must accept such roll overs. I do not believe that it is a requirement that a 401k plan must accept rollovers, but rather an option that a plan can be set up to allow for or not. Another reason to roll over 401k money from one plan to another (rather than into an IRA) is to keep it safe from creditors. If you are sued and found liable for damages in a court proceeding, the plaintiff can come after IRA assets but not after 401k money. Also, you can take a loan from the 401k money (subject to various rules about how much can be borrowed, payment requirements etc) which you cannot from an IRA. That being said, the benefits of keeping 401k money as 401k money must be weighed against the usually higher administrative costs and usually poorer and more limited choices of investment opportunities available in most 401k plans as Muro has said already.\\\"\",\n \"Rolling a 401(k) to an IRA should be your default best option. Rolling a 401(k) to another 401(k) is rarely the best option, but that does happen. I've done it once when I started a job at a company that had a great 401(k) with a good selection of low-cost mutual funds. I rolled the 401(k) from one previous job in to this 401(k) to take advantage of it. In all other cases, I rolled 401(k)s from previous jobs to my Rollover IRA, which gave me the most freedom of investment options. Finally, with 401(k)-to-Roth IRA rollovers, it's important to decouple two concepts so you can analyze it as a sum of two transactions:\",\n \"You should never roll a 401(k) to a Roth IRA. If the intention is to do so, you are better off rolling to a traditional IRA, and then converting. (Per the comment below, I should add - if the 401(k) contained post tax money, this portion rolls to a Roth, not a Tradition IRA. You then have the exercise of converting/recharacterizing just the TIRA money, as the Roth stands aside) This preserves the ability to recharacterize back to a traditional IRA. You might wish to do this if: The answers so far are great, but I'll add what I see missing -\",\n \"\\\"What ever you convert from the 401(k) will be subject to tax. The bigger issue is that there's no \\\"\\\"do over\\\"\\\" no ability to recharacterize the conversion if when you do your taxes, you realize you need to undo some. I'd suggest transferring from the 401(k) to the traditional IRA first and then convert, just bring aware of the prorata taxation that will be due.\\\"\",\n \"\\\"The instructions do specifically mention them, but not as exclusive plans. Pension and annuity payments include distributions from 401(k), 403(b), and governmental 457(b) plans. The instructions also mention this: An eligible retirement plan is a governmental plan that is a qualified trust or a section 403(a), 403(b), or 457(b) plan. 414(h) plans are \\\"\\\"qualified\\\"\\\" plans. Employee contribution to a 414(h) plan is qualified under 403(b). Report it there and mark it as \\\"\\\"Rollover\\\"\\\". Talk to a licensed (EA/CPA licensed in your state) professional when in doubt.\\\"\",\n \"You can do a trustee to trustee exchange. You will need to contact both companies to coordinate the paperwork. As long as both accounts are the same type (traditional\\\\Roth) you are fine. You can also do a rollover where you have the check but there are some limitations and deadlines which are avoided by the trustee to trustee exchange. For example the IRS limits the number of rollovers to one a year. You can have multiple accounts of the same type. The annual contribution limits can be split across accounts. Rollovers and transfers are not part of annual contribution limits.\",\n \"There is no segregation of amounts that you have in Rollover (Traditional) IRAs when it comes to figuring out how much of your basis is being converted from your Traditional IRA into a Roth IRA. So, yes, you will lose the benefit of being able to make nondeductible contributions to your Traditional IRA each year and rolling them over into a Roth IRA without tax consequences. Since your 401k amount may be substantially more than the $5K basis you create each year, converting the 401k amount into a Traditional IRA will mean that most of the money converted to the Roth IRA is pre-tax money, and so you end up paying tax on most of the converted amount.\",\n \"\\\"Yes. Two years after your first contribution to the SIMPLE IRA, you can roll it to a traditional IRA. You can still contribute \\\"\\\"pre-tax\\\"\\\", but the mechanism will be slightly different, since with an employer plan the contribution was automatically deducted from your paycheck. With an individual plan, you make the contributions yourself and then get a tax deduction when you file. Since contributions to traditional and Roth IRAs combined are capped at $5,500 if you're under 50, some sort of employer-sponsored plan might be better from a contribution standpoint. If your institution offers some sort of plan other than a 401(k), you might still want to roll to a traditional IRA, since you will have much more flexibility in the investments you choose. On the flip side, if that thought is overwhelming, having a smaller set of options might be better for your peace of mind.\\\"\",\n \"For the rollover, you should probably talk to the recipient manager. This would be your broker or whomever (your new employer if rolling into another 401k). They should be able to update you on progress and let you know if you need to do anything. In a comment, you say I could be putting in money but instead im lossing. There is no requirement that an IRA have 401k money in it. Just put the money in without the existing money. Eventually the rollover will complete and add that money to whatever you contribute to the IRA. The rollover should not affect your future contributions in any way.\",\n \"\\\"You have a few options: Option #1 - Leave the money where it is If your balance is over $5k - you should be able to leave the money in your former-employer's 401(k). The money will stay there and continue to be invested in the funds that you elect to invest in. You should at the very least be receiving quarterly statements for the account. Even better - you should have access to some type of an online account where you can transfer your investments, rebalance your account, conform to target, etc. If you do not have online account access than I'm sure you can still transfer investments and make trades via a paper form. Just reach out to the 401(k) TPA or Recordkeeper that administers your plan. Their contact info is on the quarterly statements you should be receiving. Option #2 - Rollover the money into your current employer's 401(k) plan. This is the option that I tend to recommend the most. Roll the money over into your current employer's 401(k) plan - this way all the money is in the same place and is invested in the funds that you elect. Let's say you wanted to transfer your investments to a new fund lineup. Right now - you have to fill out the paperwork or go through the online process twice (for both accounts). Moving the money to your current-employer's plan and having all the money in the same place eliminates this redundancy, and allows you to make one simple transfer of all your assets. Option #3 - Roll the money from your former-employer's plan into an IRA. This is a cool option, because now you have a new IRA with a new set of dollar limits. You can roll the money into a separate IRA - and contribute an additional $5,500 (or $6,500 if you are 50+ years of age). So this is cool because it gives you a chance to save even more for retirement. Many IRA companies give you a \\\"\\\"sign on bonus\\\"\\\" where if you rollover your former-employers 401(k)...they will give you a bonus (typically a few hundred bucks - but hey its free money!). Other things to note: Take a look at your plan document from your former-employer's 401(k) plan. Take a look at the fees. Compare the fees to your current-employer's plan. There could be a chance that the fees from your former-employer's plan are much higher than your current-employer. So this would just be yet another reason to move the money to your current-employer's plan. Don't forget you most likely have a financial advisor that oversees your current-employer's 401(k) plan. This financial advisor also probably takes fees from your account. So use his services! You are probably already paying for it! Talk to your HR at your employer and ask who the investment advisor is. Call the advisor and set up an appointment to talk about your retirement and financial goals. Ask him for his advice - its always nice talking to someone with experience face to face. Good luck with everything!\\\"\",\n \"\\\"I don't think there's a rule -- (I can't comment) but Brick cited IRS rules...but IMO Brick missed one thing -- @ashur668 is not looking for a distribution, but is looking for a rollover. My best guess: that this part of the ruleset is not well defined, and your (and my) employer have chosen to interpret any withdrawl as a \\\"\\\"distribution\\\"\\\", even if better characterized a rollover. A few months ago, I went so far as to explore if I could use a loophole -- my company had just gone through a merger; I was hoping I could rollover some or maybe all of my 401k to my IRA (I remember now, it would have been everything before starting roth 401k contributions). My company asserted this was not permitted, and further asserted that the rumors I had heard were mistaken that when we went through a company spin-off a few years before, that nobody under 59 1/2 was permitted to roll over. I did a quick search and found IRS topic 413 As far as I can tell, this topic is silent on the matter at hand. Topic 413 referred me to IRS Publication 575, where I started looking at the section on rollovers. I read some of it then got bored. Note that we're one step removed -- we are reading IRS publications and interpretations of IRS rules. I don't know that anybody here has read the actual tax law. There may be something in there that prevents companies from rolling over before 59 1/2 that is not well codified in IRS publications.\\\"\",\n \"It is typically very easy to roll a 401(k) into an IRA. Companies that provide IRA's are very experienced with it, and I would expect that they will take your calls from overseas. You will likely be able to do it over the internet without using a phone at all. Just open an IRA with any brokerage company (Scottrade, Vanguard, Fidelity, Schwab, Ameritrade, etc.) and follow instructions to roll your 401(k) into it. Most likely they will need your signature, but usually a scan of a form you have filled out will do. Be sure to have information on your 401(k) provider, including your account number there, on hand. These companies are all very reputable and this is not a difficult transaction. There's really no downside to rolling into an IRA. 401(k) plans usually have more limited options and/or worse fee structures and are frequently harder to work with, as you have observed.\",\n \"I doubt that there is an arrangement with any country that would allow you to transfer money out of a 401(k) and roll it over to another country that isn't governed by US Tax Laws without taking a distribution. The US government won't let you pull out like that without taking its cut. There may be, but I'd be surprised. Check around in the appropriate venues. If you're making a distribution that incurs penalties, then that's what you're doing. If you can do so without incurring penalties, then great for you, just deposit into the vehicle of your choice in your country.\",\n \"As others mentioned, I am not sure what you mean by stating that your 401K was rolled over to a money market account. Assuming that it was rolled over to an IRA account, you can roll it over to another IRA account with a financial institution of your choice (either a brokerage or a bank.) Alternatively, you can withdraw these funds, but since you are under 59.5 years old, you would have to cough up 10% penalty to IRS for this unqualified withdrawal. Therefore, I would strongly recommend for you to wait till you reach this eligible age. Other qualified (penalty-free) withdrawals are: purchase of the first home, college tuition, medical insurance premiums for unemployed individuals, disability, and medical expenses exceeding 7.5% of your Adjusted Gross Income. I would assume that your 401K was a Traditional 401K account (before tax contributions), and not ROTH 401K, so yo would also have to pay taxes upon withdrawing funds whether you do it now or after you are 59.5 y.o.\",\n \"My advice would be to invest in the 401k with the same type of funds you'd purchase when you rollover to your IRA. They are both retirement accounts. If the stock market tanks, your 401k balance will be low but you'll also be purchasing stocks at a much cheaper price when you establish your roth. You should create an asset allocation based on your age, not on the type of retirement account you have. One question to consider: When you do become a student, you'll likely be a in lower tax bracket. Can you contribute pre-tax dollars and then rollover to a ROTH in the year that you're a student?\",\n \"Should I convert the 401K of my old company to Traditional IRA and start investing in that instead of investing in the new employer 401K plan with high fees? Regarding the 401K funds from the previous employer, you can: Future investments: Roll overs don't have limits, but new investments do.\",\n \"Direct roll-overs / trustee to trustee transfers are typically initiated by the receiving institution. Therefore you need to work with Vanguard. They will have a form in which you provide them with your fidelity account info and they will then contact Fidelity and initiate the transfer. Do not take the option of being sent a check made out to you by Fidelity (an indirect rollover). There are too many ways to muck up and get hit with penalties if you are the middleman in the process. I believe in most, if not all, cases the IRS now requires a 20% withholding on indirect 401k rollovers. This is because too many times people would initiate a roll over but not complete it either at all or within the allowed 60 day window and then come tax time be unable to pay the tax and penalty on the distribution. The tricky part of that withholding is that you still have to deposit that amount into the new account otherwise it becomes a distribution subject to tax and penalties (and that means coming up with the money from other accounts). So in summary talk to Vanguard and set up an institution to institution transfer. They souls make this very easy as they want your money. And do not do any kind of rollover where you come into personal possession of the money. If the check is made out to Vanguard but sent to you to resend to Vanguard that should not be an issue as that is still a trustee to trustee transfer. Fidelity may have a minor account closer fee that will be deducted from the value of the account before it is sent.\",\n \"Obviously, her new employer won't know how much was contributed from the old job, so this won't work this year. Obviously the new employer would. They will not deposit anything, unless you tell them how much you have deposited already. Somehow tell the new employer how much was contributed by her last employeer, so they can stop deducting at the right time. I'm not sure if this is even possible. Why isn't it possible? I've been in a similar situation, the employer had a form to fill on this matter as part of the paperwork for the payroll, right between the direct deposit forms and the 401K contributions form. By the way, another thing to take a look at when switching jobs is the Social Security tax. I wrote about it here.\",\n \"ok if you haven't rolled in the 401k assets yet, you're fine and should put them into a traditional. if your earnings + roth conversions will put you at or below your anticipated tax bracket during retirement, then the roth conversion might make sense. in some cases, employers will give you a roth 401k option, but you are right that it's not the default.\",\n \"\\\"You can definitely open an IRA and roll the money over. I suggest instead of trying opening online calling the institution and asking what would be the procedure in your specific case. If not, I will have to cash out my 401K. Who do I contact to find out if my country has some sort of deal with the US in regards to taxes? I would of course prefer to not pay the penalty (20 % federal + 10 % state tax), and instead reinvest the money in a retirement fund in my country. US embassies some times have listings of tax advisers who work with US expats in the countries they cover. You can check for such a list on the website of your local US embassy. These people will be able to answer this question. However it is highly unlikely that you'll be able to avoid the tax and penalty in the US in this scenario. It is not likely that you could \\\"\\\"roll-over\\\"\\\" into a foreign retirement fund (from your country's laws perspective), but maybe your country has some solution for this.\\\"\",\n \"I would check to see what the fee schedule is on your previous employer's 401k. Depending on how it was setup, the quarterly/annual maintenance fee may be lower/higher than your current employer. Another reason to rollover/not-rollover is that selection of funds available is better than the other plan. And of course always consider rolling over your old plan into a standard custodial rollover IRA where the management company gives you a selection of investment options. At least look at the fees and expense ratios of your prior employer's plan and see if anything reaches a threshold of what you consider actionable and worth your time. Note: removed reference to self directed IRA as vehicle is more complicated account type allowing for more than just stocks, bonds, and mutual funds. Not for your typical retail investor.\",\n \"Yes, that's exactly what you can/should do. The only question is whether the 401(k) has good investment choices and low fees, if so, go for it.\",\n \"Since its such a small amount, they may require you to move it. A common cutoff is $5k, but it varies from plan to plan. I would roll it over into an IRA. The problem with withdrawing it is that opportunity to save is gone. Especially for IRAs, which have a low maximum contribution, its hard to make it up in the future.\",\n \"\\\"In the case of Fidelity, the answer is \\\"\\\"no.\\\"\\\" Although when you leave your employer and roll over the account to an IRA, leaving it with Fidelity allowed me to keep money in those closed funds. My Roth IRA was not able/allowed to buy those funds.\\\"\",\n \"If you roll your funds from a 401k to an individual Vanguard account it will be in an IRA. Some people talk about IRA loans, but what is happening is that you are given a check for the value of the IRA and you have 60 days to deposit that full amount in another qualified account before being assessed a distribution penalty. The IRS also has rules to prohibit you from making several back-to-back rollovers to try to float the money for longer than 60 days.\",\n \"You should be able to take a loan out on the 401(k). You can't do a roll-over unless you leave your job. If your 401(k) is that bad, you should consider maxing out your IRA contributions first and putting the rest into your 401(k) - so if you're putting away about 7k a year, lower your withholding to 1500 and put 5500 into an IRA.\",\n \"I would not recommend borrowing your 401(k) money to buy a house for two reasons: When you borrow money from your 401(k), it is no longer invested. Yes, you pay yourself interest, but you miss out on the investment gains for the life of the loan. If you leave your job, the loan is due in full shortly thereafter. If you do not pay it back, you are hit with taxes and penalties. If I were you, I would roll it over into an IRA for the reasons you mentioned.\",\n \"You should try to take out other loans sufficient to pay off your 401(k) loan if you can. Maybe you can take out a home equity loan? You can also ask your bank about unsecured loans. You should also check the rules for your new employer's 401(k), if you're rolling over your 401(k). There's a small possibility that you could take out another loan right now and apply it to the previous loan balance. Or if you need to wait, you could use it to help pay off any temporary loans that were needed to avoid the distribution penalty.\",\n \"You can take the old 401k and convert it to an IRA just about anywhere. No accountant required. Borrowing against the IRA/401k is a very stopgap measure, be sure you know what you are getting into. A distribution from it is a 10% penalty before age 59.5.\",\n \"Do not take the cash! You might be able to leave the money with the large company. Ask the HR people at the company. If you are satisfied with their work, no sense leaving if you don't have to. I have coworkers that have 401K all over from all the buyouts the company went through. If you don't want to leave it behind, do a rollover into your own account with a low cost carrier. (Vanguard, Fidelity and Charles Schwab are popular) Whoever you choose for your own account can help you rollover the funds without penalty. (Schwab helped me over the phone, it was pretty simple) More about rolling over a Roth 401K\",\n \"Take The 20k and transfer it to the new employer 401k. You then can take a loan and accomplish the same thing. By the time you pay the tax and 10% penalty, that withdrawal will be worth just over half. The same half you can borrow out, pay yourself the interest and not lose out on 50 years of growth.\",\n \"It doesn't make a difference if you will be keeping it in the 401K or transferring it to an IRA, it is still retirement money that you plan on investing for decades. Pre-Enron many employees invested significant amounts of their retirement funds with the employer. One of the risks was that if a single stock was down at the wrong time, you were hurt if you needed to sell. If you are going from an S&P 500 in the 401K to an S&P 500 in the IRA, it doesn't matter if the the market is up or down, the two funds will be pretty much in synch.\",\n \"This is called an in-plan Roth conversion and is discussed by the IRS here. If your 401(k) has a Roth option then it likely also has a provision to convert pre-tax dollars, but you'll have to check with the administrator to be sure. They could also potentially limit the type of money that can be converted. But most likely you should be able to convert any amount you want, and since it's all pre-tax (your contributions, employer matching, and earnings), it doesn't really matter which money is converted because it's all equivalent. One caveat is you won't able to convert any employer matching that hasn't fully vested.\",\n \"\\\"All things being equal, a defined benefit pension is far better than an IRA or a 401(k). Think about it this way - let's say you can have a guaranteed $100 a month*, or the chance at $100 a month. Which is better? Now, obviously, your tolerance for risk is the difference - but this is the beauty of a defined benefit plan. Your employer is picking up the risk. Assuming that the pool of investments is about the same (which unless if their funds are tremendously under performing they are), the question is, who takes the risk - you or them? Especially if you are moving into a new position, having a defined benefit plan is like having a risk-free asset in your portfolio. It increases your safety. The only reason to roll this over into a 401(k) or IRA is if your expected value (risk * payout) is better. A worked example. If half the time you would earn more than $100 and half the time less, then you could imagine the two as being equally good. Only if you really love risk would you take that chance. In reality, only half the investments out there will \\\"\\\"beat\\\"\\\" the average, and as such, you actually have less than a 50/50 shot of beating a DB - unless if there are really low returns to it. More likely, I suspect you are over-estimating your ability to get a higher return.\\\"\",\n \"A rollover IRA is a traditional IRA. Your rollover contributions are not taxed and rollover or counted against your annual limit, which is income dependent. A Roth IRA is one where your contributions will be taxed going into the IRA. Note that there are adjusted gross income maximums for contribution to a Roth IRA (see here), and as far as I can tell those income maximums also determine whether or not you can rollover to a Roth IRA.\",\n \"If you're current employer who is running the 401k says no you can't. You may be able to get a loan against those assets, that's more common. However, this post will be down voted to oblivion because you want r/personalfinance . This isn't the sub for this question.\",\n \"Post-86 After tax contributions to a 401k are after tax. The earnings on that money is taxable, but not the contributions. This means: You'll have $15,000 in the 401k and $10,000 is considered after-tax and $5,000 is considered pre-tax. The after-tax portion can be converted to a Roth IRA without paying taxes or penalties. New in September 2014 The IRS has made substantial changes that now enable this to happen. You can request a distribution from your 401k provider where they divide the money into pre-tax and after-tax funds. In my example, you'd get a check for $10,000 that you could send to a Roth IRA and a check for $5,000 you could add to a traditional Roll-over IRA. Neither of those would be taxable events and you'd end with a Roth IRA with $10K and a Traditional, Rollover IRA with $5K in it. Notes:\",\n \"I don't know about keeping different rollover IRAs separate. But I know that there is a reason to keep rollover IRAs separate from other traditional IRAs -- if you want to roll them back into a 401(k) in the future, some 401(k)s only allow funds that were rolled over from a 401(k) originally.\",\n \"Okay thanks, let's hope it's a relatively painless process to correct my mistake! Really odd that my 401(k)s are traditional, I was so sure they weren't. Maybe it's better then to open up a traditional IRA alongside the Roth, use that for rollovers, and just kick a few bucks into the Roth on occasion?\",\n \"The general advise is to contribute to the 401K up to the match limit. Then put money into a Roth IRA. Then put the rest into the 401K above the match. Yes you can have an IRA and a 401K. You can even have Roth and non-Roth versions. You do have to watch the limits, and exclusions, but there is nothing stopping you from contributing to multiple types in one year. Over a long career you may find your self with all the possible types of accounts. When you re-qualify for the company 401K, there is no need to roll over the IRA money into the 401K. Just keep the IRA.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["\"403b plans are used by school districts, colleges and universities, nonprofit hospitals, charitable foundations and the like for their employees while 401k plans are used by most everybody else. I would suspect that a school district etc can use a 401k plan instead of a 403b plan if it chooses to do so, but the reverse direction is most likely forbidden: a (for-profit) company cannot use a 403b plan. One difference between a 403b plan and a 401k plan is that the employer can choose to offer, and the employee can choose to purchase, stock in the company inside the 401k plan. This option obviously is not available to charities etc. which don't issue stock. Your comment that the 403b plan invests solely in (variable) annuities suggests that the plan administrator is an insurance company and that the employer is moving to more \"\"modern\"\" version that allows investments in mutual funds and the like. Forty years ago, my 403b plan was like that; the only investment choice was an annuity, but some time in the 1980s, the investment choices were broadened to include mutual funds (possibly because the 1986 Tax Reform Act changed the rules governing 403b plans). So, are you sure that your employer is changing from a 403b plan to a 401k plan, or is it just a change of 403b plan administrator from the insurance company to another administrator who offers investment choices other than an annuity? Note, of course, that insurance companies have changed their options too. For example, TIAA (the Teachers' Insurance and Annuity Association) which was the 403b plan administrator for many schools and colleges became TIAA/CREF (College Retirement Equities Fund) where the CREF mutual funds actually were pretty good investments.\""],"string":"[\n \"\\\"403b plans are used by school districts, colleges and universities, nonprofit hospitals, charitable foundations and the like for their employees while 401k plans are used by most everybody else. I would suspect that a school district etc can use a 401k plan instead of a 403b plan if it chooses to do so, but the reverse direction is most likely forbidden: a (for-profit) company cannot use a 403b plan. One difference between a 403b plan and a 401k plan is that the employer can choose to offer, and the employee can choose to purchase, stock in the company inside the 401k plan. This option obviously is not available to charities etc. which don't issue stock. Your comment that the 403b plan invests solely in (variable) annuities suggests that the plan administrator is an insurance company and that the employer is moving to more \\\"\\\"modern\\\"\\\" version that allows investments in mutual funds and the like. Forty years ago, my 403b plan was like that; the only investment choice was an annuity, but some time in the 1980s, the investment choices were broadened to include mutual funds (possibly because the 1986 Tax Reform Act changed the rules governing 403b plans). So, are you sure that your employer is changing from a 403b plan to a 401k plan, or is it just a change of 403b plan administrator from the insurance company to another administrator who offers investment choices other than an annuity? Note, of course, that insurance companies have changed their options too. For example, TIAA (the Teachers' Insurance and Annuity Association) which was the 403b plan administrator for many schools and colleges became TIAA/CREF (College Retirement Equities Fund) where the CREF mutual funds actually were pretty good investments.\\\"\"\n]","isConversational":false}}},{"rowIdx":84,"cells":{"_id":{"kind":"string","value":"2648"},"query":{"kind":"string","value":"How does unemployment insurance work?"},"gt_ids":{"kind":"list like","value":["307120"],"string":"[\n \"307120\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1],"string":"[\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["307120","539522","94332","277178","84896","583788","412078","123628","296844","377019","585593","181787","593628","8057","97151","401731","315244","105570","481896","234822","115190","229134","344573","577475","459850","109285","563277","272987","79903","208633","355477","30597","342618","389898","259881","338796","209706","94023","590994","597574","336242","553993","339326","62397","9152","147837","438985","538659","307831","209604","487600","291847","587193","277820","593","94960","257715","540394","72519","387304","366839","443586","267010","176183","122952","506182","192495","462923","102954","516991","366877","316045","74958","181171","272520","297255","107753","150069","487525","132601","440940","42304","329099","520047","25896","516069","214476","333688","429973","169432","471163","392895","394420","244394","3746","71575","397369","516640","129027","183349"],"string":"[\n \"307120\",\n \"539522\",\n \"94332\",\n \"277178\",\n \"84896\",\n \"583788\",\n \"412078\",\n \"123628\",\n \"296844\",\n \"377019\",\n \"585593\",\n \"181787\",\n \"593628\",\n \"8057\",\n \"97151\",\n \"401731\",\n \"315244\",\n \"105570\",\n \"481896\",\n \"234822\",\n \"115190\",\n \"229134\",\n \"344573\",\n \"577475\",\n \"459850\",\n \"109285\",\n \"563277\",\n \"272987\",\n \"79903\",\n \"208633\",\n \"355477\",\n \"30597\",\n \"342618\",\n \"389898\",\n \"259881\",\n \"338796\",\n \"209706\",\n \"94023\",\n \"590994\",\n \"597574\",\n \"336242\",\n \"553993\",\n \"339326\",\n \"62397\",\n \"9152\",\n \"147837\",\n \"438985\",\n \"538659\",\n \"307831\",\n \"209604\",\n \"487600\",\n \"291847\",\n \"587193\",\n \"277820\",\n \"593\",\n \"94960\",\n \"257715\",\n \"540394\",\n \"72519\",\n \"387304\",\n \"366839\",\n \"443586\",\n \"267010\",\n \"176183\",\n \"122952\",\n \"506182\",\n \"192495\",\n \"462923\",\n \"102954\",\n \"516991\",\n \"366877\",\n \"316045\",\n \"74958\",\n \"181171\",\n \"272520\",\n \"297255\",\n \"107753\",\n \"150069\",\n \"487525\",\n \"132601\",\n \"440940\",\n \"42304\",\n \"329099\",\n \"520047\",\n \"25896\",\n \"516069\",\n \"214476\",\n \"333688\",\n \"429973\",\n \"169432\",\n \"471163\",\n \"392895\",\n \"394420\",\n \"244394\",\n \"3746\",\n \"71575\",\n \"397369\",\n \"516640\",\n \"129027\",\n \"183349\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["\"Unemployment insurance provides a temporary safety net to workers who lose their jobs by replacing a portion of their salary for certain periods. Each state administers its own unemployment insurance program so some rules may vary from state to state. To receive unemployment insurance payments, you must have lost your job through no fault of your own. If you quit your job or lost it because of poor performance or another justifiable reason, you are not eligible for unemployment insurance benefits. State unemployment insurance programs require claimants to have worked sufficiently before they can claim benefits. As soon as you apply for unemployment insurance, an agency with the state in which you live will verify that you were a victim of a layoff by contacting your previous employer and making sure you lost your job due to lack of work and not an action within your control. After the state verifies you were indeed the victim of a layoff, your weekly payment is calculated. Your payment will be a percentage of what you made in your previous job, generally between 20 percent and 50 percent, depending on your state. Unemployment insurance replaces only a portion of your previous pay because it is intended to pay only for the essentials of living such as food and utilities until you find new employment. Before you begin receiving benefits, you must complete a waiting period of typically one or two weeks. If you find a new job during this period, you will not be eligible for unemployment benefits, even if the job does not pay you as much as your previous job. After the waiting period, you will begin to receive your weekly payments. Employers pay for unemployment insurance through payroll taxes. So, while employees' work and earnings history are important to funding their unemployment benefits, the money does not come from their pay. Employer unemployment insurance contributions depend on several factors, including how many former employees have received benefits. Employers pay taxes on an employee's base wages, which vary by state. California, for example taxes employers on the first $7,000 of an employee's annual earnings, while neighboring Oregon taxes up to $32,000 of wages. Employers must set aside funds each payroll period and then report taxes and pay their states quarterly. States have several categories of tax rates they charge employers. New businesses and those first adding employees pay the \"\"new rate,\"\" which is typically lower and geared toward small businesses. Established businesses who haven't paid their taxes recently or properly are usually assessed the \"\"standard rate\"\" --- the highest possible tax rate, which in 2010 ranged from 5.4 percent in several states including Georgia, Hawaii and Alaska to 13.56 percent in Pennsylvania. Businesses in good standing may receive discounts under the \"\"experienced rate.\"\" Depending on the number of employees a business has and how many former employees have claimed unemployment, states can give sizable rate reductions. The fewer claims, the lower the rate a business pays in unemployment insurance taxes. As a result of the economic crisis legislation has been passed to extend Unemployment benefits. Regular unemployment benefits are paid for a maximum of 26 weeks in most states. However, additional weeks of extended unemployment benefits are available during times of high unemployment. The unemployment extension legislation passed by Congress in February 2012 changed the way the tiers of Emergency Unemployment Compensation (EUC) are structured. A tier of unemployment is an extension of a certain amount of weeks of unemployment benefits. There are currently four tiers of unemployment benefits. Each tier provides extra weeks of unemployment in addition to basic state unemployment benefits. Emergency Unemployment Compensation (EUC) Tiers June - August 2012: Source and further information can be found here - Unemployment Tiers - About.com Sources: Unemployment Insurance(UI) - US Dept. of Labor How Does Unemployment Insurance Work? - eHow Percentage of Pay That Goes to Unemployment Insurance - eHow Additional Info: You can file for UI over the internet here are some useful resources. OWS Links State Unemployment Offices - About.com How to Apply for Unemployment Over the Internet - eHow\"","But they did have the accident. The insurance is in case they become unemployed which they did. If you want to come up with some alternative concept called destitution insurance or some such then go for it. So far that has turned out to be both technically and politically impossible.","The point of unemployment insurance *from a governmental spending perspective* is as stimulus. The government is interested in keeping society working properly for as many people as possible, it is not concerned with giving *you* money between *your* jobs. Unemployment insurance helps make sure that recessions do not turn into depressions, because the economy won't grind to a halt as soon as people get fired.",">So, we agree then. No, Unemployment is not insurance paid for by the worker. We do not agree on that. Apparently we agree on the fact that is not illegal. >So, what? This is why there should be qualifications and tests much like those proposed for social security. Especially since the employee doesn't actually pay for any of it. If you are making millions of dollars and still can't figure out to create an 'Oh shit' savings account, well looks like you are SOL.","That's not unemployment insurance. Because it's perfectly possible, and even likely, that your industry will do badly but you'll keep your job, or that your industry will do well but you'll lose your job anyway. Any bet you make to insure yourself against unemployment has to be individually about you -- there are no suitable proxies.","I would suggest they are not wasted because your premiums fund unemployment insurance, which is a net to prevent people from going under if they lose their jobs. Unemployment insurance is in many ways an incubator for success because it allows an entrepreneur to take more risk in starting a business because failure won't mean devastation. Perhaps that person who took the risk because of the ability to fail started the business that you now work for. Society works better (in my opinion) by keeping the bottom closer to the top. Paying into the unemployment insurance fund indirectly provides you opportunity.","If it goes to a millionaire who continues to pay larger bills than others while unemployed then that money goes right back into the economy. The money for unemployment insurance is linked to compensation. If they are millionaires then their compensation has already paid for unemployment insurance. This idea that money is going to turn around and go to some others possibly through some other program is flatly wrong. Either you have unemployment insurance or you don't. You want to withhold unemployment insurance from rich people because you don't think they are worthy. That is an interesting idea, but so far it has never worked politically.",">Most unemployment insurance money goes right back into the economy anyway The reason for that is because it's being given to poor people who need it for food and shelter and other things that are urgent. If it goes to a millionaire this is not going to be the case.","\"If we are only talking about a few extra months between jobs which is quite common now then how do you get to \"\"living beyond their means\"\"? Either they have unemployment insurance or they don't. It sounds like you don't like unemployment insurance. So go bring that to a vote. So far the majority of people want unemployment insurance in place because they see greater economic benefit in providing this service.\"","Not sure I agree. In your analogy, there was a car accident, or the closing of a position. So, yes, it is okay to claim on the insurance. Claiming and being granted unemployment requires that several very specific criteria are met on a continuing basis.","\"Wait, correct me if I'm wrong, but this is how I thought it worked: \"\"say you work 40 hours a week \"\"during a recession, NO ONE GETS FIRED \"\"instead, they cut your hours \"\"from say 40 to 32 \"\"THEN unemployment benefits make up the difference in that eight hours you're not working \"\"then you get hired again\"\" This seems like the best system ever and something America should do. No one gets fired, and companies save oodles of money not training new workers.\"","It is not wasted: it bought you peace of mind. Perhaps you would have had peace of mind without it, because of the particular industry you are in. But people from any industry can get sick or give birth, and not all industries are as evergreen as people think. A number of my onetime programmer colleagues now drive a truck or run a farm because new programming jobs weren't as easy to get as they once were. Like any insurance, it can't be affordable if it is bought only by those who think they will need it. The premiums you pay, in addition to giving you peace of mind, lower the premiums your neighbours pay. That contributes to social harmony. When your neighbours collect EI while looking for another job, they aren't tempted to turn to crime or legal-but-not-savoury ways to earn money. You probably like that, too. The fact they didn't get to choose whether or not to contribute means that they will be covered even if they aren't prudent and forward-looking people, which again is a benefit for you. And BTW, employers pay $1.40 in premiums for every dollar you pay. And we never collect. It's not for us. But we pay it.","\"This is the best tl;dr I could make, [original](http://cep.lse.ac.uk/pubs/download/dp1503.pdf) reduced by 99%. (I'm a bot) ***** > Alternative risk outcomes All risk outcomes capture ex-post risk realizations rather than ex- ante risks. > 4.8 1.2 1.6 Figure 2: Positive Correlation Tests - Dynamics t+1 t+2 t+3 t+4 t+5 t+6 Displacement Probability in Year t+k t+7 t+8 Notes: Risk realization in t + 1 may fail to fully capture the unemployment risk faced by an individual as she is making her coverage choice at time t, which justifies using risk realizations for that individual further into the future. > 05 Individual-level model &beta;OLS =.082 &beta;2SLS =.245 0.05.1.15 Firm Displacement Risk in t.2 Notes: The Figure uses cross-sectional variation in displacement risk across firms as a risk shifter to estimate how UI coverage choices react to variation in risk that is not driven by individual moral hazard. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/76t73y/lse_riskbased_selection_in_unemployment_insurance/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~229382 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **risk**^#1 **coverage**^#2 **individual**^#3 **work**^#4 **selection**^#5\"","Actually, most insurance policies DON'T have a cash value if you don't make a claim. The reason that some life insurance policies do this is that they are really tax sheltered investments posing as insurance. With that in mind, the root of your question is really whether insurance premiums are wasted if you never make a claim. It really makes no difference if you are talking about EI, Auto, or Homeowner's insurance. My answer to that is no. What you are paying for when you buy insurance is financial risk avoidance. Look at it this way, you don't buy EI as an investment where you hope to get a return on your investment. You are buying the right to be protected against catastrophic financial difficulty associated with losing your job. Whether you claim it or not you did receive that protection. This is what drives me so crazy when I hear people talk about how an insurance company is ripping you off because you paid more in premiums than they paid out in benefits. Of course you did! If most people didn't pay in more than the company paid out there would be no financial interest for someone to form an insurance company.","Many, many good answers here, but I like this one: One month's worth of expenses for each full percentage of unemployment. Therefore, it would normally float between, say five months and ten months. When the economy's hoppin' -- you have less to worry about. When times are tough -- beef up that fund.","\"Sorry, even if you never file a claim for Employment Insurance (EI), you don't get your premiums back. So, yes, if you paid into EI and never filed a claim, your contributions are, as you put it, \"\"wasted\"\" – insofar that your premiums provided no direct benefit to you. However, your premiums may have provided a benefit to society, perhaps even your previous colleagues. Yet, some would point out that a good chunk of EI premiums are likely wasted on excessive administration of the program itself. That's government. A couple of cases I'm aware of where you may be refunded some of the EI premiums paid are: Meaning, a legal way to avoid paying into the EI system altogether is to run your own business. Of course, you won't be able to file an EI claim if your business evaporates overnight. Other kinds of claims unavailable to those who don't pay into EI include maternity, parental*, and sickness benefits .. although they recently made some changes to permit the self-employed to opt-in for some special benefits. * except in the province of Quebec, where there is a separate Quebec Parental Insurance Plan (QPIP) that also covers the self-employed.\"","Let me get this straight, if I'm smart and save money to last times between jobs using my own money, I shouldn't take the unemployment given to me? If I'm reckless and save nothing on my own, I should be bailed out though. No-, That's ridiculous. Of course I'll take the unemployment, it's given whether I have 0 dollars or 1,000,000 dollars.","Require it to survive? hat has that got to do with anything? That is absolutely not the point at all. It is a bridge to the next job. People should not have to sell their homes and move on, especially in this environment, simply because they went without a job for several months more than they expected. If you don't want to collect what is owed to you, then that is fine. Do not assume that counts for others. I know people who live in rich households who pay rent and do not eat at the table with others. They show up in these statistics and could use the help even though it may not seem like it. That isn't the point. And it really isn't clear what the point is when the proposal appears to be causing people to mix their lives up in order to save the government a couple of million over the course of a year. What is disingenuous is to set up an unemployment insurance system and then expect it to be conditional based on all kinds of criteria. One thing you might not be keeping in mind is that the existing system has a error rate of around 20% varying a bit between states. That means around 1 in 5 that are owed insurance payments and sign up never get anything, and around 1 in 5 that are owed nothing for whatever reason end up getting full payments anyway. The more criteria you add to the mechanism the higher that error rate goes. You are quibbling over details that the existing system lacks the capacity to handle.","Unemployment is meant for people who were laid off, not terminated. Also, the employee who claimed unemployment did so even after they had worked for another company for several months between working for me and making the claim. If I actually laid someone off I would be the first to personally help them fill out paperwork for unemployment benefits. If those benefits go to those who shouldn't receive them it hurts everyone. That 3% increase in unemployment insurance is 3% that isn't going into paying my actual employees.","Millionaires, by definition of being millionaires (having a million dollars), save more money than the poor. That means more of the unemployment check will go to savings rather than being spent in the economy. Which means that it will not stimulate the economy as much if given to a millionaire. The whole point of unemployment is that it gets spent into the economy immediately, and that is why it is one of the most effective forms of stimulus. The money would not be spent on the economy immediately if it were given to a millionaire. >You want to withhold unemployment insurance from rich people because you don't think they are worthy. Tell me where I said that.","Good point, but the idea I was getting at is that the money was already allocated for this purpose as it is regularly with every pay day. The idea that some people should not get unemployment insurance payments because they happen to live in households that retain high income is not trivial and at very least should be put before a vote of representatives.","\"To receive unemployment benefits, you must be registered with an employment agency and be actively seeking work, and be willing to accept work should it be offered to you. As a full-time Cornell University student, as you describe yourself, this does not seem a likely scenario. Also, you need to have established a state of residence. It is not clear to me that you have done so, given your travel between the South Pacific, Ithaca, New York, North Carolina etc. You should check with your local state unemployment office in New York State, or perhaps North Carolina, although I don't know if you satisfy residency requirements in either state. They will be able to confirm however. Are your parents claiming you as a dependent on their federal income taxes? If so, I do not believe that you will be able to file for unemployment benefits, regardless of your student status at Cornell University. One more issue to consider: Have you filed tax returns for the income you received from your television production work? I am uncertain of the amount, as you said that you worked for two 4-month intervals making $10,000. That implies $20,000 of earnings over two years. Yet your bullet point number 7 states that you made \"\"10 grand each of the four months\"\". If that means that you made $10,000 per month for four months, then you earned $40,000 per summer, for a total of $80,000 for two summer's worth of work. I don't think unemployment benefits are intended for individuals in your situation.\"","Honestly, the best way to manage this risk is to manage your savings appropriately. Many experts recommend that maintain a reasonably liquid account with 6-9x your minimum monthly expenses for just this occurrence. I know, easier said than done. Right? As for insurance, I can only speak for what is the case in the US. Here, most mortgages will require you to get PMI insurance until you have at least 20% equity in your house. However, that insurance only protects the BANK from losing money if you can't pay. It doesn't save you from foreclosure or ruining your credit. Really, the type of insurance you are talking about is Unemployment insurance which all states in the US make available to workers via deductions from their paycheck. The best advice, I suppose, is to keep your expenses low enough to cover them with an unemployment check until you have accumulated enough savings to get through a rough patch. That may mean buying a less expensive home, or just waiting until you have saved a bigger down payment. If you didn't plan ahead, and you are already in the house, another option might be to extend your mortgage. For example from a 20 to a 30 year to reduce your payments to a manageable level. A more risky option might be to convert to a variable rate loan temporarily, which typically carries a lower interest rate. However, it might be hard to secure a new loan if you don't currently have an income.","In short, I suggest you take a look at your W-4 form and adjust it properly. And yes you can claim your self as a dependent, unless someone else is claiming you. But here is a more detailed explanation of how it works. How Income Tax Works. While most people tend to only think about the tax system and the Internal Revenue Service (IRS) as the month of April approaches, it's actually a never-ending process. For our purposes, a good way to explain how the system works is to give an example of one American income earner, we will call him Joe. The tax process begins when Joe starts his new job. He and his employer agree on his compensation, which will be figured into his gross income at the end of the year. One of the first things he has to do when he's hired is fill out all of his tax forms, including a W-4 form. The W-4 form lists all of Joe's withholding allowance information, such as his number of dependents and child care expenses. The information on this form tells your employer just how much money it needs to withhold from your paycheck for federal income tax. The IRS says that you should check this form each year, as your tax situation may change from year to year. Once Joe is hired and given a salary, he can estimate how much he will pay in taxes for the year. Here's the formula: At the end of each pay period, Joe's company takes the withheld money, along with all of withheld tax money from all of its employees, and deposits the money in a Federal Reserve Bank. This is how the government maintains a steady stream of income while also drawing interest on your tax dollars. Toward the end of the tax year, Joe's company has to send him a W-2 form in the mail. This happens by January 31. This form details how much money Joe made during the last year and how much federal tax was withheld from his income. This information can also be found on Joe's last paycheck of the year, but he'll need to send the W-2 to the IRS for processing purposes. At some point between the time Joe receives his W-2 and April 15, Joe will have to fill out and return his taxes to one of the IRS service and processing centers. Once the IRS receives Joe's tax returns, an IRS employee keys in every piece of information on Joe's tax forms. This information is then stored in large magnetic tape machines. If Joe is due a tax refund, he is sent a check in the mail in the next few weeks. If Joe uses e-File or TeleFile, his refund can be direct-deposited into his bank account.","\"The money for unemployment insurance was taken out of their paychecks, so why shouldn't they get the payments? Most unemployment insurance money goes right back into the economy anyway, so this \"\"pocketed\"\" conclusion is more of a weasel word argument than anything else. Furthermore, this is millionaire *households* and not millionaires. One projection put the cost of this at $2 million a year, so it isn't even really significant compared to the rest of the Federal budget.\"","Why not 180 weeks then? Being able to get cash without having to work for it changes the human psyche regarding the necessity of work. At the end if the 99 weeks, a lot of people resent having to work again, which translates into an overall lesser quality labor pool. I'm not arguing for no unemployment, but 99 weeks is extreme. No one is actively job searching that long.","You've convinced me with your capital letters. How could I have been so blind? The average person on unemployment is there for 39 weeks. Not permanent. So, you're basing your argument on false data. Further, a certain portion of these are there not because of stigma, but because the industry in which they worked doesn't need the labor. Another portion is only actually looking for work in order to continue qualifying for unemployment, and will retire after the benefits run out. You're talking about making a truly significant policy change with real negative effects on many, many real people in order to help a part of the population that doesn't necessarily exist in the manner you imagine it does. From what I can tell, you have done nothing to arrive at your conclusions beyond feeling an emotional reaction with no actual sense of the data. Or any actual knowledge of economics.","If I were you I would educate myself better on the ins and outs of employment law. Apparently not knowing all the details has already cost you substantial amount of money. [http://www.nolo.com/legal-encyclopedia/unemployment-benefits-contesting-employees-claim-30348.html](http://www.nolo.com/legal-encyclopedia/unemployment-benefits-contesting-employees-claim-30348.html) Of course the details can vary quite a bit by jurisdiction. Please consider consulting with an attorney who specializes in employment law who can help you protect yourself in the future.","Unanticipated unemployment is usually the triggering factor for drawing on an emergency fund. Ask yourself: what happens if I lose my job tomorrow? Or my spouse becomes unemployed? What happens if I become disabled and can't work for x amount of time? Sure, you can discount your chances of needing such a fund if you have free health care. But having health insurance doesn't change the fact that an emergency fund is a good idea. There are many ways to go broke!","\">That is absolutely not the point at all. It is a bridge to the next job. People should not have to sell their homes and move on, especially in this environment, simply because they went without a job for several months more than they expected. Isn't this what a savings account is for? Are you to tell me that these people don't have enough money built up in a \"\"rainy day\"\" fund? I am about 900k from making a million dollars a year however i still have enough saved up for 8 months of being laid off, so that i DON'T have to get on govt assistance right away. You can't honestly expect me to believe that someone who has this kind of wealth didn't properly plan for this.\"","Let me offer what I did in a similar situation - Two points (a) we were banking $20K/yr or so to the cash fund, 2 good incomes, and the ability to go indefinitely on just one of the 2. (b) A HELOC that was prime-1.5%. The result was to mentally treat the HELOC as our emergency fund, but to enjoy the interest savings of over $16,500/yr for the $100K that had a sub-1% return. When I first referenced this story, I came under criticism. Fair enough, it's not for everyone. Let's jump ahead. We owe $228K @3.5%. We had tapped the equity line for brief periods, but never over $20,000. When we lost our jobs, both of us, we had hit our number and are semi-retired now. Our retirement budget included the current mortgage payment, so we are in line for that dropping out of the budget in 12 years, and starting social security after that, which I did not include as part of the budget. Note - when we lost our jobs, the severance was 6 month's pay, and we collected unemployment as well. The first 12 months were covered without tapping our retirement funds at all. So, to Nick's point (and excellent answer) our first line of defense against unemployment was this combination of severance and unemployment insurance.","\"Ah, I see what you mean, then. But if you die at 57, being hit by a bus, those self-invested funds won't help the general social welfare of the union. Instead 1/3 would go to some estate tax, and the rest are left to the designated appointee of your choosing. This soulless system helps the general populace a bit more directly. That is the theory, anyways. *edit: what I mean to say is, you still perceive that money as your own, like some compulsory retirement savings plan. I see it more as tax revenue,math little to no guarantee I will personally benefit from it directly any more than the general benefit it provides to This Great Union.\"\"\"","This is something a redditor came up with. It provides a basic income to everyone, while still penalizing those who don't work (by minutely by surely lowering their stipend) and preventing a poverty trap (by never withdrawing the stipend).","\"The definition of insurance is the transfer of risk. Thus, you're paying for transferring of a risk (of an item/property) to the insurer (carrier), so that they bear the financial burden of a loss/accident and not you. You could always self-insure, but a lot of times, insurance is cheaper, since due to the \"\"Law of Large Numbers\"\" the insurer can just charge a premium that is small percentage in comparison to the cost of self-insuring.\"","This is something that many people misunderstand. Nearly everyone who works in the U.S. is required to pay Social Security and Medicare taxes (sometimes called payroll taxes or FICA). These are not a savings plan, and the money you pay is not going into an account with your name on it. This money is used to pay for the benefits of the current retirees/beneficiaries. When you retire, the benefits you get will be paid for by the workers that are still working and paying that tax. You may be receiving benefits, but you are also still working, so you still have to pay the tax.","\"Yes, it's normal. If you \"\"buy\"\" your own disability insurance with after tax money, any payout you get is non taxable. If your employer \"\"buys\"\" your disability insurance with their own money, any payout you get is taxable. Since the payout is not 100% of your pre-disability income, most folks strongly prefer that the payout be non taxable. To achieve this, I pay the premiums on behalf of my employees (including myself) and then add that premium to their salary as a taxable benefit. In effect I paid it to them, then took it from them and used it to buy the insurance. (It has no impact on my corporate taxes since I can either deduct premiums or salaries, same either way.) This ensures they won't pay tax if they should collect. And I have had people collect, and it was non-taxable to them.\"","That is exactly how the insurance companies work. What you described here falls under P/L. If you are buying insurances you are betting that you might get sick. Same as when insurance companies sells you insurance they are betting that you won't get sick. No one will sell you insurance if you are oreads sick. That's why you have government to take of you. Of course there are pools of healthy and unhealthy people. The healthier the better for the company. No one is in it to loose money.","It doesn't matter. The effect of that money being spent and entering into the economy as a whole is strongly positive. This moralist argument is that unemployment is somehow tempting or enjoyable, but the only real support for that is the loathing associated with it. Fighting with imaginary demons can hurt real people and economies.","\"First of all, insurance never covers the cost of the item, it is almost always a partial payout at best. For example, a typical house in the Northeast US where I live that costs $300,000 will have the actual house valued at maybe $100,00 and rest of the value will be in the land. Therefore, the insured value will typically be $100,000. The only problem is that to actually rebuild the house might easily cost $250,000. So, your idea that some kinds of insurance allows the beneficiary to recoup their loss is usually never true. As you say, from an actuarial point of view insurance is a sheer waste of money. For example, a typical house has maybe a 0.5% chance of burning down every year. In other words out of 2000 houses, maybe 1 will burn down every year. So, lets say you got $100,000 of insurance on your house. Then the value of that policy would be $100,000 / 2000 = $50 per year. An insurance company will charge around $700 per year for the policy. That means you are basically flushing $650 down the toilet every year to maintain that policy. The reason why they do this is what blankip says above, they are buying \"\"peace of mind\"\", a psychological product. In other they imagine they are somehow safe. So, even though they are losing money, paying it makes them feel as though they are not losing money. It's delusional, but then again most people have a lot of delusions of which insurance is just one of many.\"","The amount you contribute will reduce the taxable income for each paycheck, but it won't impact the level of your social security and medicare taxes. A 401(k) plan is a qualified deferred compensation plan in which an employee can elect to have the employer contribute a portion of his or her cash wages to the plan on a pretax basis. Generally, these deferred wages (commonly referred to as elective contributions) are not subject to income tax withholding at the time of deferral, and they are not reflected on your Form 1040 (PDF) since they were not included in the taxable wages on your Form W-2 (PDF). However, they are included as wages subject to withholding for social security and Medicare taxes. In addition, employers must report the elective contributions as wages subject to federal unemployment taxes. You might be able to keep this up for more than 7 weeks if the company offers health, dental and vision insurance. Your contributions for these policies would need to be paid for before you contribute to the 401K. Of course these items are also pre-tax so they will keep the taxable amount at zero. If there was a non-pretax deduction on your pay check that would keep the check at zero, but there would be taxes owed. This might be union dues, but it can also be some life and disability insurance polices. Most stubs specify which deductions are pre-tax, and which are post-tax. Warning. If you get the company match some companies give you the maximum match for those 7 weeks, then zero for the rest of the year. Others will still credit you with a match at the end of the year saying if you should get the benefit. It is not required that they do this. Check the company documents. You could also contribute post-tax money, which is different than Roth 401K, for the rest of the year to keep the match going. Note: If you are turning 50 this year, or are already 50, then you can contribute an additional $5,500","I don't know where the money comes from. I do know flood Insurance is through the National Government. I worked an internship for Horace Mann insurance, and all I know is that I would hate to be working their the next month and a half.","1) When you apply for insurance you indicate your expected income, they figure the subsidy based on this. Note that while this data isn't checked it's only an estimate, any errors will be fixed at tax time so lying is just going to gain you an unpleasant tax bill come April 15. 2) It's not paid in installments, it's just a monthly premium. It's quite possible for someone to be on the ACA for only part of a year. 3) I can't address the issue of the fines. However, you are wrong on who it's for--it's for anyone who doesn't have employer-provided insurance, whatever the reason. I've been on it since it's inception because I have been self employed for most of that time--there's no employer to even offer me insurance.","\"There are a few questions that need qualification, and a bit on the understanding of what is being 'purchased'. There are two axioms that require re-iteraton, Death, and Taxes. Now, The First is eventually inevitable, as most people will eventually die. It depends what is happening now, that determines what will happen tomorrow, and the concept of certainty. The Second Is a pay as you go plan. If you are contemplating what will heppen tomorrow, you have to look at what types of \"\"Insurance\"\" are available, and why they were invented in the first place. The High seas can be a rough travelling ground, and Not every shipment of goods and passengers arrived on time, and one piece. This was the origin of \"\"insurance\"\", when speculators would gamble on the safe arrival of a ship laden with goods, at the destination, and for this they received a 'cut' on the value of the goods shipped. Thus the concept of 'Underwriting', and the VALUE associated with the cargo, and the method of transport. Based on an example gallion of good repair and a well seasoned Captain and crew, a lower rate of 'insurance' was deemed needed, prior to shipment, than some other 'rating agency - or underwriter'. Now, I bring this up, because, it depends on the Underwriter that you choose as to the payout, and the associated Guarantee of Funds, that you will receive if you happen to need to 'collect' on the 'Insurance Contract'. In the case of 'Death Benefit' insurance, You will never see the benefit, at the end, however, while the policy is in force (The Term), it IS an Asset, that would be considered in any 'Estate Planning' exercise. First, you have to consider, your Occupation, and the incidence of death due to occupational hazards. Generally this is considered in your employment negotiations, and is either reflected in the salary, or if it is a state sponsored Employer funded, it is determined by your occupational risk, and assessed to the employer, and forms part of the 'Cost-of-doing-business', in that this component or 'Occupational Insurance' is covered by that program. The problem, is 'disability' and what is deemed the same by the experience of the particular 'Underwriter', in your location. For Death Benefits, Where there is an Accident, for Motor Vehicle Accidents (and 50,000 People in the US die annually) these are covered by Motor Vehicle Policy contracts, and vary from State to State. Check the Registrar of State Insurance Co's for your state to see who are the market leaders and the claim /payout ratios, compared to insurance in force. Depending on the particular, 'Underwiriter' there may be significant differences, and different results in premium, depending on your employer. (Warren Buffet did not Invest in GEICO, because of his benevolence to those who purchase Insurance Policies with GEICO). The original Poster mentions some paramaters such as Age, Smoking, and other 'Risk factors'.... , but does not mention the 'Soft Factors' that are not mentioned. They are, 'Risk Factors' such, as Incidence of Murder, in the region you live, the Zip Code, you live at, and the endeavours that you enjoy when you are not in your occupation. From the Time you get up in the morning, till the time you fall asleep (And then some), you are 'AT Risk' , not from a event standpoint, but from a 'Fianancial risk' standpoint. This is the reason that all of the insurance contracts, stipulate exclusions, and limits on when they will pay out. This is what is meant by the 'Soft Risk Factors', and need to be ascertained. IF you are in an occupation that has a limited exposure to getting killed 'on the job', then you will be paying a lower premium, than someone who has a high risk occupation. IT used to be that 'SkySkraper Iron Workers', had a high incidence of injury and death , but over the last 50 years, this has changed. The US Bureau of Labor Statistics lists these 10 jobs as the highest for death (per 100,000 workers). The scales tilt the other way for these occupations: (In Canada, the Cheapest Rate for Occupational Insurance is Lawyer, and Politician) So, for the rest in Sales, management etc, the national average is 3 to 3.5 depending on the region, of deaths per 100,000 employed in that occupation. So, for a 30 year old bank worker, the premium is more like a 'forced savings plan', in the sense that you are paying towards something in the future. The 'Risk of Payout' in Less than 6 months is slim. For a Logging Worker or Fisher(Men&Women) , the risk is very high that they might not return from that voyage for fish and seafood. If you partake in 'Extreme Sports' or similar risk factors, then consider getting 'Whole Term- Life' , where the premium is spread out over your working lifetime, and once you hit retirement (55 or 65) then the occupational risk is less, and the plan will payout at the age of 65, if you make it that far, and you get a partial benefit. IF you have a 'Pension Plan', then that also needs to be factored in, and be part of a compreshensive thinking on where you want to be 5 years from today.\"","\"how is the money the FDIC has collected Fees collected from the banks: The FDIC receives no Congressional appropriations – it is funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities. http://www.fdic.gov/about/learn/symbol/index.html They also use the proceeds from liquidating the assets of failed banks to make payouts. Are there country specific agencies with a similar mission? Canada Deposit Insurance Corporation Instituto para la Ptotección al Ahorro Bancario (Mexico) Financial Services Compensation Scheme (UK) not quite like the FDIC You'll have to search for others yourself. :) Most importantly, are there any examples of a similar system that has failed? As the Mythbusters say, \"\"failure is always an option.\"\" There is a statement on FDIC's website to the effect that they are backed by the \"\"full faith and credit\"\" of the U.S. government. That said, the FDIC maintains its own fund to make insurance payouts. Granted, in the shakiness of the 2008-2009 financial crisis they did start waving a red flag about their realistic ability to cover their obligation. Practically speaking, the government will likely step in if necessary. This 2008 article regarding a propsed revamp of the UK's FSCS should be of general interest to you on this topic, though it does not answer the question of failed systems. (Well, as far as I know. I have only skimmed the article.)\"","\"The key point to answer the question is to consider risk aversion. Assume I suggest a game to you: Throw a coin and if you win, you get $5, if you lose nothing happens. Will you play the game? Of course, you will - you have nothing to lose! What if I suggest this: If you win, you get $10,000,005 and if you lose you must pay $10,000,000 (I also accept cars, houses, spouses, and kidneys as payment). While the expected value of the second game is the same as for the first, if you lose the second game you are more or less doomed to spend the rest of your life in poverty or not even have a rest of your life. Therefore, you will not wish to play the second game. Well, maybe you do - but probably only if you are very, very rich and can easily afford a loss (even if you had $11,000,000 you won't be as happy with a possible raise to $21,000,005 as you'd be unhappy with dropping to a mere $1,000,000, so you'd still not like to play). Some model this by taking logarithms: If your capital grows from $500 to $1000 or from $1000 to $2000, in both cases it doubles, hence is considered the same \"\"personal gain\"\", effectively. And, voíla, the logartithm of your capital grows by the same amount in both cases. This refelcts that a rich man will not be as happy about finding a $10 note as a poor man will be about finding a nickel. The effect of an insurance is that you replace an uncertain event of great damage with a certain event of little damage. Of course, the insurance company plays the same game, with roles swapped - so why do they play? One point is that they play the game very often, which tends to nivel the risks - unless you do something stupid and insure all inhabitants of San Francisco (and nobody else) against eqarthquakes. But also they have enough capital that they can afford to lose the game. In a fair situation, i.e. when the insurance costs just as much as damage cost multiplied with probability of damage, a rational you would eagerly buy the insurance because of risk aversion. Therefore, the insurance will in effect be able to charge more than the statistically fair price and many will still (gnawingly) buy it, and that's how they make a living. The decision how much more one is willing to accept as insurance cost is also a matter of whether you can afford a loss of the insured item easily, with regrets, barely, or not all.\"","\"One way to look at insurance is that it replaces an unpredictable expenses with a predictable fees. That is, you pay a set monthly amount (\"\"premium\"\") instead of the sudden costs associated with a collision or other covered event. Insurance works as a business, which means they intend to make a substantial profit for providing that service. They put a lot of effort in to measuring probabilities, and carefully set the premiums to get make a steady profit*. The odds are in their favor. You have to ask yourself: if X happened tomorrow, how would I feel about the financial impact? Also, how much will it cost me to buy insurance to cover X? If you have a lot of savings, plenty of available credit, a bright financial future, and you take the bus to work anyway, then totaling your car may not be a big deal, money wise. Skip the insurance. If you have no savings, plenty of debt, little prospects for that improving, and you depend on your car to get to work just so you can pay what you already owe, then totaling your car would probably be a big problem for you. Stick with insurance. There is a middle ground. You can adjust your deductible. Raise it as high as you can comfortably handle. You cover the small stuff out of pocket, and save the insurance for the big ticket items. *Insurance companies also invest the money they take as premiums, until they pay out a claim. That's not relevant to this discussion, though.\"","Might as well just come out and say that you're talking about socialism/communism. Not that there is anything *inherently* wrong with socialistic approaches, but come on, 'we don't need jobs, they only benefit capitalists'? High unemployment isn't a bad thing? I don't think you've ever had a job.","This is just terrible. Could you imagine owning a business in Michigan, and now you have to pay more than DOUBLE what you accrued for FUTA, and by the end of January, no less. The states default, so the businesses have to pick up the slack.","*sigh* When is the last time you looked for a job? I've been employed literally non-stop since I was 15, usually with 2 or more employers, so I expect no government handout. But the job market is really *that bad.* I got lucky last year, in that one week out of college I found a job. Three days later I realized I hated it, so I started sending out resumes. I averaged 5 a week. Over the course of the next year, I received 5 replies and 2 interviews after sending out my resume **over 250 times**. The first reply took 6 months. I stayed at that same job, hating it every single day for a year, because I had no other option. I received one reply for a job that I was perfectly qualified for (I know because I interned at another office doing the exact thing) and they told me I wasn't qualified. What if I had been laid off during that time? Remember, it took 6 months before I even got a *reply*. I would have been screwed. **TL; DR: Living off of the government is not, by default, because you are lazy.**","Yes factor into your fund the cost of health insurance. You basically have three options when facing a loss of income for 3-6 months: Pre-ACA the COBRA one was the default option many planned for because there was no need to change doctors. Of course many people were shocked how expensive it was compared to just looking at the employees share of the monthly premium. For planning you can do some research into the cost of one of the ACA approved plans in your state. Keeping in mind that the lack of income might qualify you for a subsidy. As to the coverage level, that would depend on your situation and the perceived gap. I have known many people who didn't have to pick COBRA until after the new job started so they knew exactly what they needed to cover and what their bills were during the gap.","\">You understand the purpose of insurance, right? It's ok to tax the rich but not ok for them to cash in on insurance? You understand that no employees pay for this \"\"insurance\"\" right? The rich employees don't pay for this benefit, the employers do. That being said, this is not something that is an easy question to answer. One one hand if someone is out of a job then the black and white answer is \"\"yes\"\" they are absolutely allowed to use these benefits. The other hand if this person has the ability not to utilize these benefits because they were able to create a savings(either by investments or simply saving) then why would they need to use it? I think that using this specific benefit should be a last resort, Not one to use because you don't want to use any of your money. Not that im saying this happened but again, if someone is making this kind of money, one would think they should have the wherewithal to have an emergency savings fund for this exact situation. There is nothing inherently illegal about this, however it is, IMO, morally questionable.\"","Unfortunately, no. Think about the numbers. If you work for me, and I pay you $1000, you owe tax on $1000. If you still work, but I don't pay you, you have no tax due, but there's no benefit for you to collect for my stealing your time.","The point about insurance is solidarity. Think about this: In London a few hundred years ago people first started insuring their houses against fire. There were several insurance companies, and if you used one you got a marker on your house. So if your house caught fire they would come and check, and they would put the fire out only if it had their marker on it. Now, in most places these days the fire brigade will always come and always put your fire out. We expect this, and we are happy to pay for this service by taxation, and we do not fret about wasted money if we pay it for decades without ever having a fire. We also do not complain if the neighbour's house burns, and they get the full fire service which we have been paying for. Now all the fire brigade do is rescue you and put your fire out. Here in Germany every house owner is also obliged to have fire insurance, so if your house burns it can be repaired or rebuilt. Everyone pays insurance premiums, and I never heard anyone complain if they paid for 50 years and never claimed anything. If you need a new house the payout is huge. But the premiums are low. This only works if everyone is insured. This can only work if we all accept the concept of solidarity. It is easy to say, I don't smoke so I don't need to insure against fire, or, I live a healthy life so I don't need to insure against cancer. But lightning does not check your CV before it strikes. It hits you or your fellow man, and how can you justify not helping your neighbour? Insurance can only work if we all take part.","What city are you in? > I got a call for contract work and it only lasted two weeks. This can happen. Sometimes contracts don't work out. > With that contract I was finally getting paid what I was getting paid at my last permanent position, but again I did not receive the same benefits as a full time employee. That contract let me go after 18 months due to policy that they couldn't string contractors along. This is very common. Unfortunately due to a court case involving Microsoft contractors 25-30 years ago, many firms limit contracts to a hard stop at 18 months - 2 years. Not all firms have this policy. I am interested what city you are in. My career has taken me throughout flyover country, and finding 6 figure contracts has always been reasonably achievable. Most cities appeared to have a shortage of workers with 5+ years experience in most specializations. Fellow IT contractors have felt that IT unemployment insurance is $45 per hour jobs where you compete with H1B body shops, since those almost never get filled. It sounds like you are in an economically depressed area.","\"Insurance companies on average make money by selling insurance, which means you lose money on average by dealing with them. The insurance is not gambling where the house always wins. This expression is literal in gambling, because that's how they set the odds. Insurance isn't necessarily similar. Example. Suppose there's 10% chance that $10,000 the boat sinks due to a defect. So, on average your loss is going to be $1,000. The variability of your loss measured as its standard deviation is $2,846. The variability of loss is a measure of risk. Now, let's look at two $10,000 boats. There's 1% chance that they both sink, and 18% chance that only one of them sinks. So, the expected loss is, unsurprisingly, $2,000. However, the variability of expected loss is $3,842, not quite twice the risk (variability) of a single boat accident. If you imagine that instead of a couple of boats the insurance has 100 boats, the variability of their loss (hence their risk) will increase only by a factor of 10, not 100 compared to a single boat. This means that their risk in relative terms is smaller than yours, the individual insurer's. What I tried to show was that it is possible to both of you and the insurer to benefit from the arrangement. It doesn't mean that it happens in every case, but generally it does. That's why in actuarial science there's a term fair price. UPDATE I was trying to avoid talking about utility here, because it's an involved subject, but you're dragging the discussion in this direction :) You're right that expected value cannot explain the insurance. The reason is that there's another concept that's necessary in addition to the objective measures such as expected value and risk: I mean the utility function or risk-aversion. So, in short you need to maximize expected utility, not the expected payout. Here's a toy example with the same boat. Assume that insurance is $150, and they pay the entire boat's value in case of accident, i.e. $10,000. You're given two choices effectively. At the end of the year, you have either of the following: You're right that the expected value in the second option can be higher in the second option. Let's say the probability of the loss is 10%, in this case the expected value would $9,900, which is higher than certain value of option 1. Why then some people choose option 2? The reason is that we don't maximize the expected payout, but we maximize the utility, according to modern microeconomics and game theory. Utility is some kind of an function that reflects your preference given the uncertain choices. Every person has their own preferences, and utility function. Let's say that yours is exponential with a=10000. In this case we can calculate the expected utility as follows: The math works out in such a way that it accounts for your risk tolerance. Depending on how much you love or hate risk, your expected utilities for these option will come out differently. For this given toy example it turned out that the expected utility is higher with insurance, so this person should get it. However, for different values of a parameter \"\"a\"\" in the function, it may not make a sense to insure. Some people are risk averse, some are risk lovers in certain situations. That's the reason why given the same options we make different choices. You may say that you don't value certainty enough to buy this insurance. The bottom line is that nobody can tell you that you're wrong to not buy an insurance. If your risk tolerance is high it may not make a sense for you. Having said this all, I must note that sometimes the society doesn't accept your preferences and utility function. Yes, you tell me today that you accept the risk, but tomorrow when the boat sinks you may come to me and say that you can't pay the student loan because of the hardship. That's the reason why it's mandatory to get liability insurance on cars, for instance.\"","It's like collecting car insurance when you've had an accident. If you want a good analogy it's like having an accident and then some asshole reporter claims it's unfair that the policy paid for it because you made more than some arbitrary amount of money last year.","\"Because people are Risk Averse. Suppose that you own an asset worth $10,000 to you. Suppose that each year, the asset has 1% chance of being stolen (or completely broken). The expected value is 99% x 10,000 + 1% x $0 = $9,900. This is the average outcome if you do not buy insurance. Now consider two mutually exclusive outcomes: 99% chance of keeping $10,000 and 1% chance of losing everything (expected value: $9,900) 100% chance of keeping $9,900 (expected value: $9,900) Everyone would choose option 2, even though the expected values are the same. Option 2 is an insurance that cost $100 (Actuarially fair, aka the odds are fair). Now suppose the insurance costs $150 instead of $100 (despite that the bad probability is still 1%). You are faced with 99% chance of keeping $10,000 and 1% chance of losing everything (expected value: $9,900) 100% chance of keeping $9,850 (expected value: $9,850) Some people would still choose option 2, even though the expected value is actually lower. The $50 is called Risk Premium, which people are willing to pay in order to avoid uncertainty. The odds are unfair, but the Risk Premium has its value. That being said, competition between insurance companies would drive down the premium until the insurance is close to actuarially fair, but they have cost to cover (sales, administration, etc), making the odds \"\"unfair\"\".\"","No, you cannot. The FICA taxes paid are not refunded if you're not reaching the benefits threshold. They're gone. That is why foreigners who are not tax residents (mainly students) are not required to pay them. If your home country has a social security reciprocity agreement with the US - you can have a credit in your home country.","BI tapers off as you earn more. It's means tested by the tax department. Getting rid of the welfare means testing and fraud apparatus entirely. Depending on behaviour BI could save money on the current system. Especially as now there would be an explosion of fairly risk free freelancing.","\"Generally you do not pay taxes on insurance payouts that occur because of some kind of loss, provided you paid the premiums yourself. \"\"Generally, if you're paying premiums yourself, such as for homeowners insurance and auto insurance, then your insurance benefits are not a taxable event,\"\" says Adam Sherman, CEO of Firstrust Financial Resources in Philadelphia. \"\"Your benefits are reimbursement for expenses, rather than income.\"\" It's not as straightforward for death benefits and life insurance.\"","\"This is the best tl;dr I could make, [original](https://www.theatlantic.com/business/archive/2017/10/next-recession-prepared/544391/) reduced by 92%. (I'm a bot) ***** > The economy has had three jobless recoveries following the last three recessions, and the next recession would likely prompt a fourth. > &quot;Right now, one in four unemployed workers are receiving benefits. There are 15 states out there where the share of workers is less than one in five. In the southeast, the cuts have been so deep there&#039;s barely an unemployment-insurance program there.&quot; In the event of another recession, without strong and swift federal and state intervention, many Americans would face far less help from unemployment insurance than they did last time around, he said. > In terms of global circumstances, political will, and fiscal and monetary firepower the next recession seems in some ways more difficult to fight than the last. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/79xzco/the_us_isnt_prepared_for_the_next_recession/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~238467 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **recession**^#1 **last**^#2 **state**^#3 **work**^#4 **economy**^#5\"","> I think you know it is not really that simple. Does the police force teach civilians to ignore lawbreakers? Yes it does. >Does public education cause people to only learn what is taught in schools? For the vast majority of people, they do not learn anything outside the classroom. >Do people not learn CPR because 911 exists? I wonder how many people learn CPR of their own volition. I learned it in high school gym class, but not on my own. > If people don't have the skills to manage their lives and hold down a job, wouldn't forcing them into a job guarantee failure? You are confusing Unemployment Insurance with Welfare. >Would you agree they would need to first learn these skills and that probably wouldn't happen in an unstable environment? I agree.","\"The math on this only works if the workers who are \"\"choosing no income at all\"\" are being paid by something else. In first world countries, humans cannot live (eat food or sleep in a bed, etc) without some sort of money. The only question is - what else is paying them? Government programs, friends, family support?\"","Physically or mentally unable to work because of a debilitating medical condition. [How Americans Game the $200 Billion-a-Year 'Disability-Industrial Complex'](https://www.forbes.com/sites/theapothecary/2013/04/08/how-americans-game-the-200-billion-a-year-disability-industrial-complex/#f0651be4b6d8) America’s health-care entitlements—Medicare, Medicaid, and Obamacare—are the biggest drivers of our exploding federal debt. What you may not know is that there is a fourth program, that pays disability benefits through the Social Security Administration, that is also growing at an alarming pace. While part of that growth can be explained by the aging of the U.S. population, the largest factor in the proliferation of disability spending comes from the fact that Congress has dramatically expanded the definition of who gets called “disabled.” **As a result, many able-bodied Americans have been granted government paychecks for life, crowding out our ability to direct needed resources to the genuinely infirm.** The story of the growth in federal disability spending has been percolating for years. The Great Recession of 2008 led to a spike in unemployment; many people who had difficulty finding work discovered that they might be eligible for Social Security disability benefits, benefits that would replace a significant portion of their previously earned wages, while also qualifying them for Medicare, our generous health-insurance program for the elderly. Today, the United States spends around $200 billion a year, literally paying Americans not to work.","\"The guideline for the size of an emergency fund is just a guideline. I've usually heard it expressed as \"\"3 to 6 months,\"\" but everyone has a different idea of exactly how big it should be. The purpose of the fund is to give you enough cash to be able to pay for unexpected expenses that have come up that you have not budgeted for without you having to borrow money to pay for them. To figure out how big this fund should be, we look at the worst case scenario. Suppose that you lost your job tomorrow. What would you do? Cut your expenses. You'd probably be much more careful how you spend money. Secure health insurance. This would be done by either continuing your employer's policy with COBRA, or by purchasing your own insurance, likely through the Obamacare/ACA market. Keep in mind that most likely your employer is paying for a portion of your insurance now, so this expense will go up quite a bit no matter which option you choose. Look for another job. You'd probably begin your search for a new job immediately. The size of your emergency fund determines how long you will be able to go without income before you need to start a new job. Regarding cutting your expenses, it is up to you how much you would cut. There are things that are easy to cut temporarily (or permanently), such as restaurants, entertainment expenses, vacations, etc. You would probably stop retirement investing until you have income again. The more you cut, the longer your emergency fund would last. Things you don't want to cut are necessities, like housing, groceries, utilities, transportation, etc. I would also include health insurance in this list. Certainly, if you have a pre-existing condition, you do not want to let your health insurance coverage lapse. Your employability is also a factor. If you believe that you would have an easy time finding similar employment to what you have now, your emergency fund might not need to be quite as big as someone who believes they would have a harder time finding another job.\"","One small note: If you have an employer sponsored account and get let go you might have an issue. You would lose any funds in the account as of the day of your unemployment if you don't have enough expenses to use it all up! So if you put in a lot every month because you have a large planned expense like root canal or operation then you could lose it all. This happened to me.","\"Yes, and the math that tells you when is called the Kelly Criterion. The Kelly Criterion is on its face about how much you should bet on a positive-sum game. Imagine you have a game where you flip a coin, and if heads you are given 3 times your bet, and if tails you lose your bet. Naively you'd think \"\"great, I should play, and bet every dollar I have!\"\" -- after all, it has a 50% average return on investment. You get back on average 1.5$ for every dollar you bet, so every dollar you don't bet is a 0.5$ loss. But if you do this and you play every day for 10 years, you'll almost always end up bankrupt. Funny that. On the other hand, if you bet nothing, you are losing out on a great investment. So under certain assumptions, you neither want to bet everything, nor do you want to bet nothing (assuming you can repeat the bet almost indefinitely). The question then becomes, what percentage of your bankroll should you bet? Kelly Criterion answers this question. The typical Kelly Criterion case is where we are making a bet with positive returns, not an insurance against loss; but with a bit of mathematical trickery, we can use it to determine how much you should spend on insuring against loss. An \"\"easy\"\" way to undertand the Kelly Criterion is that you want to maximize the logarithm of your worth in a given period. Such a maximization results in the largest long-term value in some sense. Let us give it a try in an insurance case. Suppose you have a 1 million dollar asset. It has a 1% chance per year of being destroyed by some random event (flood, fire, taxes, pitchforks). You can buy insurance against this for 2% of its value per year. It even covers pitchforks. On its face this looks like a bad deal. Your expected loss is only 1%, but the cost to hide the loss is 2%? If this is your only asset, then the loss makes your net worth 0. The log of zero is negative infinity. Under Kelly, any insurance (no matter how inefficient) is worth it. This is a bit of an extreme case, and we'll cover why it doesn't apply even when it seems like it does elsewhere. Now suppose you have 1 million dollars in other assets. In the insured case, we always end the year with 1.98 million dollars, regardless of if the disaster happens. In the non-insured case, 99% of the time we have 2 million dollars, and 1% of the time we have 1 million dollars. We want to maximize the expected log value of our worth. We have log(2 million - 20,000) (the insured case) vs 1% * log(1 million) + 99% * log(2 million). Or 13.7953 vs 14.49. The Kelly Criterion says insurance is worth it; note that you could \"\"afford\"\" to replace your home, but because it makes up so much of your net worth, Kelly says the \"\"hit it too painful\"\" and you should just pay for insurance. Now suppose you are worth 1 billion. We have log(1 billion - 20k) on the insured side, and 1%*log(999 million) + 99% * log(1 billion) on the uninsured side. The logs of each side are 21.42 vs 20.72. (Note that the base of the logarithm doesn't matter; so long as you use the same base on each side). According to Kelly, we have found a case where insurance isn't worth it. The Kelly Criterion roughly tells you \"\"if I took this bet every (period of time), would I be on average richer after (many repeats of this bet) than if I didn't take this bet?\"\" When the answer is \"\"no\"\", it implies self-insurance is more efficient than using external insurance. The answer is going to be sensitive to the profit margin of the insurance product you are buying, and the size of the asset relative to your total wealth. Now, the Kelly Criterion can easily be misapplied. Being worth financially zero in current assets can easily ignore non-financial assets (like your ability to work, or friends, or whatever). And it presumes repeat to infinity, and people tend not to live that long. But it is a good starting spot. Note that the option of bankruptcy can easily make insurance not \"\"worth it\"\" for people far poorer; this is one of the reasons why banks insist you have insurance on your proprety. You can use Kelly to calculate how much insurance you should purchase at a given profit margin for the insurance company given your net worth and the risk involved. This can be used in Finance to work out how much you should hedge your bets in an investment as well; in effect, it quantifies how having money makes it easier to make money.\"","It gives some vague crap about pain, but talks very little about the actual diagnoses, chronic pain is one of those things that seems subjective, but can be very problematic for determining ability. A construction worker with chronic back pain might in theory be able to do a desk job, but if hes an older worker, especially only a high school graduate, he's gonna have a fuck time trying to get a desk job, and is likely unable to meet the standards required for retail, and you can not be just a cashier, all cashiers are now stock/clerk/cashier with lifting minimums and requirements to stand for 4 to 5 hours at a time. In THEORY theres a job he could be doing, in ACTUALITY there isn't. Times of high unemployment create more and more situations like that as people who found some acceptable niche to fit in that accommodated their disability now find it extremely difficult to find that accommodation again. Lacking other options, it now becomes a necessity to get into SSDI since the US has pretty much no real reliable welfare. An SSDI requires you not work, so you can't wean off of it, its a trap, once you're in, you usually don't get out. It's the biggest, most extreme welfare cliff in the way it's designed.","There are many situations where injecting a certain amount of cash at the right time may reap rewards far in excess of the value of the cash injected. For example, if someone who needs a car to get to work gets in a wreck and that person does not have ready money to make it driveable may have no choice but to secure very expensive financing. Receipt of $1000 in ready money to repair the car may thus save the person from having to take out a loan that would cost $1200 or more to repay. While the insurance business has sufficient overhead that it is unlikely that insurance would generally have a positive net expectation even considering such factors, it is at least theoretically possible that insurance could have a positive expected value for both the insurer and the insured (and in some cases it may have positive expected values for both parties in practice as well).","\"No. Switzerland is one of the few countries the United States has \"\"totalizaton\"\" agreements with (not to confuse with tax treaties) to work around this kind of thing. You can find the list of the agreements here. You can use the years you work in Switzerland to make up for the remaining credits you need to qualify for benefits in the U.S. When it's time to retire, you'll receive a partial U.S. benefit that is proportional to the number of credits you earned in the U.S. You can learn more about all this here. For other countries, for which the US doesn't have totalization agreements, in this scenario you would get no benefits back for the money. So yes, it would be lost.\"","\"The point here is actually about banks, or is in reference to banks. They expect you know how a savings account at a bank works, but not mutual funds, and so are trying to dispel an erroneous notion that you might have -- that the CBIC will insure your investment in the fund. Banks work by taking in deposits and lending that money out via mortgages. The mortgages can last up to 30 years, but the deposits are \"\"on demand\"\". Which means you can pull your money out at any time. See the problem? They're maintaining a fiction that that money is there, safe and sound in the bank vault, ready to be returned whenever you want it, when in fact it's been loaned out. And can't be called back quickly, either. They know only a little bit of that money will be \"\"demanded\"\" by depositors at any given time, so they keep a percentage called a \"\"reserve\"\" to satisfy that, er, demand. The rest, again, is loaned out. Gone. And usually that works out just fine. Except sometimes it doesn't, when people get scared they might not get their money back, and they all go to the bank at the same time to demand their on-demand deposits back. This is called a \"\"run on the bank\"\", and when that happens, the bank \"\"fails\"\". 'Cause it ain't got the money. What's failing, in fact, is the fiction that your money is there whenever you want it. And that's really bad, because when that happens to you at your bank, your friends the customers of other banks start worrying about their money, and run on their banks, which fail, which cause more people to worry and try to get their cash out, lather, rinse repeat, until the whole economy crashes. See -- The Great Depression. So, various governments introduced \"\"Deposit Insurance\"\", where the government will step in with the cash, so when you panic and pull all your money out of the bank, you can go home happy, cash in hand, and don't freak all your friends out. Therefore, the fear that your money might not really be there is assuaged, and it doesn't spread like a mental contagion. Everyone can comfortably go back to believing the fiction, and the economy goes back to merrily chugging along. Meanwhile, with mutual funds & ETFs, everyone understands the money you put in them is invested and not sitting in a gigantic vault, and so there's no need for government insurance to maintain the fiction. And that's the point they're trying to make. Poorly, I might add, where their wording is concerned.\"","\"Useless statistic. From the article: \"\"The four-week moving average of claims, a less-volatile measure, climbed to 377,750, the highest in a month, from 376,000. The number of people continuing to collect jobless benefits increased 34,000 in the week ended May 26 to 3.29 million. The continuing claims figure does not include the number of workers receiving extended benefits under federal programs. Those who’ve used up their traditional benefits and are now collecting emergency and extended payments slumped by almost 105,000 in the week ended May 19 to 2.83 million.\"\"\"","In addition to taking into account your deductions, as mentioned by @bstpierre, you also need to account for vacation, and other time off such as sick days. You also need to estimate what percentage of the year you expect to be working and pro-rate your salary accordingly. For example it is not uncommon to use 40 weeks out of the year which is about 77% of the time. Also check to see if you would be eligible for unemployment for the times you are not working. I suspect not. But in any case, you might want to use worst case scenario figures to see if it is worth it, especially in this economy.","If this was the 20th century that would be a workable idea. As you might have noticed this isn't the 20th century. We have whole industries which used to hire hundreds of thousands of people being replaced by firms with 15 people providing better services. We need a basic income because we have an economy which is more productive than ever, depends on a strong middle class, if lets to its own devices will produce one person who owns everything.","\"All investors have ultimately the same investment goal: maximize returns while limiting risk to an acceptable level. Of course we would love to maximize returns while minimizing risk, but in most cases if you want higher returns you must be willing to accept higher levels of risk. We must keep in mind that investors are humans, not computers. As such not everybody is willing to accept the same level of risk. Insurance is simply a way to \"\"buy down\"\" risk. Yes, it reduces our overall gains (most of the time), but so do bonds vs stocks (most of the time). And yet who among us doesn't have bonds in our portfolio? Insurance is yet another way to balance risk and return.\"","\">(a) people who choose not to work, in which case they have no business receiving anything but basic food and shelter from society, But currently they don't even receive that. The actual effect of the lack of housing/food and basic-income programs is that the living wage, the minimum necessary wage necessary to make it *worth working*, is much higher than we need it to be if we really want to \"\"compete\"\". >The only reason unemployment is so bad today is because America is losing many jobs to technology and globalization and not finding ways to compete and our work force can't handle many of the new jobs anyways. The systematic transfer of wealth from labor to capital nowadays plays no part? Come on!\"","I am suggesting that, on a macro level, a wage increase of 2% would offset a 1% increase in unemployment. More spending power equals more demand, and more demand creates jobs. While hard in the short term, Bob's job will come back but with a higher wage. If your goal is that no one lose their job, capitalism is not the economic system for you.","Property and Casualty insurers invest their premiums in large bond portfolios. When they need the cash, they sell some of the bonds. Catastrophe bonds, which are completely separate, do help blunt the earnings impact, as the insurer doesn't have to pay out as much interest to the purchasers after a disaster, but cat bonds aren't a major source of funds.","The companies give jack shit about what the taxpayers have to pay. They only lower their own expenses. Without collective bargaining power, and forcing competing companies to have the same expenses, the employees will quite simply be screwed. Systems setup by the government on the other hand supply both. Also, what about those without earned income... What do people deserve if they do not (currently or ever) contribute to the economy? In part it depends on what kind of society one wants to live in, I guess, and whether the people are willing to keep the government functioning for the common good.","\"There are broadly two kinds of pension: final salary / defined benefit, and money purchase. The text you quote above, where it talks about \"\"pension\"\" it is referring to a final salary / defined benefit scheme. In this type of scheme you earn a salary of £X during your working life, and you are then entitled to a proportion of £X (the proportion depends on how long you worked there) as a pension. These types of scheme are relatively rare now (outside the public sector) because the employer is liable for making enough investments into a pot to have enough money to pay everyone's pension entitlements, and when the investments do poorly the liability for the shortfall ends up on the employer's plate. You might have heard about the \"\"black hole in public sector pensions\"\" which is what this refers to - the investments that the government have made to pay public sector workers' pensions has not in fact been sufficient. The other type of scheme is a money purchase scheme. In this scheme, you and/or your employer make payments into an investment pot which is locked away until you retire. Once you retire, that pot is yours but there are restrictions on what you can do with it - you can use it to purchase an annuity (I will give you my £X,000 pension pot in return for you giving me an annual income of £Y, say) and you can take some of it as a lump sum. The onus is on you to make sure that you (and/or your employer) have contributed enough to make a large enough pot to give you the income you want to live on, and to make a sensible decision about what to do with the pot when you retire and what to use it as income. With either type of scheme, you can claim this pension after you reach retirement age, whether or not you are still working. In some schemes you are also permitted to claim the pension earlier than retirement age if you have stopped working - it will depend on the rules of the scheme. What counts as \"\"retirement age\"\" depends on how old you are now (and whether you are male or female) as the government has been pushing this age out as people have been living longer. In addition to both schemes, there is also a \"\"state pension\"\" which is a fixed, non-means-tested, weekly amount paid from government funds. Again you are entitled to receive this after you pass retirement age, whether or not you are still working.\"","If you have doubts about the long term prospects at your employer or jobs in your area, you may want to keep the option of moving to find a new job open while you save up for a larger down payment on a house. While there are insurance products out there that claim to cover your mortgage, they often have loopholes which make them difficult to collect on. Insurance companies are in business to make money and premiums are high when it's likely that people will try to collect. Splitting those premiums into your mortgage and your own self-insured unemployment fund (i.e. an emergency fund in a money market bank account) will usually be a better deal. As always, make sure you have term life insurance for a family and long term disability insurance just in case something really bad happens in the near term. Buying a home is a better financial decision when you know you'll be in an area for at least 5 years. Saving until you have 20% down on place that you can afford to pay off in 15 years (even if you take a 30 year loan) will be a lot cheaper and less stressful.","they have capital reserves set aside for this. to replenish the reserves they will raise additional capital through debt or equity markets. the new capital raise will also cover any shortfall on the claims. cat bonds are used as well but will not cover 100%","The biggest flaw in the unemployment rate is that it does not count individuals who have fallen off the unemployment benefit rolls. So if your unemployment has lasted longer than your unemployment benefits, guess what, your not unemployed anymore and the rate decreases. Also as this older article below illustrates, individuals are being pushed into other programs as a means to survive further removing them from employment opportunities. http://www.marketplace.org/topics/economy/when-unemployment-runs-out-whats-next","No. You have been purchasing protection from unexpected emergencies. You got the protection you paid for. That money has been spent. Some insurance plans do pay you something at the end. They do this by charging you additional money, and investing it. At the end, you get some of the profit n that investment, after the company has taken payments for managing this account. You can do better by setting up your own investments, separate from the insurance.","\"From the page you referenced, first click the link \"\"EI premium rate and maximum\"\". There you'll find the calculation itself, but not the percentage rate. Then from that page, near the bottom, click the link \"\"EI premium rates and maximums\"\". It's almost the same title as the prior page, so a little confusing, but that pluralized version has the data you were looking for. Partial quote: The same rates are applied across Canada, except in the province of Quebec. That province has a different set of rates because they administer their own Parental Insurance Plan. In particular, self-employed workers in Quebec can opt into QPIP (even if they wouldn't qualify to participate in EI) and potentially collect parental benefits. Typical non-self-employed workers in Quebec pay into both EI (at the reduced rates for Quebec) as well as QPIP.\"","That's the same question I've been pondering. How did they handle it in Canada umpteen years ago on their test run? Obviously they're not giving out a lump sum at the beginning of the year, but what about month to month?","\"Interesting question. How is social security funded? The social security system works by using current payroll taxes as funding to pay benefits to retirees. Historically there was always more money coming in then what was being paid out in benefits. This changed at the beginning of March, 2010 when social security started paying out more than it was taking in (this article estimates the exact date to be around March 3 or March 4 - the chart below has the approximate date highlighted with the red circle). Due to the baby boomer generation it is estimated that social security will now be perpetually in the red unless changes are made. The recent reduction in payroll taxes will not help social security solvency. What was done with all the extra money social security collected over the last three decades? The Social Security Trust Fund (SSTF) was required to purchase special-issue US government bonds with the excess funds. The SSTF was essentially purchasing US government debt with the excess funds. This allowed congress to spend the excess funds. The special-issue funds are different then normal US treasuries in that the SSTF can redeem special-issue bonds at face value at any time (even before maturity). The SSTF is currently holding $2.5 Trillion of these special-issue bonds as assets. What next? Hell if I know. The SSTF was a major purchaser of US debt over the last few decades (to the tune of $2.5 trillion). That changed in 2010. The SSTF is no longer purchasing US debt at the same time the US government is issuing record amounts of debt. The SSTF could begin redeeming its bonds to meet payment obligations. When it redeems the bonds the US treasury must cough up the funds. Where is it the US government going to get the money especially when it is currently borrowing money at record levels? I read many articles that say that we don't have to count SSTF bond holdings as debt since we owe it to ourselves. That always makes me chuckle. The US government owes the SSTF $2.5 Trillion. I'm not the US government so don't count me in the \"\"we\"\" part of \"\"we owe it to ourselves\"\". I'm also fairly certain I will never see a dime of social security so don't count me in the \"\"ourselves\"\" portion either. Charts were obtained from here.\"","\"FDIC does not insure against robbery. From the FDIC website under the heading \"\"What's not insured?\"\": Robberies and Other Thefts Stolen funds may be covered by what's called a banker's blanket bond, which is a multi-purpose insurance policy a bank purchases to protect itself from fire, flood, earthquake, robbery, defalcation, embezzlement and other causes of disappearing funds. In any event, an occurrence such as a fire or bank robbery may result in a loss to the bank but should not result in a loss to the bank's customers. If a third party somehow gains access to your account and transacts business that you would not approve of, you must contact the bank and your local law enforcement authorities, who have jurisdiction over this type of wrongdoing. So either the bank is out the funds and takes the loss, in which case no new money enters circulation, or the bank has insurance that repays the bank, in which case the insurance company incurs a cost and no new money enters circulation. Either way, no new money enters circulation.\"","You are 100% correct! This is because Unions are corrupt and even many Union members (no choice) hate them. But if the Government and the written law specifically protect workers rights, then it's the law. For example, the law says you can't employ children, you must pay minimum wage, can't discriminate, must pay social security, pay for injuries, etc, than this is the law and this is what happens. No less, no more.","\"That's the problem with capitalism. It doesn't seem to recognize any conservation principle. People may be employees when they're working, but when they're off the clock, they're customers. Maybe not at the same place where they work, but at some other business somewhere else. As a whole, businesses must pay employees in income what they expect to receive from customers in revenue. Otherwise the economic \"\"circle of life\"\" ends. What we've been seeing for decades however is business taking ever larger pieces of the pie, while employees/customers see their incomes wither. This is where government comes in. Taxation of the wealthiest individuals is the economic pump which takes the accumulated wealth and puts it back into circulation.\"","Conversly, then you should not enjoy the benefits privided by being in a union then right? That seems simple enough, but that's not how it works. Unions by law have the duty of fair representaion, so even if you are not a member, you still are awarded all the benefits and protections of the contract. So, it's not that simple, because how do you balance that if not for fair share? The union still has to pay to protect you, but you don't have to pay for any of the work they do. So then, if you can get all the benefits of being in the union and not pay a dime for it, why would you? Seems logical right, it's a good deal, we all want to save money. Well as everyone stops paying and the union can't afford to operate as it did, like any organization, it restructures and lays off staff. Now the union no longer has the resources to offer you good representation, which causes the dues paying members to be frustrated and to drop out and or ditch the union entirely. Now no one in your workplace has a voice, a contract, or any protections. That may turn out to be great, but you know, the company wants to save money too.. The company is also no longer obligated to offer you the same wages or benefits that your coworkers negotiated. So now the company is free to cut wages, benefits and workforce to improve thier bottom line or executive bonuses.","First, you need to understand how modern insurance companies operate. On the front end, they write contracts with customers, collecting up front premiums, and promising to pay out to cover future losses. Efficient premiums cover exactly what's paid out; if you charge too much customers leave for competition, and if you charge too little the company goes under, or at least loses money. Large armies of people are employed to accurately guess future risks, hopefully to the point of certainty you have in human mortality. So over time, they will pay back those premiums. And there's a constant stream of new premiums coming in to replace money going out. So there's this effective pool of money they can use to buffer against large losses with; it's called float. And when the pool of money remains relatively constant, they can invest it longer term than the people who comprise the underlying risk. Large insurance companies like Berkshire Hathaway function in this manner; it's where Warren Buffet finds capital to invest while hiding from Wall St in Nebraska. The way these companies profit is by making sure the equation works: Profits = Premiums - Payouts + Return on float Payouts could be just payments for insured risk. But they could also be for the whole life insurance you're running across from time to time. These contracts offer the insured the chance to invest their money with the people who invest the float. And as long as the return on float is greater than the return they're offering, it's still profitable for the company. Since this guarantees suboptimal returns for you, it's usually a good idea to buy term insurance (much cheaper) and invest the difference yourself.","\"Seriously. What does this mean? My understanding of how they calculated unemployment figures was by the number of new and ongoing unemployment claims being filed. \"\"Dropped out\"\"?? Does that mean they died, or exhausted their benefits? People don't just STOP looking for work, and ANNOUNCE it, do they?\"","Desire to work.? Yep everyone has a desire to earn more money, too many will not even try to. Just a great way to strip away human dignity. You citizens, you mean nothing to the world now shut up & listen to us rich government bureaucrats. You owe us.","Why would the companies pay more to cover personal risks of the employee? The employees will just have to suck it up and live with more risks. Employees who cannot work anymore because of that are the problem of the state and society, not of the company. There's a reason social safety nets were constructed in the first place.","\"There are cases where it makes sense to insure something, even if you can bear its loss. Insurance is a tool to control risk. One reason you might want to control risk is indeed if you cannot afford to bear it's loss. However, there are other reasons you might wish to insure something when you look at your life in totality. Let's say you have $100 to work with, and you have an item A that costs $30. Perhaps you really need A in your life, but its clear here that you can afford to replace it, so maybe you don't insure it. Then you get item B, which also costs $30, and item C which costs $30. We can see that you can cover all three of these (total value $90), so one might argue that you don't need to insure it. Now let's add item D onto the plate, also at a cost of $30. Now you're in an interesting position, with 4 items you depend on, A B C and D, which have a sum total replacement cost of $120. Now if all of these break or are stolen, you no longer have the funds to replace them. Of course, what are the odds that all of them break at the same time? You may be able to do the math to determine the probability of going broke, and use that to determine whether you want to insure the item or not. Now consider that you will have to make a similar mathematical analysis for every additional purchase you make. You will also have items which you can \"\"bear to lose\"\" but you really don't want to. These can add a large amount of effort to every decision you make. It may be worth getting insurance in such a case. One could think of the purchase in two parts. There is the part that accounts for the statistical expectation of loss, and the other is the insurance company's profits. The profits could be thought of as paying the insurance company for a service which makes it easier for you to think through complicated decisions by removing risk.\"","True, but it's still money that (in theory) could be paid to the employee instead, in the same way that the employer's social security contribution could also be paid to the employee. Note that I'm not saying that if the law were changed, every employer would suddenly increase wages by _x_ percent; merely that these taxes all fit into wage calculations along with perquisites, salaries, overhead, etc.","You don't decide what gets to be owed, the government does. In your example, they wouldn't owe 1000, they would determine that they only have enough for 750. So guess what, you're now owed only 750. It's called cutting benefits.","Simply put, it makes sense from the moment you can afford the loss without negative consequences. For example, if your car costs $20000 and you happen to have another $20000 laying around, you can choose not to insure your car against damage. In the worst case, you can simply buy a new one. However, not insuring your car has a hidden cost: you can't long-term invest that money anymore. If your insurance costs $500 a year, and you can invest those $20000 with a return on investment of more than 2.5%, it still makes sense to invest that money while having your car insured.","Turns out Social Security and disability insurance are two different things but if you take disability insurance before retirement age when you get to full retirement age the disability money becomes the social security money. http://www.ssa.gov/dibplan/dqualify.htm If you are receiving Social Security disability benefits when you reach full retirement age, your disability benefits automatically convert to retirement benefits, but the amount remains the same."],"string":"[\n \"\\\"Unemployment insurance provides a temporary safety net to workers who lose their jobs by replacing a portion of their salary for certain periods. Each state administers its own unemployment insurance program so some rules may vary from state to state. To receive unemployment insurance payments, you must have lost your job through no fault of your own. If you quit your job or lost it because of poor performance or another justifiable reason, you are not eligible for unemployment insurance benefits. State unemployment insurance programs require claimants to have worked sufficiently before they can claim benefits. As soon as you apply for unemployment insurance, an agency with the state in which you live will verify that you were a victim of a layoff by contacting your previous employer and making sure you lost your job due to lack of work and not an action within your control. After the state verifies you were indeed the victim of a layoff, your weekly payment is calculated. Your payment will be a percentage of what you made in your previous job, generally between 20 percent and 50 percent, depending on your state. Unemployment insurance replaces only a portion of your previous pay because it is intended to pay only for the essentials of living such as food and utilities until you find new employment. Before you begin receiving benefits, you must complete a waiting period of typically one or two weeks. If you find a new job during this period, you will not be eligible for unemployment benefits, even if the job does not pay you as much as your previous job. After the waiting period, you will begin to receive your weekly payments. Employers pay for unemployment insurance through payroll taxes. So, while employees' work and earnings history are important to funding their unemployment benefits, the money does not come from their pay. Employer unemployment insurance contributions depend on several factors, including how many former employees have received benefits. Employers pay taxes on an employee's base wages, which vary by state. California, for example taxes employers on the first $7,000 of an employee's annual earnings, while neighboring Oregon taxes up to $32,000 of wages. Employers must set aside funds each payroll period and then report taxes and pay their states quarterly. States have several categories of tax rates they charge employers. New businesses and those first adding employees pay the \\\"\\\"new rate,\\\"\\\" which is typically lower and geared toward small businesses. Established businesses who haven't paid their taxes recently or properly are usually assessed the \\\"\\\"standard rate\\\"\\\" --- the highest possible tax rate, which in 2010 ranged from 5.4 percent in several states including Georgia, Hawaii and Alaska to 13.56 percent in Pennsylvania. Businesses in good standing may receive discounts under the \\\"\\\"experienced rate.\\\"\\\" Depending on the number of employees a business has and how many former employees have claimed unemployment, states can give sizable rate reductions. The fewer claims, the lower the rate a business pays in unemployment insurance taxes. As a result of the economic crisis legislation has been passed to extend Unemployment benefits. Regular unemployment benefits are paid for a maximum of 26 weeks in most states. However, additional weeks of extended unemployment benefits are available during times of high unemployment. The unemployment extension legislation passed by Congress in February 2012 changed the way the tiers of Emergency Unemployment Compensation (EUC) are structured. A tier of unemployment is an extension of a certain amount of weeks of unemployment benefits. There are currently four tiers of unemployment benefits. Each tier provides extra weeks of unemployment in addition to basic state unemployment benefits. Emergency Unemployment Compensation (EUC) Tiers June - August 2012: Source and further information can be found here - Unemployment Tiers - About.com Sources: Unemployment Insurance(UI) - US Dept. of Labor How Does Unemployment Insurance Work? - eHow Percentage of Pay That Goes to Unemployment Insurance - eHow Additional Info: You can file for UI over the internet here are some useful resources. OWS Links State Unemployment Offices - About.com How to Apply for Unemployment Over the Internet - eHow\\\"\",\n \"But they did have the accident. The insurance is in case they become unemployed which they did. If you want to come up with some alternative concept called destitution insurance or some such then go for it. So far that has turned out to be both technically and politically impossible.\",\n \"The point of unemployment insurance *from a governmental spending perspective* is as stimulus. The government is interested in keeping society working properly for as many people as possible, it is not concerned with giving *you* money between *your* jobs. Unemployment insurance helps make sure that recessions do not turn into depressions, because the economy won't grind to a halt as soon as people get fired.\",\n \">So, we agree then. No, Unemployment is not insurance paid for by the worker. We do not agree on that. Apparently we agree on the fact that is not illegal. >So, what? This is why there should be qualifications and tests much like those proposed for social security. Especially since the employee doesn't actually pay for any of it. If you are making millions of dollars and still can't figure out to create an 'Oh shit' savings account, well looks like you are SOL.\",\n \"That's not unemployment insurance. Because it's perfectly possible, and even likely, that your industry will do badly but you'll keep your job, or that your industry will do well but you'll lose your job anyway. Any bet you make to insure yourself against unemployment has to be individually about you -- there are no suitable proxies.\",\n \"I would suggest they are not wasted because your premiums fund unemployment insurance, which is a net to prevent people from going under if they lose their jobs. Unemployment insurance is in many ways an incubator for success because it allows an entrepreneur to take more risk in starting a business because failure won't mean devastation. Perhaps that person who took the risk because of the ability to fail started the business that you now work for. Society works better (in my opinion) by keeping the bottom closer to the top. Paying into the unemployment insurance fund indirectly provides you opportunity.\",\n \"If it goes to a millionaire who continues to pay larger bills than others while unemployed then that money goes right back into the economy. The money for unemployment insurance is linked to compensation. If they are millionaires then their compensation has already paid for unemployment insurance. This idea that money is going to turn around and go to some others possibly through some other program is flatly wrong. Either you have unemployment insurance or you don't. You want to withhold unemployment insurance from rich people because you don't think they are worthy. That is an interesting idea, but so far it has never worked politically.\",\n \">Most unemployment insurance money goes right back into the economy anyway The reason for that is because it's being given to poor people who need it for food and shelter and other things that are urgent. If it goes to a millionaire this is not going to be the case.\",\n \"\\\"If we are only talking about a few extra months between jobs which is quite common now then how do you get to \\\"\\\"living beyond their means\\\"\\\"? Either they have unemployment insurance or they don't. It sounds like you don't like unemployment insurance. So go bring that to a vote. So far the majority of people want unemployment insurance in place because they see greater economic benefit in providing this service.\\\"\",\n \"Not sure I agree. In your analogy, there was a car accident, or the closing of a position. So, yes, it is okay to claim on the insurance. Claiming and being granted unemployment requires that several very specific criteria are met on a continuing basis.\",\n \"\\\"Wait, correct me if I'm wrong, but this is how I thought it worked: \\\"\\\"say you work 40 hours a week \\\"\\\"during a recession, NO ONE GETS FIRED \\\"\\\"instead, they cut your hours \\\"\\\"from say 40 to 32 \\\"\\\"THEN unemployment benefits make up the difference in that eight hours you're not working \\\"\\\"then you get hired again\\\"\\\" This seems like the best system ever and something America should do. No one gets fired, and companies save oodles of money not training new workers.\\\"\",\n \"It is not wasted: it bought you peace of mind. Perhaps you would have had peace of mind without it, because of the particular industry you are in. But people from any industry can get sick or give birth, and not all industries are as evergreen as people think. A number of my onetime programmer colleagues now drive a truck or run a farm because new programming jobs weren't as easy to get as they once were. Like any insurance, it can't be affordable if it is bought only by those who think they will need it. The premiums you pay, in addition to giving you peace of mind, lower the premiums your neighbours pay. That contributes to social harmony. When your neighbours collect EI while looking for another job, they aren't tempted to turn to crime or legal-but-not-savoury ways to earn money. You probably like that, too. The fact they didn't get to choose whether or not to contribute means that they will be covered even if they aren't prudent and forward-looking people, which again is a benefit for you. And BTW, employers pay $1.40 in premiums for every dollar you pay. And we never collect. It's not for us. But we pay it.\",\n \"\\\"This is the best tl;dr I could make, [original](http://cep.lse.ac.uk/pubs/download/dp1503.pdf) reduced by 99%. (I'm a bot) ***** > Alternative risk outcomes All risk outcomes capture ex-post risk realizations rather than ex- ante risks. > 4.8 1.2 1.6 Figure 2: Positive Correlation Tests - Dynamics t+1 t+2 t+3 t+4 t+5 t+6 Displacement Probability in Year t+k t+7 t+8 Notes: Risk realization in t + 1 may fail to fully capture the unemployment risk faced by an individual as she is making her coverage choice at time t, which justifies using risk realizations for that individual further into the future. > 05 Individual-level model &beta;OLS =.082 &beta;2SLS =.245 0.05.1.15 Firm Displacement Risk in t.2 Notes: The Figure uses cross-sectional variation in displacement risk across firms as a risk shifter to estimate how UI coverage choices react to variation in risk that is not driven by individual moral hazard. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/76t73y/lse_riskbased_selection_in_unemployment_insurance/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \\\"\\\"Version 1.65, ~229382 tl;drs so far.\\\"\\\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \\\"\\\"PM's and comments are monitored, constructive feedback is welcome.\\\"\\\") | *Top* *keywords*: **risk**^#1 **coverage**^#2 **individual**^#3 **work**^#4 **selection**^#5\\\"\",\n \"Actually, most insurance policies DON'T have a cash value if you don't make a claim. The reason that some life insurance policies do this is that they are really tax sheltered investments posing as insurance. With that in mind, the root of your question is really whether insurance premiums are wasted if you never make a claim. It really makes no difference if you are talking about EI, Auto, or Homeowner's insurance. My answer to that is no. What you are paying for when you buy insurance is financial risk avoidance. Look at it this way, you don't buy EI as an investment where you hope to get a return on your investment. You are buying the right to be protected against catastrophic financial difficulty associated with losing your job. Whether you claim it or not you did receive that protection. This is what drives me so crazy when I hear people talk about how an insurance company is ripping you off because you paid more in premiums than they paid out in benefits. Of course you did! If most people didn't pay in more than the company paid out there would be no financial interest for someone to form an insurance company.\",\n \"Many, many good answers here, but I like this one: One month's worth of expenses for each full percentage of unemployment. Therefore, it would normally float between, say five months and ten months. When the economy's hoppin' -- you have less to worry about. When times are tough -- beef up that fund.\",\n \"\\\"Sorry, even if you never file a claim for Employment Insurance (EI), you don't get your premiums back. So, yes, if you paid into EI and never filed a claim, your contributions are, as you put it, \\\"\\\"wasted\\\"\\\" – insofar that your premiums provided no direct benefit to you. However, your premiums may have provided a benefit to society, perhaps even your previous colleagues. Yet, some would point out that a good chunk of EI premiums are likely wasted on excessive administration of the program itself. That's government. A couple of cases I'm aware of where you may be refunded some of the EI premiums paid are: Meaning, a legal way to avoid paying into the EI system altogether is to run your own business. Of course, you won't be able to file an EI claim if your business evaporates overnight. Other kinds of claims unavailable to those who don't pay into EI include maternity, parental*, and sickness benefits .. although they recently made some changes to permit the self-employed to opt-in for some special benefits. * except in the province of Quebec, where there is a separate Quebec Parental Insurance Plan (QPIP) that also covers the self-employed.\\\"\",\n \"Let me get this straight, if I'm smart and save money to last times between jobs using my own money, I shouldn't take the unemployment given to me? If I'm reckless and save nothing on my own, I should be bailed out though. No-, That's ridiculous. Of course I'll take the unemployment, it's given whether I have 0 dollars or 1,000,000 dollars.\",\n \"Require it to survive? hat has that got to do with anything? That is absolutely not the point at all. It is a bridge to the next job. People should not have to sell their homes and move on, especially in this environment, simply because they went without a job for several months more than they expected. If you don't want to collect what is owed to you, then that is fine. Do not assume that counts for others. I know people who live in rich households who pay rent and do not eat at the table with others. They show up in these statistics and could use the help even though it may not seem like it. That isn't the point. And it really isn't clear what the point is when the proposal appears to be causing people to mix their lives up in order to save the government a couple of million over the course of a year. What is disingenuous is to set up an unemployment insurance system and then expect it to be conditional based on all kinds of criteria. One thing you might not be keeping in mind is that the existing system has a error rate of around 20% varying a bit between states. That means around 1 in 5 that are owed insurance payments and sign up never get anything, and around 1 in 5 that are owed nothing for whatever reason end up getting full payments anyway. The more criteria you add to the mechanism the higher that error rate goes. You are quibbling over details that the existing system lacks the capacity to handle.\",\n \"Unemployment is meant for people who were laid off, not terminated. Also, the employee who claimed unemployment did so even after they had worked for another company for several months between working for me and making the claim. If I actually laid someone off I would be the first to personally help them fill out paperwork for unemployment benefits. If those benefits go to those who shouldn't receive them it hurts everyone. That 3% increase in unemployment insurance is 3% that isn't going into paying my actual employees.\",\n \"Millionaires, by definition of being millionaires (having a million dollars), save more money than the poor. That means more of the unemployment check will go to savings rather than being spent in the economy. Which means that it will not stimulate the economy as much if given to a millionaire. The whole point of unemployment is that it gets spent into the economy immediately, and that is why it is one of the most effective forms of stimulus. The money would not be spent on the economy immediately if it were given to a millionaire. >You want to withhold unemployment insurance from rich people because you don't think they are worthy. Tell me where I said that.\",\n \"Good point, but the idea I was getting at is that the money was already allocated for this purpose as it is regularly with every pay day. The idea that some people should not get unemployment insurance payments because they happen to live in households that retain high income is not trivial and at very least should be put before a vote of representatives.\",\n \"\\\"To receive unemployment benefits, you must be registered with an employment agency and be actively seeking work, and be willing to accept work should it be offered to you. As a full-time Cornell University student, as you describe yourself, this does not seem a likely scenario. Also, you need to have established a state of residence. It is not clear to me that you have done so, given your travel between the South Pacific, Ithaca, New York, North Carolina etc. You should check with your local state unemployment office in New York State, or perhaps North Carolina, although I don't know if you satisfy residency requirements in either state. They will be able to confirm however. Are your parents claiming you as a dependent on their federal income taxes? If so, I do not believe that you will be able to file for unemployment benefits, regardless of your student status at Cornell University. One more issue to consider: Have you filed tax returns for the income you received from your television production work? I am uncertain of the amount, as you said that you worked for two 4-month intervals making $10,000. That implies $20,000 of earnings over two years. Yet your bullet point number 7 states that you made \\\"\\\"10 grand each of the four months\\\"\\\". If that means that you made $10,000 per month for four months, then you earned $40,000 per summer, for a total of $80,000 for two summer's worth of work. I don't think unemployment benefits are intended for individuals in your situation.\\\"\",\n \"Honestly, the best way to manage this risk is to manage your savings appropriately. Many experts recommend that maintain a reasonably liquid account with 6-9x your minimum monthly expenses for just this occurrence. I know, easier said than done. Right? As for insurance, I can only speak for what is the case in the US. Here, most mortgages will require you to get PMI insurance until you have at least 20% equity in your house. However, that insurance only protects the BANK from losing money if you can't pay. It doesn't save you from foreclosure or ruining your credit. Really, the type of insurance you are talking about is Unemployment insurance which all states in the US make available to workers via deductions from their paycheck. The best advice, I suppose, is to keep your expenses low enough to cover them with an unemployment check until you have accumulated enough savings to get through a rough patch. That may mean buying a less expensive home, or just waiting until you have saved a bigger down payment. If you didn't plan ahead, and you are already in the house, another option might be to extend your mortgage. For example from a 20 to a 30 year to reduce your payments to a manageable level. A more risky option might be to convert to a variable rate loan temporarily, which typically carries a lower interest rate. However, it might be hard to secure a new loan if you don't currently have an income.\",\n \"In short, I suggest you take a look at your W-4 form and adjust it properly. And yes you can claim your self as a dependent, unless someone else is claiming you. But here is a more detailed explanation of how it works. How Income Tax Works. While most people tend to only think about the tax system and the Internal Revenue Service (IRS) as the month of April approaches, it's actually a never-ending process. For our purposes, a good way to explain how the system works is to give an example of one American income earner, we will call him Joe. The tax process begins when Joe starts his new job. He and his employer agree on his compensation, which will be figured into his gross income at the end of the year. One of the first things he has to do when he's hired is fill out all of his tax forms, including a W-4 form. The W-4 form lists all of Joe's withholding allowance information, such as his number of dependents and child care expenses. The information on this form tells your employer just how much money it needs to withhold from your paycheck for federal income tax. The IRS says that you should check this form each year, as your tax situation may change from year to year. Once Joe is hired and given a salary, he can estimate how much he will pay in taxes for the year. Here's the formula: At the end of each pay period, Joe's company takes the withheld money, along with all of withheld tax money from all of its employees, and deposits the money in a Federal Reserve Bank. This is how the government maintains a steady stream of income while also drawing interest on your tax dollars. Toward the end of the tax year, Joe's company has to send him a W-2 form in the mail. This happens by January 31. This form details how much money Joe made during the last year and how much federal tax was withheld from his income. This information can also be found on Joe's last paycheck of the year, but he'll need to send the W-2 to the IRS for processing purposes. At some point between the time Joe receives his W-2 and April 15, Joe will have to fill out and return his taxes to one of the IRS service and processing centers. Once the IRS receives Joe's tax returns, an IRS employee keys in every piece of information on Joe's tax forms. This information is then stored in large magnetic tape machines. If Joe is due a tax refund, he is sent a check in the mail in the next few weeks. If Joe uses e-File or TeleFile, his refund can be direct-deposited into his bank account.\",\n \"\\\"The money for unemployment insurance was taken out of their paychecks, so why shouldn't they get the payments? Most unemployment insurance money goes right back into the economy anyway, so this \\\"\\\"pocketed\\\"\\\" conclusion is more of a weasel word argument than anything else. Furthermore, this is millionaire *households* and not millionaires. One projection put the cost of this at $2 million a year, so it isn't even really significant compared to the rest of the Federal budget.\\\"\",\n \"Why not 180 weeks then? Being able to get cash without having to work for it changes the human psyche regarding the necessity of work. At the end if the 99 weeks, a lot of people resent having to work again, which translates into an overall lesser quality labor pool. I'm not arguing for no unemployment, but 99 weeks is extreme. No one is actively job searching that long.\",\n \"You've convinced me with your capital letters. How could I have been so blind? The average person on unemployment is there for 39 weeks. Not permanent. So, you're basing your argument on false data. Further, a certain portion of these are there not because of stigma, but because the industry in which they worked doesn't need the labor. Another portion is only actually looking for work in order to continue qualifying for unemployment, and will retire after the benefits run out. You're talking about making a truly significant policy change with real negative effects on many, many real people in order to help a part of the population that doesn't necessarily exist in the manner you imagine it does. From what I can tell, you have done nothing to arrive at your conclusions beyond feeling an emotional reaction with no actual sense of the data. Or any actual knowledge of economics.\",\n \"If I were you I would educate myself better on the ins and outs of employment law. Apparently not knowing all the details has already cost you substantial amount of money. [http://www.nolo.com/legal-encyclopedia/unemployment-benefits-contesting-employees-claim-30348.html](http://www.nolo.com/legal-encyclopedia/unemployment-benefits-contesting-employees-claim-30348.html) Of course the details can vary quite a bit by jurisdiction. Please consider consulting with an attorney who specializes in employment law who can help you protect yourself in the future.\",\n \"Unanticipated unemployment is usually the triggering factor for drawing on an emergency fund. Ask yourself: what happens if I lose my job tomorrow? Or my spouse becomes unemployed? What happens if I become disabled and can't work for x amount of time? Sure, you can discount your chances of needing such a fund if you have free health care. But having health insurance doesn't change the fact that an emergency fund is a good idea. There are many ways to go broke!\",\n \"\\\">That is absolutely not the point at all. It is a bridge to the next job. People should not have to sell their homes and move on, especially in this environment, simply because they went without a job for several months more than they expected. Isn't this what a savings account is for? Are you to tell me that these people don't have enough money built up in a \\\"\\\"rainy day\\\"\\\" fund? I am about 900k from making a million dollars a year however i still have enough saved up for 8 months of being laid off, so that i DON'T have to get on govt assistance right away. You can't honestly expect me to believe that someone who has this kind of wealth didn't properly plan for this.\\\"\",\n \"Let me offer what I did in a similar situation - Two points (a) we were banking $20K/yr or so to the cash fund, 2 good incomes, and the ability to go indefinitely on just one of the 2. (b) A HELOC that was prime-1.5%. The result was to mentally treat the HELOC as our emergency fund, but to enjoy the interest savings of over $16,500/yr for the $100K that had a sub-1% return. When I first referenced this story, I came under criticism. Fair enough, it's not for everyone. Let's jump ahead. We owe $228K @3.5%. We had tapped the equity line for brief periods, but never over $20,000. When we lost our jobs, both of us, we had hit our number and are semi-retired now. Our retirement budget included the current mortgage payment, so we are in line for that dropping out of the budget in 12 years, and starting social security after that, which I did not include as part of the budget. Note - when we lost our jobs, the severance was 6 month's pay, and we collected unemployment as well. The first 12 months were covered without tapping our retirement funds at all. So, to Nick's point (and excellent answer) our first line of defense against unemployment was this combination of severance and unemployment insurance.\",\n \"\\\"Ah, I see what you mean, then. But if you die at 57, being hit by a bus, those self-invested funds won't help the general social welfare of the union. Instead 1/3 would go to some estate tax, and the rest are left to the designated appointee of your choosing. This soulless system helps the general populace a bit more directly. That is the theory, anyways. *edit: what I mean to say is, you still perceive that money as your own, like some compulsory retirement savings plan. I see it more as tax revenue,math little to no guarantee I will personally benefit from it directly any more than the general benefit it provides to This Great Union.\\\"\\\"\\\"\",\n \"This is something a redditor came up with. It provides a basic income to everyone, while still penalizing those who don't work (by minutely by surely lowering their stipend) and preventing a poverty trap (by never withdrawing the stipend).\",\n \"\\\"The definition of insurance is the transfer of risk. Thus, you're paying for transferring of a risk (of an item/property) to the insurer (carrier), so that they bear the financial burden of a loss/accident and not you. You could always self-insure, but a lot of times, insurance is cheaper, since due to the \\\"\\\"Law of Large Numbers\\\"\\\" the insurer can just charge a premium that is small percentage in comparison to the cost of self-insuring.\\\"\",\n \"This is something that many people misunderstand. Nearly everyone who works in the U.S. is required to pay Social Security and Medicare taxes (sometimes called payroll taxes or FICA). These are not a savings plan, and the money you pay is not going into an account with your name on it. This money is used to pay for the benefits of the current retirees/beneficiaries. When you retire, the benefits you get will be paid for by the workers that are still working and paying that tax. You may be receiving benefits, but you are also still working, so you still have to pay the tax.\",\n \"\\\"Yes, it's normal. If you \\\"\\\"buy\\\"\\\" your own disability insurance with after tax money, any payout you get is non taxable. If your employer \\\"\\\"buys\\\"\\\" your disability insurance with their own money, any payout you get is taxable. Since the payout is not 100% of your pre-disability income, most folks strongly prefer that the payout be non taxable. To achieve this, I pay the premiums on behalf of my employees (including myself) and then add that premium to their salary as a taxable benefit. In effect I paid it to them, then took it from them and used it to buy the insurance. (It has no impact on my corporate taxes since I can either deduct premiums or salaries, same either way.) This ensures they won't pay tax if they should collect. And I have had people collect, and it was non-taxable to them.\\\"\",\n \"That is exactly how the insurance companies work. What you described here falls under P/L. If you are buying insurances you are betting that you might get sick. Same as when insurance companies sells you insurance they are betting that you won't get sick. No one will sell you insurance if you are oreads sick. That's why you have government to take of you. Of course there are pools of healthy and unhealthy people. The healthier the better for the company. No one is in it to loose money.\",\n \"It doesn't matter. The effect of that money being spent and entering into the economy as a whole is strongly positive. This moralist argument is that unemployment is somehow tempting or enjoyable, but the only real support for that is the loathing associated with it. Fighting with imaginary demons can hurt real people and economies.\",\n \"\\\"First of all, insurance never covers the cost of the item, it is almost always a partial payout at best. For example, a typical house in the Northeast US where I live that costs $300,000 will have the actual house valued at maybe $100,00 and rest of the value will be in the land. Therefore, the insured value will typically be $100,000. The only problem is that to actually rebuild the house might easily cost $250,000. So, your idea that some kinds of insurance allows the beneficiary to recoup their loss is usually never true. As you say, from an actuarial point of view insurance is a sheer waste of money. For example, a typical house has maybe a 0.5% chance of burning down every year. In other words out of 2000 houses, maybe 1 will burn down every year. So, lets say you got $100,000 of insurance on your house. Then the value of that policy would be $100,000 / 2000 = $50 per year. An insurance company will charge around $700 per year for the policy. That means you are basically flushing $650 down the toilet every year to maintain that policy. The reason why they do this is what blankip says above, they are buying \\\"\\\"peace of mind\\\"\\\", a psychological product. In other they imagine they are somehow safe. So, even though they are losing money, paying it makes them feel as though they are not losing money. It's delusional, but then again most people have a lot of delusions of which insurance is just one of many.\\\"\",\n \"The amount you contribute will reduce the taxable income for each paycheck, but it won't impact the level of your social security and medicare taxes. A 401(k) plan is a qualified deferred compensation plan in which an employee can elect to have the employer contribute a portion of his or her cash wages to the plan on a pretax basis. Generally, these deferred wages (commonly referred to as elective contributions) are not subject to income tax withholding at the time of deferral, and they are not reflected on your Form 1040 (PDF) since they were not included in the taxable wages on your Form W-2 (PDF). However, they are included as wages subject to withholding for social security and Medicare taxes. In addition, employers must report the elective contributions as wages subject to federal unemployment taxes. You might be able to keep this up for more than 7 weeks if the company offers health, dental and vision insurance. Your contributions for these policies would need to be paid for before you contribute to the 401K. Of course these items are also pre-tax so they will keep the taxable amount at zero. If there was a non-pretax deduction on your pay check that would keep the check at zero, but there would be taxes owed. This might be union dues, but it can also be some life and disability insurance polices. Most stubs specify which deductions are pre-tax, and which are post-tax. Warning. If you get the company match some companies give you the maximum match for those 7 weeks, then zero for the rest of the year. Others will still credit you with a match at the end of the year saying if you should get the benefit. It is not required that they do this. Check the company documents. You could also contribute post-tax money, which is different than Roth 401K, for the rest of the year to keep the match going. Note: If you are turning 50 this year, or are already 50, then you can contribute an additional $5,500\",\n \"I don't know where the money comes from. I do know flood Insurance is through the National Government. I worked an internship for Horace Mann insurance, and all I know is that I would hate to be working their the next month and a half.\",\n \"1) When you apply for insurance you indicate your expected income, they figure the subsidy based on this. Note that while this data isn't checked it's only an estimate, any errors will be fixed at tax time so lying is just going to gain you an unpleasant tax bill come April 15. 2) It's not paid in installments, it's just a monthly premium. It's quite possible for someone to be on the ACA for only part of a year. 3) I can't address the issue of the fines. However, you are wrong on who it's for--it's for anyone who doesn't have employer-provided insurance, whatever the reason. I've been on it since it's inception because I have been self employed for most of that time--there's no employer to even offer me insurance.\",\n \"\\\"There are a few questions that need qualification, and a bit on the understanding of what is being 'purchased'. There are two axioms that require re-iteraton, Death, and Taxes. Now, The First is eventually inevitable, as most people will eventually die. It depends what is happening now, that determines what will happen tomorrow, and the concept of certainty. The Second Is a pay as you go plan. If you are contemplating what will heppen tomorrow, you have to look at what types of \\\"\\\"Insurance\\\"\\\" are available, and why they were invented in the first place. The High seas can be a rough travelling ground, and Not every shipment of goods and passengers arrived on time, and one piece. This was the origin of \\\"\\\"insurance\\\"\\\", when speculators would gamble on the safe arrival of a ship laden with goods, at the destination, and for this they received a 'cut' on the value of the goods shipped. Thus the concept of 'Underwriting', and the VALUE associated with the cargo, and the method of transport. Based on an example gallion of good repair and a well seasoned Captain and crew, a lower rate of 'insurance' was deemed needed, prior to shipment, than some other 'rating agency - or underwriter'. Now, I bring this up, because, it depends on the Underwriter that you choose as to the payout, and the associated Guarantee of Funds, that you will receive if you happen to need to 'collect' on the 'Insurance Contract'. In the case of 'Death Benefit' insurance, You will never see the benefit, at the end, however, while the policy is in force (The Term), it IS an Asset, that would be considered in any 'Estate Planning' exercise. First, you have to consider, your Occupation, and the incidence of death due to occupational hazards. Generally this is considered in your employment negotiations, and is either reflected in the salary, or if it is a state sponsored Employer funded, it is determined by your occupational risk, and assessed to the employer, and forms part of the 'Cost-of-doing-business', in that this component or 'Occupational Insurance' is covered by that program. The problem, is 'disability' and what is deemed the same by the experience of the particular 'Underwriter', in your location. For Death Benefits, Where there is an Accident, for Motor Vehicle Accidents (and 50,000 People in the US die annually) these are covered by Motor Vehicle Policy contracts, and vary from State to State. Check the Registrar of State Insurance Co's for your state to see who are the market leaders and the claim /payout ratios, compared to insurance in force. Depending on the particular, 'Underwiriter' there may be significant differences, and different results in premium, depending on your employer. (Warren Buffet did not Invest in GEICO, because of his benevolence to those who purchase Insurance Policies with GEICO). The original Poster mentions some paramaters such as Age, Smoking, and other 'Risk factors'.... , but does not mention the 'Soft Factors' that are not mentioned. They are, 'Risk Factors' such, as Incidence of Murder, in the region you live, the Zip Code, you live at, and the endeavours that you enjoy when you are not in your occupation. From the Time you get up in the morning, till the time you fall asleep (And then some), you are 'AT Risk' , not from a event standpoint, but from a 'Fianancial risk' standpoint. This is the reason that all of the insurance contracts, stipulate exclusions, and limits on when they will pay out. This is what is meant by the 'Soft Risk Factors', and need to be ascertained. IF you are in an occupation that has a limited exposure to getting killed 'on the job', then you will be paying a lower premium, than someone who has a high risk occupation. IT used to be that 'SkySkraper Iron Workers', had a high incidence of injury and death , but over the last 50 years, this has changed. The US Bureau of Labor Statistics lists these 10 jobs as the highest for death (per 100,000 workers). The scales tilt the other way for these occupations: (In Canada, the Cheapest Rate for Occupational Insurance is Lawyer, and Politician) So, for the rest in Sales, management etc, the national average is 3 to 3.5 depending on the region, of deaths per 100,000 employed in that occupation. So, for a 30 year old bank worker, the premium is more like a 'forced savings plan', in the sense that you are paying towards something in the future. The 'Risk of Payout' in Less than 6 months is slim. For a Logging Worker or Fisher(Men&Women) , the risk is very high that they might not return from that voyage for fish and seafood. If you partake in 'Extreme Sports' or similar risk factors, then consider getting 'Whole Term- Life' , where the premium is spread out over your working lifetime, and once you hit retirement (55 or 65) then the occupational risk is less, and the plan will payout at the age of 65, if you make it that far, and you get a partial benefit. IF you have a 'Pension Plan', then that also needs to be factored in, and be part of a compreshensive thinking on where you want to be 5 years from today.\\\"\",\n \"\\\"how is the money the FDIC has collected Fees collected from the banks: The FDIC receives no Congressional appropriations – it is funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities. http://www.fdic.gov/about/learn/symbol/index.html They also use the proceeds from liquidating the assets of failed banks to make payouts. Are there country specific agencies with a similar mission? Canada Deposit Insurance Corporation Instituto para la Ptotección al Ahorro Bancario (Mexico) Financial Services Compensation Scheme (UK) not quite like the FDIC You'll have to search for others yourself. :) Most importantly, are there any examples of a similar system that has failed? As the Mythbusters say, \\\"\\\"failure is always an option.\\\"\\\" There is a statement on FDIC's website to the effect that they are backed by the \\\"\\\"full faith and credit\\\"\\\" of the U.S. government. That said, the FDIC maintains its own fund to make insurance payouts. Granted, in the shakiness of the 2008-2009 financial crisis they did start waving a red flag about their realistic ability to cover their obligation. Practically speaking, the government will likely step in if necessary. This 2008 article regarding a propsed revamp of the UK's FSCS should be of general interest to you on this topic, though it does not answer the question of failed systems. (Well, as far as I know. I have only skimmed the article.)\\\"\",\n \"\\\"The key point to answer the question is to consider risk aversion. Assume I suggest a game to you: Throw a coin and if you win, you get $5, if you lose nothing happens. Will you play the game? Of course, you will - you have nothing to lose! What if I suggest this: If you win, you get $10,000,005 and if you lose you must pay $10,000,000 (I also accept cars, houses, spouses, and kidneys as payment). While the expected value of the second game is the same as for the first, if you lose the second game you are more or less doomed to spend the rest of your life in poverty or not even have a rest of your life. Therefore, you will not wish to play the second game. Well, maybe you do - but probably only if you are very, very rich and can easily afford a loss (even if you had $11,000,000 you won't be as happy with a possible raise to $21,000,005 as you'd be unhappy with dropping to a mere $1,000,000, so you'd still not like to play). Some model this by taking logarithms: If your capital grows from $500 to $1000 or from $1000 to $2000, in both cases it doubles, hence is considered the same \\\"\\\"personal gain\\\"\\\", effectively. And, voíla, the logartithm of your capital grows by the same amount in both cases. This refelcts that a rich man will not be as happy about finding a $10 note as a poor man will be about finding a nickel. The effect of an insurance is that you replace an uncertain event of great damage with a certain event of little damage. Of course, the insurance company plays the same game, with roles swapped - so why do they play? One point is that they play the game very often, which tends to nivel the risks - unless you do something stupid and insure all inhabitants of San Francisco (and nobody else) against eqarthquakes. But also they have enough capital that they can afford to lose the game. In a fair situation, i.e. when the insurance costs just as much as damage cost multiplied with probability of damage, a rational you would eagerly buy the insurance because of risk aversion. Therefore, the insurance will in effect be able to charge more than the statistically fair price and many will still (gnawingly) buy it, and that's how they make a living. The decision how much more one is willing to accept as insurance cost is also a matter of whether you can afford a loss of the insured item easily, with regrets, barely, or not all.\\\"\",\n \"\\\"One way to look at insurance is that it replaces an unpredictable expenses with a predictable fees. That is, you pay a set monthly amount (\\\"\\\"premium\\\"\\\") instead of the sudden costs associated with a collision or other covered event. Insurance works as a business, which means they intend to make a substantial profit for providing that service. They put a lot of effort in to measuring probabilities, and carefully set the premiums to get make a steady profit*. The odds are in their favor. You have to ask yourself: if X happened tomorrow, how would I feel about the financial impact? Also, how much will it cost me to buy insurance to cover X? If you have a lot of savings, plenty of available credit, a bright financial future, and you take the bus to work anyway, then totaling your car may not be a big deal, money wise. Skip the insurance. If you have no savings, plenty of debt, little prospects for that improving, and you depend on your car to get to work just so you can pay what you already owe, then totaling your car would probably be a big problem for you. Stick with insurance. There is a middle ground. You can adjust your deductible. Raise it as high as you can comfortably handle. You cover the small stuff out of pocket, and save the insurance for the big ticket items. *Insurance companies also invest the money they take as premiums, until they pay out a claim. That's not relevant to this discussion, though.\\\"\",\n \"Might as well just come out and say that you're talking about socialism/communism. Not that there is anything *inherently* wrong with socialistic approaches, but come on, 'we don't need jobs, they only benefit capitalists'? High unemployment isn't a bad thing? I don't think you've ever had a job.\",\n \"This is just terrible. Could you imagine owning a business in Michigan, and now you have to pay more than DOUBLE what you accrued for FUTA, and by the end of January, no less. The states default, so the businesses have to pick up the slack.\",\n \"*sigh* When is the last time you looked for a job? I've been employed literally non-stop since I was 15, usually with 2 or more employers, so I expect no government handout. But the job market is really *that bad.* I got lucky last year, in that one week out of college I found a job. Three days later I realized I hated it, so I started sending out resumes. I averaged 5 a week. Over the course of the next year, I received 5 replies and 2 interviews after sending out my resume **over 250 times**. The first reply took 6 months. I stayed at that same job, hating it every single day for a year, because I had no other option. I received one reply for a job that I was perfectly qualified for (I know because I interned at another office doing the exact thing) and they told me I wasn't qualified. What if I had been laid off during that time? Remember, it took 6 months before I even got a *reply*. I would have been screwed. **TL; DR: Living off of the government is not, by default, because you are lazy.**\",\n \"Yes factor into your fund the cost of health insurance. You basically have three options when facing a loss of income for 3-6 months: Pre-ACA the COBRA one was the default option many planned for because there was no need to change doctors. Of course many people were shocked how expensive it was compared to just looking at the employees share of the monthly premium. For planning you can do some research into the cost of one of the ACA approved plans in your state. Keeping in mind that the lack of income might qualify you for a subsidy. As to the coverage level, that would depend on your situation and the perceived gap. I have known many people who didn't have to pick COBRA until after the new job started so they knew exactly what they needed to cover and what their bills were during the gap.\",\n \"\\\">You understand the purpose of insurance, right? It's ok to tax the rich but not ok for them to cash in on insurance? You understand that no employees pay for this \\\"\\\"insurance\\\"\\\" right? The rich employees don't pay for this benefit, the employers do. That being said, this is not something that is an easy question to answer. One one hand if someone is out of a job then the black and white answer is \\\"\\\"yes\\\"\\\" they are absolutely allowed to use these benefits. The other hand if this person has the ability not to utilize these benefits because they were able to create a savings(either by investments or simply saving) then why would they need to use it? I think that using this specific benefit should be a last resort, Not one to use because you don't want to use any of your money. Not that im saying this happened but again, if someone is making this kind of money, one would think they should have the wherewithal to have an emergency savings fund for this exact situation. There is nothing inherently illegal about this, however it is, IMO, morally questionable.\\\"\",\n \"Unfortunately, no. Think about the numbers. If you work for me, and I pay you $1000, you owe tax on $1000. If you still work, but I don't pay you, you have no tax due, but there's no benefit for you to collect for my stealing your time.\",\n \"The point about insurance is solidarity. Think about this: In London a few hundred years ago people first started insuring their houses against fire. There were several insurance companies, and if you used one you got a marker on your house. So if your house caught fire they would come and check, and they would put the fire out only if it had their marker on it. Now, in most places these days the fire brigade will always come and always put your fire out. We expect this, and we are happy to pay for this service by taxation, and we do not fret about wasted money if we pay it for decades without ever having a fire. We also do not complain if the neighbour's house burns, and they get the full fire service which we have been paying for. Now all the fire brigade do is rescue you and put your fire out. Here in Germany every house owner is also obliged to have fire insurance, so if your house burns it can be repaired or rebuilt. Everyone pays insurance premiums, and I never heard anyone complain if they paid for 50 years and never claimed anything. If you need a new house the payout is huge. But the premiums are low. This only works if everyone is insured. This can only work if we all accept the concept of solidarity. It is easy to say, I don't smoke so I don't need to insure against fire, or, I live a healthy life so I don't need to insure against cancer. But lightning does not check your CV before it strikes. It hits you or your fellow man, and how can you justify not helping your neighbour? Insurance can only work if we all take part.\",\n \"What city are you in? > I got a call for contract work and it only lasted two weeks. This can happen. Sometimes contracts don't work out. > With that contract I was finally getting paid what I was getting paid at my last permanent position, but again I did not receive the same benefits as a full time employee. That contract let me go after 18 months due to policy that they couldn't string contractors along. This is very common. Unfortunately due to a court case involving Microsoft contractors 25-30 years ago, many firms limit contracts to a hard stop at 18 months - 2 years. Not all firms have this policy. I am interested what city you are in. My career has taken me throughout flyover country, and finding 6 figure contracts has always been reasonably achievable. Most cities appeared to have a shortage of workers with 5+ years experience in most specializations. Fellow IT contractors have felt that IT unemployment insurance is $45 per hour jobs where you compete with H1B body shops, since those almost never get filled. It sounds like you are in an economically depressed area.\",\n \"\\\"Insurance companies on average make money by selling insurance, which means you lose money on average by dealing with them. The insurance is not gambling where the house always wins. This expression is literal in gambling, because that's how they set the odds. Insurance isn't necessarily similar. Example. Suppose there's 10% chance that $10,000 the boat sinks due to a defect. So, on average your loss is going to be $1,000. The variability of your loss measured as its standard deviation is $2,846. The variability of loss is a measure of risk. Now, let's look at two $10,000 boats. There's 1% chance that they both sink, and 18% chance that only one of them sinks. So, the expected loss is, unsurprisingly, $2,000. However, the variability of expected loss is $3,842, not quite twice the risk (variability) of a single boat accident. If you imagine that instead of a couple of boats the insurance has 100 boats, the variability of their loss (hence their risk) will increase only by a factor of 10, not 100 compared to a single boat. This means that their risk in relative terms is smaller than yours, the individual insurer's. What I tried to show was that it is possible to both of you and the insurer to benefit from the arrangement. It doesn't mean that it happens in every case, but generally it does. That's why in actuarial science there's a term fair price. UPDATE I was trying to avoid talking about utility here, because it's an involved subject, but you're dragging the discussion in this direction :) You're right that expected value cannot explain the insurance. The reason is that there's another concept that's necessary in addition to the objective measures such as expected value and risk: I mean the utility function or risk-aversion. So, in short you need to maximize expected utility, not the expected payout. Here's a toy example with the same boat. Assume that insurance is $150, and they pay the entire boat's value in case of accident, i.e. $10,000. You're given two choices effectively. At the end of the year, you have either of the following: You're right that the expected value in the second option can be higher in the second option. Let's say the probability of the loss is 10%, in this case the expected value would $9,900, which is higher than certain value of option 1. Why then some people choose option 2? The reason is that we don't maximize the expected payout, but we maximize the utility, according to modern microeconomics and game theory. Utility is some kind of an function that reflects your preference given the uncertain choices. Every person has their own preferences, and utility function. Let's say that yours is exponential with a=10000. In this case we can calculate the expected utility as follows: The math works out in such a way that it accounts for your risk tolerance. Depending on how much you love or hate risk, your expected utilities for these option will come out differently. For this given toy example it turned out that the expected utility is higher with insurance, so this person should get it. However, for different values of a parameter \\\"\\\"a\\\"\\\" in the function, it may not make a sense to insure. Some people are risk averse, some are risk lovers in certain situations. That's the reason why given the same options we make different choices. You may say that you don't value certainty enough to buy this insurance. The bottom line is that nobody can tell you that you're wrong to not buy an insurance. If your risk tolerance is high it may not make a sense for you. Having said this all, I must note that sometimes the society doesn't accept your preferences and utility function. Yes, you tell me today that you accept the risk, but tomorrow when the boat sinks you may come to me and say that you can't pay the student loan because of the hardship. That's the reason why it's mandatory to get liability insurance on cars, for instance.\\\"\",\n \"It's like collecting car insurance when you've had an accident. If you want a good analogy it's like having an accident and then some asshole reporter claims it's unfair that the policy paid for it because you made more than some arbitrary amount of money last year.\",\n \"\\\"Because people are Risk Averse. Suppose that you own an asset worth $10,000 to you. Suppose that each year, the asset has 1% chance of being stolen (or completely broken). The expected value is 99% x 10,000 + 1% x $0 = $9,900. This is the average outcome if you do not buy insurance. Now consider two mutually exclusive outcomes: 99% chance of keeping $10,000 and 1% chance of losing everything (expected value: $9,900) 100% chance of keeping $9,900 (expected value: $9,900) Everyone would choose option 2, even though the expected values are the same. Option 2 is an insurance that cost $100 (Actuarially fair, aka the odds are fair). Now suppose the insurance costs $150 instead of $100 (despite that the bad probability is still 1%). You are faced with 99% chance of keeping $10,000 and 1% chance of losing everything (expected value: $9,900) 100% chance of keeping $9,850 (expected value: $9,850) Some people would still choose option 2, even though the expected value is actually lower. The $50 is called Risk Premium, which people are willing to pay in order to avoid uncertainty. The odds are unfair, but the Risk Premium has its value. That being said, competition between insurance companies would drive down the premium until the insurance is close to actuarially fair, but they have cost to cover (sales, administration, etc), making the odds \\\"\\\"unfair\\\"\\\".\\\"\",\n \"No, you cannot. The FICA taxes paid are not refunded if you're not reaching the benefits threshold. They're gone. That is why foreigners who are not tax residents (mainly students) are not required to pay them. If your home country has a social security reciprocity agreement with the US - you can have a credit in your home country.\",\n \"BI tapers off as you earn more. It's means tested by the tax department. Getting rid of the welfare means testing and fraud apparatus entirely. Depending on behaviour BI could save money on the current system. Especially as now there would be an explosion of fairly risk free freelancing.\",\n \"\\\"Generally you do not pay taxes on insurance payouts that occur because of some kind of loss, provided you paid the premiums yourself. \\\"\\\"Generally, if you're paying premiums yourself, such as for homeowners insurance and auto insurance, then your insurance benefits are not a taxable event,\\\"\\\" says Adam Sherman, CEO of Firstrust Financial Resources in Philadelphia. \\\"\\\"Your benefits are reimbursement for expenses, rather than income.\\\"\\\" It's not as straightforward for death benefits and life insurance.\\\"\",\n \"\\\"This is the best tl;dr I could make, [original](https://www.theatlantic.com/business/archive/2017/10/next-recession-prepared/544391/) reduced by 92%. (I'm a bot) ***** > The economy has had three jobless recoveries following the last three recessions, and the next recession would likely prompt a fourth. > &quot;Right now, one in four unemployed workers are receiving benefits. There are 15 states out there where the share of workers is less than one in five. In the southeast, the cuts have been so deep there&#039;s barely an unemployment-insurance program there.&quot; In the event of another recession, without strong and swift federal and state intervention, many Americans would face far less help from unemployment insurance than they did last time around, he said. > In terms of global circumstances, political will, and fiscal and monetary firepower the next recession seems in some ways more difficult to fight than the last. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/79xzco/the_us_isnt_prepared_for_the_next_recession/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \\\"\\\"Version 1.65, ~238467 tl;drs so far.\\\"\\\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \\\"\\\"PM's and comments are monitored, constructive feedback is welcome.\\\"\\\") | *Top* *keywords*: **recession**^#1 **last**^#2 **state**^#3 **work**^#4 **economy**^#5\\\"\",\n \"> I think you know it is not really that simple. Does the police force teach civilians to ignore lawbreakers? Yes it does. >Does public education cause people to only learn what is taught in schools? For the vast majority of people, they do not learn anything outside the classroom. >Do people not learn CPR because 911 exists? I wonder how many people learn CPR of their own volition. I learned it in high school gym class, but not on my own. > If people don't have the skills to manage their lives and hold down a job, wouldn't forcing them into a job guarantee failure? You are confusing Unemployment Insurance with Welfare. >Would you agree they would need to first learn these skills and that probably wouldn't happen in an unstable environment? I agree.\",\n \"\\\"The math on this only works if the workers who are \\\"\\\"choosing no income at all\\\"\\\" are being paid by something else. In first world countries, humans cannot live (eat food or sleep in a bed, etc) without some sort of money. The only question is - what else is paying them? Government programs, friends, family support?\\\"\",\n \"Physically or mentally unable to work because of a debilitating medical condition. [How Americans Game the $200 Billion-a-Year 'Disability-Industrial Complex'](https://www.forbes.com/sites/theapothecary/2013/04/08/how-americans-game-the-200-billion-a-year-disability-industrial-complex/#f0651be4b6d8) America’s health-care entitlements—Medicare, Medicaid, and Obamacare—are the biggest drivers of our exploding federal debt. What you may not know is that there is a fourth program, that pays disability benefits through the Social Security Administration, that is also growing at an alarming pace. While part of that growth can be explained by the aging of the U.S. population, the largest factor in the proliferation of disability spending comes from the fact that Congress has dramatically expanded the definition of who gets called “disabled.” **As a result, many able-bodied Americans have been granted government paychecks for life, crowding out our ability to direct needed resources to the genuinely infirm.** The story of the growth in federal disability spending has been percolating for years. The Great Recession of 2008 led to a spike in unemployment; many people who had difficulty finding work discovered that they might be eligible for Social Security disability benefits, benefits that would replace a significant portion of their previously earned wages, while also qualifying them for Medicare, our generous health-insurance program for the elderly. Today, the United States spends around $200 billion a year, literally paying Americans not to work.\",\n \"\\\"The guideline for the size of an emergency fund is just a guideline. I've usually heard it expressed as \\\"\\\"3 to 6 months,\\\"\\\" but everyone has a different idea of exactly how big it should be. The purpose of the fund is to give you enough cash to be able to pay for unexpected expenses that have come up that you have not budgeted for without you having to borrow money to pay for them. To figure out how big this fund should be, we look at the worst case scenario. Suppose that you lost your job tomorrow. What would you do? Cut your expenses. You'd probably be much more careful how you spend money. Secure health insurance. This would be done by either continuing your employer's policy with COBRA, or by purchasing your own insurance, likely through the Obamacare/ACA market. Keep in mind that most likely your employer is paying for a portion of your insurance now, so this expense will go up quite a bit no matter which option you choose. Look for another job. You'd probably begin your search for a new job immediately. The size of your emergency fund determines how long you will be able to go without income before you need to start a new job. Regarding cutting your expenses, it is up to you how much you would cut. There are things that are easy to cut temporarily (or permanently), such as restaurants, entertainment expenses, vacations, etc. You would probably stop retirement investing until you have income again. The more you cut, the longer your emergency fund would last. Things you don't want to cut are necessities, like housing, groceries, utilities, transportation, etc. I would also include health insurance in this list. Certainly, if you have a pre-existing condition, you do not want to let your health insurance coverage lapse. Your employability is also a factor. If you believe that you would have an easy time finding similar employment to what you have now, your emergency fund might not need to be quite as big as someone who believes they would have a harder time finding another job.\\\"\",\n \"One small note: If you have an employer sponsored account and get let go you might have an issue. You would lose any funds in the account as of the day of your unemployment if you don't have enough expenses to use it all up! So if you put in a lot every month because you have a large planned expense like root canal or operation then you could lose it all. This happened to me.\",\n \"\\\"Yes, and the math that tells you when is called the Kelly Criterion. The Kelly Criterion is on its face about how much you should bet on a positive-sum game. Imagine you have a game where you flip a coin, and if heads you are given 3 times your bet, and if tails you lose your bet. Naively you'd think \\\"\\\"great, I should play, and bet every dollar I have!\\\"\\\" -- after all, it has a 50% average return on investment. You get back on average 1.5$ for every dollar you bet, so every dollar you don't bet is a 0.5$ loss. But if you do this and you play every day for 10 years, you'll almost always end up bankrupt. Funny that. On the other hand, if you bet nothing, you are losing out on a great investment. So under certain assumptions, you neither want to bet everything, nor do you want to bet nothing (assuming you can repeat the bet almost indefinitely). The question then becomes, what percentage of your bankroll should you bet? Kelly Criterion answers this question. The typical Kelly Criterion case is where we are making a bet with positive returns, not an insurance against loss; but with a bit of mathematical trickery, we can use it to determine how much you should spend on insuring against loss. An \\\"\\\"easy\\\"\\\" way to undertand the Kelly Criterion is that you want to maximize the logarithm of your worth in a given period. Such a maximization results in the largest long-term value in some sense. Let us give it a try in an insurance case. Suppose you have a 1 million dollar asset. It has a 1% chance per year of being destroyed by some random event (flood, fire, taxes, pitchforks). You can buy insurance against this for 2% of its value per year. It even covers pitchforks. On its face this looks like a bad deal. Your expected loss is only 1%, but the cost to hide the loss is 2%? If this is your only asset, then the loss makes your net worth 0. The log of zero is negative infinity. Under Kelly, any insurance (no matter how inefficient) is worth it. This is a bit of an extreme case, and we'll cover why it doesn't apply even when it seems like it does elsewhere. Now suppose you have 1 million dollars in other assets. In the insured case, we always end the year with 1.98 million dollars, regardless of if the disaster happens. In the non-insured case, 99% of the time we have 2 million dollars, and 1% of the time we have 1 million dollars. We want to maximize the expected log value of our worth. We have log(2 million - 20,000) (the insured case) vs 1% * log(1 million) + 99% * log(2 million). Or 13.7953 vs 14.49. The Kelly Criterion says insurance is worth it; note that you could \\\"\\\"afford\\\"\\\" to replace your home, but because it makes up so much of your net worth, Kelly says the \\\"\\\"hit it too painful\\\"\\\" and you should just pay for insurance. Now suppose you are worth 1 billion. We have log(1 billion - 20k) on the insured side, and 1%*log(999 million) + 99% * log(1 billion) on the uninsured side. The logs of each side are 21.42 vs 20.72. (Note that the base of the logarithm doesn't matter; so long as you use the same base on each side). According to Kelly, we have found a case where insurance isn't worth it. The Kelly Criterion roughly tells you \\\"\\\"if I took this bet every (period of time), would I be on average richer after (many repeats of this bet) than if I didn't take this bet?\\\"\\\" When the answer is \\\"\\\"no\\\"\\\", it implies self-insurance is more efficient than using external insurance. The answer is going to be sensitive to the profit margin of the insurance product you are buying, and the size of the asset relative to your total wealth. Now, the Kelly Criterion can easily be misapplied. Being worth financially zero in current assets can easily ignore non-financial assets (like your ability to work, or friends, or whatever). And it presumes repeat to infinity, and people tend not to live that long. But it is a good starting spot. Note that the option of bankruptcy can easily make insurance not \\\"\\\"worth it\\\"\\\" for people far poorer; this is one of the reasons why banks insist you have insurance on your proprety. You can use Kelly to calculate how much insurance you should purchase at a given profit margin for the insurance company given your net worth and the risk involved. This can be used in Finance to work out how much you should hedge your bets in an investment as well; in effect, it quantifies how having money makes it easier to make money.\\\"\",\n \"It gives some vague crap about pain, but talks very little about the actual diagnoses, chronic pain is one of those things that seems subjective, but can be very problematic for determining ability. A construction worker with chronic back pain might in theory be able to do a desk job, but if hes an older worker, especially only a high school graduate, he's gonna have a fuck time trying to get a desk job, and is likely unable to meet the standards required for retail, and you can not be just a cashier, all cashiers are now stock/clerk/cashier with lifting minimums and requirements to stand for 4 to 5 hours at a time. In THEORY theres a job he could be doing, in ACTUALITY there isn't. Times of high unemployment create more and more situations like that as people who found some acceptable niche to fit in that accommodated their disability now find it extremely difficult to find that accommodation again. Lacking other options, it now becomes a necessity to get into SSDI since the US has pretty much no real reliable welfare. An SSDI requires you not work, so you can't wean off of it, its a trap, once you're in, you usually don't get out. It's the biggest, most extreme welfare cliff in the way it's designed.\",\n \"There are many situations where injecting a certain amount of cash at the right time may reap rewards far in excess of the value of the cash injected. For example, if someone who needs a car to get to work gets in a wreck and that person does not have ready money to make it driveable may have no choice but to secure very expensive financing. Receipt of $1000 in ready money to repair the car may thus save the person from having to take out a loan that would cost $1200 or more to repay. While the insurance business has sufficient overhead that it is unlikely that insurance would generally have a positive net expectation even considering such factors, it is at least theoretically possible that insurance could have a positive expected value for both the insurer and the insured (and in some cases it may have positive expected values for both parties in practice as well).\",\n \"\\\"No. Switzerland is one of the few countries the United States has \\\"\\\"totalizaton\\\"\\\" agreements with (not to confuse with tax treaties) to work around this kind of thing. You can find the list of the agreements here. You can use the years you work in Switzerland to make up for the remaining credits you need to qualify for benefits in the U.S. When it's time to retire, you'll receive a partial U.S. benefit that is proportional to the number of credits you earned in the U.S. You can learn more about all this here. For other countries, for which the US doesn't have totalization agreements, in this scenario you would get no benefits back for the money. So yes, it would be lost.\\\"\",\n \"\\\"The point here is actually about banks, or is in reference to banks. They expect you know how a savings account at a bank works, but not mutual funds, and so are trying to dispel an erroneous notion that you might have -- that the CBIC will insure your investment in the fund. Banks work by taking in deposits and lending that money out via mortgages. The mortgages can last up to 30 years, but the deposits are \\\"\\\"on demand\\\"\\\". Which means you can pull your money out at any time. See the problem? They're maintaining a fiction that that money is there, safe and sound in the bank vault, ready to be returned whenever you want it, when in fact it's been loaned out. And can't be called back quickly, either. They know only a little bit of that money will be \\\"\\\"demanded\\\"\\\" by depositors at any given time, so they keep a percentage called a \\\"\\\"reserve\\\"\\\" to satisfy that, er, demand. The rest, again, is loaned out. Gone. And usually that works out just fine. Except sometimes it doesn't, when people get scared they might not get their money back, and they all go to the bank at the same time to demand their on-demand deposits back. This is called a \\\"\\\"run on the bank\\\"\\\", and when that happens, the bank \\\"\\\"fails\\\"\\\". 'Cause it ain't got the money. What's failing, in fact, is the fiction that your money is there whenever you want it. And that's really bad, because when that happens to you at your bank, your friends the customers of other banks start worrying about their money, and run on their banks, which fail, which cause more people to worry and try to get their cash out, lather, rinse repeat, until the whole economy crashes. See -- The Great Depression. So, various governments introduced \\\"\\\"Deposit Insurance\\\"\\\", where the government will step in with the cash, so when you panic and pull all your money out of the bank, you can go home happy, cash in hand, and don't freak all your friends out. Therefore, the fear that your money might not really be there is assuaged, and it doesn't spread like a mental contagion. Everyone can comfortably go back to believing the fiction, and the economy goes back to merrily chugging along. Meanwhile, with mutual funds & ETFs, everyone understands the money you put in them is invested and not sitting in a gigantic vault, and so there's no need for government insurance to maintain the fiction. And that's the point they're trying to make. Poorly, I might add, where their wording is concerned.\\\"\",\n \"\\\"Useless statistic. From the article: \\\"\\\"The four-week moving average of claims, a less-volatile measure, climbed to 377,750, the highest in a month, from 376,000. The number of people continuing to collect jobless benefits increased 34,000 in the week ended May 26 to 3.29 million. The continuing claims figure does not include the number of workers receiving extended benefits under federal programs. Those who’ve used up their traditional benefits and are now collecting emergency and extended payments slumped by almost 105,000 in the week ended May 19 to 2.83 million.\\\"\\\"\\\"\",\n \"In addition to taking into account your deductions, as mentioned by @bstpierre, you also need to account for vacation, and other time off such as sick days. You also need to estimate what percentage of the year you expect to be working and pro-rate your salary accordingly. For example it is not uncommon to use 40 weeks out of the year which is about 77% of the time. Also check to see if you would be eligible for unemployment for the times you are not working. I suspect not. But in any case, you might want to use worst case scenario figures to see if it is worth it, especially in this economy.\",\n \"If this was the 20th century that would be a workable idea. As you might have noticed this isn't the 20th century. We have whole industries which used to hire hundreds of thousands of people being replaced by firms with 15 people providing better services. We need a basic income because we have an economy which is more productive than ever, depends on a strong middle class, if lets to its own devices will produce one person who owns everything.\",\n \"\\\"All investors have ultimately the same investment goal: maximize returns while limiting risk to an acceptable level. Of course we would love to maximize returns while minimizing risk, but in most cases if you want higher returns you must be willing to accept higher levels of risk. We must keep in mind that investors are humans, not computers. As such not everybody is willing to accept the same level of risk. Insurance is simply a way to \\\"\\\"buy down\\\"\\\" risk. Yes, it reduces our overall gains (most of the time), but so do bonds vs stocks (most of the time). And yet who among us doesn't have bonds in our portfolio? Insurance is yet another way to balance risk and return.\\\"\",\n \"\\\">(a) people who choose not to work, in which case they have no business receiving anything but basic food and shelter from society, But currently they don't even receive that. The actual effect of the lack of housing/food and basic-income programs is that the living wage, the minimum necessary wage necessary to make it *worth working*, is much higher than we need it to be if we really want to \\\"\\\"compete\\\"\\\". >The only reason unemployment is so bad today is because America is losing many jobs to technology and globalization and not finding ways to compete and our work force can't handle many of the new jobs anyways. The systematic transfer of wealth from labor to capital nowadays plays no part? Come on!\\\"\",\n \"I am suggesting that, on a macro level, a wage increase of 2% would offset a 1% increase in unemployment. More spending power equals more demand, and more demand creates jobs. While hard in the short term, Bob's job will come back but with a higher wage. If your goal is that no one lose their job, capitalism is not the economic system for you.\",\n \"Property and Casualty insurers invest their premiums in large bond portfolios. When they need the cash, they sell some of the bonds. Catastrophe bonds, which are completely separate, do help blunt the earnings impact, as the insurer doesn't have to pay out as much interest to the purchasers after a disaster, but cat bonds aren't a major source of funds.\",\n \"The companies give jack shit about what the taxpayers have to pay. They only lower their own expenses. Without collective bargaining power, and forcing competing companies to have the same expenses, the employees will quite simply be screwed. Systems setup by the government on the other hand supply both. Also, what about those without earned income... What do people deserve if they do not (currently or ever) contribute to the economy? In part it depends on what kind of society one wants to live in, I guess, and whether the people are willing to keep the government functioning for the common good.\",\n \"\\\"There are broadly two kinds of pension: final salary / defined benefit, and money purchase. The text you quote above, where it talks about \\\"\\\"pension\\\"\\\" it is referring to a final salary / defined benefit scheme. In this type of scheme you earn a salary of £X during your working life, and you are then entitled to a proportion of £X (the proportion depends on how long you worked there) as a pension. These types of scheme are relatively rare now (outside the public sector) because the employer is liable for making enough investments into a pot to have enough money to pay everyone's pension entitlements, and when the investments do poorly the liability for the shortfall ends up on the employer's plate. You might have heard about the \\\"\\\"black hole in public sector pensions\\\"\\\" which is what this refers to - the investments that the government have made to pay public sector workers' pensions has not in fact been sufficient. The other type of scheme is a money purchase scheme. In this scheme, you and/or your employer make payments into an investment pot which is locked away until you retire. Once you retire, that pot is yours but there are restrictions on what you can do with it - you can use it to purchase an annuity (I will give you my £X,000 pension pot in return for you giving me an annual income of £Y, say) and you can take some of it as a lump sum. The onus is on you to make sure that you (and/or your employer) have contributed enough to make a large enough pot to give you the income you want to live on, and to make a sensible decision about what to do with the pot when you retire and what to use it as income. With either type of scheme, you can claim this pension after you reach retirement age, whether or not you are still working. In some schemes you are also permitted to claim the pension earlier than retirement age if you have stopped working - it will depend on the rules of the scheme. What counts as \\\"\\\"retirement age\\\"\\\" depends on how old you are now (and whether you are male or female) as the government has been pushing this age out as people have been living longer. In addition to both schemes, there is also a \\\"\\\"state pension\\\"\\\" which is a fixed, non-means-tested, weekly amount paid from government funds. Again you are entitled to receive this after you pass retirement age, whether or not you are still working.\\\"\",\n \"If you have doubts about the long term prospects at your employer or jobs in your area, you may want to keep the option of moving to find a new job open while you save up for a larger down payment on a house. While there are insurance products out there that claim to cover your mortgage, they often have loopholes which make them difficult to collect on. Insurance companies are in business to make money and premiums are high when it's likely that people will try to collect. Splitting those premiums into your mortgage and your own self-insured unemployment fund (i.e. an emergency fund in a money market bank account) will usually be a better deal. As always, make sure you have term life insurance for a family and long term disability insurance just in case something really bad happens in the near term. Buying a home is a better financial decision when you know you'll be in an area for at least 5 years. Saving until you have 20% down on place that you can afford to pay off in 15 years (even if you take a 30 year loan) will be a lot cheaper and less stressful.\",\n \"they have capital reserves set aside for this. to replenish the reserves they will raise additional capital through debt or equity markets. the new capital raise will also cover any shortfall on the claims. cat bonds are used as well but will not cover 100%\",\n \"The biggest flaw in the unemployment rate is that it does not count individuals who have fallen off the unemployment benefit rolls. So if your unemployment has lasted longer than your unemployment benefits, guess what, your not unemployed anymore and the rate decreases. Also as this older article below illustrates, individuals are being pushed into other programs as a means to survive further removing them from employment opportunities. http://www.marketplace.org/topics/economy/when-unemployment-runs-out-whats-next\",\n \"No. You have been purchasing protection from unexpected emergencies. You got the protection you paid for. That money has been spent. Some insurance plans do pay you something at the end. They do this by charging you additional money, and investing it. At the end, you get some of the profit n that investment, after the company has taken payments for managing this account. You can do better by setting up your own investments, separate from the insurance.\",\n \"\\\"From the page you referenced, first click the link \\\"\\\"EI premium rate and maximum\\\"\\\". There you'll find the calculation itself, but not the percentage rate. Then from that page, near the bottom, click the link \\\"\\\"EI premium rates and maximums\\\"\\\". It's almost the same title as the prior page, so a little confusing, but that pluralized version has the data you were looking for. Partial quote: The same rates are applied across Canada, except in the province of Quebec. That province has a different set of rates because they administer their own Parental Insurance Plan. In particular, self-employed workers in Quebec can opt into QPIP (even if they wouldn't qualify to participate in EI) and potentially collect parental benefits. Typical non-self-employed workers in Quebec pay into both EI (at the reduced rates for Quebec) as well as QPIP.\\\"\",\n \"That's the same question I've been pondering. How did they handle it in Canada umpteen years ago on their test run? Obviously they're not giving out a lump sum at the beginning of the year, but what about month to month?\",\n \"\\\"Interesting question. How is social security funded? The social security system works by using current payroll taxes as funding to pay benefits to retirees. Historically there was always more money coming in then what was being paid out in benefits. This changed at the beginning of March, 2010 when social security started paying out more than it was taking in (this article estimates the exact date to be around March 3 or March 4 - the chart below has the approximate date highlighted with the red circle). Due to the baby boomer generation it is estimated that social security will now be perpetually in the red unless changes are made. The recent reduction in payroll taxes will not help social security solvency. What was done with all the extra money social security collected over the last three decades? The Social Security Trust Fund (SSTF) was required to purchase special-issue US government bonds with the excess funds. The SSTF was essentially purchasing US government debt with the excess funds. This allowed congress to spend the excess funds. The special-issue funds are different then normal US treasuries in that the SSTF can redeem special-issue bonds at face value at any time (even before maturity). The SSTF is currently holding $2.5 Trillion of these special-issue bonds as assets. What next? Hell if I know. The SSTF was a major purchaser of US debt over the last few decades (to the tune of $2.5 trillion). That changed in 2010. The SSTF is no longer purchasing US debt at the same time the US government is issuing record amounts of debt. The SSTF could begin redeeming its bonds to meet payment obligations. When it redeems the bonds the US treasury must cough up the funds. Where is it the US government going to get the money especially when it is currently borrowing money at record levels? I read many articles that say that we don't have to count SSTF bond holdings as debt since we owe it to ourselves. That always makes me chuckle. The US government owes the SSTF $2.5 Trillion. I'm not the US government so don't count me in the \\\"\\\"we\\\"\\\" part of \\\"\\\"we owe it to ourselves\\\"\\\". I'm also fairly certain I will never see a dime of social security so don't count me in the \\\"\\\"ourselves\\\"\\\" portion either. Charts were obtained from here.\\\"\",\n \"\\\"FDIC does not insure against robbery. From the FDIC website under the heading \\\"\\\"What's not insured?\\\"\\\": Robberies and Other Thefts Stolen funds may be covered by what's called a banker's blanket bond, which is a multi-purpose insurance policy a bank purchases to protect itself from fire, flood, earthquake, robbery, defalcation, embezzlement and other causes of disappearing funds. In any event, an occurrence such as a fire or bank robbery may result in a loss to the bank but should not result in a loss to the bank's customers. If a third party somehow gains access to your account and transacts business that you would not approve of, you must contact the bank and your local law enforcement authorities, who have jurisdiction over this type of wrongdoing. So either the bank is out the funds and takes the loss, in which case no new money enters circulation, or the bank has insurance that repays the bank, in which case the insurance company incurs a cost and no new money enters circulation. Either way, no new money enters circulation.\\\"\",\n \"You are 100% correct! This is because Unions are corrupt and even many Union members (no choice) hate them. But if the Government and the written law specifically protect workers rights, then it's the law. For example, the law says you can't employ children, you must pay minimum wage, can't discriminate, must pay social security, pay for injuries, etc, than this is the law and this is what happens. No less, no more.\",\n \"\\\"That's the problem with capitalism. It doesn't seem to recognize any conservation principle. People may be employees when they're working, but when they're off the clock, they're customers. Maybe not at the same place where they work, but at some other business somewhere else. As a whole, businesses must pay employees in income what they expect to receive from customers in revenue. Otherwise the economic \\\"\\\"circle of life\\\"\\\" ends. What we've been seeing for decades however is business taking ever larger pieces of the pie, while employees/customers see their incomes wither. This is where government comes in. Taxation of the wealthiest individuals is the economic pump which takes the accumulated wealth and puts it back into circulation.\\\"\",\n \"Conversly, then you should not enjoy the benefits privided by being in a union then right? That seems simple enough, but that's not how it works. Unions by law have the duty of fair representaion, so even if you are not a member, you still are awarded all the benefits and protections of the contract. So, it's not that simple, because how do you balance that if not for fair share? The union still has to pay to protect you, but you don't have to pay for any of the work they do. So then, if you can get all the benefits of being in the union and not pay a dime for it, why would you? Seems logical right, it's a good deal, we all want to save money. Well as everyone stops paying and the union can't afford to operate as it did, like any organization, it restructures and lays off staff. Now the union no longer has the resources to offer you good representation, which causes the dues paying members to be frustrated and to drop out and or ditch the union entirely. Now no one in your workplace has a voice, a contract, or any protections. That may turn out to be great, but you know, the company wants to save money too.. The company is also no longer obligated to offer you the same wages or benefits that your coworkers negotiated. So now the company is free to cut wages, benefits and workforce to improve thier bottom line or executive bonuses.\",\n \"First, you need to understand how modern insurance companies operate. On the front end, they write contracts with customers, collecting up front premiums, and promising to pay out to cover future losses. Efficient premiums cover exactly what's paid out; if you charge too much customers leave for competition, and if you charge too little the company goes under, or at least loses money. Large armies of people are employed to accurately guess future risks, hopefully to the point of certainty you have in human mortality. So over time, they will pay back those premiums. And there's a constant stream of new premiums coming in to replace money going out. So there's this effective pool of money they can use to buffer against large losses with; it's called float. And when the pool of money remains relatively constant, they can invest it longer term than the people who comprise the underlying risk. Large insurance companies like Berkshire Hathaway function in this manner; it's where Warren Buffet finds capital to invest while hiding from Wall St in Nebraska. The way these companies profit is by making sure the equation works: Profits = Premiums - Payouts + Return on float Payouts could be just payments for insured risk. But they could also be for the whole life insurance you're running across from time to time. These contracts offer the insured the chance to invest their money with the people who invest the float. And as long as the return on float is greater than the return they're offering, it's still profitable for the company. Since this guarantees suboptimal returns for you, it's usually a good idea to buy term insurance (much cheaper) and invest the difference yourself.\",\n \"\\\"Seriously. What does this mean? My understanding of how they calculated unemployment figures was by the number of new and ongoing unemployment claims being filed. \\\"\\\"Dropped out\\\"\\\"?? Does that mean they died, or exhausted their benefits? People don't just STOP looking for work, and ANNOUNCE it, do they?\\\"\",\n \"Desire to work.? Yep everyone has a desire to earn more money, too many will not even try to. Just a great way to strip away human dignity. You citizens, you mean nothing to the world now shut up & listen to us rich government bureaucrats. You owe us.\",\n \"Why would the companies pay more to cover personal risks of the employee? The employees will just have to suck it up and live with more risks. Employees who cannot work anymore because of that are the problem of the state and society, not of the company. There's a reason social safety nets were constructed in the first place.\",\n \"\\\"There are cases where it makes sense to insure something, even if you can bear its loss. Insurance is a tool to control risk. One reason you might want to control risk is indeed if you cannot afford to bear it's loss. However, there are other reasons you might wish to insure something when you look at your life in totality. Let's say you have $100 to work with, and you have an item A that costs $30. Perhaps you really need A in your life, but its clear here that you can afford to replace it, so maybe you don't insure it. Then you get item B, which also costs $30, and item C which costs $30. We can see that you can cover all three of these (total value $90), so one might argue that you don't need to insure it. Now let's add item D onto the plate, also at a cost of $30. Now you're in an interesting position, with 4 items you depend on, A B C and D, which have a sum total replacement cost of $120. Now if all of these break or are stolen, you no longer have the funds to replace them. Of course, what are the odds that all of them break at the same time? You may be able to do the math to determine the probability of going broke, and use that to determine whether you want to insure the item or not. Now consider that you will have to make a similar mathematical analysis for every additional purchase you make. You will also have items which you can \\\"\\\"bear to lose\\\"\\\" but you really don't want to. These can add a large amount of effort to every decision you make. It may be worth getting insurance in such a case. One could think of the purchase in two parts. There is the part that accounts for the statistical expectation of loss, and the other is the insurance company's profits. The profits could be thought of as paying the insurance company for a service which makes it easier for you to think through complicated decisions by removing risk.\\\"\",\n \"True, but it's still money that (in theory) could be paid to the employee instead, in the same way that the employer's social security contribution could also be paid to the employee. Note that I'm not saying that if the law were changed, every employer would suddenly increase wages by _x_ percent; merely that these taxes all fit into wage calculations along with perquisites, salaries, overhead, etc.\",\n \"You don't decide what gets to be owed, the government does. In your example, they wouldn't owe 1000, they would determine that they only have enough for 750. So guess what, you're now owed only 750. It's called cutting benefits.\",\n \"Simply put, it makes sense from the moment you can afford the loss without negative consequences. For example, if your car costs $20000 and you happen to have another $20000 laying around, you can choose not to insure your car against damage. In the worst case, you can simply buy a new one. However, not insuring your car has a hidden cost: you can't long-term invest that money anymore. If your insurance costs $500 a year, and you can invest those $20000 with a return on investment of more than 2.5%, it still makes sense to invest that money while having your car insured.\",\n \"Turns out Social Security and disability insurance are two different things but if you take disability insurance before retirement age when you get to full retirement age the disability money becomes the social security money. http://www.ssa.gov/dibplan/dqualify.htm If you are receiving Social Security disability benefits when you reach full retirement age, your disability benefits automatically convert to retirement benefits, but the amount remains the same.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["\"Unemployment insurance provides a temporary safety net to workers who lose their jobs by replacing a portion of their salary for certain periods. Each state administers its own unemployment insurance program so some rules may vary from state to state. To receive unemployment insurance payments, you must have lost your job through no fault of your own. If you quit your job or lost it because of poor performance or another justifiable reason, you are not eligible for unemployment insurance benefits. State unemployment insurance programs require claimants to have worked sufficiently before they can claim benefits. As soon as you apply for unemployment insurance, an agency with the state in which you live will verify that you were a victim of a layoff by contacting your previous employer and making sure you lost your job due to lack of work and not an action within your control. After the state verifies you were indeed the victim of a layoff, your weekly payment is calculated. Your payment will be a percentage of what you made in your previous job, generally between 20 percent and 50 percent, depending on your state. Unemployment insurance replaces only a portion of your previous pay because it is intended to pay only for the essentials of living such as food and utilities until you find new employment. Before you begin receiving benefits, you must complete a waiting period of typically one or two weeks. If you find a new job during this period, you will not be eligible for unemployment benefits, even if the job does not pay you as much as your previous job. After the waiting period, you will begin to receive your weekly payments. Employers pay for unemployment insurance through payroll taxes. So, while employees' work and earnings history are important to funding their unemployment benefits, the money does not come from their pay. Employer unemployment insurance contributions depend on several factors, including how many former employees have received benefits. Employers pay taxes on an employee's base wages, which vary by state. California, for example taxes employers on the first $7,000 of an employee's annual earnings, while neighboring Oregon taxes up to $32,000 of wages. Employers must set aside funds each payroll period and then report taxes and pay their states quarterly. States have several categories of tax rates they charge employers. New businesses and those first adding employees pay the \"\"new rate,\"\" which is typically lower and geared toward small businesses. Established businesses who haven't paid their taxes recently or properly are usually assessed the \"\"standard rate\"\" --- the highest possible tax rate, which in 2010 ranged from 5.4 percent in several states including Georgia, Hawaii and Alaska to 13.56 percent in Pennsylvania. Businesses in good standing may receive discounts under the \"\"experienced rate.\"\" Depending on the number of employees a business has and how many former employees have claimed unemployment, states can give sizable rate reductions. The fewer claims, the lower the rate a business pays in unemployment insurance taxes. As a result of the economic crisis legislation has been passed to extend Unemployment benefits. Regular unemployment benefits are paid for a maximum of 26 weeks in most states. However, additional weeks of extended unemployment benefits are available during times of high unemployment. The unemployment extension legislation passed by Congress in February 2012 changed the way the tiers of Emergency Unemployment Compensation (EUC) are structured. A tier of unemployment is an extension of a certain amount of weeks of unemployment benefits. There are currently four tiers of unemployment benefits. Each tier provides extra weeks of unemployment in addition to basic state unemployment benefits. Emergency Unemployment Compensation (EUC) Tiers June - August 2012: Source and further information can be found here - Unemployment Tiers - About.com Sources: Unemployment Insurance(UI) - US Dept. of Labor How Does Unemployment Insurance Work? - eHow Percentage of Pay That Goes to Unemployment Insurance - eHow Additional Info: You can file for UI over the internet here are some useful resources. OWS Links State Unemployment Offices - About.com How to Apply for Unemployment Over the Internet - eHow\""],"string":"[\n \"\\\"Unemployment insurance provides a temporary safety net to workers who lose their jobs by replacing a portion of their salary for certain periods. Each state administers its own unemployment insurance program so some rules may vary from state to state. To receive unemployment insurance payments, you must have lost your job through no fault of your own. If you quit your job or lost it because of poor performance or another justifiable reason, you are not eligible for unemployment insurance benefits. State unemployment insurance programs require claimants to have worked sufficiently before they can claim benefits. As soon as you apply for unemployment insurance, an agency with the state in which you live will verify that you were a victim of a layoff by contacting your previous employer and making sure you lost your job due to lack of work and not an action within your control. After the state verifies you were indeed the victim of a layoff, your weekly payment is calculated. Your payment will be a percentage of what you made in your previous job, generally between 20 percent and 50 percent, depending on your state. Unemployment insurance replaces only a portion of your previous pay because it is intended to pay only for the essentials of living such as food and utilities until you find new employment. Before you begin receiving benefits, you must complete a waiting period of typically one or two weeks. If you find a new job during this period, you will not be eligible for unemployment benefits, even if the job does not pay you as much as your previous job. After the waiting period, you will begin to receive your weekly payments. Employers pay for unemployment insurance through payroll taxes. So, while employees' work and earnings history are important to funding their unemployment benefits, the money does not come from their pay. Employer unemployment insurance contributions depend on several factors, including how many former employees have received benefits. Employers pay taxes on an employee's base wages, which vary by state. California, for example taxes employers on the first $7,000 of an employee's annual earnings, while neighboring Oregon taxes up to $32,000 of wages. Employers must set aside funds each payroll period and then report taxes and pay their states quarterly. States have several categories of tax rates they charge employers. New businesses and those first adding employees pay the \\\"\\\"new rate,\\\"\\\" which is typically lower and geared toward small businesses. Established businesses who haven't paid their taxes recently or properly are usually assessed the \\\"\\\"standard rate\\\"\\\" --- the highest possible tax rate, which in 2010 ranged from 5.4 percent in several states including Georgia, Hawaii and Alaska to 13.56 percent in Pennsylvania. Businesses in good standing may receive discounts under the \\\"\\\"experienced rate.\\\"\\\" Depending on the number of employees a business has and how many former employees have claimed unemployment, states can give sizable rate reductions. The fewer claims, the lower the rate a business pays in unemployment insurance taxes. As a result of the economic crisis legislation has been passed to extend Unemployment benefits. Regular unemployment benefits are paid for a maximum of 26 weeks in most states. However, additional weeks of extended unemployment benefits are available during times of high unemployment. The unemployment extension legislation passed by Congress in February 2012 changed the way the tiers of Emergency Unemployment Compensation (EUC) are structured. A tier of unemployment is an extension of a certain amount of weeks of unemployment benefits. There are currently four tiers of unemployment benefits. Each tier provides extra weeks of unemployment in addition to basic state unemployment benefits. Emergency Unemployment Compensation (EUC) Tiers June - August 2012: Source and further information can be found here - Unemployment Tiers - About.com Sources: Unemployment Insurance(UI) - US Dept. of Labor How Does Unemployment Insurance Work? - eHow Percentage of Pay That Goes to Unemployment Insurance - eHow Additional Info: You can file for UI over the internet here are some useful resources. OWS Links State Unemployment Offices - About.com How to Apply for Unemployment Over the Internet - eHow\\\"\"\n]","isConversational":false}}},{"rowIdx":85,"cells":{"_id":{"kind":"string","value":"620"},"query":{"kind":"string","value":"Is it wise to have plenty of current accounts in different banks?"},"gt_ids":{"kind":"list like","value":["331332","417301","189303","180673","487067"],"string":"[\n \"331332\",\n \"417301\",\n \"189303\",\n \"180673\",\n \"487067\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1,1,1,1],"string":"[\n 1,\n 1,\n 1,\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["189303","270866","463568","572848","244097","146317","535566","535817","467059","592094","422908","479918","543921","417301","61734","489959","424304","528840","455457","165378","180673","309909","314352","422938","537394","349303","332832","471175","311736","487067","165345","21420","492402","312358","283736","41484","478186","517440","104492","164801","308131","173807","284774","345091","142536","241200","404954","452121","584175","336394","230208","449439","596714","427032","210511","41012","214248","580818","195838","456636","51959","460008","278734","48346","508185","537323","393823","61968","320652","304411","79556","584132","537593","165099","213887","504951","36735","164795","209554","192589","64556","356125","498719","331332","368806","555995","452540","466950","98358","336965","349445","178181","534472","227760","570960","55084","456771","12781","380786","517428"],"string":"[\n \"189303\",\n \"270866\",\n \"463568\",\n \"572848\",\n \"244097\",\n \"146317\",\n \"535566\",\n \"535817\",\n \"467059\",\n \"592094\",\n \"422908\",\n \"479918\",\n \"543921\",\n \"417301\",\n \"61734\",\n \"489959\",\n \"424304\",\n \"528840\",\n \"455457\",\n \"165378\",\n \"180673\",\n \"309909\",\n \"314352\",\n \"422938\",\n \"537394\",\n \"349303\",\n \"332832\",\n \"471175\",\n \"311736\",\n \"487067\",\n \"165345\",\n \"21420\",\n \"492402\",\n \"312358\",\n \"283736\",\n \"41484\",\n \"478186\",\n \"517440\",\n \"104492\",\n \"164801\",\n \"308131\",\n \"173807\",\n \"284774\",\n \"345091\",\n \"142536\",\n \"241200\",\n \"404954\",\n \"452121\",\n \"584175\",\n \"336394\",\n \"230208\",\n \"449439\",\n \"596714\",\n \"427032\",\n \"210511\",\n \"41012\",\n \"214248\",\n \"580818\",\n \"195838\",\n \"456636\",\n \"51959\",\n \"460008\",\n \"278734\",\n \"48346\",\n \"508185\",\n \"537323\",\n \"393823\",\n \"61968\",\n \"320652\",\n \"304411\",\n \"79556\",\n \"584132\",\n \"537593\",\n \"165099\",\n \"213887\",\n \"504951\",\n \"36735\",\n \"164795\",\n \"209554\",\n \"192589\",\n \"64556\",\n \"356125\",\n \"498719\",\n \"331332\",\n \"368806\",\n \"555995\",\n \"452540\",\n \"466950\",\n \"98358\",\n \"336965\",\n \"349445\",\n \"178181\",\n \"534472\",\n \"227760\",\n \"570960\",\n \"55084\",\n \"456771\",\n \"12781\",\n \"380786\",\n \"517428\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["Another thing to factor in are deals provided by banks. In general, banks care about new customers more than their existing customers. Hence they explicitly restrict the best deals on credit cards, savings accounts, etc, to new customers only. (Of course, there are occasionally good deals for existing customers, and some banks choose not to discriminate.) If you have many different bank accounts, you are making yourself unavailable for switching bonuses and introductory rates.","http://www.fdic.gov/deposit/deposits/index.html FDIC currently insures up to $250,000. (I would have put that as a comment to Jeffery but it says it was locked.) You don't want to put all your eggs in one basket. If you shop around, and keep shopping all the time you can keep your accounts in a single place so long as that single place provides the best deal. Don't have any loyalty to your banking institutions because they don't have any loyalty to you. Also, having lots of accounts means you are familiar with lots of institutions, so you are likely better at shopping around. Things I consider. For fewer institutions: For more institutions:","if I open current accounts with all these institutions, will they know if I move money between them, i.e. from the one I pay my salary to, to the next, to the next etc. Of course they will know. After all you will provide the account numbers for transferring the money. Regarding the intent of transfer they don't care. They only care the about the amount coming in regularly. refuse to give me the rates and bonuses I want For this I will go through their terms and conditions and you should do it. Check for any excluded conditions. Read between the lines. But check on what amount will you be getting the interest. Most of these accounts pay interest daily and on the amount in the account in a day. So you might not be generating much of an interest in those accounts if you don't have a substantial balance.","Why not just open multiple accounts at the same bank? That would make it harder to lose track of, and you could probably still get reports summarizing the balances across them. I do this and it works well, my credit union even lets me name each account so it is easy to keep them straight.","\"Bank accounts are free, as are discount brokerage accounts (for stuff like IRA's). Any time you think there might be an advantage to getting another one, go ahead and do so. I have a number of bank accounts. Whichever has the best interest rate (typically an online bank) gets the bulk of my cash savings, whichever has the closest ATM gets as much money as I think I might want to withdraw, and I often have a bank account from which my credit cards are paid. Other banks have a token \"\"just in case I move\"\" amount of money. The only cost is that you have to check them from time to time to make sure each account has enough for its likely uses. I use mint.com for that.\"","\"When I was younger I had a problem with Washington Mutual. Someone had deposited a check in to my account then ran my account negative with a \"\"dupe\"\" of my debit card. WaMu tied up my account for three months while they investigated because it wasn't simply a debit card fraud issue, this was check fraud (so they claimed). At the time all the money I had in the world was in that account and the ordeal was extremely disruptive to my life. Since the, I never spend on my debit card(s) and I keep more than one checking account to disperse the risk and avoid disruption in the event anything ever happens again. Now one of the accounts contains just enough money (plus a small buffer) to pay my general monthly expenses and the other is my actual checking account. There's no harm in having more than one checking account and if you think it will enhance your finances, do it. Though, there's no reason to get a business account unless you've actually formed a business.\"","For small amounts I wouldn't be too concerned. There are two factors I can think of: For relatively small amounts and when dealing with reputable banking institutions there should be little concern of banking with a single bank. It's what most people do.","Another reason is that the amount of unused credit you have is a positive factor on your credit score. It's generally easier to open several different accounts for $X dollars each with different banks than to get your current bank to raise your limit severalfold in a single go. Your current bank has to worry about why you suddenly are asking for a large additional amount of credit; while other banks will be willing to offer you smaller amounts of credit in the hope that you transfer your business from your current bank to them.","Well the idea of 'good practice' is subjective so obviously there won't be an objectively correct answer. I suspect that whatever article you read was making this recommendation as a budgeting tool to physically isolate your reserve of cash from your spending account(s) as a means to keep spending in check. This is a common idea that I've heard often enough, though I don't think I am alone in believing that it's unnecessary except in the case of a habitual spender who cannot be trusted to stay within a budget. I suppose there is a very small argument to be made about security where if you use a bank account for daily spending and that account is somehow compromised, the short-term damage is limited. In the end, I would argue that if you're in control of spending and budgeting, have a single source of income that is from regular employment, and you use a credit card for most of your daily spending, there's no compelling reason to have more than one bank account. Some people have a checking and savings account simply for the psychological effect of separating their money, some couples have 3-4 accounts for income, personal spending, and savings, other people have separate accounts for business/self-employment funds, and a few people like having many accounts that act as hard limits for spending in different categories. Of course, the other submitted answer is correct in noting that the more accounts that you have, the more you are opening yourself up to accounting issues if funds don't transfer the way you expect them to (assuming you're emptying the accounts often). Some banks are more lenient with this, however, and may offer you the option to freely 'overdraft' by pulling funding from another pre-designated account that you also hold at the same bank.","Not for normal banking. You can open as many accounts as you want. I did this recently with some Amazon gift card churning for a Chase cash bonus. Staying a long time may have their credit department reach out and offer you a long time customer discount. But no one is saying you have to close one account to open another.","\"There is no \"\"should\"\", but I am strongly of the view that if you have savings of several months' salary or more, they should not only be in a separate account, but with a separate financial institution, or even split between two others. A fraction of a percent of extra interest is scant reward for massively increased personal risk. The reason for this is buried in the T&Cs. There is almost always a \"\"right of set off\"\": if one account is overdrawn, the bank reserves the right to take money from your other accounts. Which sounds fair enough, until you consider the imbalance of power. Maybe your salary account gets hacked? Maybe that's the bank's fault? Maybe the bank has made an accounting error? Maybe the bank has gone bust? Maybe you need to employ a lawyer to act on your behalf? Oh dear, you no longer have any savings. (*) This cannot happen if your savings are with a completely separate institution. Then, the only way that the salary account bank can touch your savings is by winning in the courts. If you split the savings two ways, you have also given yourself the reassurance that in the worst case only half your savings have been affected. \"\"Don't put all your eggs in one basket\"\" is proverbial. And there's a folk song that's lodged in my memory... \"\"As through this world I wander, I've met all kinds of funny men. Some rob you with a six-gun, some with a fountain pen. Yet as far as I have wandered, as far as I have roamed, I've never seen an outlaw drive a family from their home\"\". I've never been in this sort of trouble and the UK's laws tend to favour the banks' customers. I don't even hate bankers. Yet even so, why take this risk when it can so easily be reduced? (*) If this sounds far-fetched, read the news, for example https://www.theguardian.com/business/2017/feb/02/hbos-manager-and-other-city-financiers-jailed-over-245m-loans-scam\"","\"For personal accounts, I can't imagine that this is too much of a problem. The only concern that I can think of (for American banks) is that FDIC only insures you up to $100,000 if the bank were to go belly-up. If you're getting over that amount of money, you may want to \"\"diversify\"\" a little more.\"","There is nothing conceptually wrong with it. If you like it that way, go ahead. The only thing to watch out for is bank policies that effectively penalize having many small accounts. For instance, some banks charge you a fee for checking accounts with a balance below a certain minimum, but will waive the fees for accounts with a higher balance. You may be able to avoid such fees by judicious management of your funds (or by switching to a different bank), but it's something to be aware of. (The interest rates on savings accounts also often vary with the balance, making many small balances less efficient than one big balance. However, right now, at least in the US, interest rates on savings accounts are so low that the difference here is likely to be minimal.)","You should not open bank accounts just to get additional credit cards. You should be careful about carrying too many credit cards and incurring too much debt as you could find yourself in a situation whereby you may not be able to pay off your monthly interest, much less the principal balance. Credit cards are not insurance. With many years of experience under my belt I can tell you that the best approach is to live within (or below) your means and avoid carrying a balance on credit cards. I carry only one credit card (really a charge card) and I pay off the balance every month. Treat a credit card as a 30 day interest free loan and pay your balance off in full every month...as you progress through life you will save yourself a lot of heartache (and money) if you take this approach.","\"would it make sense to set up multiple bank accounts to avoid going above their thresholds? Quite possiblly yes but you need to pay attention to the fine print. I don't know what the situation is in poland but in the UK accounts that pay high interest often have strings attached. For example the santander 123 current account pays very good interest but it has an account fee and some other requirements that are difficult to meet if you are not using it as your \"\"main current account\"\". You need to read the terms carefully, if you go over the threshold does the lower rate only apply to money over the threshold? or does it apply to all the money in the account? Are there any other restrictions on how you use the account. Also I don't know if poland has any provisions for limited tax-advantaged savings (like the ISA scheme we have in the UK). If it does then that can add further complications. How to calculate how to maximize the profit here? Well in theory you would get the best account you can and fill it to the threshold. Then the next best account and so-on. You would move any interest paid in an account that was already full to the threshold to the best non-full account (or if the account strongly peanalises going over perhaps move an ammount of money equivilent to the interest just before the interest is paid). In practice that is a lot of work, so if the rates on the different accounts are similar you may want to leave some margin for interest or (in the case of an account that pays the lower rate on the overage while still paying the higher rate on money below the threshold) accepting that some of your money will earn slightly less than idea. Another option some accounts may offer is just to pay the interest to another account, avoiding the need to move it yourself. Finally you should check out your government's limits for compensation in the event of banks going bust. As a general rule you don't want to put more than that ammount in a single bank even if doing so would get you the best interest.\"","In my opinion, separating your money into separate accounts is a matter of personal preference. I can only think of two main reasons why people might suggest separating your bank accounts in this way: security and accounting. The security reasoning might go something like this: My employer has access to my bank account, because he direct deposits my salary into my account. I don't want my employer to have access to all my money, so I'll have a separate account that my employer has access to, and once the salary is deposited, I can move that money into my real account. The fault in this reasoning is that a direct deposit setup doesn't really give your employer withdrawal access to your account, and your employer doesn't have any reason to pull money out of your account after he has paid you. If fraud is going to happen, it much more likely to happen in the account that you are doing your spending out of. The other reason might be accounting. Perhaps you have several bank accounts, and you use the different accounts to separate your money for different purposes. For example, you might have a checking account that you do most of your monthly spending out of, you might have a savings account that you use to store your emergency fund, and you have more savings accounts to keep track of how much you have saved toward your next car, or your vacation, or your Christmas fund, or whatever. After you get your salary deposited, you can move some into your spending account and some into your various savings accounts for different purposes. Instead of having many bank accounts, I find it easier to do my budgeting/accounting on my own, not relying on the bank accounts to tell me how much money I have allocated to each purpose. I only have one checking account where my income goes; my own records keep track of how much money in that account is set aside for each purpose. When the checking account balance gets too large, I move a chunk of it over to my one savings account, which earns a little more interest than the checking account does. I can always move money back into my checking account if I need to spend it for some reason, and the amount of money in each of the two accounts is not directly related to the purpose of the money. In summary, I don't see a good reason for this type of general recommendation.","I have a fair number of cards floating around some reasons I have opened multiple accounts. I am not saying that it is for everyone but there are valid scenarios where multiple credit cards can make sense.","I've had all my account with the same bank for all my life. Generally, the disadvantage is that if I want some kind of product like a credit extension or a mortgage, I have the one bank to go to and if they don't want to help me I'm out of luck. However, occasionally there are also perks like the bank spontaneously offering you increased credit or even a whole line of credit. They can do this because they have your whole history and trust you.","More moving parts will make your budget harder to keep track of, not simpler. Budget systems like You Need a Budget recommend simplifying your accounts, even if the various accounts give you specialized bonuses like rewards for restaurants or gasoline or travel. The effort of keeping track of all the options and accounts can outweigh the value you get from them. Instead, I recommend using a simple and structured budget system (like YNAB) that walks you through all of the steps toward building good habits and keeping them simple so that you can maintain the habit.","You spread money/investment across different accounts for different reasons: All this is in addition to diversification reasons. Investing all your money into one stock, bond, Mutual fund, ETF is risky if that one segment of the economy/market suffers. There is a drawback to diversification of accounts. Some have minimum amounts and fee structures. In the original question you asked about 1,000 per account. That may mean that some accounts may be closed to you. In other cases they will charge a higher percentage for fees for small accounts. Those issues would disappear long before you hit the 1,000,000 per account you mentioned in your comment. One problem can occur with having too much diversification. Having dozens of funds could mean that the overlap between the funds might result in over investing in a segment because you didn't realize that one stock segment appeared in 1/3 of the funds.","I don't think there's any law against having lots of bank accounts. But what are you really gaining? Every new account is a paperwork hassle. Every new account is another target for con men who might steal your information and write bad checks or make phony credit card purchases in your name. Yes, it's not unreasonable to have a credit card or two that you keep for emergencies. I'd advise anyone with running up debts while having no idea how you will pay them off. But to say that you might keep some credit available so that if you have a legitimate emergency -- like, say, your car breaks down and you don't have the cash to fix it and you can't get to work without it -- you have some a fallback. But do you really need ten credit cards for that sort of thing? And how much credit are they giving you on each card? I don't know how the banks work this, but I'd think if they're rational, they'd consider your total credit before giving you more. I have three credit cards that I use regularly -- two personal and one business. And I find that a real pain to keep track of, to make sure that I keep each one paid by the due date and to keep a handle on how much I owe and so forth. I can't imagine trying to deal with ten. I suppose you could just stuff all these cards in a drawer and only use them in case of emergency.","Are you allowed to have two personal current accounts with a debit card attached to each one? Yes, you may have as many current accounts you want, but you should ask why should I have more than one. It is cumbersome and time consuming to keep track of ongoing incoming credits and outgoing debits. Open to bank fraud too, if you aren't careful. If yes, can a sole trader in the UK use the second personal account for business transactions? Yes, but no payments to the business. At the end of the year you file you P11D, even if you have a business bank account. You would need to justify the expenses by keeping the bills and stuff. As it will be a personal account, you have to little more careful, not to mix personal and business expenses. If you are allowed to use a second personal account for business transactions, then why would someone choose to open a business bank account, where you have to pay? What are the benefits? First of all no company will pay into you personal account, for any transactions, they need to pay you. They will only pay to an account registered with the business, with whom they are dealing with. Benefits are you have your business expenses sorted out in one account and personal expenses in other. Pure business expenses comes out of the business account, rather than from your personal purse, keeps the accounts smooth. No need to sort out expenses at the end of each quarter or at the end of each month.","If it makes your finances easier, why not? My wife and I had his/hers/our since before we were married. I also have an account to handle transactions for my rental property, and one extra for PayPal use. I was paranoid to give out a checking account number with authorization for a third party to debit it, so that account has a couple hundred dollars, maximum. All this is just to explain that your finances should be arranged to simplify your life and make you comfortable.","I use two different brokerages, both well-known. I got a bit spooked during the financial crisis and didn't want to have all my eggs in one basket. The SIPC limits weren't so much a factor. At the time, I was more worried about the hassle of dealing with a Lehman-style meltdown. If one were to fail, the misery of waiting and filing and dealing with SIPC claims would be mitigated by having half of my money in another brokerage. In hindsight, I was perhaps a bit too paranoid. Dealing with two separate brokerages is not much of an inconvenience, though, and it's interesting to see how their web interfaces are slightly different and some things are easier to do with one vs the other. Overall, they're really similar and I can't say there's much advantage (other than my tin-foil hat tendencies) to splitting it up like that.","If you are concerned about FDIC coverage, then yes, you can spread your money across multiple banks. The limit is $250k, so after you invest in property, 4 banks should do it. That having been said, in my opinion, it would be a waste to keep all this money in a bank's savings account. You will slowly lose value over time due to inflation. I suggest you spend a little money on an independent fee-based investment advisor. Choose someone who will teach you about investing in mutual funds, so you can feel comfortable with it. He or she should take into account your tolerance for risk, look at your goals, and help you come up with a low cost plan for investing your money. It's certainly okay to keep the money in a bank short-term, but don't wait too long; take steps toward putting that money to work for you.","Do you need it? It doesn't sound like it - you seem to be able to manage with just the cards you have. Will it hurt anything? Probably not either, unless it entices you to spend more than you make. Another downside might be that you would spend more than you normally would just to have activity on every card. So all in all, I don't see much upside.","Your plan will probably work. I speak from past experience approx 5-10 years ago, when Lloyds used to offer tiered interest of up to 4% on £5000 in their Vantage accounts. It was allowed for an individual person to have up to three Vantage accounts. The criteria for obtaining the headline interest rates were simply: What I, and many others, did was to set up three Vantage accounts, call them A, B, and C, and a standing order on each to transfer minimum amount + £1 on the same day each month in this manner: This satisfied the letter of conditions, though perhaps not the spirit. Most importantly it satisfied the bank, and all three accounts received that headline interest rate. These days banks have got a little wiser to this and have started including the 'set up n direct debits' condition, which makes this a more time-consuming system to arrange - you must assign your various bills across your accounts - but I believe that the overall plan still works. They don't care where the money comes from, or whether it stays - just that it comes in. Enough people get it wrong that they don't have to worry about the few who get it perfectly right (see also: how 0% balance transfer offers can be profitable...)","If your accounts have an overdraft facility, then every open account is classed as available credit which has a negative effect on your credit score. It's not normally a major concern but it is a factor. (nb. this definitely applies to the UK, maybe not where you are)","You're asking for opinions here, which is kindof against the rules, but I'll give it a try. 1) Does emergency funds and saving money(eg.Money plan to buy a house) should be in same Saving Account? 2) or should each specific saving plan set up in particular Saving Account? No, it doesn't. It's a matter of convenience. I personally find it more convinient to have different stashes for different purposes, but it means extra overhead of keeping an eye on one more account. Fortunately, with on-line access, mint.com and spreadsheets, it's not that big of an overhead. 3) If saved in same Saving Account, how could I manage easily which percentage is planned for which? Excel spreadsheet comes to mind. Banks may have some tools too, for example Wells Fargo (where I'll be closing my account soon), has a nice on-line goals manager that allows you to keep track of your savings per assigned goals (they allow one goal per savings account, but you can have multiple accounts for multiple goals, and it will show the goals and progress pretty nicely). 4) If not saved in same Saving Account, the interest earned would be smaller because they all clutter across multiple Saving Accounts? In some banks interest rates are tiered. But in most on-line savings accounts they're not, and you get the same high rate from the first $1 deposited. So if in the bank where you keep the money they only pay a decent rate if you deposit some big lump of money - just open an account elsewhere. Places to check: American Express FSB, ING Direct, E*Trade savings, Capital One, Ally, and many more.","The original poster indicates that he lives in the UK, but there are likely strong similarities with the US banking system that I am more familiar with: The result is that you are likely going to be unable to be approved for 10 checking accounts opened in rapid succession, at least in the US. Finally, in the US, there is no need to have checking accounts with a bank in order to open a credit card with them (although sometimes it can help if you have a low credit score).","Ally Bank is a good online only account. They reimburse any ATM Fees you may occur. I have both checking and savings, with both Ally and ING Direct. I don't know about having 25 total accounts - seems like overkill to me. I do something similar though - I get direct deposit into one account, then transfer the average bill amount each pay to a different account that I never touch other than for the allotted bills. It works well, especially for Utilities that are inflated seasonally. What do you use to mange the 25 accounts? I use Quicken, but I don't have 25 accounts...yet.","There is no accounting reason that it should be different, there are likely psychological reasons that it should be, however. Assuming that you live in a western country with good banking regulation, you likely have deposit insurance or a similar scheme. Here in Canada we are covered up to $100,000 in a single account with various limitations. At least my rainy-day account plus savings is nowhere near that, so I'm good to go. That said, however, having a large lump of money in an account you regularly use may tempt you more than you can stand. That iPad, car, home improvement, etc., might be too easy to buy knowing you have relatively easy access to that money. So it really becomes a self-discipline question. Good Luck","Your last sentence is key. If you have multiple accounts, it's too easy to lose track over the years. I've seen too many people pass on and the spouse has a tough time tracking the accounts, often finding a prior spouse listed as beneficiary. In this case, your gut is right, simpler is better.","\"But it's also true that the FDIC (or equivalent) insurance account doesn't have enough to cover all deposits. The FDIC may come in handy if your local FDIC member bank goes belly up and a few hundred depositors need to be made whole. However, in a national crisis, where the government is \"\"legally\"\" stealing funds, that FDIC insurance is a joke. I do agree though, if you have more than the insured amount in a single account, split it up.\"","\"3 reasons I can think of: I once worked for a bank and when credit scoring for loans, if you had been approved by different institutions, you were given a better score. So if you held a Visa and Mastercard (as opposed to two Visa cards) your credit score would go higher. More than 6 cards though looked suspicious and your score would take a big hit. Having more than card has helped me when getting special offers multiple times from some websites where it was limited to \"\"one per customer\"\" though most just used your address or email account. If you owed $1000 in total which you can't pay off in one go, it is better to have that split across two cards. You would be paying interest on $500 on each card but when you have one card paid off, the interest you would be paying on the other would be based on the original debt to that one card of $500 (not $1000). I hope that makes sense.\"","If your checking account has a card associated with it, then keeping funds in savings reduces the risk that some kind of fraud will wipe you out.","Having separate savings account for your kids college fund, retirement fund, holiday fund etc is one way to compartmentalise savings. Downside to this is the management of these funds especially if you have them with different banks. Like others here have pointed out, keeping track via spreadsheet is relatively easy and especially most banks now like OCBC, HSBC , DBS, POSB etc offer online banking, however from a financial standpoint, spreading your funds doesn't allow you to get as much interest as you would from one account that has the highest interest rate.","I would also check into whether you can keep using your credit card instead of switching to a debit card tied to your checking account. The credit card provides you protection from someone wiping your account out. Most banks will help you get the money back if this happens while using a debit card. But you are out the money while the bank figures out who is wrong. In the credit cards case none of your money is actually taken from your account while you dispute the charge. I also agree with the others that having all your money in one account is more difficult to keep real spending money separate from emergency fund money.","\"First thing is that your English is pretty damn good. You should be proud. There are certainly adult native speakers, here in the US, that cannot write as well. I like your ambition, that you are looking to save money and improve yourself. I like that you want to move your funds into a more stable currency. What is really tough with your plan and situation is your salary. Here in the US banks will typically have minimum deposits that are high for you. I imagine the same is true in the EU. You may have to save up before you can deposit into an EU bank. To answer your question: Yes it is very wise to save money in different containers. My wife and I have one household savings account. Yet that is broken down by different categories (using a spreadsheet). A certain amount might be dedicated to vacation, emergency fund, or the purchase of a luxury item. We also have business and accounts and personal accounts. It goes even further. For spending we use the \"\"envelope system\"\". After our pay check is deposited, one of us goes to the bank and withdraws cash. Some goes into the grocery envelope, some in the entertainment envelope, and so on. So yes I think you have a good plan and I would really like to see a plan on how you can increase your income.\"","\"I live in the UK so it's a little different but generally you'd have one account (a current account) which would have a Visa/MasterCard debit card associated before working and any high street bank (don't know what the US equivalent would be, but big banks such as HSBC/Santander) will offer you a savings account which pays a v small amount of interest as well as bonds as all sorts. From what I know most people have their salary paid into their current account (which would be the spending account with a card associated) and would transfer a set amount to a savings account. Personally, I have a current account and a few different saving accounts (which do not have cards associated). One savings account has incoming transfers/money received and I can use online banking to transfer that to my current account \"\"instantly\"\" (at least I've done it standing at ATM's and the money is there seconds later - but again this is the UK, not US). This way, my primary current account never has more than £10-15 in it, whenever I know I need money I'll transfer it from the instant access account. This has saved me before when I've been called by my bank for transactions a few £100 each which would have been authorised I kept all my money in my current account. If you don't have money (and dont have an overdraft!) what are they meant to do with it? The other savings account I had setup so that I could not transfer money out without going into a branch with ID/etc, less to stop someone stealing my money and more to be physically unable to waste money on a Friday if I don't arrive at the bank before 4/5PM, so saves a lot of time. US banking is a nightmare, I don't imagine any of this will translate well and I think if you had your salary paid into your savings on a Friday and missed the bank with no online banking facilities/transfers that aren't instant you'd be in a lot of trouble. If the whole \"\"current + instant access savings account\"\" thing doesn't work to well, I'm sure a credit/charge (!!!) card will work instead of a separate current account. Spend everything on that (within reason and what you can pay back/afford to pay stupid interest on) on a card with a 0% purchase rate and pay it back using an account you're paid into but is never used for expenses, some credit cards might even reward you for this type of thing but again, credit can be dangerous. A older retired relative of mine has all of his money in one account, refuses a debit card from the bank every time he is offered (he has a card, but it isn't a visa/mastercard, it's purely used for authentication in branch) and keeps that in a safe indoors! Spends everything he needs on his credit card and writes them a sort of cheque (goes into the bank with ID and signs it) for the full balance when his statement arrives. No online banking! No chance of him getting key logged any time soon. tldr; the idea of separating the accounts your money goes in (salary wise) and goes out (spending) isn't a bad idea. that is if wire transfers don't take 3-5 days where you are aha.\"","1- To max out rewards. I have 5 different credit cards, one gives me 5% back on gas, another on groceries, another on Amazon, another at restaurants and another 2% on everything else. If I had only one card, I would be missing out on a lot of rewards. Of course, you have to remember to use the right card for the right purchase. 2- To increase your credit limit. One card can give you a credit limit of $5,000, but if you have 4 of them with the same limits, you have increased your purchasing power to $20,000. This helps improve your credit score. Of course, it's never a good idea to owe $20,000 in credit card debt.","Personally, I keep two regular checking accounts at different banks. One gets a direct deposit totaling the sum of my regular monthly bills and a prorated provision for longer term regular bills like semi-annual car insurance premiums. I leave a buffer in the account to account for the odd expensive electrical bill or rate increase or whatever. One gets a direct deposit of the rest which I then allocate to savings and spending. It makes sense to me to separate off regular planned expenses (rent/mortgage, utility bills, insurance premiums) from spending money because it lets me put the basics of my life on autopilot. An added benefit is I have a failover checking account in the event something happens to one of them. I don't keep significant amounts of money in either account and don't give transfer access to the savings accounts that store the bulk of my money. I wear a tinfoil hat when it comes to automatic bank transfers and account access... It doesn't make sense to me to keep deposits separate from spending, it makes less sense to me to spend off of a savings account.","The security concept of minimising attack surface could be stretched to apply here, especially if closing the account would mean the end of your relationship with that bank. Essentially more routes into your finances or personal information means more opportunities for fraud, more accounts to keep an eye on, more logins to remember/store, and even more paperwork/idle cards to check (for unexpected activity and T&C changes), store and eventually shred. However I had a couple of online-only savings accounts with zero balance for a few years, at a bank where I have other accounts, and I didn;t worry in the slightest. (You can open the accounts online but have to phone to close them and sitting on hold is too much of a chore for me. Eventually they realised their mistake, brought in a minimum balance requirement, and after giving notice closed accounts with less that that in them)","You should ensure that your broker is a member of the Securities Investor Protection Corporation (SIPC). SIPC protects the cash and securities in your brokerage account much like the Federal Deposit Insurance Corporation (FDIC) protects bank deposits. Securities are protected with a limit of $500,000 USD. Cash is protected with a limit of $250,000 USD. It should be noted that SIPC does not protect investors against loss of value or bad advice. As far as having multiple brokerage accounts for security, I personally don’t think it’s necessary to have multiple accounts for that reason. Depending on account or transaction fees, it might not hurt to have multiple accounts. It can actually be beneficial to have multiple accounts so long as each account serves a purpose in your overall financial plan. For example, I have three brokerage accounts, each of which serves a specific purpose. One provides low cost stock and bond transactions, another provides superior market data, and the third provides low cost mutual fund transactions. If you’re worried about asset security, there are a few things you can do to protect yourself. I would recommend you begin by consulting a qualified financial advisor about your risk profile. You stated that a considerable portion of your total assets are in securities. Depending on your risk profile and the amount of your net worth held in securities, you might be better served by moving your money into lower risk asset classes. I’m not an attorney or a financial advisor. This is not legal advice or financial advice. You can and should consult your own attorney and financial advisor.","Problems with your plan (in no particular order) there is a limit, once they have decided that you have enough credit they won't offer any more. If the economy changes (like it did in 2008) they can reduce the limit on existing accounts. If you don't use them, they may decide to close them. Using existing cards will encourage the bank to increase the limit on that card. opening cards can make some lenders nervous. Having a new card close to when you are applying for a mortgage or a car loan can make them less likely to lend you the max. You have to decide: Are you trying to buildup your credit limit? or your credit score?","In the case of reward cards, different cards may offer different rewards for different kind of purchases. For example, in the UK, one of the Amex cards offers 1.25% cashback on all purchases, whereas one of the Santander cards offers 3% on fuel, 2% or 1% on certain other transactions, and nothing on others. Of course, you then have to remember to use the right card! Another reason is that a person may use a card for a while, build up a good credit limit, and then move to a different card (perhaps because it has better rewards, or a lower interest rate, etc) without cancelling the first. If it costs nothing to keep the first card, then it can be useful to have it as a spare.","Most people who have over $250,000 in liquid cash savings would not want to start putting their money into regular savings accounts in different banks, especially with interest rates as ridiculously low as they are now in 2014-15. People with money will want to diversify their investments in ways that will potentially earn them more money, and they can also afford to seek the advice of financial planners who can help them do this wisely. Even if you decide to put $250,000 into various accounts at different banks, I wouldn't necessarily trust that the FDIC will be able to help you recover your money in the event that your banks go under. The amount of money available to the FDIC to cover such losses pales in comparison to the actual amount of money that Americans have in their bank accounts.","One rule of thumb is that having regular activity on at least three different revolving accounts will improve your score: I agree that it may not be a great idea to have too many open credit accounts (Trade Lines) reporting on your credit report but if you don’t have enough active accounts, it will prevent you from being approved for a home mortgage. Both Conventional (Fannie Mae and Freddie Mac) mortgage loans and Government loans (such as FHA and VA) require that you have a minimum number of reporting trade lines that are active or have been active within the most recent 24 month period of time. An example of meeting the mortgage loan requirement is having a revolving account (credit card) that has been reporting activity for the past 24 months plus 2 other trade lines that have had activity reported for 12 months each, both within the past 24 months.","\"As your financial situation becomes more complex, it becomes increasingly more difficult to keep track of everything with a simple spreadsheet. It is much easier to work with software that is specifically designed for personal finances. A good program will allow you to keep track of as many accounts as you want. A great program will completely separate the different account balances (location of the money) from the budget category balances (purpose of the money). Let me explain: When you set up the software, you will enter in all of your different bank accounts with their balances. Perhaps you have three savings accounts and two checking accounts. It doesn't matter. When you are done entering those, the software will total them up, and the next job you have is assigning this money into different budget categories: your spending plan. For example, you might put some of it into a grocery category, some into an entertainment category, some will be assigned to pay your next car insurance bill, and some will be an emergency fund. (These categories are completely customizable, and your budget can be as broad or as detailed as you wish.) When you deposit your paycheck, you assign that new income into budget categories as well. It doesn't matter at this point which accounts your money are located in; the only thing that matters is that you own this money and you have access to it. Now, you might want to use a certain account for a certain budget category, but you are not required to do so. (For example, your grocery category money will probably be in your checking account, since you will be spending from it regularly. Your emergency fund will hopefully be in an account that earns a little higher interest.) Once you take this approach, you might find you don't need as many bank accounts as you thought you did, because the software does the job of separating your money into different \"\"accounts\"\" for different purposes. I've written before about the different categories of personal finance software. YNAB, Mvelopes, and EveryDollar are three examples of software that will take this approach of separating the concepts of the bank account and the budget category.\"","The main restrictions you see with IRA's involve contributions, and not the actual investments themselves. I would be indifferent to having a single investment across multiple accounts. It might be a bit trickier to manage, especially if your strategy involves some specific asset allocation. Other than account management though, there's no big issue.","Build a trust. I have a trust account under my name and 3 dependents, FDIC confirmed we're good to 1m. Then I have personal accounts for the 4 of us and a corp account, all at the same bank, each also insured.","\"Current is another word for Checking, as it is called in the US. Savings account is an interest-bearing account with certain limitations. For example, in the US you cannot withdraw money from it more than 6 times a month. Here is the explanation why. Current account is a \"\"general-use\"\" account on which you can write checks, use ATM/Debit cards and have unlimited transactions. It can also have negative balance (if your bank agrees to let you overdraft, they usually charge huge fees for that though). Checking accounts can have interest as well, but they usually don't, and if they do - it's much lower than the savings account interest.\"","Many reasons mentioned already. The reason why I have multiple is missing: I have a personal card for my private use and a company card for company use.","First, what's the reason? Why do you have that much in cash at all - are you concerned about market volatility, are you planning to buy a house, do you have tens of millions of dollars and this is your slush fund? Are you a house flipper and this is part of business for you? If you need the money for short term use - ie, you're buying a house in cash next month - then as long as you're in a sound bank (one of the big national ones, for example) it seems reasonable. You can never predict a crash like 2008, but it seems unlikely that Chase or Citibank will go under in the next few weeks. If you like to have a cash position, then split the money among multiple banks. Buy a CD at one major bank with some of the amount. My in-laws have a trust which is partially invested in CDs, and they use multiple banks for this purpose to keep their accounts fully insured. Each separate bank you're covered up to 250k, so if you have $150k at Chase and $150k at a local bank, you're covered. (You're also covered in a much larger amount - up to 1MM potentially - if you are married, as you can have a separate account each for $250k and a joint account up to $500k.) Otherwise, why do you have that much in cash? You should invest it in something that will return more than inflation, at a minimum... Edit post-clarifications: $350k is around my level of 'Maybe, maybe not'. You're risking $100k on a pretty low risk (assuming this isn't a small local bank, and even those are pretty low still). In order to remove that risk you have to do something active - ie, take 100k somewhere else, open a new bank account, etc. - which isn't exactly the hardest thing in the world, but it does take effort. Is it worth the 0.001% chance (entirely made up) you lose the 100k? That's $10, if you agree with that risk chance. Up to you. It wouldn't be particularly hard, though, to open an account with an online bank, deposit $100k in there in a 6 month CD, then pay the IRS from your other account and when the 6 month CD expires take the cash back into your active account. Assuming you're not planning on buying a house in the next six months this should be fine, I'd think (and even then you'd still have $150k for the downpayment up front, which is enough to buy a $750k house w/o PMI). Additionally, as several commenters note: if you can reasonably do so, and your money won't be making significant interest, you might choose to pay your taxes now rather than later. This removes the risk entirely; the likely small interest you earn over 3 months may be similar to the amount you'd spend (mostly of your time, plus possibly actual expenses) moving it to another bank. If you're making 2% or 3% this may not be true, but if you're in a 0.25% account like my accounts are, $100k * 0.25% * 0.25 is $62.50, after all.","No, to follow up on your example First Direct won't care (and I suspect won't even know) how long you held the account you are switching to them so if you don't want to switch your main current account to them you can just open a new one and switch that. To get the bonus you just need to make sure you meet the requirements imposed which in First Direct's case seem to simply be: have not held a First Direct account before pay in at least £1000 within 3 months of opening the account Once the First Direct bonus is paid, which they say should be within 28 days of you meeting the criteria, it is yours to keep. You are then free to close the First Direct account or transfer it on to another bank (and potentially claim another switching bonus).","There is no difference in safety form the perspective of the bank failing, due to FDIC/NCUA insurance. However, there is a practical issue that should be considered, if you allow payments to be automatically withdrawn from your checking account In the case of an error, all of you money may be unavailable until the error is resolved, which could be days or weeks. By having two accounts, this possibility may be reduced. It isn't a difference between checking and savings, but a benefit of having two accounts. Note that if both accounts are at the same bank, hey make take money from other accounts to cover the shortfall. That said, I've done this for years and have never had a problem. Also, I have two accounts, one at a local credit union with just enough kept in it to cover any payments, and another online account that has the rest of my savings. I can easily transfer funds between the two accounts in a couple days.","\"I live near historic Concord, Massachusetts, and frequently drive past Walden Pond. I'm reminded of Henry David Thoreau's words, \"\"Simplify, simplify, simplify.\"\" In my opinion, fewer is better. 2 checkbooks? I don't see how that makes budgeting any easier. The normal set of expenses are easily kept as one bucket, one account. The savings 2&3 accounts can also be combined and tracked if you really want to think of them as separate accounts. Now, when you talk about 'Retirement' that can be in tax-wise retirement accounts, e.g. 401(k), IRA, etc. or post tax regular brokerage accounts. In our situation, the Schwab non-retirement account was able to handle emergency (as money market funds) along with vacation/rainy day, etc, in CDs of different maturities. As an old person, I remember CDs at 10% or higher, so leaving money in lower interest accounts wasn't good. Cash would go to CDs at 1-5 year maturities to maximize interest, but keep money maturing every 6-9 months. Even with the goal of simplifying, my wife and I each have a 401(k), an IRA, and a Roth IRA, I also have an inherited Roth, and I manage my teen's Roth and brokerage accounts. That's 9 accounts right there. No way to reduce it. To wrap it up, I'd go back to the first 4 you listed, and use the #4 checking attached to the broker account to be the emergency fund. Now you're at 3. Any higher granularity can be done with a spreadsheet. Think of it this way - the day you see the house you love, will you not be so willing to give up that year's vacation?\"","Please do not conflate number of credit cards with amount of debt. Consider two scenarios, The latter scenario yields much better credit scoring. Many recommendation sources suggest the following, Although your credit score seems very important, it is only important when you have financial interactions (such as applying for credit or services) where the other party makes decisions based upon the score. You should only obtain loans and credit when you want and it makes sense based upon your needs; choosing to live your life to serve credit scoring agencies may not be your happy place.","IngDirect has this concept of sub accounts inside a main account - that might be perfect for what you are looking for. To clarify, you basically have one physical account with logical sub account groupings.","Current account offers a lot of benefits for sole proprietors. Think of it like bank account for a company. The bank provides a host of facilities for the company. A sole proprietor does not have enough value as that of a company for a bank but needs similar services. Thus Indian banks offer a toned down version of the account offered to a company. Current account offer very good overdraft ( withdrawing money even if balance is zero). This feature is very useful as business cycles and payment schedules can be different for each supplier/customer the sole proprietor does business with. Imagine the sole proprietor account has balance of zero on day 0. customer X made payment by cheque on day 1. Cheques will get credited only on Day 3 (Assume Day 2 is a national holiday or weekend). Sole proprietor gave a cheque to his supplier on day 0. The supplier deposited the cheque on Day 0 and the sole proprietor's bank will debit the the proprietor's account on day 1. As customer's cheque will get credited only day 3, the overdraft facility will let the proprietor borrow from the bank Interestingly, current accounts were offered long before Indian banks started offering customized accounts to corporate customers. The payment schedule mentioned in my example is based on a clearing system > 10 years ago. Systems have become much simpler now but banks have always managed to offer something significantly extra on lines similar to my example above to proprietor over a savings bank account","\"I would not call this a \"\"good\"\" idea. But I wouldn't necessarily call it a bad idea either. Before you even consider it, you need to do a little bit of soul searching. If there is ANY chance that having multiple credit cards could entice you to spend more than you otherwise would, then this is definitely a bad idea. Avoiding temptation is the key to preventing regrettable actions (in all aspects of life). Psychoanalysis aside, let's take a mathematical approach to the question. I believe your conclusion is correct if you add some qualifiers to it: A few years from now, then your credit score will probably be higher than if you just had 1 credit card. Here are some other things to consider: And, saving the best for last: As for the hard inquiries, they should only have an effect on your credit score for 1 year (though they can be seen on your report for 2 years). Final thought: if you decide to do this (and I personally don't recommend it), I would keep the number of applications smaller (3-5 instead of 10-15). I also would only choose cards that have no annual fee. Try to choose 1 card that has 1-2% cash back and make that your regular card.\"","They might not have to open accounts at 12 bank because the coverage does allow multiple accounts at one institution if the accounts are joint accounts. It also treats retirement accounts a separate account. The bigger issue is that most millionaires don't have all their money siting in the bank. They invest in stocks, bonds, government bonds, international funds, and their own companies. Most of these carry risk, but they are diversified. They also can afford advisers to help them manage and protect their assets.","Yes. Although I imagine the risk is small, you can remove the risk by splitting your money amongst multiple accounts at different banks so that none of the account totals exceed the FDIC Insurance limit. There are several banks or financial institutions that deposit money in multiple banks to double or triple the effective insurance limit (Fidelity has an account like this, for example)","Typically 'current' means the account from which you do your day-to-day banking (also called 'checking') and 'savings' is an interest earning account, from which you might occasionally take money. However...you can actually attach these labels (for ATM purposes) to any account you want. They don't have to be your actual checking or savings accounts. I have 'current' attached to my personal account and 'savings' on the account I hold jointly with my wife. They are just labels you attach to different accounts.","The other issue you could run into is that each deferred account is going to be subject to its own RMD's (Required Minimum Distributions) when you've retired or hit 70.5 years of age. Roth's don't generally care about RMD's at first, but are still subject to them once the person that created the Roth has passed. Having fewer accounts will simplify the RMD stuff, but that's really only a factor in terms of being forced to sell 'something' in each account in order to make the RMD. Other than that, it's just a matter of remembering to check each account if you come to a decision that it's time to liquidate holdings in a given security, lest you sell some but forget about the rest of it in another account. (and perhaps as Chris pointed out, maybe having to pay fee's on each account for the sale) Where this really can come into play is if you choose to load up each individual account with a given kind of investment, instead of spreading them across the accounts. In that case RMD's could force you into selling something that is currently 'down' when you want to hold onto it, because that is your only choice in order to meet RMD's for account X. So if you have multiple accounts, it's a good idea to not 'silo' particular vehicles into a single account, but spread similar ivestments across multiple accounts, so you always have the choice in each account of what to sell in order to meet an RMD. If you have fewer accounts, it's thus a lot easier to avoid the siloing effect","Alliant Credit Union has supplemental accounts, ING Direct has supplemental accounts as well as the poster above mentioned.","Given that we live in a world rife with geopolitical risks such as Brexit and potential EU breakup, would you say it's advisable to keep some of cash savings in a foreign currency? Probably not. Primarily because you don't know what will happen in the fallout of these sorts of political shifts. You don't know what will happen to banking treaties between the various countries involved. If you can manage to place funds on deposit in a foreign bank/country in a currency other than your home currency and maintain the deposit insurance in that country and not spend too much exchanging your currency then there probably isn't a downside other than liquidity loss. If you're thinking I'll just wire some whatever currency to some bank in some foreign country in which you have no residency or citizenship consideration without considering deposit insurance just so you might protect some of your money from a possible future event I think you should stay away.","\"It depends on your definition of \"\"inactive\"\". If you have credit cards open and do not use them at all for a period of time, some lenders will not update your usage to the credit bureaus while some will close your account in which will definitely hurt your credit score. But since you use your card once in a while and pay them off, you should be good. Lenders like to see some activity rather than no activity. If there are great offers out there by credit card companies, then why not take advantage of them? The only downside may be the annual fees if there is any but with your credit score, it implies you are financially responsible so there should be no 'compelling financial reason' to not open more cards. In fact, the number of credit accounts you have open can play a role on your score. Essentially the more the better. According to Credit Karma, 0-5 credit accounts is very poor, 6-10 is poor, 11-20 is good, 21+ is excellent.\"","To store $1 milion in a bank with full FDIC insurance currently requires 4 separate bank accounts, each at 250k. It's not that difficult, particularly if you are married and your spouse can have 2 in his/her name. (This is dependent on the FDIC limit; they raised it to 250k after the 2008 crash).","Even assuming hypothetically that you are able to split money in different bank accounts to get full coverage and all your accounts are in top ranking financial institutions in USA, you can not rely on FDIC if all or most of those banks go broke. Because FDIC just has a meagre 25 billion dollars to cover all bank accounts in the USA. And you know the amount of bank deposits in USA run in at least a trillion of dollars. US Deposits & FDIC Insurance figures","I read Q#4 as Will $250 in one account earn more interest than $250 in five accounts? in which case Excel says no, assuming a constant interest rate for all accounts. I dunno if the same holds true for banks.","\"Here are some reasons why it is advantageous to hold a portion of your savings in other countries: However, it should be noted that there are some drawbacks to holding funds in foreign banks: Don't worry; I haven't forgotten about the elephant in the room. What about tax evasion and money laundering? In general, simply transferring funds to a foreign jurisdiction will do nothing to help you evade taxes or hide evidence of a crime. Pretty much any method you can think of to transfer money is easily traceable, and any method that is difficult to trace is either illegal or heavily-regulated, with stiff penalties if you get caught. There are a few jurisdictions that have very strict banking privacy laws (the Philippines, for example). If you can somehow get the money into a bank account in one of these countries, you might be OK... at least, until that country's government decides (or is pressured) to change its banking privacy laws. But, what would you actually do with that money? Unless you want to go live in that country, you're going to have to transfer the funds out to spend them, and now you're right back on the radar — except now it's even worse, because the fact that the funds come from a suspicious jurisdiction will automatically cause your transfer to get flagged for investigation! This is where money laundering comes into play. There are lots of ways to go about this (exceptionally illegal) activity, many of which do not involve banks at all (at least, not directly). How money laundering works is outside the scope of this question, but in case you are curious, here are a couple of articles about the \"\"dark side\"\" of finance: In short, if you want to break the law, opening a foreign bank account isn't going to help much. In fact, the real crime is that offshore banking has such a criminal reputation in the first place! That said, it is possible to create legal distance between yourself and your money by using a corporate structure, and there are legitimate reasons why you might want to do this. Depending on which jurisdiction(s) you are a tax resident of, you can use this method to: Exactly how to do this is outside the scope of this question, but it's worth thinking about, especially if you have an interest in geopolitically diversifying your financial assets. If you're interested in learning more, I came across a pretty comprehensive article about Offshore Basics that covers how and why to set up offshore legal structures. (and yes, that makes now 4 links from the same site in one post! I promise it's just a coincidence; see disclaimer below) I am a US citizen with bank accounts in several countries (but not Switzerland; there are far better options out there right now). I have no affiliation with the website linked in this answer; while I was doing research for this answer, I found some really good supporting content, and it all just happened to be from the same source.\"","Yes, it's a good idea to have a separate business account for your business because it makes accounting and bookkeeping that much easier. You can open a business checking account and there will be various options for types of accounts and fees. You may or may not want an overdraft account, for example, or a separate business credit card just so you can more easily separate those expenses from your personal cards. When I started my business, I opened a business checking account and met with my banker every year just to show them how the business was doing and to keep the relationship going. Eventually, when I wanted to establish a business line of credit, it was easier to set up because I they were already familiar with my business, its revenue, and needs for a line of credit. You can set up a solo 401k with your bank, too, and they'll be very happy to do so, but I recommend shopping around for options. I've found that the dedicated investment firms (Schwab, Fidelity, etc.) tend to have better options, fees, and features for investment accounts. Just because a specific bank handles your checking account doesn't mean you need to use that bank for everything. Lastly, I use completely different banks for my personal life and for my business. Maybe I'm paranoid, but I just don't want all my finances in the same place for both privacy reasons and to avoid having all my eggs in the same basket. Just something to consider -- I don't really have a completely sane reason for using completely different banks, but it helps me sleep.","There is very little difference these days between account types. The fee structure and interest paid is different, but the actual mechanics, and as noted by others, the coverage by deposit insurance is identical. So look at how much money you have in the account(s) you have; are you maximizing the interest that you could be receiving, even from the small amounts that the banks will pay? If you could get more interest from the savings account, and only write one or two cheques per month, you might be better off with that account only; but given common fee structures, you likely would not want that as your primary account. Another reason for separate accounts is more psychological. You might be able to train yourself to not dip in to your savings if you don't have a chequebook.","I keep several savings accounts. I use an online-only bank that makes it very easy to open a new account in about 2 minutes. I keep the following accounts: Emergency Fund with 2 months of expenses. I pretend this money doesn't even exist. But if something happened that I needed money right away, I can get it. 6 6-month term CDs, with one maturing every month, each with 1 month's worth of expenses. This way, every month, I'll have a CD that matures with the money I would need that month if I lose my job or some other emergency that prevents me from working. You won't make as much interest on the 6-month term, but you'll have cash every month if you need it. Goal-specific accounts: I keep an account that I make a 'car payment' into every month so I'll have a down-payment saved when I'm ready to buy a car, and I'm used to making a payment, so it's not an additional expense if I need a loan. I also keep a vacation account so when it's time to take the family to Disneyland, I know how much I can budget for the trip. General savings: The 'everything else' account. When I just NEED to buy a new LCD TV on Black Friday, that's where I go without touching my emergency funds.","\"The type of savings account your are referring to is an \"\"Instant Access\"\" account which offers little or no interest in savings. To solve your problem I would suggest opening a higher interest Current Account, there are several on the market which offer equivalent rates of interest as an Instant Access account but still allow access via a debit card. Usually there are requirements for a regular salary transfer into the account or a minimum balance to qualify for interest. Banks that are well know for offering high interest Current Accounts include Nationwide, Santander, TSB and most of the build societies.\"","I keep one card just for monthly bills (power company,car loan, etc.). This one is unlikely to get hacked so I won't have to go change the credit card information on my monthly bills. I pay the credit card from my bank account. I just don't want a lot of businesses with direct access to my bank account.","I got a Capital One credit card because they don't charge a fee for transactions in foreign currencies. So I only use it when I travel abroad. At home, I use 3 different credit cards, each offering different types of rewards (cash back on gas, movies, restaurants, online shopping etc).","\"I'm not aware of banks offering savings account for specific reasons, other than certain accounts for college funds, as the number of reasons someone might want to open a savings account is almost infinite. What I did was open 3 savings accounts with the same bank (I could have opened more, but I didn't need more). Each account is labeled with a nickname for it's specific purpose: Vacation, Emergencies, and Annual fees. This way, I can make automated deposits to each one based on my monthly budgets and track them independently. Most E-Banks offer this type of setup (CapitalOne even advertises it as a \"\"feature\"\") and the interest rate will likely be better than a standard brick-and-mortar bank.\"","\"Go ahead, switch banks (and checking accounts) as often as you like. It won't affect your credit score since any credit check will be a \"\"soft pull\"\" (unless you're establishing a credit card or loan -- or overdraft protection, then it could be a \"\"hard pull\"\" that could affect your credit score). Bad karma? Hardly. Unethical? Absolutely not. You don't owe them anything. Practically speaking, it'd be easier just to switch once to a bank that has a fee structure you can live with -- as long as they don't change the rules on you.\"","If you're a sole proprietor there's no reason to have a separate business account, as long as you keep adequate records, as you are one and the same for tax purposes. My husband and I already have 5 accounts and a mortgage with one bank. I don't see the need to open up yet another account. As a contracted accountant, I don't need to write business checks, and my expenses are minimal. As long as I have an present my assumed business name certificate and ID, there's no reason for a bank not to deposit into my personal account.","It possibly could have made sense historically when interest rates were higher. In the UK, you used to get negligible (if any) interest on a current (checking) account, but could get modest interest from a savings account, so transferring the bulk of your salary to a savings account and paying from there (or transferring back to the current account when needed) could make some sense (but even then was probably not worth the effort). Nowadays (at least in the UK), most (easy access) savings accounts pay very little interest, but there are current accounts (example list here from comparison site) that pay more interest provided you go through several hoops. Typically you have to pay your salary (or a minimum number of £000s per month) into the account, and have a minimum number of direct debits going out. Some have fees, some only last for a year.","\"I would keep some money in the U.S. and some money in India. That way, in case \"\"something bad\"\" happens in one country, you will still have money in the other.\"","Its actually a good thing. The #1 factor to your credit score is your credit utilization. So if you don't spend money unwisely and they don't have any annual fee I would keep them and use them each twice a year to keep them in your credit mix.","\"I'd say close them if they have fees, if you're worried about fraud or if you're going to be tempted to use them. It may have an affect on your credit rating, but it shouldn't hurt you seriously. Having too many cards gives you the \"\"opportunity\"\" to overspend, which obviously isn't good.\"","\"From the banks point of view the point of a current account like this is to get you as a regular customer. They want to be your \"\"main bank\"\", the bank you interact with the most, the bank you turn to first when you need financial products and services, the bank whose advertising you see every time you log into online banking or walk into a branch. The bank knows that if they just offer the unprofitablly high interest rate or other perks with no strings attatched that people will open the account and dump a bunch of savings in it but won't actually move their financial life over, their old bank will still be their main bank. So they attatch strings like a required minimum deposit, a minimum number of direct debits and similar. These have minimal effect on people actually using the account as their main current account while being a pain for people trying to game the system. Of course as you point out it is still possible to game the system but they don't need to make gaming the system impossible, they just need to make it inconvianiant enough that most people won't bother.\"","If the checking account is in a FDIC insured bank or a NCUA insured Credit Union then you don't have to worry about what happens if the bank goes out of business. In the past the government has made sure that any disruption was minimal. The fraud issue can cause a bigger problem. If they get a hold of your debit card, they can drain your account. Yes the bank gives you fraud protection so that the most you can lose is $50 or $500; many even make your liability $0 if you report it in a timely manor. But there generally is a delay in getting the money put back in your account. One way to minimize the problem is to open a savings account,it also has the FDIC and NCUA coverage . The account may even earn a little interest. If you don't allow the bank to automatically provide an overdraft transfer from savings to checking account, then the most they can temporarily steal is your checking account balance. Getting a credit card can provide additional protection. It also limits your total losses if there is fraud. The bill is only paid once a month so if they steal the card or the number, they won't be able to drain the money in the bank account. The credit card, if used wisely can also start to build a positive credit file so that in a few years you can get a loan for a car or a place to live. Of course if they steal your entire wallet with both the credit and the debit card...","\"Having savings only in your home currency is relatively 'low risk' compared with other types of 'low diversification'. This is because, in a simple case, your future cash outflows will be in your home currency, so if the GBP fluctuates in value, it will (theoretically) still buy you the same goods at home. In this way, keeping your savings in the same currency as your future expenditures creates a natural hedge against currency fluctuation. This gets complicated for goods imported from other countries, where base price fluctuates based on a foreign currency, or for situations where you expect to incur significant foreign currency expenditures (retirement elsewhere, etc.). In such cases, you no longer have certainty that your future expenditures will be based on the GBP, and saving money in other currencies may make more sense. In many circumstances, 'diversification' of the currency of your savings may actually increase your risk, not decrease it. Be sure you are doing this for a specific reason, with a specific strategy, and not just to generally 'spread your money around'. Even in case of a Brexit, consider: what would you do with a bank account full of USD? If the answer is \"\"Convert it back to GBP when needed (in 6 months, 5 years, 30, etc.), to buy British goods\"\", then I wouldn't call this a way to reduce your risk. Instead, I would call it a type of investment, with its own set of risks associated.\"","Over time, you'll have more loans, maybe a few store cards, mortgage, car loan, etc. I'm a fan of maximizing one's wealth, and the small rebate/reward adds up over time, so I'm not against the store cards, so long as you always pay the bill in full. As far as FICO is concerned, what they 'like' to see may not necessarily be optimum for you. I'd suggest you go about your business, and over time use the few cards that combine to give to the best benefit combination that works for you.","Not OP, but let's see: My money-market account is showing 0.25% interest rate. My savings account, 0.20%. And checking, 0.22%. It doesn't matter where I keep my emergency fund and what I keep my checking balance. It's making fuck-all for interest. And I need to keep a couple thousand in there because my mortgage hits for about $1600. And my monthly CC spend averages ~$3500 monthly. I simply can't keep a couple hundred in there.","Today typically a Business needs to hold accounts in more than one currency. Banks in certain countries are offering what is called a dual currency account. It is essentially 2 accounts with same account number but different currency. So One can have an account number say 123456 and have it in say AUD and USD. So the balance will always show as X AUD and Y USD. If you deposit funds [electronic, check or cash] in USD; your USD balance goes up. Likewise at the time of withdrawal you have to specify what currency you are withdrawing. Interest rates are calculated at different percentage for different currencies. So in a nutshell it would like operating 2 accounts, with the advantage of remembering only one account number. Designate a particular currency as default currency. So if you don't quote a currency along with the account number, it would be treated as default currency. Otherwise you always quote the account number and currency. Of-course bundled with other services like free Fx Advice etc it makes the entire proposition very attractive. Edit: If you have AUD 100 and USD 100, if you try and withdraw USD 110, it will not be allowed; Unless you also sign up for a auto sweep conversion. If you deposit a GBP check into the account, by default it would get converted into AUD [assuming AUD is the default currency]","\"There are a lot of good answers, but I will share my experience. First, a savings account needs to be for savings. If your in the US you have \"\"Regulation D\"\" to deal with and that will bite you on the rear if you go over those limits. Specially easy to do if your purchasing from a savings account. Next having an \"\"Income\"\" account and a \"\"Spending\"\" account can be a very good tool to build a nest egg. So for example you get $1500 into your income account and then move $1000 to your spending account then budget based on that $1000. This is an amazing thing to do, so long as you have the discipline to never transfer that extra $500, and pretend your broke when you run out of the $1000. That being said there is no reason that you can't do that in one account. It's all preference. My wife and I use YNAB (an envelope budgeting system) to do just that. We don't need the separate accounts. We are no more likely to \"\"not spend\"\" in one account then we are to \"\"not spend\"\" in two accounts. It's all just self discipline and what you need to do. This does lead to the situation we call YNAB broke. It's when we have to start choosing between \"\"going hungry\"\" or getting that new DVD, even though our bank account has $5,000 in it. It's even harder when you choose \"\"go hungry\"\" and have to follow through with it, even though you have enough to buy a used car in your bank account. But rather it's \"\"YNAB broke\"\" or your spending account is empty and your income account it full, the result is the same. It's up to \"\"you\"\" to have the self discipline not to spend. Rather that's in one account or two makes little difference.\"","No. I have several that I haven't used in a year or so (legacy of the time when they gave you money to sign up :-)), and credit rating's something over 800 last I checked.","Another good reason: if you have to replace a card due to damage, loss, or identity theft it's nice to have a backup you can use until the new card for your primary account arrives. I know folks who use a secondary card for online purchases specifically so they can kill it if necessary without impacting their other uses, online arguably being at more risk. If there's no yearly fee, and if you're already paying the bill in full every month, a second card/account is mostly harmless. If you have trouble restraining yourself with one card, a second could be dangerous.","That's a sensible plan. No there's no reason for the IRS to see this arrangement as suspicious, particularly because the deposits will be from paychecks; you have a record of where all the money came from. Conversely, multiple cash deposits might be considered suspicious. It can only affect your credit if you have credit lines associated with the account (like an overdraft line of credit). Interest earned could increase your tax liability by a tiny amount, but in the current interest rate environment, that's not much of a worry.","I wouldn't advocate it, but one reason to pay a lower interest rate is if you have $990 on a $1000 limit credit card with 6% interest and $5000 on a $15k limit card at 10% interest. Having $500 to pay in a month and putting it on the lower interest would free up a greater percentage of credit on that card and could potentially help your credit rating I believe. I think having $1000 on 10 different credit cards w/ $15k limit reflects better than $10k on one $15k card, regardless of interest rates. Personally I think that's dumb b/c having the extra credit available is an opportunity to get into trouble a lot easier.","Just to put in one more possibility: my credit card can have a positive balance, in which case I earn interest. If more money is due, it will automatically take that from the connected checking account. If that goes into negative, of course I have to pay interest. I chose (argued with the bank in order to get) only a small credit allowance. However, I'll be able to access credit allowance + positive balance. That allows me within a day or so to make larger amounts accessible, while the possible immediate damage by credit card fraud is limited at other times. Actually, the credit card pays more interest than the checkign account. Nevertheless, I don't keep high balance there because the risk of fraud is much higher for the credit card.","\"The most important thing to look at is the FDIC insurance. Savings accounts are covered. Money markets - not necessarily. Online savings accounts provide rates of ~1%. Look at American Express, Ally, Capitol One, ING Direct, E*Trade, etc. The \"\"pledge\"\" basically brings EverBank into the same list, as they all have similar rates. Being top 5% of competitive accounts is not that hard, because there are thousands of banks around, you know. 0.76 is not the highest rate available. American Express currently give 1% on their savings account. Re moving the money a lot - depends on the amounts, but when the rates were higher, I moved around a lot. Now, it just doesn't worth the trouble, although I would move for 0.25%.\"","\"There's a lot of personal preference and personal circumstance that goes into these decisions. I think that for a person starting out, what's below is a good system. People with greater needs probably aren't reading this question looking for an answer. How many bank accounts should I have and what kinds, and how much (percentage-wise) of my income should I put into each one? You should probably have one checking account and one savings / money market account. If you're total savings are too low to avoid fees on two accounts, then just the checking account at the beginning. Keep the checking account balance high enough to cover your actual debits plus a little buffer. Put the rest in savings. Multiple bank accounts beyond the basics or using multiple banks can be appropriate for some people in some circumstances. Those people, for the most part, will have a specific reason for needing them and maybe enough experience at that point to know how many and where to get them. (Else they ask specific questions in the context of their situation.) I did see a comment about partners - If you're married / in long-term relationship, you might replicate the above for each side of the marriage / partnership. That's a personal decision between you and your partner that's more about your philosophy in the relationship then about finance specifically. Then from there, how do I portion them out into budgets and savings? I personally don't believe that there is any generic answer for this question. Others may post answers with their own rules of thumb. You need to budget based on a realistic assessment of your own income and necessary costs. Then if you have money some savings. Include a minimal level of entertainment in \"\"necessary costs\"\" because most people cannot work constantly. Beyond that minimal level, additional entertainment comes after necessary costs and basic savings. Savings should be tied to your long term goals in addition to you current constraints. Should I use credit cards for spending to reap benefits? No. Use credit cards for the convenience of them, if you want, but pay the full balance each month and don't overdo it. If you lack discipline on your spending, then you might consider avoiding credit cards completely.\"","The bottom line is to keep most of your money in accounts with no check privileges and to not give the account numbers for these accounts to anyone. Keep just enough in your checking account for the checks you are going to write."],"string":"[\n \"Another thing to factor in are deals provided by banks. In general, banks care about new customers more than their existing customers. Hence they explicitly restrict the best deals on credit cards, savings accounts, etc, to new customers only. (Of course, there are occasionally good deals for existing customers, and some banks choose not to discriminate.) If you have many different bank accounts, you are making yourself unavailable for switching bonuses and introductory rates.\",\n \"http://www.fdic.gov/deposit/deposits/index.html FDIC currently insures up to $250,000. (I would have put that as a comment to Jeffery but it says it was locked.) You don't want to put all your eggs in one basket. If you shop around, and keep shopping all the time you can keep your accounts in a single place so long as that single place provides the best deal. Don't have any loyalty to your banking institutions because they don't have any loyalty to you. Also, having lots of accounts means you are familiar with lots of institutions, so you are likely better at shopping around. Things I consider. For fewer institutions: For more institutions:\",\n \"if I open current accounts with all these institutions, will they know if I move money between them, i.e. from the one I pay my salary to, to the next, to the next etc. Of course they will know. After all you will provide the account numbers for transferring the money. Regarding the intent of transfer they don't care. They only care the about the amount coming in regularly. refuse to give me the rates and bonuses I want For this I will go through their terms and conditions and you should do it. Check for any excluded conditions. Read between the lines. But check on what amount will you be getting the interest. Most of these accounts pay interest daily and on the amount in the account in a day. So you might not be generating much of an interest in those accounts if you don't have a substantial balance.\",\n \"Why not just open multiple accounts at the same bank? That would make it harder to lose track of, and you could probably still get reports summarizing the balances across them. I do this and it works well, my credit union even lets me name each account so it is easy to keep them straight.\",\n \"\\\"Bank accounts are free, as are discount brokerage accounts (for stuff like IRA's). Any time you think there might be an advantage to getting another one, go ahead and do so. I have a number of bank accounts. Whichever has the best interest rate (typically an online bank) gets the bulk of my cash savings, whichever has the closest ATM gets as much money as I think I might want to withdraw, and I often have a bank account from which my credit cards are paid. Other banks have a token \\\"\\\"just in case I move\\\"\\\" amount of money. The only cost is that you have to check them from time to time to make sure each account has enough for its likely uses. I use mint.com for that.\\\"\",\n \"\\\"When I was younger I had a problem with Washington Mutual. Someone had deposited a check in to my account then ran my account negative with a \\\"\\\"dupe\\\"\\\" of my debit card. WaMu tied up my account for three months while they investigated because it wasn't simply a debit card fraud issue, this was check fraud (so they claimed). At the time all the money I had in the world was in that account and the ordeal was extremely disruptive to my life. Since the, I never spend on my debit card(s) and I keep more than one checking account to disperse the risk and avoid disruption in the event anything ever happens again. Now one of the accounts contains just enough money (plus a small buffer) to pay my general monthly expenses and the other is my actual checking account. There's no harm in having more than one checking account and if you think it will enhance your finances, do it. Though, there's no reason to get a business account unless you've actually formed a business.\\\"\",\n \"For small amounts I wouldn't be too concerned. There are two factors I can think of: For relatively small amounts and when dealing with reputable banking institutions there should be little concern of banking with a single bank. It's what most people do.\",\n \"Another reason is that the amount of unused credit you have is a positive factor on your credit score. It's generally easier to open several different accounts for $X dollars each with different banks than to get your current bank to raise your limit severalfold in a single go. Your current bank has to worry about why you suddenly are asking for a large additional amount of credit; while other banks will be willing to offer you smaller amounts of credit in the hope that you transfer your business from your current bank to them.\",\n \"Well the idea of 'good practice' is subjective so obviously there won't be an objectively correct answer. I suspect that whatever article you read was making this recommendation as a budgeting tool to physically isolate your reserve of cash from your spending account(s) as a means to keep spending in check. This is a common idea that I've heard often enough, though I don't think I am alone in believing that it's unnecessary except in the case of a habitual spender who cannot be trusted to stay within a budget. I suppose there is a very small argument to be made about security where if you use a bank account for daily spending and that account is somehow compromised, the short-term damage is limited. In the end, I would argue that if you're in control of spending and budgeting, have a single source of income that is from regular employment, and you use a credit card for most of your daily spending, there's no compelling reason to have more than one bank account. Some people have a checking and savings account simply for the psychological effect of separating their money, some couples have 3-4 accounts for income, personal spending, and savings, other people have separate accounts for business/self-employment funds, and a few people like having many accounts that act as hard limits for spending in different categories. Of course, the other submitted answer is correct in noting that the more accounts that you have, the more you are opening yourself up to accounting issues if funds don't transfer the way you expect them to (assuming you're emptying the accounts often). Some banks are more lenient with this, however, and may offer you the option to freely 'overdraft' by pulling funding from another pre-designated account that you also hold at the same bank.\",\n \"Not for normal banking. You can open as many accounts as you want. I did this recently with some Amazon gift card churning for a Chase cash bonus. Staying a long time may have their credit department reach out and offer you a long time customer discount. But no one is saying you have to close one account to open another.\",\n \"\\\"There is no \\\"\\\"should\\\"\\\", but I am strongly of the view that if you have savings of several months' salary or more, they should not only be in a separate account, but with a separate financial institution, or even split between two others. A fraction of a percent of extra interest is scant reward for massively increased personal risk. The reason for this is buried in the T&Cs. There is almost always a \\\"\\\"right of set off\\\"\\\": if one account is overdrawn, the bank reserves the right to take money from your other accounts. Which sounds fair enough, until you consider the imbalance of power. Maybe your salary account gets hacked? Maybe that's the bank's fault? Maybe the bank has made an accounting error? Maybe the bank has gone bust? Maybe you need to employ a lawyer to act on your behalf? Oh dear, you no longer have any savings. (*) This cannot happen if your savings are with a completely separate institution. Then, the only way that the salary account bank can touch your savings is by winning in the courts. If you split the savings two ways, you have also given yourself the reassurance that in the worst case only half your savings have been affected. \\\"\\\"Don't put all your eggs in one basket\\\"\\\" is proverbial. And there's a folk song that's lodged in my memory... \\\"\\\"As through this world I wander, I've met all kinds of funny men. Some rob you with a six-gun, some with a fountain pen. Yet as far as I have wandered, as far as I have roamed, I've never seen an outlaw drive a family from their home\\\"\\\". I've never been in this sort of trouble and the UK's laws tend to favour the banks' customers. I don't even hate bankers. Yet even so, why take this risk when it can so easily be reduced? (*) If this sounds far-fetched, read the news, for example https://www.theguardian.com/business/2017/feb/02/hbos-manager-and-other-city-financiers-jailed-over-245m-loans-scam\\\"\",\n \"\\\"For personal accounts, I can't imagine that this is too much of a problem. The only concern that I can think of (for American banks) is that FDIC only insures you up to $100,000 if the bank were to go belly-up. If you're getting over that amount of money, you may want to \\\"\\\"diversify\\\"\\\" a little more.\\\"\",\n \"There is nothing conceptually wrong with it. If you like it that way, go ahead. The only thing to watch out for is bank policies that effectively penalize having many small accounts. For instance, some banks charge you a fee for checking accounts with a balance below a certain minimum, but will waive the fees for accounts with a higher balance. You may be able to avoid such fees by judicious management of your funds (or by switching to a different bank), but it's something to be aware of. (The interest rates on savings accounts also often vary with the balance, making many small balances less efficient than one big balance. However, right now, at least in the US, interest rates on savings accounts are so low that the difference here is likely to be minimal.)\",\n \"You should not open bank accounts just to get additional credit cards. You should be careful about carrying too many credit cards and incurring too much debt as you could find yourself in a situation whereby you may not be able to pay off your monthly interest, much less the principal balance. Credit cards are not insurance. With many years of experience under my belt I can tell you that the best approach is to live within (or below) your means and avoid carrying a balance on credit cards. I carry only one credit card (really a charge card) and I pay off the balance every month. Treat a credit card as a 30 day interest free loan and pay your balance off in full every month...as you progress through life you will save yourself a lot of heartache (and money) if you take this approach.\",\n \"\\\"would it make sense to set up multiple bank accounts to avoid going above their thresholds? Quite possiblly yes but you need to pay attention to the fine print. I don't know what the situation is in poland but in the UK accounts that pay high interest often have strings attached. For example the santander 123 current account pays very good interest but it has an account fee and some other requirements that are difficult to meet if you are not using it as your \\\"\\\"main current account\\\"\\\". You need to read the terms carefully, if you go over the threshold does the lower rate only apply to money over the threshold? or does it apply to all the money in the account? Are there any other restrictions on how you use the account. Also I don't know if poland has any provisions for limited tax-advantaged savings (like the ISA scheme we have in the UK). If it does then that can add further complications. How to calculate how to maximize the profit here? Well in theory you would get the best account you can and fill it to the threshold. Then the next best account and so-on. You would move any interest paid in an account that was already full to the threshold to the best non-full account (or if the account strongly peanalises going over perhaps move an ammount of money equivilent to the interest just before the interest is paid). In practice that is a lot of work, so if the rates on the different accounts are similar you may want to leave some margin for interest or (in the case of an account that pays the lower rate on the overage while still paying the higher rate on money below the threshold) accepting that some of your money will earn slightly less than idea. Another option some accounts may offer is just to pay the interest to another account, avoiding the need to move it yourself. Finally you should check out your government's limits for compensation in the event of banks going bust. As a general rule you don't want to put more than that ammount in a single bank even if doing so would get you the best interest.\\\"\",\n \"In my opinion, separating your money into separate accounts is a matter of personal preference. I can only think of two main reasons why people might suggest separating your bank accounts in this way: security and accounting. The security reasoning might go something like this: My employer has access to my bank account, because he direct deposits my salary into my account. I don't want my employer to have access to all my money, so I'll have a separate account that my employer has access to, and once the salary is deposited, I can move that money into my real account. The fault in this reasoning is that a direct deposit setup doesn't really give your employer withdrawal access to your account, and your employer doesn't have any reason to pull money out of your account after he has paid you. If fraud is going to happen, it much more likely to happen in the account that you are doing your spending out of. The other reason might be accounting. Perhaps you have several bank accounts, and you use the different accounts to separate your money for different purposes. For example, you might have a checking account that you do most of your monthly spending out of, you might have a savings account that you use to store your emergency fund, and you have more savings accounts to keep track of how much you have saved toward your next car, or your vacation, or your Christmas fund, or whatever. After you get your salary deposited, you can move some into your spending account and some into your various savings accounts for different purposes. Instead of having many bank accounts, I find it easier to do my budgeting/accounting on my own, not relying on the bank accounts to tell me how much money I have allocated to each purpose. I only have one checking account where my income goes; my own records keep track of how much money in that account is set aside for each purpose. When the checking account balance gets too large, I move a chunk of it over to my one savings account, which earns a little more interest than the checking account does. I can always move money back into my checking account if I need to spend it for some reason, and the amount of money in each of the two accounts is not directly related to the purpose of the money. In summary, I don't see a good reason for this type of general recommendation.\",\n \"I have a fair number of cards floating around some reasons I have opened multiple accounts. I am not saying that it is for everyone but there are valid scenarios where multiple credit cards can make sense.\",\n \"I've had all my account with the same bank for all my life. Generally, the disadvantage is that if I want some kind of product like a credit extension or a mortgage, I have the one bank to go to and if they don't want to help me I'm out of luck. However, occasionally there are also perks like the bank spontaneously offering you increased credit or even a whole line of credit. They can do this because they have your whole history and trust you.\",\n \"More moving parts will make your budget harder to keep track of, not simpler. Budget systems like You Need a Budget recommend simplifying your accounts, even if the various accounts give you specialized bonuses like rewards for restaurants or gasoline or travel. The effort of keeping track of all the options and accounts can outweigh the value you get from them. Instead, I recommend using a simple and structured budget system (like YNAB) that walks you through all of the steps toward building good habits and keeping them simple so that you can maintain the habit.\",\n \"You spread money/investment across different accounts for different reasons: All this is in addition to diversification reasons. Investing all your money into one stock, bond, Mutual fund, ETF is risky if that one segment of the economy/market suffers. There is a drawback to diversification of accounts. Some have minimum amounts and fee structures. In the original question you asked about 1,000 per account. That may mean that some accounts may be closed to you. In other cases they will charge a higher percentage for fees for small accounts. Those issues would disappear long before you hit the 1,000,000 per account you mentioned in your comment. One problem can occur with having too much diversification. Having dozens of funds could mean that the overlap between the funds might result in over investing in a segment because you didn't realize that one stock segment appeared in 1/3 of the funds.\",\n \"I don't think there's any law against having lots of bank accounts. But what are you really gaining? Every new account is a paperwork hassle. Every new account is another target for con men who might steal your information and write bad checks or make phony credit card purchases in your name. Yes, it's not unreasonable to have a credit card or two that you keep for emergencies. I'd advise anyone with running up debts while having no idea how you will pay them off. But to say that you might keep some credit available so that if you have a legitimate emergency -- like, say, your car breaks down and you don't have the cash to fix it and you can't get to work without it -- you have some a fallback. But do you really need ten credit cards for that sort of thing? And how much credit are they giving you on each card? I don't know how the banks work this, but I'd think if they're rational, they'd consider your total credit before giving you more. I have three credit cards that I use regularly -- two personal and one business. And I find that a real pain to keep track of, to make sure that I keep each one paid by the due date and to keep a handle on how much I owe and so forth. I can't imagine trying to deal with ten. I suppose you could just stuff all these cards in a drawer and only use them in case of emergency.\",\n \"Are you allowed to have two personal current accounts with a debit card attached to each one? Yes, you may have as many current accounts you want, but you should ask why should I have more than one. It is cumbersome and time consuming to keep track of ongoing incoming credits and outgoing debits. Open to bank fraud too, if you aren't careful. If yes, can a sole trader in the UK use the second personal account for business transactions? Yes, but no payments to the business. At the end of the year you file you P11D, even if you have a business bank account. You would need to justify the expenses by keeping the bills and stuff. As it will be a personal account, you have to little more careful, not to mix personal and business expenses. If you are allowed to use a second personal account for business transactions, then why would someone choose to open a business bank account, where you have to pay? What are the benefits? First of all no company will pay into you personal account, for any transactions, they need to pay you. They will only pay to an account registered with the business, with whom they are dealing with. Benefits are you have your business expenses sorted out in one account and personal expenses in other. Pure business expenses comes out of the business account, rather than from your personal purse, keeps the accounts smooth. No need to sort out expenses at the end of each quarter or at the end of each month.\",\n \"If it makes your finances easier, why not? My wife and I had his/hers/our since before we were married. I also have an account to handle transactions for my rental property, and one extra for PayPal use. I was paranoid to give out a checking account number with authorization for a third party to debit it, so that account has a couple hundred dollars, maximum. All this is just to explain that your finances should be arranged to simplify your life and make you comfortable.\",\n \"I use two different brokerages, both well-known. I got a bit spooked during the financial crisis and didn't want to have all my eggs in one basket. The SIPC limits weren't so much a factor. At the time, I was more worried about the hassle of dealing with a Lehman-style meltdown. If one were to fail, the misery of waiting and filing and dealing with SIPC claims would be mitigated by having half of my money in another brokerage. In hindsight, I was perhaps a bit too paranoid. Dealing with two separate brokerages is not much of an inconvenience, though, and it's interesting to see how their web interfaces are slightly different and some things are easier to do with one vs the other. Overall, they're really similar and I can't say there's much advantage (other than my tin-foil hat tendencies) to splitting it up like that.\",\n \"If you are concerned about FDIC coverage, then yes, you can spread your money across multiple banks. The limit is $250k, so after you invest in property, 4 banks should do it. That having been said, in my opinion, it would be a waste to keep all this money in a bank's savings account. You will slowly lose value over time due to inflation. I suggest you spend a little money on an independent fee-based investment advisor. Choose someone who will teach you about investing in mutual funds, so you can feel comfortable with it. He or she should take into account your tolerance for risk, look at your goals, and help you come up with a low cost plan for investing your money. It's certainly okay to keep the money in a bank short-term, but don't wait too long; take steps toward putting that money to work for you.\",\n \"Do you need it? It doesn't sound like it - you seem to be able to manage with just the cards you have. Will it hurt anything? Probably not either, unless it entices you to spend more than you make. Another downside might be that you would spend more than you normally would just to have activity on every card. So all in all, I don't see much upside.\",\n \"Your plan will probably work. I speak from past experience approx 5-10 years ago, when Lloyds used to offer tiered interest of up to 4% on £5000 in their Vantage accounts. It was allowed for an individual person to have up to three Vantage accounts. The criteria for obtaining the headline interest rates were simply: What I, and many others, did was to set up three Vantage accounts, call them A, B, and C, and a standing order on each to transfer minimum amount + £1 on the same day each month in this manner: This satisfied the letter of conditions, though perhaps not the spirit. Most importantly it satisfied the bank, and all three accounts received that headline interest rate. These days banks have got a little wiser to this and have started including the 'set up n direct debits' condition, which makes this a more time-consuming system to arrange - you must assign your various bills across your accounts - but I believe that the overall plan still works. They don't care where the money comes from, or whether it stays - just that it comes in. Enough people get it wrong that they don't have to worry about the few who get it perfectly right (see also: how 0% balance transfer offers can be profitable...)\",\n \"If your accounts have an overdraft facility, then every open account is classed as available credit which has a negative effect on your credit score. It's not normally a major concern but it is a factor. (nb. this definitely applies to the UK, maybe not where you are)\",\n \"You're asking for opinions here, which is kindof against the rules, but I'll give it a try. 1) Does emergency funds and saving money(eg.Money plan to buy a house) should be in same Saving Account? 2) or should each specific saving plan set up in particular Saving Account? No, it doesn't. It's a matter of convenience. I personally find it more convinient to have different stashes for different purposes, but it means extra overhead of keeping an eye on one more account. Fortunately, with on-line access, mint.com and spreadsheets, it's not that big of an overhead. 3) If saved in same Saving Account, how could I manage easily which percentage is planned for which? Excel spreadsheet comes to mind. Banks may have some tools too, for example Wells Fargo (where I'll be closing my account soon), has a nice on-line goals manager that allows you to keep track of your savings per assigned goals (they allow one goal per savings account, but you can have multiple accounts for multiple goals, and it will show the goals and progress pretty nicely). 4) If not saved in same Saving Account, the interest earned would be smaller because they all clutter across multiple Saving Accounts? In some banks interest rates are tiered. But in most on-line savings accounts they're not, and you get the same high rate from the first $1 deposited. So if in the bank where you keep the money they only pay a decent rate if you deposit some big lump of money - just open an account elsewhere. Places to check: American Express FSB, ING Direct, E*Trade savings, Capital One, Ally, and many more.\",\n \"The original poster indicates that he lives in the UK, but there are likely strong similarities with the US banking system that I am more familiar with: The result is that you are likely going to be unable to be approved for 10 checking accounts opened in rapid succession, at least in the US. Finally, in the US, there is no need to have checking accounts with a bank in order to open a credit card with them (although sometimes it can help if you have a low credit score).\",\n \"Ally Bank is a good online only account. They reimburse any ATM Fees you may occur. I have both checking and savings, with both Ally and ING Direct. I don't know about having 25 total accounts - seems like overkill to me. I do something similar though - I get direct deposit into one account, then transfer the average bill amount each pay to a different account that I never touch other than for the allotted bills. It works well, especially for Utilities that are inflated seasonally. What do you use to mange the 25 accounts? I use Quicken, but I don't have 25 accounts...yet.\",\n \"There is no accounting reason that it should be different, there are likely psychological reasons that it should be, however. Assuming that you live in a western country with good banking regulation, you likely have deposit insurance or a similar scheme. Here in Canada we are covered up to $100,000 in a single account with various limitations. At least my rainy-day account plus savings is nowhere near that, so I'm good to go. That said, however, having a large lump of money in an account you regularly use may tempt you more than you can stand. That iPad, car, home improvement, etc., might be too easy to buy knowing you have relatively easy access to that money. So it really becomes a self-discipline question. Good Luck\",\n \"Your last sentence is key. If you have multiple accounts, it's too easy to lose track over the years. I've seen too many people pass on and the spouse has a tough time tracking the accounts, often finding a prior spouse listed as beneficiary. In this case, your gut is right, simpler is better.\",\n \"\\\"But it's also true that the FDIC (or equivalent) insurance account doesn't have enough to cover all deposits. The FDIC may come in handy if your local FDIC member bank goes belly up and a few hundred depositors need to be made whole. However, in a national crisis, where the government is \\\"\\\"legally\\\"\\\" stealing funds, that FDIC insurance is a joke. I do agree though, if you have more than the insured amount in a single account, split it up.\\\"\",\n \"\\\"3 reasons I can think of: I once worked for a bank and when credit scoring for loans, if you had been approved by different institutions, you were given a better score. So if you held a Visa and Mastercard (as opposed to two Visa cards) your credit score would go higher. More than 6 cards though looked suspicious and your score would take a big hit. Having more than card has helped me when getting special offers multiple times from some websites where it was limited to \\\"\\\"one per customer\\\"\\\" though most just used your address or email account. If you owed $1000 in total which you can't pay off in one go, it is better to have that split across two cards. You would be paying interest on $500 on each card but when you have one card paid off, the interest you would be paying on the other would be based on the original debt to that one card of $500 (not $1000). I hope that makes sense.\\\"\",\n \"If your checking account has a card associated with it, then keeping funds in savings reduces the risk that some kind of fraud will wipe you out.\",\n \"Having separate savings account for your kids college fund, retirement fund, holiday fund etc is one way to compartmentalise savings. Downside to this is the management of these funds especially if you have them with different banks. Like others here have pointed out, keeping track via spreadsheet is relatively easy and especially most banks now like OCBC, HSBC , DBS, POSB etc offer online banking, however from a financial standpoint, spreading your funds doesn't allow you to get as much interest as you would from one account that has the highest interest rate.\",\n \"I would also check into whether you can keep using your credit card instead of switching to a debit card tied to your checking account. The credit card provides you protection from someone wiping your account out. Most banks will help you get the money back if this happens while using a debit card. But you are out the money while the bank figures out who is wrong. In the credit cards case none of your money is actually taken from your account while you dispute the charge. I also agree with the others that having all your money in one account is more difficult to keep real spending money separate from emergency fund money.\",\n \"\\\"First thing is that your English is pretty damn good. You should be proud. There are certainly adult native speakers, here in the US, that cannot write as well. I like your ambition, that you are looking to save money and improve yourself. I like that you want to move your funds into a more stable currency. What is really tough with your plan and situation is your salary. Here in the US banks will typically have minimum deposits that are high for you. I imagine the same is true in the EU. You may have to save up before you can deposit into an EU bank. To answer your question: Yes it is very wise to save money in different containers. My wife and I have one household savings account. Yet that is broken down by different categories (using a spreadsheet). A certain amount might be dedicated to vacation, emergency fund, or the purchase of a luxury item. We also have business and accounts and personal accounts. It goes even further. For spending we use the \\\"\\\"envelope system\\\"\\\". After our pay check is deposited, one of us goes to the bank and withdraws cash. Some goes into the grocery envelope, some in the entertainment envelope, and so on. So yes I think you have a good plan and I would really like to see a plan on how you can increase your income.\\\"\",\n \"\\\"I live in the UK so it's a little different but generally you'd have one account (a current account) which would have a Visa/MasterCard debit card associated before working and any high street bank (don't know what the US equivalent would be, but big banks such as HSBC/Santander) will offer you a savings account which pays a v small amount of interest as well as bonds as all sorts. From what I know most people have their salary paid into their current account (which would be the spending account with a card associated) and would transfer a set amount to a savings account. Personally, I have a current account and a few different saving accounts (which do not have cards associated). One savings account has incoming transfers/money received and I can use online banking to transfer that to my current account \\\"\\\"instantly\\\"\\\" (at least I've done it standing at ATM's and the money is there seconds later - but again this is the UK, not US). This way, my primary current account never has more than £10-15 in it, whenever I know I need money I'll transfer it from the instant access account. This has saved me before when I've been called by my bank for transactions a few £100 each which would have been authorised I kept all my money in my current account. If you don't have money (and dont have an overdraft!) what are they meant to do with it? The other savings account I had setup so that I could not transfer money out without going into a branch with ID/etc, less to stop someone stealing my money and more to be physically unable to waste money on a Friday if I don't arrive at the bank before 4/5PM, so saves a lot of time. US banking is a nightmare, I don't imagine any of this will translate well and I think if you had your salary paid into your savings on a Friday and missed the bank with no online banking facilities/transfers that aren't instant you'd be in a lot of trouble. If the whole \\\"\\\"current + instant access savings account\\\"\\\" thing doesn't work to well, I'm sure a credit/charge (!!!) card will work instead of a separate current account. Spend everything on that (within reason and what you can pay back/afford to pay stupid interest on) on a card with a 0% purchase rate and pay it back using an account you're paid into but is never used for expenses, some credit cards might even reward you for this type of thing but again, credit can be dangerous. A older retired relative of mine has all of his money in one account, refuses a debit card from the bank every time he is offered (he has a card, but it isn't a visa/mastercard, it's purely used for authentication in branch) and keeps that in a safe indoors! Spends everything he needs on his credit card and writes them a sort of cheque (goes into the bank with ID and signs it) for the full balance when his statement arrives. No online banking! No chance of him getting key logged any time soon. tldr; the idea of separating the accounts your money goes in (salary wise) and goes out (spending) isn't a bad idea. that is if wire transfers don't take 3-5 days where you are aha.\\\"\",\n \"1- To max out rewards. I have 5 different credit cards, one gives me 5% back on gas, another on groceries, another on Amazon, another at restaurants and another 2% on everything else. If I had only one card, I would be missing out on a lot of rewards. Of course, you have to remember to use the right card for the right purchase. 2- To increase your credit limit. One card can give you a credit limit of $5,000, but if you have 4 of them with the same limits, you have increased your purchasing power to $20,000. This helps improve your credit score. Of course, it's never a good idea to owe $20,000 in credit card debt.\",\n \"Personally, I keep two regular checking accounts at different banks. One gets a direct deposit totaling the sum of my regular monthly bills and a prorated provision for longer term regular bills like semi-annual car insurance premiums. I leave a buffer in the account to account for the odd expensive electrical bill or rate increase or whatever. One gets a direct deposit of the rest which I then allocate to savings and spending. It makes sense to me to separate off regular planned expenses (rent/mortgage, utility bills, insurance premiums) from spending money because it lets me put the basics of my life on autopilot. An added benefit is I have a failover checking account in the event something happens to one of them. I don't keep significant amounts of money in either account and don't give transfer access to the savings accounts that store the bulk of my money. I wear a tinfoil hat when it comes to automatic bank transfers and account access... It doesn't make sense to me to keep deposits separate from spending, it makes less sense to me to spend off of a savings account.\",\n \"The security concept of minimising attack surface could be stretched to apply here, especially if closing the account would mean the end of your relationship with that bank. Essentially more routes into your finances or personal information means more opportunities for fraud, more accounts to keep an eye on, more logins to remember/store, and even more paperwork/idle cards to check (for unexpected activity and T&C changes), store and eventually shred. However I had a couple of online-only savings accounts with zero balance for a few years, at a bank where I have other accounts, and I didn;t worry in the slightest. (You can open the accounts online but have to phone to close them and sitting on hold is too much of a chore for me. Eventually they realised their mistake, brought in a minimum balance requirement, and after giving notice closed accounts with less that that in them)\",\n \"You should ensure that your broker is a member of the Securities Investor Protection Corporation (SIPC). SIPC protects the cash and securities in your brokerage account much like the Federal Deposit Insurance Corporation (FDIC) protects bank deposits. Securities are protected with a limit of $500,000 USD. Cash is protected with a limit of $250,000 USD. It should be noted that SIPC does not protect investors against loss of value or bad advice. As far as having multiple brokerage accounts for security, I personally don’t think it’s necessary to have multiple accounts for that reason. Depending on account or transaction fees, it might not hurt to have multiple accounts. It can actually be beneficial to have multiple accounts so long as each account serves a purpose in your overall financial plan. For example, I have three brokerage accounts, each of which serves a specific purpose. One provides low cost stock and bond transactions, another provides superior market data, and the third provides low cost mutual fund transactions. If you’re worried about asset security, there are a few things you can do to protect yourself. I would recommend you begin by consulting a qualified financial advisor about your risk profile. You stated that a considerable portion of your total assets are in securities. Depending on your risk profile and the amount of your net worth held in securities, you might be better served by moving your money into lower risk asset classes. I’m not an attorney or a financial advisor. This is not legal advice or financial advice. You can and should consult your own attorney and financial advisor.\",\n \"Problems with your plan (in no particular order) there is a limit, once they have decided that you have enough credit they won't offer any more. If the economy changes (like it did in 2008) they can reduce the limit on existing accounts. If you don't use them, they may decide to close them. Using existing cards will encourage the bank to increase the limit on that card. opening cards can make some lenders nervous. Having a new card close to when you are applying for a mortgage or a car loan can make them less likely to lend you the max. You have to decide: Are you trying to buildup your credit limit? or your credit score?\",\n \"In the case of reward cards, different cards may offer different rewards for different kind of purchases. For example, in the UK, one of the Amex cards offers 1.25% cashback on all purchases, whereas one of the Santander cards offers 3% on fuel, 2% or 1% on certain other transactions, and nothing on others. Of course, you then have to remember to use the right card! Another reason is that a person may use a card for a while, build up a good credit limit, and then move to a different card (perhaps because it has better rewards, or a lower interest rate, etc) without cancelling the first. If it costs nothing to keep the first card, then it can be useful to have it as a spare.\",\n \"Most people who have over $250,000 in liquid cash savings would not want to start putting their money into regular savings accounts in different banks, especially with interest rates as ridiculously low as they are now in 2014-15. People with money will want to diversify their investments in ways that will potentially earn them more money, and they can also afford to seek the advice of financial planners who can help them do this wisely. Even if you decide to put $250,000 into various accounts at different banks, I wouldn't necessarily trust that the FDIC will be able to help you recover your money in the event that your banks go under. The amount of money available to the FDIC to cover such losses pales in comparison to the actual amount of money that Americans have in their bank accounts.\",\n \"One rule of thumb is that having regular activity on at least three different revolving accounts will improve your score: I agree that it may not be a great idea to have too many open credit accounts (Trade Lines) reporting on your credit report but if you don’t have enough active accounts, it will prevent you from being approved for a home mortgage. Both Conventional (Fannie Mae and Freddie Mac) mortgage loans and Government loans (such as FHA and VA) require that you have a minimum number of reporting trade lines that are active or have been active within the most recent 24 month period of time. An example of meeting the mortgage loan requirement is having a revolving account (credit card) that has been reporting activity for the past 24 months plus 2 other trade lines that have had activity reported for 12 months each, both within the past 24 months.\",\n \"\\\"As your financial situation becomes more complex, it becomes increasingly more difficult to keep track of everything with a simple spreadsheet. It is much easier to work with software that is specifically designed for personal finances. A good program will allow you to keep track of as many accounts as you want. A great program will completely separate the different account balances (location of the money) from the budget category balances (purpose of the money). Let me explain: When you set up the software, you will enter in all of your different bank accounts with their balances. Perhaps you have three savings accounts and two checking accounts. It doesn't matter. When you are done entering those, the software will total them up, and the next job you have is assigning this money into different budget categories: your spending plan. For example, you might put some of it into a grocery category, some into an entertainment category, some will be assigned to pay your next car insurance bill, and some will be an emergency fund. (These categories are completely customizable, and your budget can be as broad or as detailed as you wish.) When you deposit your paycheck, you assign that new income into budget categories as well. It doesn't matter at this point which accounts your money are located in; the only thing that matters is that you own this money and you have access to it. Now, you might want to use a certain account for a certain budget category, but you are not required to do so. (For example, your grocery category money will probably be in your checking account, since you will be spending from it regularly. Your emergency fund will hopefully be in an account that earns a little higher interest.) Once you take this approach, you might find you don't need as many bank accounts as you thought you did, because the software does the job of separating your money into different \\\"\\\"accounts\\\"\\\" for different purposes. I've written before about the different categories of personal finance software. YNAB, Mvelopes, and EveryDollar are three examples of software that will take this approach of separating the concepts of the bank account and the budget category.\\\"\",\n \"The main restrictions you see with IRA's involve contributions, and not the actual investments themselves. I would be indifferent to having a single investment across multiple accounts. It might be a bit trickier to manage, especially if your strategy involves some specific asset allocation. Other than account management though, there's no big issue.\",\n \"Build a trust. I have a trust account under my name and 3 dependents, FDIC confirmed we're good to 1m. Then I have personal accounts for the 4 of us and a corp account, all at the same bank, each also insured.\",\n \"\\\"Current is another word for Checking, as it is called in the US. Savings account is an interest-bearing account with certain limitations. For example, in the US you cannot withdraw money from it more than 6 times a month. Here is the explanation why. Current account is a \\\"\\\"general-use\\\"\\\" account on which you can write checks, use ATM/Debit cards and have unlimited transactions. It can also have negative balance (if your bank agrees to let you overdraft, they usually charge huge fees for that though). Checking accounts can have interest as well, but they usually don't, and if they do - it's much lower than the savings account interest.\\\"\",\n \"Many reasons mentioned already. The reason why I have multiple is missing: I have a personal card for my private use and a company card for company use.\",\n \"First, what's the reason? Why do you have that much in cash at all - are you concerned about market volatility, are you planning to buy a house, do you have tens of millions of dollars and this is your slush fund? Are you a house flipper and this is part of business for you? If you need the money for short term use - ie, you're buying a house in cash next month - then as long as you're in a sound bank (one of the big national ones, for example) it seems reasonable. You can never predict a crash like 2008, but it seems unlikely that Chase or Citibank will go under in the next few weeks. If you like to have a cash position, then split the money among multiple banks. Buy a CD at one major bank with some of the amount. My in-laws have a trust which is partially invested in CDs, and they use multiple banks for this purpose to keep their accounts fully insured. Each separate bank you're covered up to 250k, so if you have $150k at Chase and $150k at a local bank, you're covered. (You're also covered in a much larger amount - up to 1MM potentially - if you are married, as you can have a separate account each for $250k and a joint account up to $500k.) Otherwise, why do you have that much in cash? You should invest it in something that will return more than inflation, at a minimum... Edit post-clarifications: $350k is around my level of 'Maybe, maybe not'. You're risking $100k on a pretty low risk (assuming this isn't a small local bank, and even those are pretty low still). In order to remove that risk you have to do something active - ie, take 100k somewhere else, open a new bank account, etc. - which isn't exactly the hardest thing in the world, but it does take effort. Is it worth the 0.001% chance (entirely made up) you lose the 100k? That's $10, if you agree with that risk chance. Up to you. It wouldn't be particularly hard, though, to open an account with an online bank, deposit $100k in there in a 6 month CD, then pay the IRS from your other account and when the 6 month CD expires take the cash back into your active account. Assuming you're not planning on buying a house in the next six months this should be fine, I'd think (and even then you'd still have $150k for the downpayment up front, which is enough to buy a $750k house w/o PMI). Additionally, as several commenters note: if you can reasonably do so, and your money won't be making significant interest, you might choose to pay your taxes now rather than later. This removes the risk entirely; the likely small interest you earn over 3 months may be similar to the amount you'd spend (mostly of your time, plus possibly actual expenses) moving it to another bank. If you're making 2% or 3% this may not be true, but if you're in a 0.25% account like my accounts are, $100k * 0.25% * 0.25 is $62.50, after all.\",\n \"No, to follow up on your example First Direct won't care (and I suspect won't even know) how long you held the account you are switching to them so if you don't want to switch your main current account to them you can just open a new one and switch that. To get the bonus you just need to make sure you meet the requirements imposed which in First Direct's case seem to simply be: have not held a First Direct account before pay in at least £1000 within 3 months of opening the account Once the First Direct bonus is paid, which they say should be within 28 days of you meeting the criteria, it is yours to keep. You are then free to close the First Direct account or transfer it on to another bank (and potentially claim another switching bonus).\",\n \"There is no difference in safety form the perspective of the bank failing, due to FDIC/NCUA insurance. However, there is a practical issue that should be considered, if you allow payments to be automatically withdrawn from your checking account In the case of an error, all of you money may be unavailable until the error is resolved, which could be days or weeks. By having two accounts, this possibility may be reduced. It isn't a difference between checking and savings, but a benefit of having two accounts. Note that if both accounts are at the same bank, hey make take money from other accounts to cover the shortfall. That said, I've done this for years and have never had a problem. Also, I have two accounts, one at a local credit union with just enough kept in it to cover any payments, and another online account that has the rest of my savings. I can easily transfer funds between the two accounts in a couple days.\",\n \"\\\"I live near historic Concord, Massachusetts, and frequently drive past Walden Pond. I'm reminded of Henry David Thoreau's words, \\\"\\\"Simplify, simplify, simplify.\\\"\\\" In my opinion, fewer is better. 2 checkbooks? I don't see how that makes budgeting any easier. The normal set of expenses are easily kept as one bucket, one account. The savings 2&3 accounts can also be combined and tracked if you really want to think of them as separate accounts. Now, when you talk about 'Retirement' that can be in tax-wise retirement accounts, e.g. 401(k), IRA, etc. or post tax regular brokerage accounts. In our situation, the Schwab non-retirement account was able to handle emergency (as money market funds) along with vacation/rainy day, etc, in CDs of different maturities. As an old person, I remember CDs at 10% or higher, so leaving money in lower interest accounts wasn't good. Cash would go to CDs at 1-5 year maturities to maximize interest, but keep money maturing every 6-9 months. Even with the goal of simplifying, my wife and I each have a 401(k), an IRA, and a Roth IRA, I also have an inherited Roth, and I manage my teen's Roth and brokerage accounts. That's 9 accounts right there. No way to reduce it. To wrap it up, I'd go back to the first 4 you listed, and use the #4 checking attached to the broker account to be the emergency fund. Now you're at 3. Any higher granularity can be done with a spreadsheet. Think of it this way - the day you see the house you love, will you not be so willing to give up that year's vacation?\\\"\",\n \"Please do not conflate number of credit cards with amount of debt. Consider two scenarios, The latter scenario yields much better credit scoring. Many recommendation sources suggest the following, Although your credit score seems very important, it is only important when you have financial interactions (such as applying for credit or services) where the other party makes decisions based upon the score. You should only obtain loans and credit when you want and it makes sense based upon your needs; choosing to live your life to serve credit scoring agencies may not be your happy place.\",\n \"IngDirect has this concept of sub accounts inside a main account - that might be perfect for what you are looking for. To clarify, you basically have one physical account with logical sub account groupings.\",\n \"Current account offers a lot of benefits for sole proprietors. Think of it like bank account for a company. The bank provides a host of facilities for the company. A sole proprietor does not have enough value as that of a company for a bank but needs similar services. Thus Indian banks offer a toned down version of the account offered to a company. Current account offer very good overdraft ( withdrawing money even if balance is zero). This feature is very useful as business cycles and payment schedules can be different for each supplier/customer the sole proprietor does business with. Imagine the sole proprietor account has balance of zero on day 0. customer X made payment by cheque on day 1. Cheques will get credited only on Day 3 (Assume Day 2 is a national holiday or weekend). Sole proprietor gave a cheque to his supplier on day 0. The supplier deposited the cheque on Day 0 and the sole proprietor's bank will debit the the proprietor's account on day 1. As customer's cheque will get credited only day 3, the overdraft facility will let the proprietor borrow from the bank Interestingly, current accounts were offered long before Indian banks started offering customized accounts to corporate customers. The payment schedule mentioned in my example is based on a clearing system > 10 years ago. Systems have become much simpler now but banks have always managed to offer something significantly extra on lines similar to my example above to proprietor over a savings bank account\",\n \"\\\"I would not call this a \\\"\\\"good\\\"\\\" idea. But I wouldn't necessarily call it a bad idea either. Before you even consider it, you need to do a little bit of soul searching. If there is ANY chance that having multiple credit cards could entice you to spend more than you otherwise would, then this is definitely a bad idea. Avoiding temptation is the key to preventing regrettable actions (in all aspects of life). Psychoanalysis aside, let's take a mathematical approach to the question. I believe your conclusion is correct if you add some qualifiers to it: A few years from now, then your credit score will probably be higher than if you just had 1 credit card. Here are some other things to consider: And, saving the best for last: As for the hard inquiries, they should only have an effect on your credit score for 1 year (though they can be seen on your report for 2 years). Final thought: if you decide to do this (and I personally don't recommend it), I would keep the number of applications smaller (3-5 instead of 10-15). I also would only choose cards that have no annual fee. Try to choose 1 card that has 1-2% cash back and make that your regular card.\\\"\",\n \"They might not have to open accounts at 12 bank because the coverage does allow multiple accounts at one institution if the accounts are joint accounts. It also treats retirement accounts a separate account. The bigger issue is that most millionaires don't have all their money siting in the bank. They invest in stocks, bonds, government bonds, international funds, and their own companies. Most of these carry risk, but they are diversified. They also can afford advisers to help them manage and protect their assets.\",\n \"Yes. Although I imagine the risk is small, you can remove the risk by splitting your money amongst multiple accounts at different banks so that none of the account totals exceed the FDIC Insurance limit. There are several banks or financial institutions that deposit money in multiple banks to double or triple the effective insurance limit (Fidelity has an account like this, for example)\",\n \"Typically 'current' means the account from which you do your day-to-day banking (also called 'checking') and 'savings' is an interest earning account, from which you might occasionally take money. However...you can actually attach these labels (for ATM purposes) to any account you want. They don't have to be your actual checking or savings accounts. I have 'current' attached to my personal account and 'savings' on the account I hold jointly with my wife. They are just labels you attach to different accounts.\",\n \"The other issue you could run into is that each deferred account is going to be subject to its own RMD's (Required Minimum Distributions) when you've retired or hit 70.5 years of age. Roth's don't generally care about RMD's at first, but are still subject to them once the person that created the Roth has passed. Having fewer accounts will simplify the RMD stuff, but that's really only a factor in terms of being forced to sell 'something' in each account in order to make the RMD. Other than that, it's just a matter of remembering to check each account if you come to a decision that it's time to liquidate holdings in a given security, lest you sell some but forget about the rest of it in another account. (and perhaps as Chris pointed out, maybe having to pay fee's on each account for the sale) Where this really can come into play is if you choose to load up each individual account with a given kind of investment, instead of spreading them across the accounts. In that case RMD's could force you into selling something that is currently 'down' when you want to hold onto it, because that is your only choice in order to meet RMD's for account X. So if you have multiple accounts, it's a good idea to not 'silo' particular vehicles into a single account, but spread similar ivestments across multiple accounts, so you always have the choice in each account of what to sell in order to meet an RMD. If you have fewer accounts, it's thus a lot easier to avoid the siloing effect\",\n \"Alliant Credit Union has supplemental accounts, ING Direct has supplemental accounts as well as the poster above mentioned.\",\n \"Given that we live in a world rife with geopolitical risks such as Brexit and potential EU breakup, would you say it's advisable to keep some of cash savings in a foreign currency? Probably not. Primarily because you don't know what will happen in the fallout of these sorts of political shifts. You don't know what will happen to banking treaties between the various countries involved. If you can manage to place funds on deposit in a foreign bank/country in a currency other than your home currency and maintain the deposit insurance in that country and not spend too much exchanging your currency then there probably isn't a downside other than liquidity loss. If you're thinking I'll just wire some whatever currency to some bank in some foreign country in which you have no residency or citizenship consideration without considering deposit insurance just so you might protect some of your money from a possible future event I think you should stay away.\",\n \"\\\"It depends on your definition of \\\"\\\"inactive\\\"\\\". If you have credit cards open and do not use them at all for a period of time, some lenders will not update your usage to the credit bureaus while some will close your account in which will definitely hurt your credit score. But since you use your card once in a while and pay them off, you should be good. Lenders like to see some activity rather than no activity. If there are great offers out there by credit card companies, then why not take advantage of them? The only downside may be the annual fees if there is any but with your credit score, it implies you are financially responsible so there should be no 'compelling financial reason' to not open more cards. In fact, the number of credit accounts you have open can play a role on your score. Essentially the more the better. According to Credit Karma, 0-5 credit accounts is very poor, 6-10 is poor, 11-20 is good, 21+ is excellent.\\\"\",\n \"To store $1 milion in a bank with full FDIC insurance currently requires 4 separate bank accounts, each at 250k. It's not that difficult, particularly if you are married and your spouse can have 2 in his/her name. (This is dependent on the FDIC limit; they raised it to 250k after the 2008 crash).\",\n \"Even assuming hypothetically that you are able to split money in different bank accounts to get full coverage and all your accounts are in top ranking financial institutions in USA, you can not rely on FDIC if all or most of those banks go broke. Because FDIC just has a meagre 25 billion dollars to cover all bank accounts in the USA. And you know the amount of bank deposits in USA run in at least a trillion of dollars. US Deposits & FDIC Insurance figures\",\n \"I read Q#4 as Will $250 in one account earn more interest than $250 in five accounts? in which case Excel says no, assuming a constant interest rate for all accounts. I dunno if the same holds true for banks.\",\n \"\\\"Here are some reasons why it is advantageous to hold a portion of your savings in other countries: However, it should be noted that there are some drawbacks to holding funds in foreign banks: Don't worry; I haven't forgotten about the elephant in the room. What about tax evasion and money laundering? In general, simply transferring funds to a foreign jurisdiction will do nothing to help you evade taxes or hide evidence of a crime. Pretty much any method you can think of to transfer money is easily traceable, and any method that is difficult to trace is either illegal or heavily-regulated, with stiff penalties if you get caught. There are a few jurisdictions that have very strict banking privacy laws (the Philippines, for example). If you can somehow get the money into a bank account in one of these countries, you might be OK... at least, until that country's government decides (or is pressured) to change its banking privacy laws. But, what would you actually do with that money? Unless you want to go live in that country, you're going to have to transfer the funds out to spend them, and now you're right back on the radar — except now it's even worse, because the fact that the funds come from a suspicious jurisdiction will automatically cause your transfer to get flagged for investigation! This is where money laundering comes into play. There are lots of ways to go about this (exceptionally illegal) activity, many of which do not involve banks at all (at least, not directly). How money laundering works is outside the scope of this question, but in case you are curious, here are a couple of articles about the \\\"\\\"dark side\\\"\\\" of finance: In short, if you want to break the law, opening a foreign bank account isn't going to help much. In fact, the real crime is that offshore banking has such a criminal reputation in the first place! That said, it is possible to create legal distance between yourself and your money by using a corporate structure, and there are legitimate reasons why you might want to do this. Depending on which jurisdiction(s) you are a tax resident of, you can use this method to: Exactly how to do this is outside the scope of this question, but it's worth thinking about, especially if you have an interest in geopolitically diversifying your financial assets. If you're interested in learning more, I came across a pretty comprehensive article about Offshore Basics that covers how and why to set up offshore legal structures. (and yes, that makes now 4 links from the same site in one post! I promise it's just a coincidence; see disclaimer below) I am a US citizen with bank accounts in several countries (but not Switzerland; there are far better options out there right now). I have no affiliation with the website linked in this answer; while I was doing research for this answer, I found some really good supporting content, and it all just happened to be from the same source.\\\"\",\n \"Yes, it's a good idea to have a separate business account for your business because it makes accounting and bookkeeping that much easier. You can open a business checking account and there will be various options for types of accounts and fees. You may or may not want an overdraft account, for example, or a separate business credit card just so you can more easily separate those expenses from your personal cards. When I started my business, I opened a business checking account and met with my banker every year just to show them how the business was doing and to keep the relationship going. Eventually, when I wanted to establish a business line of credit, it was easier to set up because I they were already familiar with my business, its revenue, and needs for a line of credit. You can set up a solo 401k with your bank, too, and they'll be very happy to do so, but I recommend shopping around for options. I've found that the dedicated investment firms (Schwab, Fidelity, etc.) tend to have better options, fees, and features for investment accounts. Just because a specific bank handles your checking account doesn't mean you need to use that bank for everything. Lastly, I use completely different banks for my personal life and for my business. Maybe I'm paranoid, but I just don't want all my finances in the same place for both privacy reasons and to avoid having all my eggs in the same basket. Just something to consider -- I don't really have a completely sane reason for using completely different banks, but it helps me sleep.\",\n \"There is very little difference these days between account types. The fee structure and interest paid is different, but the actual mechanics, and as noted by others, the coverage by deposit insurance is identical. So look at how much money you have in the account(s) you have; are you maximizing the interest that you could be receiving, even from the small amounts that the banks will pay? If you could get more interest from the savings account, and only write one or two cheques per month, you might be better off with that account only; but given common fee structures, you likely would not want that as your primary account. Another reason for separate accounts is more psychological. You might be able to train yourself to not dip in to your savings if you don't have a chequebook.\",\n \"I keep several savings accounts. I use an online-only bank that makes it very easy to open a new account in about 2 minutes. I keep the following accounts: Emergency Fund with 2 months of expenses. I pretend this money doesn't even exist. But if something happened that I needed money right away, I can get it. 6 6-month term CDs, with one maturing every month, each with 1 month's worth of expenses. This way, every month, I'll have a CD that matures with the money I would need that month if I lose my job or some other emergency that prevents me from working. You won't make as much interest on the 6-month term, but you'll have cash every month if you need it. Goal-specific accounts: I keep an account that I make a 'car payment' into every month so I'll have a down-payment saved when I'm ready to buy a car, and I'm used to making a payment, so it's not an additional expense if I need a loan. I also keep a vacation account so when it's time to take the family to Disneyland, I know how much I can budget for the trip. General savings: The 'everything else' account. When I just NEED to buy a new LCD TV on Black Friday, that's where I go without touching my emergency funds.\",\n \"\\\"The type of savings account your are referring to is an \\\"\\\"Instant Access\\\"\\\" account which offers little or no interest in savings. To solve your problem I would suggest opening a higher interest Current Account, there are several on the market which offer equivalent rates of interest as an Instant Access account but still allow access via a debit card. Usually there are requirements for a regular salary transfer into the account or a minimum balance to qualify for interest. Banks that are well know for offering high interest Current Accounts include Nationwide, Santander, TSB and most of the build societies.\\\"\",\n \"I keep one card just for monthly bills (power company,car loan, etc.). This one is unlikely to get hacked so I won't have to go change the credit card information on my monthly bills. I pay the credit card from my bank account. I just don't want a lot of businesses with direct access to my bank account.\",\n \"I got a Capital One credit card because they don't charge a fee for transactions in foreign currencies. So I only use it when I travel abroad. At home, I use 3 different credit cards, each offering different types of rewards (cash back on gas, movies, restaurants, online shopping etc).\",\n \"\\\"I'm not aware of banks offering savings account for specific reasons, other than certain accounts for college funds, as the number of reasons someone might want to open a savings account is almost infinite. What I did was open 3 savings accounts with the same bank (I could have opened more, but I didn't need more). Each account is labeled with a nickname for it's specific purpose: Vacation, Emergencies, and Annual fees. This way, I can make automated deposits to each one based on my monthly budgets and track them independently. Most E-Banks offer this type of setup (CapitalOne even advertises it as a \\\"\\\"feature\\\"\\\") and the interest rate will likely be better than a standard brick-and-mortar bank.\\\"\",\n \"\\\"Go ahead, switch banks (and checking accounts) as often as you like. It won't affect your credit score since any credit check will be a \\\"\\\"soft pull\\\"\\\" (unless you're establishing a credit card or loan -- or overdraft protection, then it could be a \\\"\\\"hard pull\\\"\\\" that could affect your credit score). Bad karma? Hardly. Unethical? Absolutely not. You don't owe them anything. Practically speaking, it'd be easier just to switch once to a bank that has a fee structure you can live with -- as long as they don't change the rules on you.\\\"\",\n \"If you're a sole proprietor there's no reason to have a separate business account, as long as you keep adequate records, as you are one and the same for tax purposes. My husband and I already have 5 accounts and a mortgage with one bank. I don't see the need to open up yet another account. As a contracted accountant, I don't need to write business checks, and my expenses are minimal. As long as I have an present my assumed business name certificate and ID, there's no reason for a bank not to deposit into my personal account.\",\n \"It possibly could have made sense historically when interest rates were higher. In the UK, you used to get negligible (if any) interest on a current (checking) account, but could get modest interest from a savings account, so transferring the bulk of your salary to a savings account and paying from there (or transferring back to the current account when needed) could make some sense (but even then was probably not worth the effort). Nowadays (at least in the UK), most (easy access) savings accounts pay very little interest, but there are current accounts (example list here from comparison site) that pay more interest provided you go through several hoops. Typically you have to pay your salary (or a minimum number of £000s per month) into the account, and have a minimum number of direct debits going out. Some have fees, some only last for a year.\",\n \"\\\"I would keep some money in the U.S. and some money in India. That way, in case \\\"\\\"something bad\\\"\\\" happens in one country, you will still have money in the other.\\\"\",\n \"Its actually a good thing. The #1 factor to your credit score is your credit utilization. So if you don't spend money unwisely and they don't have any annual fee I would keep them and use them each twice a year to keep them in your credit mix.\",\n \"\\\"I'd say close them if they have fees, if you're worried about fraud or if you're going to be tempted to use them. It may have an affect on your credit rating, but it shouldn't hurt you seriously. Having too many cards gives you the \\\"\\\"opportunity\\\"\\\" to overspend, which obviously isn't good.\\\"\",\n \"\\\"From the banks point of view the point of a current account like this is to get you as a regular customer. They want to be your \\\"\\\"main bank\\\"\\\", the bank you interact with the most, the bank you turn to first when you need financial products and services, the bank whose advertising you see every time you log into online banking or walk into a branch. The bank knows that if they just offer the unprofitablly high interest rate or other perks with no strings attatched that people will open the account and dump a bunch of savings in it but won't actually move their financial life over, their old bank will still be their main bank. So they attatch strings like a required minimum deposit, a minimum number of direct debits and similar. These have minimal effect on people actually using the account as their main current account while being a pain for people trying to game the system. Of course as you point out it is still possible to game the system but they don't need to make gaming the system impossible, they just need to make it inconvianiant enough that most people won't bother.\\\"\",\n \"If the checking account is in a FDIC insured bank or a NCUA insured Credit Union then you don't have to worry about what happens if the bank goes out of business. In the past the government has made sure that any disruption was minimal. The fraud issue can cause a bigger problem. If they get a hold of your debit card, they can drain your account. Yes the bank gives you fraud protection so that the most you can lose is $50 or $500; many even make your liability $0 if you report it in a timely manor. But there generally is a delay in getting the money put back in your account. One way to minimize the problem is to open a savings account,it also has the FDIC and NCUA coverage . The account may even earn a little interest. If you don't allow the bank to automatically provide an overdraft transfer from savings to checking account, then the most they can temporarily steal is your checking account balance. Getting a credit card can provide additional protection. It also limits your total losses if there is fraud. The bill is only paid once a month so if they steal the card or the number, they won't be able to drain the money in the bank account. The credit card, if used wisely can also start to build a positive credit file so that in a few years you can get a loan for a car or a place to live. Of course if they steal your entire wallet with both the credit and the debit card...\",\n \"\\\"Having savings only in your home currency is relatively 'low risk' compared with other types of 'low diversification'. This is because, in a simple case, your future cash outflows will be in your home currency, so if the GBP fluctuates in value, it will (theoretically) still buy you the same goods at home. In this way, keeping your savings in the same currency as your future expenditures creates a natural hedge against currency fluctuation. This gets complicated for goods imported from other countries, where base price fluctuates based on a foreign currency, or for situations where you expect to incur significant foreign currency expenditures (retirement elsewhere, etc.). In such cases, you no longer have certainty that your future expenditures will be based on the GBP, and saving money in other currencies may make more sense. In many circumstances, 'diversification' of the currency of your savings may actually increase your risk, not decrease it. Be sure you are doing this for a specific reason, with a specific strategy, and not just to generally 'spread your money around'. Even in case of a Brexit, consider: what would you do with a bank account full of USD? If the answer is \\\"\\\"Convert it back to GBP when needed (in 6 months, 5 years, 30, etc.), to buy British goods\\\"\\\", then I wouldn't call this a way to reduce your risk. Instead, I would call it a type of investment, with its own set of risks associated.\\\"\",\n \"Over time, you'll have more loans, maybe a few store cards, mortgage, car loan, etc. I'm a fan of maximizing one's wealth, and the small rebate/reward adds up over time, so I'm not against the store cards, so long as you always pay the bill in full. As far as FICO is concerned, what they 'like' to see may not necessarily be optimum for you. I'd suggest you go about your business, and over time use the few cards that combine to give to the best benefit combination that works for you.\",\n \"Not OP, but let's see: My money-market account is showing 0.25% interest rate. My savings account, 0.20%. And checking, 0.22%. It doesn't matter where I keep my emergency fund and what I keep my checking balance. It's making fuck-all for interest. And I need to keep a couple thousand in there because my mortgage hits for about $1600. And my monthly CC spend averages ~$3500 monthly. I simply can't keep a couple hundred in there.\",\n \"Today typically a Business needs to hold accounts in more than one currency. Banks in certain countries are offering what is called a dual currency account. It is essentially 2 accounts with same account number but different currency. So One can have an account number say 123456 and have it in say AUD and USD. So the balance will always show as X AUD and Y USD. If you deposit funds [electronic, check or cash] in USD; your USD balance goes up. Likewise at the time of withdrawal you have to specify what currency you are withdrawing. Interest rates are calculated at different percentage for different currencies. So in a nutshell it would like operating 2 accounts, with the advantage of remembering only one account number. Designate a particular currency as default currency. So if you don't quote a currency along with the account number, it would be treated as default currency. Otherwise you always quote the account number and currency. Of-course bundled with other services like free Fx Advice etc it makes the entire proposition very attractive. Edit: If you have AUD 100 and USD 100, if you try and withdraw USD 110, it will not be allowed; Unless you also sign up for a auto sweep conversion. If you deposit a GBP check into the account, by default it would get converted into AUD [assuming AUD is the default currency]\",\n \"\\\"There are a lot of good answers, but I will share my experience. First, a savings account needs to be for savings. If your in the US you have \\\"\\\"Regulation D\\\"\\\" to deal with and that will bite you on the rear if you go over those limits. Specially easy to do if your purchasing from a savings account. Next having an \\\"\\\"Income\\\"\\\" account and a \\\"\\\"Spending\\\"\\\" account can be a very good tool to build a nest egg. So for example you get $1500 into your income account and then move $1000 to your spending account then budget based on that $1000. This is an amazing thing to do, so long as you have the discipline to never transfer that extra $500, and pretend your broke when you run out of the $1000. That being said there is no reason that you can't do that in one account. It's all preference. My wife and I use YNAB (an envelope budgeting system) to do just that. We don't need the separate accounts. We are no more likely to \\\"\\\"not spend\\\"\\\" in one account then we are to \\\"\\\"not spend\\\"\\\" in two accounts. It's all just self discipline and what you need to do. This does lead to the situation we call YNAB broke. It's when we have to start choosing between \\\"\\\"going hungry\\\"\\\" or getting that new DVD, even though our bank account has $5,000 in it. It's even harder when you choose \\\"\\\"go hungry\\\"\\\" and have to follow through with it, even though you have enough to buy a used car in your bank account. But rather it's \\\"\\\"YNAB broke\\\"\\\" or your spending account is empty and your income account it full, the result is the same. It's up to \\\"\\\"you\\\"\\\" to have the self discipline not to spend. Rather that's in one account or two makes little difference.\\\"\",\n \"No. I have several that I haven't used in a year or so (legacy of the time when they gave you money to sign up :-)), and credit rating's something over 800 last I checked.\",\n \"Another good reason: if you have to replace a card due to damage, loss, or identity theft it's nice to have a backup you can use until the new card for your primary account arrives. I know folks who use a secondary card for online purchases specifically so they can kill it if necessary without impacting their other uses, online arguably being at more risk. If there's no yearly fee, and if you're already paying the bill in full every month, a second card/account is mostly harmless. If you have trouble restraining yourself with one card, a second could be dangerous.\",\n \"That's a sensible plan. No there's no reason for the IRS to see this arrangement as suspicious, particularly because the deposits will be from paychecks; you have a record of where all the money came from. Conversely, multiple cash deposits might be considered suspicious. It can only affect your credit if you have credit lines associated with the account (like an overdraft line of credit). Interest earned could increase your tax liability by a tiny amount, but in the current interest rate environment, that's not much of a worry.\",\n \"I wouldn't advocate it, but one reason to pay a lower interest rate is if you have $990 on a $1000 limit credit card with 6% interest and $5000 on a $15k limit card at 10% interest. Having $500 to pay in a month and putting it on the lower interest would free up a greater percentage of credit on that card and could potentially help your credit rating I believe. I think having $1000 on 10 different credit cards w/ $15k limit reflects better than $10k on one $15k card, regardless of interest rates. Personally I think that's dumb b/c having the extra credit available is an opportunity to get into trouble a lot easier.\",\n \"Just to put in one more possibility: my credit card can have a positive balance, in which case I earn interest. If more money is due, it will automatically take that from the connected checking account. If that goes into negative, of course I have to pay interest. I chose (argued with the bank in order to get) only a small credit allowance. However, I'll be able to access credit allowance + positive balance. That allows me within a day or so to make larger amounts accessible, while the possible immediate damage by credit card fraud is limited at other times. Actually, the credit card pays more interest than the checkign account. Nevertheless, I don't keep high balance there because the risk of fraud is much higher for the credit card.\",\n \"\\\"The most important thing to look at is the FDIC insurance. Savings accounts are covered. Money markets - not necessarily. Online savings accounts provide rates of ~1%. Look at American Express, Ally, Capitol One, ING Direct, E*Trade, etc. The \\\"\\\"pledge\\\"\\\" basically brings EverBank into the same list, as they all have similar rates. Being top 5% of competitive accounts is not that hard, because there are thousands of banks around, you know. 0.76 is not the highest rate available. American Express currently give 1% on their savings account. Re moving the money a lot - depends on the amounts, but when the rates were higher, I moved around a lot. Now, it just doesn't worth the trouble, although I would move for 0.25%.\\\"\",\n \"\\\"There's a lot of personal preference and personal circumstance that goes into these decisions. I think that for a person starting out, what's below is a good system. People with greater needs probably aren't reading this question looking for an answer. How many bank accounts should I have and what kinds, and how much (percentage-wise) of my income should I put into each one? You should probably have one checking account and one savings / money market account. If you're total savings are too low to avoid fees on two accounts, then just the checking account at the beginning. Keep the checking account balance high enough to cover your actual debits plus a little buffer. Put the rest in savings. Multiple bank accounts beyond the basics or using multiple banks can be appropriate for some people in some circumstances. Those people, for the most part, will have a specific reason for needing them and maybe enough experience at that point to know how many and where to get them. (Else they ask specific questions in the context of their situation.) I did see a comment about partners - If you're married / in long-term relationship, you might replicate the above for each side of the marriage / partnership. That's a personal decision between you and your partner that's more about your philosophy in the relationship then about finance specifically. Then from there, how do I portion them out into budgets and savings? I personally don't believe that there is any generic answer for this question. Others may post answers with their own rules of thumb. You need to budget based on a realistic assessment of your own income and necessary costs. Then if you have money some savings. Include a minimal level of entertainment in \\\"\\\"necessary costs\\\"\\\" because most people cannot work constantly. Beyond that minimal level, additional entertainment comes after necessary costs and basic savings. Savings should be tied to your long term goals in addition to you current constraints. Should I use credit cards for spending to reap benefits? No. Use credit cards for the convenience of them, if you want, but pay the full balance each month and don't overdo it. If you lack discipline on your spending, then you might consider avoiding credit cards completely.\\\"\",\n \"The bottom line is to keep most of your money in accounts with no check privileges and to not give the account numbers for these accounts to anyone. Keep just enough in your checking account for the checks you are going to write.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["Its actually a good thing. The #1 factor to your credit score is your credit utilization. So if you don't spend money unwisely and they don't have any annual fee I would keep them and use them each twice a year to keep them in your credit mix.","You should not open bank accounts just to get additional credit cards. You should be careful about carrying too many credit cards and incurring too much debt as you could find yourself in a situation whereby you may not be able to pay off your monthly interest, much less the principal balance. Credit cards are not insurance. With many years of experience under my belt I can tell you that the best approach is to live within (or below) your means and avoid carrying a balance on credit cards. I carry only one credit card (really a charge card) and I pay off the balance every month. Treat a credit card as a 30 day interest free loan and pay your balance off in full every month...as you progress through life you will save yourself a lot of heartache (and money) if you take this approach.","Another thing to factor in are deals provided by banks. In general, banks care about new customers more than their existing customers. Hence they explicitly restrict the best deals on credit cards, savings accounts, etc, to new customers only. (Of course, there are occasionally good deals for existing customers, and some banks choose not to discriminate.) If you have many different bank accounts, you are making yourself unavailable for switching bonuses and introductory rates.","I don't think there's any law against having lots of bank accounts. But what are you really gaining? Every new account is a paperwork hassle. Every new account is another target for con men who might steal your information and write bad checks or make phony credit card purchases in your name. Yes, it's not unreasonable to have a credit card or two that you keep for emergencies. I'd advise anyone with running up debts while having no idea how you will pay them off. But to say that you might keep some credit available so that if you have a legitimate emergency -- like, say, your car breaks down and you don't have the cash to fix it and you can't get to work without it -- you have some a fallback. But do you really need ten credit cards for that sort of thing? And how much credit are they giving you on each card? I don't know how the banks work this, but I'd think if they're rational, they'd consider your total credit before giving you more. I have three credit cards that I use regularly -- two personal and one business. And I find that a real pain to keep track of, to make sure that I keep each one paid by the due date and to keep a handle on how much I owe and so forth. I can't imagine trying to deal with ten. I suppose you could just stuff all these cards in a drawer and only use them in case of emergency.","The original poster indicates that he lives in the UK, but there are likely strong similarities with the US banking system that I am more familiar with: The result is that you are likely going to be unable to be approved for 10 checking accounts opened in rapid succession, at least in the US. Finally, in the US, there is no need to have checking accounts with a bank in order to open a credit card with them (although sometimes it can help if you have a low credit score)."],"string":"[\n \"Its actually a good thing. The #1 factor to your credit score is your credit utilization. So if you don't spend money unwisely and they don't have any annual fee I would keep them and use them each twice a year to keep them in your credit mix.\",\n \"You should not open bank accounts just to get additional credit cards. You should be careful about carrying too many credit cards and incurring too much debt as you could find yourself in a situation whereby you may not be able to pay off your monthly interest, much less the principal balance. Credit cards are not insurance. With many years of experience under my belt I can tell you that the best approach is to live within (or below) your means and avoid carrying a balance on credit cards. I carry only one credit card (really a charge card) and I pay off the balance every month. Treat a credit card as a 30 day interest free loan and pay your balance off in full every month...as you progress through life you will save yourself a lot of heartache (and money) if you take this approach.\",\n \"Another thing to factor in are deals provided by banks. In general, banks care about new customers more than their existing customers. Hence they explicitly restrict the best deals on credit cards, savings accounts, etc, to new customers only. (Of course, there are occasionally good deals for existing customers, and some banks choose not to discriminate.) If you have many different bank accounts, you are making yourself unavailable for switching bonuses and introductory rates.\",\n \"I don't think there's any law against having lots of bank accounts. But what are you really gaining? Every new account is a paperwork hassle. Every new account is another target for con men who might steal your information and write bad checks or make phony credit card purchases in your name. Yes, it's not unreasonable to have a credit card or two that you keep for emergencies. I'd advise anyone with running up debts while having no idea how you will pay them off. But to say that you might keep some credit available so that if you have a legitimate emergency -- like, say, your car breaks down and you don't have the cash to fix it and you can't get to work without it -- you have some a fallback. But do you really need ten credit cards for that sort of thing? And how much credit are they giving you on each card? I don't know how the banks work this, but I'd think if they're rational, they'd consider your total credit before giving you more. I have three credit cards that I use regularly -- two personal and one business. And I find that a real pain to keep track of, to make sure that I keep each one paid by the due date and to keep a handle on how much I owe and so forth. I can't imagine trying to deal with ten. I suppose you could just stuff all these cards in a drawer and only use them in case of emergency.\",\n \"The original poster indicates that he lives in the UK, but there are likely strong similarities with the US banking system that I am more familiar with: The result is that you are likely going to be unable to be approved for 10 checking accounts opened in rapid succession, at least in the US. Finally, in the US, there is no need to have checking accounts with a bank in order to open a credit card with them (although sometimes it can help if you have a low credit score).\"\n]","isConversational":false}}},{"rowIdx":86,"cells":{"_id":{"kind":"string","value":"885"},"query":{"kind":"string","value":"How long do credit cards keep working after you disappear?"},"gt_ids":{"kind":"list like","value":["337165","409184"],"string":"[\n \"337165\",\n \"409184\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1],"string":"[\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["296165","389221","524226","251701","344386","301792","89888","228871","516678","11885","251643","536463","472336","149610","15536","217030","442966","221784","522734","500620","418708","535501","51725","44685","479105","538110","97329","304009","592379","207992","331155","93972","387110","409184","588719","169275","534472","156326","384751","34108","370496","303225","115548","562378","400202","254968","165995","498888","407313","578561","368806","99449","353975","391384","378024","145220","416679","162589","98381","444748","477853","258190","312618","428910","379932","102587","533122","444447","21377","156001","161062","141459","89403","375652","550471","483018","122807","271040","375127","433933","510063","381720","165619","453074","574948","422484","453147","292871","99810","240042","267901","389511","268142","579472","254468","250285","113651","596284","100443","489368"],"string":"[\n \"296165\",\n \"389221\",\n \"524226\",\n \"251701\",\n \"344386\",\n \"301792\",\n \"89888\",\n \"228871\",\n \"516678\",\n \"11885\",\n \"251643\",\n \"536463\",\n \"472336\",\n \"149610\",\n \"15536\",\n \"217030\",\n \"442966\",\n \"221784\",\n \"522734\",\n \"500620\",\n \"418708\",\n \"535501\",\n \"51725\",\n \"44685\",\n \"479105\",\n \"538110\",\n \"97329\",\n \"304009\",\n \"592379\",\n \"207992\",\n \"331155\",\n \"93972\",\n \"387110\",\n \"409184\",\n \"588719\",\n \"169275\",\n \"534472\",\n \"156326\",\n \"384751\",\n \"34108\",\n \"370496\",\n \"303225\",\n \"115548\",\n \"562378\",\n \"400202\",\n \"254968\",\n \"165995\",\n \"498888\",\n \"407313\",\n \"578561\",\n \"368806\",\n \"99449\",\n \"353975\",\n \"391384\",\n \"378024\",\n \"145220\",\n \"416679\",\n \"162589\",\n \"98381\",\n \"444748\",\n \"477853\",\n \"258190\",\n \"312618\",\n \"428910\",\n \"379932\",\n \"102587\",\n \"533122\",\n \"444447\",\n \"21377\",\n \"156001\",\n \"161062\",\n \"141459\",\n \"89403\",\n \"375652\",\n \"550471\",\n \"483018\",\n \"122807\",\n \"271040\",\n \"375127\",\n \"433933\",\n \"510063\",\n \"381720\",\n \"165619\",\n \"453074\",\n \"574948\",\n \"422484\",\n \"453147\",\n \"292871\",\n \"99810\",\n \"240042\",\n \"267901\",\n \"389511\",\n \"268142\",\n \"579472\",\n \"254468\",\n \"250285\",\n \"113651\",\n \"596284\",\n \"100443\",\n \"489368\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["\"Assuming the question is \"\"will they close it for inactivity (alone)\"\".. the answer is \"\"Nope\"\" ... unequivocally. Update: < My answer is geared to credit Cards issues by companies that deal in credit, not merchandise (i.e. store cards, retailer cards, etc). Retailers (like Amazon, etc), want to sell goods and are in the credit card business to generate sales. Banks and credit companies (about whom I am referring) make their money primarily on interest and secondarily on service charges (either point of use charged to the vendor that accepts payment, or fees charged to the user).> The only major issuer I will say that it might be possible is Discover, because I never kept a Discover card. I also don't keep department store cards, which might possibly do this; but I do doubt it in either of those cases too. My answer is based on Having 2 AMEX cards (Optima and Blue) and multiple other Visa/MC's that I NEVER use... and most of these I have not for over 10+ years. Since I am also presuming that you are also not talking about an account that charges a yearly or other maintenance fee.. Why would they keep the account open with the overhead (statements and other mailings,etc)? Because you MIGHT use it. You MIGHT not be able to pay it off each month. Because you MIGHT end up paying thousands in interest over many years. The pennies they pay for maintaining your account and sending you new cards with chip technology, etc.. are all worth the gamble of getting recouped from you! This is why sales people waste their time with lots of people who will not buy their product, even though it costs them time and money to prospect.. because they MIGHT buy. Naturally, there are a multitude of reasons for canceling a card; but inactivity is not one. I have no less than 10+ \"\"inactive\"\" cards, one that has a balance, and two I use \"\"infrequently\"\". I really would not mind if they closed all those accounts.. but they won't ;) So enjoy your AMEX knowing that your Visa will be there when you need/want it.. The bank that issues your Visa is banking on it! (presuming you don't foul up financially) Cheers!\"","I've got a card that I've had for about 25 years now. The only time they charged me interest I showed it was their goof (the automatic payment failed because of their mistake) and they haven't cancelled it. No annual fee, a bit of cash back. The only cards I've ever had an issuer close are ones I didn't use.","The workaround solution is to simply avoid having an exactly zero balance on your account. Thus for inactive credit cards that I want to keep around for emergency use, I always leave a small positive balance on the card. The credit card company reserves the right to cancel my card at any time, but a positive balance would force them to send me a check for the privilege of doing so. A positive balance avoids making the account appear inactive and makes it cheaper for them to simply leave the account open.","If the card has no annual fee, you can keep it for as long as you like and you will never get charged. I advise you to GoPaperless so you stop getting the $0 bills every month. Many cards have the fee waived for the first year. If you have such a card, you should make sure to cancel it when you stop using it, or when the fee waiver expires.","Remember, the card company gets a percentage at the time of purchase, as well as any interest you let them collect from you. Yes, they're still making a profit on our accounts, and they can always hope that at some point we'll run up a high enough bill to be willing to pay some interest. They may kill completely inactive cards, since they need a bit of income to pay for processing the account. But if you're actively using it, they aren't very likely to tell you to go away (though they may change which plan(s) they offer you).","The answer is maybe. I had a Chase card without a purchase in over 4 years get canceled out of the blue, without so much as a notification telling me it was at risk for cancelation. They told me they typically close accounts after 24 months of inactivity (not including card fees) but let mine go for longer because I have several other credit cards, savings and checking accounts with them. I would recommend spending at least once per year on the card.","The Fair Credit Reporting Act (FCRA) says that account history will stay on your credit report as a closed account for 7 years, and then it will drop off, just like any other bad or good mark on your credit (aside from bankruptcies which stay on reports for 10 years, and can be asked about for the rest of your life). The presence of a new credit card will do more to lower your score in the short term than closing an old credit card. On a related note, reporting a card as lost or stolen can also show up as a different, closed account, even if you keep the same account open with the creditor.","Please realize that your issuer can close the account for any number of reasons. Inactivity is one, as having a credit line open costs them money and if you never charge anything, the company doesn't get any transaction fees from vendors nor does the company get to charge you any interest. An occasional charge is likely to keep your card from being closed automatically, but it is not a guarantee. Another reason they may close the account is that you have other bad marks show up on your credit score, or their criteria for offering you the card change so you no longer match their target demographic. I have a credit card issued by my credit union that I have not used for a couple of years. They will not close the card account because my other accounts are still very profitable for them. If I were not an otherwise profitable customer, I wouldn't be surprised if they closed my credit card account. If you are serious about keeping the account open, you should probably have more than a trivial amount of usage.","Your credit card company will send you funds, probably a paper check, if you have a negative balance. So this situation will not last long. I'd guess 3-6 months at most, depending on the company's procedures.","Collection agencies will eventually find you if you work for an employer that uses the credit bureaus for pre-employment screening, or you sign up for utilities or services that check your credit, or you enter into public record any other way (getting arrested, buying land, etc.). Such inquiries will put you on the grid where the collection agencies can find you and/or sue you. Two years out is about the point where they're looking for blood. The next time your friend applies for an apartment, utilities or cell phone service, she's going to get some calls.","According to Clark Howard you should use your cards every 6 months to keep them in your active credit score mix.","\"There is no universal answer here. Some card issuers will. Some that will close the account will warn you first. For my \"\"sock drawer\"\" cards I'll try to take each out semi-annually to make a single transaction, then put it back in the drawer. I've heard you should charge something quarterly, I've never had one closed with semi-annual charges.\"","Check out /r/personalfinance for more detailed advice. Not sure your question. Yes, cancelling it will cause it to disappear from your credit report. Apply for your own card right now (a free rewards one ideally) if your credit it good enough and you have a job. Never pay interest and keep that card and your credit will naturally head to 720+ with no negative marks over time.","I've got cards with no annual fee that don't get used--I never see a bill from them.","You'll need to read all the fine print with your particular credit card, but in general, if there is no annual fee and you don't make any purchases, you don't pay anything.","\"Speaking from personal experience: I have had a credit card canceled for exactly this reason. It's happened to me three times, with two different providers (NatWest and Nationwide). After the third instance I stopped bothering to even carry a credit card. It's worth noting that all three were \"\"free\"\" cards in the sense that I paid no flat fee or subscription to get the cards. The only way the issuer could make a profit on them was through interest. I was also not a frequent user, carrying the card for convenience more than anything else, although I did make purchases on all three. So it's certainly a possibility. But I live in the UK and I'm guessing most of your other respondents do not. It may be a practice that's more common here than in the US. That might even explain the origin of the rumour.\"","If you have zero activity on a card, the issuing bank may decide to close that card. They have some costs each month, and if you aren't using the card they aren't making money off of you. Your inactivity is also a risk because if you lost the card, and don't realize it, and it falls into the wrong hands then it can be used for fraudulent transactions. In their view it might already have been hijacked. If they close your account that can hurt your score: your utilization number will go up, and the age of your accounts could go down. They want you to use their card so they make money on the transaction fees and hopefully interest payments.","Check with the state that you lived in. Inactive accounts typically get turned over to the State Treasury or Comptroller to be claimed. The time is typically set by statute. Hopefully, you don't live in a state like California or Arizona that treats abandoned property like booty.","You need to find out if the credit card has been reporting these failed automated payments as late or missed payments to your credit report. To do this, go to annualcreditreport.com (the official site to get your free credit reports) and request your report from all three bureaus. If you see late or missing payments reported for the months where you made a payment but then they did an automatic payment anyway, you should call up the credit card company, explain the situation, and ask them to retract those negative reports. If they refuse, you should dispute the reports directly with the credit bureaus. If they have been reporting late payments even though you have been making the payments, that will impact your credit much more than the fact that they closed your account. Unfortunately, they can turn off your credit account for any reason they like, and there isn't much you can do about that. Find yourself another job as soon as you can, get back on your feet, pay off your debt, and think very carefully before you open another credit card in the future. Don't start a new credit card unless you can ensure that you will pay it off in full every month.","Is there a point after which they legally unable to charge me? No. If you gave a check, then the bank may bounce it as stale after 6 months, but doesn't have to. With debit/credit transactions, they post as they're processed, and some merchants may not sync their terminals or deposit their manual slips often. As the world becomes more and more connected this becomes extremely rare, but still happens. Technically your promise to pay is a contract which never expires, and they can come after you years later to collect.","\"Well, primarily because that's fraud and fraud prevents a debtor from receiving a discharge in bankruptcy court. Fraud would be pretty easy to prove if you didn't have an income change and you have several lines of credit opened on and around the same day with almost no payments made toward them. Additionally, thanks to the reforms of the bankruptcy code, if your income exceeds the median income of your state you'll be forced in to a Chapter 13 and committed to a repayment plan that allocates all of your \"\"disposable income\"\" to your creditors. Now if whoever posted that will attempt to simply not pay then negotiate repayment plans with their creditors the process will last far longer than 7 years. It takes a long time to be in default for enough time that a consumer creditor will negotiate the debt and this is assuming the creditor doesn't sue you and get a judgement which could apply liens to any property you may own. The judgment(s) will likely cause you to pursue bankruptcy anyway; only now you're at least a few years beyond the point at which you ruined your credit.\"","What I do is that I set a small transaction to automatically go on the card and then set an autopayment. Example for one card is a monthly $8 donation to the local animal humane society. The autopay is set to pay in full. *Solved - card stays active. Some payers will cancel your credit card if they don't show activity.","Don't worry about it. One of the big banks who like to whine a lot about defaulting borrowers is sending credit cards to a former resident of my home. The guy died in the late 90s.","Borrowing money to pay living expenses will not last long. Also, banks and credit card agencies are very expert at detecting people who try to live off of debt (as you might expect) and they will cut you off completely as soon as they figure out what you are doing. As a general rule, if you go six months without paying a credit card or bank loan, you will be totally cut off from all sources of borrowing for at least 10 years and all your debt will be sold to collection agencies that will then start harassing you. Some collectors will sue you in a court of law and try to seize any assets you have, like a car. It is critical you find a source of income immediately.","Something is missing from your scenario. If you don't know what it is, start by going to http://annualcreditreport.com and get your free credit report. Review it, and figure out if you have outstanding balances or judgements that you're unaware of. You should be using your card every month and pay it on time.","Assuming you don't plan on continuing to use the card frequently, the best advice I've heard is to leave them open unless they have an annual fee. Also, leaving it open with a zero balance doesn't help your credit score as much as using it a few times a year (even for small amounts) because it will eventually shift to an inactive state that is less positive for your credit score.","Generally when items go to collection you will receive a letter in the mail not an email. You can try to dispute the charge with the credit companies (TransUnion, Equifax, and Experian) showing that the charge came after you left the country. Like the answer above me said, disputing it may cause the 7 year clock to restart which leaves it on your account longer. It may just be simpler to try to improve your credit score instead. You can check your credit score as often as you want using Credit Karma online or on your phone.","credit cards are almost never closed for inactivity. i have had dozens of cards innactive for years on end, and only one was ever closed on me for inactivity. i would bet a single 1$ transaction per calendar year would keep all your cards open. as such, you could forget automating the process and just spend 20 minutes a year making manual 1$ payments (e.g. to your isp, utility company, google play, etc.). alternatively, many charities will let you set up an automatic monthly donation for any amount (e.g. 1$ to wikipedia). or perhaps you could treat yourself to an mp3 once a month (arguably a charitable donation in the age of file sharing). side note: i use both of these strategies to get the 12 debit card transactions per month required by my kasasa checking account.","\"FICO SCORING http://www.pbs.org/wgbh/pages/frontline/shows/credit/art/chart_fico.gif This is from the PBS Frontline show \"\"Secret History of the Credit Card.\"\" Getting rid of one card won't immediately trash your score, nor will it be by the full impact (15%) of credit history. If there's no fee, I'd buy gas once per quarter with it. If there is a fee, I'd check my FICO score and if I can afford to lose 20 or so points for a time, I'd go for it.\"","With a check, there are limits on cashing the stale check, but that is set by the banks involved. With a debit card transaction, it will be up the the debit card company and your bank. Imagine a situation where a person finds an old check and tries to cash it at their bank. If the bank considers the check stale, they might reject it, or put a longer hold on the check. When the check writers bank gets the transaction, they will also decide what to do. If they reject it, the first bank will reverse the transaction. You can't count on a 90 day, or 180 day limit; most banks will ask you to put a stop payment on an old check that you don't want cashed. This is especially important step if you write a replacement check. Because there is no check number to put a stop payment on, in fact the temporary hold will fall off after a few days. There doesn't appear to be a way to stop an old transaction. Be careful if you do contact the restaurant, you could end up double paying for the meal if they swipe your card again. Your best option may be just to keep the transaction as pending.","Of course, as a 'good' person (or maybe a 'stupid' person), I should call them, (wait 30 minutes in the queue), and then try to explain the issue to the service desk. I actually did that, and the guy thought I am nuts to even call, and told me to 'just use them they are yours now'. I don't feel like calling again and again until I get someone that believes it, just to return them their points. Calling generally does not solve this problem. You would need to write a letter using certified mail and send some reminders. Hopefully they should notice it, if not you at least have evidence that you have communicated. I could just toss the card and forget about it. However, I had quite some points on it that really belong to me, so that feels like I pay for their fault. There is no need. You can continue to use the card as usual. Use them and play stupid. This is not a good idea. They are clearly not yours. Somewhere in Terms and Conditions you will find some fine print about notifying Bank/Financial Institution about the errors. Best course, after intimating informing them via letters, keep using your card as normal and use your points as normal. You would roughly know your points balance.","Checks actually have a limited lifespan before the bank no longer has to honor them, which simplifies this question. After about 6 months you assume that check won't be cashed. If they find it after that, you write them a new check. If they don't, you really should pester them to do so.","I think you are not liable for unauthorized charges (on your card) no matter how the number was lost. Most banks now apply a $0 liability for card losses. Some say they use the $50 per day (legal) liability limit but I have never heard of any actually applying it to their customers.","Generally speaking the bank accounts and credit card accounts remain open. Banks and the credit card companies don't monitor public records on a daily basis. Instead, whoever is handling your estate will need to obtain copies of your death certificate and they will then search your paper records to identify all accounts (reason to get your act together - there are books on the subject). The executor will work with the banks and card companies to make sure all your charges and payments clear (common to have them open for months or even a year) and to make close or transfer autopays. They will make sure to notify the credit agencies to flag your accounts so no new accounts can be created. MANY copies of the death certicates are needed.","From Experian's FAQ How long does an item remain on my credit report? A credit reporting agency stores information from credit grantors and public records, including bankruptcies, judgments and liens. Potentially negative information, such as missed payments and most public record items, remain on a personal credit report for seven years. The exceptions are Chapters 7, 11 and 12 bankruptcies, which remain for 10 years, and unpaid tax liens, which remain for 15 years. A paid tax lien will remain for seven years. Positive information may remain on a report indefinitely. Paid closed accounts generally display for 10 years. Requests for your credit history remain on your personal credit report for two years. (This is a 'comment' to SpecKK's reply, but too long to make it as an actual comment)","You also might want to see what sort of documentation the credit card company has. Companies can get pretty lazy sometimes about recordkeeping; there have been cases where banks tried to foreclose on a property but weren't able to produce documents establishing the mortgage. With your father dead, is there anything other than the credit card company's word that the debt is valid?","No. I have several that I haven't used in a year or so (legacy of the time when they gave you money to sign up :-)), and credit rating's something over 800 last I checked.","Wow, I had never heard of this before but I looked into it a bit and Mikey was spot on. It seems that if you don't pay attention to the fine print when making credit card purchases (as most of us tend to skip) many companies have stipulations that allow continued charges if they are recurring fees (monthly, yearly, etc.) even after you have cancelled the card.","\"Under no circunstances will the bank keep the money for itself. Keeping the money is considered Unjust Enrichment: A general equitable principle that no person should be allowed to profit at another's expense without making restitution for the reasonable value of any property, services, or other benefits that have been unfairly received and retained. The banks will attempt to, in order: Wait for some time: Generally, a time frame of three to five years with no customer-initiated activity sends an account into dormancy. The amount of time that must lapse depends on the [US] state in which the bank account was opened. Attempt to contact the account holder: (...) the bank must try to notify the account holder. If the customer does not respond within a certain amount of time, the balance on the account will be turned over to the state. Turn over the money to the government: In a process what is called “escheating” an account, banks are required to turn over funds from the inactive account to the state treasury. Once the account is sent to the state, the funds are held as unclaimed property. At this point the account no longer exists so far the bank is concerned. To reclaim your money, you will have to contact your state for the instructions on how to get your money back. You’ll need to complete and submit a claim form along with the necessary identification. If you happen to have unclaimed property held by the state, you can begin the retrieval process by visiting www.unclaimed.org. For a foreigner, it is not unreasonable that the bank would attempt to contact the diplomatic body of the country of origin in step 2, but that may be subject to bank policy. There is some paperwork the bank needs to do to \"\"escheat\"\" the account and properly transfer the money to the state.\"","They don't make any money off of you personally. They make money off of the merchants per transaction when you use the card. You trigger this fee to the credit card issuer, but it doesn't come out of your pocket. (Or it shouldn't; merchants aren't allowed to pass this fee on to you.) They keep you around because you may at some point become less responsible than you already are, and it would be quite costly to get you back (a couple hundred dollars is the cost of acquiring a new credit card customer). People who are less responsible than you subsidize your free float and your rewards (if any) but the new CARD act makes it more difficult for people to use their cards irresponsibly, so these perks that you enjoy will get less perky with time.","You have little chance of getting it deleted. I have the same situation, I closed mine in 2006, and the login still works. Keep the paperwork that you closed it (or print a PDF of the site showing so), and forget about it. If someone is trying to cheat, re-opening it should be the same difficulty as making a new one in your name, so it is not really an additional risk. You could also set the username and password both to a long random string, and not keep them. That soft-forces you to never login again. Note that it will also stay on your credit record for some years (but that's not a bad thing, as it is not in default; in the contrary). The only negative is that if you apply for credit, you might be ashamed of people seeing you ever having had a Sears or Macy's card or so.","\"Aside from an annual fee, if any, the card issuer makes money 2 ways, the transaction fee, about 1.5%-2% charged to the merchant, and interest from you if you leave a balance month to month. Obviously, the bank has some cost in processing statements and maintaining your account. If up front you are saying you will not have any chance of providing a certain profit level, they may have no interest in your business. (As you updated.) Other card issuers (almost surely with fees) might. Put the cards on ice. A bag of water in freezer. Don't be so hasty that you ding your report this way. By trashing the history as well as utilization, you may impact your score enough to do some harm if you actually need credit in the near future. I know this is a game with the credit agencies, a \"\"how good a borrower am I\"\" game, but it can really impact your bottom line if you don't play along. In reply to Michael's comment 1/5/15, if I have one card and am budgeted for $1000/mo in spending, in order to keep utilization down to less than 20%, I'd need a line of more than $5000. Even if I ignore utilization, my January spending is $1000, but the bill is cut on the 31st and not due till Feb 25th. So a line of nearly $2000 is required unless you wish to make mid cycle payments on an ongoing basis.\"","There are three parties involved here: there's the store that issued you the card, then they have some bank that's actually handling the account, and there is some network (VISA, MasterCard, etc.) that the transactions go through. So one avenue to consider is seeing whether all three are aware of you canceling the card.","The number that really matters in this situation is your age of your longest account. Opening a new account is a good idea, but closing an old one may have an impact on your score if you have no other active accounts. If you have another card, or an overdraft line of credit or a car loan that is 4 or 5 years old, you won't see a big impact. I'd suggest calling the card company and asking them to waive the fee. They usually will. In the meantime, I would recommending having one card from each of the major networks. (MC, Visa, Discover, Amex) so you don't run into this again. Just don't open them all at once.","\"If you look around online and read about credit scores, you'll find all kinds of information about what you should do to maximize your credit score. However, in my opinion, it just isn't worth rearranging your life just to try to achieve some arbitrary score. If you pay your bills on time and are regularly using a credit card, your score will take care of itself. Yes, you can cut up the card you don't like and keep the credit card account open. The bank may close your account at some point in the future because of a lack of activity, but if they do, don't worry about it. You have other accounts that you are using. Personally, I don't like having open credit accounts that I'm not using; I close accounts when I'm done with them. I realize that it goes against everything that you will read, but my score is very high and my oldest open credit card account is 2 years old. Don't let them scare you into credit activity that you don't want just to try to \"\"win\"\" at the credit score.\"","Cancelled cards don't fall off the system for a long time, up to ten years. Card terms change, with notice of course, but it can happen at any time. I had a card with a crazy perk, 5% back in Apple Gift cards. This was pre-iPod days, but it was great to get a new computer every two years for free. But it was short lived. Three years into it, the cards were changed, a no-perk card from the bank. That is now my oldest account, and it goes unused. Instead of holding cards like this, I wish I had flipped it to a different card years ago. Ideally, your mix of cards should provide value to you, and if they all do, then when one perk goes away, it's time to refresh that card. This is a snapshot from my report at CreditKarma. (Disclosure, I like these guys, I've met their PR folk. I have no business relationship with them) Elsewhere on the page it's noted that average card age is a 'medium impact' item. I am 50, but I use the strategy above to keep the cards working for me. My current score is 784, so this B on the report isn't hurting too much. The tens of thousands I've saved in mortgage interest by being a serial refinancer was worth the hit on account age, as was the credit card with a 10% rebate for 90 days, the 'newest account' you see in the snapshot. In the end, the score manipulation is a bit of a game. And some of it is counter-intuitive. Your score can take a minor hit for actions that would seem responsible, but your goal should be to have the right mix of cards, and the lowest interest (long term) loans.","If it is one of those debit cards you use just like a credit card without a PIN, I'd cancel it regardless of whatever you are trying to do with your finances. They just seem too dangerous to me. Unlike a credit card, if someone makes fraudulent purchases on a debit card the money is gone from your bank account until you resolve the issue with the issue. With a credit card, the BANK is out the money until it gets worked out. My brother once had his credit card number (not the card) stolen and the criminals emptied his bank account. Eventually the bank put the money back after an investigation, but it had two really nasty side effects: 1) Dozens of checks bounced. The bank refunded the bounced check fees, but not all of the stores would. 2) He had no money in his account until it was resolved. Luckily in his case they resolved it in a few days, but he was already making preparations to borrow money to pay his rent/bills.","\"Your bank has discretion to honor checks after 6 months, so you should talk to your bank about their specific policy. In general, banks won't accept \"\"large\"\" stale checks. The meaning of \"\"large\"\" varies -- $25,000 in NYC, as little as $2k in other places. Banks that service high-volume check issuers (like rebate companies) reject checks at 180 days. For business purposes, I think some banks will create accounts for specific mailings or other purposes as well. (i.e. 2011 refund account) The accounts close after a year.\"","Put one of your monthly bills on it. (Utility bill, Netflix, monthly donation to charity, etc.) I have several automatic, recurring monthly charges on my credit card. If you don't have any current monthly bills that you want to switch, contact the Red Cross, or a charity of your choice. They would be very happy to charge your credit card once a month. Alternatively, it might be okay to let it close.","\"Most likely the bank will keep it on file for a few years then turn it over to the state as \"\"unclaimed property\"\". I can't speak for all states though.\"","\"I'd say close them if they have fees, if you're worried about fraud or if you're going to be tempted to use them. It may have an affect on your credit rating, but it shouldn't hurt you seriously. Having too many cards gives you the \"\"opportunity\"\" to overspend, which obviously isn't good.\"","If you want to close the card, close it. The impact on your credit score will be minimal, if any, and the impact on your life will likely be even less. First, as you noted, the history from your card does not disappear when you close the card; it will stay on your credit report for as long as 10 years. By that time, you'll have many years of on-time payments from your other cards, and the loss of this one card won't be significant. Because the card has a low credit limit, it won't have much effect on your credit utilization numbers, either. Finally, your credit score might just be high enough that a small drop will have no impact on your financial life whatsoever. In my opinion, hanging onto a credit card you don't want just to try to attain some type of high score is pointless. Close the card.","No. There is no incentive for the card issuer to permanently loan you money for free (Even though they make a small amount of money with every transaction). Yes, there are many credit cards that offer introductory 0% APR, often lasting for a year, some even two years. In theory, you could keep applying for new cards with these terms, and continually transfer the balance to the new card (Though you would probably incur a fee for doing so).","\"You should never close a credit card account unless it has an annual fee or you are overspending on it. Open lines of credit - even un-utilized ones - have a positive effect on your credit score. First of all, they increase your total credit which helps your score. Second of all, they are always \"\"paid on-time\"\" which is another benefit. Finally, they increase the length of your credit history. You can keep unused credit cards forever in your drawer. They are rarely closed due to inactivity and cost you nothing. However, if your card has an annual fee, you should close it. The potential loss to your credit score is unlikely to offset the annual fee.\"","\"If it is planned, then one can get a Bankers Check payable overseas; if destination is known. 1.) What will happen to the money? It will eventually go to Government as escheating. Unlcaimed.org can help you trace the funds and recover it. 2.) Will the banks close the accounts? 3.) After how much time will the banks close the accounts? Eventually Yes. If there is no activity [Note the definition of activity is different, A credit interest is not considered as activity, a authentic phone call / correspondence to change the address or any servicing request is considered activity] for a period of One year, the account is classified as \"\"Dormant\"\". Depending on state, after a period of 3-5 years, it would be inactive and the funds escheated. i.e. handed over to Government. 4.) Is there anything else to do? Any ideas? Before leaving? Try keeping it active by using internet banking or credit / debit cards linked to the account. These will be valid activities. 5.) Is there any way to send a relative to the US with any kind of paper of power, to unfreeze the accounts? 6.) The banks say they would need a power of attorney, but does that person actually need to be an attorney in the US, or can it simply be a relative WITH a paper (a paper that says power of attorney) or what is a power of attorney exactly, is it an actual attorney person, or just a paper? 7.) Is there any other way to unfreeze the accounts? Although I can confirm first hand; I think there would be an exception process if a person cannot travel to the Bank. It could even be that a person is in some remote state, not well etc and can't travel in person. I think if you are out of country, you could walk-in to an US embassy and provide / sign relevant documents there and get it attested. Although for different purpose, I know a Power of Attorney being created in other country and stamped / verified by US embassy and sent it over to US. This was almost a decade back. Not sure about it currently.\"","If you've got the money to pay off your credit cards, do it. Today, if possible. There is no need to pay another penny of interest to them. They may or may not cancel your cards. That is up to them. We can't know what will trigger an individual bank to cancel your card. The answers you got on your other question offer some speculation on why some banks might cancel, but this is not something banks reveal. Anything you do on your own to try to keep the cards open is just a guess, and may or may not succeed. But ask yourself: why do you want to keep these cards? Is it for the convenience of the card? I agree that credit cards (paid in full monthly) are convenient, but when they start costing you money, they aren't worth it anymore, in my opinion. Debit cards have most of the same conveniences of credit cards, and are free. If it is for emergencies, I recommend instead building up an emergency cash fund. That way, if an emergency arises, you won't be forced to borrow money at high credit card interest rates. If the reason you want to hang on to the credit card is so you can spend more than you have, then you will find yourself in the same situation again. If I were you, I would pay off the cards ASAP. If the banks cancel your cards, just switch to a debit card and be thankful that you are no longer continuously leaking money to the banks.","I'm not sure if someone else answered already in the same manner I will. I can't guarantee for sure if it's the same in the U.S.A. (it might since major credit cards companies like Visa/MC/AMEX are American companies) but in Canada having/keeping unused CC is a disadvantage because of the following: Banks and financing companies look more at the total amount of credit available to you than at how much purchases you have on your cards. Ex: Let's say that you have the following: - Visa cc with $10,000 limit and $2000 worth of purchases (made more than 30 days ago) on it. - Mastercard cc with $10,000 limit as well and $1000 worth of purchases (less than 30 days old) - A major retail store cc with $2000 limit and $0 balance. Hypothetical situation: You want a bank loan to do some expensive house repairs and are looking for a lower interest rate than what your cc can offer. The bank will not care about the amount on the cards. They will add-up all the limits of your cc and treat your loan request as if ALL your cards were filled to their respective limit. So in this case: they will consider you as being right now in debt of $10K+$10K+$2K = $22,000 instead of only $3000 and they might: 1. refuse you the loan 2. grant it only if you transfer all purchases on a single card and cancel all the others. 3. Once the $3000 is transferred on one of the cards (and the others cancelled), they can require that you reduce the limit of that card. Hope this helps!","Closed accounts are used when calculating Average Age of Accounts (AAoA) by FICO. They will drop off your report 7 years after their closure, at which time your AAoA will decrease and most likely lower your credit score. Keeping your oldest card with an annual fee (AF) is a tough question. Since the exact calculations are a secret, it's hard to quantify the value of that card. Keep in mind that if you do decide to close it now (or right before the next AF) it will continue to count for the next 7 years. What you can do is the following: Assume you won't be applying for any new cards in the next 7 years. Look at all your current accounts and calculate the AAoA of all of them that would still be on your report 7 years from now. Calculate it with and without your oldest card. The difference will show you the effect closing the card today will have. There is a potential way to raise your AAoA depending on if you have an AMEX card. AMEX reports all accounts as being open from your original 'member since' date. If your oldest AMEX (ever, not necessarily still open) is older than your AAoA, opening a new AMEX will actually raise your average. age of accounts is 15% of your score. note that some websites that calculate your AAoA for you (like creditkarma) don't count closed accounts, but since FICO does the age those websites generate should be ignored.","Credit card companies are businesses. Businesses will make any decision that makes them money. So does it make them money to cancel your account? It's a simple cost-benefit analysis: you having an account with them will probably give them some benefit for very little cost to them. The only real cost associated with an open account is someone who uses the card but doesn't pay, but they're pretty sure you won't be doing that.","\"I answered a similar question, How will going from 75% Credit Utilization to 0% Credit Utilization affect my credit score?, in which I show a graph of how utilization impacts your score. In another answer to Should I keep a credit card open to maintain my credit score?, I discuss the makeup of your score. From your own view at Credit Karma, you can see that age of accounts will help your score, so now is the time to get the right cards and stay with them. My background is technology (electrical engineer) and MBA with a concentration in finance. I'm not a Psychology major. If one is undisciplined, credit can destroy them. If one is disciplined, and pays in full each month, credit is a tool. The quoting of billionaires is a bit disingenuous. I've seen people get turned away at hotels for lack of a credit card. $1000 in cash would not get them into a $200/night room. Yes, a debit card can be used, but the rental car and hotel \"\"reserve\"\" a large amount on the card, so if you don't have a high balance, you may be out of town and out of luck. I'll quote another oft-quoted guru: \"\"no one gets rich on credit card rewards.\"\" No, but I'm on track to pay for my 13 year old's last semester in college with the rewards from a card that goes right into her account. It will be great to make that withdrawal and not need to take the funds from anywhere else. The card has no fee, and I've not paid them a dime in interest. By the way, with 1-20% utilization ideal, you want your total available credit to be 5X the highest monthly balance you'd every hit. Last - when you have a choice between 2% cash reward, and the cash discount Kevin manages, take the discount, obviously.\"","\"I would think it extremely unlikely that an issuer would cancel your card for having an ADB of approximately zero. The issuer charges the vendor that accepts a card a percentage of the transaction (usually up to ~3%, AMEX is generally higher) - so they are making money even if you carry no balance on your card (the specific language for various vendor-side (acceptor) credit card agreements boils down to \"\"we are essentially giving you, the vendor, a short-term loan and you will pay us for it). This why you see credit-card minimum purchase amounts at places like hot-dog stands - they're getting nailed on the percentage. This is also why, when given the choice between \"\"Debit or Credit\"\" for a particular card, I choose where to put the hit on the company I like less - the retailer or the bank.\"","A few years ago, I had the rare opportunity to take advantage of a credit card offer. Specifically, a 10% cash back deal on purchases at drug stores or supermarkets. The offer was limited to 90 days, so during that time, I bought 100 cash gift cards at my local CVS. Over the next year to use them all, when they dropped to a balance under $5 or so, I signed in to my cable TV account and charged the remaining balance there. No bothering a supermarket clerk, or store owner.","\"There are two factors in your credit score that may be affected. The first is payment history. Lenders like to see that you pay your bills, which is the most straightforward part of credit scores IMO. If you've actually been paying your bills on time, though, then this should still be fine. The second factor is the average age of your open accounts. Longer is considered better here because it means you have a history of paying your bills, and you aren't applying for a bunch of credit recently (in which case you may be taking on too much and will have difficulties paying them). If this card is closed, then it will no longer count for this calculation. If you don't have any other open credit accounts, then that means as soon as you open another one, your average age will be one day, and it will take a long time to get it to \"\"good\"\" levels; if you have other matured accounts, then those will balance out any new accounts so you don't get hit as much. Incidentally, this is one of the reasons why it's good to get cards without yearly fees, because you can keep them open for a long time even if you switch to using a different card primarily.\"","Definitely not. Credit cards only exist to suck you into the soulless corporate system. What you want to remember here is that you can't trust banks, so you'll want to convert all your savings into some durable asset, say, bitcoins for example, and then hoard them like Smaug until after the Fall.","Technically, yes but, in practice, no. I use a card for everything and pay it off every month. Sometimes, several times a month depending on how the month is going. In the last 10 years, I've paid a total of $8 in interest because I legitimately forgot to pay my balance before the statement came out when I was out of town. I wasn't late, I just didn't beat the statement and had a small interest charge that I couldn't successfully argue off. In the same time period, I've had one card cancelled at the banks request. The reason was that I hadn't used it in two years so they cancelled me. I never pay annual fees, I get cards with great rewards programs and I (almost) never pay interest. If your bank cancels your card because you're too responsible, find a better bank.","The assumption is not necessarily correct. While the seven years affects the credit report, the statute of limitations for collections may be different and is based on the State law where the debt was given (or a Federal law for NA banks). Keep in mind that the creditor can reset the clock any time by taking legal action, for example filing a lawsuit in a court to garnish some of his income or put a lien on some of his assets. Many times, just contacting the debtor is enough to reset the clock. The statute of limitations on collections is a legal issue and he should talk to a lawyer about it. Different accounts may have different statutes affecting them.","When I last asked a certain large bank in the US (in 2011 or 2012), they didn't offer expiring personal checks. (I think they did offer something like that for business customers.) They also told me that, even if the payee cashes the check a year later and the check bounces, even if it's because I have closed the respective account, he will be able to go to the police and file a report against me for non-payment. (This is what the customer service rep told me on the phone after a bit of prodding, but someone else feel free to improve this answer and fix details or disagree; it's hard to believe and quite outrageous if true.)","\"New Zealand has a statute of limitations on debt of six years, twelve years if it is \"\"a debt acknowledged in a deed\"\" (probably not the case here). If you have had no contact with the bank for that time, the debt expires. If you got convicted of a crime in relation to the debt (e.g. fraud) then that would fall under a different statute of limitations, but a bank isn't going to bother doing that over $600, and the courts would probably not accept the case anyway.\"","And the card companies not only don't seem to care, they actively try to prevent public knowledge of the issue. I think Mythbusters was going to do a show about it, and on of the companies told Discovery they'd pull their large ad campaign if the show was aired.","In general if there are no transactions for several years a bank will close the account. In my experience they also send at least one warning notice. If they do close the account they send it to the state. Each state has an unclaimed property office. You can contact them regarding the procedure to get the money. If this money was just turned over to the state there may be some lag time before you can get it back. Two notes: the state government doesn't charge a fee to get your money back. Don't pay a company a finder's fee. bank account's owned by minors don't have the same activity requirements as those owned by adults.","Have you signed anything? If not - then tell them you don't know who they are and have not agreed to pay. If you did sign that piece of paper at the airport, then you have probably agreed to pay. Either way, it won't go away. As you've already discovered, ignoring things doesn't make them go away. You should make an effort, as hard as it may be, and call them. Notify them that you have never asked for this card, never activated it, and in fact never had it in your possession. You should stress out that it was issued without your authorization, which is probably illegal. And you wish the account to be closed and the charge reversed. Otherwise it will just grow and make your life miserable.","It will be considered 'unused credit'. I have tried it yeas ago. They just report zero usage.","Apparently it is up to the credit card company on how they want to report your available balance. Another disadvantage to the no-limit credit card may not be apparent to most people, but it is something noted by organizations like The Motley Fool, which is expert in many issues of finance and investment. Part of your credit score, about 30%, considers the amount of money you have borrowed, and the limit on your present credit cards. A no-limit credit card company may report your limit as $0 if you have not used the card, or they may report a maximum limit available to you. They may not, nor are they obligated, to report times when you put tons of expenses on a credit card and then paid them off. While some companies will report your timely payments and paid off amounts, others simply report an extremely low limit. For instance if you spent $100 US Dollars (USD), your limit might be considered $100 USD, or it may merely be reported as zero. You’ll need to check with a credit card company on how they report payments and limits on a no-limit credit card before you obtain one. Some people who are scrupulous are paying off their cards at the end of each month suffer major losses to their credit score, without even realizing it, if their spending ability is rated at zero, or their payments don’t count toward showing credit worthiness. Source","They will credit your account and it will be applied to future purchases. If the credit card is not used for several months, they will send you a check or transfer it to your bank account. Some people on this site have actually considered sending money to the credit card company in advance, so that the amount that can be charged is temporarily inflated. Keep in mind they will eventually refund the money. Plus you will not earn interest on the refund.","Absolutely. It's the way credit is calculated. The most important things here are credit utilization (how much of your open credit you're using, the less the better for your score) and and length of open credit. The longer you've had a credit card, the more it helps your score. If you use your card and pay it off before the bill comes, the credit card company still knows you're using the card and won't close it. I recommend you download credit karma so you can track your score and learn more about how credit is calculated.","Hits to your credit rating for canceling one of the newer cards will be a small hit for a few months. You do have some options. I also believe that a person with good credit should have multiple cards: I like having a cash back card for the majority of our transactions. Unfortunately that card isn't accepted everywhere, so I have two other cards with broad market coverage to make sure we always have an option if the vendor doesn't take the main card. Also having multiple cards makes sure that if there is an issue with one card you are never caught without a card. One time the main card was rejected by a gas station because my wife just used the same account to buy gas across town. When we got home their was a fraud alert message on our phone.","\"I actually had a similar situation when I tried to buy my house. I paid off all my loans and was proud of my \"\"debt free\"\" status. I had no car note, no student loans... absolutely no debt, but I did have a bank-issued credit card. (USAA, not Chase, but I assume the same may apply). When I tried to get a home loan they told me I had \"\"absolutely no information on my credit report.\"\" AKA I had no credit. The mortgage lender had no idea what was going on, nor did I or anybody else. It took a lot of research before I realized that the credit bureaus use a formula for the credit rating that involves a lot of things, but if you haven't had a current line of credit reported to the agency in over a year (maybe it was longer, I didn't have anything for 3 years) you aren't going to have a credit score. Because I was \"\"debt free\"\" I was also credit report free and eventually the credit bureaus had nothing to go on, and my score disappeared. The bank-issued credit card was on my credit report, but they didn't report monthly balances so the bureaus couldn't use it to determine if I was paying off the card or if I even had a balance on it. It was essentially not doing my credit any favors, despite what I had thought. In short, based on the fact that you have no debt in her name, and you have taken on all debt in your own name, its very plausible that she has no credit rating anymore. It won't take long to get it back. Once you have ANYTHING on your credit that's actually reported the formula can kick back in and look at credit history as well as current credit and she'll be fine.\"","\"I think this stuff was more valid when grace periods were longer. For example, back in the 90's, I had an MBNA card with a 35 day grace period. Many business travellers used Diner's Club charge cards because they featured a 60 day grace period. There are valid uses for this: As JoeTaxpayer stated, if you are benefiting from \"\"tricks\"\" like this, you probably have other problems that you probably ought to deal with.\"","Yes, you can. A friend of mine once did, don't know the reason why he was so foolish and couldn't use the debit card instead. I think maybe out of curiosity or he was drunk. But I know the consequences, the bank people asked him to pay all the previous debts relating to the card the same day or he was going to be paying alot of interest to them as a penalty. So, he did pay all the debts the same night.","I agree with JoeTaxpayer that you will be better off in the end if you can just not use your card you are better off in the long run. That said if you are determined to get a card you can control go to a credit union or local bank. Most of them will give you the credit limit you want. This may provide you with a card that you can make use of but know that you can not go wild. The down side is most of these will not be reward cards but my local credit union gave me a 7% card where my Chase card is at 18%(was 5% before the changes to credit card regulations).","Depends on your credit score. If you came from foreign country, you might not be having enough Credit Score. In that case, you have to go for Prepaid Credit Card offered by Banks. For prepaid credit card,you have to deposit certain amount of money which will act as your credit line.","There is also security aspect. By reducing the number of active credit/debit cards, one significantly reduces the surface of attack. There is smaller chance of getting one of your card information stolen and misused (cf Target data leaks and others).","The length of time you have established credit does improve your credit score in the long run. As long as you can avoid paying interest, you might see if you can get a card with cash back rewards. I have one from Citi that sends me a $50 check every so often when I have enough rewards built up.","\"This does not directly address the question, but how the Bank views your behaviour is not the same as a credit reporting bureau. If you do not \"\"go deep\"\" on your card at all, you may be deemed not to be exercising the facility, indeed they may ask you to reduce your credit limit. This is not the same as \"\"missing a payment\"\". At the same time, do not just make the minimum payment. Ideally you should clear it within 3 months. Think of it as a very short term line of credit. Not clearing the balance within three months (or turning it over) demonstrates a cash flow problem, as does clearing it from another card. Some banks call this \"\"kite flying\"\" after similar behaviour in older days with cheque accounts. If you use the credit and show you can pay it off, you should never need to ask for a credit increase, it will be offered. The Bureau will be informed of these offers. Also, depending upon how much the bank trusts you, the Bureau may see a \"\"monthly\"\" periodic credit review, which is good if you have no delinquencies. Amex does this as a rule.\"","This sounds like a shady trick. I would consult with a consumer debt lawyer in your area. Most county bar associations in the US have a referral service, where they recommend a local lawyer and there is a reduced fee for the initial visit. I think the statute of limitations is 10 years in most cases, but it depends on where you live. From these bare details,I think they don;t have much of a case. Go see a lawyer and don't let them harrass you.","\"Time-Barred Debts and STATE STATUTES OF LIMITATION ON COLLECTING DEBTS are good places to start on the issues of what can be collected and for how long. What seems to be at issue is bankruptcy vs. time-barred debts vs. what creditors (original debt owners, not collection agencies or those who buy debt) can do. You should also check out The Fair Credit Reporting Act which governs some of the question. The Fair Credit Reporting Act and the section on time-barred debts applies to collection agencies, etc. (so-called debt owners as pointed out by @littleadv, since they buy debt from the creditors) not actual creditors (those the debt is/was originally owed to). Creditors (those to whom the debt was originally owed) have different rules than debt collectors and can do things debt collectors can't. State law generally governs what creditors, as original owners of the debt, can do legally and for how long. Bankruptcy Bankruptcy is a legal action that frees someone from paying all or part of debt owed (they are crying \"\"Uncle!\"\" and stating they don't have enough money to pay their creditors). On a credit report, accounts will generally be updated to show “included in bankruptcy\"\" or similar. Debt that is determined to still be owed often will be reduced in amount/payments. Time-barred Debts Time-barred debts are debts that are still owed, but cannot be collected through direct legal action (suing). Each state has its own statute of limitations on how long different types of debt can be collected by suing after initial default before being considered time-barred. This period is typically 3-6 years but a few states such as Kentucky allow much longer time periods (up to 15 years). Being a time-barred debt does NOT prevent a collector from contacting someone about a debt. Collectors can still try to collect a debt forever -- and probably will -- but they can't normally sue and collect payment once the statute of limitations period has passed. There are gotchas with time-barred debts regarding collection, however, which can make them still legally actionable. Making any payment, no matter how small, making a verbal commitment to pay or even acknowledging the time-barred debt is often enough to make the debt legally collectable, even if it would normally be past the statute of limitations for collection. This is again state-dependent, but it is a pitfall for many people. The process of making a debt collectable again is often called \"\"re-aging\"\". Re-aging essentially means the clock starts anew on the statute of limitations, extending the time that a creditor may use the courts to collect that debt. If someone is taken to court over a time-barred debt that is legally noncollectable (has not been legally re-aged), nothing happens to them. However, being time-barred does not prevent legal action in the sense that you still have to prove the debt is time-barred and noncollectable in court if your sued over it. Being time-barred does not mean the debt \"\"dissolves\"\". A debt is always owed unless the debt has been forgiven or discharged in bankruptcy court. This means that, combined with the ability of debt collectors to contact someone about out of statute debt and the pitfalls of re-aging, it is entirely possible for a debt collector to get a 20 year old debt actionable again. Also note that while someone is trying to dodge a debt to make it time-barred (e.g. by not paying anything), creditors and debt collectors can still take legal action to sue over the debt, and if they get a judgment against someone, this can extend the debt indefinitely. Judgements will eventually lapse, but often only after 10 years or more, and many states allow dormant judgements to be \"\"revived\"\" within that time period. Credit Reports Regarding credit reports, whether someone owes a debt and whether it appears on a credit report are two separate things. As previously stated, no debt \"\"dissolves\"\" or goes away unless some sort of legal action makes it so. As far as reporting is concerned, however, most \"\"bad\"\" credit stops being reported after seven years (by federal law). That is, accounts on a credit report will be deleted seven years from the original delinquency dates of the accounts regardless of being included in bankruptcy or as time-barred debt. This assumes no legal process allows the account to continue being reported (as is often the case with re-aging). As an FYI, a bankruptcy discharge date has nothing to do with when account information will be removed from your credit report. Note that some debts, such as tax liens, can be reported indefinitely. Should bankruptcy be considered? The decision to do bankruptcy is mostly a matter of how severe the debt is. If it is an extremely large amount and assets are very small, bankruptcy is a good route in so far as it will legally take care of a lot of loose ends and likely relieve most or all of the burden of actually owing the money. Credit-wise, 10 years is the maximum a bankruptcy (specifically) will appear on a credit report. Accounts may drop off a credit report before bankruptcy because they are past the seven years they can be legally reported. Debts owed to the state such as child support, student loans, income tax, etc. generally cannot be written off and aren't subject normal debt statute of limitations on collection. Finally, bad credit is bad credit -- there is likely to be little difference in terms of ability to get loans between bankruptcy and attempting to dodge legal action to make debts time-barred. If the debt is significant, bankruptcy may be the only sensible option.\"","No credit card company would ever give a card with either no credit limit or that was not in credit (for prepaid cards) because they would earn no money from it. The company's income is entirely derived from fees that they charge you for balances and interest on those balances so a 0 limit card would be worthless to them. Getting a prepaid card and letting the balance hit 0 might be a way around this but the fees that you will be charged , and will become a debt in your name, when the billing system tries to take the first paid month's cost from the card and fails will be exorbitant. They may go so far as dwarfing the actual cost but the one thing that they will certainly do is lower your credit rating so this is not a good idea.","I have a few debts in collection. I do not care, I make very good money now, but I prefer to spend it on nice cars instead. In US after 7 years they do not affect your credit score. On the contrary, if you pay them they can ding your credit. That's what Susie Orman show says as well -- there is absolutely no point paying a debt that is more than 7 years old.","Close the account. The age doesn't outweigh the fact that you have to pay for the card. It would be one thing if the credit line was a couple thousand but showing the credit bureaus that you are staying away from the $425.00 doesn't really make them think you are any more trustworthy with your available credit. Utilization matters when you are staying away from much larger chunks of your available credit (across all cards).","You don't need to use an open line of credit to help your credit score. You didn't ask this, but another option is to not cut up the card and keep the account open, even if you don't use it. I mention this because sometimes when you are calling in or setting up an online account to service the card, you may need to have the expiration date and CVV code on hand. This has burned me a few times as I had to hunt around for a card I rarely ever use. That being said, if you are worried that you might use the card if you know it's there, then sure, cut it up.","\"These agencies consolidate your debt and make it an easy monthly instalment for you. They also try to negotiate with credit cards. They do so for a fee. Other option is to not pay the debt. During this time , expect credit cards to keep sending you bills and reminders and ways to contact you. Once it is not paid for a significant amount of time ( 18 months ) , the lender will \"\"sell\"\" your debt to a collection agency. You will start getting bills from collection agencies. Collection agencies can settle for up to 40 % of the actual debt. So if you had 5 credit cards , you would have 5 different collection agencies trying to get in touch with you. You can call them and tell them that you cannot pay the full amount. They will offer you settlements which you can accept or decline. The longer the unpaid debt , the more the discount they will offer. One very important thing to remember is that the unpaid amount will be sent to you on a 1099-c form . This means you have to recognize this as income. It is applicable to the year when the debt is settled. In a nut shell , you owe 120,000. You don't pay. Credit cards keeps calling you. You don't pay. After 12-18 months , they handover your debt to collection agencies. Collection agencies will try to get in touch with you. Send you lawsuit letters. You call and settle for say 50,000. You pay off 50,000 in 2016. Your debt is settled. But wait you will get 1099-C forms from different agencies totaling 70,000 ( unpaid debt ). You will have to declare that as income and you will owe tax on that. Assuming say 30 % tax you will have to pay up 21,000 as tax to IRS assuming no other income for simplicity. SO what you did was pay up 50 + 21 = 71,000 and settled the debt of 120,000. Your credit score will be much better than if you never paid at all.\"","If you have any automated, recurring payments attached to the credit card, having the number cancelled can result in major losses - for instance, domain name expiration, VPS deletion, deactivation of mobile or VoIP phone service, etc. Good providers will give you a warning and plenty of time to replace the payment method on record, but I wouldn't necessarily trust them all to handle it well.","You're right to keep the oldest one. That's an asset to your credit rating. Since you're already responsible with your credit, a dip in your credit rating doesn't really matter unless you're looking for another loan, like a mortgage. I personally like the cash-back rewards because they're the most flexible, so you have a good thing going with that card. Do those reward cards give you perks on all of your purchases? If they do, then look carefully to see if you can do noticeably better with another card. If not, it may not really be worth it. Regarding cancelling one of the cards, I wouldn't, and here's why. Your cards can get compromised, and sometimes more than one gets compromised at the same time. I was glad that I had three cards, because two of them got hit the same day. Hence, having three cards hit on the same day is possible, and you'll be glad that you have the fourth.","\"Several events will always result in a reduction of your score, including: These will show up in the short term, but I don't think it's worth $40 per year in perpetuity to avoid this. These aren't serious \"\"black marks\"\" in the same category as missing payments, carrying too much debt, or foreclosures/evictions, etc. These effects are designed to signal issuers when someone acquires a large amount of credit in a very short period of time, which may indicate a greater risk. If your credit is good and you are using your other cards responsibly, closing the card (given the annual fee) would not cause me great concern if it were me. Since you are so much better of a risk than you likely were in college, you can also call Capital One, ask to speak with a supervisor, and ask them to drop the fee and increase your credit limit. They should be able to easily verify that you meet the requirements for other types of preferred cards they offer, and they should be willing to offer you improved terms rather than losing your business. It is very possible they simply haven't re-evaluated your risk since you initially applied. Also, remember that these types of effects determine only a portion of your overall score. Activity is also a major component. Rather than leaving an unused card open for history and debt-to-limit purposes only, I would also recommend having some minimum level of activity, such as an automatic bill payment, on each card you carry. The effect of using your cards over time will have a significant positive effect on your score. Best of luck!\"","The bank doesn't keep it. It will stay unclaimed until the unclaimed assets process in the state that the bank branch is in kicks in. At that point it it a state by state process, with each state being different. You will need to inquire to the state government about what the process is in that state. (This will probably be searchable online.)","The typical rule in the US is 180 days, but some banks do it differently. However, even if the check is dead, you should be able to call the payroll department for your old job. They can stop payment on the old check and issue you another one.","You should pay things off every month. You don't want to be paying 10%-25% interest if you don't have to. If you regularly use you card, the credit agencies can't tell the difference. The way it works is that every month, they send the credit agencies your current balance and if you paid the last bill on time. There is nothing that indicates if this is a standing balance, or if you charged all of it since the last payment. Any business that you legitimately owe a debt to can report that to the credit agencies. Not all of them do. This includes utilities, cell phone companies, landlords, etc. If any of them report overdue items it will show up on your credit report, and your credit card company can use that to raise you interest rate. Some cards will automatically raise you credit limit. They are basically looking to make money fro you. If you often charge near the limit, and pay the minimum balance each month, they may raise your limit to get you to charge more, and pay more interest. You can also call them and ask. They have some internal rules to decide if, based on your history with them and your credit history, if you are a good risk.","Question 1: Who do I report such fraud to? Walmart, or their card processor. They may be in their right to require the original purchaser to do the report. Generally, credit card and debit card fraud must be reported to the bank within 60 days of the statement for them to take responsibility. I don't see why gift cards would be different. You can also report it to the police, but I believe you'll be asked to file a report in the jurisdiction where the card was used. Again - time is of the essence, and there's nothing much they could do with your report now. Question 2: How can I recover the $100 value of my Walmart gift card? At this point, 2.5 years later when the card was used to buy prepaid cards, there's no way to catch the thief and recover the funds. Had you reported it promptly, Wlamart could have block the prepaid cards sold or track their usage, but now is too late. Question 3: Is Citibank in any way liable? (The gift card was fraudulently used shortly after---within the same month---I received it from Citibank.) I doubt it unless you can show a pattern. It could be someone working for the Citibank, someone working for the USPS, or someone just stole a bunch of numbers and waited until they became activated.","If you are the main account holder I would try contacting your bank directly, some of them have very accommodating services for this kind of thing. You might even consider going in person if you have a local branch, this might just make communicating easier. They will probably go over your recent transactions with you to identify the fraudulent ones. You might do this first by yourself if you have an online account. Once you identify the fraudulent purchases they will probably take a week or two to investigate/process and reimburse you. But do NOT just close the account and forget about it- first off closing an account that is close to $2,000 in debt probably isn't even possible. Second, if you forgot about it for a long time and just let you credit take a hit you could end up really paying for it(in the form of higher interest payments) later in life when you try to get anything financed like car or house or even student loans for college. And make no mistake that can amount to *maaany* thousands of dollars more than you would otherwise pay over the course of a loan. So don't damage your credit if you can avoid it. Long story short, banks have special departments to handle this kind of thing, so work with your bank. See how that goes, if you run into hangups you may need to bring your parents into the loop. Good luck!","Each bank is different. Usually in my experience for newer credit card accounts, there is a specific number of days in a billing cycle (something like 28) and then a 20-25 day grace period. Older accounts usually have 30+ day billing cycles. Back in the 90's, many cards also had 30-40 day grace periods. The language specific to your card is in the card agreement."],"string":"[\n \"\\\"Assuming the question is \\\"\\\"will they close it for inactivity (alone)\\\"\\\".. the answer is \\\"\\\"Nope\\\"\\\" ... unequivocally. Update: < My answer is geared to credit Cards issues by companies that deal in credit, not merchandise (i.e. store cards, retailer cards, etc). Retailers (like Amazon, etc), want to sell goods and are in the credit card business to generate sales. Banks and credit companies (about whom I am referring) make their money primarily on interest and secondarily on service charges (either point of use charged to the vendor that accepts payment, or fees charged to the user).> The only major issuer I will say that it might be possible is Discover, because I never kept a Discover card. I also don't keep department store cards, which might possibly do this; but I do doubt it in either of those cases too. My answer is based on Having 2 AMEX cards (Optima and Blue) and multiple other Visa/MC's that I NEVER use... and most of these I have not for over 10+ years. Since I am also presuming that you are also not talking about an account that charges a yearly or other maintenance fee.. Why would they keep the account open with the overhead (statements and other mailings,etc)? Because you MIGHT use it. You MIGHT not be able to pay it off each month. Because you MIGHT end up paying thousands in interest over many years. The pennies they pay for maintaining your account and sending you new cards with chip technology, etc.. are all worth the gamble of getting recouped from you! This is why sales people waste their time with lots of people who will not buy their product, even though it costs them time and money to prospect.. because they MIGHT buy. Naturally, there are a multitude of reasons for canceling a card; but inactivity is not one. I have no less than 10+ \\\"\\\"inactive\\\"\\\" cards, one that has a balance, and two I use \\\"\\\"infrequently\\\"\\\". I really would not mind if they closed all those accounts.. but they won't ;) So enjoy your AMEX knowing that your Visa will be there when you need/want it.. The bank that issues your Visa is banking on it! (presuming you don't foul up financially) Cheers!\\\"\",\n \"I've got a card that I've had for about 25 years now. The only time they charged me interest I showed it was their goof (the automatic payment failed because of their mistake) and they haven't cancelled it. No annual fee, a bit of cash back. The only cards I've ever had an issuer close are ones I didn't use.\",\n \"The workaround solution is to simply avoid having an exactly zero balance on your account. Thus for inactive credit cards that I want to keep around for emergency use, I always leave a small positive balance on the card. The credit card company reserves the right to cancel my card at any time, but a positive balance would force them to send me a check for the privilege of doing so. A positive balance avoids making the account appear inactive and makes it cheaper for them to simply leave the account open.\",\n \"If the card has no annual fee, you can keep it for as long as you like and you will never get charged. I advise you to GoPaperless so you stop getting the $0 bills every month. Many cards have the fee waived for the first year. If you have such a card, you should make sure to cancel it when you stop using it, or when the fee waiver expires.\",\n \"Remember, the card company gets a percentage at the time of purchase, as well as any interest you let them collect from you. Yes, they're still making a profit on our accounts, and they can always hope that at some point we'll run up a high enough bill to be willing to pay some interest. They may kill completely inactive cards, since they need a bit of income to pay for processing the account. But if you're actively using it, they aren't very likely to tell you to go away (though they may change which plan(s) they offer you).\",\n \"The answer is maybe. I had a Chase card without a purchase in over 4 years get canceled out of the blue, without so much as a notification telling me it was at risk for cancelation. They told me they typically close accounts after 24 months of inactivity (not including card fees) but let mine go for longer because I have several other credit cards, savings and checking accounts with them. I would recommend spending at least once per year on the card.\",\n \"The Fair Credit Reporting Act (FCRA) says that account history will stay on your credit report as a closed account for 7 years, and then it will drop off, just like any other bad or good mark on your credit (aside from bankruptcies which stay on reports for 10 years, and can be asked about for the rest of your life). The presence of a new credit card will do more to lower your score in the short term than closing an old credit card. On a related note, reporting a card as lost or stolen can also show up as a different, closed account, even if you keep the same account open with the creditor.\",\n \"Please realize that your issuer can close the account for any number of reasons. Inactivity is one, as having a credit line open costs them money and if you never charge anything, the company doesn't get any transaction fees from vendors nor does the company get to charge you any interest. An occasional charge is likely to keep your card from being closed automatically, but it is not a guarantee. Another reason they may close the account is that you have other bad marks show up on your credit score, or their criteria for offering you the card change so you no longer match their target demographic. I have a credit card issued by my credit union that I have not used for a couple of years. They will not close the card account because my other accounts are still very profitable for them. If I were not an otherwise profitable customer, I wouldn't be surprised if they closed my credit card account. If you are serious about keeping the account open, you should probably have more than a trivial amount of usage.\",\n \"Your credit card company will send you funds, probably a paper check, if you have a negative balance. So this situation will not last long. I'd guess 3-6 months at most, depending on the company's procedures.\",\n \"Collection agencies will eventually find you if you work for an employer that uses the credit bureaus for pre-employment screening, or you sign up for utilities or services that check your credit, or you enter into public record any other way (getting arrested, buying land, etc.). Such inquiries will put you on the grid where the collection agencies can find you and/or sue you. Two years out is about the point where they're looking for blood. The next time your friend applies for an apartment, utilities or cell phone service, she's going to get some calls.\",\n \"According to Clark Howard you should use your cards every 6 months to keep them in your active credit score mix.\",\n \"\\\"There is no universal answer here. Some card issuers will. Some that will close the account will warn you first. For my \\\"\\\"sock drawer\\\"\\\" cards I'll try to take each out semi-annually to make a single transaction, then put it back in the drawer. I've heard you should charge something quarterly, I've never had one closed with semi-annual charges.\\\"\",\n \"Check out /r/personalfinance for more detailed advice. Not sure your question. Yes, cancelling it will cause it to disappear from your credit report. Apply for your own card right now (a free rewards one ideally) if your credit it good enough and you have a job. Never pay interest and keep that card and your credit will naturally head to 720+ with no negative marks over time.\",\n \"I've got cards with no annual fee that don't get used--I never see a bill from them.\",\n \"You'll need to read all the fine print with your particular credit card, but in general, if there is no annual fee and you don't make any purchases, you don't pay anything.\",\n \"\\\"Speaking from personal experience: I have had a credit card canceled for exactly this reason. It's happened to me three times, with two different providers (NatWest and Nationwide). After the third instance I stopped bothering to even carry a credit card. It's worth noting that all three were \\\"\\\"free\\\"\\\" cards in the sense that I paid no flat fee or subscription to get the cards. The only way the issuer could make a profit on them was through interest. I was also not a frequent user, carrying the card for convenience more than anything else, although I did make purchases on all three. So it's certainly a possibility. But I live in the UK and I'm guessing most of your other respondents do not. It may be a practice that's more common here than in the US. That might even explain the origin of the rumour.\\\"\",\n \"If you have zero activity on a card, the issuing bank may decide to close that card. They have some costs each month, and if you aren't using the card they aren't making money off of you. Your inactivity is also a risk because if you lost the card, and don't realize it, and it falls into the wrong hands then it can be used for fraudulent transactions. In their view it might already have been hijacked. If they close your account that can hurt your score: your utilization number will go up, and the age of your accounts could go down. They want you to use their card so they make money on the transaction fees and hopefully interest payments.\",\n \"Check with the state that you lived in. Inactive accounts typically get turned over to the State Treasury or Comptroller to be claimed. The time is typically set by statute. Hopefully, you don't live in a state like California or Arizona that treats abandoned property like booty.\",\n \"You need to find out if the credit card has been reporting these failed automated payments as late or missed payments to your credit report. To do this, go to annualcreditreport.com (the official site to get your free credit reports) and request your report from all three bureaus. If you see late or missing payments reported for the months where you made a payment but then they did an automatic payment anyway, you should call up the credit card company, explain the situation, and ask them to retract those negative reports. If they refuse, you should dispute the reports directly with the credit bureaus. If they have been reporting late payments even though you have been making the payments, that will impact your credit much more than the fact that they closed your account. Unfortunately, they can turn off your credit account for any reason they like, and there isn't much you can do about that. Find yourself another job as soon as you can, get back on your feet, pay off your debt, and think very carefully before you open another credit card in the future. Don't start a new credit card unless you can ensure that you will pay it off in full every month.\",\n \"Is there a point after which they legally unable to charge me? No. If you gave a check, then the bank may bounce it as stale after 6 months, but doesn't have to. With debit/credit transactions, they post as they're processed, and some merchants may not sync their terminals or deposit their manual slips often. As the world becomes more and more connected this becomes extremely rare, but still happens. Technically your promise to pay is a contract which never expires, and they can come after you years later to collect.\",\n \"\\\"Well, primarily because that's fraud and fraud prevents a debtor from receiving a discharge in bankruptcy court. Fraud would be pretty easy to prove if you didn't have an income change and you have several lines of credit opened on and around the same day with almost no payments made toward them. Additionally, thanks to the reforms of the bankruptcy code, if your income exceeds the median income of your state you'll be forced in to a Chapter 13 and committed to a repayment plan that allocates all of your \\\"\\\"disposable income\\\"\\\" to your creditors. Now if whoever posted that will attempt to simply not pay then negotiate repayment plans with their creditors the process will last far longer than 7 years. It takes a long time to be in default for enough time that a consumer creditor will negotiate the debt and this is assuming the creditor doesn't sue you and get a judgement which could apply liens to any property you may own. The judgment(s) will likely cause you to pursue bankruptcy anyway; only now you're at least a few years beyond the point at which you ruined your credit.\\\"\",\n \"What I do is that I set a small transaction to automatically go on the card and then set an autopayment. Example for one card is a monthly $8 donation to the local animal humane society. The autopay is set to pay in full. *Solved - card stays active. Some payers will cancel your credit card if they don't show activity.\",\n \"Don't worry about it. One of the big banks who like to whine a lot about defaulting borrowers is sending credit cards to a former resident of my home. The guy died in the late 90s.\",\n \"Borrowing money to pay living expenses will not last long. Also, banks and credit card agencies are very expert at detecting people who try to live off of debt (as you might expect) and they will cut you off completely as soon as they figure out what you are doing. As a general rule, if you go six months without paying a credit card or bank loan, you will be totally cut off from all sources of borrowing for at least 10 years and all your debt will be sold to collection agencies that will then start harassing you. Some collectors will sue you in a court of law and try to seize any assets you have, like a car. It is critical you find a source of income immediately.\",\n \"Something is missing from your scenario. If you don't know what it is, start by going to http://annualcreditreport.com and get your free credit report. Review it, and figure out if you have outstanding balances or judgements that you're unaware of. You should be using your card every month and pay it on time.\",\n \"Assuming you don't plan on continuing to use the card frequently, the best advice I've heard is to leave them open unless they have an annual fee. Also, leaving it open with a zero balance doesn't help your credit score as much as using it a few times a year (even for small amounts) because it will eventually shift to an inactive state that is less positive for your credit score.\",\n \"Generally when items go to collection you will receive a letter in the mail not an email. You can try to dispute the charge with the credit companies (TransUnion, Equifax, and Experian) showing that the charge came after you left the country. Like the answer above me said, disputing it may cause the 7 year clock to restart which leaves it on your account longer. It may just be simpler to try to improve your credit score instead. You can check your credit score as often as you want using Credit Karma online or on your phone.\",\n \"credit cards are almost never closed for inactivity. i have had dozens of cards innactive for years on end, and only one was ever closed on me for inactivity. i would bet a single 1$ transaction per calendar year would keep all your cards open. as such, you could forget automating the process and just spend 20 minutes a year making manual 1$ payments (e.g. to your isp, utility company, google play, etc.). alternatively, many charities will let you set up an automatic monthly donation for any amount (e.g. 1$ to wikipedia). or perhaps you could treat yourself to an mp3 once a month (arguably a charitable donation in the age of file sharing). side note: i use both of these strategies to get the 12 debit card transactions per month required by my kasasa checking account.\",\n \"\\\"FICO SCORING http://www.pbs.org/wgbh/pages/frontline/shows/credit/art/chart_fico.gif This is from the PBS Frontline show \\\"\\\"Secret History of the Credit Card.\\\"\\\" Getting rid of one card won't immediately trash your score, nor will it be by the full impact (15%) of credit history. If there's no fee, I'd buy gas once per quarter with it. If there is a fee, I'd check my FICO score and if I can afford to lose 20 or so points for a time, I'd go for it.\\\"\",\n \"With a check, there are limits on cashing the stale check, but that is set by the banks involved. With a debit card transaction, it will be up the the debit card company and your bank. Imagine a situation where a person finds an old check and tries to cash it at their bank. If the bank considers the check stale, they might reject it, or put a longer hold on the check. When the check writers bank gets the transaction, they will also decide what to do. If they reject it, the first bank will reverse the transaction. You can't count on a 90 day, or 180 day limit; most banks will ask you to put a stop payment on an old check that you don't want cashed. This is especially important step if you write a replacement check. Because there is no check number to put a stop payment on, in fact the temporary hold will fall off after a few days. There doesn't appear to be a way to stop an old transaction. Be careful if you do contact the restaurant, you could end up double paying for the meal if they swipe your card again. Your best option may be just to keep the transaction as pending.\",\n \"Of course, as a 'good' person (or maybe a 'stupid' person), I should call them, (wait 30 minutes in the queue), and then try to explain the issue to the service desk. I actually did that, and the guy thought I am nuts to even call, and told me to 'just use them they are yours now'. I don't feel like calling again and again until I get someone that believes it, just to return them their points. Calling generally does not solve this problem. You would need to write a letter using certified mail and send some reminders. Hopefully they should notice it, if not you at least have evidence that you have communicated. I could just toss the card and forget about it. However, I had quite some points on it that really belong to me, so that feels like I pay for their fault. There is no need. You can continue to use the card as usual. Use them and play stupid. This is not a good idea. They are clearly not yours. Somewhere in Terms and Conditions you will find some fine print about notifying Bank/Financial Institution about the errors. Best course, after intimating informing them via letters, keep using your card as normal and use your points as normal. You would roughly know your points balance.\",\n \"Checks actually have a limited lifespan before the bank no longer has to honor them, which simplifies this question. After about 6 months you assume that check won't be cashed. If they find it after that, you write them a new check. If they don't, you really should pester them to do so.\",\n \"I think you are not liable for unauthorized charges (on your card) no matter how the number was lost. Most banks now apply a $0 liability for card losses. Some say they use the $50 per day (legal) liability limit but I have never heard of any actually applying it to their customers.\",\n \"Generally speaking the bank accounts and credit card accounts remain open. Banks and the credit card companies don't monitor public records on a daily basis. Instead, whoever is handling your estate will need to obtain copies of your death certificate and they will then search your paper records to identify all accounts (reason to get your act together - there are books on the subject). The executor will work with the banks and card companies to make sure all your charges and payments clear (common to have them open for months or even a year) and to make close or transfer autopays. They will make sure to notify the credit agencies to flag your accounts so no new accounts can be created. MANY copies of the death certicates are needed.\",\n \"From Experian's FAQ How long does an item remain on my credit report? A credit reporting agency stores information from credit grantors and public records, including bankruptcies, judgments and liens. Potentially negative information, such as missed payments and most public record items, remain on a personal credit report for seven years. The exceptions are Chapters 7, 11 and 12 bankruptcies, which remain for 10 years, and unpaid tax liens, which remain for 15 years. A paid tax lien will remain for seven years. Positive information may remain on a report indefinitely. Paid closed accounts generally display for 10 years. Requests for your credit history remain on your personal credit report for two years. (This is a 'comment' to SpecKK's reply, but too long to make it as an actual comment)\",\n \"You also might want to see what sort of documentation the credit card company has. Companies can get pretty lazy sometimes about recordkeeping; there have been cases where banks tried to foreclose on a property but weren't able to produce documents establishing the mortgage. With your father dead, is there anything other than the credit card company's word that the debt is valid?\",\n \"No. I have several that I haven't used in a year or so (legacy of the time when they gave you money to sign up :-)), and credit rating's something over 800 last I checked.\",\n \"Wow, I had never heard of this before but I looked into it a bit and Mikey was spot on. It seems that if you don't pay attention to the fine print when making credit card purchases (as most of us tend to skip) many companies have stipulations that allow continued charges if they are recurring fees (monthly, yearly, etc.) even after you have cancelled the card.\",\n \"\\\"Under no circunstances will the bank keep the money for itself. Keeping the money is considered Unjust Enrichment: A general equitable principle that no person should be allowed to profit at another's expense without making restitution for the reasonable value of any property, services, or other benefits that have been unfairly received and retained. The banks will attempt to, in order: Wait for some time: Generally, a time frame of three to five years with no customer-initiated activity sends an account into dormancy. The amount of time that must lapse depends on the [US] state in which the bank account was opened. Attempt to contact the account holder: (...) the bank must try to notify the account holder. If the customer does not respond within a certain amount of time, the balance on the account will be turned over to the state. Turn over the money to the government: In a process what is called “escheating” an account, banks are required to turn over funds from the inactive account to the state treasury. Once the account is sent to the state, the funds are held as unclaimed property. At this point the account no longer exists so far the bank is concerned. To reclaim your money, you will have to contact your state for the instructions on how to get your money back. You’ll need to complete and submit a claim form along with the necessary identification. If you happen to have unclaimed property held by the state, you can begin the retrieval process by visiting www.unclaimed.org. For a foreigner, it is not unreasonable that the bank would attempt to contact the diplomatic body of the country of origin in step 2, but that may be subject to bank policy. There is some paperwork the bank needs to do to \\\"\\\"escheat\\\"\\\" the account and properly transfer the money to the state.\\\"\",\n \"They don't make any money off of you personally. They make money off of the merchants per transaction when you use the card. You trigger this fee to the credit card issuer, but it doesn't come out of your pocket. (Or it shouldn't; merchants aren't allowed to pass this fee on to you.) They keep you around because you may at some point become less responsible than you already are, and it would be quite costly to get you back (a couple hundred dollars is the cost of acquiring a new credit card customer). People who are less responsible than you subsidize your free float and your rewards (if any) but the new CARD act makes it more difficult for people to use their cards irresponsibly, so these perks that you enjoy will get less perky with time.\",\n \"You have little chance of getting it deleted. I have the same situation, I closed mine in 2006, and the login still works. Keep the paperwork that you closed it (or print a PDF of the site showing so), and forget about it. If someone is trying to cheat, re-opening it should be the same difficulty as making a new one in your name, so it is not really an additional risk. You could also set the username and password both to a long random string, and not keep them. That soft-forces you to never login again. Note that it will also stay on your credit record for some years (but that's not a bad thing, as it is not in default; in the contrary). The only negative is that if you apply for credit, you might be ashamed of people seeing you ever having had a Sears or Macy's card or so.\",\n \"\\\"Aside from an annual fee, if any, the card issuer makes money 2 ways, the transaction fee, about 1.5%-2% charged to the merchant, and interest from you if you leave a balance month to month. Obviously, the bank has some cost in processing statements and maintaining your account. If up front you are saying you will not have any chance of providing a certain profit level, they may have no interest in your business. (As you updated.) Other card issuers (almost surely with fees) might. Put the cards on ice. A bag of water in freezer. Don't be so hasty that you ding your report this way. By trashing the history as well as utilization, you may impact your score enough to do some harm if you actually need credit in the near future. I know this is a game with the credit agencies, a \\\"\\\"how good a borrower am I\\\"\\\" game, but it can really impact your bottom line if you don't play along. In reply to Michael's comment 1/5/15, if I have one card and am budgeted for $1000/mo in spending, in order to keep utilization down to less than 20%, I'd need a line of more than $5000. Even if I ignore utilization, my January spending is $1000, but the bill is cut on the 31st and not due till Feb 25th. So a line of nearly $2000 is required unless you wish to make mid cycle payments on an ongoing basis.\\\"\",\n \"There are three parties involved here: there's the store that issued you the card, then they have some bank that's actually handling the account, and there is some network (VISA, MasterCard, etc.) that the transactions go through. So one avenue to consider is seeing whether all three are aware of you canceling the card.\",\n \"The number that really matters in this situation is your age of your longest account. Opening a new account is a good idea, but closing an old one may have an impact on your score if you have no other active accounts. If you have another card, or an overdraft line of credit or a car loan that is 4 or 5 years old, you won't see a big impact. I'd suggest calling the card company and asking them to waive the fee. They usually will. In the meantime, I would recommending having one card from each of the major networks. (MC, Visa, Discover, Amex) so you don't run into this again. Just don't open them all at once.\",\n \"\\\"If you look around online and read about credit scores, you'll find all kinds of information about what you should do to maximize your credit score. However, in my opinion, it just isn't worth rearranging your life just to try to achieve some arbitrary score. If you pay your bills on time and are regularly using a credit card, your score will take care of itself. Yes, you can cut up the card you don't like and keep the credit card account open. The bank may close your account at some point in the future because of a lack of activity, but if they do, don't worry about it. You have other accounts that you are using. Personally, I don't like having open credit accounts that I'm not using; I close accounts when I'm done with them. I realize that it goes against everything that you will read, but my score is very high and my oldest open credit card account is 2 years old. Don't let them scare you into credit activity that you don't want just to try to \\\"\\\"win\\\"\\\" at the credit score.\\\"\",\n \"Cancelled cards don't fall off the system for a long time, up to ten years. Card terms change, with notice of course, but it can happen at any time. I had a card with a crazy perk, 5% back in Apple Gift cards. This was pre-iPod days, but it was great to get a new computer every two years for free. But it was short lived. Three years into it, the cards were changed, a no-perk card from the bank. That is now my oldest account, and it goes unused. Instead of holding cards like this, I wish I had flipped it to a different card years ago. Ideally, your mix of cards should provide value to you, and if they all do, then when one perk goes away, it's time to refresh that card. This is a snapshot from my report at CreditKarma. (Disclosure, I like these guys, I've met their PR folk. I have no business relationship with them) Elsewhere on the page it's noted that average card age is a 'medium impact' item. I am 50, but I use the strategy above to keep the cards working for me. My current score is 784, so this B on the report isn't hurting too much. The tens of thousands I've saved in mortgage interest by being a serial refinancer was worth the hit on account age, as was the credit card with a 10% rebate for 90 days, the 'newest account' you see in the snapshot. In the end, the score manipulation is a bit of a game. And some of it is counter-intuitive. Your score can take a minor hit for actions that would seem responsible, but your goal should be to have the right mix of cards, and the lowest interest (long term) loans.\",\n \"If it is one of those debit cards you use just like a credit card without a PIN, I'd cancel it regardless of whatever you are trying to do with your finances. They just seem too dangerous to me. Unlike a credit card, if someone makes fraudulent purchases on a debit card the money is gone from your bank account until you resolve the issue with the issue. With a credit card, the BANK is out the money until it gets worked out. My brother once had his credit card number (not the card) stolen and the criminals emptied his bank account. Eventually the bank put the money back after an investigation, but it had two really nasty side effects: 1) Dozens of checks bounced. The bank refunded the bounced check fees, but not all of the stores would. 2) He had no money in his account until it was resolved. Luckily in his case they resolved it in a few days, but he was already making preparations to borrow money to pay his rent/bills.\",\n \"\\\"Your bank has discretion to honor checks after 6 months, so you should talk to your bank about their specific policy. In general, banks won't accept \\\"\\\"large\\\"\\\" stale checks. The meaning of \\\"\\\"large\\\"\\\" varies -- $25,000 in NYC, as little as $2k in other places. Banks that service high-volume check issuers (like rebate companies) reject checks at 180 days. For business purposes, I think some banks will create accounts for specific mailings or other purposes as well. (i.e. 2011 refund account) The accounts close after a year.\\\"\",\n \"Put one of your monthly bills on it. (Utility bill, Netflix, monthly donation to charity, etc.) I have several automatic, recurring monthly charges on my credit card. If you don't have any current monthly bills that you want to switch, contact the Red Cross, or a charity of your choice. They would be very happy to charge your credit card once a month. Alternatively, it might be okay to let it close.\",\n \"\\\"Most likely the bank will keep it on file for a few years then turn it over to the state as \\\"\\\"unclaimed property\\\"\\\". I can't speak for all states though.\\\"\",\n \"\\\"I'd say close them if they have fees, if you're worried about fraud or if you're going to be tempted to use them. It may have an affect on your credit rating, but it shouldn't hurt you seriously. Having too many cards gives you the \\\"\\\"opportunity\\\"\\\" to overspend, which obviously isn't good.\\\"\",\n \"If you want to close the card, close it. The impact on your credit score will be minimal, if any, and the impact on your life will likely be even less. First, as you noted, the history from your card does not disappear when you close the card; it will stay on your credit report for as long as 10 years. By that time, you'll have many years of on-time payments from your other cards, and the loss of this one card won't be significant. Because the card has a low credit limit, it won't have much effect on your credit utilization numbers, either. Finally, your credit score might just be high enough that a small drop will have no impact on your financial life whatsoever. In my opinion, hanging onto a credit card you don't want just to try to attain some type of high score is pointless. Close the card.\",\n \"No. There is no incentive for the card issuer to permanently loan you money for free (Even though they make a small amount of money with every transaction). Yes, there are many credit cards that offer introductory 0% APR, often lasting for a year, some even two years. In theory, you could keep applying for new cards with these terms, and continually transfer the balance to the new card (Though you would probably incur a fee for doing so).\",\n \"\\\"You should never close a credit card account unless it has an annual fee or you are overspending on it. Open lines of credit - even un-utilized ones - have a positive effect on your credit score. First of all, they increase your total credit which helps your score. Second of all, they are always \\\"\\\"paid on-time\\\"\\\" which is another benefit. Finally, they increase the length of your credit history. You can keep unused credit cards forever in your drawer. They are rarely closed due to inactivity and cost you nothing. However, if your card has an annual fee, you should close it. The potential loss to your credit score is unlikely to offset the annual fee.\\\"\",\n \"\\\"If it is planned, then one can get a Bankers Check payable overseas; if destination is known. 1.) What will happen to the money? It will eventually go to Government as escheating. Unlcaimed.org can help you trace the funds and recover it. 2.) Will the banks close the accounts? 3.) After how much time will the banks close the accounts? Eventually Yes. If there is no activity [Note the definition of activity is different, A credit interest is not considered as activity, a authentic phone call / correspondence to change the address or any servicing request is considered activity] for a period of One year, the account is classified as \\\"\\\"Dormant\\\"\\\". Depending on state, after a period of 3-5 years, it would be inactive and the funds escheated. i.e. handed over to Government. 4.) Is there anything else to do? Any ideas? Before leaving? Try keeping it active by using internet banking or credit / debit cards linked to the account. These will be valid activities. 5.) Is there any way to send a relative to the US with any kind of paper of power, to unfreeze the accounts? 6.) The banks say they would need a power of attorney, but does that person actually need to be an attorney in the US, or can it simply be a relative WITH a paper (a paper that says power of attorney) or what is a power of attorney exactly, is it an actual attorney person, or just a paper? 7.) Is there any other way to unfreeze the accounts? Although I can confirm first hand; I think there would be an exception process if a person cannot travel to the Bank. It could even be that a person is in some remote state, not well etc and can't travel in person. I think if you are out of country, you could walk-in to an US embassy and provide / sign relevant documents there and get it attested. Although for different purpose, I know a Power of Attorney being created in other country and stamped / verified by US embassy and sent it over to US. This was almost a decade back. Not sure about it currently.\\\"\",\n \"If you've got the money to pay off your credit cards, do it. Today, if possible. There is no need to pay another penny of interest to them. They may or may not cancel your cards. That is up to them. We can't know what will trigger an individual bank to cancel your card. The answers you got on your other question offer some speculation on why some banks might cancel, but this is not something banks reveal. Anything you do on your own to try to keep the cards open is just a guess, and may or may not succeed. But ask yourself: why do you want to keep these cards? Is it for the convenience of the card? I agree that credit cards (paid in full monthly) are convenient, but when they start costing you money, they aren't worth it anymore, in my opinion. Debit cards have most of the same conveniences of credit cards, and are free. If it is for emergencies, I recommend instead building up an emergency cash fund. That way, if an emergency arises, you won't be forced to borrow money at high credit card interest rates. If the reason you want to hang on to the credit card is so you can spend more than you have, then you will find yourself in the same situation again. If I were you, I would pay off the cards ASAP. If the banks cancel your cards, just switch to a debit card and be thankful that you are no longer continuously leaking money to the banks.\",\n \"I'm not sure if someone else answered already in the same manner I will. I can't guarantee for sure if it's the same in the U.S.A. (it might since major credit cards companies like Visa/MC/AMEX are American companies) but in Canada having/keeping unused CC is a disadvantage because of the following: Banks and financing companies look more at the total amount of credit available to you than at how much purchases you have on your cards. Ex: Let's say that you have the following: - Visa cc with $10,000 limit and $2000 worth of purchases (made more than 30 days ago) on it. - Mastercard cc with $10,000 limit as well and $1000 worth of purchases (less than 30 days old) - A major retail store cc with $2000 limit and $0 balance. Hypothetical situation: You want a bank loan to do some expensive house repairs and are looking for a lower interest rate than what your cc can offer. The bank will not care about the amount on the cards. They will add-up all the limits of your cc and treat your loan request as if ALL your cards were filled to their respective limit. So in this case: they will consider you as being right now in debt of $10K+$10K+$2K = $22,000 instead of only $3000 and they might: 1. refuse you the loan 2. grant it only if you transfer all purchases on a single card and cancel all the others. 3. Once the $3000 is transferred on one of the cards (and the others cancelled), they can require that you reduce the limit of that card. Hope this helps!\",\n \"Closed accounts are used when calculating Average Age of Accounts (AAoA) by FICO. They will drop off your report 7 years after their closure, at which time your AAoA will decrease and most likely lower your credit score. Keeping your oldest card with an annual fee (AF) is a tough question. Since the exact calculations are a secret, it's hard to quantify the value of that card. Keep in mind that if you do decide to close it now (or right before the next AF) it will continue to count for the next 7 years. What you can do is the following: Assume you won't be applying for any new cards in the next 7 years. Look at all your current accounts and calculate the AAoA of all of them that would still be on your report 7 years from now. Calculate it with and without your oldest card. The difference will show you the effect closing the card today will have. There is a potential way to raise your AAoA depending on if you have an AMEX card. AMEX reports all accounts as being open from your original 'member since' date. If your oldest AMEX (ever, not necessarily still open) is older than your AAoA, opening a new AMEX will actually raise your average. age of accounts is 15% of your score. note that some websites that calculate your AAoA for you (like creditkarma) don't count closed accounts, but since FICO does the age those websites generate should be ignored.\",\n \"Credit card companies are businesses. Businesses will make any decision that makes them money. So does it make them money to cancel your account? It's a simple cost-benefit analysis: you having an account with them will probably give them some benefit for very little cost to them. The only real cost associated with an open account is someone who uses the card but doesn't pay, but they're pretty sure you won't be doing that.\",\n \"\\\"I answered a similar question, How will going from 75% Credit Utilization to 0% Credit Utilization affect my credit score?, in which I show a graph of how utilization impacts your score. In another answer to Should I keep a credit card open to maintain my credit score?, I discuss the makeup of your score. From your own view at Credit Karma, you can see that age of accounts will help your score, so now is the time to get the right cards and stay with them. My background is technology (electrical engineer) and MBA with a concentration in finance. I'm not a Psychology major. If one is undisciplined, credit can destroy them. If one is disciplined, and pays in full each month, credit is a tool. The quoting of billionaires is a bit disingenuous. I've seen people get turned away at hotels for lack of a credit card. $1000 in cash would not get them into a $200/night room. Yes, a debit card can be used, but the rental car and hotel \\\"\\\"reserve\\\"\\\" a large amount on the card, so if you don't have a high balance, you may be out of town and out of luck. I'll quote another oft-quoted guru: \\\"\\\"no one gets rich on credit card rewards.\\\"\\\" No, but I'm on track to pay for my 13 year old's last semester in college with the rewards from a card that goes right into her account. It will be great to make that withdrawal and not need to take the funds from anywhere else. The card has no fee, and I've not paid them a dime in interest. By the way, with 1-20% utilization ideal, you want your total available credit to be 5X the highest monthly balance you'd every hit. Last - when you have a choice between 2% cash reward, and the cash discount Kevin manages, take the discount, obviously.\\\"\",\n \"\\\"I would think it extremely unlikely that an issuer would cancel your card for having an ADB of approximately zero. The issuer charges the vendor that accepts a card a percentage of the transaction (usually up to ~3%, AMEX is generally higher) - so they are making money even if you carry no balance on your card (the specific language for various vendor-side (acceptor) credit card agreements boils down to \\\"\\\"we are essentially giving you, the vendor, a short-term loan and you will pay us for it). This why you see credit-card minimum purchase amounts at places like hot-dog stands - they're getting nailed on the percentage. This is also why, when given the choice between \\\"\\\"Debit or Credit\\\"\\\" for a particular card, I choose where to put the hit on the company I like less - the retailer or the bank.\\\"\",\n \"A few years ago, I had the rare opportunity to take advantage of a credit card offer. Specifically, a 10% cash back deal on purchases at drug stores or supermarkets. The offer was limited to 90 days, so during that time, I bought 100 cash gift cards at my local CVS. Over the next year to use them all, when they dropped to a balance under $5 or so, I signed in to my cable TV account and charged the remaining balance there. No bothering a supermarket clerk, or store owner.\",\n \"\\\"There are two factors in your credit score that may be affected. The first is payment history. Lenders like to see that you pay your bills, which is the most straightforward part of credit scores IMO. If you've actually been paying your bills on time, though, then this should still be fine. The second factor is the average age of your open accounts. Longer is considered better here because it means you have a history of paying your bills, and you aren't applying for a bunch of credit recently (in which case you may be taking on too much and will have difficulties paying them). If this card is closed, then it will no longer count for this calculation. If you don't have any other open credit accounts, then that means as soon as you open another one, your average age will be one day, and it will take a long time to get it to \\\"\\\"good\\\"\\\" levels; if you have other matured accounts, then those will balance out any new accounts so you don't get hit as much. Incidentally, this is one of the reasons why it's good to get cards without yearly fees, because you can keep them open for a long time even if you switch to using a different card primarily.\\\"\",\n \"Definitely not. Credit cards only exist to suck you into the soulless corporate system. What you want to remember here is that you can't trust banks, so you'll want to convert all your savings into some durable asset, say, bitcoins for example, and then hoard them like Smaug until after the Fall.\",\n \"Technically, yes but, in practice, no. I use a card for everything and pay it off every month. Sometimes, several times a month depending on how the month is going. In the last 10 years, I've paid a total of $8 in interest because I legitimately forgot to pay my balance before the statement came out when I was out of town. I wasn't late, I just didn't beat the statement and had a small interest charge that I couldn't successfully argue off. In the same time period, I've had one card cancelled at the banks request. The reason was that I hadn't used it in two years so they cancelled me. I never pay annual fees, I get cards with great rewards programs and I (almost) never pay interest. If your bank cancels your card because you're too responsible, find a better bank.\",\n \"The assumption is not necessarily correct. While the seven years affects the credit report, the statute of limitations for collections may be different and is based on the State law where the debt was given (or a Federal law for NA banks). Keep in mind that the creditor can reset the clock any time by taking legal action, for example filing a lawsuit in a court to garnish some of his income or put a lien on some of his assets. Many times, just contacting the debtor is enough to reset the clock. The statute of limitations on collections is a legal issue and he should talk to a lawyer about it. Different accounts may have different statutes affecting them.\",\n \"When I last asked a certain large bank in the US (in 2011 or 2012), they didn't offer expiring personal checks. (I think they did offer something like that for business customers.) They also told me that, even if the payee cashes the check a year later and the check bounces, even if it's because I have closed the respective account, he will be able to go to the police and file a report against me for non-payment. (This is what the customer service rep told me on the phone after a bit of prodding, but someone else feel free to improve this answer and fix details or disagree; it's hard to believe and quite outrageous if true.)\",\n \"\\\"New Zealand has a statute of limitations on debt of six years, twelve years if it is \\\"\\\"a debt acknowledged in a deed\\\"\\\" (probably not the case here). If you have had no contact with the bank for that time, the debt expires. If you got convicted of a crime in relation to the debt (e.g. fraud) then that would fall under a different statute of limitations, but a bank isn't going to bother doing that over $600, and the courts would probably not accept the case anyway.\\\"\",\n \"And the card companies not only don't seem to care, they actively try to prevent public knowledge of the issue. I think Mythbusters was going to do a show about it, and on of the companies told Discovery they'd pull their large ad campaign if the show was aired.\",\n \"In general if there are no transactions for several years a bank will close the account. In my experience they also send at least one warning notice. If they do close the account they send it to the state. Each state has an unclaimed property office. You can contact them regarding the procedure to get the money. If this money was just turned over to the state there may be some lag time before you can get it back. Two notes: the state government doesn't charge a fee to get your money back. Don't pay a company a finder's fee. bank account's owned by minors don't have the same activity requirements as those owned by adults.\",\n \"Have you signed anything? If not - then tell them you don't know who they are and have not agreed to pay. If you did sign that piece of paper at the airport, then you have probably agreed to pay. Either way, it won't go away. As you've already discovered, ignoring things doesn't make them go away. You should make an effort, as hard as it may be, and call them. Notify them that you have never asked for this card, never activated it, and in fact never had it in your possession. You should stress out that it was issued without your authorization, which is probably illegal. And you wish the account to be closed and the charge reversed. Otherwise it will just grow and make your life miserable.\",\n \"It will be considered 'unused credit'. I have tried it yeas ago. They just report zero usage.\",\n \"Apparently it is up to the credit card company on how they want to report your available balance. Another disadvantage to the no-limit credit card may not be apparent to most people, but it is something noted by organizations like The Motley Fool, which is expert in many issues of finance and investment. Part of your credit score, about 30%, considers the amount of money you have borrowed, and the limit on your present credit cards. A no-limit credit card company may report your limit as $0 if you have not used the card, or they may report a maximum limit available to you. They may not, nor are they obligated, to report times when you put tons of expenses on a credit card and then paid them off. While some companies will report your timely payments and paid off amounts, others simply report an extremely low limit. For instance if you spent $100 US Dollars (USD), your limit might be considered $100 USD, or it may merely be reported as zero. You’ll need to check with a credit card company on how they report payments and limits on a no-limit credit card before you obtain one. Some people who are scrupulous are paying off their cards at the end of each month suffer major losses to their credit score, without even realizing it, if their spending ability is rated at zero, or their payments don’t count toward showing credit worthiness. Source\",\n \"They will credit your account and it will be applied to future purchases. If the credit card is not used for several months, they will send you a check or transfer it to your bank account. Some people on this site have actually considered sending money to the credit card company in advance, so that the amount that can be charged is temporarily inflated. Keep in mind they will eventually refund the money. Plus you will not earn interest on the refund.\",\n \"Absolutely. It's the way credit is calculated. The most important things here are credit utilization (how much of your open credit you're using, the less the better for your score) and and length of open credit. The longer you've had a credit card, the more it helps your score. If you use your card and pay it off before the bill comes, the credit card company still knows you're using the card and won't close it. I recommend you download credit karma so you can track your score and learn more about how credit is calculated.\",\n \"Hits to your credit rating for canceling one of the newer cards will be a small hit for a few months. You do have some options. I also believe that a person with good credit should have multiple cards: I like having a cash back card for the majority of our transactions. Unfortunately that card isn't accepted everywhere, so I have two other cards with broad market coverage to make sure we always have an option if the vendor doesn't take the main card. Also having multiple cards makes sure that if there is an issue with one card you are never caught without a card. One time the main card was rejected by a gas station because my wife just used the same account to buy gas across town. When we got home their was a fraud alert message on our phone.\",\n \"\\\"I actually had a similar situation when I tried to buy my house. I paid off all my loans and was proud of my \\\"\\\"debt free\\\"\\\" status. I had no car note, no student loans... absolutely no debt, but I did have a bank-issued credit card. (USAA, not Chase, but I assume the same may apply). When I tried to get a home loan they told me I had \\\"\\\"absolutely no information on my credit report.\\\"\\\" AKA I had no credit. The mortgage lender had no idea what was going on, nor did I or anybody else. It took a lot of research before I realized that the credit bureaus use a formula for the credit rating that involves a lot of things, but if you haven't had a current line of credit reported to the agency in over a year (maybe it was longer, I didn't have anything for 3 years) you aren't going to have a credit score. Because I was \\\"\\\"debt free\\\"\\\" I was also credit report free and eventually the credit bureaus had nothing to go on, and my score disappeared. The bank-issued credit card was on my credit report, but they didn't report monthly balances so the bureaus couldn't use it to determine if I was paying off the card or if I even had a balance on it. It was essentially not doing my credit any favors, despite what I had thought. In short, based on the fact that you have no debt in her name, and you have taken on all debt in your own name, its very plausible that she has no credit rating anymore. It won't take long to get it back. Once you have ANYTHING on your credit that's actually reported the formula can kick back in and look at credit history as well as current credit and she'll be fine.\\\"\",\n \"\\\"I think this stuff was more valid when grace periods were longer. For example, back in the 90's, I had an MBNA card with a 35 day grace period. Many business travellers used Diner's Club charge cards because they featured a 60 day grace period. There are valid uses for this: As JoeTaxpayer stated, if you are benefiting from \\\"\\\"tricks\\\"\\\" like this, you probably have other problems that you probably ought to deal with.\\\"\",\n \"Yes, you can. A friend of mine once did, don't know the reason why he was so foolish and couldn't use the debit card instead. I think maybe out of curiosity or he was drunk. But I know the consequences, the bank people asked him to pay all the previous debts relating to the card the same day or he was going to be paying alot of interest to them as a penalty. So, he did pay all the debts the same night.\",\n \"I agree with JoeTaxpayer that you will be better off in the end if you can just not use your card you are better off in the long run. That said if you are determined to get a card you can control go to a credit union or local bank. Most of them will give you the credit limit you want. This may provide you with a card that you can make use of but know that you can not go wild. The down side is most of these will not be reward cards but my local credit union gave me a 7% card where my Chase card is at 18%(was 5% before the changes to credit card regulations).\",\n \"Depends on your credit score. If you came from foreign country, you might not be having enough Credit Score. In that case, you have to go for Prepaid Credit Card offered by Banks. For prepaid credit card,you have to deposit certain amount of money which will act as your credit line.\",\n \"There is also security aspect. By reducing the number of active credit/debit cards, one significantly reduces the surface of attack. There is smaller chance of getting one of your card information stolen and misused (cf Target data leaks and others).\",\n \"The length of time you have established credit does improve your credit score in the long run. As long as you can avoid paying interest, you might see if you can get a card with cash back rewards. I have one from Citi that sends me a $50 check every so often when I have enough rewards built up.\",\n \"\\\"This does not directly address the question, but how the Bank views your behaviour is not the same as a credit reporting bureau. If you do not \\\"\\\"go deep\\\"\\\" on your card at all, you may be deemed not to be exercising the facility, indeed they may ask you to reduce your credit limit. This is not the same as \\\"\\\"missing a payment\\\"\\\". At the same time, do not just make the minimum payment. Ideally you should clear it within 3 months. Think of it as a very short term line of credit. Not clearing the balance within three months (or turning it over) demonstrates a cash flow problem, as does clearing it from another card. Some banks call this \\\"\\\"kite flying\\\"\\\" after similar behaviour in older days with cheque accounts. If you use the credit and show you can pay it off, you should never need to ask for a credit increase, it will be offered. The Bureau will be informed of these offers. Also, depending upon how much the bank trusts you, the Bureau may see a \\\"\\\"monthly\\\"\\\" periodic credit review, which is good if you have no delinquencies. Amex does this as a rule.\\\"\",\n \"This sounds like a shady trick. I would consult with a consumer debt lawyer in your area. Most county bar associations in the US have a referral service, where they recommend a local lawyer and there is a reduced fee for the initial visit. I think the statute of limitations is 10 years in most cases, but it depends on where you live. From these bare details,I think they don;t have much of a case. Go see a lawyer and don't let them harrass you.\",\n \"\\\"Time-Barred Debts and STATE STATUTES OF LIMITATION ON COLLECTING DEBTS are good places to start on the issues of what can be collected and for how long. What seems to be at issue is bankruptcy vs. time-barred debts vs. what creditors (original debt owners, not collection agencies or those who buy debt) can do. You should also check out The Fair Credit Reporting Act which governs some of the question. The Fair Credit Reporting Act and the section on time-barred debts applies to collection agencies, etc. (so-called debt owners as pointed out by @littleadv, since they buy debt from the creditors) not actual creditors (those the debt is/was originally owed to). Creditors (those to whom the debt was originally owed) have different rules than debt collectors and can do things debt collectors can't. State law generally governs what creditors, as original owners of the debt, can do legally and for how long. Bankruptcy Bankruptcy is a legal action that frees someone from paying all or part of debt owed (they are crying \\\"\\\"Uncle!\\\"\\\" and stating they don't have enough money to pay their creditors). On a credit report, accounts will generally be updated to show “included in bankruptcy\\\"\\\" or similar. Debt that is determined to still be owed often will be reduced in amount/payments. Time-barred Debts Time-barred debts are debts that are still owed, but cannot be collected through direct legal action (suing). Each state has its own statute of limitations on how long different types of debt can be collected by suing after initial default before being considered time-barred. This period is typically 3-6 years but a few states such as Kentucky allow much longer time periods (up to 15 years). Being a time-barred debt does NOT prevent a collector from contacting someone about a debt. Collectors can still try to collect a debt forever -- and probably will -- but they can't normally sue and collect payment once the statute of limitations period has passed. There are gotchas with time-barred debts regarding collection, however, which can make them still legally actionable. Making any payment, no matter how small, making a verbal commitment to pay or even acknowledging the time-barred debt is often enough to make the debt legally collectable, even if it would normally be past the statute of limitations for collection. This is again state-dependent, but it is a pitfall for many people. The process of making a debt collectable again is often called \\\"\\\"re-aging\\\"\\\". Re-aging essentially means the clock starts anew on the statute of limitations, extending the time that a creditor may use the courts to collect that debt. If someone is taken to court over a time-barred debt that is legally noncollectable (has not been legally re-aged), nothing happens to them. However, being time-barred does not prevent legal action in the sense that you still have to prove the debt is time-barred and noncollectable in court if your sued over it. Being time-barred does not mean the debt \\\"\\\"dissolves\\\"\\\". A debt is always owed unless the debt has been forgiven or discharged in bankruptcy court. This means that, combined with the ability of debt collectors to contact someone about out of statute debt and the pitfalls of re-aging, it is entirely possible for a debt collector to get a 20 year old debt actionable again. Also note that while someone is trying to dodge a debt to make it time-barred (e.g. by not paying anything), creditors and debt collectors can still take legal action to sue over the debt, and if they get a judgment against someone, this can extend the debt indefinitely. Judgements will eventually lapse, but often only after 10 years or more, and many states allow dormant judgements to be \\\"\\\"revived\\\"\\\" within that time period. Credit Reports Regarding credit reports, whether someone owes a debt and whether it appears on a credit report are two separate things. As previously stated, no debt \\\"\\\"dissolves\\\"\\\" or goes away unless some sort of legal action makes it so. As far as reporting is concerned, however, most \\\"\\\"bad\\\"\\\" credit stops being reported after seven years (by federal law). That is, accounts on a credit report will be deleted seven years from the original delinquency dates of the accounts regardless of being included in bankruptcy or as time-barred debt. This assumes no legal process allows the account to continue being reported (as is often the case with re-aging). As an FYI, a bankruptcy discharge date has nothing to do with when account information will be removed from your credit report. Note that some debts, such as tax liens, can be reported indefinitely. Should bankruptcy be considered? The decision to do bankruptcy is mostly a matter of how severe the debt is. If it is an extremely large amount and assets are very small, bankruptcy is a good route in so far as it will legally take care of a lot of loose ends and likely relieve most or all of the burden of actually owing the money. Credit-wise, 10 years is the maximum a bankruptcy (specifically) will appear on a credit report. Accounts may drop off a credit report before bankruptcy because they are past the seven years they can be legally reported. Debts owed to the state such as child support, student loans, income tax, etc. generally cannot be written off and aren't subject normal debt statute of limitations on collection. Finally, bad credit is bad credit -- there is likely to be little difference in terms of ability to get loans between bankruptcy and attempting to dodge legal action to make debts time-barred. If the debt is significant, bankruptcy may be the only sensible option.\\\"\",\n \"No credit card company would ever give a card with either no credit limit or that was not in credit (for prepaid cards) because they would earn no money from it. The company's income is entirely derived from fees that they charge you for balances and interest on those balances so a 0 limit card would be worthless to them. Getting a prepaid card and letting the balance hit 0 might be a way around this but the fees that you will be charged , and will become a debt in your name, when the billing system tries to take the first paid month's cost from the card and fails will be exorbitant. They may go so far as dwarfing the actual cost but the one thing that they will certainly do is lower your credit rating so this is not a good idea.\",\n \"I have a few debts in collection. I do not care, I make very good money now, but I prefer to spend it on nice cars instead. In US after 7 years they do not affect your credit score. On the contrary, if you pay them they can ding your credit. That's what Susie Orman show says as well -- there is absolutely no point paying a debt that is more than 7 years old.\",\n \"Close the account. The age doesn't outweigh the fact that you have to pay for the card. It would be one thing if the credit line was a couple thousand but showing the credit bureaus that you are staying away from the $425.00 doesn't really make them think you are any more trustworthy with your available credit. Utilization matters when you are staying away from much larger chunks of your available credit (across all cards).\",\n \"You don't need to use an open line of credit to help your credit score. You didn't ask this, but another option is to not cut up the card and keep the account open, even if you don't use it. I mention this because sometimes when you are calling in or setting up an online account to service the card, you may need to have the expiration date and CVV code on hand. This has burned me a few times as I had to hunt around for a card I rarely ever use. That being said, if you are worried that you might use the card if you know it's there, then sure, cut it up.\",\n \"\\\"These agencies consolidate your debt and make it an easy monthly instalment for you. They also try to negotiate with credit cards. They do so for a fee. Other option is to not pay the debt. During this time , expect credit cards to keep sending you bills and reminders and ways to contact you. Once it is not paid for a significant amount of time ( 18 months ) , the lender will \\\"\\\"sell\\\"\\\" your debt to a collection agency. You will start getting bills from collection agencies. Collection agencies can settle for up to 40 % of the actual debt. So if you had 5 credit cards , you would have 5 different collection agencies trying to get in touch with you. You can call them and tell them that you cannot pay the full amount. They will offer you settlements which you can accept or decline. The longer the unpaid debt , the more the discount they will offer. One very important thing to remember is that the unpaid amount will be sent to you on a 1099-c form . This means you have to recognize this as income. It is applicable to the year when the debt is settled. In a nut shell , you owe 120,000. You don't pay. Credit cards keeps calling you. You don't pay. After 12-18 months , they handover your debt to collection agencies. Collection agencies will try to get in touch with you. Send you lawsuit letters. You call and settle for say 50,000. You pay off 50,000 in 2016. Your debt is settled. But wait you will get 1099-C forms from different agencies totaling 70,000 ( unpaid debt ). You will have to declare that as income and you will owe tax on that. Assuming say 30 % tax you will have to pay up 21,000 as tax to IRS assuming no other income for simplicity. SO what you did was pay up 50 + 21 = 71,000 and settled the debt of 120,000. Your credit score will be much better than if you never paid at all.\\\"\",\n \"If you have any automated, recurring payments attached to the credit card, having the number cancelled can result in major losses - for instance, domain name expiration, VPS deletion, deactivation of mobile or VoIP phone service, etc. Good providers will give you a warning and plenty of time to replace the payment method on record, but I wouldn't necessarily trust them all to handle it well.\",\n \"You're right to keep the oldest one. That's an asset to your credit rating. Since you're already responsible with your credit, a dip in your credit rating doesn't really matter unless you're looking for another loan, like a mortgage. I personally like the cash-back rewards because they're the most flexible, so you have a good thing going with that card. Do those reward cards give you perks on all of your purchases? If they do, then look carefully to see if you can do noticeably better with another card. If not, it may not really be worth it. Regarding cancelling one of the cards, I wouldn't, and here's why. Your cards can get compromised, and sometimes more than one gets compromised at the same time. I was glad that I had three cards, because two of them got hit the same day. Hence, having three cards hit on the same day is possible, and you'll be glad that you have the fourth.\",\n \"\\\"Several events will always result in a reduction of your score, including: These will show up in the short term, but I don't think it's worth $40 per year in perpetuity to avoid this. These aren't serious \\\"\\\"black marks\\\"\\\" in the same category as missing payments, carrying too much debt, or foreclosures/evictions, etc. These effects are designed to signal issuers when someone acquires a large amount of credit in a very short period of time, which may indicate a greater risk. If your credit is good and you are using your other cards responsibly, closing the card (given the annual fee) would not cause me great concern if it were me. Since you are so much better of a risk than you likely were in college, you can also call Capital One, ask to speak with a supervisor, and ask them to drop the fee and increase your credit limit. They should be able to easily verify that you meet the requirements for other types of preferred cards they offer, and they should be willing to offer you improved terms rather than losing your business. It is very possible they simply haven't re-evaluated your risk since you initially applied. Also, remember that these types of effects determine only a portion of your overall score. Activity is also a major component. Rather than leaving an unused card open for history and debt-to-limit purposes only, I would also recommend having some minimum level of activity, such as an automatic bill payment, on each card you carry. The effect of using your cards over time will have a significant positive effect on your score. Best of luck!\\\"\",\n \"The bank doesn't keep it. It will stay unclaimed until the unclaimed assets process in the state that the bank branch is in kicks in. At that point it it a state by state process, with each state being different. You will need to inquire to the state government about what the process is in that state. (This will probably be searchable online.)\",\n \"The typical rule in the US is 180 days, but some banks do it differently. However, even if the check is dead, you should be able to call the payroll department for your old job. They can stop payment on the old check and issue you another one.\",\n \"You should pay things off every month. You don't want to be paying 10%-25% interest if you don't have to. If you regularly use you card, the credit agencies can't tell the difference. The way it works is that every month, they send the credit agencies your current balance and if you paid the last bill on time. There is nothing that indicates if this is a standing balance, or if you charged all of it since the last payment. Any business that you legitimately owe a debt to can report that to the credit agencies. Not all of them do. This includes utilities, cell phone companies, landlords, etc. If any of them report overdue items it will show up on your credit report, and your credit card company can use that to raise you interest rate. Some cards will automatically raise you credit limit. They are basically looking to make money fro you. If you often charge near the limit, and pay the minimum balance each month, they may raise your limit to get you to charge more, and pay more interest. You can also call them and ask. They have some internal rules to decide if, based on your history with them and your credit history, if you are a good risk.\",\n \"Question 1: Who do I report such fraud to? Walmart, or their card processor. They may be in their right to require the original purchaser to do the report. Generally, credit card and debit card fraud must be reported to the bank within 60 days of the statement for them to take responsibility. I don't see why gift cards would be different. You can also report it to the police, but I believe you'll be asked to file a report in the jurisdiction where the card was used. Again - time is of the essence, and there's nothing much they could do with your report now. Question 2: How can I recover the $100 value of my Walmart gift card? At this point, 2.5 years later when the card was used to buy prepaid cards, there's no way to catch the thief and recover the funds. Had you reported it promptly, Wlamart could have block the prepaid cards sold or track their usage, but now is too late. Question 3: Is Citibank in any way liable? (The gift card was fraudulently used shortly after---within the same month---I received it from Citibank.) I doubt it unless you can show a pattern. It could be someone working for the Citibank, someone working for the USPS, or someone just stole a bunch of numbers and waited until they became activated.\",\n \"If you are the main account holder I would try contacting your bank directly, some of them have very accommodating services for this kind of thing. You might even consider going in person if you have a local branch, this might just make communicating easier. They will probably go over your recent transactions with you to identify the fraudulent ones. You might do this first by yourself if you have an online account. Once you identify the fraudulent purchases they will probably take a week or two to investigate/process and reimburse you. But do NOT just close the account and forget about it- first off closing an account that is close to $2,000 in debt probably isn't even possible. Second, if you forgot about it for a long time and just let you credit take a hit you could end up really paying for it(in the form of higher interest payments) later in life when you try to get anything financed like car or house or even student loans for college. And make no mistake that can amount to *maaany* thousands of dollars more than you would otherwise pay over the course of a loan. So don't damage your credit if you can avoid it. Long story short, banks have special departments to handle this kind of thing, so work with your bank. See how that goes, if you run into hangups you may need to bring your parents into the loop. Good luck!\",\n \"Each bank is different. Usually in my experience for newer credit card accounts, there is a specific number of days in a billing cycle (something like 28) and then a 20-25 day grace period. Older accounts usually have 30+ day billing cycles. Back in the 90's, many cards also had 30-40 day grace periods. The language specific to your card is in the card agreement.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["how can I keep my website running for posterity after I die? If this is the real problem, incorporate a non-profit corporation or have a lawyer set up a foundation. Those will survive after your death and their bank accounts with them. You might even find someone willing to do this for you. It sounds like a neat business. Collect the ad revenue, charge a fee, pay the web hosting. Heck, this is a decent deal for a web host. Provide the web hosting; collect the ad revenue.","Generally speaking the bank accounts and credit card accounts remain open. Banks and the credit card companies don't monitor public records on a daily basis. Instead, whoever is handling your estate will need to obtain copies of your death certificate and they will then search your paper records to identify all accounts (reason to get your act together - there are books on the subject). The executor will work with the banks and card companies to make sure all your charges and payments clear (common to have them open for months or even a year) and to make close or transfer autopays. They will make sure to notify the credit agencies to flag your accounts so no new accounts can be created. MANY copies of the death certicates are needed."],"string":"[\n \"how can I keep my website running for posterity after I die? If this is the real problem, incorporate a non-profit corporation or have a lawyer set up a foundation. Those will survive after your death and their bank accounts with them. You might even find someone willing to do this for you. It sounds like a neat business. Collect the ad revenue, charge a fee, pay the web hosting. Heck, this is a decent deal for a web host. Provide the web hosting; collect the ad revenue.\",\n \"Generally speaking the bank accounts and credit card accounts remain open. Banks and the credit card companies don't monitor public records on a daily basis. Instead, whoever is handling your estate will need to obtain copies of your death certificate and they will then search your paper records to identify all accounts (reason to get your act together - there are books on the subject). The executor will work with the banks and card companies to make sure all your charges and payments clear (common to have them open for months or even a year) and to make close or transfer autopays. They will make sure to notify the credit agencies to flag your accounts so no new accounts can be created. MANY copies of the death certicates are needed.\"\n]","isConversational":false}}},{"rowIdx":87,"cells":{"_id":{"kind":"string","value":"8002"},"query":{"kind":"string","value":"What is the tax treatment of scrip dividends in the UK?"},"gt_ids":{"kind":"list like","value":["118786","265159","34767"],"string":"[\n \"118786\",\n \"265159\",\n \"34767\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1,1],"string":"[\n 1,\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["118786","217006","162454","265159","556144","32600","267067","263312","97842","138835","5224","392313","42521","193485","222320","115333","99448","259341","34767","110983","19144","213927","314200","89786","531423","128322","138795","245753","458431","456436","210889","474512","510599","348424","511528","532259","521604","481169","123047","437907","379463","227064","557181","85926","321114","105781","256972","472470","145999","571258","414505","423929","530410","251394","361482","379357","195977","106024","277464","537371","248269","447197","154667","459953","202645","179855","99200","33208","526714","15972","248167","149696","118663","291214","548705","596518","235266","553332","478802","326559","396180","227046","434252","507276","481555","180500","120899","158185","489044","289120","310326","387747","481283","30654","113876","11122","61103","354236","431676","528908"],"string":"[\n \"118786\",\n \"217006\",\n \"162454\",\n \"265159\",\n \"556144\",\n \"32600\",\n \"267067\",\n \"263312\",\n \"97842\",\n \"138835\",\n \"5224\",\n \"392313\",\n \"42521\",\n \"193485\",\n \"222320\",\n \"115333\",\n \"99448\",\n \"259341\",\n \"34767\",\n \"110983\",\n \"19144\",\n \"213927\",\n \"314200\",\n \"89786\",\n \"531423\",\n \"128322\",\n \"138795\",\n \"245753\",\n \"458431\",\n \"456436\",\n \"210889\",\n \"474512\",\n \"510599\",\n \"348424\",\n \"511528\",\n \"532259\",\n \"521604\",\n \"481169\",\n \"123047\",\n \"437907\",\n \"379463\",\n \"227064\",\n \"557181\",\n \"85926\",\n \"321114\",\n \"105781\",\n \"256972\",\n \"472470\",\n \"145999\",\n \"571258\",\n \"414505\",\n \"423929\",\n \"530410\",\n \"251394\",\n \"361482\",\n \"379357\",\n \"195977\",\n \"106024\",\n \"277464\",\n \"537371\",\n \"248269\",\n \"447197\",\n \"154667\",\n \"459953\",\n \"202645\",\n \"179855\",\n \"99200\",\n \"33208\",\n \"526714\",\n \"15972\",\n \"248167\",\n \"149696\",\n \"118663\",\n \"291214\",\n \"548705\",\n \"596518\",\n \"235266\",\n \"553332\",\n \"478802\",\n \"326559\",\n \"396180\",\n \"227046\",\n \"434252\",\n \"507276\",\n \"481555\",\n \"180500\",\n \"120899\",\n \"158185\",\n \"489044\",\n \"289120\",\n \"310326\",\n \"387747\",\n \"481283\",\n \"30654\",\n \"113876\",\n \"11122\",\n \"61103\",\n \"354236\",\n \"431676\",\n \"528908\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["I wrote about this in another answer: You can sell the scrip dividend in the market; the capital gain from this sale may fall below the annual tax-free allowance for capital gains, in which case you don't pay any capital gains tax on that amount. For a cash dividend, however, there isn't a minimum taxable amount, so you would owe dividend tax on the entire dividend (and may therefore pay more taxes on a cash dividend). Since you haven't sold the shares in the market yet, you haven't earned any income on the shares. You don't owe taxes on the scrip until you sell the shares and earn capital gains on them. HMRC is very explicit about this, in CG33800: It is quite common for a company, particularly a quoted company, to offer its shareholders the option of receiving additional shares instead of a cash dividend. The expression `stock or scrip dividend' is used to describe shares issued in such circumstances. The basic position under tax law is that when a company makes a bonus issue of shares no distribution arises, and the bonus issue of shares is not income for tax purposes in the hands of the recipient. Obviously, if this is an issue for you, talk to a tax professional to make sure you get it right.","Am I correct in understanding that a Scrip Dividend involves the issue of new shares instead of the purchase of existing shares? Yes. Instead of paying a cash dividend to shareholders, the company grants existing shareholders new shares at a previously determined price. This allows shareholders who join the program to obtain new shares without incurring transaction costs that would normally occur if they purchased these shares in the market. Does this mean that if I don't join this program, my existing shares will be diluted every time a Scrip Dividend is paid? Yes, because the number of shares has increased, so the relative percentage of shares in the company you hold will decrease if you opt-out of the program. The price of the existing shares will adjust so that the value of the company is essentially unchanged (similar to a stock split), but the number of outstanding shares has increased, so the relative weight of your shares declines if you opt out of the program. What is the benefit to the company of issuing Scrip Dividends? Companies may do this to conserve their cash reserves. Also, by issuing a scrip dividend, corporations could avoid the Advanced Corporation Tax (ACT) that they would normally pre-pay on their distributions. Since the abolition of the ACT in 1999, preserving cash reserves is the primary reason for a company to issue scrip dividends, as far as I know. Whether or not scrip dividends are actually a beneficial strategy for a company is debatable (this looks like a neat study, even though I've only skimmed it). The issue may be beneficial to you, however, because you might receive a tax benefit. You can sell the scrip dividend in the market; the capital gain from this sale may fall below the annual tax-free allowance for capital gains, in which case you don't pay any capital gains tax on that amount. For a cash dividend, however, there isn't a minimum taxable amount, so you would owe dividend tax on the entire dividend (and may therefore pay more taxes on a cash dividend).","Yes. Instead of paying a cash dividend to shareholders, the company grants existing shareholders new shares at a previously determined price. I'm sorry, but scrip issues are free (for all ordinary shareholders) and are in proportion to existing share holding. No payment is required from shareholders. So instead of having 10 $1 shares, the shareholder (if accepts) now could have 20 50p shares, if it was a one-for-one scrip issue.","The HMRC website says: Stock dividends are treated as income by virtue of CTA10/S1049, and taxable as savings income under Chapter 5 of Part 4 of ITTOIA05 (sections 409 to 414). ITTOIA05 is the Income Tax (Trading and Other Income) Act 2005, and says: 409 Charge to tax on stock dividend income (1) Income tax is charged on stock dividend income. (2) In this Chapter “stock dividend income” means the income that is treated as arising under section 410. 411 Income charged (1) Tax is charged under this Chapter on the amount of stock dividend income treated for income tax purposes as arising in the tax year. (2) That amount is the cash equivalent of the share capital on the issue of which the stock dividend income arises (see section 412), grossed up by reference to the dividend ordinary rate for the tax year.","Most corporations have a limit on the number of shares that they can issue, which is written into their corporate charter. They usually sell a number that is fewer than the maximum authorized number so that they have a reserve for secondary offerings, employee incentives, etc. In a scrip dividend, the company is distributing authorized shares that were not previously issued. This reduces the number of shares that it has to sell in the future to raise capital, so it reduces the assets of the company. In a split, every share (including the authorized shares that haven't been distributed) are divided. This results in more total shares (which then trade at a price that's roughly proportional to the split), but it does not reduce the assets of the company.","Scrip dividends are similar to stock splits. With a stock split, 100 shares can turn into 200 shares; with scrip dividends they might turn into 105 shares.","In the US this is considered a sale, and the proceeds will be taxed as if you've sold the stocks in any other way. The decision about the treatment (capital, ordinary, etc) is dependent on what kind of stock that is, how you acquired it, how long have you held it, etc. If it is a regular stock that you bought as an investment and held it for more than a year - then it will likely to be a capital gain treatment. However, this is only relevant for the US taxation. Since you're a UK person, you should also check how it is handled in the UK, which may or may not be different.","\"The shares are \"\"imputed income\"\" / payment in kind. You worked in the UK, but are you a \"\"US Person\"\"? If not, you should go back to payroll with this query as this income is taxable in the UK. It is important you find out on what basis they were issued. The company will have answers. Where they aquired at a discount to fair market value ? Where they purchased with a salary deduction as part of a scheme ? Where they acquired by conversion of employee stock options ? If you sell the shares, or are paid dividends, then there will be tax withheld.\"","Income and Capital are taxed separately in the uk. You probably can't get dividends paid gross even in ISA's you pay the basic rate of tax on dividends only higher rate tax payers get tax benefit from dividends. What you could do is invest in splits (Spilt capital investment trusts ) in the share class where all the return comes as capital and use up some of your yearly CGT allowance that way.","If you expect to pay tax on dividends move dividend producing assets into your ISA. If have a lot of investments you can Look at Zeros (zero dividend preference share) issued by splits (split capital trusts), https://en.wikipedia.org/wiki/Split_capital_investment_trust","If you sell your shares for more than their value at the time you received them (i.e. you make a profit) then you will be liable for capital gains tax - but only if the profit exceeds your annual allowance (£11,100, in tax year 2015-16). This is unrelated to how you came by the shares in the first place. (Note that there are certain exemptions to this, which includes some employer share schemes.)","non-resident aliens to the US do not pay capital gains on US products. You pay tax in your home country if you have done a taxable event in your country. http://www.investopedia.com/ask/answers/06/nonusresidenttax.asp#axzz1mQDut9Ru but if you hold dividends, you are subject to US dividend tax. The UK-US treaty should touch on that though.","\"If you sell a stock, with no distributions, then your gain is taxable under §1001. But not all realized gains will be recognized as taxable. And some gains which are arguably not realized, will be recognized as taxable. The stock is usually a capital asset for investors, who will generate capital gains under §1(h), but dealers, traders, and hedgers will get different treatment. If you are an investor, and you held the stock for a year or more, then you can get the beneficial capital gain rates (e.g. 20% instead of 39.6%). If the asset was held short-term, less than a year, then your tax will generally be calculated at the higher ordinary income rates. There is also the problem of the net investment tax under §1411. I am eliding many exceptions, qualifications, and permutations of these rules. If you receive a §316 dividend from a stock, then that is §61 income. Qualified dividends are ordinary income but will generally be taxed at capital gains rates under §1(h)(11). Distributions in redemption of your stock are usually treated as sales of stock. Non-dividend distributions (that are not redemptions) will reduce your basis in the stock to zero (no tax due) and past zero will be treated as gain from a sale. If you exchange stock in a tax-free reorganization (i.e. contribute your company stock in exchange for an acquirer's stock), you have what would normally be considered a realized gain on the exchange, but the differential will not be recognized, if done correctly. If you hold your shares and never sell them, but you engage in other dealings (short sales, options, collars, wash sales, etc.) that impact those shares, then you can sometimes be deemed to have recognized gain on shares that were never sold or exchanged. A more fundamental principle of income tax design is that not all realized gains will be recognized. IRC §1001(c) says that all realized gains are recognized, except as otherwise provided; that \"\"otherwise\"\" is substantial and far-ranging.\"","\"A nondividend distribution is typically a return of capital; in other words, you're getting money back that you've contributed previously (and thus would have been taxed upon in previous years when those funds were first remunerated to you). Nondividend distributions are nontaxable, so they do not represent income from capital gains, but do effect your cost basis when determining the capital gain/loss once that capital gain/loss is realized. As an example, publicly-traded real estate investment trusts (REITs) generally distribute a return of capital back to shareholders throughout the year as a nondividend distribution. This is a return of a portion of the shareholder's original capital investment, not a share of the REITs profits, so it is simply getting a portion of your original investment back, and thus, is not income being received (I like to refer to it as \"\"new income\"\" to differentiate). However, the return of capital does change the cost basis of the original investment, so if one were to then sell the shares of the REIT (in this example), the basis of the original investment has to be adjusted by the nondividend distributions received over the course of ownership (in other words, the cost basis will be reduced when the shares are sold). I'm wondering if the OP could give us some additional information about his/her S-Corp. What type of business is it? In the course of its business and trade activity, does it buy and sell securities (stocks, etc.)? Does it sell assets or business property? Does it own interests in other corporations or partnerships (sales of those interests are one form of capital gain). Long-term capital gains are taxed at rates lower than ordinary income, but the IRS has very specific rules as to what constitutes a capital gain (loss). I hate to answer a question with a question, but we need a little more information before we can weigh-in on whether you have actual capital gains or losses in the course of your S-Corporation trade.\"","\"In the USA there are two ways this situation can be treated. First, if your short position was held less than 45 days. You have to (when preparing the taxes) add the amount of dividend back to the purchase price of the stock. That's called adjusting the basis. Example: short at $10, covered at $8, but during this time stock paid a $1 dividend. It is beneficial for you to add that $1 back to $8 so your stock purchase basis is $9 and your profit is also $1. Inside software (depending what you use) there are options to click on \"\"adjust the basis\"\" or if not, than do it manually specifically for those shares and add a note for tax reviewer. Second option is to have that \"\"dividednd payment in lieu paid\"\" deducted as investment expence. But that option is only available if you hold the shorts for more than 45 days and itemize your deductions. Hope that helps!\"","With the W8-Ben filed, tax will be withheld at a lower rate. (I would expect 10%). Tax treaty treatment will mean that this witholding will reduce your UK tax even if this payment is not taxable there. This is only effective if you actually pay tax. This is how it works for lotteries and dividends as well.","\"Apparently box 39 does not receive half of box 38 if \"\"The price of the share or unit is less than its fair market value when the agreement was made.\"\" - the last point in paragraph 110(1)(d): *http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/fnncl/scrty/stckpt03-eng.html#dspst The employee can claim a deduction under paragraph 110(1)(d) of the Income Tax Act if all of the following conditions are met:\"","\"Some investment trusts have \"\"zero dividend preference shares\"\" which deliver all their gains as capital gains rather than income, even if the trust was investing in income yielding stocks. They've rather gone out of fashion after a scandal some years ago (~2000). Good 2014 article on them here includes the quote \"\"Because profits from zero dividend preference shares are taxed as capital gains, they can be used tax efficiently if you are smart about how you use your annual capital gains tax allowance.\"\"\"","The HMRC website would explain it better to you. There is a lot of factors and conditions involved, so refer to the HMRC website for clarification. If your question had more details, it could have been easy to pinpoint the exact answer. Do I declare the value of shares as income Why would you do that ? You haven't generated income from that yet(sold it to make a profit/loss), so how can that be declared as income.","In the US, dividends have special tax treatment similar to, but not the same as Capital Gains. No easy way to transform one to the other, the very fact that you invested your money in a company that has returned part of your capital as income means it is just that, income. Also in the US, you could invest in Master Limited Partnerships. These are companies that make distributions that are treated as a return of capital, instead of dividends. Throughout the life of the investment you receive tax forms that assign part of the operating expense/loss of the company to you as a tax payer. Then at the end of the investment life you are required to recapture those losses as Capital Gains on sale of the stock. In some ways, these investments do exactly what you are asking about. They transform periodic income into later capital gains, basically deferring tax on the income until the sale of the security. Here is an article I found about MLPs coming to the UK through an ETF: Master Limited Partnerships in the UK","The key point is from the penultimate sentence in your second paragraph: for which you have already paid taxes When you receive a dividend or realise a capital gain, you get taxed on that then, and you shouldn't have to pay taxes on it again in future. So the cost basis gets adjusted to reflect that.","\"It sounds like \"\"bonus shares\"\" are the same as a stock dividend. Stock dividends are equivalent to a stock split except for accounting treatment (good explanation here: http://www.accountingcoach.com/online-accounting-course/17Xpg05.html). As an investor, the only likely effect of a stock dividend is to make it more complex to keep track of cost basis and do your taxes. There's no economic effect, it's just rearranging accounting numbers.\"","If you received shares as part of a bonus you needed to pay income tax on the dollar valuse of those shares at the time you received them. This income tax is based on the dollar value of the bonus and has nothing to do with the shares. If you have since sold these shares you will need to report any capital gain or loss you made from their dollar value when you received them. If you made a gain you would need to pay capital gains tax on the profits (if you held them for more than a year you would get a discount on the capital gains tax you have to pay). If you made a loss you can use that capital loss to reduce any other capital gains in that income year, reduce any other income up to $3000 per year, or carry any additional capital loss forward to future income years to reduce any gains or income (up to $3000 per year) you do have in the future.","\"You will receive a combination of Verizon shares and cash whether you chose option B or C. Option B means that your \"\"Return of Value\"\" will be treated as capital - ie: as a capital gain. Option C means that your \"\"Return of Value\"\" will be treated as income - ie: as a dividend. As your ISA has favourable tax status, you don't end up paying any capital gain tax or income tax on dividend income. So it won't matter which option you chose.\"","The broker that is issuing the moneys after vesting is more than likely deducting a notional amount of tax and NI based on UK income tax laws. If you are not a UK resident, then you should pay income tax on those stock options based on your own tax residency. Best thing to do is speak directly with the broker to explain the situation, ask them to not deduct anything from your stock options - but keep in mind that you will need to declare these earnings yourself and pay the correct rate of tax. From my own personal experience, the UK employer more than likely receives the net value (after the notional tax and NI have been deducted) and in usual circumstances create a tax liability on your payslip (if you were working and had earnings). If of course this deduction is being made by the employer, then you can simply ask them to correct this (most UK payroll software will automatically deduct tax and NI for payments after leaving unless manually intervened, so they probably aren't aware if it is them doing so).","Now i want to get this money in my new UK bank account, does this mean that gov will take taxes from this money as well. Yes that is income and you have to pay tax on that. But it might be a bit complicated than that, so I would ask you to call up HMRC or visit an accountant or maybe ask the finance people of your employer. Also one of my family members send us money every few months and will send to this bank from now on, does taxes also apply on this? See the HMRC page about capital gains tax on gifts: You won't have to pay Capital Gains Tax when you give a gift to your husband, wife or civil partner - as long as both of the following apply: It's useful to keep a note of what the asset cost you. Your spouse or civil partner may need this to work out their Capital Gains Tax when they dispose of the asset. Example: Mr B lives with his wife and gives her an antique table that he bought for £12,000 in 2003. Mrs B spends £500 restoring the table, eventually selling it for £20,000. Her total costs are £12,500 (£500 plus Mr B's original cost £12,000). Mrs B's gain is £7,500 (£20,000 less £12,500). When you make a gift to a family member or other person you're connected with, you'll need to work out the gain or loss. This doesn't apply to gifts you make to your spouse or civil partner. This also applies if you dispose of an asset to them in any other way - for example, you sell it to them for a low price. A 'connected person' in this context is someone such as your brother, sister, child, parent, grandparent, mother-in-law or business partner. Follow the link below for more information about connected people and Capital Gains Tax. You must get a valuation of the asset at the time you made the gift. Use this value in place of any amount you received for the asset to work out your gain or loss. If you gave the asset away, then of course the amount you received for it will be nothing. If you make a loss you can only deduct the loss from gains you make on gifts or other disposals to the same person.","\"I'd agree that this can seem a little unfair, but it's an unavoidable consequence of the necessary practicality of paying out dividends periodically (rather than continuously), and differential taxation of income and capital gains. To see more clearly what's going on here, consider buying stock in a company with extremely simple economics: it generates a certain, constant earnings stream equivalent to $10 per share per annum, and redistributes all of that profit as periodic dividends (let's say once annually). Assume there's no intrinsic growth, and that the firm's instrinsic value (which we'll say is $90 per share) is completely neutral to any other market factors. Under these economics, this stock price will show a \"\"sawtooth\"\" evolution, accruing from $90 to $100 over the course of a year, and resetting back down to $90 after each dividend payment. Now, if I am invested in this stock for some period of time, the fair outcome would be that I receive an appropriately time-weighted share of the $10 annual earnings per share, less my tax. If I am invested for an exact calendar year, this works as I'd expect: the stock price on any given day in the year will be the same as it was exactly one year earlier, so I'll realise zero capital gain, but I'll have collected a $10 taxed dividend along the way. On the other hand, what if I am invested for exactly half a year, spanning a dividend payment? I receive a dividend payment of $10 less tax, but I make a capital loss of -$5. Overall, pre-tax, I'm up $5 per share as expected. However, the respective tax treatment of the dividend payment (which is classed as income) and the capital gains is likely to be different. In particular, to benefit from the \"\"negative\"\" taxation of the capital loss I need to have some positive capital gain elsewhere to offset it - if I can't do that, I'm much worse off compared to half the full-year return. Further, even if I can offset against a gain elsewhere the effective taxation rates are likely to be different - but note that this could work for or against me (if my capital gains rate is greater than my income tax rate I'd actually benefit). And if I'm invested for half a year, but not spanning a dividend, I make $5 of pure capital gains, and realise a different effective taxation rate again. In an ideal world I'd agree that the effective taxation rate wouldn't depend on the exact timing of my transactions like this, but in reality it's unavoidable in the interests of practicality. And so long as the rules are clear, I wouldn't say it's unfair per se, it just adds a bit of complexity.\"","Yes, You will have to pay the taxes at least initially but you'll most probably get a refund when you will file returns depending upon the amount and tax brackets in the UK.","\"There are no dividends from S-Corp. There are distributions. Big difference. S-Corps fill form 1120S and schedule K-1 per shareholder. In the schedule all the income of your S-Corp will be assigned to various categories that you will later copy to your personal tax return as your personal income. It is not dividend income. The reason people prefer to take distributions from their S-Corps instead of salary is because you don't pay SE taxes on the distributions. That is also the reason why the IRS forces you to pay yourself a reasonable salary. But the tax rate on the income, all of it, is your regular income tax rate, unless the S-Corp income is categorized in a preferred category. The fact that its an S-Corp income doesn't, by itself, allow any preferential treatment. If you're learning the stuff as you go - you should probably get in touch with a tax professional to advise you. All the S-Corp income must be distributed. Its not a matter of \"\"avoiding paying the tax\"\", its the matter of \"\"you must do it\"\". Not a choice. My answer was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer (circ 230 disclaimer).\"","The 'same day rule' in the UK is a rule for matching purposes only. It says that sales on any day are matched firstly with purchases made on the same day for the purposes of ascertaining any gain/loss. Hence the phrase 'bed-and-breakfast' ('b&b') when you wish to crystalise a gain (that is within the exempt amount) and re-establish a purchase price at a higher level. You do the sale on one day, just before the market closes, which gets matched with your original purchase, and then you buy the shares back the next day, just after the market opens. This is standard tax-planning. Whenever you have a paper gain, and you wish to lock that gain out of being taxed, you do a bed-and-breakfast transaction, the idea being to use up your annual exemption each and every year. Of course, if your dealing costs are high, then they may outweigh any tax saved, and so it would be pointless. For the purpose of an example, let's assume that the UK tax year is the same as the calendar year. Scenario 1. Suppose I bought some shares in 2016, for a total price of Stg.50,000. Suppose by the end of 2016, the holding is worth Stg.54,000, resulting in a paper gain of Stg.4,000. Question. Should I do a b&b transaction to make use of my Stg.11,100 annual exemption ? Answer. Well, with transaction costs at 1.5% for a round-trip trade, suppose, and stamp duty on the purchase of 0.5%, your total costs for a b&b will be Stg1,080, and your tax saved (upon some future sale date) assuming you are a 20% tax-payer is 20%x(4,000-1,080) = Stg584 (the transaction costs are deductible, we assume). This does not make sense. Scenario 2. The same as scenario 1., but the shares are worth Stg60,000 by end-2016. Answer. The total transaction costs are 2%x60,000 = 1,200 and so the taxable gain of 10,000-1,200 = 8,800 would result in a tax bill of 20%x8,800 = 1,760 and so the transaction costs are lower than the tax to be saved (a strict analysis would take into account only the present value of the tax to be saved), it makes sense to crystalise the gain. We sell some day before the tax year-end, and re-invest the very next day. Scenario 3. The same as scenario 1., but the shares are worth Stg70,000 by end-2016. Answer. The gain of 20,000 less costs would result in a tax bill for 1,500 (this is: 20%x(20,000 - 2%x70,000 - 11,100) ). This tax bill will be on top of the dealing costs of 1,400. But the gain is in excess of the annual exemption. The strategy is to sell just enough of the holding to crystallise a taxable gain of just 11,100. The fraction, f%, is given by: f%x(70,000-50,000) - 2%xf%x70,000 = 11,100 ... which simplifies to: f% = 11,100/18,600 = 59.68%. The tax saved is 20%x11,100 = 2,220, versus costs of 2%x59.58%x70,000 = 835.52. This strategy of partial b&b is adopted because it never makes sense to pay tax early ! End.","Another person, not a shareholder or director, will be treated as when a bank loans you money. You are loaning out money and you are sort of getting interest income out of it or some other benefit, which needs to be put down in you company's annual return. Full source on the HMRC website. But for a shareholder or director is different matter. Check the HMRC source for sure and check with your accountant, if you have one. If you owe your company money You or your company may have to pay tax if you take a director’s loan. Your personal and company tax responsibilities depend on how the loan is settled. You also need to check if you have extra tax responsibilities if: If the loan was more than £10,000 (£5,000 in 2013-14) If you’re a shareholder and director and you owe your company more than £10,000 (£5,000 in 2013 to 2014) at any time in the year, your company must: You must report the loan on your personal Self Assessment tax return. You may have to pay tax on the loan at the official rate of interest. If you paid interest below the official rate If you’re a shareholder and director, your company must: You must report the interest on your personal Self Assessment tax return. You may have to pay tax on the difference between the official rate and the rate you paid.","\"In the US, and in most other countries, dividends are considered income when paid, and capital gains/losses are considered income/loss when realized. This is called, in accounting, \"\"recognition\"\". We recognize income when cash reaches our pocket, for tax purposes. So for dividends - it is when they're paid, and for gains - when you actually sell. Assuming the price of that fund never changes, you have this math do to when you sell: Of course, the capital loss/gain may change by the time you actually sell and realize it, but assuming the only price change is due to the dividends payout - it's a wash.\"","A) a tax treaty probably covers this for the avoidance of double taxation. Tax treaties can be very cryptic and have little precedence clarifying them http://www.irs.gov/businesses/international/article/0,,id=169552,00.html B) I'm going to say NO since the source of your income is going to be US based. But the UK tax laws might also have specific verbage for resident source income. sorry it is an inconclusive answer, but should be some factors to consider and point you in the right direction.","You are incorrect in saying that you have a capital gains of $0. You either have no capital gains activity, because you haven't realized it or you have an unrealized capital gains of -$10k. If you were to sell immediately after receiving the dividend you would end up as a wash investment wise - the 10k of dividend offsetting the 10k capital wash. Though due to different tax treatments of money you may be slightly negative with respect to taxes. You are taxed when you receive the money. And you realized that 10k in dividends - even if you didn't want too. In the future if this bothers you. You need to pay attention to the dividend pay out dates for funds. But then just after they payout a dividend and have drain their cash account. The issue is that you unknowingly bought 90k of stock and 10k of cash. This information is laid out in the fund documentation, which you should be reviewing before investing in any new fund.","You're asking whether the shares you sold while being a US tax resident are taxable in the US. The answer is yes, they are. How you acquired them or what were the circumstances of the sale is irrelevant. When you acquired them is relevant to the determination of the tax treatment - short or long term capital gains. You report this transaction on your Schedule D, follow the instructions. Make sure you can substantiate the cost basis properly based on how much you paid for the shares you sold (the taxable income recognized to you at vest).","Can I transfer these money to India in my saving account? What will be tax implication to me? Yes you can. Whether you transfer to India or not does not change your tax obligation. If I understand correctly you are being paid an allowance in UK to cover your expense. If you are saving; then the saving portion is treated as income and you have to self declare this and pay tax according to you tax bracket. Can I transfer these money to my wife's account as a gift? What will be tax implication to me and my wife? There is no tax obligation to your wife. The tax obligation remain same to you as in first point. What if i transfer these money as loan refund to my friend? What will be tax implication for these to me and my friend? If there is proper paper trial to show your friend loaned you a sum at zero percentage and you have paid back; amounts are not to large; then there is no tax obligation to your friend. The tax obligation remains same to you as in point 1.","This is how capital shares in split capital investment trusts work they never get any dividend they just get the capital when the company is wound up","Firstly a stock split is easy, for example each unit of stock is converted into 10 units. So if you owned 1% of the company before the stock split, you will still own 1% after the stock split, but have 10 times the number of shares. The company does not pay out any money when doing this and there is no effect on tax for the company or the share holder. Now onto stock dividend… When a company make a profit, the company gives some of the profit to the share holders as a dividend; this is normally paid in cash. An investor may then wish to buy more shares in the company using the money from the dividend. However buying shares used to have a large cost in broker charges etc. Therefore some companies allowed share holders to choose to have the dividend paid as shares. The company buys enough of their own shares to cover the payout, only having one set of broker charges and then sends the correct number of shares to each share holder that has opted for a stock dividend. (Along with any cash that was not enough to buy a complete share.) This made since when you had paper shares and admin costs where high for stock brokers. It does not make sense these days. A stock dividend is taxed as if you had been paid the dividend in cash and then brought the stock yourself.","I would not expect any problems. Your interest will have tax deducted at 20% which I don't think you would be entitled to reclaim because you don't get a personal allowance if you aren't resident in the UK, and unless you have a huge amount of UK earnings you would not be legally liable to any higher rates of tax so there would be no issues there. If you were liable to more tax you would be obliged to inform the Inland Revenue.","The dividend tax credit is not applicable to foreign dividend income, so you would be taxed fully on every dollar of that income. When you sell a stock, there will be a capital gain or capital loss depending on if it gained or lost value, after accounting for the Adjusted Cost Base. You only pay income tax on half of the amount earned through capital gains, and if you have losses, you can use them to offset other investments that had capital gains (or carry forward to offset gains in the future). The dividends from US stocks are subject to a 15% withholding tax that gets paid to the IRS automatically when the dividends are issued. If the stocks are held in an RRSP, they are exempt from the withholding tax. If held in a non-registered account, you can be reimbursed for the tax by claiming the foreign tax credit that you linked to. If held in a TFSA or RESP, the withholding tax cannot be recovered. Also, if you are not directly holding the stocks, and instead buy a mutual fund or ETF that directly holds the stocks, then the RRSP exemption no longer applies, but the foreign tax credit is still claimable for a non-registered account. If the mutual fund or ETF does not directly hold stocks, and instead holds one or more ETFs, there is no way to recover the withholding tax in any type of account.","\"No, in the UK you don't need to pay tax on gifts in general. In theory there could be an inheritance tax issue. But it's highly unlikely to apply here. It could only apply at all if all of the below apply: But even then the allowance would probably count as a \"\"regular gift out of income\"\" and so would be ignored completely: Regular gifts from the giver’s income There’s no Inheritance Tax on gifts from the deceased’s income (after they paid tax) as long as the deceased had enough money to maintain their normal lifestyle.\"","You don't. When you sell them - your cost basis would be the price of the stock at which you sold the stocks to cover the taxes, and the difference is your regular capital gain.","No. Black Scholes includes a number of variables to calculate the value of the derivative but taxation isn't one of them. Whether you are trading options or futures, the dividend itelf may be part of the equation, but not the tax on said dividend.","From the UK-USA tax treaty.... ARTICLE 1 General Scope 1. Except as specifically provided herein, this Convention is applicable only to persons who are residents of one or both of the Contracting States. 2. This Convention shall not restrict in any manner any benefit now or hereafter accorded: a) by the laws of either Contracting State; or b) by any other agreement between the Contracting States... I'm not an expert but to me that sounds like the tax free advantage of an UK ISA would be respected by the IRS From the UK-USA tax treaty.... ARTICLE 7 7. Where under any provision of this Convention income or gains arising in one of the Contracting States are relieved from tax in that Contracting State and, under the law in force in the other Contracting State, a person, in respect of the said income or gains, is subject to tax by reference to the amount thereof which is remitted to or received in that other Contracting State and not by reference to the full amount thereof, then the relief to be allowed under this Convention in the first-mentioned Contracting State shall apply only to so much of the income or gains as is taxed in the other Contracting State. This is very difficult to comprehend but suggets also that tax free status is upheld in the uSa","If you receive dividends on an investment, those are taxed.","\"A dividend is a cash disbursement from the company. The value of the company goes down the same amount of the dividend, so it is analogous to having money in a savings account and taking a withdrawal every month. Obviously you are going to have less in the end than if you just kept the money in the account. suppose that I own 10 different stocks, and don't reinvest dividends, but keep them on account, and each month or two, as I add more money to invest, either in one of my existing stocks, or perhaps something new, I add whichever dividend amount is currently available in cash to my new purchase, would this strategy provide the same results? Roughly, yes. Reinvesting dividends is essentially buying more stock at the lower price, which is a net zero effect in total balance. So if you invested in the same stocks, yes you'd be in the same place. If you invested in different stocks, then you would have a performance difference depending on what you invested in. The risk is the temptation to take the cash dividend and not reinvest it, but take it in cash, thereby reducing your earning power. That is, is there some particular reason that the brokers are recommending automatically reinvesting dividends as opposed to reinvesting them manually, perhaps not always in the same item? I'd like to think that they're looking after your best interest (and they might be), but the cynical part of me thinks that they're either trying to keep your business by increasing your returns, or there's some UK regulation I'm not aware of that requires them to disclose the effect of reinvesting dividends. £100 invested in the UK stock market since 1899 would have grown into just £177 after adjusting for inflation. This figure seems ludicrous to me. I haven't actually measured what the historical returns on the \"\"UK market\"\" are, but that would mean an annualized return (adjusted for inflation) of just 0.5%. Either UK stocks pay a ridiculous amount of dividends or there's something wrong with the math. EDIT I still have not found a definitive source for the real UK market return, but according to this inflation calculator, £100 in 1899 would equate to almost £12,000 today, for an average inflation rate of 4.14 percent, which would put the CAGR of the UK market at about 4.9%, which seems reasonable. The CAGR with dividend reinvestment would then be about 9.1%, making dividend reinvestment a no-brainer in the UK market at least.\"","Any money that ScottMcGready gives to the company is a personal loan that must be repaid by the company at some point without tax consequences. Any money that the company gives to ScottMcGready is either salary (Scott pays income tax, company counts this as cost), or a dividend (Scott pays dividend tax), or a loan (Scott must repay the loan).","Stock acquired through a (non-taxable) stock dividend has the same holding period as the stock on which the dividend was paid.","\"This is the best tl;dr I could make, [original](http://www.dnsassociates.co.uk/blog/bitcoins-tax-implications-uk) reduced by 92%. (I'm a bot) ***** > Tax practices of bitcoin activities in UK The HMRC guidelines on the tax treatment of transactions relating to the sale or use of bitcoins and other similar cryptocurrencies are applicable for bitcoin. > Different taxes and their activities concerning bitcoins In the case of activities concerning bitcoins and other cryptocurrencies, the taxes like income tax, corporation tax and capital gains tax transactions will hinge on the very activities taking place and the parties involved, in the similar way as transactions involving a normal currency, such as sterling, are decided. > No special instructions are there for income tax, corporation tax and capital gain tax for the transactions relating to bitcoins. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/72z5sg/bitcoin_tax_in_the_uk_explained/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~218069 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **bitcoin**^#1 **tax**^#2 **activity**^#3 **currency**^#4 **transaction**^#5\"","Please get a view of professional. The DTAA between US and Romaina says both can tax the Dividends. Dividends (1) Dividends paid by a corporation of one of the Contracting States to a resident of the other Contracting State may be taxed by both Contracting States. (2) The rate of tax imposed by the first-mentioned Contracting State on such dividends shall not exceed 10 percent of the gross amount of the dividend. (3) Paragraph (2) shall not apply if the recipient of the dividends, being a resident of one of the Contracting States, has a permanent establishment in the other Contracting State and the shares with respect to which the dividends are paid are effectively connected with such permanent establishment. In such a case, paragraph (6) of Article 7 (Business Profits) shall apply. Edit: Quite often the wordings are tricky, hence a opinion of qualified professional is recommended. Also realize that UK and Romania are part Euro Zone. This means there are quite a few EU laws that govern taxation and DTAA relevance may be less.","\"The key difference I've found between a stock split and a stock dividend – of the exact same stock and class, as opposed to a spin-off – seems to be from the company's own accounting perspective. There doesn't appear to be any actual transfer of value to the shareholder with either kind of transaction; i.e. in theory, each transaction would be immaterial to the value of your holdings. With respect to the company's accounting, a stock split affects the par value of the shares, whereas a stock dividend reduces the retained earnings account in order to increase paid-in or contributed capital. I found a good online source which explains the history behind this accounting difference: McGraw-Hill - Intermediate Accounting eBook, 6/e - Chapter 18 - Stock Dividends and Splits. Small quote: [...] Besides being based on fallacious reasoning, accounting for stock dividends by artificially reclassifying “earned” capital as “invested” capital conflicts with the reporting objective of reporting shareholders' equity by source. Despite these limitations, this outdated accounting standard still applies. Since neither the corporation nor its shareholders apparently benefits from stock dividends, why do companies declare them?23 Occasionally, a company tries to give shareholders the illusion that they are receiving a real dividend. Another reason is merely to enable the corporation to take advantage of the accepted accounting practice of capitalizing retained earnings. Specifically, a company might wish to reduce an existing balance in retained earnings—otherwise available for cash dividends—so it can reinvest the earned assets represented by that balance without carrying a large balance in retained earnings. [...] There's a lot more on that page, before and after, worth reading. From another book: Google Books - Comparative Income Taxation, a Structural Analysis - page 314 - Stock Dividends. Small quote: The distribution of dividends in the form of stock or \"\"bonus\"\" shares to existing shareholders typically involves a transfer for corporate law purposes of retained earnings into stated capital. It can been [sic] viewed as a deemed distribution of a cash dividend to the shareholders followed by a corresponding contribution to capital or as solely as an event at the corporate level which has no effect on the shareholders whose economic interest in the corporation is unchanged by the receipt of additional shares. The systems have taken varied approaches to the stock dividend problem. The treatment is in part a function of the rules dealing with distributions of stated capital. [emphases above are mine] [... continues w/descriptions of different countries' tax treatments of the kinds of stock dividends. Includes U.S., Sweden, Japan, Netherlands, Canada, Australia, U.K., France, Germany. ...] As far as why a corporation might want to capitalize earnings and reduce the equity otherwise available for dividends, I can only imagine that, ignoring taxes for a moment, that it may have something to do with capital ratios that need to be maintained for financing or regulatory purposes? Yet, I remain curious. If I discover more on this then I'll update my answer. Additional resources:\"","If you have held the stocks longer than a year, then there is no tax apart from the STT that is already deducted when you sell the shares. If you have held the stock for less than a year, you would have to pay short term capital gains at the rate of 15% on the profit. Edit: If you buy different shares from the total amount or profits, it makes no difference to taxes.","For the employee, this is an identical tax situation to an at-the-money option purchase. They're buying an asset with a specific cost basis. For the company, you are just issuing shares from treasury as authorized... debit cash, credit additional paid-in-capital and equity. There is no tax consequence for this money received.","The capital gain is either short-term or long-term and will be indicated on the 1099-DiV. You pay taxes on this amount as the capital gain was received in a taxable account (assuming since you received a 1099-DIV). More info here: https://www.mutualfundstore.com/brokerage-account/capital-gains-distributions-taxable","Stock awards by employers are treated and taxed as salary. I.e.: you pay ordinary rate income tax, FICA taxes, State taxes etc. The fact that you got your salary in shares and not cash is irrelevant for tax purposes. Once you got the shares and paid your taxes on them, the treatment is the same as if you got the salary and immediately bought the shares. Holding period for capital gains tax purposes starts at the time you paid your taxes on the award, which is the time at which you get full ownership (i.e.: vesting time, for the restricted stocks). When you sell these stocks - you treat the sale as any other stock sale: you check the holding period for capital gains tax rates, and you do not pay (or get refund) any FICA taxes on the sales transaction. So bottom line: You got $10K salary and you bought $10K worth of company stock, and you sold it at $8K half a year later. You have $10K wages income and $2K short term capital loss.","No, not screwed. This is just an artifact of the tax code and year end dividends. You paid a tax, and in return, got a higher basis. When you sell, you will have less profit, therefore less tax to pay than the guy who bought right after the dividend. You can call the fund company if you want to buy later this year. Once you understand the process, it might not bother you at all.","Dividends are supposed to be paid from company profits (in the current or previous financial years), there are nuances around what profits mean from country to country, but the link is the UK definition from the HMRC. Profits from previous financial years are commonly called retained earnings. There are a few items around this","As the funds are Gift received from your parents, and your tax residency is US, as per US gift tax, there is no tax due from you for these funds.","Basically, yes. That doesn't mean that it's easy to do. The government provides a dividend tax credit since an individual takes on more risk to invest in dividend-paying corporations rather than trading their human capital for an income. Thus, for the most part, $1 earned from dividends is taxed much less than $1 earned from income or interest. Finally, note that foreign dividends are not eligible for the dividend tax credit, and are not preferentially taxed.","No Tax would have been deducted at the time of purchase/sale of shares. You would yourself be required to compute your tax liability and then pay taxes to the govt. In case the shares sold were held for less than 1 year - 15% tax on capital gains would be levied. In case the shares sold were held for more than 1 year - No Tax would be levied and the income earned would be tax free. PS: No Tax is levied at the time of purchase of shares and Tax is only applicable at the time of sale of shares.","It really depends. If it is offered as compensation (ie in leiu of, or in addition to salary or cash bonus) then it would be reportable income, and if sold later for a profit then that would be taxable as gains. If this share is purchased as an investment at current value then it would be treated like other securities most likely gains realized at sale. Any discount could be considered income but there are some goofy rules surrounding this enacted to prevent tax evasion and some to spur growth. That is the answer in a nut shell. It is far more complicated in reality as there are somewhere around 2000 pages of regulations deal with different exceptions and scenerios.","See my answer here What is the dividend tax rate for UK stock The only tax from US stocks you'd need to worry about would be dividend withholding tax of 30%. If you contact your ISA provider they should be able to provide you with a W8-BEN form so that you can have this rate reduced to 15%. Just because there's a tax treaty does not mean you will automatically be charged 15% - you must provide a W8-BEN form and renew it when it expires. That last 15% is unfortunately unavoidable. If you were paying any UK taxes you could claim that 15% as a discount against your UK dividend tax liability, but as your US stock would be wrapped in an ISA there's no UK tax to pay which means no tax to reclaim from the tax treaty. Other than DWT though, you will pay absolutely no tax on US stocks held in an ISA to either the US or UK government.","Generally bank transfers are not in themselves liable for tax. However making profit generally is taxed either as income, capital gains or some combination of the two. It seems that in the UK cryptocurrencies are being treated like other currencies for tax purposes and that trading profits/losses may count as either income or capital gains depending on the circumstances. https://www.gov.uk/government/publications/revenue-and-customs-brief-9-2014-bitcoin-and-other-cryptocurrencies/revenue-and-customs-brief-9-2014-bitcoin-and-other-cryptocurrencies However I do not know how to unravel whether particular trading activity would count as income or capital gains. I would suggest gathering as much information as possible and then discussing this with an accountant.","As far as I read in many articles, all earnings (capital gains and dividends) from Canadian stocks will be always tax-free. Right? There's no withholding tax, ie. a $100 dividend means you get $100. There's no withholding for capital gains in shares for anybody. You will still have to pay taxes on the amounts, but that's only due at tax time and it could be very minor (or even a refund) for eligible Canadian dividends. That's because the company has already paid tax on those dividends. In contrast, holding U.S. or any foreign stock that yields dividends in a TFSA will pay 15% withholding tax and it is not recoverable. Correct, but the 15% is a special rate for regular shares and you need to fill out a W8-BEN. Your broker will probably make sure you have every few years. But if you hold the same stock in a non-registered account, this 15% withholding tax can be used as a foreign tax credit? Is this true or not or what are the considerations? That's true but reduces your Canadian tax payable, it's not refundable, so you have to have some tax to subtract it from. Another consideration is foreign dividends are included 100% in income no mater what the character is. That means you pay tax at your highest rate always if not held in a tax sheltered account. Canadian dividends that are in a non-registered account will pay taxes, I presume and I don't know how much, but the amount can be used also as a tax credit or are unrecoverable? What happens in order to take into account taxes paid by the company is, I read also that if you don't want to pay withholding taxes from foreign > dividends you can hold your stock in a RRSP or RRIF? You don't have any withholding taxes from US entities to what they consider Canadian retirement accounts. So TFSAs and RESPs aren't covered. Note that it has to be a US fund like SPY or VTI that trades in the US, and the account has to be RRSP/RRIF. You can't buy a Canadian listed ETF that holds US stocks and get the same treatment. This is also only for the US, not foreign like Europe or Asia. Also something like VT (total world) in the US will have withholding taxes from foreign (Europe & Asia mostly) before the money gets to the US. You can't get that back. Just an honourable mention for the UK, there's no withholding taxes for anybody, and I hear it's on sale. But at some point, if I withdraw the money, who do I need to pay taxes, > U.S. or Canada? Canada.","For stocks, bonds, ETF funds and so on - Taxed only on realised gain and losses are deductible from the gain and not from company's income. Corporate tax is calculated only after all expenses have been deducted. Not the other way around. Real estate expenses can be deducted because of repairs and maintenance. In general all expenses related to the operation of the business can be deducted. But you cannot use expenses as willy nilly, as you assume. You cannot deduct your subscription to Playboy as an expense. Doing it is illegal and if caught, the tours to church will increase exponentially. VAT is only paid if you claim VAT on your invoices. Your situation seems quite complicated. I would suggest, get an accountant pronto. There are nuances in your situation, which an accountant only can understand and help.","\"While derivative pricing models are better modeling reality as academia invests more into the subject, none sufficiently do. If, for example, one assumes that stock returns are lognormal for the purposes of pricing options like Black Scholes does, the only true dependent variable becomes log-standard deviation otherwise known as \"\"volatility\"\", producing the infamous \"\"volatility smile\"\" which disappears in the cases of models with more factors accounting for other mathematical moments such as mean, skew, and kurtosis, etc. Still, these more advanced models are flawed, and suffer the same extreme time mispricing as Black Scholes. In other words, one can model anything however one wants, but the worse the model, the stranger the results since volatility for a given expiration should be constant across all strikes and is with better models. In the case of pricing dividends, these can be adjusted for the many complexities of taxation, but the model becomes ever more complex and extremely computationally expensive for each eventuality. Furthermore, with more complexity in any model, the likelihood of discovering a closed form in the short run is less. For equities in a low interest rate, not high dividend yield, not low volatility, low dividend tax environment, the standard swap pricing models will not provide results much different from one where a single low tax rate on dividends is assumed. If one is pricing a swap on equity outside of the bounds above, the dividend tax rate could have more of an effect, but for computational efficiency, applying a single assumed dividend tax rate would be optimal with D*(1-x), instead of D in a formula, where D is the dividend paid and x is the tax rate. In short, a closed form model is only as good as its assumptions, so if anomalies appear between the actual prices of swaps in the market and a swap model then that model is less correct than the one with smaller anomalies of the same type. In other words, if pricing equity swaps without a dividend tax rate factored more closely matches the actual prices than pricing with dividend taxes factored then it could be assumed that pricing without a dividend tax factored is superior. This all depends upon the data, and there doesn't seem to be much in academia to assist with a conclusion. If equity swaps do truly provide a tax advantage and both parties to a swap transaction are aware of this fact then it seems unlikely swap sellers wouldn't demand some of the tax advantage back in the form of a higher price. A model is no defense since volatility curves persist despite what Black Scholes says they should be.\"","I am relative newbie in the financial market trading and as I understand it, the response from Victor is accurate in respect of trading CFD contracts. However, there is also the option to 'trade' through a financial spread betting platform which as its name suggests is purely a bet based upon the price of the underlying stock/asset. As such, I believe that your theory to short a stock just prior to its ex-dividend date may be worth investigating further... Apart from that, it's worthwhile mentioning that financial spread betting is officially recognised by HMRC as gambling and therefore not currently [2015/16] subject to capital gains tax. This info is given in good faith and must not be relied upon when making any investment and/or trading decision(s). I hope this helps you make a fortune - if it does; then please remember me!","The dividend goes into the IRA (either reinvested automatically or remains as cash until you invest it, per your choice). You're not taxed on this dividend (IRA is a taxed-deferred account - you're taxed on the distributions, but not on the capital gains within the account).","An update for anyone looking this up, I am still working through all the details but I can answer the question as far as Stack Exchange will go. In this situation the answer and processes involved greatly differs based on the personal circumstances of the person asking the question. Best to seek qualified tax advice than relying only on a forum as they are able to be more accurate and descriptive than any reply that you might receive.","From an Indian tax point of view, this transaction is not taxable to you or your father.","France taxes capital / dividend gains accrued in France. Hence you will not be able to reduce this liability. India does have a Double Tax Avoidance Treaty with France and you can claim relief for the tax paid in France.","In a (not Roth) IRA, withdrawals are generally already taxed as regular income. So there should be no tax disadvantage to earning payment in lieu of dividends. It's possible that there is an exception for IRAs but I was unable to find one and I cannot see the reason for one since the dividend tax rate is usually lower than the income tax rate (which is why some company owners elect to receive part of the company profits via dividend rather than all through their salary).","\"OK, I found this filing by JCI on the SEC website: U.S. Federal Income Tax Consequences of the Distribution to U.S. Holders For U.S. federal income tax purposes, the distribution will not be eligible for treatment as a tax-free distribution by Johnson Controls with respect to its stock. Accordingly, the distribution will be treated as a taxable distribution by Johnson Controls to each Johnson Controls shareholder in an amount equal to the fair market value of the Adient ordinary shares received by such shareholder (including any fractional shares deemed received and any Adient ordinary shares withheld on account of any Irish withholding taxes), determined as of the distribution date (such amount, the \"\"Distribution Amount\"\"). The Distribution Amount received by a U.S. holder will be treated as a taxable dividend to the extent of such U.S. holder's ratable share of current or accumulated earnings and profits of Johnson Controls for the taxable year of the distribution (as determined under U.S. federal income tax principles). Any portion of the Distribution Amount that is treated as a dividend will not be eligible for the dividends-received deduction allowed to corporations under the Code. My broker's 1099-B form tells me that I received a Qualified Dividend from JCI on 10/31/2016 of $512.44, which would be equivalent to $45.349 valuation of ADNT as of the spinoff date for my 11.3 shares (before the 0.3 shares were sold as cash-in-lieu) .\"","I'm answering your second and third point. For first point it depends on case by case basis from which organization you are opening your trust. Trust Account are of different type: To earn interest you account should be of below type. Interest in possession trusts and Income Tax Trustees are responsible for declaring and paying Income Tax on income received by the trust. They do this on a Trust and Estate Tax Return each year. There are different rates depending on the type of income - as shown below. Type of income Income Tax rate 2014 to 2015 tax year Rent, trading and savings 20% (basic rate) UK dividends (such as income from stocks and shares) 10% (dividend ordinary rate)","This investment strategy may have tax advantages. In some countries, income received from dividends is taxed as income, whereas profits on share trades are capital gains. If you have already exceeded your tax-free income limit for the year, but not your capital gains tax allowance, it may be preferable to make a dealing profit rather than an investment income. These arrangements are called a bed-and-breakfast.","I was not able to find any authority for the opinion you suggest. Wash sale rules should, IMHO, apply. According to the regulations, you attribute the newly purchased shares to the oldest sold shares for the purposes of the calculation of the disallowed loss and cost basis. (c) Where the amount of stock or securities acquired within the 61-day period is less than the amount of stock or securities sold or otherwise disposed of, then the particular shares of stock or securities the loss from the sale or other disposition of which is not deductible shall be those with which the stock or securities acquired are matched in accordance with the following rule: The stock or securities acquired will be matched in accordance with the order of their acquisition (beginning with the earliest acquisition) with an equal number of the shares of stock or securities sold or otherwise disposed of. You can resort to the claim that you have not, in fact, entered into the contract within 30 days, but when you gave the instructions to reinvest dividends. I don't know if such a claim will hold, but to me it sounds reasonable. This is similar to the rules re short sales (in (g) there). In this case, wash sale rules will not apply (unless you instructed to reinvest dividends within the 30 days prior to the sale). But I'd ask a tax professional if such a claim would hold, talk to a EA/CPA licensed in your state.","In the general case if you have income coming in from a foreign source you need to declare it on your Canadian tax form, and nominally pay tax on it. However Canada has a tax agreement with the UK to ensure that you are not taxed twice. You also declare how much tax you have paid to the UK, and that is deducted from your Canadian tax bill. You may need to consult a tax professional, or maybe just read the Revenue Canada website to get the details. If you are holding this money for a friend, then you may find that this does not count as income to you. If you are getting it transferred to you in Canada, and then immediately passed on to your friend, it probably doesn't count as income (though again a tax professional will probably be helpful). This would mean you don't have to pay Canadian tax. But it's also a bummer because you've paid UK tax, which you might also have avoided, and you can't get that back without a lot of form filling. If this is going to be an ongoing situation, and the amount is significant, then you might look at getting your friend's money (and any you have in a UK account yourself) transferred to an offshore account, where UK tax is not automatically deducted. Most UK banks will do this for non-UK residents.","Note the above is only for shares. There are different rules for other assets like House, Jewellery, Mutual Funds, Debt Funds. Refer to the Income Tax guide for more details.","I gift my daughter stock worth $1000. No tax issue. She sells it for $2000, and has a taxable gain of $1000 that shows up on her return. Yes, you need to find out the date of the gift, as that is the date you value the fund for cost basis. The $3500 isn't a concern, as the gift seems to have been given well before that. It's a long term capital gain when you sell it. And, in a delightfully annoying aspect of our code, the dividends get added to basis each year, as you were paying tax on the dividend whether or not you actually received it. Depending on the level of dividends, your basis may very well be as high as the $6500 current value. (pls ask if anything here needs clarification)","The link provided by DumbCoder (below) is only relevant to UK resident investors and does not apply if you live in Malaysia. I noticed that in a much older question you asked a similar question about taxes on US stocks, so I'll try and answer both situations here. The answer is almost the same for any country you decide to invest in. As a foreign investor, the country from which you purchase stock cannot charge you tax on either income or capital gains. Taxation is based on residency, so even when you purchase foreign stock its the tax laws of Malaysia (as your country of residence) that matter. At the time of writing, Malaysia does not levy any capital gains tax and there is no income tax charged on dividends so you won't have to declare or pay any tax on your stocks regardless of where you buy them from. The only exception to this is Dividend Withholding Tax, which is a special tax taken by the government of the country you bought the stock from before it is paid to your account. You do not need to declare this tax as it his already been taken by the time you receive your dividend. The rate of DWT that will be withheld is unique to each country. The UK does not have any withholding tax so you will always receive the full dividend on UK stocks. The withholding tax rate for the US is 30%. Other countries vary. For most countries that do charge a withholding tax, it is possible to have this reduced to 15% if there is a double taxation treaty in place between the two countries and all of the following are true: Note: Although the taxation rules of both countries are similar, I am a resident of Singapore not Malaysia so I can't speak from first hand experience, but current Malaysia tax rates are easy to find online. The rest of this information is common to any non-US/UK resident investor (as long as you're not a US person).","\"I don't think its a taxable event since no income has been constructively received (talking about the RSU shareholders here). I believe you're right with the IRC 1033, and the basis of the RSU is the basis of the original stock option (probably zero). Edit: see below. However, once the stock becomes vested - then it is a taxable event (not when the cash is received, but when the chance of forfeiture diminishes, even if the employee doesn't sell the stock), and is an ordinary income, not capital. That is my understanding of the situation, do not consider it as a tax advice in any way. I gave it a bit more though and I don't think IRC 1033 is relevant. You're not doing any exchange or conversion here, because you didn't have anything to convert to begin with, and don't have anything after the \"\"conversion\"\". Your ISO's are forfeited and no longer available, basically - you treat them as you've never had them. What happened is that you've received RSU's, and you treat them as a regular RSU grant, based on its vesting schedule. The tax consequences are exactly as I described in my original response: you recognize ordinary income on the vested stocks, as they vest. Your basis is zero (i.e.: the whole FMV of the stock at the time of vesting is your ordinary income). It should also be reflected in your W2 accordingly.\"","\"The dividend reinvestment won't change whether the dividends themselves are qualified or not for US income tax purposes. It's still the holding period on the stock that matters. If you bought stock in different lots, then you could have a situation where some of the dividends paid are qualified and some are not, but: For completeness, it's worth noting that some dividends cannot be \"\"qualified\"\" no matter how long you hold them, but if you've got an investment in a common corporate stock (vs. something more \"\"exotic\"\"), then what's above should apply.\"","You could use HBB and other similar funds that exchange distributions for capital gains. There's HXT and HXS which is Canada and US equity markets. The swap fee + mer is a little more than some funds except for HXT which is very cheap. There's a risk for long term holders that this may eventually get banned and you're forced to sell with a gain at the wrong time, but this won't matter much if you're planning on selling in a few years. You have to pay the capital gains tax eventually. Note, the tax on distributions is really a long term drag on performance and won't make a big difference in the short term.","\"Are these all of the taxes or is there any additional taxes over these? Turn-over tax is not for retail investors. Other taxes are paid by the broker as part of transaction and one need not worry too much about it. Is there any \"\"Income tax\"\" to be paid for shares bought/holding shares? No for just buying and holding. However if you buy and sell; there would be a capital gain or loss. In stocks, if you hold a security for less than 1 year and sell it; it is classified as short term capital gain and taxes at special rate of 15%. The loss can be adjusted against any other short term gain. If held for more than year it is long term capital gain. For stock market, the tax is zero, you can't adjust long term losses in stock markets. Will the money received from selling shares fall under \"\"Taxable money for FY Income tax\"\"? Only the gain [or loss] will be tread as income not the complete sale value. To calculate gain, one need to arrive a purchase price which is price of stock + Brokerage + STT + all other taxes. Similar the sale price will be Sales of stock - Brokerage - STT - all other taxes. The difference is the gain. Will the \"\"Dividend/Bonus/Buy-back\"\" money fall under taxable category? Dividend is tax free to individual as the company has already paid dividend distribution tax. Bonus is tax free event as it does not create any additional value. Buy-Back is treated as sale of shares if you have participated. Will the share-holder pay \"\"Dividend Distribution Tax\"\"? Paid by the company. What is \"\"Capital Gains\"\"? Profit or loss of buying and selling a particular security.\"","It's a scam pushed through to benefit the banking system. Tax payments become income for the banks. Any alleged benefits for property holders are ultimately reduced by increased property prices, capital gains tax and estate taxes","Is this money taxable in US? From what you described you're likely to have been a US tax resident. As such, you're taxed on your worldwide income. Foreign tax deferral schemes are not considered qualified under the US law (unless a treaty says otherwise), so you're liable for taxes on them now. Get a new tax adviser.","Since you have already paid tax to the Government of Uk, no tax will be levied on the money earned outside India. As per the Income tax act, any income received in India in all cases is taxable irrespective of the tax payer's residential status. A NRI after receiving income from outside India cannot be taxed as income because of remittance of such income to India.","The answer to your question doesn't depend on who you trade with but what country you live in. If you live outside of the US, you will have to pay tax on dividends... sometimes. This depends on the tax treaty that your country has with the US. Canada, Australia, UK and a few other countries have favorable tax treaties with the US that allow you to not be double taxed. You must look into the tax treaty that your home country has with the US to answer the question. Each country is different.","\"Is it equity, or debt? Understanding the exact nature of one's investment (equity vs. debt) is critical. When one invests money in a company (presumably incorporated or limited) by buying some or all of it — as opposed to lending money to the company — then one ends up owning equity (shares or stock) in the company. In such a situation, one is a shareholder — not a creditor. As a shareholder, one is not generally owed a money debt just by having acquired an ownership stake in the company. Shareholders with company equity generally don't get to treat money received from the company as repayment of a loan — unless they also made a loan to the company and the payment is designated by the company as a loan repayment. Rather, shareholders can receive cash from a company through one of the following sources: \"\"Loan repayment\"\" isn't one of those options; it's only an option if one made a loan in the first place. Anyway, each of those ways of receiving money based on one's shares in a company has distinct tax implications, not just for the shareholder but for the company as well. You should consult with a tax professional about the most effective way for you to repatriate money from your investment. Considering the company is established overseas, you may want to find somebody with the appropriate expertise.\"","\"I held shares in BIND Therapeutics, a small biotechnology company on the NASDAQ that was liquidated on the chapter 11 auction block in 2016. There were sufficient proceeds to pay the debts and return some cash to shareholders, with payments in 2016 and 2017. (Some payments have yet to occur.) The whole process is counter-intuitive and full of landmines, both for tax preparation & planning and receiving payments: Landmine 0: Some shareholders will sell in a panic as soon as the chapter 11 is announced. This would have been a huge mistake in the case of BIND, because the eventual liquidation payments were worth 3 or so times as much as the share price after chapter 11. The amount of the liquidation payments wasn't immediately calculable, because the company's intellectual property had to be auctioned. Landmine 1: The large brokerages (Vanguard, Fidelity, TDA, and others) mischaracterized the distributions to shareholders on form 1099, distributed to both shareholders and the IRS. The bankruptcy trustee considered this to be their responsibility. According to the tax code and to the IRS website, the liquidation is taxed like a sale of stock, rather than a dividend. \"\"On the shareholder level, a complete liquidation can be thought of as a sale of all outstanding corporate stock held by the shareholders in exchange for all of the assets in that corporation. Like any sale of stock, the shareholder receives capital gain treatment on the difference between the amount received by the shareholder in the distribution and the cost or other basis of the stock.\"\" Mischaracterizing the distributions as dividends makes them wrongly ineligible to be wiped out by the enormous capital loss on the stock. Vanguard's error appeared on my own 1099, and the others were mentioned in an investor discussion on stocktwits. However, Geoffrey L Berman, the bankruptcy trustee stated on twitter that while the payments are NOT dividends, the 1099s were the brokers' responsibility. Landmine 2: Many shareholders will wrongly attempt to claim the capital loss for tax year 2016, or they may have failed to understand the law in time for proper tax planning for tax year 2016. It does not matter that the company's BINDQ shares were cancelled in 2016. According to the IRS website \"\"When a shareholder receives a series of distributions in liquidation, gain is recognized once all of the shareholder's stock basis is recovered. A loss, however, will not be recognized until the final distribution is received.\"\" In particular, shareholders who receive the 2017 payment will not be able to take a capital loss for tax year 2016 because the liquidation wasn't complete. Late discovery of this timing issue no doubt resulted in an end-of-year underestimation of 2016 overall capital gains for many, causing a failure to preemptively realize available capital losses elsewhere. I'm not going to carefully consider the following issues, which may or may not have some effect on the timing of the capital loss: Landmine 3: Surprisingly, it appears that some shareholders who sold their shares in 2016 still may not claim the capital loss for tax year 2016, because they will receive a liquidation distribution in 2017. Taken at face value, the IRS website's statement \"\"A loss, however, will not be recognized until the final distribution is received\"\" appears to apply to shareholders of record of August 30, 2016, who receive the payouts, even if they sold the shares after the record date. However, to know for sure it might be worth carefully parsing the relevant tax code and treasury regs. Landmine 4: Some shareholders are completely cut out of the bankruptcy distribution. The bankruptcy plan only provides distributions for shareholders of record Aug 30, 2016. Those who bought shares of BINDQ afterwards are out of luck. Landmine 5: According to the discussion on stocktwits, many shareholders have yet to receive or even learn of the existence of a form [more secure link showing brokers served here] required to accept 2017 payments. To add to confusion there is apparently ongoing legal wrangling over whether the trustee is able to require this form. Worse, shareholders report difficulty getting brokers' required cooperation in submitting this form. Landmine 6: Hopefully there are no more landmines. Boom. DISCLAIMER: I am not a tax professional. Consult the tax code/treasury regulations/IRS publications when preparing your taxes. They are more trustworthy than accountants, or at least more trustworthy than good ones.\"","\"The short answer is that the exchange of the stock in exchange for the elimination of a debt is a taxable exchange, and gains or losses are possible for the stock investor as well as the bank. The somewhat longer answer is best summarized as noting that banks don't usually accept stocks as collateral, mostly because stock values are volatile and most banks are not equipped to monitor the risk involved but it is very much part of the business of stock brokers. In the USA, as a practical matter I only know of stock brokerages offering loans against stock as part of the standard services of a \"\"margin account\"\". You can get a margin account at any US stock broker. The stockholder can deposit their shares in the margin account and then borrow around 50% of the value, though that is a bit much to borrow and a lower amount would be safer from sudden demands for repayment in the form of margin calls. In a brokerage account I can not imagine a need to repay a margin loan if the stocks dividends plus capital appreciation rises in value faster than the margin loan rate creates interest charges... Trouble begins as the stock value goes down. When the value of the loan exceeds a certain percentage of the stock value, which can depend on the stock and the broker's policy but is also subject to federal rules like Regulation T, the broker can call in the loan and/or take initiative to sell the stock to repay the loan. Notice that this may result in a capital gain or loss, depending on the investor's tax basis which is usually the original cost of the stock. Of course, this sale affects the taxes of the investor irregardless of who gets the money.\"","All that it is saying is that if you withdraw money from your account it doesn't matter whether it has come from dividends or capital gains, it is still a withdrawal. Of course you can only withdraw a capital gain if you sell part of the assets. You would only do this if it was the right time for you to sell the asset.","Eric is right regarding the tax, i.e. ordinary income on discount, cap gain treatment on profit whether long term or short. I would not let the tax tail wag the investing dog. If you would be a holder of the stock, hold on, if not, sell. You are considering a 10-15% delta on the profit to make the decision. Now. I hear you say your wife hasn't worked which potentially puts you in a lower bracket this year. I wrote Topping off your bracket with a Roth Conversion which would help your tax situation long term. Simply put, you convert enough Traditional IRA (or 401(k) money) to use up some of the current bracket you are in, but not hit the next. This may not apply to you, depending on whether you have retirement funds to do this. Note - The cited article offers numbers for a single person, but illustrates the concept. See the tax table for the marginal rates that would apply to you.","Huh. It appears it's only currencies in sterling that are fully exempt. https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg12602 Government manuals are more detailed than .gov but still not perfect as it's HMRCs interpretation of legislation and has been overturned in the past. There is also another (old) article here about foreign currency transactions. https://www.taxation.co.uk/articles/2010/10/27/21191/currency-gains I have never come across forex capital gains in practice but I've learnt something today! Something to look out for in the UK as well I guess.","\"I think the £35K band applies to the \"\"dividend income\"\" not the \"\"dividend paid to you\"\", and so you would only actually get £31.5K (90% of £35K) in your pocket before the next tax band kicked in. If your company will only supplying large VAT registered entities, then register for VAT yourself and elect the Flat Rate scheme - depending on your area of business, given that you have no expenses, your company will get an extra 7% - 14% on its income for free. Your clients won't care that you charge them VAT because they'll claim it back. Finally, depending on what your company is for, beware of the dreaded IR35\"","\"Disclaimer: I am neither a lawyer nor a tax-expert This page on the HMRC site lists several pages that appear to be relevant, starting with CG78401 - Foreign currency: delayed remittances and on to CG78408 - Foreign currency: example which seems pertinent to your case [paraphrased]: A property bought in 1983 is sold for a [taxable] gain in one tax-year (1986/87) but the proceeds cannot be released/remitted to the UK until later (1991/92), by which time currency fluctuations have created a second [taxable] gain. The size of the first gain (selling the property) is determined by the exchange rate in effect at the time of the sale but because of local restrictions, this can be deferred. The size of the second gain (currency movement) is determined by the change in exchange-rate between the time of the sale and the time of conversion. In your case, the first \"\"gain\"\" was actually a loss, so I believe you should be able to use this to offset any tax due second gain. This page states that losses can be claimed up to four years after the end of the tax-year in which they were incurred, so you are probably still OK. (The example makes application under TCGA92/S279 to defer the gain made on the original sale [because of the inability to transfer funds], but as I understand it, this is primarily to avoid a tax liability in that year. Since you made a loss on the sale, there wouldn't have been a tax liability, so there would be no need to defer it).\"","I'm guessing you're conflating bonus share issuance with stock split. That seems very common to me, from a quick search; there's even some issues of terminology between the US and Europe, I think - it seems some Europeans may use Bonus Shares to mean Stock Split, as opposed to the more common meaning in the US of Stock Dividend. Sometimes a bonus share issuance is (incorrectly) called a stock split, like in this public announcement from STADA in 2004. It is a 1:1 bonus share issuance (meaning they issue one bonus share to everyone who has one share now), but it is in essence the same thing as a stock split (a 2:1 stock split, namely). They combined the 1:1 from bonus share with the wording 'split', causing the confusion. Bonus share issuance, also known as a stock dividend, is covered well in this question/answer on this site, or from a search online. It has no obvious effect initially - both involve doubling shares out there and halving the price - but it has a substantially different treatment in terms of accounting, both to the company and to your tax accountant.","\"> What's their performance been like in recent years? IIRC the last time they were able to pay a dividend was in 2000, so I'm gonna go with \"\"not great\"\". Thanks a lot for the effort, I didn't factor in tax at all, it makes more sense then. I still think it's an interesting concept that shares are worth less than what you \"\"get\"\" for them (according to their accountants, who knows what the value actually would be if you tried to sell whatever they own now), and I found basically nothing on google. The whole is usually more than the sum of its parts, not (significantly) less.\"","In Canada, it is similarly taxed as CQM states. Mining is considered business income and you need to file a T1 form. Capital appreciation is no different than treating gains from stock.","Interest earned over my saving only As you are Tax resident in UK, UK taxes Global income. So the interest earned in India is taxable. Further this is taxable when the interest was paid to you in India and it is not relevant whether you kept the funds in India or repatriated to UK. It is not clear in your question as to when the interest was credited to your Indian account. If its been for few years, you are in breach of the UK tax regulation. Consult a tax advisor how this can be corrected. If it is for this year, pay taxes as per normal tax brackets."],"string":"[\n \"I wrote about this in another answer: You can sell the scrip dividend in the market; the capital gain from this sale may fall below the annual tax-free allowance for capital gains, in which case you don't pay any capital gains tax on that amount. For a cash dividend, however, there isn't a minimum taxable amount, so you would owe dividend tax on the entire dividend (and may therefore pay more taxes on a cash dividend). Since you haven't sold the shares in the market yet, you haven't earned any income on the shares. You don't owe taxes on the scrip until you sell the shares and earn capital gains on them. HMRC is very explicit about this, in CG33800: It is quite common for a company, particularly a quoted company, to offer its shareholders the option of receiving additional shares instead of a cash dividend. The expression `stock or scrip dividend' is used to describe shares issued in such circumstances. The basic position under tax law is that when a company makes a bonus issue of shares no distribution arises, and the bonus issue of shares is not income for tax purposes in the hands of the recipient. Obviously, if this is an issue for you, talk to a tax professional to make sure you get it right.\",\n \"Am I correct in understanding that a Scrip Dividend involves the issue of new shares instead of the purchase of existing shares? Yes. Instead of paying a cash dividend to shareholders, the company grants existing shareholders new shares at a previously determined price. This allows shareholders who join the program to obtain new shares without incurring transaction costs that would normally occur if they purchased these shares in the market. Does this mean that if I don't join this program, my existing shares will be diluted every time a Scrip Dividend is paid? Yes, because the number of shares has increased, so the relative percentage of shares in the company you hold will decrease if you opt-out of the program. The price of the existing shares will adjust so that the value of the company is essentially unchanged (similar to a stock split), but the number of outstanding shares has increased, so the relative weight of your shares declines if you opt out of the program. What is the benefit to the company of issuing Scrip Dividends? Companies may do this to conserve their cash reserves. Also, by issuing a scrip dividend, corporations could avoid the Advanced Corporation Tax (ACT) that they would normally pre-pay on their distributions. Since the abolition of the ACT in 1999, preserving cash reserves is the primary reason for a company to issue scrip dividends, as far as I know. Whether or not scrip dividends are actually a beneficial strategy for a company is debatable (this looks like a neat study, even though I've only skimmed it). The issue may be beneficial to you, however, because you might receive a tax benefit. You can sell the scrip dividend in the market; the capital gain from this sale may fall below the annual tax-free allowance for capital gains, in which case you don't pay any capital gains tax on that amount. For a cash dividend, however, there isn't a minimum taxable amount, so you would owe dividend tax on the entire dividend (and may therefore pay more taxes on a cash dividend).\",\n \"Yes. Instead of paying a cash dividend to shareholders, the company grants existing shareholders new shares at a previously determined price. I'm sorry, but scrip issues are free (for all ordinary shareholders) and are in proportion to existing share holding. No payment is required from shareholders. So instead of having 10 $1 shares, the shareholder (if accepts) now could have 20 50p shares, if it was a one-for-one scrip issue.\",\n \"The HMRC website says: Stock dividends are treated as income by virtue of CTA10/S1049, and taxable as savings income under Chapter 5 of Part 4 of ITTOIA05 (sections 409 to 414). ITTOIA05 is the Income Tax (Trading and Other Income) Act 2005, and says: 409 Charge to tax on stock dividend income (1) Income tax is charged on stock dividend income. (2) In this Chapter “stock dividend income” means the income that is treated as arising under section 410. 411 Income charged (1) Tax is charged under this Chapter on the amount of stock dividend income treated for income tax purposes as arising in the tax year. (2) That amount is the cash equivalent of the share capital on the issue of which the stock dividend income arises (see section 412), grossed up by reference to the dividend ordinary rate for the tax year.\",\n \"Most corporations have a limit on the number of shares that they can issue, which is written into their corporate charter. They usually sell a number that is fewer than the maximum authorized number so that they have a reserve for secondary offerings, employee incentives, etc. In a scrip dividend, the company is distributing authorized shares that were not previously issued. This reduces the number of shares that it has to sell in the future to raise capital, so it reduces the assets of the company. In a split, every share (including the authorized shares that haven't been distributed) are divided. This results in more total shares (which then trade at a price that's roughly proportional to the split), but it does not reduce the assets of the company.\",\n \"Scrip dividends are similar to stock splits. With a stock split, 100 shares can turn into 200 shares; with scrip dividends they might turn into 105 shares.\",\n \"In the US this is considered a sale, and the proceeds will be taxed as if you've sold the stocks in any other way. The decision about the treatment (capital, ordinary, etc) is dependent on what kind of stock that is, how you acquired it, how long have you held it, etc. If it is a regular stock that you bought as an investment and held it for more than a year - then it will likely to be a capital gain treatment. However, this is only relevant for the US taxation. Since you're a UK person, you should also check how it is handled in the UK, which may or may not be different.\",\n \"\\\"The shares are \\\"\\\"imputed income\\\"\\\" / payment in kind. You worked in the UK, but are you a \\\"\\\"US Person\\\"\\\"? If not, you should go back to payroll with this query as this income is taxable in the UK. It is important you find out on what basis they were issued. The company will have answers. Where they aquired at a discount to fair market value ? Where they purchased with a salary deduction as part of a scheme ? Where they acquired by conversion of employee stock options ? If you sell the shares, or are paid dividends, then there will be tax withheld.\\\"\",\n \"Income and Capital are taxed separately in the uk. You probably can't get dividends paid gross even in ISA's you pay the basic rate of tax on dividends only higher rate tax payers get tax benefit from dividends. What you could do is invest in splits (Spilt capital investment trusts ) in the share class where all the return comes as capital and use up some of your yearly CGT allowance that way.\",\n \"If you expect to pay tax on dividends move dividend producing assets into your ISA. If have a lot of investments you can Look at Zeros (zero dividend preference share) issued by splits (split capital trusts), https://en.wikipedia.org/wiki/Split_capital_investment_trust\",\n \"If you sell your shares for more than their value at the time you received them (i.e. you make a profit) then you will be liable for capital gains tax - but only if the profit exceeds your annual allowance (£11,100, in tax year 2015-16). This is unrelated to how you came by the shares in the first place. (Note that there are certain exemptions to this, which includes some employer share schemes.)\",\n \"non-resident aliens to the US do not pay capital gains on US products. You pay tax in your home country if you have done a taxable event in your country. http://www.investopedia.com/ask/answers/06/nonusresidenttax.asp#axzz1mQDut9Ru but if you hold dividends, you are subject to US dividend tax. The UK-US treaty should touch on that though.\",\n \"\\\"If you sell a stock, with no distributions, then your gain is taxable under §1001. But not all realized gains will be recognized as taxable. And some gains which are arguably not realized, will be recognized as taxable. The stock is usually a capital asset for investors, who will generate capital gains under §1(h), but dealers, traders, and hedgers will get different treatment. If you are an investor, and you held the stock for a year or more, then you can get the beneficial capital gain rates (e.g. 20% instead of 39.6%). If the asset was held short-term, less than a year, then your tax will generally be calculated at the higher ordinary income rates. There is also the problem of the net investment tax under §1411. I am eliding many exceptions, qualifications, and permutations of these rules. If you receive a §316 dividend from a stock, then that is §61 income. Qualified dividends are ordinary income but will generally be taxed at capital gains rates under §1(h)(11). Distributions in redemption of your stock are usually treated as sales of stock. Non-dividend distributions (that are not redemptions) will reduce your basis in the stock to zero (no tax due) and past zero will be treated as gain from a sale. If you exchange stock in a tax-free reorganization (i.e. contribute your company stock in exchange for an acquirer's stock), you have what would normally be considered a realized gain on the exchange, but the differential will not be recognized, if done correctly. If you hold your shares and never sell them, but you engage in other dealings (short sales, options, collars, wash sales, etc.) that impact those shares, then you can sometimes be deemed to have recognized gain on shares that were never sold or exchanged. A more fundamental principle of income tax design is that not all realized gains will be recognized. IRC §1001(c) says that all realized gains are recognized, except as otherwise provided; that \\\"\\\"otherwise\\\"\\\" is substantial and far-ranging.\\\"\",\n \"\\\"A nondividend distribution is typically a return of capital; in other words, you're getting money back that you've contributed previously (and thus would have been taxed upon in previous years when those funds were first remunerated to you). Nondividend distributions are nontaxable, so they do not represent income from capital gains, but do effect your cost basis when determining the capital gain/loss once that capital gain/loss is realized. As an example, publicly-traded real estate investment trusts (REITs) generally distribute a return of capital back to shareholders throughout the year as a nondividend distribution. This is a return of a portion of the shareholder's original capital investment, not a share of the REITs profits, so it is simply getting a portion of your original investment back, and thus, is not income being received (I like to refer to it as \\\"\\\"new income\\\"\\\" to differentiate). However, the return of capital does change the cost basis of the original investment, so if one were to then sell the shares of the REIT (in this example), the basis of the original investment has to be adjusted by the nondividend distributions received over the course of ownership (in other words, the cost basis will be reduced when the shares are sold). I'm wondering if the OP could give us some additional information about his/her S-Corp. What type of business is it? In the course of its business and trade activity, does it buy and sell securities (stocks, etc.)? Does it sell assets or business property? Does it own interests in other corporations or partnerships (sales of those interests are one form of capital gain). Long-term capital gains are taxed at rates lower than ordinary income, but the IRS has very specific rules as to what constitutes a capital gain (loss). I hate to answer a question with a question, but we need a little more information before we can weigh-in on whether you have actual capital gains or losses in the course of your S-Corporation trade.\\\"\",\n \"\\\"In the USA there are two ways this situation can be treated. First, if your short position was held less than 45 days. You have to (when preparing the taxes) add the amount of dividend back to the purchase price of the stock. That's called adjusting the basis. Example: short at $10, covered at $8, but during this time stock paid a $1 dividend. It is beneficial for you to add that $1 back to $8 so your stock purchase basis is $9 and your profit is also $1. Inside software (depending what you use) there are options to click on \\\"\\\"adjust the basis\\\"\\\" or if not, than do it manually specifically for those shares and add a note for tax reviewer. Second option is to have that \\\"\\\"dividednd payment in lieu paid\\\"\\\" deducted as investment expence. But that option is only available if you hold the shorts for more than 45 days and itemize your deductions. Hope that helps!\\\"\",\n \"With the W8-Ben filed, tax will be withheld at a lower rate. (I would expect 10%). Tax treaty treatment will mean that this witholding will reduce your UK tax even if this payment is not taxable there. This is only effective if you actually pay tax. This is how it works for lotteries and dividends as well.\",\n \"\\\"Apparently box 39 does not receive half of box 38 if \\\"\\\"The price of the share or unit is less than its fair market value when the agreement was made.\\\"\\\" - the last point in paragraph 110(1)(d): *http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/fnncl/scrty/stckpt03-eng.html#dspst The employee can claim a deduction under paragraph 110(1)(d) of the Income Tax Act if all of the following conditions are met:\\\"\",\n \"\\\"Some investment trusts have \\\"\\\"zero dividend preference shares\\\"\\\" which deliver all their gains as capital gains rather than income, even if the trust was investing in income yielding stocks. They've rather gone out of fashion after a scandal some years ago (~2000). Good 2014 article on them here includes the quote \\\"\\\"Because profits from zero dividend preference shares are taxed as capital gains, they can be used tax efficiently if you are smart about how you use your annual capital gains tax allowance.\\\"\\\"\\\"\",\n \"The HMRC website would explain it better to you. There is a lot of factors and conditions involved, so refer to the HMRC website for clarification. If your question had more details, it could have been easy to pinpoint the exact answer. Do I declare the value of shares as income Why would you do that ? You haven't generated income from that yet(sold it to make a profit/loss), so how can that be declared as income.\",\n \"In the US, dividends have special tax treatment similar to, but not the same as Capital Gains. No easy way to transform one to the other, the very fact that you invested your money in a company that has returned part of your capital as income means it is just that, income. Also in the US, you could invest in Master Limited Partnerships. These are companies that make distributions that are treated as a return of capital, instead of dividends. Throughout the life of the investment you receive tax forms that assign part of the operating expense/loss of the company to you as a tax payer. Then at the end of the investment life you are required to recapture those losses as Capital Gains on sale of the stock. In some ways, these investments do exactly what you are asking about. They transform periodic income into later capital gains, basically deferring tax on the income until the sale of the security. Here is an article I found about MLPs coming to the UK through an ETF: Master Limited Partnerships in the UK\",\n \"The key point is from the penultimate sentence in your second paragraph: for which you have already paid taxes When you receive a dividend or realise a capital gain, you get taxed on that then, and you shouldn't have to pay taxes on it again in future. So the cost basis gets adjusted to reflect that.\",\n \"\\\"It sounds like \\\"\\\"bonus shares\\\"\\\" are the same as a stock dividend. Stock dividends are equivalent to a stock split except for accounting treatment (good explanation here: http://www.accountingcoach.com/online-accounting-course/17Xpg05.html). As an investor, the only likely effect of a stock dividend is to make it more complex to keep track of cost basis and do your taxes. There's no economic effect, it's just rearranging accounting numbers.\\\"\",\n \"If you received shares as part of a bonus you needed to pay income tax on the dollar valuse of those shares at the time you received them. This income tax is based on the dollar value of the bonus and has nothing to do with the shares. If you have since sold these shares you will need to report any capital gain or loss you made from their dollar value when you received them. If you made a gain you would need to pay capital gains tax on the profits (if you held them for more than a year you would get a discount on the capital gains tax you have to pay). If you made a loss you can use that capital loss to reduce any other capital gains in that income year, reduce any other income up to $3000 per year, or carry any additional capital loss forward to future income years to reduce any gains or income (up to $3000 per year) you do have in the future.\",\n \"\\\"You will receive a combination of Verizon shares and cash whether you chose option B or C. Option B means that your \\\"\\\"Return of Value\\\"\\\" will be treated as capital - ie: as a capital gain. Option C means that your \\\"\\\"Return of Value\\\"\\\" will be treated as income - ie: as a dividend. As your ISA has favourable tax status, you don't end up paying any capital gain tax or income tax on dividend income. So it won't matter which option you chose.\\\"\",\n \"The broker that is issuing the moneys after vesting is more than likely deducting a notional amount of tax and NI based on UK income tax laws. If you are not a UK resident, then you should pay income tax on those stock options based on your own tax residency. Best thing to do is speak directly with the broker to explain the situation, ask them to not deduct anything from your stock options - but keep in mind that you will need to declare these earnings yourself and pay the correct rate of tax. From my own personal experience, the UK employer more than likely receives the net value (after the notional tax and NI have been deducted) and in usual circumstances create a tax liability on your payslip (if you were working and had earnings). If of course this deduction is being made by the employer, then you can simply ask them to correct this (most UK payroll software will automatically deduct tax and NI for payments after leaving unless manually intervened, so they probably aren't aware if it is them doing so).\",\n \"Now i want to get this money in my new UK bank account, does this mean that gov will take taxes from this money as well. Yes that is income and you have to pay tax on that. But it might be a bit complicated than that, so I would ask you to call up HMRC or visit an accountant or maybe ask the finance people of your employer. Also one of my family members send us money every few months and will send to this bank from now on, does taxes also apply on this? See the HMRC page about capital gains tax on gifts: You won't have to pay Capital Gains Tax when you give a gift to your husband, wife or civil partner - as long as both of the following apply: It's useful to keep a note of what the asset cost you. Your spouse or civil partner may need this to work out their Capital Gains Tax when they dispose of the asset. Example: Mr B lives with his wife and gives her an antique table that he bought for £12,000 in 2003. Mrs B spends £500 restoring the table, eventually selling it for £20,000. Her total costs are £12,500 (£500 plus Mr B's original cost £12,000). Mrs B's gain is £7,500 (£20,000 less £12,500). When you make a gift to a family member or other person you're connected with, you'll need to work out the gain or loss. This doesn't apply to gifts you make to your spouse or civil partner. This also applies if you dispose of an asset to them in any other way - for example, you sell it to them for a low price. A 'connected person' in this context is someone such as your brother, sister, child, parent, grandparent, mother-in-law or business partner. Follow the link below for more information about connected people and Capital Gains Tax. You must get a valuation of the asset at the time you made the gift. Use this value in place of any amount you received for the asset to work out your gain or loss. If you gave the asset away, then of course the amount you received for it will be nothing. If you make a loss you can only deduct the loss from gains you make on gifts or other disposals to the same person.\",\n \"\\\"I'd agree that this can seem a little unfair, but it's an unavoidable consequence of the necessary practicality of paying out dividends periodically (rather than continuously), and differential taxation of income and capital gains. To see more clearly what's going on here, consider buying stock in a company with extremely simple economics: it generates a certain, constant earnings stream equivalent to $10 per share per annum, and redistributes all of that profit as periodic dividends (let's say once annually). Assume there's no intrinsic growth, and that the firm's instrinsic value (which we'll say is $90 per share) is completely neutral to any other market factors. Under these economics, this stock price will show a \\\"\\\"sawtooth\\\"\\\" evolution, accruing from $90 to $100 over the course of a year, and resetting back down to $90 after each dividend payment. Now, if I am invested in this stock for some period of time, the fair outcome would be that I receive an appropriately time-weighted share of the $10 annual earnings per share, less my tax. If I am invested for an exact calendar year, this works as I'd expect: the stock price on any given day in the year will be the same as it was exactly one year earlier, so I'll realise zero capital gain, but I'll have collected a $10 taxed dividend along the way. On the other hand, what if I am invested for exactly half a year, spanning a dividend payment? I receive a dividend payment of $10 less tax, but I make a capital loss of -$5. Overall, pre-tax, I'm up $5 per share as expected. However, the respective tax treatment of the dividend payment (which is classed as income) and the capital gains is likely to be different. In particular, to benefit from the \\\"\\\"negative\\\"\\\" taxation of the capital loss I need to have some positive capital gain elsewhere to offset it - if I can't do that, I'm much worse off compared to half the full-year return. Further, even if I can offset against a gain elsewhere the effective taxation rates are likely to be different - but note that this could work for or against me (if my capital gains rate is greater than my income tax rate I'd actually benefit). And if I'm invested for half a year, but not spanning a dividend, I make $5 of pure capital gains, and realise a different effective taxation rate again. In an ideal world I'd agree that the effective taxation rate wouldn't depend on the exact timing of my transactions like this, but in reality it's unavoidable in the interests of practicality. And so long as the rules are clear, I wouldn't say it's unfair per se, it just adds a bit of complexity.\\\"\",\n \"Yes, You will have to pay the taxes at least initially but you'll most probably get a refund when you will file returns depending upon the amount and tax brackets in the UK.\",\n \"\\\"There are no dividends from S-Corp. There are distributions. Big difference. S-Corps fill form 1120S and schedule K-1 per shareholder. In the schedule all the income of your S-Corp will be assigned to various categories that you will later copy to your personal tax return as your personal income. It is not dividend income. The reason people prefer to take distributions from their S-Corps instead of salary is because you don't pay SE taxes on the distributions. That is also the reason why the IRS forces you to pay yourself a reasonable salary. But the tax rate on the income, all of it, is your regular income tax rate, unless the S-Corp income is categorized in a preferred category. The fact that its an S-Corp income doesn't, by itself, allow any preferential treatment. If you're learning the stuff as you go - you should probably get in touch with a tax professional to advise you. All the S-Corp income must be distributed. Its not a matter of \\\"\\\"avoiding paying the tax\\\"\\\", its the matter of \\\"\\\"you must do it\\\"\\\". Not a choice. My answer was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer (circ 230 disclaimer).\\\"\",\n \"The 'same day rule' in the UK is a rule for matching purposes only. It says that sales on any day are matched firstly with purchases made on the same day for the purposes of ascertaining any gain/loss. Hence the phrase 'bed-and-breakfast' ('b&b') when you wish to crystalise a gain (that is within the exempt amount) and re-establish a purchase price at a higher level. You do the sale on one day, just before the market closes, which gets matched with your original purchase, and then you buy the shares back the next day, just after the market opens. This is standard tax-planning. Whenever you have a paper gain, and you wish to lock that gain out of being taxed, you do a bed-and-breakfast transaction, the idea being to use up your annual exemption each and every year. Of course, if your dealing costs are high, then they may outweigh any tax saved, and so it would be pointless. For the purpose of an example, let's assume that the UK tax year is the same as the calendar year. Scenario 1. Suppose I bought some shares in 2016, for a total price of Stg.50,000. Suppose by the end of 2016, the holding is worth Stg.54,000, resulting in a paper gain of Stg.4,000. Question. Should I do a b&b transaction to make use of my Stg.11,100 annual exemption ? Answer. Well, with transaction costs at 1.5% for a round-trip trade, suppose, and stamp duty on the purchase of 0.5%, your total costs for a b&b will be Stg1,080, and your tax saved (upon some future sale date) assuming you are a 20% tax-payer is 20%x(4,000-1,080) = Stg584 (the transaction costs are deductible, we assume). This does not make sense. Scenario 2. The same as scenario 1., but the shares are worth Stg60,000 by end-2016. Answer. The total transaction costs are 2%x60,000 = 1,200 and so the taxable gain of 10,000-1,200 = 8,800 would result in a tax bill of 20%x8,800 = 1,760 and so the transaction costs are lower than the tax to be saved (a strict analysis would take into account only the present value of the tax to be saved), it makes sense to crystalise the gain. We sell some day before the tax year-end, and re-invest the very next day. Scenario 3. The same as scenario 1., but the shares are worth Stg70,000 by end-2016. Answer. The gain of 20,000 less costs would result in a tax bill for 1,500 (this is: 20%x(20,000 - 2%x70,000 - 11,100) ). This tax bill will be on top of the dealing costs of 1,400. But the gain is in excess of the annual exemption. The strategy is to sell just enough of the holding to crystallise a taxable gain of just 11,100. The fraction, f%, is given by: f%x(70,000-50,000) - 2%xf%x70,000 = 11,100 ... which simplifies to: f% = 11,100/18,600 = 59.68%. The tax saved is 20%x11,100 = 2,220, versus costs of 2%x59.58%x70,000 = 835.52. This strategy of partial b&b is adopted because it never makes sense to pay tax early ! End.\",\n \"Another person, not a shareholder or director, will be treated as when a bank loans you money. You are loaning out money and you are sort of getting interest income out of it or some other benefit, which needs to be put down in you company's annual return. Full source on the HMRC website. But for a shareholder or director is different matter. Check the HMRC source for sure and check with your accountant, if you have one. If you owe your company money You or your company may have to pay tax if you take a director’s loan. Your personal and company tax responsibilities depend on how the loan is settled. You also need to check if you have extra tax responsibilities if: If the loan was more than £10,000 (£5,000 in 2013-14) If you’re a shareholder and director and you owe your company more than £10,000 (£5,000 in 2013 to 2014) at any time in the year, your company must: You must report the loan on your personal Self Assessment tax return. You may have to pay tax on the loan at the official rate of interest. If you paid interest below the official rate If you’re a shareholder and director, your company must: You must report the interest on your personal Self Assessment tax return. You may have to pay tax on the difference between the official rate and the rate you paid.\",\n \"\\\"In the US, and in most other countries, dividends are considered income when paid, and capital gains/losses are considered income/loss when realized. This is called, in accounting, \\\"\\\"recognition\\\"\\\". We recognize income when cash reaches our pocket, for tax purposes. So for dividends - it is when they're paid, and for gains - when you actually sell. Assuming the price of that fund never changes, you have this math do to when you sell: Of course, the capital loss/gain may change by the time you actually sell and realize it, but assuming the only price change is due to the dividends payout - it's a wash.\\\"\",\n \"A) a tax treaty probably covers this for the avoidance of double taxation. Tax treaties can be very cryptic and have little precedence clarifying them http://www.irs.gov/businesses/international/article/0,,id=169552,00.html B) I'm going to say NO since the source of your income is going to be US based. But the UK tax laws might also have specific verbage for resident source income. sorry it is an inconclusive answer, but should be some factors to consider and point you in the right direction.\",\n \"You are incorrect in saying that you have a capital gains of $0. You either have no capital gains activity, because you haven't realized it or you have an unrealized capital gains of -$10k. If you were to sell immediately after receiving the dividend you would end up as a wash investment wise - the 10k of dividend offsetting the 10k capital wash. Though due to different tax treatments of money you may be slightly negative with respect to taxes. You are taxed when you receive the money. And you realized that 10k in dividends - even if you didn't want too. In the future if this bothers you. You need to pay attention to the dividend pay out dates for funds. But then just after they payout a dividend and have drain their cash account. The issue is that you unknowingly bought 90k of stock and 10k of cash. This information is laid out in the fund documentation, which you should be reviewing before investing in any new fund.\",\n \"You're asking whether the shares you sold while being a US tax resident are taxable in the US. The answer is yes, they are. How you acquired them or what were the circumstances of the sale is irrelevant. When you acquired them is relevant to the determination of the tax treatment - short or long term capital gains. You report this transaction on your Schedule D, follow the instructions. Make sure you can substantiate the cost basis properly based on how much you paid for the shares you sold (the taxable income recognized to you at vest).\",\n \"Can I transfer these money to India in my saving account? What will be tax implication to me? Yes you can. Whether you transfer to India or not does not change your tax obligation. If I understand correctly you are being paid an allowance in UK to cover your expense. If you are saving; then the saving portion is treated as income and you have to self declare this and pay tax according to you tax bracket. Can I transfer these money to my wife's account as a gift? What will be tax implication to me and my wife? There is no tax obligation to your wife. The tax obligation remain same to you as in first point. What if i transfer these money as loan refund to my friend? What will be tax implication for these to me and my friend? If there is proper paper trial to show your friend loaned you a sum at zero percentage and you have paid back; amounts are not to large; then there is no tax obligation to your friend. The tax obligation remains same to you as in point 1.\",\n \"This is how capital shares in split capital investment trusts work they never get any dividend they just get the capital when the company is wound up\",\n \"Firstly a stock split is easy, for example each unit of stock is converted into 10 units. So if you owned 1% of the company before the stock split, you will still own 1% after the stock split, but have 10 times the number of shares. The company does not pay out any money when doing this and there is no effect on tax for the company or the share holder. Now onto stock dividend… When a company make a profit, the company gives some of the profit to the share holders as a dividend; this is normally paid in cash. An investor may then wish to buy more shares in the company using the money from the dividend. However buying shares used to have a large cost in broker charges etc. Therefore some companies allowed share holders to choose to have the dividend paid as shares. The company buys enough of their own shares to cover the payout, only having one set of broker charges and then sends the correct number of shares to each share holder that has opted for a stock dividend. (Along with any cash that was not enough to buy a complete share.) This made since when you had paper shares and admin costs where high for stock brokers. It does not make sense these days. A stock dividend is taxed as if you had been paid the dividend in cash and then brought the stock yourself.\",\n \"I would not expect any problems. Your interest will have tax deducted at 20% which I don't think you would be entitled to reclaim because you don't get a personal allowance if you aren't resident in the UK, and unless you have a huge amount of UK earnings you would not be legally liable to any higher rates of tax so there would be no issues there. If you were liable to more tax you would be obliged to inform the Inland Revenue.\",\n \"The dividend tax credit is not applicable to foreign dividend income, so you would be taxed fully on every dollar of that income. When you sell a stock, there will be a capital gain or capital loss depending on if it gained or lost value, after accounting for the Adjusted Cost Base. You only pay income tax on half of the amount earned through capital gains, and if you have losses, you can use them to offset other investments that had capital gains (or carry forward to offset gains in the future). The dividends from US stocks are subject to a 15% withholding tax that gets paid to the IRS automatically when the dividends are issued. If the stocks are held in an RRSP, they are exempt from the withholding tax. If held in a non-registered account, you can be reimbursed for the tax by claiming the foreign tax credit that you linked to. If held in a TFSA or RESP, the withholding tax cannot be recovered. Also, if you are not directly holding the stocks, and instead buy a mutual fund or ETF that directly holds the stocks, then the RRSP exemption no longer applies, but the foreign tax credit is still claimable for a non-registered account. If the mutual fund or ETF does not directly hold stocks, and instead holds one or more ETFs, there is no way to recover the withholding tax in any type of account.\",\n \"\\\"No, in the UK you don't need to pay tax on gifts in general. In theory there could be an inheritance tax issue. But it's highly unlikely to apply here. It could only apply at all if all of the below apply: But even then the allowance would probably count as a \\\"\\\"regular gift out of income\\\"\\\" and so would be ignored completely: Regular gifts from the giver’s income There’s no Inheritance Tax on gifts from the deceased’s income (after they paid tax) as long as the deceased had enough money to maintain their normal lifestyle.\\\"\",\n \"You don't. When you sell them - your cost basis would be the price of the stock at which you sold the stocks to cover the taxes, and the difference is your regular capital gain.\",\n \"No. Black Scholes includes a number of variables to calculate the value of the derivative but taxation isn't one of them. Whether you are trading options or futures, the dividend itelf may be part of the equation, but not the tax on said dividend.\",\n \"From the UK-USA tax treaty.... ARTICLE 1 General Scope 1. Except as specifically provided herein, this Convention is applicable only to persons who are residents of one or both of the Contracting States. 2. This Convention shall not restrict in any manner any benefit now or hereafter accorded: a) by the laws of either Contracting State; or b) by any other agreement between the Contracting States... I'm not an expert but to me that sounds like the tax free advantage of an UK ISA would be respected by the IRS From the UK-USA tax treaty.... ARTICLE 7 7. Where under any provision of this Convention income or gains arising in one of the Contracting States are relieved from tax in that Contracting State and, under the law in force in the other Contracting State, a person, in respect of the said income or gains, is subject to tax by reference to the amount thereof which is remitted to or received in that other Contracting State and not by reference to the full amount thereof, then the relief to be allowed under this Convention in the first-mentioned Contracting State shall apply only to so much of the income or gains as is taxed in the other Contracting State. This is very difficult to comprehend but suggets also that tax free status is upheld in the uSa\",\n \"If you receive dividends on an investment, those are taxed.\",\n \"\\\"A dividend is a cash disbursement from the company. The value of the company goes down the same amount of the dividend, so it is analogous to having money in a savings account and taking a withdrawal every month. Obviously you are going to have less in the end than if you just kept the money in the account. suppose that I own 10 different stocks, and don't reinvest dividends, but keep them on account, and each month or two, as I add more money to invest, either in one of my existing stocks, or perhaps something new, I add whichever dividend amount is currently available in cash to my new purchase, would this strategy provide the same results? Roughly, yes. Reinvesting dividends is essentially buying more stock at the lower price, which is a net zero effect in total balance. So if you invested in the same stocks, yes you'd be in the same place. If you invested in different stocks, then you would have a performance difference depending on what you invested in. The risk is the temptation to take the cash dividend and not reinvest it, but take it in cash, thereby reducing your earning power. That is, is there some particular reason that the brokers are recommending automatically reinvesting dividends as opposed to reinvesting them manually, perhaps not always in the same item? I'd like to think that they're looking after your best interest (and they might be), but the cynical part of me thinks that they're either trying to keep your business by increasing your returns, or there's some UK regulation I'm not aware of that requires them to disclose the effect of reinvesting dividends. £100 invested in the UK stock market since 1899 would have grown into just £177 after adjusting for inflation. This figure seems ludicrous to me. I haven't actually measured what the historical returns on the \\\"\\\"UK market\\\"\\\" are, but that would mean an annualized return (adjusted for inflation) of just 0.5%. Either UK stocks pay a ridiculous amount of dividends or there's something wrong with the math. EDIT I still have not found a definitive source for the real UK market return, but according to this inflation calculator, £100 in 1899 would equate to almost £12,000 today, for an average inflation rate of 4.14 percent, which would put the CAGR of the UK market at about 4.9%, which seems reasonable. The CAGR with dividend reinvestment would then be about 9.1%, making dividend reinvestment a no-brainer in the UK market at least.\\\"\",\n \"Any money that ScottMcGready gives to the company is a personal loan that must be repaid by the company at some point without tax consequences. Any money that the company gives to ScottMcGready is either salary (Scott pays income tax, company counts this as cost), or a dividend (Scott pays dividend tax), or a loan (Scott must repay the loan).\",\n \"Stock acquired through a (non-taxable) stock dividend has the same holding period as the stock on which the dividend was paid.\",\n \"\\\"This is the best tl;dr I could make, [original](http://www.dnsassociates.co.uk/blog/bitcoins-tax-implications-uk) reduced by 92%. (I'm a bot) ***** > Tax practices of bitcoin activities in UK The HMRC guidelines on the tax treatment of transactions relating to the sale or use of bitcoins and other similar cryptocurrencies are applicable for bitcoin. > Different taxes and their activities concerning bitcoins In the case of activities concerning bitcoins and other cryptocurrencies, the taxes like income tax, corporation tax and capital gains tax transactions will hinge on the very activities taking place and the parties involved, in the similar way as transactions involving a normal currency, such as sterling, are decided. > No special instructions are there for income tax, corporation tax and capital gain tax for the transactions relating to bitcoins. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/72z5sg/bitcoin_tax_in_the_uk_explained/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \\\"\\\"Version 1.65, ~218069 tl;drs so far.\\\"\\\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \\\"\\\"PM's and comments are monitored, constructive feedback is welcome.\\\"\\\") | *Top* *keywords*: **bitcoin**^#1 **tax**^#2 **activity**^#3 **currency**^#4 **transaction**^#5\\\"\",\n \"Please get a view of professional. The DTAA between US and Romaina says both can tax the Dividends. Dividends (1) Dividends paid by a corporation of one of the Contracting States to a resident of the other Contracting State may be taxed by both Contracting States. (2) The rate of tax imposed by the first-mentioned Contracting State on such dividends shall not exceed 10 percent of the gross amount of the dividend. (3) Paragraph (2) shall not apply if the recipient of the dividends, being a resident of one of the Contracting States, has a permanent establishment in the other Contracting State and the shares with respect to which the dividends are paid are effectively connected with such permanent establishment. In such a case, paragraph (6) of Article 7 (Business Profits) shall apply. Edit: Quite often the wordings are tricky, hence a opinion of qualified professional is recommended. Also realize that UK and Romania are part Euro Zone. This means there are quite a few EU laws that govern taxation and DTAA relevance may be less.\",\n \"\\\"The key difference I've found between a stock split and a stock dividend – of the exact same stock and class, as opposed to a spin-off – seems to be from the company's own accounting perspective. There doesn't appear to be any actual transfer of value to the shareholder with either kind of transaction; i.e. in theory, each transaction would be immaterial to the value of your holdings. With respect to the company's accounting, a stock split affects the par value of the shares, whereas a stock dividend reduces the retained earnings account in order to increase paid-in or contributed capital. I found a good online source which explains the history behind this accounting difference: McGraw-Hill - Intermediate Accounting eBook, 6/e - Chapter 18 - Stock Dividends and Splits. Small quote: [...] Besides being based on fallacious reasoning, accounting for stock dividends by artificially reclassifying “earned” capital as “invested” capital conflicts with the reporting objective of reporting shareholders' equity by source. Despite these limitations, this outdated accounting standard still applies. Since neither the corporation nor its shareholders apparently benefits from stock dividends, why do companies declare them?23 Occasionally, a company tries to give shareholders the illusion that they are receiving a real dividend. Another reason is merely to enable the corporation to take advantage of the accepted accounting practice of capitalizing retained earnings. Specifically, a company might wish to reduce an existing balance in retained earnings—otherwise available for cash dividends—so it can reinvest the earned assets represented by that balance without carrying a large balance in retained earnings. [...] There's a lot more on that page, before and after, worth reading. From another book: Google Books - Comparative Income Taxation, a Structural Analysis - page 314 - Stock Dividends. Small quote: The distribution of dividends in the form of stock or \\\"\\\"bonus\\\"\\\" shares to existing shareholders typically involves a transfer for corporate law purposes of retained earnings into stated capital. It can been [sic] viewed as a deemed distribution of a cash dividend to the shareholders followed by a corresponding contribution to capital or as solely as an event at the corporate level which has no effect on the shareholders whose economic interest in the corporation is unchanged by the receipt of additional shares. The systems have taken varied approaches to the stock dividend problem. The treatment is in part a function of the rules dealing with distributions of stated capital. [emphases above are mine] [... continues w/descriptions of different countries' tax treatments of the kinds of stock dividends. Includes U.S., Sweden, Japan, Netherlands, Canada, Australia, U.K., France, Germany. ...] As far as why a corporation might want to capitalize earnings and reduce the equity otherwise available for dividends, I can only imagine that, ignoring taxes for a moment, that it may have something to do with capital ratios that need to be maintained for financing or regulatory purposes? Yet, I remain curious. If I discover more on this then I'll update my answer. Additional resources:\\\"\",\n \"If you have held the stocks longer than a year, then there is no tax apart from the STT that is already deducted when you sell the shares. If you have held the stock for less than a year, you would have to pay short term capital gains at the rate of 15% on the profit. Edit: If you buy different shares from the total amount or profits, it makes no difference to taxes.\",\n \"For the employee, this is an identical tax situation to an at-the-money option purchase. They're buying an asset with a specific cost basis. For the company, you are just issuing shares from treasury as authorized... debit cash, credit additional paid-in-capital and equity. There is no tax consequence for this money received.\",\n \"The capital gain is either short-term or long-term and will be indicated on the 1099-DiV. You pay taxes on this amount as the capital gain was received in a taxable account (assuming since you received a 1099-DIV). More info here: https://www.mutualfundstore.com/brokerage-account/capital-gains-distributions-taxable\",\n \"Stock awards by employers are treated and taxed as salary. I.e.: you pay ordinary rate income tax, FICA taxes, State taxes etc. The fact that you got your salary in shares and not cash is irrelevant for tax purposes. Once you got the shares and paid your taxes on them, the treatment is the same as if you got the salary and immediately bought the shares. Holding period for capital gains tax purposes starts at the time you paid your taxes on the award, which is the time at which you get full ownership (i.e.: vesting time, for the restricted stocks). When you sell these stocks - you treat the sale as any other stock sale: you check the holding period for capital gains tax rates, and you do not pay (or get refund) any FICA taxes on the sales transaction. So bottom line: You got $10K salary and you bought $10K worth of company stock, and you sold it at $8K half a year later. You have $10K wages income and $2K short term capital loss.\",\n \"No, not screwed. This is just an artifact of the tax code and year end dividends. You paid a tax, and in return, got a higher basis. When you sell, you will have less profit, therefore less tax to pay than the guy who bought right after the dividend. You can call the fund company if you want to buy later this year. Once you understand the process, it might not bother you at all.\",\n \"Dividends are supposed to be paid from company profits (in the current or previous financial years), there are nuances around what profits mean from country to country, but the link is the UK definition from the HMRC. Profits from previous financial years are commonly called retained earnings. There are a few items around this\",\n \"As the funds are Gift received from your parents, and your tax residency is US, as per US gift tax, there is no tax due from you for these funds.\",\n \"Basically, yes. That doesn't mean that it's easy to do. The government provides a dividend tax credit since an individual takes on more risk to invest in dividend-paying corporations rather than trading their human capital for an income. Thus, for the most part, $1 earned from dividends is taxed much less than $1 earned from income or interest. Finally, note that foreign dividends are not eligible for the dividend tax credit, and are not preferentially taxed.\",\n \"No Tax would have been deducted at the time of purchase/sale of shares. You would yourself be required to compute your tax liability and then pay taxes to the govt. In case the shares sold were held for less than 1 year - 15% tax on capital gains would be levied. In case the shares sold were held for more than 1 year - No Tax would be levied and the income earned would be tax free. PS: No Tax is levied at the time of purchase of shares and Tax is only applicable at the time of sale of shares.\",\n \"It really depends. If it is offered as compensation (ie in leiu of, or in addition to salary or cash bonus) then it would be reportable income, and if sold later for a profit then that would be taxable as gains. If this share is purchased as an investment at current value then it would be treated like other securities most likely gains realized at sale. Any discount could be considered income but there are some goofy rules surrounding this enacted to prevent tax evasion and some to spur growth. That is the answer in a nut shell. It is far more complicated in reality as there are somewhere around 2000 pages of regulations deal with different exceptions and scenerios.\",\n \"See my answer here What is the dividend tax rate for UK stock The only tax from US stocks you'd need to worry about would be dividend withholding tax of 30%. If you contact your ISA provider they should be able to provide you with a W8-BEN form so that you can have this rate reduced to 15%. Just because there's a tax treaty does not mean you will automatically be charged 15% - you must provide a W8-BEN form and renew it when it expires. That last 15% is unfortunately unavoidable. If you were paying any UK taxes you could claim that 15% as a discount against your UK dividend tax liability, but as your US stock would be wrapped in an ISA there's no UK tax to pay which means no tax to reclaim from the tax treaty. Other than DWT though, you will pay absolutely no tax on US stocks held in an ISA to either the US or UK government.\",\n \"Generally bank transfers are not in themselves liable for tax. However making profit generally is taxed either as income, capital gains or some combination of the two. It seems that in the UK cryptocurrencies are being treated like other currencies for tax purposes and that trading profits/losses may count as either income or capital gains depending on the circumstances. https://www.gov.uk/government/publications/revenue-and-customs-brief-9-2014-bitcoin-and-other-cryptocurrencies/revenue-and-customs-brief-9-2014-bitcoin-and-other-cryptocurrencies However I do not know how to unravel whether particular trading activity would count as income or capital gains. I would suggest gathering as much information as possible and then discussing this with an accountant.\",\n \"As far as I read in many articles, all earnings (capital gains and dividends) from Canadian stocks will be always tax-free. Right? There's no withholding tax, ie. a $100 dividend means you get $100. There's no withholding for capital gains in shares for anybody. You will still have to pay taxes on the amounts, but that's only due at tax time and it could be very minor (or even a refund) for eligible Canadian dividends. That's because the company has already paid tax on those dividends. In contrast, holding U.S. or any foreign stock that yields dividends in a TFSA will pay 15% withholding tax and it is not recoverable. Correct, but the 15% is a special rate for regular shares and you need to fill out a W8-BEN. Your broker will probably make sure you have every few years. But if you hold the same stock in a non-registered account, this 15% withholding tax can be used as a foreign tax credit? Is this true or not or what are the considerations? That's true but reduces your Canadian tax payable, it's not refundable, so you have to have some tax to subtract it from. Another consideration is foreign dividends are included 100% in income no mater what the character is. That means you pay tax at your highest rate always if not held in a tax sheltered account. Canadian dividends that are in a non-registered account will pay taxes, I presume and I don't know how much, but the amount can be used also as a tax credit or are unrecoverable? What happens in order to take into account taxes paid by the company is, I read also that if you don't want to pay withholding taxes from foreign > dividends you can hold your stock in a RRSP or RRIF? You don't have any withholding taxes from US entities to what they consider Canadian retirement accounts. So TFSAs and RESPs aren't covered. Note that it has to be a US fund like SPY or VTI that trades in the US, and the account has to be RRSP/RRIF. You can't buy a Canadian listed ETF that holds US stocks and get the same treatment. This is also only for the US, not foreign like Europe or Asia. Also something like VT (total world) in the US will have withholding taxes from foreign (Europe & Asia mostly) before the money gets to the US. You can't get that back. Just an honourable mention for the UK, there's no withholding taxes for anybody, and I hear it's on sale. But at some point, if I withdraw the money, who do I need to pay taxes, > U.S. or Canada? Canada.\",\n \"For stocks, bonds, ETF funds and so on - Taxed only on realised gain and losses are deductible from the gain and not from company's income. Corporate tax is calculated only after all expenses have been deducted. Not the other way around. Real estate expenses can be deducted because of repairs and maintenance. In general all expenses related to the operation of the business can be deducted. But you cannot use expenses as willy nilly, as you assume. You cannot deduct your subscription to Playboy as an expense. Doing it is illegal and if caught, the tours to church will increase exponentially. VAT is only paid if you claim VAT on your invoices. Your situation seems quite complicated. I would suggest, get an accountant pronto. There are nuances in your situation, which an accountant only can understand and help.\",\n \"\\\"While derivative pricing models are better modeling reality as academia invests more into the subject, none sufficiently do. If, for example, one assumes that stock returns are lognormal for the purposes of pricing options like Black Scholes does, the only true dependent variable becomes log-standard deviation otherwise known as \\\"\\\"volatility\\\"\\\", producing the infamous \\\"\\\"volatility smile\\\"\\\" which disappears in the cases of models with more factors accounting for other mathematical moments such as mean, skew, and kurtosis, etc. Still, these more advanced models are flawed, and suffer the same extreme time mispricing as Black Scholes. In other words, one can model anything however one wants, but the worse the model, the stranger the results since volatility for a given expiration should be constant across all strikes and is with better models. In the case of pricing dividends, these can be adjusted for the many complexities of taxation, but the model becomes ever more complex and extremely computationally expensive for each eventuality. Furthermore, with more complexity in any model, the likelihood of discovering a closed form in the short run is less. For equities in a low interest rate, not high dividend yield, not low volatility, low dividend tax environment, the standard swap pricing models will not provide results much different from one where a single low tax rate on dividends is assumed. If one is pricing a swap on equity outside of the bounds above, the dividend tax rate could have more of an effect, but for computational efficiency, applying a single assumed dividend tax rate would be optimal with D*(1-x), instead of D in a formula, where D is the dividend paid and x is the tax rate. In short, a closed form model is only as good as its assumptions, so if anomalies appear between the actual prices of swaps in the market and a swap model then that model is less correct than the one with smaller anomalies of the same type. In other words, if pricing equity swaps without a dividend tax rate factored more closely matches the actual prices than pricing with dividend taxes factored then it could be assumed that pricing without a dividend tax factored is superior. This all depends upon the data, and there doesn't seem to be much in academia to assist with a conclusion. If equity swaps do truly provide a tax advantage and both parties to a swap transaction are aware of this fact then it seems unlikely swap sellers wouldn't demand some of the tax advantage back in the form of a higher price. A model is no defense since volatility curves persist despite what Black Scholes says they should be.\\\"\",\n \"I am relative newbie in the financial market trading and as I understand it, the response from Victor is accurate in respect of trading CFD contracts. However, there is also the option to 'trade' through a financial spread betting platform which as its name suggests is purely a bet based upon the price of the underlying stock/asset. As such, I believe that your theory to short a stock just prior to its ex-dividend date may be worth investigating further... Apart from that, it's worthwhile mentioning that financial spread betting is officially recognised by HMRC as gambling and therefore not currently [2015/16] subject to capital gains tax. This info is given in good faith and must not be relied upon when making any investment and/or trading decision(s). I hope this helps you make a fortune - if it does; then please remember me!\",\n \"The dividend goes into the IRA (either reinvested automatically or remains as cash until you invest it, per your choice). You're not taxed on this dividend (IRA is a taxed-deferred account - you're taxed on the distributions, but not on the capital gains within the account).\",\n \"An update for anyone looking this up, I am still working through all the details but I can answer the question as far as Stack Exchange will go. In this situation the answer and processes involved greatly differs based on the personal circumstances of the person asking the question. Best to seek qualified tax advice than relying only on a forum as they are able to be more accurate and descriptive than any reply that you might receive.\",\n \"From an Indian tax point of view, this transaction is not taxable to you or your father.\",\n \"France taxes capital / dividend gains accrued in France. Hence you will not be able to reduce this liability. India does have a Double Tax Avoidance Treaty with France and you can claim relief for the tax paid in France.\",\n \"In a (not Roth) IRA, withdrawals are generally already taxed as regular income. So there should be no tax disadvantage to earning payment in lieu of dividends. It's possible that there is an exception for IRAs but I was unable to find one and I cannot see the reason for one since the dividend tax rate is usually lower than the income tax rate (which is why some company owners elect to receive part of the company profits via dividend rather than all through their salary).\",\n \"\\\"OK, I found this filing by JCI on the SEC website: U.S. Federal Income Tax Consequences of the Distribution to U.S. Holders For U.S. federal income tax purposes, the distribution will not be eligible for treatment as a tax-free distribution by Johnson Controls with respect to its stock. Accordingly, the distribution will be treated as a taxable distribution by Johnson Controls to each Johnson Controls shareholder in an amount equal to the fair market value of the Adient ordinary shares received by such shareholder (including any fractional shares deemed received and any Adient ordinary shares withheld on account of any Irish withholding taxes), determined as of the distribution date (such amount, the \\\"\\\"Distribution Amount\\\"\\\"). The Distribution Amount received by a U.S. holder will be treated as a taxable dividend to the extent of such U.S. holder's ratable share of current or accumulated earnings and profits of Johnson Controls for the taxable year of the distribution (as determined under U.S. federal income tax principles). Any portion of the Distribution Amount that is treated as a dividend will not be eligible for the dividends-received deduction allowed to corporations under the Code. My broker's 1099-B form tells me that I received a Qualified Dividend from JCI on 10/31/2016 of $512.44, which would be equivalent to $45.349 valuation of ADNT as of the spinoff date for my 11.3 shares (before the 0.3 shares were sold as cash-in-lieu) .\\\"\",\n \"I'm answering your second and third point. For first point it depends on case by case basis from which organization you are opening your trust. Trust Account are of different type: To earn interest you account should be of below type. Interest in possession trusts and Income Tax Trustees are responsible for declaring and paying Income Tax on income received by the trust. They do this on a Trust and Estate Tax Return each year. There are different rates depending on the type of income - as shown below. Type of income Income Tax rate 2014 to 2015 tax year Rent, trading and savings 20% (basic rate) UK dividends (such as income from stocks and shares) 10% (dividend ordinary rate)\",\n \"This investment strategy may have tax advantages. In some countries, income received from dividends is taxed as income, whereas profits on share trades are capital gains. If you have already exceeded your tax-free income limit for the year, but not your capital gains tax allowance, it may be preferable to make a dealing profit rather than an investment income. These arrangements are called a bed-and-breakfast.\",\n \"I was not able to find any authority for the opinion you suggest. Wash sale rules should, IMHO, apply. According to the regulations, you attribute the newly purchased shares to the oldest sold shares for the purposes of the calculation of the disallowed loss and cost basis. (c) Where the amount of stock or securities acquired within the 61-day period is less than the amount of stock or securities sold or otherwise disposed of, then the particular shares of stock or securities the loss from the sale or other disposition of which is not deductible shall be those with which the stock or securities acquired are matched in accordance with the following rule: The stock or securities acquired will be matched in accordance with the order of their acquisition (beginning with the earliest acquisition) with an equal number of the shares of stock or securities sold or otherwise disposed of. You can resort to the claim that you have not, in fact, entered into the contract within 30 days, but when you gave the instructions to reinvest dividends. I don't know if such a claim will hold, but to me it sounds reasonable. This is similar to the rules re short sales (in (g) there). In this case, wash sale rules will not apply (unless you instructed to reinvest dividends within the 30 days prior to the sale). But I'd ask a tax professional if such a claim would hold, talk to a EA/CPA licensed in your state.\",\n \"In the general case if you have income coming in from a foreign source you need to declare it on your Canadian tax form, and nominally pay tax on it. However Canada has a tax agreement with the UK to ensure that you are not taxed twice. You also declare how much tax you have paid to the UK, and that is deducted from your Canadian tax bill. You may need to consult a tax professional, or maybe just read the Revenue Canada website to get the details. If you are holding this money for a friend, then you may find that this does not count as income to you. If you are getting it transferred to you in Canada, and then immediately passed on to your friend, it probably doesn't count as income (though again a tax professional will probably be helpful). This would mean you don't have to pay Canadian tax. But it's also a bummer because you've paid UK tax, which you might also have avoided, and you can't get that back without a lot of form filling. If this is going to be an ongoing situation, and the amount is significant, then you might look at getting your friend's money (and any you have in a UK account yourself) transferred to an offshore account, where UK tax is not automatically deducted. Most UK banks will do this for non-UK residents.\",\n \"Note the above is only for shares. There are different rules for other assets like House, Jewellery, Mutual Funds, Debt Funds. Refer to the Income Tax guide for more details.\",\n \"I gift my daughter stock worth $1000. No tax issue. She sells it for $2000, and has a taxable gain of $1000 that shows up on her return. Yes, you need to find out the date of the gift, as that is the date you value the fund for cost basis. The $3500 isn't a concern, as the gift seems to have been given well before that. It's a long term capital gain when you sell it. And, in a delightfully annoying aspect of our code, the dividends get added to basis each year, as you were paying tax on the dividend whether or not you actually received it. Depending on the level of dividends, your basis may very well be as high as the $6500 current value. (pls ask if anything here needs clarification)\",\n \"The link provided by DumbCoder (below) is only relevant to UK resident investors and does not apply if you live in Malaysia. I noticed that in a much older question you asked a similar question about taxes on US stocks, so I'll try and answer both situations here. The answer is almost the same for any country you decide to invest in. As a foreign investor, the country from which you purchase stock cannot charge you tax on either income or capital gains. Taxation is based on residency, so even when you purchase foreign stock its the tax laws of Malaysia (as your country of residence) that matter. At the time of writing, Malaysia does not levy any capital gains tax and there is no income tax charged on dividends so you won't have to declare or pay any tax on your stocks regardless of where you buy them from. The only exception to this is Dividend Withholding Tax, which is a special tax taken by the government of the country you bought the stock from before it is paid to your account. You do not need to declare this tax as it his already been taken by the time you receive your dividend. The rate of DWT that will be withheld is unique to each country. The UK does not have any withholding tax so you will always receive the full dividend on UK stocks. The withholding tax rate for the US is 30%. Other countries vary. For most countries that do charge a withholding tax, it is possible to have this reduced to 15% if there is a double taxation treaty in place between the two countries and all of the following are true: Note: Although the taxation rules of both countries are similar, I am a resident of Singapore not Malaysia so I can't speak from first hand experience, but current Malaysia tax rates are easy to find online. The rest of this information is common to any non-US/UK resident investor (as long as you're not a US person).\",\n \"\\\"I don't think its a taxable event since no income has been constructively received (talking about the RSU shareholders here). I believe you're right with the IRC 1033, and the basis of the RSU is the basis of the original stock option (probably zero). Edit: see below. However, once the stock becomes vested - then it is a taxable event (not when the cash is received, but when the chance of forfeiture diminishes, even if the employee doesn't sell the stock), and is an ordinary income, not capital. That is my understanding of the situation, do not consider it as a tax advice in any way. I gave it a bit more though and I don't think IRC 1033 is relevant. You're not doing any exchange or conversion here, because you didn't have anything to convert to begin with, and don't have anything after the \\\"\\\"conversion\\\"\\\". Your ISO's are forfeited and no longer available, basically - you treat them as you've never had them. What happened is that you've received RSU's, and you treat them as a regular RSU grant, based on its vesting schedule. The tax consequences are exactly as I described in my original response: you recognize ordinary income on the vested stocks, as they vest. Your basis is zero (i.e.: the whole FMV of the stock at the time of vesting is your ordinary income). It should also be reflected in your W2 accordingly.\\\"\",\n \"\\\"The dividend reinvestment won't change whether the dividends themselves are qualified or not for US income tax purposes. It's still the holding period on the stock that matters. If you bought stock in different lots, then you could have a situation where some of the dividends paid are qualified and some are not, but: For completeness, it's worth noting that some dividends cannot be \\\"\\\"qualified\\\"\\\" no matter how long you hold them, but if you've got an investment in a common corporate stock (vs. something more \\\"\\\"exotic\\\"\\\"), then what's above should apply.\\\"\",\n \"You could use HBB and other similar funds that exchange distributions for capital gains. There's HXT and HXS which is Canada and US equity markets. The swap fee + mer is a little more than some funds except for HXT which is very cheap. There's a risk for long term holders that this may eventually get banned and you're forced to sell with a gain at the wrong time, but this won't matter much if you're planning on selling in a few years. You have to pay the capital gains tax eventually. Note, the tax on distributions is really a long term drag on performance and won't make a big difference in the short term.\",\n \"\\\"Are these all of the taxes or is there any additional taxes over these? Turn-over tax is not for retail investors. Other taxes are paid by the broker as part of transaction and one need not worry too much about it. Is there any \\\"\\\"Income tax\\\"\\\" to be paid for shares bought/holding shares? No for just buying and holding. However if you buy and sell; there would be a capital gain or loss. In stocks, if you hold a security for less than 1 year and sell it; it is classified as short term capital gain and taxes at special rate of 15%. The loss can be adjusted against any other short term gain. If held for more than year it is long term capital gain. For stock market, the tax is zero, you can't adjust long term losses in stock markets. Will the money received from selling shares fall under \\\"\\\"Taxable money for FY Income tax\\\"\\\"? Only the gain [or loss] will be tread as income not the complete sale value. To calculate gain, one need to arrive a purchase price which is price of stock + Brokerage + STT + all other taxes. Similar the sale price will be Sales of stock - Brokerage - STT - all other taxes. The difference is the gain. Will the \\\"\\\"Dividend/Bonus/Buy-back\\\"\\\" money fall under taxable category? Dividend is tax free to individual as the company has already paid dividend distribution tax. Bonus is tax free event as it does not create any additional value. Buy-Back is treated as sale of shares if you have participated. Will the share-holder pay \\\"\\\"Dividend Distribution Tax\\\"\\\"? Paid by the company. What is \\\"\\\"Capital Gains\\\"\\\"? Profit or loss of buying and selling a particular security.\\\"\",\n \"It's a scam pushed through to benefit the banking system. Tax payments become income for the banks. Any alleged benefits for property holders are ultimately reduced by increased property prices, capital gains tax and estate taxes\",\n \"Is this money taxable in US? From what you described you're likely to have been a US tax resident. As such, you're taxed on your worldwide income. Foreign tax deferral schemes are not considered qualified under the US law (unless a treaty says otherwise), so you're liable for taxes on them now. Get a new tax adviser.\",\n \"Since you have already paid tax to the Government of Uk, no tax will be levied on the money earned outside India. As per the Income tax act, any income received in India in all cases is taxable irrespective of the tax payer's residential status. A NRI after receiving income from outside India cannot be taxed as income because of remittance of such income to India.\",\n \"The answer to your question doesn't depend on who you trade with but what country you live in. If you live outside of the US, you will have to pay tax on dividends... sometimes. This depends on the tax treaty that your country has with the US. Canada, Australia, UK and a few other countries have favorable tax treaties with the US that allow you to not be double taxed. You must look into the tax treaty that your home country has with the US to answer the question. Each country is different.\",\n \"\\\"Is it equity, or debt? Understanding the exact nature of one's investment (equity vs. debt) is critical. When one invests money in a company (presumably incorporated or limited) by buying some or all of it — as opposed to lending money to the company — then one ends up owning equity (shares or stock) in the company. In such a situation, one is a shareholder — not a creditor. As a shareholder, one is not generally owed a money debt just by having acquired an ownership stake in the company. Shareholders with company equity generally don't get to treat money received from the company as repayment of a loan — unless they also made a loan to the company and the payment is designated by the company as a loan repayment. Rather, shareholders can receive cash from a company through one of the following sources: \\\"\\\"Loan repayment\\\"\\\" isn't one of those options; it's only an option if one made a loan in the first place. Anyway, each of those ways of receiving money based on one's shares in a company has distinct tax implications, not just for the shareholder but for the company as well. You should consult with a tax professional about the most effective way for you to repatriate money from your investment. Considering the company is established overseas, you may want to find somebody with the appropriate expertise.\\\"\",\n \"\\\"I held shares in BIND Therapeutics, a small biotechnology company on the NASDAQ that was liquidated on the chapter 11 auction block in 2016. There were sufficient proceeds to pay the debts and return some cash to shareholders, with payments in 2016 and 2017. (Some payments have yet to occur.) The whole process is counter-intuitive and full of landmines, both for tax preparation & planning and receiving payments: Landmine 0: Some shareholders will sell in a panic as soon as the chapter 11 is announced. This would have been a huge mistake in the case of BIND, because the eventual liquidation payments were worth 3 or so times as much as the share price after chapter 11. The amount of the liquidation payments wasn't immediately calculable, because the company's intellectual property had to be auctioned. Landmine 1: The large brokerages (Vanguard, Fidelity, TDA, and others) mischaracterized the distributions to shareholders on form 1099, distributed to both shareholders and the IRS. The bankruptcy trustee considered this to be their responsibility. According to the tax code and to the IRS website, the liquidation is taxed like a sale of stock, rather than a dividend. \\\"\\\"On the shareholder level, a complete liquidation can be thought of as a sale of all outstanding corporate stock held by the shareholders in exchange for all of the assets in that corporation. Like any sale of stock, the shareholder receives capital gain treatment on the difference between the amount received by the shareholder in the distribution and the cost or other basis of the stock.\\\"\\\" Mischaracterizing the distributions as dividends makes them wrongly ineligible to be wiped out by the enormous capital loss on the stock. Vanguard's error appeared on my own 1099, and the others were mentioned in an investor discussion on stocktwits. However, Geoffrey L Berman, the bankruptcy trustee stated on twitter that while the payments are NOT dividends, the 1099s were the brokers' responsibility. Landmine 2: Many shareholders will wrongly attempt to claim the capital loss for tax year 2016, or they may have failed to understand the law in time for proper tax planning for tax year 2016. It does not matter that the company's BINDQ shares were cancelled in 2016. According to the IRS website \\\"\\\"When a shareholder receives a series of distributions in liquidation, gain is recognized once all of the shareholder's stock basis is recovered. A loss, however, will not be recognized until the final distribution is received.\\\"\\\" In particular, shareholders who receive the 2017 payment will not be able to take a capital loss for tax year 2016 because the liquidation wasn't complete. Late discovery of this timing issue no doubt resulted in an end-of-year underestimation of 2016 overall capital gains for many, causing a failure to preemptively realize available capital losses elsewhere. I'm not going to carefully consider the following issues, which may or may not have some effect on the timing of the capital loss: Landmine 3: Surprisingly, it appears that some shareholders who sold their shares in 2016 still may not claim the capital loss for tax year 2016, because they will receive a liquidation distribution in 2017. Taken at face value, the IRS website's statement \\\"\\\"A loss, however, will not be recognized until the final distribution is received\\\"\\\" appears to apply to shareholders of record of August 30, 2016, who receive the payouts, even if they sold the shares after the record date. However, to know for sure it might be worth carefully parsing the relevant tax code and treasury regs. Landmine 4: Some shareholders are completely cut out of the bankruptcy distribution. The bankruptcy plan only provides distributions for shareholders of record Aug 30, 2016. Those who bought shares of BINDQ afterwards are out of luck. Landmine 5: According to the discussion on stocktwits, many shareholders have yet to receive or even learn of the existence of a form [more secure link showing brokers served here] required to accept 2017 payments. To add to confusion there is apparently ongoing legal wrangling over whether the trustee is able to require this form. Worse, shareholders report difficulty getting brokers' required cooperation in submitting this form. Landmine 6: Hopefully there are no more landmines. Boom. DISCLAIMER: I am not a tax professional. Consult the tax code/treasury regulations/IRS publications when preparing your taxes. They are more trustworthy than accountants, or at least more trustworthy than good ones.\\\"\",\n \"\\\"The short answer is that the exchange of the stock in exchange for the elimination of a debt is a taxable exchange, and gains or losses are possible for the stock investor as well as the bank. The somewhat longer answer is best summarized as noting that banks don't usually accept stocks as collateral, mostly because stock values are volatile and most banks are not equipped to monitor the risk involved but it is very much part of the business of stock brokers. In the USA, as a practical matter I only know of stock brokerages offering loans against stock as part of the standard services of a \\\"\\\"margin account\\\"\\\". You can get a margin account at any US stock broker. The stockholder can deposit their shares in the margin account and then borrow around 50% of the value, though that is a bit much to borrow and a lower amount would be safer from sudden demands for repayment in the form of margin calls. In a brokerage account I can not imagine a need to repay a margin loan if the stocks dividends plus capital appreciation rises in value faster than the margin loan rate creates interest charges... Trouble begins as the stock value goes down. When the value of the loan exceeds a certain percentage of the stock value, which can depend on the stock and the broker's policy but is also subject to federal rules like Regulation T, the broker can call in the loan and/or take initiative to sell the stock to repay the loan. Notice that this may result in a capital gain or loss, depending on the investor's tax basis which is usually the original cost of the stock. Of course, this sale affects the taxes of the investor irregardless of who gets the money.\\\"\",\n \"All that it is saying is that if you withdraw money from your account it doesn't matter whether it has come from dividends or capital gains, it is still a withdrawal. Of course you can only withdraw a capital gain if you sell part of the assets. You would only do this if it was the right time for you to sell the asset.\",\n \"Eric is right regarding the tax, i.e. ordinary income on discount, cap gain treatment on profit whether long term or short. I would not let the tax tail wag the investing dog. If you would be a holder of the stock, hold on, if not, sell. You are considering a 10-15% delta on the profit to make the decision. Now. I hear you say your wife hasn't worked which potentially puts you in a lower bracket this year. I wrote Topping off your bracket with a Roth Conversion which would help your tax situation long term. Simply put, you convert enough Traditional IRA (or 401(k) money) to use up some of the current bracket you are in, but not hit the next. This may not apply to you, depending on whether you have retirement funds to do this. Note - The cited article offers numbers for a single person, but illustrates the concept. See the tax table for the marginal rates that would apply to you.\",\n \"Huh. It appears it's only currencies in sterling that are fully exempt. https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg12602 Government manuals are more detailed than .gov but still not perfect as it's HMRCs interpretation of legislation and has been overturned in the past. There is also another (old) article here about foreign currency transactions. https://www.taxation.co.uk/articles/2010/10/27/21191/currency-gains I have never come across forex capital gains in practice but I've learnt something today! Something to look out for in the UK as well I guess.\",\n \"\\\"I think the £35K band applies to the \\\"\\\"dividend income\\\"\\\" not the \\\"\\\"dividend paid to you\\\"\\\", and so you would only actually get £31.5K (90% of £35K) in your pocket before the next tax band kicked in. If your company will only supplying large VAT registered entities, then register for VAT yourself and elect the Flat Rate scheme - depending on your area of business, given that you have no expenses, your company will get an extra 7% - 14% on its income for free. Your clients won't care that you charge them VAT because they'll claim it back. Finally, depending on what your company is for, beware of the dreaded IR35\\\"\",\n \"\\\"Disclaimer: I am neither a lawyer nor a tax-expert This page on the HMRC site lists several pages that appear to be relevant, starting with CG78401 - Foreign currency: delayed remittances and on to CG78408 - Foreign currency: example which seems pertinent to your case [paraphrased]: A property bought in 1983 is sold for a [taxable] gain in one tax-year (1986/87) but the proceeds cannot be released/remitted to the UK until later (1991/92), by which time currency fluctuations have created a second [taxable] gain. The size of the first gain (selling the property) is determined by the exchange rate in effect at the time of the sale but because of local restrictions, this can be deferred. The size of the second gain (currency movement) is determined by the change in exchange-rate between the time of the sale and the time of conversion. In your case, the first \\\"\\\"gain\\\"\\\" was actually a loss, so I believe you should be able to use this to offset any tax due second gain. This page states that losses can be claimed up to four years after the end of the tax-year in which they were incurred, so you are probably still OK. (The example makes application under TCGA92/S279 to defer the gain made on the original sale [because of the inability to transfer funds], but as I understand it, this is primarily to avoid a tax liability in that year. Since you made a loss on the sale, there wouldn't have been a tax liability, so there would be no need to defer it).\\\"\",\n \"I'm guessing you're conflating bonus share issuance with stock split. That seems very common to me, from a quick search; there's even some issues of terminology between the US and Europe, I think - it seems some Europeans may use Bonus Shares to mean Stock Split, as opposed to the more common meaning in the US of Stock Dividend. Sometimes a bonus share issuance is (incorrectly) called a stock split, like in this public announcement from STADA in 2004. It is a 1:1 bonus share issuance (meaning they issue one bonus share to everyone who has one share now), but it is in essence the same thing as a stock split (a 2:1 stock split, namely). They combined the 1:1 from bonus share with the wording 'split', causing the confusion. Bonus share issuance, also known as a stock dividend, is covered well in this question/answer on this site, or from a search online. It has no obvious effect initially - both involve doubling shares out there and halving the price - but it has a substantially different treatment in terms of accounting, both to the company and to your tax accountant.\",\n \"\\\"> What's their performance been like in recent years? IIRC the last time they were able to pay a dividend was in 2000, so I'm gonna go with \\\"\\\"not great\\\"\\\". Thanks a lot for the effort, I didn't factor in tax at all, it makes more sense then. I still think it's an interesting concept that shares are worth less than what you \\\"\\\"get\\\"\\\" for them (according to their accountants, who knows what the value actually would be if you tried to sell whatever they own now), and I found basically nothing on google. The whole is usually more than the sum of its parts, not (significantly) less.\\\"\",\n \"In Canada, it is similarly taxed as CQM states. Mining is considered business income and you need to file a T1 form. Capital appreciation is no different than treating gains from stock.\",\n \"Interest earned over my saving only As you are Tax resident in UK, UK taxes Global income. So the interest earned in India is taxable. Further this is taxable when the interest was paid to you in India and it is not relevant whether you kept the funds in India or repatriated to UK. It is not clear in your question as to when the interest was credited to your Indian account. If its been for few years, you are in breach of the UK tax regulation. Consult a tax advisor how this can be corrected. If it is for this year, pay taxes as per normal tax brackets.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["I wrote about this in another answer: You can sell the scrip dividend in the market; the capital gain from this sale may fall below the annual tax-free allowance for capital gains, in which case you don't pay any capital gains tax on that amount. For a cash dividend, however, there isn't a minimum taxable amount, so you would owe dividend tax on the entire dividend (and may therefore pay more taxes on a cash dividend). Since you haven't sold the shares in the market yet, you haven't earned any income on the shares. You don't owe taxes on the scrip until you sell the shares and earn capital gains on them. HMRC is very explicit about this, in CG33800: It is quite common for a company, particularly a quoted company, to offer its shareholders the option of receiving additional shares instead of a cash dividend. The expression `stock or scrip dividend' is used to describe shares issued in such circumstances. The basic position under tax law is that when a company makes a bonus issue of shares no distribution arises, and the bonus issue of shares is not income for tax purposes in the hands of the recipient. Obviously, if this is an issue for you, talk to a tax professional to make sure you get it right.","The HMRC website says: Stock dividends are treated as income by virtue of CTA10/S1049, and taxable as savings income under Chapter 5 of Part 4 of ITTOIA05 (sections 409 to 414). ITTOIA05 is the Income Tax (Trading and Other Income) Act 2005, and says: 409 Charge to tax on stock dividend income (1) Income tax is charged on stock dividend income. (2) In this Chapter “stock dividend income” means the income that is treated as arising under section 410. 411 Income charged (1) Tax is charged under this Chapter on the amount of stock dividend income treated for income tax purposes as arising in the tax year. (2) That amount is the cash equivalent of the share capital on the issue of which the stock dividend income arises (see section 412), grossed up by reference to the dividend ordinary rate for the tax year.","The HMRC website would explain it better to you. There is a lot of factors and conditions involved, so refer to the HMRC website for clarification. If your question had more details, it could have been easy to pinpoint the exact answer. Do I declare the value of shares as income Why would you do that ? You haven't generated income from that yet(sold it to make a profit/loss), so how can that be declared as income."],"string":"[\n \"I wrote about this in another answer: You can sell the scrip dividend in the market; the capital gain from this sale may fall below the annual tax-free allowance for capital gains, in which case you don't pay any capital gains tax on that amount. For a cash dividend, however, there isn't a minimum taxable amount, so you would owe dividend tax on the entire dividend (and may therefore pay more taxes on a cash dividend). Since you haven't sold the shares in the market yet, you haven't earned any income on the shares. You don't owe taxes on the scrip until you sell the shares and earn capital gains on them. HMRC is very explicit about this, in CG33800: It is quite common for a company, particularly a quoted company, to offer its shareholders the option of receiving additional shares instead of a cash dividend. The expression `stock or scrip dividend' is used to describe shares issued in such circumstances. The basic position under tax law is that when a company makes a bonus issue of shares no distribution arises, and the bonus issue of shares is not income for tax purposes in the hands of the recipient. Obviously, if this is an issue for you, talk to a tax professional to make sure you get it right.\",\n \"The HMRC website says: Stock dividends are treated as income by virtue of CTA10/S1049, and taxable as savings income under Chapter 5 of Part 4 of ITTOIA05 (sections 409 to 414). ITTOIA05 is the Income Tax (Trading and Other Income) Act 2005, and says: 409 Charge to tax on stock dividend income (1) Income tax is charged on stock dividend income. (2) In this Chapter “stock dividend income” means the income that is treated as arising under section 410. 411 Income charged (1) Tax is charged under this Chapter on the amount of stock dividend income treated for income tax purposes as arising in the tax year. (2) That amount is the cash equivalent of the share capital on the issue of which the stock dividend income arises (see section 412), grossed up by reference to the dividend ordinary rate for the tax year.\",\n \"The HMRC website would explain it better to you. There is a lot of factors and conditions involved, so refer to the HMRC website for clarification. If your question had more details, it could have been easy to pinpoint the exact answer. Do I declare the value of shares as income Why would you do that ? You haven't generated income from that yet(sold it to make a profit/loss), so how can that be declared as income.\"\n]","isConversational":false}}},{"rowIdx":88,"cells":{"_id":{"kind":"string","value":"8834"},"query":{"kind":"string","value":"Pros/Cons of Buying Discounted Company Stock"},"gt_ids":{"kind":"list like","value":["133644","521095","12232","197151","203139","569303"],"string":"[\n \"133644\",\n \"521095\",\n \"12232\",\n \"197151\",\n \"203139\",\n \"569303\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1,1,1,1,1],"string":"[\n 1,\n 1,\n 1,\n 1,\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["133644","371821","203139","469100","569224","197151","528827","451737","521095","599156","67625","407911","439404","88540","121480","217124","71713","35575","90085","95243","436222","87331","409039","15030","434812","518088","348927","43653","344372","408695","550879","238215","248269","135798","345388","294573","40831","393164","517774","255045","556421","124230","212470","575213","68094","350872","12232","52185","30774","135873","273829","127702","483765","556696","54064","213976","495568","498604","39345","580534","315760","589443","528699","102237","194359","295258","306688","569303","453829","448789","451613","193396","69308","102449","519433","142401","160787","519148","393759","261522","361345","517516","361482","581866","387035","178684","169587","535110","68515","237718","473907","415433","56027","106104","57387","287092","240225","220147","200756","481339"],"string":"[\n \"133644\",\n \"371821\",\n \"203139\",\n \"469100\",\n \"569224\",\n \"197151\",\n \"528827\",\n \"451737\",\n \"521095\",\n \"599156\",\n \"67625\",\n \"407911\",\n \"439404\",\n \"88540\",\n \"121480\",\n \"217124\",\n \"71713\",\n \"35575\",\n \"90085\",\n \"95243\",\n \"436222\",\n \"87331\",\n \"409039\",\n \"15030\",\n \"434812\",\n \"518088\",\n \"348927\",\n \"43653\",\n \"344372\",\n \"408695\",\n \"550879\",\n \"238215\",\n \"248269\",\n \"135798\",\n \"345388\",\n \"294573\",\n \"40831\",\n \"393164\",\n \"517774\",\n \"255045\",\n \"556421\",\n \"124230\",\n \"212470\",\n \"575213\",\n \"68094\",\n \"350872\",\n \"12232\",\n \"52185\",\n \"30774\",\n \"135873\",\n \"273829\",\n \"127702\",\n \"483765\",\n \"556696\",\n \"54064\",\n \"213976\",\n \"495568\",\n \"498604\",\n \"39345\",\n \"580534\",\n \"315760\",\n \"589443\",\n \"528699\",\n \"102237\",\n \"194359\",\n \"295258\",\n \"306688\",\n \"569303\",\n \"453829\",\n \"448789\",\n \"451613\",\n \"193396\",\n \"69308\",\n \"102449\",\n \"519433\",\n \"142401\",\n \"160787\",\n \"519148\",\n \"393759\",\n \"261522\",\n \"361345\",\n \"517516\",\n \"361482\",\n \"581866\",\n \"387035\",\n \"178684\",\n \"169587\",\n \"535110\",\n \"68515\",\n \"237718\",\n \"473907\",\n \"415433\",\n \"56027\",\n \"106104\",\n \"57387\",\n \"287092\",\n \"240225\",\n \"220147\",\n \"200756\",\n \"481339\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["Is this an employee stock purchase plan (ESPP)? If so, and there is no required holding period, selling right away is essentially a guaranteed bonus with minimal risk. One caveat is that sometimes it takes a while to actually receive the shares at your brokerage, and in the meantime your company may have an earnings report that could cause the share price to drop. If your discount is only 5%, for example, a bad earnings report could easily wipe that out. The only other cons I can think of is ESPP contributions being withheld from you for months (albeit for a virtually guaranteed return), and it complicates your taxes a bit. On the flip side, another pro is that after you sell the shares, you are more likely to invest that money rather than spend it.","Make sure to check the language describing the 'discount'. The company may be matching your contribution by 5% instead of a discount. You will likely be taxed on the match as compensation and your benefit would net to less than 5%. The next risk is that you've increased your exposure if your company does poorly. In the worst case scenario you could lose your wages to a layoff and your portfolio to a falling share price. Investing in other companies will diversify this risk. As for benefits, you get the 5% (less taxes) for free which isn't a bad thing in my book. Just don't put everything you own into the stock. It should be part of your overall investing strategy.","One major benefit to being able to buy discounted company stock is that you can sell in-the-money covered calls and potentially make more than you would selling at strike.","You didn't give enough information. What is your goal? What is your financial situation? A discount to buy company stock can seem very tempting. I was tempted by it myself, gee, almost 20 years ago. I still own some of the stock. But I held mutual funds first. There are two disadvantages that have disuaded me from partaking in the ESPP of my subsequent employers (one of which was a spin-out company of the stock-issuing company, the other having bought the spin-out). First, putting a bunch of money in a single stock is rather risky. single stocks will drop dramatically due to market conditions. Generally market conditions don't act so dramatically on all stock. Second, is it wise to put not only your salary but also your saved wealth all in one basket? It worked out reasonably well for me. The stock doubled right before my division was spun out -- I sold half of my position. And the resulting stock has continued to provide opportunities to diversify. However, it could have just as easily dropped in half instead of doubled. What is your timeline for holding the stock -- for realizing any gain? Can you afford patience if the stock value should drop in half? I have co-workers who continue to invest through our new company's ESPP. At least one co-worker has the stated goal to sell after every purchase -- he holds the stock long enough to make a long-term gain instead of short term, but he sells after every purchase. And it seems to him that the stock always drops right when he wants to sell.","What most respondents are forgetting, is when a company allows its employees to purchase its shares at a discount with their salary, the employee is usually required to hold the stock for a number of years before they can sell them. The reason the company is allowing or promoting its employees to purchase its shares at a discount is to give the employees a sense of ownership of the company. Being a part owner in the company, the employee will want the company to succeed and will tend to be more productive. If employees were allowed to purchase the shares at a discount and sell them straight away, it would defeat this purpose. Your best option to decide whether or not to buy the shares is to work out if the investment is a good one as per any other investment you would undertake, i.e. determine how the company is currently performing and what its future prospects are likely to be. Regarding what percentage of pay to purchase the shares with, if you do decide to buy them, you need to work that out based on your current and future budgetary needs and your savings plan for the future.","Assuming US. The only con that I know of is that hassle factor. You have to remember to sell when you get the new shares, and your taxes become a bit more complicated; the discount that you receive is taxed as ordinary income, and then any change in the price of the stock between when you receive it and you sell it will be considered a capital gain or loss. It's not hard to account for properly if you keep good records.","I would not hold any company stock for the company that provides your income. This is a too many eggs in one basket kind of problem. With a discounted stock purchase plan, I would buy the shares at a 10% discount and immediately resell for a profit. If the company prevents you from immediately reselling, I don't know if I would invest. The risk is too great that you'll see your job lost and your 401k/investments emptied due to a single cause.","\"Does your job give you access to \"\"confidential information\"\", such that you can only buy or sell shares in the company during certain windows? Employees with access to company financial data, resource planning databases, or customer databases are often only allowed to trade in company securities (or derivatives thereof) during certain \"\"windows\"\" a few days after the company releases its quarterly earnings reports. Even those windows can be cancelled if a major event is about to be announced. These windows are designed to prevent the appearance of insider trading, which is a serious crime in the United States. Is there a minimum time that you would need to hold the stock, before you are allowed to sell it? Do you have confidence that the stock would retain most of its value, long enough that your profits are long-term capital gains instead of short-term capital gains? What happens to your stock if you lose your job, retire, or go to another company? Does your company's stock price seem to be inflated by any of these factors: If any of these nine warning flags are the case, I would think carefully before investing. If I had a basic emergency fund set aside and none of the nine warning flags are present, or if I had a solid emergency fund and the company seemed likely to continue to justify its stock price for several years, I would seriously consider taking full advantage of the stock purchase plan. I would not invest more money than I could afford to lose. At first, I would cash out my profits quickly (either as quickly as allowed, or as quickly as lets me minimize my capital gains taxes). I would reinvest in more shares, until I could afford to buy as many shares as the company would allow me to buy at the discount. In the long-run, I would avoid having more than one-third of my net worth in any single investment. (E.g., company stock, home equity, bonds in general, et cetera.)\"","\"The major pros tend to be: The major cons tend to be: Being in California, you've got state income tax to worry about as well. It might be worth using some of that extra cash to hire someone who knows what they're doing to handle your taxes the first year, at least. I've always maxed mine out, because it's always seemed like a solid way to make a few extra dollars. If you can live without the money in your regular paycheck, it's always seemed that the rewards outweighed the risks. I've also always immediately sold the stock, since I usually feel like being employed at the company is enough \"\"eggs in that basket\"\" without holding investments in the same company. (NB: I've participated in several of these ESPP programs at large international US-based software companies, so this is from my personal experience. You should carefully review the terms of your ESPP before signing up, and I'm a software engineer and not a financial advisor.)\"","It's 5% free money, if you believe the company's stock is fairly valued and likely to grow and/or return reasonable dividends until you're ready to sell it. There's usually a minimum holding period of a few months to a year before these discounted shares can be sold; take that into account","It appears your company is offering roughly a 25% discount on its shares. I start there as a basis to give you a perspective on what the 30% matching offer means to you in terms of value. Since you are asking for things to consider not whether to do it, below are a few considerations (there may be others) in general you should think about your sources of income. if this company is your only source of income, it is more prudent to make your investment in their shares a smaller portion of your overall investment/savings strategy. what is the holding period for the shares you purchase. some companies institute a holding period or hold duration which restricts when you can sell the shares. Generally, the shorter the duration period the less risk there is for you. So if you can buy the shares and immediately sell the shares that represents the least amount of relative risk. what are the tax implications for shares offered at such a discount. this may be something you will need to consult a tax adviser to get a better understanding. your company should also be able to provide a reasonable interpretation of the tax consequences for the offering as well. is the stock you are buying liquid. liquid, in this case, is just a fancy term for asking how many shares trade in a public market daily. if it is a very liquid stock you can have some confidence that you may be able to sell out of your shares when you need. personally, i would review the company's financial statements and public statements to investors to get a better understanding of their competitive positioning, market size and prospects for profitability and growth. given you are a novice at this it may be good idea to solicit the opinion of your colleagues at work and others who have insight on the financial performance of the company. you should consider other investment options as well. since this seems to be your first foray into investing you should consider diversifying your savings into a few investments areas (such as big market indices which typically should be less volatile). last, there is always the chance that your company could fail. Companies like Enron, Lehman Brothers and many others that were much smaller than those two examples have failed in the past. only you can gauge your tolerance for risk. As a young investor, the best place to start is to use index funds which track a broader universe of stocks or bonds as the first step in building an investment portfolio. once you own a good set of index funds you can diversify with smaller investments.","Rather than take anyone's word for it (including and especially mine) you need to do think very carefully about your company; you know it far better than almost anyone else. Do you feel that the company values its employees? If it values you and your immediate colleagues then its likely that it not only values its other employees but also its customers which is a sign that it will do well. Does the company have a good relationship with its customers? Since you are a software engineer using a web stack I assume that it is either a web consultancy or has an e-commerce side to it so you will have some exposure to what the customers complain about, either in terms of bugs or UX difficulties. You probably even get bug reports that tell you what customer pain points are. Are customers' concerns valid, serious and damaging? If they are then you should think twice about taking up the offer, if not then you may well be fine. Also bear in mind how much profit is made on each item of product and how many you can possibly sell - you need to be able to sell items that have been produced. Those factors indicate how the future of the company looks currently, next you need to think about why the IPO is needed. IPOs and other share offerings are generally done to raise capital for the firm so is your company raising money to invest for the future or to cover losses and cashflow shortfalls? Are you being paid on time and without issues? Do you get all of the equipment and hiring positions that you want or is money always a limiting factor? As an insider you have a better chance to analyse these things than outsiders as they effect your day-to-day work. Remember that anything in the prospectus is just marketing spiel; expecting a 4.5 - 5.3% div yield is not the same as actually paying it or guaranteeing it. Do you think that they could afford to pay it? The company is trying to sell these shares for the maximum price they can get, don't fall for the hyped up sales pitch. If you feel that all of these factors are positive then you should buy as much as you can, hopefully far more than the minimum, as it seems like the company is a strong, growing concern. If you have any concerns from thinking about these factors then you probably shouldn't buy any (unless you are getting a discount but that's a different set of considerations) as your money would be better utilized elsewhere.","Whether it's wise or not depends on what you think and what you should consider are the risks both ways. What are the risks? For Let's say that the company produces great value and its current price and initial price are well below what it's worth. By investing some of your money in the company, you can take advantage of this value and capitalize off of it if the market recognizes this value too, or when the market does (if it's a successful company it will be a matter of when). Other reasons to be for it are that the tech industry is considered a solid industry and a lot of money is flowing into it. Therefore, if this assumption is correct, you may assume that your job is safe even if your investment doesn't pay off (meaning, you don't lose income, but your investment may not be a great move). Against Let's say that you dump a lot of money into your company and invest in the stock. You're being paid by the company, you're taking some of that money and investing it in the company, meaning that, depending on how much you make outside the company, you are increasing your risk of loss if something negative happens to the company (ie: it fails). Other reasons to be against it are just the opposite as above: due to the NSA, some analysts (like Mish, ZeroHedge, and others) think that the world will cut back on doing IT business with the United States, thus the tech industry will take a major hit over the next decade. In addition to that, Jesse Colombo (@TheBubbleBubble) on Twitter is predicting that there's another tech bubble and it will make a mess when it pops (to be fair to Colombo, he was one of analysts who predicted the housing bubble and his predictions on trading are often right). Finally, there is a risk of lost money and there is also a risk of lost opportunity. Looking at your past investments, which generally hurt more? That might give you a clue what to do.","One such strategy I have heard for those who have this opportunity is to purchase the maximum allowed. When the window to sell opens, sell all of your shares and repurchase the most you can with the amount you gained (or keep an equivalent to avoid another transaction fee). This allows you to buy at a discount, and spread out the risk by investing elsewhere. This way you are really only exposing yourself to lose money which you wouldn't have had access to without the stock discount.","A 15% discount is a 17.6% return. (100/85 = 1.176). For a holding period that's an average 15.5 days, a half month. It would be silly to compound this over a year as the numbers are limited. The safest way to do this is to sell the day you are permitted. In effect, you are betting, 12 times a year, that the stock won't drop 15% in 3 days. You can pull data going back decades, or as long as your company has been public, and run a spreadsheet to see how many times, if at all, the stock has seen this kind of volatility over 3 day periods. Even for volatile stocks, a 15% move is pretty large, you're likely to find your stock doing this less than once per year. It's also safest to not accumulate too many shares of your company for multiple reasons, having to do with risk spreading, diversification, etc. 2 additional points - the Brexit just caused the S&P to drop 4% over the last 3 days trading. This was a major world event, but, on average we are down 4%. One would have to be very unlucky to have their stock drop 15% over the specific 3 days we are discussing. The dollars at risk are minimal. Say you make $120K/yr. $10K/month. 15% of this is $1500 and you are buying $1765 worth of stock. The gains, on average are expected to be $265/mo. Doesn't seem like too much, but it's $3180 over a years' time. $3180 in profit for a maximum $1500 at risk at any month's cycle.","\"Check how long you have to hold the stock after buying it. If you can sell reasonably soon and your company is reasonably stable, you're unlikely to lose and/or be taxed and/or pay enough in fees to lose more than the 30% \"\"free money\"\" they're giving you. Whether you hold it longer than the minimum time depends partly on whether you think you can better invest the money elsewhere, and partly on how you feel about having both your salary and (part of) your investments tied to the company's success? The company would like you to \"\"double down\"\" that way, in the theory that it may make you mors motivated... but some investment councelors would advise keeping that a relatively small part of your total investments, basically for the same reasons you are always advised to diversify.\"","I agree with the other comments that you should not buy/hold your company stock even if given at a discount. If equity is provided as part of the compensation package (Options/Restrictive Stock Units RSU)then this rule does not apply. As a matter of diversification, you should not have majority equity stake of other companies in the same sector (e.g. technology) as your employer. Asset allocation and diversification if done in the right way, takes care of the returns. Buying and selling on the same day is generally not allowed for ESPP. Taxation headaches. This is from personal experience (Cisco Systems). I had options issued in Sept 2008 at 18$ which vested regularly. I exited at various points - 19$,20$,21$,23$ My friend held on to all of it hoping for 30$ is stuck. Options expire if you leave your employment. ESPP shares though remain.","Other than the guaranteed 5% bonus (assuming you sell it right away), no benefits. Keep in mind that the price from which the discount is calculated is not necessarily the market price at the date of the ESPP purchase, so the actual discount may be more than 5% (depending on the volatility of the stock - much more).","Employee Stock Purchase Plans (ESPPs) were heavily neutered by U.S. tax laws a few years ago, and many companies have cut them way back. While discounts of 15% were common a decade ago, now a company can only offer negligible discounts of 5% or less (tax free), and you can just as easily get that from fluctuations in the market. These are the features to look for to determine if the ESPP is even worth the effort: As for a cash value, if a plan has at least one of those features, (and you believe the stock has real long term value), you still have to determine how much of your money you can afford to divert into stock. If the discount is 5%, the company is paying you an extra 5% on the money you put into the plan.","So the key factor here, IMHO, is the amount we are talking about. $2K is just not a lot of money. If you lose every penny, you can recover. On the other hand it is unlikely to make you wealthy. So if I was you I would buy in, more for the fun of it all. Now if it was a large amount of money that we were talking about it would be about a percentage of my net worth. For example, lets say the minimum was 20K, and you really believed in the company. If I had a net worth of less than 200K, I would not do it. If I had a larger net worth, I would consider it unless I was near retirement. So if I was 30, hand a net worth of 300K, I would probably invest as even if I did lose it all, I could recover. Having said all that it does not sound like you completely agree that the company will be profitable. So in that case, don't buy. Also, I have the opportunity to buy my own company's stock at a discount. However, I do not for two reasons. The first is I don't like investing in the company I work for. Secondly, they require you to hold the stock for a year.","I think of these things in terms of risk. Investing in individual stocks is risky, and investing in brand new individual stocks is riskier still. However, the payoff can be quite high. The fact that you work at the company increases your exposure. If the company goes under, then not only have you lost your investment, but you've lost your job and income as well. It really depends on how much of your total portfolio this investment represents. Consider the following: If you can say yes to all or most of these, then a small investment in your company is fine. If you end up losing your investment, you'll still be okay. I think it can help a company when the employees have a little skin in the game. I hope it pays out big for you.","As far as I know, the AMT implications are the same for a privately held company as for one that is publicly traded. When I was given my ISO package, it came with a big package of articles on AMT to encourage me to exercise as close to the strike price as possible. Remember that the further the actual price at the time of purchase is from the strike price, the more the likely liability for AMT. That is an argument for buying early. Your company should have a common metric for determining the price of the stock that is vetted by outside sources and stable from year to year that is used in a similar way to the publicly traded value when determining AMT liability. During acquisitions stock options often, from what I know of my industry, at least, become options in the new company's stock. This won't always happen, but its possible that your options will simply translate. This can be valuable, because the price of stock during acquisition may triple or quadruple (unless the acquisition is helping out a very troubled company). As long as you are confident that the company will one day be acquired rather than fold and you are able to hold the stock until that one day comes, or you'll be able to sell it back at a likely gain, other than tying up the money I don't see much of a downside to investing now.","Generally, it is considered a bad idea to put significant parts of your money in your own employer's stock, no matter how great the company looks right now. The reason is the old 'don't put all your eggs in one basket'. If there is ever a serious issue with your company, and you lose your job because they go down the drain, you don't only lose your job, but also your savings (and potentially 401k if you have their stock there too). So you end unemployed and without all your savings. Of course, this is a generic tip, and depending on the situation, it might be ok to ignore it, that's your decision. Just remember to have an eye on it, so you can get out while they are still floating - typically employees are not the first to know when it goes downhill, and when you see it in the papers, it's too late. Typically, you get a more secure and independent return-on-invest by buying into a well-managed mixed portfolio","Advantage: more money. The financial tradeoff is usually to your benefit: Given these, for having your money locked up for the average length of the vesting periods (some is locked up for 3 months, some is locked up for nearly 0), you get a 10% return. Overall, it's like a 1.5% bonus for the year, assuming you were to sell everything right away. Of course, whether or not you wish to keep the stock depends on how you value MSFT as an investment. The disadvantage lies in a couple parts:","ESPP is common among US companies, often with a framework similar to your outline. In the US, some ESPPs allow sales of shares to be considered qualifying (subject to capital gains rather than ordinary income tax) if they are sold at least 2 years after the enrollment date and at least 1 year after the purchase date. These details can vary from one plan to another and will be stated in the company's ESPP enrollment documents. Do look at the high and low values of the stock over the last year. If it swings up and down more than 15% (or whatever the discount is), then that risk should be a factor in your decision. If the stock is trending upward over the long term and you are confident in the durability of the company, then you might favor holding.","Since the 2 existing answers addressed the question as asked. Let me offer a warning. You have 10,000 options at $1. You've worked four years and the options are vested. The stock is worth $101 when you get a job offer (at another company) which you accept. So you put up $10k and buy the shares. At this moment, you put up $10K for stock worth $1.01M, a $1M profit and ordinary income. You got out of the company just in time. For whatever reason, the stock drops to $21 and at tax time you realize the $1M gain was ordinary income, but now the $800k loss is a capital loss, limited to $3000/yr above capital gains. In other words you have $210k worth of stock but a tax bill on $1M. This is not a contrived story, but a common one from the dotcon bubble. It's a warning that 'buy and hold' has the potential to blow up in your face, even if the shares you buy retain some value.","The main advantage and disadvantage I can see in a scenario like this are - how savvy and good an investor are you? It's a good way to create below-market average returns if you're not that good at investing and returns way above market average if you are...","Some companies offer discounts for shareholders. I believe Disney used to do so, for example; if your family was doing the Disneyland-every-year routine that could be a significant benefit.","I like C. Ross and MrChrister's advice to not be heavily weighted in one stock over the long run, especially the stock of your employer. I'll add this: One thing you really ought to find out – and this is where your tax advisor is likely able to help – is whether your company's stock options plan use qualified incentive stock options (ISO) or non-qualified stock options (NQO or NSO). See Wikipedia - Incentive stock option for details. From my understanding, only if your plan is a qualified (or statutory) ISO and you hold the shares for at least 1 year of the date of exercise and 2 years from the date of the option grant could your gain be considered a long-term capital gain. As opposed to: if your options are non-qualified, then your gain may be considered ordinary income no matter how long you wait – in which case there's no tax benefit to waiting to cash out. In terms of hedging the risk if you do choose to hold long, here are some ideas: Sell just enough stock at exercise (i.e. taking some tax hit up front) to at least recover your principal, so your original money is no longer at risk, or If your company has publicly listed options – which is unlikely, if they are very small – then you could purchase put options to insure against losses in your stock. Try a symbol lookup at the CBOE. Note: Hedging with put options is an advanced strategy and I suggest you learn more and seek advice from a pro if you want to consider this route. You'll also need to find out if there are restrictions on trading your employer's public stock or options – many companies have restrictions or black-out periods on employee trading, especially for people who have inside knowledge.","its the best investment you can have specially with the company you work for and IPO, if i was you i would invest in more then just the minimum since its IPO. ask you your manager or supervisor how much are they buying the stocks for if they are doing it the go for it you'll be okay just keep track of it regular sometime you can invest more as time go by. You can get the idea by how much production your company is doing, if your company's profit going up chances are you need to buy more.","There would be small generic risk that the company stock goes down real fast by more than 15% in a specific event to the company [fraud, segment company operates suffers a shock, etc] or a generic event to the stock market like recent events of Greece etc.","You'd likely be subject to a lock-up period before you could sell the shares along with possibly having other rules about how you could sell your shares as you'd likely be seen as an insider that may have information that gives you an unfair advantage for selling the stock possibly. Depending on how far in advance you hold the shares, you may or may not have adjustments in the valuation and number of shares as some companies may do a split or reverse split when preparing for an IPO. A company I worked for in the late 1990s had an IPO and my stock options had a revised strike price because of a reverse stock split that was done prior to the IPO.","It really depends. If it is offered as compensation (ie in leiu of, or in addition to salary or cash bonus) then it would be reportable income, and if sold later for a profit then that would be taxable as gains. If this share is purchased as an investment at current value then it would be treated like other securities most likely gains realized at sale. Any discount could be considered income but there are some goofy rules surrounding this enacted to prevent tax evasion and some to spur growth. That is the answer in a nut shell. It is far more complicated in reality as there are somewhere around 2000 pages of regulations deal with different exceptions and scenerios.","\"It depends on how big the dilution is. Could be a good trade. Do the math yourself, many times nobody else has as all the employees think they are going to get rich because \"\"options\"\" :)\"","I would pass on their deal if they will only match if you invest in their stock. Think about when/if the company falls on bad times. What happens to the stock of a company when bad times come? The board of directors will reduce or eliminate the dividend payout. Current and potential investors will take notice. Current owners of the stock will sell. Potential investors will avoid buying. The price of the stock with go down. And, quite likely, the company will lay off workers. If/when that happens you would find yourself without a job and holding (almost) worthless stock as your savings. That would be quite a bad situation to be in.","You should always always enroll in an espp if there is no lockup period and you can finance the contributions at a non-onerous rate. You should also always always sell it right away regardless of your feelings for the company. If you feel you must hold company stock to be a good employee buy some in your 401k which has additional advantages for company stock. (Gains treated as gains and not income on distribution.) If you can't contribute at first, do as much as you can and use your results from the previous offering period to finance a greater contribution the next period. I slowly went from 4% to 10% over 6 offering periods at my plan. The actual apr on a 15% discount plan is ~90% if you are able to sell right when the shares are priced. (Usually not the case, but the risk is small, there usually is a day or two administrative lockup (getting the shares into your account)) even for ESPP's that have no official lockup period. see here for details on the calculation. http://blog.adamnash.com/2006/11/22/your-employee-stock-purchase-plan-espp-is-worth-a-lot-more-than-15/ Just a note For your reference I worked for Motorola for 10 years. A stock that fell pretty dramatically over those 10 years and I always made money on the ESPP and more than once doubled my money. One additional note....Be aware of tax treatment on espp. Specifically be aware that plans generally withhold income tax on gains over the purchase price automatically. I didn't realize this for a couple of years and double taxed myself on those gains. Fortunately I found out my error in time to refile and get the money back, but it was a headache.","Only if you sell the stock in question, and use the proceeds to buy other stock. (You should probably never feel bad about selling your company stock, even if it goes up a lot later, because from a risk-exposure basis you are already exposed to your company's performance through your career. Unless you have a lot of other savings, you should diversify.)","Should I invest money in the pre-IPO stocks soon to be offered by the company that I work for? Is it wise to do this? What should I be thinking about? What are the risks? The last time I was offered pre-IPO friends and family stock, I purchased half of my allotment, and had my parents purchase the other half. Since I had a 6-month blackout period, I had to hold my portion. My parents sold their portion one day after the IPO. The price went up dramatically for about a day and a half, then dived continuously. My portion ended up being worthless. My parents made a few bucks. Good for them. Not a huge deal either way, since my cost was relatively low. If I had a chance to do it again, I'd give it all to friends or family instead of splitting it, and have them sell quickly if they realized a profit. You might be luckier than I was.","Your maximum risk is 100%. If you buy the stock 15% off and your company goes bankrupt tomorrow, you've lost everything. It also sounds like you have foreign exchange risk. One can debate how much risk this is in terms of expected outcomes, but that was not your question. However, if you purchase the company stock and buy put options at the same time, you can lock in a sale price ahead of time and absolutely limit your risk. Depending on the amount of stock we're talking about, you can buy currency futures as well to hedge the exchange risk. You don't necessarily have to buy the break-even strikes, you can buy the ones that guarantee a positive return. These are probably fairly cheap. Note that a lot of companies have policies that prohibit beneficiaries from shorting the company stocks, in which case you might not be able to hedge yourself with put options.","As littleadv says it depends on the local laws. Normally one shouldn't be too worried. Typically the stocks given to the employees are a very small portion of the overall stocks ... the owners would not try to jeopardize the deal just so that they make an incrementally small amount of money ... they would rather play safe than get into such a practice.","You really have asked two different questions here: I'm interested in putting away some money for my family Then I urge you to read up on investing. Improving your knowledge in investing is an investment that will very likely pay off in the long-term - this can't be answered here in full length, pointers to where to start are asset allocation and low-cost index funds. Read serious books, read stackexchange posts, and try avoid the Wall Street marketing machine. Also, before considering any long term investments, build an emergency fund (e.g. 6 months worth of your expenses) in case you need some liquid money (loss of job etc.), and also helps you sleep better at night. What things are important to consider before making this kind of investment? Mainly the risk (other answers already elaborate on the details). Investing in a single stock is quite risky, even more so when your income also depends on that company. Framed another way: which percentage of your portfolio should you put into a single stock? (which has been answered in this post). If after considering all things you think it's a good deal, take the offer, but don't put a too great percentage of you overall savings into it, limit it to say 10% (maybe even less).","A general rule of thumb is to avoid having more than 5% of your investments in any single stock, to avoid excessive risk; it's usually even more risky if you're talking company stock because an adverse event could result in an inferior stock price and you getting laid off. Under other circumstances, the ideal amount of company stock is probably 0%. But there are tax benefits to waiting, as you've noted, and if you're reasonably confident that the stock isn't likely to jerk around too much, and you have a high risk tolerance (i.e. lots of extra savings besides this), and you're comfortable shouldering the risk of losing some money, it might make sense to hold onto the stock for a year - but never any longer. The real risk to holding a lot of company stock doesn't depend on how often you buy it and sell it per se, but having period purchases every month should make it easier for you to ladder the funds, and regularly sell your old shares as you purchase new shares. You might also consider a stop-loss order on the stock at or near the price you purchased it at. If the stock is at $100, then you buy at $85, and then the stock drops to $85, there are no more outstanding tax benefits and it makes no sense to have it as part of your portfolio instead of any other speculative instrument - you probably get better diversification benefits with any other speculative instrument, so your risk-adjusted returns would be higher.","A 15% discount does not necessarily mean it is a good investment. The stock price can go down at any point. 15% discount might mean you are getting a little better deal than the average cat.","You're talking about ESPP? For ESPP it makes sense to utilize the most the company allows, i.e.: in your case - 15% of the paycheck (if you can afford deferring that much, I assume you can). When the stocks are purchased, I would sell them immediately, not hold. This way you have ~10% premium as your income (pretty much guaranteed, unless the stock falls significantly on the very same day), and almost no exposure. This sums up to be a nice 1.5% yearly guaranteed bonus, on top of any other compensation. As to keeping the stocks, this depends on how much you believe in your company and expect the stocks to appreciate. Being employed and dependent on the company with your salary, I'd avoid investing in your company, as you're invested in it deeply as it is.","Depending on your perspective of it, I can see reasons for and against this idea. Only with the benefit of hindsight can one say how wise or unwise it is to do so. Earlier in my career, I invested and lost it all. Understand if you do buy when would you be able to sell, do you have to have an account with the underwriter, what fees may there be in having such an account, and would there be restrictions on when you could sell.","Judge this stock no differently than any other is the answer. Optimism isn't fact. http://clarkhoward.com/liveweb/shownotes/2007/06/06/12304/?printer=1 Now because you get to buy extremely low, and sell for probably higher and you believe in the stock, I'd say go ahead and purchase the stock, manage it for taxes with the advice of your advisor and get your portfolio rebalanced as soon as you can. That might admittedly be a year or more, but as you say you have time. Like any investment, don't spend money you can't lose.","Some other answers mention the ability to sell at grant. This is very important. If you have that ability, think about your guaranteed return. In my case, I get a 15% discount on the lowest 6 month window price from the last two years. If you do the math, the worst case return can be calculated: 1) Money that from the beginning of the window, I make 15% for 6 months (30% annual return guaranteed) 2) Money at the end of the window (say the last month) is 15% for one month (180% annual return guaranteed) In the end, your average holding window for your money is about 3 months (you can calculate it exactly). At that rate, you have a guaranteed 60% annual return. You can't beat that anywhere, with a significant upside if your company stock is increasing. So, if your company has an instant sell at grant option, you have to be brain dead not to do it. If it takes time to get your shares, then you need to look at the volatility of the stock to see how big the chance of losing money is. To generalize to a formula (if that's what you want): WM = purchase window (in months); D = Discount Percentage; GR = Guaranteed Return GR = 12/(WM/2) * D = 6*D/WM One last thing, If you are going to participate in ESPP, make you that you understand how to do your taxes yourself. I haven't found a tax person yet who does ESPP correctly (including an ex IRS agent), so I always have to do my taxes myself to make sure they get done correctly.","There are two sources for shares that employees buy through ESOPs. A company can simply buy the shares on the open market. The company must pay for the stock, but the employee then pays the company for the shares. If employees get a discount on the ESOP shares, the company would pay for that percentage directly. The company can choose to issue new shares. These new shares dilute the ownership of all the other current stockholders. While #2 is common when companies issue stock options, I'd be surprised to see it with an ESOP. In most cases, employees are limited in the amount of their salary they can devote towards the ESOP. If that limit is 10% and the discount that the employees get is 10%, the cost on a per-employee basis would only be 1% of that employees salary, which is a small expense.","The biggest challenge with owning any individual stock is price fluctuation, which is called risk. The scenarios you describe assume that the stock behaves exactly as you predict (price/portfolio doubles) and you need to consider risk. One way to measure risk in a stock or in a portfolio is Sharpe Ratio (risk adjusted return), or the related Sortino ratio. One piece of advice that is often offered to individual investors is to diversify, and the stated reason for diversification is to reduce risk. But that is not telling the whole story. When you are able to identify stocks that are not price correlated, you can construct a portfolio that reduces risk. You are trying to avoid 10% tax on the stock grant (25%-15%), but need to accept significant risk to avoid the 10% differential tax ($1000). An alternative to a single stock is to invest in an ETF (much lower risk), which you can buy and hold for a long time, and the price/growth of an ETF (ex. SPY) can be charted versus your stock to visualize the difference in growth/fluctuation. Look up the beta (volatility) of your stock compared to SPY (for example, IBM). Compare the beta of IBM and TSLA and note that you may accept higher volatility when you invest in a stock like Tesla over IBM. What is the beta of your stock? And how willing are you to accept that risk? When you can identify stocks that move in opposite directions, and mix your portfolio (look up beta balanced portolio), you can smooth out the variability (reduce the risk), although you may reduce your absolute return. This cannot be done with a single stock, but if you have more money to invest you could compose the rest of your portfolio to balance the risk for this stock grant, keep the grant shares, and still effectively manage risk. Some years ago I had accumulated over 10,000 shares (grants, options) in a company where I worked. During the time I worked there, their price varied between $30/share and < $1/share. I was able to liquidate at $3/share.","\"Does your company offer a 401k? or similar pre-tax retirement plans? Is your company a publicly traded company? These questions are important, basically the key to any of your investments should be diversification. This means buying more than one kind of investment, amongst stock(s), bonds, real estate or more. The answer to \"\"How Much\"\" of your salary should go to company stock, is subjective. I personally would contribute the max toward a retirement plan or even post-tax savings, which would be invested in a variety of public companies. Hope that helps.\"","With the Employee Stock Purchase Plan stock, if you sell it in less than 18 months from exercise, the discount you bought it at (normally 15%) becomes taxable income and included in your W-2.","I don't think you are reading the stock chart right. ORCL has a beta of 1.12 which means it has more volatility than the market as a whole. See image below for a fairly wild stock chart for a year. I would not truly consider ESPP participation investing, unless you intend to buy and hold the stock. If you intend to sell the stock soon after you are able, it is more speculation. ESPP's are okay based upon the terms. If the stock was a constant price, and you could sell right away, then an ESPP plan would be easy money. Often, employees are often given a 15% discount to purchase the stock. If you can sell it before any price drop, then you are guaranteed to make 15% on the money invested minus any commissions. Some employers make ESPP participants hold the stock for a year. This makes such a plan less of a value. The reasons are the stock can drop in price during that time, you could need the money, or (in the best case) your money is tied up longer making the ROI less. The reasons people invest in stock are varied and is far to much to discuss in a single post. Some of your colleagues are using the ESPP solely to earn the discount in their money.","Oracle specifically is paying a dividend with a current yield of about 1.4% annually and has appreciated nearly 50% over the last 5 years. Granted, the past doesn't guarantee the future but the company has paid a pretty steady dividend since 2009. If you're buying as part of an employee program you would presumably be holding the shares for a long time and the daily and even monthly movements aren't terribly relevant to a long term holding period. Additionally, you may be able to buy the shares at a discount to the market price as part of your employee program. You probably also won't pay any transaction fee.","Typically, the discount is taxable at sale time But what about taxes? When the company buys the shares for you, you do not owe any taxes. You are exercising your rights under the ESPP. You have bought some stock. So far so good. When you sell the stock, the discount that you received when you bought the stock is generally considered additional compensation to you, so you have to pay taxes on it as regular income. Source: Turbotax. Second source. Your pretax rate of return would be: 17% (100/85) In your scenario where the stock price is fixed at $100. Your tax rate would be your marginal rate. If the stock stayed at 100, you would still be taxed as income on $15/share (the discount) and would receive no benefit for holding the stock one year. Assuming you are in the 25% tax bracket, your after tax rate of return would be 13% ((15*.75)+85)/85)","The answer is simple. If your employer is offering you a discount, that is free money. You always take free money, always.","To me it depends on things like your net worth, debt, and how other assets are invested. Currently you have 25K invested in the company you work for. If you have 100K in student loans, are a renter, and 12K in your 401K, then I would recommend exercising almost all of your options. In that case you have a much to large part of your world wrapped up in your company. If you have 250K in your 401K, own a home and have an emergency fund with no debt then you are fine with letting it ride. You can afford to absorb a loss of 25K without wrecking your net worth. More than likely, you are somewhere in between (just statistics speaking there). So why not exercise some of them now with the purpose of improving your financial situation? Say do a 1/3 now and when they come available. When 401ks were first invented people put almost all of their money in their company stock. They lost just about everything when the company went down in value and were often a victim of layoffs exasperating the issue. This is akin to the same situation. Most financial advisers recommend against putting any 401K money to company stock, or at least limiting the amount.","Since you work there, you may have some home bias. You should treat that as any other stock. I sell my ESPP stocks periodically to reduce the over allocation of my portfolio while I keep my ESOP for longer periods.","The question is for your HR department, or administrator of the plan. How long must you hold the employee shares before you are permitted to sell? Loyalty to your company is one thing, but after a time, you will be too heavily invested in one company, and you need to diversify out. One can cite any number they wish, 5%, 10%. All I know is that when Enron blew up, it only added insult to injury that not only did these people lose their job, they lost a huge chunk of their savings as well.","Good questions. I can only add that it may be valuable if the company is bought, they may buy the options. Happened to me in previous company.","It is a very complex question to answer and it really depends. However, here are some points to consider and verify with your accountant or tax expert. First, if you exercise now, the downside is that you may be subject to Alternative Minimum Tax (AMT) based on the theoretical gain on the stock (current price minus your strike price) when you file your tax return. The other obvious downside is that if the company goes nowhere, you are stuck with the stock and potentially lose money. The benefit is that the clock starts ticking for long-term capital gains so if you sell after 1 year from the exercise date (or your company gets sold) then the gain would be taxed as long-term capital gain which is taxed at a lower rate. If your company were to get sold, the gains are not necessarily taxed as ordinary income. If it is a cash transaction then most likely (unless you have exercised and held the stock for over a year). However, if it is a stock sale, then you may end up getting stock of the company that acquires your company. In that situation, the tax event would be when you sell the new shares vs. the time of company sale. Finally, whether to exercise or not also depends on how you feel about the prospects of the company. If you think they will be sold or of more value down the road then exercising makes sense. If you are not sure then you could hedge your bets by only exercising a portion of it. You should definitely consult with a financial advisor or a tax consultant regarding these matters.","It might go down a bit, or it might not. That is nearly impossible to predict, as the relative volumes are unknown, and the exact procedure is also unknown (they might do the selling over a longer period, or as a buy back, or immediately, or...) However, why would you want to wait at all? It is generally not a great idea to put your savings into the company you work for ('all eggs in one basket' - when it goes down, you lose your job and your savings), so the best approach is to pick a good day in the next weeks and sell the stock and invest into something more neutral.","\"If by \"\"Company Stock\"\" you mean \"\"stock in the company I work for\"\" then absolutely sell your stock. It is too big a risk to have your investments tied into the same company that is also providing your salary. If you mean stock as in general investments, I like to look at it this way. If you have $25,000 stock and a $100,000 mortgage you ask this question: If I had a $75,000 mortgage would I borrow an additional $25,000 against my house to invest in the stock market? If the answer is yes, then you are taking a risk consistent with your tolerance for risk. If you answer no, then your tolerance for risk says you'd be happier paying down your mortgage.\"","There is Free employer money on both sides of the tax fence for some employees. On the pretax side, your employer may provide you a match. If so, invest the maximum to get 100% of the match. On the after tax side, many companies offers a 15% discount on ESPP plans and a one year hold. My wife has such an employer. The one year hold is fine because it allows us to be taxed at Long Term Capital gains if the stock goes up which is lower than our current income bracket. After creating a seasoned pool of stocks that we could sell after the one year hold, we are then able to sell the same number of stocks purchased each month. This provides a 17.6% guaranteed gain on a monthly basis. How much would you purchase if you had a guaranteed 17.6% return. Our answer is 15% (our maximum allowed). The other trick is that while the employer is collecting the money, you will purchase the stock at the lowest day of the period. You will usually sell for even more than the purchase price unless the day purchased was the lowest day of month. The trick is to reinvest the money in tax free investments to balance out the pretax investing. Never leave the money in the plan. That is too much risk.","An instant 15% profit sounds good to me, so you can't go wrong selling as soon as you are able. Here are a couple other considerations: Tax implications: When you sell the stock, you have to pay taxes on the profit (including that 15% discount). The tax rate you pay is based on how long you wait to sell it. If you wait a certain amount of time (usually 2 years, but it will depend on your specific tax codes) before you sell, you could be subject to lower tax rates on that profit. See here for a more detailed description. This might only apply if you're in the US. Since you work for the company, you may be privy to a bit more information about how the company is run and how likely it is to grow. As such, if you feel like the company is headed in the right direction, you may want to hold on the the stock for a while. I am generally wary of being significantly invested in the company you work for. If the company goes south, then the stock price will obviously drop, but you'll also be at risk to be laid off. As such you're exposed much more risk than investing in other companies. This is a good argument to sell the stock and take the 15% profit.* * - I realize your question wasn't really about whether to sell the stock, but more for when, but I felt this was relevant nonetheless.","I don't know what restrictions are put on the average employee at your company. In my case, we were told we were not permitted to either short the stock, or to trade in it options. That said, I was successful shorting the exact number of shares I'd be buying at the 6 month close, the same day the purchase price would be set. I then requested transfer of the stock purchase to my broker where the long and short netted to zero. The return isn't 15%, it's 100/85 or 17.6% for an average 3 months they have your money. So do the math on APR. (Higher if the stock has risen over 6 months and you get the lower price from 6 months prior.) My method was riskless, as far as I am concerned. I did this a dozen times. The stock itself was +/- 4% by the time the shares hit, so in the end it was an effort, mostly to sleep better. I agree with posts suggesting the non-zero risk of a 20% 4 day drop.","\"First, you mentioned your brother-in-law has \"\"$100,000 in stock options (fully vested)\"\". Do you mean his exercise cost would be $100,000, i.e. what he'd need to pay to buy the shares? If so, then what might be the estimated value of the shares acquired? Options having vested doesn't necessarily mean they possess value, merely that they may be exercised. Or did you mean the estimated intrinsic value of those options (estimated value less exercise cost) is $100,000? Speaking from my own experience, I'd like to address just the first part of your question: Have you treated this as you would a serious investment in any other company? That is, have you or your brother-in-law reviewed the company's financial statements for the last few years? Other than hearing from people with a vested interest (quite literally!) to pump up the stock with talk around the office, how do you know the company is: BTW, as an option holder only, your brother-in-law's rights to financial information may be limited. Will the company share these details anyway? Or, if he exercised at least one option to become a bona-fide shareholder, I believe he'd have rights to request the financial statements – but company bylaws vary, and different jurisdictions say different things about what can be restricted. Beyond the financial statements, here are some more things to consider: The worst-case risk you'd need to accept is zero liquidity and complete loss: If there's no eventual buy-out or IPO, the shares may (effectively) be worthless. Even if there is a private market, willing buyers may quickly dry up if company fortunes decline. Contrast this to public stock markets, where there's usually an opportunity to witness deterioration, exit at a loss, and preserve some capital. Of course, with great risk may come great reward. Do your own due diligence and convince yourself through a rigorous analysis — not hopes & dreams — that the investment might be worth the risk.\"","Note that you're asking about withholding, not about taxing. Withholding doesn't mean this is exactly the tax you'll pay: it means they're withholding a certain amount to make sure you pay taxes on it, but the tax bill at the end of the year is the same regardless of how you choose to do the withholding. Your tax bill may be higher or lower than the withholding amount. As far as tax rate, that will be the same regardless - you're just moving the money from one place to the other. The only difference would be that your tax is based on total shares under the plan - meaning that if you buy 1k shares, for example, at $10, so $1,500 discounted income, if you go the payroll route you get (say) $375 withheld. If you go the share route, you either get $375 worth of stock (so 38 shares) withheld (and then you would lose out on selling that stock, meaning you don't get quite as much out of it at the end) or you would ask them to actually buy rather more shares to make up for it, meaning you'd have a slightly higher total gain. That would involve a slightly higher tax at the end of it, of course. Option 1: Buy and then sell $10000 worth, share-based withholding. Assuming 15% profit, and $10/share at both points, then buy/sell 1000 shares, $1500 in profit to take into account, 38 shares' worth (=$380) withheld. You put in $8500, you get back $9620, net $1120. Option 2: Buy and then sell $13500 worth, share based withholding. Same assumptions. You make about $2000 in pre-tax profit, meaning you owe about $500 in tax withholding. Put in $11475, get back $13000, net $1525. Owe 35% more tax at the end of the year, but you have the full $1500 to spend on whatever you are doing with it. Option 3: Buy and then sell $1000 worth, paycheck withholding. You get the full $10000-$8500 = $1500 up front, but your next paycheck is $375 lighter. Same taxes as Option 1 at the end of the year.","I see another way of looking at this that hasn't been addressed yet. By offering the discount, the company is attempting to change your behavior into doing something irrational, that benefits them at your expense. The company hopes for one (or more) of the following psychological effects to happen to you: The proper thing to do, if you have enough capital to prevent margin calls, it to short-sell the stock at the same instant the price is set, thus locking in the profit. Eventually you can take possession of the shares and deliver them to offset the short -- hopefully before you get a margin call from the stock dropping.","At the most basic level, the employee is getting a share of ownership in the company and would get a percentage of the sales price. That said, as littleadv alluded to, different share classes have different priorities and get paid in different orders. In a bankruptcy, for example, some classes almost never get paid in practice because they are so far down the ladder of priority. The first step you should take would be to try to clarify what you are getting with the company itself. Failing that, contact a financial professional or an attorney in your area who can read the terms and give you a better understanding of the contract before you sign.","Their reasoning is probably that by eliminating the option for company stock, employees now are exposed to less risk. That is, if the company goes bk, they're only exposed to the company through their paycheck and not their paycheck plus retirement savings. In reality, it's probably a classic case of buy high and sell low. That is, your plan admin (HR or legal, probably) thinks that since the price went down, they should sell.","Having stock options means that you have worked for and rightfully earned a part of the company's capital appreciation. Takeover of the company would indicate someone is interested in the company (something should be valuable). It would be unwise to not strike before the period lapses since the strike price is always lower than market price and takeovers generally increases stock values ... it is capital gains all the way my friend. Good luck. *observations not in professional capacity. pls consult a professional for investment related advice.","I think you're not applying the right time scale here. ESPP (Employee Stock Purchase Plan) is usually vesting every 6 months. So every half a year you receive a chunk of stocks based on your salary deduction, with the 15% discount. Every half a year you have a chunk of money from the sale of these stocks that you're going to put into your long term investment portfolio. That is dollar cost averaging. You're investing periodically (every 6 months in this case), same (based on your salary deferral) amount of money, regardless of the stock market behavior. That is precisely what dollar cost averaging is.","Like @chirs, I'm of the opinion that you might want to buy more. I've done this a couple of times, price dropped a bunch, and I said, heck, I bought some last week, and this week I can get twice as much stock for about the same price. Brought down my average cost per share, and when the company was taken private, I actually didn't lose money - unlike some other people I know, who only bought at one price, watched the drop, and held on awaiting a recovery (which didn't happen in time before the big money swooped in on it). But to do this, you need to keep cash reserves (that, like @afforess says, you can afford to lose all of) on hand, awaiting buying opportunities. This, too, is a cost - an opportunity cost.","Let's take an example: IBM has about 430,000 employees worldwide. Assume the average yearly salary is $80K (it's probably less, since a lot of jobs are offshore). If every employee took 10% of their pay as stock, that's $132 million every two weeks. But IBM's market capitalization is about $153 billion, so stock purchases would be less than 0.1% of that.","But unless he's getting shares at a premium there's no difference between him getting shares or getting cash and buying Disney stock with half of it. And if he's looking to make money in the stock market he certainly has better options than putting everything on DIS.","It depends. If you accept the offer, then your stock will cease existing. If you reject the offer, then you will become a minority shareholder. Depending on the circumstances, you could be in the case where it becomes illegal to trade your shares. That can happen if the firm ceases to be a public company. In that case, you would discount the cash flows of future dividends to determine worth because there would be no market for it. If the firm remained public and also was listed for trading, then you could sell your shares although the terms and conditions in the market would depend on how the controlling firm managed the original firm.","In my experience, any kind of equity you may be offered by the company is just a carrot. Your offer may be written in such a way that your potential ownership represents, say, 1% of the company today. But if the company goes for a round of financing your ownership percentage can get diluted. If this happens a couple of times and the terms of financing aren't very favorable then your percentage can go from that 1% down to 0.001%, making the equity worthless. I've known people who heard their company was being bought and thought they might get some kind of payoff. Come to find out the company hadn't done all that well and there wasn't anything to pay out after the main investors got some money back. (The main investors took a loss.) For obvious reasons, management wasn't keeping the staff up to date about the fact that they were operating in the red and their options were worthless. Some people grumbled about lawyers and filing lawsuits, but at the end of the day, there wasn't any money to be won. Keep this in mind. As to your question regarding what to look out for:","In many ESPP programs (i.e. every one I've had the opportunity to be a part of in my career), your purchase is at a discount from the lower of the stock prices at the start and end of the period. So a before-tax 5% return is the minimum you should expect; if the price of the stock appreciates between July 1 and December 31, you benefit from that gain as well. More concretely: Stock closes at $10/share on July 1, and $11/share on December 31. The plan buys for you at $9.50/share. If you sell immediately, you clear $1.50/share in profit, or a nearly 16% pre-tax gain. If the price declines instead of increases, though, you still see that 5% guaranteed profit. Combine that with the fact that you're contributing every paycheck, not all at once at the start, and your implied annual rate of return starts to look pretty good. So if it was me, I'd pay the minimum on the student loan and put the excess into the ESPP.","the implications are that the company's earnings per share may seem greater, (after the company buys them there will be less shares outstanding), giving wall street the impression that there is more growth potential than there really is. its an accounting gimmick that can work for a few quarters while the company evaluates how else to impress wall street","Like others have already said, it may cause an immediate dip due to a large and sudden move in shares for that particular stock. However, if there is nothing else affecting the company's financials and investors perceive no other risks, it will probably bounce back a bit, but not back to the full value before the shares were issued. Why? Whenever a company issues more stock, the new shares dilute the value of the current shares outstanding, simply because there are now more shares of that stock trading on the market; the Earnings Per Share (EPS) Ratio will drop since the same profit and company value has to be spread across more shares. Example: If a company is valued at $100 dollars and they have 25 shares outstanding, then the EPS ratio equates to $4 per share (100/25 = 4). If the company then issues more shares (stock to employees who sell or keep them), let's say 25 more shares, then shares outstanding increase to 50, but the company's value still remains at $100 dollars. EPS now equates to $2 per share (100/50 = 2). Now, sometimes when shareholders (especially employees...and especially employees who just received them) suddenly all sell their shares, this causes a micro-panic in the market because investors believe the employees know something bad about the company that they don't. Other common shareholders then want to dump their holdings for fear of impending collapse in the company. This could cause the share price to dip a bit below the new diluted value, but again if no real, immediate risks exist, the price should go back up to the new, diluted value. Example 2: If EPS was at $4 before issuing more stock, and then dropped to $2 after issuing new stock, the micro-panic may cause the EPS to drop below $2 and then soon rebound back to $2 or more when investors realize no actual risk exists. After the dilution phase plays out, the EPS could actually even go above the pre-issuing value of $4 because investors may believe that since more stock was issued due to good profits, more profits may ensue. Hope that helps!","Short answer is to put the max 15% contribution into your ESPP. Long answer is that since you want to be saving as much as you can anyway, this is a great way to force you to do it, and pick up at least a 15% return every six months (or however often your plan makes a purchase). I say at least because sometimes an ESPP will give you the lower of the beginning or end period stock price, and then a 15% discount off of that (but check the details of your plan). If you feel like your company's stock is a good long term investment, then hold onto the shares when purchased. Otherwise sell as soon as you get them, and bank that 15% return.","I am not required to hold any company stock. I also have an ESOP plan carrying a similar number of shares in company stock. So if it were to be sold, what would the recommendation be to replace it? I can move the shares into any option shown, and have quite a few others. Not dealing with any huge amounts, just a 4.5% contribution over three years (so far).","Stock awards by employers are treated and taxed as salary. I.e.: you pay ordinary rate income tax, FICA taxes, State taxes etc. The fact that you got your salary in shares and not cash is irrelevant for tax purposes. Once you got the shares and paid your taxes on them, the treatment is the same as if you got the salary and immediately bought the shares. Holding period for capital gains tax purposes starts at the time you paid your taxes on the award, which is the time at which you get full ownership (i.e.: vesting time, for the restricted stocks). When you sell these stocks - you treat the sale as any other stock sale: you check the holding period for capital gains tax rates, and you do not pay (or get refund) any FICA taxes on the sales transaction. So bottom line: You got $10K salary and you bought $10K worth of company stock, and you sold it at $8K half a year later. You have $10K wages income and $2K short term capital loss.","To try to answer the three explicit questions: Every share of stock is treated proportionately: each share is assigned the same dollar amount of investment (1/176th part of the contribution in the example), and has the same discount amount (15% of $20 or $25, depending on when you sell, usually). So if you immediately sell 120 shares at $25, you have taxable income on the gain for those shares (120*($25-$17)). Either selling immediately or holding for the long term period (12-18 mo) can be advantageous, just in different ways. Selling immediately avoids a risk of a decline in the price of the stock, and allows you to invest elsewhere and earn income on the proceeds for the next 12-18 months that you would not otherwise have had. The downside is that all of your gain ($25-$17 per share) is taxed as ordinary income. Holding for the full period is advantageous in that only the discount (15% of $20 or $25) will be taxed as ordinary income and the rest of the gain (sell price minus $20 or $25) will be taxed at long-term capital gain tax rates, which generally are lower than ordinary rates (all taxes are due in the year you do sell). The catch is you will sell at different price, higher or lower, and thus have a risk of loss (or gain). You will never be (Federally) double taxed in any scenario. The $3000 you put in will not be taxed after all is sold, as it is a return of your capital investment. All money you receive in excess of the $3000 will be taxed, in all scenarios, just potentially at different rates, ordinary or capital gain. (All this ignores AMT considerations, which you likely are not subject to.)","Your gain is $1408. The difference between 32% of your gain and 15% of your gain is $236.36 or $1.60 per share. If you sell now, you have $3957.44 after taxes. Forget about the ESPP for a moment. Are you be willing to wager $4000 on the proposition that your company's stock price won't go down more than $1.60 or so over the next 18 months? I've never felt it was worth it. Also, I never thought it made much sense to own any of my employer's stock. If their business does poorly, I'd prefer not to have both my job and my money at risk. If you sell now: Now assuming you hold for 18 months, pay 15% capital gains tax, and the stock price drops by $1.60 to $23.40:","Usually the amount of the ESPP stocks is very small compared to the overall volume of the trading, so it shouldn't matter. But check if for your company it not so (look at the stock history for the previous ESPP dates, and volumes).","Erisa laws protect your retirement just like something should mandate what minimum ownership should be to classify yourself as exempt from labor laws. I like this idea a lot....however how does 1 employee present enough value to actually effect the price of their company stock? This would only work for top brass positions....which is probably the way it should be.","Let’s turn this round. Now what if the only people willing to own part of company are doing it due to the expectation that they will make money in the short term form the company….","\"Here is one \"\"other consideration\"\": don't, don't, don't sell based on insider information. Insider trading can land you in jail. And it's not restricted to top executives. Even overhearing a discussion about the current status of the acquisition talks can mean that you have insider information that you legally cannot act on in many jurisdictions. If you are just a regular employee, the SEC will likely not subject your dealings to special scrutiny, especially since lots of your colleagues will likely trade your company's shares at this point in time. And if you definitely hold insider info (for example, if you are intimately involved with the acquisition talks), you will likely have had a very serious warning about insider trading and know what you can and what you cannot do. Nevertheless, it's better to be careful here.\"","There are two things to consider: taxes - beneficial treatment for long-term holding, and for ESPP's you can get lower taxes on higher earnings. Also, depending on local laws, some share schemes allow one to avoid some or all on the income tax. For example, in the UK £2000 in shares is treated differently to 2000 in cash vesting - restricted stocks or options can only be sold/exercised years after being granted, as long as the employee keeps his part of the contract (usually - staying at the same place of works through the vesting period). This means job retention for the employees, that's why they don't really care if you exercise the same day or not, they care that you actually keep working until the day when you can exercise arrives. By then you'll get more grants you'll want to wait to vest, and so on. This would keep you at the same place of work for a long time because by quitting you'd be forfeiting the grants.","There are ups and downs to doing this. This isn't a taxable gain, because it's borrowed money that will be repaid. Whether there are restrictions or not depends upon your contract with the seller and your bank. If the concessions are for health & safety related repairs, your bank may require you to complete the work before closing or within a certain period of time. Overall: Upsides Downsides","I like the answer given by mikeazo. If paid in cash would you immediately buy the stock of the company? We all want to be the next Steve Jobs (or Woz), but the truth is that a Jobs comes along only once in a lifetime and chances are that you are not him. We have seen this kind of question here before. Search the site for the answers given previously.","As with everything else, it's a question of trade-offs. Pros For Buying In Bulk Cons For Buying In Bulk Inventory cost. You need to purchase more shelving/cupboards to stock the goods. This is a real cost. The psychological effect of having more means you are more likely to use more, thus costing you more. Deflation of the cost of the item should occur over time in a well-functioning market economy. A $10 item today might be $9.50 in one year in real terms. There is a real opportunity cost associated with overbuying. Granted, an extra $100 in your bank account won't be earning too much if you have to spend it one month later, but it does mean you have less financial independence for that month. Risk of spoilage. There is a nonzero risk that your goods could be ruined by flood/fire/toddler/klutz damage. You need to decide which of these pros and cons are more important to you. Financially, you should only buy what you need between shopping trips. In reality the convenience of holding goods in storage for when you need them may outweigh the costs.","\"If you sold the stock for a profit, you will owe tax on that profit. Whether it is taxed as short-term or long-term capital gains depends on how long you held the stock before selling it. Presumably you're going to invest this money into mutual funds or something of that sort. Those may pay dividends which can be reinvested, and will grow in value (you hope) just as the individual stock shares would (you hope). Assuming the advice you've been given is at all reasonable, there's no need for buyer's remorse here; you're just changing your investing style to a different point on the risk-versus-return curve. (If you have to ask this question, I tend to agree that you should do more homework before playing with shares in individual companieS ... unless you're getting thess shares at employee discount, in which case you should still seriously consider selling them fairly quickly and reinvesting the money in a more structured manner. In a very real sense your job is itself an \"\"investment\"\" in your employer; if they ever get into trouble you don't want that to hit both your income and investments.)\"","\"For new shares to be successfully sold, the price has to be below market price. If you currently own shares of that company, you should always get an option to buy those newly sold shares at that discounted price. The number of options depends on the relative number of shares you hold. Lets say you own 100 out of 1000 shares, currently priced at $10. 100 new shares are to be sold at $9. Since you are holding 10% of all shares, you have the option (i.e. the right) to buy 10 new (cheaper) shares (10% of 100) before anybody else can buy them. Theoretically, the money you save by getting the shares at a discounted price is equal to the money you lose by the share's value being diluted. So, if you're a shareholder and the company is increasing it's capital, you're given the right to \"\"go with it\"\".\"","It basically only affects the company's dealings with its own stock, not with operational concerns. If the company were to offer more stock for sale, it would get less cash. If it had a stock buy-back program, it could buy more shares for the same money. If it was to offer to acquire another company in exchange for its own stock, the terms would be less attractive to the other company's owners. Employee stock remuneration, stock options, and so forth would be affected, so there might be considerations and tax consequences for the company.","\"If you're risking \"\"everything\"\" by buying stock, you shouldn't be buying stock. The employees are the ones who are really at risk. Should the business go belly up, the investors are out some investment money, they'll make more; the employees don't have an income source anymore. CAT may have no legal obligation to pay better than market-wages but if they want to keep their skilled labor from going to competitors, they might want to think about it. You can't build machines without workers. If you have a good product in an established market, you can always get more investors.\"","Options granted by an employer to an employee are generally different that the standardized options that are traded on public stock option exchanges. They may or may not have somewhat comparable terms, but generally the terms are fairly different. As a holder of an expiring employee option, you can only choose to exercise it by paying the specified price and receiving the shares, or not. It is common that the exercise system will allow you to exercise all the shares and simultaneously sell enough of the acquired shares to cover the option cost of all the shares, thus leaving you owning some of the stock without having to spend any cash. You will owe taxes on the gain on exercise, regardless of what you do with the stock. If you want to buy publicly-traded options, you should consider that completely separately from your employer options other than thinking about how much exposure you have to your company situation. It is very common for employees to be imprudently overexposed to their company's stock (through direct ownership or options).","This is not right. Inferring the employee stock pool’s takeaway is not as easy as just taking a fraction of the purchase price. As an example, that wouldn’t account for any preferred returns of other ownership classes, among other things. All considered though, it’s reasonable to assume that the employee stock pool will get some premium. Best of luck.","There's an odd anomaly that often occurs with shares acquired through company plans via ESPP or option purchase. The general situation is that the share value above strike price or grant price may become ordinary income, but a sale below the price at day the shares are valued is a capital loss. e.g. in an ESPP offering, I have a $10 purchase price, but at the end of the offering, the shares are valued at $100. Unless I hold the shares for an additional year, the sale price contains ordinary W2 income. So, if I see the shares falling and sell for $50, I have a tax bill for $90 of W2 income, but a $50 capital loss. Tax is due on $90 (and for 1K shares, $90,000 which can be a $30K hit) but that $50K loss can only be applied to cap gains, or $3K/yr of income. In the dotcom bubble, there were many people who had million dollar tax bills and the value of the money netted from the sale couldn't even cover the taxes. And $1M in losses would take 300 years at $3K/yr. The above is one reason the lockup date expiration is why shares get sold. And one can probably profit on the bigger companies stock. Edit - see Yelp down 3% following expiration of 180 day IPO lock-up period, for similar situation."],"string":"[\n \"Is this an employee stock purchase plan (ESPP)? If so, and there is no required holding period, selling right away is essentially a guaranteed bonus with minimal risk. One caveat is that sometimes it takes a while to actually receive the shares at your brokerage, and in the meantime your company may have an earnings report that could cause the share price to drop. If your discount is only 5%, for example, a bad earnings report could easily wipe that out. The only other cons I can think of is ESPP contributions being withheld from you for months (albeit for a virtually guaranteed return), and it complicates your taxes a bit. On the flip side, another pro is that after you sell the shares, you are more likely to invest that money rather than spend it.\",\n \"Make sure to check the language describing the 'discount'. The company may be matching your contribution by 5% instead of a discount. You will likely be taxed on the match as compensation and your benefit would net to less than 5%. The next risk is that you've increased your exposure if your company does poorly. In the worst case scenario you could lose your wages to a layoff and your portfolio to a falling share price. Investing in other companies will diversify this risk. As for benefits, you get the 5% (less taxes) for free which isn't a bad thing in my book. Just don't put everything you own into the stock. It should be part of your overall investing strategy.\",\n \"One major benefit to being able to buy discounted company stock is that you can sell in-the-money covered calls and potentially make more than you would selling at strike.\",\n \"You didn't give enough information. What is your goal? What is your financial situation? A discount to buy company stock can seem very tempting. I was tempted by it myself, gee, almost 20 years ago. I still own some of the stock. But I held mutual funds first. There are two disadvantages that have disuaded me from partaking in the ESPP of my subsequent employers (one of which was a spin-out company of the stock-issuing company, the other having bought the spin-out). First, putting a bunch of money in a single stock is rather risky. single stocks will drop dramatically due to market conditions. Generally market conditions don't act so dramatically on all stock. Second, is it wise to put not only your salary but also your saved wealth all in one basket? It worked out reasonably well for me. The stock doubled right before my division was spun out -- I sold half of my position. And the resulting stock has continued to provide opportunities to diversify. However, it could have just as easily dropped in half instead of doubled. What is your timeline for holding the stock -- for realizing any gain? Can you afford patience if the stock value should drop in half? I have co-workers who continue to invest through our new company's ESPP. At least one co-worker has the stated goal to sell after every purchase -- he holds the stock long enough to make a long-term gain instead of short term, but he sells after every purchase. And it seems to him that the stock always drops right when he wants to sell.\",\n \"What most respondents are forgetting, is when a company allows its employees to purchase its shares at a discount with their salary, the employee is usually required to hold the stock for a number of years before they can sell them. The reason the company is allowing or promoting its employees to purchase its shares at a discount is to give the employees a sense of ownership of the company. Being a part owner in the company, the employee will want the company to succeed and will tend to be more productive. If employees were allowed to purchase the shares at a discount and sell them straight away, it would defeat this purpose. Your best option to decide whether or not to buy the shares is to work out if the investment is a good one as per any other investment you would undertake, i.e. determine how the company is currently performing and what its future prospects are likely to be. Regarding what percentage of pay to purchase the shares with, if you do decide to buy them, you need to work that out based on your current and future budgetary needs and your savings plan for the future.\",\n \"Assuming US. The only con that I know of is that hassle factor. You have to remember to sell when you get the new shares, and your taxes become a bit more complicated; the discount that you receive is taxed as ordinary income, and then any change in the price of the stock between when you receive it and you sell it will be considered a capital gain or loss. It's not hard to account for properly if you keep good records.\",\n \"I would not hold any company stock for the company that provides your income. This is a too many eggs in one basket kind of problem. With a discounted stock purchase plan, I would buy the shares at a 10% discount and immediately resell for a profit. If the company prevents you from immediately reselling, I don't know if I would invest. The risk is too great that you'll see your job lost and your 401k/investments emptied due to a single cause.\",\n \"\\\"Does your job give you access to \\\"\\\"confidential information\\\"\\\", such that you can only buy or sell shares in the company during certain windows? Employees with access to company financial data, resource planning databases, or customer databases are often only allowed to trade in company securities (or derivatives thereof) during certain \\\"\\\"windows\\\"\\\" a few days after the company releases its quarterly earnings reports. Even those windows can be cancelled if a major event is about to be announced. These windows are designed to prevent the appearance of insider trading, which is a serious crime in the United States. Is there a minimum time that you would need to hold the stock, before you are allowed to sell it? Do you have confidence that the stock would retain most of its value, long enough that your profits are long-term capital gains instead of short-term capital gains? What happens to your stock if you lose your job, retire, or go to another company? Does your company's stock price seem to be inflated by any of these factors: If any of these nine warning flags are the case, I would think carefully before investing. If I had a basic emergency fund set aside and none of the nine warning flags are present, or if I had a solid emergency fund and the company seemed likely to continue to justify its stock price for several years, I would seriously consider taking full advantage of the stock purchase plan. I would not invest more money than I could afford to lose. At first, I would cash out my profits quickly (either as quickly as allowed, or as quickly as lets me minimize my capital gains taxes). I would reinvest in more shares, until I could afford to buy as many shares as the company would allow me to buy at the discount. In the long-run, I would avoid having more than one-third of my net worth in any single investment. (E.g., company stock, home equity, bonds in general, et cetera.)\\\"\",\n \"\\\"The major pros tend to be: The major cons tend to be: Being in California, you've got state income tax to worry about as well. It might be worth using some of that extra cash to hire someone who knows what they're doing to handle your taxes the first year, at least. I've always maxed mine out, because it's always seemed like a solid way to make a few extra dollars. If you can live without the money in your regular paycheck, it's always seemed that the rewards outweighed the risks. I've also always immediately sold the stock, since I usually feel like being employed at the company is enough \\\"\\\"eggs in that basket\\\"\\\" without holding investments in the same company. (NB: I've participated in several of these ESPP programs at large international US-based software companies, so this is from my personal experience. You should carefully review the terms of your ESPP before signing up, and I'm a software engineer and not a financial advisor.)\\\"\",\n \"It's 5% free money, if you believe the company's stock is fairly valued and likely to grow and/or return reasonable dividends until you're ready to sell it. There's usually a minimum holding period of a few months to a year before these discounted shares can be sold; take that into account\",\n \"It appears your company is offering roughly a 25% discount on its shares. I start there as a basis to give you a perspective on what the 30% matching offer means to you in terms of value. Since you are asking for things to consider not whether to do it, below are a few considerations (there may be others) in general you should think about your sources of income. if this company is your only source of income, it is more prudent to make your investment in their shares a smaller portion of your overall investment/savings strategy. what is the holding period for the shares you purchase. some companies institute a holding period or hold duration which restricts when you can sell the shares. Generally, the shorter the duration period the less risk there is for you. So if you can buy the shares and immediately sell the shares that represents the least amount of relative risk. what are the tax implications for shares offered at such a discount. this may be something you will need to consult a tax adviser to get a better understanding. your company should also be able to provide a reasonable interpretation of the tax consequences for the offering as well. is the stock you are buying liquid. liquid, in this case, is just a fancy term for asking how many shares trade in a public market daily. if it is a very liquid stock you can have some confidence that you may be able to sell out of your shares when you need. personally, i would review the company's financial statements and public statements to investors to get a better understanding of their competitive positioning, market size and prospects for profitability and growth. given you are a novice at this it may be good idea to solicit the opinion of your colleagues at work and others who have insight on the financial performance of the company. you should consider other investment options as well. since this seems to be your first foray into investing you should consider diversifying your savings into a few investments areas (such as big market indices which typically should be less volatile). last, there is always the chance that your company could fail. Companies like Enron, Lehman Brothers and many others that were much smaller than those two examples have failed in the past. only you can gauge your tolerance for risk. As a young investor, the best place to start is to use index funds which track a broader universe of stocks or bonds as the first step in building an investment portfolio. once you own a good set of index funds you can diversify with smaller investments.\",\n \"Rather than take anyone's word for it (including and especially mine) you need to do think very carefully about your company; you know it far better than almost anyone else. Do you feel that the company values its employees? If it values you and your immediate colleagues then its likely that it not only values its other employees but also its customers which is a sign that it will do well. Does the company have a good relationship with its customers? Since you are a software engineer using a web stack I assume that it is either a web consultancy or has an e-commerce side to it so you will have some exposure to what the customers complain about, either in terms of bugs or UX difficulties. You probably even get bug reports that tell you what customer pain points are. Are customers' concerns valid, serious and damaging? If they are then you should think twice about taking up the offer, if not then you may well be fine. Also bear in mind how much profit is made on each item of product and how many you can possibly sell - you need to be able to sell items that have been produced. Those factors indicate how the future of the company looks currently, next you need to think about why the IPO is needed. IPOs and other share offerings are generally done to raise capital for the firm so is your company raising money to invest for the future or to cover losses and cashflow shortfalls? Are you being paid on time and without issues? Do you get all of the equipment and hiring positions that you want or is money always a limiting factor? As an insider you have a better chance to analyse these things than outsiders as they effect your day-to-day work. Remember that anything in the prospectus is just marketing spiel; expecting a 4.5 - 5.3% div yield is not the same as actually paying it or guaranteeing it. Do you think that they could afford to pay it? The company is trying to sell these shares for the maximum price they can get, don't fall for the hyped up sales pitch. If you feel that all of these factors are positive then you should buy as much as you can, hopefully far more than the minimum, as it seems like the company is a strong, growing concern. If you have any concerns from thinking about these factors then you probably shouldn't buy any (unless you are getting a discount but that's a different set of considerations) as your money would be better utilized elsewhere.\",\n \"Whether it's wise or not depends on what you think and what you should consider are the risks both ways. What are the risks? For Let's say that the company produces great value and its current price and initial price are well below what it's worth. By investing some of your money in the company, you can take advantage of this value and capitalize off of it if the market recognizes this value too, or when the market does (if it's a successful company it will be a matter of when). Other reasons to be for it are that the tech industry is considered a solid industry and a lot of money is flowing into it. Therefore, if this assumption is correct, you may assume that your job is safe even if your investment doesn't pay off (meaning, you don't lose income, but your investment may not be a great move). Against Let's say that you dump a lot of money into your company and invest in the stock. You're being paid by the company, you're taking some of that money and investing it in the company, meaning that, depending on how much you make outside the company, you are increasing your risk of loss if something negative happens to the company (ie: it fails). Other reasons to be against it are just the opposite as above: due to the NSA, some analysts (like Mish, ZeroHedge, and others) think that the world will cut back on doing IT business with the United States, thus the tech industry will take a major hit over the next decade. In addition to that, Jesse Colombo (@TheBubbleBubble) on Twitter is predicting that there's another tech bubble and it will make a mess when it pops (to be fair to Colombo, he was one of analysts who predicted the housing bubble and his predictions on trading are often right). Finally, there is a risk of lost money and there is also a risk of lost opportunity. Looking at your past investments, which generally hurt more? That might give you a clue what to do.\",\n \"One such strategy I have heard for those who have this opportunity is to purchase the maximum allowed. When the window to sell opens, sell all of your shares and repurchase the most you can with the amount you gained (or keep an equivalent to avoid another transaction fee). This allows you to buy at a discount, and spread out the risk by investing elsewhere. This way you are really only exposing yourself to lose money which you wouldn't have had access to without the stock discount.\",\n \"A 15% discount is a 17.6% return. (100/85 = 1.176). For a holding period that's an average 15.5 days, a half month. It would be silly to compound this over a year as the numbers are limited. The safest way to do this is to sell the day you are permitted. In effect, you are betting, 12 times a year, that the stock won't drop 15% in 3 days. You can pull data going back decades, or as long as your company has been public, and run a spreadsheet to see how many times, if at all, the stock has seen this kind of volatility over 3 day periods. Even for volatile stocks, a 15% move is pretty large, you're likely to find your stock doing this less than once per year. It's also safest to not accumulate too many shares of your company for multiple reasons, having to do with risk spreading, diversification, etc. 2 additional points - the Brexit just caused the S&P to drop 4% over the last 3 days trading. This was a major world event, but, on average we are down 4%. One would have to be very unlucky to have their stock drop 15% over the specific 3 days we are discussing. The dollars at risk are minimal. Say you make $120K/yr. $10K/month. 15% of this is $1500 and you are buying $1765 worth of stock. The gains, on average are expected to be $265/mo. Doesn't seem like too much, but it's $3180 over a years' time. $3180 in profit for a maximum $1500 at risk at any month's cycle.\",\n \"\\\"Check how long you have to hold the stock after buying it. If you can sell reasonably soon and your company is reasonably stable, you're unlikely to lose and/or be taxed and/or pay enough in fees to lose more than the 30% \\\"\\\"free money\\\"\\\" they're giving you. Whether you hold it longer than the minimum time depends partly on whether you think you can better invest the money elsewhere, and partly on how you feel about having both your salary and (part of) your investments tied to the company's success? The company would like you to \\\"\\\"double down\\\"\\\" that way, in the theory that it may make you mors motivated... but some investment councelors would advise keeping that a relatively small part of your total investments, basically for the same reasons you are always advised to diversify.\\\"\",\n \"I agree with the other comments that you should not buy/hold your company stock even if given at a discount. If equity is provided as part of the compensation package (Options/Restrictive Stock Units RSU)then this rule does not apply. As a matter of diversification, you should not have majority equity stake of other companies in the same sector (e.g. technology) as your employer. Asset allocation and diversification if done in the right way, takes care of the returns. Buying and selling on the same day is generally not allowed for ESPP. Taxation headaches. This is from personal experience (Cisco Systems). I had options issued in Sept 2008 at 18$ which vested regularly. I exited at various points - 19$,20$,21$,23$ My friend held on to all of it hoping for 30$ is stuck. Options expire if you leave your employment. ESPP shares though remain.\",\n \"Other than the guaranteed 5% bonus (assuming you sell it right away), no benefits. Keep in mind that the price from which the discount is calculated is not necessarily the market price at the date of the ESPP purchase, so the actual discount may be more than 5% (depending on the volatility of the stock - much more).\",\n \"Employee Stock Purchase Plans (ESPPs) were heavily neutered by U.S. tax laws a few years ago, and many companies have cut them way back. While discounts of 15% were common a decade ago, now a company can only offer negligible discounts of 5% or less (tax free), and you can just as easily get that from fluctuations in the market. These are the features to look for to determine if the ESPP is even worth the effort: As for a cash value, if a plan has at least one of those features, (and you believe the stock has real long term value), you still have to determine how much of your money you can afford to divert into stock. If the discount is 5%, the company is paying you an extra 5% on the money you put into the plan.\",\n \"So the key factor here, IMHO, is the amount we are talking about. $2K is just not a lot of money. If you lose every penny, you can recover. On the other hand it is unlikely to make you wealthy. So if I was you I would buy in, more for the fun of it all. Now if it was a large amount of money that we were talking about it would be about a percentage of my net worth. For example, lets say the minimum was 20K, and you really believed in the company. If I had a net worth of less than 200K, I would not do it. If I had a larger net worth, I would consider it unless I was near retirement. So if I was 30, hand a net worth of 300K, I would probably invest as even if I did lose it all, I could recover. Having said all that it does not sound like you completely agree that the company will be profitable. So in that case, don't buy. Also, I have the opportunity to buy my own company's stock at a discount. However, I do not for two reasons. The first is I don't like investing in the company I work for. Secondly, they require you to hold the stock for a year.\",\n \"I think of these things in terms of risk. Investing in individual stocks is risky, and investing in brand new individual stocks is riskier still. However, the payoff can be quite high. The fact that you work at the company increases your exposure. If the company goes under, then not only have you lost your investment, but you've lost your job and income as well. It really depends on how much of your total portfolio this investment represents. Consider the following: If you can say yes to all or most of these, then a small investment in your company is fine. If you end up losing your investment, you'll still be okay. I think it can help a company when the employees have a little skin in the game. I hope it pays out big for you.\",\n \"As far as I know, the AMT implications are the same for a privately held company as for one that is publicly traded. When I was given my ISO package, it came with a big package of articles on AMT to encourage me to exercise as close to the strike price as possible. Remember that the further the actual price at the time of purchase is from the strike price, the more the likely liability for AMT. That is an argument for buying early. Your company should have a common metric for determining the price of the stock that is vetted by outside sources and stable from year to year that is used in a similar way to the publicly traded value when determining AMT liability. During acquisitions stock options often, from what I know of my industry, at least, become options in the new company's stock. This won't always happen, but its possible that your options will simply translate. This can be valuable, because the price of stock during acquisition may triple or quadruple (unless the acquisition is helping out a very troubled company). As long as you are confident that the company will one day be acquired rather than fold and you are able to hold the stock until that one day comes, or you'll be able to sell it back at a likely gain, other than tying up the money I don't see much of a downside to investing now.\",\n \"Generally, it is considered a bad idea to put significant parts of your money in your own employer's stock, no matter how great the company looks right now. The reason is the old 'don't put all your eggs in one basket'. If there is ever a serious issue with your company, and you lose your job because they go down the drain, you don't only lose your job, but also your savings (and potentially 401k if you have their stock there too). So you end unemployed and without all your savings. Of course, this is a generic tip, and depending on the situation, it might be ok to ignore it, that's your decision. Just remember to have an eye on it, so you can get out while they are still floating - typically employees are not the first to know when it goes downhill, and when you see it in the papers, it's too late. Typically, you get a more secure and independent return-on-invest by buying into a well-managed mixed portfolio\",\n \"Advantage: more money. The financial tradeoff is usually to your benefit: Given these, for having your money locked up for the average length of the vesting periods (some is locked up for 3 months, some is locked up for nearly 0), you get a 10% return. Overall, it's like a 1.5% bonus for the year, assuming you were to sell everything right away. Of course, whether or not you wish to keep the stock depends on how you value MSFT as an investment. The disadvantage lies in a couple parts:\",\n \"ESPP is common among US companies, often with a framework similar to your outline. In the US, some ESPPs allow sales of shares to be considered qualifying (subject to capital gains rather than ordinary income tax) if they are sold at least 2 years after the enrollment date and at least 1 year after the purchase date. These details can vary from one plan to another and will be stated in the company's ESPP enrollment documents. Do look at the high and low values of the stock over the last year. If it swings up and down more than 15% (or whatever the discount is), then that risk should be a factor in your decision. If the stock is trending upward over the long term and you are confident in the durability of the company, then you might favor holding.\",\n \"Since the 2 existing answers addressed the question as asked. Let me offer a warning. You have 10,000 options at $1. You've worked four years and the options are vested. The stock is worth $101 when you get a job offer (at another company) which you accept. So you put up $10k and buy the shares. At this moment, you put up $10K for stock worth $1.01M, a $1M profit and ordinary income. You got out of the company just in time. For whatever reason, the stock drops to $21 and at tax time you realize the $1M gain was ordinary income, but now the $800k loss is a capital loss, limited to $3000/yr above capital gains. In other words you have $210k worth of stock but a tax bill on $1M. This is not a contrived story, but a common one from the dotcon bubble. It's a warning that 'buy and hold' has the potential to blow up in your face, even if the shares you buy retain some value.\",\n \"The main advantage and disadvantage I can see in a scenario like this are - how savvy and good an investor are you? It's a good way to create below-market average returns if you're not that good at investing and returns way above market average if you are...\",\n \"Some companies offer discounts for shareholders. I believe Disney used to do so, for example; if your family was doing the Disneyland-every-year routine that could be a significant benefit.\",\n \"I like C. Ross and MrChrister's advice to not be heavily weighted in one stock over the long run, especially the stock of your employer. I'll add this: One thing you really ought to find out – and this is where your tax advisor is likely able to help – is whether your company's stock options plan use qualified incentive stock options (ISO) or non-qualified stock options (NQO or NSO). See Wikipedia - Incentive stock option for details. From my understanding, only if your plan is a qualified (or statutory) ISO and you hold the shares for at least 1 year of the date of exercise and 2 years from the date of the option grant could your gain be considered a long-term capital gain. As opposed to: if your options are non-qualified, then your gain may be considered ordinary income no matter how long you wait – in which case there's no tax benefit to waiting to cash out. In terms of hedging the risk if you do choose to hold long, here are some ideas: Sell just enough stock at exercise (i.e. taking some tax hit up front) to at least recover your principal, so your original money is no longer at risk, or If your company has publicly listed options – which is unlikely, if they are very small – then you could purchase put options to insure against losses in your stock. Try a symbol lookup at the CBOE. Note: Hedging with put options is an advanced strategy and I suggest you learn more and seek advice from a pro if you want to consider this route. You'll also need to find out if there are restrictions on trading your employer's public stock or options – many companies have restrictions or black-out periods on employee trading, especially for people who have inside knowledge.\",\n \"its the best investment you can have specially with the company you work for and IPO, if i was you i would invest in more then just the minimum since its IPO. ask you your manager or supervisor how much are they buying the stocks for if they are doing it the go for it you'll be okay just keep track of it regular sometime you can invest more as time go by. You can get the idea by how much production your company is doing, if your company's profit going up chances are you need to buy more.\",\n \"There would be small generic risk that the company stock goes down real fast by more than 15% in a specific event to the company [fraud, segment company operates suffers a shock, etc] or a generic event to the stock market like recent events of Greece etc.\",\n \"You'd likely be subject to a lock-up period before you could sell the shares along with possibly having other rules about how you could sell your shares as you'd likely be seen as an insider that may have information that gives you an unfair advantage for selling the stock possibly. Depending on how far in advance you hold the shares, you may or may not have adjustments in the valuation and number of shares as some companies may do a split or reverse split when preparing for an IPO. A company I worked for in the late 1990s had an IPO and my stock options had a revised strike price because of a reverse stock split that was done prior to the IPO.\",\n \"It really depends. If it is offered as compensation (ie in leiu of, or in addition to salary or cash bonus) then it would be reportable income, and if sold later for a profit then that would be taxable as gains. If this share is purchased as an investment at current value then it would be treated like other securities most likely gains realized at sale. Any discount could be considered income but there are some goofy rules surrounding this enacted to prevent tax evasion and some to spur growth. That is the answer in a nut shell. It is far more complicated in reality as there are somewhere around 2000 pages of regulations deal with different exceptions and scenerios.\",\n \"\\\"It depends on how big the dilution is. Could be a good trade. Do the math yourself, many times nobody else has as all the employees think they are going to get rich because \\\"\\\"options\\\"\\\" :)\\\"\",\n \"I would pass on their deal if they will only match if you invest in their stock. Think about when/if the company falls on bad times. What happens to the stock of a company when bad times come? The board of directors will reduce or eliminate the dividend payout. Current and potential investors will take notice. Current owners of the stock will sell. Potential investors will avoid buying. The price of the stock with go down. And, quite likely, the company will lay off workers. If/when that happens you would find yourself without a job and holding (almost) worthless stock as your savings. That would be quite a bad situation to be in.\",\n \"You should always always enroll in an espp if there is no lockup period and you can finance the contributions at a non-onerous rate. You should also always always sell it right away regardless of your feelings for the company. If you feel you must hold company stock to be a good employee buy some in your 401k which has additional advantages for company stock. (Gains treated as gains and not income on distribution.) If you can't contribute at first, do as much as you can and use your results from the previous offering period to finance a greater contribution the next period. I slowly went from 4% to 10% over 6 offering periods at my plan. The actual apr on a 15% discount plan is ~90% if you are able to sell right when the shares are priced. (Usually not the case, but the risk is small, there usually is a day or two administrative lockup (getting the shares into your account)) even for ESPP's that have no official lockup period. see here for details on the calculation. http://blog.adamnash.com/2006/11/22/your-employee-stock-purchase-plan-espp-is-worth-a-lot-more-than-15/ Just a note For your reference I worked for Motorola for 10 years. A stock that fell pretty dramatically over those 10 years and I always made money on the ESPP and more than once doubled my money. One additional note....Be aware of tax treatment on espp. Specifically be aware that plans generally withhold income tax on gains over the purchase price automatically. I didn't realize this for a couple of years and double taxed myself on those gains. Fortunately I found out my error in time to refile and get the money back, but it was a headache.\",\n \"Only if you sell the stock in question, and use the proceeds to buy other stock. (You should probably never feel bad about selling your company stock, even if it goes up a lot later, because from a risk-exposure basis you are already exposed to your company's performance through your career. Unless you have a lot of other savings, you should diversify.)\",\n \"Should I invest money in the pre-IPO stocks soon to be offered by the company that I work for? Is it wise to do this? What should I be thinking about? What are the risks? The last time I was offered pre-IPO friends and family stock, I purchased half of my allotment, and had my parents purchase the other half. Since I had a 6-month blackout period, I had to hold my portion. My parents sold their portion one day after the IPO. The price went up dramatically for about a day and a half, then dived continuously. My portion ended up being worthless. My parents made a few bucks. Good for them. Not a huge deal either way, since my cost was relatively low. If I had a chance to do it again, I'd give it all to friends or family instead of splitting it, and have them sell quickly if they realized a profit. You might be luckier than I was.\",\n \"Your maximum risk is 100%. If you buy the stock 15% off and your company goes bankrupt tomorrow, you've lost everything. It also sounds like you have foreign exchange risk. One can debate how much risk this is in terms of expected outcomes, but that was not your question. However, if you purchase the company stock and buy put options at the same time, you can lock in a sale price ahead of time and absolutely limit your risk. Depending on the amount of stock we're talking about, you can buy currency futures as well to hedge the exchange risk. You don't necessarily have to buy the break-even strikes, you can buy the ones that guarantee a positive return. These are probably fairly cheap. Note that a lot of companies have policies that prohibit beneficiaries from shorting the company stocks, in which case you might not be able to hedge yourself with put options.\",\n \"As littleadv says it depends on the local laws. Normally one shouldn't be too worried. Typically the stocks given to the employees are a very small portion of the overall stocks ... the owners would not try to jeopardize the deal just so that they make an incrementally small amount of money ... they would rather play safe than get into such a practice.\",\n \"You really have asked two different questions here: I'm interested in putting away some money for my family Then I urge you to read up on investing. Improving your knowledge in investing is an investment that will very likely pay off in the long-term - this can't be answered here in full length, pointers to where to start are asset allocation and low-cost index funds. Read serious books, read stackexchange posts, and try avoid the Wall Street marketing machine. Also, before considering any long term investments, build an emergency fund (e.g. 6 months worth of your expenses) in case you need some liquid money (loss of job etc.), and also helps you sleep better at night. What things are important to consider before making this kind of investment? Mainly the risk (other answers already elaborate on the details). Investing in a single stock is quite risky, even more so when your income also depends on that company. Framed another way: which percentage of your portfolio should you put into a single stock? (which has been answered in this post). If after considering all things you think it's a good deal, take the offer, but don't put a too great percentage of you overall savings into it, limit it to say 10% (maybe even less).\",\n \"A general rule of thumb is to avoid having more than 5% of your investments in any single stock, to avoid excessive risk; it's usually even more risky if you're talking company stock because an adverse event could result in an inferior stock price and you getting laid off. Under other circumstances, the ideal amount of company stock is probably 0%. But there are tax benefits to waiting, as you've noted, and if you're reasonably confident that the stock isn't likely to jerk around too much, and you have a high risk tolerance (i.e. lots of extra savings besides this), and you're comfortable shouldering the risk of losing some money, it might make sense to hold onto the stock for a year - but never any longer. The real risk to holding a lot of company stock doesn't depend on how often you buy it and sell it per se, but having period purchases every month should make it easier for you to ladder the funds, and regularly sell your old shares as you purchase new shares. You might also consider a stop-loss order on the stock at or near the price you purchased it at. If the stock is at $100, then you buy at $85, and then the stock drops to $85, there are no more outstanding tax benefits and it makes no sense to have it as part of your portfolio instead of any other speculative instrument - you probably get better diversification benefits with any other speculative instrument, so your risk-adjusted returns would be higher.\",\n \"A 15% discount does not necessarily mean it is a good investment. The stock price can go down at any point. 15% discount might mean you are getting a little better deal than the average cat.\",\n \"You're talking about ESPP? For ESPP it makes sense to utilize the most the company allows, i.e.: in your case - 15% of the paycheck (if you can afford deferring that much, I assume you can). When the stocks are purchased, I would sell them immediately, not hold. This way you have ~10% premium as your income (pretty much guaranteed, unless the stock falls significantly on the very same day), and almost no exposure. This sums up to be a nice 1.5% yearly guaranteed bonus, on top of any other compensation. As to keeping the stocks, this depends on how much you believe in your company and expect the stocks to appreciate. Being employed and dependent on the company with your salary, I'd avoid investing in your company, as you're invested in it deeply as it is.\",\n \"Depending on your perspective of it, I can see reasons for and against this idea. Only with the benefit of hindsight can one say how wise or unwise it is to do so. Earlier in my career, I invested and lost it all. Understand if you do buy when would you be able to sell, do you have to have an account with the underwriter, what fees may there be in having such an account, and would there be restrictions on when you could sell.\",\n \"Judge this stock no differently than any other is the answer. Optimism isn't fact. http://clarkhoward.com/liveweb/shownotes/2007/06/06/12304/?printer=1 Now because you get to buy extremely low, and sell for probably higher and you believe in the stock, I'd say go ahead and purchase the stock, manage it for taxes with the advice of your advisor and get your portfolio rebalanced as soon as you can. That might admittedly be a year or more, but as you say you have time. Like any investment, don't spend money you can't lose.\",\n \"Some other answers mention the ability to sell at grant. This is very important. If you have that ability, think about your guaranteed return. In my case, I get a 15% discount on the lowest 6 month window price from the last two years. If you do the math, the worst case return can be calculated: 1) Money that from the beginning of the window, I make 15% for 6 months (30% annual return guaranteed) 2) Money at the end of the window (say the last month) is 15% for one month (180% annual return guaranteed) In the end, your average holding window for your money is about 3 months (you can calculate it exactly). At that rate, you have a guaranteed 60% annual return. You can't beat that anywhere, with a significant upside if your company stock is increasing. So, if your company has an instant sell at grant option, you have to be brain dead not to do it. If it takes time to get your shares, then you need to look at the volatility of the stock to see how big the chance of losing money is. To generalize to a formula (if that's what you want): WM = purchase window (in months); D = Discount Percentage; GR = Guaranteed Return GR = 12/(WM/2) * D = 6*D/WM One last thing, If you are going to participate in ESPP, make you that you understand how to do your taxes yourself. I haven't found a tax person yet who does ESPP correctly (including an ex IRS agent), so I always have to do my taxes myself to make sure they get done correctly.\",\n \"There are two sources for shares that employees buy through ESOPs. A company can simply buy the shares on the open market. The company must pay for the stock, but the employee then pays the company for the shares. If employees get a discount on the ESOP shares, the company would pay for that percentage directly. The company can choose to issue new shares. These new shares dilute the ownership of all the other current stockholders. While #2 is common when companies issue stock options, I'd be surprised to see it with an ESOP. In most cases, employees are limited in the amount of their salary they can devote towards the ESOP. If that limit is 10% and the discount that the employees get is 10%, the cost on a per-employee basis would only be 1% of that employees salary, which is a small expense.\",\n \"The biggest challenge with owning any individual stock is price fluctuation, which is called risk. The scenarios you describe assume that the stock behaves exactly as you predict (price/portfolio doubles) and you need to consider risk. One way to measure risk in a stock or in a portfolio is Sharpe Ratio (risk adjusted return), or the related Sortino ratio. One piece of advice that is often offered to individual investors is to diversify, and the stated reason for diversification is to reduce risk. But that is not telling the whole story. When you are able to identify stocks that are not price correlated, you can construct a portfolio that reduces risk. You are trying to avoid 10% tax on the stock grant (25%-15%), but need to accept significant risk to avoid the 10% differential tax ($1000). An alternative to a single stock is to invest in an ETF (much lower risk), which you can buy and hold for a long time, and the price/growth of an ETF (ex. SPY) can be charted versus your stock to visualize the difference in growth/fluctuation. Look up the beta (volatility) of your stock compared to SPY (for example, IBM). Compare the beta of IBM and TSLA and note that you may accept higher volatility when you invest in a stock like Tesla over IBM. What is the beta of your stock? And how willing are you to accept that risk? When you can identify stocks that move in opposite directions, and mix your portfolio (look up beta balanced portolio), you can smooth out the variability (reduce the risk), although you may reduce your absolute return. This cannot be done with a single stock, but if you have more money to invest you could compose the rest of your portfolio to balance the risk for this stock grant, keep the grant shares, and still effectively manage risk. Some years ago I had accumulated over 10,000 shares (grants, options) in a company where I worked. During the time I worked there, their price varied between $30/share and < $1/share. I was able to liquidate at $3/share.\",\n \"\\\"Does your company offer a 401k? or similar pre-tax retirement plans? Is your company a publicly traded company? These questions are important, basically the key to any of your investments should be diversification. This means buying more than one kind of investment, amongst stock(s), bonds, real estate or more. The answer to \\\"\\\"How Much\\\"\\\" of your salary should go to company stock, is subjective. I personally would contribute the max toward a retirement plan or even post-tax savings, which would be invested in a variety of public companies. Hope that helps.\\\"\",\n \"With the Employee Stock Purchase Plan stock, if you sell it in less than 18 months from exercise, the discount you bought it at (normally 15%) becomes taxable income and included in your W-2.\",\n \"I don't think you are reading the stock chart right. ORCL has a beta of 1.12 which means it has more volatility than the market as a whole. See image below for a fairly wild stock chart for a year. I would not truly consider ESPP participation investing, unless you intend to buy and hold the stock. If you intend to sell the stock soon after you are able, it is more speculation. ESPP's are okay based upon the terms. If the stock was a constant price, and you could sell right away, then an ESPP plan would be easy money. Often, employees are often given a 15% discount to purchase the stock. If you can sell it before any price drop, then you are guaranteed to make 15% on the money invested minus any commissions. Some employers make ESPP participants hold the stock for a year. This makes such a plan less of a value. The reasons are the stock can drop in price during that time, you could need the money, or (in the best case) your money is tied up longer making the ROI less. The reasons people invest in stock are varied and is far to much to discuss in a single post. Some of your colleagues are using the ESPP solely to earn the discount in their money.\",\n \"Oracle specifically is paying a dividend with a current yield of about 1.4% annually and has appreciated nearly 50% over the last 5 years. Granted, the past doesn't guarantee the future but the company has paid a pretty steady dividend since 2009. If you're buying as part of an employee program you would presumably be holding the shares for a long time and the daily and even monthly movements aren't terribly relevant to a long term holding period. Additionally, you may be able to buy the shares at a discount to the market price as part of your employee program. You probably also won't pay any transaction fee.\",\n \"Typically, the discount is taxable at sale time But what about taxes? When the company buys the shares for you, you do not owe any taxes. You are exercising your rights under the ESPP. You have bought some stock. So far so good. When you sell the stock, the discount that you received when you bought the stock is generally considered additional compensation to you, so you have to pay taxes on it as regular income. Source: Turbotax. Second source. Your pretax rate of return would be: 17% (100/85) In your scenario where the stock price is fixed at $100. Your tax rate would be your marginal rate. If the stock stayed at 100, you would still be taxed as income on $15/share (the discount) and would receive no benefit for holding the stock one year. Assuming you are in the 25% tax bracket, your after tax rate of return would be 13% ((15*.75)+85)/85)\",\n \"The answer is simple. If your employer is offering you a discount, that is free money. You always take free money, always.\",\n \"To me it depends on things like your net worth, debt, and how other assets are invested. Currently you have 25K invested in the company you work for. If you have 100K in student loans, are a renter, and 12K in your 401K, then I would recommend exercising almost all of your options. In that case you have a much to large part of your world wrapped up in your company. If you have 250K in your 401K, own a home and have an emergency fund with no debt then you are fine with letting it ride. You can afford to absorb a loss of 25K without wrecking your net worth. More than likely, you are somewhere in between (just statistics speaking there). So why not exercise some of them now with the purpose of improving your financial situation? Say do a 1/3 now and when they come available. When 401ks were first invented people put almost all of their money in their company stock. They lost just about everything when the company went down in value and were often a victim of layoffs exasperating the issue. This is akin to the same situation. Most financial advisers recommend against putting any 401K money to company stock, or at least limiting the amount.\",\n \"Since you work there, you may have some home bias. You should treat that as any other stock. I sell my ESPP stocks periodically to reduce the over allocation of my portfolio while I keep my ESOP for longer periods.\",\n \"The question is for your HR department, or administrator of the plan. How long must you hold the employee shares before you are permitted to sell? Loyalty to your company is one thing, but after a time, you will be too heavily invested in one company, and you need to diversify out. One can cite any number they wish, 5%, 10%. All I know is that when Enron blew up, it only added insult to injury that not only did these people lose their job, they lost a huge chunk of their savings as well.\",\n \"Good questions. I can only add that it may be valuable if the company is bought, they may buy the options. Happened to me in previous company.\",\n \"It is a very complex question to answer and it really depends. However, here are some points to consider and verify with your accountant or tax expert. First, if you exercise now, the downside is that you may be subject to Alternative Minimum Tax (AMT) based on the theoretical gain on the stock (current price minus your strike price) when you file your tax return. The other obvious downside is that if the company goes nowhere, you are stuck with the stock and potentially lose money. The benefit is that the clock starts ticking for long-term capital gains so if you sell after 1 year from the exercise date (or your company gets sold) then the gain would be taxed as long-term capital gain which is taxed at a lower rate. If your company were to get sold, the gains are not necessarily taxed as ordinary income. If it is a cash transaction then most likely (unless you have exercised and held the stock for over a year). However, if it is a stock sale, then you may end up getting stock of the company that acquires your company. In that situation, the tax event would be when you sell the new shares vs. the time of company sale. Finally, whether to exercise or not also depends on how you feel about the prospects of the company. If you think they will be sold or of more value down the road then exercising makes sense. If you are not sure then you could hedge your bets by only exercising a portion of it. You should definitely consult with a financial advisor or a tax consultant regarding these matters.\",\n \"It might go down a bit, or it might not. That is nearly impossible to predict, as the relative volumes are unknown, and the exact procedure is also unknown (they might do the selling over a longer period, or as a buy back, or immediately, or...) However, why would you want to wait at all? It is generally not a great idea to put your savings into the company you work for ('all eggs in one basket' - when it goes down, you lose your job and your savings), so the best approach is to pick a good day in the next weeks and sell the stock and invest into something more neutral.\",\n \"\\\"If by \\\"\\\"Company Stock\\\"\\\" you mean \\\"\\\"stock in the company I work for\\\"\\\" then absolutely sell your stock. It is too big a risk to have your investments tied into the same company that is also providing your salary. If you mean stock as in general investments, I like to look at it this way. If you have $25,000 stock and a $100,000 mortgage you ask this question: If I had a $75,000 mortgage would I borrow an additional $25,000 against my house to invest in the stock market? If the answer is yes, then you are taking a risk consistent with your tolerance for risk. If you answer no, then your tolerance for risk says you'd be happier paying down your mortgage.\\\"\",\n \"There is Free employer money on both sides of the tax fence for some employees. On the pretax side, your employer may provide you a match. If so, invest the maximum to get 100% of the match. On the after tax side, many companies offers a 15% discount on ESPP plans and a one year hold. My wife has such an employer. The one year hold is fine because it allows us to be taxed at Long Term Capital gains if the stock goes up which is lower than our current income bracket. After creating a seasoned pool of stocks that we could sell after the one year hold, we are then able to sell the same number of stocks purchased each month. This provides a 17.6% guaranteed gain on a monthly basis. How much would you purchase if you had a guaranteed 17.6% return. Our answer is 15% (our maximum allowed). The other trick is that while the employer is collecting the money, you will purchase the stock at the lowest day of the period. You will usually sell for even more than the purchase price unless the day purchased was the lowest day of month. The trick is to reinvest the money in tax free investments to balance out the pretax investing. Never leave the money in the plan. That is too much risk.\",\n \"An instant 15% profit sounds good to me, so you can't go wrong selling as soon as you are able. Here are a couple other considerations: Tax implications: When you sell the stock, you have to pay taxes on the profit (including that 15% discount). The tax rate you pay is based on how long you wait to sell it. If you wait a certain amount of time (usually 2 years, but it will depend on your specific tax codes) before you sell, you could be subject to lower tax rates on that profit. See here for a more detailed description. This might only apply if you're in the US. Since you work for the company, you may be privy to a bit more information about how the company is run and how likely it is to grow. As such, if you feel like the company is headed in the right direction, you may want to hold on the the stock for a while. I am generally wary of being significantly invested in the company you work for. If the company goes south, then the stock price will obviously drop, but you'll also be at risk to be laid off. As such you're exposed much more risk than investing in other companies. This is a good argument to sell the stock and take the 15% profit.* * - I realize your question wasn't really about whether to sell the stock, but more for when, but I felt this was relevant nonetheless.\",\n \"I don't know what restrictions are put on the average employee at your company. In my case, we were told we were not permitted to either short the stock, or to trade in it options. That said, I was successful shorting the exact number of shares I'd be buying at the 6 month close, the same day the purchase price would be set. I then requested transfer of the stock purchase to my broker where the long and short netted to zero. The return isn't 15%, it's 100/85 or 17.6% for an average 3 months they have your money. So do the math on APR. (Higher if the stock has risen over 6 months and you get the lower price from 6 months prior.) My method was riskless, as far as I am concerned. I did this a dozen times. The stock itself was +/- 4% by the time the shares hit, so in the end it was an effort, mostly to sleep better. I agree with posts suggesting the non-zero risk of a 20% 4 day drop.\",\n \"\\\"First, you mentioned your brother-in-law has \\\"\\\"$100,000 in stock options (fully vested)\\\"\\\". Do you mean his exercise cost would be $100,000, i.e. what he'd need to pay to buy the shares? If so, then what might be the estimated value of the shares acquired? Options having vested doesn't necessarily mean they possess value, merely that they may be exercised. Or did you mean the estimated intrinsic value of those options (estimated value less exercise cost) is $100,000? Speaking from my own experience, I'd like to address just the first part of your question: Have you treated this as you would a serious investment in any other company? That is, have you or your brother-in-law reviewed the company's financial statements for the last few years? Other than hearing from people with a vested interest (quite literally!) to pump up the stock with talk around the office, how do you know the company is: BTW, as an option holder only, your brother-in-law's rights to financial information may be limited. Will the company share these details anyway? Or, if he exercised at least one option to become a bona-fide shareholder, I believe he'd have rights to request the financial statements – but company bylaws vary, and different jurisdictions say different things about what can be restricted. Beyond the financial statements, here are some more things to consider: The worst-case risk you'd need to accept is zero liquidity and complete loss: If there's no eventual buy-out or IPO, the shares may (effectively) be worthless. Even if there is a private market, willing buyers may quickly dry up if company fortunes decline. Contrast this to public stock markets, where there's usually an opportunity to witness deterioration, exit at a loss, and preserve some capital. Of course, with great risk may come great reward. Do your own due diligence and convince yourself through a rigorous analysis — not hopes & dreams — that the investment might be worth the risk.\\\"\",\n \"Note that you're asking about withholding, not about taxing. Withholding doesn't mean this is exactly the tax you'll pay: it means they're withholding a certain amount to make sure you pay taxes on it, but the tax bill at the end of the year is the same regardless of how you choose to do the withholding. Your tax bill may be higher or lower than the withholding amount. As far as tax rate, that will be the same regardless - you're just moving the money from one place to the other. The only difference would be that your tax is based on total shares under the plan - meaning that if you buy 1k shares, for example, at $10, so $1,500 discounted income, if you go the payroll route you get (say) $375 withheld. If you go the share route, you either get $375 worth of stock (so 38 shares) withheld (and then you would lose out on selling that stock, meaning you don't get quite as much out of it at the end) or you would ask them to actually buy rather more shares to make up for it, meaning you'd have a slightly higher total gain. That would involve a slightly higher tax at the end of it, of course. Option 1: Buy and then sell $10000 worth, share-based withholding. Assuming 15% profit, and $10/share at both points, then buy/sell 1000 shares, $1500 in profit to take into account, 38 shares' worth (=$380) withheld. You put in $8500, you get back $9620, net $1120. Option 2: Buy and then sell $13500 worth, share based withholding. Same assumptions. You make about $2000 in pre-tax profit, meaning you owe about $500 in tax withholding. Put in $11475, get back $13000, net $1525. Owe 35% more tax at the end of the year, but you have the full $1500 to spend on whatever you are doing with it. Option 3: Buy and then sell $1000 worth, paycheck withholding. You get the full $10000-$8500 = $1500 up front, but your next paycheck is $375 lighter. Same taxes as Option 1 at the end of the year.\",\n \"I see another way of looking at this that hasn't been addressed yet. By offering the discount, the company is attempting to change your behavior into doing something irrational, that benefits them at your expense. The company hopes for one (or more) of the following psychological effects to happen to you: The proper thing to do, if you have enough capital to prevent margin calls, it to short-sell the stock at the same instant the price is set, thus locking in the profit. Eventually you can take possession of the shares and deliver them to offset the short -- hopefully before you get a margin call from the stock dropping.\",\n \"At the most basic level, the employee is getting a share of ownership in the company and would get a percentage of the sales price. That said, as littleadv alluded to, different share classes have different priorities and get paid in different orders. In a bankruptcy, for example, some classes almost never get paid in practice because they are so far down the ladder of priority. The first step you should take would be to try to clarify what you are getting with the company itself. Failing that, contact a financial professional or an attorney in your area who can read the terms and give you a better understanding of the contract before you sign.\",\n \"Their reasoning is probably that by eliminating the option for company stock, employees now are exposed to less risk. That is, if the company goes bk, they're only exposed to the company through their paycheck and not their paycheck plus retirement savings. In reality, it's probably a classic case of buy high and sell low. That is, your plan admin (HR or legal, probably) thinks that since the price went down, they should sell.\",\n \"Having stock options means that you have worked for and rightfully earned a part of the company's capital appreciation. Takeover of the company would indicate someone is interested in the company (something should be valuable). It would be unwise to not strike before the period lapses since the strike price is always lower than market price and takeovers generally increases stock values ... it is capital gains all the way my friend. Good luck. *observations not in professional capacity. pls consult a professional for investment related advice.\",\n \"I think you're not applying the right time scale here. ESPP (Employee Stock Purchase Plan) is usually vesting every 6 months. So every half a year you receive a chunk of stocks based on your salary deduction, with the 15% discount. Every half a year you have a chunk of money from the sale of these stocks that you're going to put into your long term investment portfolio. That is dollar cost averaging. You're investing periodically (every 6 months in this case), same (based on your salary deferral) amount of money, regardless of the stock market behavior. That is precisely what dollar cost averaging is.\",\n \"Like @chirs, I'm of the opinion that you might want to buy more. I've done this a couple of times, price dropped a bunch, and I said, heck, I bought some last week, and this week I can get twice as much stock for about the same price. Brought down my average cost per share, and when the company was taken private, I actually didn't lose money - unlike some other people I know, who only bought at one price, watched the drop, and held on awaiting a recovery (which didn't happen in time before the big money swooped in on it). But to do this, you need to keep cash reserves (that, like @afforess says, you can afford to lose all of) on hand, awaiting buying opportunities. This, too, is a cost - an opportunity cost.\",\n \"Let's take an example: IBM has about 430,000 employees worldwide. Assume the average yearly salary is $80K (it's probably less, since a lot of jobs are offshore). If every employee took 10% of their pay as stock, that's $132 million every two weeks. But IBM's market capitalization is about $153 billion, so stock purchases would be less than 0.1% of that.\",\n \"But unless he's getting shares at a premium there's no difference between him getting shares or getting cash and buying Disney stock with half of it. And if he's looking to make money in the stock market he certainly has better options than putting everything on DIS.\",\n \"It depends. If you accept the offer, then your stock will cease existing. If you reject the offer, then you will become a minority shareholder. Depending on the circumstances, you could be in the case where it becomes illegal to trade your shares. That can happen if the firm ceases to be a public company. In that case, you would discount the cash flows of future dividends to determine worth because there would be no market for it. If the firm remained public and also was listed for trading, then you could sell your shares although the terms and conditions in the market would depend on how the controlling firm managed the original firm.\",\n \"In my experience, any kind of equity you may be offered by the company is just a carrot. Your offer may be written in such a way that your potential ownership represents, say, 1% of the company today. But if the company goes for a round of financing your ownership percentage can get diluted. If this happens a couple of times and the terms of financing aren't very favorable then your percentage can go from that 1% down to 0.001%, making the equity worthless. I've known people who heard their company was being bought and thought they might get some kind of payoff. Come to find out the company hadn't done all that well and there wasn't anything to pay out after the main investors got some money back. (The main investors took a loss.) For obvious reasons, management wasn't keeping the staff up to date about the fact that they were operating in the red and their options were worthless. Some people grumbled about lawyers and filing lawsuits, but at the end of the day, there wasn't any money to be won. Keep this in mind. As to your question regarding what to look out for:\",\n \"In many ESPP programs (i.e. every one I've had the opportunity to be a part of in my career), your purchase is at a discount from the lower of the stock prices at the start and end of the period. So a before-tax 5% return is the minimum you should expect; if the price of the stock appreciates between July 1 and December 31, you benefit from that gain as well. More concretely: Stock closes at $10/share on July 1, and $11/share on December 31. The plan buys for you at $9.50/share. If you sell immediately, you clear $1.50/share in profit, or a nearly 16% pre-tax gain. If the price declines instead of increases, though, you still see that 5% guaranteed profit. Combine that with the fact that you're contributing every paycheck, not all at once at the start, and your implied annual rate of return starts to look pretty good. So if it was me, I'd pay the minimum on the student loan and put the excess into the ESPP.\",\n \"the implications are that the company's earnings per share may seem greater, (after the company buys them there will be less shares outstanding), giving wall street the impression that there is more growth potential than there really is. its an accounting gimmick that can work for a few quarters while the company evaluates how else to impress wall street\",\n \"Like others have already said, it may cause an immediate dip due to a large and sudden move in shares for that particular stock. However, if there is nothing else affecting the company's financials and investors perceive no other risks, it will probably bounce back a bit, but not back to the full value before the shares were issued. Why? Whenever a company issues more stock, the new shares dilute the value of the current shares outstanding, simply because there are now more shares of that stock trading on the market; the Earnings Per Share (EPS) Ratio will drop since the same profit and company value has to be spread across more shares. Example: If a company is valued at $100 dollars and they have 25 shares outstanding, then the EPS ratio equates to $4 per share (100/25 = 4). If the company then issues more shares (stock to employees who sell or keep them), let's say 25 more shares, then shares outstanding increase to 50, but the company's value still remains at $100 dollars. EPS now equates to $2 per share (100/50 = 2). Now, sometimes when shareholders (especially employees...and especially employees who just received them) suddenly all sell their shares, this causes a micro-panic in the market because investors believe the employees know something bad about the company that they don't. Other common shareholders then want to dump their holdings for fear of impending collapse in the company. This could cause the share price to dip a bit below the new diluted value, but again if no real, immediate risks exist, the price should go back up to the new, diluted value. Example 2: If EPS was at $4 before issuing more stock, and then dropped to $2 after issuing new stock, the micro-panic may cause the EPS to drop below $2 and then soon rebound back to $2 or more when investors realize no actual risk exists. After the dilution phase plays out, the EPS could actually even go above the pre-issuing value of $4 because investors may believe that since more stock was issued due to good profits, more profits may ensue. Hope that helps!\",\n \"Short answer is to put the max 15% contribution into your ESPP. Long answer is that since you want to be saving as much as you can anyway, this is a great way to force you to do it, and pick up at least a 15% return every six months (or however often your plan makes a purchase). I say at least because sometimes an ESPP will give you the lower of the beginning or end period stock price, and then a 15% discount off of that (but check the details of your plan). If you feel like your company's stock is a good long term investment, then hold onto the shares when purchased. Otherwise sell as soon as you get them, and bank that 15% return.\",\n \"I am not required to hold any company stock. I also have an ESOP plan carrying a similar number of shares in company stock. So if it were to be sold, what would the recommendation be to replace it? I can move the shares into any option shown, and have quite a few others. Not dealing with any huge amounts, just a 4.5% contribution over three years (so far).\",\n \"Stock awards by employers are treated and taxed as salary. I.e.: you pay ordinary rate income tax, FICA taxes, State taxes etc. The fact that you got your salary in shares and not cash is irrelevant for tax purposes. Once you got the shares and paid your taxes on them, the treatment is the same as if you got the salary and immediately bought the shares. Holding period for capital gains tax purposes starts at the time you paid your taxes on the award, which is the time at which you get full ownership (i.e.: vesting time, for the restricted stocks). When you sell these stocks - you treat the sale as any other stock sale: you check the holding period for capital gains tax rates, and you do not pay (or get refund) any FICA taxes on the sales transaction. So bottom line: You got $10K salary and you bought $10K worth of company stock, and you sold it at $8K half a year later. You have $10K wages income and $2K short term capital loss.\",\n \"To try to answer the three explicit questions: Every share of stock is treated proportionately: each share is assigned the same dollar amount of investment (1/176th part of the contribution in the example), and has the same discount amount (15% of $20 or $25, depending on when you sell, usually). So if you immediately sell 120 shares at $25, you have taxable income on the gain for those shares (120*($25-$17)). Either selling immediately or holding for the long term period (12-18 mo) can be advantageous, just in different ways. Selling immediately avoids a risk of a decline in the price of the stock, and allows you to invest elsewhere and earn income on the proceeds for the next 12-18 months that you would not otherwise have had. The downside is that all of your gain ($25-$17 per share) is taxed as ordinary income. Holding for the full period is advantageous in that only the discount (15% of $20 or $25) will be taxed as ordinary income and the rest of the gain (sell price minus $20 or $25) will be taxed at long-term capital gain tax rates, which generally are lower than ordinary rates (all taxes are due in the year you do sell). The catch is you will sell at different price, higher or lower, and thus have a risk of loss (or gain). You will never be (Federally) double taxed in any scenario. The $3000 you put in will not be taxed after all is sold, as it is a return of your capital investment. All money you receive in excess of the $3000 will be taxed, in all scenarios, just potentially at different rates, ordinary or capital gain. (All this ignores AMT considerations, which you likely are not subject to.)\",\n \"Your gain is $1408. The difference between 32% of your gain and 15% of your gain is $236.36 or $1.60 per share. If you sell now, you have $3957.44 after taxes. Forget about the ESPP for a moment. Are you be willing to wager $4000 on the proposition that your company's stock price won't go down more than $1.60 or so over the next 18 months? I've never felt it was worth it. Also, I never thought it made much sense to own any of my employer's stock. If their business does poorly, I'd prefer not to have both my job and my money at risk. If you sell now: Now assuming you hold for 18 months, pay 15% capital gains tax, and the stock price drops by $1.60 to $23.40:\",\n \"Usually the amount of the ESPP stocks is very small compared to the overall volume of the trading, so it shouldn't matter. But check if for your company it not so (look at the stock history for the previous ESPP dates, and volumes).\",\n \"Erisa laws protect your retirement just like something should mandate what minimum ownership should be to classify yourself as exempt from labor laws. I like this idea a lot....however how does 1 employee present enough value to actually effect the price of their company stock? This would only work for top brass positions....which is probably the way it should be.\",\n \"Let’s turn this round. Now what if the only people willing to own part of company are doing it due to the expectation that they will make money in the short term form the company….\",\n \"\\\"Here is one \\\"\\\"other consideration\\\"\\\": don't, don't, don't sell based on insider information. Insider trading can land you in jail. And it's not restricted to top executives. Even overhearing a discussion about the current status of the acquisition talks can mean that you have insider information that you legally cannot act on in many jurisdictions. If you are just a regular employee, the SEC will likely not subject your dealings to special scrutiny, especially since lots of your colleagues will likely trade your company's shares at this point in time. And if you definitely hold insider info (for example, if you are intimately involved with the acquisition talks), you will likely have had a very serious warning about insider trading and know what you can and what you cannot do. Nevertheless, it's better to be careful here.\\\"\",\n \"There are two things to consider: taxes - beneficial treatment for long-term holding, and for ESPP's you can get lower taxes on higher earnings. Also, depending on local laws, some share schemes allow one to avoid some or all on the income tax. For example, in the UK £2000 in shares is treated differently to 2000 in cash vesting - restricted stocks or options can only be sold/exercised years after being granted, as long as the employee keeps his part of the contract (usually - staying at the same place of works through the vesting period). This means job retention for the employees, that's why they don't really care if you exercise the same day or not, they care that you actually keep working until the day when you can exercise arrives. By then you'll get more grants you'll want to wait to vest, and so on. This would keep you at the same place of work for a long time because by quitting you'd be forfeiting the grants.\",\n \"There are ups and downs to doing this. This isn't a taxable gain, because it's borrowed money that will be repaid. Whether there are restrictions or not depends upon your contract with the seller and your bank. If the concessions are for health & safety related repairs, your bank may require you to complete the work before closing or within a certain period of time. Overall: Upsides Downsides\",\n \"I like the answer given by mikeazo. If paid in cash would you immediately buy the stock of the company? We all want to be the next Steve Jobs (or Woz), but the truth is that a Jobs comes along only once in a lifetime and chances are that you are not him. We have seen this kind of question here before. Search the site for the answers given previously.\",\n \"As with everything else, it's a question of trade-offs. Pros For Buying In Bulk Cons For Buying In Bulk Inventory cost. You need to purchase more shelving/cupboards to stock the goods. This is a real cost. The psychological effect of having more means you are more likely to use more, thus costing you more. Deflation of the cost of the item should occur over time in a well-functioning market economy. A $10 item today might be $9.50 in one year in real terms. There is a real opportunity cost associated with overbuying. Granted, an extra $100 in your bank account won't be earning too much if you have to spend it one month later, but it does mean you have less financial independence for that month. Risk of spoilage. There is a nonzero risk that your goods could be ruined by flood/fire/toddler/klutz damage. You need to decide which of these pros and cons are more important to you. Financially, you should only buy what you need between shopping trips. In reality the convenience of holding goods in storage for when you need them may outweigh the costs.\",\n \"\\\"If you sold the stock for a profit, you will owe tax on that profit. Whether it is taxed as short-term or long-term capital gains depends on how long you held the stock before selling it. Presumably you're going to invest this money into mutual funds or something of that sort. Those may pay dividends which can be reinvested, and will grow in value (you hope) just as the individual stock shares would (you hope). Assuming the advice you've been given is at all reasonable, there's no need for buyer's remorse here; you're just changing your investing style to a different point on the risk-versus-return curve. (If you have to ask this question, I tend to agree that you should do more homework before playing with shares in individual companieS ... unless you're getting thess shares at employee discount, in which case you should still seriously consider selling them fairly quickly and reinvesting the money in a more structured manner. In a very real sense your job is itself an \\\"\\\"investment\\\"\\\" in your employer; if they ever get into trouble you don't want that to hit both your income and investments.)\\\"\",\n \"\\\"For new shares to be successfully sold, the price has to be below market price. If you currently own shares of that company, you should always get an option to buy those newly sold shares at that discounted price. The number of options depends on the relative number of shares you hold. Lets say you own 100 out of 1000 shares, currently priced at $10. 100 new shares are to be sold at $9. Since you are holding 10% of all shares, you have the option (i.e. the right) to buy 10 new (cheaper) shares (10% of 100) before anybody else can buy them. Theoretically, the money you save by getting the shares at a discounted price is equal to the money you lose by the share's value being diluted. So, if you're a shareholder and the company is increasing it's capital, you're given the right to \\\"\\\"go with it\\\"\\\".\\\"\",\n \"It basically only affects the company's dealings with its own stock, not with operational concerns. If the company were to offer more stock for sale, it would get less cash. If it had a stock buy-back program, it could buy more shares for the same money. If it was to offer to acquire another company in exchange for its own stock, the terms would be less attractive to the other company's owners. Employee stock remuneration, stock options, and so forth would be affected, so there might be considerations and tax consequences for the company.\",\n \"\\\"If you're risking \\\"\\\"everything\\\"\\\" by buying stock, you shouldn't be buying stock. The employees are the ones who are really at risk. Should the business go belly up, the investors are out some investment money, they'll make more; the employees don't have an income source anymore. CAT may have no legal obligation to pay better than market-wages but if they want to keep their skilled labor from going to competitors, they might want to think about it. You can't build machines without workers. If you have a good product in an established market, you can always get more investors.\\\"\",\n \"Options granted by an employer to an employee are generally different that the standardized options that are traded on public stock option exchanges. They may or may not have somewhat comparable terms, but generally the terms are fairly different. As a holder of an expiring employee option, you can only choose to exercise it by paying the specified price and receiving the shares, or not. It is common that the exercise system will allow you to exercise all the shares and simultaneously sell enough of the acquired shares to cover the option cost of all the shares, thus leaving you owning some of the stock without having to spend any cash. You will owe taxes on the gain on exercise, regardless of what you do with the stock. If you want to buy publicly-traded options, you should consider that completely separately from your employer options other than thinking about how much exposure you have to your company situation. It is very common for employees to be imprudently overexposed to their company's stock (through direct ownership or options).\",\n \"This is not right. Inferring the employee stock pool’s takeaway is not as easy as just taking a fraction of the purchase price. As an example, that wouldn’t account for any preferred returns of other ownership classes, among other things. All considered though, it’s reasonable to assume that the employee stock pool will get some premium. Best of luck.\",\n \"There's an odd anomaly that often occurs with shares acquired through company plans via ESPP or option purchase. The general situation is that the share value above strike price or grant price may become ordinary income, but a sale below the price at day the shares are valued is a capital loss. e.g. in an ESPP offering, I have a $10 purchase price, but at the end of the offering, the shares are valued at $100. Unless I hold the shares for an additional year, the sale price contains ordinary W2 income. So, if I see the shares falling and sell for $50, I have a tax bill for $90 of W2 income, but a $50 capital loss. Tax is due on $90 (and for 1K shares, $90,000 which can be a $30K hit) but that $50K loss can only be applied to cap gains, or $3K/yr of income. In the dotcom bubble, there were many people who had million dollar tax bills and the value of the money netted from the sale couldn't even cover the taxes. And $1M in losses would take 300 years at $3K/yr. The above is one reason the lockup date expiration is why shares get sold. And one can probably profit on the bigger companies stock. Edit - see Yelp down 3% following expiration of 180 day IPO lock-up period, for similar situation.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["Is this an employee stock purchase plan (ESPP)? If so, and there is no required holding period, selling right away is essentially a guaranteed bonus with minimal risk. One caveat is that sometimes it takes a while to actually receive the shares at your brokerage, and in the meantime your company may have an earnings report that could cause the share price to drop. If your discount is only 5%, for example, a bad earnings report could easily wipe that out. The only other cons I can think of is ESPP contributions being withheld from you for months (albeit for a virtually guaranteed return), and it complicates your taxes a bit. On the flip side, another pro is that after you sell the shares, you are more likely to invest that money rather than spend it.","\"The major pros tend to be: The major cons tend to be: Being in California, you've got state income tax to worry about as well. It might be worth using some of that extra cash to hire someone who knows what they're doing to handle your taxes the first year, at least. I've always maxed mine out, because it's always seemed like a solid way to make a few extra dollars. If you can live without the money in your regular paycheck, it's always seemed that the rewards outweighed the risks. I've also always immediately sold the stock, since I usually feel like being employed at the company is enough \"\"eggs in that basket\"\" without holding investments in the same company. (NB: I've participated in several of these ESPP programs at large international US-based software companies, so this is from my personal experience. You should carefully review the terms of your ESPP before signing up, and I'm a software engineer and not a financial advisor.)\"","Some other answers mention the ability to sell at grant. This is very important. If you have that ability, think about your guaranteed return. In my case, I get a 15% discount on the lowest 6 month window price from the last two years. If you do the math, the worst case return can be calculated: 1) Money that from the beginning of the window, I make 15% for 6 months (30% annual return guaranteed) 2) Money at the end of the window (say the last month) is 15% for one month (180% annual return guaranteed) In the end, your average holding window for your money is about 3 months (you can calculate it exactly). At that rate, you have a guaranteed 60% annual return. You can't beat that anywhere, with a significant upside if your company stock is increasing. So, if your company has an instant sell at grant option, you have to be brain dead not to do it. If it takes time to get your shares, then you need to look at the volatility of the stock to see how big the chance of losing money is. To generalize to a formula (if that's what you want): WM = purchase window (in months); D = Discount Percentage; GR = Guaranteed Return GR = 12/(WM/2) * D = 6*D/WM One last thing, If you are going to participate in ESPP, make you that you understand how to do your taxes yourself. I haven't found a tax person yet who does ESPP correctly (including an ex IRS agent), so I always have to do my taxes myself to make sure they get done correctly.","Assuming US. The only con that I know of is that hassle factor. You have to remember to sell when you get the new shares, and your taxes become a bit more complicated; the discount that you receive is taxed as ordinary income, and then any change in the price of the stock between when you receive it and you sell it will be considered a capital gain or loss. It's not hard to account for properly if you keep good records.","One major benefit to being able to buy discounted company stock is that you can sell in-the-money covered calls and potentially make more than you would selling at strike.","I see another way of looking at this that hasn't been addressed yet. By offering the discount, the company is attempting to change your behavior into doing something irrational, that benefits them at your expense. The company hopes for one (or more) of the following psychological effects to happen to you: The proper thing to do, if you have enough capital to prevent margin calls, it to short-sell the stock at the same instant the price is set, thus locking in the profit. Eventually you can take possession of the shares and deliver them to offset the short -- hopefully before you get a margin call from the stock dropping."],"string":"[\n \"Is this an employee stock purchase plan (ESPP)? If so, and there is no required holding period, selling right away is essentially a guaranteed bonus with minimal risk. One caveat is that sometimes it takes a while to actually receive the shares at your brokerage, and in the meantime your company may have an earnings report that could cause the share price to drop. If your discount is only 5%, for example, a bad earnings report could easily wipe that out. The only other cons I can think of is ESPP contributions being withheld from you for months (albeit for a virtually guaranteed return), and it complicates your taxes a bit. On the flip side, another pro is that after you sell the shares, you are more likely to invest that money rather than spend it.\",\n \"\\\"The major pros tend to be: The major cons tend to be: Being in California, you've got state income tax to worry about as well. It might be worth using some of that extra cash to hire someone who knows what they're doing to handle your taxes the first year, at least. I've always maxed mine out, because it's always seemed like a solid way to make a few extra dollars. If you can live without the money in your regular paycheck, it's always seemed that the rewards outweighed the risks. I've also always immediately sold the stock, since I usually feel like being employed at the company is enough \\\"\\\"eggs in that basket\\\"\\\" without holding investments in the same company. (NB: I've participated in several of these ESPP programs at large international US-based software companies, so this is from my personal experience. You should carefully review the terms of your ESPP before signing up, and I'm a software engineer and not a financial advisor.)\\\"\",\n \"Some other answers mention the ability to sell at grant. This is very important. If you have that ability, think about your guaranteed return. In my case, I get a 15% discount on the lowest 6 month window price from the last two years. If you do the math, the worst case return can be calculated: 1) Money that from the beginning of the window, I make 15% for 6 months (30% annual return guaranteed) 2) Money at the end of the window (say the last month) is 15% for one month (180% annual return guaranteed) In the end, your average holding window for your money is about 3 months (you can calculate it exactly). At that rate, you have a guaranteed 60% annual return. You can't beat that anywhere, with a significant upside if your company stock is increasing. So, if your company has an instant sell at grant option, you have to be brain dead not to do it. If it takes time to get your shares, then you need to look at the volatility of the stock to see how big the chance of losing money is. To generalize to a formula (if that's what you want): WM = purchase window (in months); D = Discount Percentage; GR = Guaranteed Return GR = 12/(WM/2) * D = 6*D/WM One last thing, If you are going to participate in ESPP, make you that you understand how to do your taxes yourself. I haven't found a tax person yet who does ESPP correctly (including an ex IRS agent), so I always have to do my taxes myself to make sure they get done correctly.\",\n \"Assuming US. The only con that I know of is that hassle factor. You have to remember to sell when you get the new shares, and your taxes become a bit more complicated; the discount that you receive is taxed as ordinary income, and then any change in the price of the stock between when you receive it and you sell it will be considered a capital gain or loss. It's not hard to account for properly if you keep good records.\",\n \"One major benefit to being able to buy discounted company stock is that you can sell in-the-money covered calls and potentially make more than you would selling at strike.\",\n \"I see another way of looking at this that hasn't been addressed yet. By offering the discount, the company is attempting to change your behavior into doing something irrational, that benefits them at your expense. The company hopes for one (or more) of the following psychological effects to happen to you: The proper thing to do, if you have enough capital to prevent margin calls, it to short-sell the stock at the same instant the price is set, thus locking in the profit. Eventually you can take possession of the shares and deliver them to offset the short -- hopefully before you get a margin call from the stock dropping.\"\n]","isConversational":false}}},{"rowIdx":89,"cells":{"_id":{"kind":"string","value":"4464"},"query":{"kind":"string","value":"Are Australian mutual fund fees large compared to US?"},"gt_ids":{"kind":"list like","value":["102904"],"string":"[\n \"102904\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1],"string":"[\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["102904","14185","366753","518402","34689","385182","177138","62853","586851","52589","197877","287537","236036","63577","403017","135405","412197","593962","268731","41625","402314","404261","506302","303525","49168","402240","110729","565296","358997","525478","312015","155797","158075","19364","514529","326667","133788","189868","361013","11464","196721","451855","142696","592892","544082","145555","436930","475640","56894","520963","550319","463105","398572","21986","62003","397445","570271","9479","283893","370244","59670","531095","228686","424824","249972","59571","4666","99528","454224","43245","293626","200212","100341","233226","346498","30417","555237","524612","208296","324817","66754","120133","576652","254257","65587","301477","132760","346387","188296","307999","10082","218261","195336","271997","356202","225815","450662","3279","20504","286525"],"string":"[\n \"102904\",\n \"14185\",\n \"366753\",\n \"518402\",\n \"34689\",\n \"385182\",\n \"177138\",\n \"62853\",\n \"586851\",\n \"52589\",\n \"197877\",\n \"287537\",\n \"236036\",\n \"63577\",\n \"403017\",\n \"135405\",\n \"412197\",\n \"593962\",\n \"268731\",\n \"41625\",\n \"402314\",\n \"404261\",\n \"506302\",\n \"303525\",\n \"49168\",\n \"402240\",\n \"110729\",\n \"565296\",\n \"358997\",\n \"525478\",\n \"312015\",\n \"155797\",\n \"158075\",\n \"19364\",\n \"514529\",\n \"326667\",\n \"133788\",\n \"189868\",\n \"361013\",\n \"11464\",\n \"196721\",\n \"451855\",\n \"142696\",\n \"592892\",\n \"544082\",\n \"145555\",\n \"436930\",\n \"475640\",\n \"56894\",\n \"520963\",\n \"550319\",\n \"463105\",\n \"398572\",\n \"21986\",\n \"62003\",\n \"397445\",\n \"570271\",\n \"9479\",\n \"283893\",\n \"370244\",\n \"59670\",\n \"531095\",\n \"228686\",\n \"424824\",\n \"249972\",\n \"59571\",\n \"4666\",\n \"99528\",\n \"454224\",\n \"43245\",\n \"293626\",\n \"200212\",\n \"100341\",\n \"233226\",\n \"346498\",\n \"30417\",\n \"555237\",\n \"524612\",\n \"208296\",\n \"324817\",\n \"66754\",\n \"120133\",\n \"576652\",\n \"254257\",\n \"65587\",\n \"301477\",\n \"132760\",\n \"346387\",\n \"188296\",\n \"307999\",\n \"10082\",\n \"218261\",\n \"195336\",\n \"271997\",\n \"356202\",\n \"225815\",\n \"450662\",\n \"3279\",\n \"20504\",\n \"286525\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["This is a Vanguard-specific difference in the sense that in the US, Vanguard is a leader in lowering management fees for the mutual funds that they offer. Of course, several US mutual fund companies have also been lowering the expense ratio of their mutual funds in recent years because more and more investors have been paying attention to this particular performance parameter, and opting for funds that have low expense ratios. But many US funds have not reduced their expense ratios very much and continue to have expense ratios of 1% or even higher. For example, American Funds Developing World Growth and Income Fund (DWGAX) charges a 1.39% expense ratio while their 2060 Retirement Fund (AANTX) charges 1.12% (the funds also have a 5.75% sales charge); Putnam Capital Opportunities Fund charges 1.91% for their Class C shares, and so on. Many funds with high expense ratios (and sometimes sales charges as well) show up as options in far too many 401(k) plans, especially 401(k) plans of small companies, because small companies do not enjoy economies of scale and do not have much negotiating power when dealing with 401(k) custodians and administrators.","Your link is pointing to managed funds where the fees are higher, you should look at their exchange traded funds; you will note that the management fees are much lower and better reflect the index fund strategy.","Suppose that the fixed overhead costs of delivering a service, not related to the actual volume of sales, are $50 million per year. Suppose the variable costs on top are $100 per customer per year. Suppose further that 1% of the population buys the service. In the US, 3.2 million people buy the service, and it costs $116 per person to deliver it ($100 plus $50 million divided by 3.2 million). In Australia, 230,000 people buy it, and it costs $317 per person per year to deliver it ($100 plus $50 million divided by 230,000). The larger your market, the cheaper everything is, and Australia is a very small market compared with the USA, the EU, China or India.","Yes you should take in the expenses being incurred by the mutual fund. This lists down the fees charged by the mutual fund and where expenses can be found in the annual statement of the fund. To calculate fees and expenses. As you might expect, fees and expenses vary from fund to fund. A fund with high costs must perform better than a low-cost fund to generate the same returns for you. Even small differences in fees can translate into large differences in returns over time. You don't pay expenses, so the money is taken from the assets of the fund. So you pay it indirectly. If the expenses are huge, that may point to something i.e. fund managers are enjoying at your expense, money is being used somewhere else rather than being paid as dividends. If the expenses are used in the growth of the fund, that is a positive sign. Else you can expect the fund to be downgraded or upgraded by the credit rating agencies, depending on how the credit rating agencies see the expenses of the fund and other factors. Generally comparison should be done with funds invested in the same sectors, same distribution of assets so that you have a homogeneous comparison to make. Else it would be unwise to compare between a fund invested in oil companies and other in computers. Yes the economy is inter twined, but that is not how a comparison should be done.","Brokers will have transaction fees in addition to the find management fees, but they should be very transparent. Brokering is a very competitive business. Any broker that added hidden fees to their transactions would lose customers very quickly to other brokers than can offer the same services. Hedge funds are a very different animal, with less regulation, less transparency, and less competition. Their fees are tolerated because the leveraged returns are usually much higher. When times are bad, though, those fees might drive investors elsewhere.","Since you have presumably now been living here for six months you may already have discovered that Australian banks charge a transaction fee whether the funds are deposited from overseas by check/cheque or telegraphically. I have an account with Bank of America and used to be able to draw funds from Australian bank Westpac via their ATMs without incurring a fee, because BofA and Westpac are both members of a Global ATM Alliance that did not charge fees to each others customers. But now they have initiated a new policy, and take 3% of every sum withdrawn. Not quite usury, but in the same ballpark. I'm now investigating the possibility of opening a Schwab or a Capital One account in the US, and using one of their credit cards, which, I believe, would allow withdrawals at Australian ATMs for no fee. If you find or have found a good answer to your dilemma I hope you will share it.","your 401k is charged a management fee, directly debited from your account. the mutual funds and etfs therein have operating expense ratios, which are taken out of their performance. your IRA and brokerage accounts likely have commissions assessed per transaction. that is really it!","\"(This answer refers to the US investment landscape) I'm not sure your classification of funds as direct and regular accurately reflects the nature of the mutual fund industry. It's not the funds themselves that are \"\"direct\"\" or \"\"regular.\"\" Rather it's the way an investor chooses to invest in them. If you make the investment yourself through your brokerage account, you may say it's a direct investment. If you pay a financial advisor to do this for you, it's \"\"regular.\"\" For a given fund, you could make the investment yourself or you could use an advisor. Note that many funds have various share classes. Share classes may be accessed in different ways. The institutional class may be accessible through your 401(k) or perhaps not even there, for example. The premium class may require a certain minimum investment. Some classes will have a front-end-load or back-end-load. Each of these will have a different expense ratio and fees even though the money ends up in the same portfolio. These expenses are, by law, publicly available in the prospectus and in numerous other places. Share classes with higher fees will earn less each year after fees, just as you suggest. Your intuition is correct on this point. Now, there is one fee to be aware of that funds either have or do not have. That's a 12b-1 fee. This fee is a kickback to financial advisors who funnel your money into their fund. If you use a financial advisor, he or she will likely put your money into these funds because they have a financial incentive to do so. That way they get paid twice: once by you and once by the mutual fund. It has been robustly shown in the finance academic literature that funds without this fee dominate (are better in some ways and in no ways worse than) funds with this fee. I suppose you could say that funds and share classes with a 12b-1 fee were designed for \"\"regular\"\" investment and those without were designed for \"\"direct\"\" but that doesn't mean you can't invest in a 12b-1 fee fund directly nor that you can't twist your advisor's arm into getting you into a good fund without a 12b-1. Unfortunately, if you have this level of knowledge, then you probably don't need a financial advisor.\"","@JoeTaxpayer gave a great response to your first question. Here are some thoughts on the other two... 2) Transaction fees for mutual funds are tied to the class of shares you're buying and will be the same no matter where you buy them. A-shares have a front-end 'load' (the fee charged), and the lowest expenses, and can be liquidated without any fees. B-shares have no up-front load, but come with a 4-7 year period where they will charge you a fee to liquidate (technically called Contingent Deferred Sales Charge, CDSC), and slightly higher management fees, after which they often will convert to A-shares. C-shares have the highest management fees, and usually a 12- to 18-month period where they will charge a small percentage fee if you liquidate. There are lots of other share classes available, but they are tied to special accounts such as managed accounts and 401-K plans. Not all companies offer all share classes. C-shares are intended for shorter timeframes, eg 2-5 years. A and B shares work best for longer times. Use a B share if you're sure you won't need to take the money out until after the fee period ends. Most fund companies will allow you to exchange funds within the same fund family without charging the CDSC. EDIT: No-load funds don't charge a fee in or out (usually). They are a great option if they are available to you. Most self-service brokerages offer them. Few full-service brokerages offer them. The advantage of a brokerage versus personal accounts at each fund is the brokerage gives you a single view of things and a single statement, and buying and selling is easy and convenient. 3) High turnover rates in bond funds... depending on how actively the portfolio is managed, the fund company may deliver returns as a mix of both interest and capital gains, and the management expenses may be high with a lot of churn in the underlying portfolio. Bond values fall as interest rates rise, so (at least in the USA) be prepared to see the share values of the fund fall in the next few years. The biggest risk of a bond fund is that there is no maturity date, so there is no point in time that you have an assurance that your original investment will be returned to you.","See if any of the funds they offer are index funds, which will generally have MUCH lower fees and which seem to perform as well as any of the actively managed funds in the same categories.","It's well worth to sell it for a low-cost ETF, even with taxes considering you want to keep it invested for 15 years more. An ETF fee is between 0.07% to 0.7%. The massive saving from what Federated Kaufmann Fund is charging will compound greatly over the term.","You do realize that the fund will have management expenses that are likely already factored into the NAV and that when you sell, the NAV will not yet be known, right? There are often fees to run a mutual fund that may be taken as part of managing the fund that are already factored into the Net Asset Value(NAV) of the shares that would be my caution as well as possible fee changes as Dilip Sarwate notes in a comment. Expense ratios are standard for mutual funds, yes. Individual stocks that represent corporations not structured as a mutual fund don't declare a ratio of how much are their costs, e.g. Apple or Google may well invest in numerous other companies but the costs of making those investments won't be well detailed though these companies do have non-investment operations of course. Don't forget to read the fund's prospectus as sometimes a fund will have other fees like account maintenance fees that may be taken out of distributions as well as being aware of how taxes will be handled as you don't specify what kind of account these purchases are being done using.","For Vanguard: Vanguard does compare its fees with similar funds from its competitors on this tab, but then again, this is Vanguard giving you this information, so take with a grain of salt.","\"YES.. Management fees cut directly into your profits. A fund which achieves 8% growth but costs 1% to maintain delivers only 7% to you. Compounded over years, even a relatively small difference can add up to a significant amount of money. This is one of the advantages index funds have. They may not be as \"\"sophisticated\"\" as human-managed funds, but their expense ratio is so much lower that the end result for the investor is often as good as or better than the more expensive products. In fact, at least one study found that, for each category they researched, low expense ratio was a better predictor of good return on investment than anything else they looked at. That doesn't mean cheapest is always best or most expensive is always worst .... but it does mean you should be very, very sure an expensive fund really is that much better before choosing it. And sticking with simple index funds may be a perfectly reasonable choice.\"","\"Most financial \"\"advisors\"\" are actually financial-product salesmen. Their job is to sweet-talk you into parting with as much money as possible - either in management fees, or in commissions (kickbacks) on high-fee investment products** (which come from fees charged to you, inside the investment.) This is a scrappy, cutthroat business for the salesmen themselves. Realistically that is how they feed their family, and I empathize, but I can't afford to buy their product. I wish they would sell something else. These people prey on people's financial lack of knowledge. For instance, you put too much importance on \"\"returns\"\". Why? because the salesman told you that's important. It's not. The market goes up and down, that's normal. The question is how much of your investment is being consumed by fees. How do you tell that (and generally if you're invested well)? You compare your money's performance to an index that's relevant to you. You've heard of the S&P 500, that's an index, relevant to US investors. Take 2015. The S&P 500 was $2058.20 on January 2, 2015. It was $2043.94 on December 31, 2015. So it was flat; it dropped 0.7%. If your US investments dropped 0.7%, you broke even. If you made less, that was lost to the expenses within the investment, or the investment performing worse than the S&P 500 index. I lost 0.8% in 2015, the extra 0.1% being expenses of the investment. Try 2013: S&P 500 was $1402.43 on December 28, 2012 and $1841.10 on Dec. 27, 2013. That's 31.2% growth. That's amazing, but it also means 31.2% is holding even with the market. If your salesman proudly announced that you made 18%... problem! All this to say: when you say the investments performed \"\"poorly\"\", don't go by absolute numbers. Find a suitable index and compare to the index. A lot of markets were down in 2015-16, and that is not your investment's fault. You want to know if were down compared to your index. Because that reflects either a lousy funds manager, or high fees. This may leave you wondering \"\"where can I invest that is safe and has sensible fees? I don't know your market, but here we have \"\"discount brokers\"\" which allow self-selection of investments, charge no custodial fees, and simply charge by the trade (commonly $10). Many mutual funds and ETFs are \"\"index funds\"\" with very low annual fees, 0.20% (1 in 500) or even less. How do you pick investments? Look at any of numerous books, starting with John Bogle's classic \"\"Common Sense on Mutual Funds\"\" book which is the seminal work on the value of keeping fees low. If you need the cool, confident professional to hand-hold you through the process, a fee-only advisor is a true financial advisor who actually acts in your best interest. They honestly recommend what's best for you. But beware: many commission-driven salespeople pretend to be fee-only advisors. The good advisor will be happy to advise investment types, and let you pick the brand (Fidelity vs Vanguard) and buy it in your own discount brokerage account with a password you don't share. Frankly, finance is not that hard. But it's made hard by impossibly complex products that don't need to exist, and are designed to confuse people to conceal hidden fees. Avoid those products. You just don't need them. Now, you really need to take a harder look at what this investment is. Like I say, they make these things unnecessarily complex specifically to make them confusing, and I am confused. Although it doesn't seem like much of a question to me. 1.5% a quarter is 6% a year or 60% in 10 years (to ignore compounding). If the market grows 6% a year on average so growth just pays the fees, they will consume 60% of the $220,000, or $132,000. As far as the $60,000, for that kind of money it's definitely worth talking to a good lawyer because it sounds like they misrepresented something to get your friend to sign up in the first place. Put some legal pressure on them, that $60k penalty might get a lot smaller. ** For instance they'll recommend JAMCX, which has a 5.25% buy-in fee (front-end load) and a 1.23% per year fee (expense ratio). Compare to VIMSX with zero load and a 0.20% fee. That front-end load is kicked back to your broker as commission, so he literally can't recommend VIMSX - there's no commission! His company would, and should, fire him for doing so.\"","In almost every circumstance high expense ratios are a bad idea. I would say every circumstance, but I don't want backlash from anyone. There are many other investment companies out there that offer mutual funds for FAR less than 1.5% ratio. I couldn't even imagine paying a 1% expense ratio for a mutual fund. Vanguard offers mutual funds that are significantly lower, on average, than the industry. Certainly MUCH lower than 1.5%, but then again I'm not sure what mutual funds you have, stock, bonds, etc. Here is a list of all Vanguard's mutual funds. I honestly like the company a lot, many people haven't heard of them because they don't spend nearly as much money on advertisements or a flashy website - but they have extremely low expense ratios. You can buy into many of their mutual funds with a 0.10%-0.20% expense ratio. Some are higher, but certainly not even close to 1.5%. I don't believe any of them are even half of that. Also, if you were referring to ETF's when you mentioned Index Fund (assuming that since you have ETFs in your tag), then 0.20% for ETF's is steep, check out some identical ETFs on Vanguard. I am not a Vanguard employee soliciting their service to you. I'm just trying to pass on good information to another investor. I believe you can buy vanguard funds through other investment companies, like Fidelity, for a good price, but I prefer to go through them.","12b1 refers to a specific marketing fee on funds in my world. are you referring to the expense ratio? yes - that is what fund wholesalers will do. another practice that won't affect your cost though. basically what i want to express is that you shouldn't need a flowchart to understand your fees. it is simply the layers of management that will raise your cost, in addition to any transactional fees.","In my opinion, the fee is criminal. There are ETFs available to the public that have expenses as low as .05%. The index fund VIIIX an institution level fund available to large 401(k) plans charges .02%. I'll pay a total of under 1% over the next 50 years, Consider that at retirement, the safe withdrawal rate has been thought to be 4%, and today this is considered risky, perhaps too high. Do you think it's fair, in any sense of the word to lose 30% of that withdrawal? Another angle for you - In my working years, I spent most of those years at either the 25% or 28% federal bracket taxable income. I should spend my retirement at 15% marginal rate. On average, the purpose of my 401(k) was to save me (and my wife) 10-13% in tax from deposit to withdrawal. How long does it take for an annual 1.1% excess fee to negate that 10% savings? If one spends their working life paying that rate, they will lose half their wealth to those managing their money. PBS aired a show in its Frontline series titled The Retirement Gamble, it offers a sobering look at how such fees are a killer to your wealth.","I like that you are hedging ONLY the Roth IRA - more than likely you will not touch that until retirement. Looking at fees, I noticed Vanguard Target retirement funds are .17% - 0.19% expense ratios, versus 0.04 - 0.14% for their Small/Mid/Large cap stocks.","\"Oddly enough, in the USA, there are enough cost and tax savings between buy-and-hold of a static portfolio and buying into a fund that a few brokerages have sprung up around the concept, such as FolioFN, to make it easier for small investors to manage numerous small holdings via fractional shares and no commission window trades. A static buy-and-hold portfolio of stocks can be had for a few dollars per trade. Buying into a fund involves various annual and one time fees that are quoted as percentages of the investment. Even 1-2% can be a lot, especially if it is every year. Typically, a US mutual fund must send out a 1099 tax form to each investor, stating that investors share of the dividends and capital gains for each year. The true impact of this is not obvious until you get a tax bill for gains that you did not enjoy, which can happen when you buy into a fund late in the year that has realized capital gains. What fund investors sometimes fail to appreciate is that they are taxed both on their own holding period of fund shares and the fund's capital gains distributions determined by the fund's holding period of its investments. For example, if ABC tech fund bought Google stock several years ago for $100/share, and sold it for $500/share in the same year you bought into the ABC fund, then you will receive a \"\"capital gains distribution\"\" on your 1099 that will include some dollar amount, which is considered your share of that long-term profit for tax purposes. The amount is not customized for your holding period, capital gains are distributed pro-rata among all current fund shareholders as of the ex-distribution date. Morningstar tracks this as Potential Capital Gains Exposure and so there is a way to check this possibility before investing. Funds who have unsold losers in their portfolio are also affected by these same rules, have been called \"\"free rides\"\" because those funds, if they find some winners, will have losers that they can sell simultaneously with the winners to remain tax neutral. See \"\"On the Lookout for Tax Traps and Free Riders\"\", Morningstar, pdf In contrast, buying-and-holding a portfolio does not attract any capital gains taxes until the stocks in the portfolio are sold at a profit. A fund often is actively managed. That is, experts will alter the portfolio from time to time or advise the fund to buy or sell particular investments. Note however, that even the experts are required to tell you that \"\"past performance is no guarantee of future results.\"\"\"","AU rates are higher than 3.75%. The market for deposits here in Australia is very competitive (banks have change increased deposits as a share of liabilities from ~50% to ~60% in just the last few years) and, as a result, demand deposits here pay far more than the central bank rate. My demand savings account, for example, pays 4.95%. That AU-US interest differentials are so staggeringly high means that, inmevitably, lots of investors are carrying. Depending of FX moves over the next year, a lot of investors will either gain heaps or lose more. If you can leverage, you can gain even more (or lose the house).","The fee representing the expense ratio is charged as long as you hold the investment. It is deducted daily from the fund assets, and thus reduces the price per share (NAV per share) that is calculated each day after the markets close. The investment fee is charged only when you make an investment in the fund. So, invest in the fund in one swell foop (all $5500 or $6500 for older people, all invested in a single transaction) rather than make monthly investments into the fund (hold the money in a money-market within your Roth IRA if need be). But, do check if there are back-end loads or 12b1 fees associated with the fund. The former often disappear after a few years; the latter are another permanent drain on performance. Also, please check whether reinvestment of dividends and capital gains incur the $75 transaction fee.","2%? I would put in just what it takes to share in the profit sharing, not a dime more. My S&P fund cost is .02% (edited, as it dropped to .02 since original post), 1/100 of the cost of most funds you list. Doesn't take too many years of this fee to negate the potential tax savings, and not many more to make this a real loser.","Have you shopped around? I would agree that the fees seem high. The first question I would ask if if the .75% management fee is per year or per month? If it is per month, you will almost certainly lose money each year. A quick search shows that Fidelity will allow one to transfer their pensions into a self directed account. Here in the US, where we have 401Ks, it is almost always better to transfer them into something self directed once you leave an employer. Fidelity makes it really easy, and I always recommend them. (No affiliation.) Here in the US they actually pay you for you transferring money into your account. This can come in the form of free stock trades or money added to your account. I would encourage you to give them or their competitors a look in order to make an informed decision. Often times, a person with lowish balances, can't really afford to pay those high management fees. You might need in the 10s of millions before something like that makes sense.","The creation mechanism for ETF's ensures that the value of the underlying stocks do not diverge significantly from the Fund's value. Authorized participants have a strong incentive to arbitrage any pricing differences and create/redeem blocks of stock/etf until the prices are back inline. Contrary to what was stated in a previous answer, this mechanism lowers the cost of management of ETF's when compared to mutual funds that must access the market on a regular basis when any investors enter/exit the fund. The ETF only needs to create/redeem in a wholesale basis, this allows them to operate with management fees that are much lower than those of a mutual fund. Expenses Due to the passive nature of indexed strategies, the internal expenses of most ETFs are considerably lower than those of many mutual funds. Of the more than 900 available ETFs listed on Morningstar in 2010, those with the lowest expense ratios charged about .10%, while those with the highest expenses ran about 1.25%. By comparison, the lowest fund fees range from .01% to more than 10% per year for other funds. (For more on mutual fund feeds, read Stop Paying High Fees.)","Whether or not it's reasonable is a matter of opinion, but there are certainly cheaper options out there. It does seem strange to me that your credit union charges a percentage of your assets rather than a flat fee since they shouldn't have to do any more work based on how much money you have invested. I would look into rolling over your IRA to Vanguard or Fidelity. Neither charge administrative fees, and they offer no-load and no-transaction fee funds with low expenses. If you went with Fidelity directly, you'd be bypassing the middle man (your credit union) and their additional administrative fees. Vanguard tends to offer even cheaper funds.","We face the same issue here in Switzerland. My background: Institutional investment management, currency risk management. My thoughs are: Home Bias is the core concept of your quesiton. You will find many research papers on this topic. The main problems with a high home bias is that the investment universe in your small local investment market is usually geared toward your coutries large corporations. Lack of diversification: In your case: the ASX top 4 are all financials, actually banks, making up almost 25% of the index. I would expect the bond market to be similarly concentrated but I dont know. In a portfolio context, this is certainly a negative. Liquidity: A smaller economy obviously has less large corporations when compared globally (check wikipedia / List_of_public_corporations_by_market_capitalization) thereby offering lower liquidity and a smaller investment universe. Currency Risk: I like your point on not taking a stance on FX. This simplifies the task to find a hedge ratio that minimises portfolio volatility when investing internationally and dealing with currencies. For equities, you would usually find that a hedge ratio anywhere from 0-30% is effective and for bonds one that ranges from 80-100%. The reason is that in an equity portfolio, currency risk contributes less to overall volatility than in a bond portfolio. Therefore you will need to hedge less to achieve the lowest possible risk. Interestingly, from a global perspective, we find, that the AUD is a special case whereby, if you hedge the AUD you actually increase total portfolio risk. Maybe it has to do with the AUD being used in carry trades a lot, but that is a wild guess. Hedged share classes: You could buy the currency hedged shared classes of investment funds to invest globally without taking currency risks. Be careful to read exactly what and how the share class implements its currency hedging though.","You have left out the most important piece of information: are you an American citizen? If you are, then PFIC rules mean you need to be very careful not to invest in any foreign index funds/ETFs. That means it will probably be easiest for you to just leave the money in the US and continue to invest it there. If you do not have US citizenship, and have never had a green card, then you will qualify for non-resident alien status after you've been gone for 3 years. Once that happens, you won't owe US capital gains tax (though you will owe it in AUS). You will owe 30% tax on dividends, though. Much more at Investopedia.","What is your time horizon? Over long horizons, you absolutely want to minimise the expense ratio – a seemingly puny 2% fee p.a. can cost you a third of your savings over 35 years. Over short horizons, the cost of trading in and trading out might matter more. A mutual fund might be front-loaded, i.e. charge a fixed initial percentage when you first purchase it. ETFs, traded daily on an exchange just like a stock, don't have that. What you'll pay there is the broker commission, and the bid-ask spread (and possibly any premium/discount the ETF has vis-a-vis the underlying asset value). Another thing to keep in mind is tracking error: how closely does the fond mirror the underlying index it attempts to track? More often than not it works against you. However, not sure there is a systematic difference between ETFs and funds there. Size and age of a fund can matter, indeed - I've had new and smallish ETFs that didn't take off close down, so I had to sell and re-allocate the money. Two more minor aspects: Synthetic ETFs and lending to short sellers. 1) Some ETFs are synthetic, that is, they don't buy all the underlying shares replicating the index, actually owning the shares. Instead, they put the money in the bank and enter a swap with a counter-party, typically an investment bank, that promises to pay them the equivalent return of holding that share portfolio. In this case, you have (implicit) credit exposure to that counter-party - if the index performs well, and they don't pay up, well, tough luck. The ETF was relying on that swap, never really held the shares comprising the index, and won't necessarily cough up the difference. 2) In a similar vein, some (non-synthetic) ETFs hold the shares, but then lend them out to short sellers, earning extra money. This will increase the profit of the ETF provider, and potentially decrease your expense ratio (if they pass some of the profit on, or charge lower fees). So, that's a good thing. In case of an operational screw up, or if the short seller can't fulfil their obligations to return the shares, there is a risk of a loss. These two considerations are not really a factor in normal times (except in improving ETF expense ratios), but during the 2009 meltdown they were floated as things to consider. Mutual funds and ETFs re-invest or pay out dividends. For a given mutual fund, you might be able to choose, while ETFs typically are of one type or the other. Not sure how tax treatment differs there, though, sorry (not something I have to deal with in my jurisdiction). As a rule of thumb though, as alex vieux says, for a popular index, ETFs will be cheaper over the long term. Very low cost mutual funds, such as Vanguard, might be competitive though.","\"In the US there are a few different schemes, namely Regulated and Unregulated. In Regulated states (e.g. Colorado) everything except for some of the generators are owned by one company (called a Vertically Integrated Utility) and that company is allowed a specific return on its investment rates being set by a formula that includes the utility's fixed costs, the variable & fuel costs, and this return. In Unregulated markets (like Texas) the generators, transmission system, load serving entities (aka distributors), and retailers are all separate (although sometimes the same company owns parts at various levels). The transmission and load serving entities function like the traditional utilities I described above but ratepayers can choose their own retailer and the retailers then buy energy from the generators. Here is a good video about how the US energy market works: https://www.youtube.com/watch?v=rJAPHFGAgRw To answer the \"\"robustness\"\" question; I think the answer is actually that, in most cases, the \"\"wires\"\" costs for US customers is lower due to the higher density and compactness of the various power systems in the US. In the NEM (the primary energy market in Australia) there are SIGNIFICANT distances between loads and the larger generators and there are overall fewer customers per mile of line. Other than that the system (both electrically and from a market design standpoint) is generally based on the US system (PJM specifically). The other big difference is that Australia does not have a single grid like the US does (US has 3 interconnects but is one big grid).\"","I see a couple of reasons why you could consider choosing a mutual fund over an ETF In some cases index mutual funds can be a cheaper alternative to ETFs. In the UK where I am based, Fidelity is offering a management fee of 0.07% on its FTSE All shares tracker. Last time I checked, no ETF was beating that There are quite a few cost you have to foot when dealing ETFs In some cases, when dealing for relatively small amounts (e.g. a monthly investment plan) you can get a better deal, if your broker has negotiated discounts for you with a fund provider. My broker asks £12.5 when dealing in shares (£1.5 for the regular investment plan) whereas he asks £0 when dealing in funds and I get a 100% discount on the initial charge of the fund. As a conclusion, I would suggest you look at the all-in costs over total investment period you are considering for the exact amount you are planning to invest. Despite all the hype, ETFs are not always the cheapest alternative.","\"FSEMX has an annual expense ratio of 0.1% which is very low. What that means is that each month, the FSEMX will pay itself one-twelfth of 0.1% of the total value of all the shares owned by the shareholders in the mutual fund. If the fund has cash on hand from its trading activities or dividends collected from companies whose stock is owned by FSEMX or interest on bonds owned by FSEMX, the money comes out of that, but if there is no such pot (or the pot is not large enough), then the fund manager has the authority to sell some shares of the stocks held by FSEMX so that the employees can be paid, etc. If the total of cash generated by the trading and the dividend collection in a given year is (say) 3% of the share value of all the outstanding mutual fund, then only 2.9% will be paid out as dividend and capital gain distribution income to the share holders, the remaining 0.1% already having been paid to FSEMX management for operating expenses. It is important to keep in mind that expenses are always paid even if there are no profits, or even if there are losses that year so that no dividends or capital gains distributions are made. You don't see the expenses explicitly on any statement that you receive. If FSEMX sells shares of stocks that it holds to pay the expenses, this reduces the share value (NAV) of the mutual fund shares that you hold. So, if your mutual fund account \"\"lost\"\" 20% in value that year because the market was falling, and you got no dividend or capital gains distributions either, remember that only 19.9% of that loss can be blamed on the President or Congress or Wall Street or public-sector unions or your neighbor's refusal to ditch his old PC in favor of a new Mac, and the rest (0.1%) has gone to FSEMX to pay for fees you agreed to when you bought FSEMX shares. If you invest directly in FSEMX through Fidelity's web site, there is no sales charge, and you pay no expenses other than the 0.1% annual expense ratio. There is a fee for selling FSEMX shares after owning them only for a short time since the fund wants to discourage short-term investors. Whatever other fees finance.yahoo.com lists might be descriptive of the uses that FSEMX puts its expense ratio income to in its internal management, but are not of any importance to the prudent investor in FSEMX who will never encounter them or have to pay them.\"","Over time, fees are a killer. The $65k is a lot of money, of course, but I'd like to know the fees involved. Are you doubling from 1 to 2%? if so, I'd rethink this. Diversification adds value, I agree, but 2%/yr? A very low cost S&P fund will be about .10%, others may go a bit higher. There's little magic in creating the target allocation, no two companies are going to be exactly the same, just in the general ballpark. I'd encourage you to get an idea of what makes sense, and go DIY. I agree 2% slices of some sectors don't add much, don't get carried away with this.","\"Loads may be widespread but they are absolutely not an \"\"industry standard\"\". Almost every major provider of mutual funds has \"\"no load\"\" funds. I'm sure your bank wants you to buy the funds with front loads, but they can't force you to buy those funds (unless you sign such a disclaimer when you open the account). What your bank can do is charge their own transaction fees for \"\"third-party\"\" funds, and those may end up being as much as or more than the funds' own loads. I don't know which bank you have, but many banks have their own mutual funds that have no loads or other transaction fees. Essentially you can rearrange your portfolio however you want (within reason) at no cost as long as you buy and sell their funds exclusively. But of course every bank is different, and in many cases those funds will perform poorly compared to investment companies like Vanguard. Of course every mutual fund must report its performance so you can always check that yourself. If your bank refuses to let you buy any no-load mutual funds (even ones that they run themselves) and/or wants to charge you steep transaction fees in order to discourage buying them, then may I suggest a different bank? FYI, mutual funds generally \"\"make their money\"\" on management fees. If a fund advertises a load but a particularly low management fee, it may actually be worth buying compared to another fund with no load and a high management fee, if you don't expect to be buying and selling frequently. On the other hand, if a fund has a high management fee and a high load, it's probably garbage.\"","\"The 0.14% is coming out of the assets of the fund itself. The expense ratio can be broken down so that on any given day, a portion of the fund's assets are set aside to cover the administrative cost of running the fund. A fund's total return already includes the expense ratio. This depends a lot on what kind of account in which you hold the fund. If you hold the fund in an IRA then you wouldn't have taxes from the fund itself as the account is sheltered. There may be notes in the prospectus and latest annual and semi-annual report of what past distributions have been as remember the fund isn't paying taxes but rather passing that along in the form of distributions to shareholders. Also, there is something to be said for what kinds of investments the fund holds as if the fund is to hold small-cap stocks then it may have to sell the stock if it gets too big and thus would pass on the capital gains to shareholders. Other funds may not have this issue as they invest in large-cap stocks that don't have this problem. Some funds may invest in municipal bonds which would have tax-exempt interest that may be another strategy for lowering taxes in bond funds. Depending on the fund quite a broad range actually. In the case of the Fidelity fund you link, it is a \"\"Fund of funds\"\" and thus has a 0% expense ratio as Fidelity has underlying funds that that fund holds. What level of active management are you expecting, what economies of scale does the fund have to bring down the expense ratio and what expense ratio is typical for that category of fund would come to mind as a few things to consider. That Fidelity link is incorrect as both Morningstar and Fidelity's site list an expense ratio for the fund of funds at .79%. I'd expect an institutional US large-cap index fund to have the lowest expense ratio outside of the fund of fund situation while if I were to pick an actively managed fund that requires a lot of research then the expense ratio may well be much higher though this is where you have to consider what strategy do you want the fund to be employing and how much of a cost are you prepared to accept for that? VTTHX is Vanguard Target Retirement 2035 Fund which has a .14% expense ratio which is using index funds in the fund of funds system.\"","Vanguard might be the top provider of no-load mutual funds around. Attempting to do better than 0.13% in fees is just as likely to cost you more time than the money you're attempting to say. You're in your first job out of school--you've got better things to do with your time.","1: Low fees means: a Total Expense Ratio of less than 0,5%. One detail you may also want to pay attention to whether the fund reinvests returns (Thesaurierender Fonds) which is basically good for investing, but if it's also a foreign-based fund then taxes get complicated, see http://www.finanztip.de/indexfonds-etf/thesaurierende-fonds/","That expense ratio on the bank fund is criminally high. Use the Vanguard one, they have really low expenses.","The net return reported to you (as a percentage) by a mutual fund is the gross return minus the expense ratio. So, if the gross return is X% and the expense ratio is Y%, your account will show a return of (X-Y)%. Be aware that X could be negative too. So, with Y = 1, If X = 10 (as you might get from a stock fund if you believe historical averages will continue), then the net return is 9% and you have lost (Y/X) times 100% = 10% of the gross return. If X = 8 (as you might get from a bond fund if you believe historical averages will continue), then the net return is 7% and you have lost (Y/X) times 100% = 12.5% of the gross return. and so on and so forth. The numbers used are merely examples of the returns that have been obtained historically, though it is worth emphasizing that 10% is an average return, averaged over many decades, from investments in stocks, and to believe that one will get a 10% return year after year is to mislead oneself very badly. I think the point of the illustrations is that expense ratios are important, and should matter a lot to you, but that their impact is proportionately somewhat less if the gross return is high, but very significant if the gross return is low, as in money-market funds. In fact, some money market funds which found that X < Y have even foregone charging the expense ratio fee so as to maintain a fixed $1 per share price. Personally, I would need a lot of persuading to invest in even a stock fund with 1% expense ratio.","817/150,000 = .54% Fees are based on balances not deposits, usually. Putting a front loaded fund as an option in a 401(k) should be criminal, not sure it is though. Ask your HR dept to provide you fee details. If the .54% is correct, it's not bad. I hope you have money from prior jobs as well, by the way.","As these all seem to be US Equity, just getting one broad based US Equity index might offer similar diversification at lower cost. Over 5 years, 20 basis points in fees will only make about 1% difference. However, for longer periods (retirement saving), it is worth it to aim for the lowest fees. For further diversification, you might want to consider other asset classes, such as foreign equity, fixed income, etc.","It says expense ratio of 0.14%. What does it mean? Essentially it means that they will take 0.14% of your money, regardless of the performance. This measures how much money the fund spends out of its assets on the regular management expenses. How much taxes will I be subject to This depends on your personal situation, not much to do with the fund (though investment/rebalancing policies may affect the taxable distributions). If you hold it in your IRA - there will be no taxes at all. However, some funds do have measures of non-taxable distributions vs dividends vs. capital gains. Not all the funds do that, and these are very rough estimates anyway. What is considered to be a reasonable expense ratio? That depends greatly on the investment policy. For passive index funds, 0.05-0.5% is a reasonable range, while for actively managed funds it can go up as much as 2% and higher. You need to compare to other funds with similar investment policies to see where your fund stands.","Disclosure - I love Jack Bogle. Jack basically invented the index fund, and as a result, let the common investor have an opportunity to choose a long term return of (S&P-.05%) instead of losing nearly 2% that many funds in that day charged. The use of index investing has saved investors many billions of dollars. The 1% round trip, total cost to buy/sell, was common. Fees for trading have since dropped. I happen to use Schwab who charges $9 for a trade. On $100,000, this is not .5% ($500) but less than .01%. I think it's safe to say that billion dollar mutual funds are paying even less for trades that I do. I believe Jack's example here is a combination of old data and hyperbole. The cost is not so much for the trades, per se, but for the people managing the fund. An index fund has a manager of course, but it's pretty much run by a computer.","It's a good question, I am amazed how few people ask this. To summarise: is it really worth paying substantial fees to arrange a generic investment though your high street bank? Almost certainly not. However, one caveat: You didn't mention what kind of fund(s) you want to invest in, or for how long. You also mention an “advice fee”. Are you actually getting financial advice – i.e. a personal recommendation relating to one or more specific investments, based on the investments' suitability for your circumstances – and are you content with the quality of that advice? If you are, it may be worth it. If they've advised you to choose this fund that has the potential to achieve your desired returns while matching the amount of risk you are willing to take, then the advice could be worth paying for. It entirely depends how much guidance you need. Or are you choosing your own fund anyway? It sounds to me like you have done some research on your own, you believe the building society adviser is “trying to sell” a fund and you aren't entirely convinced by their recommendation. If you are happy making your own investment decisions and are merely looking for a place to execute that trade, the deal you have described via your bank would almost certainly be poor value – and you're looking in the right places for an alternative. ~ ~ ~ On to the active-vs-passive fund debate: That AMC of 1.43% you mention would not be unreasonable for an actively managed fund that you strongly feel will outperform the market. However, you also mention ETFs (a passive type of fund) and believe that after charges they might offer at least as good net performance as many actively managed funds. Good point – although please note that many comparisons of this nature compare passives to all actively managed funds (the good and bad, including e.g. poorly managed life company funds). A better comparison would be to compare the fund managers you're considering vs. the benchmark – although obviously this is past performance and won't necessarily be repeated. At the crux of the matter is cost, of course. So if you're looking for low-cost funds, the cost of the platform is also significant. Therefore if you are comfortable going with a passive investment strategy, let's look at how much that might cost you on the platform you mentioned, Hargreaves Lansdown. Two of the most popular FTSE All-Share tracker funds among Hargreaves Lansdown clients are: (You'll notice they have slightly different performance btw. That's a funny thing with trackers. They all aim to track but have a slightly different way of trading to achieve it.) To hold either of these funds in a Hargreaves Lansdown account you'll also pay the 0.45% platform charge (this percentage tapers off for portolio values higher than £250,000 if you get that far). So in total to track the FTSE All Share with these funds through an HL account you would be paying: This gives you an indication of how much less you could pay to run a DIY portfolio based on passive funds. NB. Both the above are a 100% equities allocation with a large UK companies weighting, so won't suit a lower risk approach. You'll also end up invested indiscriminately in eg. mining, tobacco, oil companies, whoever's in the index – perhaps you'd prefer to be more selective. If you feel you need financial advice (with Nationwide) or portfolio management (with Nutmeg) you have to judge whether these services are worth the added charges. It sounds like you're not convinced! In which case, all the best with a low-cost passive funds strategy.","The management expense ratio (MER) is the management fee, plus all of the other costs required to run the fund, excluding any trading costs. Here's a pretty good explanation.","Rules appear to be changing (21NOV2014) Aviva Plc. AV on NYSE pass thru fee is 0.02 cents per ADR but that equals 11% deduction from ADR dividend. For utility or insurance stock that is significant ongoing fee. Registrar in US is Citibank, could be specific to them. This is the first for me except some modest fees on indonesian ADR. Information very difficult to find. Buy and hold OZ investor.","$10.90 for every $1000 per year. Are you kidding me!!! These are usually hidden within the expense ratio of the plan funds, but >1% seems to be quite a lot regardless. FUND X 1 year return 3% 3 year return 6% 10 year return 5% What does that exactly mean? This is the average annual rate of return. If measured for the last 3 years, the average annual rate of return is 6%, if measured for 1 year - it's 3%. What it means is that out of the last 3 years, the last year return was not the best, the previous two were much better. Does that mean that if I hold my mutual funds for 10 years I will get 5% return on it. Definitely not. Past performance doesn't promise anything for the future. It is merely a guidance for you, a comparison measure between the funds. You can assume that if in the past the fund performed certain way, then given the same conditions in the future, it will perform the same again. But it is in no way a promise or a guarantee of anything. Since my 401K plan stinks what are my options. If I put my money in a traditional IRA then I lose my pre tax benefits right! Wrong, IRA is pre-tax as well. But the pre-tax deduction limits for IRA are much lower than for 401k. You can consider investing in the 401k, and then rolling over to a IRA which will allow better investment options. After your update: Just clearing up the question. My current employer has a 401K. Most of the funds have the expense ratio of 1.20%. There is NO MATCHING CONTRIBUTIONS. Ouch. Should I convert the 401K of my old company to Traditional IRA and start investing in that instead of investing in the new employer 401K plan with high fees. You should probably consider rolling over the old company 401k to a traditional IRA. However, it is unrelated to the current employer's 401k. If you're contributing up to the max to the Roth IRA, you can't add any additional contributions to traditional IRA on top of that - the $5000 limit is for both, and the AGI limitations for Roth are higher, so you're likely not able to contribute anything at all to the traditional IRA. You can contribute to the employer's 401k. You have to consider if the rather high expenses are worth the tax deferral for you.","All mutual funds disclose their investments, funds are large cap only or midcsp etc. So it depends on what funds you choose.","I don't think that you'll notice a difference in the NAV in a fund with fees that are low as the Vanguard Total Stock Market Fund. Their management fees are incorporated into the NAV, but keep in mind that the fund has a total of $144 billion in assets, with $66 billion in the investor class. The actual fees represent a tiny fraction of the NAV, and may only show up at all on the day they assess the fees. With Vanguard total stock market, you notice the fee difference in the distributions. In the example of Vanguard Total Stock Market, there are institutional-class shares (like VITPX with a minimum investment of $200M) with still lower costs -- as low as 0.0250% vs. 0.18% for the investor class. You will notice a different NAV and distributions for that fund, but there may be other reasons for the variation that I'm not familar with, as I'm not an institutional investor.","\"Your bank's fund is not an index fund. From your link: To provide a balanced portfolio of primarily Canadian securities that produce income and capital appreciation by investing primarily in Canadian money market instruments, debt securities and common and preferred shares. This is a very broad actively managed fund. Compare this to the investment objective listed for Vanguard's VOO: Invests in stocks in the S&P 500 Index, representing 500 of the largest U.S. companies. There are loads of market indices with varying formulas that are supposed to track the performance of a market or market segment that they intend to track. The Russel 2000, The Wilshire 1000, The S&P 500, the Dow Industrial Average, there is even the SSGA Gender Diversity Index. Some body comes up with a market index. An \"\"Index Fund\"\" is simply a Mutual Fund or Exchange Traded Fund (ETF) that uses a market index formula to make it's investment decisions enabling an investor to track the performance of the index without having to buy and sell the constituent securities on their own. These \"\"index funds\"\" are able to charge lower fees because they spend $0 on research, and only make investment decisions in order to track the holdings of the index. I think 1.2% is too high, but I'm coming from the US investing world it might not be that high compared to Canadian offerings. Additionally, comparing this fund's expense ratio to the Vanguard 500 or Total Market index fund is nonsensical. Similarly, comparing the investment returns is nonsensical because one tracks the S&P 500 and one does not, nor does it seek to (as an example the #5 largest holding of the CIBC fund is a Government of Canada 2045 3.5% bond). Everyone should diversify their holdings and adjust their investment allocations as they age. As you age you should be reallocating away from highly volatile common stock and in to assets classes that are historically more stable/less volatile like national government debt and high grade corporate/local government debt. This fund is already diversified in to some debt instruments, depending on your age and other asset allocations this might not be the best place to put your money regardless of the fees. Personally, I handle my own asset allocations and I'm split between Large, Mid and Small cap low-fee index funds, and the lowest cost high grade debt funds available to me.\"","This depends on a lot actually - with the overall being your goals and how much you like risk. Question: What are your fees/commissions for selling? $8.95/trade will wipe out some gains on those trades. (.69% if all are sold with $8.95 commission - not including the commission payed when purchased that should be factored into the cost basis) Also, I would recommend doing commission free ETFs. You can get the same affect as a mutual fund without the fees associated with paying someone to invest in ETFs and stocks. On another note: Your portfolio looks rather risky. Although everyone has their own risk preference so this might be yours but if you are thinking about a mutual fund instead of individual stocks you probably are risk averse. I would suggest consulting with an adviser on how to set up for the future. Financial advice is free flowing from your local barber, dentist, and of course StackExchange but I would look towards a professional. Disclaimer: These are my thoughts and opinions only ;) Feel free to add comments below.","fx-rate.net offers a AUDUSD exchange rate comparison, which includes paypal: Currencyfair $1.14 Transferwise $ 2.29 Worldremit $ 3.50 Xendpay $ 3.71 Tranzfers $ 5.52 Ukforex $ 7.35 Skrill $ 15.13 Paypal $ 25.77 Kantox $ 27.76 http://fx-rate.net/currency-transfer/?c_input=AUD&cp_input=USD","I just looked through 40+ random funds on barclayhedge.com's database, and it's about evenly split between 2/20, 1.5/20 and 1/20, with a slight majority at 1.5/20, and 2/20 slightly ahead of 1/20. Others are at various rates like 0/10 and 2.5/20. I was very surprised to see Renaissance funds at just .35/10. I believe his Medallion Fund was at 5/36. James Simons is quite the quant. Nothing is too expensive if it's actually worth the price, but most hedge funds are no better than mutual funds. The only real advantage to hedge funds is the wider risk profile.","\"It really depends on the value your financial adviser provides. Does he help with your 401K? Does he help you avoid making foolish moves? Does he really help you find funds that beat average market returns? Many people answer \"\"no\"\" to all of these questions and do their investing on their own. I personally prefer Fidelity because I find their web site easier to work with, but Vanguard is another option. At Fidelity you will have zero fee per year. You can buy Fidelity and many other mutual funds with no cost. You can buy iShares ETFs at no cost. Some funds do have a fee to purchase, but they are pretty low ($35) and are only collected when you buy, not yearly. Now some people do go it alone and it is a huge mistake. The news tends to only report negative stock market events, and many people were scared away from 2008 and missed wonderful gains since that time. If you pull your money out during corrections, stick with a financial adviser. If you will stop contributing because of a correction, stick with a financial adviser. In those cases the fee is well worth the cost. Also if your guy provides education in association with investment advice, the fee might also be worth it. If you are able to stomach losses, able to keep on contributing like clockwork, and can read a Morning star mutual fund chart, then you might be best to go it alone. One thing would really help is to have a friend that is also interested in investing to share ideas with.\"","Virgin and AMP Flexible Super both offer funds that track Australian indexes.","\"That share class may not have a ticker symbol though \"\"Black Rock MSCI ACWI ex-US Index\"\" does have a ticker for \"\"Investor A\"\" shares that is BDOAX. Some funds will have multiple share classes that is a way to have fees be applied in various ways. Mutual fund classes would be the SEC document about this if you want a government source within the US around this. Something else to consider is that if you are investing in a \"\"Fund of funds\"\" is that there can be two layers of expense ratios to consider. Vanguard is well-known for keeping its expenses low.\"","12b1's have fallen out of favor in recent years, and are typically capped at about 0.25%. they are also usually waived and factored into the fund OER these days, too, though it depends on who your broker is. any revenue sharing shouldn't increase your fees. in my experience, there is more incentivizing for cross selling rather than revenue sharing, but in any case those would be fractions of your revenue allocated to different parties, and not additional fees.","\"I don't think blanket answers are very helpful. You are asking the right question when you are young! You have a large number of investment options and Australia has the Superannuation system that you can extract significant tax value from. I've not attempted to grade these with regard to \"\"risk\"\", as different people will rate various things with different levels, depending on their experience and knowledge. Consider the following factors for you:-\"","If this is the case, then shouldn't the difference between their annualized returns be same year on year? In general yes, however there difference has a compounding effect. i.e. if the difference if 5% first year, this money is invested and it would generate more of the said returns. However in reality as the corpus size of direct funds is very small, there difference is not very significant as other factors come into play.","Behind the scenes, mutual funds and ETFs are very similar. Both can vary widely in purpose and policies, which is why understanding the prospectus before investing is so important. Since both mutual funds and ETFs cover a wide range of choices, any discussion of management, assets, or expenses when discussing the differences between the two is inaccurate. Mutual funds and ETFs can both be either managed or index-based, high expense or low expense, stock or commodity backed. Method of investing When you invest in a mutual fund, you typically set up an account with the mutual fund company and send your money directly to them. There is often a minimum initial investment required to open your mutual fund account. Mutual funds sometimes, but not always, have a load, which is a fee that you pay either when you put money in or take money out. An ETF is a mutual fund that is traded like a stock. To invest, you need a brokerage account that can buy and sell stocks. When you invest, you pay a transaction fee, just as you would if you purchase a stock. There isn't really a minimum investment required as there is with a traditional mutual fund, but you usually need to purchase whole shares of the ETF. There is inherently no load with ETFs. Tax treatment Mutual funds and ETFs are usually taxed the same. However, capital gain distributions, which are taxable events that occur while you are holding the investment, are more common with mutual funds than they are with ETFs, due to the way that ETFs are structured. (See Fidelity: ETF versus mutual funds: Tax efficiency for more details.) That having been said, in an index fund, capital gain distributions are rare anyway, due to the low turnover of the fund. Conclusion When comparing a mutual fund and ETF with similar objectives and expenses and deciding which to choose, it more often comes down to convenience. If you already have a brokerage account and you are planning on making a one-time investment, an ETF could be more convenient. If, on the other hand, you have more than the minimum initial investment required and you also plan on making additional regular monthly investments, a traditional no-load mutual fund account could be more convenient and less expensive.","\"Lifecycle funds might be a suitable fit for you. Lifecycle funds (aka \"\"target date funds\"\") are a mutual fund that invests your money in other mutual funds based on how much time is left until you need the money-- they follow a \"\"glide-path\"\" of reducing stock holdings in favor of bonds over time to reduce volatility of your final return as you near retirement. The ones I've looked at don't charge a fee of their own for this, but they do direct your portfolio to actively managed funds. That said, the ones I've seen have an \"\"acquired\"\" expense ratio of less than what you're proposing you'd pay a professional. FWIW, my current plan is to invest in a binary portfolio of cheap mutual funds that track S&P500 and AGG and rebalance regularly. This is easy enough that I don't see the point of adding in a 1 percent commission.\"","It means someone's getting paid too much. I'd check the sharpe ratio and compare that to similar funds along with their expense ratio. So in some scenarios it's not necessarily a bad thing but being informed is the important thing","Excellent summary. I'd add a minor point that it's cheaper to setup and run a hedge fund. The legal fees associated with starting a 40 Act mutual fund are about $750,000. A hedge fund cane be setup for about $80,000. It's also cheaper to keep the hedge fund going as the reporting requirements are much less. source: Have setup hedge funds and mutual funds. edit: A word and source. Edi","\"US-Australian tax treaty limits the tax the US can levy on interest payments to Australian residents at 10%. However, that is the \"\"worst\"\" situation. There are several exempted situations which your specific example may fall into where you wouldn't need to deal with the US taxes at all. I suggest contacting a tax accountant proficient in that treaty and the Australian tax law. You will still be obviously paying taxes in Australia.\"","I'm of the belief that, long term, fees eat away at your performance. If you chose an ETF, say VOO, with its .05% expense, and a short term bond fund or money market fund, you are going be ahead, long term. It's pretty much accepted fact that money managers are not beating the average long term. For you to simply do as well as I do (S&P less .05%) your guy has to beat the market year in, year out, by 1.2%. Not going to happen. Yes, in hindsight, some funds have done this. Over the decades, losing funds are closed, or merged into performing ones. But, in the end, the average fund lags the average market return quite a bit. To pay someone 25% over two decades isn't what I'd recommend to anyone. There was recently a PBS Frontline special, The Retirement Gamble, (and this link to my article reviewing the show). I put up an image which shows the effect of 50 years' impact of expenses. The Vanguard S&P ETF, linked earlier has just a .05% fee. In my chart I show .1%, and then a total 1% or 2% fee. $447K return for .1%, $294K for 1%. I'm painfully aware that 3/4 of US taxpayers aren't saving at all. For those that are savers, the value in learning about investing is huge. This isn't a onetime $150K saved, but the savings on just that $10K deposit. Meanwhile, before you learn this, a pay-for-his-time fee-only planner is worth it, for a meeting and first year follow up.","\"Your bank Lloyds sent the Australian bank $500 AUD, having converted $317.90 GBP at a rate of 1.5728 AUD per GBP which was slightly less than the published rate which normally applies to transfers measured in hundred thousands if not millions of pounds. Using the published rate amounts to an unstated fee of 11 AUD which you are not complaining about. You also paid a fee to Lloyds of 20 GBP which you disclosed after I had posted this answer. The Australian bank refused to accept the payment because the account to which the money had to be deposited was closed. Perhaps, instead of just sending back $500 AUD, it converted the amount to GBP (less its fee of what I suspect is $60 AUD) and sent it back. Notice that the bank rate of 1.592 AUD per GBP says that 276.58 GBP is what you get from a tad over $440 AUD, and so perhaps St George's charged you a $60 AUD fee for the conversion while converting the rest ($440 AUD) to GBP. Or maybe Lloyds got $500 AUD from St Georges and charged you a $60 AUD fee for converting it to GBP. Regardless of who did the conversion, it is also possible that the rate you got (not quite as good as the published rate) corresponds to $450 AUD converting to 276.58 GBP and a $50 AUD fee for the conversion. You said I was told by Lloyds TSB that St. Georges wouldn't levy any charges, as they would be paid a separate \"\"agent's fee\"\". This might have been told to you as \"\"St. Georges will not be levying any charges if you send $500 AUD for deposit to the account in Australia and your payee will get exactly $500 AUD if you pay us 317.90 GBP plus 20 GBP as our conversion fee today. If you want to send GBP instead, we cannot tell you how much to send because St. George's will levy a charge for conversion to AUD, and the conversion will be at the rate then prevailing. So your payee may receive more or less than $500 AUD.\"\" Perhaps, wanting to send exactly $500 AUD, you chose to pay Lloyds TSB and send AUD. But, since the account was closed, the money came back, and so you ended up paying yet another conversion fee. The questions are, who charged the second fee? As Muro said in a comment, it should be listed somewhere on the itemized statement. and is it a reasonable charge? I think $50 or $60 AUD is excessive but, then, I am not a bank, and maybe that is what their standard (minimum) charge is. As I said in my comment, the charge is usually a percentage of the amount transferred subject to a minimum levy that the bank sets.\"","@sharam - big question. I am going to answer part of it, but not as directly as you might like. You mention 4-6 cents per unit per month, but fail to give a unit price, so it is hard to tell how much return you are really looking for. Given the amount you have to invest, depending on your time horizon, you will do much better outside of mutual funds. Many funds in this category have fees in the 2% range. You actually have enough money to have a diversified portfolio on your own, without recourse to funds. If you want to use a fund-like product, I encourage you to look at well established ETFs (Exchange Traded Funds). They are basically like mutual funds that trade on the open stock market. One good example in this category is iShares XDV Good Luck","I misspoke, but really when you look at the exact same securities what other advantage does a fund have over a moderately wealthy investor than leverage and managerial clout? That and professional analysts can only give you so much of an edge.","A mutual fund has several classes of shares that are charged different fees. Some shares are sold through brokers and carry a sales charge (called load) that compensates the broker in lieu of a fee that the broker would charge the client for the service. Vanguard does not have sales charge on its funds and you don't need to go through a broker to buy its shares; you can buy directly from them. Admiral shares of Vanguard funds are charged lower annual expenses than regular shares (yes, all mutual funds charge expenses for fund adninistration that reduce the return that you get, and Vanguard has some of the lowest expense ratios) but Admiral shares are available only for large investments, typically $50K or so. If you have invested in a Vanguard mutual fund, your shares can be set to automatically convert to Admiral shares when the investment reaches the right level. A mutual fund manager can buy and sell stocks to achieve the objectives of the fund, so what stockes you are invested in as a share holder in a mutual fund will typically be unknown to you on a day-to-day basis. On the other hand, Exchange-traded funds (ETFs) are fixed baskets of stocks, and you can buy shares in the ETF. These shares are bought and sold through a broker (so you pay a transaction fee each time) but expenses are lower since there is no manager to buy and sell stocks: the basket is fixed. Many ETFs follow specific market indexes (e.g. S&P 500). Another difference between ETFs and mutual funds is that you can buy and sell ETFs at any time of the day just as if you could if you held stocks. With mutual funds, any buy and sell requests made during the day are processed at the end of the day and the value of the shares that you buy or sell is determined by the closing price of the stocks held by the mutual fund. With ETFs, you are getting the intra-day price at the time the buy or sell order is executed by your broker.","For mine, that info's in the quarterly reports... and in the prospectus, which you should be looking at before you put money into the fund.","\"I just looked at a fund for my client, the fund is T Rowe Price Retirement 2015 (TRRGX). As stated in the prospectus, it has an annual expense ratio of 0.63%. In the fine print below the funds expenses, it says \"\"While the fund itself charges no management fee, it will indirectly bear its pro-rata share of the expenses of the underlying T. Rowe Price funds in which it invests (acquired funds). The acquired funds are expected to bear the operating expenses of the fund.\"\" One of it's acquired funds is TROSX which has an expense ratio of 0.86%. So the total cost of the fund is the weighted average of the \"\"acquired funds\"\" expense ratio's plus the listed expense ratio of the fund. You can see this at http://doc.morningstar.com/docdetail.aspx?clientid=schwab&key=84b36f1bf3830e07&cusip=74149P796 and its all listed in \"\"Fees and Expenses of the Fund\"\"\"","http://www.efficientfrontier.com/ef/104/stupid.htm would have some data though a bit old about open-end funds vs an ETF that would be one point. Secondly, do you know that the Math on your ETF will always work out to whole numbers of shares or do you plan on using brokers that would allow fractional shares easily? This is a factor as $3,000 of an open-end fund will automatically go into fractional shares that isn't necessarily the case of an ETF where you have to specify a number of shares when you purchase as well as consider are you doing a market or limit order? These are a couple of things to keep in mind here. Lastly, what if the broker you use charges account maintenance fees for your account? In buying the mutual fund from the fund company directly, there may be a lower likelihood of having such fees. I don't know of any way to buy shares in the ETF directly without using a broker.","According to my research one only needs £5000 to invest in this fund. However, it also has a sales charge of 4% with an annual charge of 1.75%. If this is short term money, you would have to have a fairly high return to break even.","Before investing, absolutely follow the advice in mbhunter's answer. There is no safe investment (unless you count your mattress, and even there you could find moths, theives, or simple inflation taking a chunk out of your change). There is only maximizing your reward for a given level of risk - and there is always risk. This question should be enshrined somewhere on the Q&A site for its comprehensive list of sources for information on asset allocation. The tag is also going to have tons of good information for you. To answer your question on what slice of the pie is devoted to what, you can check out some common portfolios given by U. S. experts for U. S. investors - these should be convertible into Australian funds. Another portfolio that is, like all those above, loosely based on Modern Portfolio Theory for maximizing reward for a given level of risk is the Gone Fishin' Portfolio. A common denominator amongst these portfolios is that they emphasize index funds over mutual funds for their long-term performance and preference lazy management (yearly rebalancing is a common suggestion as the maximum level of involvement) over active management. You can see more Lazy Portfolios.","\"Is he affiliated with the company charging this fee? If so, 1% is great. For him. You are correct, this is way too high. Whatever tax benefit this account provides is negated over a sufficiently long period of time. you need a different plan, and perhaps, a different friend. I see the ISA is similar to the US Roth account. Post tax money deposited, but growth and withdrawals tax free. (Someone correct, if I mis-read this). Consider - You deposit £10,000. 7.2% growth over 10 years and you'd have £20,000. Not quite, since 1% is taken each year, you have £18,250. Here's what's crazy. When you realize you lost £1750 to fees, it's really 17.5% of the £10,000 your account would have grown absent those fees. In the US, our long term capital gain rate is 15%, so the fees after 10 years more than wipe out the benefit. We are not supposed to recommend investments here, but it's safe to say there are ETFs (baskets of stocks reflecting an index, but trading like an individual stock) that have fees less than .1%. The UK tag is appreciated, but your concern regarding fees is universal. Sorry for the long lecture, but \"\"1%, bad.\"\"\"","Zero. Zero is reasonable. That's what Schwab offers with a low minimum to open the IRA. The fact is, you'll have expenses for the investments, whether a commission on stock purchase or ongoing expense of a fund or ETF. But, in my opinion, .25% is criminal. An S&P fund or ETF will have a sub-.10% expense. To spend .25% before any other fees are added is just wrong.","\"The portfolio described in that post has a blend of small slices of Vanguard sector funds, such as Vanguard Pacific Stock Index (VPACX). And the theory is that rebalancing across them will give you a good risk-return tradeoff. (Caveat: I haven't read the book, only the post you link to.) Similar ETFs are available from Vanguard, iShares, and State Street. If you want to replicate the GFP exactly, pick from them. (If you have questions about how to match specific funds in Australia, just ask another question.) So I think you could match it fairly exactly if you wanted to. However, I think trying to exactly replicate the Gone Fishin Portfolio in Australia would not be a good move for most people, for a few reasons: Brokerage and management fees are generally higher in Australia (smaller market), so dividing your investment across ten different securities, and rebalancing, is going to be somewhat more expensive. If you have a \"\"middle-class-sized\"\" portfolio of somewhere in the tens of thousands to low millions of dollars, you're cutting it into fairly small slices to manually allocate 5% to various sectors. To keep brokerage costs low you probably want to buy each ETF only once every one-two years or so. You also need to keep track of the tax consequences of each of them. If you are earning and spending Australian dollars, and looking at the portfolio in Australian dollars, a lot of those assets are going to move together as the Australian dollar moves, regardless of changes in the underlying assets. So there is effectively less diversification than you would have in the US. The post doesn't mention the GFP's approach to tax. I expect they do consider it, but it's not going to be directly applicable to Australia. If you are more interested in implementing the general approach of GFP rather than the specific details, what I would recommend is: The Vanguard and superannuation diversified funds have a very similar internal split to the GFP with a mix of local, first-world and emerging market shares, bonds, and property trusts. This is pretty much fire-and-forget: contribute every month and they will take care of rebalancing, spreading across asset classes, and tax calculations. By my calculations the cost is very similar, the diversification is very similar, and it's much easier. The only thing they don't generally cover is a precious metals allocation, and if you want that, just put 5% of your money into the ASX:GOLD ETF, or something similar.\"","ETFs are a type of investment, not a specific choice. In other words, there are good ETFs and bad. What you see is the general statement that ETFs are preferable to most mutual funds, if only for the fact that they are low cost. An index ETF such as SPY (which reflects the S&P 500 index) has a .09% annual expense, vs a mutual fund which average a full percent or more. sheegaon isn't wrong, I just have a different spin to offer you. Given a long term return of say even 8% (note - this question is not a debate of the long term return, and I purposely chose a low number compared to the long term average, closer to 10%) and the current CD rate of <1%, a 1% hit for the commission on the buy side doesn't bother me. The sell won't occur for a long time, and $8 on a $10K sale is no big deal. I'd not expect you to save $1K/yr in cash/CDs for the years it would take to make that $8 fee look tiny. Not when over time the growth will overshaddow this. One day you will be in a position where the swings in the market will produce the random increase or decrease to your net worth in the $10s of thousands. Do you know why you won't lose a night's sleep over this? Because when you invested your first $1K, and started to pay attention to the market, you saw how some days had swings of 3 or 4%, and you built up an immunity to the day to day noise. You stayed invested and as you gained wealth, you stuck to the right rebalancing each year, so a market crash which took others down by 30%, only impacted you by 15-20, and you were ready for the next move to the upside. And you also saw that since mutual funds with their 1% fees never beat the index over time, you were happy to say you lagged the S&P by .09%, or 1% over 11 year's time vs those whose funds had some great years, but lost it all in the bad years. And by the way, right until you are in the 25% bracket, Roth is the way to go. When you are at 25%, that's the time to use pre-tax accounts to get just below the cuttoff. Last, welcome to SE. Edit - see sheegaon's answer below. I agree, I missed the cost of the bid/ask spread. Going with the lowest cost (index) funds may make better sense for you. To clarify, Sheehan points out that ETFs trade like a stock, a commission, and a bid/ask, both add to transaction cost. So, agreeing this is the case, an indexed-based mutual fund can provide the best of possible options. Reflecting the S&P (for example) less a small anual expense, .1% or less.","My main criterion for choosing a broker is the fee schedule. I care about investing in index funds and paying as little as possible in fees. In the US that brings everyone to Vanguard or Fidelity, and currently Vanguard edges Fidelity out on costs for the particular funds I am invested in.","When investigating transferring funds from the UK to Australia, I found the exchange rate offered by by banks for swift / Telegraphic transfers to be far below companies which specialise in international transfers. Not applicable to you unfortunately, but I used http://www.ozforex.com.au/ and got a conversion rate which ended up netting me $100's of dollars compared with my banks, thanks to a better rate and no fee.","Every 401(k) has managers to make the stock choices. They all have different rates. You want to see that fidelity or Vangard is handling your 401(k).(and I am sure others) If you have a mega bank managing your funds or an insurance company odds are you are paying way to high management fees. So find out, the management fees should be available should be less than 1%. They can get as high as 2%...Ouch","I quite like the Canadian Couch Potato which provides useful information targeted at investors in Canada. They specifically provide some model portfolios. Canadian Couch Potato generally suggests investing in indexed ETFs or mutual funds made up of four components. One ETF or mutual fund tracking Canadian bonds, another tracking Canadian stocks, a third tracking US stocks, and a fourth tracking international stocks. I personally add a REIT ETF (BMO Equal Weight REITs Index ETF, ZRE), but that may complicate things too much for your liking. Canadian Couch Potato specifically recommends the Tangerine Streetwise Portfolio if you are looking for something particularly easy, though the Management Expense Ratio is rather high for my liking. Anyway, the website provides specific suggestions, whether you are looking for a single mutual fund, multiple mutual funds, or prefer ETFs. From personal experience, Tangerine's offerings are very, very simple and far cheaper than the 2.5% you are quoting. I currently use TD's e-series funds and spend only a few minutes a year rebalancing. There are a number of good ETFs available if you want to lower your overhead further, though Canadians don't get quite the deals available in the U.S. Still, you shouldn't be paying anything remotely close to 2.5%. Also, beware of tax implications; the website has several articles that cover these in detail.","The math is wrong. $16m grows to $72b over 44 years at 21% return (exact return is (72000/16)^(1/44) - 1 = 0.21067). At one percentage point lower return, i.e. 20%, $16m grows to $50b (16m x 1.21^44 = 49.985b). In that case you would have paid about 30 percent of your gain in fees. Still a lot, but not severe. Even the calculation of percent fees is wrong in the article!","You could get a Multi-Currency Cash Passport which has no transaction fees for deposits or withdrawals. (You can pick one up at Australia Post.) This allows you to load it with money now in US dollars. The exchange rate is locked in at the time you load it to the card. When you're in the USA, just use that card or get the cash out from an ATM so you can deposit it into a US bank. To see the exchange rate they charge, you can scroll to the very bottom of their Fees and Limits page at there's a nice little table you can compare with. Otherwise, they've got a calculator tool.","Some index funds offer lower expense ratios to those who invest large amounts of money. For example, Vanguard offers Admiral Shares of many of its mutual funds (including several index funds) to individuals who invest more than $50K or $100K, and these Shares have lower expense ratios than the Investor shares in the fund. There are Institutional Shares designed for investments by pension plans, 401k plans of large companies etc which have even lower expenses than Admiral Shares. Individuals working for large companies sometimes get access to Institutional Shares through their 401k plans. Thus, there is something to gained by investing in just one index fund (for a particular index) that offers lower expense ratios for large investments instead of diversifying into several index funds all tracking the same index. Of course, this advantage might be offset by failure to track the index closely, but this tracking should be monitored not on a daily basis but over much longer periods of time to test whether your favorite fund is perennially trailing the index by far more than its competitors with larger expense ratios. Remember that the Net Asset Value (NAV) published by each mutual fund after the markets close already take into account the expense ratio.","If you want higher returns you may have to take on more risk. From lowest returns (and usually lower risk) to higher returns (and usually higher risk), Bank savings accounts, term deposits, on-line savings accounts, offset accounts (if you have a mortgage), fixed interest eg. Bonds, property and stock markets. If you want potentially higher returns then you can go for derivatives like options or CFDs, FX or Futures. These usually have higher risks again but as with any investments some risks can be partly managed. Also, CMC Markets charges $11 commission up to $10,000 trade. This is actually quite a low fee - based on your $7,000, $22 for in and out of a position would be less than 0.32% (of course you might want to buy into more than one company - so your brokerage would be slightly higher). Still this is way lower than full service brokerage which could be $100 or more in and then again out again. What ever you decide to do, get yourself educated first.","\"What are reasonable administrative fees for an IRA? was recently discussed here. My answer was zero. An IRA is not an investment, it's a container representing the tax status of an account. Once you decide what to actually invest it in, you'll likely incur additional fees. Mutual funds, for instance can range from .05% per year to 2.00% or more. In your case, you are telling us you are spending 2% per year even before you decide what to invest in. The real question I'd like to see answered is \"\"what value can an advisor bring to one's retirement account to deserve a 2%/year fee?\"\" My final thought - most financial types had been suggesting that a retiree can target a 4% per year withdrawal after retiring. This rule of thumb has been debated since the lost decade of 2000-2009, and the safe number may be lower. If an advisor is taking 2% off the top, you are basically sharing half your income with him. A million dollar IRA, you get $20K, he gets $20K?\"","There are several things being mixed up in the questions being asked. The expense ratio charged by the mutual fund is built into the NAV per share of the fund, and you do not see the charge explicitly mentioned as a deduction on your 401k statement (or in the statement received from the mutual fund in a non-401k situation). The expense ratio is listed in the fund's prospectus, and should also have been made available to you in the literature about the new 401k plan that your employer is setting up. Mutual fund fees (for things like having a small balance, or for that matter, sales charges if any of the funds in the 401k are load funds, God forbid) are different. Some load mutual funds waive the sales charge load for 401k participants, while some may not. Actually, it all depends on how hard the employer negotiates with the 401k administration company who handles all the paperwork and the mutual fund company with which the 401k administration company negotiates. (In the 1980s, Fidelity Magellan (3% sales load) was a hot fund, but my employer managed to get it as an option in our plan with no sales load: it helped that my employer was large and could twist arms more easily than a mom-and-pop outfit or Solo 401k plan could). A long long time ago in a galaxy far far away, my first ever IRA contribution of $2000 into a no-load mutual fund resulted in a $25 annual maintenance fee, but the law allowed the payment of this fee separately from the $2000 if the IRA owner wished to do so. (If not, the $25 would reduce the IRA balance (and no, this did not count as a premature distribution from the IRA). Plan expenses are what the 401k administration company charges the employer for running the plan (and these expenses are not necessarily peanuts; a 401k plan is not something that needs just a spreadsheet -- there is lots of other paperwork that the employee never gets to see). In some cases, the employer pays the entire expense as a cost of doing business; in other cases, part is paid by the employer and the rest is passed on to the employees. As far as I know, there is no mechanism for the employee to pay these expenses outside the 401k plan (that is, these expenses are (visibly) deducted from the 401k plan balance). Finally, with regard to the question asked: how are plan fees divided among the investment options? I don't believe that anyone other than the 401k plan administrator or the employer can answer this. Even if the employer simply adopts one of the pre-packaged plans offered by a big 401k administrator (many brokerages and mutual fund companies offer these), the exact numbers depend on which pre-packaged plan has been chosen. (I do think the answers the OP has received are rubbish).","https://www.ato.gov.au/Business/GST/ Some of the costs are indeed related to the conversion rate, which, as we all know,changes daily. You don't say whether you're using a credit card. If so, some cards do charge foreign transaction fees; some do not. However, Australia, like many European countries, does use a VAT system. Therefore your charges will be increased. Please be aware that these taxes are built into the economic system. In many cases, you van apply for and receive a waiver to be reimbursed if the purchase is made through a duty free store.","For a lot of info on different funds, fees, average returns, etc, see this site. (Not all sections are free - but areas like Best of the Rest are, and they offer good basic starting info.) I think for getting further into the nitty-gritty, for example if a fund is socially responsible, you will need to go to the individual fund sites or read reviews - although sites like Morningstar may help. However, a few funds like this are: HESTA, Cruelty Free Super, and VicSuper (I'm with the latter). It might be useful to check out their sites to orient yourself to the Aussie approach to this issue, and then start searching more broadly from there. And for what it's worth, for a general overview of the Superannuation system, and some nice-to-know info, see this page on the Oz govt website.","AUD is not a great choice as it has nowhere to go against USD but down. Take a look at the 5 year graph http://au.finance.yahoo.com/q/bc?s=AUDUSD=X&t=5y&l=on&z=l&q=l&c= Most in Australia predict that it will eventually hover around 0.8, at which point you would have lost almost 20% of your savings. Another thing is that savings interest is taxed in Australia, so take that rate with a grain of salt. For a typical household that would be a 30% tax, at which point it is just in line with inflation, so real term growth is nil.","Should you care? From Vanguard: The long-term impact of investment costs on portfolio balances Assuming a starting balance of $100,000 and a yearly return of 6%, which is reinvested Check out this chart, reflecting the impact of relatively small expense ratios on your 30 year return: All else being equal you should very much care about expense ratios. You end up with a significantly smaller amount if your pre-expense return is the same. A 0.75% difference in ER compounds to 20% over 30 years. If so, how should I take them into consideration when comparing funds? I'm in the U.S. if that matters. If they track the same index, cheaper is better. The cases where higher expense ratios might be better are if you believe that index will outperform the market by enough to recoup the cost of the ER. There is significant research that most funds do not do this.","0.13% is a pretty low fee. PTTRX expenses are 0.45%, VINIX expenses are 0.04%. So based on your allocation, you end up with at least 0.08%. While lower than 0.13%, don't know if it is worth the trouble (and potentially fees) of monthly re-balancing.","Mutual funds are funds composed of financial assets and the funds of investors, and are managed by a firm, usually a large wealth management firm. They are generally accessible to anyone. Hedge funds are private investment funds with limited access, and are subject to fewer regulations. They are usually legally set up as their own firm.","\"One other thing to consider, particularly with Vanguard, is the total dollar amount available. Vanguard has \"\"Admiralty\"\" shares of funds which offer lower expense ratios, around 15-20% lower, but require a fairly large investment in each fund (often 10k) to earn the discounted rate. It is a tradeoff between slightly lower expense ratios and possibly a somewhat less diverse holding if you are relatively early in your savings and only have say 20-30k (which would mean 2 or 3 Admiralty share funds only).\"","Here's the purely mathematical answer for which fees hurt more. You say taking the money out has an immediate cost of $60,000. We need to calculate the present value of the future fees and compare it against that number. Let's assume that the investment will grow at the same rate either with or without the broker. That's actually a bit generous to the broker, since they're probably investing it in funds that in turn charge unjustifiable fees. We can calculate the present cost of the fees by calculating the difference between: As it turns out, this number doesn't depend on how much we should expect to get as investment returns. Doing the math, the fees cost: 220000 - 220000 * (1-0.015)^40 = $99809 That is, the cost of the fees is comparable to paying nearly $100,000 right now. Nearly half the investment! If there are no other options, I strongly recommend taking the one-time hit and investing elsewhere, preferably in low-cost index funds. Details of the derivation. For simplicity, assume that both fees and growth compound continuously. (The growth does compound continuously. We don't know about the fees, but in any case the distinction isn't very significant.) Fees occur at a (continuous) rate of rf = ln((1-0.015)^4) (which is negative), and growth occurs at rate rg. The OPs current principal is P, and the present value of the fees over time is F. We therefore have the equation P e^((rg+rf)t) = (P-F) e^(rg t) Solving for F, we notice that the e^rg*t components cancel, and we obtain F = P - P e^(rf t) = P - P e^(ln((1-0.015)^4) t) = P - P (1-0.015)^(4t)","Mary Holm, who has a column on money in the NZ Herald, had this to say on the matter: Research shows that over and over again, the top dogs in one decade can be bottom dogs the next decade, and vice versa. Past performance really is no guide to the future. ... Fees are much less likely than returns to change over time. And low fees make a big difference to the long-term growth of your account. So just how low are your fund's fees? Perhaps that means the most sensible bet would be to pick a fund with good (but not necessarily best) historical returns but also with low fees. Personally, I've also included ethics as a factor in the decision, and I chose the ethical investment option offered by Superlife, hoping that it makes a small difference as explained here. (I have no affiliation with Superlife)","Most mutual funds underperform the stock market. Of those that over-perform, much of the performance can be attributed to dumb luck. Most mutual funds exist to generate fees from you, rather than make you wealthy. In my opinion, if you want to invest in one, choose a no-load index fund, and you will outperform most other funds. Better still get some good financial education and learn to manage your funds/investments yourself.","that's just it, though - they are splitting up the 1%! and in most cases, especially vanguard, they are splitting up far less. ETFs don't have 12b-1 fees. explaining why you're experiencing different returns for ETFs will almost certainly involve something other than their expense. again, this is especially true for vanguard. they have the cheapest ETFs around (though i think schwab beats them on a few now). i can only guess at the full compensation structure. betterment likely earns money on cash reserves and securities hypothecation (i guess?). they also charge a small fee from what i understand. finance is very slim these days. i guess i'm wondering what your ultimate question is. if it's the inter corporate compensation structure, above is my best guess. if it's about performance, then we need to compare the ETFs you are looking at. if it's about the fees on funds, i think we covered that! as an advisor, it's my experience that very specific inquiries about fees have a deeper concern. people hear a lot about being overcharged so cost is a very standard place for clients to initially look when trying to compare performance of portfolios or securities.","There is a LOT of shuffling going on in the financial services industry. I would not immediately say your advisor is acting in bad faith. The DOL fiduciary changes are quite significant for some brokers. Investment Advisors who are fee-based have less of an impact since they are already fiduciaries. That being said, your issue is still the same. How can you get a low-cost solution to your problem? You might want to consider Vanguard, Fidelity, or another mutual fund company that can keep your costs low. However, you should understand that if you are using mutual funds, the fees are paid one way or another. 12b1 fees, commissions, and expenses are all deducted from the fund's gross returns. You have to choose between low cost and paid advice. you cannot get high-quality low-cost advice. Fortunately, there are a lot of new solutions out there, robo-advisors, indexing, asset allocation mutual funds, ETFs, and more. Do a bit of homework and you should be able to come up with a reasonable solution. I hope you found this helpful. Kirk"],"string":"[\n \"This is a Vanguard-specific difference in the sense that in the US, Vanguard is a leader in lowering management fees for the mutual funds that they offer. Of course, several US mutual fund companies have also been lowering the expense ratio of their mutual funds in recent years because more and more investors have been paying attention to this particular performance parameter, and opting for funds that have low expense ratios. But many US funds have not reduced their expense ratios very much and continue to have expense ratios of 1% or even higher. For example, American Funds Developing World Growth and Income Fund (DWGAX) charges a 1.39% expense ratio while their 2060 Retirement Fund (AANTX) charges 1.12% (the funds also have a 5.75% sales charge); Putnam Capital Opportunities Fund charges 1.91% for their Class C shares, and so on. Many funds with high expense ratios (and sometimes sales charges as well) show up as options in far too many 401(k) plans, especially 401(k) plans of small companies, because small companies do not enjoy economies of scale and do not have much negotiating power when dealing with 401(k) custodians and administrators.\",\n \"Your link is pointing to managed funds where the fees are higher, you should look at their exchange traded funds; you will note that the management fees are much lower and better reflect the index fund strategy.\",\n \"Suppose that the fixed overhead costs of delivering a service, not related to the actual volume of sales, are $50 million per year. Suppose the variable costs on top are $100 per customer per year. Suppose further that 1% of the population buys the service. In the US, 3.2 million people buy the service, and it costs $116 per person to deliver it ($100 plus $50 million divided by 3.2 million). In Australia, 230,000 people buy it, and it costs $317 per person per year to deliver it ($100 plus $50 million divided by 230,000). The larger your market, the cheaper everything is, and Australia is a very small market compared with the USA, the EU, China or India.\",\n \"Yes you should take in the expenses being incurred by the mutual fund. This lists down the fees charged by the mutual fund and where expenses can be found in the annual statement of the fund. To calculate fees and expenses. As you might expect, fees and expenses vary from fund to fund. A fund with high costs must perform better than a low-cost fund to generate the same returns for you. Even small differences in fees can translate into large differences in returns over time. You don't pay expenses, so the money is taken from the assets of the fund. So you pay it indirectly. If the expenses are huge, that may point to something i.e. fund managers are enjoying at your expense, money is being used somewhere else rather than being paid as dividends. If the expenses are used in the growth of the fund, that is a positive sign. Else you can expect the fund to be downgraded or upgraded by the credit rating agencies, depending on how the credit rating agencies see the expenses of the fund and other factors. Generally comparison should be done with funds invested in the same sectors, same distribution of assets so that you have a homogeneous comparison to make. Else it would be unwise to compare between a fund invested in oil companies and other in computers. Yes the economy is inter twined, but that is not how a comparison should be done.\",\n \"Brokers will have transaction fees in addition to the find management fees, but they should be very transparent. Brokering is a very competitive business. Any broker that added hidden fees to their transactions would lose customers very quickly to other brokers than can offer the same services. Hedge funds are a very different animal, with less regulation, less transparency, and less competition. Their fees are tolerated because the leveraged returns are usually much higher. When times are bad, though, those fees might drive investors elsewhere.\",\n \"Since you have presumably now been living here for six months you may already have discovered that Australian banks charge a transaction fee whether the funds are deposited from overseas by check/cheque or telegraphically. I have an account with Bank of America and used to be able to draw funds from Australian bank Westpac via their ATMs without incurring a fee, because BofA and Westpac are both members of a Global ATM Alliance that did not charge fees to each others customers. But now they have initiated a new policy, and take 3% of every sum withdrawn. Not quite usury, but in the same ballpark. I'm now investigating the possibility of opening a Schwab or a Capital One account in the US, and using one of their credit cards, which, I believe, would allow withdrawals at Australian ATMs for no fee. If you find or have found a good answer to your dilemma I hope you will share it.\",\n \"your 401k is charged a management fee, directly debited from your account. the mutual funds and etfs therein have operating expense ratios, which are taken out of their performance. your IRA and brokerage accounts likely have commissions assessed per transaction. that is really it!\",\n \"\\\"(This answer refers to the US investment landscape) I'm not sure your classification of funds as direct and regular accurately reflects the nature of the mutual fund industry. It's not the funds themselves that are \\\"\\\"direct\\\"\\\" or \\\"\\\"regular.\\\"\\\" Rather it's the way an investor chooses to invest in them. If you make the investment yourself through your brokerage account, you may say it's a direct investment. If you pay a financial advisor to do this for you, it's \\\"\\\"regular.\\\"\\\" For a given fund, you could make the investment yourself or you could use an advisor. Note that many funds have various share classes. Share classes may be accessed in different ways. The institutional class may be accessible through your 401(k) or perhaps not even there, for example. The premium class may require a certain minimum investment. Some classes will have a front-end-load or back-end-load. Each of these will have a different expense ratio and fees even though the money ends up in the same portfolio. These expenses are, by law, publicly available in the prospectus and in numerous other places. Share classes with higher fees will earn less each year after fees, just as you suggest. Your intuition is correct on this point. Now, there is one fee to be aware of that funds either have or do not have. That's a 12b-1 fee. This fee is a kickback to financial advisors who funnel your money into their fund. If you use a financial advisor, he or she will likely put your money into these funds because they have a financial incentive to do so. That way they get paid twice: once by you and once by the mutual fund. It has been robustly shown in the finance academic literature that funds without this fee dominate (are better in some ways and in no ways worse than) funds with this fee. I suppose you could say that funds and share classes with a 12b-1 fee were designed for \\\"\\\"regular\\\"\\\" investment and those without were designed for \\\"\\\"direct\\\"\\\" but that doesn't mean you can't invest in a 12b-1 fee fund directly nor that you can't twist your advisor's arm into getting you into a good fund without a 12b-1. Unfortunately, if you have this level of knowledge, then you probably don't need a financial advisor.\\\"\",\n \"@JoeTaxpayer gave a great response to your first question. Here are some thoughts on the other two... 2) Transaction fees for mutual funds are tied to the class of shares you're buying and will be the same no matter where you buy them. A-shares have a front-end 'load' (the fee charged), and the lowest expenses, and can be liquidated without any fees. B-shares have no up-front load, but come with a 4-7 year period where they will charge you a fee to liquidate (technically called Contingent Deferred Sales Charge, CDSC), and slightly higher management fees, after which they often will convert to A-shares. C-shares have the highest management fees, and usually a 12- to 18-month period where they will charge a small percentage fee if you liquidate. There are lots of other share classes available, but they are tied to special accounts such as managed accounts and 401-K plans. Not all companies offer all share classes. C-shares are intended for shorter timeframes, eg 2-5 years. A and B shares work best for longer times. Use a B share if you're sure you won't need to take the money out until after the fee period ends. Most fund companies will allow you to exchange funds within the same fund family without charging the CDSC. EDIT: No-load funds don't charge a fee in or out (usually). They are a great option if they are available to you. Most self-service brokerages offer them. Few full-service brokerages offer them. The advantage of a brokerage versus personal accounts at each fund is the brokerage gives you a single view of things and a single statement, and buying and selling is easy and convenient. 3) High turnover rates in bond funds... depending on how actively the portfolio is managed, the fund company may deliver returns as a mix of both interest and capital gains, and the management expenses may be high with a lot of churn in the underlying portfolio. Bond values fall as interest rates rise, so (at least in the USA) be prepared to see the share values of the fund fall in the next few years. The biggest risk of a bond fund is that there is no maturity date, so there is no point in time that you have an assurance that your original investment will be returned to you.\",\n \"See if any of the funds they offer are index funds, which will generally have MUCH lower fees and which seem to perform as well as any of the actively managed funds in the same categories.\",\n \"It's well worth to sell it for a low-cost ETF, even with taxes considering you want to keep it invested for 15 years more. An ETF fee is between 0.07% to 0.7%. The massive saving from what Federated Kaufmann Fund is charging will compound greatly over the term.\",\n \"You do realize that the fund will have management expenses that are likely already factored into the NAV and that when you sell, the NAV will not yet be known, right? There are often fees to run a mutual fund that may be taken as part of managing the fund that are already factored into the Net Asset Value(NAV) of the shares that would be my caution as well as possible fee changes as Dilip Sarwate notes in a comment. Expense ratios are standard for mutual funds, yes. Individual stocks that represent corporations not structured as a mutual fund don't declare a ratio of how much are their costs, e.g. Apple or Google may well invest in numerous other companies but the costs of making those investments won't be well detailed though these companies do have non-investment operations of course. Don't forget to read the fund's prospectus as sometimes a fund will have other fees like account maintenance fees that may be taken out of distributions as well as being aware of how taxes will be handled as you don't specify what kind of account these purchases are being done using.\",\n \"For Vanguard: Vanguard does compare its fees with similar funds from its competitors on this tab, but then again, this is Vanguard giving you this information, so take with a grain of salt.\",\n \"\\\"YES.. Management fees cut directly into your profits. A fund which achieves 8% growth but costs 1% to maintain delivers only 7% to you. Compounded over years, even a relatively small difference can add up to a significant amount of money. This is one of the advantages index funds have. They may not be as \\\"\\\"sophisticated\\\"\\\" as human-managed funds, but their expense ratio is so much lower that the end result for the investor is often as good as or better than the more expensive products. In fact, at least one study found that, for each category they researched, low expense ratio was a better predictor of good return on investment than anything else they looked at. That doesn't mean cheapest is always best or most expensive is always worst .... but it does mean you should be very, very sure an expensive fund really is that much better before choosing it. And sticking with simple index funds may be a perfectly reasonable choice.\\\"\",\n \"\\\"Most financial \\\"\\\"advisors\\\"\\\" are actually financial-product salesmen. Their job is to sweet-talk you into parting with as much money as possible - either in management fees, or in commissions (kickbacks) on high-fee investment products** (which come from fees charged to you, inside the investment.) This is a scrappy, cutthroat business for the salesmen themselves. Realistically that is how they feed their family, and I empathize, but I can't afford to buy their product. I wish they would sell something else. These people prey on people's financial lack of knowledge. For instance, you put too much importance on \\\"\\\"returns\\\"\\\". Why? because the salesman told you that's important. It's not. The market goes up and down, that's normal. The question is how much of your investment is being consumed by fees. How do you tell that (and generally if you're invested well)? You compare your money's performance to an index that's relevant to you. You've heard of the S&P 500, that's an index, relevant to US investors. Take 2015. The S&P 500 was $2058.20 on January 2, 2015. It was $2043.94 on December 31, 2015. So it was flat; it dropped 0.7%. If your US investments dropped 0.7%, you broke even. If you made less, that was lost to the expenses within the investment, or the investment performing worse than the S&P 500 index. I lost 0.8% in 2015, the extra 0.1% being expenses of the investment. Try 2013: S&P 500 was $1402.43 on December 28, 2012 and $1841.10 on Dec. 27, 2013. That's 31.2% growth. That's amazing, but it also means 31.2% is holding even with the market. If your salesman proudly announced that you made 18%... problem! All this to say: when you say the investments performed \\\"\\\"poorly\\\"\\\", don't go by absolute numbers. Find a suitable index and compare to the index. A lot of markets were down in 2015-16, and that is not your investment's fault. You want to know if were down compared to your index. Because that reflects either a lousy funds manager, or high fees. This may leave you wondering \\\"\\\"where can I invest that is safe and has sensible fees? I don't know your market, but here we have \\\"\\\"discount brokers\\\"\\\" which allow self-selection of investments, charge no custodial fees, and simply charge by the trade (commonly $10). Many mutual funds and ETFs are \\\"\\\"index funds\\\"\\\" with very low annual fees, 0.20% (1 in 500) or even less. How do you pick investments? Look at any of numerous books, starting with John Bogle's classic \\\"\\\"Common Sense on Mutual Funds\\\"\\\" book which is the seminal work on the value of keeping fees low. If you need the cool, confident professional to hand-hold you through the process, a fee-only advisor is a true financial advisor who actually acts in your best interest. They honestly recommend what's best for you. But beware: many commission-driven salespeople pretend to be fee-only advisors. The good advisor will be happy to advise investment types, and let you pick the brand (Fidelity vs Vanguard) and buy it in your own discount brokerage account with a password you don't share. Frankly, finance is not that hard. But it's made hard by impossibly complex products that don't need to exist, and are designed to confuse people to conceal hidden fees. Avoid those products. You just don't need them. Now, you really need to take a harder look at what this investment is. Like I say, they make these things unnecessarily complex specifically to make them confusing, and I am confused. Although it doesn't seem like much of a question to me. 1.5% a quarter is 6% a year or 60% in 10 years (to ignore compounding). If the market grows 6% a year on average so growth just pays the fees, they will consume 60% of the $220,000, or $132,000. As far as the $60,000, for that kind of money it's definitely worth talking to a good lawyer because it sounds like they misrepresented something to get your friend to sign up in the first place. Put some legal pressure on them, that $60k penalty might get a lot smaller. ** For instance they'll recommend JAMCX, which has a 5.25% buy-in fee (front-end load) and a 1.23% per year fee (expense ratio). Compare to VIMSX with zero load and a 0.20% fee. That front-end load is kicked back to your broker as commission, so he literally can't recommend VIMSX - there's no commission! His company would, and should, fire him for doing so.\\\"\",\n \"In almost every circumstance high expense ratios are a bad idea. I would say every circumstance, but I don't want backlash from anyone. There are many other investment companies out there that offer mutual funds for FAR less than 1.5% ratio. I couldn't even imagine paying a 1% expense ratio for a mutual fund. Vanguard offers mutual funds that are significantly lower, on average, than the industry. Certainly MUCH lower than 1.5%, but then again I'm not sure what mutual funds you have, stock, bonds, etc. Here is a list of all Vanguard's mutual funds. I honestly like the company a lot, many people haven't heard of them because they don't spend nearly as much money on advertisements or a flashy website - but they have extremely low expense ratios. You can buy into many of their mutual funds with a 0.10%-0.20% expense ratio. Some are higher, but certainly not even close to 1.5%. I don't believe any of them are even half of that. Also, if you were referring to ETF's when you mentioned Index Fund (assuming that since you have ETFs in your tag), then 0.20% for ETF's is steep, check out some identical ETFs on Vanguard. I am not a Vanguard employee soliciting their service to you. I'm just trying to pass on good information to another investor. I believe you can buy vanguard funds through other investment companies, like Fidelity, for a good price, but I prefer to go through them.\",\n \"12b1 refers to a specific marketing fee on funds in my world. are you referring to the expense ratio? yes - that is what fund wholesalers will do. another practice that won't affect your cost though. basically what i want to express is that you shouldn't need a flowchart to understand your fees. it is simply the layers of management that will raise your cost, in addition to any transactional fees.\",\n \"In my opinion, the fee is criminal. There are ETFs available to the public that have expenses as low as .05%. The index fund VIIIX an institution level fund available to large 401(k) plans charges .02%. I'll pay a total of under 1% over the next 50 years, Consider that at retirement, the safe withdrawal rate has been thought to be 4%, and today this is considered risky, perhaps too high. Do you think it's fair, in any sense of the word to lose 30% of that withdrawal? Another angle for you - In my working years, I spent most of those years at either the 25% or 28% federal bracket taxable income. I should spend my retirement at 15% marginal rate. On average, the purpose of my 401(k) was to save me (and my wife) 10-13% in tax from deposit to withdrawal. How long does it take for an annual 1.1% excess fee to negate that 10% savings? If one spends their working life paying that rate, they will lose half their wealth to those managing their money. PBS aired a show in its Frontline series titled The Retirement Gamble, it offers a sobering look at how such fees are a killer to your wealth.\",\n \"I like that you are hedging ONLY the Roth IRA - more than likely you will not touch that until retirement. Looking at fees, I noticed Vanguard Target retirement funds are .17% - 0.19% expense ratios, versus 0.04 - 0.14% for their Small/Mid/Large cap stocks.\",\n \"\\\"Oddly enough, in the USA, there are enough cost and tax savings between buy-and-hold of a static portfolio and buying into a fund that a few brokerages have sprung up around the concept, such as FolioFN, to make it easier for small investors to manage numerous small holdings via fractional shares and no commission window trades. A static buy-and-hold portfolio of stocks can be had for a few dollars per trade. Buying into a fund involves various annual and one time fees that are quoted as percentages of the investment. Even 1-2% can be a lot, especially if it is every year. Typically, a US mutual fund must send out a 1099 tax form to each investor, stating that investors share of the dividends and capital gains for each year. The true impact of this is not obvious until you get a tax bill for gains that you did not enjoy, which can happen when you buy into a fund late in the year that has realized capital gains. What fund investors sometimes fail to appreciate is that they are taxed both on their own holding period of fund shares and the fund's capital gains distributions determined by the fund's holding period of its investments. For example, if ABC tech fund bought Google stock several years ago for $100/share, and sold it for $500/share in the same year you bought into the ABC fund, then you will receive a \\\"\\\"capital gains distribution\\\"\\\" on your 1099 that will include some dollar amount, which is considered your share of that long-term profit for tax purposes. The amount is not customized for your holding period, capital gains are distributed pro-rata among all current fund shareholders as of the ex-distribution date. Morningstar tracks this as Potential Capital Gains Exposure and so there is a way to check this possibility before investing. Funds who have unsold losers in their portfolio are also affected by these same rules, have been called \\\"\\\"free rides\\\"\\\" because those funds, if they find some winners, will have losers that they can sell simultaneously with the winners to remain tax neutral. See \\\"\\\"On the Lookout for Tax Traps and Free Riders\\\"\\\", Morningstar, pdf In contrast, buying-and-holding a portfolio does not attract any capital gains taxes until the stocks in the portfolio are sold at a profit. A fund often is actively managed. That is, experts will alter the portfolio from time to time or advise the fund to buy or sell particular investments. Note however, that even the experts are required to tell you that \\\"\\\"past performance is no guarantee of future results.\\\"\\\"\\\"\",\n \"AU rates are higher than 3.75%. The market for deposits here in Australia is very competitive (banks have change increased deposits as a share of liabilities from ~50% to ~60% in just the last few years) and, as a result, demand deposits here pay far more than the central bank rate. My demand savings account, for example, pays 4.95%. That AU-US interest differentials are so staggeringly high means that, inmevitably, lots of investors are carrying. Depending of FX moves over the next year, a lot of investors will either gain heaps or lose more. If you can leverage, you can gain even more (or lose the house).\",\n \"The fee representing the expense ratio is charged as long as you hold the investment. It is deducted daily from the fund assets, and thus reduces the price per share (NAV per share) that is calculated each day after the markets close. The investment fee is charged only when you make an investment in the fund. So, invest in the fund in one swell foop (all $5500 or $6500 for older people, all invested in a single transaction) rather than make monthly investments into the fund (hold the money in a money-market within your Roth IRA if need be). But, do check if there are back-end loads or 12b1 fees associated with the fund. The former often disappear after a few years; the latter are another permanent drain on performance. Also, please check whether reinvestment of dividends and capital gains incur the $75 transaction fee.\",\n \"2%? I would put in just what it takes to share in the profit sharing, not a dime more. My S&P fund cost is .02% (edited, as it dropped to .02 since original post), 1/100 of the cost of most funds you list. Doesn't take too many years of this fee to negate the potential tax savings, and not many more to make this a real loser.\",\n \"Have you shopped around? I would agree that the fees seem high. The first question I would ask if if the .75% management fee is per year or per month? If it is per month, you will almost certainly lose money each year. A quick search shows that Fidelity will allow one to transfer their pensions into a self directed account. Here in the US, where we have 401Ks, it is almost always better to transfer them into something self directed once you leave an employer. Fidelity makes it really easy, and I always recommend them. (No affiliation.) Here in the US they actually pay you for you transferring money into your account. This can come in the form of free stock trades or money added to your account. I would encourage you to give them or their competitors a look in order to make an informed decision. Often times, a person with lowish balances, can't really afford to pay those high management fees. You might need in the 10s of millions before something like that makes sense.\",\n \"The creation mechanism for ETF's ensures that the value of the underlying stocks do not diverge significantly from the Fund's value. Authorized participants have a strong incentive to arbitrage any pricing differences and create/redeem blocks of stock/etf until the prices are back inline. Contrary to what was stated in a previous answer, this mechanism lowers the cost of management of ETF's when compared to mutual funds that must access the market on a regular basis when any investors enter/exit the fund. The ETF only needs to create/redeem in a wholesale basis, this allows them to operate with management fees that are much lower than those of a mutual fund. Expenses Due to the passive nature of indexed strategies, the internal expenses of most ETFs are considerably lower than those of many mutual funds. Of the more than 900 available ETFs listed on Morningstar in 2010, those with the lowest expense ratios charged about .10%, while those with the highest expenses ran about 1.25%. By comparison, the lowest fund fees range from .01% to more than 10% per year for other funds. (For more on mutual fund feeds, read Stop Paying High Fees.)\",\n \"Whether or not it's reasonable is a matter of opinion, but there are certainly cheaper options out there. It does seem strange to me that your credit union charges a percentage of your assets rather than a flat fee since they shouldn't have to do any more work based on how much money you have invested. I would look into rolling over your IRA to Vanguard or Fidelity. Neither charge administrative fees, and they offer no-load and no-transaction fee funds with low expenses. If you went with Fidelity directly, you'd be bypassing the middle man (your credit union) and their additional administrative fees. Vanguard tends to offer even cheaper funds.\",\n \"We face the same issue here in Switzerland. My background: Institutional investment management, currency risk management. My thoughs are: Home Bias is the core concept of your quesiton. You will find many research papers on this topic. The main problems with a high home bias is that the investment universe in your small local investment market is usually geared toward your coutries large corporations. Lack of diversification: In your case: the ASX top 4 are all financials, actually banks, making up almost 25% of the index. I would expect the bond market to be similarly concentrated but I dont know. In a portfolio context, this is certainly a negative. Liquidity: A smaller economy obviously has less large corporations when compared globally (check wikipedia / List_of_public_corporations_by_market_capitalization) thereby offering lower liquidity and a smaller investment universe. Currency Risk: I like your point on not taking a stance on FX. This simplifies the task to find a hedge ratio that minimises portfolio volatility when investing internationally and dealing with currencies. For equities, you would usually find that a hedge ratio anywhere from 0-30% is effective and for bonds one that ranges from 80-100%. The reason is that in an equity portfolio, currency risk contributes less to overall volatility than in a bond portfolio. Therefore you will need to hedge less to achieve the lowest possible risk. Interestingly, from a global perspective, we find, that the AUD is a special case whereby, if you hedge the AUD you actually increase total portfolio risk. Maybe it has to do with the AUD being used in carry trades a lot, but that is a wild guess. Hedged share classes: You could buy the currency hedged shared classes of investment funds to invest globally without taking currency risks. Be careful to read exactly what and how the share class implements its currency hedging though.\",\n \"You have left out the most important piece of information: are you an American citizen? If you are, then PFIC rules mean you need to be very careful not to invest in any foreign index funds/ETFs. That means it will probably be easiest for you to just leave the money in the US and continue to invest it there. If you do not have US citizenship, and have never had a green card, then you will qualify for non-resident alien status after you've been gone for 3 years. Once that happens, you won't owe US capital gains tax (though you will owe it in AUS). You will owe 30% tax on dividends, though. Much more at Investopedia.\",\n \"What is your time horizon? Over long horizons, you absolutely want to minimise the expense ratio – a seemingly puny 2% fee p.a. can cost you a third of your savings over 35 years. Over short horizons, the cost of trading in and trading out might matter more. A mutual fund might be front-loaded, i.e. charge a fixed initial percentage when you first purchase it. ETFs, traded daily on an exchange just like a stock, don't have that. What you'll pay there is the broker commission, and the bid-ask spread (and possibly any premium/discount the ETF has vis-a-vis the underlying asset value). Another thing to keep in mind is tracking error: how closely does the fond mirror the underlying index it attempts to track? More often than not it works against you. However, not sure there is a systematic difference between ETFs and funds there. Size and age of a fund can matter, indeed - I've had new and smallish ETFs that didn't take off close down, so I had to sell and re-allocate the money. Two more minor aspects: Synthetic ETFs and lending to short sellers. 1) Some ETFs are synthetic, that is, they don't buy all the underlying shares replicating the index, actually owning the shares. Instead, they put the money in the bank and enter a swap with a counter-party, typically an investment bank, that promises to pay them the equivalent return of holding that share portfolio. In this case, you have (implicit) credit exposure to that counter-party - if the index performs well, and they don't pay up, well, tough luck. The ETF was relying on that swap, never really held the shares comprising the index, and won't necessarily cough up the difference. 2) In a similar vein, some (non-synthetic) ETFs hold the shares, but then lend them out to short sellers, earning extra money. This will increase the profit of the ETF provider, and potentially decrease your expense ratio (if they pass some of the profit on, or charge lower fees). So, that's a good thing. In case of an operational screw up, or if the short seller can't fulfil their obligations to return the shares, there is a risk of a loss. These two considerations are not really a factor in normal times (except in improving ETF expense ratios), but during the 2009 meltdown they were floated as things to consider. Mutual funds and ETFs re-invest or pay out dividends. For a given mutual fund, you might be able to choose, while ETFs typically are of one type or the other. Not sure how tax treatment differs there, though, sorry (not something I have to deal with in my jurisdiction). As a rule of thumb though, as alex vieux says, for a popular index, ETFs will be cheaper over the long term. Very low cost mutual funds, such as Vanguard, might be competitive though.\",\n \"\\\"In the US there are a few different schemes, namely Regulated and Unregulated. In Regulated states (e.g. Colorado) everything except for some of the generators are owned by one company (called a Vertically Integrated Utility) and that company is allowed a specific return on its investment rates being set by a formula that includes the utility's fixed costs, the variable & fuel costs, and this return. In Unregulated markets (like Texas) the generators, transmission system, load serving entities (aka distributors), and retailers are all separate (although sometimes the same company owns parts at various levels). The transmission and load serving entities function like the traditional utilities I described above but ratepayers can choose their own retailer and the retailers then buy energy from the generators. Here is a good video about how the US energy market works: https://www.youtube.com/watch?v=rJAPHFGAgRw To answer the \\\"\\\"robustness\\\"\\\" question; I think the answer is actually that, in most cases, the \\\"\\\"wires\\\"\\\" costs for US customers is lower due to the higher density and compactness of the various power systems in the US. In the NEM (the primary energy market in Australia) there are SIGNIFICANT distances between loads and the larger generators and there are overall fewer customers per mile of line. Other than that the system (both electrically and from a market design standpoint) is generally based on the US system (PJM specifically). The other big difference is that Australia does not have a single grid like the US does (US has 3 interconnects but is one big grid).\\\"\",\n \"I see a couple of reasons why you could consider choosing a mutual fund over an ETF In some cases index mutual funds can be a cheaper alternative to ETFs. In the UK where I am based, Fidelity is offering a management fee of 0.07% on its FTSE All shares tracker. Last time I checked, no ETF was beating that There are quite a few cost you have to foot when dealing ETFs In some cases, when dealing for relatively small amounts (e.g. a monthly investment plan) you can get a better deal, if your broker has negotiated discounts for you with a fund provider. My broker asks £12.5 when dealing in shares (£1.5 for the regular investment plan) whereas he asks £0 when dealing in funds and I get a 100% discount on the initial charge of the fund. As a conclusion, I would suggest you look at the all-in costs over total investment period you are considering for the exact amount you are planning to invest. Despite all the hype, ETFs are not always the cheapest alternative.\",\n \"\\\"FSEMX has an annual expense ratio of 0.1% which is very low. What that means is that each month, the FSEMX will pay itself one-twelfth of 0.1% of the total value of all the shares owned by the shareholders in the mutual fund. If the fund has cash on hand from its trading activities or dividends collected from companies whose stock is owned by FSEMX or interest on bonds owned by FSEMX, the money comes out of that, but if there is no such pot (or the pot is not large enough), then the fund manager has the authority to sell some shares of the stocks held by FSEMX so that the employees can be paid, etc. If the total of cash generated by the trading and the dividend collection in a given year is (say) 3% of the share value of all the outstanding mutual fund, then only 2.9% will be paid out as dividend and capital gain distribution income to the share holders, the remaining 0.1% already having been paid to FSEMX management for operating expenses. It is important to keep in mind that expenses are always paid even if there are no profits, or even if there are losses that year so that no dividends or capital gains distributions are made. You don't see the expenses explicitly on any statement that you receive. If FSEMX sells shares of stocks that it holds to pay the expenses, this reduces the share value (NAV) of the mutual fund shares that you hold. So, if your mutual fund account \\\"\\\"lost\\\"\\\" 20% in value that year because the market was falling, and you got no dividend or capital gains distributions either, remember that only 19.9% of that loss can be blamed on the President or Congress or Wall Street or public-sector unions or your neighbor's refusal to ditch his old PC in favor of a new Mac, and the rest (0.1%) has gone to FSEMX to pay for fees you agreed to when you bought FSEMX shares. If you invest directly in FSEMX through Fidelity's web site, there is no sales charge, and you pay no expenses other than the 0.1% annual expense ratio. There is a fee for selling FSEMX shares after owning them only for a short time since the fund wants to discourage short-term investors. Whatever other fees finance.yahoo.com lists might be descriptive of the uses that FSEMX puts its expense ratio income to in its internal management, but are not of any importance to the prudent investor in FSEMX who will never encounter them or have to pay them.\\\"\",\n \"Over time, fees are a killer. The $65k is a lot of money, of course, but I'd like to know the fees involved. Are you doubling from 1 to 2%? if so, I'd rethink this. Diversification adds value, I agree, but 2%/yr? A very low cost S&P fund will be about .10%, others may go a bit higher. There's little magic in creating the target allocation, no two companies are going to be exactly the same, just in the general ballpark. I'd encourage you to get an idea of what makes sense, and go DIY. I agree 2% slices of some sectors don't add much, don't get carried away with this.\",\n \"\\\"Loads may be widespread but they are absolutely not an \\\"\\\"industry standard\\\"\\\". Almost every major provider of mutual funds has \\\"\\\"no load\\\"\\\" funds. I'm sure your bank wants you to buy the funds with front loads, but they can't force you to buy those funds (unless you sign such a disclaimer when you open the account). What your bank can do is charge their own transaction fees for \\\"\\\"third-party\\\"\\\" funds, and those may end up being as much as or more than the funds' own loads. I don't know which bank you have, but many banks have their own mutual funds that have no loads or other transaction fees. Essentially you can rearrange your portfolio however you want (within reason) at no cost as long as you buy and sell their funds exclusively. But of course every bank is different, and in many cases those funds will perform poorly compared to investment companies like Vanguard. Of course every mutual fund must report its performance so you can always check that yourself. If your bank refuses to let you buy any no-load mutual funds (even ones that they run themselves) and/or wants to charge you steep transaction fees in order to discourage buying them, then may I suggest a different bank? FYI, mutual funds generally \\\"\\\"make their money\\\"\\\" on management fees. If a fund advertises a load but a particularly low management fee, it may actually be worth buying compared to another fund with no load and a high management fee, if you don't expect to be buying and selling frequently. On the other hand, if a fund has a high management fee and a high load, it's probably garbage.\\\"\",\n \"\\\"The 0.14% is coming out of the assets of the fund itself. The expense ratio can be broken down so that on any given day, a portion of the fund's assets are set aside to cover the administrative cost of running the fund. A fund's total return already includes the expense ratio. This depends a lot on what kind of account in which you hold the fund. If you hold the fund in an IRA then you wouldn't have taxes from the fund itself as the account is sheltered. There may be notes in the prospectus and latest annual and semi-annual report of what past distributions have been as remember the fund isn't paying taxes but rather passing that along in the form of distributions to shareholders. Also, there is something to be said for what kinds of investments the fund holds as if the fund is to hold small-cap stocks then it may have to sell the stock if it gets too big and thus would pass on the capital gains to shareholders. Other funds may not have this issue as they invest in large-cap stocks that don't have this problem. Some funds may invest in municipal bonds which would have tax-exempt interest that may be another strategy for lowering taxes in bond funds. Depending on the fund quite a broad range actually. In the case of the Fidelity fund you link, it is a \\\"\\\"Fund of funds\\\"\\\" and thus has a 0% expense ratio as Fidelity has underlying funds that that fund holds. What level of active management are you expecting, what economies of scale does the fund have to bring down the expense ratio and what expense ratio is typical for that category of fund would come to mind as a few things to consider. That Fidelity link is incorrect as both Morningstar and Fidelity's site list an expense ratio for the fund of funds at .79%. I'd expect an institutional US large-cap index fund to have the lowest expense ratio outside of the fund of fund situation while if I were to pick an actively managed fund that requires a lot of research then the expense ratio may well be much higher though this is where you have to consider what strategy do you want the fund to be employing and how much of a cost are you prepared to accept for that? VTTHX is Vanguard Target Retirement 2035 Fund which has a .14% expense ratio which is using index funds in the fund of funds system.\\\"\",\n \"Vanguard might be the top provider of no-load mutual funds around. Attempting to do better than 0.13% in fees is just as likely to cost you more time than the money you're attempting to say. You're in your first job out of school--you've got better things to do with your time.\",\n \"1: Low fees means: a Total Expense Ratio of less than 0,5%. One detail you may also want to pay attention to whether the fund reinvests returns (Thesaurierender Fonds) which is basically good for investing, but if it's also a foreign-based fund then taxes get complicated, see http://www.finanztip.de/indexfonds-etf/thesaurierende-fonds/\",\n \"That expense ratio on the bank fund is criminally high. Use the Vanguard one, they have really low expenses.\",\n \"The net return reported to you (as a percentage) by a mutual fund is the gross return minus the expense ratio. So, if the gross return is X% and the expense ratio is Y%, your account will show a return of (X-Y)%. Be aware that X could be negative too. So, with Y = 1, If X = 10 (as you might get from a stock fund if you believe historical averages will continue), then the net return is 9% and you have lost (Y/X) times 100% = 10% of the gross return. If X = 8 (as you might get from a bond fund if you believe historical averages will continue), then the net return is 7% and you have lost (Y/X) times 100% = 12.5% of the gross return. and so on and so forth. The numbers used are merely examples of the returns that have been obtained historically, though it is worth emphasizing that 10% is an average return, averaged over many decades, from investments in stocks, and to believe that one will get a 10% return year after year is to mislead oneself very badly. I think the point of the illustrations is that expense ratios are important, and should matter a lot to you, but that their impact is proportionately somewhat less if the gross return is high, but very significant if the gross return is low, as in money-market funds. In fact, some money market funds which found that X < Y have even foregone charging the expense ratio fee so as to maintain a fixed $1 per share price. Personally, I would need a lot of persuading to invest in even a stock fund with 1% expense ratio.\",\n \"817/150,000 = .54% Fees are based on balances not deposits, usually. Putting a front loaded fund as an option in a 401(k) should be criminal, not sure it is though. Ask your HR dept to provide you fee details. If the .54% is correct, it's not bad. I hope you have money from prior jobs as well, by the way.\",\n \"As these all seem to be US Equity, just getting one broad based US Equity index might offer similar diversification at lower cost. Over 5 years, 20 basis points in fees will only make about 1% difference. However, for longer periods (retirement saving), it is worth it to aim for the lowest fees. For further diversification, you might want to consider other asset classes, such as foreign equity, fixed income, etc.\",\n \"It says expense ratio of 0.14%. What does it mean? Essentially it means that they will take 0.14% of your money, regardless of the performance. This measures how much money the fund spends out of its assets on the regular management expenses. How much taxes will I be subject to This depends on your personal situation, not much to do with the fund (though investment/rebalancing policies may affect the taxable distributions). If you hold it in your IRA - there will be no taxes at all. However, some funds do have measures of non-taxable distributions vs dividends vs. capital gains. Not all the funds do that, and these are very rough estimates anyway. What is considered to be a reasonable expense ratio? That depends greatly on the investment policy. For passive index funds, 0.05-0.5% is a reasonable range, while for actively managed funds it can go up as much as 2% and higher. You need to compare to other funds with similar investment policies to see where your fund stands.\",\n \"Disclosure - I love Jack Bogle. Jack basically invented the index fund, and as a result, let the common investor have an opportunity to choose a long term return of (S&P-.05%) instead of losing nearly 2% that many funds in that day charged. The use of index investing has saved investors many billions of dollars. The 1% round trip, total cost to buy/sell, was common. Fees for trading have since dropped. I happen to use Schwab who charges $9 for a trade. On $100,000, this is not .5% ($500) but less than .01%. I think it's safe to say that billion dollar mutual funds are paying even less for trades that I do. I believe Jack's example here is a combination of old data and hyperbole. The cost is not so much for the trades, per se, but for the people managing the fund. An index fund has a manager of course, but it's pretty much run by a computer.\",\n \"It's a good question, I am amazed how few people ask this. To summarise: is it really worth paying substantial fees to arrange a generic investment though your high street bank? Almost certainly not. However, one caveat: You didn't mention what kind of fund(s) you want to invest in, or for how long. You also mention an “advice fee”. Are you actually getting financial advice – i.e. a personal recommendation relating to one or more specific investments, based on the investments' suitability for your circumstances – and are you content with the quality of that advice? If you are, it may be worth it. If they've advised you to choose this fund that has the potential to achieve your desired returns while matching the amount of risk you are willing to take, then the advice could be worth paying for. It entirely depends how much guidance you need. Or are you choosing your own fund anyway? It sounds to me like you have done some research on your own, you believe the building society adviser is “trying to sell” a fund and you aren't entirely convinced by their recommendation. If you are happy making your own investment decisions and are merely looking for a place to execute that trade, the deal you have described via your bank would almost certainly be poor value – and you're looking in the right places for an alternative. ~ ~ ~ On to the active-vs-passive fund debate: That AMC of 1.43% you mention would not be unreasonable for an actively managed fund that you strongly feel will outperform the market. However, you also mention ETFs (a passive type of fund) and believe that after charges they might offer at least as good net performance as many actively managed funds. Good point – although please note that many comparisons of this nature compare passives to all actively managed funds (the good and bad, including e.g. poorly managed life company funds). A better comparison would be to compare the fund managers you're considering vs. the benchmark – although obviously this is past performance and won't necessarily be repeated. At the crux of the matter is cost, of course. So if you're looking for low-cost funds, the cost of the platform is also significant. Therefore if you are comfortable going with a passive investment strategy, let's look at how much that might cost you on the platform you mentioned, Hargreaves Lansdown. Two of the most popular FTSE All-Share tracker funds among Hargreaves Lansdown clients are: (You'll notice they have slightly different performance btw. That's a funny thing with trackers. They all aim to track but have a slightly different way of trading to achieve it.) To hold either of these funds in a Hargreaves Lansdown account you'll also pay the 0.45% platform charge (this percentage tapers off for portolio values higher than £250,000 if you get that far). So in total to track the FTSE All Share with these funds through an HL account you would be paying: This gives you an indication of how much less you could pay to run a DIY portfolio based on passive funds. NB. Both the above are a 100% equities allocation with a large UK companies weighting, so won't suit a lower risk approach. You'll also end up invested indiscriminately in eg. mining, tobacco, oil companies, whoever's in the index – perhaps you'd prefer to be more selective. If you feel you need financial advice (with Nationwide) or portfolio management (with Nutmeg) you have to judge whether these services are worth the added charges. It sounds like you're not convinced! In which case, all the best with a low-cost passive funds strategy.\",\n \"The management expense ratio (MER) is the management fee, plus all of the other costs required to run the fund, excluding any trading costs. Here's a pretty good explanation.\",\n \"Rules appear to be changing (21NOV2014) Aviva Plc. AV on NYSE pass thru fee is 0.02 cents per ADR but that equals 11% deduction from ADR dividend. For utility or insurance stock that is significant ongoing fee. Registrar in US is Citibank, could be specific to them. This is the first for me except some modest fees on indonesian ADR. Information very difficult to find. Buy and hold OZ investor.\",\n \"$10.90 for every $1000 per year. Are you kidding me!!! These are usually hidden within the expense ratio of the plan funds, but >1% seems to be quite a lot regardless. FUND X 1 year return 3% 3 year return 6% 10 year return 5% What does that exactly mean? This is the average annual rate of return. If measured for the last 3 years, the average annual rate of return is 6%, if measured for 1 year - it's 3%. What it means is that out of the last 3 years, the last year return was not the best, the previous two were much better. Does that mean that if I hold my mutual funds for 10 years I will get 5% return on it. Definitely not. Past performance doesn't promise anything for the future. It is merely a guidance for you, a comparison measure between the funds. You can assume that if in the past the fund performed certain way, then given the same conditions in the future, it will perform the same again. But it is in no way a promise or a guarantee of anything. Since my 401K plan stinks what are my options. If I put my money in a traditional IRA then I lose my pre tax benefits right! Wrong, IRA is pre-tax as well. But the pre-tax deduction limits for IRA are much lower than for 401k. You can consider investing in the 401k, and then rolling over to a IRA which will allow better investment options. After your update: Just clearing up the question. My current employer has a 401K. Most of the funds have the expense ratio of 1.20%. There is NO MATCHING CONTRIBUTIONS. Ouch. Should I convert the 401K of my old company to Traditional IRA and start investing in that instead of investing in the new employer 401K plan with high fees. You should probably consider rolling over the old company 401k to a traditional IRA. However, it is unrelated to the current employer's 401k. If you're contributing up to the max to the Roth IRA, you can't add any additional contributions to traditional IRA on top of that - the $5000 limit is for both, and the AGI limitations for Roth are higher, so you're likely not able to contribute anything at all to the traditional IRA. You can contribute to the employer's 401k. You have to consider if the rather high expenses are worth the tax deferral for you.\",\n \"All mutual funds disclose their investments, funds are large cap only or midcsp etc. So it depends on what funds you choose.\",\n \"I don't think that you'll notice a difference in the NAV in a fund with fees that are low as the Vanguard Total Stock Market Fund. Their management fees are incorporated into the NAV, but keep in mind that the fund has a total of $144 billion in assets, with $66 billion in the investor class. The actual fees represent a tiny fraction of the NAV, and may only show up at all on the day they assess the fees. With Vanguard total stock market, you notice the fee difference in the distributions. In the example of Vanguard Total Stock Market, there are institutional-class shares (like VITPX with a minimum investment of $200M) with still lower costs -- as low as 0.0250% vs. 0.18% for the investor class. You will notice a different NAV and distributions for that fund, but there may be other reasons for the variation that I'm not familar with, as I'm not an institutional investor.\",\n \"\\\"Your bank's fund is not an index fund. From your link: To provide a balanced portfolio of primarily Canadian securities that produce income and capital appreciation by investing primarily in Canadian money market instruments, debt securities and common and preferred shares. This is a very broad actively managed fund. Compare this to the investment objective listed for Vanguard's VOO: Invests in stocks in the S&P 500 Index, representing 500 of the largest U.S. companies. There are loads of market indices with varying formulas that are supposed to track the performance of a market or market segment that they intend to track. The Russel 2000, The Wilshire 1000, The S&P 500, the Dow Industrial Average, there is even the SSGA Gender Diversity Index. Some body comes up with a market index. An \\\"\\\"Index Fund\\\"\\\" is simply a Mutual Fund or Exchange Traded Fund (ETF) that uses a market index formula to make it's investment decisions enabling an investor to track the performance of the index without having to buy and sell the constituent securities on their own. These \\\"\\\"index funds\\\"\\\" are able to charge lower fees because they spend $0 on research, and only make investment decisions in order to track the holdings of the index. I think 1.2% is too high, but I'm coming from the US investing world it might not be that high compared to Canadian offerings. Additionally, comparing this fund's expense ratio to the Vanguard 500 or Total Market index fund is nonsensical. Similarly, comparing the investment returns is nonsensical because one tracks the S&P 500 and one does not, nor does it seek to (as an example the #5 largest holding of the CIBC fund is a Government of Canada 2045 3.5% bond). Everyone should diversify their holdings and adjust their investment allocations as they age. As you age you should be reallocating away from highly volatile common stock and in to assets classes that are historically more stable/less volatile like national government debt and high grade corporate/local government debt. This fund is already diversified in to some debt instruments, depending on your age and other asset allocations this might not be the best place to put your money regardless of the fees. Personally, I handle my own asset allocations and I'm split between Large, Mid and Small cap low-fee index funds, and the lowest cost high grade debt funds available to me.\\\"\",\n \"This depends on a lot actually - with the overall being your goals and how much you like risk. Question: What are your fees/commissions for selling? $8.95/trade will wipe out some gains on those trades. (.69% if all are sold with $8.95 commission - not including the commission payed when purchased that should be factored into the cost basis) Also, I would recommend doing commission free ETFs. You can get the same affect as a mutual fund without the fees associated with paying someone to invest in ETFs and stocks. On another note: Your portfolio looks rather risky. Although everyone has their own risk preference so this might be yours but if you are thinking about a mutual fund instead of individual stocks you probably are risk averse. I would suggest consulting with an adviser on how to set up for the future. Financial advice is free flowing from your local barber, dentist, and of course StackExchange but I would look towards a professional. Disclaimer: These are my thoughts and opinions only ;) Feel free to add comments below.\",\n \"fx-rate.net offers a AUDUSD exchange rate comparison, which includes paypal: Currencyfair $1.14 Transferwise $ 2.29 Worldremit $ 3.50 Xendpay $ 3.71 Tranzfers $ 5.52 Ukforex $ 7.35 Skrill $ 15.13 Paypal $ 25.77 Kantox $ 27.76 http://fx-rate.net/currency-transfer/?c_input=AUD&cp_input=USD\",\n \"I just looked through 40+ random funds on barclayhedge.com's database, and it's about evenly split between 2/20, 1.5/20 and 1/20, with a slight majority at 1.5/20, and 2/20 slightly ahead of 1/20. Others are at various rates like 0/10 and 2.5/20. I was very surprised to see Renaissance funds at just .35/10. I believe his Medallion Fund was at 5/36. James Simons is quite the quant. Nothing is too expensive if it's actually worth the price, but most hedge funds are no better than mutual funds. The only real advantage to hedge funds is the wider risk profile.\",\n \"\\\"It really depends on the value your financial adviser provides. Does he help with your 401K? Does he help you avoid making foolish moves? Does he really help you find funds that beat average market returns? Many people answer \\\"\\\"no\\\"\\\" to all of these questions and do their investing on their own. I personally prefer Fidelity because I find their web site easier to work with, but Vanguard is another option. At Fidelity you will have zero fee per year. You can buy Fidelity and many other mutual funds with no cost. You can buy iShares ETFs at no cost. Some funds do have a fee to purchase, but they are pretty low ($35) and are only collected when you buy, not yearly. Now some people do go it alone and it is a huge mistake. The news tends to only report negative stock market events, and many people were scared away from 2008 and missed wonderful gains since that time. If you pull your money out during corrections, stick with a financial adviser. If you will stop contributing because of a correction, stick with a financial adviser. In those cases the fee is well worth the cost. Also if your guy provides education in association with investment advice, the fee might also be worth it. If you are able to stomach losses, able to keep on contributing like clockwork, and can read a Morning star mutual fund chart, then you might be best to go it alone. One thing would really help is to have a friend that is also interested in investing to share ideas with.\\\"\",\n \"Virgin and AMP Flexible Super both offer funds that track Australian indexes.\",\n \"\\\"That share class may not have a ticker symbol though \\\"\\\"Black Rock MSCI ACWI ex-US Index\\\"\\\" does have a ticker for \\\"\\\"Investor A\\\"\\\" shares that is BDOAX. Some funds will have multiple share classes that is a way to have fees be applied in various ways. Mutual fund classes would be the SEC document about this if you want a government source within the US around this. Something else to consider is that if you are investing in a \\\"\\\"Fund of funds\\\"\\\" is that there can be two layers of expense ratios to consider. Vanguard is well-known for keeping its expenses low.\\\"\",\n \"12b1's have fallen out of favor in recent years, and are typically capped at about 0.25%. they are also usually waived and factored into the fund OER these days, too, though it depends on who your broker is. any revenue sharing shouldn't increase your fees. in my experience, there is more incentivizing for cross selling rather than revenue sharing, but in any case those would be fractions of your revenue allocated to different parties, and not additional fees.\",\n \"\\\"I don't think blanket answers are very helpful. You are asking the right question when you are young! You have a large number of investment options and Australia has the Superannuation system that you can extract significant tax value from. I've not attempted to grade these with regard to \\\"\\\"risk\\\"\\\", as different people will rate various things with different levels, depending on their experience and knowledge. Consider the following factors for you:-\\\"\",\n \"If this is the case, then shouldn't the difference between their annualized returns be same year on year? In general yes, however there difference has a compounding effect. i.e. if the difference if 5% first year, this money is invested and it would generate more of the said returns. However in reality as the corpus size of direct funds is very small, there difference is not very significant as other factors come into play.\",\n \"Behind the scenes, mutual funds and ETFs are very similar. Both can vary widely in purpose and policies, which is why understanding the prospectus before investing is so important. Since both mutual funds and ETFs cover a wide range of choices, any discussion of management, assets, or expenses when discussing the differences between the two is inaccurate. Mutual funds and ETFs can both be either managed or index-based, high expense or low expense, stock or commodity backed. Method of investing When you invest in a mutual fund, you typically set up an account with the mutual fund company and send your money directly to them. There is often a minimum initial investment required to open your mutual fund account. Mutual funds sometimes, but not always, have a load, which is a fee that you pay either when you put money in or take money out. An ETF is a mutual fund that is traded like a stock. To invest, you need a brokerage account that can buy and sell stocks. When you invest, you pay a transaction fee, just as you would if you purchase a stock. There isn't really a minimum investment required as there is with a traditional mutual fund, but you usually need to purchase whole shares of the ETF. There is inherently no load with ETFs. Tax treatment Mutual funds and ETFs are usually taxed the same. However, capital gain distributions, which are taxable events that occur while you are holding the investment, are more common with mutual funds than they are with ETFs, due to the way that ETFs are structured. (See Fidelity: ETF versus mutual funds: Tax efficiency for more details.) That having been said, in an index fund, capital gain distributions are rare anyway, due to the low turnover of the fund. Conclusion When comparing a mutual fund and ETF with similar objectives and expenses and deciding which to choose, it more often comes down to convenience. If you already have a brokerage account and you are planning on making a one-time investment, an ETF could be more convenient. If, on the other hand, you have more than the minimum initial investment required and you also plan on making additional regular monthly investments, a traditional no-load mutual fund account could be more convenient and less expensive.\",\n \"\\\"Lifecycle funds might be a suitable fit for you. Lifecycle funds (aka \\\"\\\"target date funds\\\"\\\") are a mutual fund that invests your money in other mutual funds based on how much time is left until you need the money-- they follow a \\\"\\\"glide-path\\\"\\\" of reducing stock holdings in favor of bonds over time to reduce volatility of your final return as you near retirement. The ones I've looked at don't charge a fee of their own for this, but they do direct your portfolio to actively managed funds. That said, the ones I've seen have an \\\"\\\"acquired\\\"\\\" expense ratio of less than what you're proposing you'd pay a professional. FWIW, my current plan is to invest in a binary portfolio of cheap mutual funds that track S&P500 and AGG and rebalance regularly. This is easy enough that I don't see the point of adding in a 1 percent commission.\\\"\",\n \"It means someone's getting paid too much. I'd check the sharpe ratio and compare that to similar funds along with their expense ratio. So in some scenarios it's not necessarily a bad thing but being informed is the important thing\",\n \"Excellent summary. I'd add a minor point that it's cheaper to setup and run a hedge fund. The legal fees associated with starting a 40 Act mutual fund are about $750,000. A hedge fund cane be setup for about $80,000. It's also cheaper to keep the hedge fund going as the reporting requirements are much less. source: Have setup hedge funds and mutual funds. edit: A word and source. Edi\",\n \"\\\"US-Australian tax treaty limits the tax the US can levy on interest payments to Australian residents at 10%. However, that is the \\\"\\\"worst\\\"\\\" situation. There are several exempted situations which your specific example may fall into where you wouldn't need to deal with the US taxes at all. I suggest contacting a tax accountant proficient in that treaty and the Australian tax law. You will still be obviously paying taxes in Australia.\\\"\",\n \"I'm of the belief that, long term, fees eat away at your performance. If you chose an ETF, say VOO, with its .05% expense, and a short term bond fund or money market fund, you are going be ahead, long term. It's pretty much accepted fact that money managers are not beating the average long term. For you to simply do as well as I do (S&P less .05%) your guy has to beat the market year in, year out, by 1.2%. Not going to happen. Yes, in hindsight, some funds have done this. Over the decades, losing funds are closed, or merged into performing ones. But, in the end, the average fund lags the average market return quite a bit. To pay someone 25% over two decades isn't what I'd recommend to anyone. There was recently a PBS Frontline special, The Retirement Gamble, (and this link to my article reviewing the show). I put up an image which shows the effect of 50 years' impact of expenses. The Vanguard S&P ETF, linked earlier has just a .05% fee. In my chart I show .1%, and then a total 1% or 2% fee. $447K return for .1%, $294K for 1%. I'm painfully aware that 3/4 of US taxpayers aren't saving at all. For those that are savers, the value in learning about investing is huge. This isn't a onetime $150K saved, but the savings on just that $10K deposit. Meanwhile, before you learn this, a pay-for-his-time fee-only planner is worth it, for a meeting and first year follow up.\",\n \"\\\"Your bank Lloyds sent the Australian bank $500 AUD, having converted $317.90 GBP at a rate of 1.5728 AUD per GBP which was slightly less than the published rate which normally applies to transfers measured in hundred thousands if not millions of pounds. Using the published rate amounts to an unstated fee of 11 AUD which you are not complaining about. You also paid a fee to Lloyds of 20 GBP which you disclosed after I had posted this answer. The Australian bank refused to accept the payment because the account to which the money had to be deposited was closed. Perhaps, instead of just sending back $500 AUD, it converted the amount to GBP (less its fee of what I suspect is $60 AUD) and sent it back. Notice that the bank rate of 1.592 AUD per GBP says that 276.58 GBP is what you get from a tad over $440 AUD, and so perhaps St George's charged you a $60 AUD fee for the conversion while converting the rest ($440 AUD) to GBP. Or maybe Lloyds got $500 AUD from St Georges and charged you a $60 AUD fee for converting it to GBP. Regardless of who did the conversion, it is also possible that the rate you got (not quite as good as the published rate) corresponds to $450 AUD converting to 276.58 GBP and a $50 AUD fee for the conversion. You said I was told by Lloyds TSB that St. Georges wouldn't levy any charges, as they would be paid a separate \\\"\\\"agent's fee\\\"\\\". This might have been told to you as \\\"\\\"St. Georges will not be levying any charges if you send $500 AUD for deposit to the account in Australia and your payee will get exactly $500 AUD if you pay us 317.90 GBP plus 20 GBP as our conversion fee today. If you want to send GBP instead, we cannot tell you how much to send because St. George's will levy a charge for conversion to AUD, and the conversion will be at the rate then prevailing. So your payee may receive more or less than $500 AUD.\\\"\\\" Perhaps, wanting to send exactly $500 AUD, you chose to pay Lloyds TSB and send AUD. But, since the account was closed, the money came back, and so you ended up paying yet another conversion fee. The questions are, who charged the second fee? As Muro said in a comment, it should be listed somewhere on the itemized statement. and is it a reasonable charge? I think $50 or $60 AUD is excessive but, then, I am not a bank, and maybe that is what their standard (minimum) charge is. As I said in my comment, the charge is usually a percentage of the amount transferred subject to a minimum levy that the bank sets.\\\"\",\n \"@sharam - big question. I am going to answer part of it, but not as directly as you might like. You mention 4-6 cents per unit per month, but fail to give a unit price, so it is hard to tell how much return you are really looking for. Given the amount you have to invest, depending on your time horizon, you will do much better outside of mutual funds. Many funds in this category have fees in the 2% range. You actually have enough money to have a diversified portfolio on your own, without recourse to funds. If you want to use a fund-like product, I encourage you to look at well established ETFs (Exchange Traded Funds). They are basically like mutual funds that trade on the open stock market. One good example in this category is iShares XDV Good Luck\",\n \"I misspoke, but really when you look at the exact same securities what other advantage does a fund have over a moderately wealthy investor than leverage and managerial clout? That and professional analysts can only give you so much of an edge.\",\n \"A mutual fund has several classes of shares that are charged different fees. Some shares are sold through brokers and carry a sales charge (called load) that compensates the broker in lieu of a fee that the broker would charge the client for the service. Vanguard does not have sales charge on its funds and you don't need to go through a broker to buy its shares; you can buy directly from them. Admiral shares of Vanguard funds are charged lower annual expenses than regular shares (yes, all mutual funds charge expenses for fund adninistration that reduce the return that you get, and Vanguard has some of the lowest expense ratios) but Admiral shares are available only for large investments, typically $50K or so. If you have invested in a Vanguard mutual fund, your shares can be set to automatically convert to Admiral shares when the investment reaches the right level. A mutual fund manager can buy and sell stocks to achieve the objectives of the fund, so what stockes you are invested in as a share holder in a mutual fund will typically be unknown to you on a day-to-day basis. On the other hand, Exchange-traded funds (ETFs) are fixed baskets of stocks, and you can buy shares in the ETF. These shares are bought and sold through a broker (so you pay a transaction fee each time) but expenses are lower since there is no manager to buy and sell stocks: the basket is fixed. Many ETFs follow specific market indexes (e.g. S&P 500). Another difference between ETFs and mutual funds is that you can buy and sell ETFs at any time of the day just as if you could if you held stocks. With mutual funds, any buy and sell requests made during the day are processed at the end of the day and the value of the shares that you buy or sell is determined by the closing price of the stocks held by the mutual fund. With ETFs, you are getting the intra-day price at the time the buy or sell order is executed by your broker.\",\n \"For mine, that info's in the quarterly reports... and in the prospectus, which you should be looking at before you put money into the fund.\",\n \"\\\"I just looked at a fund for my client, the fund is T Rowe Price Retirement 2015 (TRRGX). As stated in the prospectus, it has an annual expense ratio of 0.63%. In the fine print below the funds expenses, it says \\\"\\\"While the fund itself charges no management fee, it will indirectly bear its pro-rata share of the expenses of the underlying T. Rowe Price funds in which it invests (acquired funds). The acquired funds are expected to bear the operating expenses of the fund.\\\"\\\" One of it's acquired funds is TROSX which has an expense ratio of 0.86%. So the total cost of the fund is the weighted average of the \\\"\\\"acquired funds\\\"\\\" expense ratio's plus the listed expense ratio of the fund. You can see this at http://doc.morningstar.com/docdetail.aspx?clientid=schwab&key=84b36f1bf3830e07&cusip=74149P796 and its all listed in \\\"\\\"Fees and Expenses of the Fund\\\"\\\"\\\"\",\n \"http://www.efficientfrontier.com/ef/104/stupid.htm would have some data though a bit old about open-end funds vs an ETF that would be one point. Secondly, do you know that the Math on your ETF will always work out to whole numbers of shares or do you plan on using brokers that would allow fractional shares easily? This is a factor as $3,000 of an open-end fund will automatically go into fractional shares that isn't necessarily the case of an ETF where you have to specify a number of shares when you purchase as well as consider are you doing a market or limit order? These are a couple of things to keep in mind here. Lastly, what if the broker you use charges account maintenance fees for your account? In buying the mutual fund from the fund company directly, there may be a lower likelihood of having such fees. I don't know of any way to buy shares in the ETF directly without using a broker.\",\n \"According to my research one only needs £5000 to invest in this fund. However, it also has a sales charge of 4% with an annual charge of 1.75%. If this is short term money, you would have to have a fairly high return to break even.\",\n \"Before investing, absolutely follow the advice in mbhunter's answer. There is no safe investment (unless you count your mattress, and even there you could find moths, theives, or simple inflation taking a chunk out of your change). There is only maximizing your reward for a given level of risk - and there is always risk. This question should be enshrined somewhere on the Q&A site for its comprehensive list of sources for information on asset allocation. The tag is also going to have tons of good information for you. To answer your question on what slice of the pie is devoted to what, you can check out some common portfolios given by U. S. experts for U. S. investors - these should be convertible into Australian funds. Another portfolio that is, like all those above, loosely based on Modern Portfolio Theory for maximizing reward for a given level of risk is the Gone Fishin' Portfolio. A common denominator amongst these portfolios is that they emphasize index funds over mutual funds for their long-term performance and preference lazy management (yearly rebalancing is a common suggestion as the maximum level of involvement) over active management. You can see more Lazy Portfolios.\",\n \"\\\"Is he affiliated with the company charging this fee? If so, 1% is great. For him. You are correct, this is way too high. Whatever tax benefit this account provides is negated over a sufficiently long period of time. you need a different plan, and perhaps, a different friend. I see the ISA is similar to the US Roth account. Post tax money deposited, but growth and withdrawals tax free. (Someone correct, if I mis-read this). Consider - You deposit £10,000. 7.2% growth over 10 years and you'd have £20,000. Not quite, since 1% is taken each year, you have £18,250. Here's what's crazy. When you realize you lost £1750 to fees, it's really 17.5% of the £10,000 your account would have grown absent those fees. In the US, our long term capital gain rate is 15%, so the fees after 10 years more than wipe out the benefit. We are not supposed to recommend investments here, but it's safe to say there are ETFs (baskets of stocks reflecting an index, but trading like an individual stock) that have fees less than .1%. The UK tag is appreciated, but your concern regarding fees is universal. Sorry for the long lecture, but \\\"\\\"1%, bad.\\\"\\\"\\\"\",\n \"Zero. Zero is reasonable. That's what Schwab offers with a low minimum to open the IRA. The fact is, you'll have expenses for the investments, whether a commission on stock purchase or ongoing expense of a fund or ETF. But, in my opinion, .25% is criminal. An S&P fund or ETF will have a sub-.10% expense. To spend .25% before any other fees are added is just wrong.\",\n \"\\\"The portfolio described in that post has a blend of small slices of Vanguard sector funds, such as Vanguard Pacific Stock Index (VPACX). And the theory is that rebalancing across them will give you a good risk-return tradeoff. (Caveat: I haven't read the book, only the post you link to.) Similar ETFs are available from Vanguard, iShares, and State Street. If you want to replicate the GFP exactly, pick from them. (If you have questions about how to match specific funds in Australia, just ask another question.) So I think you could match it fairly exactly if you wanted to. However, I think trying to exactly replicate the Gone Fishin Portfolio in Australia would not be a good move for most people, for a few reasons: Brokerage and management fees are generally higher in Australia (smaller market), so dividing your investment across ten different securities, and rebalancing, is going to be somewhat more expensive. If you have a \\\"\\\"middle-class-sized\\\"\\\" portfolio of somewhere in the tens of thousands to low millions of dollars, you're cutting it into fairly small slices to manually allocate 5% to various sectors. To keep brokerage costs low you probably want to buy each ETF only once every one-two years or so. You also need to keep track of the tax consequences of each of them. If you are earning and spending Australian dollars, and looking at the portfolio in Australian dollars, a lot of those assets are going to move together as the Australian dollar moves, regardless of changes in the underlying assets. So there is effectively less diversification than you would have in the US. The post doesn't mention the GFP's approach to tax. I expect they do consider it, but it's not going to be directly applicable to Australia. If you are more interested in implementing the general approach of GFP rather than the specific details, what I would recommend is: The Vanguard and superannuation diversified funds have a very similar internal split to the GFP with a mix of local, first-world and emerging market shares, bonds, and property trusts. This is pretty much fire-and-forget: contribute every month and they will take care of rebalancing, spreading across asset classes, and tax calculations. By my calculations the cost is very similar, the diversification is very similar, and it's much easier. The only thing they don't generally cover is a precious metals allocation, and if you want that, just put 5% of your money into the ASX:GOLD ETF, or something similar.\\\"\",\n \"ETFs are a type of investment, not a specific choice. In other words, there are good ETFs and bad. What you see is the general statement that ETFs are preferable to most mutual funds, if only for the fact that they are low cost. An index ETF such as SPY (which reflects the S&P 500 index) has a .09% annual expense, vs a mutual fund which average a full percent or more. sheegaon isn't wrong, I just have a different spin to offer you. Given a long term return of say even 8% (note - this question is not a debate of the long term return, and I purposely chose a low number compared to the long term average, closer to 10%) and the current CD rate of <1%, a 1% hit for the commission on the buy side doesn't bother me. The sell won't occur for a long time, and $8 on a $10K sale is no big deal. I'd not expect you to save $1K/yr in cash/CDs for the years it would take to make that $8 fee look tiny. Not when over time the growth will overshaddow this. One day you will be in a position where the swings in the market will produce the random increase or decrease to your net worth in the $10s of thousands. Do you know why you won't lose a night's sleep over this? Because when you invested your first $1K, and started to pay attention to the market, you saw how some days had swings of 3 or 4%, and you built up an immunity to the day to day noise. You stayed invested and as you gained wealth, you stuck to the right rebalancing each year, so a market crash which took others down by 30%, only impacted you by 15-20, and you were ready for the next move to the upside. And you also saw that since mutual funds with their 1% fees never beat the index over time, you were happy to say you lagged the S&P by .09%, or 1% over 11 year's time vs those whose funds had some great years, but lost it all in the bad years. And by the way, right until you are in the 25% bracket, Roth is the way to go. When you are at 25%, that's the time to use pre-tax accounts to get just below the cuttoff. Last, welcome to SE. Edit - see sheegaon's answer below. I agree, I missed the cost of the bid/ask spread. Going with the lowest cost (index) funds may make better sense for you. To clarify, Sheehan points out that ETFs trade like a stock, a commission, and a bid/ask, both add to transaction cost. So, agreeing this is the case, an indexed-based mutual fund can provide the best of possible options. Reflecting the S&P (for example) less a small anual expense, .1% or less.\",\n \"My main criterion for choosing a broker is the fee schedule. I care about investing in index funds and paying as little as possible in fees. In the US that brings everyone to Vanguard or Fidelity, and currently Vanguard edges Fidelity out on costs for the particular funds I am invested in.\",\n \"When investigating transferring funds from the UK to Australia, I found the exchange rate offered by by banks for swift / Telegraphic transfers to be far below companies which specialise in international transfers. Not applicable to you unfortunately, but I used http://www.ozforex.com.au/ and got a conversion rate which ended up netting me $100's of dollars compared with my banks, thanks to a better rate and no fee.\",\n \"Every 401(k) has managers to make the stock choices. They all have different rates. You want to see that fidelity or Vangard is handling your 401(k).(and I am sure others) If you have a mega bank managing your funds or an insurance company odds are you are paying way to high management fees. So find out, the management fees should be available should be less than 1%. They can get as high as 2%...Ouch\",\n \"I quite like the Canadian Couch Potato which provides useful information targeted at investors in Canada. They specifically provide some model portfolios. Canadian Couch Potato generally suggests investing in indexed ETFs or mutual funds made up of four components. One ETF or mutual fund tracking Canadian bonds, another tracking Canadian stocks, a third tracking US stocks, and a fourth tracking international stocks. I personally add a REIT ETF (BMO Equal Weight REITs Index ETF, ZRE), but that may complicate things too much for your liking. Canadian Couch Potato specifically recommends the Tangerine Streetwise Portfolio if you are looking for something particularly easy, though the Management Expense Ratio is rather high for my liking. Anyway, the website provides specific suggestions, whether you are looking for a single mutual fund, multiple mutual funds, or prefer ETFs. From personal experience, Tangerine's offerings are very, very simple and far cheaper than the 2.5% you are quoting. I currently use TD's e-series funds and spend only a few minutes a year rebalancing. There are a number of good ETFs available if you want to lower your overhead further, though Canadians don't get quite the deals available in the U.S. Still, you shouldn't be paying anything remotely close to 2.5%. Also, beware of tax implications; the website has several articles that cover these in detail.\",\n \"The math is wrong. $16m grows to $72b over 44 years at 21% return (exact return is (72000/16)^(1/44) - 1 = 0.21067). At one percentage point lower return, i.e. 20%, $16m grows to $50b (16m x 1.21^44 = 49.985b). In that case you would have paid about 30 percent of your gain in fees. Still a lot, but not severe. Even the calculation of percent fees is wrong in the article!\",\n \"You could get a Multi-Currency Cash Passport which has no transaction fees for deposits or withdrawals. (You can pick one up at Australia Post.) This allows you to load it with money now in US dollars. The exchange rate is locked in at the time you load it to the card. When you're in the USA, just use that card or get the cash out from an ATM so you can deposit it into a US bank. To see the exchange rate they charge, you can scroll to the very bottom of their Fees and Limits page at there's a nice little table you can compare with. Otherwise, they've got a calculator tool.\",\n \"Some index funds offer lower expense ratios to those who invest large amounts of money. For example, Vanguard offers Admiral Shares of many of its mutual funds (including several index funds) to individuals who invest more than $50K or $100K, and these Shares have lower expense ratios than the Investor shares in the fund. There are Institutional Shares designed for investments by pension plans, 401k plans of large companies etc which have even lower expenses than Admiral Shares. Individuals working for large companies sometimes get access to Institutional Shares through their 401k plans. Thus, there is something to gained by investing in just one index fund (for a particular index) that offers lower expense ratios for large investments instead of diversifying into several index funds all tracking the same index. Of course, this advantage might be offset by failure to track the index closely, but this tracking should be monitored not on a daily basis but over much longer periods of time to test whether your favorite fund is perennially trailing the index by far more than its competitors with larger expense ratios. Remember that the Net Asset Value (NAV) published by each mutual fund after the markets close already take into account the expense ratio.\",\n \"If you want higher returns you may have to take on more risk. From lowest returns (and usually lower risk) to higher returns (and usually higher risk), Bank savings accounts, term deposits, on-line savings accounts, offset accounts (if you have a mortgage), fixed interest eg. Bonds, property and stock markets. If you want potentially higher returns then you can go for derivatives like options or CFDs, FX or Futures. These usually have higher risks again but as with any investments some risks can be partly managed. Also, CMC Markets charges $11 commission up to $10,000 trade. This is actually quite a low fee - based on your $7,000, $22 for in and out of a position would be less than 0.32% (of course you might want to buy into more than one company - so your brokerage would be slightly higher). Still this is way lower than full service brokerage which could be $100 or more in and then again out again. What ever you decide to do, get yourself educated first.\",\n \"\\\"What are reasonable administrative fees for an IRA? was recently discussed here. My answer was zero. An IRA is not an investment, it's a container representing the tax status of an account. Once you decide what to actually invest it in, you'll likely incur additional fees. Mutual funds, for instance can range from .05% per year to 2.00% or more. In your case, you are telling us you are spending 2% per year even before you decide what to invest in. The real question I'd like to see answered is \\\"\\\"what value can an advisor bring to one's retirement account to deserve a 2%/year fee?\\\"\\\" My final thought - most financial types had been suggesting that a retiree can target a 4% per year withdrawal after retiring. This rule of thumb has been debated since the lost decade of 2000-2009, and the safe number may be lower. If an advisor is taking 2% off the top, you are basically sharing half your income with him. A million dollar IRA, you get $20K, he gets $20K?\\\"\",\n \"There are several things being mixed up in the questions being asked. The expense ratio charged by the mutual fund is built into the NAV per share of the fund, and you do not see the charge explicitly mentioned as a deduction on your 401k statement (or in the statement received from the mutual fund in a non-401k situation). The expense ratio is listed in the fund's prospectus, and should also have been made available to you in the literature about the new 401k plan that your employer is setting up. Mutual fund fees (for things like having a small balance, or for that matter, sales charges if any of the funds in the 401k are load funds, God forbid) are different. Some load mutual funds waive the sales charge load for 401k participants, while some may not. Actually, it all depends on how hard the employer negotiates with the 401k administration company who handles all the paperwork and the mutual fund company with which the 401k administration company negotiates. (In the 1980s, Fidelity Magellan (3% sales load) was a hot fund, but my employer managed to get it as an option in our plan with no sales load: it helped that my employer was large and could twist arms more easily than a mom-and-pop outfit or Solo 401k plan could). A long long time ago in a galaxy far far away, my first ever IRA contribution of $2000 into a no-load mutual fund resulted in a $25 annual maintenance fee, but the law allowed the payment of this fee separately from the $2000 if the IRA owner wished to do so. (If not, the $25 would reduce the IRA balance (and no, this did not count as a premature distribution from the IRA). Plan expenses are what the 401k administration company charges the employer for running the plan (and these expenses are not necessarily peanuts; a 401k plan is not something that needs just a spreadsheet -- there is lots of other paperwork that the employee never gets to see). In some cases, the employer pays the entire expense as a cost of doing business; in other cases, part is paid by the employer and the rest is passed on to the employees. As far as I know, there is no mechanism for the employee to pay these expenses outside the 401k plan (that is, these expenses are (visibly) deducted from the 401k plan balance). Finally, with regard to the question asked: how are plan fees divided among the investment options? I don't believe that anyone other than the 401k plan administrator or the employer can answer this. Even if the employer simply adopts one of the pre-packaged plans offered by a big 401k administrator (many brokerages and mutual fund companies offer these), the exact numbers depend on which pre-packaged plan has been chosen. (I do think the answers the OP has received are rubbish).\",\n \"https://www.ato.gov.au/Business/GST/ Some of the costs are indeed related to the conversion rate, which, as we all know,changes daily. You don't say whether you're using a credit card. If so, some cards do charge foreign transaction fees; some do not. However, Australia, like many European countries, does use a VAT system. Therefore your charges will be increased. Please be aware that these taxes are built into the economic system. In many cases, you van apply for and receive a waiver to be reimbursed if the purchase is made through a duty free store.\",\n \"For a lot of info on different funds, fees, average returns, etc, see this site. (Not all sections are free - but areas like Best of the Rest are, and they offer good basic starting info.) I think for getting further into the nitty-gritty, for example if a fund is socially responsible, you will need to go to the individual fund sites or read reviews - although sites like Morningstar may help. However, a few funds like this are: HESTA, Cruelty Free Super, and VicSuper (I'm with the latter). It might be useful to check out their sites to orient yourself to the Aussie approach to this issue, and then start searching more broadly from there. And for what it's worth, for a general overview of the Superannuation system, and some nice-to-know info, see this page on the Oz govt website.\",\n \"AUD is not a great choice as it has nowhere to go against USD but down. Take a look at the 5 year graph http://au.finance.yahoo.com/q/bc?s=AUDUSD=X&t=5y&l=on&z=l&q=l&c= Most in Australia predict that it will eventually hover around 0.8, at which point you would have lost almost 20% of your savings. Another thing is that savings interest is taxed in Australia, so take that rate with a grain of salt. For a typical household that would be a 30% tax, at which point it is just in line with inflation, so real term growth is nil.\",\n \"Should you care? From Vanguard: The long-term impact of investment costs on portfolio balances Assuming a starting balance of $100,000 and a yearly return of 6%, which is reinvested Check out this chart, reflecting the impact of relatively small expense ratios on your 30 year return: All else being equal you should very much care about expense ratios. You end up with a significantly smaller amount if your pre-expense return is the same. A 0.75% difference in ER compounds to 20% over 30 years. If so, how should I take them into consideration when comparing funds? I'm in the U.S. if that matters. If they track the same index, cheaper is better. The cases where higher expense ratios might be better are if you believe that index will outperform the market by enough to recoup the cost of the ER. There is significant research that most funds do not do this.\",\n \"0.13% is a pretty low fee. PTTRX expenses are 0.45%, VINIX expenses are 0.04%. So based on your allocation, you end up with at least 0.08%. While lower than 0.13%, don't know if it is worth the trouble (and potentially fees) of monthly re-balancing.\",\n \"Mutual funds are funds composed of financial assets and the funds of investors, and are managed by a firm, usually a large wealth management firm. They are generally accessible to anyone. Hedge funds are private investment funds with limited access, and are subject to fewer regulations. They are usually legally set up as their own firm.\",\n \"\\\"One other thing to consider, particularly with Vanguard, is the total dollar amount available. Vanguard has \\\"\\\"Admiralty\\\"\\\" shares of funds which offer lower expense ratios, around 15-20% lower, but require a fairly large investment in each fund (often 10k) to earn the discounted rate. It is a tradeoff between slightly lower expense ratios and possibly a somewhat less diverse holding if you are relatively early in your savings and only have say 20-30k (which would mean 2 or 3 Admiralty share funds only).\\\"\",\n \"Here's the purely mathematical answer for which fees hurt more. You say taking the money out has an immediate cost of $60,000. We need to calculate the present value of the future fees and compare it against that number. Let's assume that the investment will grow at the same rate either with or without the broker. That's actually a bit generous to the broker, since they're probably investing it in funds that in turn charge unjustifiable fees. We can calculate the present cost of the fees by calculating the difference between: As it turns out, this number doesn't depend on how much we should expect to get as investment returns. Doing the math, the fees cost: 220000 - 220000 * (1-0.015)^40 = $99809 That is, the cost of the fees is comparable to paying nearly $100,000 right now. Nearly half the investment! If there are no other options, I strongly recommend taking the one-time hit and investing elsewhere, preferably in low-cost index funds. Details of the derivation. For simplicity, assume that both fees and growth compound continuously. (The growth does compound continuously. We don't know about the fees, but in any case the distinction isn't very significant.) Fees occur at a (continuous) rate of rf = ln((1-0.015)^4) (which is negative), and growth occurs at rate rg. The OPs current principal is P, and the present value of the fees over time is F. We therefore have the equation P e^((rg+rf)t) = (P-F) e^(rg t) Solving for F, we notice that the e^rg*t components cancel, and we obtain F = P - P e^(rf t) = P - P e^(ln((1-0.015)^4) t) = P - P (1-0.015)^(4t)\",\n \"Mary Holm, who has a column on money in the NZ Herald, had this to say on the matter: Research shows that over and over again, the top dogs in one decade can be bottom dogs the next decade, and vice versa. Past performance really is no guide to the future. ... Fees are much less likely than returns to change over time. And low fees make a big difference to the long-term growth of your account. So just how low are your fund's fees? Perhaps that means the most sensible bet would be to pick a fund with good (but not necessarily best) historical returns but also with low fees. Personally, I've also included ethics as a factor in the decision, and I chose the ethical investment option offered by Superlife, hoping that it makes a small difference as explained here. (I have no affiliation with Superlife)\",\n \"Most mutual funds underperform the stock market. Of those that over-perform, much of the performance can be attributed to dumb luck. Most mutual funds exist to generate fees from you, rather than make you wealthy. In my opinion, if you want to invest in one, choose a no-load index fund, and you will outperform most other funds. Better still get some good financial education and learn to manage your funds/investments yourself.\",\n \"that's just it, though - they are splitting up the 1%! and in most cases, especially vanguard, they are splitting up far less. ETFs don't have 12b-1 fees. explaining why you're experiencing different returns for ETFs will almost certainly involve something other than their expense. again, this is especially true for vanguard. they have the cheapest ETFs around (though i think schwab beats them on a few now). i can only guess at the full compensation structure. betterment likely earns money on cash reserves and securities hypothecation (i guess?). they also charge a small fee from what i understand. finance is very slim these days. i guess i'm wondering what your ultimate question is. if it's the inter corporate compensation structure, above is my best guess. if it's about performance, then we need to compare the ETFs you are looking at. if it's about the fees on funds, i think we covered that! as an advisor, it's my experience that very specific inquiries about fees have a deeper concern. people hear a lot about being overcharged so cost is a very standard place for clients to initially look when trying to compare performance of portfolios or securities.\",\n \"There is a LOT of shuffling going on in the financial services industry. I would not immediately say your advisor is acting in bad faith. The DOL fiduciary changes are quite significant for some brokers. Investment Advisors who are fee-based have less of an impact since they are already fiduciaries. That being said, your issue is still the same. How can you get a low-cost solution to your problem? You might want to consider Vanguard, Fidelity, or another mutual fund company that can keep your costs low. However, you should understand that if you are using mutual funds, the fees are paid one way or another. 12b1 fees, commissions, and expenses are all deducted from the fund's gross returns. You have to choose between low cost and paid advice. you cannot get high-quality low-cost advice. Fortunately, there are a lot of new solutions out there, robo-advisors, indexing, asset allocation mutual funds, ETFs, and more. Do a bit of homework and you should be able to come up with a reasonable solution. I hope you found this helpful. Kirk\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["This is a Vanguard-specific difference in the sense that in the US, Vanguard is a leader in lowering management fees for the mutual funds that they offer. Of course, several US mutual fund companies have also been lowering the expense ratio of their mutual funds in recent years because more and more investors have been paying attention to this particular performance parameter, and opting for funds that have low expense ratios. But many US funds have not reduced their expense ratios very much and continue to have expense ratios of 1% or even higher. For example, American Funds Developing World Growth and Income Fund (DWGAX) charges a 1.39% expense ratio while their 2060 Retirement Fund (AANTX) charges 1.12% (the funds also have a 5.75% sales charge); Putnam Capital Opportunities Fund charges 1.91% for their Class C shares, and so on. Many funds with high expense ratios (and sometimes sales charges as well) show up as options in far too many 401(k) plans, especially 401(k) plans of small companies, because small companies do not enjoy economies of scale and do not have much negotiating power when dealing with 401(k) custodians and administrators."],"string":"[\n \"This is a Vanguard-specific difference in the sense that in the US, Vanguard is a leader in lowering management fees for the mutual funds that they offer. Of course, several US mutual fund companies have also been lowering the expense ratio of their mutual funds in recent years because more and more investors have been paying attention to this particular performance parameter, and opting for funds that have low expense ratios. But many US funds have not reduced their expense ratios very much and continue to have expense ratios of 1% or even higher. For example, American Funds Developing World Growth and Income Fund (DWGAX) charges a 1.39% expense ratio while their 2060 Retirement Fund (AANTX) charges 1.12% (the funds also have a 5.75% sales charge); Putnam Capital Opportunities Fund charges 1.91% for their Class C shares, and so on. Many funds with high expense ratios (and sometimes sales charges as well) show up as options in far too many 401(k) plans, especially 401(k) plans of small companies, because small companies do not enjoy economies of scale and do not have much negotiating power when dealing with 401(k) custodians and administrators.\"\n]","isConversational":false}}},{"rowIdx":90,"cells":{"_id":{"kind":"string","value":"11039"},"query":{"kind":"string","value":"Pay off credit card debt or earn employer 401(k) match?"},"gt_ids":{"kind":"list like","value":["53544","202768","353625","293531","249063","79363","330058","91183"],"string":"[\n \"53544\",\n \"202768\",\n \"353625\",\n \"293531\",\n \"249063\",\n \"79363\",\n \"330058\",\n \"91183\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1,1,1,1,1,1,1],"string":"[\n 1,\n 1,\n 1,\n 1,\n 1,\n 1,\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["91183","287876","79363","293531","5203","392924","272223","353625","422142","552383","508534","345895","437706","462481","350131","130691","534837","477511","202768","330058","115499","163287","244692","299819","577517","519750","60017","409681","4810","317419","310361","390655","329249","463260","486402","256323","160780","423816","457945","35357","561056","52136","519967","315836","53544","284827","137267","449294","426215","367272","147889","303795","590711","500034","268699","465916","480036","43573","531051","428150","79038","455033","176110","499752","486574","477452","124042","281049","78361","551145","344206","333219","115717","2619","389019","354985","1366","493578","204035","555377","245786","261697","401450","262026","305862","422421","373554","396889","464080","420727","235036","8088","213159","81206","232049","105557","159762","28230","114592","278290"],"string":"[\n \"91183\",\n \"287876\",\n \"79363\",\n \"293531\",\n \"5203\",\n \"392924\",\n \"272223\",\n \"353625\",\n \"422142\",\n \"552383\",\n \"508534\",\n \"345895\",\n \"437706\",\n \"462481\",\n \"350131\",\n \"130691\",\n \"534837\",\n \"477511\",\n \"202768\",\n \"330058\",\n \"115499\",\n \"163287\",\n \"244692\",\n \"299819\",\n \"577517\",\n \"519750\",\n \"60017\",\n \"409681\",\n \"4810\",\n \"317419\",\n \"310361\",\n \"390655\",\n \"329249\",\n \"463260\",\n \"486402\",\n \"256323\",\n \"160780\",\n \"423816\",\n \"457945\",\n \"35357\",\n \"561056\",\n \"52136\",\n \"519967\",\n \"315836\",\n \"53544\",\n \"284827\",\n \"137267\",\n \"449294\",\n \"426215\",\n \"367272\",\n \"147889\",\n \"303795\",\n \"590711\",\n \"500034\",\n \"268699\",\n \"465916\",\n \"480036\",\n \"43573\",\n \"531051\",\n \"428150\",\n \"79038\",\n \"455033\",\n \"176110\",\n \"499752\",\n \"486574\",\n \"477452\",\n \"124042\",\n \"281049\",\n \"78361\",\n \"551145\",\n \"344206\",\n \"333219\",\n \"115717\",\n \"2619\",\n \"389019\",\n \"354985\",\n \"1366\",\n \"493578\",\n \"204035\",\n \"555377\",\n \"245786\",\n \"261697\",\n \"401450\",\n \"262026\",\n \"305862\",\n \"422421\",\n \"373554\",\n \"396889\",\n \"464080\",\n \"420727\",\n \"235036\",\n \"8088\",\n \"213159\",\n \"81206\",\n \"232049\",\n \"105557\",\n \"159762\",\n \"28230\",\n \"114592\",\n \"278290\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["\"There is a very simple calculation that will answer the question: Is the expected ROI of the 401K including the match greater than the interest rate of your credit card? Some assumptions that don't affect the calculation, but do help illustrate the points. You have 30 years until you can pull out the 401K. Your credit card interest rate is 20% compounded annually. The minimum payoffs are being disregarded, because that would legally just force a certain percentage to credit card. You only have $1000. You can either pay off your credit card or invest, but not both. For most people, this isn't the case. Ideally, you would simply forego $1000 worth of spending, AND DO BOTH Worked Example: Pay $1000 in Credit Card Debt, at 20% interest. After 1 year, if you pay off that debt, you no longer owe $1200. ROI = 20% (Duh!) After 30 years, you no longer owe (and this is pretty amazing) $237,376.31. ROI = 23,638% In all cases, the ROI is GUARANTEED. Invest $1000 in matching 401k, with expected ROI of 5%. 2a. For illustration purposes, let's assume no match After 1 year, you have $1050 ($1000 principal, $0 match, 5% interest) - but you can't take it out. ROI = 5% After 30 years, you have $4321.94, ROI of 332% - assuming away all risk. 2b. Then, we'll assume a 50% match. After 1 year, you have $1575 ($1000 principle, $500 match, 5% interest) - but you can't take it out. ROI = 57% - but you are stuck for a bit After 30 years, you have $6482.91, ROI of 548% - assuming away all risk. 2c. Finally, a full match After 1 year, you have $2100 ($1000 principle, $1000 match, 5% interest) - but you can't take it out. ROI = 110% - but again, you are stuck. After 30 years, you have $8643.89, ROI of 764% - assuming away all risk. Here's the summary - The interest rate is really all that matters. Paying off a credit card is a guaranteed investment. The only reason not to pay off a 20% credit card interest rate is if, after taxes, time, etc..., you could earn more than 20% somewhere else. Note that at 1 year, the matching funds of a 401k, in all cases where the match exceeded 20%, beat the credit card. If you could take that money before you could have paid off the credit card, it would have been a good deal. The problem with the 401k is that you can't realize that gain until you retire. Credit Card debt, on the other hand, keeps growing until you pay it off. As such, paying off your credit card debt - assuming its interest rate is greater than the stock market (which trust me, it almost always is) - is the better deal. Indeed, with the exception of tax advantaged mortgages, there is almost no debt that has an interest rate than is \"\"better\"\" than the market.\"","If your employer is matching 50 cents on the dollar then your 401(k) is a better place to put your money than paying off credit cards This. Assuming you can also get the credit cards paid off reasonably soon too (say, by next year). Otherwise, you have to look at how long before you can withdraw that money, to see if the compounded credit card debt isn't growing faster than your retirement. But a guaranteed 50% gain, your first year is a pretty hard deal to beat. And if you currently have no savings, unless all of your surplus income has been reducing your debt, you're living beyond your means. You should be earning more than you're (going to be) spending, when you start paying rent/car bills. If you don't know what this is going to be, you need to be budgeting. Get this under control, by any means necessary. New job/career? Change priorities/expectations? Cut expenses? Live to your budget? Whatever it takes. I don't think you should be in any investment that includes bonds until you're 40, and maybe not even then - equities and cash-equivalents all the way (cash is for emergency funds, and for waiting for buying opportunities). Otherwise Michael has some good ideas. I would caveat that I think you should not buy any investments in one chunk, but dollar average it over some period of time, in case the market is unnaturally high right when you decide to invest. You should also gauge possible returns and potential tax liabilities. Debt is good to get rid of, unless it is good debt (very low interest rates - ie: lower than you could borrow the money for). Good debt should still get paid off - who knows how long your job could last for - but maybe not dump all of your $50K on it. Roth is amazing. You should be maxing that contribution out every year.","Mathwise, I absolutely agree with the other answers. No contest, you should keep getting the match. But, just for completeness, I'll give a contrarian opinion that is generally not very popular, but does have some merit. If you can focus on just one main financial goal at a time, and throw every extra dollar you have at that one focus (i.e., getting out of debt, in your case), you will make better progress than if you're trying to do too many things at once. Also, there something incredibly freeing about being out of debt that has other beneficial impacts on your life. So, if you can bring a lot of focus to the credit card debt and get it paid off quickly, it may be worth deferring the 401(k) investing long enough to do that, even though it doesn't make as much mathematical sense. (This is essentially what Dave Ramsey teaches, BTW.)","\"Agree with Randy, if debt and debt reduction was all about math, nobody would be in debt. It is an emotional game. If you've taken care of the reasons you're in debt, changed your behaviors, then start focusing on the math of getting it done faster. Otherwise, if you don't have a handle on the behaviors that got you there, you're just going to get more rope to hang yourself with. I.e., makes sense to take a low-interest home equity loan to pay off high-interest credit card debt, but more likely than not, you'll just re-rack up the debt on the cards because you never fixed the behavior that put you into debt. Same thing here, if you opt not to contribute to \"\"pay off the cards\"\" without fixing the debt-accumulating behaviors, what you're going to do is stay in debt AND not provide for retirement. Take the match until you're certain you have your debt accumulation habits in check.\"","I have credit card debt of about $5000 That's the answer right there. You told us the 401(b) has no match. The next highest priority would be credit card debt that's costing you interest. You didn't mention the rate on the card, I'm assuming it's 8% or more. As far as your balance sheet (the 'bottom line') is concerned, pay off a 10% debt is the same as earning 10% on your money. If anyone promises you a higher return with a different investment, I'd run the other way. We hope the market, i.e. the US stock market, as measured by a broad index, say the S&P 500, will return 8-10%/yr over the long term, but this isn't guaranteed. Paying off that credit card will save you the interest every year, and free up the payments to invest elsewhere. In response to Marlene's comment - Crazy? No. Human nature and emotion is what it is. I honestly don't know how to address some of it. Years ago, I was in a similar situation with a reader who had a $5000 'emergency' account, yet had $5000 in credit card debt. I had a tough time getting my head around why it wasn't obvious this made no sense. In your case, I might suggest you pay the card down to below $1000 and have the credit line reduced. Paying high interest on $5K makes no sense at any point in one's life. At least a 20-something can dig his way out and learn a lesson. A pre-retiree shouldn't be throwing this money away.","\"First of all, you need to stop using the card completely. Yes, that means you lose out on cash back, double miles, whatever, but that's how you got to this mess in the first place. Switch to a cash budget until you can consistently spend less than you bring home. Keep better track of your expenses, build an emergency fund, and learn to save for expenses rather than borrow for them until you have your spending under control. If you can't cut your expenses any more, consider ways to increase your income (more hours at work, part-time jobs, sell stuff, etc.) Assuming that the employer match is 1-to-1 up to 4%, and you're saving an additional 7 percent to get to 15% total, I would definitely lower your contribution down to 4%, get the card paid off, and ONLY bump your contribution back up once you can safely pay off the card each month and know how much you can contribute. It is not wise to put 15% in retirement if that causes you to spend more than your net take-home pay. Your \"\"13%\"\" in your Roth is not guaranteed by any means, but the interest you pay on your credit card is. I would even be tempted to cut your retirement completely until the debt is paid, but more for motivational reasons that mathematical: I would be more concerned about living within your income at this point than getting a company match. I believe the benefits of spending wisely will outweigh a temporary loss in matched retirement funds in the long run.\"","\"The original question was aimed at early payment on a student loan at 6%. Let's look at some numbers. Note, the actual numbers were much lower, I've increased the debt to a level that's more typical, as well as more likely to keep the borrower worried, and \"\"up at night.\"\" On a $50K loan, we see 2 potential payoffs. A 6 year accelerated payoff which requires $273.54 extra per month, and the original payoff, with a payment of $555.10. Next, I show the 6 year balance on the original loan terms, $23,636.44 which we would need to exceed in the 401(k) to consider we made the right choice. The last section reflects the 401(k) balance with different rates of return. I purposely offer a wide range of returns. Even if we had another 'lost decade' averaging -1%/yr, the 401(k) balance is more than 50% higher than the current loan debt. At a more reasonable 6% average, it's double. (Note: The $273.54 deposit should really be adjusted, adding 33% if one is in the 25% bracket, or 17.6% if 15% bracket. That opens the can of worms at withdrawal. But let me add, I coerced my sister to deposit to the match, while married and a 25%er. Divorced, and disabled, her withdrawals are penalty free, and $10K is tax free due to STD deduction and exemption.) Note: The chart and text above have been edited at the request of a member comment. What about an 18% credit card? Glad you asked - The same $50K debt. It's tough to imagine a worse situation. You budgeted and can afford $901, because that's the number for a 10 year payoff. Your spouse says she can grab a extra shift and add $239/mo to the plan, because that' the number to get to a 6 year payoff. The balance after 6 years if we stick to the 10 year plan? $30,669.82. The 401(k) balances at varying rates of return again appear above. A bit less dramatic, as that 18% is tough, but even at a negative return the 401(k) is still ahead. You are welcome to run the numbers, adjust deposits for your tax rate and same for withdrawals. You'll see -1% is still about break-even. To be fair, there are a number of variables, debt owed, original time for loan to be paid, rate of loan, rate of return assumed on the 401(k), amount of potential extra payment, and the 2 tax rates, going in, coming out. Combine a horrific loan rate (the 18%) with a longer payback (15+ years) and you can contrive a scenario where, in fact, even the matched funds have trouble keeping up. I'm not judging, but I believe it's fair to say that if one can't find a budget that allows them to pay their 18% debt over a 10 year period, they need more help that we can offer here. I'm only offering the math that shows the power of the matched deposit. From a comment below, the one warning I'd offer is regarding vesting. The matched funds may not be yours immediately. Companies are allowed to have a vesting schedule which means your right to this money may be tiered, at say, 20%/year from year 2-6, for example. It's a good idea to check how your plan handles this. On further reflection, the comments of David Wallace need to be understood. At zero return, the matched money will lag the 18% payment after 4 years. The reason my chart doesn't reflect that is the match from the deposits younger than 4 years is still making up for that potential loss. I'd maintain my advice, to grab the match regardless, as there are other factors involved, the more likely return of ~8%, the tax differential should one lose their job, and the hope that one would get their act together and pay the debt off faster.\"","\"For easy math, say you are in the 25% tax bracket. A thousand deposited dollars is $750 out of your pocket, but $2000 after the match. Now, you say you want to take the $750 and pay down the card. If you wait a year (at 20%) you'll owe $900, but have access to borrow a full $1000, at a low rate, 4% or so. The payment is less than $19/mo for 5 years. So long as one is comfortable juggling their debt a bit, the impact of a fully matched 401(k) cannot be beat. Keep in mind, this is a different story than those who just say \"\"don't take a 401(k) loan.\"\" Here, it's the loan that offers you the chance to fund the account. If you are let go, and withdraw the money, even at the 25% rate, you net $1500 less the $200 penalty, or $1300 compared to the $750 you are out of pocket. If you don't want to take the loan, you're still ahead so long as you are able to pay the cards over a reasonable time. I'll admit, a 20% card paid over 10+ years can still trash a 100% return. This is why I add the 401(k) loan to the mix. The question for you - jldugger - is how tight is the budget? And how much is the match? Is it dollar for dollar on first X%?\"","The long term growth is not 6.5%, it's 10% give or take. But, that return comes with risk. A standard deviation of 14%. Does the 401(k) have a match? And are you getting the full match? If no match, or you already top it off, the 6.5% is a rate that I'd be happy to get on my money. So, I would pay it off faster. My highest rate debt is my 3.5% mortgage, which is 2.5% after tax. At 2.5%, I prefer to be a borrower, as that gap 2.5%-10% is pretty appealing, long term.","\"Aside from employer 401(k) matches (which may double your money immediately), paying off debts is almost always the best place to start. Paying off a debt early is a zero-risk operation and will earn you N% (where N is your interest rate). Is that a good deal for a zero-risk return? The closest equivalent today (Aug 24, 2012) is that you can earn about 2.68% on 10-year Treasury bonds. Unless you have a really, really good interest rate (or the interest is tax-deductible), paying off your loan will offer an excellent risk-adjusted return, so you should do that. The \"\"really good\"\" interest rate is typically a mortgage or student loans. (Mortgage interest is also tax-deductible, at least for now.) In those cases, you're not going to gain nearly as much by paying the loan early, and the loan is large - larger than the amount you want to have in risk-free investments. You want to invest for returns, as well! So you can save for retirement instead (in a 401(k) or similar account) and take on a little risk.\"","John's answer is great, the question, however, is complex enough that one can write a book on the topic. So, I'll take the liberty to add two observations. The matched 401(k) should be the priority, even before paying off one's credit cards if any. A dollar for dollar match combined with the extra years of compounding is worth a bit longer on the debt pay off. To a younger person, the Roth (either Roth 401(k) or IRA) is a good choice while you are in a lower tax bracket. I recommend you look at the page at Fairmark to understand the tax brackets. It's easy to see how many people straddle that 15% line (at $68K taxable) and with a bit of planning, using Roth while in the 15% bracket and deductible accounts as you go above, you can tax-manage your affairs to avoid the higher rates.","\"I have never double-answered till now. This loan can't be taken out of context. By the way, how much is it? What rate? \"\"Debt bad.\"\" Really? Line the debt up. This is the highest debt you have. But, you work for a company that offers a generous match, i.e. the match to your 401(k). Now, it's a choice, pay off 6% debt or deposit that money to get an immediate 100% return. Your question has validity. In the end, we can tell you when to pay off the debt. After - The issue is that you are quoting a third party without having the discussion or ever being privy to it. In court, this is called 'hearsay.' The best we can do is offer both sides of the issue and priority for the payments. Welcome to Money.SE, nice first question.\"","Your comment regarding your existing finances is very relevant and helpful. You need to understand that generally in personal finance circles, when a strong earning 22 year-old is looking for a loan it's usually a gross spending problem. Their car costs $1,000 /month and their bar tabs are adding up so the only logical thing to do is get a loan. Most 22-year-olds don't have a mortgage soaking up their income, or a newborn. With all of this in mind I essentially agree with DStanley and, personally, and many people here would probably disagree, I'd stop the 401(K) contribution and use that money to pay the debt. You're still very young from a retirement standpoint, let the current balance ride and forego the match until the debt is paid. I think this is more about being debt free at 22 quickly than it's about how much marginal money could be saved via 401(k) or personal loan or this strategy or that strategy. I think at your age, you'll benefit greatly from simply being debt free. There are other very good answers on this site and other places regarding the pitfalls of a 401(k) loan. The most serious of which is that you have an extremely limited time to pay the entire loan upon leaving the company. Failure to repay in that situation incurs tax liability and penalties. From my quick math, assuming your contribution is 8% of $70,000 /year, you're contributing something in the neighborhood of $460/month to your 401(k). If you stopped contributing you'd probably take home a high $300 number net of taxes. It'll take around 20 months to pay the loan off using this contribution money without considering your existing payments, in total you're probably looking at closer to 15 months. You'll give up something in the neighborhood of $3,500 in match funds over the repayment time. But again, you're 22, you'll resume your contributions at 24; still WAY ahead of most people from a retirement savings standpoint. I don't think my first retirement dollar was contributed until I was about 29. Sure, retirement savings is important, but if you've already started at age 22 you're probably going to end up way ahead of most either way. When you're 60 you're probably not going to bemoan giving up a few grand of employer match in your 20s. That's what I would do. Edit: I actually like stannius's suggestion in the comments below. IF there's enough vested in your plan that is also available for withdrawal that you could just scoop $6,500 out of your 401(k) net of the 10% penalty and federal and state taxes (which would be on the full amount) to pay the debt, I'd consider that instead of stopping the prospective contributions. That way you could continue your contributions and receive the match contributions on a prospective basis. I doubt this is a legitimate option because it's very common for employers to restrict or forbid withdrawal of employee and/or employer contributions made during your employment, but it would be worth looking in to.","\"I'll add 2 observations regarding current answers. Jack nailed it - a 401(k) match beats all. But choose the right flavor account. You are currently in the 15% bracket (i.e. your marginal tax rate, the rate paid on the last taxed $100, and next taxed $100.) You should focus on Roth. Roth 401(k) (and if any company match, that goes into a traditional pretax 401(k). But if they permit conversions to the Roth side, do it) You have a long time before retirement to earn your way into the next tax bracket, 25%. As your income rises, use the deductible IRA/ 401(k) to take out money pretax that would otherwise be taxed at 25%. One day, you'll be so far into the 25% bracket, you'll benefit by 100% traditional. But why waste the opportunity to deposit to Roth money that's taxed at just 15%? To clarify the above, this is the single rate table for 2015: For this discussion, I am talking taxable income, the line on the tax return designating this number. If that line is $37,450 or less, you are in the 15% bracket and I recommend Roth. Say it's $40,000. In hindsight on should put $2,550 in a pretax account (Traditional 401(k) or IRA) to bring it down to the $37,450. In other words, try to keep the 15% bracket full, but not push into 25%. Last, after enough raises, say you at $60,000 taxable. That, to me is \"\"far into the 25% bracket.\"\" $20,000 or 1/3 of income into the 401(k) and IRA and you're still in the 25% bracket. One can plan to a point, and then use the IRA flavors to get it dead on in April of the following year. To Ben's point regarding paying off the Student Loan faster - A $33K income for a single person, about to have the new expense of rent, is not a huge income. I'll concede that there's a sleep factor, the long tern benefit of being debt free, and won't argue the long term market return vs the rate on the loan. But here we have the probability that OP is not investing at all. It may take $2000/yr to his 401(k) capture the match (my 401 had a dollar for dollar match up to first 6% of income). This $45K, after killing the card, may be his only source for the extra money to replace what he deposits to his 401(k). And also serve as his emergency fund along the way.\"","I would definitely pay down the debt first. If it is going to take 15 years to do so, you probably need to allocate more money to paying down debt. Cut expenses by going out to eat less, and keeping spending to the bare necessities. You might even consider getting a second job, just for paying down the debt. If that isn't enough, consider selling off some assets. You should be able to come up with a plan to be debt free (excluding maybe a regular mortgage) within 3-5 years. Once the only debt you have is a home mortgage, then its time to look at putting money towards retirement again. Note, you should not take money out of a 401k or IRA to pay off debt. The costs for doing so are nearly always too great.","Does the 401(k) get any match? Whatever you do, don't lose the match. Without more detail, it's tough. Will you lose more sleep for the debt rising, or for the retire account not? It seems your debt is well managed, a year to zero? A student loan wouldn't scare me.","One should fund a 401(k) or matched retirement account up to the match, even if you have other debt. Long term, you will come out ahead, but you must be disciplined in making the payments. If one wants to point out the risk in a 401(k), I'd suggest the money need not be invested in stocks, there's always a short term safe option.","Please direct personal finance questions to /r/personalfinance However, my opinion is that you are unlikely to earn more than 7% annualized returns from any combination of asset offerings in your 401k over the next several years; therefore, you should pay off your student loans first. I am ignoring tax consequences, but /r/personalfinance may be able to provide a more quantitative answer.","Nope, take the match. I cannot see not taking the match unless you don't have enough money to cover the bills. Every situation is different of course, and if the option is to missing minimum payments or other bills in order to get the match, make your payments. But in all other circumstances, take the match. My reasoning is, it is hard enough to earn money so take every chance you can. If you save for retirement in the process, all the better.","I would definitely be putting in enough to get the most out of the match. Only reasons I can think of not too would be: Other than that, not investing in the 401(k) is turning down free money. Edit based on feedback in comments. The only time I would advocate number 1 is if you are intensely committed to getting out of debt, were on a very tight budget and had eliminated all non-essential spending. In that situation only, I think the mental benefit of having that last debt paid off would be worth more than a few dollars in interest.","Finding a way to pay down credit debt is important, because you're probably paying in the high teens in APR. 401k should be last resort. Have you researched other options? E.g loan consolidation If you don't mind me asking, how did you get that far in debt?","\"Your initial plan (of minimizing your interest rate, and taking advantage of the 401(k) match) makes sense, except I would put the 401(k) money in a very low risk investment (such as a money market fund) while the stock market seems to be in a bear market. How to decide when the stock market is in a bear market is a separate question. You earn a 100% return immediately on money that receives the company match -- provided that you stay at the company long enough for the company match to \"\"vest\"\". This immediate 100% return far exceeds the 3.25% return by paying down debt. As long as it makes sense to keep your retirement funds in low-risk, low-return investments, it makes more sense to use your remaining free cash flow to pay down debts than to save extra money in retirement funds. After setting aside the 6% of your income that is eligible for the company match, you should be able to rapidly pay down your debts. This will make it far easier for you to qualify for a mortgage later on. Also, if you can pay off your debt in a couple years, you will minimize your risk from the proposed variable rate. First, there will be fewer chances for the rate to go up. Second, even if the rate does go up, you will not owe the money very long.\"","\"One can generalize on Traditional vs Roth flavors of accounts, I suggest Roth for 15% money and going pretax to avoid 25% tax. If the student loan is much over 4%, it may make sense to put it right after emergency fund. For emergency fund priority - I'm assuming EF really requires 2 phases, the $2500 broken transmission/root canal bill, and the lose your job, or need a new roof level bills. I'm in favor of doing what let's you sleep well. I'm also quick to point out that if you owe $2500 at 18%, yet have $2500 in your emergency fund, you're really throwing away $450 in interest each year. There's an ongoing debate of \"\"credit card as emergency fund.\"\" No, I don't claim that your cards should be considered an emergency fund, per se, but I would prioritize knocking off the 18% debt as a high priority. Once that crazy interest debt is gone, fund the ER, and find a balance for savings and the next level ER, the 6-9mo of expenses one. One can choose to fund a Roth IRA, but keep the asset out of retirement calculations. It's simply an emergency account returning tax free interest, and if never used, it eventually is retirement money. A Roth permits withdrawal of deposited funds with no tax or penalty, just tracking it each year. This actually rubs some people the wrong way as it sounds like tapping your retirement account for emergencies. For my purpose, it's a tax free emergency fund. Not retirement, unless and until you are saving so much in the 401(k) you need more tax favored retirement money. I wrote an article some time ago, the Roth Emergency Fund which went into a bit more detail. Last - keep in mind, this is my opinion. I can intelligently argue my case, but at some point, it's up to the individual to do what feels right. Paying 18% debt off a bit slower, say 4 years instead of 3, in favor of funding the matched 401(k), to me, you run the numbers, watch the 401(k) balance grow by 2X your pretax deposits, and see that in year 3, your retirement account is jump-started and far, far more than your remaining 18% cards. Those who feel the opposite and wish to be debt free first are going to do what they want. And the truth is, if this lets you sleep better at night, I'm in favor of it.\"","How old are you? With $15k, I assume late twenties. Do you still use your credit cards? or is this just past accumulated debt? (paying them off will do you no good if you just run them back up again.) Does your employer match you contributions? How much? Are you fully vested in their contributions? In general, it is not a good idea, but under the right circumstances it isn't a bad idea.","With a credit card debt at 17%, you should basically not eat in order to pay the balance off. This should be gone within the month. That being said, I would have a hard time reducing my contributions below the 4%, but would certainly do it to the 4%. However, I would also deliver pizzas on nights and weekends and work all available overtime. Coincidentally the pizza place by my home is hiring delivery drivers however, they did not disclose how much they typically make. Only that they make min wage plus tips. Make sure you stop borrowing first, then try to have this knocked out in 4 weeks or less.","If your employer offers a 401(k) match, definitely take advantage of it. It's free money, so take advantage of it!","\"The others nailed it, great answers. I'd add - the two things I'd prioritize ahead of this debt, higher interest debt, obviously. And matched 401(k) deposits. I can't repeat enough - many people are so anti debt, they walk away from guaranteed 100% returns. \"\"after I pay my mortgage, I'll max out my 401(k) and catch up.\"\" I've read this, and it will never make sense. After that, pay off the 9% rate as soon as you can.\"","Congratulations on doing all the right things in your financial life. To me, the answer to your question is a no-brainer: pay off the loans immediately. However, I am sure that some people will post answers arguing exactly the opposite. I would also recommend using the extra cash that you will have each month (since the payments on the loans will disappear) to increase your 401k contributions even though they will not attract additional company match, and once again, you will certainly get answers telling you why doing so is a very bad idea.","\"There is no equation. Only data that would help you come to the decision that's right for you. Assuming the 401(k) is invested in a stock fund of one sort or another, the choice is nearly the same as if you had $5K cash to either invest or pay debt. Since stock returns are not fixed, but are a random distribution that somewhat resembles a bell curve, median about 10%, standard deviation about 14%. It's the age old question of \"\"getting a guaranteed X% (paying the debt) or a shot at 8-10% or so in the market.\"\" This come up frequently in the decision to pre-pay mortgages at 4-5% versus invest. Many people will take the guaranteed 4% return vs the risk that comes with the market. For your decision, the 401(k) loan, note that the loan is due if you separate from the company for whatever reason. This adds an additional layer of risk and another data point to the mix. For your exact numbers, the savings is barely $50. I'd probably not do it. If the cards were 18%, I'd lean toward the loan, but only if I knew I could raise the cash to pay it back to not default.\"","I see you've marked an answer as accepted but I MUST tell you that STOPPING your 401k contribution all together is a bad idea. Your company match is 100% rate of return(or 50% depending on structure). I don't care what market you look at, or how bad a loan you take out, you will not receive 100% rate of return, or be charged 100% interest. Further, taking out a loan against your 401k effectively does two things: It is a loan that must be repaid according to the terms of your 401k AND in every 401k I've ever encountered, you cannot make contributions to the 401k until the loan is repaid. This in effect stops your contributions, and will almost certainly save you very little on your interest rates on your current loans. I have 4 potential solutions that may help achieve your goal without sacrificing your 401k match and transferring the debt from one lender to another, but they are conditional. Is your company match 100% up to 4% of your salary, or 50% of your contribution (up to a limit you have not yet reached)? This is important. If it is 100% up to 4%, stop committing the additional 4% and use that to pay down your debt...and after ward set up that 4% as auto pay into an IRA, not into the 401k. An IRA will make you more money because YOU have control over its management, not your employer. If it is 50% match, contribute until the match is met because you cannot get 50% rate of return anywhere, then take your additional monies and get an IRA. As far as your debt, in this scenario simply suck it up and pay it as is. You will lose far more than you gain by stopping your contributions. If you simply must reduce your expenses by 150$ month try refinancing the mortgage and rolling the 6500$ into it. If you get a big enough drop in the interest rate you could still end up paying less. OR If you cannot make the gain there, try snowballing the three payments. You do this by calling your student loan vendor and telling them you need to make much smaller payments, like even zero depending on the type of loan. Then take ALL of the money you are currently spending on the 3 loans and put into the car payment. When it's gone, roll the whole thing into the higher interest student loan, then finally roll it all into the last student loan. You'll pay it off faster, and student loans have lots of laws and regulations regarding working with payers to keep them paying something without breaking them. WHATEVER YOU DO, DO NOT STOP YOUR CONTRIBUTIONS. 50% OR 100%, THAT MONEY IS GUARANTEED AT A HIGHER RATE OF RETURN THAN YOU CAN GET ANYWHERE, ESPECIALLY GUARANTEED.","It has to do with return. I don't know if Canada has a matching feature on retirement accounts, but in the US many companies will match the first X% you put in. So for me, my first $5000 or so is matched 100%. I'll take that match over paying down any debt. Beyond that, of course it's a simple matter of rate of return. Why save in the bank at 2% when you owe at 10-18%? One can make this as simple or convoluted as they like. My mortgage is a tax deduction so my 5% mortgage costs me 3.6%. I've continued to invest rather than pay the mortgage too early, as my retirement account is with pre-tax dollars. So $72 will put $100 in that account. Even in this last decade, bad as it was, I got more than 3.6% return.","Pay the debt down. Any kind of debt equals risk. No debt equals no risk and a better chance to have that money earn you income down the road once it's invested. That and you will sleep so much better knowing you have ZERO debt. You 6 month emergency fund is probably good. Remember to keep it at 6 months living expenses (restaurants don't count as living expenses).","In your scenario, I would do the following: If, in the short term, something should happen, you can always tap into a line of credit or even a cash advance on the credit card. But, you should in no way be paying $70 a month in interest. Assume you want to pay off the Credit card over 12 payments, you would need to pay about 450 a month, which costs 400 in interest. At the end of the year, you have $5000 in savings, and $0 debt. The alternative, is to pay off the credit card right now, and put that $450 into savings, you would have $5400 in savings, and $0 debt. I'm usually the last to recommend a $0 safety net, but I make an exception in the case of retirable credit card debt. In the worst case, you are no worse off than you are now, in the best case, you're up about $400 at the end of the year.","The answer will vary person to person and situation to situation. But the basic concept to always consider is this: What interest rate am I paying on my debt? 10%? 18%? And what interest rate am I making on my savings/investment, etc? 3%? 7%? It won't give you a hard and fast answer, but will definitely let you know if you should take a closer look at it. I'd suggest talking to a financial planner about it. Find a fee-based planner that you can turn to intermittently to make sure you are on the right track...not a commission-based planner, a fee-based one. (with respectful apologies to any commission-based planners who may read this.) My instinct is usually to pay off the debt, try to clean everything up so you don't have anything outstanding that is charging you interest. Debt is clutter, it's stressful, it can be a reminder of money you wish you hadn't spent. As long as you have access to money in case of emergency, job loss, etc, get your debt paid off and keep it paid off. You'll sleep much better.","Here's what I'd do. Show these figures to your bank, and ask if they can offer you some type of account with a small overdraft, say up to $2000. Typically this won't pay the same kind of interest as your savings account, but it doesn't matter. If such an account is available, then yes, dump most of your savings into the student loan, and keep a few hundred in your new account. The overdraft on this account is your emergency fund. This means that in the more likely scenario (no emergencies) you're saving yourself 6% interest on something like $4000 to $4500. In the case of an emergency, you're still covered; but you'll be paying a larger amount of interest. Let's say you have an emergency cost and need to dip into the overdraft for $1000. If the interest is 15%, then you've cost yourself an extra 9% on that $1000 over leaving that debt in the student loan. This seems to me like a really good gamble - more likely to gain 6% of $4000, less likely to lose 9% of $1000. If your bank won't give you a low-interest account with a small overdraft, then use your credit card as your emergency fund. The same kind of logic applies; but since credit card interest rates are typically higher than overdraft interest rates, you'll want to keep slightly more in your savings account. About $1200 to $1500 feels right to me; and move the remaining $3500 to $3800 to your student loan. So yes, pay off the student loan. That 6% interest really is worth having, even if you'd be taking a small gamble. Edit - Alexander Kosubek has suggested that I should compare this to matched retirement plans. The 100% gain in a matched retirement plan isn't 100% per annum; it's 100% divided across the length of time you have to wait until you can get your hands on that money. Suppose the money is accessible when you turn 60 - a matched plan is a good deal if you're in your 50's, but not so good if you're in your 20's. The 100% matching is equivalent to 6% interest per annum compounded over slightly under 12 years. So if you're less than 12 years away from retiring, go for the matched plan. Otherwise, pay off your student loan first.","Pay the highest rate debt first, it's as simple as that. When that debt is paid (the 24% card in this case) pay off the next one. As far as having an emergency fund is concerned, I consider it a second priority. If one owes 24% money, that $2000 emergency fund is costing $480/yr. Ouch. Avoid the behaviors that got you into debt in the first place, and pay the cards off as fast as you can. When you have no balance, start to save, first into the emergency account, then toward retirement.","\"A fascinating view on this. The math of a 10% deposit and projected 10% return lead to an inevitable point when the account is worth 10X your income (nice) and the deposit, 10% of income only represents 1% of the account balance. The use of an IRA is neither here nor there, as your proposed deposit is still just 1% of your retirement account total. Pay off debt? For one with this level of savings, it should be assumed you aren't carrying any high interest debt. It really depends on your age and retirement budget. Our \"\"number\"\" was 12X our final income, so at 10X, we were still saving. For you, if you project hitting your number soon enough, I'd still deposit to the match, but maybe no more. It might be time to just enjoy the extra money. For others, their goal may be much higher and those extra years deposits are still needed. I'd play with a spreadsheet and see the impact of reduced retirement account deposits. Note - the question asks about funding the 401(k) vs paying down debt. I'd always advise to deposit to the match, but beyond that, one should focus on their high interest debt, especially by their 50's.\"","Gaining traction is your first priority. WARNING: as @JosephZambrano explains in his answer the tax penalty for withdrawing from a 401(k) can easily exceed the APR of the credit card making it a very bad strategy. Consult in-depth with a financial advisor to see before taking that path. As @JoeTaxpayer has noted a loan is another alternative. The 401k is no good to you if you can't have shelter or comfort in the mean time. The idea is to look at all the money as a single thing and balance it together. There is no credit and retirement, just a single target that you can hit by moving the good money to clear the bad. Consolidating the credit card debt somehow would be very wise if you can. Assuming it is 30% APR shrinking that quickly is the first priority. You may be able to justify a hardship withdrawal to finance the reduction/consolidation of the credit card. It may be worth considering negotiating a closure arrangement with a reduced principal. Credit card companies can be quite open to this as it gets their money back. You may also be able to negotiate a lower interest rate. You may be able to negotiate a non-credit-affecting debt consolidation with a debt consolidator. They want to make money and a 25K loan to a person with sound credit is a pretty good bet. Moving, buying a house, or any of that may just relocate the problem. You may be able to withdraw $25K from your 401k under hardship, pay the credit card, and come up with a payment plan for the medical debt. It's a retirement setback for sure, but retirement is an illusion with that credit card shark eating all of your hard-earned money. You gotta slay that beast quick. Again, be sure to fully analyze whether the penalty on the 401(k) withdrawal exceeds the APR of the credit card.","Depends upon the debt cost. Assuming it is consumer debt or credit card debt, it is better to pay that off first, it is the best investment you can make. Let's say it is credit card debt. If you pay 18% interst and have for example a $1,000 amount. If you pay it off you save $180 in interest ($1,000 times 18%). You would have to earn 18% on 1,000 to generate $180 if it was in aninvestment. Here is a link discussing ways of reducing debt Once you have debt paid off you have the cashflow to begin building wealth. The key is in the cashflow.","Do you have other things you might want to spend that cash on in the near future? (Like a down-payment on a house?) Beyond having emergency cash, the only reason to keep a pile of cash around is because you might need it for another purchase. Unless you are going to have other expenses that will require higher-interest loans to cover them, there's no need to sit on a big pile of cash. As long as you are getting the full match on your 401(k), that's the free money that might be worth more than the interest you are paying on the loans. In any case, I suggest you aim for at least 10% into your 401(k) account moving forward in your life so that you can properly fund retirement. 15% would be even better. It doesn't sound like you would be losing anything by paying the student loans, and you could then use the money freed from your loan payments to pay down your car faster.","you should always invest if your investment rate of return is higher than your interest rate Your next line, about standard deviation is dead on. There are too many variables to give an exact answer here, in my opinion. The main reason is that one variable isn't easy to quantify - One's risk tolerance. Clearly, there's one extreme, the 18% credit card. Unless you are funding loanshark type rates of 2%/week, it's safe to say that 18% debt should take priority over any investments, except for the matched 401(k) deposits. What I think you're talking about is something we've addressed here in multiple threads. Do I prepay my sub 4% mortgage or invest? In this case, (and to Noah's comment) the question is whether you can expect a post-tax return of over 3% during your time horizon. I look at the return for 15 years from 1998-2013 and see a 6% CAGR for the S&P. I chose 15 years, as the choice is often one of paying a 30 year mortgage faster, as fast as 15. The last 15 years offer a pretty bad scenario, 2 crashes and a mortgage crisis. 6% after long term gains would get you 5.1% net. You can pull the data back to 1871 and run CAGR numbers for the timeframe of your choosing. I haven't done it yet, but I imagine there's no 15 year span that lags the 3% target I cite. What makes it more complex is that the investment isn't lump sum. It may not be obvious, but CAGR is a dollar invested at T=0, and returns calculated to T=final year. It would take a bit of spreadsheeting to invest the extra funds every month/year over your period of analysis. In the end, there are still those who will choose to pay off their 4% mortgage regardless of what the numbers show. Even if the 15 year result showed worst case 3.5% (almost no profit) and an average 10%, the feeling of risk is more than many will want.","You can play with the numbers all you like (and that's good), however, here is a different way to look at it. The debt you have is risk. It limits your choices and eats your cash flow. Without the debt, you can invest at a much greater rate. It frees up you cash flow for all the things you might want to do, or decide in the future you might want to do. Right now is the easiest time for you to focus on debt repayment. It sounds like you are not married and have no children. It is much easier now to cut back your lifestyle and concentrate on paying off this $50k of student debt. This will get harder as your responsibility increases. Build up a small amount of cash for emergencies and put the rest at the debt. You can keep contributing to your 401k to the match if you want. This will give you 2 benefits: Patience. When you actually DO start investing, you will have a new appreciation for the money you are using. If you sacrifice to pay off $50k now, you wont look at money the same for the rest of your life. Drive. If you see the debt as a barrier to achieving your goals, you will work harder to get out of debt. These are all things I would tell my 23 year-old self if i could go back in time. Good luck!","No. You will be penalized for taking your 25k out so you will only get like 18k out. Plus you can slowly pay back the credit cards but you can't build up the 401k as fast. You can also try a service that can negotiate the amount down for you (so you would only pay 16k or something). Protect the 401k.","With respect to the 401(k). Before taking a hardship withdrawal, one must first deplete the ability to take any 401(k) loans available. This is a regulation. The 401(k) loan limit is the lesser of $50k, 50% your vested balance, or $50k minus the highest loan balance within the last year. Here's the good news: it is not a taxable event; you can pay back over a maximum of 5 years; interest is low (usually 4.25% or so). The bad news: if you terminate employment then the loan balance must be repaid or else it becomes taxable income plus a 10% penalty. I suggest you consider eliminating the credit card debt via this option. Pay back as aggressively as possible and if/when you terminate you can take the 10% penalty - it will be far less of an impact than 25k accruing approximately 25% annually.","A matching pension scheme is like free money. No wait, it actually IS free money. You are literally earning 100% interest rate on that money the instant you pay it in to the account. That money would have to sit in your credit card account for at least five years to earn that kind of return; five years in which the pension money would have earned an additional return over and above the 100%. Mathematically there is no contest that contributing to a matching pension scheme is one of the best investment there is. You should always do it. Well, almost always. When should you not do it?","Does your company offer matching on 401(k) deposits? Are you depositing at least to the match? If not, that should be priority one. Kill the card, never pay that kind of interest. Ever. Why are you paying 5%? The 30 year rate is 4% right now, and even if you pay some closing costs, you'll recoup the money quickly. In general, borrowing to invest is a losing game. I agree, get rid of the HELOC as well. If you refine to 15 years, you can get 3.5%, and in 16 years won't regret the decision.","Paying off the high-interest debt is a good first start. Paying interest, or compound interest on debt is like paying somebody to make you poor. As for your 401k, you want to contribute enough to get the full match from your employer. You might also consider checking out the fees associated with your 401k with an online fee analyzer. If it turns out you're getting reamed with fees, you can reduce them by fiddling with your investments. Checking your investment options is always a good idea since jobs frequently change them. Opening an IRA is a good call. If you're eligible for both Roth and Traditional IRAs, consider the following: Most financial institutions (brokers or banks) can help you open an IRA in a matter of minutes. If you shop around, you will find very cheap or even no fee options. Many brokers might try to get your business by giving away something for ‘free.' Just make sure you read the fine print so you understand the conditions of their promotional offer. Whichever IRA you choose, you want to make sure that it's managed properly. Some people might say, ‘go for it, do it yourself’ but I strongly disagree with that approach. Stock picking is a waste of time and market timing rarely works. I'd look into flat fee financial advisors. You have lots of options. Just make sure they hear you out, and can design/execute an investment plan specific to your needs At a minimum, they should: Hope this is helpful.","If you can get a rate of savings that is higher than your debt, you save. If you can't then you pay off your debt. That makes the most of the money you have. Also to think about: what are you goals? Do you want to own a home, start a family, further your education, move to a new town? All of these you would need to save up for. If you can do these large transactions in cash you will be better off. If it were me I would do what I think is a parroting of Dave Ramsay's advice Congratulations by the way. It isn't easy to do what you have accomplished and you will lead a simpler life if you don't have to worry about money everyday.","\"Understand your own risk tolerance and discipline. From Moneychimp we can see different market results - This is a 15 year span, containing what was arguably one of the most awful decades going. A full 10 year period with a negative return. Yet, the 15 year return was a 6.65% CAGR. You'd net 5.65% after long term cap gains. Your mortgage is likely costing ~4% or 3% after tax (This is not applicable to my Canadian friends, I understand you don't deduct interest). In my not so humble opinion, I'd pay off the highest rate debts first (unlike The David followers who are happy to pay off tens of thousands of dollars in 0% interest debt before the large 18% debt) and invest at the highest rate I'd get long term. The problem is knowing when to flip from one to the other. Here's food for thought - The David insists on his use of the 12% long term market return. The last 100 years have had an average 11.96% return, but you can't spend average, the CAGR, the real compound rate was 10.06%. Why would he recommend paying off a sub 3% loan while using 12% for his long term planning (All my David remarks are not applicable to Canadian members, you all probably know better than to listen to US entertainers)? I am retired, and put my money where my mouth is. The $200K I still owe on my mortgage is offset by over $400K in my 401(k). The money went in at 25%/28% pretax, has grown over these past 20 years, and comes out at 15% to pay my mortgage each month. No regrets. Anyone starting out now, and taking a 30 year mortgage, but putting the delta to a 15 year mortgage payment into their 401(k) is nearly certain to have far more in the retirement account 15 years hence than their remaining balance on the loan, even after taxes are considered. Even more if this money helps them to get the full matching, which too many miss. All that said, keep in mind, the market is likely to see a correction or two in the next 15 years, one of which may be painful. If that would keep you up at night, don't listen to me. If a fixed return of 4% seems more appealing than a 10% return with a 15% standard deviation, pay the mortgage first. Last - if you have a paid off house but no job, the town still wants its property tax, and the utilities still need to be paid. If you lose your job with $400K in your 401(k)/IRA but have a $200K mortgage, you have a lot of time to find a new job or sell the house with little pressure from the debt collectors. (To answer the question in advance - \"\"Joe, at what mortgage rate do you pay it off first?\"\" Good question. I'd deposit to my 401(k) to grab matching deposits first, and then if the mortgage was anywhere north of 6%, prioritize that. This would keep my chances at near 100% of coming out ahead.)\"","One thing you didn't mention is whether the 401(k) offers a match. If it does, this is a slam-dunk. The $303 ($303, right?) is $3636/yr that will be doubled on deposit. It's typical for the first 5% of one's salary to capture the match, so this is right there. In 15 years, you'll still owe $76,519. But 15 * $7272 is $109,080 in your 401(k) even without taking any growth into account. The likely value of that 401(k) is closer to $210K, using 8% over that 15 years, (At 6%, it drops to 'only' $176K, but as I stated, the value of the match is so great that I'd jump right on that.) If you don't get a match of any kind, I need to edit / completely rip my answer. It morphs into whether you feel that 15 years (Really 30) the market will exceed the 4% cost of that money. Odds are, it will. The worst 15 year period this past century 2000-2014 still had a CAGR of 4.2%.","With a match, the 401(k) becomes the priority, up to that match, often ahead of other high interest debt. Without the match, the analysis is more about the cost within the 401(k). The 401(k) is a tax deferred account (let's not go on a tangent to Roth 401(k)) so ideally, you'd be skimming off money at 25% and saving it till you retire, so some of it is taxed at 0, 10, 15%. If the fees in the 401(k) are say 1.5% between the underlying funds and management fee, it doesn't take long to wipe out the potential 10 or 15% you are trying to gain. Yes, there's a risk that cap gain rates go away, but with today's tax law, the long term rate is 15%. So that money put into a long term low cost ETF will have reinvested dividends taxed at 15% and upon sale, a 15% rate on the gains. There are great index ETFs with sub - .1% annual cost. My simple answer is - If the total cost in that 401(k) is .5% or higher, I'd pass. Save the money in an outside account, using IRAs as best you can. (The exact situation needs to be looked at very carefully. In personal finance, there's a lot of 'grey'. For example, a frequent job changer can view the 401(k) as a way of saving pretax, knowing the fee will only last 2 years, and will end with a transfer to the IRA)","Let's say you owe $200K (since you didn't mention balance. If you do, I'd edit my response), and can get 4.5%. You'd save 1.5% or about $3K/yr the first few years. If a $12K paydown is all that's between you and and refi I'd figure out a way. There are banks that are offering refi's under the HARP program if your current mortgage is owned by FNMA or FMAC which permit even if under water. So, the first step is research to see if you can refi exactly what's owed, failing that, shop around. A 401(k) loan will not appear as a loan on your credit report, that may be one way to raise the $12K. The best thing you can do is put all the savings into the 401(k) to really get it going.","\"As Mhoran answered, typical match, but some have no match at all, so not bad. The loan provision means you can borrow up to $50k or 50% of your balance, whichever is less. 5 year payback for any loan, but a 10 year payback for a home purchase. I am on the side of \"\"don't do it\"\" but finance is personal, and in some situations it does make sense. The elephant in this room is the expenses within the 401(k). Simply put, a high enough expense will wipe out any benefit from tax deferral. If you are in this situation, I recommend depositing to the match, but not a cent more. Last, do they offer a Roth 401(k) option? There's a high probability you will never be in as low a tax bracket as the next few years, now's the time to focus on the Roth deposits, if not in the 401(k), then in an IRA.\"","This is something that will vary from situation to situation. What is the secured debt? What is the interest rate? Does your retirement account have a match? What are your other financial obligations? How much money do you have available after meeting all of your minimum financial obligations. All of these are very important factors in deciding what the best course of action would be.","Ok. I'll ask - Does the job offer a 401(k)? Matching deposits? You see, the answers given depend on your risk tolerance. There are two schools of thought, one extreme will tell you not to start investing until you have the emergency fund set up, the other, start from day one. I accept there are pros and cons to either approach. But - if you have access to a matched 401(k), even a conservative, risk-adverse approach might agree that a 100% match (on the first say 5% of your income) is preferable to saving in a low return emergency fund. If the emergency occurs, a low interest loan for the need is a cheap way out. Since the money goes in pre-tax and is matched, being able to borrow out half (IRS rules) effectively lets you borrow more than you deposited out of pocket. And the word emergency implies a low occurrence event. Deposit to the match and start the emergency fund in another account. If no matched 401(k) at work, the other two answers are great. Edit - To clarify, and answer a comment below - say the risk isn't just a money emergency, but job loss. $1000 deposited to the 401(k) cost $850 out of pocket, assuming 15% bracket. After the match, it's $2000. After the job loss, if this is withdrawn, if the 15% still applies (it may be 10% or even 0%) the net is $1700 less the 10% penalty, or $1500 back in your pocket. There are those who will say they are just not comfortable running an emergency account so lean, I understand that. For the OP here, $800/mo is nearly $10,000 per year. If even half of that can be deposited pre-tax and matched, the account will grow very quickly and there would still be cash on the side.","If your plan permits loans, deposit enough through the year to maximize the match and then take a loan from the plan. Use the loan portion to pay your student loan. Essentially you have refinanced your debt at a (presumably) lower rate and recieved the match. You pay yourself back (with interest) through your payroll. The rates are typically the prime rate + 1%. The loans are subject to a lesser of 50% vested account balance or $50,000 provision.","These are the basics in order: Max your employer contributions to your 401k if available Pay off any loans Contribute to an IRA Perhaps max out your 401k Look into other investment options (refinance your mortgage, buy stocks) Those are the typical rules, special situations may need specials actions...","If stopping the 401k contributions temporarily would get you out of debt faster and also stop you from having to take out more student loans, then stop the contributions right now. You can always put some money into regular savings for emergencies etc - in fact, you should - but given a choice between deferring further contributions to your retirement and deferring the (hopeful) increase in income you get when you graduate, definitely choose the former. That of course also means that you don't take off a few semesters from studying to make money to put into a 401(k).","I completely agree with Pete that a 401(k) loan is not the answer, but I have an alternate proposal: Reduce your 401(k) contribution down to the 4% that you get a match on. If you are cash poor now and have debts to be cleaned up, those need to be addressed before retirement savings. You'll have plenty of time to make up the lost savings after you get the debts paid off. If your company matches 50% (meaning you have to contribute 8% to get the 4% match), then consider temporarily stopping your 401(k) altogether. A 100% match is very hard to give up, but a 50% match is less difficult. You have plenty of years left ahead of you to make up the lost match. Plus, the pain of knowing you're leaving money on the table will incentivize you to get the loans paid as quickly as possible. It seems to me that I would be reducing middle to high interest debt while also saving myself $150 per month. No, you'd be deferring $150 per month for an additional two years, and not reducing debt at all, just moving it to a different lender. Interest rate is not your problem. Right now you're paying less than $30 per month in interest on these 3 loans and about $270 in principal, and at the current rate should have them paid off in about 2 years. You're wanting to extend these loans to 4 years by borrowing from your retirement savings. I would buckle down, reduce expenses wherever possible (cable? cell phone? coffee? movies? restaurants?) until you get these debts paid off. You make $70,000 per year, or almost $6,000 per month. I bet if you try hard enough you can come up with $1,100 fairly quickly. Then the next $1,200 should come twice as fast. Then attack the next $4,000. (You can argue whether the $1,200 should come first because of the interest rate, but in the end it doesn't matter - either one should be paid off very quickly, so the interest saved is negligible) Maybe you can get one of them paid off, get yourself some breathing room, then loosen up a little bit, but extending the pain for an additional two years is not wise. Some more drastic measures:","\"Think of yourself as a business with two accounts, \"\"cash\"\" and \"\"net worth\"\". Your goal is to make money. \"\"Cash\"\" is what you need to meet your obligations. You need to pay your rent/mortgage, utilities, buy food, pay for transportation, service debt, etc. If you make $100 a month, and your obligations are $90, you're clearing $10. \"\"Net worth\"\" are assets that you own, including cash, retirement savings, investments, or even tangible goods like real property or items you collect with value. The \"\"pay off debt\"\" versus \"\"save money\"\" debate, in my opinion, is driven by two things, in this order: If you start saving too soon, you'll have a hard time getting by when your car suddenly needs a $500 repair or you need a new furnace. You need to improve your cash flow so that you actually have discretionary income. Pay off those credit cards, then start directing those old payments into savings and investments.\"","I used a large portion of my 401k to pay off my credit card. My intentions were to then use my extra cash flow to build up the 401k again. Unfortunately I didn't learn my lesson and now I'm back to where I started, minus my 401k savings. If I could do it again, I would have cut up the card, kept the 401k and pay it down slowly. Good luck to you. I hope you do better than I did.","I would go with your alternative idea: get rid of the debt as fast as possible. You have $32k of debt. It's a lot, but with your new $90k salary, do you think you could get rid of it all in 12 months? See if you can make that happen. Once the debt is gone, you'll be in a position to invest as much as you want and keep all your gains. You are worried about sacrificing future money in your investments, but if you eliminate the debt over the next year, this will be minimized. Just lose the debt.","Since there is no match on the 401k, it seems to me that your first priority should be your IRA (Roth or otherwise). I don't know what your salary is, but most 22 year-olds won't be maxing out both an IRA and 401k on only 10% of their incomes, so the rest of the list may be irrelevant.","With all due respect to The David, the $1000 is best put against 20%+ debt, no sitting in checking as part of some emergency fund. I'd agree with the decision to pay off the lower rate card. Why? Because we can do the math, and can see the cost in doing so. Low enough that other factors come in, namely, a freed up card. That card can function as the emergency one in the short term. Long term, once these high rate cards are paid off, you'll build your proper emergency fund, but the cost is too high right now. The $4000 is a nice start, but the most important thing is to get your budget under control. Only you can decide how much you can cut back, and go after this debt as if it were life or death.","It all depends on your priorities, but if it were me I'd work to get rid of that debt as your first priority based on a few factors: I might shift towards the house if you think you can save enough to avoid PMI, as the total savings would probably be more in aggregate if you plan on buying a house anyway with less than 20% down. Of course, all this is lower priority than funding your retirement at least up to the tax advantaged and/or employer matched maximums, but it sounds like you have that covered.","You're paying $850/yr interest, and probably earning close to zero on the $5000 in savings. I don't know why this feels safe in comparison to having both at zero, and depositing the payment you now make to the card into savings. Even if the payment is just $100, you'll have $1200 in a years time. I don't know of an emergency that can't be handled on a credit card, and I'd go that route until you build up a decent real emergency fund. I wouldn't offer the same advice if the debt were low rate loans such as your mortgage or student loan, but 17% is high enough to do it this way.","Yours two funds are redundant. Both are designed to have a mix of bonds and stocks and allow you to put all your money in them. Pick the one that has the lowest fees and stick with that (I didn't look at the funds you didn't select...they didn't look great either). Although all your funds have high fees, some are higher than others, so don't ignore fees. When you have decided on your portfolio weights, prioritize your money thus: Contribute enough to your 401(k) to get the full match from your employer Put everything else toward paying off that credit card until you have 0 balance. It's ok to use the card, but let it be little enough that you pay your statement balance off each month so you pay no interest. Then set aside some savings and invest any retirement money into a Roth IRA. At your income level your taxes are low so Roth is better than traditional IRA or 401(k). If you max out your Roth, put any other retirement savings in your 401(k).","The other answers assumed student loan debt -- and for that, it's rarely worth it (unless your company only offers managed plans w/ really bad returns, or the economy recovers to the point where banks are paying 5% again on money market accounts) ... but if it's high rate debt, such as carrying a credit card debt, and the current rate of returns on the 401k aren't that great at the time, it would be worth doing the calculations to see if it's better to pay them down instead. If you're carrying extremely high interest debt (such as 'payday loans' or similar), it's almost always going to be worth paying down that debt as quickly as possible, even if it means forgoing matching 401k payments. The other possible reason for not taking the matching funds are if the required contributions would put you in a significant bind -- if you're barely scraping by, and you can't squeeze enough savings out of your budget that you'd risk default on a loan (eg, car or house) or might take penalties for late fees on your utilities, it might be preferable to save up for a bit before starting the contributions -- especially if you've maxed your available credit so you can't just push stuff to credit cards as a last resort.","The chances are good that the interest you are going to pay on the debt is going to be higher than the interest you are going to receive on any type of short term investments. That would make the paying off of the debt worth more to you in the long run than saving your money. Note that without the particulars of your situation this is all just theory crafting so consult the details of you loan agreements. I cannot imagine that a credit provider did not discuss this with you before you put pen on paper.","None of your options seem mutually exclusive. Ordinarily nothing stops you from participating in your 401(k), opening an IRA, qualifying for your company's pension, and paying off your debts except your ability to pay for all this stuff. Moreover, you can open an IRA anywhere (scottrade, vanguard, etrade, etc.) and freely invest in vanguard mutual funds as well as those of other companies...you aren't normally locked in to the funds of your IRA provider. Consider a traditional IRA. To me your marginal tax rate of 25% doesn't seem that great. If I were in your shoes I would be more likely to contribute to a traditional IRA instead of a Roth. This will save you taxes today and you can put the extra 25% of $5,500 toward your loans. Yes, you will be taxed on that money when you retire, but I think it's likely your rate will be lower than 25%. Moreover, when you are retired you will already own a house and have paid off all your debt, hopefully. You kind of need money now. Between your current tax rate and your need for money now, I'd say a traditional makes good sense. Buy whatever funds you want. If you want a single, cheap, whole-market fund just buy VTSAX. You will need a minimum of $10K to get in, so until then you can buy the ETF version, VTI. Personally I would contribute enough to your 401(k) to get the match and anything else to an IRA (usually they have more and better investment options). If you max that out, go back to the 401(k). Your investment mix isn't that important. Recent research into target date funds puts them in a poor light. Since there isn't a good benchmark for a target date fund, the managers tend to buy whatever they feel like and it may not be what you would prefer if you were choosing. However, the fund you mention has a pretty low expense ratio and the difference between that and your own allocation to an equity index fund or a blend of equity and bond funds is small in expectation. Plus, you can change your allocation whenever you want. You are not locked in. The investment options you mention are reasonable enough that the difference between portfolios is not critical. More important is optimizing your taxes and paying off your debt in the right order. Your interest rates matter more than term does. Paying off debt with more debt will help you if the new debt has a lower interest rate and it won't if it has a higher interest rate. Normally speaking, longer term debt has a higher interest rate. For that reason shorter term debt, if you can afford it, is generally better. Be cold and calculating with your debt. Always pay off highest interest rate debt first and never pay off cheap debt with expensive debt. If the 25 year debt option is lower than all your other interest rates and will allow you to pay off higher interest rate debt faster, it's a good idea. Otherwise it most likely is not. Do not make debt decisions for psychological reasons (e.g., simplicity). Instead, always chose the option that maximizes your ultimate wealth.","I am a firm believer in the idea of limiting debt as much as possible. I would not recommend borrowing money for anything other than a reasonably sized mortgage. As a result, my recommendations are going to be geared toward that goal. The top priorities for me, then, would be to make sure, first, that we don't have to go further into debt, and second, that we eliminate the debt that we already have as soon as possible. Here is how I would rate your list: A small emergency fund, perhaps $1000 USD, is going to ensure that, while you are funding other things, you don't end up so cash poor that, if something unexpected and urgent comes up, you are forced to add to your credit card debt. Make this small fund your top priority, and it shouldn't take much more than a month or two to do it. Getting out of debt is important, but if your employer hands out free money, you have to take it. It is just too good of a deal. Get rid of this debt as fast as possible. When you are done, you'll have more income available to you than you've ever had before. Now that you have just gotten done eliminating your debt as fast as possible, don't stop there. Take the income you had been throwing at your debt, and build up your emergency fund to a few months' worth of your expenses. Finishing this fund up will enable you to withstand a small crisis without borrowing anything. You are now in a very strong position financially, and can confidently invest. Deciding which type of retirement account is best for you depends on the details of your situation. Once you are contributing a healthy amount to your retirement funds, you may want to consider paying off your mortgage early. As I said before, I recommend getting down to the last step as quickly as possible. Depending on how much debt you actually have, if you sacrifice for a year or two you could be debt free and in a position to keep all of your investment gains. If you take your time paying off debt, like many people do, you could find yourself 10 years from now still making payments on your loans, still making car payments, and still needlessly sending interest to the banks, eating away at the gains you are making in your investments. If you aren't committed to eliminating your debt quickly, and plan on having payments for a long time, then skip this advice and put retirement savings at the top.","\"All of the provided advice is great, but a slightly different viewpoint on debt is worth mentioning. Here are the areas that you should concentrate your efforts and the (rough) order you should proceed. Much of the following is predicated upon your having a situation where you need to get out of debt, and learn to better budget and control your spending. You may already have accomplished some of these steps, or you may prioritize differently. Many people advise prioritizing contributing to a 401(k) savings plan. But with the assumption that you need advise because you have debt trouble, you are probably paying absurd interest rates, and any savings you might have will be earning much lower rates than you are paying on consumer debt. If you are already contributing, continue the plan. But remember, you are looking for advice because your financial situation is in trouble, so you need to put out the fire (your present problem), and learn how to manage your money and plan for the future. Compose a budget, comprised of the following three areas (the exact percentages are fungible, fit them to your circumstances). Here is where planning can get fun, when you have freed yourself from debt, and you can make choices that resonate with your individual goals. Once you have \"\"put out the fire\"\" of debt, then you should do two things at the same time. As you pay off debt (and avoid further debt), you will find that saving for both independence and retirement become easier. The average American household may have $8000+ credit card debt, and at 20-30%, the interest payments are $150-200/month, and the average car payment is nearly $500/month. Eliminate debt and you will have $500-800/month that you can comfortably allocate towards retirement. But you also need to learn (educate yourself) how to invest your money to grow your money, and earn income from your savings. This is an area where many struggle, because we are taught to save, but we are not taught how to invest, choose investments wisely and carefully, and how to decide our goals. Investing needs to be addressed separately, but you need to learn how. Live in an affordable house, and pay off your mortgage. Consider that the payment on a mortgage on even a modest $200K house is over $1000/month. Combine saving the money you would have paid towards a mortgage payment with the money you would have paid towards credit card debt or a car loan. Saving becomes easy when you are freed from these large debts.\"","Simply, you should put your money into whatever has the higher interest rate, savings or repayment of debt. Let's say at the beginning of month A you put $1000 into each account. In the case of the savings, at the end of month A you will have $1001.6 ($1000 + 1000 x 2% annual interest / 12) In the case of a loan, at the end of month A you will have $1005.7. ($17000 plus 6.8 interest for one month is 17096.3. On $16000, the new value is 16090.6. The difference between these is $1005.7. 5.7 / 1.6 = 3.56 Therefore, using your money to repay your loan nets you a return about 3.5 times greater.","Whether or not it is logical probably depends on individual circumstance. When you take on (or maintain) debt, you are choosing to do two things: The first is clear. This is what you describe very well in your answer. It is a straightforward analysis of interest rates. The fixed cost of the debt can then be directly compared to expected return on investments that are made with the newly available cash flow. If you can reasonably expect to beat your debt interest rate, this is an argument to borrow and invest. Add to this equation an overwhelming upside, such as a 401k match, and the argument becomes very compelling. The second cost listed is more speculative in nature, but just as important. When you acquire debt, you are committing your future cash flow to payments. This exposes you to the risk of too little financial margin in the future. It also exposes you to the risk of any negatives that come with non-payment of debt (repossession, foreclosure, credit hit, sleeping at night, family tension, worst-case bankruptcy) Since the future tends to be difficult to predict, this risk is not so easy to quantify. Clearly the amount and nature of the debt is a large factor here. This would seem to be highly personal, with different individuals having unique financial or personal resources or income earning power. I will never say someone is illogical for choosing to repay their debts before investing in a 401k. I can see why some would always choose to invest to the match.","If there is no match and you are disciplined enough to contribute without it coming directly out of your paycheck, dump the 401K. The reason: Most 401K plans have huge hidden fees built into the investment prices. You won't see them directly, but 3% is not uncommon. 3% is a horrible drag on your investment performance. Get an IRA or Roth IRA and pick something with low fees. Bonus: You will have a lot more investment choices!","Fund the Roth. If your loan interest is deductible (see firedfly's comment) then your effective cost for the loan is lower than 6.25% You get tax free earnings on the same amount in a Roth. Assuming you can get 6%, it's at least break even, probably better. And you can never gain back the time for compounding on the retirement account. With that said, there may be an emotional component to the decision. If you really just want to get rid of the debt, go ahead and do it.","If you can afford to put money in your 401(k) account, I would say at least you should invest enough to get your employer's matching fund. It's free money, why not get it?","\"If you're willing to do a little more work and bookkeeping than just putting money into the 401(k) I would recommend the following. I note that you said you chose some funds based on performance since the expense ratios are all high. I would recommend against chasing performance because active funds will almost always falter; honor the old saw: \"\"past performance is no guarantee of future returns\"\". Assuming the cash in your Ally account is an emergency fund, I would use it to pay off your credit card debt to avoid the interest payments. Use free cash flow in the coming months to bring the emergency fund balance back up to an acceptable level. If the Ally account is not an emergency fund, I would make it one! With no debt and an emergency fund for 3-12 months of living expenses (pick your risk tolerance), then you can concentrate on investing. Your 401(k) options are unfortunately pretty poor. With those choices I would invest this way: Once you fill up your choice of IRA, then you have the tougher decision of where to put any extra money you have to invest (if any). A brokerage account gives you the freedom of investment choices and the ability to easily pull out money in the case of a dire emergency. The 401(k) will give you tax benefits, but high fund expenses. The tax benefits are considerable, so if I were at a job where I plan on moving on in a few years, I'd fund the 401(k) up to the max with the knowledge that I'd roll the 401(k) into a rollover IRA in the (relatively) short term. If I saw myself staying at the employer for a long time (5+ years), I'd probably take the taxable account route since those high fund fees will add up over time. One you start building up a solid base, then I might look into having a small allocation in one of my accounts for \"\"play money\"\" to pick individual stocks, or start making sector bets.\"","As a rule, one should have a retirement. HOWEVER, you also have over a half a million dollars of debt. Paying down debt is another way to prepare for retirement. I would say throwing your excess money at your debts is a fine strategy right now. Especially the student loan (the mortgage probably has a lower rate and brings tax savings, so paying it off is less urgent). If I were you I'd probably put SOMETHING into tax deferred retirement accounts because in your tax bracket, the savings from doing so are significant. The max you can put in tax deferred is $5,500 per year (each) in IRA's and up to $17,000 to your 401(k) each. The tax-saving contribution opportunities will not come up again...you can't make up for it later. Any retirement saving beyond the tax advantaged part makes no sense while you have outstanding debt.","An experienced individual wouldn't ask such questions. I don't say this to take a jab at you, but to provide context. The matter is much more complicated than a simple answer to your question could accomplish. The short answer is no, not necessarily; but it depends on the details. Generally, if the employer matches, it's suggested that you take advantage of the match. It's free money. That said, it comes with some strings attached, like a vesting schedule. It's not yours right away, necessarily. Choices are limited in a 401k, but we should still come out ahead with that free money. The investment choices available in a 401k are also a part of the details. If they meet your needs you should certainly consider the 401k even if the employer doesn't match. There is also the matter of one's particular tax situation, which is certainly an involved matter. A 401k can certainly be a part of judicious tax planning. It's a matter of working out the details. Continuing this theme of details and coming back to the employer match: if the employer doesn't mach, I would make sure that I'm maxing out an IRA before considering the 401k. If the employer matched, I would probably contribute to take advantage of that match. However, it quickly becomes complicated here. I'm accustomed to employer matching up to some percentage of pay, which typically works out to be less then the anual contribution limits for a 401k. So, I my plan for such a situation is to contribute up to the employer match in the 401k, then max out an IRA, and then return to the 401k to finish contributing up to its yearly maximum. There is plenty for you to consider in order to come up with a plan of action. While it's certainly complicated, it's accessible to most people. You don't have to be a genius. In fact, eggheads are regularly trounced by the markets.","Don't frett to much about your retirement savings just put something towards it each year. You could be dead in ten years. You should always try to clear out debt when you can. But don't wipe yourself out! Expedite the repayment process.","I would say it depends on what your long term plans and goals are. If you are trying to get rid of credit cards and never use them again, then I would say to keep $1000 as an emergency fund, pay the cards off and then save to build your emergency fund up to 3-6 months expenses. However, if you are just going to run the balances back up, I would save save 3-6 months expenses out of the money you just received and pay down the higher interest cards with what is left over.","I would suggest you rollover your Roth 401k to a Roth IRA. Then pay off your debt before investing anymore money. In the long run you will be better off to have all your debt paid off. But I would not withdraw from the Roth 401k to pay down your debt. The penality is too steep.","Should I pay off the credit cards now or do the monthly payments thing? It need not be a binary choice; you could take the middle ground. Assuming that an emergency fund of $10-15k is sufficient, you could pay off one credit card and do the monthly payment for the other cards. With one card cleared, you may feel better. I would choose to clear the card with the highest interest, followed by the smallest debt first as it's the mathematically optimum way. I should also let you know that there's this debt-snowball method which is not as optimum but has some valid reasons for existing. Choose the optimum way if you're financially disciplined. p.s. I'm not trained financially, nor am I in the industry. Just my two cents.","\"I'd recommend hitting the loan the hardest, but getting something invested as well. It's tempting to see these decisions as binary, so it's good to see you wondering if a \"\"mix\"\" is best. I admit to being a spreadsheet junky, but I think this is a good candidate for working up various scenarios to see where the pain/pleasure point is and once you've identified it, move forward with it (e.g., let's say it's a 10K lump sum you're dealing with, what does 5k on the loan and 5k invested look like over the next 6 months, 12 months, 24 months (requires assumptions on investment performance)? What about 6K loan, 4K invested? 7K loan, 3K invested? etc)\"","First, read my answer here: Oversimplify it for me: the correct order of investing For me, the answer to your question comes down to how badly you want to get rid of your student loan debt. I recommend that you get rid of it as fast as possible, and that you sacrifice a little in your budget temporarily to make that happen. If that is what you want, here is what I would do. Following the steps in my other answer, I would pay off the student loans first. Cash out your non-retirement growth fund to jump start that, then challenge yourself to take as much of your paycheck as you can and throw it at the debt. Figure out how many months it will take before the debt is gone. Once the debt is gone, you won't have those monthly payments anymore and you won't be continually losing money in interest to the bank. At that point, you can build up your cash savings, invest in your employer's 401(k) plan for retirement, and start saving toward other long-term saving goals (car, house, etc.) To address some of your other concerns: If you cash out the non-retirement fund, you'll probably owe some capital gains tax. (Although, on a $3k investment, the long term rate won't add up to very much, depending on your tax bracket and cost basis.) You can't use the money from your non-retirement fund to invest in your 401(k). You can only contribute to your 401(k) via payroll deduction. To explicitly answer your question, your non-retirement fund is not bound by the limitations of retirement funds, meaning that you can cash it out and use it however you like without penalty, only paying perhaps a few hundred dollars of capital gains tax at tax time next year. Think of it as another source of cash for you.","If what you are paying in interest on the debt is a higher percentage than what your investments are returning, the best investment you can make is to pay off the debt. If you're lucky enough to be paying historically low rates (as I am on my mortgage) and getting good returns on the investments so the latter is the higher percentage, the balance goes the other way and you'd want to continue paying off the debt relatively slowly -- essentially treating it as a leveraged investment. If you aren't sure, paying off the debt should probably be the default prefrence.","\"Welcome to Money.SE. Your question is similar to a number of others. The \"\"How do I pay my debt down?\"\" and \"\"How do I invest extra money?\"\" is a bit of a continuum since there's no consensus than one should pay off the last cent of debt before investing. Oversimplify it for me: the correct order of investing offers a good look at this. You see, Pete's answer on your question is perfectly fine, but, since you make no mention of, say, a matched 401(k), I'd suggest that any answer to a question like yours should first take a step back and evaluate the bigger picture. A dollar for dollar matched 401(k) beats paying off even an 18% credit card. Absent any tangents, any thought of investing, saving for anything else, etc, my answer is simple, line up the debt, highest interest rate to lowest. Keep in mind the post-tax rate, i.e. a 6% student loan you can deduct, is an effective 4.5% if you are in the 25% bracket.\"","\"Given that the 6 answers all advocate similar information, let me offer you the alternate scenario - You earn $60K and have an employer offering a 50% match on all deposits. All deposits. (Note, I recently read a Q&A here describing such an offer. If I see it again, I'll link). Let the thought of the above settle in. You think about the fact that $42K isn't a bad salary, and decide to deposit 30%, to gain the full match on your $18K deposit. Now, you budget to live your life, pay your bills, etc, but it's tight. When you accumulate $2000, and a strong want comes up (a toy, a trip, anything, no judgement) you have a tough decision. You think to yourself, \"\"after the match, I am literally saving 45% of my income. I'm on a pace to have the ability to retire in 20 years. Why do I need to save even more?\"\" Your budget has enough discretionary spending that if you have a $2000 'emergency', you charge it and pay it off over the next 6-8 months. Much larger, and you know that your super-funded 401(k) has the ability to tap a loan. Your choice to turn away from the common wisdom has the recommended $20K (about 6 months of your spending) sitting in your 401(k), pretax deposited as $26K, and matched to nearly $40K, growing long term. Note: This is a devil's advocate answer. Had I been the first to answer, it would reflect the above. In my own experience, when I got married, we built up the proper emergency fund. As interest rates fell, we looked at our mortgage balance, and agreed that paying down the loan would enable us to refinance and save enough in mortgage interest that the net effect was as if we were getting 8% on the money. At the same time as we got that new mortgage, the bank offered a HELOC, which I never needed to use. Did we somehow create high risk? Perhaps. Given that my wife and I were both still working, and had similar incomes, it seemed reasonable.\"","One way to analyze the opportunity cost of using a 401K loan would be to calculate your net worth after using a 401K loan. If your net worth increases then the 401K loan would be advisable. Note that the calculations provided below do not take into account tax considerations. A net worth calculation is where you add all your assets and then subtract all your liabilities. The resulting number is your net worth. First, calculate the net worth of not taking the loan and simply paying the credit card interest. This means you only pay the interest on the credit card. In addition to the parameters identified in your question, two additional parameters will need to be considered: Cash and the market rate of return on the 401K. Scenario 1 (only pay credit card interest): After 12 months all you have paid is the interest on the credit card. The 401K balance is untouched so it will hopefully grow. The balance on the credit card remains at the end of 12 months. Scenario 2 (use 401K loan to pay credit card balance): You borrow $5,000 from your 401K to pay the credit card balance. You will have to pay $5,000 plus the 401K interest rate back into your 401K account. Use the following equation to determine when Scenario 2 increases your net worth more than scenario 1: Thus, if your credit card interest rate is greater than the rate you can earn on your 401K then use the 401K loan to pay off the credit card balance. Another scenario that should be considered: borrow money from somewhere else to pay off the credit card balance. Scenario 3 (external loan to pay credit card balance): You borrow $5,000 from somewhere besides your 401K to pay off the credit card balance. The following is used to determine if you should use an external loan over the 401K loan: This means you should use an external loan if you can obtain an interest rate less than the rate of return you can earn on your 401K. The same methodology can be used to compare Scenario 3 to Scenario 1.","Pay off the debt first. Life circumstances change without notice, and starting any stage of life with a debt puts you at a disadvantage. Luckily, your debt is small. Please also consider accumulating a 6 month emergency fund before making investments. This will further protect you when life hands you a curveball.","Only having 1200 dollars sounds extremely dangerous and in my opinion is not a sound situation to intentionally put yourself into. You have what, 11k total? That is roughly a rainy day fund, depending on your expenses and clarity of cash flow. I think you should keep that money in the bank as your new baseline. At least 10k of it. Don't touch that money unless you need to pay for an unexpected expense. Now, you have $0 to work with, but a safe-ish cushion. Then, and only then, should any extra money be used for either paying down the loan or tax advantaged accounts. A retirement account is probably the right long term financial choice. However, if it were me and I were (back) in that kind of situation, I would pay off the loan first, primarily for personal satisfaction, then start maxing retirement contributions.","I feel this is best. Credit card is an immediate debt and you has the finds to wipe it out. the Student loans are a longer term debt and you have the money to pay it all off. So yes, pay cc, and keep loan on scheduled payments. Plus it helps your credit","When paying off multiple debts there is a protocol that many support. Payoff your debts according to the snowball method. The snowball method proposes that you make minimum payments on all debts except the smallest one. Payoff the smallest debt as quickly as possible. As smaller debts are paid off, that makes one less minimum payment you need to make, leaving you with more money to put against the next smallest debt. So in your case, pay off the smaller debt completely, then follow up on the larger one by making regular payments at least equal to the sum of your two current minimum payments. You'll see immediate progress in tackling your debt and have one less minimum to worry about, which can serve as a little safety of it's own if you have a bad month. As to saving the thousand dollars, that is pragmatic and prudent. It's not financially useful (you won't make any money in a savings account), but having cash on hand for emergencies and various other reasons is an important security for modern living. As suggested in another answer, you can forgo saving this thousand and put it against debt now, because you will have a freed up credit card. Credit can certainly give you that same security. This is an alternative option, but not all emergencies will take a credit card. You typically can't make rent with your credit card, for example. Good luck paying your debts and I hope you can soon enjoy the freedom of a debt free life.","No. Few reasons. 1) You'll pay a penalty (tax) if you liquidate your 401k. 2) Instead of using your 401k, adjust your monthly budget and live frugal for some time. 3) Look for 0% balance transfer offers and transfer debt to that so you'll be able to reduce interest accumulation. 4) 401k is your savings, one of many I hope, keep that as is and don't touch it. 5) Sell things that you don't need and pay it towards the credit card 6) Do an analysis of your spending and figure out how you got to 21k.","Great questions -- the fact that you're thinking about it is what's most important. I think a priority should be maximizing any employer match in your 401(k) because it's free money. Second would be paying off high interest debt because it's a big expense. Everything else is a matter of setting good financial habits so I think the order of importance will vary from person to person. (That's why I ordered the priorities the way I did: employer matching is the easiest way to get more income with no additional work, and paying down high-interest debt is the best way to lower your long-term expenses.) After that, continue to maximize your income and savings, and be frugal with your expenses. Avoid debt. Take a vacation once in a while, too!","\"When is the best time to pay? At the end of each year? If you save $1,000 each month at 1% so as to pay $12,000 at EOY on a 4.75% loan, you've lost \"\"4.75% - 1% = 3.75%\"\" over that year. (And that's presuming you put the money in a \"\"high yield\"\" online savings account.) Thus, the best time to pay is as soon as you have the money. EDIT: This all assumes that you have an emergency fund (more than the bare minimum $1K), zero other debt with a higher rate than 4.75% and that you are getting the full company match from 401(k).\"","I am answering this in light of the OP mentioning the desire to buy a house. A proper mortgage uses debt to income ratios. Typically 28/36 which means 28% of monthly gross can go toward PITI (principal, interest, tax, insurance) and the total debt can go as high as 36% including credit cards and car payment etc. So, if you earn $5000/mo (for easy math) the 8% gap (between 28 and 36) is $400. If you have zero debt, they don't let you use it for the mortgage, it's just ignored. So a low interest long term student loan should not be accelerated if you are planning to buy a house, better put that money to the down payment. But for credit cards, the $400/mo carries $8000 (banks treat it as though the payment is 5% of debt owed). So, I'd attack that debt with a vengeance. No eating out, no movies, beer, etc. Pay it off as if your life depended on it, and you'll be happier in the long run.","The best approach depends on how much of an emergency fund you have. If you have no emergency fund Calculate how much you need in order to pay your expenses for 1 month and put at least that amount in a savings account. 3-6 months' worth of expenses is better. Put the remainder towards one credit card. If you have less than 3 months' worth of expenses in your emergency fund Deposit 1 additional month's worth of expenses into your savings account and apply the rest to one card. If you have an emergency fund that you're completely comfortable with Pay $8000 towards one card and $2000 towards the other one. Paying off one card fully gets rid of a bill that you have to think about each month, even if the two cards are otherwise identical.","You could pay off a portion of the debt and your minimum payments should also go down proportionately. Your investment managers may be able to continue making returns in the markets in a sideways and a bear market. So you have 24k contributing to your net worth, and ~50k giving you a negative net worth. At best, you can bring this down to a negative 25k net worth, or you can start and keep using some of the gains from your investment account to supplement your credit payments (along with your income). This is based on chance that your investment managers can continue making gains, compared to paying down 24k and having possibly zero liquid savings now, but having more of your salary to start saving and make the lowered minimum payments, assuming you don't borrow more. Those are the options I've thought of, I don't see either option being necessarily quicker than the other."],"string":"[\n \"\\\"There is a very simple calculation that will answer the question: Is the expected ROI of the 401K including the match greater than the interest rate of your credit card? Some assumptions that don't affect the calculation, but do help illustrate the points. You have 30 years until you can pull out the 401K. Your credit card interest rate is 20% compounded annually. The minimum payoffs are being disregarded, because that would legally just force a certain percentage to credit card. You only have $1000. You can either pay off your credit card or invest, but not both. For most people, this isn't the case. Ideally, you would simply forego $1000 worth of spending, AND DO BOTH Worked Example: Pay $1000 in Credit Card Debt, at 20% interest. After 1 year, if you pay off that debt, you no longer owe $1200. ROI = 20% (Duh!) After 30 years, you no longer owe (and this is pretty amazing) $237,376.31. ROI = 23,638% In all cases, the ROI is GUARANTEED. Invest $1000 in matching 401k, with expected ROI of 5%. 2a. For illustration purposes, let's assume no match After 1 year, you have $1050 ($1000 principal, $0 match, 5% interest) - but you can't take it out. ROI = 5% After 30 years, you have $4321.94, ROI of 332% - assuming away all risk. 2b. Then, we'll assume a 50% match. After 1 year, you have $1575 ($1000 principle, $500 match, 5% interest) - but you can't take it out. ROI = 57% - but you are stuck for a bit After 30 years, you have $6482.91, ROI of 548% - assuming away all risk. 2c. Finally, a full match After 1 year, you have $2100 ($1000 principle, $1000 match, 5% interest) - but you can't take it out. ROI = 110% - but again, you are stuck. After 30 years, you have $8643.89, ROI of 764% - assuming away all risk. Here's the summary - The interest rate is really all that matters. Paying off a credit card is a guaranteed investment. The only reason not to pay off a 20% credit card interest rate is if, after taxes, time, etc..., you could earn more than 20% somewhere else. Note that at 1 year, the matching funds of a 401k, in all cases where the match exceeded 20%, beat the credit card. If you could take that money before you could have paid off the credit card, it would have been a good deal. The problem with the 401k is that you can't realize that gain until you retire. Credit Card debt, on the other hand, keeps growing until you pay it off. As such, paying off your credit card debt - assuming its interest rate is greater than the stock market (which trust me, it almost always is) - is the better deal. Indeed, with the exception of tax advantaged mortgages, there is almost no debt that has an interest rate than is \\\"\\\"better\\\"\\\" than the market.\\\"\",\n \"If your employer is matching 50 cents on the dollar then your 401(k) is a better place to put your money than paying off credit cards This. Assuming you can also get the credit cards paid off reasonably soon too (say, by next year). Otherwise, you have to look at how long before you can withdraw that money, to see if the compounded credit card debt isn't growing faster than your retirement. But a guaranteed 50% gain, your first year is a pretty hard deal to beat. And if you currently have no savings, unless all of your surplus income has been reducing your debt, you're living beyond your means. You should be earning more than you're (going to be) spending, when you start paying rent/car bills. If you don't know what this is going to be, you need to be budgeting. Get this under control, by any means necessary. New job/career? Change priorities/expectations? Cut expenses? Live to your budget? Whatever it takes. I don't think you should be in any investment that includes bonds until you're 40, and maybe not even then - equities and cash-equivalents all the way (cash is for emergency funds, and for waiting for buying opportunities). Otherwise Michael has some good ideas. I would caveat that I think you should not buy any investments in one chunk, but dollar average it over some period of time, in case the market is unnaturally high right when you decide to invest. You should also gauge possible returns and potential tax liabilities. Debt is good to get rid of, unless it is good debt (very low interest rates - ie: lower than you could borrow the money for). Good debt should still get paid off - who knows how long your job could last for - but maybe not dump all of your $50K on it. Roth is amazing. You should be maxing that contribution out every year.\",\n \"Mathwise, I absolutely agree with the other answers. No contest, you should keep getting the match. But, just for completeness, I'll give a contrarian opinion that is generally not very popular, but does have some merit. If you can focus on just one main financial goal at a time, and throw every extra dollar you have at that one focus (i.e., getting out of debt, in your case), you will make better progress than if you're trying to do too many things at once. Also, there something incredibly freeing about being out of debt that has other beneficial impacts on your life. So, if you can bring a lot of focus to the credit card debt and get it paid off quickly, it may be worth deferring the 401(k) investing long enough to do that, even though it doesn't make as much mathematical sense. (This is essentially what Dave Ramsey teaches, BTW.)\",\n \"\\\"Agree with Randy, if debt and debt reduction was all about math, nobody would be in debt. It is an emotional game. If you've taken care of the reasons you're in debt, changed your behaviors, then start focusing on the math of getting it done faster. Otherwise, if you don't have a handle on the behaviors that got you there, you're just going to get more rope to hang yourself with. I.e., makes sense to take a low-interest home equity loan to pay off high-interest credit card debt, but more likely than not, you'll just re-rack up the debt on the cards because you never fixed the behavior that put you into debt. Same thing here, if you opt not to contribute to \\\"\\\"pay off the cards\\\"\\\" without fixing the debt-accumulating behaviors, what you're going to do is stay in debt AND not provide for retirement. Take the match until you're certain you have your debt accumulation habits in check.\\\"\",\n \"I have credit card debt of about $5000 That's the answer right there. You told us the 401(b) has no match. The next highest priority would be credit card debt that's costing you interest. You didn't mention the rate on the card, I'm assuming it's 8% or more. As far as your balance sheet (the 'bottom line') is concerned, pay off a 10% debt is the same as earning 10% on your money. If anyone promises you a higher return with a different investment, I'd run the other way. We hope the market, i.e. the US stock market, as measured by a broad index, say the S&P 500, will return 8-10%/yr over the long term, but this isn't guaranteed. Paying off that credit card will save you the interest every year, and free up the payments to invest elsewhere. In response to Marlene's comment - Crazy? No. Human nature and emotion is what it is. I honestly don't know how to address some of it. Years ago, I was in a similar situation with a reader who had a $5000 'emergency' account, yet had $5000 in credit card debt. I had a tough time getting my head around why it wasn't obvious this made no sense. In your case, I might suggest you pay the card down to below $1000 and have the credit line reduced. Paying high interest on $5K makes no sense at any point in one's life. At least a 20-something can dig his way out and learn a lesson. A pre-retiree shouldn't be throwing this money away.\",\n \"\\\"First of all, you need to stop using the card completely. Yes, that means you lose out on cash back, double miles, whatever, but that's how you got to this mess in the first place. Switch to a cash budget until you can consistently spend less than you bring home. Keep better track of your expenses, build an emergency fund, and learn to save for expenses rather than borrow for them until you have your spending under control. If you can't cut your expenses any more, consider ways to increase your income (more hours at work, part-time jobs, sell stuff, etc.) Assuming that the employer match is 1-to-1 up to 4%, and you're saving an additional 7 percent to get to 15% total, I would definitely lower your contribution down to 4%, get the card paid off, and ONLY bump your contribution back up once you can safely pay off the card each month and know how much you can contribute. It is not wise to put 15% in retirement if that causes you to spend more than your net take-home pay. Your \\\"\\\"13%\\\"\\\" in your Roth is not guaranteed by any means, but the interest you pay on your credit card is. I would even be tempted to cut your retirement completely until the debt is paid, but more for motivational reasons that mathematical: I would be more concerned about living within your income at this point than getting a company match. I believe the benefits of spending wisely will outweigh a temporary loss in matched retirement funds in the long run.\\\"\",\n \"\\\"The original question was aimed at early payment on a student loan at 6%. Let's look at some numbers. Note, the actual numbers were much lower, I've increased the debt to a level that's more typical, as well as more likely to keep the borrower worried, and \\\"\\\"up at night.\\\"\\\" On a $50K loan, we see 2 potential payoffs. A 6 year accelerated payoff which requires $273.54 extra per month, and the original payoff, with a payment of $555.10. Next, I show the 6 year balance on the original loan terms, $23,636.44 which we would need to exceed in the 401(k) to consider we made the right choice. The last section reflects the 401(k) balance with different rates of return. I purposely offer a wide range of returns. Even if we had another 'lost decade' averaging -1%/yr, the 401(k) balance is more than 50% higher than the current loan debt. At a more reasonable 6% average, it's double. (Note: The $273.54 deposit should really be adjusted, adding 33% if one is in the 25% bracket, or 17.6% if 15% bracket. That opens the can of worms at withdrawal. But let me add, I coerced my sister to deposit to the match, while married and a 25%er. Divorced, and disabled, her withdrawals are penalty free, and $10K is tax free due to STD deduction and exemption.) Note: The chart and text above have been edited at the request of a member comment. What about an 18% credit card? Glad you asked - The same $50K debt. It's tough to imagine a worse situation. You budgeted and can afford $901, because that's the number for a 10 year payoff. Your spouse says she can grab a extra shift and add $239/mo to the plan, because that' the number to get to a 6 year payoff. The balance after 6 years if we stick to the 10 year plan? $30,669.82. The 401(k) balances at varying rates of return again appear above. A bit less dramatic, as that 18% is tough, but even at a negative return the 401(k) is still ahead. You are welcome to run the numbers, adjust deposits for your tax rate and same for withdrawals. You'll see -1% is still about break-even. To be fair, there are a number of variables, debt owed, original time for loan to be paid, rate of loan, rate of return assumed on the 401(k), amount of potential extra payment, and the 2 tax rates, going in, coming out. Combine a horrific loan rate (the 18%) with a longer payback (15+ years) and you can contrive a scenario where, in fact, even the matched funds have trouble keeping up. I'm not judging, but I believe it's fair to say that if one can't find a budget that allows them to pay their 18% debt over a 10 year period, they need more help that we can offer here. I'm only offering the math that shows the power of the matched deposit. From a comment below, the one warning I'd offer is regarding vesting. The matched funds may not be yours immediately. Companies are allowed to have a vesting schedule which means your right to this money may be tiered, at say, 20%/year from year 2-6, for example. It's a good idea to check how your plan handles this. On further reflection, the comments of David Wallace need to be understood. At zero return, the matched money will lag the 18% payment after 4 years. The reason my chart doesn't reflect that is the match from the deposits younger than 4 years is still making up for that potential loss. I'd maintain my advice, to grab the match regardless, as there are other factors involved, the more likely return of ~8%, the tax differential should one lose their job, and the hope that one would get their act together and pay the debt off faster.\\\"\",\n \"\\\"For easy math, say you are in the 25% tax bracket. A thousand deposited dollars is $750 out of your pocket, but $2000 after the match. Now, you say you want to take the $750 and pay down the card. If you wait a year (at 20%) you'll owe $900, but have access to borrow a full $1000, at a low rate, 4% or so. The payment is less than $19/mo for 5 years. So long as one is comfortable juggling their debt a bit, the impact of a fully matched 401(k) cannot be beat. Keep in mind, this is a different story than those who just say \\\"\\\"don't take a 401(k) loan.\\\"\\\" Here, it's the loan that offers you the chance to fund the account. If you are let go, and withdraw the money, even at the 25% rate, you net $1500 less the $200 penalty, or $1300 compared to the $750 you are out of pocket. If you don't want to take the loan, you're still ahead so long as you are able to pay the cards over a reasonable time. I'll admit, a 20% card paid over 10+ years can still trash a 100% return. This is why I add the 401(k) loan to the mix. The question for you - jldugger - is how tight is the budget? And how much is the match? Is it dollar for dollar on first X%?\\\"\",\n \"The long term growth is not 6.5%, it's 10% give or take. But, that return comes with risk. A standard deviation of 14%. Does the 401(k) have a match? And are you getting the full match? If no match, or you already top it off, the 6.5% is a rate that I'd be happy to get on my money. So, I would pay it off faster. My highest rate debt is my 3.5% mortgage, which is 2.5% after tax. At 2.5%, I prefer to be a borrower, as that gap 2.5%-10% is pretty appealing, long term.\",\n \"\\\"Aside from employer 401(k) matches (which may double your money immediately), paying off debts is almost always the best place to start. Paying off a debt early is a zero-risk operation and will earn you N% (where N is your interest rate). Is that a good deal for a zero-risk return? The closest equivalent today (Aug 24, 2012) is that you can earn about 2.68% on 10-year Treasury bonds. Unless you have a really, really good interest rate (or the interest is tax-deductible), paying off your loan will offer an excellent risk-adjusted return, so you should do that. The \\\"\\\"really good\\\"\\\" interest rate is typically a mortgage or student loans. (Mortgage interest is also tax-deductible, at least for now.) In those cases, you're not going to gain nearly as much by paying the loan early, and the loan is large - larger than the amount you want to have in risk-free investments. You want to invest for returns, as well! So you can save for retirement instead (in a 401(k) or similar account) and take on a little risk.\\\"\",\n \"John's answer is great, the question, however, is complex enough that one can write a book on the topic. So, I'll take the liberty to add two observations. The matched 401(k) should be the priority, even before paying off one's credit cards if any. A dollar for dollar match combined with the extra years of compounding is worth a bit longer on the debt pay off. To a younger person, the Roth (either Roth 401(k) or IRA) is a good choice while you are in a lower tax bracket. I recommend you look at the page at Fairmark to understand the tax brackets. It's easy to see how many people straddle that 15% line (at $68K taxable) and with a bit of planning, using Roth while in the 15% bracket and deductible accounts as you go above, you can tax-manage your affairs to avoid the higher rates.\",\n \"\\\"I have never double-answered till now. This loan can't be taken out of context. By the way, how much is it? What rate? \\\"\\\"Debt bad.\\\"\\\" Really? Line the debt up. This is the highest debt you have. But, you work for a company that offers a generous match, i.e. the match to your 401(k). Now, it's a choice, pay off 6% debt or deposit that money to get an immediate 100% return. Your question has validity. In the end, we can tell you when to pay off the debt. After - The issue is that you are quoting a third party without having the discussion or ever being privy to it. In court, this is called 'hearsay.' The best we can do is offer both sides of the issue and priority for the payments. Welcome to Money.SE, nice first question.\\\"\",\n \"Your comment regarding your existing finances is very relevant and helpful. You need to understand that generally in personal finance circles, when a strong earning 22 year-old is looking for a loan it's usually a gross spending problem. Their car costs $1,000 /month and their bar tabs are adding up so the only logical thing to do is get a loan. Most 22-year-olds don't have a mortgage soaking up their income, or a newborn. With all of this in mind I essentially agree with DStanley and, personally, and many people here would probably disagree, I'd stop the 401(K) contribution and use that money to pay the debt. You're still very young from a retirement standpoint, let the current balance ride and forego the match until the debt is paid. I think this is more about being debt free at 22 quickly than it's about how much marginal money could be saved via 401(k) or personal loan or this strategy or that strategy. I think at your age, you'll benefit greatly from simply being debt free. There are other very good answers on this site and other places regarding the pitfalls of a 401(k) loan. The most serious of which is that you have an extremely limited time to pay the entire loan upon leaving the company. Failure to repay in that situation incurs tax liability and penalties. From my quick math, assuming your contribution is 8% of $70,000 /year, you're contributing something in the neighborhood of $460/month to your 401(k). If you stopped contributing you'd probably take home a high $300 number net of taxes. It'll take around 20 months to pay the loan off using this contribution money without considering your existing payments, in total you're probably looking at closer to 15 months. You'll give up something in the neighborhood of $3,500 in match funds over the repayment time. But again, you're 22, you'll resume your contributions at 24; still WAY ahead of most people from a retirement savings standpoint. I don't think my first retirement dollar was contributed until I was about 29. Sure, retirement savings is important, but if you've already started at age 22 you're probably going to end up way ahead of most either way. When you're 60 you're probably not going to bemoan giving up a few grand of employer match in your 20s. That's what I would do. Edit: I actually like stannius's suggestion in the comments below. IF there's enough vested in your plan that is also available for withdrawal that you could just scoop $6,500 out of your 401(k) net of the 10% penalty and federal and state taxes (which would be on the full amount) to pay the debt, I'd consider that instead of stopping the prospective contributions. That way you could continue your contributions and receive the match contributions on a prospective basis. I doubt this is a legitimate option because it's very common for employers to restrict or forbid withdrawal of employee and/or employer contributions made during your employment, but it would be worth looking in to.\",\n \"\\\"I'll add 2 observations regarding current answers. Jack nailed it - a 401(k) match beats all. But choose the right flavor account. You are currently in the 15% bracket (i.e. your marginal tax rate, the rate paid on the last taxed $100, and next taxed $100.) You should focus on Roth. Roth 401(k) (and if any company match, that goes into a traditional pretax 401(k). But if they permit conversions to the Roth side, do it) You have a long time before retirement to earn your way into the next tax bracket, 25%. As your income rises, use the deductible IRA/ 401(k) to take out money pretax that would otherwise be taxed at 25%. One day, you'll be so far into the 25% bracket, you'll benefit by 100% traditional. But why waste the opportunity to deposit to Roth money that's taxed at just 15%? To clarify the above, this is the single rate table for 2015: For this discussion, I am talking taxable income, the line on the tax return designating this number. If that line is $37,450 or less, you are in the 15% bracket and I recommend Roth. Say it's $40,000. In hindsight on should put $2,550 in a pretax account (Traditional 401(k) or IRA) to bring it down to the $37,450. In other words, try to keep the 15% bracket full, but not push into 25%. Last, after enough raises, say you at $60,000 taxable. That, to me is \\\"\\\"far into the 25% bracket.\\\"\\\" $20,000 or 1/3 of income into the 401(k) and IRA and you're still in the 25% bracket. One can plan to a point, and then use the IRA flavors to get it dead on in April of the following year. To Ben's point regarding paying off the Student Loan faster - A $33K income for a single person, about to have the new expense of rent, is not a huge income. I'll concede that there's a sleep factor, the long tern benefit of being debt free, and won't argue the long term market return vs the rate on the loan. But here we have the probability that OP is not investing at all. It may take $2000/yr to his 401(k) capture the match (my 401 had a dollar for dollar match up to first 6% of income). This $45K, after killing the card, may be his only source for the extra money to replace what he deposits to his 401(k). And also serve as his emergency fund along the way.\\\"\",\n \"I would definitely pay down the debt first. If it is going to take 15 years to do so, you probably need to allocate more money to paying down debt. Cut expenses by going out to eat less, and keeping spending to the bare necessities. You might even consider getting a second job, just for paying down the debt. If that isn't enough, consider selling off some assets. You should be able to come up with a plan to be debt free (excluding maybe a regular mortgage) within 3-5 years. Once the only debt you have is a home mortgage, then its time to look at putting money towards retirement again. Note, you should not take money out of a 401k or IRA to pay off debt. The costs for doing so are nearly always too great.\",\n \"Does the 401(k) get any match? Whatever you do, don't lose the match. Without more detail, it's tough. Will you lose more sleep for the debt rising, or for the retire account not? It seems your debt is well managed, a year to zero? A student loan wouldn't scare me.\",\n \"One should fund a 401(k) or matched retirement account up to the match, even if you have other debt. Long term, you will come out ahead, but you must be disciplined in making the payments. If one wants to point out the risk in a 401(k), I'd suggest the money need not be invested in stocks, there's always a short term safe option.\",\n \"Please direct personal finance questions to /r/personalfinance However, my opinion is that you are unlikely to earn more than 7% annualized returns from any combination of asset offerings in your 401k over the next several years; therefore, you should pay off your student loans first. I am ignoring tax consequences, but /r/personalfinance may be able to provide a more quantitative answer.\",\n \"Nope, take the match. I cannot see not taking the match unless you don't have enough money to cover the bills. Every situation is different of course, and if the option is to missing minimum payments or other bills in order to get the match, make your payments. But in all other circumstances, take the match. My reasoning is, it is hard enough to earn money so take every chance you can. If you save for retirement in the process, all the better.\",\n \"I would definitely be putting in enough to get the most out of the match. Only reasons I can think of not too would be: Other than that, not investing in the 401(k) is turning down free money. Edit based on feedback in comments. The only time I would advocate number 1 is if you are intensely committed to getting out of debt, were on a very tight budget and had eliminated all non-essential spending. In that situation only, I think the mental benefit of having that last debt paid off would be worth more than a few dollars in interest.\",\n \"Finding a way to pay down credit debt is important, because you're probably paying in the high teens in APR. 401k should be last resort. Have you researched other options? E.g loan consolidation If you don't mind me asking, how did you get that far in debt?\",\n \"\\\"Your initial plan (of minimizing your interest rate, and taking advantage of the 401(k) match) makes sense, except I would put the 401(k) money in a very low risk investment (such as a money market fund) while the stock market seems to be in a bear market. How to decide when the stock market is in a bear market is a separate question. You earn a 100% return immediately on money that receives the company match -- provided that you stay at the company long enough for the company match to \\\"\\\"vest\\\"\\\". This immediate 100% return far exceeds the 3.25% return by paying down debt. As long as it makes sense to keep your retirement funds in low-risk, low-return investments, it makes more sense to use your remaining free cash flow to pay down debts than to save extra money in retirement funds. After setting aside the 6% of your income that is eligible for the company match, you should be able to rapidly pay down your debts. This will make it far easier for you to qualify for a mortgage later on. Also, if you can pay off your debt in a couple years, you will minimize your risk from the proposed variable rate. First, there will be fewer chances for the rate to go up. Second, even if the rate does go up, you will not owe the money very long.\\\"\",\n \"\\\"One can generalize on Traditional vs Roth flavors of accounts, I suggest Roth for 15% money and going pretax to avoid 25% tax. If the student loan is much over 4%, it may make sense to put it right after emergency fund. For emergency fund priority - I'm assuming EF really requires 2 phases, the $2500 broken transmission/root canal bill, and the lose your job, or need a new roof level bills. I'm in favor of doing what let's you sleep well. I'm also quick to point out that if you owe $2500 at 18%, yet have $2500 in your emergency fund, you're really throwing away $450 in interest each year. There's an ongoing debate of \\\"\\\"credit card as emergency fund.\\\"\\\" No, I don't claim that your cards should be considered an emergency fund, per se, but I would prioritize knocking off the 18% debt as a high priority. Once that crazy interest debt is gone, fund the ER, and find a balance for savings and the next level ER, the 6-9mo of expenses one. One can choose to fund a Roth IRA, but keep the asset out of retirement calculations. It's simply an emergency account returning tax free interest, and if never used, it eventually is retirement money. A Roth permits withdrawal of deposited funds with no tax or penalty, just tracking it each year. This actually rubs some people the wrong way as it sounds like tapping your retirement account for emergencies. For my purpose, it's a tax free emergency fund. Not retirement, unless and until you are saving so much in the 401(k) you need more tax favored retirement money. I wrote an article some time ago, the Roth Emergency Fund which went into a bit more detail. Last - keep in mind, this is my opinion. I can intelligently argue my case, but at some point, it's up to the individual to do what feels right. Paying 18% debt off a bit slower, say 4 years instead of 3, in favor of funding the matched 401(k), to me, you run the numbers, watch the 401(k) balance grow by 2X your pretax deposits, and see that in year 3, your retirement account is jump-started and far, far more than your remaining 18% cards. Those who feel the opposite and wish to be debt free first are going to do what they want. And the truth is, if this lets you sleep better at night, I'm in favor of it.\\\"\",\n \"How old are you? With $15k, I assume late twenties. Do you still use your credit cards? or is this just past accumulated debt? (paying them off will do you no good if you just run them back up again.) Does your employer match you contributions? How much? Are you fully vested in their contributions? In general, it is not a good idea, but under the right circumstances it isn't a bad idea.\",\n \"With a credit card debt at 17%, you should basically not eat in order to pay the balance off. This should be gone within the month. That being said, I would have a hard time reducing my contributions below the 4%, but would certainly do it to the 4%. However, I would also deliver pizzas on nights and weekends and work all available overtime. Coincidentally the pizza place by my home is hiring delivery drivers however, they did not disclose how much they typically make. Only that they make min wage plus tips. Make sure you stop borrowing first, then try to have this knocked out in 4 weeks or less.\",\n \"If your employer offers a 401(k) match, definitely take advantage of it. It's free money, so take advantage of it!\",\n \"\\\"The others nailed it, great answers. I'd add - the two things I'd prioritize ahead of this debt, higher interest debt, obviously. And matched 401(k) deposits. I can't repeat enough - many people are so anti debt, they walk away from guaranteed 100% returns. \\\"\\\"after I pay my mortgage, I'll max out my 401(k) and catch up.\\\"\\\" I've read this, and it will never make sense. After that, pay off the 9% rate as soon as you can.\\\"\",\n \"Congratulations on doing all the right things in your financial life. To me, the answer to your question is a no-brainer: pay off the loans immediately. However, I am sure that some people will post answers arguing exactly the opposite. I would also recommend using the extra cash that you will have each month (since the payments on the loans will disappear) to increase your 401k contributions even though they will not attract additional company match, and once again, you will certainly get answers telling you why doing so is a very bad idea.\",\n \"\\\"There is no equation. Only data that would help you come to the decision that's right for you. Assuming the 401(k) is invested in a stock fund of one sort or another, the choice is nearly the same as if you had $5K cash to either invest or pay debt. Since stock returns are not fixed, but are a random distribution that somewhat resembles a bell curve, median about 10%, standard deviation about 14%. It's the age old question of \\\"\\\"getting a guaranteed X% (paying the debt) or a shot at 8-10% or so in the market.\\\"\\\" This come up frequently in the decision to pre-pay mortgages at 4-5% versus invest. Many people will take the guaranteed 4% return vs the risk that comes with the market. For your decision, the 401(k) loan, note that the loan is due if you separate from the company for whatever reason. This adds an additional layer of risk and another data point to the mix. For your exact numbers, the savings is barely $50. I'd probably not do it. If the cards were 18%, I'd lean toward the loan, but only if I knew I could raise the cash to pay it back to not default.\\\"\",\n \"I see you've marked an answer as accepted but I MUST tell you that STOPPING your 401k contribution all together is a bad idea. Your company match is 100% rate of return(or 50% depending on structure). I don't care what market you look at, or how bad a loan you take out, you will not receive 100% rate of return, or be charged 100% interest. Further, taking out a loan against your 401k effectively does two things: It is a loan that must be repaid according to the terms of your 401k AND in every 401k I've ever encountered, you cannot make contributions to the 401k until the loan is repaid. This in effect stops your contributions, and will almost certainly save you very little on your interest rates on your current loans. I have 4 potential solutions that may help achieve your goal without sacrificing your 401k match and transferring the debt from one lender to another, but they are conditional. Is your company match 100% up to 4% of your salary, or 50% of your contribution (up to a limit you have not yet reached)? This is important. If it is 100% up to 4%, stop committing the additional 4% and use that to pay down your debt...and after ward set up that 4% as auto pay into an IRA, not into the 401k. An IRA will make you more money because YOU have control over its management, not your employer. If it is 50% match, contribute until the match is met because you cannot get 50% rate of return anywhere, then take your additional monies and get an IRA. As far as your debt, in this scenario simply suck it up and pay it as is. You will lose far more than you gain by stopping your contributions. If you simply must reduce your expenses by 150$ month try refinancing the mortgage and rolling the 6500$ into it. If you get a big enough drop in the interest rate you could still end up paying less. OR If you cannot make the gain there, try snowballing the three payments. You do this by calling your student loan vendor and telling them you need to make much smaller payments, like even zero depending on the type of loan. Then take ALL of the money you are currently spending on the 3 loans and put into the car payment. When it's gone, roll the whole thing into the higher interest student loan, then finally roll it all into the last student loan. You'll pay it off faster, and student loans have lots of laws and regulations regarding working with payers to keep them paying something without breaking them. WHATEVER YOU DO, DO NOT STOP YOUR CONTRIBUTIONS. 50% OR 100%, THAT MONEY IS GUARANTEED AT A HIGHER RATE OF RETURN THAN YOU CAN GET ANYWHERE, ESPECIALLY GUARANTEED.\",\n \"It has to do with return. I don't know if Canada has a matching feature on retirement accounts, but in the US many companies will match the first X% you put in. So for me, my first $5000 or so is matched 100%. I'll take that match over paying down any debt. Beyond that, of course it's a simple matter of rate of return. Why save in the bank at 2% when you owe at 10-18%? One can make this as simple or convoluted as they like. My mortgage is a tax deduction so my 5% mortgage costs me 3.6%. I've continued to invest rather than pay the mortgage too early, as my retirement account is with pre-tax dollars. So $72 will put $100 in that account. Even in this last decade, bad as it was, I got more than 3.6% return.\",\n \"Pay the debt down. Any kind of debt equals risk. No debt equals no risk and a better chance to have that money earn you income down the road once it's invested. That and you will sleep so much better knowing you have ZERO debt. You 6 month emergency fund is probably good. Remember to keep it at 6 months living expenses (restaurants don't count as living expenses).\",\n \"In your scenario, I would do the following: If, in the short term, something should happen, you can always tap into a line of credit or even a cash advance on the credit card. But, you should in no way be paying $70 a month in interest. Assume you want to pay off the Credit card over 12 payments, you would need to pay about 450 a month, which costs 400 in interest. At the end of the year, you have $5000 in savings, and $0 debt. The alternative, is to pay off the credit card right now, and put that $450 into savings, you would have $5400 in savings, and $0 debt. I'm usually the last to recommend a $0 safety net, but I make an exception in the case of retirable credit card debt. In the worst case, you are no worse off than you are now, in the best case, you're up about $400 at the end of the year.\",\n \"The answer will vary person to person and situation to situation. But the basic concept to always consider is this: What interest rate am I paying on my debt? 10%? 18%? And what interest rate am I making on my savings/investment, etc? 3%? 7%? It won't give you a hard and fast answer, but will definitely let you know if you should take a closer look at it. I'd suggest talking to a financial planner about it. Find a fee-based planner that you can turn to intermittently to make sure you are on the right track...not a commission-based planner, a fee-based one. (with respectful apologies to any commission-based planners who may read this.) My instinct is usually to pay off the debt, try to clean everything up so you don't have anything outstanding that is charging you interest. Debt is clutter, it's stressful, it can be a reminder of money you wish you hadn't spent. As long as you have access to money in case of emergency, job loss, etc, get your debt paid off and keep it paid off. You'll sleep much better.\",\n \"Here's what I'd do. Show these figures to your bank, and ask if they can offer you some type of account with a small overdraft, say up to $2000. Typically this won't pay the same kind of interest as your savings account, but it doesn't matter. If such an account is available, then yes, dump most of your savings into the student loan, and keep a few hundred in your new account. The overdraft on this account is your emergency fund. This means that in the more likely scenario (no emergencies) you're saving yourself 6% interest on something like $4000 to $4500. In the case of an emergency, you're still covered; but you'll be paying a larger amount of interest. Let's say you have an emergency cost and need to dip into the overdraft for $1000. If the interest is 15%, then you've cost yourself an extra 9% on that $1000 over leaving that debt in the student loan. This seems to me like a really good gamble - more likely to gain 6% of $4000, less likely to lose 9% of $1000. If your bank won't give you a low-interest account with a small overdraft, then use your credit card as your emergency fund. The same kind of logic applies; but since credit card interest rates are typically higher than overdraft interest rates, you'll want to keep slightly more in your savings account. About $1200 to $1500 feels right to me; and move the remaining $3500 to $3800 to your student loan. So yes, pay off the student loan. That 6% interest really is worth having, even if you'd be taking a small gamble. Edit - Alexander Kosubek has suggested that I should compare this to matched retirement plans. The 100% gain in a matched retirement plan isn't 100% per annum; it's 100% divided across the length of time you have to wait until you can get your hands on that money. Suppose the money is accessible when you turn 60 - a matched plan is a good deal if you're in your 50's, but not so good if you're in your 20's. The 100% matching is equivalent to 6% interest per annum compounded over slightly under 12 years. So if you're less than 12 years away from retiring, go for the matched plan. Otherwise, pay off your student loan first.\",\n \"Pay the highest rate debt first, it's as simple as that. When that debt is paid (the 24% card in this case) pay off the next one. As far as having an emergency fund is concerned, I consider it a second priority. If one owes 24% money, that $2000 emergency fund is costing $480/yr. Ouch. Avoid the behaviors that got you into debt in the first place, and pay the cards off as fast as you can. When you have no balance, start to save, first into the emergency account, then toward retirement.\",\n \"\\\"A fascinating view on this. The math of a 10% deposit and projected 10% return lead to an inevitable point when the account is worth 10X your income (nice) and the deposit, 10% of income only represents 1% of the account balance. The use of an IRA is neither here nor there, as your proposed deposit is still just 1% of your retirement account total. Pay off debt? For one with this level of savings, it should be assumed you aren't carrying any high interest debt. It really depends on your age and retirement budget. Our \\\"\\\"number\\\"\\\" was 12X our final income, so at 10X, we were still saving. For you, if you project hitting your number soon enough, I'd still deposit to the match, but maybe no more. It might be time to just enjoy the extra money. For others, their goal may be much higher and those extra years deposits are still needed. I'd play with a spreadsheet and see the impact of reduced retirement account deposits. Note - the question asks about funding the 401(k) vs paying down debt. I'd always advise to deposit to the match, but beyond that, one should focus on their high interest debt, especially by their 50's.\\\"\",\n \"Gaining traction is your first priority. WARNING: as @JosephZambrano explains in his answer the tax penalty for withdrawing from a 401(k) can easily exceed the APR of the credit card making it a very bad strategy. Consult in-depth with a financial advisor to see before taking that path. As @JoeTaxpayer has noted a loan is another alternative. The 401k is no good to you if you can't have shelter or comfort in the mean time. The idea is to look at all the money as a single thing and balance it together. There is no credit and retirement, just a single target that you can hit by moving the good money to clear the bad. Consolidating the credit card debt somehow would be very wise if you can. Assuming it is 30% APR shrinking that quickly is the first priority. You may be able to justify a hardship withdrawal to finance the reduction/consolidation of the credit card. It may be worth considering negotiating a closure arrangement with a reduced principal. Credit card companies can be quite open to this as it gets their money back. You may also be able to negotiate a lower interest rate. You may be able to negotiate a non-credit-affecting debt consolidation with a debt consolidator. They want to make money and a 25K loan to a person with sound credit is a pretty good bet. Moving, buying a house, or any of that may just relocate the problem. You may be able to withdraw $25K from your 401k under hardship, pay the credit card, and come up with a payment plan for the medical debt. It's a retirement setback for sure, but retirement is an illusion with that credit card shark eating all of your hard-earned money. You gotta slay that beast quick. Again, be sure to fully analyze whether the penalty on the 401(k) withdrawal exceeds the APR of the credit card.\",\n \"Depends upon the debt cost. Assuming it is consumer debt or credit card debt, it is better to pay that off first, it is the best investment you can make. Let's say it is credit card debt. If you pay 18% interst and have for example a $1,000 amount. If you pay it off you save $180 in interest ($1,000 times 18%). You would have to earn 18% on 1,000 to generate $180 if it was in aninvestment. Here is a link discussing ways of reducing debt Once you have debt paid off you have the cashflow to begin building wealth. The key is in the cashflow.\",\n \"Do you have other things you might want to spend that cash on in the near future? (Like a down-payment on a house?) Beyond having emergency cash, the only reason to keep a pile of cash around is because you might need it for another purchase. Unless you are going to have other expenses that will require higher-interest loans to cover them, there's no need to sit on a big pile of cash. As long as you are getting the full match on your 401(k), that's the free money that might be worth more than the interest you are paying on the loans. In any case, I suggest you aim for at least 10% into your 401(k) account moving forward in your life so that you can properly fund retirement. 15% would be even better. It doesn't sound like you would be losing anything by paying the student loans, and you could then use the money freed from your loan payments to pay down your car faster.\",\n \"you should always invest if your investment rate of return is higher than your interest rate Your next line, about standard deviation is dead on. There are too many variables to give an exact answer here, in my opinion. The main reason is that one variable isn't easy to quantify - One's risk tolerance. Clearly, there's one extreme, the 18% credit card. Unless you are funding loanshark type rates of 2%/week, it's safe to say that 18% debt should take priority over any investments, except for the matched 401(k) deposits. What I think you're talking about is something we've addressed here in multiple threads. Do I prepay my sub 4% mortgage or invest? In this case, (and to Noah's comment) the question is whether you can expect a post-tax return of over 3% during your time horizon. I look at the return for 15 years from 1998-2013 and see a 6% CAGR for the S&P. I chose 15 years, as the choice is often one of paying a 30 year mortgage faster, as fast as 15. The last 15 years offer a pretty bad scenario, 2 crashes and a mortgage crisis. 6% after long term gains would get you 5.1% net. You can pull the data back to 1871 and run CAGR numbers for the timeframe of your choosing. I haven't done it yet, but I imagine there's no 15 year span that lags the 3% target I cite. What makes it more complex is that the investment isn't lump sum. It may not be obvious, but CAGR is a dollar invested at T=0, and returns calculated to T=final year. It would take a bit of spreadsheeting to invest the extra funds every month/year over your period of analysis. In the end, there are still those who will choose to pay off their 4% mortgage regardless of what the numbers show. Even if the 15 year result showed worst case 3.5% (almost no profit) and an average 10%, the feeling of risk is more than many will want.\",\n \"You can play with the numbers all you like (and that's good), however, here is a different way to look at it. The debt you have is risk. It limits your choices and eats your cash flow. Without the debt, you can invest at a much greater rate. It frees up you cash flow for all the things you might want to do, or decide in the future you might want to do. Right now is the easiest time for you to focus on debt repayment. It sounds like you are not married and have no children. It is much easier now to cut back your lifestyle and concentrate on paying off this $50k of student debt. This will get harder as your responsibility increases. Build up a small amount of cash for emergencies and put the rest at the debt. You can keep contributing to your 401k to the match if you want. This will give you 2 benefits: Patience. When you actually DO start investing, you will have a new appreciation for the money you are using. If you sacrifice to pay off $50k now, you wont look at money the same for the rest of your life. Drive. If you see the debt as a barrier to achieving your goals, you will work harder to get out of debt. These are all things I would tell my 23 year-old self if i could go back in time. Good luck!\",\n \"No. You will be penalized for taking your 25k out so you will only get like 18k out. Plus you can slowly pay back the credit cards but you can't build up the 401k as fast. You can also try a service that can negotiate the amount down for you (so you would only pay 16k or something). Protect the 401k.\",\n \"With respect to the 401(k). Before taking a hardship withdrawal, one must first deplete the ability to take any 401(k) loans available. This is a regulation. The 401(k) loan limit is the lesser of $50k, 50% your vested balance, or $50k minus the highest loan balance within the last year. Here's the good news: it is not a taxable event; you can pay back over a maximum of 5 years; interest is low (usually 4.25% or so). The bad news: if you terminate employment then the loan balance must be repaid or else it becomes taxable income plus a 10% penalty. I suggest you consider eliminating the credit card debt via this option. Pay back as aggressively as possible and if/when you terminate you can take the 10% penalty - it will be far less of an impact than 25k accruing approximately 25% annually.\",\n \"A matching pension scheme is like free money. No wait, it actually IS free money. You are literally earning 100% interest rate on that money the instant you pay it in to the account. That money would have to sit in your credit card account for at least five years to earn that kind of return; five years in which the pension money would have earned an additional return over and above the 100%. Mathematically there is no contest that contributing to a matching pension scheme is one of the best investment there is. You should always do it. Well, almost always. When should you not do it?\",\n \"Does your company offer matching on 401(k) deposits? Are you depositing at least to the match? If not, that should be priority one. Kill the card, never pay that kind of interest. Ever. Why are you paying 5%? The 30 year rate is 4% right now, and even if you pay some closing costs, you'll recoup the money quickly. In general, borrowing to invest is a losing game. I agree, get rid of the HELOC as well. If you refine to 15 years, you can get 3.5%, and in 16 years won't regret the decision.\",\n \"Paying off the high-interest debt is a good first start. Paying interest, or compound interest on debt is like paying somebody to make you poor. As for your 401k, you want to contribute enough to get the full match from your employer. You might also consider checking out the fees associated with your 401k with an online fee analyzer. If it turns out you're getting reamed with fees, you can reduce them by fiddling with your investments. Checking your investment options is always a good idea since jobs frequently change them. Opening an IRA is a good call. If you're eligible for both Roth and Traditional IRAs, consider the following: Most financial institutions (brokers or banks) can help you open an IRA in a matter of minutes. If you shop around, you will find very cheap or even no fee options. Many brokers might try to get your business by giving away something for ‘free.' Just make sure you read the fine print so you understand the conditions of their promotional offer. Whichever IRA you choose, you want to make sure that it's managed properly. Some people might say, ‘go for it, do it yourself’ but I strongly disagree with that approach. Stock picking is a waste of time and market timing rarely works. I'd look into flat fee financial advisors. You have lots of options. Just make sure they hear you out, and can design/execute an investment plan specific to your needs At a minimum, they should: Hope this is helpful.\",\n \"If you can get a rate of savings that is higher than your debt, you save. If you can't then you pay off your debt. That makes the most of the money you have. Also to think about: what are you goals? Do you want to own a home, start a family, further your education, move to a new town? All of these you would need to save up for. If you can do these large transactions in cash you will be better off. If it were me I would do what I think is a parroting of Dave Ramsay's advice Congratulations by the way. It isn't easy to do what you have accomplished and you will lead a simpler life if you don't have to worry about money everyday.\",\n \"\\\"Understand your own risk tolerance and discipline. From Moneychimp we can see different market results - This is a 15 year span, containing what was arguably one of the most awful decades going. A full 10 year period with a negative return. Yet, the 15 year return was a 6.65% CAGR. You'd net 5.65% after long term cap gains. Your mortgage is likely costing ~4% or 3% after tax (This is not applicable to my Canadian friends, I understand you don't deduct interest). In my not so humble opinion, I'd pay off the highest rate debts first (unlike The David followers who are happy to pay off tens of thousands of dollars in 0% interest debt before the large 18% debt) and invest at the highest rate I'd get long term. The problem is knowing when to flip from one to the other. Here's food for thought - The David insists on his use of the 12% long term market return. The last 100 years have had an average 11.96% return, but you can't spend average, the CAGR, the real compound rate was 10.06%. Why would he recommend paying off a sub 3% loan while using 12% for his long term planning (All my David remarks are not applicable to Canadian members, you all probably know better than to listen to US entertainers)? I am retired, and put my money where my mouth is. The $200K I still owe on my mortgage is offset by over $400K in my 401(k). The money went in at 25%/28% pretax, has grown over these past 20 years, and comes out at 15% to pay my mortgage each month. No regrets. Anyone starting out now, and taking a 30 year mortgage, but putting the delta to a 15 year mortgage payment into their 401(k) is nearly certain to have far more in the retirement account 15 years hence than their remaining balance on the loan, even after taxes are considered. Even more if this money helps them to get the full matching, which too many miss. All that said, keep in mind, the market is likely to see a correction or two in the next 15 years, one of which may be painful. If that would keep you up at night, don't listen to me. If a fixed return of 4% seems more appealing than a 10% return with a 15% standard deviation, pay the mortgage first. Last - if you have a paid off house but no job, the town still wants its property tax, and the utilities still need to be paid. If you lose your job with $400K in your 401(k)/IRA but have a $200K mortgage, you have a lot of time to find a new job or sell the house with little pressure from the debt collectors. (To answer the question in advance - \\\"\\\"Joe, at what mortgage rate do you pay it off first?\\\"\\\" Good question. I'd deposit to my 401(k) to grab matching deposits first, and then if the mortgage was anywhere north of 6%, prioritize that. This would keep my chances at near 100% of coming out ahead.)\\\"\",\n \"One thing you didn't mention is whether the 401(k) offers a match. If it does, this is a slam-dunk. The $303 ($303, right?) is $3636/yr that will be doubled on deposit. It's typical for the first 5% of one's salary to capture the match, so this is right there. In 15 years, you'll still owe $76,519. But 15 * $7272 is $109,080 in your 401(k) even without taking any growth into account. The likely value of that 401(k) is closer to $210K, using 8% over that 15 years, (At 6%, it drops to 'only' $176K, but as I stated, the value of the match is so great that I'd jump right on that.) If you don't get a match of any kind, I need to edit / completely rip my answer. It morphs into whether you feel that 15 years (Really 30) the market will exceed the 4% cost of that money. Odds are, it will. The worst 15 year period this past century 2000-2014 still had a CAGR of 4.2%.\",\n \"With a match, the 401(k) becomes the priority, up to that match, often ahead of other high interest debt. Without the match, the analysis is more about the cost within the 401(k). The 401(k) is a tax deferred account (let's not go on a tangent to Roth 401(k)) so ideally, you'd be skimming off money at 25% and saving it till you retire, so some of it is taxed at 0, 10, 15%. If the fees in the 401(k) are say 1.5% between the underlying funds and management fee, it doesn't take long to wipe out the potential 10 or 15% you are trying to gain. Yes, there's a risk that cap gain rates go away, but with today's tax law, the long term rate is 15%. So that money put into a long term low cost ETF will have reinvested dividends taxed at 15% and upon sale, a 15% rate on the gains. There are great index ETFs with sub - .1% annual cost. My simple answer is - If the total cost in that 401(k) is .5% or higher, I'd pass. Save the money in an outside account, using IRAs as best you can. (The exact situation needs to be looked at very carefully. In personal finance, there's a lot of 'grey'. For example, a frequent job changer can view the 401(k) as a way of saving pretax, knowing the fee will only last 2 years, and will end with a transfer to the IRA)\",\n \"Let's say you owe $200K (since you didn't mention balance. If you do, I'd edit my response), and can get 4.5%. You'd save 1.5% or about $3K/yr the first few years. If a $12K paydown is all that's between you and and refi I'd figure out a way. There are banks that are offering refi's under the HARP program if your current mortgage is owned by FNMA or FMAC which permit even if under water. So, the first step is research to see if you can refi exactly what's owed, failing that, shop around. A 401(k) loan will not appear as a loan on your credit report, that may be one way to raise the $12K. The best thing you can do is put all the savings into the 401(k) to really get it going.\",\n \"\\\"As Mhoran answered, typical match, but some have no match at all, so not bad. The loan provision means you can borrow up to $50k or 50% of your balance, whichever is less. 5 year payback for any loan, but a 10 year payback for a home purchase. I am on the side of \\\"\\\"don't do it\\\"\\\" but finance is personal, and in some situations it does make sense. The elephant in this room is the expenses within the 401(k). Simply put, a high enough expense will wipe out any benefit from tax deferral. If you are in this situation, I recommend depositing to the match, but not a cent more. Last, do they offer a Roth 401(k) option? There's a high probability you will never be in as low a tax bracket as the next few years, now's the time to focus on the Roth deposits, if not in the 401(k), then in an IRA.\\\"\",\n \"This is something that will vary from situation to situation. What is the secured debt? What is the interest rate? Does your retirement account have a match? What are your other financial obligations? How much money do you have available after meeting all of your minimum financial obligations. All of these are very important factors in deciding what the best course of action would be.\",\n \"Ok. I'll ask - Does the job offer a 401(k)? Matching deposits? You see, the answers given depend on your risk tolerance. There are two schools of thought, one extreme will tell you not to start investing until you have the emergency fund set up, the other, start from day one. I accept there are pros and cons to either approach. But - if you have access to a matched 401(k), even a conservative, risk-adverse approach might agree that a 100% match (on the first say 5% of your income) is preferable to saving in a low return emergency fund. If the emergency occurs, a low interest loan for the need is a cheap way out. Since the money goes in pre-tax and is matched, being able to borrow out half (IRS rules) effectively lets you borrow more than you deposited out of pocket. And the word emergency implies a low occurrence event. Deposit to the match and start the emergency fund in another account. If no matched 401(k) at work, the other two answers are great. Edit - To clarify, and answer a comment below - say the risk isn't just a money emergency, but job loss. $1000 deposited to the 401(k) cost $850 out of pocket, assuming 15% bracket. After the match, it's $2000. After the job loss, if this is withdrawn, if the 15% still applies (it may be 10% or even 0%) the net is $1700 less the 10% penalty, or $1500 back in your pocket. There are those who will say they are just not comfortable running an emergency account so lean, I understand that. For the OP here, $800/mo is nearly $10,000 per year. If even half of that can be deposited pre-tax and matched, the account will grow very quickly and there would still be cash on the side.\",\n \"If your plan permits loans, deposit enough through the year to maximize the match and then take a loan from the plan. Use the loan portion to pay your student loan. Essentially you have refinanced your debt at a (presumably) lower rate and recieved the match. You pay yourself back (with interest) through your payroll. The rates are typically the prime rate + 1%. The loans are subject to a lesser of 50% vested account balance or $50,000 provision.\",\n \"These are the basics in order: Max your employer contributions to your 401k if available Pay off any loans Contribute to an IRA Perhaps max out your 401k Look into other investment options (refinance your mortgage, buy stocks) Those are the typical rules, special situations may need specials actions...\",\n \"If stopping the 401k contributions temporarily would get you out of debt faster and also stop you from having to take out more student loans, then stop the contributions right now. You can always put some money into regular savings for emergencies etc - in fact, you should - but given a choice between deferring further contributions to your retirement and deferring the (hopeful) increase in income you get when you graduate, definitely choose the former. That of course also means that you don't take off a few semesters from studying to make money to put into a 401(k).\",\n \"I completely agree with Pete that a 401(k) loan is not the answer, but I have an alternate proposal: Reduce your 401(k) contribution down to the 4% that you get a match on. If you are cash poor now and have debts to be cleaned up, those need to be addressed before retirement savings. You'll have plenty of time to make up the lost savings after you get the debts paid off. If your company matches 50% (meaning you have to contribute 8% to get the 4% match), then consider temporarily stopping your 401(k) altogether. A 100% match is very hard to give up, but a 50% match is less difficult. You have plenty of years left ahead of you to make up the lost match. Plus, the pain of knowing you're leaving money on the table will incentivize you to get the loans paid as quickly as possible. It seems to me that I would be reducing middle to high interest debt while also saving myself $150 per month. No, you'd be deferring $150 per month for an additional two years, and not reducing debt at all, just moving it to a different lender. Interest rate is not your problem. Right now you're paying less than $30 per month in interest on these 3 loans and about $270 in principal, and at the current rate should have them paid off in about 2 years. You're wanting to extend these loans to 4 years by borrowing from your retirement savings. I would buckle down, reduce expenses wherever possible (cable? cell phone? coffee? movies? restaurants?) until you get these debts paid off. You make $70,000 per year, or almost $6,000 per month. I bet if you try hard enough you can come up with $1,100 fairly quickly. Then the next $1,200 should come twice as fast. Then attack the next $4,000. (You can argue whether the $1,200 should come first because of the interest rate, but in the end it doesn't matter - either one should be paid off very quickly, so the interest saved is negligible) Maybe you can get one of them paid off, get yourself some breathing room, then loosen up a little bit, but extending the pain for an additional two years is not wise. Some more drastic measures:\",\n \"\\\"Think of yourself as a business with two accounts, \\\"\\\"cash\\\"\\\" and \\\"\\\"net worth\\\"\\\". Your goal is to make money. \\\"\\\"Cash\\\"\\\" is what you need to meet your obligations. You need to pay your rent/mortgage, utilities, buy food, pay for transportation, service debt, etc. If you make $100 a month, and your obligations are $90, you're clearing $10. \\\"\\\"Net worth\\\"\\\" are assets that you own, including cash, retirement savings, investments, or even tangible goods like real property or items you collect with value. The \\\"\\\"pay off debt\\\"\\\" versus \\\"\\\"save money\\\"\\\" debate, in my opinion, is driven by two things, in this order: If you start saving too soon, you'll have a hard time getting by when your car suddenly needs a $500 repair or you need a new furnace. You need to improve your cash flow so that you actually have discretionary income. Pay off those credit cards, then start directing those old payments into savings and investments.\\\"\",\n \"I used a large portion of my 401k to pay off my credit card. My intentions were to then use my extra cash flow to build up the 401k again. Unfortunately I didn't learn my lesson and now I'm back to where I started, minus my 401k savings. If I could do it again, I would have cut up the card, kept the 401k and pay it down slowly. Good luck to you. I hope you do better than I did.\",\n \"I would go with your alternative idea: get rid of the debt as fast as possible. You have $32k of debt. It's a lot, but with your new $90k salary, do you think you could get rid of it all in 12 months? See if you can make that happen. Once the debt is gone, you'll be in a position to invest as much as you want and keep all your gains. You are worried about sacrificing future money in your investments, but if you eliminate the debt over the next year, this will be minimized. Just lose the debt.\",\n \"Since there is no match on the 401k, it seems to me that your first priority should be your IRA (Roth or otherwise). I don't know what your salary is, but most 22 year-olds won't be maxing out both an IRA and 401k on only 10% of their incomes, so the rest of the list may be irrelevant.\",\n \"With all due respect to The David, the $1000 is best put against 20%+ debt, no sitting in checking as part of some emergency fund. I'd agree with the decision to pay off the lower rate card. Why? Because we can do the math, and can see the cost in doing so. Low enough that other factors come in, namely, a freed up card. That card can function as the emergency one in the short term. Long term, once these high rate cards are paid off, you'll build your proper emergency fund, but the cost is too high right now. The $4000 is a nice start, but the most important thing is to get your budget under control. Only you can decide how much you can cut back, and go after this debt as if it were life or death.\",\n \"It all depends on your priorities, but if it were me I'd work to get rid of that debt as your first priority based on a few factors: I might shift towards the house if you think you can save enough to avoid PMI, as the total savings would probably be more in aggregate if you plan on buying a house anyway with less than 20% down. Of course, all this is lower priority than funding your retirement at least up to the tax advantaged and/or employer matched maximums, but it sounds like you have that covered.\",\n \"You're paying $850/yr interest, and probably earning close to zero on the $5000 in savings. I don't know why this feels safe in comparison to having both at zero, and depositing the payment you now make to the card into savings. Even if the payment is just $100, you'll have $1200 in a years time. I don't know of an emergency that can't be handled on a credit card, and I'd go that route until you build up a decent real emergency fund. I wouldn't offer the same advice if the debt were low rate loans such as your mortgage or student loan, but 17% is high enough to do it this way.\",\n \"Yours two funds are redundant. Both are designed to have a mix of bonds and stocks and allow you to put all your money in them. Pick the one that has the lowest fees and stick with that (I didn't look at the funds you didn't select...they didn't look great either). Although all your funds have high fees, some are higher than others, so don't ignore fees. When you have decided on your portfolio weights, prioritize your money thus: Contribute enough to your 401(k) to get the full match from your employer Put everything else toward paying off that credit card until you have 0 balance. It's ok to use the card, but let it be little enough that you pay your statement balance off each month so you pay no interest. Then set aside some savings and invest any retirement money into a Roth IRA. At your income level your taxes are low so Roth is better than traditional IRA or 401(k). If you max out your Roth, put any other retirement savings in your 401(k).\",\n \"The other answers assumed student loan debt -- and for that, it's rarely worth it (unless your company only offers managed plans w/ really bad returns, or the economy recovers to the point where banks are paying 5% again on money market accounts) ... but if it's high rate debt, such as carrying a credit card debt, and the current rate of returns on the 401k aren't that great at the time, it would be worth doing the calculations to see if it's better to pay them down instead. If you're carrying extremely high interest debt (such as 'payday loans' or similar), it's almost always going to be worth paying down that debt as quickly as possible, even if it means forgoing matching 401k payments. The other possible reason for not taking the matching funds are if the required contributions would put you in a significant bind -- if you're barely scraping by, and you can't squeeze enough savings out of your budget that you'd risk default on a loan (eg, car or house) or might take penalties for late fees on your utilities, it might be preferable to save up for a bit before starting the contributions -- especially if you've maxed your available credit so you can't just push stuff to credit cards as a last resort.\",\n \"The chances are good that the interest you are going to pay on the debt is going to be higher than the interest you are going to receive on any type of short term investments. That would make the paying off of the debt worth more to you in the long run than saving your money. Note that without the particulars of your situation this is all just theory crafting so consult the details of you loan agreements. I cannot imagine that a credit provider did not discuss this with you before you put pen on paper.\",\n \"None of your options seem mutually exclusive. Ordinarily nothing stops you from participating in your 401(k), opening an IRA, qualifying for your company's pension, and paying off your debts except your ability to pay for all this stuff. Moreover, you can open an IRA anywhere (scottrade, vanguard, etrade, etc.) and freely invest in vanguard mutual funds as well as those of other companies...you aren't normally locked in to the funds of your IRA provider. Consider a traditional IRA. To me your marginal tax rate of 25% doesn't seem that great. If I were in your shoes I would be more likely to contribute to a traditional IRA instead of a Roth. This will save you taxes today and you can put the extra 25% of $5,500 toward your loans. Yes, you will be taxed on that money when you retire, but I think it's likely your rate will be lower than 25%. Moreover, when you are retired you will already own a house and have paid off all your debt, hopefully. You kind of need money now. Between your current tax rate and your need for money now, I'd say a traditional makes good sense. Buy whatever funds you want. If you want a single, cheap, whole-market fund just buy VTSAX. You will need a minimum of $10K to get in, so until then you can buy the ETF version, VTI. Personally I would contribute enough to your 401(k) to get the match and anything else to an IRA (usually they have more and better investment options). If you max that out, go back to the 401(k). Your investment mix isn't that important. Recent research into target date funds puts them in a poor light. Since there isn't a good benchmark for a target date fund, the managers tend to buy whatever they feel like and it may not be what you would prefer if you were choosing. However, the fund you mention has a pretty low expense ratio and the difference between that and your own allocation to an equity index fund or a blend of equity and bond funds is small in expectation. Plus, you can change your allocation whenever you want. You are not locked in. The investment options you mention are reasonable enough that the difference between portfolios is not critical. More important is optimizing your taxes and paying off your debt in the right order. Your interest rates matter more than term does. Paying off debt with more debt will help you if the new debt has a lower interest rate and it won't if it has a higher interest rate. Normally speaking, longer term debt has a higher interest rate. For that reason shorter term debt, if you can afford it, is generally better. Be cold and calculating with your debt. Always pay off highest interest rate debt first and never pay off cheap debt with expensive debt. If the 25 year debt option is lower than all your other interest rates and will allow you to pay off higher interest rate debt faster, it's a good idea. Otherwise it most likely is not. Do not make debt decisions for psychological reasons (e.g., simplicity). Instead, always chose the option that maximizes your ultimate wealth.\",\n \"I am a firm believer in the idea of limiting debt as much as possible. I would not recommend borrowing money for anything other than a reasonably sized mortgage. As a result, my recommendations are going to be geared toward that goal. The top priorities for me, then, would be to make sure, first, that we don't have to go further into debt, and second, that we eliminate the debt that we already have as soon as possible. Here is how I would rate your list: A small emergency fund, perhaps $1000 USD, is going to ensure that, while you are funding other things, you don't end up so cash poor that, if something unexpected and urgent comes up, you are forced to add to your credit card debt. Make this small fund your top priority, and it shouldn't take much more than a month or two to do it. Getting out of debt is important, but if your employer hands out free money, you have to take it. It is just too good of a deal. Get rid of this debt as fast as possible. When you are done, you'll have more income available to you than you've ever had before. Now that you have just gotten done eliminating your debt as fast as possible, don't stop there. Take the income you had been throwing at your debt, and build up your emergency fund to a few months' worth of your expenses. Finishing this fund up will enable you to withstand a small crisis without borrowing anything. You are now in a very strong position financially, and can confidently invest. Deciding which type of retirement account is best for you depends on the details of your situation. Once you are contributing a healthy amount to your retirement funds, you may want to consider paying off your mortgage early. As I said before, I recommend getting down to the last step as quickly as possible. Depending on how much debt you actually have, if you sacrifice for a year or two you could be debt free and in a position to keep all of your investment gains. If you take your time paying off debt, like many people do, you could find yourself 10 years from now still making payments on your loans, still making car payments, and still needlessly sending interest to the banks, eating away at the gains you are making in your investments. If you aren't committed to eliminating your debt quickly, and plan on having payments for a long time, then skip this advice and put retirement savings at the top.\",\n \"\\\"All of the provided advice is great, but a slightly different viewpoint on debt is worth mentioning. Here are the areas that you should concentrate your efforts and the (rough) order you should proceed. Much of the following is predicated upon your having a situation where you need to get out of debt, and learn to better budget and control your spending. You may already have accomplished some of these steps, or you may prioritize differently. Many people advise prioritizing contributing to a 401(k) savings plan. But with the assumption that you need advise because you have debt trouble, you are probably paying absurd interest rates, and any savings you might have will be earning much lower rates than you are paying on consumer debt. If you are already contributing, continue the plan. But remember, you are looking for advice because your financial situation is in trouble, so you need to put out the fire (your present problem), and learn how to manage your money and plan for the future. Compose a budget, comprised of the following three areas (the exact percentages are fungible, fit them to your circumstances). Here is where planning can get fun, when you have freed yourself from debt, and you can make choices that resonate with your individual goals. Once you have \\\"\\\"put out the fire\\\"\\\" of debt, then you should do two things at the same time. As you pay off debt (and avoid further debt), you will find that saving for both independence and retirement become easier. The average American household may have $8000+ credit card debt, and at 20-30%, the interest payments are $150-200/month, and the average car payment is nearly $500/month. Eliminate debt and you will have $500-800/month that you can comfortably allocate towards retirement. But you also need to learn (educate yourself) how to invest your money to grow your money, and earn income from your savings. This is an area where many struggle, because we are taught to save, but we are not taught how to invest, choose investments wisely and carefully, and how to decide our goals. Investing needs to be addressed separately, but you need to learn how. Live in an affordable house, and pay off your mortgage. Consider that the payment on a mortgage on even a modest $200K house is over $1000/month. Combine saving the money you would have paid towards a mortgage payment with the money you would have paid towards credit card debt or a car loan. Saving becomes easy when you are freed from these large debts.\\\"\",\n \"Simply, you should put your money into whatever has the higher interest rate, savings or repayment of debt. Let's say at the beginning of month A you put $1000 into each account. In the case of the savings, at the end of month A you will have $1001.6 ($1000 + 1000 x 2% annual interest / 12) In the case of a loan, at the end of month A you will have $1005.7. ($17000 plus 6.8 interest for one month is 17096.3. On $16000, the new value is 16090.6. The difference between these is $1005.7. 5.7 / 1.6 = 3.56 Therefore, using your money to repay your loan nets you a return about 3.5 times greater.\",\n \"Whether or not it is logical probably depends on individual circumstance. When you take on (or maintain) debt, you are choosing to do two things: The first is clear. This is what you describe very well in your answer. It is a straightforward analysis of interest rates. The fixed cost of the debt can then be directly compared to expected return on investments that are made with the newly available cash flow. If you can reasonably expect to beat your debt interest rate, this is an argument to borrow and invest. Add to this equation an overwhelming upside, such as a 401k match, and the argument becomes very compelling. The second cost listed is more speculative in nature, but just as important. When you acquire debt, you are committing your future cash flow to payments. This exposes you to the risk of too little financial margin in the future. It also exposes you to the risk of any negatives that come with non-payment of debt (repossession, foreclosure, credit hit, sleeping at night, family tension, worst-case bankruptcy) Since the future tends to be difficult to predict, this risk is not so easy to quantify. Clearly the amount and nature of the debt is a large factor here. This would seem to be highly personal, with different individuals having unique financial or personal resources or income earning power. I will never say someone is illogical for choosing to repay their debts before investing in a 401k. I can see why some would always choose to invest to the match.\",\n \"If there is no match and you are disciplined enough to contribute without it coming directly out of your paycheck, dump the 401K. The reason: Most 401K plans have huge hidden fees built into the investment prices. You won't see them directly, but 3% is not uncommon. 3% is a horrible drag on your investment performance. Get an IRA or Roth IRA and pick something with low fees. Bonus: You will have a lot more investment choices!\",\n \"Fund the Roth. If your loan interest is deductible (see firedfly's comment) then your effective cost for the loan is lower than 6.25% You get tax free earnings on the same amount in a Roth. Assuming you can get 6%, it's at least break even, probably better. And you can never gain back the time for compounding on the retirement account. With that said, there may be an emotional component to the decision. If you really just want to get rid of the debt, go ahead and do it.\",\n \"If you can afford to put money in your 401(k) account, I would say at least you should invest enough to get your employer's matching fund. It's free money, why not get it?\",\n \"\\\"If you're willing to do a little more work and bookkeeping than just putting money into the 401(k) I would recommend the following. I note that you said you chose some funds based on performance since the expense ratios are all high. I would recommend against chasing performance because active funds will almost always falter; honor the old saw: \\\"\\\"past performance is no guarantee of future returns\\\"\\\". Assuming the cash in your Ally account is an emergency fund, I would use it to pay off your credit card debt to avoid the interest payments. Use free cash flow in the coming months to bring the emergency fund balance back up to an acceptable level. If the Ally account is not an emergency fund, I would make it one! With no debt and an emergency fund for 3-12 months of living expenses (pick your risk tolerance), then you can concentrate on investing. Your 401(k) options are unfortunately pretty poor. With those choices I would invest this way: Once you fill up your choice of IRA, then you have the tougher decision of where to put any extra money you have to invest (if any). A brokerage account gives you the freedom of investment choices and the ability to easily pull out money in the case of a dire emergency. The 401(k) will give you tax benefits, but high fund expenses. The tax benefits are considerable, so if I were at a job where I plan on moving on in a few years, I'd fund the 401(k) up to the max with the knowledge that I'd roll the 401(k) into a rollover IRA in the (relatively) short term. If I saw myself staying at the employer for a long time (5+ years), I'd probably take the taxable account route since those high fund fees will add up over time. One you start building up a solid base, then I might look into having a small allocation in one of my accounts for \\\"\\\"play money\\\"\\\" to pick individual stocks, or start making sector bets.\\\"\",\n \"As a rule, one should have a retirement. HOWEVER, you also have over a half a million dollars of debt. Paying down debt is another way to prepare for retirement. I would say throwing your excess money at your debts is a fine strategy right now. Especially the student loan (the mortgage probably has a lower rate and brings tax savings, so paying it off is less urgent). If I were you I'd probably put SOMETHING into tax deferred retirement accounts because in your tax bracket, the savings from doing so are significant. The max you can put in tax deferred is $5,500 per year (each) in IRA's and up to $17,000 to your 401(k) each. The tax-saving contribution opportunities will not come up again...you can't make up for it later. Any retirement saving beyond the tax advantaged part makes no sense while you have outstanding debt.\",\n \"An experienced individual wouldn't ask such questions. I don't say this to take a jab at you, but to provide context. The matter is much more complicated than a simple answer to your question could accomplish. The short answer is no, not necessarily; but it depends on the details. Generally, if the employer matches, it's suggested that you take advantage of the match. It's free money. That said, it comes with some strings attached, like a vesting schedule. It's not yours right away, necessarily. Choices are limited in a 401k, but we should still come out ahead with that free money. The investment choices available in a 401k are also a part of the details. If they meet your needs you should certainly consider the 401k even if the employer doesn't match. There is also the matter of one's particular tax situation, which is certainly an involved matter. A 401k can certainly be a part of judicious tax planning. It's a matter of working out the details. Continuing this theme of details and coming back to the employer match: if the employer doesn't mach, I would make sure that I'm maxing out an IRA before considering the 401k. If the employer matched, I would probably contribute to take advantage of that match. However, it quickly becomes complicated here. I'm accustomed to employer matching up to some percentage of pay, which typically works out to be less then the anual contribution limits for a 401k. So, I my plan for such a situation is to contribute up to the employer match in the 401k, then max out an IRA, and then return to the 401k to finish contributing up to its yearly maximum. There is plenty for you to consider in order to come up with a plan of action. While it's certainly complicated, it's accessible to most people. You don't have to be a genius. In fact, eggheads are regularly trounced by the markets.\",\n \"Don't frett to much about your retirement savings just put something towards it each year. You could be dead in ten years. You should always try to clear out debt when you can. But don't wipe yourself out! Expedite the repayment process.\",\n \"I would say it depends on what your long term plans and goals are. If you are trying to get rid of credit cards and never use them again, then I would say to keep $1000 as an emergency fund, pay the cards off and then save to build your emergency fund up to 3-6 months expenses. However, if you are just going to run the balances back up, I would save save 3-6 months expenses out of the money you just received and pay down the higher interest cards with what is left over.\",\n \"I would suggest you rollover your Roth 401k to a Roth IRA. Then pay off your debt before investing anymore money. In the long run you will be better off to have all your debt paid off. But I would not withdraw from the Roth 401k to pay down your debt. The penality is too steep.\",\n \"Should I pay off the credit cards now or do the monthly payments thing? It need not be a binary choice; you could take the middle ground. Assuming that an emergency fund of $10-15k is sufficient, you could pay off one credit card and do the monthly payment for the other cards. With one card cleared, you may feel better. I would choose to clear the card with the highest interest, followed by the smallest debt first as it's the mathematically optimum way. I should also let you know that there's this debt-snowball method which is not as optimum but has some valid reasons for existing. Choose the optimum way if you're financially disciplined. p.s. I'm not trained financially, nor am I in the industry. Just my two cents.\",\n \"\\\"I'd recommend hitting the loan the hardest, but getting something invested as well. It's tempting to see these decisions as binary, so it's good to see you wondering if a \\\"\\\"mix\\\"\\\" is best. I admit to being a spreadsheet junky, but I think this is a good candidate for working up various scenarios to see where the pain/pleasure point is and once you've identified it, move forward with it (e.g., let's say it's a 10K lump sum you're dealing with, what does 5k on the loan and 5k invested look like over the next 6 months, 12 months, 24 months (requires assumptions on investment performance)? What about 6K loan, 4K invested? 7K loan, 3K invested? etc)\\\"\",\n \"First, read my answer here: Oversimplify it for me: the correct order of investing For me, the answer to your question comes down to how badly you want to get rid of your student loan debt. I recommend that you get rid of it as fast as possible, and that you sacrifice a little in your budget temporarily to make that happen. If that is what you want, here is what I would do. Following the steps in my other answer, I would pay off the student loans first. Cash out your non-retirement growth fund to jump start that, then challenge yourself to take as much of your paycheck as you can and throw it at the debt. Figure out how many months it will take before the debt is gone. Once the debt is gone, you won't have those monthly payments anymore and you won't be continually losing money in interest to the bank. At that point, you can build up your cash savings, invest in your employer's 401(k) plan for retirement, and start saving toward other long-term saving goals (car, house, etc.) To address some of your other concerns: If you cash out the non-retirement fund, you'll probably owe some capital gains tax. (Although, on a $3k investment, the long term rate won't add up to very much, depending on your tax bracket and cost basis.) You can't use the money from your non-retirement fund to invest in your 401(k). You can only contribute to your 401(k) via payroll deduction. To explicitly answer your question, your non-retirement fund is not bound by the limitations of retirement funds, meaning that you can cash it out and use it however you like without penalty, only paying perhaps a few hundred dollars of capital gains tax at tax time next year. Think of it as another source of cash for you.\",\n \"If what you are paying in interest on the debt is a higher percentage than what your investments are returning, the best investment you can make is to pay off the debt. If you're lucky enough to be paying historically low rates (as I am on my mortgage) and getting good returns on the investments so the latter is the higher percentage, the balance goes the other way and you'd want to continue paying off the debt relatively slowly -- essentially treating it as a leveraged investment. If you aren't sure, paying off the debt should probably be the default prefrence.\",\n \"\\\"Welcome to Money.SE. Your question is similar to a number of others. The \\\"\\\"How do I pay my debt down?\\\"\\\" and \\\"\\\"How do I invest extra money?\\\"\\\" is a bit of a continuum since there's no consensus than one should pay off the last cent of debt before investing. Oversimplify it for me: the correct order of investing offers a good look at this. You see, Pete's answer on your question is perfectly fine, but, since you make no mention of, say, a matched 401(k), I'd suggest that any answer to a question like yours should first take a step back and evaluate the bigger picture. A dollar for dollar matched 401(k) beats paying off even an 18% credit card. Absent any tangents, any thought of investing, saving for anything else, etc, my answer is simple, line up the debt, highest interest rate to lowest. Keep in mind the post-tax rate, i.e. a 6% student loan you can deduct, is an effective 4.5% if you are in the 25% bracket.\\\"\",\n \"\\\"Given that the 6 answers all advocate similar information, let me offer you the alternate scenario - You earn $60K and have an employer offering a 50% match on all deposits. All deposits. (Note, I recently read a Q&A here describing such an offer. If I see it again, I'll link). Let the thought of the above settle in. You think about the fact that $42K isn't a bad salary, and decide to deposit 30%, to gain the full match on your $18K deposit. Now, you budget to live your life, pay your bills, etc, but it's tight. When you accumulate $2000, and a strong want comes up (a toy, a trip, anything, no judgement) you have a tough decision. You think to yourself, \\\"\\\"after the match, I am literally saving 45% of my income. I'm on a pace to have the ability to retire in 20 years. Why do I need to save even more?\\\"\\\" Your budget has enough discretionary spending that if you have a $2000 'emergency', you charge it and pay it off over the next 6-8 months. Much larger, and you know that your super-funded 401(k) has the ability to tap a loan. Your choice to turn away from the common wisdom has the recommended $20K (about 6 months of your spending) sitting in your 401(k), pretax deposited as $26K, and matched to nearly $40K, growing long term. Note: This is a devil's advocate answer. Had I been the first to answer, it would reflect the above. In my own experience, when I got married, we built up the proper emergency fund. As interest rates fell, we looked at our mortgage balance, and agreed that paying down the loan would enable us to refinance and save enough in mortgage interest that the net effect was as if we were getting 8% on the money. At the same time as we got that new mortgage, the bank offered a HELOC, which I never needed to use. Did we somehow create high risk? Perhaps. Given that my wife and I were both still working, and had similar incomes, it seemed reasonable.\\\"\",\n \"One way to analyze the opportunity cost of using a 401K loan would be to calculate your net worth after using a 401K loan. If your net worth increases then the 401K loan would be advisable. Note that the calculations provided below do not take into account tax considerations. A net worth calculation is where you add all your assets and then subtract all your liabilities. The resulting number is your net worth. First, calculate the net worth of not taking the loan and simply paying the credit card interest. This means you only pay the interest on the credit card. In addition to the parameters identified in your question, two additional parameters will need to be considered: Cash and the market rate of return on the 401K. Scenario 1 (only pay credit card interest): After 12 months all you have paid is the interest on the credit card. The 401K balance is untouched so it will hopefully grow. The balance on the credit card remains at the end of 12 months. Scenario 2 (use 401K loan to pay credit card balance): You borrow $5,000 from your 401K to pay the credit card balance. You will have to pay $5,000 plus the 401K interest rate back into your 401K account. Use the following equation to determine when Scenario 2 increases your net worth more than scenario 1: Thus, if your credit card interest rate is greater than the rate you can earn on your 401K then use the 401K loan to pay off the credit card balance. Another scenario that should be considered: borrow money from somewhere else to pay off the credit card balance. Scenario 3 (external loan to pay credit card balance): You borrow $5,000 from somewhere besides your 401K to pay off the credit card balance. The following is used to determine if you should use an external loan over the 401K loan: This means you should use an external loan if you can obtain an interest rate less than the rate of return you can earn on your 401K. The same methodology can be used to compare Scenario 3 to Scenario 1.\",\n \"Pay off the debt first. Life circumstances change without notice, and starting any stage of life with a debt puts you at a disadvantage. Luckily, your debt is small. Please also consider accumulating a 6 month emergency fund before making investments. This will further protect you when life hands you a curveball.\",\n \"Only having 1200 dollars sounds extremely dangerous and in my opinion is not a sound situation to intentionally put yourself into. You have what, 11k total? That is roughly a rainy day fund, depending on your expenses and clarity of cash flow. I think you should keep that money in the bank as your new baseline. At least 10k of it. Don't touch that money unless you need to pay for an unexpected expense. Now, you have $0 to work with, but a safe-ish cushion. Then, and only then, should any extra money be used for either paying down the loan or tax advantaged accounts. A retirement account is probably the right long term financial choice. However, if it were me and I were (back) in that kind of situation, I would pay off the loan first, primarily for personal satisfaction, then start maxing retirement contributions.\",\n \"I feel this is best. Credit card is an immediate debt and you has the finds to wipe it out. the Student loans are a longer term debt and you have the money to pay it all off. So yes, pay cc, and keep loan on scheduled payments. Plus it helps your credit\",\n \"When paying off multiple debts there is a protocol that many support. Payoff your debts according to the snowball method. The snowball method proposes that you make minimum payments on all debts except the smallest one. Payoff the smallest debt as quickly as possible. As smaller debts are paid off, that makes one less minimum payment you need to make, leaving you with more money to put against the next smallest debt. So in your case, pay off the smaller debt completely, then follow up on the larger one by making regular payments at least equal to the sum of your two current minimum payments. You'll see immediate progress in tackling your debt and have one less minimum to worry about, which can serve as a little safety of it's own if you have a bad month. As to saving the thousand dollars, that is pragmatic and prudent. It's not financially useful (you won't make any money in a savings account), but having cash on hand for emergencies and various other reasons is an important security for modern living. As suggested in another answer, you can forgo saving this thousand and put it against debt now, because you will have a freed up credit card. Credit can certainly give you that same security. This is an alternative option, but not all emergencies will take a credit card. You typically can't make rent with your credit card, for example. Good luck paying your debts and I hope you can soon enjoy the freedom of a debt free life.\",\n \"No. Few reasons. 1) You'll pay a penalty (tax) if you liquidate your 401k. 2) Instead of using your 401k, adjust your monthly budget and live frugal for some time. 3) Look for 0% balance transfer offers and transfer debt to that so you'll be able to reduce interest accumulation. 4) 401k is your savings, one of many I hope, keep that as is and don't touch it. 5) Sell things that you don't need and pay it towards the credit card 6) Do an analysis of your spending and figure out how you got to 21k.\",\n \"Great questions -- the fact that you're thinking about it is what's most important. I think a priority should be maximizing any employer match in your 401(k) because it's free money. Second would be paying off high interest debt because it's a big expense. Everything else is a matter of setting good financial habits so I think the order of importance will vary from person to person. (That's why I ordered the priorities the way I did: employer matching is the easiest way to get more income with no additional work, and paying down high-interest debt is the best way to lower your long-term expenses.) After that, continue to maximize your income and savings, and be frugal with your expenses. Avoid debt. Take a vacation once in a while, too!\",\n \"\\\"When is the best time to pay? At the end of each year? If you save $1,000 each month at 1% so as to pay $12,000 at EOY on a 4.75% loan, you've lost \\\"\\\"4.75% - 1% = 3.75%\\\"\\\" over that year. (And that's presuming you put the money in a \\\"\\\"high yield\\\"\\\" online savings account.) Thus, the best time to pay is as soon as you have the money. EDIT: This all assumes that you have an emergency fund (more than the bare minimum $1K), zero other debt with a higher rate than 4.75% and that you are getting the full company match from 401(k).\\\"\",\n \"I am answering this in light of the OP mentioning the desire to buy a house. A proper mortgage uses debt to income ratios. Typically 28/36 which means 28% of monthly gross can go toward PITI (principal, interest, tax, insurance) and the total debt can go as high as 36% including credit cards and car payment etc. So, if you earn $5000/mo (for easy math) the 8% gap (between 28 and 36) is $400. If you have zero debt, they don't let you use it for the mortgage, it's just ignored. So a low interest long term student loan should not be accelerated if you are planning to buy a house, better put that money to the down payment. But for credit cards, the $400/mo carries $8000 (banks treat it as though the payment is 5% of debt owed). So, I'd attack that debt with a vengeance. No eating out, no movies, beer, etc. Pay it off as if your life depended on it, and you'll be happier in the long run.\",\n \"The best approach depends on how much of an emergency fund you have. If you have no emergency fund Calculate how much you need in order to pay your expenses for 1 month and put at least that amount in a savings account. 3-6 months' worth of expenses is better. Put the remainder towards one credit card. If you have less than 3 months' worth of expenses in your emergency fund Deposit 1 additional month's worth of expenses into your savings account and apply the rest to one card. If you have an emergency fund that you're completely comfortable with Pay $8000 towards one card and $2000 towards the other one. Paying off one card fully gets rid of a bill that you have to think about each month, even if the two cards are otherwise identical.\",\n \"You could pay off a portion of the debt and your minimum payments should also go down proportionately. Your investment managers may be able to continue making returns in the markets in a sideways and a bear market. So you have 24k contributing to your net worth, and ~50k giving you a negative net worth. At best, you can bring this down to a negative 25k net worth, or you can start and keep using some of the gains from your investment account to supplement your credit payments (along with your income). This is based on chance that your investment managers can continue making gains, compared to paying down 24k and having possibly zero liquid savings now, but having more of your salary to start saving and make the lowered minimum payments, assuming you don't borrow more. Those are the options I've thought of, I don't see either option being necessarily quicker than the other.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["A matching pension scheme is like free money. No wait, it actually IS free money. You are literally earning 100% interest rate on that money the instant you pay it in to the account. That money would have to sit in your credit card account for at least five years to earn that kind of return; five years in which the pension money would have earned an additional return over and above the 100%. Mathematically there is no contest that contributing to a matching pension scheme is one of the best investment there is. You should always do it. Well, almost always. When should you not do it?","Nope, take the match. I cannot see not taking the match unless you don't have enough money to cover the bills. Every situation is different of course, and if the option is to missing minimum payments or other bills in order to get the match, make your payments. But in all other circumstances, take the match. My reasoning is, it is hard enough to earn money so take every chance you can. If you save for retirement in the process, all the better.","\"For easy math, say you are in the 25% tax bracket. A thousand deposited dollars is $750 out of your pocket, but $2000 after the match. Now, you say you want to take the $750 and pay down the card. If you wait a year (at 20%) you'll owe $900, but have access to borrow a full $1000, at a low rate, 4% or so. The payment is less than $19/mo for 5 years. So long as one is comfortable juggling their debt a bit, the impact of a fully matched 401(k) cannot be beat. Keep in mind, this is a different story than those who just say \"\"don't take a 401(k) loan.\"\" Here, it's the loan that offers you the chance to fund the account. If you are let go, and withdraw the money, even at the 25% rate, you net $1500 less the $200 penalty, or $1300 compared to the $750 you are out of pocket. If you don't want to take the loan, you're still ahead so long as you are able to pay the cards over a reasonable time. I'll admit, a 20% card paid over 10+ years can still trash a 100% return. This is why I add the 401(k) loan to the mix. The question for you - jldugger - is how tight is the budget? And how much is the match? Is it dollar for dollar on first X%?\"","\"Agree with Randy, if debt and debt reduction was all about math, nobody would be in debt. It is an emotional game. If you've taken care of the reasons you're in debt, changed your behaviors, then start focusing on the math of getting it done faster. Otherwise, if you don't have a handle on the behaviors that got you there, you're just going to get more rope to hang yourself with. I.e., makes sense to take a low-interest home equity loan to pay off high-interest credit card debt, but more likely than not, you'll just re-rack up the debt on the cards because you never fixed the behavior that put you into debt. Same thing here, if you opt not to contribute to \"\"pay off the cards\"\" without fixing the debt-accumulating behaviors, what you're going to do is stay in debt AND not provide for retirement. Take the match until you're certain you have your debt accumulation habits in check.\"","I'd take the match, but I wouldn't contribute beyond your match, for two reasons:","Mathwise, I absolutely agree with the other answers. No contest, you should keep getting the match. But, just for completeness, I'll give a contrarian opinion that is generally not very popular, but does have some merit. If you can focus on just one main financial goal at a time, and throw every extra dollar you have at that one focus (i.e., getting out of debt, in your case), you will make better progress than if you're trying to do too many things at once. Also, there something incredibly freeing about being out of debt that has other beneficial impacts on your life. So, if you can bring a lot of focus to the credit card debt and get it paid off quickly, it may be worth deferring the 401(k) investing long enough to do that, even though it doesn't make as much mathematical sense. (This is essentially what Dave Ramsey teaches, BTW.)","I would definitely be putting in enough to get the most out of the match. Only reasons I can think of not too would be: Other than that, not investing in the 401(k) is turning down free money. Edit based on feedback in comments. The only time I would advocate number 1 is if you are intensely committed to getting out of debt, were on a very tight budget and had eliminated all non-essential spending. In that situation only, I think the mental benefit of having that last debt paid off would be worth more than a few dollars in interest.","\"There is a very simple calculation that will answer the question: Is the expected ROI of the 401K including the match greater than the interest rate of your credit card? Some assumptions that don't affect the calculation, but do help illustrate the points. You have 30 years until you can pull out the 401K. Your credit card interest rate is 20% compounded annually. The minimum payoffs are being disregarded, because that would legally just force a certain percentage to credit card. You only have $1000. You can either pay off your credit card or invest, but not both. For most people, this isn't the case. Ideally, you would simply forego $1000 worth of spending, AND DO BOTH Worked Example: Pay $1000 in Credit Card Debt, at 20% interest. After 1 year, if you pay off that debt, you no longer owe $1200. ROI = 20% (Duh!) After 30 years, you no longer owe (and this is pretty amazing) $237,376.31. ROI = 23,638% In all cases, the ROI is GUARANTEED. Invest $1000 in matching 401k, with expected ROI of 5%. 2a. For illustration purposes, let's assume no match After 1 year, you have $1050 ($1000 principal, $0 match, 5% interest) - but you can't take it out. ROI = 5% After 30 years, you have $4321.94, ROI of 332% - assuming away all risk. 2b. Then, we'll assume a 50% match. After 1 year, you have $1575 ($1000 principle, $500 match, 5% interest) - but you can't take it out. ROI = 57% - but you are stuck for a bit After 30 years, you have $6482.91, ROI of 548% - assuming away all risk. 2c. Finally, a full match After 1 year, you have $2100 ($1000 principle, $1000 match, 5% interest) - but you can't take it out. ROI = 110% - but again, you are stuck. After 30 years, you have $8643.89, ROI of 764% - assuming away all risk. Here's the summary - The interest rate is really all that matters. Paying off a credit card is a guaranteed investment. The only reason not to pay off a 20% credit card interest rate is if, after taxes, time, etc..., you could earn more than 20% somewhere else. Note that at 1 year, the matching funds of a 401k, in all cases where the match exceeded 20%, beat the credit card. If you could take that money before you could have paid off the credit card, it would have been a good deal. The problem with the 401k is that you can't realize that gain until you retire. Credit Card debt, on the other hand, keeps growing until you pay it off. As such, paying off your credit card debt - assuming its interest rate is greater than the stock market (which trust me, it almost always is) - is the better deal. Indeed, with the exception of tax advantaged mortgages, there is almost no debt that has an interest rate than is \"\"better\"\" than the market.\""],"string":"[\n \"A matching pension scheme is like free money. No wait, it actually IS free money. You are literally earning 100% interest rate on that money the instant you pay it in to the account. That money would have to sit in your credit card account for at least five years to earn that kind of return; five years in which the pension money would have earned an additional return over and above the 100%. Mathematically there is no contest that contributing to a matching pension scheme is one of the best investment there is. You should always do it. Well, almost always. When should you not do it?\",\n \"Nope, take the match. I cannot see not taking the match unless you don't have enough money to cover the bills. Every situation is different of course, and if the option is to missing minimum payments or other bills in order to get the match, make your payments. But in all other circumstances, take the match. My reasoning is, it is hard enough to earn money so take every chance you can. If you save for retirement in the process, all the better.\",\n \"\\\"For easy math, say you are in the 25% tax bracket. A thousand deposited dollars is $750 out of your pocket, but $2000 after the match. Now, you say you want to take the $750 and pay down the card. If you wait a year (at 20%) you'll owe $900, but have access to borrow a full $1000, at a low rate, 4% or so. The payment is less than $19/mo for 5 years. So long as one is comfortable juggling their debt a bit, the impact of a fully matched 401(k) cannot be beat. Keep in mind, this is a different story than those who just say \\\"\\\"don't take a 401(k) loan.\\\"\\\" Here, it's the loan that offers you the chance to fund the account. If you are let go, and withdraw the money, even at the 25% rate, you net $1500 less the $200 penalty, or $1300 compared to the $750 you are out of pocket. If you don't want to take the loan, you're still ahead so long as you are able to pay the cards over a reasonable time. I'll admit, a 20% card paid over 10+ years can still trash a 100% return. This is why I add the 401(k) loan to the mix. The question for you - jldugger - is how tight is the budget? And how much is the match? Is it dollar for dollar on first X%?\\\"\",\n \"\\\"Agree with Randy, if debt and debt reduction was all about math, nobody would be in debt. It is an emotional game. If you've taken care of the reasons you're in debt, changed your behaviors, then start focusing on the math of getting it done faster. Otherwise, if you don't have a handle on the behaviors that got you there, you're just going to get more rope to hang yourself with. I.e., makes sense to take a low-interest home equity loan to pay off high-interest credit card debt, but more likely than not, you'll just re-rack up the debt on the cards because you never fixed the behavior that put you into debt. Same thing here, if you opt not to contribute to \\\"\\\"pay off the cards\\\"\\\" without fixing the debt-accumulating behaviors, what you're going to do is stay in debt AND not provide for retirement. Take the match until you're certain you have your debt accumulation habits in check.\\\"\",\n \"I'd take the match, but I wouldn't contribute beyond your match, for two reasons:\",\n \"Mathwise, I absolutely agree with the other answers. No contest, you should keep getting the match. But, just for completeness, I'll give a contrarian opinion that is generally not very popular, but does have some merit. If you can focus on just one main financial goal at a time, and throw every extra dollar you have at that one focus (i.e., getting out of debt, in your case), you will make better progress than if you're trying to do too many things at once. Also, there something incredibly freeing about being out of debt that has other beneficial impacts on your life. So, if you can bring a lot of focus to the credit card debt and get it paid off quickly, it may be worth deferring the 401(k) investing long enough to do that, even though it doesn't make as much mathematical sense. (This is essentially what Dave Ramsey teaches, BTW.)\",\n \"I would definitely be putting in enough to get the most out of the match. Only reasons I can think of not too would be: Other than that, not investing in the 401(k) is turning down free money. Edit based on feedback in comments. The only time I would advocate number 1 is if you are intensely committed to getting out of debt, were on a very tight budget and had eliminated all non-essential spending. In that situation only, I think the mental benefit of having that last debt paid off would be worth more than a few dollars in interest.\",\n \"\\\"There is a very simple calculation that will answer the question: Is the expected ROI of the 401K including the match greater than the interest rate of your credit card? Some assumptions that don't affect the calculation, but do help illustrate the points. You have 30 years until you can pull out the 401K. Your credit card interest rate is 20% compounded annually. The minimum payoffs are being disregarded, because that would legally just force a certain percentage to credit card. You only have $1000. You can either pay off your credit card or invest, but not both. For most people, this isn't the case. Ideally, you would simply forego $1000 worth of spending, AND DO BOTH Worked Example: Pay $1000 in Credit Card Debt, at 20% interest. After 1 year, if you pay off that debt, you no longer owe $1200. ROI = 20% (Duh!) After 30 years, you no longer owe (and this is pretty amazing) $237,376.31. ROI = 23,638% In all cases, the ROI is GUARANTEED. Invest $1000 in matching 401k, with expected ROI of 5%. 2a. For illustration purposes, let's assume no match After 1 year, you have $1050 ($1000 principal, $0 match, 5% interest) - but you can't take it out. ROI = 5% After 30 years, you have $4321.94, ROI of 332% - assuming away all risk. 2b. Then, we'll assume a 50% match. After 1 year, you have $1575 ($1000 principle, $500 match, 5% interest) - but you can't take it out. ROI = 57% - but you are stuck for a bit After 30 years, you have $6482.91, ROI of 548% - assuming away all risk. 2c. Finally, a full match After 1 year, you have $2100 ($1000 principle, $1000 match, 5% interest) - but you can't take it out. ROI = 110% - but again, you are stuck. After 30 years, you have $8643.89, ROI of 764% - assuming away all risk. Here's the summary - The interest rate is really all that matters. Paying off a credit card is a guaranteed investment. The only reason not to pay off a 20% credit card interest rate is if, after taxes, time, etc..., you could earn more than 20% somewhere else. Note that at 1 year, the matching funds of a 401k, in all cases where the match exceeded 20%, beat the credit card. If you could take that money before you could have paid off the credit card, it would have been a good deal. The problem with the 401k is that you can't realize that gain until you retire. Credit Card debt, on the other hand, keeps growing until you pay it off. As such, paying off your credit card debt - assuming its interest rate is greater than the stock market (which trust me, it almost always is) - is the better deal. Indeed, with the exception of tax advantaged mortgages, there is almost no debt that has an interest rate than is \\\"\\\"better\\\"\\\" than the market.\\\"\"\n]","isConversational":false}}},{"rowIdx":91,"cells":{"_id":{"kind":"string","value":"9329"},"query":{"kind":"string","value":"Interactive Brokers: IOPTS and list of structured products"},"gt_ids":{"kind":"list like","value":["523913","326991"],"string":"[\n \"523913\",\n \"326991\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1],"string":"[\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["326991","598680","89351","523913","398012","284059","238173","411799","316645","138201","306104","530951","6426","44101","586018","93727","304999","510061","213824","478469","347315","96467","119154","588836","340210","234851","453524","94262","38545","6574","131225","175413","152607","555506","338727","100089","562964","29642","496923","27303","593029","425561","422941","584223","55443","568067","144628","436652","15772","118389","289853","297421","358227","65894","130422","555683","520952","332924","405217","570247","501504","71330","432187","15112","156234","508492","486058","376126","41178","396985","139089","296913","270166","564957","420361","355450","393101","444461","399885","382597","483299","40793","190756","425723","262589","480967","450910","168705","433023","300698","113644","204202","386796","501372","454896","282143","559417","163433","277760","87512"],"string":"[\n \"326991\",\n \"598680\",\n \"89351\",\n \"523913\",\n \"398012\",\n \"284059\",\n \"238173\",\n \"411799\",\n \"316645\",\n \"138201\",\n \"306104\",\n \"530951\",\n \"6426\",\n \"44101\",\n \"586018\",\n \"93727\",\n \"304999\",\n \"510061\",\n \"213824\",\n \"478469\",\n \"347315\",\n \"96467\",\n \"119154\",\n \"588836\",\n \"340210\",\n \"234851\",\n \"453524\",\n \"94262\",\n \"38545\",\n \"6574\",\n \"131225\",\n \"175413\",\n \"152607\",\n \"555506\",\n \"338727\",\n \"100089\",\n \"562964\",\n \"29642\",\n \"496923\",\n \"27303\",\n \"593029\",\n \"425561\",\n \"422941\",\n \"584223\",\n \"55443\",\n \"568067\",\n \"144628\",\n \"436652\",\n \"15772\",\n \"118389\",\n \"289853\",\n \"297421\",\n \"358227\",\n \"65894\",\n \"130422\",\n \"555683\",\n \"520952\",\n \"332924\",\n \"405217\",\n \"570247\",\n \"501504\",\n \"71330\",\n \"432187\",\n \"15112\",\n \"156234\",\n \"508492\",\n \"486058\",\n \"376126\",\n \"41178\",\n \"396985\",\n \"139089\",\n \"296913\",\n \"270166\",\n \"564957\",\n \"420361\",\n \"355450\",\n \"393101\",\n \"444461\",\n \"399885\",\n \"382597\",\n \"483299\",\n \"40793\",\n \"190756\",\n \"425723\",\n \"262589\",\n \"480967\",\n \"450910\",\n \"168705\",\n \"433023\",\n \"300698\",\n \"113644\",\n \"204202\",\n \"386796\",\n \"501372\",\n \"454896\",\n \"282143\",\n \"559417\",\n \"163433\",\n \"277760\",\n \"87512\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["\"Interactive Brokers offers global securities trading. Notice that the security types are: cash, stock (STK), futures (FUT), options (OPT), futures options (FOP), warrants (WAR), bonds, contracts for differences (CFD), or Dutch warrants (IOPT) There is a distinction between options (OPT), warrants (WAR), options on futures (FOP) and finally, Dutch Warrants (IOPT). IOPT is intuitively similar to an \"\"index option\"\". (For index option valuation equations, iopt=1 for a call, and iopt= -1 for a put. I don't know if Interactive Brokers uses that convention). What is the difference between a \"\"Dutch Warrant\"\" and an option or warrant? Dutch warrants aren't analogous to Dutch auctions e.g. in the U.S.Treasury bond market. For North America, Interactive Brokers only lists commissions for traditional warrants and options, that is, warrants and options that have a single stock as the underlying security. For Asia and Europe, Interactive Brokers lists both the \"\"regular\"\" options (and warrants) as well as \"\"equity index options\"\", see commission schedule. Dutch warrants are actually more like options than warrants, and that may be why Interactive Brokers refers to them as IOPTS (index options). Here's some background from a research article about Dutch warrants (which was NOT easy to find): In the Netherlands, ING Bank introduced call and put warrants on the FT-SE 100, the CAC 40 and the German DAX indexes. These are some differences between [Dutch] index warrants and exchange traded index options: That last point is the most important, as it makes the pricing and valuation less subject to arbitrage. Last part of the question: Where do you find Structured Products on Interactive Brokers website? Look on the Products page (rather than the Commissions page, which does't mention Structured Products at all). There is a Structured Products tab with details.\"","You can trade currency ETF options on IB. It is SIPC insured; the options are just like vanilla options in Saxo.","Interactive Brokers offers many foreign markets (19 countries) for US based investors. You can trade all these local markets within one universal account which is very convenient in my view. IB offering","I think an IOPT is a Dutch warrant. Someone else might understand what this is.","The CBOE Rule Book, Section 5.5 explains exactly what programmes are available, how and when they will start listing and expire. The super-concise summary is: It's a per-underlying decision process, though there's some rules that may provide you with a minimum set of options (e.g. the quarterly programme on highly capitalised stocks trading for more than $75, etc.) For greater detail, for better or worse, you will have to scan the New Listings service regularly.","\"If you have a big pocket there are quite a few.. not sure if they take us clients though. Vcap, Barclays, Icap, Fixi, Fc Stone, Ikon.. Then there are probably a few banks that have x options also but i don't know if a private investor can trade them. A few im not sure if they have fx options or if they are \"\"good\"\": GFTFOREX, Gain capital, XTB, hmslux, Ifx Markets, Alpari, us.etrade.com Betonmarkets might be something if you are interested in \"\"exotic options\"\" maybe?\"","I've been a retail trader for close to 7 years and while I have a specialized futures account, I use Interactive Brokers for my other trading. They charge per share or contract rather than per trade (good for smaller accounts or if you want to piece into and out of positions). You can also trade just about anything. Futures, options, options on futures, individual stocks, ETFs, Bonds (futures), currencies. The interface is pretty good as well. I have seperate charts (eSignal) so I'm not sure how good their charting is","Selftrade does list them. Not sure if you'll be able to sign up from the US though, particularly given the FATCA issues.","\"Say we are in 'normal times.' Passbook rates are 5% or so. Longer rates, 6-7%. I offer you a product with these terms, for $10,000 I will return a \"\"Guaranteed\"\" $10,000 in 6 years and based on the stock market, 1% for every 2% the S&P is up beyond 10% at maturity. As the seller of this product, I take $6666, and buy a fixed investment, 6 years at 7% in treasuries will return the $10000. Really. I then take the $3334 and buy out of the money calls on the S&P each year to capture the gains, if any, and to deliver on my promise. This is one example of a structured deposit offering. They can have nearly any terms one can imagine. Tied to any product. S&P, Crude Oil, Gold. Whatever.\"","A broker does not have to allow the full trading suite the regulations permit. From brokersXpress: Do you allow equity and index options trading in brokersXpress IRAs? Yes, we allow trading of equity and index options in IRAs based on the trading level assigned to an investor. Trading in IRAs includes call buying, put buying, cash-secured put writing, spreads, and covered calls. I understand OptionsXpress.com offers the same level of trading. Disclosure - I have a Schwab account and am limited in what's permitted just as your broker does. The trade you want is no more risky that a limit (buy) order, only someone is paying you to extend that order for a fixed time. The real answer is to ask the broker. If you really want that level of trading, you might want to change to one that permits it.","Not that I am aware. There are times that an option is available, but none have traded yet, and it takes a request to get a bid/ask, or you can make an offer and see if it's accepted. But the option chain itself has to be open.","With InteractiveBrokers there is no minimum trade amount, they also offer Australian Equities.","With reference to the UK: Structured deposits should not be confused with structured products. Structured deposits are often, quite simple deposit accounts. You place your money into what is essentially a deposit account, and are therefore guaranteed not to lose your capital as with any other deposit account. The attraction is that you could earn more than you would in a normal deposit account, often around double, due to indirect exposure to the markets. Another benefit is that structured deposits can form part of your annual cash ISA allowance, so the returns can be tax free. These products are popular with those who have savings which they are happy to deposit away for between 3 and 6 years, and are looking for better rates of return than standard cash ISAs or savings accounts. The main drawback is that you may not receive anything other than your original deposit. That poses a minimal risk if your savings are earning less than 1% currently. See my article at financialandrew.blogspot.co.uk/2013/03/fed-up-with-low-returns-from-cash-isas.html for a more rounded overview of the structured deposits.","\"To other users save yourselves time, do not test any of the alternatives mentioned in this post. I have, to no avail. At the moment (nov/2013) Saxobank unfortunately seems to be the only broker who offers OTC (over-the counter) FX options trading to Retail Investors. In other words, it is the only alternative for those who are interested in trading non-exchange options (ie, only alternative to those interested in trading FX options with any date or strike, rather than only one date per month and strikes every 50 pips only). I say \"\"unfortunately\"\" because competition is good, Saxo options spreads are a rip off, and their platform extremely clunky. But it is what it is.\"","Option tiers are broker specific, according mostly to their business model and presumably within the bounds of FINRA Rule 2111 (Suitability). The tier system can be as complex as E*Trade or as simple as none with Interactive Brokers. The suitability is determined presumably by compliance presumably by the legal history of the rule. The exact reasoning is political, effected by the relevant party composition of the legislature and executive. The full legal history will have the judiciary's interpretations of legislation and policy. Cash and margin rules are dictated primarily by the Federal Reserve and more precisely by FINRA and the SEC. This is the only distinction made by IB.","I've looked into Thinkorswim; my father uses it. Although better than eTrade, it wasn't quite what I was looking for. Interactive Brokers is a name I had heard a long time ago but forgotten. Thank you for that, it seems to be just what I need.","\"You can call CBOE and tell them you want that series or a particular contract. And this has nothing to do with FLEX. Tell them there is demand for it, if they ask who you are, DONT SAY YOU ARE A RETAIL INVESTOR, the contracts will be in the option chain the next day. I have done this plenty of times. The CBOE does not care and are only limited by OCC and the SEC, but the CBOE will trade and list anything if you can think of it, and convince them that \"\"some people want to trade it\"\" or that \"\"it has benefits for hedging\"\" I've gotten 50 cent strike prices on stocks under $5 , I've gotten additional LEAPS and far dated options traded, I've gotten entire large chains created. I also have been with prop shops before, so I could technically say I was a professional trader. But since you are using IB and are paying for data feeds, you can easily spin that too.\"","\"My broker (thinkorswim) offers this from the platform's trade tab. I believe this feature isn't crippled in the PaperMoney version which is effectively a \"\"free online service.\"\"\"","\"HSBC Hong Kong's “Deposit Plus” Product\"\" the same as \"\"Dual Currency Product\"\" . it's Currency link Sell base Currency Call / Alternative Currency Put FX Option It's not protected by the Deposit Insurance System in HK You can search Key Word \"\"Dual Currency Product\"\" & \"\"Dual Currency Investment\"\" & \"\"Dual Currency Deposit\"\" The only one of the world's foreign exchange structured product book 『雙元貨幣產品 Dual Currency Product』 ISBN 9789574181506\"","Power Options is one such example of what you seek, not cheap, but one good trade will recover a year's fee. There's a lot you can do with the stock price alone as most options pricing will follow Black Scholes. Keep in mind, this is a niche, these questions, while interesting to me, generate little response here.","They're all in one place. The OCC provides: http://www.optionsclearing.com/webapps/flex-reports","you can try CME DataSuite. Your broker gives you real time options quotes. If you do not have one you can open a scottrade account with just $500 deposit. When I moved my money from scottrade to ameritrade they did not close my account even till this day I can access my scottrade account and see real time quotes and the same research they offered me before. You can try withdrawing your deposit and see if it stays open like mine did.","Oanda.com trades spot forex and something they call box options, it's not quite what you are looking for, but maybe worth looking up.","Fair enough. I would imagine the ETF could get a better option pricing if that were the case, plus liquidity and counterpart risk concerns but your point is well taken. Serves me right to shoot my mouth off on something I do not do (short). Speaking of which, do you do a lot of shorting? Cover positions or speculation?","You might what to check out Interactive Brokers. If your India stock is NSE listed they might be able to do it since they support trading on that exchange. I would talk to a customer service rep there first. https://www.interactivebrokers.com/en/index.php?f=exchanges&p=asia","You can use interactive brokers. It allows you to have a single account to trade stocks and currencies from several countries.","This is what is called a Structured Product. The linked page gives an overview of the relative pros and cons. They tend to hold the bulk of funds in bonds and then used equity index futures and other derivatives to match returns on the S&P, or other indices tracked. All combine to provide the downside protection. Note that your mother did not receive the dividends paid by the constituent companies. She only received the capital return. Here is a link to Citigroup (Europe) current structured product offerings. Here is a link to Fidelity's current offerings of structured products. Here is Investopedia's article detailing the pitfalls. The popularity of these products appears to be on the wane, having been heavily promoted and sold by the providers at the time your mother invested. Most of these products only provide 100% protection of capital if the market does not fall by a specified amount, either in successive reporting periods or over the life of the product. There are almost as many terms and conditions imposed on the protection as there are structured products available. I have no personal experience buying this type of product, preferring to have the option to trade and receive dividend income.","There are two basic kinds of derivatives - forward contracts and options. A forward is an agreement between two parties for one party to buy/sell some asset to the other at a price that they agree upon today at some date in the future. An option is an agreement that gives one party the right, but not the obligation, to buy/sell the asset at some date in the future. Most derivatives that exist are a combination of these two things. For instance, a futures contract is a standardized forward contract that is traded on an exchange, and a swap is a portfolio (or chain) of forward contracts linked together. American/Bermudan options are just options that allow you to exercise on more than one day.","\"Yes, Interactive Brokers is a good source for live data feeds and they have an API which is used to programmatically access the feeds, you will have to pay for data feeds from the individual data sources though. The stock exchanges have a very high price for their data and this has stifled innovation in the financial sector for several decades in the united states. But at the same time, it has inflated the value and mystique of \"\"quants\"\" doing simple algorithms \"\"that execute within milliseconds\"\" for banks and funds. Also RIZM has live feeds, it is a younger service than other exchanges but helps people tap into any online broker's feeds and let you trade your custom algorithms that way, that is their goal.\"","Options are a derivative product, and in this case, derive their value from an underlying security, a traded stock. An option gives you the right, but not the obligation, to buy a stock at a given price (the strike price) by a given time (the expiration date.) What I just described is a call option. The opposite instrument is a put, giving you the right, but not the obligation, to sell the stock at a given price. Volumes have been written on the subject, but I'd suggest that for a custodial Roth, I'd not activate the ability to trade options. How to get started with options investing? offers a nice introduction to trading options. In my response, I offer an example of a trade that's actually less risky due to the option component.","Double check with your broker, but if a series isn't open yet for trading, you can't trade it. If there is a series trading without open interest (rare), simply work your open, as options are created at trade. If you have enough money, do this https://money.stackexchange.com/questions/21839/list-of-cflex-2-0-brokers","Oh really. I will have to check into that. It would be a bummer if that is the case. Something I will need to look into. If you don't need margin and are not trading the underlying asset (which I could see being a problem), then I don't see what the problem is. But I shall see. Thanks.","Yes you can get them from your broker. Two main advantages I can see are:","I can't provide a list, but when I took out my Stocks and Shares, I extensively researched for a good, cheap, flexible option and I went with FoolShareDealing. I've found them to be good, and their online trading system works well. I hope that's still the case.","You have to call Interactive Brokers for this. This is what you should do, they might even have a web chat. These are very broker specific idiosyncrasies, because although margin rules are standardized to an extent, when they start charging you for interest and giving you margin until settlement may not be standardized. I mean, I can call them and tell you what they said for the 100 rep.","I have been looking into CMEs trading tool. I might just play around with futures on it. You make a good point on that though. I am reading Hull's book on options, futures and derivatives, and so far so good. Only thing I would want to test is options on futures, which is missing :( .","\"I have a Roth IRA with Scottrade, and they allow me to write cash secured puts, as well as covered calls. I can also purchase calls or puts, if I choose. When I write a cash secured put, it automatically deducts the amount required to purchase the shares at the strike price from my \"\"cash available for transactions\"\".\"","Some of the ETFs you have specified have been delisted and are no longer trading. If you want to invest in those specific ETFs, you need to find a broker that will let you buy European equities such as those ETFs. Since you mentioned Merrill Edge, a discount broking platform, you could also consider Interactive Brokers since they do offer trading on the London Stock Exchange. There are plenty more though. Beware that you are now introducing a foreign exchange risk into your investment too and that taxation of capital returns/dividends may be quite different from a standard US-listed ETF. In the US, there are no Islamic or Shariah focussed ETFs or ETNs listed. There was an ETF (JVS) that traded from 2009-2010 but this had such little volume and interest, the fees probably didn't cover the listing expenses. It's just not a popular theme for North American listings.","Have you looked at ThinkorSwim, which is now part of TD Ameritrade? Because of their new owner, you'll certainly be accepted as a US customer and the support will likely be responsive. They are certainly pushing webinars and learning resources around the ThinkorSwim platform. At the least you can start a Live Help session and get your answers. That link will take you to the supported order types list. Another tab there will show you the currency pairs. USD is available with both CAD and JPY. Looks like the minimum balance requirement is $25k across all ThinkorSwim accounts. Barron's likes the platform and their annual review may help you find reasons to like it. Here is more specific news from a press release: OMAHA, Neb., Aug 24, 2010 (BUSINESS WIRE) -- TD AMERITRADE Holding Corporation (NASDAQ: AMTD) today announced that futures and spot forex (foreign exchange) trading capabilities are now available via the firm's thinkorswim from TD AMERITRADE trading platform, joining the recently introduced complex options functionality.","Options - yes we can :) Options tickers on Yahoo! Finance will be displayed as per new options symbology announced by OCC. The basic parts of new option symbol are: Root symbol + Expiration Year(yy)+ Expiration Month(mm)+ Expiration Day(dd) + Call/Put Indicator (C or P) + Strike price Ex.: AAPL January 19 2013, Put 615 would be AAPL130119P00615000 http://finance.yahoo.com/q?s=AAPL130119P00615000&ql=1 Futures - yes as well (: Ex.: 6A.M12.E would be 6AM12.CME using Yahoo Finance symbology. (simple as that, try it out) Get your major futures symbols from here: http://quotes.ino.com/exchanges/exchange.html?e=CME","You are in a difficult situation because of US regulation, that is much more demanding to fulfill than in EU or rest of the world. Second, Interactive Brokers stopped serving FX for US clients. Third, EU brokers - like Saxo Bank - don't accept US clients: Almost any private client can open an account with Saxo Bank, although there are few exceptions. You can’t open an account if you are US, Iranian or North Korean resident - Brokerchooser: Saxo Bank Review Working for Brokerchooser, I would say you are limited to Oanda or Gain Capital. The latter is an ECN broker, and operates through other white label partners, you could try Forex.com also.","Agree with some of the posts above - Barchart is a good source for finding unusual options activity and also open interest -https://www.barchart.com/options/open-interest-change","\"The \"\"pure play\"\" would be using interest rate options. http://www.cboe.com/Products/InterestRateOptionsSpecs.aspx\"","There are options on options. Some derivative instruments assets ARE options (some ETFs), and you are able to buy shares of those ETFs OR options on those ETFs. Secondly, options are just a contract, so you just need to write one up and find someone to buy the contract. The only thing is that the exchange won't facilitate it, so you will have liquidity issues. What you want to do is a diagonal / calendar spread. Buy the back month option, sell the front month option, this isn't a foreign concept and nobody is stopping you. Since you have extra leverage on your LEAPS, then you just need to change the balancing of your short leg to match the amount of leverage the leaps will provide. (so instead of buying,selling 1:1, you need to buy one leap and perhaps sell 5 puts)","\"I have received a response from SIPC, confirming littleadv's answer: For a brief background, the protections available under the Securities Investor Protection Act (\"\"SIPA\"\"), are only available in the context of a liquidation proceeding of a SIPC member broker-dealer and relate to the \"\"custody\"\" of securities and related cash at the SIPC member broker-dealer. Thus, if a SIPC member broker-dealer were to fail at a time when a customer had securities and/or cash in the custody of the SIPC member broker-dealer, in most instances it would be SIPC's obligation to restore those securities and cash to the customer, within statutory limits. That does not mean, however, that the customer would necessarily receive the original value of his or her purchase. Rather, the customer receives the security itself and/or the value of the customer's account as of the day that the liquidation commenced. SIPC does not protect against the decline in value of any security. In a liquidation proceeding under the SIPA, SIPC may advance up to $500,000 per customer (including a $250,000 limit on cash in the account). Please note that this protection only applies to the extent that you entrust cash or securities to a U.S. SIPC member. Foreign broker dealer subsidiaries are not SIPC members. However, to the extent that any assets, including foreign securities, are being held by the U.S. broker dealer, the assets are protected by SIPC. Stocks listed on the LSE are protected by SIPC to the extent they are held with a SIPC member broker dealer, up to the statutory limit of $500,000 per customer. As I mentioned in the comments, in the case of IB, indeed they have a foreign subsidiary, which is why SIPC does not cover it (rather they are insured by Lloyds of London for such cases).\"","The product itself is a derivative as it derives its value from another stock or commodity. It's similar to a US option, which offers (in the case of a 'call') the right, but not the obligation to buy a stock at a predetermined price before a certain date. But, unlike the US option, instead of buying the stock, the contract is only closed out in cash. I've made the analogy to betting, so I believe it to be a fair comparison. I hope this question is theoretical. You should never buy a financial instrument with no clue how it works.","Why do all this work yourself? Pay a modest price to have a professional do this for you. Look at the tickers PUTX, PUTW.","\"OptionsXpress is good. I have used them for many years to trade stocks mainly (writing Covered calls and trading volatility). You set the account up through OptionsXpress Australia, and then fund the account from one of your accounts in Australia (I just use my Bank of Queensland account). The currency conversion will be something to watch (AUD to USD). The rates are low, but one of the best features is \"\"virtual trading\"\". It allows you to give yourself virtual funds to practice. You can then experiment with stop-losses and all other features. Perhaps other platforms have this, but I am yet to see it... anyway, if you want to trade in US stocks you are going to need to switch to USD anyway. ASX never moves enough for my interests. Regards, SB\"","You will likely need to open an account in another EU country, like a broker operating out of France, Britain or Germany, to get the best options. If you are comfortable using an english language site and interface, I highly recommend Interactive Brokers as they let you trade in many markets simultaneously, have simple currency conversion, and great tools. But, they are geared toward active traders so you might be better with a more retail oriented broker if you are new to trading stocks. There are many options. Here is a list to start with:","One broker told me that I have to simply read the ask size and the bid size, seeing what the market makers are offering. This implies that my order would have to match that price exactly, which is unfortunate because options contract spreads can be WIDE. Also, if my planned position size is larger than the best bid/best ask, then I should break up the order, which is also unfortunate because most brokers charge a lot for options orders.","API wise there's just one at the retail level: Interactive Brokers (India). Brokerage is high though - 3.5 bps for F&O and 5 bps for cash. I've used Sharekhan (good, can get to 2 bps brokerage, trading client software, no API). Also used multiple other brokerages, and am advising a new one, Zerodha http://www.zerodha.com. API wise the brokers don't provide it easily to retail, though I've worked with direct access APIs at an institutional level.","If you have an account with a major bank they may trade an over the counter option with you. Just depends how much work you need to go through and how much you are planning on buying.","\"Check the transactions costs, \"\"Desk fees\"\" and the whole structure, sit down with them and list everything. Then make a spreadsheet and calculate all the stuff they hit you with and figure out how good you have to be in trading to make money, (in terms of accuracy and p/l).\"","Since I've been doing this since late 03 I have colo machines in Chicago and NYC, and have direct exchange data feeds etc. I mentioned in a prior post though, for someone starting out on algorithmic trading, I'd recommend Nanex for tick data and Interactive Brokers for your brokerage account. IB has a robust and easy to use API. It won't let you do the most low latency stuff bc you can't colo at the exchange and have to clear through their order management systems but if you are looking at opportunities that exist in the market in excess of 50ms it's probably a good place to start. If not, go Lightspeed imo, but that'll cost you on the colo/data a lot more.","GIC perhaps? These would be quite similar to Certificates of Deposit where one is agreeing to lock up their money for a term and be paid a percentage for doing so. There are various kinds as some may be linked to market returns in some cases and others are just simple interest.","I have a father who is worth a few million I could eventually borrow from for my own trading but IB from the way my friend described it seemed like an easy way to make 500 k with brainless excel sheets etc. After hearing yours and multiple peoples opinions I agree with you.","\"This type of structured product is called a capital protection product. It's like an insurance product - where you give up some upside for protection against losses in certain cases. From the bank's perspective they take your investment, treat it as an \"\"interest-free loan\"\" and buy derivatives (like options) that give them an expected return greater then They make their money: With this product, you are giving up some potential upside in order to protect against losses (other than catastrophic losses if the lower index drops by 50% or more). What's the catch? There's not really a catch. It's a lot like insurance, you might come out ahead (e.g. if the market goes down less than 50%), but you might also give up some upside. The bank will sell enough of these in various flavors to reduce their risk overall (losses in your product will be covered by gains in another). Note that this product won't necessarily sell for $1,000. You might have to pay $1,100 (or $1,005, or whatever the bank can get people to buy them for) for each note whenever it's released. That's where the gain or loss comes into play. If you pay $1,100 but only get $1,000 back because the index didn't go up (or went down) you'd have a net loss of $100. It's subtle, but it is in the prospectus: The estimated value of the notes is only an estimate determined by reference to several factors. The original issue price of the notes will exceed the estimated value of the notes because costs associated with selling, structuring and hedging the notes are included in the original issue price of the notes. These costs include the selling commissions, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under the notes.\"","\"I recommend avoiding trading directly in commodities futures and options. If you're not prepared to learn a lot about how futures markets and trading works, it will be an experience fraught with pitfalls and lost money – and I am speaking from experience. Looking at stock-exchange listed products is a reasonable approach for an individual investor desiring added diversification for their portfolio. Still, exercise caution and know what you're buying. It's easy to access many commodity-based exchange-traded funds (ETFs) on North American stock exchanges. If you already have low-cost access to U.S. markets, consider this option – but be mindful of currency conversion costs, etc. Yet, there is also a European-based company, ETF Securities, headquartered in Jersey, Channel Islands, which offers many exchange-traded funds on European exchanges such as London and Frankfurt. ETF Securities started in 2003 by first offering a gold commodity exchange-traded fund. I also found the following: London Stock Exchange: Frequently Asked Questions about ETCs. The LSE ETC FAQ specifically mentions \"\"ETF Securities\"\" by name, and addresses questions such as how/where they are regulated, what happens to investments if \"\"ETF Securities\"\" were to go bankrupt, etc. I hope this helps, but please, do your own due diligence.\"","For self-service type online customers, OptionsXpress gives me far better trading features(like technicals advanced conditions) and tools, ACH money management & scheduling, fullfillment too. $9 stock trades. I don't know if they yet share Schwab's (their new parent company?) commission-free ETFs getting so trendy nowadays.","Barclays offers an iPath ETN (not quite an ETF), DJP, which tracks the total return of the Dow Jones-AIG Commodity Index.","What financial instruments are there that are profitable when an underlying assets falls? The instrument you are looking for is called an Option, specifically a Put Option. It allows you, within the validity date, to sell ('Put') the respective shares to the option giver, at the predefined Strike Price. For example, let's assume APPL trades currently at 100 $ per share, and you think they will go down a lot. You buy one Put Option for 100 shares (they always come for larger amounts like 100s) for a Strike Price of 90 $, and pay 5 $ for it (it would be cheap if nobody believes they will fall that much). Note the last sentence under 2. - it is rather easy and very common when trading options to make complete losses. You have been warned. Are they available for IPOs? They could be available for IPOs, even before the IPO. However, someone has to put them out (some large bank, typically), which is some effort, and they would only do that if they expect enough interest and volume in the trade. most of the time, there will be no such options on the market. Are they available for foreign stocks?Yes, but again only selectively - only if the stock is well known and interesting enough for a broad audience.","Well, kind of XD. I usually just look through Business Week for the ADRs that are on the OTC market. I don't do anything major, but why I love them is that they have a greater reach than just ADRs on the NYSE or NASDAQ. Like for instance, if I wanted to own Thai or European stocks, many of the larger, more reputable firms are listed on the OTC market. Having said that, most other sites don't have earnings reports laid out for you. Business Week does. The only fancy thing I am interested in are options and options on futures, and Bar Chart is good for the latter.","I find this site to be really poor for the virtual play portion, especially the options league. After you place a trade, you can't tell what you actually traded. The columns for Exp and type are blank. I have had better luck with OptionsXpress virtual trader. Although they have recently changed their criteria for a non funded accounts and will only keep them active for 90 days. I know the cboe has a paper trading platform but I haven't tried it out yet.","Neither site offers index futures or options pricing. Your best best is likely to get the quote from a broker who supports trading those vehicles. Free sites usually limit themselves to stocks and sometimes to options chains -- the exception is Reuters where just about any security for which you have the reuters formatted trading symbol can be quoted.","\"It is explained on their website. Just look for the word \"\"routing\"\" on the Features page: Choose Your Venues Liquidity Pools Group 1: Bats Europe Group 2: Liquidity Partner (LP) Add this group to access dark pool liquidity. Group 3: Exchanges and MTFs Choose to access additional Exchanges and MTFs across Europe.\"","Call the CBOE, the Chicago Board of Options Exchange I've requested options on several IPOs in the past. You mainly have to convince them that there is a market for them (or they won't be inclined to provide liquidity). The CBOE could talk to the company in question to help convince them, or the CBOE will just tell you when the options will begin trading. Oh yeah, sometimes they'll ask you who you work for, just try to avoid that question, they don't like to talk to individual/retail investors.","Disclosure: I am working for an aggregation startup business called Brokerchooser, that is matching the needs of clients to the right online broker. FxPro and similar brokers are rather CFD/FX brokers. If you want to trade stocks you have to find a broker who is registered member of an exchange like LSE. Long list: http://www.londonstockexchange.com/exchange/traders-and-brokers/membership/member-firm-directory/member-firm-directory-search.html From the brokers we have tested at Brokerchooser.com I would suggest:","The vast majority of retail Forex brokers are market makers, rather than ECNs. With that said, the one that fits your description mostly closely is Interactive Brokers, is US-based, and well-respected. They have a good amount of exoitcs available. Many ECNs don't carry these because of the mere fact that they make money on transactions, versus market makers who make money on transactions and even more on your losses. So, if the business model is to make money only on transactions, and they are as rarely traded as exotics are, there's no money to be made.","The only purpose the ILS market fills is directly lining up capital to pay for potential cats. Unless you're doing directly that you don't really have a way to participate, long or short. The cat bond market really isn't liquid or developed enough for derivatives to exist at this point. Due to the losses this year the cat bond market could shrink significantly too because all the existing catastrophe models have seemed to be inadequate to model these occurrences and investors are losing their shirts. There are questions of the extent to which the alternative capital in the reinsurance market will reload in the wake of 2017.","The Greek Piraeus Bank offers such services for trading stocks in Athens Stock Exchange (ASE) and in addition 26 other markets including NASDAQ, NYSE and largest European ones (full list, in Greek). Same goes for Eurobank with a list of 17 international markets and the ability to trade bonds. BETA Securities has also an online platform, but I think it's only for ASE. Some other banks (like National Bank of Greece) do have similar online services, but are usually restricted to ASE.","The penny pilot program has a dramatic effect on increasing options liquidity. Bids can be posted at .01 penny increments instead of .05 increments. A lot of money is lost dealing with .05 increments. Issues are added to the penny pilot program based on existing liquidity in both the stock and the options market, but the utility of the penny pilot program outweighs the discretionary liquidity judgement that the CBOE makes to list issues in that program. The reason the CBOE doesn't list all stocks in the penny pilot program is because they believe that their data vendors cannot handle all of the market data. But they have been saying this since 2006 and storage and bandwidth technology has greatly improved since then.","From what I see, it is more like .70 per contract, with a $1 minimum (for options that trade over a dime.) IB does not provide any help, at all, so you have to know what you are doing. I use tradeking, which charges about $6 for a contract, but you can call them for help if needed. There looks to be other fees for IB, like when you cancel an order, but that can be offset by other trades. It is one of the reason the Motley Fool Stock Adviser service has recommended IB for an investment.","This is exactly how I started, starting a simulation account on the CBOE website just to see what situation was profitable because it was all greek to me. Actually after learning the greeks, I realize that site was worse and eventually read some books and got better tools. The screenshot you have is telling you the strikes, but unfortunately they are showing you the technical name of the contract on the exchanges. For example, just like you type in AAPL to buy shares of AAPL stock, you can type in VIX1616K16E to get that one particular contract, expiration and strike. So lets break it down just by inferring, because this is what I just did with that picture: You know the current price of VIX, $17.06 Calls expiring November 16th, 2016: What is changing? SYMBOL / YEAR / EXPIRATION DAY / STRIKE / OPTION-STYLE (?) So knowing that in the money options will be more expensive, and near the money options will be slightly cheaper, and out the money will be even cheaper, you can see what is going on, per expiration.","I think you are right. I hear people all the time with horror stories about futures and trading horror stories in general. I want to learn about this market, but I don't want to go in without some education on the matter. I watched their video on options on futures, but the valuation method needs a bit more explaining to be (beta, gamma, etc.). I get the basic idea of options on futures, but I need to formulate a strategy, and that is where study would come in. I have wanted to play around with a few strategies I had in my head for regular options, and by the time I get the grasp of it, I might be able to trade options on futures. I guess my biggest thing with options on futures is not to be sophisticated, but more so I can have access to new markets. On the topic of options though, I do think there is some strategies that could boost my returns a bit on my existing strategies. I think selling various options (selling call options on weak dividend stocks stuck as bulk shipper or mortgage reits and as of late oil trusts or selling put options on some stronger oil reits or other stronger dividend stocks). The only problem is I don't know if the premium would be enough to make it worth while with the weak dividend stocks. So either way, even if you are only earning a conservative 9% on dividends, if you add in another 4% for premium, you could be making 13% off of one trade, and could repeat the process (assuming the target stayed weak or strong).","\"I think you should start here https://www.tastytrade.com/tt/ and learn about equity options. Its a lot more accessible for you to get hands on experience. Start with learning about put/call spreads and maybe put on some SPY trades. Options are essentially the same in every market; I would start here. I think this idea you have of not having to use \"\"margin\"\" is coming from people running spread strategies that have limited downside/upside\"","Thanks for your reply. I’m not familiar with the term “Held-For-Trading Security”. My securities are generally held as collateral against my shorts. To clarify, I am just trying to track the “money in” and “money out” entries in my account for the shorts I write. The transaction is relatively straight forward, except there is a ton of information attached! In simple terms, for the ticker CSR and short contract CSRUQ8, the relevant entries look something like this: There are no entries for expiries. I need to ensure that funds are available for future margin calls and assignments. The sale side using covered calls is as involved.","\"There are a number of choices: I prefer Dilip's response \"\"Have you tried asking etrade?\"\" No offense, but questions about how a particular broker handles certain situations are best asked of the broker. Last - one should never enter into any trade (especially options trades) without understanding the process in advance. I hope you are asking this before trading.\"","Oh it is ok. I was a little confused, because I tried to read up on future options and options as much as possible, and to still get question marks worried me. I mean to my knowledge, options can be traded as is without margin, while futures do need margin. If you are a starving artist, you can see the draw of not having to have margin to keep track of, but be able at the same time to learn about another market to trade in (commodities).","\"Just as a matter of research, apparently there is a way to find high option volumes such as a site here: https://www.barchart.com/options/volume-leaders/stocks However, that information is going to be heavily skewed by \"\"underlying security that moved a lot more than expected and probably got a lot of positions filled incidentally today\"\", but I think it is a good place to start building up a list of securities with a lot of option interest. There is also a tab there for ETFs. This will not tell you exactly that a particular stock always has high option volume, but most of the ones that show up there repeatedly and across multiple strike prices will meet your criteria.\"","\"Thinkorswim's ThinkDesktop platform allows you to replay a previous market day if you wish. You can also use paper money in stocks, options, futures, futures options, forex, etc there. I really can't think of any other platform that allows you to dabble around in so many products fictionally. And honestly, if all that \"\"make[s] the learning experience a bit more complicated\"\" and demotivates you, well thats probably a good thing for your sake.\"","An additional way to get a better grip on the mechanics of what you're looking to do is to use a paper trading tool. For example, thinkorswim gives you $200k in virtual money to trade with- money you don't have to worry about as you might initially make mistakes in trading futures. As mentioned above, each product has it's own pricing and trading options on futures (derivatives of derivatives) is even more confusing, so you'll be well-served by a risk-free learning tool.","Why do you care? In any case, you can easily Google the answer... Effective Sunday, April 2, 2017 for trade date Monday, April 3, 2017, and pending all relevant CFTC regulatory review periods, Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) will list Monday Weekly Options on the E-mini Standard and Poor’s Stock Price Index Futures and Standard and Poor’s 500 Stock Price Index Futures contracts (collectively the “Contracts”) for trading on CME Globex and for submission for clearing via CME ClearPort as described in Appendix A below. Appendix B below provides the Exchange fee schedule for the Contracts. source","Depending on the currencies you want to trade there are mini-futures available with a contract value of 12.500 (for example EUR/USD) or standard futures with a contract value of 125.000. You will find an overview at the Globex CME website For a broker to trade the futures I would recommend Interactive Brokers. They offer real-time trading at very low commission.","The liquidity of options is really not a problem, as the option price is determined by the underlying price, and even if there was very little liquidity in the option itself, market makers are required to make a market at the price determined by the underlying. As long as the underlying has enough liquidity your slippage in trading the options should not be too much of a problem. You can read this ETO Market Making Scheme document for more details.","\"I don't see EWQ6 in any of your links, so I can't say for certain, but when you buy an option contract on a future, the option will be for a specific future (and strike). So the page you're looking at may be for options on E-mini S&P 500 futures in general, and when you actually purchase one through your broker, you pick a specific expiry (which will be based on the \"\"prompt\"\" future, meaning the next future that expires after the option) and strike. UPDATE: Based on this page mirror, the option EWQ7 is an option on the ESU7 (SEP 2017) future. The next 3 monthly options use ESZ7 as the underlier, which confirms that they use the next prompt future as the underlier.\"","\"Aganju has mentioned put options, which are one good possibility. I would suggest considering an even easier strategy: short selling. Technically you are borrowing the stock from someone and selling it. At some point you repurchase the stock to return to the lender (\"\"covering your short\"\"). If the stock price has fallen, then when you repurchase it, it will be cheaper and you keep the profit. Short selling sounds complicated but it's actually very easy--your broker takes care of all the details. Just go to your brokerage and click \"\"sell\"\" or \"\"sell short.\"\" You can use a market or limit order just like you were selling something you own. When it sells, you are done. The money gets credited to your account. At some point (after the price falls) you should repurchase it so you don't have a negative position any more, but your brokerage isn't going to hassle you for this unless you bought a lot and the stock price starts rising. There will be limits on how much you can short, depending on how much money is in your account. Some stocks (distressed and small stocks) may sometimes be hard to short, meaning your broker will charge you a kind of interest and/or may not be able to complete your transaction. You will need a margin account (a type of brokerage account) to either use options or short sell. They are easy to come by, though. Note that for a given amount of starting money in your account, puts can give you a much more dramatic gain if the stock price falls. But they can (and often do) expire worthless, causing you to lose all money you have spent on them. If you want to maximize how much you make, use puts. Otherwise I'd short sell. About IPOs, it depends on what you mean. If the IPO has just completed and you want to bet that the share price will fall, either puts or short selling will work. Before an IPO you can't short sell and I doubt you would be able to buy an option either. Foreign stocks? Depends on whether there is an ADR for them that trades on the domestic market and on the details of your brokerage account. Let me put it this way, if you can buy it, you can short sell it.\"","The liquidity is quite bad. I have seen open Intrest drop from thousands to zero. Theta and the lack of liquidity are strong reasons not to buy options. Instead, consider selling them. They say that most Option purchases expire worthless. Why is this so? Because hedge funds buy those out-of-the-money puts in case their position goes against them (like insurance). Make money selling insurance. No one makes money buying insurance.","You can do some very crafty hedging with the variety of options. For instance, deep out of the money options are affected more by changes of market volatility, knowing this you can get long or short vega very easily, as opposed to necessarily betting on changes in the underlying asset.","Saxo Bank offers direct access to Athens Stock Exchange. Interactive Brokers is your next best bet, and as you probably already noticed, they do not have a free platform. They are open to US and non-US citizens. Although they do not currently have direct exposure to individual companies on the Athens Stock Exchange, the various european exchanges they do provide direct market access for will give a lot of exposure. There are a few Greek companies that trade on non-Greek stock exchanges, if you want exposure. There are also Greek ETFs which bundle several companies together or try to replicate Greek company indices.","One answer in four days tells you this is a niche, else there should be many replies by now. The bible is McMillan on Options Note - I link to the 1996 edition which starts at 39 cents, the latest revision will set you back $30 used. The word bible says it all, it offers a great course in options, everything you need to know. You don't get a special account for option trading. You just apply to your regular broker, so depending what you wish to do, the amount starts at You sell calls against stock you own in your IRA. You see, selling covered calls always runs the risk of having your stock called away, and you'd have a gain, I'd hope. By doing this within the IRA, you avoid that. Options can be, but are not always, speculative. Covered calls just change the shape of your return curve. i.e. you lower your cost by the option premium, but create a fixed maximum gain. I've created covered calls on the purchase of a stock or after holding a while depending on the stock. Here's the one I have now: MU 1000 shares bought at $8700, sold the $7.50 call (jan12) for $3000. Now, this means my cost is $5700, but I have to let it go for $7500, a 32% return if called. (This was bought in mid 2010, BTW.) On the flip side, a drop of up to 35% over the time will still keep me at break even. The call seemed overpriced when I sold it. Stock is still at $7.20, so I'm close to maximum gain. This whole deal was less risky than just owning one risky stock. I just wrote a post on this trade Micron Covered Call, using today's numbers for those actually looking to understand this as new position. (The article was updated after the expiration. The trade resulted in a 42% profit after 491 days of holding the position, with the stock called away.) On the other hand, buying calls, lots of them, during the tech bubble was the best and worst thing I did. One set of trades' value increased by a factor of 50, and in a few weeks blew up on me, ended at 'only' triple. I left the bubble much better off than I went in, but the peak was beautiful, I'd give my little toe to have stayed right there. From 99Q2 to 00Q2, net worth was up by 3X our gross salary. Half of that (i.e. 1.5X) was gone after the crash. For many, they left the bubble far far worse than before it started. I purposely set things up so no more than a certain amount was at risk at any given time, knowing a burst would come, just not when. If nothing else, it was a learning experience. You sell calls against stock you own in your IRA. You see, selling covered calls always runs the risk of having your stock called away, and you'd have a gain, I'd hope. By doing this within the IRA, you avoid that. Options can be, but are not always, speculative. Covered calls just change the shape of your return curve. i.e. you lower your cost by the option premium, but create a fixed maximum gain. I've created covered calls on the purchase of a stock or after holding a while depending on the stock. Here's the one I have now: MU 1000 shares bought at $8700, sold the $7.50 call (jan12) for $3000. Now, this means my cost is $5700, but I have to let it go for $7500, a 32% return if called. (This was bought in mid 2010, BTW.) On the flip side, a drop of up to 35% over the time will still keep me at break even. The call seemed overpriced when I sold it. Stock is still at $7.20, so I'm close to maximum gain. This whole deal was less risky than just owning one risky stock. I just wrote a post on this trade Micron Covered Call, using today's numbers for those actually looking to understand this as new position. (The article was updated after the expiration. The trade resulted in a 42% profit after 491 days of holding the position, with the stock called away.) On the other hand, buying calls, lots of them, during the tech bubble was the best and worst thing I did. One set of trades' value increased by a factor of 50, and in a few weeks blew up on me, ended at 'only' triple. I left the bubble much better off than I went in, but the peak was beautiful, I'd give my little toe to have stayed right there. From 99Q2 to 00Q2, net worth was up by 3X our gross salary. Half of that (i.e. 1.5X) was gone after the crash. For many, they left the bubble far far worse than before it started. I purposely set things up so no more than a certain amount was at risk at any given time, knowing a burst would come, just not when. If nothing else, it was a learning experience.","OptionsXpress includes India in the list of countries where is possible to open an international account to invest in the US Stock Market. They just merged with Charles Schwab and they have a nice online trading platform. Stocks and ETFs are little bit pricey.. Get in touch with them to get more information.","They're exchange traded debt, basically, not funds. E.g. from the NYSE: An exchange-traded note (ETN) is a senior unsecured debt obligation designed to track the total return of an underlying market index or other benchmark, minus investor fees. Whereas an ETF, in some way or another, is an equity product - which doesn't mean that they can only expose you to equity, but that they themselves are a company that you buy shares in. FCOR for example is a bond ETF, basically a company whose sole purpose is to own a basket of bonds. Contrast that to DTYS, a bear Treasury ETN, which is described as The ETNs are unsecured debt obligations of the issuer, Barclays Bank PLC, and are not, either directly or indirectly, an obligation of or guaranteed by any third party. Also from Barclays site: Because the iPath ETNs are debt securities, they do not have any voting rights. FCOR on the other hand is some sort of company owned/managed by a Fidelity trust, though my EDGAR skills are rusty. AGREEMENT made this 18th day of September, 2014, by and between Fidelity Merrimack Street Trust, a Massachusetts business trust which may issue one or more series of shares of beneficial interest (hereinafter called the Trust), on behalf of Fidelity Corporate Bond ETF (hereinafter called the Fund), and Fidelity Investments Money Management, Inc., a New Hampshire corporation (hereinafter called the Adviser) as set forth in its entirety below.","I have had accounts at both IB and Questrade. Whatever you've heard about Questrade, sadly much of it is true pertaining to 2007-2009. I have not had any issues with their service, and making the few trades I do with the QuestraderWEB service has been flawless. In the time that I've had the account, their service has constantly been improving (statements are easier to read, customer service is more responsive). You should read what FrugalTrader and Canadian Capitalist have to say along with the combined 1000+ comments before deciding. Interactive Brokers is a whole different world. Those guys are the definition of real-time. You can get daily and weekly statements, along with the typical monthly statements. Buying power, margin, etc, is all updated in real-time and viewable in their TWS software. Trading fees are definitely lower than Questrade unless you're routinely trading 800-1000+ shares. Most of my trades cost $1. Options have a lower limit before Questrade makes more sense. And nothing beats IB for forex. Ultimately it really depends on what you will be doing. Note that IB charges a minimum monthly fee of $10 ($3 if you're young and foolish). If you don't hit that with commissions, the balance is taken from your account. Also, all other fees are passed on to you (e.g. data, order cancellation). IB also doesn't have any registered accounts such as TFSA or RRSP, and doesn't plan to. If you'll be doing a bunch of hefty trading, IB offers a trading platform free of charge, but charges for everything else. Questrade instead has a monthly fee for its QuestraderPRO and QuestraderELITE services, but that includes data and flat rate commissions. If you're just looking for a place to invest cheaply without extra fees and plan on making a few trades a year, Questrade might be the right choice.","If you get selected for exercise, your broker will liquidate the whole position for you most likely Talk to your broker.","Does anyone know if there is a way to set up a practice account? I only have index ETFs currently, and would like to play around and get a feel for other stocks/options before putting real money into it.","From my own personal experience, you cannot trade spreads in RRSP or TFSA accounts in Canada. You can only buy options (buy a call or buy a put) or you can sell calls against your stock (covered call selling). You will not be able to sell naked options, or trade any type of spread or combo (calendars, condors, etc). I am not sure why these are the rules, but they are at least where I trade those accounts.","When I log in to Schwab to look at these options it tells me there's only Adjusted Options available on these terms: Adjusted Options: Multiplier: 100; Deliverable: 15 PTIE; Cash: ---- It does confirm your July Call quote price of $0.05 because the contract, though priced for 100 shares, will only deliver 15 shares. Separately, looking at the company website for news there was a 7 for 1 Reverse Split announced on May 8, which is the culprit for this option adjustment and the seemingly nonsensical call price.","There are many stategies with options that you have listed. The one I use frequently is buy in the money calls and sell at the money staddles. Do this ONLY on stocks you do not mind owning because that is the worse thing that can happen and if you like the company you stand less of a chance of being scared out of the trade. It works well with high quality resonable dividend paying stocks. Cat, GE, Mrk, PM etc. Good luck","Shorts are difficult because you have to find someone to lend the stock to you. In contrast, put options don't require that. They also have some nice properties like you're only out the contract price. The options chain for BSFT will give you an idea of where the market is. Keep in mind that BSFT only IPO'd last year and announced blowout earnings recently. Make sure the P:E you're looking at is using recent earnings reports!","IB will get you in the ballpark but Lightspeed obviously for the more low latency stuff. You can colo w Lightspeed at Nasdaq and can get direct market data feeds etc. that's not something I'd recco for someone starting out... Expensive for most budgets. Once you get going though, worth it. IB will let you work with opportunities on the 50-100ms level. I don't think telling these guys to go with NewEdge from day one and colo globally would really help anyone get started algo trading. Wouldn't have the capital or scale. Trying to give actual useful advice to them."],"string":"[\n \"\\\"Interactive Brokers offers global securities trading. Notice that the security types are: cash, stock (STK), futures (FUT), options (OPT), futures options (FOP), warrants (WAR), bonds, contracts for differences (CFD), or Dutch warrants (IOPT) There is a distinction between options (OPT), warrants (WAR), options on futures (FOP) and finally, Dutch Warrants (IOPT). IOPT is intuitively similar to an \\\"\\\"index option\\\"\\\". (For index option valuation equations, iopt=1 for a call, and iopt= -1 for a put. I don't know if Interactive Brokers uses that convention). What is the difference between a \\\"\\\"Dutch Warrant\\\"\\\" and an option or warrant? Dutch warrants aren't analogous to Dutch auctions e.g. in the U.S.Treasury bond market. For North America, Interactive Brokers only lists commissions for traditional warrants and options, that is, warrants and options that have a single stock as the underlying security. For Asia and Europe, Interactive Brokers lists both the \\\"\\\"regular\\\"\\\" options (and warrants) as well as \\\"\\\"equity index options\\\"\\\", see commission schedule. Dutch warrants are actually more like options than warrants, and that may be why Interactive Brokers refers to them as IOPTS (index options). Here's some background from a research article about Dutch warrants (which was NOT easy to find): In the Netherlands, ING Bank introduced call and put warrants on the FT-SE 100, the CAC 40 and the German DAX indexes. These are some differences between [Dutch] index warrants and exchange traded index options: That last point is the most important, as it makes the pricing and valuation less subject to arbitrage. Last part of the question: Where do you find Structured Products on Interactive Brokers website? Look on the Products page (rather than the Commissions page, which does't mention Structured Products at all). There is a Structured Products tab with details.\\\"\",\n \"You can trade currency ETF options on IB. It is SIPC insured; the options are just like vanilla options in Saxo.\",\n \"Interactive Brokers offers many foreign markets (19 countries) for US based investors. You can trade all these local markets within one universal account which is very convenient in my view. IB offering\",\n \"I think an IOPT is a Dutch warrant. Someone else might understand what this is.\",\n \"The CBOE Rule Book, Section 5.5 explains exactly what programmes are available, how and when they will start listing and expire. The super-concise summary is: It's a per-underlying decision process, though there's some rules that may provide you with a minimum set of options (e.g. the quarterly programme on highly capitalised stocks trading for more than $75, etc.) For greater detail, for better or worse, you will have to scan the New Listings service regularly.\",\n \"\\\"If you have a big pocket there are quite a few.. not sure if they take us clients though. Vcap, Barclays, Icap, Fixi, Fc Stone, Ikon.. Then there are probably a few banks that have x options also but i don't know if a private investor can trade them. A few im not sure if they have fx options or if they are \\\"\\\"good\\\"\\\": GFTFOREX, Gain capital, XTB, hmslux, Ifx Markets, Alpari, us.etrade.com Betonmarkets might be something if you are interested in \\\"\\\"exotic options\\\"\\\" maybe?\\\"\",\n \"I've been a retail trader for close to 7 years and while I have a specialized futures account, I use Interactive Brokers for my other trading. They charge per share or contract rather than per trade (good for smaller accounts or if you want to piece into and out of positions). You can also trade just about anything. Futures, options, options on futures, individual stocks, ETFs, Bonds (futures), currencies. The interface is pretty good as well. I have seperate charts (eSignal) so I'm not sure how good their charting is\",\n \"Selftrade does list them. Not sure if you'll be able to sign up from the US though, particularly given the FATCA issues.\",\n \"\\\"Say we are in 'normal times.' Passbook rates are 5% or so. Longer rates, 6-7%. I offer you a product with these terms, for $10,000 I will return a \\\"\\\"Guaranteed\\\"\\\" $10,000 in 6 years and based on the stock market, 1% for every 2% the S&P is up beyond 10% at maturity. As the seller of this product, I take $6666, and buy a fixed investment, 6 years at 7% in treasuries will return the $10000. Really. I then take the $3334 and buy out of the money calls on the S&P each year to capture the gains, if any, and to deliver on my promise. This is one example of a structured deposit offering. They can have nearly any terms one can imagine. Tied to any product. S&P, Crude Oil, Gold. Whatever.\\\"\",\n \"A broker does not have to allow the full trading suite the regulations permit. From brokersXpress: Do you allow equity and index options trading in brokersXpress IRAs? Yes, we allow trading of equity and index options in IRAs based on the trading level assigned to an investor. Trading in IRAs includes call buying, put buying, cash-secured put writing, spreads, and covered calls. I understand OptionsXpress.com offers the same level of trading. Disclosure - I have a Schwab account and am limited in what's permitted just as your broker does. The trade you want is no more risky that a limit (buy) order, only someone is paying you to extend that order for a fixed time. The real answer is to ask the broker. If you really want that level of trading, you might want to change to one that permits it.\",\n \"Not that I am aware. There are times that an option is available, but none have traded yet, and it takes a request to get a bid/ask, or you can make an offer and see if it's accepted. But the option chain itself has to be open.\",\n \"With InteractiveBrokers there is no minimum trade amount, they also offer Australian Equities.\",\n \"With reference to the UK: Structured deposits should not be confused with structured products. Structured deposits are often, quite simple deposit accounts. You place your money into what is essentially a deposit account, and are therefore guaranteed not to lose your capital as with any other deposit account. The attraction is that you could earn more than you would in a normal deposit account, often around double, due to indirect exposure to the markets. Another benefit is that structured deposits can form part of your annual cash ISA allowance, so the returns can be tax free. These products are popular with those who have savings which they are happy to deposit away for between 3 and 6 years, and are looking for better rates of return than standard cash ISAs or savings accounts. The main drawback is that you may not receive anything other than your original deposit. That poses a minimal risk if your savings are earning less than 1% currently. See my article at financialandrew.blogspot.co.uk/2013/03/fed-up-with-low-returns-from-cash-isas.html for a more rounded overview of the structured deposits.\",\n \"\\\"To other users save yourselves time, do not test any of the alternatives mentioned in this post. I have, to no avail. At the moment (nov/2013) Saxobank unfortunately seems to be the only broker who offers OTC (over-the counter) FX options trading to Retail Investors. In other words, it is the only alternative for those who are interested in trading non-exchange options (ie, only alternative to those interested in trading FX options with any date or strike, rather than only one date per month and strikes every 50 pips only). I say \\\"\\\"unfortunately\\\"\\\" because competition is good, Saxo options spreads are a rip off, and their platform extremely clunky. But it is what it is.\\\"\",\n \"Option tiers are broker specific, according mostly to their business model and presumably within the bounds of FINRA Rule 2111 (Suitability). The tier system can be as complex as E*Trade or as simple as none with Interactive Brokers. The suitability is determined presumably by compliance presumably by the legal history of the rule. The exact reasoning is political, effected by the relevant party composition of the legislature and executive. The full legal history will have the judiciary's interpretations of legislation and policy. Cash and margin rules are dictated primarily by the Federal Reserve and more precisely by FINRA and the SEC. This is the only distinction made by IB.\",\n \"I've looked into Thinkorswim; my father uses it. Although better than eTrade, it wasn't quite what I was looking for. Interactive Brokers is a name I had heard a long time ago but forgotten. Thank you for that, it seems to be just what I need.\",\n \"\\\"You can call CBOE and tell them you want that series or a particular contract. And this has nothing to do with FLEX. Tell them there is demand for it, if they ask who you are, DONT SAY YOU ARE A RETAIL INVESTOR, the contracts will be in the option chain the next day. I have done this plenty of times. The CBOE does not care and are only limited by OCC and the SEC, but the CBOE will trade and list anything if you can think of it, and convince them that \\\"\\\"some people want to trade it\\\"\\\" or that \\\"\\\"it has benefits for hedging\\\"\\\" I've gotten 50 cent strike prices on stocks under $5 , I've gotten additional LEAPS and far dated options traded, I've gotten entire large chains created. I also have been with prop shops before, so I could technically say I was a professional trader. But since you are using IB and are paying for data feeds, you can easily spin that too.\\\"\",\n \"\\\"My broker (thinkorswim) offers this from the platform's trade tab. I believe this feature isn't crippled in the PaperMoney version which is effectively a \\\"\\\"free online service.\\\"\\\"\\\"\",\n \"\\\"HSBC Hong Kong's “Deposit Plus” Product\\\"\\\" the same as \\\"\\\"Dual Currency Product\\\"\\\" . it's Currency link Sell base Currency Call / Alternative Currency Put FX Option It's not protected by the Deposit Insurance System in HK You can search Key Word \\\"\\\"Dual Currency Product\\\"\\\" & \\\"\\\"Dual Currency Investment\\\"\\\" & \\\"\\\"Dual Currency Deposit\\\"\\\" The only one of the world's foreign exchange structured product book 『雙元貨幣產品 Dual Currency Product』 ISBN 9789574181506\\\"\",\n \"Power Options is one such example of what you seek, not cheap, but one good trade will recover a year's fee. There's a lot you can do with the stock price alone as most options pricing will follow Black Scholes. Keep in mind, this is a niche, these questions, while interesting to me, generate little response here.\",\n \"They're all in one place. The OCC provides: http://www.optionsclearing.com/webapps/flex-reports\",\n \"you can try CME DataSuite. Your broker gives you real time options quotes. If you do not have one you can open a scottrade account with just $500 deposit. When I moved my money from scottrade to ameritrade they did not close my account even till this day I can access my scottrade account and see real time quotes and the same research they offered me before. You can try withdrawing your deposit and see if it stays open like mine did.\",\n \"Oanda.com trades spot forex and something they call box options, it's not quite what you are looking for, but maybe worth looking up.\",\n \"Fair enough. I would imagine the ETF could get a better option pricing if that were the case, plus liquidity and counterpart risk concerns but your point is well taken. Serves me right to shoot my mouth off on something I do not do (short). Speaking of which, do you do a lot of shorting? Cover positions or speculation?\",\n \"You might what to check out Interactive Brokers. If your India stock is NSE listed they might be able to do it since they support trading on that exchange. I would talk to a customer service rep there first. https://www.interactivebrokers.com/en/index.php?f=exchanges&p=asia\",\n \"You can use interactive brokers. It allows you to have a single account to trade stocks and currencies from several countries.\",\n \"This is what is called a Structured Product. The linked page gives an overview of the relative pros and cons. They tend to hold the bulk of funds in bonds and then used equity index futures and other derivatives to match returns on the S&P, or other indices tracked. All combine to provide the downside protection. Note that your mother did not receive the dividends paid by the constituent companies. She only received the capital return. Here is a link to Citigroup (Europe) current structured product offerings. Here is a link to Fidelity's current offerings of structured products. Here is Investopedia's article detailing the pitfalls. The popularity of these products appears to be on the wane, having been heavily promoted and sold by the providers at the time your mother invested. Most of these products only provide 100% protection of capital if the market does not fall by a specified amount, either in successive reporting periods or over the life of the product. There are almost as many terms and conditions imposed on the protection as there are structured products available. I have no personal experience buying this type of product, preferring to have the option to trade and receive dividend income.\",\n \"There are two basic kinds of derivatives - forward contracts and options. A forward is an agreement between two parties for one party to buy/sell some asset to the other at a price that they agree upon today at some date in the future. An option is an agreement that gives one party the right, but not the obligation, to buy/sell the asset at some date in the future. Most derivatives that exist are a combination of these two things. For instance, a futures contract is a standardized forward contract that is traded on an exchange, and a swap is a portfolio (or chain) of forward contracts linked together. American/Bermudan options are just options that allow you to exercise on more than one day.\",\n \"\\\"Yes, Interactive Brokers is a good source for live data feeds and they have an API which is used to programmatically access the feeds, you will have to pay for data feeds from the individual data sources though. The stock exchanges have a very high price for their data and this has stifled innovation in the financial sector for several decades in the united states. But at the same time, it has inflated the value and mystique of \\\"\\\"quants\\\"\\\" doing simple algorithms \\\"\\\"that execute within milliseconds\\\"\\\" for banks and funds. Also RIZM has live feeds, it is a younger service than other exchanges but helps people tap into any online broker's feeds and let you trade your custom algorithms that way, that is their goal.\\\"\",\n \"Options are a derivative product, and in this case, derive their value from an underlying security, a traded stock. An option gives you the right, but not the obligation, to buy a stock at a given price (the strike price) by a given time (the expiration date.) What I just described is a call option. The opposite instrument is a put, giving you the right, but not the obligation, to sell the stock at a given price. Volumes have been written on the subject, but I'd suggest that for a custodial Roth, I'd not activate the ability to trade options. How to get started with options investing? offers a nice introduction to trading options. In my response, I offer an example of a trade that's actually less risky due to the option component.\",\n \"Double check with your broker, but if a series isn't open yet for trading, you can't trade it. If there is a series trading without open interest (rare), simply work your open, as options are created at trade. If you have enough money, do this https://money.stackexchange.com/questions/21839/list-of-cflex-2-0-brokers\",\n \"Oh really. I will have to check into that. It would be a bummer if that is the case. Something I will need to look into. If you don't need margin and are not trading the underlying asset (which I could see being a problem), then I don't see what the problem is. But I shall see. Thanks.\",\n \"Yes you can get them from your broker. Two main advantages I can see are:\",\n \"I can't provide a list, but when I took out my Stocks and Shares, I extensively researched for a good, cheap, flexible option and I went with FoolShareDealing. I've found them to be good, and their online trading system works well. I hope that's still the case.\",\n \"You have to call Interactive Brokers for this. This is what you should do, they might even have a web chat. These are very broker specific idiosyncrasies, because although margin rules are standardized to an extent, when they start charging you for interest and giving you margin until settlement may not be standardized. I mean, I can call them and tell you what they said for the 100 rep.\",\n \"I have been looking into CMEs trading tool. I might just play around with futures on it. You make a good point on that though. I am reading Hull's book on options, futures and derivatives, and so far so good. Only thing I would want to test is options on futures, which is missing :( .\",\n \"\\\"I have a Roth IRA with Scottrade, and they allow me to write cash secured puts, as well as covered calls. I can also purchase calls or puts, if I choose. When I write a cash secured put, it automatically deducts the amount required to purchase the shares at the strike price from my \\\"\\\"cash available for transactions\\\"\\\".\\\"\",\n \"Some of the ETFs you have specified have been delisted and are no longer trading. If you want to invest in those specific ETFs, you need to find a broker that will let you buy European equities such as those ETFs. Since you mentioned Merrill Edge, a discount broking platform, you could also consider Interactive Brokers since they do offer trading on the London Stock Exchange. There are plenty more though. Beware that you are now introducing a foreign exchange risk into your investment too and that taxation of capital returns/dividends may be quite different from a standard US-listed ETF. In the US, there are no Islamic or Shariah focussed ETFs or ETNs listed. There was an ETF (JVS) that traded from 2009-2010 but this had such little volume and interest, the fees probably didn't cover the listing expenses. It's just not a popular theme for North American listings.\",\n \"Have you looked at ThinkorSwim, which is now part of TD Ameritrade? Because of their new owner, you'll certainly be accepted as a US customer and the support will likely be responsive. They are certainly pushing webinars and learning resources around the ThinkorSwim platform. At the least you can start a Live Help session and get your answers. That link will take you to the supported order types list. Another tab there will show you the currency pairs. USD is available with both CAD and JPY. Looks like the minimum balance requirement is $25k across all ThinkorSwim accounts. Barron's likes the platform and their annual review may help you find reasons to like it. Here is more specific news from a press release: OMAHA, Neb., Aug 24, 2010 (BUSINESS WIRE) -- TD AMERITRADE Holding Corporation (NASDAQ: AMTD) today announced that futures and spot forex (foreign exchange) trading capabilities are now available via the firm's thinkorswim from TD AMERITRADE trading platform, joining the recently introduced complex options functionality.\",\n \"Options - yes we can :) Options tickers on Yahoo! Finance will be displayed as per new options symbology announced by OCC. The basic parts of new option symbol are: Root symbol + Expiration Year(yy)+ Expiration Month(mm)+ Expiration Day(dd) + Call/Put Indicator (C or P) + Strike price Ex.: AAPL January 19 2013, Put 615 would be AAPL130119P00615000 http://finance.yahoo.com/q?s=AAPL130119P00615000&ql=1 Futures - yes as well (: Ex.: 6A.M12.E would be 6AM12.CME using Yahoo Finance symbology. (simple as that, try it out) Get your major futures symbols from here: http://quotes.ino.com/exchanges/exchange.html?e=CME\",\n \"You are in a difficult situation because of US regulation, that is much more demanding to fulfill than in EU or rest of the world. Second, Interactive Brokers stopped serving FX for US clients. Third, EU brokers - like Saxo Bank - don't accept US clients: Almost any private client can open an account with Saxo Bank, although there are few exceptions. You can’t open an account if you are US, Iranian or North Korean resident - Brokerchooser: Saxo Bank Review Working for Brokerchooser, I would say you are limited to Oanda or Gain Capital. The latter is an ECN broker, and operates through other white label partners, you could try Forex.com also.\",\n \"Agree with some of the posts above - Barchart is a good source for finding unusual options activity and also open interest -https://www.barchart.com/options/open-interest-change\",\n \"\\\"The \\\"\\\"pure play\\\"\\\" would be using interest rate options. http://www.cboe.com/Products/InterestRateOptionsSpecs.aspx\\\"\",\n \"There are options on options. Some derivative instruments assets ARE options (some ETFs), and you are able to buy shares of those ETFs OR options on those ETFs. Secondly, options are just a contract, so you just need to write one up and find someone to buy the contract. The only thing is that the exchange won't facilitate it, so you will have liquidity issues. What you want to do is a diagonal / calendar spread. Buy the back month option, sell the front month option, this isn't a foreign concept and nobody is stopping you. Since you have extra leverage on your LEAPS, then you just need to change the balancing of your short leg to match the amount of leverage the leaps will provide. (so instead of buying,selling 1:1, you need to buy one leap and perhaps sell 5 puts)\",\n \"\\\"I have received a response from SIPC, confirming littleadv's answer: For a brief background, the protections available under the Securities Investor Protection Act (\\\"\\\"SIPA\\\"\\\"), are only available in the context of a liquidation proceeding of a SIPC member broker-dealer and relate to the \\\"\\\"custody\\\"\\\" of securities and related cash at the SIPC member broker-dealer. Thus, if a SIPC member broker-dealer were to fail at a time when a customer had securities and/or cash in the custody of the SIPC member broker-dealer, in most instances it would be SIPC's obligation to restore those securities and cash to the customer, within statutory limits. That does not mean, however, that the customer would necessarily receive the original value of his or her purchase. Rather, the customer receives the security itself and/or the value of the customer's account as of the day that the liquidation commenced. SIPC does not protect against the decline in value of any security. In a liquidation proceeding under the SIPA, SIPC may advance up to $500,000 per customer (including a $250,000 limit on cash in the account). Please note that this protection only applies to the extent that you entrust cash or securities to a U.S. SIPC member. Foreign broker dealer subsidiaries are not SIPC members. However, to the extent that any assets, including foreign securities, are being held by the U.S. broker dealer, the assets are protected by SIPC. Stocks listed on the LSE are protected by SIPC to the extent they are held with a SIPC member broker dealer, up to the statutory limit of $500,000 per customer. As I mentioned in the comments, in the case of IB, indeed they have a foreign subsidiary, which is why SIPC does not cover it (rather they are insured by Lloyds of London for such cases).\\\"\",\n \"The product itself is a derivative as it derives its value from another stock or commodity. It's similar to a US option, which offers (in the case of a 'call') the right, but not the obligation to buy a stock at a predetermined price before a certain date. But, unlike the US option, instead of buying the stock, the contract is only closed out in cash. I've made the analogy to betting, so I believe it to be a fair comparison. I hope this question is theoretical. You should never buy a financial instrument with no clue how it works.\",\n \"Why do all this work yourself? Pay a modest price to have a professional do this for you. Look at the tickers PUTX, PUTW.\",\n \"\\\"OptionsXpress is good. I have used them for many years to trade stocks mainly (writing Covered calls and trading volatility). You set the account up through OptionsXpress Australia, and then fund the account from one of your accounts in Australia (I just use my Bank of Queensland account). The currency conversion will be something to watch (AUD to USD). The rates are low, but one of the best features is \\\"\\\"virtual trading\\\"\\\". It allows you to give yourself virtual funds to practice. You can then experiment with stop-losses and all other features. Perhaps other platforms have this, but I am yet to see it... anyway, if you want to trade in US stocks you are going to need to switch to USD anyway. ASX never moves enough for my interests. Regards, SB\\\"\",\n \"You will likely need to open an account in another EU country, like a broker operating out of France, Britain or Germany, to get the best options. If you are comfortable using an english language site and interface, I highly recommend Interactive Brokers as they let you trade in many markets simultaneously, have simple currency conversion, and great tools. But, they are geared toward active traders so you might be better with a more retail oriented broker if you are new to trading stocks. There are many options. Here is a list to start with:\",\n \"One broker told me that I have to simply read the ask size and the bid size, seeing what the market makers are offering. This implies that my order would have to match that price exactly, which is unfortunate because options contract spreads can be WIDE. Also, if my planned position size is larger than the best bid/best ask, then I should break up the order, which is also unfortunate because most brokers charge a lot for options orders.\",\n \"API wise there's just one at the retail level: Interactive Brokers (India). Brokerage is high though - 3.5 bps for F&O and 5 bps for cash. I've used Sharekhan (good, can get to 2 bps brokerage, trading client software, no API). Also used multiple other brokerages, and am advising a new one, Zerodha http://www.zerodha.com. API wise the brokers don't provide it easily to retail, though I've worked with direct access APIs at an institutional level.\",\n \"If you have an account with a major bank they may trade an over the counter option with you. Just depends how much work you need to go through and how much you are planning on buying.\",\n \"\\\"Check the transactions costs, \\\"\\\"Desk fees\\\"\\\" and the whole structure, sit down with them and list everything. Then make a spreadsheet and calculate all the stuff they hit you with and figure out how good you have to be in trading to make money, (in terms of accuracy and p/l).\\\"\",\n \"Since I've been doing this since late 03 I have colo machines in Chicago and NYC, and have direct exchange data feeds etc. I mentioned in a prior post though, for someone starting out on algorithmic trading, I'd recommend Nanex for tick data and Interactive Brokers for your brokerage account. IB has a robust and easy to use API. It won't let you do the most low latency stuff bc you can't colo at the exchange and have to clear through their order management systems but if you are looking at opportunities that exist in the market in excess of 50ms it's probably a good place to start. If not, go Lightspeed imo, but that'll cost you on the colo/data a lot more.\",\n \"GIC perhaps? These would be quite similar to Certificates of Deposit where one is agreeing to lock up their money for a term and be paid a percentage for doing so. There are various kinds as some may be linked to market returns in some cases and others are just simple interest.\",\n \"I have a father who is worth a few million I could eventually borrow from for my own trading but IB from the way my friend described it seemed like an easy way to make 500 k with brainless excel sheets etc. After hearing yours and multiple peoples opinions I agree with you.\",\n \"\\\"This type of structured product is called a capital protection product. It's like an insurance product - where you give up some upside for protection against losses in certain cases. From the bank's perspective they take your investment, treat it as an \\\"\\\"interest-free loan\\\"\\\" and buy derivatives (like options) that give them an expected return greater then They make their money: With this product, you are giving up some potential upside in order to protect against losses (other than catastrophic losses if the lower index drops by 50% or more). What's the catch? There's not really a catch. It's a lot like insurance, you might come out ahead (e.g. if the market goes down less than 50%), but you might also give up some upside. The bank will sell enough of these in various flavors to reduce their risk overall (losses in your product will be covered by gains in another). Note that this product won't necessarily sell for $1,000. You might have to pay $1,100 (or $1,005, or whatever the bank can get people to buy them for) for each note whenever it's released. That's where the gain or loss comes into play. If you pay $1,100 but only get $1,000 back because the index didn't go up (or went down) you'd have a net loss of $100. It's subtle, but it is in the prospectus: The estimated value of the notes is only an estimate determined by reference to several factors. The original issue price of the notes will exceed the estimated value of the notes because costs associated with selling, structuring and hedging the notes are included in the original issue price of the notes. These costs include the selling commissions, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under the notes.\\\"\",\n \"\\\"I recommend avoiding trading directly in commodities futures and options. If you're not prepared to learn a lot about how futures markets and trading works, it will be an experience fraught with pitfalls and lost money – and I am speaking from experience. Looking at stock-exchange listed products is a reasonable approach for an individual investor desiring added diversification for their portfolio. Still, exercise caution and know what you're buying. It's easy to access many commodity-based exchange-traded funds (ETFs) on North American stock exchanges. If you already have low-cost access to U.S. markets, consider this option – but be mindful of currency conversion costs, etc. Yet, there is also a European-based company, ETF Securities, headquartered in Jersey, Channel Islands, which offers many exchange-traded funds on European exchanges such as London and Frankfurt. ETF Securities started in 2003 by first offering a gold commodity exchange-traded fund. I also found the following: London Stock Exchange: Frequently Asked Questions about ETCs. The LSE ETC FAQ specifically mentions \\\"\\\"ETF Securities\\\"\\\" by name, and addresses questions such as how/where they are regulated, what happens to investments if \\\"\\\"ETF Securities\\\"\\\" were to go bankrupt, etc. I hope this helps, but please, do your own due diligence.\\\"\",\n \"For self-service type online customers, OptionsXpress gives me far better trading features(like technicals advanced conditions) and tools, ACH money management & scheduling, fullfillment too. $9 stock trades. I don't know if they yet share Schwab's (their new parent company?) commission-free ETFs getting so trendy nowadays.\",\n \"Barclays offers an iPath ETN (not quite an ETF), DJP, which tracks the total return of the Dow Jones-AIG Commodity Index.\",\n \"What financial instruments are there that are profitable when an underlying assets falls? The instrument you are looking for is called an Option, specifically a Put Option. It allows you, within the validity date, to sell ('Put') the respective shares to the option giver, at the predefined Strike Price. For example, let's assume APPL trades currently at 100 $ per share, and you think they will go down a lot. You buy one Put Option for 100 shares (they always come for larger amounts like 100s) for a Strike Price of 90 $, and pay 5 $ for it (it would be cheap if nobody believes they will fall that much). Note the last sentence under 2. - it is rather easy and very common when trading options to make complete losses. You have been warned. Are they available for IPOs? They could be available for IPOs, even before the IPO. However, someone has to put them out (some large bank, typically), which is some effort, and they would only do that if they expect enough interest and volume in the trade. most of the time, there will be no such options on the market. Are they available for foreign stocks?Yes, but again only selectively - only if the stock is well known and interesting enough for a broad audience.\",\n \"Well, kind of XD. I usually just look through Business Week for the ADRs that are on the OTC market. I don't do anything major, but why I love them is that they have a greater reach than just ADRs on the NYSE or NASDAQ. Like for instance, if I wanted to own Thai or European stocks, many of the larger, more reputable firms are listed on the OTC market. Having said that, most other sites don't have earnings reports laid out for you. Business Week does. The only fancy thing I am interested in are options and options on futures, and Bar Chart is good for the latter.\",\n \"I find this site to be really poor for the virtual play portion, especially the options league. After you place a trade, you can't tell what you actually traded. The columns for Exp and type are blank. I have had better luck with OptionsXpress virtual trader. Although they have recently changed their criteria for a non funded accounts and will only keep them active for 90 days. I know the cboe has a paper trading platform but I haven't tried it out yet.\",\n \"Neither site offers index futures or options pricing. Your best best is likely to get the quote from a broker who supports trading those vehicles. Free sites usually limit themselves to stocks and sometimes to options chains -- the exception is Reuters where just about any security for which you have the reuters formatted trading symbol can be quoted.\",\n \"\\\"It is explained on their website. Just look for the word \\\"\\\"routing\\\"\\\" on the Features page: Choose Your Venues Liquidity Pools Group 1: Bats Europe Group 2: Liquidity Partner (LP) Add this group to access dark pool liquidity. Group 3: Exchanges and MTFs Choose to access additional Exchanges and MTFs across Europe.\\\"\",\n \"Call the CBOE, the Chicago Board of Options Exchange I've requested options on several IPOs in the past. You mainly have to convince them that there is a market for them (or they won't be inclined to provide liquidity). The CBOE could talk to the company in question to help convince them, or the CBOE will just tell you when the options will begin trading. Oh yeah, sometimes they'll ask you who you work for, just try to avoid that question, they don't like to talk to individual/retail investors.\",\n \"Disclosure: I am working for an aggregation startup business called Brokerchooser, that is matching the needs of clients to the right online broker. FxPro and similar brokers are rather CFD/FX brokers. If you want to trade stocks you have to find a broker who is registered member of an exchange like LSE. Long list: http://www.londonstockexchange.com/exchange/traders-and-brokers/membership/member-firm-directory/member-firm-directory-search.html From the brokers we have tested at Brokerchooser.com I would suggest:\",\n \"The vast majority of retail Forex brokers are market makers, rather than ECNs. With that said, the one that fits your description mostly closely is Interactive Brokers, is US-based, and well-respected. They have a good amount of exoitcs available. Many ECNs don't carry these because of the mere fact that they make money on transactions, versus market makers who make money on transactions and even more on your losses. So, if the business model is to make money only on transactions, and they are as rarely traded as exotics are, there's no money to be made.\",\n \"The only purpose the ILS market fills is directly lining up capital to pay for potential cats. Unless you're doing directly that you don't really have a way to participate, long or short. The cat bond market really isn't liquid or developed enough for derivatives to exist at this point. Due to the losses this year the cat bond market could shrink significantly too because all the existing catastrophe models have seemed to be inadequate to model these occurrences and investors are losing their shirts. There are questions of the extent to which the alternative capital in the reinsurance market will reload in the wake of 2017.\",\n \"The Greek Piraeus Bank offers such services for trading stocks in Athens Stock Exchange (ASE) and in addition 26 other markets including NASDAQ, NYSE and largest European ones (full list, in Greek). Same goes for Eurobank with a list of 17 international markets and the ability to trade bonds. BETA Securities has also an online platform, but I think it's only for ASE. Some other banks (like National Bank of Greece) do have similar online services, but are usually restricted to ASE.\",\n \"The penny pilot program has a dramatic effect on increasing options liquidity. Bids can be posted at .01 penny increments instead of .05 increments. A lot of money is lost dealing with .05 increments. Issues are added to the penny pilot program based on existing liquidity in both the stock and the options market, but the utility of the penny pilot program outweighs the discretionary liquidity judgement that the CBOE makes to list issues in that program. The reason the CBOE doesn't list all stocks in the penny pilot program is because they believe that their data vendors cannot handle all of the market data. But they have been saying this since 2006 and storage and bandwidth technology has greatly improved since then.\",\n \"From what I see, it is more like .70 per contract, with a $1 minimum (for options that trade over a dime.) IB does not provide any help, at all, so you have to know what you are doing. I use tradeking, which charges about $6 for a contract, but you can call them for help if needed. There looks to be other fees for IB, like when you cancel an order, but that can be offset by other trades. It is one of the reason the Motley Fool Stock Adviser service has recommended IB for an investment.\",\n \"This is exactly how I started, starting a simulation account on the CBOE website just to see what situation was profitable because it was all greek to me. Actually after learning the greeks, I realize that site was worse and eventually read some books and got better tools. The screenshot you have is telling you the strikes, but unfortunately they are showing you the technical name of the contract on the exchanges. For example, just like you type in AAPL to buy shares of AAPL stock, you can type in VIX1616K16E to get that one particular contract, expiration and strike. So lets break it down just by inferring, because this is what I just did with that picture: You know the current price of VIX, $17.06 Calls expiring November 16th, 2016: What is changing? SYMBOL / YEAR / EXPIRATION DAY / STRIKE / OPTION-STYLE (?) So knowing that in the money options will be more expensive, and near the money options will be slightly cheaper, and out the money will be even cheaper, you can see what is going on, per expiration.\",\n \"I think you are right. I hear people all the time with horror stories about futures and trading horror stories in general. I want to learn about this market, but I don't want to go in without some education on the matter. I watched their video on options on futures, but the valuation method needs a bit more explaining to be (beta, gamma, etc.). I get the basic idea of options on futures, but I need to formulate a strategy, and that is where study would come in. I have wanted to play around with a few strategies I had in my head for regular options, and by the time I get the grasp of it, I might be able to trade options on futures. I guess my biggest thing with options on futures is not to be sophisticated, but more so I can have access to new markets. On the topic of options though, I do think there is some strategies that could boost my returns a bit on my existing strategies. I think selling various options (selling call options on weak dividend stocks stuck as bulk shipper or mortgage reits and as of late oil trusts or selling put options on some stronger oil reits or other stronger dividend stocks). The only problem is I don't know if the premium would be enough to make it worth while with the weak dividend stocks. So either way, even if you are only earning a conservative 9% on dividends, if you add in another 4% for premium, you could be making 13% off of one trade, and could repeat the process (assuming the target stayed weak or strong).\",\n \"\\\"I think you should start here https://www.tastytrade.com/tt/ and learn about equity options. Its a lot more accessible for you to get hands on experience. Start with learning about put/call spreads and maybe put on some SPY trades. Options are essentially the same in every market; I would start here. I think this idea you have of not having to use \\\"\\\"margin\\\"\\\" is coming from people running spread strategies that have limited downside/upside\\\"\",\n \"Thanks for your reply. I’m not familiar with the term “Held-For-Trading Security”. My securities are generally held as collateral against my shorts. To clarify, I am just trying to track the “money in” and “money out” entries in my account for the shorts I write. The transaction is relatively straight forward, except there is a ton of information attached! In simple terms, for the ticker CSR and short contract CSRUQ8, the relevant entries look something like this: There are no entries for expiries. I need to ensure that funds are available for future margin calls and assignments. The sale side using covered calls is as involved.\",\n \"\\\"There are a number of choices: I prefer Dilip's response \\\"\\\"Have you tried asking etrade?\\\"\\\" No offense, but questions about how a particular broker handles certain situations are best asked of the broker. Last - one should never enter into any trade (especially options trades) without understanding the process in advance. I hope you are asking this before trading.\\\"\",\n \"Oh it is ok. I was a little confused, because I tried to read up on future options and options as much as possible, and to still get question marks worried me. I mean to my knowledge, options can be traded as is without margin, while futures do need margin. If you are a starving artist, you can see the draw of not having to have margin to keep track of, but be able at the same time to learn about another market to trade in (commodities).\",\n \"\\\"Just as a matter of research, apparently there is a way to find high option volumes such as a site here: https://www.barchart.com/options/volume-leaders/stocks However, that information is going to be heavily skewed by \\\"\\\"underlying security that moved a lot more than expected and probably got a lot of positions filled incidentally today\\\"\\\", but I think it is a good place to start building up a list of securities with a lot of option interest. There is also a tab there for ETFs. This will not tell you exactly that a particular stock always has high option volume, but most of the ones that show up there repeatedly and across multiple strike prices will meet your criteria.\\\"\",\n \"\\\"Thinkorswim's ThinkDesktop platform allows you to replay a previous market day if you wish. You can also use paper money in stocks, options, futures, futures options, forex, etc there. I really can't think of any other platform that allows you to dabble around in so many products fictionally. And honestly, if all that \\\"\\\"make[s] the learning experience a bit more complicated\\\"\\\" and demotivates you, well thats probably a good thing for your sake.\\\"\",\n \"An additional way to get a better grip on the mechanics of what you're looking to do is to use a paper trading tool. For example, thinkorswim gives you $200k in virtual money to trade with- money you don't have to worry about as you might initially make mistakes in trading futures. As mentioned above, each product has it's own pricing and trading options on futures (derivatives of derivatives) is even more confusing, so you'll be well-served by a risk-free learning tool.\",\n \"Why do you care? In any case, you can easily Google the answer... Effective Sunday, April 2, 2017 for trade date Monday, April 3, 2017, and pending all relevant CFTC regulatory review periods, Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) will list Monday Weekly Options on the E-mini Standard and Poor’s Stock Price Index Futures and Standard and Poor’s 500 Stock Price Index Futures contracts (collectively the “Contracts”) for trading on CME Globex and for submission for clearing via CME ClearPort as described in Appendix A below. Appendix B below provides the Exchange fee schedule for the Contracts. source\",\n \"Depending on the currencies you want to trade there are mini-futures available with a contract value of 12.500 (for example EUR/USD) or standard futures with a contract value of 125.000. You will find an overview at the Globex CME website For a broker to trade the futures I would recommend Interactive Brokers. They offer real-time trading at very low commission.\",\n \"The liquidity of options is really not a problem, as the option price is determined by the underlying price, and even if there was very little liquidity in the option itself, market makers are required to make a market at the price determined by the underlying. As long as the underlying has enough liquidity your slippage in trading the options should not be too much of a problem. You can read this ETO Market Making Scheme document for more details.\",\n \"\\\"I don't see EWQ6 in any of your links, so I can't say for certain, but when you buy an option contract on a future, the option will be for a specific future (and strike). So the page you're looking at may be for options on E-mini S&P 500 futures in general, and when you actually purchase one through your broker, you pick a specific expiry (which will be based on the \\\"\\\"prompt\\\"\\\" future, meaning the next future that expires after the option) and strike. UPDATE: Based on this page mirror, the option EWQ7 is an option on the ESU7 (SEP 2017) future. The next 3 monthly options use ESZ7 as the underlier, which confirms that they use the next prompt future as the underlier.\\\"\",\n \"\\\"Aganju has mentioned put options, which are one good possibility. I would suggest considering an even easier strategy: short selling. Technically you are borrowing the stock from someone and selling it. At some point you repurchase the stock to return to the lender (\\\"\\\"covering your short\\\"\\\"). If the stock price has fallen, then when you repurchase it, it will be cheaper and you keep the profit. Short selling sounds complicated but it's actually very easy--your broker takes care of all the details. Just go to your brokerage and click \\\"\\\"sell\\\"\\\" or \\\"\\\"sell short.\\\"\\\" You can use a market or limit order just like you were selling something you own. When it sells, you are done. The money gets credited to your account. At some point (after the price falls) you should repurchase it so you don't have a negative position any more, but your brokerage isn't going to hassle you for this unless you bought a lot and the stock price starts rising. There will be limits on how much you can short, depending on how much money is in your account. Some stocks (distressed and small stocks) may sometimes be hard to short, meaning your broker will charge you a kind of interest and/or may not be able to complete your transaction. You will need a margin account (a type of brokerage account) to either use options or short sell. They are easy to come by, though. Note that for a given amount of starting money in your account, puts can give you a much more dramatic gain if the stock price falls. But they can (and often do) expire worthless, causing you to lose all money you have spent on them. If you want to maximize how much you make, use puts. Otherwise I'd short sell. About IPOs, it depends on what you mean. If the IPO has just completed and you want to bet that the share price will fall, either puts or short selling will work. Before an IPO you can't short sell and I doubt you would be able to buy an option either. Foreign stocks? Depends on whether there is an ADR for them that trades on the domestic market and on the details of your brokerage account. Let me put it this way, if you can buy it, you can short sell it.\\\"\",\n \"The liquidity is quite bad. I have seen open Intrest drop from thousands to zero. Theta and the lack of liquidity are strong reasons not to buy options. Instead, consider selling them. They say that most Option purchases expire worthless. Why is this so? Because hedge funds buy those out-of-the-money puts in case their position goes against them (like insurance). Make money selling insurance. No one makes money buying insurance.\",\n \"You can do some very crafty hedging with the variety of options. For instance, deep out of the money options are affected more by changes of market volatility, knowing this you can get long or short vega very easily, as opposed to necessarily betting on changes in the underlying asset.\",\n \"Saxo Bank offers direct access to Athens Stock Exchange. Interactive Brokers is your next best bet, and as you probably already noticed, they do not have a free platform. They are open to US and non-US citizens. Although they do not currently have direct exposure to individual companies on the Athens Stock Exchange, the various european exchanges they do provide direct market access for will give a lot of exposure. There are a few Greek companies that trade on non-Greek stock exchanges, if you want exposure. There are also Greek ETFs which bundle several companies together or try to replicate Greek company indices.\",\n \"One answer in four days tells you this is a niche, else there should be many replies by now. The bible is McMillan on Options Note - I link to the 1996 edition which starts at 39 cents, the latest revision will set you back $30 used. The word bible says it all, it offers a great course in options, everything you need to know. You don't get a special account for option trading. You just apply to your regular broker, so depending what you wish to do, the amount starts at You sell calls against stock you own in your IRA. You see, selling covered calls always runs the risk of having your stock called away, and you'd have a gain, I'd hope. By doing this within the IRA, you avoid that. Options can be, but are not always, speculative. Covered calls just change the shape of your return curve. i.e. you lower your cost by the option premium, but create a fixed maximum gain. I've created covered calls on the purchase of a stock or after holding a while depending on the stock. Here's the one I have now: MU 1000 shares bought at $8700, sold the $7.50 call (jan12) for $3000. Now, this means my cost is $5700, but I have to let it go for $7500, a 32% return if called. (This was bought in mid 2010, BTW.) On the flip side, a drop of up to 35% over the time will still keep me at break even. The call seemed overpriced when I sold it. Stock is still at $7.20, so I'm close to maximum gain. This whole deal was less risky than just owning one risky stock. I just wrote a post on this trade Micron Covered Call, using today's numbers for those actually looking to understand this as new position. (The article was updated after the expiration. The trade resulted in a 42% profit after 491 days of holding the position, with the stock called away.) On the other hand, buying calls, lots of them, during the tech bubble was the best and worst thing I did. One set of trades' value increased by a factor of 50, and in a few weeks blew up on me, ended at 'only' triple. I left the bubble much better off than I went in, but the peak was beautiful, I'd give my little toe to have stayed right there. From 99Q2 to 00Q2, net worth was up by 3X our gross salary. Half of that (i.e. 1.5X) was gone after the crash. For many, they left the bubble far far worse than before it started. I purposely set things up so no more than a certain amount was at risk at any given time, knowing a burst would come, just not when. If nothing else, it was a learning experience. You sell calls against stock you own in your IRA. You see, selling covered calls always runs the risk of having your stock called away, and you'd have a gain, I'd hope. By doing this within the IRA, you avoid that. Options can be, but are not always, speculative. Covered calls just change the shape of your return curve. i.e. you lower your cost by the option premium, but create a fixed maximum gain. I've created covered calls on the purchase of a stock or after holding a while depending on the stock. Here's the one I have now: MU 1000 shares bought at $8700, sold the $7.50 call (jan12) for $3000. Now, this means my cost is $5700, but I have to let it go for $7500, a 32% return if called. (This was bought in mid 2010, BTW.) On the flip side, a drop of up to 35% over the time will still keep me at break even. The call seemed overpriced when I sold it. Stock is still at $7.20, so I'm close to maximum gain. This whole deal was less risky than just owning one risky stock. I just wrote a post on this trade Micron Covered Call, using today's numbers for those actually looking to understand this as new position. (The article was updated after the expiration. The trade resulted in a 42% profit after 491 days of holding the position, with the stock called away.) On the other hand, buying calls, lots of them, during the tech bubble was the best and worst thing I did. One set of trades' value increased by a factor of 50, and in a few weeks blew up on me, ended at 'only' triple. I left the bubble much better off than I went in, but the peak was beautiful, I'd give my little toe to have stayed right there. From 99Q2 to 00Q2, net worth was up by 3X our gross salary. Half of that (i.e. 1.5X) was gone after the crash. For many, they left the bubble far far worse than before it started. I purposely set things up so no more than a certain amount was at risk at any given time, knowing a burst would come, just not when. If nothing else, it was a learning experience.\",\n \"OptionsXpress includes India in the list of countries where is possible to open an international account to invest in the US Stock Market. They just merged with Charles Schwab and they have a nice online trading platform. Stocks and ETFs are little bit pricey.. Get in touch with them to get more information.\",\n \"They're exchange traded debt, basically, not funds. E.g. from the NYSE: An exchange-traded note (ETN) is a senior unsecured debt obligation designed to track the total return of an underlying market index or other benchmark, minus investor fees. Whereas an ETF, in some way or another, is an equity product - which doesn't mean that they can only expose you to equity, but that they themselves are a company that you buy shares in. FCOR for example is a bond ETF, basically a company whose sole purpose is to own a basket of bonds. Contrast that to DTYS, a bear Treasury ETN, which is described as The ETNs are unsecured debt obligations of the issuer, Barclays Bank PLC, and are not, either directly or indirectly, an obligation of or guaranteed by any third party. Also from Barclays site: Because the iPath ETNs are debt securities, they do not have any voting rights. FCOR on the other hand is some sort of company owned/managed by a Fidelity trust, though my EDGAR skills are rusty. AGREEMENT made this 18th day of September, 2014, by and between Fidelity Merrimack Street Trust, a Massachusetts business trust which may issue one or more series of shares of beneficial interest (hereinafter called the Trust), on behalf of Fidelity Corporate Bond ETF (hereinafter called the Fund), and Fidelity Investments Money Management, Inc., a New Hampshire corporation (hereinafter called the Adviser) as set forth in its entirety below.\",\n \"I have had accounts at both IB and Questrade. Whatever you've heard about Questrade, sadly much of it is true pertaining to 2007-2009. I have not had any issues with their service, and making the few trades I do with the QuestraderWEB service has been flawless. In the time that I've had the account, their service has constantly been improving (statements are easier to read, customer service is more responsive). You should read what FrugalTrader and Canadian Capitalist have to say along with the combined 1000+ comments before deciding. Interactive Brokers is a whole different world. Those guys are the definition of real-time. You can get daily and weekly statements, along with the typical monthly statements. Buying power, margin, etc, is all updated in real-time and viewable in their TWS software. Trading fees are definitely lower than Questrade unless you're routinely trading 800-1000+ shares. Most of my trades cost $1. Options have a lower limit before Questrade makes more sense. And nothing beats IB for forex. Ultimately it really depends on what you will be doing. Note that IB charges a minimum monthly fee of $10 ($3 if you're young and foolish). If you don't hit that with commissions, the balance is taken from your account. Also, all other fees are passed on to you (e.g. data, order cancellation). IB also doesn't have any registered accounts such as TFSA or RRSP, and doesn't plan to. If you'll be doing a bunch of hefty trading, IB offers a trading platform free of charge, but charges for everything else. Questrade instead has a monthly fee for its QuestraderPRO and QuestraderELITE services, but that includes data and flat rate commissions. If you're just looking for a place to invest cheaply without extra fees and plan on making a few trades a year, Questrade might be the right choice.\",\n \"If you get selected for exercise, your broker will liquidate the whole position for you most likely Talk to your broker.\",\n \"Does anyone know if there is a way to set up a practice account? I only have index ETFs currently, and would like to play around and get a feel for other stocks/options before putting real money into it.\",\n \"From my own personal experience, you cannot trade spreads in RRSP or TFSA accounts in Canada. You can only buy options (buy a call or buy a put) or you can sell calls against your stock (covered call selling). You will not be able to sell naked options, or trade any type of spread or combo (calendars, condors, etc). I am not sure why these are the rules, but they are at least where I trade those accounts.\",\n \"When I log in to Schwab to look at these options it tells me there's only Adjusted Options available on these terms: Adjusted Options: Multiplier: 100; Deliverable: 15 PTIE; Cash: ---- It does confirm your July Call quote price of $0.05 because the contract, though priced for 100 shares, will only deliver 15 shares. Separately, looking at the company website for news there was a 7 for 1 Reverse Split announced on May 8, which is the culprit for this option adjustment and the seemingly nonsensical call price.\",\n \"There are many stategies with options that you have listed. The one I use frequently is buy in the money calls and sell at the money staddles. Do this ONLY on stocks you do not mind owning because that is the worse thing that can happen and if you like the company you stand less of a chance of being scared out of the trade. It works well with high quality resonable dividend paying stocks. Cat, GE, Mrk, PM etc. Good luck\",\n \"Shorts are difficult because you have to find someone to lend the stock to you. In contrast, put options don't require that. They also have some nice properties like you're only out the contract price. The options chain for BSFT will give you an idea of where the market is. Keep in mind that BSFT only IPO'd last year and announced blowout earnings recently. Make sure the P:E you're looking at is using recent earnings reports!\",\n \"IB will get you in the ballpark but Lightspeed obviously for the more low latency stuff. You can colo w Lightspeed at Nasdaq and can get direct market data feeds etc. that's not something I'd recco for someone starting out... Expensive for most budgets. Once you get going though, worth it. IB will let you work with opportunities on the 50-100ms level. I don't think telling these guys to go with NewEdge from day one and colo globally would really help anyone get started algo trading. Wouldn't have the capital or scale. Trying to give actual useful advice to them.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["I think an IOPT is a Dutch warrant. Someone else might understand what this is.","\"Interactive Brokers offers global securities trading. Notice that the security types are: cash, stock (STK), futures (FUT), options (OPT), futures options (FOP), warrants (WAR), bonds, contracts for differences (CFD), or Dutch warrants (IOPT) There is a distinction between options (OPT), warrants (WAR), options on futures (FOP) and finally, Dutch Warrants (IOPT). IOPT is intuitively similar to an \"\"index option\"\". (For index option valuation equations, iopt=1 for a call, and iopt= -1 for a put. I don't know if Interactive Brokers uses that convention). What is the difference between a \"\"Dutch Warrant\"\" and an option or warrant? Dutch warrants aren't analogous to Dutch auctions e.g. in the U.S.Treasury bond market. For North America, Interactive Brokers only lists commissions for traditional warrants and options, that is, warrants and options that have a single stock as the underlying security. For Asia and Europe, Interactive Brokers lists both the \"\"regular\"\" options (and warrants) as well as \"\"equity index options\"\", see commission schedule. Dutch warrants are actually more like options than warrants, and that may be why Interactive Brokers refers to them as IOPTS (index options). Here's some background from a research article about Dutch warrants (which was NOT easy to find): In the Netherlands, ING Bank introduced call and put warrants on the FT-SE 100, the CAC 40 and the German DAX indexes. These are some differences between [Dutch] index warrants and exchange traded index options: That last point is the most important, as it makes the pricing and valuation less subject to arbitrage. Last part of the question: Where do you find Structured Products on Interactive Brokers website? Look on the Products page (rather than the Commissions page, which does't mention Structured Products at all). There is a Structured Products tab with details.\""],"string":"[\n \"I think an IOPT is a Dutch warrant. Someone else might understand what this is.\",\n \"\\\"Interactive Brokers offers global securities trading. Notice that the security types are: cash, stock (STK), futures (FUT), options (OPT), futures options (FOP), warrants (WAR), bonds, contracts for differences (CFD), or Dutch warrants (IOPT) There is a distinction between options (OPT), warrants (WAR), options on futures (FOP) and finally, Dutch Warrants (IOPT). IOPT is intuitively similar to an \\\"\\\"index option\\\"\\\". (For index option valuation equations, iopt=1 for a call, and iopt= -1 for a put. I don't know if Interactive Brokers uses that convention). What is the difference between a \\\"\\\"Dutch Warrant\\\"\\\" and an option or warrant? Dutch warrants aren't analogous to Dutch auctions e.g. in the U.S.Treasury bond market. For North America, Interactive Brokers only lists commissions for traditional warrants and options, that is, warrants and options that have a single stock as the underlying security. For Asia and Europe, Interactive Brokers lists both the \\\"\\\"regular\\\"\\\" options (and warrants) as well as \\\"\\\"equity index options\\\"\\\", see commission schedule. Dutch warrants are actually more like options than warrants, and that may be why Interactive Brokers refers to them as IOPTS (index options). Here's some background from a research article about Dutch warrants (which was NOT easy to find): In the Netherlands, ING Bank introduced call and put warrants on the FT-SE 100, the CAC 40 and the German DAX indexes. These are some differences between [Dutch] index warrants and exchange traded index options: That last point is the most important, as it makes the pricing and valuation less subject to arbitrage. Last part of the question: Where do you find Structured Products on Interactive Brokers website? Look on the Products page (rather than the Commissions page, which does't mention Structured Products at all). There is a Structured Products tab with details.\\\"\"\n]","isConversational":false}}},{"rowIdx":92,"cells":{"_id":{"kind":"string","value":"10414"},"query":{"kind":"string","value":"What is considered high or low when talking about volume?"},"gt_ids":{"kind":"list like","value":["79807","303325"],"string":"[\n \"79807\",\n \"303325\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1],"string":"[\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["79807","303325","10017","468025","91363","198583","541730","418124","503025","464810","173836","348886","293484","102075","407759","569627","351011","211444","175831","230343","115134","302372","372153","169954","36038","374151","94591","93814","522372","392403","34680","236594","320155","104652","212685","261802","506460","85484","508144","384583","177926","112701","387521","477162","471611","42347","280676","295344","546932","565539","24537","78816","5018","73846","78448","427747","182772","378342","230456","107227","117764","208331","316296","270573","317148","472500","121745","15504","39927","582479","60284","384850","524940","112946","190619","171709","533075","434263","28590","251813","133760","196173","580108","428117","389329","229573","121418","197856","415700","399885","208907","460230","390524","293027","536689","314698","157021","295465","294867","10710"],"string":"[\n \"79807\",\n \"303325\",\n \"10017\",\n \"468025\",\n \"91363\",\n \"198583\",\n \"541730\",\n \"418124\",\n \"503025\",\n \"464810\",\n \"173836\",\n \"348886\",\n \"293484\",\n \"102075\",\n \"407759\",\n \"569627\",\n \"351011\",\n \"211444\",\n \"175831\",\n \"230343\",\n \"115134\",\n \"302372\",\n \"372153\",\n \"169954\",\n \"36038\",\n \"374151\",\n \"94591\",\n \"93814\",\n \"522372\",\n \"392403\",\n \"34680\",\n \"236594\",\n \"320155\",\n \"104652\",\n \"212685\",\n \"261802\",\n \"506460\",\n \"85484\",\n \"508144\",\n \"384583\",\n \"177926\",\n \"112701\",\n \"387521\",\n \"477162\",\n \"471611\",\n \"42347\",\n \"280676\",\n \"295344\",\n \"546932\",\n \"565539\",\n \"24537\",\n \"78816\",\n \"5018\",\n \"73846\",\n \"78448\",\n \"427747\",\n \"182772\",\n \"378342\",\n \"230456\",\n \"107227\",\n \"117764\",\n \"208331\",\n \"316296\",\n \"270573\",\n \"317148\",\n \"472500\",\n \"121745\",\n \"15504\",\n \"39927\",\n \"582479\",\n \"60284\",\n \"384850\",\n \"524940\",\n \"112946\",\n \"190619\",\n \"171709\",\n \"533075\",\n \"434263\",\n \"28590\",\n \"251813\",\n \"133760\",\n \"196173\",\n \"580108\",\n \"428117\",\n \"389329\",\n \"229573\",\n \"121418\",\n \"197856\",\n \"415700\",\n \"399885\",\n \"208907\",\n \"460230\",\n \"390524\",\n \"293027\",\n \"536689\",\n \"314698\",\n \"157021\",\n \"295465\",\n \"294867\",\n \"10710\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["The daily Volume is usually compared to the average daily volume over the past 50 days for a stock. High volume is usually considered to be 2 or more times the average daily volume over the last 50 days for that stock, however some traders might set the crireia to be 3x or 4x the ADV for confirmation of a particular pattern or event. The volume is compared to the ADV of the stock itself, as comparing it to the volume of other stocks would be like comparing apples with oranges, as difference companies would have different number of total stocks available, different levels of liquidity and different levels of volatility, which can all contribute to the volumes traded each day.","\"Volume is really only valuable when compared to some other volume, either from a historical value, or from some other stock. The article you linked to doesn't provide specific numbers for you to evaluate whether volume is high or low. Many people simply look at the charts and use a gut feel for whether a day's volume is \"\"high\"\" or \"\"low\"\" in their estimation. Typically, if a day's volume is not significantly taller than the usual volume, you wouldn't call it high. The same goes for low volume. If you want a more quantitative approach, a simple approach would be to use the normal distribution statistics: Calculate the mean volume and the standard deviation. Anything outside of 1.5 to 2.0 standard deviations (either high or low) could be significant in your analysis. You'll need to pick your own numbers (1.5 or 2.0 are just numbers I pulled out of thin air.) It's hard to read anything specific into volume, since for every seller, there's a buyer, and each has their reasons for doing so. The article you link to has some good examples of using volume as a basis for strengthening conclusions drawn using other factors.\"","You should not look at volume in isolation but look at it together with other indicators and/or the release of news (good or bad). When there is lower than average volume this could be an indication that the stock is in a bit of a holding pattern, possibly waiting for some company or economic news to come out (especially when accompanied by small changes in price). It could also mean that trading in a certain direction is drying up and the trend is about to end (this could be accompanied with a large move in price). When there is higher than average volume (2 to 3 times more or higher), this could be due to the release of company results, company or economic news, or the start or end of a trend (especially if accompanied by a gap). A large increase in volume accompanied by a large fall in price (usually a gap down) may also be an indication the stock has gone ex-dividend. There could be a range of reasons for variations in volume to the average volume. That is why you need to look at other indicators, company reporting and news, and economic news in combination with the volume changes to get a grasp of what is really happening.","Opening - is the price at which the first trade gets executed at the start of the trading day (or trading period). High - is the highest price the stock is traded at during the day (or trading period). Low - is the lowest price the stock is traded at during the day (or trading period). Closing - is the price at which the last trade gets executed at the end of the trading day (or trading period). Volume - is the amount of shares that get traded during the trading day (or trading period). For example, if you bought 1000 shares during the day and another 9 people also bought 1000 shares each, then the trading volume for the day would be 10 x 1000 = 10,000.","As said previously, most of the time volume does not affect stock prices, except with penny stocks. These stocks typically have a small volume in the 3 or 4 figure range and because of this they typically experience very sharp rises and drops in stock prices, contrasting normal stocks that go up and down constantly every minute. Volume is not one thing you should be looking at when analyzing a stock in most cases, since it is simply the number of people of trades made in a day. That has no effect on the value of the company, whereas looking at P/E ratios, dividend growth, etc all can be analyzed to see if a company is growing and is doing well in its field. If I buy an iPhone, it doesn't matter if 100 other people or 100,000 other people have bought it as well, since they won't really affect my experience with the product. Whereas the type of iPhone I buy will.","There is no direct relationship between volume and stock price. High volume indicates how much stock is changing hands. That can be because people are enthusiastically buying OR enthusiastically selling... and their reasons for doing so may not agree with your own sense of the future value of the stock. Higher volume may mean that the price is more likely to change during the day, but it can be in either direction -- or in no direction at all if there isn't a general agreement on how to react to some piece of news. It's a possibly interesting datum, but it means nothing in isolation.","Consider the case where a stock has low volume. If the stock normally has a few hundred shares trade each minute and you want to buy 10,000 shares then chances are you'll move the market by driving up the price to find enough sellers so that you can get all those shares. Similarly, if you sell way more than the typical volume, this can be an issue.","I hovered over the label for trading volume and the following message popped up: Volume / average volume Volume is the number of shares traded on the latest trading day. The average volume is measured over 30 days.","You can't tell for sure. If there was such a technique then everyone would use it and the price would instantly change to reflect the future price value. However, trade volume does say something. If you have a lemonade stand and offer a large glass of ice cold lemonade for 1c on a hot summer day I'm pretty sure you'll have high trading volume. If you offer it for $5000 the trading volume is going to be around zero. Since the supply of lemonade is presumably limited at some point dropping the price further isn't going to increase the number of transactions. Trade volumes reflect to some degree the difference of valuations between buyers and sellers and the supply and demand. It's another piece of information that you can try looking at and interpreting. If you can be more successful at this than the majority of others on the market (not very likely) you may get a small edge. I'm willing to bet that high frequency trading algorithms factor volume into their trading decisions among multiple other factors.","In general, liquidity is a good thing, because it means it is easy for you to buy or sell a stock. Since high liquidity stocks have a lot of trading, the bid-ask spreads tend to be pretty low. That means you can go into the market and trade easily and cheaply at just about any time. For low liquidity stocks, the bid-ask spreads can get pretty high, so it can make it hard or expensive to get into or out of your trades. On the flip side, everyone pays attention to high liquidity stocks, so it's harder to get an edge in your trading. For a company like Microsoft there are 30-50 full time analysts that cover them, thousands of professional traders and millions of investors in general all reading the same new articles and looking through the same financials as you. But in low liquidity stocks, there probably aren't any analysts, a few professional traders and maybe a few thousand total investors, so it can be easier to find a good buy (or sell). In general, high liquidity doesn't mean that everyone is selling or everyone is buy, it just means everyone is trading.","\"Volume is measured in the number of shares traded in a given day, week, month, etc. This means that it's not necessarily a directly-comparable measure between stocks, as there's a large difference between 1 million shares traded of a $1 stock ($1 million total) and 1 million shares traded of a $1000 stock ($1 billion total). Volume as a number on its own is lacking in context; it often makes more sense to look at it as an overall dollar amount (as in the parentheses above) or as a fraction of the total number of shares in the marketplace. When you see a price quoted for a particular ticker symbol, whether online, or on TV, or elsewhere, that price is typically the price of the last trade that executed for that security. A good proxy for the current fair price of an asset is what someone else paid for it in the recent past (as long as it wasn't too long ago!). So, when you see a quote labeled \"\"15.5K @ $60.00\"\", that means that the last trade on that security, which the service is using to quote the security's price, was for 15500 shares at a price of $60 per share. Your guess is correct. The term \"\"institutional investor\"\" often is meant to include many types of institutions that would control large sums of money. This includes large banks, insurance companies, pooled retirement funds, hedge funds, and so on.\"","Trading volumes are higher at the end of the day as many traders close their open positions. In the morning however, traders incorporate various factors like performance of worldwide markets overnight, any corporate or government announcements, global macro events, etc.","The first statement is talking about a sudden sharp increase in volume (double or more of average volume) with a sudden increase in price. In other words, there has been a last rush to buy the stock exhausting all the current bulls (buyers), so the bears (sellers) take over, at least temporarily. Whilst the second statement is talking about a gradual increase in volume as the price up trends (thus the use of a volume oscillator). In other words (in an uptrend), the bulls (buyers) are gradually increasing in numbers sending the price higher, and new buyers keep entering the market. (The opposite is the case for a down-trend).","Not directly an answer to your question, but somewhat related: There are derivatives (whose English name I sadly don't know) that allow to profit from breaking through an upper or alternatively a lower barrier. If the trade range does not hit either barrier you lose. This kind of derivative is useful if you expect a strong movement in either direction, which typically occurs at high volume.","You have just answered your question in the last sentence of your question: More volume just means more people are interested in the stock...i.e supply and demand are matched well. If the stock is illiquid there is more chance of the spread and slippage being larger. Even if the spread is small to start with, once a trade has been transacted, if no new buyers and sellers enter the market near the last transacted price, then you could get a large spread occurring between the bid and ask prices. Here is an example, MDG has a 50 day moving average volume of only 1200 share traded per day (obviously it does not trade every day). As you can see there is already an 86% spread from the bid price. If a new bid price is entered to match and take out the offer price at $0.039, then this spread would instantly increase to 614% from the bid price.","Volumes are used to predict momentum of movement, not the direction of it. Large trading volumes generally tend to create a price breakout in either positive or negative direction. Especially in relatively illiquid stocks (like small caps), sudden volume surges can create sharp price fluctuations.","While volume per trade is higher at the open and to a lesser extent at the close, the overall volume is actually lower, on average. Bid ask spreads are widest at the open and to a lesser extent at the close. Generally, bid ask spreads are inversely proportional to overall volumes. Why this is the case hasn't been sufficiently clearly answered by academia yet, but some theories are that","That is called a 'volume chart'. There are many interactive charts available for the purpose. Here is clear example. (just for demonstration but this is for India only) 1) Yahoo Finance 2) Google Finance 3) And many more Usually, the stock volume density is presented together (below it) with normal price vs time chart. Note: There is a friendly site about topics like this. Quant.stackexchange.com. Think of checking it out.","yes you are right as per my understanding while doing trade you must consider fol (specially for starters like me) The volume of the stock you are trading in should be high enough to keep you secure for quick in and out Whenever the bid volume is more than the ask volume the prices will move up and vice versa. to give an example if a stock is at 100 points and there are fol bids: The transaction will occur when either the bidder agrees to pay the ask price (case 1. he pays 101 . his bid offer will disappear and the next best ask will be 102. and the current price will be 101 which was the last transaction.) or when the person giving ask price agrees to deal at best bid which was 99 in which case the share will go down.","\"High liquidity doesn't necessarily mean that \"\"everybody is getting rid of the stock\"\", since somebody is obviously buying whatever stock that is being sold. Also, as mentioned, low liquidity may mean that you would have trouble selling the stock in the future.\"","How I understand it is: supply/demand affect price of stock negatively/positively, respectively. Correct. Volume is the amount of buying/selling activity in these stocks (more volume = more fluctuation, right?). Sort of. Higher volume means higher liquidity. That is, a stock that is traded more is easier to trade. It doesn't necessarily mean more fluctuation and in the real world, it often means that these are well-understood stocks with a high amount of analyst coverage. This tends towards these stocks not being as volatile as smaller stocks with less liquidity. Company revenue (and profit) will help an investor predict company growth. That is one factor in a stock price. There are certain stocks that you would buy without them making a profit because their future revenue looks potentially explosive. However, these stocks are very risky and are bubble-prone. If you're starting out in the share market, it's generally a good idea to invest in index funds (I am not a broker, my advice should not be taken as financial advice). These funds aggregate risk by holding a lot of different companies. Also, statistics have shown that over time, buying and holding index funds long term tends to dramatically outperform other investment strategies, particularly for people with low amounts of capital.","\"Stocks with a low average daily trading volume (\"\"thinly traded stocks\"\") will also tend to have higher spreads. So you'll tend to pay more when you buy and get less when you sell.\"","Yep, you have it pretty much right. The volume is the number of shares traded that day. The ticker is giving you the number of shares bought at that price in a given transaction, the arrow meaning whether the stock is up or down on the day at that price. Institutional can also refer to pensions, mutuals funds, corporates; generally any shareholder that isn't an individual person.","\"Insofar as a 52 week high indicates a peak, yes. However, the truth is that \"\"buying low and selling high\"\" means \"\"Act a Fool!\"\" You see, when you buy low, you are perceived to be buying total garbage - throwing your money away and conversely when selling high you are perceived to be a total idiot - selling a winner. That's how people will see you when you are in fact buying low and/or selling high, right? It's those people that (mis)value the asset, right? An asset is worth what the people will pay for it, right? ...And don't forget that holding a loser is MUCH easier than holding a winner. Good luck!\"","Really not sure with this one and I don't want to cheat and look up an answer. I'd say you could find the high/low points of the stock over the last year or two and see how large the spread is between those values and the average price of the stock over the same time period.","hello pointbox, i enjoy getting in front of someone that does know what they are talking about, so i have a question for you... could you give to us a textbook example of what a high frequency trade looks like?","P/E = price per earnings. low P/E (P/E < 4) means stock is undervalued.","The shortest-hand yet most reliable metric is daily volume / total shares outstanding. A security with a high turnover rate will be more efficient than a lower one, ceteris paribus. The practical impacts are tighter spread and lower average percentage change between trades. A security with a spread of 0% and an average change of 0% between trades is perfectly efficient.","You can use trade volume for divergence and convergence studies","High frequency trades are intra day. The would buy a stock for 100 and sell for 100.10 multiple times. So If you start with 100 in your broker account, you buy something [it takes 2-3 days to settle], you sell for 100.10 [it takes 2-3 days to settle]. You again buy something for 100. It is the net value of both buys and sells that you need to look at. Trading on Margin Accounts. Most brokers offer Margin Accounts. The exact leverage ratios varies. What this means is that if you start with 10 [or 15 or 25] in your broker you can buy stock of 100. Of course legally you wont own the stock unless you pay the broker balance, etc.","Buying pressure means there are more interested buyers than there are ready sellers putting upward pressure on prices. That might include institutional buyers who are slowly executing buy orders because they still want the best prices possible without clearing out the market. Buying pressure doesn't have to be related to volume at all. If everyone who owns shares think they are going to be worth far more than recent market prices, they will not offer them for sale. That means there is more demand to buy than there is a supply of shares to be bought. That condition can exist regardless of trading volume.","\"The tricky part is that it's NAV is quite high these days, almost close to its 52 week high You will find, if you look historically, most markets are often close to their 52 week or even historical highs. This is an important consideration. \"\"The markets are at their all-time high!\"\" has been true a large percentage of the past decades. Everyone wants to buy low, sell high. But the reality is, buying low often will be \"\"buying at close to the highest point\"\" as no one has a crystal ball.\"","What is the average daily volume traded? It looks like this stock may have a liquidity problem. If that is the case I would not buy this stock at all as you may have the same problem when you try to sell it. Generally try to stay away from illiquid stocks, if your order size is more than 10% of the average daily volume traded, then don't buy it. I usually stay away from stocks with an average daily volume of less than 100,000.","This is called the Ask-Bid Spread. The difference varies based on the liquidly of the asset. The more liquid or the higher the volume of trades for the asset then the smaller the spread is. The spread goes to the broker to pay for some of the cost of the trade. My guess is that when there is a higher volume of shares being traded, brokers need to take less of a fee per share out of the transaction to cover their costs. This makes the spread is smaller. This is essentially the difference in price between the highest price that a buyer is willing to pay for an asset and the lowest price for which a seller is willing to sell it. The seller will get the bid price and the buyer will pay the ask and the broker keeps the spread. From http://www.investopedia.com/terms/b/bid-askspread.asp","At any point of time, buyer wants to purchase a stock at lesser price and seller wants to sell the stock at a higher price. Let's consider this scenario Company XYZ is trading at 100$, as stated above buyer wants to purchase at lower price and seller at higher price, this information will be available in Market depth, let's consider there are 5 buyers and 5 sellers, below are the details of their orders Buyers List Sellers List Highest order in buyers list will contain the bid price and bid quantity, Lowest order in Sellers list will contain the offer price and offer quantity. Now, if I want to buy 50 Stocks of company XYZ, need to place an order first, it can be either limit or Market. Limit Order : In this order, I will mention the price(buy price) at which I wish to buy, if there is any seller selling the stock less than or equal to price I have mentioned, then the order will be executed else it will be added to buyers list Market Order : In this order, I will not mention the price, if I wish to purchase 50 Stocks, then it will find the lowest offer price and buy stocks, in our case it will be 101. if I wish to purchase 200 Stocks, then it will find the lowest offer price and buy stocks, in our case it will be 2 transactions, since entire request cannot be accommodated in single order Usually the volume(Ask Volume and Offer Volume) being displayed are all Limit orders and not Market orders, Market orders are executed immediately. This is just an example, However several transactions are executed within a second, hence we will get to know the exact value only after the order is completed(executed)","Open, high, low, close, volume. The hint is that volume on new years day is 0. DC's comment is actually a better answer than mine - when given any data set, you should really know the meaning of each cell/number.","First, I want to point out that your question contains an assumption. Does anyone make significant money trading low volume stocks? I'm not sure this is the case - I've never heard of a hedge fund trading in the pink sheets, for example. Second, if your assumption is valid, here are a few ideas how it might work: Accumulate slowly, exit slowly. This won't work for short-term swings, but if you feel like a low-volume stock will be a longer-term winner, you can accumulate a sizable portion in small enough chunks not to swing the price (and then slowly unwind your position when the price has increased sufficiently). Create additional buyers/sellers. Your frustration may be one of the reasons low-volume stock is so full of scammers pumping and dumping (read any investing message board to see examples of this). If you can scare holders of the stock into selling, you can buy significant portions without driving the stock price up. Similarly, if you can convince people to buy the stock, you can unload without destroying the price. This is (of course) morally and legally dubious, so I would not recommend this practice.","\"In the US, stocks are listed on one exchange but can be traded on multiple venues. You need to confirm exactly what your data is showing: a) trades on the primary-listed exchange; or b) trades made at any venue. Also, the trade condition codes are important. Only certain trade condition codes contribute towards the day's open/high/low/close and some others only contribute towards the volume data. The Consolidated Tape Association is very clear on which trades should contribute towards each value - but some vendors have their own interpretation (or just simply an erroneous interpretation of the specifications). It may surprise you to find that the majority of trading volume for many stocks is not on their primary-listed exchange. For example, on 2 Mar 2015, NASDAQ:AAPL traded a total volume across all venues was 48096663 shares but trading on NASDAQ itself was 12050277 shares. Trades can be cancelled. Some data vendors do not modify their data to reflect these busted trades. Some data vendors also \"\"snapshot\"\" their feed at a particular point in time of the data. Some exchanges can provide data (mainly corrections) 4-5 hours after the closing bell. By snapshotting the data too early and throwing away any subsequent data is a typical cause of data discrepancies. Some data vendors also round prices/volumes - but stocks don't just trade to two decimal places. So you may well be comparing two different sets of trades (with their own specific inclusion rules) against the same stock. You need to confirm with your data sources exactly how they do things. Disclosure: Premium Data is an end-of-day daily data vendor.\"","Theoretically, it's a question of rate of return. If a desired or acceptable rate of return for market makers' capital is X, and X is determined by the product of margin & turnover then higher turnover means lower margin for a constant X. Margin, in the case of trading, is the bid/ask spread, and turnover, in the case of trading, is volume. Empirically, it has been noted in the last markets still offering such wide-varying evidence, equity options: http://faculty.baruch.cuny.edu/lwu/890/mayhew_jf2002.pdf","No. The information you are describing is technical data about a stock's market price and trading volume, only. There is nothing implied in that data about a company's financial fundamentals (earnings/profitability, outstanding shares, market capitalization, dividends, balance sheet assets and liabilities, etc.) All you can infer is positive or negative momentum in the trading of the stock. If you want to understand if a company is performing well, then you need fundamental data about the company such as you would get from a company's annual and quarterly reports.","In the stock market many participants enter orders that are not necessarily set at the current market price of the stock (i.e. they are not market orders, they are limit orders). They can be lower than the market price (if they want to buy) or they can be higher than the market price (if they want to sell). The set of orders at each point of time for a security is called the order book. The lowest selling price of the order book is the offer or ask, the higher buying price is the bid. The more liquid is a security, the more orders will be in the order book, and the narrower will be the bid-ask spread. The depth of the order book is the number of units that the order book can absorb in any direction (buy or sell). As an example: imagine I want to buy 100 units at the lowest offer, but the size of the lowest offer is only 50 units, and there is not any further order, that means the stock has little depth.","Volume and prices are affected together by how folks feel about the stock; there is no direct relationship between them. There are no simple analysis techniques that work. Some would argue strongly that there are few complex analysis techniques that work either, and that for anyone but full-time professionals. And there isn't clear evidence that the full-time professionals do sufficiently better than index funds to justify their fees. For most folks, the best bet is to diversify, using low-overhead index funds, and simply ride with the market rather than trying to beat it.","As long as the tax rate is below 100%, there is still money to make. You pay taxes on your gain, not on your trading volume. Taxed income is still income - many people seem to get that wrong.","The GuruFocus Link is just reporting the high and low price of the quarter. Price Range (Average) – The estimated trade prices. The average price is calculated from the time weighted average during the period. If no price range is shown, the trade prices are estimated trade prices, which are more accurate estimates. AAPL: $420.05 - $549.03 ($467.26) The numbers for the high and low match what I found for AAPL on Yahoo Finance. Keep in mind their definition uses estimate 3 times.","Beta is an indication of a Stock's risk with respect to the market. For instance if a stock had a beta of 1 it means it is in tandem with the S&P 500. If it is more than 1, the stock is volatile. If it is less than 1, it implies market movement doesn't affect this stock much. Tech stocks and small cap stocks have high beta, utilities have low beta. (In general, not always). Hope this helps - I've tried to explain it in very simple terms!","Something to consider is that in the case of the company you chose, on the OTC market, that stock is thinly traded and with such low volume, it can be easy for it to fluctuate greatly to have trades occur. This is why volume can matter for some people when it comes to buying shares. Some OTC stocks may have really low volume and thus may have bigger swings than other stocks that have higher volume.","\"6% isn't \"\"too high\"\" in terms of market rates at the moment, however it's a very subjective question whether it's too high for you. The real question to determine is if paying 6%, can you make more than 6% return (to cover the costs plus your profit)? As for a rule of thumb, there's none I know of, however your best bet is to take the time to model it in Excel (not difficult). It's different for each portfolio or investment. Something with a high standard deviation of returns is already high risk, adding margin to it only makes it worse. So, long story short is that, \"\"it depends\"\".\"","Trading at the start of the day is highest because of news flows that may have come after the close of the previous day. And trading at the end of the day is highest because of expected news flows after closing hours. Moreover, there are many day traders who buy in the morning without making any payment for purchase and such traders have to sell by evening or else they will have to make the payment for the purchases which they have made.","If you are looking at long-term investments then you can look to Dheer's answer and see that it doesn't matter whether the money is large or small, the return will be the same. When it comes to shorter-term investments, it can actually pay to be a smaller investor. Consider a stock that may not be trading in high volume. If I want to take a position for 2,000 shares, I can probably buy it quite quickly without moving the market considerably. If I was managing your hypothetical portfolio opening a position for 1,000,000 shares, it can cause the price to go up significantly because I have to execute the order very carefully in order to not tip my hand to the market that I want a million shares. Algorithmic traders will see the volume increasing on those shares and will raise their asking price. High speed traders and market makers will also cause a lot of purchasing overhead. Then later when it comes time to sell, I will lose a percentage to the price drop as I start flooding the market with available shares.","Stock B could be considered to be more risky because it seems to be more volatile - sharp rises on large volume increases can easily be followed by sharp drops or by further rises in the start of a new uptrend. However, if both A and B are trading on low volume in general, they can both be more on the risky side due to having relatively low liquidity, especially if you buy a large order compared to the average daily volume. But just looking at the criteria you have included in your question is not enough to determine which stock is riskier than the other, and you should look at this criteria in combination with other indicators and information about each stock to obtain a more complete picture.","\"During the day, market and limit orders are submitted at any time by market participants and there is a bid and an ask that move around over time. Trades occur whenever a market order is submitted or a limit order is submitted that at a price that matches or exceeds an existing limit order. If you submit a market order, it may consume all best-price limit orders and you can get multiple prices, changing the bid or ask at the same time. All that stuff happens during the trading day only. What happens at the end of the day is different. A bunch of orders that were submitted during the day but marked as \"\"on close\"\" are aggregated with any outstanding limit orders to create a single closing price according to the algorithm established by the exchange. Each exchange may handle the details of this closing event differently. For example, the Nasdaq's closing cross or the NYSE's closing auction. The close is the most liquid time of the day, so investors who are trading large amounts and not interested in intraday swings will often submit a market-on-close or limit-on-close order. This minimizes their chance of affecting the price or crossing a big spread. It's actually most relevant for smaller stocks, which may have too little volume during the day to make big trades, but have plenty at the close. In short, the volume you see is due to these on-close orders. The spike in volume most likely has no special information about what will happen overnight or the next day. It's probably just a normal part of the market for illiquid stocks.\"","Large volume just means a lot of market participants believe they know where the stock price will be (after some amount of time). The fact that the price is not moving just means that about 50% of those really confident traders think the stock will be moving up, and about 50% of those really confident traders think the stock will be moving down.","It could be that the contracts were bought at cheaper prices such as $.01 earlier in the day. What you see there with the bid and ask is the CURRENT bid and CURRENT ask. The high ask price means there is no current liquidity, as someone is quoting a very high ask price just in case someone really wants to trade that price. But as you said, no one would buy this with a better price on a closer strike price. The volume likely occurred at a different price than listed on the current ask.","\"For stock options, where I'm used to seeing these terms: Volume is usually reported per day, whereas open interest is cumulative. In addition, some volume closes positions and some opens positions. For example, if I am long one contract and sell it to someone who was short one contract, then that adds to volume and reduces open interest. If I hold no contracts and sell (creating a short position) to someone who also had no contracts, then I add to volume and I increase open interest. EDIT: With the clarification in your comment, then I would say some people opened and closed positions in that one day. Their opening and closing trades both contribute to \"\"volume\"\" but they have not net position in the \"\"open interest.\"\"\"","\"Day trading is an attempt to profit on high frequency signal changes. Long term investing profits on low frequency changes. What is the difference? High Frequency Signal = the news of the day. This includes things like an earnings report coming out, panic selling, Jim Cramer pushing his \"\"buy buy buy\"\" button, an oil rig blowing up in the ocean, a terrorist attack in some remote region of the globe, a government mandated recall, the fed announcing an interest rate hike, a competitor announcing a new product, hurricanes, cold winters, a new health study on child obesity, some other company in the same sector missing their earnings, etc. Think daily red and green triangles on CNBC: up a buck, down a buck. Low Frequency Signal = The long term effectiveness of a company to produce and sell a product efficiently plus the sum of the high frequency signal over a long period of time. Think 200 day moving average chart of a stock. No fast changes, just, long term trends. Over time, the high frequency changes tend to negate each other. To me, long term investing is wiser because the low frequency signal is dominated by a companies ability to function well over time. That in turn is driven by the effectiveness of its leadership coupled with the skill and motivation of its employees. You are betting on the company and its people. Pseudo-random shorterm forces, which you can't control, play less of a role. The high frequency signal, on the other hand, is dominated by sporadic and unpredictable forces that typically can't be controlled by the company. It has some tinge of randomness about it. Trying to invest on that random component is not investing at all, it is gambling (akin to \"\"investing\"\" in that next coin flip coming up heads) I understand the allure of high frequency trading. Look at the daily chart of a popular stock and focus on the up and down ticks. Mathematically, you could make a killing if you could just stack all those upticks on top of each other. If only it was that easy.\"","Market price simply depends on your order side. If you are placing a buy order the market price is the lowest ask, if you are placing a sell order the market price is the highest bid. If your order is larger than the volume then you'd need to also consider the next lowest ask or next highest bid until you've fulfilled your order volume.","With the caveat that you should always read the fine print... Generally, the high water mark is the absolute highest mark at end of any quarter (sometimes month) over all the quarters (months) in the past. Intra-quarter marks don't matter. So, in your example the mark at the end of the second quarter would only be the new HWM if that mark is higher then the mark at the end of every previous quarter. Again, what happened in the middle of of the second quarter doesn't matter. For hedge funds, the HWM may only be be from the date you started investing rather than over the whole history of the fund, but I would be surprised if that was true for any mutual funds. Though, as I may have mentioned, it is worth reading the fine print.","You can have a pretty good guess by looking at price pattern and order flow (size of the trades) a) price should be traded in a range b) relatively large size orders, speed.","\"Trading at the start of a session is by far higher than at any other time of the day. This is mostly due to markets incorporating news into the prices of stocks. In other words, there are a lot of factors that can affect a stock, 24 hours a day, but the market trades for only 6.5 hours a day. So, a lot of news accumulates during the time when people cannot trade on that news. Then when markets finally open, people are able to finally trade on that news, and there is a lot of \"\"price discovery\"\" going on between market participants. In the last minutes of trading, volumes increase as well. This can often be attributed to certain kinds of traders closing out their position before the end of the day. For example, if you don't want to take the risk a large price movement at the start of the next day affecting you, you would need to completely close your position.\"","popularity that you are referring to is just known as liquidity when discussing markets. More liquid securities tend to trade more shares per day and have very tight bid/ask spreads as many investors are buying and selling the shares at one time. Some larger securities, especially on exchanges, further enhance liquidity by providing market makers. These are individuals on the NYSE, for example, that will make the market in large securities by handling large orders and providing liquidity through their own book of capital. The individuals on the floor on the NYSE you often see on TV are those market makers. However, as trading becomes more electronic, market markers are becoming less and less required. A previous comment suggested pink sheets are risky companies. This is not entirely factual. While the majority of pink sheets are very highly risky companies, many very solid international companies trade their ADRs (American Depository Receipt) on the pink sheets to avoid the high cost of setting up a large exchange at the NYSE and register and report through the SEC. As a TD Ameritrade user, I would be willing to help you out if you have any other questions.","Almost every screener is able to do this. Please put effort into researching. Take the difference between http://finviz.com/screener.ashx?v=111&f=sh_avgvol_o1000,sh_price_u10,ta_highlow52w_nh&ft=4 and http://finviz.com/screener.ashx?v=111&f=sh_avgvol_o1000,sh_price_u5,ta_highlow52w_nh&ft=4 to get your results. Even MSN Money can do this http://www.msn.com/en-us/money/stockscreener/52weekhighs","It is known as the range or the price spread of the stock. You can read more about it here http://www.investopedia.com/terms/r/range.asp","I think if you are only trading stocks with average volume greater than 1M you should not have any trouble entering a 10,000 size trade. If you are you can try a couple of things: Change your order from a market order to a limit order, however this may potentially reduce the number of shares that are actually traded on that day, and you may miss out on some or all of your order. Limit your trading to more liquid stocks, say average daily volumes above 10M or 100M. Apart from that you might have to just put up with some extra slippage and incorporate it into your trading plan. That is you can reduce your R multiple to allow some slippage.","What is cheap? A stock may fall from $20 per share to $10 per share, but it may have gone from making a $100M profit last year to a $100M loss this year. So now at $10 per share it may still be considered expensive. You need to be very careful when to consider that a stock is cheap or not, you'll have to look at more than just the share price.","So in your screenshot, someone or some group of someones is willing to buy 3,000 shares at $3.45, and someone or some group of someones is willing to sell 2,000 shares at 3.88. Without getting in to the specific mechanics, you can place a market buy order for 10 (or whatever number) shares and it will probably transact at $3.88 per share because that's the lowest price for which someone will currently sell their shares. As a small fish, you can generally ignore the volume notations in the bid/ask quotes.","\"Some companies have a steady, reliable, stream of earnings. In that case, a low P/E ratio is likely to indicate a good stock. Other companies have a \"\"feast or famine\"\" pattern, great earnings one year, no earnings or losses the following year. In that case, it is misleading to use a P/E ratio for a good year, when earnings are high and the ratio is low. Instead, you have to figure out what the company's AVERAGE earnings may be for some years, and assign a P/E ratio to that.\"","> There are growing signs that the business of high-speed trading, or electronic market-making as it is sometimes called, is shrinking because of the steadily declining volume on the world’s stock exchanges over the last four years. Why is it shrinking? Less trading or more OTC and dark pools?","There's no rule of thumb but the purpose of candlesticks of any kind (fixed, volume weighted etc.) is to display the intra-period price action. So if you'd fit 3 years worth of 1 minute bars on a chart, candlesticks become useless and you might as well use a line chart.","Because swing trading isn't the only reason to buy a stock, and it's not the only way to make money on a stock. I do not have the expertise to make advice one way or the other, but I personally I feel swing trading is one of the worse ways to invest in the stock market. To answer your specific questions: In the previous post, I outlined a naive trade intended to make $1,000 off a $10k buy, but it was shown this would likely fail, even if the stock price would have increased by 10% had I not placed the trade. Another way to state this is that my trade would disrupt the stock price, and not in my favor at all. So, that means I'd have to settle for a smaller trade. If I bought $100 worth of the stock, that size of a buy wouldn't be too disruptive. I might succeed and get $10 out of the trade (10% of $100). But my trade fee was $8 or so... To summarize, you are completely correct that even hoping for gains of 10% on a consistent basis (in other words, after every single trade!) is totally unrealistic. You already seem to understand that swing trading on low-volume stocks is pointless. But your last question was... So how do people make any significant money trading low volume stocks--if they even do? I assume money is made, since the stocks are bought and sold. I have some guesses, but I'd like to hear from the experts. ... and in a comment: Then if no one does make significant money trading these stocks...what are they doing there on the market? The answer is that the buying and selling is mostly likely not by swing traders. It's by investors that believe in the company. The company is on the market because the company believes public trading to be an advantageous position for them to receive capital investments, and there are people out there who think that transaction makes sense. In other words, real investing.","It's a really big stretch to assume that a particular 10Q release will have the exact same impact on trading volume, trading price, and volatility as a prior release, in a different quarter, under a different set of circumstances and a different set of results, which is what you seem to be implying when you suggest that a lack of volume in response to one quarter's results should therefore be used as a benchmark. I think traders and the HFT firms are a lot smarter than you think.","One of the most useful ways to depict Open, High, Low, Close, and Volume is with a Candlestick Chart. I like to use the following options from Stockcharts.com: http://stockcharts.com/h-sc/ui?s=SPY&p=D&yr=0&mn=3&dy=0&id=p57211761385","\"My Broker and probably many Brokers provide this information in a table format under \"\"Course of Sale\"\". It provides the time, price and volume of each trade on that day. You could also view this data on a chart in some charting programs. Just set the interval to \"\"Tick by Tick\"\" and look at the volume. \"\"Tick by Tick\"\" will basically place a mark for every trade that is taken and then the volume will tell you the size of that trade.\"","One difference is the bid/ask spread will cost you more in a lower cost stock than a higher cost one. Say you have two highly liquid stocks with tiny spreads: If you wanted to buy say $2,000 of stock: Now imagine these are almost identical ETFs tracking the S&P 500 index and extrapolate this to a trade of $2,000,000 and you can see there's some cost savings in the higher priced stock. As a practical example, recently a popular S&P 500 ETF (Vanguard's VOO) did a reverse split to help investors minimize this oft-missed cost.","The actual price is represented on charts and not the change in price as a percentage, because it is the actual price which is used in all other parts of analysis (both technical and fundamental), and it is the actual figure the security is bought and sold at. A change in price has to be relative to a previous price at a previous time, and we can easily work out the change in price over any given time period. I think what you are concerned about is how to compare a certain actual price change in low priced securities to the same actual price change in a higher priced securities. For example: $1.00 rise in a $2.00 stock representing a 50% increase in price; $1.00 rise in a $10.00 stock representing a 10% increase in price. On a standard chart both of these look the same, as they both show a $1.00 increase in price. So what can we do to show the true representation of the percentage increase in price? It is actually quite simple. You view the chart using a log scale instead of a standard scale (most charting packages should have this option). What may look like a bubble on a standard scale chart, looks like a healthy uptrend on a log scale chart and represents a true picture of the percentage change in price. Example of Standard Price Scale VS LOG Price Scale on a Chart Standard Price Scale On the standard scale the price seems to have very little movement from Mar09 to Jan12 and then the price seems to zoom up after Jan12 to Mar13. This is because a 4% increase (for example) of $0.50 is only $0.02, whilst a 4% increase of $7.00 $0.28, so the increases seem much bigger at the end of the chart. LOG Price Scale On the LOG chart however, these price changes seem to be more evenly displayed no matter at what price level the price change has occurred at. This thus give a better representation of how fast or slow the price is rising or falling, or the size of the change in price.","Is it possible that mutual funds account for a significant portion of this volume. Investors may decide to buy or sell anytime within a 24 hour period, but the transaction only happened at the close of the market. Therefore at 3:59 pm the mutual fund knows if they will be buying or selling stocks that day. As nws pointed out the non-market hours are longer and therefore accumulate more news event. Some financial news is specifically given during the time the market is closed. Therefore the reaction to that news has to either be in the morning when the market opens or in the late afternoon if they are trying to anticipate the news. Also in the US market the early morning trader may be reacting to European market activities.","Well the thing to understand about HFT is that the volume levels heavily affect not just the earnings but also the ecosystem. HFT is almost always liquidity constrained so the volume and volatility is going to affect the overall profitability of the strategy since less of these things means fewer and smaller trading opportunities. Since 2008 volume and volatility have been heavily negatively correlated with risk-on/risk-off. During risk-off periods investors seem to panic and trading hits a frentic pace. This describes late 2008 and more recently August 2011. Even in 2012 the highest volume/volatility period was in May when the Euro deals were in danger. Risk-on environments tend to be marked be calm, orderly buying. Second the dark pool issue is bringing liquidity out of the lit markets where HFT normally makes its money. The primary reason for this trend is that dark pools are allowed to offer sub-penny quotes whereas lit exchanges are not. Because of this arbitrary regulatory constraint most of the time dark pools are going to offer better prices, especially on thick book securities. But beyond that the level of volume effects some HFT players more heavily then others. Imagine all the HFT firms as a pride of lions. When volume is high and liquidity is flowing it's like the pride has brought in a giant water buffalo. The biggest, baddest cats eat first, but there's still food left for the cubs after they're finished feeding. But if the pride only brings in say a baby gazelle the alpha cats will eat everything and the runts will go hungry. That basically describes what's happening now. A firm like RennTech or GETCO will make less money in a low volume environment, but still do fine. Marginal firms like Eladian will lose the ability to make any money. Since the marginal firms need the press and the dominant firms tend to be more secretive than the NSA, you'll tend to read more about the former than the latter.","Assuming the data you're referring to is this line: the difference might be related to the different exchanges on which the stock trades. FINRA could be listing the reported volume from one exchange, while the NASDAQ data might be listing the volume on all exchanges. This is an important distinction because AAV is a Canadian company that is listed on the Toronto Stock Exchange and the NYSE. The Q at the end of the line stands for NASDAQ, according to FINRA's codebook for those data. My guess is that the FINRA data is only reporting the volume for the NASDAQ exchange and not the total volume for all exchanges (Toronto, NASDAQ, NYSE, etc.) while the data straight from NASDAQ, oddly enough, is reporting the total volume. However, FINRA could also face reporting discrepancies, since it's a regulatory body and therefore might not have the most up-to-date volume data that the various exchanges can access. I don't know if it's related or not, but looking at the NASDAQ historical data, it looks like the volume on March 6, the day you're asking about, was much lower than the volume in most of the days immediately before or after it. For all I know, something might have happened that day concerning that particular stock or the market as a whole. I don't remember anything in particular, but you never know.","Prior to 1975, commissions for trading stock on the NYSE were fixed at 1% of the amount of the trade. In 1975, the SEC made fixed commission rates illegal, giving rise to discount brokers offering much reduced commission rates. Simultaneously, Electronic Communications Networks (ECNs) gained market share as alternative venues for executing trades. The increased competition led to further declines in commissions. Finally, as technology was widely adopted on Wall Street and human beings were largely taken out of the order execution process, commissions fell further. This had the effect of both drawing in new participants and increasing the rate of transactions of the existing participants (see Day Trading, which was largely unheard of prior to the technology revolution of the 1990s). Most recently, the exchanges themselves have shifted their business model to depend on high frequency traders, and the proportion of trades accounted for by HFT firms ballooned from under 10% in the early 2000s to over 50% today.","There is a great 3rd party application out there that I use (I am a broker) along with my internal analysts and other 3rd party sources. VectorVest has a LOT of technical information, but is very easy to use. It will run any kind of screen you like, including low 52 week numbers. (No, I don't get anything for recommending them.)","\"Orders large enough to buy down the current Bid and Ask Book are common. This is the essential strategy through which larger traders \"\"Strip\"\" the Bid or Ask in order to excite motion in a direction that is favorable to their interests. Smaller traders will often focus on low float/small cap tickers, as both conditions tend to favor volatility on relatively small volume.\"","\"Buying pressure is when there are more buy orders than sell orders outstanding. Just because someone wants to buy a stock doesn't mean there's a seller ready to fill that order. When there's buying pressure, stock prices rise. When there's selling pressure, stock prices fall. There can be high volume where buying and selling are roughly equal, in which case share prices wouldn't move much. The market makers who actually fill buy and sell orders for stock will raise share prices in the face of buying pressure and lower them in the face of selling pressure. That's because they get to keep the margin between what they bought shares from a seller for and what they can sell them to a new buyer for. Here's an explanation from InvestorPlace.com about \"\"buying pressure\"\": Buying pressure can basically be defined as increasingly higher demand for a particular stock's shares. This demand for shares exceeds the supply and causes the price to rise. ... The strength or weakness of a stock determines how much buying or selling interest will be required to break support and resistance areas. I hope this helps!\"","Suppose I purchase $10,000 worth of a particular share today. If the person(s) I am purchasing the shares from paid $9,000 for those shares, then I replacing their $9,000 investment with my $10,000 investment. This is a net inflow of $1,000 into the market. Similarly, if the person(s) I am purchasing the shares from paid $11,000 for those shares, then their $11,000 investment is being replace by my $10,000 investment. This is a net outflow of $1,000 out of the market. The aggregate of all such inflows and outflows in the net inflow/outflow into the market over a given period of time. (Here we are ignoring the effects of new share issues.)","The volatility measures how fast the stock moves, not how much. So you need to know the period during which that change occurred. Then the volatility naturally is higher the faster is the change.","\"You seem to prefer to trade like I do: \"\"Buy low, sell high.\"\" But there are some people that prefer a different way: \"\"Buy high, sell higher.\"\" A stock that has \"\"just appreciated\"\" is \"\"in motion.\"\" That is a \"\"promise\"\" (not always kept) that it will continue to go higher. Some people want stocks that not only go higher, but also SOON. The disadvantage of \"\"buy low, sell high\"\" is that the stock can stay low for some time. So that's a strategy for patient investors like you and me.\"","Consider the mechanic which actually drives the 'price' of a stock. In simplest terms, the 'price' of a stock is the price at which the most recent trade occurred. ie: if the price of IBM is $100/share, that means the last time someone bought IBM stock, they paid $100. Above and below the 'spot price', are dozens/hundreds/thousands of buyers and sellers who have placed orders that no one is yet willing to match. ie: if IBM's spot price is at $100, there could still be 10,000 people willing to sell for $101 (called the 'ask' price, for the lowest price someone is currently willing to sell at), and 15,000 willing to buy for $99 (called the 'bid' price, for the highest price someone is currently willing to buy for). Until someone is willing to buy for $101, then no one will be able to sell at $101. Until someone is willing to sell for $99, no one will be able to buy for $99. Typically orders are placed in the market at a particular limit. Meaning that those orders to buy at $99/sell at $101 are already in the 'system', and will be matched immediately as soon as someone is willing to meet the price on the other side. Now consider general market economics: high demand drives up price, and high supply drives down price. If the details above for IBM were yesterday, and today some news came out that IBM was laying off employees, imagine that another 10,000 people who held shares wanted to sell. Now there would be 20,000 sellers and only 15,000 buyers. If those new sellers were aggressive about wanting to sell, they would have to drop their price to $99, to match the highest buyers in the market. Put together, this means that as more sellers enter the market, supply of shares increases, driving down price. Conversely, as more buyers enter the market, demand for shares increases, driving up share price. As a result of the above, you can say that (all else being equal) if price for a stock goes up, there were more buyers that day, and if price goes down, there were more sellers that day. On the face of it, that is not necessarily true, because you could have the same number of buyers and sellers, one side could have simply decreased/increased their acceptable price to match the other side.","What does it mean when some one says that today there was a lot of net selling or buying in a stock. What does it mean because for every selling there is also a buying going on then how can you determine a selling or buying ? Generally if the price of stock has gone down compared to previous day, the trend is of selling. As the price can be volatile, there maybe few trades that are above close price of previous day, or below close price of previous day. How can you calculate average trade price for a stock It is simple {sum of all [price*quantity]}/quantity. Related question Equity market inflow meaning","Volatility is a shitty metric and is sample dependent, What is more interesting is point recurrence, i.e. how many times has a certain point been touched in x time, you can make good day trading strategies off point recurrence (relative that is).","Obviously there are good answers about the alternatives to the stock market in the referenced question. HFT has been debated heavily over the past couple of years, and the Flash crash of May 6, 2010, has spurred regulators to rein in heavy automated trading. HFT takes advantage of churn and split second reactions to changing market trends, news and rumors. It is not wise for individual investors to fight the big boys in these games and you will likely lose money in day trading as a result. HFT's defender's may be right when they claim that it makes the market more liquid for you to get the listed price for a security, but the article points out that their actions more closely resemble the currently illegal practice of front-running than a negotiated trade where both parties feel that they've received a fair value. There are many factors including supply and demand which affect stock prices more than volume does. While market makers are generating the majority of volume with their HFT practices, volume is merely the number of shares bought and sold in a day. Volume shows how many shares people are interested in trading, not the actual underlying value of the security and its long term prospects. Extra volume doesn't affect most long term investments, so your long term investments aren't in any extra danger due to HFT. That said, the stock market is a risky place whether panicked people or poorly written programs are trading out of control. Most people are better off investing rather than merely trading. Long term investors don't need to get the absolute lowest price or the highest sell. They move into and out of positions based on overall value and long term prospects. They're diversified so bad apples like Enron, etc. won't destroy their portfolio. Investors long term view allows them to ignore the effects of churn, while working like the tortoise to win the race while the hare eventually gets swallowed by a bad bet. There are a lot of worrying and stressful uncertainties in the global economy. If it's a question of wisdom, focus on sound investments and work politically (as a citizen and shareholder) to fix problems you see in the system.","It's been particularly low the past couple months though... and I'm talking futures a couple months out too. 5 years is about the cycle length for significant VIX change too. I do believe though that the prominence of algo trading and other high speed trading has made prices less volatile though. But at this level and, more importantly, with so many people short VIX: it's a bit worrisome here.","\"Just as a matter of research, apparently there is a way to find high option volumes such as a site here: https://www.barchart.com/options/volume-leaders/stocks However, that information is going to be heavily skewed by \"\"underlying security that moved a lot more than expected and probably got a lot of positions filled incidentally today\"\", but I think it is a good place to start building up a list of securities with a lot of option interest. There is also a tab there for ETFs. This will not tell you exactly that a particular stock always has high option volume, but most of the ones that show up there repeatedly and across multiple strike prices will meet your criteria.\"","That is mostly true, in most situations when there are more buy orders than sell orders (higher buy volume orders than sell volume orders), the price will generally move upwards and vice versa, when there are more sell orders than buy orders (higher sell volume orders than buy volume orders), the price will generally move downwards. Note that this does not always happen, but usually it does. You are also correct that for a trade to take place a buyer has to be matched with a seller (or the buy volume matched with the sell volume). But not all orders get executed as trades. Say there are 50 buy orders in the order book with a total volume of 100,000 shares and the highest buy order is currently at $10.00. On the other side there are only 10 sell orders in the order book with total volume of 10,000 shares and the lowest sell order is currently $10.05. At the moment there won't be a trade unless a new buyer or seller enters the market to match the opposing side, or an existing order gets amended upper or lower to match the opposing side. With more demand than supply in the order books what will be the most likely direction that this stock moves in? Most likely the price will move upwards. If a new buyer sees the price moving higher and then looks at the market depth, they would most likely place an order closer to the lowest sell order than the current highest buy order, say $10.01, to be first in line in case a market sell order is placed on the market. As new buy orders enter the market it drives the price higher and higher until the buy orders dry up.","Market capitalization is one way to represent the value of the company. So if a company has 10 million shares, which are each worth $100, then the company's market capitalization is 1 billion. Large cap companies tend to be larger and more stable. Small cap companies are smaller, which indicates higher volatility. So if you want more aggressive investments then you may want to invest in small cap companies while if you lean on the side of caution then big cap companies may be your friend.","\"A lot (sometimes called a round lot) always refers to the quantity of physical good that you're getting, like a carton of eggs or a barrel of oil. The tricky thing in the case of forex is that the physical good also happens to be a currency. A spot currency product trades in the denomination on the right-hand side (RHS) of the product name. So if you're buying EUR/USD you are paying USD currency to get EUR \"\"units\"\", and if you're selling EUR/USD you are receiving USD by giving away EUR \"\"units\"\". The EUR is the \"\"physical good\"\" in this case. The way I remember it is to think of all products (not just currencies) as trading pairs. So AAPL in my mind is AAPL/USD. When I buy AAPL/USD I am paying USD to get AAPL units. When I sell AAPL/USD I am receiving USD by giving away AAPL units. The thing on the left is the physical good (even if it happens to be money) that you are exchanging, and the thing on the right is the money that you are exchanging. So, when I buy a lot of AAPL, I am buying 100 shares at their current price in dollars. Similarly, when I buy a lot of EUR/USD, I am buying 100K Euros at their current price in dollars.\"","What is your investment goal? Many investors buy for the long haul, not short-term gain. If you're looking for long-term gain then daily fluctuations should be of no concern to you. If you want to day-trade and time the market (buy low and sell high with a short holding period) then yes less volatile stock can be less profitable, but they also carry less risk. In that case, though, transaction fees have more of an impact, and you usually have to trade in larger quantities to reduce the impact of transaction fees.","I usually look at the high and low exchange rates for the last five years. If the current rate is fairly close to the high for a trade over the past five years, then I do the trade. If the current exchange rate is close to the low, then I wait.","\"I was the one who made the beating you to the punch comment. That liquidity is worthless without an active market. That's the whole point of liquidity. An ability to sell back when needed. High volume means nothing when the fucking HFT buys all the stock and holds you hostage to his sell price. The only thing raising the price of pineapples is high speed trading. They only buy OR sell **when they see a bid.** That is not a traditional market maker. Please, tell me how that is wrong. That is not a rhetorical question. edit: If a pineapple is listed at 6.00 let's say you decide to buy and throw it in your cart. A store employee overhears you saying \"\"I'd be willing to pay 6.02 for this\"\". The employee tells the cashier to raise the price to 6.02 right before you get to the register. This is HFT in a nutshell. It doesn't provide an active pineapple market because the pineapple was only being offered once a buyer was lined up.\"","**Volume-weighted average price** In finance, volume-weighted average price (VWAP) is the ratio of the value traded to total volume traded over a particular time horizon (usually one day). It is a measure of the average price at which a stock is traded over the trading horizon. VWAP is often used as a trading benchmark by investors who aim to be as passive as possible in their execution. Many pension funds, and some mutual funds, fall into this category. *** ^[ [^PM](https://www.reddit.com/message/compose?to=kittens_from_space) ^| [^Exclude ^me](https://reddit.com/message/compose?to=WikiTextBot&message=Excludeme&subject=Excludeme) ^| [^Exclude ^from ^subreddit](https://np.reddit.com/r/finance/about/banned) ^| [^FAQ ^/ ^Information](https://np.reddit.com/r/WikiTextBot/wiki/index) ^| [^Source](https://github.com/kittenswolf/WikiTextBot) ^] ^Downvote ^to ^remove ^| ^v0.24","Any such number would depend on the country, the market, and the economic situation - especially inflation ratio. Generally, if you are not in a booming or a dying technology, getting a raise above the inflation ratio is 'good'; anything below is poor.","You don't see Buying and Selling. You see Bid and Ask. Best Bid--Highest Price someone is willing to pay to buy a stock. Best Ask - Lowest price someone is willing to accept to sell a stock. As for your second question, if you can look up Accumulation/Distribution Algorithm and Iceberg Order, you will get basic idea.","As per the chart pattern when ever a stock breaks its 52 week high. This information may differ for penny stocks,small caps and mid cap stocks"],"string":"[\n \"The daily Volume is usually compared to the average daily volume over the past 50 days for a stock. High volume is usually considered to be 2 or more times the average daily volume over the last 50 days for that stock, however some traders might set the crireia to be 3x or 4x the ADV for confirmation of a particular pattern or event. The volume is compared to the ADV of the stock itself, as comparing it to the volume of other stocks would be like comparing apples with oranges, as difference companies would have different number of total stocks available, different levels of liquidity and different levels of volatility, which can all contribute to the volumes traded each day.\",\n \"\\\"Volume is really only valuable when compared to some other volume, either from a historical value, or from some other stock. The article you linked to doesn't provide specific numbers for you to evaluate whether volume is high or low. Many people simply look at the charts and use a gut feel for whether a day's volume is \\\"\\\"high\\\"\\\" or \\\"\\\"low\\\"\\\" in their estimation. Typically, if a day's volume is not significantly taller than the usual volume, you wouldn't call it high. The same goes for low volume. If you want a more quantitative approach, a simple approach would be to use the normal distribution statistics: Calculate the mean volume and the standard deviation. Anything outside of 1.5 to 2.0 standard deviations (either high or low) could be significant in your analysis. You'll need to pick your own numbers (1.5 or 2.0 are just numbers I pulled out of thin air.) It's hard to read anything specific into volume, since for every seller, there's a buyer, and each has their reasons for doing so. The article you link to has some good examples of using volume as a basis for strengthening conclusions drawn using other factors.\\\"\",\n \"You should not look at volume in isolation but look at it together with other indicators and/or the release of news (good or bad). When there is lower than average volume this could be an indication that the stock is in a bit of a holding pattern, possibly waiting for some company or economic news to come out (especially when accompanied by small changes in price). It could also mean that trading in a certain direction is drying up and the trend is about to end (this could be accompanied with a large move in price). When there is higher than average volume (2 to 3 times more or higher), this could be due to the release of company results, company or economic news, or the start or end of a trend (especially if accompanied by a gap). A large increase in volume accompanied by a large fall in price (usually a gap down) may also be an indication the stock has gone ex-dividend. There could be a range of reasons for variations in volume to the average volume. That is why you need to look at other indicators, company reporting and news, and economic news in combination with the volume changes to get a grasp of what is really happening.\",\n \"Opening - is the price at which the first trade gets executed at the start of the trading day (or trading period). High - is the highest price the stock is traded at during the day (or trading period). Low - is the lowest price the stock is traded at during the day (or trading period). Closing - is the price at which the last trade gets executed at the end of the trading day (or trading period). Volume - is the amount of shares that get traded during the trading day (or trading period). For example, if you bought 1000 shares during the day and another 9 people also bought 1000 shares each, then the trading volume for the day would be 10 x 1000 = 10,000.\",\n \"As said previously, most of the time volume does not affect stock prices, except with penny stocks. These stocks typically have a small volume in the 3 or 4 figure range and because of this they typically experience very sharp rises and drops in stock prices, contrasting normal stocks that go up and down constantly every minute. Volume is not one thing you should be looking at when analyzing a stock in most cases, since it is simply the number of people of trades made in a day. That has no effect on the value of the company, whereas looking at P/E ratios, dividend growth, etc all can be analyzed to see if a company is growing and is doing well in its field. If I buy an iPhone, it doesn't matter if 100 other people or 100,000 other people have bought it as well, since they won't really affect my experience with the product. Whereas the type of iPhone I buy will.\",\n \"There is no direct relationship between volume and stock price. High volume indicates how much stock is changing hands. That can be because people are enthusiastically buying OR enthusiastically selling... and their reasons for doing so may not agree with your own sense of the future value of the stock. Higher volume may mean that the price is more likely to change during the day, but it can be in either direction -- or in no direction at all if there isn't a general agreement on how to react to some piece of news. It's a possibly interesting datum, but it means nothing in isolation.\",\n \"Consider the case where a stock has low volume. If the stock normally has a few hundred shares trade each minute and you want to buy 10,000 shares then chances are you'll move the market by driving up the price to find enough sellers so that you can get all those shares. Similarly, if you sell way more than the typical volume, this can be an issue.\",\n \"I hovered over the label for trading volume and the following message popped up: Volume / average volume Volume is the number of shares traded on the latest trading day. The average volume is measured over 30 days.\",\n \"You can't tell for sure. If there was such a technique then everyone would use it and the price would instantly change to reflect the future price value. However, trade volume does say something. If you have a lemonade stand and offer a large glass of ice cold lemonade for 1c on a hot summer day I'm pretty sure you'll have high trading volume. If you offer it for $5000 the trading volume is going to be around zero. Since the supply of lemonade is presumably limited at some point dropping the price further isn't going to increase the number of transactions. Trade volumes reflect to some degree the difference of valuations between buyers and sellers and the supply and demand. It's another piece of information that you can try looking at and interpreting. If you can be more successful at this than the majority of others on the market (not very likely) you may get a small edge. I'm willing to bet that high frequency trading algorithms factor volume into their trading decisions among multiple other factors.\",\n \"In general, liquidity is a good thing, because it means it is easy for you to buy or sell a stock. Since high liquidity stocks have a lot of trading, the bid-ask spreads tend to be pretty low. That means you can go into the market and trade easily and cheaply at just about any time. For low liquidity stocks, the bid-ask spreads can get pretty high, so it can make it hard or expensive to get into or out of your trades. On the flip side, everyone pays attention to high liquidity stocks, so it's harder to get an edge in your trading. For a company like Microsoft there are 30-50 full time analysts that cover them, thousands of professional traders and millions of investors in general all reading the same new articles and looking through the same financials as you. But in low liquidity stocks, there probably aren't any analysts, a few professional traders and maybe a few thousand total investors, so it can be easier to find a good buy (or sell). In general, high liquidity doesn't mean that everyone is selling or everyone is buy, it just means everyone is trading.\",\n \"\\\"Volume is measured in the number of shares traded in a given day, week, month, etc. This means that it's not necessarily a directly-comparable measure between stocks, as there's a large difference between 1 million shares traded of a $1 stock ($1 million total) and 1 million shares traded of a $1000 stock ($1 billion total). Volume as a number on its own is lacking in context; it often makes more sense to look at it as an overall dollar amount (as in the parentheses above) or as a fraction of the total number of shares in the marketplace. When you see a price quoted for a particular ticker symbol, whether online, or on TV, or elsewhere, that price is typically the price of the last trade that executed for that security. A good proxy for the current fair price of an asset is what someone else paid for it in the recent past (as long as it wasn't too long ago!). So, when you see a quote labeled \\\"\\\"15.5K @ $60.00\\\"\\\", that means that the last trade on that security, which the service is using to quote the security's price, was for 15500 shares at a price of $60 per share. Your guess is correct. The term \\\"\\\"institutional investor\\\"\\\" often is meant to include many types of institutions that would control large sums of money. This includes large banks, insurance companies, pooled retirement funds, hedge funds, and so on.\\\"\",\n \"Trading volumes are higher at the end of the day as many traders close their open positions. In the morning however, traders incorporate various factors like performance of worldwide markets overnight, any corporate or government announcements, global macro events, etc.\",\n \"The first statement is talking about a sudden sharp increase in volume (double or more of average volume) with a sudden increase in price. In other words, there has been a last rush to buy the stock exhausting all the current bulls (buyers), so the bears (sellers) take over, at least temporarily. Whilst the second statement is talking about a gradual increase in volume as the price up trends (thus the use of a volume oscillator). In other words (in an uptrend), the bulls (buyers) are gradually increasing in numbers sending the price higher, and new buyers keep entering the market. (The opposite is the case for a down-trend).\",\n \"Not directly an answer to your question, but somewhat related: There are derivatives (whose English name I sadly don't know) that allow to profit from breaking through an upper or alternatively a lower barrier. If the trade range does not hit either barrier you lose. This kind of derivative is useful if you expect a strong movement in either direction, which typically occurs at high volume.\",\n \"You have just answered your question in the last sentence of your question: More volume just means more people are interested in the stock...i.e supply and demand are matched well. If the stock is illiquid there is more chance of the spread and slippage being larger. Even if the spread is small to start with, once a trade has been transacted, if no new buyers and sellers enter the market near the last transacted price, then you could get a large spread occurring between the bid and ask prices. Here is an example, MDG has a 50 day moving average volume of only 1200 share traded per day (obviously it does not trade every day). As you can see there is already an 86% spread from the bid price. If a new bid price is entered to match and take out the offer price at $0.039, then this spread would instantly increase to 614% from the bid price.\",\n \"Volumes are used to predict momentum of movement, not the direction of it. Large trading volumes generally tend to create a price breakout in either positive or negative direction. Especially in relatively illiquid stocks (like small caps), sudden volume surges can create sharp price fluctuations.\",\n \"While volume per trade is higher at the open and to a lesser extent at the close, the overall volume is actually lower, on average. Bid ask spreads are widest at the open and to a lesser extent at the close. Generally, bid ask spreads are inversely proportional to overall volumes. Why this is the case hasn't been sufficiently clearly answered by academia yet, but some theories are that\",\n \"That is called a 'volume chart'. There are many interactive charts available for the purpose. Here is clear example. (just for demonstration but this is for India only) 1) Yahoo Finance 2) Google Finance 3) And many more Usually, the stock volume density is presented together (below it) with normal price vs time chart. Note: There is a friendly site about topics like this. Quant.stackexchange.com. Think of checking it out.\",\n \"yes you are right as per my understanding while doing trade you must consider fol (specially for starters like me) The volume of the stock you are trading in should be high enough to keep you secure for quick in and out Whenever the bid volume is more than the ask volume the prices will move up and vice versa. to give an example if a stock is at 100 points and there are fol bids: The transaction will occur when either the bidder agrees to pay the ask price (case 1. he pays 101 . his bid offer will disappear and the next best ask will be 102. and the current price will be 101 which was the last transaction.) or when the person giving ask price agrees to deal at best bid which was 99 in which case the share will go down.\",\n \"\\\"High liquidity doesn't necessarily mean that \\\"\\\"everybody is getting rid of the stock\\\"\\\", since somebody is obviously buying whatever stock that is being sold. Also, as mentioned, low liquidity may mean that you would have trouble selling the stock in the future.\\\"\",\n \"How I understand it is: supply/demand affect price of stock negatively/positively, respectively. Correct. Volume is the amount of buying/selling activity in these stocks (more volume = more fluctuation, right?). Sort of. Higher volume means higher liquidity. That is, a stock that is traded more is easier to trade. It doesn't necessarily mean more fluctuation and in the real world, it often means that these are well-understood stocks with a high amount of analyst coverage. This tends towards these stocks not being as volatile as smaller stocks with less liquidity. Company revenue (and profit) will help an investor predict company growth. That is one factor in a stock price. There are certain stocks that you would buy without them making a profit because their future revenue looks potentially explosive. However, these stocks are very risky and are bubble-prone. If you're starting out in the share market, it's generally a good idea to invest in index funds (I am not a broker, my advice should not be taken as financial advice). These funds aggregate risk by holding a lot of different companies. Also, statistics have shown that over time, buying and holding index funds long term tends to dramatically outperform other investment strategies, particularly for people with low amounts of capital.\",\n \"\\\"Stocks with a low average daily trading volume (\\\"\\\"thinly traded stocks\\\"\\\") will also tend to have higher spreads. So you'll tend to pay more when you buy and get less when you sell.\\\"\",\n \"Yep, you have it pretty much right. The volume is the number of shares traded that day. The ticker is giving you the number of shares bought at that price in a given transaction, the arrow meaning whether the stock is up or down on the day at that price. Institutional can also refer to pensions, mutuals funds, corporates; generally any shareholder that isn't an individual person.\",\n \"\\\"Insofar as a 52 week high indicates a peak, yes. However, the truth is that \\\"\\\"buying low and selling high\\\"\\\" means \\\"\\\"Act a Fool!\\\"\\\" You see, when you buy low, you are perceived to be buying total garbage - throwing your money away and conversely when selling high you are perceived to be a total idiot - selling a winner. That's how people will see you when you are in fact buying low and/or selling high, right? It's those people that (mis)value the asset, right? An asset is worth what the people will pay for it, right? ...And don't forget that holding a loser is MUCH easier than holding a winner. Good luck!\\\"\",\n \"Really not sure with this one and I don't want to cheat and look up an answer. I'd say you could find the high/low points of the stock over the last year or two and see how large the spread is between those values and the average price of the stock over the same time period.\",\n \"hello pointbox, i enjoy getting in front of someone that does know what they are talking about, so i have a question for you... could you give to us a textbook example of what a high frequency trade looks like?\",\n \"P/E = price per earnings. low P/E (P/E < 4) means stock is undervalued.\",\n \"The shortest-hand yet most reliable metric is daily volume / total shares outstanding. A security with a high turnover rate will be more efficient than a lower one, ceteris paribus. The practical impacts are tighter spread and lower average percentage change between trades. A security with a spread of 0% and an average change of 0% between trades is perfectly efficient.\",\n \"You can use trade volume for divergence and convergence studies\",\n \"High frequency trades are intra day. The would buy a stock for 100 and sell for 100.10 multiple times. So If you start with 100 in your broker account, you buy something [it takes 2-3 days to settle], you sell for 100.10 [it takes 2-3 days to settle]. You again buy something for 100. It is the net value of both buys and sells that you need to look at. Trading on Margin Accounts. Most brokers offer Margin Accounts. The exact leverage ratios varies. What this means is that if you start with 10 [or 15 or 25] in your broker you can buy stock of 100. Of course legally you wont own the stock unless you pay the broker balance, etc.\",\n \"Buying pressure means there are more interested buyers than there are ready sellers putting upward pressure on prices. That might include institutional buyers who are slowly executing buy orders because they still want the best prices possible without clearing out the market. Buying pressure doesn't have to be related to volume at all. If everyone who owns shares think they are going to be worth far more than recent market prices, they will not offer them for sale. That means there is more demand to buy than there is a supply of shares to be bought. That condition can exist regardless of trading volume.\",\n \"\\\"The tricky part is that it's NAV is quite high these days, almost close to its 52 week high You will find, if you look historically, most markets are often close to their 52 week or even historical highs. This is an important consideration. \\\"\\\"The markets are at their all-time high!\\\"\\\" has been true a large percentage of the past decades. Everyone wants to buy low, sell high. But the reality is, buying low often will be \\\"\\\"buying at close to the highest point\\\"\\\" as no one has a crystal ball.\\\"\",\n \"What is the average daily volume traded? It looks like this stock may have a liquidity problem. If that is the case I would not buy this stock at all as you may have the same problem when you try to sell it. Generally try to stay away from illiquid stocks, if your order size is more than 10% of the average daily volume traded, then don't buy it. I usually stay away from stocks with an average daily volume of less than 100,000.\",\n \"This is called the Ask-Bid Spread. The difference varies based on the liquidly of the asset. The more liquid or the higher the volume of trades for the asset then the smaller the spread is. The spread goes to the broker to pay for some of the cost of the trade. My guess is that when there is a higher volume of shares being traded, brokers need to take less of a fee per share out of the transaction to cover their costs. This makes the spread is smaller. This is essentially the difference in price between the highest price that a buyer is willing to pay for an asset and the lowest price for which a seller is willing to sell it. The seller will get the bid price and the buyer will pay the ask and the broker keeps the spread. From http://www.investopedia.com/terms/b/bid-askspread.asp\",\n \"At any point of time, buyer wants to purchase a stock at lesser price and seller wants to sell the stock at a higher price. Let's consider this scenario Company XYZ is trading at 100$, as stated above buyer wants to purchase at lower price and seller at higher price, this information will be available in Market depth, let's consider there are 5 buyers and 5 sellers, below are the details of their orders Buyers List Sellers List Highest order in buyers list will contain the bid price and bid quantity, Lowest order in Sellers list will contain the offer price and offer quantity. Now, if I want to buy 50 Stocks of company XYZ, need to place an order first, it can be either limit or Market. Limit Order : In this order, I will mention the price(buy price) at which I wish to buy, if there is any seller selling the stock less than or equal to price I have mentioned, then the order will be executed else it will be added to buyers list Market Order : In this order, I will not mention the price, if I wish to purchase 50 Stocks, then it will find the lowest offer price and buy stocks, in our case it will be 101. if I wish to purchase 200 Stocks, then it will find the lowest offer price and buy stocks, in our case it will be 2 transactions, since entire request cannot be accommodated in single order Usually the volume(Ask Volume and Offer Volume) being displayed are all Limit orders and not Market orders, Market orders are executed immediately. This is just an example, However several transactions are executed within a second, hence we will get to know the exact value only after the order is completed(executed)\",\n \"Open, high, low, close, volume. The hint is that volume on new years day is 0. DC's comment is actually a better answer than mine - when given any data set, you should really know the meaning of each cell/number.\",\n \"First, I want to point out that your question contains an assumption. Does anyone make significant money trading low volume stocks? I'm not sure this is the case - I've never heard of a hedge fund trading in the pink sheets, for example. Second, if your assumption is valid, here are a few ideas how it might work: Accumulate slowly, exit slowly. This won't work for short-term swings, but if you feel like a low-volume stock will be a longer-term winner, you can accumulate a sizable portion in small enough chunks not to swing the price (and then slowly unwind your position when the price has increased sufficiently). Create additional buyers/sellers. Your frustration may be one of the reasons low-volume stock is so full of scammers pumping and dumping (read any investing message board to see examples of this). If you can scare holders of the stock into selling, you can buy significant portions without driving the stock price up. Similarly, if you can convince people to buy the stock, you can unload without destroying the price. This is (of course) morally and legally dubious, so I would not recommend this practice.\",\n \"\\\"In the US, stocks are listed on one exchange but can be traded on multiple venues. You need to confirm exactly what your data is showing: a) trades on the primary-listed exchange; or b) trades made at any venue. Also, the trade condition codes are important. Only certain trade condition codes contribute towards the day's open/high/low/close and some others only contribute towards the volume data. The Consolidated Tape Association is very clear on which trades should contribute towards each value - but some vendors have their own interpretation (or just simply an erroneous interpretation of the specifications). It may surprise you to find that the majority of trading volume for many stocks is not on their primary-listed exchange. For example, on 2 Mar 2015, NASDAQ:AAPL traded a total volume across all venues was 48096663 shares but trading on NASDAQ itself was 12050277 shares. Trades can be cancelled. Some data vendors do not modify their data to reflect these busted trades. Some data vendors also \\\"\\\"snapshot\\\"\\\" their feed at a particular point in time of the data. Some exchanges can provide data (mainly corrections) 4-5 hours after the closing bell. By snapshotting the data too early and throwing away any subsequent data is a typical cause of data discrepancies. Some data vendors also round prices/volumes - but stocks don't just trade to two decimal places. So you may well be comparing two different sets of trades (with their own specific inclusion rules) against the same stock. You need to confirm with your data sources exactly how they do things. Disclosure: Premium Data is an end-of-day daily data vendor.\\\"\",\n \"Theoretically, it's a question of rate of return. If a desired or acceptable rate of return for market makers' capital is X, and X is determined by the product of margin & turnover then higher turnover means lower margin for a constant X. Margin, in the case of trading, is the bid/ask spread, and turnover, in the case of trading, is volume. Empirically, it has been noted in the last markets still offering such wide-varying evidence, equity options: http://faculty.baruch.cuny.edu/lwu/890/mayhew_jf2002.pdf\",\n \"No. The information you are describing is technical data about a stock's market price and trading volume, only. There is nothing implied in that data about a company's financial fundamentals (earnings/profitability, outstanding shares, market capitalization, dividends, balance sheet assets and liabilities, etc.) All you can infer is positive or negative momentum in the trading of the stock. If you want to understand if a company is performing well, then you need fundamental data about the company such as you would get from a company's annual and quarterly reports.\",\n \"In the stock market many participants enter orders that are not necessarily set at the current market price of the stock (i.e. they are not market orders, they are limit orders). They can be lower than the market price (if they want to buy) or they can be higher than the market price (if they want to sell). The set of orders at each point of time for a security is called the order book. The lowest selling price of the order book is the offer or ask, the higher buying price is the bid. The more liquid is a security, the more orders will be in the order book, and the narrower will be the bid-ask spread. The depth of the order book is the number of units that the order book can absorb in any direction (buy or sell). As an example: imagine I want to buy 100 units at the lowest offer, but the size of the lowest offer is only 50 units, and there is not any further order, that means the stock has little depth.\",\n \"Volume and prices are affected together by how folks feel about the stock; there is no direct relationship between them. There are no simple analysis techniques that work. Some would argue strongly that there are few complex analysis techniques that work either, and that for anyone but full-time professionals. And there isn't clear evidence that the full-time professionals do sufficiently better than index funds to justify their fees. For most folks, the best bet is to diversify, using low-overhead index funds, and simply ride with the market rather than trying to beat it.\",\n \"As long as the tax rate is below 100%, there is still money to make. You pay taxes on your gain, not on your trading volume. Taxed income is still income - many people seem to get that wrong.\",\n \"The GuruFocus Link is just reporting the high and low price of the quarter. Price Range (Average) – The estimated trade prices. The average price is calculated from the time weighted average during the period. If no price range is shown, the trade prices are estimated trade prices, which are more accurate estimates. AAPL: $420.05 - $549.03 ($467.26) The numbers for the high and low match what I found for AAPL on Yahoo Finance. Keep in mind their definition uses estimate 3 times.\",\n \"Beta is an indication of a Stock's risk with respect to the market. For instance if a stock had a beta of 1 it means it is in tandem with the S&P 500. If it is more than 1, the stock is volatile. If it is less than 1, it implies market movement doesn't affect this stock much. Tech stocks and small cap stocks have high beta, utilities have low beta. (In general, not always). Hope this helps - I've tried to explain it in very simple terms!\",\n \"Something to consider is that in the case of the company you chose, on the OTC market, that stock is thinly traded and with such low volume, it can be easy for it to fluctuate greatly to have trades occur. This is why volume can matter for some people when it comes to buying shares. Some OTC stocks may have really low volume and thus may have bigger swings than other stocks that have higher volume.\",\n \"\\\"6% isn't \\\"\\\"too high\\\"\\\" in terms of market rates at the moment, however it's a very subjective question whether it's too high for you. The real question to determine is if paying 6%, can you make more than 6% return (to cover the costs plus your profit)? As for a rule of thumb, there's none I know of, however your best bet is to take the time to model it in Excel (not difficult). It's different for each portfolio or investment. Something with a high standard deviation of returns is already high risk, adding margin to it only makes it worse. So, long story short is that, \\\"\\\"it depends\\\"\\\".\\\"\",\n \"Trading at the start of the day is highest because of news flows that may have come after the close of the previous day. And trading at the end of the day is highest because of expected news flows after closing hours. Moreover, there are many day traders who buy in the morning without making any payment for purchase and such traders have to sell by evening or else they will have to make the payment for the purchases which they have made.\",\n \"If you are looking at long-term investments then you can look to Dheer's answer and see that it doesn't matter whether the money is large or small, the return will be the same. When it comes to shorter-term investments, it can actually pay to be a smaller investor. Consider a stock that may not be trading in high volume. If I want to take a position for 2,000 shares, I can probably buy it quite quickly without moving the market considerably. If I was managing your hypothetical portfolio opening a position for 1,000,000 shares, it can cause the price to go up significantly because I have to execute the order very carefully in order to not tip my hand to the market that I want a million shares. Algorithmic traders will see the volume increasing on those shares and will raise their asking price. High speed traders and market makers will also cause a lot of purchasing overhead. Then later when it comes time to sell, I will lose a percentage to the price drop as I start flooding the market with available shares.\",\n \"Stock B could be considered to be more risky because it seems to be more volatile - sharp rises on large volume increases can easily be followed by sharp drops or by further rises in the start of a new uptrend. However, if both A and B are trading on low volume in general, they can both be more on the risky side due to having relatively low liquidity, especially if you buy a large order compared to the average daily volume. But just looking at the criteria you have included in your question is not enough to determine which stock is riskier than the other, and you should look at this criteria in combination with other indicators and information about each stock to obtain a more complete picture.\",\n \"\\\"During the day, market and limit orders are submitted at any time by market participants and there is a bid and an ask that move around over time. Trades occur whenever a market order is submitted or a limit order is submitted that at a price that matches or exceeds an existing limit order. If you submit a market order, it may consume all best-price limit orders and you can get multiple prices, changing the bid or ask at the same time. All that stuff happens during the trading day only. What happens at the end of the day is different. A bunch of orders that were submitted during the day but marked as \\\"\\\"on close\\\"\\\" are aggregated with any outstanding limit orders to create a single closing price according to the algorithm established by the exchange. Each exchange may handle the details of this closing event differently. For example, the Nasdaq's closing cross or the NYSE's closing auction. The close is the most liquid time of the day, so investors who are trading large amounts and not interested in intraday swings will often submit a market-on-close or limit-on-close order. This minimizes their chance of affecting the price or crossing a big spread. It's actually most relevant for smaller stocks, which may have too little volume during the day to make big trades, but have plenty at the close. In short, the volume you see is due to these on-close orders. The spike in volume most likely has no special information about what will happen overnight or the next day. It's probably just a normal part of the market for illiquid stocks.\\\"\",\n \"Large volume just means a lot of market participants believe they know where the stock price will be (after some amount of time). The fact that the price is not moving just means that about 50% of those really confident traders think the stock will be moving up, and about 50% of those really confident traders think the stock will be moving down.\",\n \"It could be that the contracts were bought at cheaper prices such as $.01 earlier in the day. What you see there with the bid and ask is the CURRENT bid and CURRENT ask. The high ask price means there is no current liquidity, as someone is quoting a very high ask price just in case someone really wants to trade that price. But as you said, no one would buy this with a better price on a closer strike price. The volume likely occurred at a different price than listed on the current ask.\",\n \"\\\"For stock options, where I'm used to seeing these terms: Volume is usually reported per day, whereas open interest is cumulative. In addition, some volume closes positions and some opens positions. For example, if I am long one contract and sell it to someone who was short one contract, then that adds to volume and reduces open interest. If I hold no contracts and sell (creating a short position) to someone who also had no contracts, then I add to volume and I increase open interest. EDIT: With the clarification in your comment, then I would say some people opened and closed positions in that one day. Their opening and closing trades both contribute to \\\"\\\"volume\\\"\\\" but they have not net position in the \\\"\\\"open interest.\\\"\\\"\\\"\",\n \"\\\"Day trading is an attempt to profit on high frequency signal changes. Long term investing profits on low frequency changes. What is the difference? High Frequency Signal = the news of the day. This includes things like an earnings report coming out, panic selling, Jim Cramer pushing his \\\"\\\"buy buy buy\\\"\\\" button, an oil rig blowing up in the ocean, a terrorist attack in some remote region of the globe, a government mandated recall, the fed announcing an interest rate hike, a competitor announcing a new product, hurricanes, cold winters, a new health study on child obesity, some other company in the same sector missing their earnings, etc. Think daily red and green triangles on CNBC: up a buck, down a buck. Low Frequency Signal = The long term effectiveness of a company to produce and sell a product efficiently plus the sum of the high frequency signal over a long period of time. Think 200 day moving average chart of a stock. No fast changes, just, long term trends. Over time, the high frequency changes tend to negate each other. To me, long term investing is wiser because the low frequency signal is dominated by a companies ability to function well over time. That in turn is driven by the effectiveness of its leadership coupled with the skill and motivation of its employees. You are betting on the company and its people. Pseudo-random shorterm forces, which you can't control, play less of a role. The high frequency signal, on the other hand, is dominated by sporadic and unpredictable forces that typically can't be controlled by the company. It has some tinge of randomness about it. Trying to invest on that random component is not investing at all, it is gambling (akin to \\\"\\\"investing\\\"\\\" in that next coin flip coming up heads) I understand the allure of high frequency trading. Look at the daily chart of a popular stock and focus on the up and down ticks. Mathematically, you could make a killing if you could just stack all those upticks on top of each other. If only it was that easy.\\\"\",\n \"Market price simply depends on your order side. If you are placing a buy order the market price is the lowest ask, if you are placing a sell order the market price is the highest bid. If your order is larger than the volume then you'd need to also consider the next lowest ask or next highest bid until you've fulfilled your order volume.\",\n \"With the caveat that you should always read the fine print... Generally, the high water mark is the absolute highest mark at end of any quarter (sometimes month) over all the quarters (months) in the past. Intra-quarter marks don't matter. So, in your example the mark at the end of the second quarter would only be the new HWM if that mark is higher then the mark at the end of every previous quarter. Again, what happened in the middle of of the second quarter doesn't matter. For hedge funds, the HWM may only be be from the date you started investing rather than over the whole history of the fund, but I would be surprised if that was true for any mutual funds. Though, as I may have mentioned, it is worth reading the fine print.\",\n \"You can have a pretty good guess by looking at price pattern and order flow (size of the trades) a) price should be traded in a range b) relatively large size orders, speed.\",\n \"\\\"Trading at the start of a session is by far higher than at any other time of the day. This is mostly due to markets incorporating news into the prices of stocks. In other words, there are a lot of factors that can affect a stock, 24 hours a day, but the market trades for only 6.5 hours a day. So, a lot of news accumulates during the time when people cannot trade on that news. Then when markets finally open, people are able to finally trade on that news, and there is a lot of \\\"\\\"price discovery\\\"\\\" going on between market participants. In the last minutes of trading, volumes increase as well. This can often be attributed to certain kinds of traders closing out their position before the end of the day. For example, if you don't want to take the risk a large price movement at the start of the next day affecting you, you would need to completely close your position.\\\"\",\n \"popularity that you are referring to is just known as liquidity when discussing markets. More liquid securities tend to trade more shares per day and have very tight bid/ask spreads as many investors are buying and selling the shares at one time. Some larger securities, especially on exchanges, further enhance liquidity by providing market makers. These are individuals on the NYSE, for example, that will make the market in large securities by handling large orders and providing liquidity through their own book of capital. The individuals on the floor on the NYSE you often see on TV are those market makers. However, as trading becomes more electronic, market markers are becoming less and less required. A previous comment suggested pink sheets are risky companies. This is not entirely factual. While the majority of pink sheets are very highly risky companies, many very solid international companies trade their ADRs (American Depository Receipt) on the pink sheets to avoid the high cost of setting up a large exchange at the NYSE and register and report through the SEC. As a TD Ameritrade user, I would be willing to help you out if you have any other questions.\",\n \"Almost every screener is able to do this. Please put effort into researching. Take the difference between http://finviz.com/screener.ashx?v=111&f=sh_avgvol_o1000,sh_price_u10,ta_highlow52w_nh&ft=4 and http://finviz.com/screener.ashx?v=111&f=sh_avgvol_o1000,sh_price_u5,ta_highlow52w_nh&ft=4 to get your results. Even MSN Money can do this http://www.msn.com/en-us/money/stockscreener/52weekhighs\",\n \"It is known as the range or the price spread of the stock. You can read more about it here http://www.investopedia.com/terms/r/range.asp\",\n \"I think if you are only trading stocks with average volume greater than 1M you should not have any trouble entering a 10,000 size trade. If you are you can try a couple of things: Change your order from a market order to a limit order, however this may potentially reduce the number of shares that are actually traded on that day, and you may miss out on some or all of your order. Limit your trading to more liquid stocks, say average daily volumes above 10M or 100M. Apart from that you might have to just put up with some extra slippage and incorporate it into your trading plan. That is you can reduce your R multiple to allow some slippage.\",\n \"What is cheap? A stock may fall from $20 per share to $10 per share, but it may have gone from making a $100M profit last year to a $100M loss this year. So now at $10 per share it may still be considered expensive. You need to be very careful when to consider that a stock is cheap or not, you'll have to look at more than just the share price.\",\n \"So in your screenshot, someone or some group of someones is willing to buy 3,000 shares at $3.45, and someone or some group of someones is willing to sell 2,000 shares at 3.88. Without getting in to the specific mechanics, you can place a market buy order for 10 (or whatever number) shares and it will probably transact at $3.88 per share because that's the lowest price for which someone will currently sell their shares. As a small fish, you can generally ignore the volume notations in the bid/ask quotes.\",\n \"\\\"Some companies have a steady, reliable, stream of earnings. In that case, a low P/E ratio is likely to indicate a good stock. Other companies have a \\\"\\\"feast or famine\\\"\\\" pattern, great earnings one year, no earnings or losses the following year. In that case, it is misleading to use a P/E ratio for a good year, when earnings are high and the ratio is low. Instead, you have to figure out what the company's AVERAGE earnings may be for some years, and assign a P/E ratio to that.\\\"\",\n \"> There are growing signs that the business of high-speed trading, or electronic market-making as it is sometimes called, is shrinking because of the steadily declining volume on the world’s stock exchanges over the last four years. Why is it shrinking? Less trading or more OTC and dark pools?\",\n \"There's no rule of thumb but the purpose of candlesticks of any kind (fixed, volume weighted etc.) is to display the intra-period price action. So if you'd fit 3 years worth of 1 minute bars on a chart, candlesticks become useless and you might as well use a line chart.\",\n \"Because swing trading isn't the only reason to buy a stock, and it's not the only way to make money on a stock. I do not have the expertise to make advice one way or the other, but I personally I feel swing trading is one of the worse ways to invest in the stock market. To answer your specific questions: In the previous post, I outlined a naive trade intended to make $1,000 off a $10k buy, but it was shown this would likely fail, even if the stock price would have increased by 10% had I not placed the trade. Another way to state this is that my trade would disrupt the stock price, and not in my favor at all. So, that means I'd have to settle for a smaller trade. If I bought $100 worth of the stock, that size of a buy wouldn't be too disruptive. I might succeed and get $10 out of the trade (10% of $100). But my trade fee was $8 or so... To summarize, you are completely correct that even hoping for gains of 10% on a consistent basis (in other words, after every single trade!) is totally unrealistic. You already seem to understand that swing trading on low-volume stocks is pointless. But your last question was... So how do people make any significant money trading low volume stocks--if they even do? I assume money is made, since the stocks are bought and sold. I have some guesses, but I'd like to hear from the experts. ... and in a comment: Then if no one does make significant money trading these stocks...what are they doing there on the market? The answer is that the buying and selling is mostly likely not by swing traders. It's by investors that believe in the company. The company is on the market because the company believes public trading to be an advantageous position for them to receive capital investments, and there are people out there who think that transaction makes sense. In other words, real investing.\",\n \"It's a really big stretch to assume that a particular 10Q release will have the exact same impact on trading volume, trading price, and volatility as a prior release, in a different quarter, under a different set of circumstances and a different set of results, which is what you seem to be implying when you suggest that a lack of volume in response to one quarter's results should therefore be used as a benchmark. I think traders and the HFT firms are a lot smarter than you think.\",\n \"One of the most useful ways to depict Open, High, Low, Close, and Volume is with a Candlestick Chart. I like to use the following options from Stockcharts.com: http://stockcharts.com/h-sc/ui?s=SPY&p=D&yr=0&mn=3&dy=0&id=p57211761385\",\n \"\\\"My Broker and probably many Brokers provide this information in a table format under \\\"\\\"Course of Sale\\\"\\\". It provides the time, price and volume of each trade on that day. You could also view this data on a chart in some charting programs. Just set the interval to \\\"\\\"Tick by Tick\\\"\\\" and look at the volume. \\\"\\\"Tick by Tick\\\"\\\" will basically place a mark for every trade that is taken and then the volume will tell you the size of that trade.\\\"\",\n \"One difference is the bid/ask spread will cost you more in a lower cost stock than a higher cost one. Say you have two highly liquid stocks with tiny spreads: If you wanted to buy say $2,000 of stock: Now imagine these are almost identical ETFs tracking the S&P 500 index and extrapolate this to a trade of $2,000,000 and you can see there's some cost savings in the higher priced stock. As a practical example, recently a popular S&P 500 ETF (Vanguard's VOO) did a reverse split to help investors minimize this oft-missed cost.\",\n \"The actual price is represented on charts and not the change in price as a percentage, because it is the actual price which is used in all other parts of analysis (both technical and fundamental), and it is the actual figure the security is bought and sold at. A change in price has to be relative to a previous price at a previous time, and we can easily work out the change in price over any given time period. I think what you are concerned about is how to compare a certain actual price change in low priced securities to the same actual price change in a higher priced securities. For example: $1.00 rise in a $2.00 stock representing a 50% increase in price; $1.00 rise in a $10.00 stock representing a 10% increase in price. On a standard chart both of these look the same, as they both show a $1.00 increase in price. So what can we do to show the true representation of the percentage increase in price? It is actually quite simple. You view the chart using a log scale instead of a standard scale (most charting packages should have this option). What may look like a bubble on a standard scale chart, looks like a healthy uptrend on a log scale chart and represents a true picture of the percentage change in price. Example of Standard Price Scale VS LOG Price Scale on a Chart Standard Price Scale On the standard scale the price seems to have very little movement from Mar09 to Jan12 and then the price seems to zoom up after Jan12 to Mar13. This is because a 4% increase (for example) of $0.50 is only $0.02, whilst a 4% increase of $7.00 $0.28, so the increases seem much bigger at the end of the chart. LOG Price Scale On the LOG chart however, these price changes seem to be more evenly displayed no matter at what price level the price change has occurred at. This thus give a better representation of how fast or slow the price is rising or falling, or the size of the change in price.\",\n \"Is it possible that mutual funds account for a significant portion of this volume. Investors may decide to buy or sell anytime within a 24 hour period, but the transaction only happened at the close of the market. Therefore at 3:59 pm the mutual fund knows if they will be buying or selling stocks that day. As nws pointed out the non-market hours are longer and therefore accumulate more news event. Some financial news is specifically given during the time the market is closed. Therefore the reaction to that news has to either be in the morning when the market opens or in the late afternoon if they are trying to anticipate the news. Also in the US market the early morning trader may be reacting to European market activities.\",\n \"Well the thing to understand about HFT is that the volume levels heavily affect not just the earnings but also the ecosystem. HFT is almost always liquidity constrained so the volume and volatility is going to affect the overall profitability of the strategy since less of these things means fewer and smaller trading opportunities. Since 2008 volume and volatility have been heavily negatively correlated with risk-on/risk-off. During risk-off periods investors seem to panic and trading hits a frentic pace. This describes late 2008 and more recently August 2011. Even in 2012 the highest volume/volatility period was in May when the Euro deals were in danger. Risk-on environments tend to be marked be calm, orderly buying. Second the dark pool issue is bringing liquidity out of the lit markets where HFT normally makes its money. The primary reason for this trend is that dark pools are allowed to offer sub-penny quotes whereas lit exchanges are not. Because of this arbitrary regulatory constraint most of the time dark pools are going to offer better prices, especially on thick book securities. But beyond that the level of volume effects some HFT players more heavily then others. Imagine all the HFT firms as a pride of lions. When volume is high and liquidity is flowing it's like the pride has brought in a giant water buffalo. The biggest, baddest cats eat first, but there's still food left for the cubs after they're finished feeding. But if the pride only brings in say a baby gazelle the alpha cats will eat everything and the runts will go hungry. That basically describes what's happening now. A firm like RennTech or GETCO will make less money in a low volume environment, but still do fine. Marginal firms like Eladian will lose the ability to make any money. Since the marginal firms need the press and the dominant firms tend to be more secretive than the NSA, you'll tend to read more about the former than the latter.\",\n \"Assuming the data you're referring to is this line: the difference might be related to the different exchanges on which the stock trades. FINRA could be listing the reported volume from one exchange, while the NASDAQ data might be listing the volume on all exchanges. This is an important distinction because AAV is a Canadian company that is listed on the Toronto Stock Exchange and the NYSE. The Q at the end of the line stands for NASDAQ, according to FINRA's codebook for those data. My guess is that the FINRA data is only reporting the volume for the NASDAQ exchange and not the total volume for all exchanges (Toronto, NASDAQ, NYSE, etc.) while the data straight from NASDAQ, oddly enough, is reporting the total volume. However, FINRA could also face reporting discrepancies, since it's a regulatory body and therefore might not have the most up-to-date volume data that the various exchanges can access. I don't know if it's related or not, but looking at the NASDAQ historical data, it looks like the volume on March 6, the day you're asking about, was much lower than the volume in most of the days immediately before or after it. For all I know, something might have happened that day concerning that particular stock or the market as a whole. I don't remember anything in particular, but you never know.\",\n \"Prior to 1975, commissions for trading stock on the NYSE were fixed at 1% of the amount of the trade. In 1975, the SEC made fixed commission rates illegal, giving rise to discount brokers offering much reduced commission rates. Simultaneously, Electronic Communications Networks (ECNs) gained market share as alternative venues for executing trades. The increased competition led to further declines in commissions. Finally, as technology was widely adopted on Wall Street and human beings were largely taken out of the order execution process, commissions fell further. This had the effect of both drawing in new participants and increasing the rate of transactions of the existing participants (see Day Trading, which was largely unheard of prior to the technology revolution of the 1990s). Most recently, the exchanges themselves have shifted their business model to depend on high frequency traders, and the proportion of trades accounted for by HFT firms ballooned from under 10% in the early 2000s to over 50% today.\",\n \"There is a great 3rd party application out there that I use (I am a broker) along with my internal analysts and other 3rd party sources. VectorVest has a LOT of technical information, but is very easy to use. It will run any kind of screen you like, including low 52 week numbers. (No, I don't get anything for recommending them.)\",\n \"\\\"Orders large enough to buy down the current Bid and Ask Book are common. This is the essential strategy through which larger traders \\\"\\\"Strip\\\"\\\" the Bid or Ask in order to excite motion in a direction that is favorable to their interests. Smaller traders will often focus on low float/small cap tickers, as both conditions tend to favor volatility on relatively small volume.\\\"\",\n \"\\\"Buying pressure is when there are more buy orders than sell orders outstanding. Just because someone wants to buy a stock doesn't mean there's a seller ready to fill that order. When there's buying pressure, stock prices rise. When there's selling pressure, stock prices fall. There can be high volume where buying and selling are roughly equal, in which case share prices wouldn't move much. The market makers who actually fill buy and sell orders for stock will raise share prices in the face of buying pressure and lower them in the face of selling pressure. That's because they get to keep the margin between what they bought shares from a seller for and what they can sell them to a new buyer for. Here's an explanation from InvestorPlace.com about \\\"\\\"buying pressure\\\"\\\": Buying pressure can basically be defined as increasingly higher demand for a particular stock's shares. This demand for shares exceeds the supply and causes the price to rise. ... The strength or weakness of a stock determines how much buying or selling interest will be required to break support and resistance areas. I hope this helps!\\\"\",\n \"Suppose I purchase $10,000 worth of a particular share today. If the person(s) I am purchasing the shares from paid $9,000 for those shares, then I replacing their $9,000 investment with my $10,000 investment. This is a net inflow of $1,000 into the market. Similarly, if the person(s) I am purchasing the shares from paid $11,000 for those shares, then their $11,000 investment is being replace by my $10,000 investment. This is a net outflow of $1,000 out of the market. The aggregate of all such inflows and outflows in the net inflow/outflow into the market over a given period of time. (Here we are ignoring the effects of new share issues.)\",\n \"The volatility measures how fast the stock moves, not how much. So you need to know the period during which that change occurred. Then the volatility naturally is higher the faster is the change.\",\n \"\\\"You seem to prefer to trade like I do: \\\"\\\"Buy low, sell high.\\\"\\\" But there are some people that prefer a different way: \\\"\\\"Buy high, sell higher.\\\"\\\" A stock that has \\\"\\\"just appreciated\\\"\\\" is \\\"\\\"in motion.\\\"\\\" That is a \\\"\\\"promise\\\"\\\" (not always kept) that it will continue to go higher. Some people want stocks that not only go higher, but also SOON. The disadvantage of \\\"\\\"buy low, sell high\\\"\\\" is that the stock can stay low for some time. So that's a strategy for patient investors like you and me.\\\"\",\n \"Consider the mechanic which actually drives the 'price' of a stock. In simplest terms, the 'price' of a stock is the price at which the most recent trade occurred. ie: if the price of IBM is $100/share, that means the last time someone bought IBM stock, they paid $100. Above and below the 'spot price', are dozens/hundreds/thousands of buyers and sellers who have placed orders that no one is yet willing to match. ie: if IBM's spot price is at $100, there could still be 10,000 people willing to sell for $101 (called the 'ask' price, for the lowest price someone is currently willing to sell at), and 15,000 willing to buy for $99 (called the 'bid' price, for the highest price someone is currently willing to buy for). Until someone is willing to buy for $101, then no one will be able to sell at $101. Until someone is willing to sell for $99, no one will be able to buy for $99. Typically orders are placed in the market at a particular limit. Meaning that those orders to buy at $99/sell at $101 are already in the 'system', and will be matched immediately as soon as someone is willing to meet the price on the other side. Now consider general market economics: high demand drives up price, and high supply drives down price. If the details above for IBM were yesterday, and today some news came out that IBM was laying off employees, imagine that another 10,000 people who held shares wanted to sell. Now there would be 20,000 sellers and only 15,000 buyers. If those new sellers were aggressive about wanting to sell, they would have to drop their price to $99, to match the highest buyers in the market. Put together, this means that as more sellers enter the market, supply of shares increases, driving down price. Conversely, as more buyers enter the market, demand for shares increases, driving up share price. As a result of the above, you can say that (all else being equal) if price for a stock goes up, there were more buyers that day, and if price goes down, there were more sellers that day. On the face of it, that is not necessarily true, because you could have the same number of buyers and sellers, one side could have simply decreased/increased their acceptable price to match the other side.\",\n \"What does it mean when some one says that today there was a lot of net selling or buying in a stock. What does it mean because for every selling there is also a buying going on then how can you determine a selling or buying ? Generally if the price of stock has gone down compared to previous day, the trend is of selling. As the price can be volatile, there maybe few trades that are above close price of previous day, or below close price of previous day. How can you calculate average trade price for a stock It is simple {sum of all [price*quantity]}/quantity. Related question Equity market inflow meaning\",\n \"Volatility is a shitty metric and is sample dependent, What is more interesting is point recurrence, i.e. how many times has a certain point been touched in x time, you can make good day trading strategies off point recurrence (relative that is).\",\n \"Obviously there are good answers about the alternatives to the stock market in the referenced question. HFT has been debated heavily over the past couple of years, and the Flash crash of May 6, 2010, has spurred regulators to rein in heavy automated trading. HFT takes advantage of churn and split second reactions to changing market trends, news and rumors. It is not wise for individual investors to fight the big boys in these games and you will likely lose money in day trading as a result. HFT's defender's may be right when they claim that it makes the market more liquid for you to get the listed price for a security, but the article points out that their actions more closely resemble the currently illegal practice of front-running than a negotiated trade where both parties feel that they've received a fair value. There are many factors including supply and demand which affect stock prices more than volume does. While market makers are generating the majority of volume with their HFT practices, volume is merely the number of shares bought and sold in a day. Volume shows how many shares people are interested in trading, not the actual underlying value of the security and its long term prospects. Extra volume doesn't affect most long term investments, so your long term investments aren't in any extra danger due to HFT. That said, the stock market is a risky place whether panicked people or poorly written programs are trading out of control. Most people are better off investing rather than merely trading. Long term investors don't need to get the absolute lowest price or the highest sell. They move into and out of positions based on overall value and long term prospects. They're diversified so bad apples like Enron, etc. won't destroy their portfolio. Investors long term view allows them to ignore the effects of churn, while working like the tortoise to win the race while the hare eventually gets swallowed by a bad bet. There are a lot of worrying and stressful uncertainties in the global economy. If it's a question of wisdom, focus on sound investments and work politically (as a citizen and shareholder) to fix problems you see in the system.\",\n \"It's been particularly low the past couple months though... and I'm talking futures a couple months out too. 5 years is about the cycle length for significant VIX change too. I do believe though that the prominence of algo trading and other high speed trading has made prices less volatile though. But at this level and, more importantly, with so many people short VIX: it's a bit worrisome here.\",\n \"\\\"Just as a matter of research, apparently there is a way to find high option volumes such as a site here: https://www.barchart.com/options/volume-leaders/stocks However, that information is going to be heavily skewed by \\\"\\\"underlying security that moved a lot more than expected and probably got a lot of positions filled incidentally today\\\"\\\", but I think it is a good place to start building up a list of securities with a lot of option interest. There is also a tab there for ETFs. This will not tell you exactly that a particular stock always has high option volume, but most of the ones that show up there repeatedly and across multiple strike prices will meet your criteria.\\\"\",\n \"That is mostly true, in most situations when there are more buy orders than sell orders (higher buy volume orders than sell volume orders), the price will generally move upwards and vice versa, when there are more sell orders than buy orders (higher sell volume orders than buy volume orders), the price will generally move downwards. Note that this does not always happen, but usually it does. You are also correct that for a trade to take place a buyer has to be matched with a seller (or the buy volume matched with the sell volume). But not all orders get executed as trades. Say there are 50 buy orders in the order book with a total volume of 100,000 shares and the highest buy order is currently at $10.00. On the other side there are only 10 sell orders in the order book with total volume of 10,000 shares and the lowest sell order is currently $10.05. At the moment there won't be a trade unless a new buyer or seller enters the market to match the opposing side, or an existing order gets amended upper or lower to match the opposing side. With more demand than supply in the order books what will be the most likely direction that this stock moves in? Most likely the price will move upwards. If a new buyer sees the price moving higher and then looks at the market depth, they would most likely place an order closer to the lowest sell order than the current highest buy order, say $10.01, to be first in line in case a market sell order is placed on the market. As new buy orders enter the market it drives the price higher and higher until the buy orders dry up.\",\n \"Market capitalization is one way to represent the value of the company. So if a company has 10 million shares, which are each worth $100, then the company's market capitalization is 1 billion. Large cap companies tend to be larger and more stable. Small cap companies are smaller, which indicates higher volatility. So if you want more aggressive investments then you may want to invest in small cap companies while if you lean on the side of caution then big cap companies may be your friend.\",\n \"\\\"A lot (sometimes called a round lot) always refers to the quantity of physical good that you're getting, like a carton of eggs or a barrel of oil. The tricky thing in the case of forex is that the physical good also happens to be a currency. A spot currency product trades in the denomination on the right-hand side (RHS) of the product name. So if you're buying EUR/USD you are paying USD currency to get EUR \\\"\\\"units\\\"\\\", and if you're selling EUR/USD you are receiving USD by giving away EUR \\\"\\\"units\\\"\\\". The EUR is the \\\"\\\"physical good\\\"\\\" in this case. The way I remember it is to think of all products (not just currencies) as trading pairs. So AAPL in my mind is AAPL/USD. When I buy AAPL/USD I am paying USD to get AAPL units. When I sell AAPL/USD I am receiving USD by giving away AAPL units. The thing on the left is the physical good (even if it happens to be money) that you are exchanging, and the thing on the right is the money that you are exchanging. So, when I buy a lot of AAPL, I am buying 100 shares at their current price in dollars. Similarly, when I buy a lot of EUR/USD, I am buying 100K Euros at their current price in dollars.\\\"\",\n \"What is your investment goal? Many investors buy for the long haul, not short-term gain. If you're looking for long-term gain then daily fluctuations should be of no concern to you. If you want to day-trade and time the market (buy low and sell high with a short holding period) then yes less volatile stock can be less profitable, but they also carry less risk. In that case, though, transaction fees have more of an impact, and you usually have to trade in larger quantities to reduce the impact of transaction fees.\",\n \"I usually look at the high and low exchange rates for the last five years. If the current rate is fairly close to the high for a trade over the past five years, then I do the trade. If the current exchange rate is close to the low, then I wait.\",\n \"\\\"I was the one who made the beating you to the punch comment. That liquidity is worthless without an active market. That's the whole point of liquidity. An ability to sell back when needed. High volume means nothing when the fucking HFT buys all the stock and holds you hostage to his sell price. The only thing raising the price of pineapples is high speed trading. They only buy OR sell **when they see a bid.** That is not a traditional market maker. Please, tell me how that is wrong. That is not a rhetorical question. edit: If a pineapple is listed at 6.00 let's say you decide to buy and throw it in your cart. A store employee overhears you saying \\\"\\\"I'd be willing to pay 6.02 for this\\\"\\\". The employee tells the cashier to raise the price to 6.02 right before you get to the register. This is HFT in a nutshell. It doesn't provide an active pineapple market because the pineapple was only being offered once a buyer was lined up.\\\"\",\n \"**Volume-weighted average price** In finance, volume-weighted average price (VWAP) is the ratio of the value traded to total volume traded over a particular time horizon (usually one day). It is a measure of the average price at which a stock is traded over the trading horizon. VWAP is often used as a trading benchmark by investors who aim to be as passive as possible in their execution. Many pension funds, and some mutual funds, fall into this category. *** ^[ [^PM](https://www.reddit.com/message/compose?to=kittens_from_space) ^| [^Exclude ^me](https://reddit.com/message/compose?to=WikiTextBot&message=Excludeme&subject=Excludeme) ^| [^Exclude ^from ^subreddit](https://np.reddit.com/r/finance/about/banned) ^| [^FAQ ^/ ^Information](https://np.reddit.com/r/WikiTextBot/wiki/index) ^| [^Source](https://github.com/kittenswolf/WikiTextBot) ^] ^Downvote ^to ^remove ^| ^v0.24\",\n \"Any such number would depend on the country, the market, and the economic situation - especially inflation ratio. Generally, if you are not in a booming or a dying technology, getting a raise above the inflation ratio is 'good'; anything below is poor.\",\n \"You don't see Buying and Selling. You see Bid and Ask. Best Bid--Highest Price someone is willing to pay to buy a stock. Best Ask - Lowest price someone is willing to accept to sell a stock. As for your second question, if you can look up Accumulation/Distribution Algorithm and Iceberg Order, you will get basic idea.\",\n \"As per the chart pattern when ever a stock breaks its 52 week high. This information may differ for penny stocks,small caps and mid cap stocks\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["The daily Volume is usually compared to the average daily volume over the past 50 days for a stock. High volume is usually considered to be 2 or more times the average daily volume over the last 50 days for that stock, however some traders might set the crireia to be 3x or 4x the ADV for confirmation of a particular pattern or event. The volume is compared to the ADV of the stock itself, as comparing it to the volume of other stocks would be like comparing apples with oranges, as difference companies would have different number of total stocks available, different levels of liquidity and different levels of volatility, which can all contribute to the volumes traded each day.","\"Volume is really only valuable when compared to some other volume, either from a historical value, or from some other stock. The article you linked to doesn't provide specific numbers for you to evaluate whether volume is high or low. Many people simply look at the charts and use a gut feel for whether a day's volume is \"\"high\"\" or \"\"low\"\" in their estimation. Typically, if a day's volume is not significantly taller than the usual volume, you wouldn't call it high. The same goes for low volume. If you want a more quantitative approach, a simple approach would be to use the normal distribution statistics: Calculate the mean volume and the standard deviation. Anything outside of 1.5 to 2.0 standard deviations (either high or low) could be significant in your analysis. You'll need to pick your own numbers (1.5 or 2.0 are just numbers I pulled out of thin air.) It's hard to read anything specific into volume, since for every seller, there's a buyer, and each has their reasons for doing so. The article you link to has some good examples of using volume as a basis for strengthening conclusions drawn using other factors.\""],"string":"[\n \"The daily Volume is usually compared to the average daily volume over the past 50 days for a stock. High volume is usually considered to be 2 or more times the average daily volume over the last 50 days for that stock, however some traders might set the crireia to be 3x or 4x the ADV for confirmation of a particular pattern or event. The volume is compared to the ADV of the stock itself, as comparing it to the volume of other stocks would be like comparing apples with oranges, as difference companies would have different number of total stocks available, different levels of liquidity and different levels of volatility, which can all contribute to the volumes traded each day.\",\n \"\\\"Volume is really only valuable when compared to some other volume, either from a historical value, or from some other stock. The article you linked to doesn't provide specific numbers for you to evaluate whether volume is high or low. Many people simply look at the charts and use a gut feel for whether a day's volume is \\\"\\\"high\\\"\\\" or \\\"\\\"low\\\"\\\" in their estimation. Typically, if a day's volume is not significantly taller than the usual volume, you wouldn't call it high. The same goes for low volume. If you want a more quantitative approach, a simple approach would be to use the normal distribution statistics: Calculate the mean volume and the standard deviation. Anything outside of 1.5 to 2.0 standard deviations (either high or low) could be significant in your analysis. You'll need to pick your own numbers (1.5 or 2.0 are just numbers I pulled out of thin air.) It's hard to read anything specific into volume, since for every seller, there's a buyer, and each has their reasons for doing so. The article you link to has some good examples of using volume as a basis for strengthening conclusions drawn using other factors.\\\"\"\n]","isConversational":false}}},{"rowIdx":93,"cells":{"_id":{"kind":"string","value":"7509"},"query":{"kind":"string","value":"Investment Portfolio Setup for beginner"},"gt_ids":{"kind":"list like","value":["178303"],"string":"[\n \"178303\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1],"string":"[\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["591909","281865","469141","412331","146679","65006","231195","384983","280530","505993","363753","199181","404800","234979","7748","155242","322591","45970","172913","160170","238500","332022","233226","246253","142320","178303","576890","224816","171189","409959","83079","60032","30825","418551","330743","35995","328086","120133","218285","458183","206285","187124","115378","133517","574359","535720","464297","551719","136270","65567","424247","78893","45174","167194","580313","531965","329466","51848","405344","586632","531005","560395","122679","392826","328076","70558","571218","226298","418003","495600","240975","566069","275376","240351","298985","581635","526664","26172","411084","177036","84800","474296","513818","478242","129255","227733","429929","399543","382384","416358","356515","489640","144030","155074","328691","397976","262196","312591","308764","438294"],"string":"[\n \"591909\",\n \"281865\",\n \"469141\",\n \"412331\",\n \"146679\",\n \"65006\",\n \"231195\",\n \"384983\",\n \"280530\",\n \"505993\",\n \"363753\",\n \"199181\",\n \"404800\",\n \"234979\",\n \"7748\",\n \"155242\",\n \"322591\",\n \"45970\",\n \"172913\",\n \"160170\",\n \"238500\",\n \"332022\",\n \"233226\",\n \"246253\",\n \"142320\",\n \"178303\",\n \"576890\",\n \"224816\",\n \"171189\",\n \"409959\",\n \"83079\",\n \"60032\",\n \"30825\",\n \"418551\",\n \"330743\",\n \"35995\",\n \"328086\",\n \"120133\",\n \"218285\",\n \"458183\",\n \"206285\",\n \"187124\",\n \"115378\",\n \"133517\",\n \"574359\",\n \"535720\",\n \"464297\",\n \"551719\",\n \"136270\",\n \"65567\",\n \"424247\",\n \"78893\",\n \"45174\",\n \"167194\",\n \"580313\",\n \"531965\",\n \"329466\",\n \"51848\",\n \"405344\",\n \"586632\",\n \"531005\",\n \"560395\",\n \"122679\",\n \"392826\",\n \"328076\",\n \"70558\",\n \"571218\",\n \"226298\",\n \"418003\",\n \"495600\",\n \"240975\",\n \"566069\",\n \"275376\",\n \"240351\",\n \"298985\",\n \"581635\",\n \"526664\",\n \"26172\",\n \"411084\",\n \"177036\",\n \"84800\",\n \"474296\",\n \"513818\",\n \"478242\",\n \"129255\",\n \"227733\",\n \"429929\",\n \"399543\",\n \"382384\",\n \"416358\",\n \"356515\",\n \"489640\",\n \"144030\",\n \"155074\",\n \"328691\",\n \"397976\",\n \"262196\",\n \"312591\",\n \"308764\",\n \"438294\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["As stated in the comments, Index Funds are the way to go. Stocks have the best return on investment, if you can stomach the volatility, and the diversification index funds bring you is unbeatable, while keeping costs low. You don't need an Individual Savings Account (UK), 401(k) (US) or similar, though they would be helpful to boost investment performance. These are tax advantaged accounts; without them you will have to pay taxes on your investment gains. However, there's still a lot to gain from investing, specially if the alternative is to place them in the vault or similar. Bear in mind that inflation makes your money shrink in real terms. Even a small interest is better than no interest. By best I mean that is safe (regulated by the financial authorities, so your money is safe and insured up to a certain amount) and has reasonable fees (keeping costs low is a must in any scenario). The two main concerns when designing your portfolio are diversification and low TER (Total Expense Ratio). As when we chose broker, our concern is to be as safe as we possibly can (diversification helps with this) and to keep costs at the bare minimum. Some issues might restrict your election or make others seem better. Depending on the country you live and the one of the fund, you might have to pay more taxes on gains/dividends. e.g. The US keeps some of them if your country doesn't have a special treaty with them. Look for W-8Ben and tax withholding for more information. Vanguard and Blackrock offer nice index funds. Morningstar might be a good place for gathering information. Don't trust blindly the 'rating'. Some values are 'not rated' and kick ass the 4 star ones. Again: seek low TER. Not a big fan of this point, but I'm bound to mention it. It can be actually helpful for sorting out tax related issues, which might decide the kind of index fund you pick, and if you find this topic somewhat daunting. You start with a good chunk of money, so it might make even more sense in your scenario to hire someone knowledgeable and trustworthy. I hope this helps to get you started. Best of luck.","On reading couple of articles & some research over internet, I got to know about diversified investment where one should invest 70% in equity related & rest 30% in debt related funds Yes that is about right. Although the recommendation keeps varying a bit. However your first investment should not aim for diversification. Putting small amounts in multiple mutual funds may create paper work and tracking issues. My suggestion would be to start with an Index EFT or Large cap. Then move to balanced funds and mid caps etc. On this site we don't advise on specific funds. You can refer to moneycontrol.com or economictimes or quite a few other personal finance advisory sites to understand the top funds in the segments and decide on funds accordingly. PS: Rather than buying paper, buy it electronic, better you can now buy it as Demat. If you already have an Demat account it would be best to buy through it.","When you are starting out using a balanced fund can be quite advantageous. A balanced fund is represents a diversified portfolio in single fund. The primary advantage of using a balanced fund is that with it being a single fund it is easier to meet the initial investment minimum. Later once you have enough to transition to a portfolio of diversified funds you would sell the fund and buy the portfolio. With a custom portfolio, you will be better able to target your risk level and you might also be able to use lower cost funds. The other item to check is do any of the funds that you might be interested in for the diversified portfolio have lower initial investment option if you can commit to adding money on a specified basis (assuming that you are able to). Also there might be an ETF version of a mutual fund and for those the initial investment amount is just the share price. The one thing to be aware of is make sure that you can buy enough shares that you can rebalance (holding a single share makes it hard to sell some gain when rebalancing). I would stay away from individual stocks until you have a much larger portfolio, assuming that you want to invest with a diversified portfolio. The reason being that it takes a lot more money to create a diversified portfolio out of individual stocks since you have to buy whole shares. With a mutual fund or ETF, your underlying ownership of can be fractional with no issue as each fund share is going to map into a fraction of the various companies held and with mutual funds you can buy fractional shares of the fund itself.","Take the easy approach - as suggested by John Bogle (founder of Vanguard - and a man worthy of tremendous respect). Two portfolios consisting of 1 index fund each. Invest your age% in the Fixed Income index fund. Invest (1-age)% in the stock index fund. Examples of these funds are the Total Market Index Fund (VTSMX) and the Total Bond Market Index (VBMFX). If you wish to be slightly more adventurous, blend (1-age-10)% as the Total Market Index Fund and a fixed 10% as Total International Stock Index (VGTSX). You will sleep well at night for most of your life.","It sounds like you are soliciting opinions a little here, so I'll go ahead and give you mine, recognizing that there's a degree of arbitrariness here. A basic portfolio consists of a few mutual funds that try to span the space of investments. My choices given your pot: I like VLTCX because regular bond index funds have way too much weight in government securities. Government bonds earn way too little. The CAPM would suggest a lot more weight in bonds and international equity. I won't put too much in bonds because...I just don't feel like it. My international allocation is artificially low because it's always a little more costly and I'm not sure how good the diversification gains are. If you are relatively risk averse, you can hold some of your money in a high-interest online bank and only put a portion in these investments. $100K isn't all that much money but the above portfolio is, I think, sufficient for most people. If I had a lot more I'd buy some REIT exposure, developing market equity, and maybe small cap. If I had a ton more (several million) I'd switch to holding individual equities instead of funds and maybe start looking at alternative investments, real estate, startups, etc.","There are quite a few options. Suggest you put a mix of things and begin investing into Mutual Funds.","I am not interested in watching stock exchange rates all day long. I just want to place it somewhere and let it grow Your intuition is spot on! To buy & hold is the sensible thing to do. There is no need to constantly monitor the stock market. To invest successfully you only need some basic pointers. People make it look like it's more complicated than it actually is for individual investors. You might find useful some wisdom pearls I wish I had learned even earlier. Stocks & Bonds are the best passive investment available. Stocks offer the best return, while bonds are reduce risk. The stock/bond allocation depends of your risk tolerance. Since you're as young as it gets, I would forget about bonds until later and go with a full stock portfolio. Banks are glorified money mausoleums; the interest you can get from them is rarely noticeable. Index investing is the best alternative. How so? Because 'you can't beat the market'. Nobody can; but people like to try and fail. So instead of trying, some fund managers simply track a market index (always successfully) while others try to beat it (consistently failing). Actively managed mutual funds have higher costs for the extra work involved. Avoid them like the plague. Look for a diversified index fund with low TER (Total Expense Ratio). These are the most important factors. Diversification will increase safety, while low costs guarantee that you get the most out of your money. Vanguard has truly good index funds, as well as Blackrock (iShares). Since you can't simply buy equity by yourself, you need a broker to buy and sell. Luckily, there are many good online brokers in Europe. What we're looking for in a broker is safety (run background checks, ask other wise individual investors that have taken time out of their schedules to read the small print) and that charges us with low fees. You probably can do this through the bank, but... well, it defeats its own purpose. US citizens have their 401(k) accounts. Very neat stuff. Check your country's law to see if you can make use of something similar to reduce the tax cost of investing. Your government will want a slice of those juicy dividends. An alternative is to buy an index fund on which dividends are not distributed, but are automatically reinvested instead. Some links for further reference: Investment 101, and why index investment rocks: However the author is based in the US, so you might find the next link useful. Investment for Europeans: Very useful to check specific information regarding European investing. Portfolio Ideas: You'll realise you don't actually need many equities, since the diversification is built-in the index funds. I hope this helps! There's not much more, but it's all condensed in a handful of blogs.","\"You mentioned three concepts: (1) trading (2) diversification (3) buy and hold. Trading with any frequency is for people who want to manage their investments as a hobby or profession. You do not seem to be in that category. Diversification is a critical element of any investment strategy. No matter what you do, you should be diversified. All the way would be best (this means owning at least some of every asset out there). The usual way to do this is to own a mutual or index fund. Or several. These funds own hundreds or thousands of stocks, so that buying the fund instantly diversifies you. Buy and hold is the only reasonable approach to a portfolio for someone who is not interested in spending a lot of time managing it. There's no reason to think a buy-and-hold portfolio will underperform a typical traded portfolio, nor that the gains will come later. It's the assets in the portfolio that determine how aggressive/risky it is, not the frequency with which it is traded. This isn't really a site for specific recommendations, but I'll provide a quick idea: Buy a couple of index funds that cover the whole universe of investments. Index funds have low expenses and are the cheapest/easiest way to diversify. Buy a \"\"total stock market\"\" fund and a \"\"total bond fund\"\" in a ratio that you like. If you want, also buy an \"\"international fund.\"\" If you want specific tickers and ratios, another forum would be better(or just ask your broker or 401(k) provider). The bogleheads forum is one that I respect where people are very happy to give and debate specific recommendations. At the end of the day, responsibly managing your investment portfolio is not rocket science and shouldn't occupy a lot of time or worry. Just choose a few funds with low expenses that cover all the assets you are really interested in, put your money in them in a reasonable-ish ratio (no one knows that the best ratio is) and then forget about it.\"","Most people carry a diversity of stock, bond, and commodities in their portfolio. The ratio and types of these investments should be based on your goals and risk tolerance. I personally choose to manage mine through mutual funds which combine the three, but ETFs are also becoming popular. As for where you keep your portfolio, it depends on what you're investing for. If you're investing for retirement you are definitely best to keep as much of your investment as possible in 401k or IRAs (preferably Roth IRAs). Many advisers suggest contributing as much to your 401k as your company matches, then the rest to IRA, and if you over contribute for the IRA back to the 401k. You may choose to skip the 401k if you are not comfortable with the choices your company offers in it (such as only investing in company stock). If you are investing for a point closer than retirement and you still want the risk (and reward potential) of stock I would suggest investing in low tax mutual funds, or eating the tax and investing in regular mutual funds. If you are going to take money out before retirement the penalties of a 401k or IRA make it not worth doing. Technically a savings account isn't investing, but rather a place to store money.","Buy the minimum of one fund now. (Eg total bond market) Buy the minimum of the next fund next time you have $2500. (Eg large-cap stocks.) Continue with those until you have enough to buy the next fund (eg small-cap stocks). Adjust as you go to balance these funds according to your planned ratios, or as close as you can reasonably get without having to actually transfer money between the funds more than once a year or so. Build up to your targets over time. If you can't easily afford to tie up that first $2500, stay with banks and CDs and maybe money market accounts until you can. And don't try to invest (except maybe through a matched 401k) before you have adequate savings both for normal life and for an emergency reserve. Note too that the 401k can be a way to buy into funds without a minimum. Check with your employer. If you haven't maxed out your 401k yet, and it has matching funds, that is usually the place to start saving for retirement; otherwise you are leaving free money on the table.","Don't over think about your choices. The most important thing to start now and keep adjusting and tuning your portfolio as you move along in your life. Each individual's situation is unique. Start with something simple and straight forward, like 100 - your age, in Total Stock market Index fund and the remaining total bond market index fund. For your 401k, at least contribute so much as to get the maximum employer match. Its always good if you can contribute the yearly maximum in your 401k or IRA. Once you have built up a substantial amount of assets (~ $50k+) then its time to think more about asset allocation and start buying into more specific investments as needed. Remember to keep your investment expenses low by using index funds. Also remember to factor in tax implications on your investment decisions. eg. buying an REIT fund in a tax advantaged account like 40k is more tax efficient than buying it in a normal brokerage account.","If you are a novice investor and want to diversify, I'd recommend looking into targeted mutual funds. They couldn't be easier. You just put your money in the fund with the year that you anticipating needing to take the money out and the fund manager handles diversification and adjusting the risk appropriately over the life of the fund based on the remaining time horizon. The only downside is that the annual expenses tend to be higher on these than if you just invested in the underlying securities/funds, but you are pretty much paying them to manage it for you.","First, check out some of the answers on this question: Oversimplify it for me: the correct order of investing When you have determined that you are ready to invest for retirement, there are two things you need to consider: the investment and the account. These are separate items. The investment is what makes your money grow. The type of account provides tax advantages (and restrictions). Generally, these can be considered separately; for the most part, you can do any type of investment in any account. Briefly, here is an overview of some of the main options: In your situation, the Roth IRA is what I would recommend. This grows tax free, and if you need the funds for some reason, you can get out what you put in without penalty. You can invest up to $5500 in your Roth IRA each year. In addition to the above reasons, which are true for anybody, a Roth IRA would be especially beneficial for you for three reasons: For someone that is closer in age to retirement and in a higher tax bracket now, a Roth IRA is less attractive than it is for you. Inside your Roth IRA, there are lots of choices. You can invest in stocks, bonds, mutual funds (which are simply collections of stocks and bonds), bank accounts, precious metals, and many other things. Discussing all of these investments in one answer is too broad, but my recommendation is this: If you are investing for retirement, you should be investing in the stock market. However, picking individual stocks is too risky; you need to be diversified in a lot of stocks. Stock mutual funds are a great way to invest in the stock market. There are lots of different types of stock mutual funds with different strategies and expenses associated with them. Managed funds actively buy and sell different stocks inside them, but have high expenses to pay the managers. Index funds buy and hold a list of stocks, and have very low expenses. The conventional wisdom is that, in general, index funds perform better than managed funds when you take the expenses into account. I hope this overview and these recommendations were helpful. If you have any specific questions about any of these types of accounts or investments, feel free to ask another question.","There is no rule of thumb (although some may suggest there is). Everybody will have different goals, investment preferences and risk tolerances. You need to figure this out by yourself by either education yourself in the type of investments you are interested in or by engaging (and paying for) a financial advisor. You should not be taking advice from others unless it is specifically geared for your goals, investment DNA and risk tolerance. The only advice I would give you is to have a plan (whether you develop it yourself or pay a financial advisor to develop one). Also, don't have all your savings sitting in cash, as long-term you will fall behind the eight ball in real returns (allowing for inflation).","\"For your first question, the general guidelines I've seen recommended are as follows: As to your second question, portfolio management is something you should familiarize yourself with. If you trust it to other people, don't be surprised when they make \"\"mistakes\"\". Remember, they get paid regardless of whether you make money. Consider how much any degree of risk will affect you. When starting out, your contributions make up most of the growth of your accounts; now is the time when you can most afford to take higher risk for higher payouts (still limiting your risk as much as possible, of course). A 10% loss on a portfolio of $50k can be replaced with a good year's contributions. Once your portfolio has grown to a much larger sum, it will be time to dial back the risk and focus on preserving your capital. When choosing investments, always treat your porfolio as a whole - including non-retirement assets (other investment accounts, savings, even your house). Don't put too many eggs from every account into the same basket, or you'll find that 30% of your porfolio is a single investment. Also consider that some investments have different tax consequences, and you can leverage the properties of each account to offset that.\"","You have to look at the market conditions and make decisions based on them. Ideally, you may want to have 30% of your portfolio in bonds. But from a practical point of view, it's probably not so smart to invest in bond funds right at this moment given the interest rate market. Styles of funds tend to go into and out of style. I personally do asset allocation two ways in my 457 plan (like a 401k for government workers): In my IRA, I invest in a portfolio of 5-6 stocks. The approach you take is dependent on what you are able to put into it. I invest about 10 hours a week into investment related research. If you can't do that, you want a strategy that is simpler -- but you still need to be cognizant of market conditions.","This is a very open ended question with no concrete answer as it depends on your personal situation. However, for starters I would suggest picking up a copy of The Investment Answer. It's a very light read, less than 100 pages, but it has some amazingly simple yet very concrete advice on investing and answers a lot of common questions (like yours).","\"Index funds can be a very good way to get into the stock market. It's a lot easier, and cheaper, to buy a few shares of an index fund than it is to buy a few shares in hundreds of different companies. An index fund will also generally charge lower fees than an \"\"actively managed\"\" mutual fund, where the manager tries to pick which stocks to invest for you. While the actively managed fund might give you better returns (by investing in good companies instead of every company in the index) that doesn't always work out, and the fees can eat away at that advantage. (Stocks, on average, are expected to yield an annual return of 4%, after inflation. Consider that when you see an expense ratio of 1%. Index funds should charge you more like 0.1%-0.3% or so, possibly more if it's an exotic index.) The question is what sort of index you're going to invest in. The Standard and Poor's 500 (S&P 500) is a major index, and if you see someone talking about the performance of a mutual fund or investment strategy, there's a good chance they'll compare it to the return of the S&P 500. Moreover, there are a variety of index funds and exchange-traded funds that offer very good expense ratios (e.g. Vanguard's ETF charges ~0.06%, very cheap!). You can also find some funds which try to get you exposure to the entire world stock market, e.g. Vanguard Total World Stock ETF, NYSE:VT). An index fund is probably the ideal way to start a portfolio - easy, and you get a lot of diversification. Later, when you have more money available, you can consider adding individual stocks or investing in specific sectors or regions. (Someone else suggested Brazil/Russia/Indo-China, or BRICs - having some money invested in that region isn't necessarily a bad idea, but putting all or most of your money in that region would be. If BRICs are more of your portfolio then they are of the world economy, your portfolio isn't balanced. Also, while these countries are experiencing a lot of economic growth, that doesn't always mean that the companies that you own stock in are the ones which will benefit; small businesses and new ventures may make up a significant part of that growth.) Bond funds are useful when you want to diversify your portfolio so that it's not all stocks. There's a bunch of portfolio theory built around asset allocation strategies. The idea is that you should try to maintain a target mix of assets, whatever the market's doing. The basic simplified guideline about investing for retirement says that your portfolio should have (your age)% in bonds (e.g. a 30-year-old should have 30% in bonds, a 50-year-old 50%.) This helps maintain a balance between the volatility of your portfolio (the stock market's ups and downs) and the rate of return: you want to earn money when you can, but when it's almost time to spend it, you don't want a sudden stock market crash to wipe it all out. Bonds help preserve that value (but don't have as nice of a return). The other idea behind asset allocation is that if the market changes - e.g. your stocks go up a lot while your bonds stagnate - you rebalance and buy more bonds. If the stock market subsequently crashes, you move some of your bond money back into stocks. This basically means that you buy low and sell high, just by maintaining your asset allocation. This is generally more reliable than trying to \"\"time the market\"\" and move into an asset class before it goes up (and move out before it goes down). Market-timing is just speculation. You get better returns if you guess right, but you get worse returns if you guess wrong. Commodity funds are useful as another way to diversify your portfolio, and can serve as a little bit of protection in case of crisis or inflation. You can buy gold, silver, platinum and palladium ETFs on the stock exchanges. Having a small amount of money in these funds isn't a bad idea, but commodities can be subject to violent price swings! Moreover, a bar of gold doesn't really earn any money (and owning a share of a precious-metals ETF will incur administrative, storage, and insurance costs to boot). A well-run business does earn money. Assuming you're saving for the long haul (retirement or something several decades off) my suggestion for you would be to start by investing most of your money* in index funds to match the total world stock market (with something like the aforementioned NYSE:VT, for instance), a small portion in bonds, and a smaller portion in commodity funds. (For all the negative stuff I've said about market-timing, it's pretty clear that the bond market is very expensive right now, and so are the commodities!) Then, as you do additional research and determine what sort investments are right for you, add new investment money in the places that you think are appropriate - stock funds, bond funds, commodity funds, individual stocks, sector-specific funds, actively managed mutual funds, et cetera - and try to maintain a reasonable asset allocation. Have fun. *(Most of your investment money. You should have a separate fund for emergencies, and don't invest money in stocks if you know you're going need it within the next few years).\"","What is the best form of investment? It only depends on your goals... The perfect amount of money depends also on your particular situation. The first thing you should start getting familiar with is the notion of portfolio and diversification. Managing risk is also fundamental especially with the current market funkiness... Start looking at index based ETFs -Exchange Traded Funds- and Balanced Mutual Funds to begin with. Many discounted online brokerage companies in the USA offer good training and knowledge centers. Some of them will also let you practice with a demo account that let you invest virtual money to make you feel comfortable with the interface and also with investing in general.","What explains the most of the future returns of a portfolio is the allocation between asset classes. In the long term, stock investments are almost certain to return more than any other kinds of investments. For 40+ years, I would choose a portfolio of 100% stocks. How to construct the portfolio, then? Diversification is the key. You should diversify in time (don't put a large sum of money into your stock portfolio immediately; if you have a large sum to invest, spread it around several years). You should diversify based on company size (invest in both large and small companies). You should also diversify internationally (don't invest in just US companies). If you prefer to pick individual stocks, 20 very carefully selected stocks may provide enough diversification if you keep diversification in mind during stock picking. However, careful stock picking cannot be expected to yield excess returns, and if you pick stocks manually, you need to rebalance your portfolio occasionally. Thus, if you're lazy, I would recommend a mutual fund, or many mutual funds if you have difficulty finding a low-cost one that is internationally diversified. The most important consideration is the cost. You cannot expect careful fund selection to yield excess returns before expenses. However, the expenses are certain costs, so prefer low-cost funds. Almost always this means picking index funds. Avoid funds that have a small number of stocks, because they typically invest only in the largest companies, which means you fail to get diversification in company size. So, instead of Euro STOXX 50, select STOXX 600 when investing to the European market. ETFs may have lower costs than traditional mutual funds, so keep ETFs in mind when selecting the mutual funds in which to invest. For international diversification, do not forget emerging markets. It is not excessive to invest e.g. 20% to emerging markets. Emerging markets have a higher risk but they also have a higher return. A portfolio that does not include emerging markets is not in my opinion well diversified. When getting close to retirement age, I would consider increasing the percentage of bonds in the portfolio. This should be done primarily by putting additional money to bonds instead of selling existing investments to avoid additional taxes (not sure if this applies to other taxation systems than the Finnish one). Bond investments are best made though low-cost mutual funds as well. Keep bond investments in your local currency and risk-free assets (i.e. select US government bonds). Whatever you do, remember that historical return is no guarantee of future return. Actually, the opposite may be true: there is a mean reversion law. If a particular investment has returned well in the past, it often means its price has gone up, making it more likely that the price goes down in the future. So don't select a fund based on its historical return; instead, select a fund based on low costs. However, I'm 99% certain that over a period of 40 years, stocks will return better than other investments. In addition to fund costs, taxes are the other certain thing that will be deducted from your returns. Research what options you have to reduce the taxes you need to pay. 401-K was explained in another answer; this may be a good option. Some things recommended in other answers that I would avoid:","What is the best option to start with? and I am not sure about my goals right now but I do want to have a major retirement account without changing it for a long time That is a loaded question. Your goals should be set up first, else what is stopping you from playing the mega millions lottery to earn the retirement amount instantly. If you have the time and resources, you should try doing it yourself. It helps you learn and at a latter stage if you don't have the time to manage it yourself, you can find an adviser who does it for you. To find a good adviser or find a fund who/which can help you achieve your monetary goals you will need to understand the details, how it works and other stuff, behind it. When you are thrown terms at your face by somebody, you should be able to join the dots and get a picture for yourself. Many a rich men have lost their money to unscrupulous people i.e. Bernie Madoff. So knowing helps a lot and then you can ask questions or find for yourself to calm yourself i.e. ditch the fund or adviser, when you see red flags. It also makes you not to be too greedy, when somebody paints you a picture of great returns, because then your well oiled mind would start questioning the rationale behind such investments. Have a look at Warren Buffet. He is an investor and you can follow how he does his investing. It is simple but very difficult to follow. Investing through my bank I would prefer to stay away from them, because their main service is banking and not allowing people to trade. I would first compare the services provided by a bank to TD Ameritrade, or any firm providing trading services. The thing is, as you mentioned in the question, you have to go through a specific process of calling him to change your portfolio, which shouldn't be a condition. What might happen is, if he is getting some benefits out of the arrangement(get it clarified in the first place if you intend to go through them), from the side of the fund, he might try to dissuade you from doing so to protect his stream of income. And what if he is on a holiday or you cannot get hold of him. Secondly from your question, it seems you aren't that investing literate. So it is very easy to get you confused by jargon and making you do what he gets the maximum benefit out of it, rather than which benefits you more. I ain't saying he is doing so but that could be a possibility too, so you have consider that angle too. The pro is that setting up an account through them might be much easier than directly going to a provider. But the best point doing it yourself is, you will learn and there is nothing which tops that. You don't want somebody else managing your money, however knowledgeable they maybe i.e. Anthony Bolton.","\"Put it in a Vanguard fund with 80% VTI and 20% VXUS. That's what you'll let set for 10-15 years. For somebody that is totally new to investing, use \"\"play money\"\" in the stock market. It's easy for young people to get dreams of glory and blow it all on some stock tip they've seen on Twitter.\"","Before investing, absolutely follow the advice in mbhunter's answer. There is no safe investment (unless you count your mattress, and even there you could find moths, theives, or simple inflation taking a chunk out of your change). There is only maximizing your reward for a given level of risk - and there is always risk. This question should be enshrined somewhere on the Q&A site for its comprehensive list of sources for information on asset allocation. The tag is also going to have tons of good information for you. To answer your question on what slice of the pie is devoted to what, you can check out some common portfolios given by U. S. experts for U. S. investors - these should be convertible into Australian funds. Another portfolio that is, like all those above, loosely based on Modern Portfolio Theory for maximizing reward for a given level of risk is the Gone Fishin' Portfolio. A common denominator amongst these portfolios is that they emphasize index funds over mutual funds for their long-term performance and preference lazy management (yearly rebalancing is a common suggestion as the maximum level of involvement) over active management. You can see more Lazy Portfolios.","\"An investment portfolio is typically divided into three components: All three of those can be accessed through mutual funds or ETFs. A 401(k) will probably have a small set of mutual funds for you to pick from. Mutual funds may charge you silly expenses if you pick a bad one. Look at the prospectus for the expense ratio. If it's over 1% you're definitely paying too much. If it's over 0.5% you're probably paying too much. If it's less than 0.1% you have a really good deal. US stocks are generally the core holding until you move into retirement (or get close to spending the money on something else if it's not invested for retirement). International stocks are riskier than US stocks, but provide opportunity for diversification and better returns than the US stocks. Bonds, or fixed-income investments, are generally very safe, but have limited opportunities for returns. They tend to do better when stocks are doing poorly. When you've got a while to invest, you should be looking at riskier investments; when you don't, you should be looking for safer investments. A quick (and rough) rule of thumb is that \"\"your age should match the portion of your portfolio in bonds\"\". So if you're 50 years old and approaching retirement in 15 years or so, you should have about 50% in bonds. Roughly. People whose employment and future income is particularly tied to one sector of the market would also do well to avoid investing there, because they already are at risk if it performs badly. For instance, if you work in the technology sector, loading up on tech stocks is extra risky: if there's a big bust, you're not just out of a job, your portfolio is dead as well. More exotic options are available to diversify a portfolio: While many portfolios could benefit from these sorts of holdings, they come with their own advantages and disadvantages and should be researched carefully before taking a significant stake in them.\"","\"Most articles on investing recommend that investors that are just starting out to invest in index stock or bonds funds. This is the easiest way to get rolling and limit risk by investing in bonds and stocks, and not either one of the asset classes alone. When you start to look deeper into investing there are so many options: Small Cap, Large Cap, technical analysis, fundamental analysis, option strategies, and on and on. This can end up being a full time job or chewing into a lot of personal time. It is a great challenge to learn various investment strategies frankly for the average person that works full time it is a huge effort. I would recommend also reading \"\"The Intelligent Asset Allocator\"\" to get a wider perspective on how asset allocation can help grow a portfolio and reduce risk. This book covers a simple process.\"","\"Some thoughts: 1) Do you have a significant emergency fund (3-6 months of after-tax living expenses)? If not, you stand to take a significant loss if you have an unexpected need for cash that is tied up in investments. What if you lose/hate your job or your car breaks down? What if a you want to spend some time with a relative or significant other who learns they only have a few months to live? Having a dedicated emergency fund is an important way to avoid downside risk. 2) Lagerbaer has a good suggestion. Given that if you'd reinvested your dividends, the S&P 500 has returned about 3.5% over the last 5 years, you may be able to get a very nice risk-free return. 3) Do you have access to employer matching funds, such as in a 401(k) at work? If you get a dollar-for-dollar match, that is a risk-free pre-tax 100% return and should be a high priority. 4) What do you mean by \"\"medium\"\" volatility? Given that you are considering a 2/3 equity allocation, it would not be at all out of the realm of possibility that your balance could fall by 15% or more in any given year and take several years to recover. If that would spook you, you may want to consider lowering your equity weights. A high quality bond fund may be a good fit. 5) Personally, I would avoid putting money into stocks that I didn't need back for 10 years. If you only want to tie your money up for 2-5 years, you are taking a significant risk that if prices fall, you won't have time to recover before you need your money back. The portfolio you described would be appropriate for someone with a long-term investment horizon and significant risk tolerance, which is usually the case for young people saving for retirement. However, if your goals are to invest for 2-5 years only, your situation would be significantly different. 6) You can often borrow from an investment account to purchase a primary residence, but you must pay that amount back in order to avoid significant taxes and fees, unless you plan to liquidate assets. If you plan to buy a house, saving enough to avoid PMI is a good risk-free return on your money. 7) In general, and ETF or index fund is a good idea, the key being to minimize the compound effect of expenses over the long term. There are many good choices a la Vanguard here to choose from. 8) Don't worry about \"\"Buy low, sell high\"\". Don't be a speculator, be an investor (that's my version of Anthony Bourdain's, \"\"don't be a tourist, be a traveler\"\"). A speculator wants to sell shares at a higher price than they were purchased at. An investor wants to share in the profits of a company as a part-owner. If you can consistently beat the market by trying to time your transactions, good for you - you can move to Wall Street and make millions. However, almost no one can do this consistently, and it doesn't seem worth it to me to try. I don't mean to discourage you from investing, just make sure you have your bases covered so that you don't have to cash out at a bad time. Best of luck! Edit Response to additional questions below. 1) Emergency fund. I would recommend not investing in anything other than cash equivalents (money market, short-term CDs, etc.) until you've built up an emergency fund. It makes sense to want to make the \"\"best\"\" use of your money, but you also have to account for risk. My concern is that if you were to experience one or more adverse life events, that you could lose a lot of money, or need to pay a lot in interest on credit card debt, and it would be prudent to self-insure against some of those risks. I would also recommend against using an investment account as an emergency fund account. Taking money out of investment accounts is inefficient because the commissions/taxes/fees can easily eat up a significant portion of your returns. Ideally, you would want to put money in and not touch it for a long time in order to take advantage of compounding returns. There are also high penalties for early disbursements from retirement funds. Just like you need enough money in your checking account to buy food and pay the rent every month, you need enough money in an emergency fund to pay for things that are a real possibility, even if they are less common. Using a credit card or an investment account is a relatively expensive way to do this. 2) Invest at all? I would recommend starting an emergency fund, and then beginning to invest for retirement. Once your retirement savings are on track, you can begin saving for whatever other goals you may have\"","I would personally suggest owning Mutual Funds or ETF's in a tax sheltered account, such as a 401k or an IRA, especially Roth options if available. This lets you participate in the stock market while ensuring that you have diversified portfolio, and the money is managed by an expert. The tax sheltered accounts (or tax free in the case of Roth accounts) increase your savings, and simplify your life as you don't need to worry about taxes on earnings within those accounts, as long as you leave the money in. For a great beginner's guide see Clark's Investment Guide (Easy).","Littleadv has given you excellent general advice, but to my mind, the most important part of it all and the path which I will strongly recommend you follow, is the suggestion to look into a mutual fund. I would add even more strongly, go to a mutual fund company directly and make an investment with them directly instead of making the investment through a brokerage account. Pick an index fund with low expenses, e.g. there are S&P 500 index funds available with expenses that are a fraction of 1%. (However, many also require minimum investments on the order of $2500 or $3000 except for IRA accounts). At this time, your goal should be to reduce expenses as much as possible because expenses, whether they be in brokerage fees which may be directly visible to you or mutual fund expenses which are invisible to you, are what will eat away at your return far more than the difference between the returns of various investments.","\"Say you have $15,000 of capital to invest. You want to put the majority of your capital into low risk investments that will yield positive gains over the course of your working career. $5,000: Government bonds and mutual funds, split how you want. $9,500: Low risk, trusted companies with positive historical growth. If the stock market is very unfamiliar for you, I recommend Google Finance, Yahoo Finance, and Zack's to learn about smart investments you can make. You can also research the investments that hedge fund managers and top investors are making. Google \"\"Warren Buffett or Carl Icahn portfolio\"\", and this will give you an idea of stocks you can put your money into. Do not leave your money into a certain company for more than 25 years. Rebalance your portfolio and take the gains when you feel you need them. You have no idea when to take your profits now, but 5 years from now, you will be a smart and experienced investor. A safe investment strategy to start is to put your money into an ETF that mimics the S&P 500. Over the past 20 years, the S&P 500 has yielded gains of about 270%. During the financial crisis a few years back, the S&P 500 had lost over 50% of its value when it reached its low point. However, from when it hit rock bottom in 2009, it has had as high percentage gains in six years as it did in 12 years from 1995 to 2007, which about 200%. The market is very strong and will treat your money well if you invest wisely. $500: Medium - High risk Speculative Stocks There is a reason this category accounts for only approximately 3% of your portfolio. This may take some research on the weekend, but the returns that may result can be extraordinary. Speculative companies are often innovative, low priced stocks that see high volatility, gains or losses of more than 10% over a single month. The likelihood of your $500 investment being completely evaporated is very slim, but if you lose $300 here, the thousands invested in the S&P 500, low risk stocks, government bonds, and mutual funds will more than recuperate the losses. If your pick is a winner, however, expect that the $500 investment could easily double, triple, or gain even more in a single year or over the course of just a few, perhaps, 2-4 years will see a very large return. I hope this advice helps and happy investing! Sending your money to smart investments is the key to financial security, freedom, and later, a comfortable retirement. Good luck, Matt McLaughlin\"","\"RED FLAG. You should not be invested in 1 share. You should buy a diversified ETF which can have fees of 0.06% per year. This has SIGNIFICANTLY less volatility for the same statistical expectation. Left tail risk is MUCH lower (probability of gigantic losses) since losses will tend to cancel out gains in diversified portfolios. Moreover, your view that \"\"you believe these will continue\"\" is fallacious. Stocks of developed countries are efficient to the extent that retail investors cannot predict price evolution in the future. Countless academic studies show that individual investors forecast in the incorrect direction on average. I would be quite right to objectively classify you as a incorrect if you continued to hold the philosophy that owning 1 stock instead of the entire market is a superior stategy. ALL the evidence favours holding the market. In addition, do not invest in active managers. Academic evidence demonstrates that they perform worse than holding a passive market-tracking portfolio after fees, and on average (and plz don't try to select managers that you think can outperform -- you can't do this, even the best in the field can't do this). Direct answer: It depends on your investment horizon. If you do not need the money until you are 60 then you should invest in very aggressive assets with high expected return and high volatility. These assets SHOULD mainly be stocks (through ETFs or mutual funds) but could also include US-REIT or global-REIT ETFs, private equity and a handful of other asset classes (no gold, please.) ... or perhaps wealth management products which pool many retail investors' funds together and create a diversified portfolio (but I'm unconvinced that their fees are worth the added diversification). If you need the money in 2-3 years time then you should invest in safe assets -- fixed income and term deposits. Why is investment horizon so important? If you are holding to 60 years old then it doesn't matter if we have a massive financial crisis in 5 years time, since the stock market will rebound (unless it's a nuclear bomb in New York or something) and by the time you are 60 you will be laughing all the way to the bank. Gains on risky assets overtake losses in the long run such that over a 20-30 year horizon they WILL do much better than a deposit account. As you approach 45-50, you should slowly reduce your allocation to risky assets and put it in safe haven assets such as fixed income and cash. This is because your investment horizon is now SHORTER so you need a less risky portfolio so you don't have to keep working until 65/70 if the market tanks just before retirement. VERY IMPORTANT. If you may need the savings to avoid defaulting on your home loan if you lose your job or something, then the above does not apply. Decisions in these context are more vague and ambiguous.\"","Check out some common portfolios compared: Note that all these portfolios are loosely based on Modern Portfolio Theory, a theory of how to maximize reward given a risk tolerance introduced by Harry Markowitz. The theory behind the Gone Fishin' Portfolio and the Couch Potato Portfolio (more info) is that you can make money by rebalancing once a year or less. You can take a look at 8 Lazy ETF Portfolios to see other lazy allocation percentages. One big thing to remember - the expense ratio of the funds you invest in is a major contributor to the return you get. If they're taking 1% of all of your gains, you're not. If they're only taking .2%, that's an automatic .8% you get. The reason Vanguard is so often used in these model portfolios is that they have the lowest expense ratios around. If you are talking about an IRA or a mutual fund account where you get to choose who you go with (as opposed to a 401K with company match), conventional wisdom says go with Vanguard for the lowest expense ratios.","\"This turned out be a lot longer than I expected. So, here's the overview. Despite the presence of asset allocation calculators and what not, this is a subjective matter. Only you know how much risk you are willing to take. You seem to be aware of one rule of thumb, namely that with a longer investing horizon you can stand to take on more risk. However, how much risk you should take is subject to your own risk aversion. Honestly, the best way to answer your questions is to educate yourself about the individual topics. There are just too many variables to provide neat, concise answers to such a broad question. There are no easy ways around this. You should not blindly rely on the opinions of others, but rather use your own judgment to asses their advice. Some of the links I provide in the main text: S&P 500: Total and Inflation-Adjusted Historical Returns 10-year index fund returns The Motley Fool Risk aversion Disclaimer: These are the opinions of an enthusiastic amateur. Why should I invest 20% in domestic large cap and 10% in developing markets instead of 10% in domestic large cap and 20% in developing markets? Should I invest in REITs? Why or why not? Simply put, developing markets are very risky. Even if you have a long investment horizon, you should pace yourself and not take on too much risk. How much is \"\"too much\"\" is ultimately subjective. Specific to why 10% in developing vs 20% in large cap, it is probably because 10% seems like a reasonable amount of your total portfolio to gamble. Another way to look at this is to consider that 10% as gone, because it is invested in very risky markets. So, if you're willing to take a 20% haircut, then by all means do that. However, realize that you may be throwing 1/5 of your money out the window. Meanwhile, REITs can be quite risky as investing in the real estate market itself can be quite risky. One reason is that the assets are very much fixed in place and thus can not be liquidated in the same way as other assets. Thus, you are subject to the vicissitudes of a relatively small market. Another issue is the large capital outlays required for most commercial building projects, thus typically requiring quite a bit of credit and risk. Another way to put it: Donald Trump made his name in real estate, but it was (and still is) a very bumpy ride. Yet another way to put it: you have to build it before they will come and there is no guarantee that they will like what you built. What mutual funds or index funds should I investigate to implement these strategies? I would generally avoid actively managed mutual funds, due to the expenses. They can seriously eat into the returns. There is a reason that the most mutual funds compare themselves to the Lipper average instead of something like the S&P 500. All of those costs involved in managing a mutual fund (teams of people and trading costs) tend to weigh down on them quite heavily. As the Motley Fool expounded on years ago, if you can not do better than the S&P 500, you should save yourself the headaches and simply invest in an S&P 500 index fund. That said, depending on your skill (and luck) picking stocks (or even funds), you may very well have been able to beat the S&P 500 over the past 10 years. Of course, you may have also done a whole lot worse. This article discusses the performance of the S&P 500 over the past 60 years. As you can see, the past 10 years have been a very bumpy ride yielding in a negative return. Again, keep in mind that you could have done much worse with other investments. That site, Simple Stock Investing may be a good place to start educating yourself. I am not familiar with the site, so do not take this as an endorsement. A quick once-over of the material on the site leads me to believe that it may provide a good bit of information in readily digestible forms. The Motley Fool was a favorite site of mine in the past for the individual investor. However, they seem to have turned to the dark side, charging for much of their advice. That said, it may still be a good place to get started. You may also decide that it is worth paying for their advice. This blog post, though dated, compares some Vanguard index funds and is a light introduction into the contrarian view of investing. Simply put, this view holds that one should not be a lemming following the crowd, rather one should do the opposite of what everyone else is doing. One strong argument in favor of this view is the fact that as more people pile onto an investing strategy or into a particular market, the yields thin out and the risk of a correction (i.e. a downturn) increases. In the worst case, this leads to a bubble, which corrects itself suddenly (or \"\"pops\"\" thus the term \"\"bubble\"\") leading to quite a bit of pain for the unprepared participants. An unprepared participant is one who is not hedged properly. Basically, this means they were not invested in other markets/strategies that would increase in yield as a result of the event that caused the bubble to pop. Note that the recent housing bubble and resulting credit crunch beat quite heavily on the both the stock and bond markets. So, the easy hedge for stocks being bonds did not necessarily work out so well. This makes sense, as the housing bubble burst due to concerns over easy credit. Unfortunately, I don't have any good resources on hand that may provide starting points or discuss the various investing strategies. I must admit that I am turning my interests back to investing after a hiatus. As I stated, I used to really like the Motley Fool, but now I am somewhat suspicious of them. The main reason is the fact that as they were exploring alternatives to advertising driven revenue for their site, they promised to always have free resources available for those unwilling to pay for their advice. A cursory review of their site does show a decent amount of general investing information, so take these words with a grain of salt. (Another reason I am suspicious of them is the fact that they \"\"spammed\"\" me with lots of enticements to pay for their advice which seemed just like the type of advice they spoke against.) Anyway, time to put the soapbox away. As I do that though, I should explain the reason for this soapboxing. Simply put, investing is a risky endeavor, any way you slice it. You can never eliminate risk, you can only hope to reduce it to an acceptable level. What is acceptable is subject to your situation and to the magnitude of your risk aversion. Ultimately, it is rather subjective and you should not blindly follow someone else's opinion (professional or otherwise). Point being, use your judgment to evaluate anything you read about investing. If it sounds too good to be true, it probably is. If someone purports to have some strategy for guaranteed (steady) returns, be very suspicious of it. (Read up on the Bernard Madoff scandal.) If someone is putting on a heavy sales pitch, be weary. Be especially suspicious of anyone asking you to pay for their advice before giving you any solid understanding of their strategy. Sure, many people want to get paid for their advice in some way (in fact, I am getting \"\"paid\"\" with reputation on this site). However, if they take the sketchy approach of a slimy salesmen, they are likely making more money from selling their strategy, than they are from the advice itself. Most likely, if they were getting outsized returns from their strategy they would keep quiet about it and continue using it themselves. As stated before, the more people pile onto a strategy, the smaller the returns. The typical model for selling is to make money from the sale. When the item being sold is an intangible good, your risk as a buyer increases. You may wonder why I have written at length without much discussion of asset allocation. One reason is that I am still a relative neophyte and have a mostly high level understanding of the various strategies. While I feel confident enough in my understanding for my own purposes, I do not necessarily feel confident creating an asset allocation strategy for someone else. The more important reason is that this is a subjective matter with a lot of variables to consider. If you want a quick and simple answer, I am afraid you will be disappointed. The best approach is to educate yourself and make these decisions for yourself. Hence, my attempt to educate you as best as I can at this point in time. Personally, I suggest you do what I did. Start reading the Wall Street Journal every day. (An acceptable substitute may be the business section of the New York Times.) At first you will be overwhelmed with information, but in the long run it will pay off. Another good piece of advice is to be patient and not rush into investing. If you are in a hurry to determine how you should invest in a 401(k) or other such investment vehicle due to a desire to take advantage of an employer's matching funds, then I would place my money in an S&P 500 index fund. I would also explore placing some of that money into broad index funds from other regions of the globe. The reason for broad index funds is to provide some protection from the normal fluctuations and to reduce the risk of a sudden downturn causing you a lot pain while you determine the best approach for yourself. In this scenario, think more about capital preservation and hedging against inflation then about \"\"beating\"\" the market.\"","First of all, make sure you have all your credit cards paid in full -the compounding interests on those can zero out returns on any of your private investments. Fundamentally, there are 2 major parts of personal finance: optimizing the savings output (see frugal blogs for getting costs down, and entrepreneur sites for upping revenues), and matching investment vehicles to your particular taste of risk/reward. For the later, Fool's 13 steps to invest provides a sound foundation, by explaining the basics of stocks, indexes, long-holding strategy, etc. A full list Financial instruments can be found on Wikipedia; however, you will find most of these to be irrelevant to your goals listed above. For a more detailed guide to long-term strategies on portfolio composition, I'd recommend A Random Walk Down Wall Street: The Time-tested Strategy for Successful Investing. One of the most handy charts can be found in the second half of this book, which basically outlines for a given age a recommended asset allocation for wealth creation. Good luck!","\"Aggressiveness in a retirement portfolio is usually a function of your age and your risk tolerance. Your portfolio is usually a mix of the following asset classes: You can break down these asset classes further, but each one is a topic unto itself. If you are young, you want to invest in things that have a higher return, but are more volatile, because market fluctuations (like the current financial meltdown) will be long gone before you reach retirement age. This means that at a younger age, you should be investing more in stocks and foreign/developing countries. If you are older, you need to be into more conservative investments (bonds, money market, etc). If you were in your 50s-60s and still heavily invested in stock, something like the current financial crisis could have ruined your retirement plans. (A lot of baby boomers learned this the hard way.) For most of your life, you will probably be somewhere in between these two. Start aggressive, and gradually get more conservative as you get older. You will probably need to re-check your asset allocation once every 5 years or so. As for how much of each investment class, there are no hard and fast rules. The idea is to maximize return while accepting a certain amount of risk. There are two big unknowns in there: (1) how much return do you expect from the various investments, and (2) how much risk are you willing to accept. #1 is a big guess, and #2 is personal opinion. A general portfolio guideline is \"\"100 minus your age\"\". This means if you are 20, you should have 80% of your retirement portfolio in stocks. If you are 60, your retirement portfolio should be 40% stock. Over the years, the \"\"100\"\" number has varied. Some financial advisor types have suggested \"\"150\"\" or \"\"200\"\". Unfortunately, that's why a lot of baby boomers can't retire now. Above all, re-balance your portfolio regularly. At least once a year, perhaps quarterly if the market is going wild. Make sure you are still in-line with your desired asset allocation. If the stock market tanks and you are under-invested in stocks, buy more stock, selling off other funds if necessary. (I've read interviews with fund managers who say failure to rebalance in a down stock market is one of the big mistakes people make when managing a retirement portfolio.) As for specific mutual fund suggestions, I'm not going to do that, because it depends on what your 401k or IRA has available as investment options. I do suggest that your focus on selecting a \"\"passive\"\" index fund, not an actively managed fund with a high expense ratio. Personally, I like \"\"total market\"\" funds to give you the broadest allocation of small and big companies. (This makes your question about large/small cap stocks moot.) The next best choice would be an S&P 500 index fund. You should also be able to find a low-cost Bond Index Fund that will give you a healthy mix of different bond types. However, you need to look at expense ratios to make an informed decision. A better-performing fund is pointless if you lose it all to fees! Also, watch out for overlap between your fund choices. Investing in both a Total Market fund, and an S&P 500 fund undermines the idea of a diversified portfolio. An aggressive portfolio usually includes some Foreign/Developing Nation investments. There aren't many index fund options here, so you may have to go with an actively-managed fund (with a much higher expense ratio). However, this kind of investment can be worth it to take advantage of the economic growth in places like China. http://www.getrichslowly.org/blog/2009/04/27/how-to-create-your-own-target-date-mutual-fund/\"","There are fund of funds,e.g. life cycle funds or target retirement funds, that could cover a lot of these with an initial investment that one could invest into for a few years and then after building up a balance large enough, then it may make sense to switch to having more control.","Are you going to need any of the money in the next year or two, or are you saving it long term? Are you going to need any of it before you are 65? If no to both, put in a Roth IRA with a Vanguard Target retirement fund. If no to the first and yes to the second, put in the VTI index fund. If you want, you can keep 20-30% in a bond fund instead of 100% stock. Every 3-12 months, log in and redistribute your funds to maintain the desired split if you'd like, but this is somewhat optional. If you really, really want, set aside 5% for investing in a few companies you really believe in. You'll probably lose money on that investment, but it will reassure you that the rest of your money is wisely invested.","There's a few different types of investments you could do. As poolie mentioned, you could split your money between the Vanguard All World ex-US and Vanguard Total Stock Market index. A similar approach would be to invest in the Vanguard Total World Stock ETF. You wouldn't have to track separate fund performances, at the downside of not being able to allocate differential amounts to the US and non-US markets (Vanguard will allocate them by market cap). You could consider investing in country-specific broad market indices like the S&P 500 and FTSE 100. While not as diversified as the world indices, they are more correlated with the country's economic outlook. Other common investing paradigms are investing in companies which have historically paid out high dividends and companies that are under-valued by the market but have good prospects for future growth. This gets in the domain of value investing, which an entire field by itself. Like Andrew mentioned, investing in a mutual fund is hassle-free. However, mutual fees/commissions and taxes can be higher (somewhere in the range 1%-5%) than index funds/ETF expense ratios (typically <0.50%), so they would have to outperform the market by a bit to break-even. There are quite a few good books out there to read up about investing. I'd recommend The Intelligent Investor and Millionaire Teacher to understand the basics of long-term investing, but of course, there are many other equally good books too.","I quite like the Canadian Couch Potato which provides useful information targeted at investors in Canada. They specifically provide some model portfolios. Canadian Couch Potato generally suggests investing in indexed ETFs or mutual funds made up of four components. One ETF or mutual fund tracking Canadian bonds, another tracking Canadian stocks, a third tracking US stocks, and a fourth tracking international stocks. I personally add a REIT ETF (BMO Equal Weight REITs Index ETF, ZRE), but that may complicate things too much for your liking. Canadian Couch Potato specifically recommends the Tangerine Streetwise Portfolio if you are looking for something particularly easy, though the Management Expense Ratio is rather high for my liking. Anyway, the website provides specific suggestions, whether you are looking for a single mutual fund, multiple mutual funds, or prefer ETFs. From personal experience, Tangerine's offerings are very, very simple and far cheaper than the 2.5% you are quoting. I currently use TD's e-series funds and spend only a few minutes a year rebalancing. There are a number of good ETFs available if you want to lower your overhead further, though Canadians don't get quite the deals available in the U.S. Still, you shouldn't be paying anything remotely close to 2.5%. Also, beware of tax implications; the website has several articles that cover these in detail.","I'd go to specialist community web sites such as The Motley Fool and read their investing articles, and their forums, and everything. You cannot get enough information and advice to get going, as it is really easy to think investing is easy and returns are guaranteed. A lot of people found that out in 2008 and 2000! For example, they have a 'beginners portfolio' that will teach you the very basics of investing (though not necessarily what to invest in)","Here would be the general steps to my mind for creating such a plan: Write out the final desired outcome. Is it $x in y years to fund your retirement? Is it $a in b years to put as a house down payment? This is the first step in defining how much money you want at what point in time. Consider what is your risk tolerance and how much time do you plan on spending in this plan. Is it rebalancing once a quarter and that's it or do you plan on doing monthly research and making tweaks all the time? This is slightly different from the first where one has to be mindful of how much volatility would one handle and what time commitment does one have for an investing strategy. Also, how much money would you be adding to the investments on what kind of time table would also be worth noting here. Construct the asset allocation based on the previous two steps along with historical returns averaged out to be a first draft of what you are buying in general. Is it US stocks? Is it a short-term bond fund? There are more than a few choices here that may make sense and it is worth considering based on the first couple of responses that determine what this will look like. Retirement in 40 years may be quite different than a house down payment in 2 years for example. Determine what brokerages or fund companies would offer such funds along with what types of accounts you'd want to have as in some countries there may be tax-advantaged accounts that may be useful to use here. This is where you're almost ready to start by doing the homework of figuring out how will things work. This may vary depending on one's jurisdiction. Get the applications from whatever institutions you'll be using and run with the desired asset allocation across various funds and accounts. Note that in the first few steps there were points of being aware of how much would you have, how aggressive are you investing and so forth. This is where you actually send in the money and get things rolling. Run with the plan and make tweaks as needed to achieve result, hopefully desired or better.","\"First off, I highly recommend the book Get a Financial Life. The basics of personal finance and money management are pretty straightforward, and this book does a great job with it. It is very light reading, and it really geared for the young person starting their career. It isn't the most current book (pre real-estate boom), but the recommendations in the book are still sound. (update 8/28/2012: New edition of the book came out.) Now, with that out of the way, there's really two kinds of \"\"investing\"\" to think about: For most individuals, it is best to take care of #1 first. Most people shouldn't even think about #2 until they have fully funded their retirement accounts, established an emergency fund, and gotten their debt under control. There are lots of financial incentives for retirement investing, both from your employer, and the government. All the more reason to take care of #1 before #2! Your employer probably offers some kind of 401k (or equivalent, like a 403b) with a company-provided match. This is a potential 100% return on your investment after the vesting period. No investment you make on your own will ever match that. Additionally, there are tax advantages to contributing to the 401k. (The money you contribute doesn't count as taxable income.) The best way to start investing is to learn about your employer's retirement plan, and contribute enough to fully utilize the employer matching. Beyond this, there are also Individual Retirement Accounts (IRAs) you can open to contribute money to on your own. You should open one of these and start contributing, but only after you have fully utilized the employer matching with the 401k. The IRA won't give you that 100% ROI that the 401k will. Keep in mind that retirement investments are pretty much \"\"walled off\"\" from your day-to-day financial life. Money that goes into a retirement account generally can't be touched until retirement age, unless you want to pay lots of taxes and penalties. You generally don't want to put the money for your house down payment into a retirement account. One other thing to note: Your 401K and your IRA is an account that you put money into. Just because the money is sitting in the account doesn't necessarily mean it is invested. You put the money into this account, and then you use this money for investments. How you invest the retirement money is a topic unto itself. Here is a good starting point. If you want to ask questions about retirement portfolios, it is probably worth posting a new question.\"","\"There's already an excellent answer here from @BenMiller, but I wanted to expand a bit on Types of Investments with some additional actionable information. You can invest in stocks, bonds, mutual funds (which are simply collections of stocks and bonds), bank accounts, precious metals, and many other things. Discussing all of these investments in one answer is too broad, but my recommendation is this: If you are investing for retirement, you should be investing in the stock market. However, picking individual stocks is too risky; you need to be diversified in a lot of stocks. Stock mutual funds are a great way to invest in the stock market. So how does one go about actually investing in the stock market in a diversified way? What if you also want to diversify a bit into bonds? Fortunately, in the last several years, several products have come about that do just these things, and are targeted towards newer investors. These are often labeled \"\"robo-advisors\"\". Most even allow you to adjust your allocation according to your risk preferences. Here's a list of the ones I know about: While these products all purport to achieve similar goals of giving you an easy way to obtain a diversified portfolio according to your risk, they differ in the buckets of stocks and funds they put your money into; the careful investor would be wise to compare which specific ETFs they use (e.g. looking at their expense ratios, capitalization, and spreads).\"","I'd say that because you are young, even the 'riskier' asset classes are not as risky as you think, for example, assuming conservatively that you only have 30 years to retirement, investing in stocks index might be a good option. In short term share prices are volatile and prone to bull and bear cycles but given enough time they have pretty much always outperformed any other asset classes. The key is not to be desperate to withdraw when an index is at the bottom. Some cycles can be 20 years, so when you need get nearer retirement you will need to diversify so that you can survive without selling low. Just make sure to pick an index tracker with low fees and you should be good to go. A word of warning is of course past performance is no indication of a future one, but if a diversified index tracker goes belly up for 20+ years, we are talking global calamity, in which case buy a shotgun and some canned food ;)","The classic answer is simple. Aim to build up a a financial cushion that is the equivalent of 3 times your monthly salary. This should be readily accessible and in cash, to cover any unforeseen expenses that you may incur (car needs repairing, washing machine breaks down etc). Once you have this in place its then time to think about longer term investments. Monthly 'drip feeding' into a mutual stock based investment fund is a good place to start. Pick a simple Index based or fund with a global investment bias and put in a set amount that you can regularly commit to each month. You can get way more complicated but for sheer simplicity and longer term returns, this is a simple way to build up some financial security and longer term investments.","if you don't intent to touch the money for 10 years or longer, then dumping 100% into a low-expense-ratio index fund seems like a perfectly reasonable thing to do. it is simple, low maintenance and fairly mindless. just remember to reinvest the dividends occasionally (e.g. every 6 months). however, if you are the kind of person who is going to lose their nerve when the market goes down 30%, then putting some of your money into a bond index fund or even a treasury note fund would be better than selling stock in a down market. just figure out how much of your portfolio you are comfortable losing, and put that in stocks. then put the rest in some stable value fund and watch it's value get slowly washed away by inflation while your stock investments rise through violent swings.","\"Split your contributions evenly across the funds on that list with the word \"\"core\"\" or \"\"S&P\"\" in the name. Maybe add \"\"International Large Cap Index\"\". Leave it & rebalance occasionally. Read a book on Modern Portfolio Theory sometime in the next 5 years.\"","If you have money and may need to access it at any time, you should put it in a savings account. It won't return much interest, but it will return some and it is easily accessible. If you have all your emergency savings that you need (at least six months of income), buy index-based mutual funds. These should invest in a broad range of securities including both stocks and bonds (three dollars in stocks for every dollar in bonds) so as to be robust in the face of market shifts. You should not buy individual stocks unless you have enough money to buy a lot of them in different industries. Thirty different stocks is a minimum for a diversified portfolio, and you really should be looking at more like a hundred. There's also considerable research effort required to verify that the stocks are good buys. For most people, this is too much work. For most people, broad-based index funds are better purchases. You don't have as much upside, but you also are much less likely to find yourself holding worthless paper. If you do buy stocks, look for ones where you know something about them. For example, if you've been to a restaurant chain with a recent IPO that really wowed you with their food and service, consider investing. But do your research, so that you don't get caught buying after everyone else has already overbid the price. The time to buy is right before everyone else notices how great they are, not after. Some people benefit from joining investment clubs with others with similar incomes and goals. That way you can share some of the research duties. Also, you can get other opinions before buying, which can restrain risky impulse buys. Just to reiterate, I would recommend sticking to mutual funds and saving accounts for most investors. Only make the move into individual stocks if you're willing to be serious about it. There's considerable work involved. And don't forget diversification. You want to have stocks that benefit regardless of what the overall economy does. Some stocks should benefit from lower oil prices while others benefit from higher prices. You want to have both types so as not to be caught flat-footed when prices move. There are much more experienced people trying to guess market directions. If your strategy relies on outperforming them, it has a high chance of failure. Index-based mutual funds allow you to share the diversification burden with others. Since the market almost always goes up in the long term, a fund that mimics the market is much safer than any individual security can be. Maintaining a three to one balance in stocks to bonds also helps as they tend to move in opposite directions. I.e. stocks tend to be good when bonds are weak and vice versa.","\"The standard low-risk/gain very-short-term parking spot these days tends to be a money market account. However, you have only mentioned stock. For good balance, your portfolio should consider the bond market too. Consider adding a bond index fund to diversify the basic mix, taking up much of that 40%. This will also help stabilize your risk since bonds tend to move opposite stocks (prperhaps just because everyone else is also using them as the main alternative, though there are theoretical arguments why this should be so.) Eventually you may want to add a small amount of REIT fund to be mix, but that's back on the higher risk side. (By the way: Trying to guess when the next correction will occur is usually not a winning strategy; guesses tend to go wrong as often as they go right, even for pros. Rather than attempting to \"\"time the market\"\", pick a strategic mix of investments and rebalance periodically to maintain those ratios. There has been debate here about \"\"dollar-cost averaging\"\" -- see other answers -- but that idea may argue for investing and rebalancing in more small chunks rather than a few large ones. I generally actively rebalance once a year or so, and between those times let maintainng the balance suggest which fund(s) new money should go into -- minimal effort and it has worked quite well enough.,)\"","The vanilla advice is investing your age in bonds and the rest in stocks (index funds, of course). So if you're 25, have 75% in stock index fund and 25% in bond index. Of course, your 401k is tax sheltered, so you want keep bonds there, assuming you have taxable investments. When comparing specific funds, you need to pay attention to expense ratios. For example, Vanguard's SP 500 index has an expense ratio of .17%. Many mutual funds charge around 1.5%. That means every year, 1.5% of the fund total goes to the fund manager(s). And that is regardless of up or down market. Since you're young, I would start studying up on personal finance as much as possible. Everyone has their favorite books and websites. For sane, no-nonsense investment advise I would start at bogleheads.org. I also recommend two books - This is assuming you want to set up a strategy and not fuss with it daily/weekly/monthly. The problem with so many financial strategies is they 1) don't work, i.e. try to time the market or 2) are so overly complex the gains are not worth the effort. I've gotten a LOT of help at the boglehead forums in terms of asset allocation and investment strategy. Good luck!","If you have just started an IRA (presumably with a contribution for 2012), you likely have $5000 in it, or $10,000 if you made a full contribution for 2013 as well. At this time, I would recommend putting it all in a single low-cost mutual fund. Typically, mutual funds that track an index such as the S&P 500 Index have lower costs (annual expense fees) than actively managed funds, and most investment companies offer such mutual funds, with Fidelity, Vanguard, Schwab, to name a few, having very low expenses even among index funds. Later, when you have more money in the account, you can consider diversifying into more funds, buying stocks and bonds, investing in ETFs, etc. Incidentally, if you are just starting out and your Roth IRA is essentially your first investment experience, be aware that you do not need a brokerage account for your Roth IRA until you have more money in the account to invest and specifically want to buy individual stocks and bonds instead of just mutual funds. If you opened a brokerage account for your Roth IRA, close it and transfer the Roth IRA to your choice of mutual fund company; else you will be paying annual fees to the brokerage for maintaining your account, inactivity fees since you won't be doing any trading, etc. The easiest way to do this is to go to the mutual fund company web site and tell them that you want to transfer your IRA to them (not roll over your IRA to them) and they will take care of all the paper work and collecting your money from the brokerage (ditto if your Roth IRA is with a bank or another mutual fund company). Then close your brokerage account.","\"Congratulations on a solid start. Here are my thoughts, based on your situation: Asset Classes I would recommend against a long-term savings account as an investment vehicle. While very safe, the yields will almost always be well below inflation. Since you have a long time horizon (most likely at least 30 years to retirement), you have enough time to take on more risk, as long as it's not more than you can live with. If you are looking for safer alternatives to stocks for part of your investments, you can also consider investment-grade bonds/bond funds, or even a stable value fund. Later, when you are much closer to retirement, you may also want to consider an annuity. Depending on the interest rate on your loan, you may also be able to get a better return from paying down your loan than from putting more in a savings account. I would recommend that you only keep in a savings account what you expect to need in the next few years (cushion for regular expenses, emergency fund, etc.). On Stocks Stocks are riskier but have the best chance to outperform versus inflation over the long term. I tend to favor funds over individual stocks, mostly for a few practical reasons. First, one of the goals of investing is to diversify your risk, which produces a more efficient risk/reward ratio than a group of stocks that are highly correlated. Diversification is easier to achieve via an index fund, but it is possible for a well-educated investor to stay diversified via individual stocks. Also, since most investors don't actually want to take physical possession of their shares, funds will manage the shares for you, as well as offering additional services, such as the automatic reinvestments of dividends and tax management. Asset Allocation It's very important that you are comfortable with the amount of risk you take on. Investment salespeople will prefer to sell you stocks, as they make more commission on stocks than bonds or other investments, but unless you're able to stay in the market for the long term, it's unlikely you'll be able to get the market return over the long term. Make sure to take one or more risk tolerance assessments to understand how often you're willing to accept significant losses, as well as what the optimal asset allocation is for you given the level of risk you can live with. Generally speaking, for someone with a long investment horizon and a medium risk tolerance, even the most conservative allocations will have at least 60% in stocks (total of US and international) with the rest in bonds/other, and up to 80% or even 100% for a more aggressive investor. Owning more bonds will result in a lower expected return, but will also dramatically reduce your portfolio's risk and volatility. Pension With so many companies deciding that they don't feel like keeping the promises they made to yesterday's workers or simply can't afford to, the pension is nice but like Social Security, I wouldn't bank on all of this money being there for you in the future. This is where a fee-only financial planner can really be helpful - they can run a bunch of scenarios in planning software that will show you different retirement scenarios based on a variety of assumptions (ie what if you only get 60% of the promised pension, etc). This is probably not as much of an issue if you are an equity partner, or if the company fully funds the pension in a segregated account, or if the pension is defined-contribution, but most corporate pensions are just a general promise to pay you later in the future with no real money actually set aside for that purpose, so I'd discount this in my planning somewhat. Fund/Stock Selection Generally speaking, most investment literature agrees that you're most likely to get the best risk-adjusted returns over the long term by owning the entire market rather than betting on individual winners and losers, since no one can predict the future (including professional money managers). As such, I'd recommend owning a low-cost index fund over holding specific sectors or specific companies only. Remember that even if one sector is more profitable than another, the stock prices already tend to reflect this. Concentration in IT Consultancy I am concerned that one third of your investable assets are currently in one company (the IT consultancy). It's very possible that you are right that it will continue to do well, that is not my concern. My concern is the risk you're carrying that things will not go well. Again, you are taking on risks not just over the next few years, but over the next 30 or so years until you retire, and even if it seems unlikely that this company will experience a downturn in the next few years, it's very possible that could change over a longer period of time. Please just be aware that there is a risk. One way to mitigate that risk would be to work with an advisor or a fund to structure and investment plan where you invest in a variety of sector funds, except for technology. That way, your overall portfolio, including the single company, will be closer to the market as a whole rather than over-weighted in IT/Tech. However, if this IT Consultancy happens to be the company that you work for, I would strongly recommend divesting yourself of those shares as soon as reasonably possible. In my opinion, the risk of having your salary, pension, and much of your investments tied up in the fortunes of one company would simply be a much larger risk than I'd be comfortable with. Last, make sure to keep learning so that you are making decisions that you're comfortable with. With the amount of savings you have, most investment firms will consider you a \"\"high net worth\"\" client, so make sure you are making decisions that are in your best financial interests, not theirs. Again, this is where a fee-only financial advisor may be helpful (you can find a local advisor at napfa.org). Best of luck with your decisions!\"","Contrary to most other advise given here, I'd recommend (in your situation) not to invest in stock (yet). There are some 'hidden' cost to investing that will eat your profit and in the end, that's why you are investing. Banks will charge for buying, selling and maintaining stock as well as for cashing dividends. Depending on which bank or intermediary these costs will rise. So, my advise is to start playing with stock creating a virtual portfolio and track that. Just as duffbeer says, start saving. Also look at my answer here.","Here's a good strategy: Open up a Roth IRA at a discount-broker, like TD Ameritrade, invest in no-fee ETF's, tracking an Index, with very low expense ratios (look for around .15%) This way, you won't pay brokers fees whenever you buy shares, and shares are cheap enough to buy casually. This is a good way to start. When you learn more about the market, you can check out individual stocks, exploring different market sectors, etc. But you won't regret starting with a good index fund. Also, it's easy to know how well you did. Just listen on the radio or online for how the Dow or S&P did that day/month/year. Your account will mirror these changes!","Since you're 20-30 years out of retirement, you should be 90% to 100% in stocks, and in one or two broad stock market funds likely. I'm not sure about the minimums at TD Ameritrade, but at Vanguard even $3k will get you into the basic funds. One option is the Targeted Retirement Year funds, which automatically rebalance as you get closer to retirement. They're a bit higher expense usually than a basic stock market fund, but they're often not too bad. (Look for expenses under 0.5% annually, and preferably much lower - I pay 0.05% on mine for example.) Otherwise, I'd just put everything into something simple - an S&P500 tracker for example (SPY or VOO are two examples) that has very low management fees. Then when your 401(k) gets up and running, that may have fewer options and thus you may end up in something more conservative - don't feel like you have to balance each account separately when they're just starting, think of them as one whole balancing act for the first year or two. Once they're each over $10k or so, then you can balance them individually (which you do want to do, to allow you to get better returns).","you should invest in a range of stock market indexes. Ex : Dow jones, S&P500, Nasdaq and keep it there until you are ready to retire. I'm invested half in SLYV and SLYG (S&P600 small cap value and S&P600 small cap growth; Respectively). It brings on average between 8-13% a year (since 1971). This is not investment advice. Talk to your broker before doing this.","First, as Dheer mentioned above, there is no right answer as investment avenues for a person is dicteted by many subjective considerations. Given that below a few of my thoughts (strictly thoughts): 1) Have a plan for how much money you would need in next 5-7 years, one hint is, do you plan you buy a house, car, get married ... Try to project this requirement 2) Related to the above, if you have some idea on point 1, then it would be possible for you to determine how much you need to save now to achieve the above (possibly with a loan thrown in). It will also give you some indication as to where and how much of your current cash holding that you should invest now 3) From an investment perspective there are many instruments, some more risky some less. The exact mix of instruments that you should consider is based on many things, one among them is your risk apetite and fund requirement projections 4) Usually (not as a rule of thumb) the % of savings corresponding to your age should go into low risk investments and 100-the % into higher risk investment 5) You could talk to some professional invetment planners, all banks offer the service Hope this helps, I reiterate as Dheer did, there is truely no right answer for your question all the answers would be rather contextual.","If you are going to the frenzy of individual stock picking, like almost everyone initially, I suggest you to write your plan to paper. Like, I want an orthogonal set of assets and limit single investments to 10%. If with such limitations the percentage of brokerage fees rise to unbearable large, you should not invest that way in the first hand. You may find better to invest in already diversified fund, to skip stupid fees. There are screeners like in morningstar that allow you to see overlapping items in funds but in stocks it becomes trickier and much errorsome. I know you are going to the stock market frenzy, even if you are saying to want to be long-term or contrarian investor, most investors are convex, i.e. they follow their peers, despite it would better to be a concave investor (but as we know it can be hard). If the last part confused you, fire up a spreadsheet and do a balance. It is a very motivating activity, really. You will immediately notice things important to you, not just to providers such as morningstar, but alert it may take some time. And Bogleheads become to your rescue, ready spreadsheets here.","\"Before anything else, read up on the basics of economics. After that, there a few things you need to ask yourself before you even think about investing in anything: If you have an answer to those questions: Once you answered those questions I could make a simple first suggestion: Confident in handling it yourself and low maintenance with uncertain horizon: look up an online bank that offers ETFs such as IWDA (accumulation (dividend is not payed but reinvested) or income(dividend is payed out)) and maybe a few more specific ones then buy and hold for at least 5 years. Confident and high maintenance with long horizon: maybe stock picking but you'll probably never be able to beat the market unless you invest 10's of hours in research per week. However this will also cost a bit and given your initial amount not advisable to do. Be sure that you also have a VERY close look at the prospectus of an investment (especially if you go with a (retail) bank and they \"\"recommend\"\" you certain actively traded funds). They tend to charge you quite a bit (yearly management fees of 2-3% (which is A LOT if you are eying maybe 7%-8% yearly) aren't unheard of). ETF's such IWDA only have for example a yearly cost of 0.20%. Personally I have one portfolio (of many) only consisting of that ETF (so IWDA) and one global small cap. It's one of the best and most consistant ones to date. In the end, the amount you start with doesn't really matter so much as long as it's enough to buy at least a few shares of what you have in mind. If you can then increase your portfolio over time and keep the expenses in check, compounding interest should do the rest.\"","Something not in answers so far: define your goals. What is important to you? My goals, if I were in your shoes, would include a debt-free home, passive (investment) income so I would not have to work, and have health insurance covered. I could think of many more details, and already have, but you get the idea. To help determine which investment information to learn first, consider how much risk you can tolerate. I know that's vague at this point, but if you're looking for safe investments first, you could learn about mutual funds, and then index funds specifically. At the risky extreme, you could learn about stock options, but I would not recommend such risk.","Try this as a starter - my eBook served up as a blog (http://www.sspf.co.uk/blog/001/). Then read as much as possible about investing. Once you have money set aside for emergencies, then make some steps towards investing. I'd guide you towards low-fee 'tracker-style' funds to provide a bedrock to long-term investing. Your post suggests it will be investing over the long-term (ie. 5-10 years or more), perhaps even to middle-age/retirement? Read as much as you can about the types of investments: unit trusts, investment trusts, ETFs; fixed-interest (bonds/corporate bonds), equities (IPOs/shares/dividends), property (mortgages, buy-to-let, off-plan). Be conservative and start with simple products. If you don't understand enough to describe it to me in a lift in 60 seconds, stay away from it and learn more about it. Many of the items you think are good long-term investments will be available within any pension plans you encounter, so the learning has a double benefit. Work a plan. Learn all the time. Keep your day-to-day life quite conservative and be more risky in your long-term investing. And ask for advice on things here, from friends who aren't skint and professionals for specific tasks (IFAs, financial planners, personal finance coaches, accountants, mortgage brokers). The fact you're being proactive tells me you've the tools to do well. Best wishes to you.","\"I got started by reading the following two books: You could probably get by with just the first of those two. I haven't been a big fan of the \"\"for dummies\"\" series in the past, but I found both of these were quite good, particularly for people who have little understanding of investing. I also rather like the site, Canadian Couch Potato. That has a wealth of information on passive investing using mutual funds and ETFs. It's a good next step after reading one or the other of the books above. In your specific case, you are investing for the fairly short term and your tolerance for risk seems to be quite low. Gold is a high-risk investment, and in my opinion is ill-suited to your investment goals. I'd say you are looking at a money market account (very low risk, low return) such as e.g. the TD Canadian Money Market fund (TDB164). You may also want to take a look at e.g. the TD Canadian Bond Index (TDB909) which is only slightly higher risk. However, for someone just starting out and without a whack of knowledge, I rather like pointing people at the ING Direct Streetwise Funds. They offer three options, balancing risk vs reward. You can fill in their online fund selector and it'll point you in the right direction. You can pay less by buying individual stock and bond funds through your bank (following e.g. one of the Canadian Couch Potato's model portfolios), but ING Direct makes things nice and simple, and is a good option for people who don't care to spend a lot of time on this. Note that I am not a financial adviser, and I have only a limited understanding of your needs. You may want to consult one, though you'll want to be careful when doing so to avoid just talking to a salesperson. Also, note that I am biased toward passive index investing. Other people may recommend that you invest in gold or real estate or specific stocks. I think that's a bad idea and believe I have the science to back this up, but I may be wrong.\"","Congratulations on being in this position. Your problem - which I think that you identified - is that you don't know much about investing. My recommendation is that you start with three goals: The Motley Fool (www.fool.com) has a lot of good information on their site. Their approach may or may not align with what you want to do; I've subscribed to their newsletters for quite a while and have found them useful. I'm what is known as a value investor; I like to make investments and hold them for a long time. Others have different philosophies. For the second goal, it's very important to follow the money and ask how people get paid in the investment business. The real money in Wall Street is made not by investment, but by charging money to those who are in the investment business. There are numerous people in line for some of your money in return for service or advice; fees for buying/selling stocks, fees for telling you which stocks to buy/sell, fees for managing your money, etc. You can invest without spending too much on fees if you understand how the system works. For the third goal, I recommend choosing a few stocks, and creating a virtual portfolio. You can then then get used to watching and tracking your investments. If you want a place to put your money while you do this, I'd start with an S&P 500 index fund with a low expense ratio, and I'd buy it through a discount broker (I use Scottrade but there are a number of choices). Hope that helps.","For your purposes, I would recommend using direct investment in a no-load mutual fund. I mostly use Vanguard and would recommend them. They just about invented index funds, usually have the lowest (internal) expenses for index and many other funds, if you take electronic instead of paper statements there is no maintenance fee, have no transaction commission, can do periodic automatic investment from a bank account etc. A typical index fund there would require an initial $3000 investment and would have a minimum of $100 for each additional investment. If you can't come up with an initial sum of that size, you might be able to find a broker with a lower minimum and suitable free ETFs trades as others have suggested.","It doesn't matter which way you use. As long as your comfortable with the overall level of risk/reward in your portfolio, that's what matters. (Though I will say that there are more investment vehicles than stocks, bonds, and cash that are worth considering.)","The 10K in savings and money market is equal to about 1.5 months of income for emergency funds. You should add additional funds to this account over the next few years to let that increase to 3 to 6 months of monthly expenses. This money should be kept secure so that it will be there when you need it. Growth is not the primary function for this account. Investment at this stage should be for retirement. This means take advantage of 401K matching if it is available. You will have to determine if Roth or regular makes the most sense for you. In general the lower your current tax bracket the more sense Roth makes for you. If you want an IRA again decide which type. Also remember that you have until the tax deadline to make a contribution so you can decide to use a refund to fund the IRA. IRAs and 401Ks are just account types with some rules attached. They can be invested in everything from CD's to individual stocks depending on how aggressive you want to be.","This is all very basic and general advice, that works for most, but not all. You are unique with your own special needs and desires. Good luck! P.S.: not exactly related to your question, but when you get more familiar with investing and utilizing your money, find more ways to save more. For example, change phone plan, cut the cable, home made food in bulk, etc.","Congratulations! You're making enough money to invest. There are two easy places to start: I recommend against savings accounts because they will quite safely lose your money: the inflation rate is usually higher than the interest rate on a savings account. You may have twice as much money after 50 years, but if everything costs four times as much, then you've lost buying power. If, in the course of learning about investing, you'd like to try buying individual stocks, do it only with money you wouldn't mind losing. Index funds will go down slightly if one of the companies in that index fails entirely, but the stock of a failed company is worthless.","I would just buy a low-cost diversified equity ETF. VTI is pretty solid. Also, JW are you working or in school? If you are working you should consider opening an IRA or Roth IRA. Also if your employer has a 401k or other retirement plan you can contribute to I would advise doing so.","I've read a nice rule of thumb somewhere that you should consider: You should invest (100-YOURAGE)% of your money in stock The rest should be something less volatile and more liquid, so you have some money when the stock market goes down and you need some money nevertheless. So you would start with buying about 75% stock and balance your stock percentage over time by buing more secure assets to keep the stock percentage at the desired level. At some time you might need to sell stock to rebalance and invest in more secure assets.","\"Question 1: How do I start? or \"\"the broker\"\" problem Get an online broker. You can do a wire transfer to fund the account from your bank. Question 2: What criticism do you have for my plan? Dividend investing is smart. The only problem is that everyone's currently doing it. There is an insatiable demand for yield, not just individual investors but investment firms and pension funds that need to generate income to fund retirements for their clients. As more investors purchase the shares of dividend paying securities, the share price goes up. As the share price goes up, the dividend yield goes down. Same for bonds. For example, if a stock pays $1 per year in dividends, and you purchase the shares at $20/each, then your yearly return (not including share price fluctuations) would be 1/20 = 5%. But if you end up having to pay $30 per share, then your yearly return would be 1/30 or 3.3% yield. The more money you invest, the bigger this difference becomes; with $100K invested you'd make about $1.6K more at 5%. (BTW, don't put all your money in any small group of stocks, you want to diversify). ETFs work the same way, where new investors buying the shares cause the custodian to purchase more shares of the underlying securities, thus driving up the price up and yield down. Instead of ETFs, I'd have a look at something called closed end funds, or CEFs which also hold an underlying basket of securities but often trade at a discount to their net asset value, unlike ETFs. CEFs usually have higher yields than their ETF counterparts. I can't fully describe the ins and outs here in this space, but you'll definately want to do some research on them to better understand what you're buying, and HOW to successfully buy (ie make sure you're buying at a historically steep discount to NAV [https://seekingalpha.com/article/1116411-the-closed-end-fund-trifecta-how-to-analyze-a-cef] and where to screen [https://www.cefconnect.com/closed-end-funds-screener] Regardless of whether you decide to buy stocks, bonds, ETFs, CEFs, sell puts, or some mix, the best advice I can give is to a) diversify (personally, with a single RARE exception, I never let any one holding account for more than 2% of my total portfolio value), and b) space out your purchases over time. b) is important because we've been in a low interest rate environment since about 2009, and when the risk free rate of return is very low, investors purchase stocks and bonds which results in lower yields. As the risk free rate of return is expected to finally start slowly rising in 2017 and gradually over time, there should be gradual downward pressure (ie selling) on the prices of dividend stocks and especially bonds meaning you'll get better yields if you wait. Then again, we could hit a recession and the central banks actually lower rates which is why I say you want to space your purchases out.\"","First, you should diversify your portfolio. If your entire portfolio is in the Roth IRA, then you should eventually diversify that. However, if you have an IRA and a 401k, then it's perfectly fine for the IRA to be in a single fund. For example, I used my IRA to buy a riskier REIT that my 401k doesn't support. Second, if you only have a small amount currently invested, e.g. $5500, it may make sense to put everything in a single fund until you have enough to get past the low balance fees. It's not uncommon for funds to charge lower fees to someone who has $8000, $10,000, or $12,000 invested. Note that if you deposit $10,000 and the fund loses money, they'll usually charge you the rate for less than $10,000. So try to exceed the minimum with a decent cushion. A balanced fund may make sense as a first fund. That way they handle the diversification for you. A targeted fund is a special kind of balanced fund that changes the balance over time. Some have reported that targeted funds charge higher fees. Commissions on those higher fees may explain why your bank wants you to buy. I personally don't like the asset mixes that I've seen from targeted funds. They often change the stock/bond ratio, which is not really correct. The stock/bond ratio should stay the same. It's the securities (stocks and bonds) to monetary equivalents that should change, and that only starting five to ten years before retirement. Prior to that the only reason to put money into monetary equivalents is to provide time to pick the right securities fund. Retirees should maintain about a five year cushion in monetary equivalents so as not to be forced to sell into a bad market. Long term, I'd prefer low-load index funds. A bond fund and two or three stock funds. You might want to build your balance first though. It doesn't really make sense to have a separate fund until you have enough money to get the best fees. 70-75% stocks and 25-30% bonds (should add to 100%, e.g. 73% and 27%). Balance annually when you make your new deposit.","The simplest way is to invest in a few ETFs, depending on your tolerance for risk; assuming you're very short-term risk tolerant you can invest almost all in a stock ETF like VOO or VTI. Stock market ETFs return close to 10% (unadjusted) over long periods of time, which will out-earn almost any other option and are very easy for a non-finance person to invest in (You don't trade actively - you leave the money there for years). If you want to hedge some of your risk, you can also invest in Bond funds, which tend to move up in stock market downturns - but if you're looking for the long term, you don't need to put much there. Otherwise, try to make sure you take advantage of tax breaks when you can - IRAs, 401Ks, etc.; most of those will have ETFs (whether Vanguard or similar) available to invest in. Look for funds that have low expense ratios and are fairly diversified (ie, don't just invest in one small sector of the economy); as long as the economy continues to grow, the ETFs will grow.","Your urge to invest is a good one. If you don’t invest your money, you're probably leaving about two thirds of it on the table. By the time you need the money (without knowing your exact future withdrawals, and taking national averages into consideration), investing would have grown it by three times. As far as how much money you should invest...I invest everything I'm not going to use in the next month or two. My advisor is able to monitor my bank accounts and sweep any unused cash into investment accounts. Using AI, they're able to figure out exactly which days I'll be needing cash then put it back in my accounts before I need it. 1% of my portfolio is always kept in cash, for emergencies. With investing, there are lots of things to consider. You need to decide what to invest in - spread your money over many different asset classes - monitor market trends - have a plan for market ups and downs - regularly rebalance - maneuver the fun world of taxes. Basically - asset management. Vanguard mutual funds are an easy, affordable way to spread your money over many different assets, but they don't offer much when it comes to asset management. I'd suggest you find a flat fee advisor (no more than 1% of your managed assets) who listens to you, determines your goals, creates a plan based on upon, then executes it with no commission or execution costs. In this particular vein, robo advisors are the best bet. I don't want to come across like I'm selling something, however, I have had much satisfaction with online digital advisors. Hope this helps.","Just to clarify Short Team Goals & Long Term Goals... Long Term goals are for something in future, your retirement fund, Children’s education etc. Short Term goals are something in the near future, your down payment for car, house, and holiday being planned. First have both the long and short terms goals defined. Of Couse you would need to review both these goals on a ongoing basis... To meet the short term goals you would need to make short term investments. Having arrived at a short term goal value, you would now need to make a decision as to how much risk you are willing [also how much is required to take] to take in order to meet your goal. For example if you goal is to save Rs 100,000 by yearend for the car, and you can easily set aside Rs 8,000 every month, you don't really need to take a risk. A simple Term / Fixed Deposit would suffice you to meet your goal. On the other hand if you can only save Rs 6,000 a year, then you would need to invest this into something that would return you around 35%. You would now need to take a risk. Stocks market is one option, there are multiple types of trades [day trades, shorts, options, regular trades] that one can do ... however the risk can wipe out even your capital. As you don't know these types of investments, suggest you start with dummy investing using quite a few free websites, MoneyControl is one such site, you get pseudo money and can buy sell and see how things actually move. This should teach you something about making quick gains or losses without actually gaining or loosing real money. Once you reach some confidence level, you can start trading using real money by opening a trading account almost every other bank in India offers online trading linked to bank account. Never lose sight of risk appetite, and revise if every now and then. When you don't have dependents, you can easily risk money for potential bumper, however after you have other commitments, you may want to tone down... Edit: http://moneybhai.moneycontrol.com/moneybhai-rules.html is one such site, there are quite a few others as well that offer you to trade on virtual money. Try this for few months and you will understand whether you are making right decissions or not.","\"Is this amount an adequate starting amount to begin investing with? Yes. You can open an account at a brokerage with this amount. I'm not sure I would invest in individual stocks at this point. Which services should I use to start buying shares? (Currently my bank offers this service but I'm willing to use other sources) I can't make UK-specific recommendations, but I'd compare your bank's fees to those of a discount broker -- as well as the variety and level of service available. I would like to regularly increase the amount invested in shares. Is it worth doing this in say £200 increments? Take a look at the fees associated with each investment. Divide the fee by the increment to see what percent you'll lose to fees/commissions. Keep in mind that you have to gain more than that percentage to start earning a positive return on your investment. If you have access to fee-free automatic mutual fund investments, and you can commit to the £200 amount on a regular basis going forward, then this can be a completely free way of making these incremental investments. See also this answer on dollar cost averaging, and my comment on the other answer on that question for how fees impact returns. When buying shares should I focus on say two or three companies, or diversify more? I would diversify into two or three different index funds. Read up on asset allocation. For example, you might invest 1/3 of your balance into S&P 500 index fund, bond index fund, and MSCI EAFE index fund (but that's just a rough example, and not necessarily good for you). I highly recommend \"\"The Intelligent Asset Allocator\"\" by William Bernstein for excellent info on diversification and asset allocation.\"","\"Okay. Savings-in-a-nutshell. So, take at least year's worth of rent - $30k or so, maybe more for additional expenses. That's your core emergency fund for when you lose your job or total a few cars or something. Keep it in a good savings account, maybe a CD ladder - but the point is it's liquid, and you can get it when you need it in case of emergency. Replenish it immediately after using it. You may lose a little cash to inflation, but you need liquidity to protect you from risk. It is worth it. The rest is long-term savings, probably for retirement, or possibly for a down payment on a home. A blended set of stocks and bonds is appropriate, with stocks storing most of it. If saving for retirement, you may want to put the stocks in a tax-deferred account (if only for the reduced paperwork! egads, stocks generate so much!). Having some money (especially bonds) in something like a Roth IRA or a non-tax-advantaged account is also useful as a backup emergency fund, because you can withdraw it without penalties. Take the money out of stocks gradually when you are approaching the time when you use the money. If it's closer than five years, don't use stocks; your money should be mostly-bonds when you're about to use it. (And not 30-year bonds or anything like that either. Those are sensitive to interest rates in the short term. You should have bonds that mature approximately the same time you're going to use them. Keep an eye on that if you're using bond funds, which continually roll over.) That's basically how any savings goal should work. Retirement is a little special because it's sort of like 20 years' worth of savings goals (so you don't want all your savings in bonds at the beginning), and because you can get fancy tax-deferred accounts, but otherwise it's about the same thing. College savings? Likewise. There are tools available to help you with this. An asset allocation calculator can be found from a variety of sources, including most investment firms. You can use a target-date fund for something this if you'd like automation. There are also a couple things like, say, \"\"Vanguard LifeStrategy funds\"\" (from Vanguard) which target other savings goals. You may be able to understand the way these sorts of instruments function more easily than you could other investments. You could do a decent job for yourself by just opening up an account at Vanguard, using their online tool, and pouring your money into the stuff they recommend.\"","\"For starting with zero knowledge you certainly did a great job on research as you hit on most of the important points with your question. It seems like you have already saved up around six months of expenses in savings so it is a great time to look into investing. The hardest part of your question is actually one of the most important details. Investing in a way that minimizes your taxes is generally more important, in the end, than what assets you actually invest in (as long as you invest even semi-reasonably). The problem is that the interaction between your home country's tax system and the U.S. tax system can be complex. It's probably (likely?) still worth maxing out your 401(k) (IRA, SEP, 529 accounts if you qualify) to avoid taxes, but like this question from an Indian investor it may be worth seeing an investment professional about this. If you do, see a fee-based professional preferably one familiar with your country. If tax-advantaged accounts are not a good deal for you or if you max them out, a discount broker is probably a good second option for someone willing to do a bit of research like you. With this money investing in broadly-diversified, low fee, index mutual funds or exchange traded funds is generally recommended. Among other benefits, diversified funds make sure that if any particular company fails you don't feel too much pain. The advantages of low fees are fairly obvious and one very good reason why so many people recommend Vanguard on this site. A common mix for someone your age is mostly stocks (local and international) and some bonds. Though with how you talk about risk you may prefer more bonds. Some people recommend spicing this up a bit with a small amount of real estate (REITs), sometimes even other assets. The right portfolio of the above can change a lot given the person. The above mentioned adviser and/or more research can help here. If, in the future, you start to believe you will go back to your home country soon that may throw much of this advice out the window and you should definitely reevaluate then. Also, if you are interested in the math/stats behind the above advice \"\"A Random Walk Down Wall Street\"\" is a light read and a good place to start. Investing makes for a very interesting and reasonably profitable math/stats problem.\"","Financial advisers like to ask lots of questions and get nitty-gritty about investment objectives, but for the most part this is not well-founded in financial theory. Investment objectives really boils down to one big question and an addendum. The big question is how much risk you are willing to tolerate. This determines your expected return and most characteristics of your portfolio. The addendum is what assets you already have (background risk). Your portfolio should contain things that hedge that risk and not load up on it. If you expect to have a fixed income, some extra inflation protection is warranted. If you have a lot of real estate investing, your portfolio should avoid real estate. If you work for Google, you should avoid it in your portfolio or perhaps even short it. Given risk tolerance and background risk, financial theory suggests that there is a single best portfolio for you, which is diversified across all available assets in a market-cap-weighted fashion.","\"Consultant, I commend you for thinking about your financial future at such an early age. Warren Buffet, arguably the most successful investor ever lived, and the best known student of Ben Graham has a very simple advice for non-professional investors: \"\"Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.)\"\" This quote is from his 2013 letter to shareholders. Source: http://www.berkshirehathaway.com/letters/2013ltr.pdf Buffet's annual letters to shareholders are the wealth of useful and practical wisdom for building one's financial future. The logic behind his advice is that most investors cannot consistently pick stock \"\"winners\"\", additionally, they are not able to predict timing of the market; hence, one has to simply stay in the market, and win over in the long run.\"","@bstpierre gave you an example of a portfolio similar to IFA's 70 portfolio. Please, look other variants of example portfolios there and investigate which would suit to you. Although the example portfolios are not ETF-based, required by the op, you can rather easily check corresponding components with this tool here. Before deciding your portfolio, fire up a spreadsheet (samples here) and do calculations and do not underestimate things below: Bogleheads have already answered this type of questions so why not look there? Less reinventing the wheel: google retirement portfolios site:bogleheads.org. I am not making any recommendations like other replies because financial recommendations devalue. I hope I steered you to the right track, use less time to pick individual funds or stocks and use more time to do your research.","\"Your broker, Ameritrade, offers a variety of Exchange Traded Funds (ETFs) that you can buy and sell with zero commission. An ETF is like a mutual fund, but you buy and sell shares the same way you buy and sell shares of stocks. From your point of view, the relevance of this is that you can buy and sell as many or as few shares as you like, even down to a single share. Note that to get the commission-free trades on the available ETFs you have to sign up for it in your account profile. Be sure to do that before you enter any buy orders. You'll want to start by looking at the Ameritrade's list of commission-free ETFs. Notice that they are divided into different categories: stocks, bonds, international, and commodities. Which categories you pick from will depend on your personal investing goals, time horizon, risk tolerance, and so on. There are lots of questions and answers on this site that talk about asset allocation. You should read them, as it is the most important decision you will make with your portfolio. The other thing you want to be aware of is the expense ratio for each fund. These expenses reduce the fund's return (they are included in the calculation of the net asset value of the shares), so lower is definitely better. Personally, I wouldn't even consider paying more than about 0.10% (commonly read \"\"10 basis points\"\" or \"\"10 bp\"\") for a broad-based domestic stock fund. For a sectoral fund you might put up with as much as 20 bp in expenses. Bond funds tend to be a little more expensive, so maybe allow as much as 25 bp, and likewise for international funds. I've never invested in commodity funds, so I'll let someone else opine on appropriate expense ratios for those. Once you've decided what funds you want (and have signed up for commission-free trades), all you have to do is enter the trade orders. The website where you manage your account has tutorials on how to do that. After that you should be all set. Good luck with your investing!\"","\"Spend your first 50 euros on research materials. Warren Buffett got started as a boy by reading every book in the Library of Congress on investing and stock market analysis. You can research the company filings for Canadian companies at http://www.sedar.com, U.S companies at http://www.edgar.com, and European companies at https://www.gov.uk/government/organisations/companies-house. Find conflicting arguments and strategies and decide for yourself which ones are right. The Motley Fool http://www.fool.ca offers articles on good stocks to add to your portfolio and why, as well as why not. They provide a balanced judgement instead of just hype. They also sell advice through their newsletter. In Canada the Globe & Mail runs a daily column on screening stocks. Every day they present a different stock-picking strategy and the filters used to reach their end list. They then show how much that portfolio would have increased or decreased as well as talking about some of the good & bad points of the stocks in the list. It's interesting to see over time a very few stocks show up on multiple lists for different strategies. These ones in my opinion are the stocks to be investing in. While the Globe's stock picks focus on Canadian and US exchanges, you might find the strategies worthwhile. You can subscribe to the digital version at http://www.theglobeandmail.com Once you have your analytical tools ready, pick any bank or stock house that offers a free practice account. Use that account and their screening tools to try out your strategies and see if you can make money picking stocks. My personal stock-picking strategy is to look for companies with: - a long uninterrupted history of paying dividends, - that are regularly increased, - and do not exceed the net profit per share of the company - and whose share price has a long history of increasing These are called unicorn companies, because there are so very few of them. Another great read is, \"\"Do Stocks Outperform Treasury Bills?\"\" by Hendrik Bessembinder. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2900447 In this paper the author looks at the entire history of the U.S. stock universe and finds that less than 4% of stocks are responsible for 100% of the wealth creation in the U.S. stock market. He discusses his strategies for picking the winners, but it also suggests that if you don't want to do any research, you could pick pretty much any stock at random, short it, and wait. I avoid mutual funds because they are a winner only for the fellas selling them. A great description on why the mutual fund industry is skewed against the investor can be found in a book called \"\"The RRSP Secret\"\" by Greg Habstritt. \"\"Unshakeable\"\" by Tony Robbins also discusses why mutual funds are not the best way to invest in stocks. The investor puts up 100% of the money, takes 100% of the risk, and gets at best 30% of the return. Rich people don't invest like that.\"","Stock portfolios have diversifiable risk and undiversifiable risk. The market rewards investors for taking undiversifiable risk (e.g. owning an index of oil producing companies) and does not reward investors for assuming diversifiable risk (e.g. owning a single oil producing company). The market will not provide investors with any extra return for owning a single oil company when they can buy an oil index fund at no additional cost. Similarly, the market will not reward you for owning a small-cap index fund when you can purchase a globally diversified / capitalization diversified index fund at no additional cost. This article provides a more detailed description. The Vanguard Total World Stock Index Fund is a much better staring point for an equity portfolio. You will need to make sure that the asset allocation of your overall portfolio (e.g. stocks, bonds, P2P lending, cash) is consistent with your time horizon (5-10 years).","At twenty-two, you can have anywhere between 100%-70% of your securities portfolio in equities. It is reasonable to start at 100% and reduce over time. The one thing that I would mention with that is that your target at retirement should be 70% stocks/30% bonds. You should NEVER have more than 30% bonds. Why? Because a 70/30 mix is both safer than 100% bonds and will give a higher return. Absent some market timing strategy (which as an amateur investor, you should absolutely avoid) or some complicated balancing scheme, there is never a reason to be at more than 30% bonds. A 50/50 mix of stocks and bonds or a 100% bonds ratio not only returns less than the 70/30 mix, it is actually riskier. Why? Because sometimes bonds fall. And when they do, stocks generally gain. And vice versa. Because of this behavior, the 70/30 mix is less likely to fall than 50% or 100% bonds. Does that mean that your stock percentage should never drop below 70%? No. If your portfolio contains things other than stocks and bonds, it is reasonable for stocks to fall below 70%. The problem is that when you drop stocks below 70%, you should drop bonds below 30% as well. So you keep the stock to bond ratio at 7:3. If you want to get a lower risk than a 70/30 mix, then you should move into cash equivalents. Cash equivalents are actually safer than stocks and bonds either individually or in combination. But at twenty-two, you don't really need more safety. At twenty-two, the first thing to do is to build your emergency fund. This should be able to handle six months of expenses without income. I recommend making it equal to six months of your income. The reason being that it is easy to calculate your income and difficult to be sure of expenses. Also, you can save six months of income at twenty-two. Are you going to stay where you are for the next five years? At twenty-two, the answer is almost certainly no. But the standard is the five year time frame. If you want a bigger place or one that is closer to work, then no. If you stay somewhere at least five years, then it is likely that the advantages to owning rather than renting will outweigh the costs of switching houses. Less than five years, the reverse is true. So you should probably rent now. You can max out your 401k and IRA now. Doing so even with a conservative strategy will produce big returns by sixty-seven. And perhaps more importantly, it helps keep your spending down. The less you do spend, the less you will feel that you need to spend. Once you fill your emergency fund, start building savings for a house. I would consider putting them in a Real Estate Investment Trust (REIT). A REIT will tend to track real estate. Since you want to buy real estate with the results, this is its own kind of safety. It fell in value? Houses are probably cheap. Houses increasing in price rapidly? A REIT is probably growing by leaps and bounds. You do this outside your retirement accounts, as you want to be able to access it without penalty.","Investing is really about learning your own comfort level. You will make money and lose money. You will make mistakes but you will also learn a great deal. First off, invest in your own financial knowledge, this doesn't require capital at all but a commitment. No one will watch or care for your own money better than yourself. Read books, and follow some companies in a Google Finance virtual portfolio. Track how they're doing over time - you can do this as a virtual portfolio without actually spending or losing money. Have you ever invested before? What is your knowledge level? Investing long term is about trying to balance risk while reducing losses and trying not to get screwed along the way (by people). My personal advice: Go to an independent financial planner, go to one that charges you per hour only. Financial planners that don't charge you hourly get paid in commissions. They will be biased to sell you what puts the most money in their pockets. Do not go to the banks investment people, they are employed by the banks who have sales and quota requirements to have you invest and push their own investment vehicles like mutual funds. Take $15k to the financial planner and see what they suggest. Keep the other $5K in something slow and boring and $1k under your mattress in actual cash as an emergency. While you're young, compound interest is the magic that will make that $25k increase hand over fist in time. But you need to have it consistently make money. I'm young too and more risk tolerant because I have time. While I get older I can start to scale back my risk because I'm nearing retirement and preserve instead of try to make returns.","such analysis helps you keep track of the percentage of income that you invest You could apply 1:1:1 ratio. i.e spend 1/3, save 1/3 and invest 1/3. Hope that helps","While it is certainly easy to manage single fund, I am not sure it's the right strategy. It's been proven again and again that portfolio diversification is key to long term gains in wealth. I think your best option is to invest in low cost index funds and ETFs. While rebalancing your portfolio is hard, it is vastly simpler if your portfolio only has ETFs.","Does your employer provide a matching contribution to your 401k? If so, contribute enough to the 401k that you can fully take advantage of the 401k match (e.g. if you employer matches 3% of your income, contribute 3% of your income). It's free money, take advantage of it. Next up, max out your Roth IRA. The limit is $5000 currently a year. After maxing your Roth, revisit your 401k. You can contribute up to 16,500 per year. You savings account is a good place to keep a rainy day fund (do you have one?), but it lacks the tax advantages of a Roth IRA or 401k, so it is not really suitable for retirement savings (unless you have maxed out both your 401k and Roth IRA). Once you have take care of getting money into your 401k and Roth IRA accounts, the next step is investing it. The specific investment options available to you will vary depending on who provides your retirement account(s), so these are general guidelines. Generally, you want to invest in higher-risk, higher-return investments when you are young. This includes things like stocks and developing countries. As you get older (>30), you should look at moving some of your investments into things that less volatile. Bond funds are the usual choice. They tend to be safer than stocks (assuming you don't invest in Junk bonds), but your investment grows at a slower rate. Now this doesn't mean you immediately dump all of your stock and buy bonds. Rather, it is a gradual transition over time. As you get older and older, you gradually shift your investments to bond funds. A general rule of thumb I have seen: 100 - (YOUR AGE) = Percentage of your portfolio that should be in stocks Someone that is 30 would have 70% of their portfolio in stock, someone that is 40 would have 60% in stock, etc. As you get closer to retirement (50s-60s), you will want to start looking at investments that are more conservatie than bonds. Start to look at fixed-income and money market funds.","\"Investing is always a matter of balancing risk vs reward, with the two being fairly strongly linked. Risk-free assets generally keep up with inflation, if that; these days advice is that even in retirement you're going to want something with better eturns for at least part of your portfolio. A \"\"whole market\"\" strategy is a reasonable idea, but not well defined. You need to decide wheher/how to weight stocks vs bonds, for example, and short/long term. And you may want international or REIT in the mix; again the question is how much. Again, the tradeoff is trying to decide how much volatility and risk you are comfortable with and picking a mix which comes in somewhere around that point -- and noting which assets tend to move out of synch with each other (stock/bond is the classic example) to help tune that. The recommendation for higher risk/return when you have a longer horizon before you need the money comes from being able to tolerate more volatility early on when you have less at risk and more time to let the market recover. That lets you take a more aggressive position and, on average, ger higher returns. Over time, you generally want to dial that back (in the direction of lower-risk if not risk free) so a late blip doesn't cause you to lose too much of what you've already gained... but see above re \"\"risk free\"\". That's the theoretical answer. The practical answer is that running various strategies against both historical data and statistical simulations of what the market might do in the future suggests some specific distributions among the categories I've mentioned do seem to work better than others. (The mix I use -- which is basically a whole-market with weighting factors for the categories mentioned above -- was the result of starting with a general mix appropriate to my risk tolerance based on historical data, then checking it by running about 100 monte-carlo simulations of the market for the next 50 years.)\"","\"As many before me said but will say again for the sake of completeness of an answer: First off provision to have an emergency fund of 6 months living expenses to cover loss of employment, unforeseen medical issues etc. When that is done you re free to start investing. Do remember that putting all your eggs in one basket enable risks, so diversify your portfolio and diversify even within each investment vehicle. Stocks: I would personally stay away from stocks as it's for the most part a bear market right now (and I assume you re not interested day-trading to make any short term return) and most importantly you dont mention any trading experience which means you can get shafted. Mutual Funds: Long story short most of these work; mainly for the benefit for their management and people selling them. Bonds Instead, I would go for corporate bonds where you essentially buy the seller(aka the issuing company) and unlike gambling on stocks of the same company, you dont rely on speculation and stock gains to make a profit. As long as the company is standing when the bond matures you get your payment. This allows you to invest with less effort spent on a daily basis to monitor your investments and much better returns(especially if you find opportunities where you can buy bonds from structurally sound companies that have for reasons you deem irrelevant, purchase prices in the secondary market for cents in the dollar) than your other long term \"\"stable options\"\" like German issued bonds or saving accounts that are low in general and more so like in the current situation for German banks. Cryptocurrency I would also look into cryptocurrency for the long term as that seems to be past its childhood diseases and its also a good period of time to invest in as even the blue chips of that market are down party due to correction from all time highs and partly due to speculation. As Im more knowledgeable on this than German-locale bonds, a few coins I suggest you look into and decide for yourself would be the obvious ETH & BTC, then a slew of newer ones including but not limited to OmiseGO, Tenx(Pay), Augur and IOTA. Beware though, make sure to understand the basics of security and good practices on this field, as there's no central bank in this sector and if you leave funds in an exchange or your wallet's private key is compromised the money are as good as gone.\"","\"You don't state where you are, so any answers to this will by necessity be very general in nature. How many bank accounts should I have and what kinds You should have one transaction account and one savings account. You can get by with just a single transaction account, but I really don't recommend that. These are referred to with different names in different jurisdictions, but the basic idea is that you have one account where money is going in and out (the transaction account), and one where money goes in and stays (the savings account). You can then later on, as you discover various needs, build on top of that basic foundation. For example, I have separate accounts for each source of money that comes into my personal finances, which makes things much easier when I sit down to fill out the tax forms up to almost a year and a half later, but also adds a bit of complexity. For me, that simplicity at tax time is worth the additional complexity; for someone just starting out, it might not be. (And of course, it is completely unnecessary if you have only one source of taxable income and no other specific reason to separate income streams.) how much (percentage-wise) of my income should I put into each one? With a single transaction account, your entire income will be going into that account. Having a single account to pay money into will also make life easier for your employer. You will then have to work out a budget that says how much you plan to spend on food, shelter, savings, and so on. how do I portion them out into budgets and savings? If you have no idea where to start, but have an appropriate financial history (as opposed to just now moving into a household of your own), bring out some old account statements and categorize each line item in a way that makes sense to you. Don't be too specific; four or five categories will probably be plenty. These are categories like \"\"living expenses\"\" (rent, electricity, utilities, ...), \"\"food and eating out\"\" (everything you put in your mouth), \"\"savings\"\" (don't forget to subtract what you take out of savings), and so on. This will be your initial budget. If you have no financial history, you are probably quite young and just moving out from living with your parents. Ask them how much might be reasonable in your area to spend on basic food, a place to live, and so on. Use those numbers as a starting point for a budget of your own, but don't take them as absolute truths. Always have a \"\"miscellaneous expenses\"\" or \"\"other\"\" line in your budget. There will always be expenses that you didn't plan for, and/or which don't neatly fall into any other category. Allocate a reasonable sum of money to this category. This should be where you take money from during a normal month when you overshoot in some budget category; your savings should be a last resort, not something you tap into on a regular basis. (If you find yourself needing to tap into your savings on a regular basis, adjust your budget accordingly.) Figure out based on your projected expenses and income how much you can reasonably set aside and not touch. It's impossible for us to say exactly how much this will be. Some people have trouble setting aside 5% of their income on a regular basis without touching it; others easily manage to save over 50% of their income. Don't worry if this turns out a small amount at first. Get in touch with your bank and set up an automatic transfer from your transaction account to the savings account, set to recur each and every time you get paid (you may want to allow a day or two of margin to ensure that the money has arrived in your account before it gets taken out), of the amount you determined that you can save on a regular basis. Then, try to forget that this money ever makes it into your finances. This is often referred to as the \"\"pay yourself first\"\" principle. You won't hit your budget exactly every month. Nobody does. In fact, it's more likely that no month will have you hit the budget exactly. Try to stay under your budgeted expenses, and when you get your next pay, unless you have a large bill coming up soon, transfer whatever remains into your savings account. Spend some time at the end of each month looking back at how well you managed to match your budget, and make any necessary adjustments. If you do this regularly, it won't take very long, and it will greatly increase the value of the budget you have made. Should I use credit cards for spending to reap benefits? Only if you would have made those purchases anyway, and have the money on hand to pay the bill in full when it comes due. Using credit cards to pay for things is a great convenience in many cases. Using credit cards to pay for things that you couldn't pay for using cash instead, is a recipe for financial disaster. People have also mentioned investment accounts, brokerage accounts, etc. This is good to have in mind, but in my opinion, the exact \"\"savings vehicle\"\" (type of place where you put the money) is a lot less important than getting into the habit of saving regularly and not touching that money. That is why I recommend just a savings account: if you miscalculate, forgot a large bill coming up, or for any other (good!) reason need access to the money, it won't be at a time when the investment has dropped 15% in value and you face a large penalty for withdrawing from your retirement savings. Once you have a good understanding of how much you are able to save reliably, you can divert a portion of that into other savings vehicles, including retirement savings. In fact, at that point, you probably should. Also, I suggest making a list of every single bill you pay regularly, its amount, when you paid it last time, and when you expect the next one to be due. Some bills are easy to predict (\"\"$234 rent is due the 1st of every month\"\"), and some are more difficult (\"\"the electricity bill is due on the 15th of the month after I use the electricity, but the amount due varies greatly from month to month\"\"). This isn't to know exactly how much you will have to pay, but to ensure that you aren't surprised by a bill that you didn't expect.\"","First I assume you are resident for tax purposes in the UK? 1 Put 2000 in a cash ISA as an emergency fund. 2 Buy shares in 2 or 3 of the big generalist Investment trusts as they have low charges and long track records – unless your a higher rate tax payer don’t buy the shares inside the ISA its not worth it You could use FTSE 100 tracker ETF's or iShares instead of Investment Trusts.","\"There are many questions and good answers here regarding investment choices. The first decision you need to make is how involved do you intend to be in investment activity. If you plan to be actively investing by yourself, you should look for questions here about making investment choices. If you intend to be a more passive investor, look for posts by \"\"Bogleheads\"\", who focus on broad-focused, low cost investments. This is the optimal choice for many people. If you are not comfortable managing investments at all, you need to figure out how to find a competent and reasonably priced financial advisor to meet with and guide your investment strategy. This advice generally costs about 1-2% of your total managed assets annually.\"","I would make this a comment, but I am not worthy...... You will need to define your objectives before you can do anything. What is the money for? What is your risk tolerance? Where do you live? Capital appreciation? Preservation? Can you eat if your savings are cut in half? How much are you currently making? How much are you currently saving? What do you already have exposure to? How secure is your job? What is the makeup of the congregation? Do you have any tax-related surprises? Do you own your home? Have you previously consulted with a financial planner? There are many many factors obviously. More than I think most people want to give out over the internet, but they are all important to making a decision. Get a recommendation from someone you know for a financial planner. Ask upfront what their background is. Education, experience credentials. You want a certified financial planner or analyst. Ask how their fees are structured and what their approach is like, and make sure they're speaking intelligibly. Feel free to shop around until you find someone you like.","It really is dependent upon your goals. What are your short term needs? Do you need a car/clothing/high cost apartment/equipment when you start your career? For those kinds of things, a savings account might be best as you will need to have quick access to cash. Many have said that people need two careers, the one they work in and being an investor. You can start on that second career now. Open up some small accounts to get the feel for investing. This can be index funds, or something more specialized. I would put money earmarked for a home purchase in funds with a lower beta (fluctuation) and some in index funds. You probably would want to get a feel for what and where you will actually be doing in your career prior to making a leap into a home purchase. So figure you have about 5 years. That gives you time to ride out the waves in the market. BTW, good job on your financial situation. You are set up to succeed.","You are suggesting something called dollar cost averaging (or its cousin, dollar value averaging) - http://www.investopedia.com/articles/stocks/07/dcavsva.asp This is certainly a valid investment strategy, although personally, I feel that for long term investment, it is not necessary unless you plan on being an active trader. I still strongly encourage you to research these two methods and see if they would work well for your personal investment strategy and goals. As far as what sorts of investments for a taxable account, I have three general recommendations: As far as which company to use for your brokerage, I personally have accounts at Voya, TRowe Price and Fidelity. I would strongly recommend Fidelity out of those three, mostly due to customer service and quality and ease of use of their website. Vanguard is a great brokerage, but you don't have to choose them just because you plan to mostly invest in Vanguard funds. I also recommend you research how capital gains and dividend taxing works (and things like lost harvesting), so that you can structure your investments with taxes in mind. Do this ahead of time, don't wait until April of 2016 because it will be too late to save on taxes by then.","\"You want to \"\"begin building a nice portfolio\"\" comprised of \"\"real estate\"\" and \"\"solar and wind\"\". There are ways to do that without starting your own solar power farm or buying giant wind turbines, or whole apartment complexes. They're called ETFs. They're diversified and it's unlikely that you'll use the entirety of your initial investment.\"","\"Funds - especially index funds - are a safe way for beginning investors to get a diversified investment across a lot of the stock market. They are not the perfect investment, but they are better than the majority of mutual funds, and you do not spend a lot of money in fees. Compared to the alternative - buying individual stocks based on what a friend tells you or buying a \"\"hot\"\" mutual fund - it's a great choice for a lot of people. If you are willing to do some study, you can do better - quite a bit better - with common stocks. As an individual investor, you have some structural advantages; you can take significant (to you) positions in small-cap companies, while this is not practical for large institutional investors or mutual fund managers. However, you can also lose a lot of money quickly in individual stocks. It pays to go slow and to your homework, however, and make sure that you are investing, not speculating. I like fool.com as a good place to start, and subscribe to a couple of their newsletters. I will note that investing is not for the faint of heart; to do well, you may need to do the opposite of what everybody else is doing; buying when the market is down and selling when the market is high. A few people mentioned the efficient market hypothesis. There is ample evidence that the market is not efficient; the existence of the .com and mortgage bubbles makes it pretty obvious that the market is often not rationally valued, and a couple of hedge funds profited in the billions from this.\"","Good question. There are plenty of investors who think they can simply rely on intuition, and although luck is always present it is not enough to construct a proper portfolio. First of all there are two basic types of portfolio management: Passive and Active. The majority of abnormal gains are made with active portfolio management although passive managers are less likely to suffer loses. Both types must be created with some kind of qualitative and quantitative research, but an active portfolio requires constant adjustments (Market Timing) to preserve the desired levels of risk and return. The topic is extremely broad and every manager has his own preferred methods of quantitative analysis. I will try to list here some most common, in my opinion, ways of stock-picking and portfolio management. Roy's Criterion: The best portfolio is that with the lowest probability that the return will be below a specified level. This is achieved by maximising the number of standard deviations between the return on the portfolio and minimum specified level: Max k = (Rp-Rl)/Sp Where (Rp) - return on portfolio, (Rl) - specified minimum return, (Sp) - standard deviation of portfolio return. Kataoka's Criterion: Maximise the minimum return (Rl) subject to constraint that the chance of a return below (Rl) is less than or equal to a specified value (a). Maximise (Rl) Subject to Prob (Rp < Rl) =< a For example, assume that the specified value is 20% - this will be met provided (Rl) is at least 0.84 standard deviations below (Rp). Therefore the best portfolio is the one that maximises (Rl) where: Rl = Rp-0.84*Sp Telser's Criterion: Maximise expected return subject to the constraint that the chance of a return below the specified minimum is less than or equal to some specified minimum (a) Maximise (Rp) subject to Prob (Rp < Rl) =< a Assuming same data as previously: Rl =< Rp-0.84*Sp and select the portfolio with highest expected return. Security Selection Now let's look at some methods of security selection. This is important when a manager believes some shares are mispriced. The required return on security 'i' is given by: Ri = Rf+(Rm-Rf)Bi Where (Rf) - is a risk-free rate, (Rm) - return on the market, (Bi) - security's beta. The difference between the required return and the actual return expected is known as the security's alpha (Ai). Ai = Rai - Ri, where (Rai) is actual return on security 'i'. Stock Picking One way of stock-picking is to select portfolios of securities with positive alphas. Alpha of a portfolio is simply the weighted average of the alphas of the securities in the portfolio. Ap = {(n*Ai) Where ({) is sigma (sorry for such weird typing, haven't figured out yet how to type proper-looking formulas), (n) - share of 'i'th security in portfolio. So another way of stock-picking is ranking securities by their excess return to beta (ERB): ERB = (Ri - Rf)/Bi The greater the ERB the more desirable the security and the greater the proportion it will make up of the portfolio. Thus portfolios produced by this technique will have greater proportion of some securities than the market portfolio and lower proportions of other securities. The number of securities depends on a cut-off rate (C*) for the ERB, defined so that all securities with ERB>C* are included in portfolio while if ERB The cut-off rate for a portfolio containing the first 'j' securities is given by (i'm inserting an image cut from Word below): Here comes the tricky part: Basically what you do is first calculate ERB for each security, then calculate Cj for each security mix (gradually adding new securities one by one and recalculating Cj each time). Then you select an optimum portfolio by comparing Cj of each mix to ERB's of it's securities. Let me show you a simple example: Say you have securities A,B,C and D you calculated ERB's: ERB(a)=6, ERB(b)=6.5, ERB(c)=5, ERB(d)=4 also you calculated: C(a)=4.1, C(ab)=4.8, C(abc)=4.9, C(abcd)=4.5. Then you check: ERB(a),ERB(b),ERB(c) are greater than C(a), but C(a) only contains security A so C(a) is not an optimum mix. ERB(a),ERB(b),ERB(c) are greater than C(ab), but C(ab) only contains securities A and B ERB(a),ERB(b),ERB(c) are greater than C(abc), and C(abc) contains A B and C so it is an optimum. ERB(d) is lower than C(abcd) so C(abcd) is not an optimum portfolio. Finally the most important part: Below is a formula to find the share of each security in the portfolio: Here you simply plug in already obtained values for each security to find it's proportion in your portfolio. I hope this somehow answers your question, however there is a lot more than this to consider if you decide to manage your portfolio yourself. Some of the most important areas are: Market Timing Hedging Stocks vs Bonds Good luck with your investments! And remember, the safest portfolio is the one that replicates the Global Market. The cut-off rate for a portfolio containing the first 'j' securities is given by (i'm inserting an image cut from Word below): Here comes the tricky part: Basically what you do is first calculate ERB for each security, then calculate Cj for each security mix (gradually adding new securities one by one and recalculating Cj each time). Then you select an optimum portfolio by comparing Cj of each mix to ERB's of it's securities. Let me show you a simple example: Say you have securities A,B,C and D you calculated ERB's: ERB(a)=6, ERB(b)=6.5, ERB(c)=5, ERB(d)=4 also you calculated: C(a)=4.1, C(ab)=4.8, C(abc)=4.9, C(abcd)=4.5. Then you check: ERB(a),ERB(b),ERB(c) are greater than C(a), but C(a) only contains security A so C(a) is not an optimum mix. ERB(a),ERB(b),ERB(c) are greater than C(ab), but C(ab) only contains securities A and B ERB(a),ERB(b),ERB(c) are greater than C(abc), and C(abc) contains A B and C so it is an optimum. ERB(d) is lower than C(abcd) so C(abcd) is not an optimum portfolio. Finally the most important part: Below is a formula to find the share of each security in the portfolio: Here you simply plug in already obtained values for each security to find it's proportion in your portfolio. I hope this somehow answers your question, however there is a lot more than this to consider if you decide to manage your portfolio yourself. Some of the most important areas are: Good luck with your investments! And remember, the safest portfolio is the one that replicates the Global Market.","Not all debt is bad. If it carries a reasonable interest rate, you don't need to clear it immediately. As for investing in an index fund, they're an affordable, easy way to spread your money over various assets. However, asset allocation is just one of many investment strategies. Ideally, you want to invest according to your goals, tax situation, and risk tolerance. You want a portfolio that dynamically allocates to various investment strategies, both beta and alpha, according to changing market conditions. Most importantly, you want systematic risk management for every aspect of your investments."],"string":"[\n \"As stated in the comments, Index Funds are the way to go. Stocks have the best return on investment, if you can stomach the volatility, and the diversification index funds bring you is unbeatable, while keeping costs low. You don't need an Individual Savings Account (UK), 401(k) (US) or similar, though they would be helpful to boost investment performance. These are tax advantaged accounts; without them you will have to pay taxes on your investment gains. However, there's still a lot to gain from investing, specially if the alternative is to place them in the vault or similar. Bear in mind that inflation makes your money shrink in real terms. Even a small interest is better than no interest. By best I mean that is safe (regulated by the financial authorities, so your money is safe and insured up to a certain amount) and has reasonable fees (keeping costs low is a must in any scenario). The two main concerns when designing your portfolio are diversification and low TER (Total Expense Ratio). As when we chose broker, our concern is to be as safe as we possibly can (diversification helps with this) and to keep costs at the bare minimum. Some issues might restrict your election or make others seem better. Depending on the country you live and the one of the fund, you might have to pay more taxes on gains/dividends. e.g. The US keeps some of them if your country doesn't have a special treaty with them. Look for W-8Ben and tax withholding for more information. Vanguard and Blackrock offer nice index funds. Morningstar might be a good place for gathering information. Don't trust blindly the 'rating'. Some values are 'not rated' and kick ass the 4 star ones. Again: seek low TER. Not a big fan of this point, but I'm bound to mention it. It can be actually helpful for sorting out tax related issues, which might decide the kind of index fund you pick, and if you find this topic somewhat daunting. You start with a good chunk of money, so it might make even more sense in your scenario to hire someone knowledgeable and trustworthy. I hope this helps to get you started. Best of luck.\",\n \"On reading couple of articles & some research over internet, I got to know about diversified investment where one should invest 70% in equity related & rest 30% in debt related funds Yes that is about right. Although the recommendation keeps varying a bit. However your first investment should not aim for diversification. Putting small amounts in multiple mutual funds may create paper work and tracking issues. My suggestion would be to start with an Index EFT or Large cap. Then move to balanced funds and mid caps etc. On this site we don't advise on specific funds. You can refer to moneycontrol.com or economictimes or quite a few other personal finance advisory sites to understand the top funds in the segments and decide on funds accordingly. PS: Rather than buying paper, buy it electronic, better you can now buy it as Demat. If you already have an Demat account it would be best to buy through it.\",\n \"When you are starting out using a balanced fund can be quite advantageous. A balanced fund is represents a diversified portfolio in single fund. The primary advantage of using a balanced fund is that with it being a single fund it is easier to meet the initial investment minimum. Later once you have enough to transition to a portfolio of diversified funds you would sell the fund and buy the portfolio. With a custom portfolio, you will be better able to target your risk level and you might also be able to use lower cost funds. The other item to check is do any of the funds that you might be interested in for the diversified portfolio have lower initial investment option if you can commit to adding money on a specified basis (assuming that you are able to). Also there might be an ETF version of a mutual fund and for those the initial investment amount is just the share price. The one thing to be aware of is make sure that you can buy enough shares that you can rebalance (holding a single share makes it hard to sell some gain when rebalancing). I would stay away from individual stocks until you have a much larger portfolio, assuming that you want to invest with a diversified portfolio. The reason being that it takes a lot more money to create a diversified portfolio out of individual stocks since you have to buy whole shares. With a mutual fund or ETF, your underlying ownership of can be fractional with no issue as each fund share is going to map into a fraction of the various companies held and with mutual funds you can buy fractional shares of the fund itself.\",\n \"Take the easy approach - as suggested by John Bogle (founder of Vanguard - and a man worthy of tremendous respect). Two portfolios consisting of 1 index fund each. Invest your age% in the Fixed Income index fund. Invest (1-age)% in the stock index fund. Examples of these funds are the Total Market Index Fund (VTSMX) and the Total Bond Market Index (VBMFX). If you wish to be slightly more adventurous, blend (1-age-10)% as the Total Market Index Fund and a fixed 10% as Total International Stock Index (VGTSX). You will sleep well at night for most of your life.\",\n \"It sounds like you are soliciting opinions a little here, so I'll go ahead and give you mine, recognizing that there's a degree of arbitrariness here. A basic portfolio consists of a few mutual funds that try to span the space of investments. My choices given your pot: I like VLTCX because regular bond index funds have way too much weight in government securities. Government bonds earn way too little. The CAPM would suggest a lot more weight in bonds and international equity. I won't put too much in bonds because...I just don't feel like it. My international allocation is artificially low because it's always a little more costly and I'm not sure how good the diversification gains are. If you are relatively risk averse, you can hold some of your money in a high-interest online bank and only put a portion in these investments. $100K isn't all that much money but the above portfolio is, I think, sufficient for most people. If I had a lot more I'd buy some REIT exposure, developing market equity, and maybe small cap. If I had a ton more (several million) I'd switch to holding individual equities instead of funds and maybe start looking at alternative investments, real estate, startups, etc.\",\n \"There are quite a few options. Suggest you put a mix of things and begin investing into Mutual Funds.\",\n \"I am not interested in watching stock exchange rates all day long. I just want to place it somewhere and let it grow Your intuition is spot on! To buy & hold is the sensible thing to do. There is no need to constantly monitor the stock market. To invest successfully you only need some basic pointers. People make it look like it's more complicated than it actually is for individual investors. You might find useful some wisdom pearls I wish I had learned even earlier. Stocks & Bonds are the best passive investment available. Stocks offer the best return, while bonds are reduce risk. The stock/bond allocation depends of your risk tolerance. Since you're as young as it gets, I would forget about bonds until later and go with a full stock portfolio. Banks are glorified money mausoleums; the interest you can get from them is rarely noticeable. Index investing is the best alternative. How so? Because 'you can't beat the market'. Nobody can; but people like to try and fail. So instead of trying, some fund managers simply track a market index (always successfully) while others try to beat it (consistently failing). Actively managed mutual funds have higher costs for the extra work involved. Avoid them like the plague. Look for a diversified index fund with low TER (Total Expense Ratio). These are the most important factors. Diversification will increase safety, while low costs guarantee that you get the most out of your money. Vanguard has truly good index funds, as well as Blackrock (iShares). Since you can't simply buy equity by yourself, you need a broker to buy and sell. Luckily, there are many good online brokers in Europe. What we're looking for in a broker is safety (run background checks, ask other wise individual investors that have taken time out of their schedules to read the small print) and that charges us with low fees. You probably can do this through the bank, but... well, it defeats its own purpose. US citizens have their 401(k) accounts. Very neat stuff. Check your country's law to see if you can make use of something similar to reduce the tax cost of investing. Your government will want a slice of those juicy dividends. An alternative is to buy an index fund on which dividends are not distributed, but are automatically reinvested instead. Some links for further reference: Investment 101, and why index investment rocks: However the author is based in the US, so you might find the next link useful. Investment for Europeans: Very useful to check specific information regarding European investing. Portfolio Ideas: You'll realise you don't actually need many equities, since the diversification is built-in the index funds. I hope this helps! There's not much more, but it's all condensed in a handful of blogs.\",\n \"\\\"You mentioned three concepts: (1) trading (2) diversification (3) buy and hold. Trading with any frequency is for people who want to manage their investments as a hobby or profession. You do not seem to be in that category. Diversification is a critical element of any investment strategy. No matter what you do, you should be diversified. All the way would be best (this means owning at least some of every asset out there). The usual way to do this is to own a mutual or index fund. Or several. These funds own hundreds or thousands of stocks, so that buying the fund instantly diversifies you. Buy and hold is the only reasonable approach to a portfolio for someone who is not interested in spending a lot of time managing it. There's no reason to think a buy-and-hold portfolio will underperform a typical traded portfolio, nor that the gains will come later. It's the assets in the portfolio that determine how aggressive/risky it is, not the frequency with which it is traded. This isn't really a site for specific recommendations, but I'll provide a quick idea: Buy a couple of index funds that cover the whole universe of investments. Index funds have low expenses and are the cheapest/easiest way to diversify. Buy a \\\"\\\"total stock market\\\"\\\" fund and a \\\"\\\"total bond fund\\\"\\\" in a ratio that you like. If you want, also buy an \\\"\\\"international fund.\\\"\\\" If you want specific tickers and ratios, another forum would be better(or just ask your broker or 401(k) provider). The bogleheads forum is one that I respect where people are very happy to give and debate specific recommendations. At the end of the day, responsibly managing your investment portfolio is not rocket science and shouldn't occupy a lot of time or worry. Just choose a few funds with low expenses that cover all the assets you are really interested in, put your money in them in a reasonable-ish ratio (no one knows that the best ratio is) and then forget about it.\\\"\",\n \"Most people carry a diversity of stock, bond, and commodities in their portfolio. The ratio and types of these investments should be based on your goals and risk tolerance. I personally choose to manage mine through mutual funds which combine the three, but ETFs are also becoming popular. As for where you keep your portfolio, it depends on what you're investing for. If you're investing for retirement you are definitely best to keep as much of your investment as possible in 401k or IRAs (preferably Roth IRAs). Many advisers suggest contributing as much to your 401k as your company matches, then the rest to IRA, and if you over contribute for the IRA back to the 401k. You may choose to skip the 401k if you are not comfortable with the choices your company offers in it (such as only investing in company stock). If you are investing for a point closer than retirement and you still want the risk (and reward potential) of stock I would suggest investing in low tax mutual funds, or eating the tax and investing in regular mutual funds. If you are going to take money out before retirement the penalties of a 401k or IRA make it not worth doing. Technically a savings account isn't investing, but rather a place to store money.\",\n \"Buy the minimum of one fund now. (Eg total bond market) Buy the minimum of the next fund next time you have $2500. (Eg large-cap stocks.) Continue with those until you have enough to buy the next fund (eg small-cap stocks). Adjust as you go to balance these funds according to your planned ratios, or as close as you can reasonably get without having to actually transfer money between the funds more than once a year or so. Build up to your targets over time. If you can't easily afford to tie up that first $2500, stay with banks and CDs and maybe money market accounts until you can. And don't try to invest (except maybe through a matched 401k) before you have adequate savings both for normal life and for an emergency reserve. Note too that the 401k can be a way to buy into funds without a minimum. Check with your employer. If you haven't maxed out your 401k yet, and it has matching funds, that is usually the place to start saving for retirement; otherwise you are leaving free money on the table.\",\n \"Don't over think about your choices. The most important thing to start now and keep adjusting and tuning your portfolio as you move along in your life. Each individual's situation is unique. Start with something simple and straight forward, like 100 - your age, in Total Stock market Index fund and the remaining total bond market index fund. For your 401k, at least contribute so much as to get the maximum employer match. Its always good if you can contribute the yearly maximum in your 401k or IRA. Once you have built up a substantial amount of assets (~ $50k+) then its time to think more about asset allocation and start buying into more specific investments as needed. Remember to keep your investment expenses low by using index funds. Also remember to factor in tax implications on your investment decisions. eg. buying an REIT fund in a tax advantaged account like 40k is more tax efficient than buying it in a normal brokerage account.\",\n \"If you are a novice investor and want to diversify, I'd recommend looking into targeted mutual funds. They couldn't be easier. You just put your money in the fund with the year that you anticipating needing to take the money out and the fund manager handles diversification and adjusting the risk appropriately over the life of the fund based on the remaining time horizon. The only downside is that the annual expenses tend to be higher on these than if you just invested in the underlying securities/funds, but you are pretty much paying them to manage it for you.\",\n \"First, check out some of the answers on this question: Oversimplify it for me: the correct order of investing When you have determined that you are ready to invest for retirement, there are two things you need to consider: the investment and the account. These are separate items. The investment is what makes your money grow. The type of account provides tax advantages (and restrictions). Generally, these can be considered separately; for the most part, you can do any type of investment in any account. Briefly, here is an overview of some of the main options: In your situation, the Roth IRA is what I would recommend. This grows tax free, and if you need the funds for some reason, you can get out what you put in without penalty. You can invest up to $5500 in your Roth IRA each year. In addition to the above reasons, which are true for anybody, a Roth IRA would be especially beneficial for you for three reasons: For someone that is closer in age to retirement and in a higher tax bracket now, a Roth IRA is less attractive than it is for you. Inside your Roth IRA, there are lots of choices. You can invest in stocks, bonds, mutual funds (which are simply collections of stocks and bonds), bank accounts, precious metals, and many other things. Discussing all of these investments in one answer is too broad, but my recommendation is this: If you are investing for retirement, you should be investing in the stock market. However, picking individual stocks is too risky; you need to be diversified in a lot of stocks. Stock mutual funds are a great way to invest in the stock market. There are lots of different types of stock mutual funds with different strategies and expenses associated with them. Managed funds actively buy and sell different stocks inside them, but have high expenses to pay the managers. Index funds buy and hold a list of stocks, and have very low expenses. The conventional wisdom is that, in general, index funds perform better than managed funds when you take the expenses into account. I hope this overview and these recommendations were helpful. If you have any specific questions about any of these types of accounts or investments, feel free to ask another question.\",\n \"There is no rule of thumb (although some may suggest there is). Everybody will have different goals, investment preferences and risk tolerances. You need to figure this out by yourself by either education yourself in the type of investments you are interested in or by engaging (and paying for) a financial advisor. You should not be taking advice from others unless it is specifically geared for your goals, investment DNA and risk tolerance. The only advice I would give you is to have a plan (whether you develop it yourself or pay a financial advisor to develop one). Also, don't have all your savings sitting in cash, as long-term you will fall behind the eight ball in real returns (allowing for inflation).\",\n \"\\\"For your first question, the general guidelines I've seen recommended are as follows: As to your second question, portfolio management is something you should familiarize yourself with. If you trust it to other people, don't be surprised when they make \\\"\\\"mistakes\\\"\\\". Remember, they get paid regardless of whether you make money. Consider how much any degree of risk will affect you. When starting out, your contributions make up most of the growth of your accounts; now is the time when you can most afford to take higher risk for higher payouts (still limiting your risk as much as possible, of course). A 10% loss on a portfolio of $50k can be replaced with a good year's contributions. Once your portfolio has grown to a much larger sum, it will be time to dial back the risk and focus on preserving your capital. When choosing investments, always treat your porfolio as a whole - including non-retirement assets (other investment accounts, savings, even your house). Don't put too many eggs from every account into the same basket, or you'll find that 30% of your porfolio is a single investment. Also consider that some investments have different tax consequences, and you can leverage the properties of each account to offset that.\\\"\",\n \"You have to look at the market conditions and make decisions based on them. Ideally, you may want to have 30% of your portfolio in bonds. But from a practical point of view, it's probably not so smart to invest in bond funds right at this moment given the interest rate market. Styles of funds tend to go into and out of style. I personally do asset allocation two ways in my 457 plan (like a 401k for government workers): In my IRA, I invest in a portfolio of 5-6 stocks. The approach you take is dependent on what you are able to put into it. I invest about 10 hours a week into investment related research. If you can't do that, you want a strategy that is simpler -- but you still need to be cognizant of market conditions.\",\n \"This is a very open ended question with no concrete answer as it depends on your personal situation. However, for starters I would suggest picking up a copy of The Investment Answer. It's a very light read, less than 100 pages, but it has some amazingly simple yet very concrete advice on investing and answers a lot of common questions (like yours).\",\n \"\\\"Index funds can be a very good way to get into the stock market. It's a lot easier, and cheaper, to buy a few shares of an index fund than it is to buy a few shares in hundreds of different companies. An index fund will also generally charge lower fees than an \\\"\\\"actively managed\\\"\\\" mutual fund, where the manager tries to pick which stocks to invest for you. While the actively managed fund might give you better returns (by investing in good companies instead of every company in the index) that doesn't always work out, and the fees can eat away at that advantage. (Stocks, on average, are expected to yield an annual return of 4%, after inflation. Consider that when you see an expense ratio of 1%. Index funds should charge you more like 0.1%-0.3% or so, possibly more if it's an exotic index.) The question is what sort of index you're going to invest in. The Standard and Poor's 500 (S&P 500) is a major index, and if you see someone talking about the performance of a mutual fund or investment strategy, there's a good chance they'll compare it to the return of the S&P 500. Moreover, there are a variety of index funds and exchange-traded funds that offer very good expense ratios (e.g. Vanguard's ETF charges ~0.06%, very cheap!). You can also find some funds which try to get you exposure to the entire world stock market, e.g. Vanguard Total World Stock ETF, NYSE:VT). An index fund is probably the ideal way to start a portfolio - easy, and you get a lot of diversification. Later, when you have more money available, you can consider adding individual stocks or investing in specific sectors or regions. (Someone else suggested Brazil/Russia/Indo-China, or BRICs - having some money invested in that region isn't necessarily a bad idea, but putting all or most of your money in that region would be. If BRICs are more of your portfolio then they are of the world economy, your portfolio isn't balanced. Also, while these countries are experiencing a lot of economic growth, that doesn't always mean that the companies that you own stock in are the ones which will benefit; small businesses and new ventures may make up a significant part of that growth.) Bond funds are useful when you want to diversify your portfolio so that it's not all stocks. There's a bunch of portfolio theory built around asset allocation strategies. The idea is that you should try to maintain a target mix of assets, whatever the market's doing. The basic simplified guideline about investing for retirement says that your portfolio should have (your age)% in bonds (e.g. a 30-year-old should have 30% in bonds, a 50-year-old 50%.) This helps maintain a balance between the volatility of your portfolio (the stock market's ups and downs) and the rate of return: you want to earn money when you can, but when it's almost time to spend it, you don't want a sudden stock market crash to wipe it all out. Bonds help preserve that value (but don't have as nice of a return). The other idea behind asset allocation is that if the market changes - e.g. your stocks go up a lot while your bonds stagnate - you rebalance and buy more bonds. If the stock market subsequently crashes, you move some of your bond money back into stocks. This basically means that you buy low and sell high, just by maintaining your asset allocation. This is generally more reliable than trying to \\\"\\\"time the market\\\"\\\" and move into an asset class before it goes up (and move out before it goes down). Market-timing is just speculation. You get better returns if you guess right, but you get worse returns if you guess wrong. Commodity funds are useful as another way to diversify your portfolio, and can serve as a little bit of protection in case of crisis or inflation. You can buy gold, silver, platinum and palladium ETFs on the stock exchanges. Having a small amount of money in these funds isn't a bad idea, but commodities can be subject to violent price swings! Moreover, a bar of gold doesn't really earn any money (and owning a share of a precious-metals ETF will incur administrative, storage, and insurance costs to boot). A well-run business does earn money. Assuming you're saving for the long haul (retirement or something several decades off) my suggestion for you would be to start by investing most of your money* in index funds to match the total world stock market (with something like the aforementioned NYSE:VT, for instance), a small portion in bonds, and a smaller portion in commodity funds. (For all the negative stuff I've said about market-timing, it's pretty clear that the bond market is very expensive right now, and so are the commodities!) Then, as you do additional research and determine what sort investments are right for you, add new investment money in the places that you think are appropriate - stock funds, bond funds, commodity funds, individual stocks, sector-specific funds, actively managed mutual funds, et cetera - and try to maintain a reasonable asset allocation. Have fun. *(Most of your investment money. You should have a separate fund for emergencies, and don't invest money in stocks if you know you're going need it within the next few years).\\\"\",\n \"What is the best form of investment? It only depends on your goals... The perfect amount of money depends also on your particular situation. The first thing you should start getting familiar with is the notion of portfolio and diversification. Managing risk is also fundamental especially with the current market funkiness... Start looking at index based ETFs -Exchange Traded Funds- and Balanced Mutual Funds to begin with. Many discounted online brokerage companies in the USA offer good training and knowledge centers. Some of them will also let you practice with a demo account that let you invest virtual money to make you feel comfortable with the interface and also with investing in general.\",\n \"What explains the most of the future returns of a portfolio is the allocation between asset classes. In the long term, stock investments are almost certain to return more than any other kinds of investments. For 40+ years, I would choose a portfolio of 100% stocks. How to construct the portfolio, then? Diversification is the key. You should diversify in time (don't put a large sum of money into your stock portfolio immediately; if you have a large sum to invest, spread it around several years). You should diversify based on company size (invest in both large and small companies). You should also diversify internationally (don't invest in just US companies). If you prefer to pick individual stocks, 20 very carefully selected stocks may provide enough diversification if you keep diversification in mind during stock picking. However, careful stock picking cannot be expected to yield excess returns, and if you pick stocks manually, you need to rebalance your portfolio occasionally. Thus, if you're lazy, I would recommend a mutual fund, or many mutual funds if you have difficulty finding a low-cost one that is internationally diversified. The most important consideration is the cost. You cannot expect careful fund selection to yield excess returns before expenses. However, the expenses are certain costs, so prefer low-cost funds. Almost always this means picking index funds. Avoid funds that have a small number of stocks, because they typically invest only in the largest companies, which means you fail to get diversification in company size. So, instead of Euro STOXX 50, select STOXX 600 when investing to the European market. ETFs may have lower costs than traditional mutual funds, so keep ETFs in mind when selecting the mutual funds in which to invest. For international diversification, do not forget emerging markets. It is not excessive to invest e.g. 20% to emerging markets. Emerging markets have a higher risk but they also have a higher return. A portfolio that does not include emerging markets is not in my opinion well diversified. When getting close to retirement age, I would consider increasing the percentage of bonds in the portfolio. This should be done primarily by putting additional money to bonds instead of selling existing investments to avoid additional taxes (not sure if this applies to other taxation systems than the Finnish one). Bond investments are best made though low-cost mutual funds as well. Keep bond investments in your local currency and risk-free assets (i.e. select US government bonds). Whatever you do, remember that historical return is no guarantee of future return. Actually, the opposite may be true: there is a mean reversion law. If a particular investment has returned well in the past, it often means its price has gone up, making it more likely that the price goes down in the future. So don't select a fund based on its historical return; instead, select a fund based on low costs. However, I'm 99% certain that over a period of 40 years, stocks will return better than other investments. In addition to fund costs, taxes are the other certain thing that will be deducted from your returns. Research what options you have to reduce the taxes you need to pay. 401-K was explained in another answer; this may be a good option. Some things recommended in other answers that I would avoid:\",\n \"What is the best option to start with? and I am not sure about my goals right now but I do want to have a major retirement account without changing it for a long time That is a loaded question. Your goals should be set up first, else what is stopping you from playing the mega millions lottery to earn the retirement amount instantly. If you have the time and resources, you should try doing it yourself. It helps you learn and at a latter stage if you don't have the time to manage it yourself, you can find an adviser who does it for you. To find a good adviser or find a fund who/which can help you achieve your monetary goals you will need to understand the details, how it works and other stuff, behind it. When you are thrown terms at your face by somebody, you should be able to join the dots and get a picture for yourself. Many a rich men have lost their money to unscrupulous people i.e. Bernie Madoff. So knowing helps a lot and then you can ask questions or find for yourself to calm yourself i.e. ditch the fund or adviser, when you see red flags. It also makes you not to be too greedy, when somebody paints you a picture of great returns, because then your well oiled mind would start questioning the rationale behind such investments. Have a look at Warren Buffet. He is an investor and you can follow how he does his investing. It is simple but very difficult to follow. Investing through my bank I would prefer to stay away from them, because their main service is banking and not allowing people to trade. I would first compare the services provided by a bank to TD Ameritrade, or any firm providing trading services. The thing is, as you mentioned in the question, you have to go through a specific process of calling him to change your portfolio, which shouldn't be a condition. What might happen is, if he is getting some benefits out of the arrangement(get it clarified in the first place if you intend to go through them), from the side of the fund, he might try to dissuade you from doing so to protect his stream of income. And what if he is on a holiday or you cannot get hold of him. Secondly from your question, it seems you aren't that investing literate. So it is very easy to get you confused by jargon and making you do what he gets the maximum benefit out of it, rather than which benefits you more. I ain't saying he is doing so but that could be a possibility too, so you have consider that angle too. The pro is that setting up an account through them might be much easier than directly going to a provider. But the best point doing it yourself is, you will learn and there is nothing which tops that. You don't want somebody else managing your money, however knowledgeable they maybe i.e. Anthony Bolton.\",\n \"\\\"Put it in a Vanguard fund with 80% VTI and 20% VXUS. That's what you'll let set for 10-15 years. For somebody that is totally new to investing, use \\\"\\\"play money\\\"\\\" in the stock market. It's easy for young people to get dreams of glory and blow it all on some stock tip they've seen on Twitter.\\\"\",\n \"Before investing, absolutely follow the advice in mbhunter's answer. There is no safe investment (unless you count your mattress, and even there you could find moths, theives, or simple inflation taking a chunk out of your change). There is only maximizing your reward for a given level of risk - and there is always risk. This question should be enshrined somewhere on the Q&A site for its comprehensive list of sources for information on asset allocation. The tag is also going to have tons of good information for you. To answer your question on what slice of the pie is devoted to what, you can check out some common portfolios given by U. S. experts for U. S. investors - these should be convertible into Australian funds. Another portfolio that is, like all those above, loosely based on Modern Portfolio Theory for maximizing reward for a given level of risk is the Gone Fishin' Portfolio. A common denominator amongst these portfolios is that they emphasize index funds over mutual funds for their long-term performance and preference lazy management (yearly rebalancing is a common suggestion as the maximum level of involvement) over active management. You can see more Lazy Portfolios.\",\n \"\\\"An investment portfolio is typically divided into three components: All three of those can be accessed through mutual funds or ETFs. A 401(k) will probably have a small set of mutual funds for you to pick from. Mutual funds may charge you silly expenses if you pick a bad one. Look at the prospectus for the expense ratio. If it's over 1% you're definitely paying too much. If it's over 0.5% you're probably paying too much. If it's less than 0.1% you have a really good deal. US stocks are generally the core holding until you move into retirement (or get close to spending the money on something else if it's not invested for retirement). International stocks are riskier than US stocks, but provide opportunity for diversification and better returns than the US stocks. Bonds, or fixed-income investments, are generally very safe, but have limited opportunities for returns. They tend to do better when stocks are doing poorly. When you've got a while to invest, you should be looking at riskier investments; when you don't, you should be looking for safer investments. A quick (and rough) rule of thumb is that \\\"\\\"your age should match the portion of your portfolio in bonds\\\"\\\". So if you're 50 years old and approaching retirement in 15 years or so, you should have about 50% in bonds. Roughly. People whose employment and future income is particularly tied to one sector of the market would also do well to avoid investing there, because they already are at risk if it performs badly. For instance, if you work in the technology sector, loading up on tech stocks is extra risky: if there's a big bust, you're not just out of a job, your portfolio is dead as well. More exotic options are available to diversify a portfolio: While many portfolios could benefit from these sorts of holdings, they come with their own advantages and disadvantages and should be researched carefully before taking a significant stake in them.\\\"\",\n \"\\\"Most articles on investing recommend that investors that are just starting out to invest in index stock or bonds funds. This is the easiest way to get rolling and limit risk by investing in bonds and stocks, and not either one of the asset classes alone. When you start to look deeper into investing there are so many options: Small Cap, Large Cap, technical analysis, fundamental analysis, option strategies, and on and on. This can end up being a full time job or chewing into a lot of personal time. It is a great challenge to learn various investment strategies frankly for the average person that works full time it is a huge effort. I would recommend also reading \\\"\\\"The Intelligent Asset Allocator\\\"\\\" to get a wider perspective on how asset allocation can help grow a portfolio and reduce risk. This book covers a simple process.\\\"\",\n \"\\\"Some thoughts: 1) Do you have a significant emergency fund (3-6 months of after-tax living expenses)? If not, you stand to take a significant loss if you have an unexpected need for cash that is tied up in investments. What if you lose/hate your job or your car breaks down? What if a you want to spend some time with a relative or significant other who learns they only have a few months to live? Having a dedicated emergency fund is an important way to avoid downside risk. 2) Lagerbaer has a good suggestion. Given that if you'd reinvested your dividends, the S&P 500 has returned about 3.5% over the last 5 years, you may be able to get a very nice risk-free return. 3) Do you have access to employer matching funds, such as in a 401(k) at work? If you get a dollar-for-dollar match, that is a risk-free pre-tax 100% return and should be a high priority. 4) What do you mean by \\\"\\\"medium\\\"\\\" volatility? Given that you are considering a 2/3 equity allocation, it would not be at all out of the realm of possibility that your balance could fall by 15% or more in any given year and take several years to recover. If that would spook you, you may want to consider lowering your equity weights. A high quality bond fund may be a good fit. 5) Personally, I would avoid putting money into stocks that I didn't need back for 10 years. If you only want to tie your money up for 2-5 years, you are taking a significant risk that if prices fall, you won't have time to recover before you need your money back. The portfolio you described would be appropriate for someone with a long-term investment horizon and significant risk tolerance, which is usually the case for young people saving for retirement. However, if your goals are to invest for 2-5 years only, your situation would be significantly different. 6) You can often borrow from an investment account to purchase a primary residence, but you must pay that amount back in order to avoid significant taxes and fees, unless you plan to liquidate assets. If you plan to buy a house, saving enough to avoid PMI is a good risk-free return on your money. 7) In general, and ETF or index fund is a good idea, the key being to minimize the compound effect of expenses over the long term. There are many good choices a la Vanguard here to choose from. 8) Don't worry about \\\"\\\"Buy low, sell high\\\"\\\". Don't be a speculator, be an investor (that's my version of Anthony Bourdain's, \\\"\\\"don't be a tourist, be a traveler\\\"\\\"). A speculator wants to sell shares at a higher price than they were purchased at. An investor wants to share in the profits of a company as a part-owner. If you can consistently beat the market by trying to time your transactions, good for you - you can move to Wall Street and make millions. However, almost no one can do this consistently, and it doesn't seem worth it to me to try. I don't mean to discourage you from investing, just make sure you have your bases covered so that you don't have to cash out at a bad time. Best of luck! Edit Response to additional questions below. 1) Emergency fund. I would recommend not investing in anything other than cash equivalents (money market, short-term CDs, etc.) until you've built up an emergency fund. It makes sense to want to make the \\\"\\\"best\\\"\\\" use of your money, but you also have to account for risk. My concern is that if you were to experience one or more adverse life events, that you could lose a lot of money, or need to pay a lot in interest on credit card debt, and it would be prudent to self-insure against some of those risks. I would also recommend against using an investment account as an emergency fund account. Taking money out of investment accounts is inefficient because the commissions/taxes/fees can easily eat up a significant portion of your returns. Ideally, you would want to put money in and not touch it for a long time in order to take advantage of compounding returns. There are also high penalties for early disbursements from retirement funds. Just like you need enough money in your checking account to buy food and pay the rent every month, you need enough money in an emergency fund to pay for things that are a real possibility, even if they are less common. Using a credit card or an investment account is a relatively expensive way to do this. 2) Invest at all? I would recommend starting an emergency fund, and then beginning to invest for retirement. Once your retirement savings are on track, you can begin saving for whatever other goals you may have\\\"\",\n \"I would personally suggest owning Mutual Funds or ETF's in a tax sheltered account, such as a 401k or an IRA, especially Roth options if available. This lets you participate in the stock market while ensuring that you have diversified portfolio, and the money is managed by an expert. The tax sheltered accounts (or tax free in the case of Roth accounts) increase your savings, and simplify your life as you don't need to worry about taxes on earnings within those accounts, as long as you leave the money in. For a great beginner's guide see Clark's Investment Guide (Easy).\",\n \"Littleadv has given you excellent general advice, but to my mind, the most important part of it all and the path which I will strongly recommend you follow, is the suggestion to look into a mutual fund. I would add even more strongly, go to a mutual fund company directly and make an investment with them directly instead of making the investment through a brokerage account. Pick an index fund with low expenses, e.g. there are S&P 500 index funds available with expenses that are a fraction of 1%. (However, many also require minimum investments on the order of $2500 or $3000 except for IRA accounts). At this time, your goal should be to reduce expenses as much as possible because expenses, whether they be in brokerage fees which may be directly visible to you or mutual fund expenses which are invisible to you, are what will eat away at your return far more than the difference between the returns of various investments.\",\n \"\\\"Say you have $15,000 of capital to invest. You want to put the majority of your capital into low risk investments that will yield positive gains over the course of your working career. $5,000: Government bonds and mutual funds, split how you want. $9,500: Low risk, trusted companies with positive historical growth. If the stock market is very unfamiliar for you, I recommend Google Finance, Yahoo Finance, and Zack's to learn about smart investments you can make. You can also research the investments that hedge fund managers and top investors are making. Google \\\"\\\"Warren Buffett or Carl Icahn portfolio\\\"\\\", and this will give you an idea of stocks you can put your money into. Do not leave your money into a certain company for more than 25 years. Rebalance your portfolio and take the gains when you feel you need them. You have no idea when to take your profits now, but 5 years from now, you will be a smart and experienced investor. A safe investment strategy to start is to put your money into an ETF that mimics the S&P 500. Over the past 20 years, the S&P 500 has yielded gains of about 270%. During the financial crisis a few years back, the S&P 500 had lost over 50% of its value when it reached its low point. However, from when it hit rock bottom in 2009, it has had as high percentage gains in six years as it did in 12 years from 1995 to 2007, which about 200%. The market is very strong and will treat your money well if you invest wisely. $500: Medium - High risk Speculative Stocks There is a reason this category accounts for only approximately 3% of your portfolio. This may take some research on the weekend, but the returns that may result can be extraordinary. Speculative companies are often innovative, low priced stocks that see high volatility, gains or losses of more than 10% over a single month. The likelihood of your $500 investment being completely evaporated is very slim, but if you lose $300 here, the thousands invested in the S&P 500, low risk stocks, government bonds, and mutual funds will more than recuperate the losses. If your pick is a winner, however, expect that the $500 investment could easily double, triple, or gain even more in a single year or over the course of just a few, perhaps, 2-4 years will see a very large return. I hope this advice helps and happy investing! Sending your money to smart investments is the key to financial security, freedom, and later, a comfortable retirement. Good luck, Matt McLaughlin\\\"\",\n \"\\\"RED FLAG. You should not be invested in 1 share. You should buy a diversified ETF which can have fees of 0.06% per year. This has SIGNIFICANTLY less volatility for the same statistical expectation. Left tail risk is MUCH lower (probability of gigantic losses) since losses will tend to cancel out gains in diversified portfolios. Moreover, your view that \\\"\\\"you believe these will continue\\\"\\\" is fallacious. Stocks of developed countries are efficient to the extent that retail investors cannot predict price evolution in the future. Countless academic studies show that individual investors forecast in the incorrect direction on average. I would be quite right to objectively classify you as a incorrect if you continued to hold the philosophy that owning 1 stock instead of the entire market is a superior stategy. ALL the evidence favours holding the market. In addition, do not invest in active managers. Academic evidence demonstrates that they perform worse than holding a passive market-tracking portfolio after fees, and on average (and plz don't try to select managers that you think can outperform -- you can't do this, even the best in the field can't do this). Direct answer: It depends on your investment horizon. If you do not need the money until you are 60 then you should invest in very aggressive assets with high expected return and high volatility. These assets SHOULD mainly be stocks (through ETFs or mutual funds) but could also include US-REIT or global-REIT ETFs, private equity and a handful of other asset classes (no gold, please.) ... or perhaps wealth management products which pool many retail investors' funds together and create a diversified portfolio (but I'm unconvinced that their fees are worth the added diversification). If you need the money in 2-3 years time then you should invest in safe assets -- fixed income and term deposits. Why is investment horizon so important? If you are holding to 60 years old then it doesn't matter if we have a massive financial crisis in 5 years time, since the stock market will rebound (unless it's a nuclear bomb in New York or something) and by the time you are 60 you will be laughing all the way to the bank. Gains on risky assets overtake losses in the long run such that over a 20-30 year horizon they WILL do much better than a deposit account. As you approach 45-50, you should slowly reduce your allocation to risky assets and put it in safe haven assets such as fixed income and cash. This is because your investment horizon is now SHORTER so you need a less risky portfolio so you don't have to keep working until 65/70 if the market tanks just before retirement. VERY IMPORTANT. If you may need the savings to avoid defaulting on your home loan if you lose your job or something, then the above does not apply. Decisions in these context are more vague and ambiguous.\\\"\",\n \"Check out some common portfolios compared: Note that all these portfolios are loosely based on Modern Portfolio Theory, a theory of how to maximize reward given a risk tolerance introduced by Harry Markowitz. The theory behind the Gone Fishin' Portfolio and the Couch Potato Portfolio (more info) is that you can make money by rebalancing once a year or less. You can take a look at 8 Lazy ETF Portfolios to see other lazy allocation percentages. One big thing to remember - the expense ratio of the funds you invest in is a major contributor to the return you get. If they're taking 1% of all of your gains, you're not. If they're only taking .2%, that's an automatic .8% you get. The reason Vanguard is so often used in these model portfolios is that they have the lowest expense ratios around. If you are talking about an IRA or a mutual fund account where you get to choose who you go with (as opposed to a 401K with company match), conventional wisdom says go with Vanguard for the lowest expense ratios.\",\n \"\\\"This turned out be a lot longer than I expected. So, here's the overview. Despite the presence of asset allocation calculators and what not, this is a subjective matter. Only you know how much risk you are willing to take. You seem to be aware of one rule of thumb, namely that with a longer investing horizon you can stand to take on more risk. However, how much risk you should take is subject to your own risk aversion. Honestly, the best way to answer your questions is to educate yourself about the individual topics. There are just too many variables to provide neat, concise answers to such a broad question. There are no easy ways around this. You should not blindly rely on the opinions of others, but rather use your own judgment to asses their advice. Some of the links I provide in the main text: S&P 500: Total and Inflation-Adjusted Historical Returns 10-year index fund returns The Motley Fool Risk aversion Disclaimer: These are the opinions of an enthusiastic amateur. Why should I invest 20% in domestic large cap and 10% in developing markets instead of 10% in domestic large cap and 20% in developing markets? Should I invest in REITs? Why or why not? Simply put, developing markets are very risky. Even if you have a long investment horizon, you should pace yourself and not take on too much risk. How much is \\\"\\\"too much\\\"\\\" is ultimately subjective. Specific to why 10% in developing vs 20% in large cap, it is probably because 10% seems like a reasonable amount of your total portfolio to gamble. Another way to look at this is to consider that 10% as gone, because it is invested in very risky markets. So, if you're willing to take a 20% haircut, then by all means do that. However, realize that you may be throwing 1/5 of your money out the window. Meanwhile, REITs can be quite risky as investing in the real estate market itself can be quite risky. One reason is that the assets are very much fixed in place and thus can not be liquidated in the same way as other assets. Thus, you are subject to the vicissitudes of a relatively small market. Another issue is the large capital outlays required for most commercial building projects, thus typically requiring quite a bit of credit and risk. Another way to put it: Donald Trump made his name in real estate, but it was (and still is) a very bumpy ride. Yet another way to put it: you have to build it before they will come and there is no guarantee that they will like what you built. What mutual funds or index funds should I investigate to implement these strategies? I would generally avoid actively managed mutual funds, due to the expenses. They can seriously eat into the returns. There is a reason that the most mutual funds compare themselves to the Lipper average instead of something like the S&P 500. All of those costs involved in managing a mutual fund (teams of people and trading costs) tend to weigh down on them quite heavily. As the Motley Fool expounded on years ago, if you can not do better than the S&P 500, you should save yourself the headaches and simply invest in an S&P 500 index fund. That said, depending on your skill (and luck) picking stocks (or even funds), you may very well have been able to beat the S&P 500 over the past 10 years. Of course, you may have also done a whole lot worse. This article discusses the performance of the S&P 500 over the past 60 years. As you can see, the past 10 years have been a very bumpy ride yielding in a negative return. Again, keep in mind that you could have done much worse with other investments. That site, Simple Stock Investing may be a good place to start educating yourself. I am not familiar with the site, so do not take this as an endorsement. A quick once-over of the material on the site leads me to believe that it may provide a good bit of information in readily digestible forms. The Motley Fool was a favorite site of mine in the past for the individual investor. However, they seem to have turned to the dark side, charging for much of their advice. That said, it may still be a good place to get started. You may also decide that it is worth paying for their advice. This blog post, though dated, compares some Vanguard index funds and is a light introduction into the contrarian view of investing. Simply put, this view holds that one should not be a lemming following the crowd, rather one should do the opposite of what everyone else is doing. One strong argument in favor of this view is the fact that as more people pile onto an investing strategy or into a particular market, the yields thin out and the risk of a correction (i.e. a downturn) increases. In the worst case, this leads to a bubble, which corrects itself suddenly (or \\\"\\\"pops\\\"\\\" thus the term \\\"\\\"bubble\\\"\\\") leading to quite a bit of pain for the unprepared participants. An unprepared participant is one who is not hedged properly. Basically, this means they were not invested in other markets/strategies that would increase in yield as a result of the event that caused the bubble to pop. Note that the recent housing bubble and resulting credit crunch beat quite heavily on the both the stock and bond markets. So, the easy hedge for stocks being bonds did not necessarily work out so well. This makes sense, as the housing bubble burst due to concerns over easy credit. Unfortunately, I don't have any good resources on hand that may provide starting points or discuss the various investing strategies. I must admit that I am turning my interests back to investing after a hiatus. As I stated, I used to really like the Motley Fool, but now I am somewhat suspicious of them. The main reason is the fact that as they were exploring alternatives to advertising driven revenue for their site, they promised to always have free resources available for those unwilling to pay for their advice. A cursory review of their site does show a decent amount of general investing information, so take these words with a grain of salt. (Another reason I am suspicious of them is the fact that they \\\"\\\"spammed\\\"\\\" me with lots of enticements to pay for their advice which seemed just like the type of advice they spoke against.) Anyway, time to put the soapbox away. As I do that though, I should explain the reason for this soapboxing. Simply put, investing is a risky endeavor, any way you slice it. You can never eliminate risk, you can only hope to reduce it to an acceptable level. What is acceptable is subject to your situation and to the magnitude of your risk aversion. Ultimately, it is rather subjective and you should not blindly follow someone else's opinion (professional or otherwise). Point being, use your judgment to evaluate anything you read about investing. If it sounds too good to be true, it probably is. If someone purports to have some strategy for guaranteed (steady) returns, be very suspicious of it. (Read up on the Bernard Madoff scandal.) If someone is putting on a heavy sales pitch, be weary. Be especially suspicious of anyone asking you to pay for their advice before giving you any solid understanding of their strategy. Sure, many people want to get paid for their advice in some way (in fact, I am getting \\\"\\\"paid\\\"\\\" with reputation on this site). However, if they take the sketchy approach of a slimy salesmen, they are likely making more money from selling their strategy, than they are from the advice itself. Most likely, if they were getting outsized returns from their strategy they would keep quiet about it and continue using it themselves. As stated before, the more people pile onto a strategy, the smaller the returns. The typical model for selling is to make money from the sale. When the item being sold is an intangible good, your risk as a buyer increases. You may wonder why I have written at length without much discussion of asset allocation. One reason is that I am still a relative neophyte and have a mostly high level understanding of the various strategies. While I feel confident enough in my understanding for my own purposes, I do not necessarily feel confident creating an asset allocation strategy for someone else. The more important reason is that this is a subjective matter with a lot of variables to consider. If you want a quick and simple answer, I am afraid you will be disappointed. The best approach is to educate yourself and make these decisions for yourself. Hence, my attempt to educate you as best as I can at this point in time. Personally, I suggest you do what I did. Start reading the Wall Street Journal every day. (An acceptable substitute may be the business section of the New York Times.) At first you will be overwhelmed with information, but in the long run it will pay off. Another good piece of advice is to be patient and not rush into investing. If you are in a hurry to determine how you should invest in a 401(k) or other such investment vehicle due to a desire to take advantage of an employer's matching funds, then I would place my money in an S&P 500 index fund. I would also explore placing some of that money into broad index funds from other regions of the globe. The reason for broad index funds is to provide some protection from the normal fluctuations and to reduce the risk of a sudden downturn causing you a lot pain while you determine the best approach for yourself. In this scenario, think more about capital preservation and hedging against inflation then about \\\"\\\"beating\\\"\\\" the market.\\\"\",\n \"First of all, make sure you have all your credit cards paid in full -the compounding interests on those can zero out returns on any of your private investments. Fundamentally, there are 2 major parts of personal finance: optimizing the savings output (see frugal blogs for getting costs down, and entrepreneur sites for upping revenues), and matching investment vehicles to your particular taste of risk/reward. For the later, Fool's 13 steps to invest provides a sound foundation, by explaining the basics of stocks, indexes, long-holding strategy, etc. A full list Financial instruments can be found on Wikipedia; however, you will find most of these to be irrelevant to your goals listed above. For a more detailed guide to long-term strategies on portfolio composition, I'd recommend A Random Walk Down Wall Street: The Time-tested Strategy for Successful Investing. One of the most handy charts can be found in the second half of this book, which basically outlines for a given age a recommended asset allocation for wealth creation. Good luck!\",\n \"\\\"Aggressiveness in a retirement portfolio is usually a function of your age and your risk tolerance. Your portfolio is usually a mix of the following asset classes: You can break down these asset classes further, but each one is a topic unto itself. If you are young, you want to invest in things that have a higher return, but are more volatile, because market fluctuations (like the current financial meltdown) will be long gone before you reach retirement age. This means that at a younger age, you should be investing more in stocks and foreign/developing countries. If you are older, you need to be into more conservative investments (bonds, money market, etc). If you were in your 50s-60s and still heavily invested in stock, something like the current financial crisis could have ruined your retirement plans. (A lot of baby boomers learned this the hard way.) For most of your life, you will probably be somewhere in between these two. Start aggressive, and gradually get more conservative as you get older. You will probably need to re-check your asset allocation once every 5 years or so. As for how much of each investment class, there are no hard and fast rules. The idea is to maximize return while accepting a certain amount of risk. There are two big unknowns in there: (1) how much return do you expect from the various investments, and (2) how much risk are you willing to accept. #1 is a big guess, and #2 is personal opinion. A general portfolio guideline is \\\"\\\"100 minus your age\\\"\\\". This means if you are 20, you should have 80% of your retirement portfolio in stocks. If you are 60, your retirement portfolio should be 40% stock. Over the years, the \\\"\\\"100\\\"\\\" number has varied. Some financial advisor types have suggested \\\"\\\"150\\\"\\\" or \\\"\\\"200\\\"\\\". Unfortunately, that's why a lot of baby boomers can't retire now. Above all, re-balance your portfolio regularly. At least once a year, perhaps quarterly if the market is going wild. Make sure you are still in-line with your desired asset allocation. If the stock market tanks and you are under-invested in stocks, buy more stock, selling off other funds if necessary. (I've read interviews with fund managers who say failure to rebalance in a down stock market is one of the big mistakes people make when managing a retirement portfolio.) As for specific mutual fund suggestions, I'm not going to do that, because it depends on what your 401k or IRA has available as investment options. I do suggest that your focus on selecting a \\\"\\\"passive\\\"\\\" index fund, not an actively managed fund with a high expense ratio. Personally, I like \\\"\\\"total market\\\"\\\" funds to give you the broadest allocation of small and big companies. (This makes your question about large/small cap stocks moot.) The next best choice would be an S&P 500 index fund. You should also be able to find a low-cost Bond Index Fund that will give you a healthy mix of different bond types. However, you need to look at expense ratios to make an informed decision. A better-performing fund is pointless if you lose it all to fees! Also, watch out for overlap between your fund choices. Investing in both a Total Market fund, and an S&P 500 fund undermines the idea of a diversified portfolio. An aggressive portfolio usually includes some Foreign/Developing Nation investments. There aren't many index fund options here, so you may have to go with an actively-managed fund (with a much higher expense ratio). However, this kind of investment can be worth it to take advantage of the economic growth in places like China. http://www.getrichslowly.org/blog/2009/04/27/how-to-create-your-own-target-date-mutual-fund/\\\"\",\n \"There are fund of funds,e.g. life cycle funds or target retirement funds, that could cover a lot of these with an initial investment that one could invest into for a few years and then after building up a balance large enough, then it may make sense to switch to having more control.\",\n \"Are you going to need any of the money in the next year or two, or are you saving it long term? Are you going to need any of it before you are 65? If no to both, put in a Roth IRA with a Vanguard Target retirement fund. If no to the first and yes to the second, put in the VTI index fund. If you want, you can keep 20-30% in a bond fund instead of 100% stock. Every 3-12 months, log in and redistribute your funds to maintain the desired split if you'd like, but this is somewhat optional. If you really, really want, set aside 5% for investing in a few companies you really believe in. You'll probably lose money on that investment, but it will reassure you that the rest of your money is wisely invested.\",\n \"There's a few different types of investments you could do. As poolie mentioned, you could split your money between the Vanguard All World ex-US and Vanguard Total Stock Market index. A similar approach would be to invest in the Vanguard Total World Stock ETF. You wouldn't have to track separate fund performances, at the downside of not being able to allocate differential amounts to the US and non-US markets (Vanguard will allocate them by market cap). You could consider investing in country-specific broad market indices like the S&P 500 and FTSE 100. While not as diversified as the world indices, they are more correlated with the country's economic outlook. Other common investing paradigms are investing in companies which have historically paid out high dividends and companies that are under-valued by the market but have good prospects for future growth. This gets in the domain of value investing, which an entire field by itself. Like Andrew mentioned, investing in a mutual fund is hassle-free. However, mutual fees/commissions and taxes can be higher (somewhere in the range 1%-5%) than index funds/ETF expense ratios (typically <0.50%), so they would have to outperform the market by a bit to break-even. There are quite a few good books out there to read up about investing. I'd recommend The Intelligent Investor and Millionaire Teacher to understand the basics of long-term investing, but of course, there are many other equally good books too.\",\n \"I quite like the Canadian Couch Potato which provides useful information targeted at investors in Canada. They specifically provide some model portfolios. Canadian Couch Potato generally suggests investing in indexed ETFs or mutual funds made up of four components. One ETF or mutual fund tracking Canadian bonds, another tracking Canadian stocks, a third tracking US stocks, and a fourth tracking international stocks. I personally add a REIT ETF (BMO Equal Weight REITs Index ETF, ZRE), but that may complicate things too much for your liking. Canadian Couch Potato specifically recommends the Tangerine Streetwise Portfolio if you are looking for something particularly easy, though the Management Expense Ratio is rather high for my liking. Anyway, the website provides specific suggestions, whether you are looking for a single mutual fund, multiple mutual funds, or prefer ETFs. From personal experience, Tangerine's offerings are very, very simple and far cheaper than the 2.5% you are quoting. I currently use TD's e-series funds and spend only a few minutes a year rebalancing. There are a number of good ETFs available if you want to lower your overhead further, though Canadians don't get quite the deals available in the U.S. Still, you shouldn't be paying anything remotely close to 2.5%. Also, beware of tax implications; the website has several articles that cover these in detail.\",\n \"I'd go to specialist community web sites such as The Motley Fool and read their investing articles, and their forums, and everything. You cannot get enough information and advice to get going, as it is really easy to think investing is easy and returns are guaranteed. A lot of people found that out in 2008 and 2000! For example, they have a 'beginners portfolio' that will teach you the very basics of investing (though not necessarily what to invest in)\",\n \"Here would be the general steps to my mind for creating such a plan: Write out the final desired outcome. Is it $x in y years to fund your retirement? Is it $a in b years to put as a house down payment? This is the first step in defining how much money you want at what point in time. Consider what is your risk tolerance and how much time do you plan on spending in this plan. Is it rebalancing once a quarter and that's it or do you plan on doing monthly research and making tweaks all the time? This is slightly different from the first where one has to be mindful of how much volatility would one handle and what time commitment does one have for an investing strategy. Also, how much money would you be adding to the investments on what kind of time table would also be worth noting here. Construct the asset allocation based on the previous two steps along with historical returns averaged out to be a first draft of what you are buying in general. Is it US stocks? Is it a short-term bond fund? There are more than a few choices here that may make sense and it is worth considering based on the first couple of responses that determine what this will look like. Retirement in 40 years may be quite different than a house down payment in 2 years for example. Determine what brokerages or fund companies would offer such funds along with what types of accounts you'd want to have as in some countries there may be tax-advantaged accounts that may be useful to use here. This is where you're almost ready to start by doing the homework of figuring out how will things work. This may vary depending on one's jurisdiction. Get the applications from whatever institutions you'll be using and run with the desired asset allocation across various funds and accounts. Note that in the first few steps there were points of being aware of how much would you have, how aggressive are you investing and so forth. This is where you actually send in the money and get things rolling. Run with the plan and make tweaks as needed to achieve result, hopefully desired or better.\",\n \"\\\"First off, I highly recommend the book Get a Financial Life. The basics of personal finance and money management are pretty straightforward, and this book does a great job with it. It is very light reading, and it really geared for the young person starting their career. It isn't the most current book (pre real-estate boom), but the recommendations in the book are still sound. (update 8/28/2012: New edition of the book came out.) Now, with that out of the way, there's really two kinds of \\\"\\\"investing\\\"\\\" to think about: For most individuals, it is best to take care of #1 first. Most people shouldn't even think about #2 until they have fully funded their retirement accounts, established an emergency fund, and gotten their debt under control. There are lots of financial incentives for retirement investing, both from your employer, and the government. All the more reason to take care of #1 before #2! Your employer probably offers some kind of 401k (or equivalent, like a 403b) with a company-provided match. This is a potential 100% return on your investment after the vesting period. No investment you make on your own will ever match that. Additionally, there are tax advantages to contributing to the 401k. (The money you contribute doesn't count as taxable income.) The best way to start investing is to learn about your employer's retirement plan, and contribute enough to fully utilize the employer matching. Beyond this, there are also Individual Retirement Accounts (IRAs) you can open to contribute money to on your own. You should open one of these and start contributing, but only after you have fully utilized the employer matching with the 401k. The IRA won't give you that 100% ROI that the 401k will. Keep in mind that retirement investments are pretty much \\\"\\\"walled off\\\"\\\" from your day-to-day financial life. Money that goes into a retirement account generally can't be touched until retirement age, unless you want to pay lots of taxes and penalties. You generally don't want to put the money for your house down payment into a retirement account. One other thing to note: Your 401K and your IRA is an account that you put money into. Just because the money is sitting in the account doesn't necessarily mean it is invested. You put the money into this account, and then you use this money for investments. How you invest the retirement money is a topic unto itself. Here is a good starting point. If you want to ask questions about retirement portfolios, it is probably worth posting a new question.\\\"\",\n \"\\\"There's already an excellent answer here from @BenMiller, but I wanted to expand a bit on Types of Investments with some additional actionable information. You can invest in stocks, bonds, mutual funds (which are simply collections of stocks and bonds), bank accounts, precious metals, and many other things. Discussing all of these investments in one answer is too broad, but my recommendation is this: If you are investing for retirement, you should be investing in the stock market. However, picking individual stocks is too risky; you need to be diversified in a lot of stocks. Stock mutual funds are a great way to invest in the stock market. So how does one go about actually investing in the stock market in a diversified way? What if you also want to diversify a bit into bonds? Fortunately, in the last several years, several products have come about that do just these things, and are targeted towards newer investors. These are often labeled \\\"\\\"robo-advisors\\\"\\\". Most even allow you to adjust your allocation according to your risk preferences. Here's a list of the ones I know about: While these products all purport to achieve similar goals of giving you an easy way to obtain a diversified portfolio according to your risk, they differ in the buckets of stocks and funds they put your money into; the careful investor would be wise to compare which specific ETFs they use (e.g. looking at their expense ratios, capitalization, and spreads).\\\"\",\n \"I'd say that because you are young, even the 'riskier' asset classes are not as risky as you think, for example, assuming conservatively that you only have 30 years to retirement, investing in stocks index might be a good option. In short term share prices are volatile and prone to bull and bear cycles but given enough time they have pretty much always outperformed any other asset classes. The key is not to be desperate to withdraw when an index is at the bottom. Some cycles can be 20 years, so when you need get nearer retirement you will need to diversify so that you can survive without selling low. Just make sure to pick an index tracker with low fees and you should be good to go. A word of warning is of course past performance is no indication of a future one, but if a diversified index tracker goes belly up for 20+ years, we are talking global calamity, in which case buy a shotgun and some canned food ;)\",\n \"The classic answer is simple. Aim to build up a a financial cushion that is the equivalent of 3 times your monthly salary. This should be readily accessible and in cash, to cover any unforeseen expenses that you may incur (car needs repairing, washing machine breaks down etc). Once you have this in place its then time to think about longer term investments. Monthly 'drip feeding' into a mutual stock based investment fund is a good place to start. Pick a simple Index based or fund with a global investment bias and put in a set amount that you can regularly commit to each month. You can get way more complicated but for sheer simplicity and longer term returns, this is a simple way to build up some financial security and longer term investments.\",\n \"if you don't intent to touch the money for 10 years or longer, then dumping 100% into a low-expense-ratio index fund seems like a perfectly reasonable thing to do. it is simple, low maintenance and fairly mindless. just remember to reinvest the dividends occasionally (e.g. every 6 months). however, if you are the kind of person who is going to lose their nerve when the market goes down 30%, then putting some of your money into a bond index fund or even a treasury note fund would be better than selling stock in a down market. just figure out how much of your portfolio you are comfortable losing, and put that in stocks. then put the rest in some stable value fund and watch it's value get slowly washed away by inflation while your stock investments rise through violent swings.\",\n \"\\\"Split your contributions evenly across the funds on that list with the word \\\"\\\"core\\\"\\\" or \\\"\\\"S&P\\\"\\\" in the name. Maybe add \\\"\\\"International Large Cap Index\\\"\\\". Leave it & rebalance occasionally. Read a book on Modern Portfolio Theory sometime in the next 5 years.\\\"\",\n \"If you have money and may need to access it at any time, you should put it in a savings account. It won't return much interest, but it will return some and it is easily accessible. If you have all your emergency savings that you need (at least six months of income), buy index-based mutual funds. These should invest in a broad range of securities including both stocks and bonds (three dollars in stocks for every dollar in bonds) so as to be robust in the face of market shifts. You should not buy individual stocks unless you have enough money to buy a lot of them in different industries. Thirty different stocks is a minimum for a diversified portfolio, and you really should be looking at more like a hundred. There's also considerable research effort required to verify that the stocks are good buys. For most people, this is too much work. For most people, broad-based index funds are better purchases. You don't have as much upside, but you also are much less likely to find yourself holding worthless paper. If you do buy stocks, look for ones where you know something about them. For example, if you've been to a restaurant chain with a recent IPO that really wowed you with their food and service, consider investing. But do your research, so that you don't get caught buying after everyone else has already overbid the price. The time to buy is right before everyone else notices how great they are, not after. Some people benefit from joining investment clubs with others with similar incomes and goals. That way you can share some of the research duties. Also, you can get other opinions before buying, which can restrain risky impulse buys. Just to reiterate, I would recommend sticking to mutual funds and saving accounts for most investors. Only make the move into individual stocks if you're willing to be serious about it. There's considerable work involved. And don't forget diversification. You want to have stocks that benefit regardless of what the overall economy does. Some stocks should benefit from lower oil prices while others benefit from higher prices. You want to have both types so as not to be caught flat-footed when prices move. There are much more experienced people trying to guess market directions. If your strategy relies on outperforming them, it has a high chance of failure. Index-based mutual funds allow you to share the diversification burden with others. Since the market almost always goes up in the long term, a fund that mimics the market is much safer than any individual security can be. Maintaining a three to one balance in stocks to bonds also helps as they tend to move in opposite directions. I.e. stocks tend to be good when bonds are weak and vice versa.\",\n \"\\\"The standard low-risk/gain very-short-term parking spot these days tends to be a money market account. However, you have only mentioned stock. For good balance, your portfolio should consider the bond market too. Consider adding a bond index fund to diversify the basic mix, taking up much of that 40%. This will also help stabilize your risk since bonds tend to move opposite stocks (prperhaps just because everyone else is also using them as the main alternative, though there are theoretical arguments why this should be so.) Eventually you may want to add a small amount of REIT fund to be mix, but that's back on the higher risk side. (By the way: Trying to guess when the next correction will occur is usually not a winning strategy; guesses tend to go wrong as often as they go right, even for pros. Rather than attempting to \\\"\\\"time the market\\\"\\\", pick a strategic mix of investments and rebalance periodically to maintain those ratios. There has been debate here about \\\"\\\"dollar-cost averaging\\\"\\\" -- see other answers -- but that idea may argue for investing and rebalancing in more small chunks rather than a few large ones. I generally actively rebalance once a year or so, and between those times let maintainng the balance suggest which fund(s) new money should go into -- minimal effort and it has worked quite well enough.,)\\\"\",\n \"The vanilla advice is investing your age in bonds and the rest in stocks (index funds, of course). So if you're 25, have 75% in stock index fund and 25% in bond index. Of course, your 401k is tax sheltered, so you want keep bonds there, assuming you have taxable investments. When comparing specific funds, you need to pay attention to expense ratios. For example, Vanguard's SP 500 index has an expense ratio of .17%. Many mutual funds charge around 1.5%. That means every year, 1.5% of the fund total goes to the fund manager(s). And that is regardless of up or down market. Since you're young, I would start studying up on personal finance as much as possible. Everyone has their favorite books and websites. For sane, no-nonsense investment advise I would start at bogleheads.org. I also recommend two books - This is assuming you want to set up a strategy and not fuss with it daily/weekly/monthly. The problem with so many financial strategies is they 1) don't work, i.e. try to time the market or 2) are so overly complex the gains are not worth the effort. I've gotten a LOT of help at the boglehead forums in terms of asset allocation and investment strategy. Good luck!\",\n \"If you have just started an IRA (presumably with a contribution for 2012), you likely have $5000 in it, or $10,000 if you made a full contribution for 2013 as well. At this time, I would recommend putting it all in a single low-cost mutual fund. Typically, mutual funds that track an index such as the S&P 500 Index have lower costs (annual expense fees) than actively managed funds, and most investment companies offer such mutual funds, with Fidelity, Vanguard, Schwab, to name a few, having very low expenses even among index funds. Later, when you have more money in the account, you can consider diversifying into more funds, buying stocks and bonds, investing in ETFs, etc. Incidentally, if you are just starting out and your Roth IRA is essentially your first investment experience, be aware that you do not need a brokerage account for your Roth IRA until you have more money in the account to invest and specifically want to buy individual stocks and bonds instead of just mutual funds. If you opened a brokerage account for your Roth IRA, close it and transfer the Roth IRA to your choice of mutual fund company; else you will be paying annual fees to the brokerage for maintaining your account, inactivity fees since you won't be doing any trading, etc. The easiest way to do this is to go to the mutual fund company web site and tell them that you want to transfer your IRA to them (not roll over your IRA to them) and they will take care of all the paper work and collecting your money from the brokerage (ditto if your Roth IRA is with a bank or another mutual fund company). Then close your brokerage account.\",\n \"\\\"Congratulations on a solid start. Here are my thoughts, based on your situation: Asset Classes I would recommend against a long-term savings account as an investment vehicle. While very safe, the yields will almost always be well below inflation. Since you have a long time horizon (most likely at least 30 years to retirement), you have enough time to take on more risk, as long as it's not more than you can live with. If you are looking for safer alternatives to stocks for part of your investments, you can also consider investment-grade bonds/bond funds, or even a stable value fund. Later, when you are much closer to retirement, you may also want to consider an annuity. Depending on the interest rate on your loan, you may also be able to get a better return from paying down your loan than from putting more in a savings account. I would recommend that you only keep in a savings account what you expect to need in the next few years (cushion for regular expenses, emergency fund, etc.). On Stocks Stocks are riskier but have the best chance to outperform versus inflation over the long term. I tend to favor funds over individual stocks, mostly for a few practical reasons. First, one of the goals of investing is to diversify your risk, which produces a more efficient risk/reward ratio than a group of stocks that are highly correlated. Diversification is easier to achieve via an index fund, but it is possible for a well-educated investor to stay diversified via individual stocks. Also, since most investors don't actually want to take physical possession of their shares, funds will manage the shares for you, as well as offering additional services, such as the automatic reinvestments of dividends and tax management. Asset Allocation It's very important that you are comfortable with the amount of risk you take on. Investment salespeople will prefer to sell you stocks, as they make more commission on stocks than bonds or other investments, but unless you're able to stay in the market for the long term, it's unlikely you'll be able to get the market return over the long term. Make sure to take one or more risk tolerance assessments to understand how often you're willing to accept significant losses, as well as what the optimal asset allocation is for you given the level of risk you can live with. Generally speaking, for someone with a long investment horizon and a medium risk tolerance, even the most conservative allocations will have at least 60% in stocks (total of US and international) with the rest in bonds/other, and up to 80% or even 100% for a more aggressive investor. Owning more bonds will result in a lower expected return, but will also dramatically reduce your portfolio's risk and volatility. Pension With so many companies deciding that they don't feel like keeping the promises they made to yesterday's workers or simply can't afford to, the pension is nice but like Social Security, I wouldn't bank on all of this money being there for you in the future. This is where a fee-only financial planner can really be helpful - they can run a bunch of scenarios in planning software that will show you different retirement scenarios based on a variety of assumptions (ie what if you only get 60% of the promised pension, etc). This is probably not as much of an issue if you are an equity partner, or if the company fully funds the pension in a segregated account, or if the pension is defined-contribution, but most corporate pensions are just a general promise to pay you later in the future with no real money actually set aside for that purpose, so I'd discount this in my planning somewhat. Fund/Stock Selection Generally speaking, most investment literature agrees that you're most likely to get the best risk-adjusted returns over the long term by owning the entire market rather than betting on individual winners and losers, since no one can predict the future (including professional money managers). As such, I'd recommend owning a low-cost index fund over holding specific sectors or specific companies only. Remember that even if one sector is more profitable than another, the stock prices already tend to reflect this. Concentration in IT Consultancy I am concerned that one third of your investable assets are currently in one company (the IT consultancy). It's very possible that you are right that it will continue to do well, that is not my concern. My concern is the risk you're carrying that things will not go well. Again, you are taking on risks not just over the next few years, but over the next 30 or so years until you retire, and even if it seems unlikely that this company will experience a downturn in the next few years, it's very possible that could change over a longer period of time. Please just be aware that there is a risk. One way to mitigate that risk would be to work with an advisor or a fund to structure and investment plan where you invest in a variety of sector funds, except for technology. That way, your overall portfolio, including the single company, will be closer to the market as a whole rather than over-weighted in IT/Tech. However, if this IT Consultancy happens to be the company that you work for, I would strongly recommend divesting yourself of those shares as soon as reasonably possible. In my opinion, the risk of having your salary, pension, and much of your investments tied up in the fortunes of one company would simply be a much larger risk than I'd be comfortable with. Last, make sure to keep learning so that you are making decisions that you're comfortable with. With the amount of savings you have, most investment firms will consider you a \\\"\\\"high net worth\\\"\\\" client, so make sure you are making decisions that are in your best financial interests, not theirs. Again, this is where a fee-only financial advisor may be helpful (you can find a local advisor at napfa.org). Best of luck with your decisions!\\\"\",\n \"Contrary to most other advise given here, I'd recommend (in your situation) not to invest in stock (yet). There are some 'hidden' cost to investing that will eat your profit and in the end, that's why you are investing. Banks will charge for buying, selling and maintaining stock as well as for cashing dividends. Depending on which bank or intermediary these costs will rise. So, my advise is to start playing with stock creating a virtual portfolio and track that. Just as duffbeer says, start saving. Also look at my answer here.\",\n \"Here's a good strategy: Open up a Roth IRA at a discount-broker, like TD Ameritrade, invest in no-fee ETF's, tracking an Index, with very low expense ratios (look for around .15%) This way, you won't pay brokers fees whenever you buy shares, and shares are cheap enough to buy casually. This is a good way to start. When you learn more about the market, you can check out individual stocks, exploring different market sectors, etc. But you won't regret starting with a good index fund. Also, it's easy to know how well you did. Just listen on the radio or online for how the Dow or S&P did that day/month/year. Your account will mirror these changes!\",\n \"Since you're 20-30 years out of retirement, you should be 90% to 100% in stocks, and in one or two broad stock market funds likely. I'm not sure about the minimums at TD Ameritrade, but at Vanguard even $3k will get you into the basic funds. One option is the Targeted Retirement Year funds, which automatically rebalance as you get closer to retirement. They're a bit higher expense usually than a basic stock market fund, but they're often not too bad. (Look for expenses under 0.5% annually, and preferably much lower - I pay 0.05% on mine for example.) Otherwise, I'd just put everything into something simple - an S&P500 tracker for example (SPY or VOO are two examples) that has very low management fees. Then when your 401(k) gets up and running, that may have fewer options and thus you may end up in something more conservative - don't feel like you have to balance each account separately when they're just starting, think of them as one whole balancing act for the first year or two. Once they're each over $10k or so, then you can balance them individually (which you do want to do, to allow you to get better returns).\",\n \"you should invest in a range of stock market indexes. Ex : Dow jones, S&P500, Nasdaq and keep it there until you are ready to retire. I'm invested half in SLYV and SLYG (S&P600 small cap value and S&P600 small cap growth; Respectively). It brings on average between 8-13% a year (since 1971). This is not investment advice. Talk to your broker before doing this.\",\n \"First, as Dheer mentioned above, there is no right answer as investment avenues for a person is dicteted by many subjective considerations. Given that below a few of my thoughts (strictly thoughts): 1) Have a plan for how much money you would need in next 5-7 years, one hint is, do you plan you buy a house, car, get married ... Try to project this requirement 2) Related to the above, if you have some idea on point 1, then it would be possible for you to determine how much you need to save now to achieve the above (possibly with a loan thrown in). It will also give you some indication as to where and how much of your current cash holding that you should invest now 3) From an investment perspective there are many instruments, some more risky some less. The exact mix of instruments that you should consider is based on many things, one among them is your risk apetite and fund requirement projections 4) Usually (not as a rule of thumb) the % of savings corresponding to your age should go into low risk investments and 100-the % into higher risk investment 5) You could talk to some professional invetment planners, all banks offer the service Hope this helps, I reiterate as Dheer did, there is truely no right answer for your question all the answers would be rather contextual.\",\n \"If you are going to the frenzy of individual stock picking, like almost everyone initially, I suggest you to write your plan to paper. Like, I want an orthogonal set of assets and limit single investments to 10%. If with such limitations the percentage of brokerage fees rise to unbearable large, you should not invest that way in the first hand. You may find better to invest in already diversified fund, to skip stupid fees. There are screeners like in morningstar that allow you to see overlapping items in funds but in stocks it becomes trickier and much errorsome. I know you are going to the stock market frenzy, even if you are saying to want to be long-term or contrarian investor, most investors are convex, i.e. they follow their peers, despite it would better to be a concave investor (but as we know it can be hard). If the last part confused you, fire up a spreadsheet and do a balance. It is a very motivating activity, really. You will immediately notice things important to you, not just to providers such as morningstar, but alert it may take some time. And Bogleheads become to your rescue, ready spreadsheets here.\",\n \"\\\"Before anything else, read up on the basics of economics. After that, there a few things you need to ask yourself before you even think about investing in anything: If you have an answer to those questions: Once you answered those questions I could make a simple first suggestion: Confident in handling it yourself and low maintenance with uncertain horizon: look up an online bank that offers ETFs such as IWDA (accumulation (dividend is not payed but reinvested) or income(dividend is payed out)) and maybe a few more specific ones then buy and hold for at least 5 years. Confident and high maintenance with long horizon: maybe stock picking but you'll probably never be able to beat the market unless you invest 10's of hours in research per week. However this will also cost a bit and given your initial amount not advisable to do. Be sure that you also have a VERY close look at the prospectus of an investment (especially if you go with a (retail) bank and they \\\"\\\"recommend\\\"\\\" you certain actively traded funds). They tend to charge you quite a bit (yearly management fees of 2-3% (which is A LOT if you are eying maybe 7%-8% yearly) aren't unheard of). ETF's such IWDA only have for example a yearly cost of 0.20%. Personally I have one portfolio (of many) only consisting of that ETF (so IWDA) and one global small cap. It's one of the best and most consistant ones to date. In the end, the amount you start with doesn't really matter so much as long as it's enough to buy at least a few shares of what you have in mind. If you can then increase your portfolio over time and keep the expenses in check, compounding interest should do the rest.\\\"\",\n \"Something not in answers so far: define your goals. What is important to you? My goals, if I were in your shoes, would include a debt-free home, passive (investment) income so I would not have to work, and have health insurance covered. I could think of many more details, and already have, but you get the idea. To help determine which investment information to learn first, consider how much risk you can tolerate. I know that's vague at this point, but if you're looking for safe investments first, you could learn about mutual funds, and then index funds specifically. At the risky extreme, you could learn about stock options, but I would not recommend such risk.\",\n \"Try this as a starter - my eBook served up as a blog (http://www.sspf.co.uk/blog/001/). Then read as much as possible about investing. Once you have money set aside for emergencies, then make some steps towards investing. I'd guide you towards low-fee 'tracker-style' funds to provide a bedrock to long-term investing. Your post suggests it will be investing over the long-term (ie. 5-10 years or more), perhaps even to middle-age/retirement? Read as much as you can about the types of investments: unit trusts, investment trusts, ETFs; fixed-interest (bonds/corporate bonds), equities (IPOs/shares/dividends), property (mortgages, buy-to-let, off-plan). Be conservative and start with simple products. If you don't understand enough to describe it to me in a lift in 60 seconds, stay away from it and learn more about it. Many of the items you think are good long-term investments will be available within any pension plans you encounter, so the learning has a double benefit. Work a plan. Learn all the time. Keep your day-to-day life quite conservative and be more risky in your long-term investing. And ask for advice on things here, from friends who aren't skint and professionals for specific tasks (IFAs, financial planners, personal finance coaches, accountants, mortgage brokers). The fact you're being proactive tells me you've the tools to do well. Best wishes to you.\",\n \"\\\"I got started by reading the following two books: You could probably get by with just the first of those two. I haven't been a big fan of the \\\"\\\"for dummies\\\"\\\" series in the past, but I found both of these were quite good, particularly for people who have little understanding of investing. I also rather like the site, Canadian Couch Potato. That has a wealth of information on passive investing using mutual funds and ETFs. It's a good next step after reading one or the other of the books above. In your specific case, you are investing for the fairly short term and your tolerance for risk seems to be quite low. Gold is a high-risk investment, and in my opinion is ill-suited to your investment goals. I'd say you are looking at a money market account (very low risk, low return) such as e.g. the TD Canadian Money Market fund (TDB164). You may also want to take a look at e.g. the TD Canadian Bond Index (TDB909) which is only slightly higher risk. However, for someone just starting out and without a whack of knowledge, I rather like pointing people at the ING Direct Streetwise Funds. They offer three options, balancing risk vs reward. You can fill in their online fund selector and it'll point you in the right direction. You can pay less by buying individual stock and bond funds through your bank (following e.g. one of the Canadian Couch Potato's model portfolios), but ING Direct makes things nice and simple, and is a good option for people who don't care to spend a lot of time on this. Note that I am not a financial adviser, and I have only a limited understanding of your needs. You may want to consult one, though you'll want to be careful when doing so to avoid just talking to a salesperson. Also, note that I am biased toward passive index investing. Other people may recommend that you invest in gold or real estate or specific stocks. I think that's a bad idea and believe I have the science to back this up, but I may be wrong.\\\"\",\n \"Congratulations on being in this position. Your problem - which I think that you identified - is that you don't know much about investing. My recommendation is that you start with three goals: The Motley Fool (www.fool.com) has a lot of good information on their site. Their approach may or may not align with what you want to do; I've subscribed to their newsletters for quite a while and have found them useful. I'm what is known as a value investor; I like to make investments and hold them for a long time. Others have different philosophies. For the second goal, it's very important to follow the money and ask how people get paid in the investment business. The real money in Wall Street is made not by investment, but by charging money to those who are in the investment business. There are numerous people in line for some of your money in return for service or advice; fees for buying/selling stocks, fees for telling you which stocks to buy/sell, fees for managing your money, etc. You can invest without spending too much on fees if you understand how the system works. For the third goal, I recommend choosing a few stocks, and creating a virtual portfolio. You can then then get used to watching and tracking your investments. If you want a place to put your money while you do this, I'd start with an S&P 500 index fund with a low expense ratio, and I'd buy it through a discount broker (I use Scottrade but there are a number of choices). Hope that helps.\",\n \"For your purposes, I would recommend using direct investment in a no-load mutual fund. I mostly use Vanguard and would recommend them. They just about invented index funds, usually have the lowest (internal) expenses for index and many other funds, if you take electronic instead of paper statements there is no maintenance fee, have no transaction commission, can do periodic automatic investment from a bank account etc. A typical index fund there would require an initial $3000 investment and would have a minimum of $100 for each additional investment. If you can't come up with an initial sum of that size, you might be able to find a broker with a lower minimum and suitable free ETFs trades as others have suggested.\",\n \"It doesn't matter which way you use. As long as your comfortable with the overall level of risk/reward in your portfolio, that's what matters. (Though I will say that there are more investment vehicles than stocks, bonds, and cash that are worth considering.)\",\n \"The 10K in savings and money market is equal to about 1.5 months of income for emergency funds. You should add additional funds to this account over the next few years to let that increase to 3 to 6 months of monthly expenses. This money should be kept secure so that it will be there when you need it. Growth is not the primary function for this account. Investment at this stage should be for retirement. This means take advantage of 401K matching if it is available. You will have to determine if Roth or regular makes the most sense for you. In general the lower your current tax bracket the more sense Roth makes for you. If you want an IRA again decide which type. Also remember that you have until the tax deadline to make a contribution so you can decide to use a refund to fund the IRA. IRAs and 401Ks are just account types with some rules attached. They can be invested in everything from CD's to individual stocks depending on how aggressive you want to be.\",\n \"This is all very basic and general advice, that works for most, but not all. You are unique with your own special needs and desires. Good luck! P.S.: not exactly related to your question, but when you get more familiar with investing and utilizing your money, find more ways to save more. For example, change phone plan, cut the cable, home made food in bulk, etc.\",\n \"Congratulations! You're making enough money to invest. There are two easy places to start: I recommend against savings accounts because they will quite safely lose your money: the inflation rate is usually higher than the interest rate on a savings account. You may have twice as much money after 50 years, but if everything costs four times as much, then you've lost buying power. If, in the course of learning about investing, you'd like to try buying individual stocks, do it only with money you wouldn't mind losing. Index funds will go down slightly if one of the companies in that index fails entirely, but the stock of a failed company is worthless.\",\n \"I would just buy a low-cost diversified equity ETF. VTI is pretty solid. Also, JW are you working or in school? If you are working you should consider opening an IRA or Roth IRA. Also if your employer has a 401k or other retirement plan you can contribute to I would advise doing so.\",\n \"I've read a nice rule of thumb somewhere that you should consider: You should invest (100-YOURAGE)% of your money in stock The rest should be something less volatile and more liquid, so you have some money when the stock market goes down and you need some money nevertheless. So you would start with buying about 75% stock and balance your stock percentage over time by buing more secure assets to keep the stock percentage at the desired level. At some time you might need to sell stock to rebalance and invest in more secure assets.\",\n \"\\\"Question 1: How do I start? or \\\"\\\"the broker\\\"\\\" problem Get an online broker. You can do a wire transfer to fund the account from your bank. Question 2: What criticism do you have for my plan? Dividend investing is smart. The only problem is that everyone's currently doing it. There is an insatiable demand for yield, not just individual investors but investment firms and pension funds that need to generate income to fund retirements for their clients. As more investors purchase the shares of dividend paying securities, the share price goes up. As the share price goes up, the dividend yield goes down. Same for bonds. For example, if a stock pays $1 per year in dividends, and you purchase the shares at $20/each, then your yearly return (not including share price fluctuations) would be 1/20 = 5%. But if you end up having to pay $30 per share, then your yearly return would be 1/30 or 3.3% yield. The more money you invest, the bigger this difference becomes; with $100K invested you'd make about $1.6K more at 5%. (BTW, don't put all your money in any small group of stocks, you want to diversify). ETFs work the same way, where new investors buying the shares cause the custodian to purchase more shares of the underlying securities, thus driving up the price up and yield down. Instead of ETFs, I'd have a look at something called closed end funds, or CEFs which also hold an underlying basket of securities but often trade at a discount to their net asset value, unlike ETFs. CEFs usually have higher yields than their ETF counterparts. I can't fully describe the ins and outs here in this space, but you'll definately want to do some research on them to better understand what you're buying, and HOW to successfully buy (ie make sure you're buying at a historically steep discount to NAV [https://seekingalpha.com/article/1116411-the-closed-end-fund-trifecta-how-to-analyze-a-cef] and where to screen [https://www.cefconnect.com/closed-end-funds-screener] Regardless of whether you decide to buy stocks, bonds, ETFs, CEFs, sell puts, or some mix, the best advice I can give is to a) diversify (personally, with a single RARE exception, I never let any one holding account for more than 2% of my total portfolio value), and b) space out your purchases over time. b) is important because we've been in a low interest rate environment since about 2009, and when the risk free rate of return is very low, investors purchase stocks and bonds which results in lower yields. As the risk free rate of return is expected to finally start slowly rising in 2017 and gradually over time, there should be gradual downward pressure (ie selling) on the prices of dividend stocks and especially bonds meaning you'll get better yields if you wait. Then again, we could hit a recession and the central banks actually lower rates which is why I say you want to space your purchases out.\\\"\",\n \"First, you should diversify your portfolio. If your entire portfolio is in the Roth IRA, then you should eventually diversify that. However, if you have an IRA and a 401k, then it's perfectly fine for the IRA to be in a single fund. For example, I used my IRA to buy a riskier REIT that my 401k doesn't support. Second, if you only have a small amount currently invested, e.g. $5500, it may make sense to put everything in a single fund until you have enough to get past the low balance fees. It's not uncommon for funds to charge lower fees to someone who has $8000, $10,000, or $12,000 invested. Note that if you deposit $10,000 and the fund loses money, they'll usually charge you the rate for less than $10,000. So try to exceed the minimum with a decent cushion. A balanced fund may make sense as a first fund. That way they handle the diversification for you. A targeted fund is a special kind of balanced fund that changes the balance over time. Some have reported that targeted funds charge higher fees. Commissions on those higher fees may explain why your bank wants you to buy. I personally don't like the asset mixes that I've seen from targeted funds. They often change the stock/bond ratio, which is not really correct. The stock/bond ratio should stay the same. It's the securities (stocks and bonds) to monetary equivalents that should change, and that only starting five to ten years before retirement. Prior to that the only reason to put money into monetary equivalents is to provide time to pick the right securities fund. Retirees should maintain about a five year cushion in monetary equivalents so as not to be forced to sell into a bad market. Long term, I'd prefer low-load index funds. A bond fund and two or three stock funds. You might want to build your balance first though. It doesn't really make sense to have a separate fund until you have enough money to get the best fees. 70-75% stocks and 25-30% bonds (should add to 100%, e.g. 73% and 27%). Balance annually when you make your new deposit.\",\n \"The simplest way is to invest in a few ETFs, depending on your tolerance for risk; assuming you're very short-term risk tolerant you can invest almost all in a stock ETF like VOO or VTI. Stock market ETFs return close to 10% (unadjusted) over long periods of time, which will out-earn almost any other option and are very easy for a non-finance person to invest in (You don't trade actively - you leave the money there for years). If you want to hedge some of your risk, you can also invest in Bond funds, which tend to move up in stock market downturns - but if you're looking for the long term, you don't need to put much there. Otherwise, try to make sure you take advantage of tax breaks when you can - IRAs, 401Ks, etc.; most of those will have ETFs (whether Vanguard or similar) available to invest in. Look for funds that have low expense ratios and are fairly diversified (ie, don't just invest in one small sector of the economy); as long as the economy continues to grow, the ETFs will grow.\",\n \"Your urge to invest is a good one. If you don’t invest your money, you're probably leaving about two thirds of it on the table. By the time you need the money (without knowing your exact future withdrawals, and taking national averages into consideration), investing would have grown it by three times. As far as how much money you should invest...I invest everything I'm not going to use in the next month or two. My advisor is able to monitor my bank accounts and sweep any unused cash into investment accounts. Using AI, they're able to figure out exactly which days I'll be needing cash then put it back in my accounts before I need it. 1% of my portfolio is always kept in cash, for emergencies. With investing, there are lots of things to consider. You need to decide what to invest in - spread your money over many different asset classes - monitor market trends - have a plan for market ups and downs - regularly rebalance - maneuver the fun world of taxes. Basically - asset management. Vanguard mutual funds are an easy, affordable way to spread your money over many different assets, but they don't offer much when it comes to asset management. I'd suggest you find a flat fee advisor (no more than 1% of your managed assets) who listens to you, determines your goals, creates a plan based on upon, then executes it with no commission or execution costs. In this particular vein, robo advisors are the best bet. I don't want to come across like I'm selling something, however, I have had much satisfaction with online digital advisors. Hope this helps.\",\n \"Just to clarify Short Team Goals & Long Term Goals... Long Term goals are for something in future, your retirement fund, Children’s education etc. Short Term goals are something in the near future, your down payment for car, house, and holiday being planned. First have both the long and short terms goals defined. Of Couse you would need to review both these goals on a ongoing basis... To meet the short term goals you would need to make short term investments. Having arrived at a short term goal value, you would now need to make a decision as to how much risk you are willing [also how much is required to take] to take in order to meet your goal. For example if you goal is to save Rs 100,000 by yearend for the car, and you can easily set aside Rs 8,000 every month, you don't really need to take a risk. A simple Term / Fixed Deposit would suffice you to meet your goal. On the other hand if you can only save Rs 6,000 a year, then you would need to invest this into something that would return you around 35%. You would now need to take a risk. Stocks market is one option, there are multiple types of trades [day trades, shorts, options, regular trades] that one can do ... however the risk can wipe out even your capital. As you don't know these types of investments, suggest you start with dummy investing using quite a few free websites, MoneyControl is one such site, you get pseudo money and can buy sell and see how things actually move. This should teach you something about making quick gains or losses without actually gaining or loosing real money. Once you reach some confidence level, you can start trading using real money by opening a trading account almost every other bank in India offers online trading linked to bank account. Never lose sight of risk appetite, and revise if every now and then. When you don't have dependents, you can easily risk money for potential bumper, however after you have other commitments, you may want to tone down... Edit: http://moneybhai.moneycontrol.com/moneybhai-rules.html is one such site, there are quite a few others as well that offer you to trade on virtual money. Try this for few months and you will understand whether you are making right decissions or not.\",\n \"\\\"Is this amount an adequate starting amount to begin investing with? Yes. You can open an account at a brokerage with this amount. I'm not sure I would invest in individual stocks at this point. Which services should I use to start buying shares? (Currently my bank offers this service but I'm willing to use other sources) I can't make UK-specific recommendations, but I'd compare your bank's fees to those of a discount broker -- as well as the variety and level of service available. I would like to regularly increase the amount invested in shares. Is it worth doing this in say £200 increments? Take a look at the fees associated with each investment. Divide the fee by the increment to see what percent you'll lose to fees/commissions. Keep in mind that you have to gain more than that percentage to start earning a positive return on your investment. If you have access to fee-free automatic mutual fund investments, and you can commit to the £200 amount on a regular basis going forward, then this can be a completely free way of making these incremental investments. See also this answer on dollar cost averaging, and my comment on the other answer on that question for how fees impact returns. When buying shares should I focus on say two or three companies, or diversify more? I would diversify into two or three different index funds. Read up on asset allocation. For example, you might invest 1/3 of your balance into S&P 500 index fund, bond index fund, and MSCI EAFE index fund (but that's just a rough example, and not necessarily good for you). I highly recommend \\\"\\\"The Intelligent Asset Allocator\\\"\\\" by William Bernstein for excellent info on diversification and asset allocation.\\\"\",\n \"\\\"Okay. Savings-in-a-nutshell. So, take at least year's worth of rent - $30k or so, maybe more for additional expenses. That's your core emergency fund for when you lose your job or total a few cars or something. Keep it in a good savings account, maybe a CD ladder - but the point is it's liquid, and you can get it when you need it in case of emergency. Replenish it immediately after using it. You may lose a little cash to inflation, but you need liquidity to protect you from risk. It is worth it. The rest is long-term savings, probably for retirement, or possibly for a down payment on a home. A blended set of stocks and bonds is appropriate, with stocks storing most of it. If saving for retirement, you may want to put the stocks in a tax-deferred account (if only for the reduced paperwork! egads, stocks generate so much!). Having some money (especially bonds) in something like a Roth IRA or a non-tax-advantaged account is also useful as a backup emergency fund, because you can withdraw it without penalties. Take the money out of stocks gradually when you are approaching the time when you use the money. If it's closer than five years, don't use stocks; your money should be mostly-bonds when you're about to use it. (And not 30-year bonds or anything like that either. Those are sensitive to interest rates in the short term. You should have bonds that mature approximately the same time you're going to use them. Keep an eye on that if you're using bond funds, which continually roll over.) That's basically how any savings goal should work. Retirement is a little special because it's sort of like 20 years' worth of savings goals (so you don't want all your savings in bonds at the beginning), and because you can get fancy tax-deferred accounts, but otherwise it's about the same thing. College savings? Likewise. There are tools available to help you with this. An asset allocation calculator can be found from a variety of sources, including most investment firms. You can use a target-date fund for something this if you'd like automation. There are also a couple things like, say, \\\"\\\"Vanguard LifeStrategy funds\\\"\\\" (from Vanguard) which target other savings goals. You may be able to understand the way these sorts of instruments function more easily than you could other investments. You could do a decent job for yourself by just opening up an account at Vanguard, using their online tool, and pouring your money into the stuff they recommend.\\\"\",\n \"\\\"For starting with zero knowledge you certainly did a great job on research as you hit on most of the important points with your question. It seems like you have already saved up around six months of expenses in savings so it is a great time to look into investing. The hardest part of your question is actually one of the most important details. Investing in a way that minimizes your taxes is generally more important, in the end, than what assets you actually invest in (as long as you invest even semi-reasonably). The problem is that the interaction between your home country's tax system and the U.S. tax system can be complex. It's probably (likely?) still worth maxing out your 401(k) (IRA, SEP, 529 accounts if you qualify) to avoid taxes, but like this question from an Indian investor it may be worth seeing an investment professional about this. If you do, see a fee-based professional preferably one familiar with your country. If tax-advantaged accounts are not a good deal for you or if you max them out, a discount broker is probably a good second option for someone willing to do a bit of research like you. With this money investing in broadly-diversified, low fee, index mutual funds or exchange traded funds is generally recommended. Among other benefits, diversified funds make sure that if any particular company fails you don't feel too much pain. The advantages of low fees are fairly obvious and one very good reason why so many people recommend Vanguard on this site. A common mix for someone your age is mostly stocks (local and international) and some bonds. Though with how you talk about risk you may prefer more bonds. Some people recommend spicing this up a bit with a small amount of real estate (REITs), sometimes even other assets. The right portfolio of the above can change a lot given the person. The above mentioned adviser and/or more research can help here. If, in the future, you start to believe you will go back to your home country soon that may throw much of this advice out the window and you should definitely reevaluate then. Also, if you are interested in the math/stats behind the above advice \\\"\\\"A Random Walk Down Wall Street\\\"\\\" is a light read and a good place to start. Investing makes for a very interesting and reasonably profitable math/stats problem.\\\"\",\n \"Financial advisers like to ask lots of questions and get nitty-gritty about investment objectives, but for the most part this is not well-founded in financial theory. Investment objectives really boils down to one big question and an addendum. The big question is how much risk you are willing to tolerate. This determines your expected return and most characteristics of your portfolio. The addendum is what assets you already have (background risk). Your portfolio should contain things that hedge that risk and not load up on it. If you expect to have a fixed income, some extra inflation protection is warranted. If you have a lot of real estate investing, your portfolio should avoid real estate. If you work for Google, you should avoid it in your portfolio or perhaps even short it. Given risk tolerance and background risk, financial theory suggests that there is a single best portfolio for you, which is diversified across all available assets in a market-cap-weighted fashion.\",\n \"\\\"Consultant, I commend you for thinking about your financial future at such an early age. Warren Buffet, arguably the most successful investor ever lived, and the best known student of Ben Graham has a very simple advice for non-professional investors: \\\"\\\"Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.)\\\"\\\" This quote is from his 2013 letter to shareholders. Source: http://www.berkshirehathaway.com/letters/2013ltr.pdf Buffet's annual letters to shareholders are the wealth of useful and practical wisdom for building one's financial future. The logic behind his advice is that most investors cannot consistently pick stock \\\"\\\"winners\\\"\\\", additionally, they are not able to predict timing of the market; hence, one has to simply stay in the market, and win over in the long run.\\\"\",\n \"@bstpierre gave you an example of a portfolio similar to IFA's 70 portfolio. Please, look other variants of example portfolios there and investigate which would suit to you. Although the example portfolios are not ETF-based, required by the op, you can rather easily check corresponding components with this tool here. Before deciding your portfolio, fire up a spreadsheet (samples here) and do calculations and do not underestimate things below: Bogleheads have already answered this type of questions so why not look there? Less reinventing the wheel: google retirement portfolios site:bogleheads.org. I am not making any recommendations like other replies because financial recommendations devalue. I hope I steered you to the right track, use less time to pick individual funds or stocks and use more time to do your research.\",\n \"\\\"Your broker, Ameritrade, offers a variety of Exchange Traded Funds (ETFs) that you can buy and sell with zero commission. An ETF is like a mutual fund, but you buy and sell shares the same way you buy and sell shares of stocks. From your point of view, the relevance of this is that you can buy and sell as many or as few shares as you like, even down to a single share. Note that to get the commission-free trades on the available ETFs you have to sign up for it in your account profile. Be sure to do that before you enter any buy orders. You'll want to start by looking at the Ameritrade's list of commission-free ETFs. Notice that they are divided into different categories: stocks, bonds, international, and commodities. Which categories you pick from will depend on your personal investing goals, time horizon, risk tolerance, and so on. There are lots of questions and answers on this site that talk about asset allocation. You should read them, as it is the most important decision you will make with your portfolio. The other thing you want to be aware of is the expense ratio for each fund. These expenses reduce the fund's return (they are included in the calculation of the net asset value of the shares), so lower is definitely better. Personally, I wouldn't even consider paying more than about 0.10% (commonly read \\\"\\\"10 basis points\\\"\\\" or \\\"\\\"10 bp\\\"\\\") for a broad-based domestic stock fund. For a sectoral fund you might put up with as much as 20 bp in expenses. Bond funds tend to be a little more expensive, so maybe allow as much as 25 bp, and likewise for international funds. I've never invested in commodity funds, so I'll let someone else opine on appropriate expense ratios for those. Once you've decided what funds you want (and have signed up for commission-free trades), all you have to do is enter the trade orders. The website where you manage your account has tutorials on how to do that. After that you should be all set. Good luck with your investing!\\\"\",\n \"\\\"Spend your first 50 euros on research materials. Warren Buffett got started as a boy by reading every book in the Library of Congress on investing and stock market analysis. You can research the company filings for Canadian companies at http://www.sedar.com, U.S companies at http://www.edgar.com, and European companies at https://www.gov.uk/government/organisations/companies-house. Find conflicting arguments and strategies and decide for yourself which ones are right. The Motley Fool http://www.fool.ca offers articles on good stocks to add to your portfolio and why, as well as why not. They provide a balanced judgement instead of just hype. They also sell advice through their newsletter. In Canada the Globe & Mail runs a daily column on screening stocks. Every day they present a different stock-picking strategy and the filters used to reach their end list. They then show how much that portfolio would have increased or decreased as well as talking about some of the good & bad points of the stocks in the list. It's interesting to see over time a very few stocks show up on multiple lists for different strategies. These ones in my opinion are the stocks to be investing in. While the Globe's stock picks focus on Canadian and US exchanges, you might find the strategies worthwhile. You can subscribe to the digital version at http://www.theglobeandmail.com Once you have your analytical tools ready, pick any bank or stock house that offers a free practice account. Use that account and their screening tools to try out your strategies and see if you can make money picking stocks. My personal stock-picking strategy is to look for companies with: - a long uninterrupted history of paying dividends, - that are regularly increased, - and do not exceed the net profit per share of the company - and whose share price has a long history of increasing These are called unicorn companies, because there are so very few of them. Another great read is, \\\"\\\"Do Stocks Outperform Treasury Bills?\\\"\\\" by Hendrik Bessembinder. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2900447 In this paper the author looks at the entire history of the U.S. stock universe and finds that less than 4% of stocks are responsible for 100% of the wealth creation in the U.S. stock market. He discusses his strategies for picking the winners, but it also suggests that if you don't want to do any research, you could pick pretty much any stock at random, short it, and wait. I avoid mutual funds because they are a winner only for the fellas selling them. A great description on why the mutual fund industry is skewed against the investor can be found in a book called \\\"\\\"The RRSP Secret\\\"\\\" by Greg Habstritt. \\\"\\\"Unshakeable\\\"\\\" by Tony Robbins also discusses why mutual funds are not the best way to invest in stocks. The investor puts up 100% of the money, takes 100% of the risk, and gets at best 30% of the return. Rich people don't invest like that.\\\"\",\n \"Stock portfolios have diversifiable risk and undiversifiable risk. The market rewards investors for taking undiversifiable risk (e.g. owning an index of oil producing companies) and does not reward investors for assuming diversifiable risk (e.g. owning a single oil producing company). The market will not provide investors with any extra return for owning a single oil company when they can buy an oil index fund at no additional cost. Similarly, the market will not reward you for owning a small-cap index fund when you can purchase a globally diversified / capitalization diversified index fund at no additional cost. This article provides a more detailed description. The Vanguard Total World Stock Index Fund is a much better staring point for an equity portfolio. You will need to make sure that the asset allocation of your overall portfolio (e.g. stocks, bonds, P2P lending, cash) is consistent with your time horizon (5-10 years).\",\n \"At twenty-two, you can have anywhere between 100%-70% of your securities portfolio in equities. It is reasonable to start at 100% and reduce over time. The one thing that I would mention with that is that your target at retirement should be 70% stocks/30% bonds. You should NEVER have more than 30% bonds. Why? Because a 70/30 mix is both safer than 100% bonds and will give a higher return. Absent some market timing strategy (which as an amateur investor, you should absolutely avoid) or some complicated balancing scheme, there is never a reason to be at more than 30% bonds. A 50/50 mix of stocks and bonds or a 100% bonds ratio not only returns less than the 70/30 mix, it is actually riskier. Why? Because sometimes bonds fall. And when they do, stocks generally gain. And vice versa. Because of this behavior, the 70/30 mix is less likely to fall than 50% or 100% bonds. Does that mean that your stock percentage should never drop below 70%? No. If your portfolio contains things other than stocks and bonds, it is reasonable for stocks to fall below 70%. The problem is that when you drop stocks below 70%, you should drop bonds below 30% as well. So you keep the stock to bond ratio at 7:3. If you want to get a lower risk than a 70/30 mix, then you should move into cash equivalents. Cash equivalents are actually safer than stocks and bonds either individually or in combination. But at twenty-two, you don't really need more safety. At twenty-two, the first thing to do is to build your emergency fund. This should be able to handle six months of expenses without income. I recommend making it equal to six months of your income. The reason being that it is easy to calculate your income and difficult to be sure of expenses. Also, you can save six months of income at twenty-two. Are you going to stay where you are for the next five years? At twenty-two, the answer is almost certainly no. But the standard is the five year time frame. If you want a bigger place or one that is closer to work, then no. If you stay somewhere at least five years, then it is likely that the advantages to owning rather than renting will outweigh the costs of switching houses. Less than five years, the reverse is true. So you should probably rent now. You can max out your 401k and IRA now. Doing so even with a conservative strategy will produce big returns by sixty-seven. And perhaps more importantly, it helps keep your spending down. The less you do spend, the less you will feel that you need to spend. Once you fill your emergency fund, start building savings for a house. I would consider putting them in a Real Estate Investment Trust (REIT). A REIT will tend to track real estate. Since you want to buy real estate with the results, this is its own kind of safety. It fell in value? Houses are probably cheap. Houses increasing in price rapidly? A REIT is probably growing by leaps and bounds. You do this outside your retirement accounts, as you want to be able to access it without penalty.\",\n \"Investing is really about learning your own comfort level. You will make money and lose money. You will make mistakes but you will also learn a great deal. First off, invest in your own financial knowledge, this doesn't require capital at all but a commitment. No one will watch or care for your own money better than yourself. Read books, and follow some companies in a Google Finance virtual portfolio. Track how they're doing over time - you can do this as a virtual portfolio without actually spending or losing money. Have you ever invested before? What is your knowledge level? Investing long term is about trying to balance risk while reducing losses and trying not to get screwed along the way (by people). My personal advice: Go to an independent financial planner, go to one that charges you per hour only. Financial planners that don't charge you hourly get paid in commissions. They will be biased to sell you what puts the most money in their pockets. Do not go to the banks investment people, they are employed by the banks who have sales and quota requirements to have you invest and push their own investment vehicles like mutual funds. Take $15k to the financial planner and see what they suggest. Keep the other $5K in something slow and boring and $1k under your mattress in actual cash as an emergency. While you're young, compound interest is the magic that will make that $25k increase hand over fist in time. But you need to have it consistently make money. I'm young too and more risk tolerant because I have time. While I get older I can start to scale back my risk because I'm nearing retirement and preserve instead of try to make returns.\",\n \"such analysis helps you keep track of the percentage of income that you invest You could apply 1:1:1 ratio. i.e spend 1/3, save 1/3 and invest 1/3. Hope that helps\",\n \"While it is certainly easy to manage single fund, I am not sure it's the right strategy. It's been proven again and again that portfolio diversification is key to long term gains in wealth. I think your best option is to invest in low cost index funds and ETFs. While rebalancing your portfolio is hard, it is vastly simpler if your portfolio only has ETFs.\",\n \"Does your employer provide a matching contribution to your 401k? If so, contribute enough to the 401k that you can fully take advantage of the 401k match (e.g. if you employer matches 3% of your income, contribute 3% of your income). It's free money, take advantage of it. Next up, max out your Roth IRA. The limit is $5000 currently a year. After maxing your Roth, revisit your 401k. You can contribute up to 16,500 per year. You savings account is a good place to keep a rainy day fund (do you have one?), but it lacks the tax advantages of a Roth IRA or 401k, so it is not really suitable for retirement savings (unless you have maxed out both your 401k and Roth IRA). Once you have take care of getting money into your 401k and Roth IRA accounts, the next step is investing it. The specific investment options available to you will vary depending on who provides your retirement account(s), so these are general guidelines. Generally, you want to invest in higher-risk, higher-return investments when you are young. This includes things like stocks and developing countries. As you get older (>30), you should look at moving some of your investments into things that less volatile. Bond funds are the usual choice. They tend to be safer than stocks (assuming you don't invest in Junk bonds), but your investment grows at a slower rate. Now this doesn't mean you immediately dump all of your stock and buy bonds. Rather, it is a gradual transition over time. As you get older and older, you gradually shift your investments to bond funds. A general rule of thumb I have seen: 100 - (YOUR AGE) = Percentage of your portfolio that should be in stocks Someone that is 30 would have 70% of their portfolio in stock, someone that is 40 would have 60% in stock, etc. As you get closer to retirement (50s-60s), you will want to start looking at investments that are more conservatie than bonds. Start to look at fixed-income and money market funds.\",\n \"\\\"Investing is always a matter of balancing risk vs reward, with the two being fairly strongly linked. Risk-free assets generally keep up with inflation, if that; these days advice is that even in retirement you're going to want something with better eturns for at least part of your portfolio. A \\\"\\\"whole market\\\"\\\" strategy is a reasonable idea, but not well defined. You need to decide wheher/how to weight stocks vs bonds, for example, and short/long term. And you may want international or REIT in the mix; again the question is how much. Again, the tradeoff is trying to decide how much volatility and risk you are comfortable with and picking a mix which comes in somewhere around that point -- and noting which assets tend to move out of synch with each other (stock/bond is the classic example) to help tune that. The recommendation for higher risk/return when you have a longer horizon before you need the money comes from being able to tolerate more volatility early on when you have less at risk and more time to let the market recover. That lets you take a more aggressive position and, on average, ger higher returns. Over time, you generally want to dial that back (in the direction of lower-risk if not risk free) so a late blip doesn't cause you to lose too much of what you've already gained... but see above re \\\"\\\"risk free\\\"\\\". That's the theoretical answer. The practical answer is that running various strategies against both historical data and statistical simulations of what the market might do in the future suggests some specific distributions among the categories I've mentioned do seem to work better than others. (The mix I use -- which is basically a whole-market with weighting factors for the categories mentioned above -- was the result of starting with a general mix appropriate to my risk tolerance based on historical data, then checking it by running about 100 monte-carlo simulations of the market for the next 50 years.)\\\"\",\n \"\\\"As many before me said but will say again for the sake of completeness of an answer: First off provision to have an emergency fund of 6 months living expenses to cover loss of employment, unforeseen medical issues etc. When that is done you re free to start investing. Do remember that putting all your eggs in one basket enable risks, so diversify your portfolio and diversify even within each investment vehicle. Stocks: I would personally stay away from stocks as it's for the most part a bear market right now (and I assume you re not interested day-trading to make any short term return) and most importantly you dont mention any trading experience which means you can get shafted. Mutual Funds: Long story short most of these work; mainly for the benefit for their management and people selling them. Bonds Instead, I would go for corporate bonds where you essentially buy the seller(aka the issuing company) and unlike gambling on stocks of the same company, you dont rely on speculation and stock gains to make a profit. As long as the company is standing when the bond matures you get your payment. This allows you to invest with less effort spent on a daily basis to monitor your investments and much better returns(especially if you find opportunities where you can buy bonds from structurally sound companies that have for reasons you deem irrelevant, purchase prices in the secondary market for cents in the dollar) than your other long term \\\"\\\"stable options\\\"\\\" like German issued bonds or saving accounts that are low in general and more so like in the current situation for German banks. Cryptocurrency I would also look into cryptocurrency for the long term as that seems to be past its childhood diseases and its also a good period of time to invest in as even the blue chips of that market are down party due to correction from all time highs and partly due to speculation. As Im more knowledgeable on this than German-locale bonds, a few coins I suggest you look into and decide for yourself would be the obvious ETH & BTC, then a slew of newer ones including but not limited to OmiseGO, Tenx(Pay), Augur and IOTA. Beware though, make sure to understand the basics of security and good practices on this field, as there's no central bank in this sector and if you leave funds in an exchange or your wallet's private key is compromised the money are as good as gone.\\\"\",\n \"\\\"You don't state where you are, so any answers to this will by necessity be very general in nature. How many bank accounts should I have and what kinds You should have one transaction account and one savings account. You can get by with just a single transaction account, but I really don't recommend that. These are referred to with different names in different jurisdictions, but the basic idea is that you have one account where money is going in and out (the transaction account), and one where money goes in and stays (the savings account). You can then later on, as you discover various needs, build on top of that basic foundation. For example, I have separate accounts for each source of money that comes into my personal finances, which makes things much easier when I sit down to fill out the tax forms up to almost a year and a half later, but also adds a bit of complexity. For me, that simplicity at tax time is worth the additional complexity; for someone just starting out, it might not be. (And of course, it is completely unnecessary if you have only one source of taxable income and no other specific reason to separate income streams.) how much (percentage-wise) of my income should I put into each one? With a single transaction account, your entire income will be going into that account. Having a single account to pay money into will also make life easier for your employer. You will then have to work out a budget that says how much you plan to spend on food, shelter, savings, and so on. how do I portion them out into budgets and savings? If you have no idea where to start, but have an appropriate financial history (as opposed to just now moving into a household of your own), bring out some old account statements and categorize each line item in a way that makes sense to you. Don't be too specific; four or five categories will probably be plenty. These are categories like \\\"\\\"living expenses\\\"\\\" (rent, electricity, utilities, ...), \\\"\\\"food and eating out\\\"\\\" (everything you put in your mouth), \\\"\\\"savings\\\"\\\" (don't forget to subtract what you take out of savings), and so on. This will be your initial budget. If you have no financial history, you are probably quite young and just moving out from living with your parents. Ask them how much might be reasonable in your area to spend on basic food, a place to live, and so on. Use those numbers as a starting point for a budget of your own, but don't take them as absolute truths. Always have a \\\"\\\"miscellaneous expenses\\\"\\\" or \\\"\\\"other\\\"\\\" line in your budget. There will always be expenses that you didn't plan for, and/or which don't neatly fall into any other category. Allocate a reasonable sum of money to this category. This should be where you take money from during a normal month when you overshoot in some budget category; your savings should be a last resort, not something you tap into on a regular basis. (If you find yourself needing to tap into your savings on a regular basis, adjust your budget accordingly.) Figure out based on your projected expenses and income how much you can reasonably set aside and not touch. It's impossible for us to say exactly how much this will be. Some people have trouble setting aside 5% of their income on a regular basis without touching it; others easily manage to save over 50% of their income. Don't worry if this turns out a small amount at first. Get in touch with your bank and set up an automatic transfer from your transaction account to the savings account, set to recur each and every time you get paid (you may want to allow a day or two of margin to ensure that the money has arrived in your account before it gets taken out), of the amount you determined that you can save on a regular basis. Then, try to forget that this money ever makes it into your finances. This is often referred to as the \\\"\\\"pay yourself first\\\"\\\" principle. You won't hit your budget exactly every month. Nobody does. In fact, it's more likely that no month will have you hit the budget exactly. Try to stay under your budgeted expenses, and when you get your next pay, unless you have a large bill coming up soon, transfer whatever remains into your savings account. Spend some time at the end of each month looking back at how well you managed to match your budget, and make any necessary adjustments. If you do this regularly, it won't take very long, and it will greatly increase the value of the budget you have made. Should I use credit cards for spending to reap benefits? Only if you would have made those purchases anyway, and have the money on hand to pay the bill in full when it comes due. Using credit cards to pay for things is a great convenience in many cases. Using credit cards to pay for things that you couldn't pay for using cash instead, is a recipe for financial disaster. People have also mentioned investment accounts, brokerage accounts, etc. This is good to have in mind, but in my opinion, the exact \\\"\\\"savings vehicle\\\"\\\" (type of place where you put the money) is a lot less important than getting into the habit of saving regularly and not touching that money. That is why I recommend just a savings account: if you miscalculate, forgot a large bill coming up, or for any other (good!) reason need access to the money, it won't be at a time when the investment has dropped 15% in value and you face a large penalty for withdrawing from your retirement savings. Once you have a good understanding of how much you are able to save reliably, you can divert a portion of that into other savings vehicles, including retirement savings. In fact, at that point, you probably should. Also, I suggest making a list of every single bill you pay regularly, its amount, when you paid it last time, and when you expect the next one to be due. Some bills are easy to predict (\\\"\\\"$234 rent is due the 1st of every month\\\"\\\"), and some are more difficult (\\\"\\\"the electricity bill is due on the 15th of the month after I use the electricity, but the amount due varies greatly from month to month\\\"\\\"). This isn't to know exactly how much you will have to pay, but to ensure that you aren't surprised by a bill that you didn't expect.\\\"\",\n \"First I assume you are resident for tax purposes in the UK? 1 Put 2000 in a cash ISA as an emergency fund. 2 Buy shares in 2 or 3 of the big generalist Investment trusts as they have low charges and long track records – unless your a higher rate tax payer don’t buy the shares inside the ISA its not worth it You could use FTSE 100 tracker ETF's or iShares instead of Investment Trusts.\",\n \"\\\"There are many questions and good answers here regarding investment choices. The first decision you need to make is how involved do you intend to be in investment activity. If you plan to be actively investing by yourself, you should look for questions here about making investment choices. If you intend to be a more passive investor, look for posts by \\\"\\\"Bogleheads\\\"\\\", who focus on broad-focused, low cost investments. This is the optimal choice for many people. If you are not comfortable managing investments at all, you need to figure out how to find a competent and reasonably priced financial advisor to meet with and guide your investment strategy. This advice generally costs about 1-2% of your total managed assets annually.\\\"\",\n \"I would make this a comment, but I am not worthy...... You will need to define your objectives before you can do anything. What is the money for? What is your risk tolerance? Where do you live? Capital appreciation? Preservation? Can you eat if your savings are cut in half? How much are you currently making? How much are you currently saving? What do you already have exposure to? How secure is your job? What is the makeup of the congregation? Do you have any tax-related surprises? Do you own your home? Have you previously consulted with a financial planner? There are many many factors obviously. More than I think most people want to give out over the internet, but they are all important to making a decision. Get a recommendation from someone you know for a financial planner. Ask upfront what their background is. Education, experience credentials. You want a certified financial planner or analyst. Ask how their fees are structured and what their approach is like, and make sure they're speaking intelligibly. Feel free to shop around until you find someone you like.\",\n \"It really is dependent upon your goals. What are your short term needs? Do you need a car/clothing/high cost apartment/equipment when you start your career? For those kinds of things, a savings account might be best as you will need to have quick access to cash. Many have said that people need two careers, the one they work in and being an investor. You can start on that second career now. Open up some small accounts to get the feel for investing. This can be index funds, or something more specialized. I would put money earmarked for a home purchase in funds with a lower beta (fluctuation) and some in index funds. You probably would want to get a feel for what and where you will actually be doing in your career prior to making a leap into a home purchase. So figure you have about 5 years. That gives you time to ride out the waves in the market. BTW, good job on your financial situation. You are set up to succeed.\",\n \"You are suggesting something called dollar cost averaging (or its cousin, dollar value averaging) - http://www.investopedia.com/articles/stocks/07/dcavsva.asp This is certainly a valid investment strategy, although personally, I feel that for long term investment, it is not necessary unless you plan on being an active trader. I still strongly encourage you to research these two methods and see if they would work well for your personal investment strategy and goals. As far as what sorts of investments for a taxable account, I have three general recommendations: As far as which company to use for your brokerage, I personally have accounts at Voya, TRowe Price and Fidelity. I would strongly recommend Fidelity out of those three, mostly due to customer service and quality and ease of use of their website. Vanguard is a great brokerage, but you don't have to choose them just because you plan to mostly invest in Vanguard funds. I also recommend you research how capital gains and dividend taxing works (and things like lost harvesting), so that you can structure your investments with taxes in mind. Do this ahead of time, don't wait until April of 2016 because it will be too late to save on taxes by then.\",\n \"\\\"You want to \\\"\\\"begin building a nice portfolio\\\"\\\" comprised of \\\"\\\"real estate\\\"\\\" and \\\"\\\"solar and wind\\\"\\\". There are ways to do that without starting your own solar power farm or buying giant wind turbines, or whole apartment complexes. They're called ETFs. They're diversified and it's unlikely that you'll use the entirety of your initial investment.\\\"\",\n \"\\\"Funds - especially index funds - are a safe way for beginning investors to get a diversified investment across a lot of the stock market. They are not the perfect investment, but they are better than the majority of mutual funds, and you do not spend a lot of money in fees. Compared to the alternative - buying individual stocks based on what a friend tells you or buying a \\\"\\\"hot\\\"\\\" mutual fund - it's a great choice for a lot of people. If you are willing to do some study, you can do better - quite a bit better - with common stocks. As an individual investor, you have some structural advantages; you can take significant (to you) positions in small-cap companies, while this is not practical for large institutional investors or mutual fund managers. However, you can also lose a lot of money quickly in individual stocks. It pays to go slow and to your homework, however, and make sure that you are investing, not speculating. I like fool.com as a good place to start, and subscribe to a couple of their newsletters. I will note that investing is not for the faint of heart; to do well, you may need to do the opposite of what everybody else is doing; buying when the market is down and selling when the market is high. A few people mentioned the efficient market hypothesis. There is ample evidence that the market is not efficient; the existence of the .com and mortgage bubbles makes it pretty obvious that the market is often not rationally valued, and a couple of hedge funds profited in the billions from this.\\\"\",\n \"Good question. There are plenty of investors who think they can simply rely on intuition, and although luck is always present it is not enough to construct a proper portfolio. First of all there are two basic types of portfolio management: Passive and Active. The majority of abnormal gains are made with active portfolio management although passive managers are less likely to suffer loses. Both types must be created with some kind of qualitative and quantitative research, but an active portfolio requires constant adjustments (Market Timing) to preserve the desired levels of risk and return. The topic is extremely broad and every manager has his own preferred methods of quantitative analysis. I will try to list here some most common, in my opinion, ways of stock-picking and portfolio management. Roy's Criterion: The best portfolio is that with the lowest probability that the return will be below a specified level. This is achieved by maximising the number of standard deviations between the return on the portfolio and minimum specified level: Max k = (Rp-Rl)/Sp Where (Rp) - return on portfolio, (Rl) - specified minimum return, (Sp) - standard deviation of portfolio return. Kataoka's Criterion: Maximise the minimum return (Rl) subject to constraint that the chance of a return below (Rl) is less than or equal to a specified value (a). Maximise (Rl) Subject to Prob (Rp < Rl) =< a For example, assume that the specified value is 20% - this will be met provided (Rl) is at least 0.84 standard deviations below (Rp). Therefore the best portfolio is the one that maximises (Rl) where: Rl = Rp-0.84*Sp Telser's Criterion: Maximise expected return subject to the constraint that the chance of a return below the specified minimum is less than or equal to some specified minimum (a) Maximise (Rp) subject to Prob (Rp < Rl) =< a Assuming same data as previously: Rl =< Rp-0.84*Sp and select the portfolio with highest expected return. Security Selection Now let's look at some methods of security selection. This is important when a manager believes some shares are mispriced. The required return on security 'i' is given by: Ri = Rf+(Rm-Rf)Bi Where (Rf) - is a risk-free rate, (Rm) - return on the market, (Bi) - security's beta. The difference between the required return and the actual return expected is known as the security's alpha (Ai). Ai = Rai - Ri, where (Rai) is actual return on security 'i'. Stock Picking One way of stock-picking is to select portfolios of securities with positive alphas. Alpha of a portfolio is simply the weighted average of the alphas of the securities in the portfolio. Ap = {(n*Ai) Where ({) is sigma (sorry for such weird typing, haven't figured out yet how to type proper-looking formulas), (n) - share of 'i'th security in portfolio. So another way of stock-picking is ranking securities by their excess return to beta (ERB): ERB = (Ri - Rf)/Bi The greater the ERB the more desirable the security and the greater the proportion it will make up of the portfolio. Thus portfolios produced by this technique will have greater proportion of some securities than the market portfolio and lower proportions of other securities. The number of securities depends on a cut-off rate (C*) for the ERB, defined so that all securities with ERB>C* are included in portfolio while if ERB The cut-off rate for a portfolio containing the first 'j' securities is given by (i'm inserting an image cut from Word below): Here comes the tricky part: Basically what you do is first calculate ERB for each security, then calculate Cj for each security mix (gradually adding new securities one by one and recalculating Cj each time). Then you select an optimum portfolio by comparing Cj of each mix to ERB's of it's securities. Let me show you a simple example: Say you have securities A,B,C and D you calculated ERB's: ERB(a)=6, ERB(b)=6.5, ERB(c)=5, ERB(d)=4 also you calculated: C(a)=4.1, C(ab)=4.8, C(abc)=4.9, C(abcd)=4.5. Then you check: ERB(a),ERB(b),ERB(c) are greater than C(a), but C(a) only contains security A so C(a) is not an optimum mix. ERB(a),ERB(b),ERB(c) are greater than C(ab), but C(ab) only contains securities A and B ERB(a),ERB(b),ERB(c) are greater than C(abc), and C(abc) contains A B and C so it is an optimum. ERB(d) is lower than C(abcd) so C(abcd) is not an optimum portfolio. Finally the most important part: Below is a formula to find the share of each security in the portfolio: Here you simply plug in already obtained values for each security to find it's proportion in your portfolio. I hope this somehow answers your question, however there is a lot more than this to consider if you decide to manage your portfolio yourself. Some of the most important areas are: Market Timing Hedging Stocks vs Bonds Good luck with your investments! And remember, the safest portfolio is the one that replicates the Global Market. The cut-off rate for a portfolio containing the first 'j' securities is given by (i'm inserting an image cut from Word below): Here comes the tricky part: Basically what you do is first calculate ERB for each security, then calculate Cj for each security mix (gradually adding new securities one by one and recalculating Cj each time). Then you select an optimum portfolio by comparing Cj of each mix to ERB's of it's securities. Let me show you a simple example: Say you have securities A,B,C and D you calculated ERB's: ERB(a)=6, ERB(b)=6.5, ERB(c)=5, ERB(d)=4 also you calculated: C(a)=4.1, C(ab)=4.8, C(abc)=4.9, C(abcd)=4.5. Then you check: ERB(a),ERB(b),ERB(c) are greater than C(a), but C(a) only contains security A so C(a) is not an optimum mix. ERB(a),ERB(b),ERB(c) are greater than C(ab), but C(ab) only contains securities A and B ERB(a),ERB(b),ERB(c) are greater than C(abc), and C(abc) contains A B and C so it is an optimum. ERB(d) is lower than C(abcd) so C(abcd) is not an optimum portfolio. Finally the most important part: Below is a formula to find the share of each security in the portfolio: Here you simply plug in already obtained values for each security to find it's proportion in your portfolio. I hope this somehow answers your question, however there is a lot more than this to consider if you decide to manage your portfolio yourself. Some of the most important areas are: Good luck with your investments! And remember, the safest portfolio is the one that replicates the Global Market.\",\n \"Not all debt is bad. If it carries a reasonable interest rate, you don't need to clear it immediately. As for investing in an index fund, they're an affordable, easy way to spread your money over various assets. However, asset allocation is just one of many investment strategies. Ideally, you want to invest according to your goals, tax situation, and risk tolerance. You want a portfolio that dynamically allocates to various investment strategies, both beta and alpha, according to changing market conditions. Most importantly, you want systematic risk management for every aspect of your investments.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["\"Some thoughts: 1) Do you have a significant emergency fund (3-6 months of after-tax living expenses)? If not, you stand to take a significant loss if you have an unexpected need for cash that is tied up in investments. What if you lose/hate your job or your car breaks down? What if a you want to spend some time with a relative or significant other who learns they only have a few months to live? Having a dedicated emergency fund is an important way to avoid downside risk. 2) Lagerbaer has a good suggestion. Given that if you'd reinvested your dividends, the S&P 500 has returned about 3.5% over the last 5 years, you may be able to get a very nice risk-free return. 3) Do you have access to employer matching funds, such as in a 401(k) at work? If you get a dollar-for-dollar match, that is a risk-free pre-tax 100% return and should be a high priority. 4) What do you mean by \"\"medium\"\" volatility? Given that you are considering a 2/3 equity allocation, it would not be at all out of the realm of possibility that your balance could fall by 15% or more in any given year and take several years to recover. If that would spook you, you may want to consider lowering your equity weights. A high quality bond fund may be a good fit. 5) Personally, I would avoid putting money into stocks that I didn't need back for 10 years. If you only want to tie your money up for 2-5 years, you are taking a significant risk that if prices fall, you won't have time to recover before you need your money back. The portfolio you described would be appropriate for someone with a long-term investment horizon and significant risk tolerance, which is usually the case for young people saving for retirement. However, if your goals are to invest for 2-5 years only, your situation would be significantly different. 6) You can often borrow from an investment account to purchase a primary residence, but you must pay that amount back in order to avoid significant taxes and fees, unless you plan to liquidate assets. If you plan to buy a house, saving enough to avoid PMI is a good risk-free return on your money. 7) In general, and ETF or index fund is a good idea, the key being to minimize the compound effect of expenses over the long term. There are many good choices a la Vanguard here to choose from. 8) Don't worry about \"\"Buy low, sell high\"\". Don't be a speculator, be an investor (that's my version of Anthony Bourdain's, \"\"don't be a tourist, be a traveler\"\"). A speculator wants to sell shares at a higher price than they were purchased at. An investor wants to share in the profits of a company as a part-owner. If you can consistently beat the market by trying to time your transactions, good for you - you can move to Wall Street and make millions. However, almost no one can do this consistently, and it doesn't seem worth it to me to try. I don't mean to discourage you from investing, just make sure you have your bases covered so that you don't have to cash out at a bad time. Best of luck! Edit Response to additional questions below. 1) Emergency fund. I would recommend not investing in anything other than cash equivalents (money market, short-term CDs, etc.) until you've built up an emergency fund. It makes sense to want to make the \"\"best\"\" use of your money, but you also have to account for risk. My concern is that if you were to experience one or more adverse life events, that you could lose a lot of money, or need to pay a lot in interest on credit card debt, and it would be prudent to self-insure against some of those risks. I would also recommend against using an investment account as an emergency fund account. Taking money out of investment accounts is inefficient because the commissions/taxes/fees can easily eat up a significant portion of your returns. Ideally, you would want to put money in and not touch it for a long time in order to take advantage of compounding returns. There are also high penalties for early disbursements from retirement funds. Just like you need enough money in your checking account to buy food and pay the rent every month, you need enough money in an emergency fund to pay for things that are a real possibility, even if they are less common. Using a credit card or an investment account is a relatively expensive way to do this. 2) Invest at all? I would recommend starting an emergency fund, and then beginning to invest for retirement. Once your retirement savings are on track, you can begin saving for whatever other goals you may have\""],"string":"[\n \"\\\"Some thoughts: 1) Do you have a significant emergency fund (3-6 months of after-tax living expenses)? If not, you stand to take a significant loss if you have an unexpected need for cash that is tied up in investments. What if you lose/hate your job or your car breaks down? What if a you want to spend some time with a relative or significant other who learns they only have a few months to live? Having a dedicated emergency fund is an important way to avoid downside risk. 2) Lagerbaer has a good suggestion. Given that if you'd reinvested your dividends, the S&P 500 has returned about 3.5% over the last 5 years, you may be able to get a very nice risk-free return. 3) Do you have access to employer matching funds, such as in a 401(k) at work? If you get a dollar-for-dollar match, that is a risk-free pre-tax 100% return and should be a high priority. 4) What do you mean by \\\"\\\"medium\\\"\\\" volatility? Given that you are considering a 2/3 equity allocation, it would not be at all out of the realm of possibility that your balance could fall by 15% or more in any given year and take several years to recover. If that would spook you, you may want to consider lowering your equity weights. A high quality bond fund may be a good fit. 5) Personally, I would avoid putting money into stocks that I didn't need back for 10 years. If you only want to tie your money up for 2-5 years, you are taking a significant risk that if prices fall, you won't have time to recover before you need your money back. The portfolio you described would be appropriate for someone with a long-term investment horizon and significant risk tolerance, which is usually the case for young people saving for retirement. However, if your goals are to invest for 2-5 years only, your situation would be significantly different. 6) You can often borrow from an investment account to purchase a primary residence, but you must pay that amount back in order to avoid significant taxes and fees, unless you plan to liquidate assets. If you plan to buy a house, saving enough to avoid PMI is a good risk-free return on your money. 7) In general, and ETF or index fund is a good idea, the key being to minimize the compound effect of expenses over the long term. There are many good choices a la Vanguard here to choose from. 8) Don't worry about \\\"\\\"Buy low, sell high\\\"\\\". Don't be a speculator, be an investor (that's my version of Anthony Bourdain's, \\\"\\\"don't be a tourist, be a traveler\\\"\\\"). A speculator wants to sell shares at a higher price than they were purchased at. An investor wants to share in the profits of a company as a part-owner. If you can consistently beat the market by trying to time your transactions, good for you - you can move to Wall Street and make millions. However, almost no one can do this consistently, and it doesn't seem worth it to me to try. I don't mean to discourage you from investing, just make sure you have your bases covered so that you don't have to cash out at a bad time. Best of luck! Edit Response to additional questions below. 1) Emergency fund. I would recommend not investing in anything other than cash equivalents (money market, short-term CDs, etc.) until you've built up an emergency fund. It makes sense to want to make the \\\"\\\"best\\\"\\\" use of your money, but you also have to account for risk. My concern is that if you were to experience one or more adverse life events, that you could lose a lot of money, or need to pay a lot in interest on credit card debt, and it would be prudent to self-insure against some of those risks. I would also recommend against using an investment account as an emergency fund account. Taking money out of investment accounts is inefficient because the commissions/taxes/fees can easily eat up a significant portion of your returns. Ideally, you would want to put money in and not touch it for a long time in order to take advantage of compounding returns. There are also high penalties for early disbursements from retirement funds. Just like you need enough money in your checking account to buy food and pay the rent every month, you need enough money in an emergency fund to pay for things that are a real possibility, even if they are less common. Using a credit card or an investment account is a relatively expensive way to do this. 2) Invest at all? I would recommend starting an emergency fund, and then beginning to invest for retirement. Once your retirement savings are on track, you can begin saving for whatever other goals you may have\\\"\"\n]","isConversational":false}}},{"rowIdx":94,"cells":{"_id":{"kind":"string","value":"3932"},"query":{"kind":"string","value":"How do historically low interest rates affect real estate prices?"},"gt_ids":{"kind":"list like","value":["107697","527443"],"string":"[\n \"107697\",\n \"527443\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1],"string":"[\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["107697","288376","406372","509197","527443","484843","72510","435740","257716","542321","179532","34844","598764","36602","327479","486707","129676","150332","346064","60486","144177","52299","466745","400646","360199","497200","358736","232421","569691","288167","319126","190891","5759","173781","213975","203926","391766","363817","575976","447237","216717","285064","347411","544020","531551","24822","295089","339024","337793","127082","457800","499112","360621","197966","265218","538064","517750","390397","522554","584036","319367","354117","229653","25128","97358","297664","578597","177137","120061","286668","545633","132994","356100","292475","354775","187324","387702","375606","503988","52735","389264","153445","15951","88190","133486","355327","491219","113189","380071","595002","559157","245918","70099","171479","401542","532430","367497","341399","31663","559699"],"string":"[\n \"107697\",\n \"288376\",\n \"406372\",\n \"509197\",\n \"527443\",\n \"484843\",\n \"72510\",\n \"435740\",\n \"257716\",\n \"542321\",\n \"179532\",\n \"34844\",\n \"598764\",\n \"36602\",\n \"327479\",\n \"486707\",\n \"129676\",\n \"150332\",\n \"346064\",\n \"60486\",\n \"144177\",\n \"52299\",\n \"466745\",\n \"400646\",\n \"360199\",\n \"497200\",\n \"358736\",\n \"232421\",\n \"569691\",\n \"288167\",\n \"319126\",\n \"190891\",\n \"5759\",\n \"173781\",\n \"213975\",\n \"203926\",\n \"391766\",\n \"363817\",\n \"575976\",\n \"447237\",\n \"216717\",\n \"285064\",\n \"347411\",\n \"544020\",\n \"531551\",\n \"24822\",\n \"295089\",\n \"339024\",\n \"337793\",\n \"127082\",\n \"457800\",\n \"499112\",\n \"360621\",\n \"197966\",\n \"265218\",\n \"538064\",\n \"517750\",\n \"390397\",\n \"522554\",\n \"584036\",\n \"319367\",\n \"354117\",\n \"229653\",\n \"25128\",\n \"97358\",\n \"297664\",\n \"578597\",\n \"177137\",\n \"120061\",\n \"286668\",\n \"545633\",\n \"132994\",\n \"356100\",\n \"292475\",\n \"354775\",\n \"187324\",\n \"387702\",\n \"375606\",\n \"503988\",\n \"52735\",\n \"389264\",\n \"153445\",\n \"15951\",\n \"88190\",\n \"133486\",\n \"355327\",\n \"491219\",\n \"113189\",\n \"380071\",\n \"595002\",\n \"559157\",\n \"245918\",\n \"70099\",\n \"171479\",\n \"401542\",\n \"532430\",\n \"367497\",\n \"341399\",\n \"31663\",\n \"559699\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["The article John cites says no correlation, but this chart from the article says otherwise; One sees the rate drop from 14% to 4% and housing rise from an index of 50 to near 190. (reaching over to my TI BA-35 calculator) I see that at 14%, $1000/mo will buy $84,400 worth of mortgage, but at 4%, it will buy $209,500. 2-1/2 times the borrowing power for the same payment. But wait, my friends at West Egg tell me that inflation means I can't compare $1000 in 1980 to the same $1000 in 2010. The $1,000 inflates to $2611 (i.e. an income rising only with inflation, no more) and that can fund a mortgage for $546,900. This is 6.5 times the original borrowing power, yet the housing index 'only' rose 3.8X. See that crazy chart? Housing actually got cheaper from 1980 to the peak. Statistics can say whatever you wish. Interest rate change drove all the change in housing prices, but not quite as much as it should have. To answer your question - I expect that when rates rise (and they will) housing prices will take a hit. In today's dollars, a current $1000 borrows (at 4%) nearly $210K, but at 6%, just $167K. If rates took a jump from these record lows, that's the nature of the risk you'd take.","All else constant, yes. It's one more reason rates aren't being raised quickly. The housing market is very delicate. Before the crash, a lot of homes in my area were 25% cheaper than after the rates dropped to historic lows. My area wasn't heavily affected by the recession, but homeowners still greatly benefitted from the increase in housing values which led to a lot more investment, though the houses aren't actually worth anything more. To raise rates dramatically now would be to trap a lot of homebuyers in homes that aren't worth what they owe.","Sooner or later though, don't you think Janet Yellen will decide to raise the rates? I think its becoming a bit too ridiculous at this stage. If we keep the rates as low as they currently are, don't you think we're putting ourselves at risk for another recession, assuming that a large proportion of home buyers today are buying with mortgages (not paying full amounts), and using borrowed money? After all, folks who use borrowed money to put down a mortgage are very likely to default.","\"There are five main drivers to real estate returns: Income (cash flow from rental payments); Depreciation (as an expense that can be used to reduce taxes); Equity (the gradual paydown of the mortgage the increases underlying equity in the property); Appreciation (any increase in the overall value of the property); Leverage (the impact of debt financing on the deal, increasing the effective \"\"cash-on-cash\"\" return). (Asset Rover has a detailed walk-through of the components, and a useful comparison to stocks) So interest rates are certainly a component (as they increase the expenses), but they are just one factor. Depending on a particular market's conditions, appreciation or rent increases could offset or (exceed) any increase in the interest expense. My own experience is mostly with non-listed REITs (including Reg A+ investments like the ones from Fundrise) and commercial syndicates, and for right now in both cases there's plenty of capital chasing yield to go around (and in fact competition among new funding sources like Reg D and Reg A+ platforms seems to be driving down borrowing rates as platforms compete both for borrowers and for investors). Personally I pay more attention to where each local market (and the broader national market) is along the ~18-year real estate cycle (spoiler: the last trough was 2008...). Dividend Capital puts out a quarterly report that's super useful.\"","Interest rates do generally affect house prices but other factors do too, especially the unemployment rate. However, everything else being equal, when interest rates drop, it makes the borrowing of money cheaper so tends to stimulate the economy and the housing market, increasing the demand for houses and generally causes house prices to increase (especially if the supply of new housing doesn't increase with the demand). When interest rates go up the opposite happens. Usually interest rates go down in order to stimulate a slowing economy and interest rates go up to slow down an overheated economy. Regarding your situation you are able to get a 30 year fixed rate at today’s interest rates (in Australia the longest fixed rate you can get is for 10 years and the rate is usually 1 or 2 percent higher than the standard variable rate. Most people here go for the variable rate or a fixed rate of between 1 to 3 years). This means that even if rates do go up in the future you won't be paying a higher rate, which is a positive for you. You are buying the house to live in so as long as you can keep making the repayments you should not be too worried if the price of the house drops sometime in the future, because if your house has dropped and you want to sell to buy another house to live in, then that house would have also dropped relative to yours (give or take). So your main worry is that rates will go up causing both house prices to fall and unemployment to rise, and you yourself losing your job and eventually your house. It is a risk, but what you need to consider is if you can manage that risk. Firstly, I believe rates won't be going up in the US for a number of years, and if and when they do start going up they will most probably start going up slowly. So you have some time on your side. Secondly, what can you do between now and when interest rates do start going up in a few years: Try to put more saving away to increase your safety net from 6 months to 12 months or more, or make extra repayments into your home loan so that you are ahead if things do go wrong. If you are worried that you could lose your job, what can you do to reduce your chances of losing your job or increasing your chances of getting a new job quickly if you do lose it? Improve your current skills, get new skills, become an invaluable employee, or look at possible opportunities to start your own business. Do your own research on the types of houses you are looking at buying, the more houses you look at the better prepared you will be when the right house at the right price comes along, and the less chance that you will be rushed into buying what might be an overpriced house. So to sum it up; do as much research as you can, have an understanding of what your risks are and how you are going to manage those risks.","\"... interest rates will go up. When that happens prices will be kept down. (if you can only afford $1,500/month payments and the interest portion of the mortgage goes up then you have less to spend on the house) There are also millions of houses that are foreclosed or in some process of foreclosure that are being kept off the market. That \"\"shadow inventory\"\" being kept off the market is keeping supply artificially low. At some point the shadow inventory will be brought to market and as supply increases it will hold prices down. ... [housing prices could drop another 20% or more](http://online.wsj.com/article/SB10001424052702304299304577348083297932466.html)... and it could take a decde or more before the housing market works through the effects of the great recession. btw, I just refinanced again. It was easier this time than any of the other times I've refinanced. This time I got 2.875% for 10 years... I'll save over 20 grand of interest over the next 10 years. The banks are loaning money out, and at incredibly low interest rates.\"","Asset prices are inversely related to interest rates. If you're valuing a business or a bond, if you use a lower interest rate you get a higher valuation. Historic equity returns benefit from a falling interest rate environment which won't be repeated as interest rates can only go so low. edit: typo","There is a significant tie between housing prices and mortgage rates. As such, don't assume low mortgage rates mean you will be financially better off if you buy now, since housing prices are inversely correlated with mortgage rates. This isn't a huge correlation - it's R-squared is a bit under 20%, at a 1.5-2 year lag - but there is a significant connection there. Particularly in that 10%+ era (see chart at end of post for details) in 1979-1982, there was a dramatic drop in housing price growth that corresponded with high interest rates. There is a second major factor here, though, one that is likely much more important: why the interest rates are at 10%. Interest rates are largely set to follow the Federal Funds rate (the rate at which the Federal Reserve loans to banks). That rate is set higher for essentially one purpose: to combat inflation. Higher interest rates means less borrowing, slower economic growth, and most importantly, a slower increase in the money supply - all of which come together to prevent inflation. Those 10% (and higher!) rates you heard about? Those were in the 70's and early 80's. Anyone remember the Jimmy Carter years? Inflation in the period from 1979 to 1981 averaged over 10%. Inflation in the 70s from 1973 to 1982 averaged nearly 9% annually. That meant your dollar this year was worth only $0.90 next year - which means inevitably a higher cost of borrowing. In addition to simply keeping pace with inflation, the Fed also uses the rate as a carrot/stick to control US inflation. They weren't as good at that in the 70s - they misread economic indicators in the late 1970s significantly, lowering rates dramatically in 1975-1977 (from ~12% to ~5%). This led to the dramatic double-digit inflation of the 1979-1981 period, requiring them to raise rates to astronomic levels - nearly 20% at one point. Yeah, I hope nobody bought a house on a fixed-rate mortgage from 1979-1981. The Fed has gotten a lot more careful over the years - Alan Greenspan largely was responsible for the shift in policy which seems to have been quite effective from the mid 1980s to the present (though he's long gone from his spot on the Fed board). Despite significant economic changes in both directions, inflation has been kept largely under control since then, and since 1991 have been keeping pretty steady around 6% or less. The current rate (around 0%) is unlikely to stay around forever - that would lead to massive inflation, eventually - but it's reasonable to say that prolonged periods over 10% are unlikely in the medium term. Further, if inflation did spike (and with it, your interest rates), salaries tend to spike also. Not quite as fast as inflation - in fact, that's a major reason a small positive inflation around 2-3% is important, to allow for wages to grow more slowly for poorer performers - but still, at 10% inflation the average wage will climb at a fairly similar pace. Thus, you'd be able to buy more house - or, perhaps a better idea, save more money for a house that you can then buy a few years down the road when rates drop. Ultimately, the advice here is to not worry too much about interest rates. Buy a house when you're ready, and buy the house you're ready for. Interest rates may rise, but if so it's likely due to an increase in inflation and thus wage growth; and it would take a major shift in the economy for rates to rise to the 10-11% level. If that did happen, housing prices (or at least growth in prices) would likely drop significantly. Some further references:","Basically, they all do. The relationship is much more dynamic with stocks but corporate financing costs increase, return requirements increase (risk free rate goes up). Same with real estate. Commodity demand is correlated with economic activity, which is correlated with interest rates, although not perfectly. The most important factor is, a higher risk free rate increases the discount rate, which reduces asset values","If money is more expensive (costs more to borrow) then fewer people will be able to qualify to make the payments for a particular size of mortgage. This reduces the number of potential buyers for property at that price. As sellers still want to sell, they will move their prices down to where more people can afford to buy. So rising interest rates create downward pressure on housing prices. But Toronto is the biggest city in Canada. I'd expect part of the high prices there is the location: lots of people want to be close to lots of activities, action, and opportunity. Unless something catastrophic happens, I don't see Toronto losing that advantage. If anything, it's going to get a tad warmer up there in the coming decades.","\"True. My thinking is, the higher the rates are, the less people you'll have borrowing, the less chance of people defaulting, more people buying with flat cash, and of course cheaper housing prices. Whereas with low interest rates, you'll have more people borrowing (thus, increasing the likelihood of more people defaulting), more people \"\"buying\"\" homes (technically not buying, technically just \"\"borrowing\"\" money and putting down mortgages), and more expensive housing prices. Quite frankly, I think the way that the western world can solve its issue with unaffordable housing is by raising the interest rates to at least the double digits, like they once were (when housing was still cheap).\"","\"Yes, it's unreasonable to think the prices will drop 10-20% in that time frame. Housing prices are not an equation that can can be solved to \"\"home prices are X% overvalued.\"\" You have 3 answers so far, Quanty's \"\"prices are inversely proportional to rates,\"\" Rob's \"\"there's no strong correlation between interest rates and house prices,\"\" and MB's, \"\"rising interest rates create downward pressure on housing prices.\"\" Any research into price history had better take every other variable into account. Articles that look at rates vs price don't always address a key item, income. Say we agree that the data show your city to be 10% too high. But if sellers like their high price and have some 'dig my heels in' power, prices won't drop. The seller simply stays put, and the supply/demand curves result not in a lower price, but in less supply. And the effect is to change the demographic of that area, i.e. attracting higher income earners. Rob linked to an article with a nice set of charts. One chart showing the US30 yr fixed rate and 'Real House Prices'. What results is a chart that can refute the relationship between rates and prices. But that would ignore an historical point that's too important to forget. The tumble that started in Jan '06 had nothing to do with the 30 year rate. It was the result of a series of insane financial products including 'interest only option ARMs' which permitted buyers to get approved for a purchase based on a payment that wasn't fixed, and would change to a fully amortizing mortgage at a higher rate that was unaffordable. A product that was a financial time bomb. Canada Banks offered no such product, and when the US market got pneumonia, Canada experienced a mild cold. With respect to any answers that offer US centric data to prove any hypothesis, I don't feel such comparisons are appropriate. Correlations, and the data used to prove them are an interesting thing. I can suggest that you take the US 30 year rate, along with our median income, or rather 25% of monthly median income. Calculate the mortgage that results. This translates nicely to the home a median family can afford. And I claim that long term this is the equilibrium price of that median home. But supply/demand has another factor, 'stickyness' or the more technical term, 'inelasticity of demand.' This means that for example, a 10% increase in the price of cigarettes does not cause a 10% drop in consumption. Each and every good has its own elasticity, and in the case of housing, a rise in cost would certainly impact the marginal buyers, but others will simply adjust their budgets. Not all buyers were planning to hit the bank's limit on what they could afford, so the rise doesn't change their mind, just their budget. Last - I know that Canada does not have a 30 year mortgage, most common is a 5 year rate with 30 year amortization. (correction/clarification, anyone?) The effect of this is less volatility in the market, since I believe your rates are not poised for the 2.5% to 4% jump implied by another response. Small increases can be absorbed. In a beautiful coincidence, the Federal Reserve Board sent me a link to The Interest Rate Elasticity of Mortgage Demand: Evidence From Bunching at the Conforming Loan Limit. It's a bit long but a worthwhile look at how the correlation isn't as instant as some might think.\"","I know that assets like bonds have prices that have an inverse relationship with interest rates, but what other assets do as well? I'm a bit new to finance and all that so I'm trying to learn. Would real estate prices be high as well? If so, why?","1) Low-Interest Rate: Isn't the inflation rate currently (and over the last couple of years) also really low, around 2%? If you're saying the inflation rate is going to go back up, I'm curious as to your reasoning. I don't see any general decrease in the money supply in the near future, wages are stagnant, and GDP looks like it's trundling along at standard rates - however, with the Gini coefficient still rising, more and more of that production is finding its way into fewer and fewer hands that don't have a lot of incentive to re-invest it.","Ultra-low rates can spur an unhealthy boon in M&A deals/Corporate takeovers as management (defensively) and raiders (offensively) lever up cheaply to acquire companies. This can be problematic down the line when takeovers/large investments (that were funded with cheap debt) dont pan out and interest rates rise, and with it the cost of servicing that debt.","Banks buy up, because they get free money at 0.1% interest or so. It does not mean that anybody will afford the houses at those prices in the future. The price will not go up to infinity, unless there is a major inflation round, in which case you will have to wait a decade to sell the house at nominal price after the central bankers let you to do so. But then again. it is better to own a house in that case, than not having one.","Most of the bankruptcy is due to taking [or building over a period of time] a loan that one cannot service, if the interest rates rise, then the amount of money to repay the loan increases, when one doesnt pay the revised amount and keeps paying less, the over all debt keeps shooting through the roof ... a lower interest rate means that one can continue to pay the same amount ... and few missed payments do not cause as much as damage as it does when the rates are high.","> the less chance of people defaulting, You know a non-trivial part of the mortgages out there are adjustable right? Did you never study what happened when in '07 after rates went up 4% in a year or two? Rising interest rates are also a factor in rent prices. Meaning rent prices go up and people won't be saving as much. Investment accounts (savings) will be taking a shit because of severe contractionary fiscal policy. > more people buying with flat cash, How much cash do you think the average American has ready to pay for a home? I agree higher interest rates will definitely lead to lower home prices (that's ultimately what happened in '07) but you need to stop thinking about a ceteris paribus model and begin considering the cascade of other variables and what the impact of housing affordability is from their respective changes as well.","This is a very interesting question. I'm going to attempt to answer it. Use debt to leverage investment. Historically, stock markets have returned 10% p.a., so today when interest rates are very low, and depending on which country you live in, you could theoretically borrow money at a very low interest rate and earn 10% p.a., pocketing the difference. This can be done through an ETF, mutual funds and other investment instruments. Make sure you have enough cash flow to cover the interest payments! Similar to the concept of acid ratio for companies, you should have slightly more than enough liquid funds to meet the monthly payments. Naturally, this strategy only works when interest rates are low. After that, you'll have to think of other ideas. However, IMO the Fed seems to be heading towards QE3 so we might be seeing a prolonged period of low interest rates, so borrowing seems like a sensible option now. Since the movements of interest rates are political in nature, monitoring this should be quite simple. It depends on you. Since interest rates are the opportunity cost of spending money, the lower the interest rates, the lower the opportunity costs of using money now and repaying it later. Interest rates are a market mechanism so that people who prefer to spend later can lend to people who prefer to spend now for the price of interest. *Disclaimer: Historically stocks have returned 10% p.a., but that doesn't mean this trend will continue indefinitely as we have seen fixed income outperform stocks in the recent past.","\"On a longer time scale, the plot thickens: It almost looks random. A large drop in real rates in the mid-70s, a massive spike in the early 80s, followed by a slow multi-decade decline. The chaos doesn't seem to be due to interest rates. They steadily climbed and steadily fell: All that's left is inflation: First, real rates should be expected to pay a moderate rate, so nominal rates will usually be higher than inflation. However, interest rates are very stable over long time periods while inflation is not. Economists call this type of phenomenon \"\"sticky pricing\"\", where the price, interest rates in this case, do not change much despite the realities surrounding them. But the story is a little more complicated. In the early 1970s, Nixon had an election to win and tried to lessen the impacts of recession by increasing gov't spending, not raising taxes, and financing through the central bank, causing inflation. The strategy failed, but he was reelected anyways. This set the precedent for the hyperinflation of the 1970s that ended abruptly by Reagan at the beginning of his first term in the early 1980s. Again, interest rates remained sticky, so real rates spiked. Now, the world is not growing, almost stagnating. Demand for equity is somewhat above average, but because corporate income is decelerating, and the developed world's population is aging, demand for investment income is skyrocketing. As demand rises, so does the price, which for an investor is a form of inverse of the interest rate. Future demand is probably best answered by forecasters, and the monetarist over and undertones still dominating the Federal Reserve show that they have finally learned after 100 years that inflation is best kept \"\"low and stable\"\": But what happens if growth in the US suddenly spikes, inflation rises, and the Federal Reserve must sell all of the long term assets it has bet so heavily on quickly while interest rates rise? Inflation may not be intended, but it is not impossible.\"","\"If you owned a bank how would you invest the bank's money? Typically banks are involved in loaning out money to businesses, people, and government at a higher interest rate then what they are paying to depositors. This is the spread and how they make money. If the bank determines that the yields on government bonds is more attractive then loaning the money out to businesses and people then the bank will purchase government bonds. It can also decide the other way. In this manner the mortgage and bond markets are always competing for capital and tend to offer very similar yields. Certain banks have the unique privilege of being able to borrow money from the FED at the Federal Funds rate and use this money to purchase government debt or loan it out to other banks or purchase other debt products. In this manner you see a high correlation between the FED funds rate, mortgage rates, and treasury yields. Other political factors include legislation that encourages mortgage lending (see Community Reinvestment Act) where banks may not have made the loans without said legislation. In short, keep your eye on the FED and ask yourself: \"\"Does the FED want rates to rise?\"\" and \"\"Can the US government afford rising rates?\"\" The answer to these two questions is no. However, the FED may be pressured to \"\"stop the presses\"\" if inflation becomes unwieldy and the FED actually starts to care about food and energy prices. So far this hasn't been the case.\"","That's true, though I feel he means it more in terms of hindsight. Yes, low interest rates will cause the stock market, as a whole, to rise. Though it is not actionable by us prior to the rise or fall in rates because we can never know before it happens. We're then left with only one real way of making money in the market and that's the purchase of undervalued companies with all the aforementioned criteria.","but I can't help but feel that these low rates are somehow a gimmick to trick people into taking out loans Let me help you: it's not a feeling. That's exactly what it is. Since the economy is down, people don't want to jeopardize what they have, and keep the cash in their wallets. But, while keeping the money safe in the pocket, it makes the economy even worse. So in order to make people spend some money, the rates go down so that the cost of money is lower. It also means that the inflation will be on the rise, which is again a reason not to keep money uninvested. So yes, the rates are now very low, and the housing market is a buyers' market, so it does make sense to take out a loan at this time (provided of course that you can actually repay it over time, and don't take loans you can't handle). Of course, you shouldn't be taking loans just because the rates are low. But if you were already planning on purchasing a house - now would be a good time to go on with that.","\"Can it be so that these low-interest rates cause investors to take greater risk to get a decent return? With interest rates being as low as they are, there is little to no risk in banking; especially after Dodd-Frank. \"\"Risk\"\" is just a fancy word for \"\"Will I make money in the near/ long future.\"\" No one knows what the actual risk is (unless you can see into the future.) But there are ways to mitigate it. So, arguably, the best way to make money is the stock market, not in banking. There is a great misallocation of resources which at some point will show itself and cause tremendous losses, even maybe cause a new financial crisis? A financial crisis is backed on a believed-to-be strong investment that goes belly-up. \"\"Tremendous Losses\"\" is a rather grand term with no merit. Banks are not purposely keeping interest rates low to cause a financial crisis. As the central banks have kept interest rates extremely low for a decade, even negative, this affects how much we save and borrow. The biggest point here is to know one thing: bonds. Bonds affect all things from municipalities, construction, to pensions. If interest rates increased currently, the current rate of bonds would drop vastly and actually cause a financial crisis (in the U.S.) due to millions of older persons relying on bonds as sources of income.\"","In general, prices are inversely proportional to rates; however, accurate interest rate prediction would make one worthy of managing a large credit derivative hedge fund. This is not to say that interest rates cannot go up in Canada since the world is currently undergoing a resource bust, and the United States has begun exporting more oil, even trying to recently open the market to Europe, both of which Canada is relatively dependent upon. Also, to say that Canada currently has the most overpriced real estate is an oversight to say the least considering China currently has entire cities that are empty because prices are too high. A ten to twenty percent drop in real estate prices would probably be a full blown financial crisis, and since mortgage rates are currently around 2.5%, a one to two hundred basis point rise could mean a nearly 50% decrease in real estate prices if interest payments are held constant. Canada would either have to start growing its economy at a much higher rate to encourage the central bank to raise rates to such a height, or oil would have to completely collapse suddenly to cause a speculatively possible collapse of CAD to encourage the same. The easiest relationship to manipulate between prices and rates is the perpetuity: where p is the price, i is the interest payment, and r is the interest rate. In this case, an increase of r from 2.5% to 4.5% would cause a 44.5% decrease in p if i is held constant. However, typical Canadian mortgages seem to mature in ten years at a fixed rate, so i cannot be held constant, and the relationship between r and p is less strong at earlier maturities, thus the most likely way for prices to collapse is for a financial collapse as described above.","So after you learn some basics about bubbles you might then see that interest rates kept at their lowest since the days they were backed with gold may allow a bubble to form in housing. You know the bond purchases increased real estate prices right? What is it about the magic $2 Trillion that makes you think the FED hit the spot right on?","Companies with existing borrowings (where borrowings are on variable interest rates) or in the case with fixed interest rates - companies that get new borrowings - would pay less interest on these borrowings, so their cost will go down and profits up, making them more attractive to investors. So, in general lower interest rates will make the share market a more attractive investment (than some alternatives) as investors are willing to take on more risk for potentially higher returns. This will usually result in the stock market rising as it is currently in the US. EDIT: The case for rising interest rates A central bank's purpose when raising interest rates is to slow down an economy that is booming. As interest rates rise consumers will tighten up their spending and companies will thus have less revenue on top of higher costs for maintaining existing borrowing (with variable rates) or new borrowing (with fixed rates). If rates are higher companies may also defer new borrowings to expand their business. This will eventually lead to lower profits and lower valuation for these companies. Another thing that happens is that as banks start increasing interest for saving accounts investors will look for safety where they can get a higher return (than before) without the risk of the stock market. With lowering profits and valuations, and investor's money flowing out of shares and into the money market, so will company share prices drop (although this may lag a bit with the share market still booming due to greed. But once the boom stops watchout for the crash).","\"Yes, I completely agree with you there. Interest rates and prices have an inverse relationship. The point that I am trying to make is that when home prices are not manipulated by some stupid government program, they will \"\"seep to their level\"\".\"","\"Interest rates are at a record low and the government is printing money. You can get a fixed rate loan at a rate equal to inflation in a healthy economy. Unless you know that you are moving in < 5 years, why would you expose yourself to interest rate risk when rates are about as close to zero as they can be? If your thought with respect to mitigating interest rate risk is: \"\"What's the big deal, I'll just refinance!\"\", think again, because in a market where rates are climbing, you may not be able to affordably refinance at the LTV that you'll have in 5-7 years. From 1974-1991, 30 year mortgages never fell below 9%, and were over 12% from 1979 to 1985. Think about what those kinds of rates -- which reduce a new homeowner's buying power by over 40%, would do to your homes value.\"","There are two impacts: First, if the pound is dropping, then buying houses becomes cheaper for foreign investors, so they will tend to buy more houses as investments, which will drive house prices up. Second, in theory you might be able to get a mortgage in a foreign country, let's say in Euro, and you might hope that over the next few years the pound would go up again, and the Euros that you owe the foreign bank become worth less.","\"Mortgage lending, as the article points out, has been historically weak, despite record low rates. Cash buyers (read investors looking for rental inventory) are driving sales and prices. I wouldn't exactly call that a \"\"thriving\"\" RE market.\"","\"The price of real estate reacts to both demand for property and the rate of inflation and rate of income growth. Mortgage rates generally move as treasury rates move. See this paragraph: As we mentioned, intermediate term bonds and long-term mortgages (more properly, Mortgage-Backed Securities, or MBS) compete for the same fixed-income investor dollar. Treasury issues are 100% guaranteed to be repaid, but mortgages are not; therefore mortgages carry more risk of default or early repayment, which could potentially disturb the return on the investment. Therefore, mortgage rates must be priced higher to compensate for that risk. But how much higher are mortgages priced? In a normal market, the average \"\"spread\"\" or markup above the 100% secured Treasury is about 170 basis points, or 1.7%. That markup -- the spread relationship -- widens and contracts with a range of market conditions, investor appetites and supply of available product -- as well as the presence of competing investment opportunities, like corporate bonds or domestic (or foreign) equity markets Source: What Moves Mortgage Rates? And when the stock market crashes, investors tend to run to bonds and treasuries, which causes prices to go up and treasury yields to drop. Theoretically, this would also cause mortgage rates to drop, although most mortgage rates have a base price below which they cannot fall. How easy is it to profit from recent stock market drops and at what frequency? Incredibly difficult. The issue with your strategy is that you cannot predict the bottom of the market (at least us mortals can't). Just take the month of August for example. Stocks fell something like 15%? After the first 5-10% drop, people felt that the bottom was there, so they rushed in, only to have the market fall even more. How will you know when to invest? Even if the market falls by 50%, and there's a huge buying opportunity, and you increase the mortgage on your house, odds are your rates will increase because of the equity you take out. What if the market stays low for a very long time? Will you be able to maintain mortgage payments? Japan's stock bubble popped in the early 90's, and they've had two lost decade's now. Furthermore, there are issues of liquidity. What if you need more capital? Can you just sell a property or can you buy now property to draw equity against? What if the market is moving too fast for you to take advantage of. Don't ignore transaction costs and taxes either. Overall, there are a lot of ways that your idea can go wrong, and not many ways it can go right.\"","At 5%, this means you expect rents to double every 14 years. I bought a condo style apartment 28 years ago, (sold a while back, by the way) and recently saw the going rate for rents has moved up from $525 to $750, after all this time. The rent hasn't increased four fold. If rents appear to be too low compared to the cost of buying the house, people tend to prefer to rent. On the flip side, if the rent can cover a mortgage and then some, there's strong motivation to buy, if not by the renters, then by investors who seek a high return from renting those houses, thereby pushing the price up. The price to rent ratio isn't fixed, it depends in part on interest rates, consumer sentiment, and banks willingness to lend. Similar to stock's P/E, there can be quite a range, but too far in either direction is a sign a correction is due.","In the US market at least, there is long-term evidence that there's no strong correlation between interest rates and house prices. A less detailed Canadian study found that house prices tended to increase when rates increase. One possible reason: interest rates can increase when the economy is doing well (needs less help), which is also the time when people feel more confident about buying. The are many reasons why Toronto condo prices may come down (such as oversupply), or may increase (empty nesters downsizing). But, by itself, a small increase in interest rates appears, based on history, to be unlikely to lead to a substantial drop in prices over a short timescale.",">means less demand for absurdly priced homes which means prices will drop to affordable levels. Rent and home prices are obviously variable but in my area home prices are pretty aligned with rents. Assuming both home prices and rent goes up with inflation and accounting for insurance, taxes, tax advantages, maintenance and a list of other issues the prices are comparable. If you have the capital for a down payment and plan to stay in one house (or aparment) for 5 years you are probably better off buying. To say home prices are absurd you need to be comparing it to what you consider it's true worth but how are you determining that? Edit: Perhaps both rent and home prices will go down as more people live with their parents and room mates but I haven't seen that trend start yet and vacancy rates aren't that high (as far as I know) so I don't see it starting soon. If that trend did start I imagine new construction would be the first ones to go but housing developments are going strong around me.","I haven't read the terms here but the question may not have a good answer. That won't stop me from trying. Call the real rate (interest rate - inflation) and you'll have what is called negative real rates. It's rare for the overnight real rate to be negative. If you check the same sources for historical data you'll find it's usually higher. This is because borrowing money is usually done to gain an economic benefit, ie. make a profit. That is no longer a consideration when borrowing money short term and is IMO a serious problem. This will cause poor investment decisions like you see in housing. Notice I said overnight rate. That is the only rate set by the BoC and the longer rates are set by the market. The central bank has some influence because a longer term is just a series of shorter terms but if you looked up the rate on long Canadian real return bonds, you'd see them with a real rate around 1%. What happens when the central bank raise or lowers rates will depend on the circumstances. The rate in India is so high because they are using it to defend the rupee. If people earn more interest they have a preference to buy that currency rather than others. However these people aren't stupid, they realize it's the real rate that matters. That's why Japan can get away with very low rates and still have demand for the currency - they have, or had, deflation. When that changed, the preference for their currency changed. So if Canada hast forex driven inflation then the BoC will have to raise rates to defend the dollar for the purpose of lowering inflation from imports. Whether it works or not is another story. Note that the Canadian dollar is very dependant on the total dollar value of net oil exports. If Canada has inflation due too an accelerating economy this implies that there are profitable opportunities so businesses and individuals will be more likely to pay a positive real rate of interest. In that scenario the demand for credit money will drive the real rate of return.","It's the physiological impact it has. If you took a loan to buy a home for $500k and you recently had it appraised for $450k you are more inclined to skip out on any home remodeling projects. Also as ShakeyBobWillis pointed out it can be to your financial benefit to just walk away from an underwater mortgage. This creates even more glut in the marketplace.","Interest rates can't remain this low. It's like having extremely low blood pressure. When you raise the rates, banks are incented to loan money and that movement of capital is good for the economy. It forces us to become savers instead of spenders, and our pensions, 401ks, social security are all getting killed by not being able to use debt to get safer stable returns. Interest rates have to come back up.","Great reply. This is one of reasons why I like this subreddit. I thought that fed interest are far more important that you state. Rate is low + economy is booming (lender thinks there is good chance of repayment), banks loan money much more willingly (reserves are covered by cheap fed loans -> greater profit). That should significantly affect money supply.","Without commenting on whether or not it's needed I don't think we are going to see a QE3 and all the political pressure is for some reason to start raising rates. Regardless of how it plays out it's safe to say that the Fed Rate isn't going any lower. You should also watch closely what happens to Fannie and Freddie. If they are dismantled and government backed mortgages become a thing of the past then I think it'll become impossible for a consumer to find a 30 year fixed rate mortgage. Even if they are kept alive, they will be put on a short leash and that will serve to further depress the mortgage market. Long story short, I'd lock your rate in.","Lowered rates = boom for equities, currently held bonds, and assets. Cheaper money means a (disproportionately) good time had by all. This all comes with malinvestment, potential for moral hazard, and savers losing in a big way. Why save for retirement when your risk free return on US Treasuries can barely keep up with inflation? As an aside, it is not really a risk free rate anymore, with $20 trillion in debt and no real hope of paying it off. This is why we see the rate increases and movement towards asset sales by the Fed to get the poop off their books. They are worried about all of the above and need more arrows in their quiver when the next recession hits. They won't have enough, however. They are trying to right a ship that is fully overturned. This is now the longest period of growth (however tepid) since the tech bubble of the 1990's. Are the fundamentals really better than then?","Fundamentally interest rates reflect the time preference people place on money and the things money can buy. If I have a high time preference then I prefer money in my hand versus money promised to me at some date in the future. Thus, I will only loan my money to someone if they offer me an incentive which would be an amount of money to be received in the future that is larger than the amount of money I’m giving the debtor in the present (i.e. the interest rate). Many factors go into my time preference determination. My demand for cash (i.e. my cash balance), the credit rating of the borrower, the length of the loan, and my expectation of the change in currency value are just a few of the factors that affect what interest rate I will loan money. The first loan I make will have a lower interest rate than the last loan, ceteris paribus. This is because my supply of cash diminishes with each loan which makes my remaining cash more valuable and a higher interest rate will be needed to entice me to make additional loans. This is the theory behind why interest rates will rise when QE3 or QEinfinity ever stops. QE is where the Federal Reserve cartel prints new money to purchase bonds from cartel banks. If QE slows or ends the supply of money will stop increasing which will make cash more valuable and higher interest rates will be needed to entice creditors to loan money. Note that increasing the stock of money does not necessarily result in lower interest rates. As stated earlier, the change in value of the currency also affects the interest rate lenders are willing to accept. If the Federal Reserve cartel deposited $1 million everyday into every US citizen’s bank account it wouldn’t take long before lenders demanded very high interest rates as compensation for the decrease in the value of the currency. Does the Federal Reserve cartel affect interest rates? Yes, in two ways. First, as mentioned before, it prints new money that is loaned to the government. It either purchases the bonds directly or purchases the bonds from cartel banks which give them cash to purchase more government bonds. This keeps demand high for government bonds which lowers the yield on government bonds (yields move inverse to the price of the bond). The Federal Reserve cartel also can provide an unlimited amount of funds at the Federal Funds rate to the cartel member banks. Banks can borrow at this rate and then proceed to make loans at a higher rate and pocket the difference. Remember, however, that the Federal Reserve cartel is not the only market participant. Other bond holders, such as foreign governments and pension funds, buy and sell US bonds. At some point they could demand higher rates. The Federal Reserve cartel, which currently holds close to 17% of US public debt, could attempt to keep rates low by printing new money to buy all existing US bonds to prevent the yield on bonds from going up. At that point, however, holding US dollars becomes very dangerous as it is apparent the Federal Reserve cartel is just a money printing machine for the US government. That’s when most people begin to dump dollars en masse.","Too expand on /u/stoneeus, mortgage rates were/are also heavily influenced by the FED QE program, which holds about $4.5T in mortgage-backed securities and treasuries on the FED's balance sheet. The FED has been holding this balance steady since it ended the QE program a couple years ago, purchasing new securities as old ones mature. However, the FED has started signalling that they are going to end these purchases and let their portfolio wind down. Once that happens, you'll start to see mortgage rates rise.","When the inflation rate increases, this tends to push up interest rates because of supply and demand: If the interest rate is less than the inflation rate, then putting your money in the bank means that you are losing value every day that it is there. So there's an incentive to withdraw your money and spend it now. If, say, I'm planning to buy a car, and my savings are declining in real value, then if I buy a car today I can get a better car than if I wait until tomorrow. When interest rates are high compared to inflation, the reverse is true. My savings are increasing in value, so the longer I leave my money in the bank the more it's worth. If I wait until tomorrow to buy a car I can get a better car than I would be able to buy today. Also, people find alternative places to keep their savings. If a savings account will result in me losing value every day my money is there, then maybe I'll put the money in the stock market or buy gold or whatever. So for the banks to continue to get enough money to make loans, they have to increase the interest rates they pay to lure customers back to the bank. There is no reason per se for rising interest rates to consumers to directly cause an increase in the inflation rate. Inflation is caused by the money supply growing faster than the amount of goods and services produced. Interest rates are a cost. If interest rates go up, people will borrow less money and spend it on other things, but that has no direct effect on the total money supply. Except ... you may note I put a bunch of qualifiers in that paragraph. In the United States, the Federal Reserve loans money to banks. It creates this money out of thin air. So when the interest that the Federal Reserve charges to the banks is low, the banks will borrow more from the Feds. As this money is created on the spot, this adds to the money supply, and thus contributes to inflation. So if interest rates to consumers are low, this encourages people to borrow more money from the banks, which encourages the banks to borrow more from the Feds, which increases the money supply, which increases inflation. I don't know much about how it works in other countries, but I think it's similar in most nations.","\"These rates are so low because the cost of money is so low. Specifically, two rates are near zero. The Federal Reserve discount rate, which is \"\"the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank's lending facility--the discount window.\"\" The effective federal funds rate, which is the rate banks pay when they trade balances with each other through the Federal Reserve. Banks want to profit on the loans they make, like mortgage loans. To do so, they try to maximize the difference between the rates they charge on mortgages and other loans (revenue), and the rates they pay savings account holders, the Federal Reserve or other banks to obtain funds (expenses). This means that the rates they offer to pay are as close to these rates as possible. As the charts shows, both rates have been cut significantly since the start of the recession, either through open market operations (the federal funds rate) or directly (the discount rate). The discount rate is set directly by the regional Federal Reserve banks every 14 days. In most cases, the federal funds rate is lower than the discount rate, in order to encourage banks to lend money to each other instead of borrowing it from the Fed. In the past, however, there have been rare instances where the federal funds rate has exceeded the discount rate, and it's been cheaper for banks to borrow money directly from the Fed than from each other.\"","I don't like REITs because they are more closely correlated to the movement of the stock market. They don't really do the job of diversifying a portfolio because of that correlation. When the stock market dropped in 2008, REITs were hammered as well because the housing bubble burst. Bonds went up, and if you rebalanced (sold the bonds to buy more stock) then you came out much further ahead when the stock market recovered. The point of adding bonds for diversification is that they move in the opposite direction of equities; blunting the major drops (and providing buying opportunities). REITs don't fit that bill. REITs are not undergoing a correction like bonds because the price of real estate is a function of housing supply and buyer demand. Rising interest rates only make it a little harder for buyers to buy, so the effect of rising interest rates on real estate prices is muted. The other effects on real estate prices (more wealth in the economy for buyers) pushes in the opposite direction of the rising interest rates.","Some countries, like the United States, allow a mortgage interest tax deduction. This means the interest you pay on a mortgage, which is typically much more than half of the monthly payment at the beginning of a 25 year mortgage, is tax deductible, so you might get 33% or more of the interest back, and that effectively makes the interest rate significantly lower. Therefore you are borrowing the money really cheap. That makes MrChrister's answer even more appropriate.","It is supported by inflation and historical values. if you look at real estate as well as the stock market they have consistently increased over a long period of history even with short term drops. It is also based on inflation and the fact that the price of land and building material has increased over time.","Real estate is not an investment but pure speculation. Rental income may make it look like an investment but if you ask some experienced investor you would be told to stay away from real estate unless it is for your own use. If you believe otherwise then please read on : Another strong reason not to buy real estate right now is the low interest rates. You should be selling real estate when the interest rates are so low not buying it. You buy real estate when the interest rate cycle peaks like you would see in Russia in months to come with 17% central bank rate right now and if it goes up a little more that is when it is time to start looking for a property in Russia. This thread sums it up nicely.","Actually, bond prices are technically high right now, so if and when rates theoretically go up in the future, bond prices will fall. The past 25 years for bonds have been great with falling interest rates, but it's not likely going to continue with rates not able to go any lower.","That tends to be the case with a lot of things I am seeing. Any changes seem to create short term recession with projections of long-term growth. I would normally see that as a problem, because the reaction to the recession could effect the outcome post recession, but the LFPR trending downward is not a good sign for the economy as a whole. Eventually that portion would leave most markets, or welfare would have to increase, on the current trajectory. I think encouraging non-income producing assets for wealth generation is a flawed system, personally. Whether I am right or wrong, I do not know. I think the Government, and subsequently the fed, should encourage income-producing assets for the wealth affect, or in the very least, not something as crucial as housing to the health of the consumer base.","Wait, if everyone isn't buying things and saving money instead, who is left to get loans to buy things at higher rates? Banks don't wag the consumer's tail. Banks will make loads more money on their variable rate loans which will hurt a lot of people. Until wages rise to incentivize buying things, loan interest rates need to be low. Only way to spur the economy is to get more money in the hands of the spenders. We keep giving it to the hoarders.","\"QUICK ANSWER When it comes to fixed income assets, whether rental real estate or government bonds, it's unusual for highly-leveraged assets to yield less than the same asset unleveraged or lowly-leveraged. This is especially so in countries where interest costs are tax deductible. If we exclude capital losses (i.e. the property sells in future at a price less than it was purchased) or net rental income that doesn't keep up with maintenance, regulatory, taxation, inflation and / or other costs, there is one primary scenario where higher leverage results in lower yields compared to lower leverage, even if rental income keeps up with non-funding costs. This occurs when variable rate financing is used and rates substantially increase. EXPLANATION Borrowers and lenders in different countries have different mortgage rate customs. Some are more likely to have long-term fixed rates; some prefer variable rates; and others are a hybrid, i.e. fixed for a few years and then become variable. If variable rates are used for a mortgage and the reference rates increase substantially, as they did in the US during the 1970s, the borrower can easily become \"\"upside-down,\"\" i.e. owe more on the mortgage than the property is then worth, and have mortgage service costs that exceed the net rental income. Some of those costs aren't easy to pass along to renters, even when there are periodic lease renewals or base rent increases referencing inflation rates. Central banks set policies for what would be the lowest short-term rates in a country that has such a bank. Private sector rates are established broadly by supply and demand for credit and can thus diverge markedly from central bank rates. Over time, the higher finance-carrying-cost-to-net-rental-income ratio should abate as (1) rental market prices change to reflect the costs and (2) the landlord can reinvest his net rental income at a higher rate. In the short-term though, this can result in the landlord having to \"\"eat\"\" the costs making his yield on his leveraged fixed income asset less than what he would have without leverage, even if the property was later sold at same price regardless of financing method. ========== Interestingly, and on the flip side, this is one of the quirks in finance where an accounting liability can become, at least in part, an economic asset. If a landlord borrows at a high loan-to-value ratio for a fixed interest rate for the life of the mortgage and rates, variable and fixed, were to increase substantially, the difference between his original rate and the present rates accrues to him. If he's able to sell the property with the loan attached (which is not uncommon for commercial, industrial and sometimes municipal real estate), the buyer will be assuming a liability with a lower carrying cost than his present alternatives and will hence pay a higher price for the property than if it were unleveraged. With long-term rates in many economically advanced countries at historic lows, if a borrower today were to take a long-term fixed rate loan and rates shortly after increased substantially, he may have an instant profit in this scenario even if his property hasn't increased in value.\"","For various reasons, real estate prices exhibit far more memory than stock prices. The primary reason for this is that real estate is much less liquid. Transaction costs for stock trading are on the order of 10 basis points (0.1%), whereas a real estate transaction will typically have total costs (including title, lawyers, brokers, engineers, etc.) of around 5% of the amount of the transaction. A stock transaction can be executed in milliseconds, whereas real estate transactions typically take months. Thus today's behavior is a much better indicator of future price behavior for real estate than for stocks.","Since 1971, mortgage interest rates have never been more than .25% below current rates (3.6%). Even restricting just to the last four years, rates have been as much as .89% higher. Overall, we're much closer to the record low interest rate than any type of high. We're currently at a three-year low. Yes, we should expect interest rates to go up. Eventually. Maybe when that happens, bonds will fall. It hasn't happened yet though. In fact, there remain significant worries that the Fed has been overly aggressive in raising rates (as it was around 2008). The Brexit side effects seem to be leaning towards an easing in monetary policy rather than a tightening.","> The purpose of buying these bonds was not to step in due to the absence of a market. Rather, the purpose was to deliberately bid up the price of these bonds (ahead of the market), causing their price to rise and yields (interest rates) to drop. There are some important things you need to understand about bubbles and how they form. When interest rates are artificially low and down payments aren't required for many loans, do you agree this is a recipe for a bubble?","As of now in 2016, is is safe to assume that mortgage rates would/should not get back to 10%? What would the rates be in future is speculation. It depends on quite a few things, overall economy, demand / supply, liquidity in market etc ... Chances are less that rates would show a dramatic rise in near future. Does this mean that one should always buy a house ONLy when mortgage rates are low? Is it worth the wait IF the rates are high right now? Nope. House purchase decision are not solely based on interest rates. There are quite a few other aspects to consider, the housing industry, your need, etc. Although interest rate do form one of the aspect to consider specially affordability of the EMI. Is refinancing an option on the table, if I made a deal at a bad time when rates are high? This depends on the terms of current mortgage. Most would allow refinance, there may be penal charges breaking the current mortgage. Note refinance does not always mean that you would get a better rate. Many mortgages these days are on variable interest rates, this means that they can go down or go up. How can people afford 10% mortgage? Well if you buy a small cheaper [Less expensive] house you can afford a higher interest rate.","Because the federal government won't use the money to buy a car thus generating profits for the car company. The aim of cheap loans is to drive sales of cars. The difference between the amount of interest paid on the loan, and the amount they could have got by investing it elsewhere, is simply a reduction in the profit. This is true whatever the actual interest rates are.","According to the tax reform framework, changes to the current tax code would eliminate important provisions, such as the state and local tax deduction, while nearly doubling the standard deduction and eliminating personal and dependency exemptions. NAR believes the result would all but nullify the incentive to purchase a home for most, amounting to a de facto tax increase on homeowners, putting home values across the country at risk and ensuring that only the top 5 percent of Americans have the opportunity to benefit from the mortgage interest deduction. This isn't good and serves no benefit. You would THINK someone with a background in real Estate would know this. It appears not. There would also be a rise in rents as taxes go up.","Surely because higher education participation has increased there are a larger number of students with debt which means less demand for absurdly priced homes which means prices will drop to affordable levels. But we can't talk about markets working normally when it comes to home prices which always remain high! Right?","People purchase homes and rent them instead of putting their money into other investment vehicles. This drives up property values and makes it more expensive to buy, which pushes more people into the rental market, making it more expensive to rent. If you lower the returns people make on their rental homes via increased property taxes, some percentage of those individuals would sell their extra homes and put their money into more lucrative investments. That would increase the number of homes on the market, lower those homes' price, and take people out of the rental market as well.","Yes, but only because the US had a huge crash. Other economies have, in the absence of any credible *real* growth strategy, continued pumping housing. I still think student debt will erode incomes further as it's simply pulling forward demand that will drag on incomes later. When nearly everyone has a degree then nearly everyone doesn't get paid much more for having one. By the same principle of supply and demand all the boomer downsizing vs impoverished 30-something lack of upsizing will mean prices will fall.","Asset prices across the board are at historic highs because interest rates have been too low for too long. Owners/sellers of assets win, and this is primarily the baby boomer generation, and the buyer of these assets loose, primarily gen x and millennials. I'm really not looking forward to at best, stagnating asset prices as interest rates are inevitably increased, or at worst, another crash.","well it 2008 was six years ago, over time we would expect some price inflation. however it's only really a good thing for people who already own houses (it increases their net worth on paper) and people who want to sell, and move to a cheaper area. If you aren't selling, it doesn't help you much. If you're a young person trying to get into the housing market, it's obviously bad. A housing market where young people can't afford to get in is unhealthy. If you already own, and you want to move up and buy a bigger house, that's hard if no one is willing to buy your existing house. I don't know why the govt is helping create a new bubble. But, if the underlying issues that caused the last crash are not fixed, well... the bigger the bubble, the bigger the pop.","\"It is and certainly will continue to drive up real estate (and, more generally, housing) prices in large cities. However, \"\"bubble\"\" implies an undeserved/irrational increase. I would argue that it is not; people (especially, but not only, millennials) do want live in large, vibrant cities where high-paying jobs exist. And indeed this rise in housing prices drives employers to raise wages. At first glance, this would suggest a vicious cycle, but I believe it is self-regulating. The real danger is economic-geographic stratification; only the richest, highest-skilled will be able to afford living in cities.\"","What about the debt attached to more recently purchased properties, purchased at the price before the market gets flooded with baby-boomer homes? I'm not an expert in real estate finance, but it sounds like if that downward pressure on prices isn't slight, financial institutions will be taking that risk for anyone who defaults on a mortgage after their property loses a substantial amount of its value. It seems like immigration could play an important role in offsetting this and keeping the prices stable, but that's a politically unpredictable issue to say the least.","You apparently assume that pouring money into a landlord's pocket is a bad thing. Not necessarily. Whether it makes sense to purchase your own home or to live in a rental property varies based on the market prices and rents of properties. In the long term, real estate prices closely follow inflation. However, in some areas it may be possible that real estate prices have increased by more than inflation in the past, say, 10 years. This may mean that some (stupid) people assume that real estate prices continue to appreciate at this rate in the future. The price of real estates when compared to rents may become unrealistically high so that the rental yield becomes low, and the only reasonable way of obtaining money from real estate investments is price appreciation continuing. No, it will not continue forever. Furthermore, an individual real estate is a very poorly diversified investment. And a very risky investment, too: a mold problem can destroy the entire value of your investment, if you invest in only one property. Real estates are commonly said to be less risky than stocks, but this applies only to large real estate portfolios when compared with large stock portfolios. It is easier to build a large stock portfolio with a small amount of money to invest when compared to building a large real estate portfolio. Thus, I would consider this: how much return are you going to get (by not needing to pay rent, but needing to pay some minor maintenance costs) when purchasing your own home? How much does the home cost? What is the annual return on the investment? Is it larger than smaller when compared to investing the same amount of money in the stock market? As I said, an individual house is a more risky investment than a well-diversified stock portfolio. Thus, if a well-diversified stock portfolio yields 8% annually, I would demand 10% return from an individual house before considering to move my money from stocks to a house.","I've read this claim many times in the news: banks are making less profit from the lending business when interest rates are historically low. The issue with most loans is they can be satisfied at any time. When you have falling interest rates it means most of the banks loans are refinanced from nice high rates to current market low interest rates which can significantly reduce the expected return on past loans. The bank gets the money back when it wants it the least because it can only re-lend the money at the current market (lower) interest rates. When interest rates are increasing refinance and early repayment activity reduces significantly. It's important to look at the loan from the point of view of the bank, a bank must first issue out the entire principal amount. On a 60 month loan the lender has not received payments sufficient to satisfy the principal until around 50th or 55th month depending on the interest rate. If the bank receives payment of the outstanding amount on month 30 the expected return on that loan is reduced significantly. Consider a $10,000, 60 month loan at 5% apr. The bank is expected to receive $11,322 in total for interest income of $1,322. If the loan is repaid on month 30, the total interest is about $972. That's a 26% reduction of expected interest income, and the money received can only be re-lent for yet a lower interest rate. Add to this the tricky accounting of holding a loan, which is really a discounted bond, which is an asset, on the books and profitability of lending while interest rates are falling gets really funky. And this doesn't even examine default risk/cost.","\"First piece of advice: fire your agent. A pushy agent is a bad agent. From what you've told us, he's actually given you poor advice regarding mortgage interest rates. Rates are already at historic lows. That and the precarious state of the world economy mean that further rate cuts are more likely in the near term. Second piece of advice: While more information on the real estate market you're in would help, going in at asking price is rarely a good idea. Sale prices from \"\"the last few years\"\" are not relevant to what you should pay, because the last few years include a financial crisis caused in large part by the bursting of a housing bubble. They could be even less relevant depending on your location because of a spike in foreclosures in certain areas of the U.S. There was already a ton of housing inventory before, so an increase due to foreclosures is going to depress prices further. Now that banks are finally practicing the due diligence they should have been all along, your ability to be pre-approved for large mortgage amount puts you in a strong position. Use a tool like Zillow or Redfin to see what properties in that area have sold for over the past six months. You should also be able to see a history of what prices the particular property you're interested in has been offered and/or sold at in the past. Also check and see how long the particular property you're interested in has been on the market. If it's been on the market more than 60-90 days, it's priced too high.\"","\"There's an aspect to real estate that's under-discussed. When you take all factors into account, it just about keeps up with inflation over the long term. Three factors: Now - when you normalize all of this, calculating the \"\"hours worked\"\" needed to pay for the median home, you find a nearly flat line at just over 40 or so hours of pay per month.\"","I just don't see that many suckers falling for cheap or subprime loans, given their student loans. Yellen raising rates will dampen aggressive bank profits somewhat. Smucks will be smucks, but smarter buyers would appraise their debt load and opt for renting or cheaper houses. But then again, people don't even learn from recent history. US market is at recovery/pre-euphoria stage now. Canada is soon to pop a year after rates rise courtesy of Yellen. Given the size of the US gen y cohort, it is likely that many in their 30s in 2020 will buy. And will cry when the next bubble pops, as Boomers start selling assets to fund their retirements.","Yes, in 2 ways: As you mention, the price of a home generally grows with inflation - along with other factors (supply and demand in local markets, etc.). Through financing. If you finance 80% of your purchase today, in 2014 dollars, you will pay back in future dollars. Those future dollars are worth less, because of inflation.","\"The reason is that although the American economy is functioning normally, mortgage rates are stupid-low, and are below a prudent expectation of long-term (30 year) rates of return in the market. I manage endowments, so I say \"\"prudent\"\" in the context of endowment investment, which is the picture of caution and subject to UPMIFA law (the P being prudent). What's more, there are tax benefits. Yes, you pay 15% long-term capital gains tax on investment income. But your mortgage interest is tax deductible at your \"\"tax bracket\"\" rate of 25, 28 or 33% - this being the tax you would pay on your next dollar of earned income. And in the early years of a mortgage, mortgage payments are nearly 100% interest. So even if it's a wash: you gain $10k in the market but pay $10k in mortgage interest -- you pay $1500 tax on the gains, but the interest deduction redudes tax by $2800. So you are still $1300 ahead. TLDR: the government pays us to do this.\"","When inflation is high or is rising generally interest rates will be raised to reduce people spending their money and slow down the rate of inflation. As interest rates rise people will be less willing to borrow money and more willing to keep their money earning a good interest rate in the bank. People will reduce their spending and invest less into alternative assets but instead put more into their bank savings. When inflation is too low and the economy is starting to slow down generally interest rates will be raised to encourage more spending to restart the economy again. As interest rates drop more will take their saving out of their bank accounts as is starts to earn very little in interest rate and more will be willing to borrow as it becomes cheaper to borrow. People will start spending more and investing their money outside of bank savings.","Prices have fallen, but this article didn't go there. Maybe because they haven't fallen nearly as much as the 15% drop in sales. Regardless, I doubt anyone is feeling out anything. This has gone on for too long because of human emotions and low interest rates. These new regulations are purely political and will achieve nothing. Other than being a scapegoat.","Well it's not so simple as just swapping cash and assets. It has its unintentional effects. Such as encouraging debt, increasing inflation over a longer time period, decreased attraction from foreign investors. And yea it drives valuations up, but it's making the assets overpriced. And we all know what eventually happens to overpriced assets.","No, there is no linkage to the value of real estate and inflation. In most of the United States if you bought at the peak of the market in 2006, you still haven't recovered 7+ years later. Also real estate has a strong local component to the price. Pick the wrong location or the wrong type of real estate and the value of your real estate will be dropping while everybody else sees their values rising. Three properties I have owned near Washington DC, have had three different price patterns since the late 80's. Each had a different starting and ending point for the peak price rise. You can get lucky and make a lot, but there is no way to guarantee that prices will rise at all during the period you will own it.","When over the long term housing costs in a area rise faster than wages rise, the demographic of who lives in the area changes. The size and income parameters change. A region that was full of young singles is now populated with couples with adult children, that means that the businesses and amenities have to change. At a national level it isn't sustainable unless other items change. The portion of monthly income that can be safely allocated to housing would have to change. One adjustment could be the the lengthening of home loan periods, thus dropping the monthly payment. This has been seen with car loans, over the last few decades the length of loans has increased. In interesting related event could be the change in deduction of mortgage interest and property tax. If this was to change abruptly, there could be an abrupt change the estimated value of housing, because the calculus of affordability would change.","Reasons for no: In your first sentence you say something interesting: rates low - prices high. Actually those 2 are reversely correlated, imagine if rates would be 5% higher-very few people could buy at current prices so prices would drop. Also you need to keep in mind the rate of inflation that was much higher during some periods in the US history(for example over 10% in the 1980) so you can not make comparisons just based on the nominal interest rate. Putting all your eggs in one basket. If you think real estate is a good investment buy some REITs for 10k, do not spend 20% of your future income for 20 years. Maintenance - people who rent usually underestimate this or do not even count it when making rent vs mortgage comparisons. Reasons for yes: Lifestyle decision - you don't want to be kicked out of your house, you want to remodel... Speculation - I would recommend against this strongly, but housing prices go up and down, if they will go up you can make a lot of money. To answer one of questions directly: 1. My guess is that FED will try to keep rates well bellow 10% (even much lower, since government can not service debts if interest rates go much higher), but nobody can say if they will succeed.","so this is a loan for a house? a loan on a house? a new mortgage? you shouldn't just get a loan for the hell of it any time. interests rates are low because the yields on US treasuries have been pushed closer to zero, and thats pretty much that. the risk is on the bank that approves the loan, and not you. (your ability to repay should be truthful, but your payments are smaller because the interest is so low)","And how is that even an argument? So...the fed needs to raise rates, is what you seem to be saying. I'm not sure that now is the time for that, considering the weak jobs numbers recently, but it's possibly a good idea for them to announce that a hike will come soon instead of actually raising the rate. Either way, to say that having a low interest rate for a decade is a bad thing sort of obscures a harsh reality. It's certainly not something that you *want*, but what's the alternative? Would the US have been better off without the Feds balance sheet expansion? Very few economists would say yes. In fact that exact line of thought likely turned a financial crash into the Great Depression of the 30's.","When prices get to a point where it's *beyond* crazy. There's a good price, a cheap price, a crazy cheap price and there's beyond crazy cheap. Something that happens maybe every 10 years or so. Also be prepared to lose your home if it doesn't work out.","\"House prices do not go up. Land prices in countries with growing economies tend to go up. The price of the house on the land generally depreciates as it wears out. Houses require money; they are called money pits for a reason. You have to replace HVAC periodically, roofs, repairs, rot, foundation problems, leaks, electrical repair; and all of that just reduces the rate at which the house (not the land) loses value. To maintain value (of the house proper), you need to regularly rebuild parts of the house. People expect different things in Kitchens, bathrooms, dining rooms, doors, bedrooms today than they do in the past, and wear on flooring and fixtures accumulate over time. The price of land and is going to be highly determined by the current interest rates. Interest rates are currently near zero; if they go up by even a few percent, we can expect land prices to stop growing and start shrinking, even if the economy continues to grow. So the assumption that land+house prices go up is predicated on the last 35 years of constant rigorous economic growth mixed with interest rate decreases. This is a common illusion, that people assume the recent economic past is somehow the way things are \"\"naturally\"\". But we cannot decrease interest rates further, and rigorous economic growth is far from guaranteed. This is because people price land based on their carrying cost; the cost you have to spend out of your income to have ownership of it. And that is a function of interest rates. Throw in no longer expecting land values to constantly grow and second-order effects that boost land value also go away. Depending on the juristiction, a mortgage is a hugely leveraged investment. It is akin to taking 10,000$, borrowing 40,000$ and buying stock. If the stock goes up, you make almost 5x as much money; if it goes down, you lose 5x as much. And you owe a constant stream of money to service the debt on top of that. If you want to be risk free, work out how you'd deal with the value of your house dropping by 50% together with losing your job, getting a job paying half as much after a period of 6 months unemployment. The new job requires a 1.5 hour commute from your house. Interest rates going up to 12% and your mortgage is up for renewal (in 15 years - they climbed gradually over the time, say), optionally. That is a medium-bad situation (not a great depression scale problem), but is a realistic \"\"bad luck\"\" event that could happen to you. Not likely, but possible. Can you weather it? If so, the risk is within your bounds. Note that going bankrupt may be a reasonable plan to such a bit of bad luck. However, note that had you not purchased the house, you wouldn't be bankrupt in that situation. It is reasonably likely that house prices will, after you spend ~3% of the construction cost of the house per year, pay the mortgage on the land+house, grow at a rate sufficient to offset the cost of renting and generate an economically reasonable level of profit. It is not a risk-free investment. If someone tries to sell you a risk-free investment, they are almost certainly wrong.\"","Considering that we are in a low-interest rate period (the lowest in history), it's smart to loan money from the bank to reinvest in property or other investments as far as you get a better yield (ROI) than the interest.","\"Keep in mind that the Federal Reserve Chairman needs to be very careful with his use of words. Here's what he said: It is arguable that interest rates are too high, that they are being constrained by the fact that interest rates can't go below zero. We have an economy where demand falls far short of the capacity of the economy to produce. We have an economy where the amount of investment in durable goods spending is far less than the capacity of the economy to produce. That suggests that interest rates in some sense should be lower rather than higher. We can't make interest rates lower, of course. (They) only can go down to zero. And again I would argue that a healthy economy with good returns is the best way to get returns to savers. So what does that mean? When he says that \"\"we can't make interest rates lower\"\", that doesn't mean that it isn't possible. He's saying that our demand for goods is lower than our ability to produce them. Negative interest would actually make that problem worse -- if I know that things will cost less in a month, I'm not going to buy anything. The Fed is incentivizing spending by lowering the cost of capital to zero. By continuing this policy, they are eventually going to bring on inflation, which will reduce the value of the currency -- which gives people and companies that are sitting on money an dis-incentive to continue hoarding it.\"","The real idea is to get inflation even higher than it currently is to try and get more bullets in the future for the next recession. We'd like nominal rates to be much higher than before so that we can have even larger real negative rates when needed. This takes time and finesse and I'd say Yellen is doing a fine job. Every mark she is reaching for in the dual mandate is exactly where it needs to be for a perfect storm. Almost all people borrow money to get houses. That doesn't make them likely to default. What made defaults skyrocket in '08 was predatory lending and NINJA loans, as well as a group of men who actively did everything they could to make the system fail because of credit default swaps whose payout was significantly higher than the loss.","Mortgage or other interest rates are determined by the banks on cost of funds, risk and operating cost. The Fed raises money from the markets by issuing Tresury Bonds at a specified rate. This rate at which it raises money varies depening on the economy. Thus there are 2 rates: the rate at which banks can borrow money from the Fed, which is higher than the rate that the Fed would give banks for excess money deposited with them. So if the cost of borrowing is less, banks can borrow this money from the Fed and loan it to individuals at a slightly higher rate that would cover their costs plus a small profit. The risk associated with a mortgage is less, and hence these would be cheaper, then say a personal loan. If the cost of borrowing goes up, the mortgage rate will go up. If the cost of borrowing money goes down, the cost would come down. Banks may not always borrow money to lend. If they have existing money, they can either park it with the Fed for a lower interest rate, or loan it to individuals for a rate higher than what they would have received from the Fed.","Similarly to buying property on your own, REITs cannot get to good returns without leveraging. If you buy an investment property 100% cash only - chances are that 10% ROI is a very very optimistic scenario. If you use leveraging (i.e.: take out a mortgage) - you're susceptible to interest rate changes. REITs invest in properties all around all the time. They invest in mortgages themselves as well (In the US, that's the only security REITs can hold without being disqualified). You can't expect all that to be cash-only, there have to be loans and financing involved. When rates go up - financing costs go up. That brings net income down. Simple math. In the US, there's an additional benefit to investing in REIT vs directly holding real estate: taxes. REITs pay dividends, which have preferential (if qualified) taxation. You'll pay capital gains taxes on the dividends if you hold the fund long enough. If you own a rental property directly, your income after all the expenses is taxed at ordinary rates, which would usually be higher. Also, as you mentioned, you can use them as margin, and they're much much more liquid than holding real estate directly. Not to mention you don't need to deal with tenants or periods where you don't have any, or if local real-estate market tanks (while REITs are usually quite diversified in kinds of real estate they hold and areas). On the other hand, if you own real estate, you can leverage it at lower rates than margin (with HELOCs etc), and it provides some safety net in case of a stock market crash (which REITs are somewhat susceptible to). You can also live in your property, if needed, which is something that's hard to do with REITs....","\"Banks make less profit when \"\"long\"\" rates are low compared to \"\"short\"\" rates. Banks lend for long term purposes like five year business loans or 30 year mortgages. They get their funds from (mostly) \"\"short term\"\" deposits, which can be emptied in days. Banks make money on the difference between 5 and 30 year rates, and short term rates. It is the difference, and not the absolute level of rates, that determines their profitability. A bank that pays 1% on CDs, and lends at 3% will make money. During the 1970s, short rates kept rising,and banks were stuck with 30 year loans at 7% from the early part of the decade, when short rates rose to double digits around 1980, and they lost money.\"","Sure! Anything that affects the balance of supply and demand could cause rent prices to fall. I'll betcha rent prices in Wilmington, Ohio collapsed when the biggest employer, DHL, shut down. An economic depression of any sort would cause people to substitute expensive rentals for cheaper ones, putting downward pressure on rents. It would also cause people to double up or move in with family, decreasing demand for rentals. Anything that makes buying a house cheaper will actually make rents lower, too, because more people will buy houses when houses get cheaper... those people are moving out of rentals, thus decreasing demand for rentals.","\"Bonds are priced \"\"very high\"\" because their price is compared to their yields. With the current interest rates, which are very low, the bond yields will be low. However, bond issuers still need the money, so there still will be high par value, and investors will not sell bonds at a loss unless there's a better investment (=bonds with better yields). Once the rates start going up, you'll see bonds with current rates dropping in value significantly. Once alternatives appear, people holding them will start dumping them to move the money somewhere more profitable. Similarly the stocks - since there's no other investment alternatives (yields on the bonds are low, interests are low), people invest more in the stocks. Once the rates go up, the investors will start rebalancing portfolios and cashing out.\"","\"In the US, the government effectively sets a price floor for rents with a concept called \"\"prevailing rent\"\" for government subsidy. Even the crappiest, minimally compliant hovel is ultimately worth whatever the government will issue housing vouchers for. Rent can and does fluctuate for the higher end of the market. Basically in most places the available, cheap credit has a negative impact on rent prices, and tighter, costlier credit increases demand and rents. Local economic events have an impact too. If the company closes in a company town, people leave.\"","Follow your own logic. Millennials have less capital, so they have to borrow more for any given house. Sure you can expect some amount of reduction in prices, but it will not make up for the lost cash of losing the deduction. If you buy a $200k house ((100% financing @4% just to keep it easy). Say the price drops 10% to $180. That saves you $800/yr. Say 25% tax rate. @ 200k your deduction is $2000. I don't think prices will drop 10%,but you need 25% for this to be better for millennials.","The issue is that housing price increases can't sustain themselves indefinitely, in comparison to the rental market. Increases drive people back to the rental market, which brings the rental market up. Also, just as a AirBnB would drive property prices to go up, it also allows people who would otherwise not be able to buy a house to make the house purchase. Example - Loftium is a mortgage lender that will give you a cheaper loan if you put your house on AirBnB. That enables people to purchase a home when they otherwise wouldn't be able to. So over time (many years), the market should work itself out. In the short term, AirBnB can definitely cause market fluctuations. For example, it might enable people to continue to own their homes during a depression, which would cause a supply shortage. The only factor that affects ownership prices differently than rental prices in the long term would be regulation. Here's a [good article](http://www.sightline.org/2017/08/14/why-seattle-builds-apartments-but-vancouver-bc-builds-condos/) about that aspect specifically.","You can thank hedge funds for that. Was looking to buy a rental and the home sold for more than asking. This happened 3 times. Realtor told me that they are buying all the single family homes sight unseen. As soon as a home under 250k goes up for sale, it's sold in my city. Since 2011 the average home buyer has had to out offer them significantly in order to get them.","In India, where I live, you can: In addition, housing loans are given priority status as well - bank capital requirements on housing loans is lower than for, say, a corporate loan or a loan against other kinds of collateral. That makes housing loans cheaper as well - you get a home loan at around 10% in India versus 15% against most other assets, and since you can deduct it against tax, the effective interest rate is even lower. Housing in India is unaffordable too, if you're wondering. In a suburb 40 Km away from Delhi, a 2000 sq. foot apartment, about 1500 sq. ft. of carpet area, with no appliances costs about USD 250,000.","Real estate is always an interesting dynamic. In most cases prices have always gone up. Price is mainly a function of demand. Sometimes demand is artificially inflated over a short term period and can come down quickly due to corrections. During recessions the housing market will usually slow down. There are some rare instances where certain areas never recover (see Subprime Mortgage Crisis Savings & Loans Crisis where scores of unwanted properties exist). Things to consider:","A possibility could be real estate brokerage firms such as Realogy or Prudential. Although a brokerage commission is linked to the sale prices it is more directly impacted by sales volume. If volume is maintained or goes up a real estate brokerage firm can actually profit rather handsomely in an up market or a down market. If sales volume does go up another option would be other service markets for real estate such as real estate information and marketing websites and sources i.e. http://www.trulia.com. Furthermore one can go and make a broad generalization such as since real estate no longer requires the same quantity of construction material other industries sensitive to the price of those commodities should technically have a lower cost of doing business. But be careful in the US much of the wealth an average american has is in their home. In this case this means that the economy as a whole takes a dive due to consumer uncertainty. In which case safe havens could benefit, may be things like Proctor & Gamble, gold, or treasuries. Side Note: You can always short builders or someone who loses if the housing market declines, this will make your investment higher as a result of the security going lower.","Those folks should be introduced to some real estate folks I know, they'd get along famously, being as how they still think it's 2007. The amount of housing out there requires that a large market of consumers is available to purchase them. If housing prices rose infinitely ahead of salaries, the market for potential buyers would continue to shrink until supply would outstrip demand. And then we have the wonderful housing bubble like the one that we just went through (or in some places like China, have the potential to go through). Short version: It violates the relationship between supply and demand.","Mortgage interest is a different story. That's a consumer financing consumption. A business is financing a profit making enterprise. Not sure what the implications would be once this settles down -- probably less long term debt and a greater dependency on equity financing."],"string":"[\n \"The article John cites says no correlation, but this chart from the article says otherwise; One sees the rate drop from 14% to 4% and housing rise from an index of 50 to near 190. (reaching over to my TI BA-35 calculator) I see that at 14%, $1000/mo will buy $84,400 worth of mortgage, but at 4%, it will buy $209,500. 2-1/2 times the borrowing power for the same payment. But wait, my friends at West Egg tell me that inflation means I can't compare $1000 in 1980 to the same $1000 in 2010. The $1,000 inflates to $2611 (i.e. an income rising only with inflation, no more) and that can fund a mortgage for $546,900. This is 6.5 times the original borrowing power, yet the housing index 'only' rose 3.8X. See that crazy chart? Housing actually got cheaper from 1980 to the peak. Statistics can say whatever you wish. Interest rate change drove all the change in housing prices, but not quite as much as it should have. To answer your question - I expect that when rates rise (and they will) housing prices will take a hit. In today's dollars, a current $1000 borrows (at 4%) nearly $210K, but at 6%, just $167K. If rates took a jump from these record lows, that's the nature of the risk you'd take.\",\n \"All else constant, yes. It's one more reason rates aren't being raised quickly. The housing market is very delicate. Before the crash, a lot of homes in my area were 25% cheaper than after the rates dropped to historic lows. My area wasn't heavily affected by the recession, but homeowners still greatly benefitted from the increase in housing values which led to a lot more investment, though the houses aren't actually worth anything more. To raise rates dramatically now would be to trap a lot of homebuyers in homes that aren't worth what they owe.\",\n \"Sooner or later though, don't you think Janet Yellen will decide to raise the rates? I think its becoming a bit too ridiculous at this stage. If we keep the rates as low as they currently are, don't you think we're putting ourselves at risk for another recession, assuming that a large proportion of home buyers today are buying with mortgages (not paying full amounts), and using borrowed money? After all, folks who use borrowed money to put down a mortgage are very likely to default.\",\n \"\\\"There are five main drivers to real estate returns: Income (cash flow from rental payments); Depreciation (as an expense that can be used to reduce taxes); Equity (the gradual paydown of the mortgage the increases underlying equity in the property); Appreciation (any increase in the overall value of the property); Leverage (the impact of debt financing on the deal, increasing the effective \\\"\\\"cash-on-cash\\\"\\\" return). (Asset Rover has a detailed walk-through of the components, and a useful comparison to stocks) So interest rates are certainly a component (as they increase the expenses), but they are just one factor. Depending on a particular market's conditions, appreciation or rent increases could offset or (exceed) any increase in the interest expense. My own experience is mostly with non-listed REITs (including Reg A+ investments like the ones from Fundrise) and commercial syndicates, and for right now in both cases there's plenty of capital chasing yield to go around (and in fact competition among new funding sources like Reg D and Reg A+ platforms seems to be driving down borrowing rates as platforms compete both for borrowers and for investors). Personally I pay more attention to where each local market (and the broader national market) is along the ~18-year real estate cycle (spoiler: the last trough was 2008...). Dividend Capital puts out a quarterly report that's super useful.\\\"\",\n \"Interest rates do generally affect house prices but other factors do too, especially the unemployment rate. However, everything else being equal, when interest rates drop, it makes the borrowing of money cheaper so tends to stimulate the economy and the housing market, increasing the demand for houses and generally causes house prices to increase (especially if the supply of new housing doesn't increase with the demand). When interest rates go up the opposite happens. Usually interest rates go down in order to stimulate a slowing economy and interest rates go up to slow down an overheated economy. Regarding your situation you are able to get a 30 year fixed rate at today’s interest rates (in Australia the longest fixed rate you can get is for 10 years and the rate is usually 1 or 2 percent higher than the standard variable rate. Most people here go for the variable rate or a fixed rate of between 1 to 3 years). This means that even if rates do go up in the future you won't be paying a higher rate, which is a positive for you. You are buying the house to live in so as long as you can keep making the repayments you should not be too worried if the price of the house drops sometime in the future, because if your house has dropped and you want to sell to buy another house to live in, then that house would have also dropped relative to yours (give or take). So your main worry is that rates will go up causing both house prices to fall and unemployment to rise, and you yourself losing your job and eventually your house. It is a risk, but what you need to consider is if you can manage that risk. Firstly, I believe rates won't be going up in the US for a number of years, and if and when they do start going up they will most probably start going up slowly. So you have some time on your side. Secondly, what can you do between now and when interest rates do start going up in a few years: Try to put more saving away to increase your safety net from 6 months to 12 months or more, or make extra repayments into your home loan so that you are ahead if things do go wrong. If you are worried that you could lose your job, what can you do to reduce your chances of losing your job or increasing your chances of getting a new job quickly if you do lose it? Improve your current skills, get new skills, become an invaluable employee, or look at possible opportunities to start your own business. Do your own research on the types of houses you are looking at buying, the more houses you look at the better prepared you will be when the right house at the right price comes along, and the less chance that you will be rushed into buying what might be an overpriced house. So to sum it up; do as much research as you can, have an understanding of what your risks are and how you are going to manage those risks.\",\n \"\\\"... interest rates will go up. When that happens prices will be kept down. (if you can only afford $1,500/month payments and the interest portion of the mortgage goes up then you have less to spend on the house) There are also millions of houses that are foreclosed or in some process of foreclosure that are being kept off the market. That \\\"\\\"shadow inventory\\\"\\\" being kept off the market is keeping supply artificially low. At some point the shadow inventory will be brought to market and as supply increases it will hold prices down. ... [housing prices could drop another 20% or more](http://online.wsj.com/article/SB10001424052702304299304577348083297932466.html)... and it could take a decde or more before the housing market works through the effects of the great recession. btw, I just refinanced again. It was easier this time than any of the other times I've refinanced. This time I got 2.875% for 10 years... I'll save over 20 grand of interest over the next 10 years. The banks are loaning money out, and at incredibly low interest rates.\\\"\",\n \"Asset prices are inversely related to interest rates. If you're valuing a business or a bond, if you use a lower interest rate you get a higher valuation. Historic equity returns benefit from a falling interest rate environment which won't be repeated as interest rates can only go so low. edit: typo\",\n \"There is a significant tie between housing prices and mortgage rates. As such, don't assume low mortgage rates mean you will be financially better off if you buy now, since housing prices are inversely correlated with mortgage rates. This isn't a huge correlation - it's R-squared is a bit under 20%, at a 1.5-2 year lag - but there is a significant connection there. Particularly in that 10%+ era (see chart at end of post for details) in 1979-1982, there was a dramatic drop in housing price growth that corresponded with high interest rates. There is a second major factor here, though, one that is likely much more important: why the interest rates are at 10%. Interest rates are largely set to follow the Federal Funds rate (the rate at which the Federal Reserve loans to banks). That rate is set higher for essentially one purpose: to combat inflation. Higher interest rates means less borrowing, slower economic growth, and most importantly, a slower increase in the money supply - all of which come together to prevent inflation. Those 10% (and higher!) rates you heard about? Those were in the 70's and early 80's. Anyone remember the Jimmy Carter years? Inflation in the period from 1979 to 1981 averaged over 10%. Inflation in the 70s from 1973 to 1982 averaged nearly 9% annually. That meant your dollar this year was worth only $0.90 next year - which means inevitably a higher cost of borrowing. In addition to simply keeping pace with inflation, the Fed also uses the rate as a carrot/stick to control US inflation. They weren't as good at that in the 70s - they misread economic indicators in the late 1970s significantly, lowering rates dramatically in 1975-1977 (from ~12% to ~5%). This led to the dramatic double-digit inflation of the 1979-1981 period, requiring them to raise rates to astronomic levels - nearly 20% at one point. Yeah, I hope nobody bought a house on a fixed-rate mortgage from 1979-1981. The Fed has gotten a lot more careful over the years - Alan Greenspan largely was responsible for the shift in policy which seems to have been quite effective from the mid 1980s to the present (though he's long gone from his spot on the Fed board). Despite significant economic changes in both directions, inflation has been kept largely under control since then, and since 1991 have been keeping pretty steady around 6% or less. The current rate (around 0%) is unlikely to stay around forever - that would lead to massive inflation, eventually - but it's reasonable to say that prolonged periods over 10% are unlikely in the medium term. Further, if inflation did spike (and with it, your interest rates), salaries tend to spike also. Not quite as fast as inflation - in fact, that's a major reason a small positive inflation around 2-3% is important, to allow for wages to grow more slowly for poorer performers - but still, at 10% inflation the average wage will climb at a fairly similar pace. Thus, you'd be able to buy more house - or, perhaps a better idea, save more money for a house that you can then buy a few years down the road when rates drop. Ultimately, the advice here is to not worry too much about interest rates. Buy a house when you're ready, and buy the house you're ready for. Interest rates may rise, but if so it's likely due to an increase in inflation and thus wage growth; and it would take a major shift in the economy for rates to rise to the 10-11% level. If that did happen, housing prices (or at least growth in prices) would likely drop significantly. Some further references:\",\n \"Basically, they all do. The relationship is much more dynamic with stocks but corporate financing costs increase, return requirements increase (risk free rate goes up). Same with real estate. Commodity demand is correlated with economic activity, which is correlated with interest rates, although not perfectly. The most important factor is, a higher risk free rate increases the discount rate, which reduces asset values\",\n \"If money is more expensive (costs more to borrow) then fewer people will be able to qualify to make the payments for a particular size of mortgage. This reduces the number of potential buyers for property at that price. As sellers still want to sell, they will move their prices down to where more people can afford to buy. So rising interest rates create downward pressure on housing prices. But Toronto is the biggest city in Canada. I'd expect part of the high prices there is the location: lots of people want to be close to lots of activities, action, and opportunity. Unless something catastrophic happens, I don't see Toronto losing that advantage. If anything, it's going to get a tad warmer up there in the coming decades.\",\n \"\\\"True. My thinking is, the higher the rates are, the less people you'll have borrowing, the less chance of people defaulting, more people buying with flat cash, and of course cheaper housing prices. Whereas with low interest rates, you'll have more people borrowing (thus, increasing the likelihood of more people defaulting), more people \\\"\\\"buying\\\"\\\" homes (technically not buying, technically just \\\"\\\"borrowing\\\"\\\" money and putting down mortgages), and more expensive housing prices. Quite frankly, I think the way that the western world can solve its issue with unaffordable housing is by raising the interest rates to at least the double digits, like they once were (when housing was still cheap).\\\"\",\n \"\\\"Yes, it's unreasonable to think the prices will drop 10-20% in that time frame. Housing prices are not an equation that can can be solved to \\\"\\\"home prices are X% overvalued.\\\"\\\" You have 3 answers so far, Quanty's \\\"\\\"prices are inversely proportional to rates,\\\"\\\" Rob's \\\"\\\"there's no strong correlation between interest rates and house prices,\\\"\\\" and MB's, \\\"\\\"rising interest rates create downward pressure on housing prices.\\\"\\\" Any research into price history had better take every other variable into account. Articles that look at rates vs price don't always address a key item, income. Say we agree that the data show your city to be 10% too high. But if sellers like their high price and have some 'dig my heels in' power, prices won't drop. The seller simply stays put, and the supply/demand curves result not in a lower price, but in less supply. And the effect is to change the demographic of that area, i.e. attracting higher income earners. Rob linked to an article with a nice set of charts. One chart showing the US30 yr fixed rate and 'Real House Prices'. What results is a chart that can refute the relationship between rates and prices. But that would ignore an historical point that's too important to forget. The tumble that started in Jan '06 had nothing to do with the 30 year rate. It was the result of a series of insane financial products including 'interest only option ARMs' which permitted buyers to get approved for a purchase based on a payment that wasn't fixed, and would change to a fully amortizing mortgage at a higher rate that was unaffordable. A product that was a financial time bomb. Canada Banks offered no such product, and when the US market got pneumonia, Canada experienced a mild cold. With respect to any answers that offer US centric data to prove any hypothesis, I don't feel such comparisons are appropriate. Correlations, and the data used to prove them are an interesting thing. I can suggest that you take the US 30 year rate, along with our median income, or rather 25% of monthly median income. Calculate the mortgage that results. This translates nicely to the home a median family can afford. And I claim that long term this is the equilibrium price of that median home. But supply/demand has another factor, 'stickyness' or the more technical term, 'inelasticity of demand.' This means that for example, a 10% increase in the price of cigarettes does not cause a 10% drop in consumption. Each and every good has its own elasticity, and in the case of housing, a rise in cost would certainly impact the marginal buyers, but others will simply adjust their budgets. Not all buyers were planning to hit the bank's limit on what they could afford, so the rise doesn't change their mind, just their budget. Last - I know that Canada does not have a 30 year mortgage, most common is a 5 year rate with 30 year amortization. (correction/clarification, anyone?) The effect of this is less volatility in the market, since I believe your rates are not poised for the 2.5% to 4% jump implied by another response. Small increases can be absorbed. In a beautiful coincidence, the Federal Reserve Board sent me a link to The Interest Rate Elasticity of Mortgage Demand: Evidence From Bunching at the Conforming Loan Limit. It's a bit long but a worthwhile look at how the correlation isn't as instant as some might think.\\\"\",\n \"I know that assets like bonds have prices that have an inverse relationship with interest rates, but what other assets do as well? I'm a bit new to finance and all that so I'm trying to learn. Would real estate prices be high as well? If so, why?\",\n \"1) Low-Interest Rate: Isn't the inflation rate currently (and over the last couple of years) also really low, around 2%? If you're saying the inflation rate is going to go back up, I'm curious as to your reasoning. I don't see any general decrease in the money supply in the near future, wages are stagnant, and GDP looks like it's trundling along at standard rates - however, with the Gini coefficient still rising, more and more of that production is finding its way into fewer and fewer hands that don't have a lot of incentive to re-invest it.\",\n \"Ultra-low rates can spur an unhealthy boon in M&A deals/Corporate takeovers as management (defensively) and raiders (offensively) lever up cheaply to acquire companies. This can be problematic down the line when takeovers/large investments (that were funded with cheap debt) dont pan out and interest rates rise, and with it the cost of servicing that debt.\",\n \"Banks buy up, because they get free money at 0.1% interest or so. It does not mean that anybody will afford the houses at those prices in the future. The price will not go up to infinity, unless there is a major inflation round, in which case you will have to wait a decade to sell the house at nominal price after the central bankers let you to do so. But then again. it is better to own a house in that case, than not having one.\",\n \"Most of the bankruptcy is due to taking [or building over a period of time] a loan that one cannot service, if the interest rates rise, then the amount of money to repay the loan increases, when one doesnt pay the revised amount and keeps paying less, the over all debt keeps shooting through the roof ... a lower interest rate means that one can continue to pay the same amount ... and few missed payments do not cause as much as damage as it does when the rates are high.\",\n \"> the less chance of people defaulting, You know a non-trivial part of the mortgages out there are adjustable right? Did you never study what happened when in '07 after rates went up 4% in a year or two? Rising interest rates are also a factor in rent prices. Meaning rent prices go up and people won't be saving as much. Investment accounts (savings) will be taking a shit because of severe contractionary fiscal policy. > more people buying with flat cash, How much cash do you think the average American has ready to pay for a home? I agree higher interest rates will definitely lead to lower home prices (that's ultimately what happened in '07) but you need to stop thinking about a ceteris paribus model and begin considering the cascade of other variables and what the impact of housing affordability is from their respective changes as well.\",\n \"This is a very interesting question. I'm going to attempt to answer it. Use debt to leverage investment. Historically, stock markets have returned 10% p.a., so today when interest rates are very low, and depending on which country you live in, you could theoretically borrow money at a very low interest rate and earn 10% p.a., pocketing the difference. This can be done through an ETF, mutual funds and other investment instruments. Make sure you have enough cash flow to cover the interest payments! Similar to the concept of acid ratio for companies, you should have slightly more than enough liquid funds to meet the monthly payments. Naturally, this strategy only works when interest rates are low. After that, you'll have to think of other ideas. However, IMO the Fed seems to be heading towards QE3 so we might be seeing a prolonged period of low interest rates, so borrowing seems like a sensible option now. Since the movements of interest rates are political in nature, monitoring this should be quite simple. It depends on you. Since interest rates are the opportunity cost of spending money, the lower the interest rates, the lower the opportunity costs of using money now and repaying it later. Interest rates are a market mechanism so that people who prefer to spend later can lend to people who prefer to spend now for the price of interest. *Disclaimer: Historically stocks have returned 10% p.a., but that doesn't mean this trend will continue indefinitely as we have seen fixed income outperform stocks in the recent past.\",\n \"\\\"On a longer time scale, the plot thickens: It almost looks random. A large drop in real rates in the mid-70s, a massive spike in the early 80s, followed by a slow multi-decade decline. The chaos doesn't seem to be due to interest rates. They steadily climbed and steadily fell: All that's left is inflation: First, real rates should be expected to pay a moderate rate, so nominal rates will usually be higher than inflation. However, interest rates are very stable over long time periods while inflation is not. Economists call this type of phenomenon \\\"\\\"sticky pricing\\\"\\\", where the price, interest rates in this case, do not change much despite the realities surrounding them. But the story is a little more complicated. In the early 1970s, Nixon had an election to win and tried to lessen the impacts of recession by increasing gov't spending, not raising taxes, and financing through the central bank, causing inflation. The strategy failed, but he was reelected anyways. This set the precedent for the hyperinflation of the 1970s that ended abruptly by Reagan at the beginning of his first term in the early 1980s. Again, interest rates remained sticky, so real rates spiked. Now, the world is not growing, almost stagnating. Demand for equity is somewhat above average, but because corporate income is decelerating, and the developed world's population is aging, demand for investment income is skyrocketing. As demand rises, so does the price, which for an investor is a form of inverse of the interest rate. Future demand is probably best answered by forecasters, and the monetarist over and undertones still dominating the Federal Reserve show that they have finally learned after 100 years that inflation is best kept \\\"\\\"low and stable\\\"\\\": But what happens if growth in the US suddenly spikes, inflation rises, and the Federal Reserve must sell all of the long term assets it has bet so heavily on quickly while interest rates rise? Inflation may not be intended, but it is not impossible.\\\"\",\n \"\\\"If you owned a bank how would you invest the bank's money? Typically banks are involved in loaning out money to businesses, people, and government at a higher interest rate then what they are paying to depositors. This is the spread and how they make money. If the bank determines that the yields on government bonds is more attractive then loaning the money out to businesses and people then the bank will purchase government bonds. It can also decide the other way. In this manner the mortgage and bond markets are always competing for capital and tend to offer very similar yields. Certain banks have the unique privilege of being able to borrow money from the FED at the Federal Funds rate and use this money to purchase government debt or loan it out to other banks or purchase other debt products. In this manner you see a high correlation between the FED funds rate, mortgage rates, and treasury yields. Other political factors include legislation that encourages mortgage lending (see Community Reinvestment Act) where banks may not have made the loans without said legislation. In short, keep your eye on the FED and ask yourself: \\\"\\\"Does the FED want rates to rise?\\\"\\\" and \\\"\\\"Can the US government afford rising rates?\\\"\\\" The answer to these two questions is no. However, the FED may be pressured to \\\"\\\"stop the presses\\\"\\\" if inflation becomes unwieldy and the FED actually starts to care about food and energy prices. So far this hasn't been the case.\\\"\",\n \"That's true, though I feel he means it more in terms of hindsight. Yes, low interest rates will cause the stock market, as a whole, to rise. Though it is not actionable by us prior to the rise or fall in rates because we can never know before it happens. We're then left with only one real way of making money in the market and that's the purchase of undervalued companies with all the aforementioned criteria.\",\n \"but I can't help but feel that these low rates are somehow a gimmick to trick people into taking out loans Let me help you: it's not a feeling. That's exactly what it is. Since the economy is down, people don't want to jeopardize what they have, and keep the cash in their wallets. But, while keeping the money safe in the pocket, it makes the economy even worse. So in order to make people spend some money, the rates go down so that the cost of money is lower. It also means that the inflation will be on the rise, which is again a reason not to keep money uninvested. So yes, the rates are now very low, and the housing market is a buyers' market, so it does make sense to take out a loan at this time (provided of course that you can actually repay it over time, and don't take loans you can't handle). Of course, you shouldn't be taking loans just because the rates are low. But if you were already planning on purchasing a house - now would be a good time to go on with that.\",\n \"\\\"Can it be so that these low-interest rates cause investors to take greater risk to get a decent return? With interest rates being as low as they are, there is little to no risk in banking; especially after Dodd-Frank. \\\"\\\"Risk\\\"\\\" is just a fancy word for \\\"\\\"Will I make money in the near/ long future.\\\"\\\" No one knows what the actual risk is (unless you can see into the future.) But there are ways to mitigate it. So, arguably, the best way to make money is the stock market, not in banking. There is a great misallocation of resources which at some point will show itself and cause tremendous losses, even maybe cause a new financial crisis? A financial crisis is backed on a believed-to-be strong investment that goes belly-up. \\\"\\\"Tremendous Losses\\\"\\\" is a rather grand term with no merit. Banks are not purposely keeping interest rates low to cause a financial crisis. As the central banks have kept interest rates extremely low for a decade, even negative, this affects how much we save and borrow. The biggest point here is to know one thing: bonds. Bonds affect all things from municipalities, construction, to pensions. If interest rates increased currently, the current rate of bonds would drop vastly and actually cause a financial crisis (in the U.S.) due to millions of older persons relying on bonds as sources of income.\\\"\",\n \"In general, prices are inversely proportional to rates; however, accurate interest rate prediction would make one worthy of managing a large credit derivative hedge fund. This is not to say that interest rates cannot go up in Canada since the world is currently undergoing a resource bust, and the United States has begun exporting more oil, even trying to recently open the market to Europe, both of which Canada is relatively dependent upon. Also, to say that Canada currently has the most overpriced real estate is an oversight to say the least considering China currently has entire cities that are empty because prices are too high. A ten to twenty percent drop in real estate prices would probably be a full blown financial crisis, and since mortgage rates are currently around 2.5%, a one to two hundred basis point rise could mean a nearly 50% decrease in real estate prices if interest payments are held constant. Canada would either have to start growing its economy at a much higher rate to encourage the central bank to raise rates to such a height, or oil would have to completely collapse suddenly to cause a speculatively possible collapse of CAD to encourage the same. The easiest relationship to manipulate between prices and rates is the perpetuity: where p is the price, i is the interest payment, and r is the interest rate. In this case, an increase of r from 2.5% to 4.5% would cause a 44.5% decrease in p if i is held constant. However, typical Canadian mortgages seem to mature in ten years at a fixed rate, so i cannot be held constant, and the relationship between r and p is less strong at earlier maturities, thus the most likely way for prices to collapse is for a financial collapse as described above.\",\n \"So after you learn some basics about bubbles you might then see that interest rates kept at their lowest since the days they were backed with gold may allow a bubble to form in housing. You know the bond purchases increased real estate prices right? What is it about the magic $2 Trillion that makes you think the FED hit the spot right on?\",\n \"Companies with existing borrowings (where borrowings are on variable interest rates) or in the case with fixed interest rates - companies that get new borrowings - would pay less interest on these borrowings, so their cost will go down and profits up, making them more attractive to investors. So, in general lower interest rates will make the share market a more attractive investment (than some alternatives) as investors are willing to take on more risk for potentially higher returns. This will usually result in the stock market rising as it is currently in the US. EDIT: The case for rising interest rates A central bank's purpose when raising interest rates is to slow down an economy that is booming. As interest rates rise consumers will tighten up their spending and companies will thus have less revenue on top of higher costs for maintaining existing borrowing (with variable rates) or new borrowing (with fixed rates). If rates are higher companies may also defer new borrowings to expand their business. This will eventually lead to lower profits and lower valuation for these companies. Another thing that happens is that as banks start increasing interest for saving accounts investors will look for safety where they can get a higher return (than before) without the risk of the stock market. With lowering profits and valuations, and investor's money flowing out of shares and into the money market, so will company share prices drop (although this may lag a bit with the share market still booming due to greed. But once the boom stops watchout for the crash).\",\n \"\\\"Yes, I completely agree with you there. Interest rates and prices have an inverse relationship. The point that I am trying to make is that when home prices are not manipulated by some stupid government program, they will \\\"\\\"seep to their level\\\"\\\".\\\"\",\n \"\\\"Interest rates are at a record low and the government is printing money. You can get a fixed rate loan at a rate equal to inflation in a healthy economy. Unless you know that you are moving in < 5 years, why would you expose yourself to interest rate risk when rates are about as close to zero as they can be? If your thought with respect to mitigating interest rate risk is: \\\"\\\"What's the big deal, I'll just refinance!\\\"\\\", think again, because in a market where rates are climbing, you may not be able to affordably refinance at the LTV that you'll have in 5-7 years. From 1974-1991, 30 year mortgages never fell below 9%, and were over 12% from 1979 to 1985. Think about what those kinds of rates -- which reduce a new homeowner's buying power by over 40%, would do to your homes value.\\\"\",\n \"There are two impacts: First, if the pound is dropping, then buying houses becomes cheaper for foreign investors, so they will tend to buy more houses as investments, which will drive house prices up. Second, in theory you might be able to get a mortgage in a foreign country, let's say in Euro, and you might hope that over the next few years the pound would go up again, and the Euros that you owe the foreign bank become worth less.\",\n \"\\\"Mortgage lending, as the article points out, has been historically weak, despite record low rates. Cash buyers (read investors looking for rental inventory) are driving sales and prices. I wouldn't exactly call that a \\\"\\\"thriving\\\"\\\" RE market.\\\"\",\n \"\\\"The price of real estate reacts to both demand for property and the rate of inflation and rate of income growth. Mortgage rates generally move as treasury rates move. See this paragraph: As we mentioned, intermediate term bonds and long-term mortgages (more properly, Mortgage-Backed Securities, or MBS) compete for the same fixed-income investor dollar. Treasury issues are 100% guaranteed to be repaid, but mortgages are not; therefore mortgages carry more risk of default or early repayment, which could potentially disturb the return on the investment. Therefore, mortgage rates must be priced higher to compensate for that risk. But how much higher are mortgages priced? In a normal market, the average \\\"\\\"spread\\\"\\\" or markup above the 100% secured Treasury is about 170 basis points, or 1.7%. That markup -- the spread relationship -- widens and contracts with a range of market conditions, investor appetites and supply of available product -- as well as the presence of competing investment opportunities, like corporate bonds or domestic (or foreign) equity markets Source: What Moves Mortgage Rates? And when the stock market crashes, investors tend to run to bonds and treasuries, which causes prices to go up and treasury yields to drop. Theoretically, this would also cause mortgage rates to drop, although most mortgage rates have a base price below which they cannot fall. How easy is it to profit from recent stock market drops and at what frequency? Incredibly difficult. The issue with your strategy is that you cannot predict the bottom of the market (at least us mortals can't). Just take the month of August for example. Stocks fell something like 15%? After the first 5-10% drop, people felt that the bottom was there, so they rushed in, only to have the market fall even more. How will you know when to invest? Even if the market falls by 50%, and there's a huge buying opportunity, and you increase the mortgage on your house, odds are your rates will increase because of the equity you take out. What if the market stays low for a very long time? Will you be able to maintain mortgage payments? Japan's stock bubble popped in the early 90's, and they've had two lost decade's now. Furthermore, there are issues of liquidity. What if you need more capital? Can you just sell a property or can you buy now property to draw equity against? What if the market is moving too fast for you to take advantage of. Don't ignore transaction costs and taxes either. Overall, there are a lot of ways that your idea can go wrong, and not many ways it can go right.\\\"\",\n \"At 5%, this means you expect rents to double every 14 years. I bought a condo style apartment 28 years ago, (sold a while back, by the way) and recently saw the going rate for rents has moved up from $525 to $750, after all this time. The rent hasn't increased four fold. If rents appear to be too low compared to the cost of buying the house, people tend to prefer to rent. On the flip side, if the rent can cover a mortgage and then some, there's strong motivation to buy, if not by the renters, then by investors who seek a high return from renting those houses, thereby pushing the price up. The price to rent ratio isn't fixed, it depends in part on interest rates, consumer sentiment, and banks willingness to lend. Similar to stock's P/E, there can be quite a range, but too far in either direction is a sign a correction is due.\",\n \"In the US market at least, there is long-term evidence that there's no strong correlation between interest rates and house prices. A less detailed Canadian study found that house prices tended to increase when rates increase. One possible reason: interest rates can increase when the economy is doing well (needs less help), which is also the time when people feel more confident about buying. The are many reasons why Toronto condo prices may come down (such as oversupply), or may increase (empty nesters downsizing). But, by itself, a small increase in interest rates appears, based on history, to be unlikely to lead to a substantial drop in prices over a short timescale.\",\n \">means less demand for absurdly priced homes which means prices will drop to affordable levels. Rent and home prices are obviously variable but in my area home prices are pretty aligned with rents. Assuming both home prices and rent goes up with inflation and accounting for insurance, taxes, tax advantages, maintenance and a list of other issues the prices are comparable. If you have the capital for a down payment and plan to stay in one house (or aparment) for 5 years you are probably better off buying. To say home prices are absurd you need to be comparing it to what you consider it's true worth but how are you determining that? Edit: Perhaps both rent and home prices will go down as more people live with their parents and room mates but I haven't seen that trend start yet and vacancy rates aren't that high (as far as I know) so I don't see it starting soon. If that trend did start I imagine new construction would be the first ones to go but housing developments are going strong around me.\",\n \"I haven't read the terms here but the question may not have a good answer. That won't stop me from trying. Call the real rate (interest rate - inflation) and you'll have what is called negative real rates. It's rare for the overnight real rate to be negative. If you check the same sources for historical data you'll find it's usually higher. This is because borrowing money is usually done to gain an economic benefit, ie. make a profit. That is no longer a consideration when borrowing money short term and is IMO a serious problem. This will cause poor investment decisions like you see in housing. Notice I said overnight rate. That is the only rate set by the BoC and the longer rates are set by the market. The central bank has some influence because a longer term is just a series of shorter terms but if you looked up the rate on long Canadian real return bonds, you'd see them with a real rate around 1%. What happens when the central bank raise or lowers rates will depend on the circumstances. The rate in India is so high because they are using it to defend the rupee. If people earn more interest they have a preference to buy that currency rather than others. However these people aren't stupid, they realize it's the real rate that matters. That's why Japan can get away with very low rates and still have demand for the currency - they have, or had, deflation. When that changed, the preference for their currency changed. So if Canada hast forex driven inflation then the BoC will have to raise rates to defend the dollar for the purpose of lowering inflation from imports. Whether it works or not is another story. Note that the Canadian dollar is very dependant on the total dollar value of net oil exports. If Canada has inflation due too an accelerating economy this implies that there are profitable opportunities so businesses and individuals will be more likely to pay a positive real rate of interest. In that scenario the demand for credit money will drive the real rate of return.\",\n \"It's the physiological impact it has. If you took a loan to buy a home for $500k and you recently had it appraised for $450k you are more inclined to skip out on any home remodeling projects. Also as ShakeyBobWillis pointed out it can be to your financial benefit to just walk away from an underwater mortgage. This creates even more glut in the marketplace.\",\n \"Interest rates can't remain this low. It's like having extremely low blood pressure. When you raise the rates, banks are incented to loan money and that movement of capital is good for the economy. It forces us to become savers instead of spenders, and our pensions, 401ks, social security are all getting killed by not being able to use debt to get safer stable returns. Interest rates have to come back up.\",\n \"Great reply. This is one of reasons why I like this subreddit. I thought that fed interest are far more important that you state. Rate is low + economy is booming (lender thinks there is good chance of repayment), banks loan money much more willingly (reserves are covered by cheap fed loans -> greater profit). That should significantly affect money supply.\",\n \"Without commenting on whether or not it's needed I don't think we are going to see a QE3 and all the political pressure is for some reason to start raising rates. Regardless of how it plays out it's safe to say that the Fed Rate isn't going any lower. You should also watch closely what happens to Fannie and Freddie. If they are dismantled and government backed mortgages become a thing of the past then I think it'll become impossible for a consumer to find a 30 year fixed rate mortgage. Even if they are kept alive, they will be put on a short leash and that will serve to further depress the mortgage market. Long story short, I'd lock your rate in.\",\n \"Lowered rates = boom for equities, currently held bonds, and assets. Cheaper money means a (disproportionately) good time had by all. This all comes with malinvestment, potential for moral hazard, and savers losing in a big way. Why save for retirement when your risk free return on US Treasuries can barely keep up with inflation? As an aside, it is not really a risk free rate anymore, with $20 trillion in debt and no real hope of paying it off. This is why we see the rate increases and movement towards asset sales by the Fed to get the poop off their books. They are worried about all of the above and need more arrows in their quiver when the next recession hits. They won't have enough, however. They are trying to right a ship that is fully overturned. This is now the longest period of growth (however tepid) since the tech bubble of the 1990's. Are the fundamentals really better than then?\",\n \"Fundamentally interest rates reflect the time preference people place on money and the things money can buy. If I have a high time preference then I prefer money in my hand versus money promised to me at some date in the future. Thus, I will only loan my money to someone if they offer me an incentive which would be an amount of money to be received in the future that is larger than the amount of money I’m giving the debtor in the present (i.e. the interest rate). Many factors go into my time preference determination. My demand for cash (i.e. my cash balance), the credit rating of the borrower, the length of the loan, and my expectation of the change in currency value are just a few of the factors that affect what interest rate I will loan money. The first loan I make will have a lower interest rate than the last loan, ceteris paribus. This is because my supply of cash diminishes with each loan which makes my remaining cash more valuable and a higher interest rate will be needed to entice me to make additional loans. This is the theory behind why interest rates will rise when QE3 or QEinfinity ever stops. QE is where the Federal Reserve cartel prints new money to purchase bonds from cartel banks. If QE slows or ends the supply of money will stop increasing which will make cash more valuable and higher interest rates will be needed to entice creditors to loan money. Note that increasing the stock of money does not necessarily result in lower interest rates. As stated earlier, the change in value of the currency also affects the interest rate lenders are willing to accept. If the Federal Reserve cartel deposited $1 million everyday into every US citizen’s bank account it wouldn’t take long before lenders demanded very high interest rates as compensation for the decrease in the value of the currency. Does the Federal Reserve cartel affect interest rates? Yes, in two ways. First, as mentioned before, it prints new money that is loaned to the government. It either purchases the bonds directly or purchases the bonds from cartel banks which give them cash to purchase more government bonds. This keeps demand high for government bonds which lowers the yield on government bonds (yields move inverse to the price of the bond). The Federal Reserve cartel also can provide an unlimited amount of funds at the Federal Funds rate to the cartel member banks. Banks can borrow at this rate and then proceed to make loans at a higher rate and pocket the difference. Remember, however, that the Federal Reserve cartel is not the only market participant. Other bond holders, such as foreign governments and pension funds, buy and sell US bonds. At some point they could demand higher rates. The Federal Reserve cartel, which currently holds close to 17% of US public debt, could attempt to keep rates low by printing new money to buy all existing US bonds to prevent the yield on bonds from going up. At that point, however, holding US dollars becomes very dangerous as it is apparent the Federal Reserve cartel is just a money printing machine for the US government. That’s when most people begin to dump dollars en masse.\",\n \"Too expand on /u/stoneeus, mortgage rates were/are also heavily influenced by the FED QE program, which holds about $4.5T in mortgage-backed securities and treasuries on the FED's balance sheet. The FED has been holding this balance steady since it ended the QE program a couple years ago, purchasing new securities as old ones mature. However, the FED has started signalling that they are going to end these purchases and let their portfolio wind down. Once that happens, you'll start to see mortgage rates rise.\",\n \"When the inflation rate increases, this tends to push up interest rates because of supply and demand: If the interest rate is less than the inflation rate, then putting your money in the bank means that you are losing value every day that it is there. So there's an incentive to withdraw your money and spend it now. If, say, I'm planning to buy a car, and my savings are declining in real value, then if I buy a car today I can get a better car than if I wait until tomorrow. When interest rates are high compared to inflation, the reverse is true. My savings are increasing in value, so the longer I leave my money in the bank the more it's worth. If I wait until tomorrow to buy a car I can get a better car than I would be able to buy today. Also, people find alternative places to keep their savings. If a savings account will result in me losing value every day my money is there, then maybe I'll put the money in the stock market or buy gold or whatever. So for the banks to continue to get enough money to make loans, they have to increase the interest rates they pay to lure customers back to the bank. There is no reason per se for rising interest rates to consumers to directly cause an increase in the inflation rate. Inflation is caused by the money supply growing faster than the amount of goods and services produced. Interest rates are a cost. If interest rates go up, people will borrow less money and spend it on other things, but that has no direct effect on the total money supply. Except ... you may note I put a bunch of qualifiers in that paragraph. In the United States, the Federal Reserve loans money to banks. It creates this money out of thin air. So when the interest that the Federal Reserve charges to the banks is low, the banks will borrow more from the Feds. As this money is created on the spot, this adds to the money supply, and thus contributes to inflation. So if interest rates to consumers are low, this encourages people to borrow more money from the banks, which encourages the banks to borrow more from the Feds, which increases the money supply, which increases inflation. I don't know much about how it works in other countries, but I think it's similar in most nations.\",\n \"\\\"These rates are so low because the cost of money is so low. Specifically, two rates are near zero. The Federal Reserve discount rate, which is \\\"\\\"the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank's lending facility--the discount window.\\\"\\\" The effective federal funds rate, which is the rate banks pay when they trade balances with each other through the Federal Reserve. Banks want to profit on the loans they make, like mortgage loans. To do so, they try to maximize the difference between the rates they charge on mortgages and other loans (revenue), and the rates they pay savings account holders, the Federal Reserve or other banks to obtain funds (expenses). This means that the rates they offer to pay are as close to these rates as possible. As the charts shows, both rates have been cut significantly since the start of the recession, either through open market operations (the federal funds rate) or directly (the discount rate). The discount rate is set directly by the regional Federal Reserve banks every 14 days. In most cases, the federal funds rate is lower than the discount rate, in order to encourage banks to lend money to each other instead of borrowing it from the Fed. In the past, however, there have been rare instances where the federal funds rate has exceeded the discount rate, and it's been cheaper for banks to borrow money directly from the Fed than from each other.\\\"\",\n \"I don't like REITs because they are more closely correlated to the movement of the stock market. They don't really do the job of diversifying a portfolio because of that correlation. When the stock market dropped in 2008, REITs were hammered as well because the housing bubble burst. Bonds went up, and if you rebalanced (sold the bonds to buy more stock) then you came out much further ahead when the stock market recovered. The point of adding bonds for diversification is that they move in the opposite direction of equities; blunting the major drops (and providing buying opportunities). REITs don't fit that bill. REITs are not undergoing a correction like bonds because the price of real estate is a function of housing supply and buyer demand. Rising interest rates only make it a little harder for buyers to buy, so the effect of rising interest rates on real estate prices is muted. The other effects on real estate prices (more wealth in the economy for buyers) pushes in the opposite direction of the rising interest rates.\",\n \"Some countries, like the United States, allow a mortgage interest tax deduction. This means the interest you pay on a mortgage, which is typically much more than half of the monthly payment at the beginning of a 25 year mortgage, is tax deductible, so you might get 33% or more of the interest back, and that effectively makes the interest rate significantly lower. Therefore you are borrowing the money really cheap. That makes MrChrister's answer even more appropriate.\",\n \"It is supported by inflation and historical values. if you look at real estate as well as the stock market they have consistently increased over a long period of history even with short term drops. It is also based on inflation and the fact that the price of land and building material has increased over time.\",\n \"Real estate is not an investment but pure speculation. Rental income may make it look like an investment but if you ask some experienced investor you would be told to stay away from real estate unless it is for your own use. If you believe otherwise then please read on : Another strong reason not to buy real estate right now is the low interest rates. You should be selling real estate when the interest rates are so low not buying it. You buy real estate when the interest rate cycle peaks like you would see in Russia in months to come with 17% central bank rate right now and if it goes up a little more that is when it is time to start looking for a property in Russia. This thread sums it up nicely.\",\n \"Actually, bond prices are technically high right now, so if and when rates theoretically go up in the future, bond prices will fall. The past 25 years for bonds have been great with falling interest rates, but it's not likely going to continue with rates not able to go any lower.\",\n \"That tends to be the case with a lot of things I am seeing. Any changes seem to create short term recession with projections of long-term growth. I would normally see that as a problem, because the reaction to the recession could effect the outcome post recession, but the LFPR trending downward is not a good sign for the economy as a whole. Eventually that portion would leave most markets, or welfare would have to increase, on the current trajectory. I think encouraging non-income producing assets for wealth generation is a flawed system, personally. Whether I am right or wrong, I do not know. I think the Government, and subsequently the fed, should encourage income-producing assets for the wealth affect, or in the very least, not something as crucial as housing to the health of the consumer base.\",\n \"Wait, if everyone isn't buying things and saving money instead, who is left to get loans to buy things at higher rates? Banks don't wag the consumer's tail. Banks will make loads more money on their variable rate loans which will hurt a lot of people. Until wages rise to incentivize buying things, loan interest rates need to be low. Only way to spur the economy is to get more money in the hands of the spenders. We keep giving it to the hoarders.\",\n \"\\\"QUICK ANSWER When it comes to fixed income assets, whether rental real estate or government bonds, it's unusual for highly-leveraged assets to yield less than the same asset unleveraged or lowly-leveraged. This is especially so in countries where interest costs are tax deductible. If we exclude capital losses (i.e. the property sells in future at a price less than it was purchased) or net rental income that doesn't keep up with maintenance, regulatory, taxation, inflation and / or other costs, there is one primary scenario where higher leverage results in lower yields compared to lower leverage, even if rental income keeps up with non-funding costs. This occurs when variable rate financing is used and rates substantially increase. EXPLANATION Borrowers and lenders in different countries have different mortgage rate customs. Some are more likely to have long-term fixed rates; some prefer variable rates; and others are a hybrid, i.e. fixed for a few years and then become variable. If variable rates are used for a mortgage and the reference rates increase substantially, as they did in the US during the 1970s, the borrower can easily become \\\"\\\"upside-down,\\\"\\\" i.e. owe more on the mortgage than the property is then worth, and have mortgage service costs that exceed the net rental income. Some of those costs aren't easy to pass along to renters, even when there are periodic lease renewals or base rent increases referencing inflation rates. Central banks set policies for what would be the lowest short-term rates in a country that has such a bank. Private sector rates are established broadly by supply and demand for credit and can thus diverge markedly from central bank rates. Over time, the higher finance-carrying-cost-to-net-rental-income ratio should abate as (1) rental market prices change to reflect the costs and (2) the landlord can reinvest his net rental income at a higher rate. In the short-term though, this can result in the landlord having to \\\"\\\"eat\\\"\\\" the costs making his yield on his leveraged fixed income asset less than what he would have without leverage, even if the property was later sold at same price regardless of financing method. ========== Interestingly, and on the flip side, this is one of the quirks in finance where an accounting liability can become, at least in part, an economic asset. If a landlord borrows at a high loan-to-value ratio for a fixed interest rate for the life of the mortgage and rates, variable and fixed, were to increase substantially, the difference between his original rate and the present rates accrues to him. If he's able to sell the property with the loan attached (which is not uncommon for commercial, industrial and sometimes municipal real estate), the buyer will be assuming a liability with a lower carrying cost than his present alternatives and will hence pay a higher price for the property than if it were unleveraged. With long-term rates in many economically advanced countries at historic lows, if a borrower today were to take a long-term fixed rate loan and rates shortly after increased substantially, he may have an instant profit in this scenario even if his property hasn't increased in value.\\\"\",\n \"For various reasons, real estate prices exhibit far more memory than stock prices. The primary reason for this is that real estate is much less liquid. Transaction costs for stock trading are on the order of 10 basis points (0.1%), whereas a real estate transaction will typically have total costs (including title, lawyers, brokers, engineers, etc.) of around 5% of the amount of the transaction. A stock transaction can be executed in milliseconds, whereas real estate transactions typically take months. Thus today's behavior is a much better indicator of future price behavior for real estate than for stocks.\",\n \"Since 1971, mortgage interest rates have never been more than .25% below current rates (3.6%). Even restricting just to the last four years, rates have been as much as .89% higher. Overall, we're much closer to the record low interest rate than any type of high. We're currently at a three-year low. Yes, we should expect interest rates to go up. Eventually. Maybe when that happens, bonds will fall. It hasn't happened yet though. In fact, there remain significant worries that the Fed has been overly aggressive in raising rates (as it was around 2008). The Brexit side effects seem to be leaning towards an easing in monetary policy rather than a tightening.\",\n \"> The purpose of buying these bonds was not to step in due to the absence of a market. Rather, the purpose was to deliberately bid up the price of these bonds (ahead of the market), causing their price to rise and yields (interest rates) to drop. There are some important things you need to understand about bubbles and how they form. When interest rates are artificially low and down payments aren't required for many loans, do you agree this is a recipe for a bubble?\",\n \"As of now in 2016, is is safe to assume that mortgage rates would/should not get back to 10%? What would the rates be in future is speculation. It depends on quite a few things, overall economy, demand / supply, liquidity in market etc ... Chances are less that rates would show a dramatic rise in near future. Does this mean that one should always buy a house ONLy when mortgage rates are low? Is it worth the wait IF the rates are high right now? Nope. House purchase decision are not solely based on interest rates. There are quite a few other aspects to consider, the housing industry, your need, etc. Although interest rate do form one of the aspect to consider specially affordability of the EMI. Is refinancing an option on the table, if I made a deal at a bad time when rates are high? This depends on the terms of current mortgage. Most would allow refinance, there may be penal charges breaking the current mortgage. Note refinance does not always mean that you would get a better rate. Many mortgages these days are on variable interest rates, this means that they can go down or go up. How can people afford 10% mortgage? Well if you buy a small cheaper [Less expensive] house you can afford a higher interest rate.\",\n \"Because the federal government won't use the money to buy a car thus generating profits for the car company. The aim of cheap loans is to drive sales of cars. The difference between the amount of interest paid on the loan, and the amount they could have got by investing it elsewhere, is simply a reduction in the profit. This is true whatever the actual interest rates are.\",\n \"According to the tax reform framework, changes to the current tax code would eliminate important provisions, such as the state and local tax deduction, while nearly doubling the standard deduction and eliminating personal and dependency exemptions. NAR believes the result would all but nullify the incentive to purchase a home for most, amounting to a de facto tax increase on homeowners, putting home values across the country at risk and ensuring that only the top 5 percent of Americans have the opportunity to benefit from the mortgage interest deduction. This isn't good and serves no benefit. You would THINK someone with a background in real Estate would know this. It appears not. There would also be a rise in rents as taxes go up.\",\n \"Surely because higher education participation has increased there are a larger number of students with debt which means less demand for absurdly priced homes which means prices will drop to affordable levels. But we can't talk about markets working normally when it comes to home prices which always remain high! Right?\",\n \"People purchase homes and rent them instead of putting their money into other investment vehicles. This drives up property values and makes it more expensive to buy, which pushes more people into the rental market, making it more expensive to rent. If you lower the returns people make on their rental homes via increased property taxes, some percentage of those individuals would sell their extra homes and put their money into more lucrative investments. That would increase the number of homes on the market, lower those homes' price, and take people out of the rental market as well.\",\n \"Yes, but only because the US had a huge crash. Other economies have, in the absence of any credible *real* growth strategy, continued pumping housing. I still think student debt will erode incomes further as it's simply pulling forward demand that will drag on incomes later. When nearly everyone has a degree then nearly everyone doesn't get paid much more for having one. By the same principle of supply and demand all the boomer downsizing vs impoverished 30-something lack of upsizing will mean prices will fall.\",\n \"Asset prices across the board are at historic highs because interest rates have been too low for too long. Owners/sellers of assets win, and this is primarily the baby boomer generation, and the buyer of these assets loose, primarily gen x and millennials. I'm really not looking forward to at best, stagnating asset prices as interest rates are inevitably increased, or at worst, another crash.\",\n \"well it 2008 was six years ago, over time we would expect some price inflation. however it's only really a good thing for people who already own houses (it increases their net worth on paper) and people who want to sell, and move to a cheaper area. If you aren't selling, it doesn't help you much. If you're a young person trying to get into the housing market, it's obviously bad. A housing market where young people can't afford to get in is unhealthy. If you already own, and you want to move up and buy a bigger house, that's hard if no one is willing to buy your existing house. I don't know why the govt is helping create a new bubble. But, if the underlying issues that caused the last crash are not fixed, well... the bigger the bubble, the bigger the pop.\",\n \"\\\"It is and certainly will continue to drive up real estate (and, more generally, housing) prices in large cities. However, \\\"\\\"bubble\\\"\\\" implies an undeserved/irrational increase. I would argue that it is not; people (especially, but not only, millennials) do want live in large, vibrant cities where high-paying jobs exist. And indeed this rise in housing prices drives employers to raise wages. At first glance, this would suggest a vicious cycle, but I believe it is self-regulating. The real danger is economic-geographic stratification; only the richest, highest-skilled will be able to afford living in cities.\\\"\",\n \"What about the debt attached to more recently purchased properties, purchased at the price before the market gets flooded with baby-boomer homes? I'm not an expert in real estate finance, but it sounds like if that downward pressure on prices isn't slight, financial institutions will be taking that risk for anyone who defaults on a mortgage after their property loses a substantial amount of its value. It seems like immigration could play an important role in offsetting this and keeping the prices stable, but that's a politically unpredictable issue to say the least.\",\n \"You apparently assume that pouring money into a landlord's pocket is a bad thing. Not necessarily. Whether it makes sense to purchase your own home or to live in a rental property varies based on the market prices and rents of properties. In the long term, real estate prices closely follow inflation. However, in some areas it may be possible that real estate prices have increased by more than inflation in the past, say, 10 years. This may mean that some (stupid) people assume that real estate prices continue to appreciate at this rate in the future. The price of real estates when compared to rents may become unrealistically high so that the rental yield becomes low, and the only reasonable way of obtaining money from real estate investments is price appreciation continuing. No, it will not continue forever. Furthermore, an individual real estate is a very poorly diversified investment. And a very risky investment, too: a mold problem can destroy the entire value of your investment, if you invest in only one property. Real estates are commonly said to be less risky than stocks, but this applies only to large real estate portfolios when compared with large stock portfolios. It is easier to build a large stock portfolio with a small amount of money to invest when compared to building a large real estate portfolio. Thus, I would consider this: how much return are you going to get (by not needing to pay rent, but needing to pay some minor maintenance costs) when purchasing your own home? How much does the home cost? What is the annual return on the investment? Is it larger than smaller when compared to investing the same amount of money in the stock market? As I said, an individual house is a more risky investment than a well-diversified stock portfolio. Thus, if a well-diversified stock portfolio yields 8% annually, I would demand 10% return from an individual house before considering to move my money from stocks to a house.\",\n \"I've read this claim many times in the news: banks are making less profit from the lending business when interest rates are historically low. The issue with most loans is they can be satisfied at any time. When you have falling interest rates it means most of the banks loans are refinanced from nice high rates to current market low interest rates which can significantly reduce the expected return on past loans. The bank gets the money back when it wants it the least because it can only re-lend the money at the current market (lower) interest rates. When interest rates are increasing refinance and early repayment activity reduces significantly. It's important to look at the loan from the point of view of the bank, a bank must first issue out the entire principal amount. On a 60 month loan the lender has not received payments sufficient to satisfy the principal until around 50th or 55th month depending on the interest rate. If the bank receives payment of the outstanding amount on month 30 the expected return on that loan is reduced significantly. Consider a $10,000, 60 month loan at 5% apr. The bank is expected to receive $11,322 in total for interest income of $1,322. If the loan is repaid on month 30, the total interest is about $972. That's a 26% reduction of expected interest income, and the money received can only be re-lent for yet a lower interest rate. Add to this the tricky accounting of holding a loan, which is really a discounted bond, which is an asset, on the books and profitability of lending while interest rates are falling gets really funky. And this doesn't even examine default risk/cost.\",\n \"\\\"First piece of advice: fire your agent. A pushy agent is a bad agent. From what you've told us, he's actually given you poor advice regarding mortgage interest rates. Rates are already at historic lows. That and the precarious state of the world economy mean that further rate cuts are more likely in the near term. Second piece of advice: While more information on the real estate market you're in would help, going in at asking price is rarely a good idea. Sale prices from \\\"\\\"the last few years\\\"\\\" are not relevant to what you should pay, because the last few years include a financial crisis caused in large part by the bursting of a housing bubble. They could be even less relevant depending on your location because of a spike in foreclosures in certain areas of the U.S. There was already a ton of housing inventory before, so an increase due to foreclosures is going to depress prices further. Now that banks are finally practicing the due diligence they should have been all along, your ability to be pre-approved for large mortgage amount puts you in a strong position. Use a tool like Zillow or Redfin to see what properties in that area have sold for over the past six months. You should also be able to see a history of what prices the particular property you're interested in has been offered and/or sold at in the past. Also check and see how long the particular property you're interested in has been on the market. If it's been on the market more than 60-90 days, it's priced too high.\\\"\",\n \"\\\"There's an aspect to real estate that's under-discussed. When you take all factors into account, it just about keeps up with inflation over the long term. Three factors: Now - when you normalize all of this, calculating the \\\"\\\"hours worked\\\"\\\" needed to pay for the median home, you find a nearly flat line at just over 40 or so hours of pay per month.\\\"\",\n \"I just don't see that many suckers falling for cheap or subprime loans, given their student loans. Yellen raising rates will dampen aggressive bank profits somewhat. Smucks will be smucks, but smarter buyers would appraise their debt load and opt for renting or cheaper houses. But then again, people don't even learn from recent history. US market is at recovery/pre-euphoria stage now. Canada is soon to pop a year after rates rise courtesy of Yellen. Given the size of the US gen y cohort, it is likely that many in their 30s in 2020 will buy. And will cry when the next bubble pops, as Boomers start selling assets to fund their retirements.\",\n \"Yes, in 2 ways: As you mention, the price of a home generally grows with inflation - along with other factors (supply and demand in local markets, etc.). Through financing. If you finance 80% of your purchase today, in 2014 dollars, you will pay back in future dollars. Those future dollars are worth less, because of inflation.\",\n \"\\\"The reason is that although the American economy is functioning normally, mortgage rates are stupid-low, and are below a prudent expectation of long-term (30 year) rates of return in the market. I manage endowments, so I say \\\"\\\"prudent\\\"\\\" in the context of endowment investment, which is the picture of caution and subject to UPMIFA law (the P being prudent). What's more, there are tax benefits. Yes, you pay 15% long-term capital gains tax on investment income. But your mortgage interest is tax deductible at your \\\"\\\"tax bracket\\\"\\\" rate of 25, 28 or 33% - this being the tax you would pay on your next dollar of earned income. And in the early years of a mortgage, mortgage payments are nearly 100% interest. So even if it's a wash: you gain $10k in the market but pay $10k in mortgage interest -- you pay $1500 tax on the gains, but the interest deduction redudes tax by $2800. So you are still $1300 ahead. TLDR: the government pays us to do this.\\\"\",\n \"When inflation is high or is rising generally interest rates will be raised to reduce people spending their money and slow down the rate of inflation. As interest rates rise people will be less willing to borrow money and more willing to keep their money earning a good interest rate in the bank. People will reduce their spending and invest less into alternative assets but instead put more into their bank savings. When inflation is too low and the economy is starting to slow down generally interest rates will be raised to encourage more spending to restart the economy again. As interest rates drop more will take their saving out of their bank accounts as is starts to earn very little in interest rate and more will be willing to borrow as it becomes cheaper to borrow. People will start spending more and investing their money outside of bank savings.\",\n \"Prices have fallen, but this article didn't go there. Maybe because they haven't fallen nearly as much as the 15% drop in sales. Regardless, I doubt anyone is feeling out anything. This has gone on for too long because of human emotions and low interest rates. These new regulations are purely political and will achieve nothing. Other than being a scapegoat.\",\n \"Well it's not so simple as just swapping cash and assets. It has its unintentional effects. Such as encouraging debt, increasing inflation over a longer time period, decreased attraction from foreign investors. And yea it drives valuations up, but it's making the assets overpriced. And we all know what eventually happens to overpriced assets.\",\n \"No, there is no linkage to the value of real estate and inflation. In most of the United States if you bought at the peak of the market in 2006, you still haven't recovered 7+ years later. Also real estate has a strong local component to the price. Pick the wrong location or the wrong type of real estate and the value of your real estate will be dropping while everybody else sees their values rising. Three properties I have owned near Washington DC, have had three different price patterns since the late 80's. Each had a different starting and ending point for the peak price rise. You can get lucky and make a lot, but there is no way to guarantee that prices will rise at all during the period you will own it.\",\n \"When over the long term housing costs in a area rise faster than wages rise, the demographic of who lives in the area changes. The size and income parameters change. A region that was full of young singles is now populated with couples with adult children, that means that the businesses and amenities have to change. At a national level it isn't sustainable unless other items change. The portion of monthly income that can be safely allocated to housing would have to change. One adjustment could be the the lengthening of home loan periods, thus dropping the monthly payment. This has been seen with car loans, over the last few decades the length of loans has increased. In interesting related event could be the change in deduction of mortgage interest and property tax. If this was to change abruptly, there could be an abrupt change the estimated value of housing, because the calculus of affordability would change.\",\n \"Reasons for no: In your first sentence you say something interesting: rates low - prices high. Actually those 2 are reversely correlated, imagine if rates would be 5% higher-very few people could buy at current prices so prices would drop. Also you need to keep in mind the rate of inflation that was much higher during some periods in the US history(for example over 10% in the 1980) so you can not make comparisons just based on the nominal interest rate. Putting all your eggs in one basket. If you think real estate is a good investment buy some REITs for 10k, do not spend 20% of your future income for 20 years. Maintenance - people who rent usually underestimate this or do not even count it when making rent vs mortgage comparisons. Reasons for yes: Lifestyle decision - you don't want to be kicked out of your house, you want to remodel... Speculation - I would recommend against this strongly, but housing prices go up and down, if they will go up you can make a lot of money. To answer one of questions directly: 1. My guess is that FED will try to keep rates well bellow 10% (even much lower, since government can not service debts if interest rates go much higher), but nobody can say if they will succeed.\",\n \"so this is a loan for a house? a loan on a house? a new mortgage? you shouldn't just get a loan for the hell of it any time. interests rates are low because the yields on US treasuries have been pushed closer to zero, and thats pretty much that. the risk is on the bank that approves the loan, and not you. (your ability to repay should be truthful, but your payments are smaller because the interest is so low)\",\n \"And how is that even an argument? So...the fed needs to raise rates, is what you seem to be saying. I'm not sure that now is the time for that, considering the weak jobs numbers recently, but it's possibly a good idea for them to announce that a hike will come soon instead of actually raising the rate. Either way, to say that having a low interest rate for a decade is a bad thing sort of obscures a harsh reality. It's certainly not something that you *want*, but what's the alternative? Would the US have been better off without the Feds balance sheet expansion? Very few economists would say yes. In fact that exact line of thought likely turned a financial crash into the Great Depression of the 30's.\",\n \"When prices get to a point where it's *beyond* crazy. There's a good price, a cheap price, a crazy cheap price and there's beyond crazy cheap. Something that happens maybe every 10 years or so. Also be prepared to lose your home if it doesn't work out.\",\n \"\\\"House prices do not go up. Land prices in countries with growing economies tend to go up. The price of the house on the land generally depreciates as it wears out. Houses require money; they are called money pits for a reason. You have to replace HVAC periodically, roofs, repairs, rot, foundation problems, leaks, electrical repair; and all of that just reduces the rate at which the house (not the land) loses value. To maintain value (of the house proper), you need to regularly rebuild parts of the house. People expect different things in Kitchens, bathrooms, dining rooms, doors, bedrooms today than they do in the past, and wear on flooring and fixtures accumulate over time. The price of land and is going to be highly determined by the current interest rates. Interest rates are currently near zero; if they go up by even a few percent, we can expect land prices to stop growing and start shrinking, even if the economy continues to grow. So the assumption that land+house prices go up is predicated on the last 35 years of constant rigorous economic growth mixed with interest rate decreases. This is a common illusion, that people assume the recent economic past is somehow the way things are \\\"\\\"naturally\\\"\\\". But we cannot decrease interest rates further, and rigorous economic growth is far from guaranteed. This is because people price land based on their carrying cost; the cost you have to spend out of your income to have ownership of it. And that is a function of interest rates. Throw in no longer expecting land values to constantly grow and second-order effects that boost land value also go away. Depending on the juristiction, a mortgage is a hugely leveraged investment. It is akin to taking 10,000$, borrowing 40,000$ and buying stock. If the stock goes up, you make almost 5x as much money; if it goes down, you lose 5x as much. And you owe a constant stream of money to service the debt on top of that. If you want to be risk free, work out how you'd deal with the value of your house dropping by 50% together with losing your job, getting a job paying half as much after a period of 6 months unemployment. The new job requires a 1.5 hour commute from your house. Interest rates going up to 12% and your mortgage is up for renewal (in 15 years - they climbed gradually over the time, say), optionally. That is a medium-bad situation (not a great depression scale problem), but is a realistic \\\"\\\"bad luck\\\"\\\" event that could happen to you. Not likely, but possible. Can you weather it? If so, the risk is within your bounds. Note that going bankrupt may be a reasonable plan to such a bit of bad luck. However, note that had you not purchased the house, you wouldn't be bankrupt in that situation. It is reasonably likely that house prices will, after you spend ~3% of the construction cost of the house per year, pay the mortgage on the land+house, grow at a rate sufficient to offset the cost of renting and generate an economically reasonable level of profit. It is not a risk-free investment. If someone tries to sell you a risk-free investment, they are almost certainly wrong.\\\"\",\n \"Considering that we are in a low-interest rate period (the lowest in history), it's smart to loan money from the bank to reinvest in property or other investments as far as you get a better yield (ROI) than the interest.\",\n \"\\\"Keep in mind that the Federal Reserve Chairman needs to be very careful with his use of words. Here's what he said: It is arguable that interest rates are too high, that they are being constrained by the fact that interest rates can't go below zero. We have an economy where demand falls far short of the capacity of the economy to produce. We have an economy where the amount of investment in durable goods spending is far less than the capacity of the economy to produce. That suggests that interest rates in some sense should be lower rather than higher. We can't make interest rates lower, of course. (They) only can go down to zero. And again I would argue that a healthy economy with good returns is the best way to get returns to savers. So what does that mean? When he says that \\\"\\\"we can't make interest rates lower\\\"\\\", that doesn't mean that it isn't possible. He's saying that our demand for goods is lower than our ability to produce them. Negative interest would actually make that problem worse -- if I know that things will cost less in a month, I'm not going to buy anything. The Fed is incentivizing spending by lowering the cost of capital to zero. By continuing this policy, they are eventually going to bring on inflation, which will reduce the value of the currency -- which gives people and companies that are sitting on money an dis-incentive to continue hoarding it.\\\"\",\n \"The real idea is to get inflation even higher than it currently is to try and get more bullets in the future for the next recession. We'd like nominal rates to be much higher than before so that we can have even larger real negative rates when needed. This takes time and finesse and I'd say Yellen is doing a fine job. Every mark she is reaching for in the dual mandate is exactly where it needs to be for a perfect storm. Almost all people borrow money to get houses. That doesn't make them likely to default. What made defaults skyrocket in '08 was predatory lending and NINJA loans, as well as a group of men who actively did everything they could to make the system fail because of credit default swaps whose payout was significantly higher than the loss.\",\n \"Mortgage or other interest rates are determined by the banks on cost of funds, risk and operating cost. The Fed raises money from the markets by issuing Tresury Bonds at a specified rate. This rate at which it raises money varies depening on the economy. Thus there are 2 rates: the rate at which banks can borrow money from the Fed, which is higher than the rate that the Fed would give banks for excess money deposited with them. So if the cost of borrowing is less, banks can borrow this money from the Fed and loan it to individuals at a slightly higher rate that would cover their costs plus a small profit. The risk associated with a mortgage is less, and hence these would be cheaper, then say a personal loan. If the cost of borrowing goes up, the mortgage rate will go up. If the cost of borrowing money goes down, the cost would come down. Banks may not always borrow money to lend. If they have existing money, they can either park it with the Fed for a lower interest rate, or loan it to individuals for a rate higher than what they would have received from the Fed.\",\n \"Similarly to buying property on your own, REITs cannot get to good returns without leveraging. If you buy an investment property 100% cash only - chances are that 10% ROI is a very very optimistic scenario. If you use leveraging (i.e.: take out a mortgage) - you're susceptible to interest rate changes. REITs invest in properties all around all the time. They invest in mortgages themselves as well (In the US, that's the only security REITs can hold without being disqualified). You can't expect all that to be cash-only, there have to be loans and financing involved. When rates go up - financing costs go up. That brings net income down. Simple math. In the US, there's an additional benefit to investing in REIT vs directly holding real estate: taxes. REITs pay dividends, which have preferential (if qualified) taxation. You'll pay capital gains taxes on the dividends if you hold the fund long enough. If you own a rental property directly, your income after all the expenses is taxed at ordinary rates, which would usually be higher. Also, as you mentioned, you can use them as margin, and they're much much more liquid than holding real estate directly. Not to mention you don't need to deal with tenants or periods where you don't have any, or if local real-estate market tanks (while REITs are usually quite diversified in kinds of real estate they hold and areas). On the other hand, if you own real estate, you can leverage it at lower rates than margin (with HELOCs etc), and it provides some safety net in case of a stock market crash (which REITs are somewhat susceptible to). You can also live in your property, if needed, which is something that's hard to do with REITs....\",\n \"\\\"Banks make less profit when \\\"\\\"long\\\"\\\" rates are low compared to \\\"\\\"short\\\"\\\" rates. Banks lend for long term purposes like five year business loans or 30 year mortgages. They get their funds from (mostly) \\\"\\\"short term\\\"\\\" deposits, which can be emptied in days. Banks make money on the difference between 5 and 30 year rates, and short term rates. It is the difference, and not the absolute level of rates, that determines their profitability. A bank that pays 1% on CDs, and lends at 3% will make money. During the 1970s, short rates kept rising,and banks were stuck with 30 year loans at 7% from the early part of the decade, when short rates rose to double digits around 1980, and they lost money.\\\"\",\n \"Sure! Anything that affects the balance of supply and demand could cause rent prices to fall. I'll betcha rent prices in Wilmington, Ohio collapsed when the biggest employer, DHL, shut down. An economic depression of any sort would cause people to substitute expensive rentals for cheaper ones, putting downward pressure on rents. It would also cause people to double up or move in with family, decreasing demand for rentals. Anything that makes buying a house cheaper will actually make rents lower, too, because more people will buy houses when houses get cheaper... those people are moving out of rentals, thus decreasing demand for rentals.\",\n \"\\\"Bonds are priced \\\"\\\"very high\\\"\\\" because their price is compared to their yields. With the current interest rates, which are very low, the bond yields will be low. However, bond issuers still need the money, so there still will be high par value, and investors will not sell bonds at a loss unless there's a better investment (=bonds with better yields). Once the rates start going up, you'll see bonds with current rates dropping in value significantly. Once alternatives appear, people holding them will start dumping them to move the money somewhere more profitable. Similarly the stocks - since there's no other investment alternatives (yields on the bonds are low, interests are low), people invest more in the stocks. Once the rates go up, the investors will start rebalancing portfolios and cashing out.\\\"\",\n \"\\\"In the US, the government effectively sets a price floor for rents with a concept called \\\"\\\"prevailing rent\\\"\\\" for government subsidy. Even the crappiest, minimally compliant hovel is ultimately worth whatever the government will issue housing vouchers for. Rent can and does fluctuate for the higher end of the market. Basically in most places the available, cheap credit has a negative impact on rent prices, and tighter, costlier credit increases demand and rents. Local economic events have an impact too. If the company closes in a company town, people leave.\\\"\",\n \"Follow your own logic. Millennials have less capital, so they have to borrow more for any given house. Sure you can expect some amount of reduction in prices, but it will not make up for the lost cash of losing the deduction. If you buy a $200k house ((100% financing @4% just to keep it easy). Say the price drops 10% to $180. That saves you $800/yr. Say 25% tax rate. @ 200k your deduction is $2000. I don't think prices will drop 10%,but you need 25% for this to be better for millennials.\",\n \"The issue is that housing price increases can't sustain themselves indefinitely, in comparison to the rental market. Increases drive people back to the rental market, which brings the rental market up. Also, just as a AirBnB would drive property prices to go up, it also allows people who would otherwise not be able to buy a house to make the house purchase. Example - Loftium is a mortgage lender that will give you a cheaper loan if you put your house on AirBnB. That enables people to purchase a home when they otherwise wouldn't be able to. So over time (many years), the market should work itself out. In the short term, AirBnB can definitely cause market fluctuations. For example, it might enable people to continue to own their homes during a depression, which would cause a supply shortage. The only factor that affects ownership prices differently than rental prices in the long term would be regulation. Here's a [good article](http://www.sightline.org/2017/08/14/why-seattle-builds-apartments-but-vancouver-bc-builds-condos/) about that aspect specifically.\",\n \"You can thank hedge funds for that. Was looking to buy a rental and the home sold for more than asking. This happened 3 times. Realtor told me that they are buying all the single family homes sight unseen. As soon as a home under 250k goes up for sale, it's sold in my city. Since 2011 the average home buyer has had to out offer them significantly in order to get them.\",\n \"In India, where I live, you can: In addition, housing loans are given priority status as well - bank capital requirements on housing loans is lower than for, say, a corporate loan or a loan against other kinds of collateral. That makes housing loans cheaper as well - you get a home loan at around 10% in India versus 15% against most other assets, and since you can deduct it against tax, the effective interest rate is even lower. Housing in India is unaffordable too, if you're wondering. In a suburb 40 Km away from Delhi, a 2000 sq. foot apartment, about 1500 sq. ft. of carpet area, with no appliances costs about USD 250,000.\",\n \"Real estate is always an interesting dynamic. In most cases prices have always gone up. Price is mainly a function of demand. Sometimes demand is artificially inflated over a short term period and can come down quickly due to corrections. During recessions the housing market will usually slow down. There are some rare instances where certain areas never recover (see Subprime Mortgage Crisis Savings & Loans Crisis where scores of unwanted properties exist). Things to consider:\",\n \"A possibility could be real estate brokerage firms such as Realogy or Prudential. Although a brokerage commission is linked to the sale prices it is more directly impacted by sales volume. If volume is maintained or goes up a real estate brokerage firm can actually profit rather handsomely in an up market or a down market. If sales volume does go up another option would be other service markets for real estate such as real estate information and marketing websites and sources i.e. http://www.trulia.com. Furthermore one can go and make a broad generalization such as since real estate no longer requires the same quantity of construction material other industries sensitive to the price of those commodities should technically have a lower cost of doing business. But be careful in the US much of the wealth an average american has is in their home. In this case this means that the economy as a whole takes a dive due to consumer uncertainty. In which case safe havens could benefit, may be things like Proctor & Gamble, gold, or treasuries. Side Note: You can always short builders or someone who loses if the housing market declines, this will make your investment higher as a result of the security going lower.\",\n \"Those folks should be introduced to some real estate folks I know, they'd get along famously, being as how they still think it's 2007. The amount of housing out there requires that a large market of consumers is available to purchase them. If housing prices rose infinitely ahead of salaries, the market for potential buyers would continue to shrink until supply would outstrip demand. And then we have the wonderful housing bubble like the one that we just went through (or in some places like China, have the potential to go through). Short version: It violates the relationship between supply and demand.\",\n \"Mortgage interest is a different story. That's a consumer financing consumption. A business is financing a profit making enterprise. Not sure what the implications would be once this settles down -- probably less long term debt and a greater dependency on equity financing.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["The article John cites says no correlation, but this chart from the article says otherwise; One sees the rate drop from 14% to 4% and housing rise from an index of 50 to near 190. (reaching over to my TI BA-35 calculator) I see that at 14%, $1000/mo will buy $84,400 worth of mortgage, but at 4%, it will buy $209,500. 2-1/2 times the borrowing power for the same payment. But wait, my friends at West Egg tell me that inflation means I can't compare $1000 in 1980 to the same $1000 in 2010. The $1,000 inflates to $2611 (i.e. an income rising only with inflation, no more) and that can fund a mortgage for $546,900. This is 6.5 times the original borrowing power, yet the housing index 'only' rose 3.8X. See that crazy chart? Housing actually got cheaper from 1980 to the peak. Statistics can say whatever you wish. Interest rate change drove all the change in housing prices, but not quite as much as it should have. To answer your question - I expect that when rates rise (and they will) housing prices will take a hit. In today's dollars, a current $1000 borrows (at 4%) nearly $210K, but at 6%, just $167K. If rates took a jump from these record lows, that's the nature of the risk you'd take.","Interest rates do generally affect house prices but other factors do too, especially the unemployment rate. However, everything else being equal, when interest rates drop, it makes the borrowing of money cheaper so tends to stimulate the economy and the housing market, increasing the demand for houses and generally causes house prices to increase (especially if the supply of new housing doesn't increase with the demand). When interest rates go up the opposite happens. Usually interest rates go down in order to stimulate a slowing economy and interest rates go up to slow down an overheated economy. Regarding your situation you are able to get a 30 year fixed rate at today’s interest rates (in Australia the longest fixed rate you can get is for 10 years and the rate is usually 1 or 2 percent higher than the standard variable rate. Most people here go for the variable rate or a fixed rate of between 1 to 3 years). This means that even if rates do go up in the future you won't be paying a higher rate, which is a positive for you. You are buying the house to live in so as long as you can keep making the repayments you should not be too worried if the price of the house drops sometime in the future, because if your house has dropped and you want to sell to buy another house to live in, then that house would have also dropped relative to yours (give or take). So your main worry is that rates will go up causing both house prices to fall and unemployment to rise, and you yourself losing your job and eventually your house. It is a risk, but what you need to consider is if you can manage that risk. Firstly, I believe rates won't be going up in the US for a number of years, and if and when they do start going up they will most probably start going up slowly. So you have some time on your side. Secondly, what can you do between now and when interest rates do start going up in a few years: Try to put more saving away to increase your safety net from 6 months to 12 months or more, or make extra repayments into your home loan so that you are ahead if things do go wrong. If you are worried that you could lose your job, what can you do to reduce your chances of losing your job or increasing your chances of getting a new job quickly if you do lose it? Improve your current skills, get new skills, become an invaluable employee, or look at possible opportunities to start your own business. Do your own research on the types of houses you are looking at buying, the more houses you look at the better prepared you will be when the right house at the right price comes along, and the less chance that you will be rushed into buying what might be an overpriced house. So to sum it up; do as much research as you can, have an understanding of what your risks are and how you are going to manage those risks."],"string":"[\n \"The article John cites says no correlation, but this chart from the article says otherwise; One sees the rate drop from 14% to 4% and housing rise from an index of 50 to near 190. (reaching over to my TI BA-35 calculator) I see that at 14%, $1000/mo will buy $84,400 worth of mortgage, but at 4%, it will buy $209,500. 2-1/2 times the borrowing power for the same payment. But wait, my friends at West Egg tell me that inflation means I can't compare $1000 in 1980 to the same $1000 in 2010. The $1,000 inflates to $2611 (i.e. an income rising only with inflation, no more) and that can fund a mortgage for $546,900. This is 6.5 times the original borrowing power, yet the housing index 'only' rose 3.8X. See that crazy chart? Housing actually got cheaper from 1980 to the peak. Statistics can say whatever you wish. Interest rate change drove all the change in housing prices, but not quite as much as it should have. To answer your question - I expect that when rates rise (and they will) housing prices will take a hit. In today's dollars, a current $1000 borrows (at 4%) nearly $210K, but at 6%, just $167K. If rates took a jump from these record lows, that's the nature of the risk you'd take.\",\n \"Interest rates do generally affect house prices but other factors do too, especially the unemployment rate. However, everything else being equal, when interest rates drop, it makes the borrowing of money cheaper so tends to stimulate the economy and the housing market, increasing the demand for houses and generally causes house prices to increase (especially if the supply of new housing doesn't increase with the demand). When interest rates go up the opposite happens. Usually interest rates go down in order to stimulate a slowing economy and interest rates go up to slow down an overheated economy. Regarding your situation you are able to get a 30 year fixed rate at today’s interest rates (in Australia the longest fixed rate you can get is for 10 years and the rate is usually 1 or 2 percent higher than the standard variable rate. Most people here go for the variable rate or a fixed rate of between 1 to 3 years). This means that even if rates do go up in the future you won't be paying a higher rate, which is a positive for you. You are buying the house to live in so as long as you can keep making the repayments you should not be too worried if the price of the house drops sometime in the future, because if your house has dropped and you want to sell to buy another house to live in, then that house would have also dropped relative to yours (give or take). So your main worry is that rates will go up causing both house prices to fall and unemployment to rise, and you yourself losing your job and eventually your house. It is a risk, but what you need to consider is if you can manage that risk. Firstly, I believe rates won't be going up in the US for a number of years, and if and when they do start going up they will most probably start going up slowly. So you have some time on your side. Secondly, what can you do between now and when interest rates do start going up in a few years: Try to put more saving away to increase your safety net from 6 months to 12 months or more, or make extra repayments into your home loan so that you are ahead if things do go wrong. If you are worried that you could lose your job, what can you do to reduce your chances of losing your job or increasing your chances of getting a new job quickly if you do lose it? Improve your current skills, get new skills, become an invaluable employee, or look at possible opportunities to start your own business. Do your own research on the types of houses you are looking at buying, the more houses you look at the better prepared you will be when the right house at the right price comes along, and the less chance that you will be rushed into buying what might be an overpriced house. So to sum it up; do as much research as you can, have an understanding of what your risks are and how you are going to manage those risks.\"\n]","isConversational":false}}},{"rowIdx":95,"cells":{"_id":{"kind":"string","value":"7758"},"query":{"kind":"string","value":"Bid/ask spreads for index funds"},"gt_ids":{"kind":"list like","value":["574327"],"string":"[\n \"574327\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1],"string":"[\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["574327","107123","480315","185115","122323","351518","148721","580364","501153","408524","479461","410123","443275","65587","107462","71545","142696","460347","341544","351011","187061","524612","524940","143238","308071","89205","220486","104652","159471","178034","235576","397445","466845","514529","340143","464337","27930","364735","322826","473150","451855","151391","138383","14185","314008","231863","172569","122679","43432","49168","188497","172703","208331","408103","246531","298350","457811","409995","119819","524030","292865","67616","52589","358997","217002","222974","153660","387980","169062","558130","330890","237450","206744","78626","435746","362579","452122","334919","196721","520963","30417","88228","452939","492212","196520","367071","184051","367960","172374","312015","403864","173967","313525","285466","501748","133788","56894","412197","506302","161153"],"string":"[\n \"574327\",\n \"107123\",\n \"480315\",\n \"185115\",\n \"122323\",\n \"351518\",\n \"148721\",\n \"580364\",\n \"501153\",\n \"408524\",\n \"479461\",\n \"410123\",\n \"443275\",\n \"65587\",\n \"107462\",\n \"71545\",\n \"142696\",\n \"460347\",\n \"341544\",\n \"351011\",\n \"187061\",\n \"524612\",\n \"524940\",\n \"143238\",\n \"308071\",\n \"89205\",\n \"220486\",\n \"104652\",\n \"159471\",\n \"178034\",\n \"235576\",\n \"397445\",\n \"466845\",\n \"514529\",\n \"340143\",\n \"464337\",\n \"27930\",\n \"364735\",\n \"322826\",\n \"473150\",\n \"451855\",\n \"151391\",\n \"138383\",\n \"14185\",\n \"314008\",\n \"231863\",\n \"172569\",\n \"122679\",\n \"43432\",\n \"49168\",\n \"188497\",\n \"172703\",\n \"208331\",\n \"408103\",\n \"246531\",\n \"298350\",\n \"457811\",\n \"409995\",\n \"119819\",\n \"524030\",\n \"292865\",\n \"67616\",\n \"52589\",\n \"358997\",\n \"217002\",\n \"222974\",\n \"153660\",\n \"387980\",\n \"169062\",\n \"558130\",\n \"330890\",\n \"237450\",\n \"206744\",\n \"78626\",\n \"435746\",\n \"362579\",\n \"452122\",\n \"334919\",\n \"196721\",\n \"520963\",\n \"30417\",\n \"88228\",\n \"452939\",\n \"492212\",\n \"196520\",\n \"367071\",\n \"184051\",\n \"367960\",\n \"172374\",\n \"312015\",\n \"403864\",\n \"173967\",\n \"313525\",\n \"285466\",\n \"501748\",\n \"133788\",\n \"56894\",\n \"412197\",\n \"506302\",\n \"161153\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["\"First, what structure does your index fund have? If it is an open-end mutual fund, there are no bid/ask spread as the structure of this security is that it is priced once a day and transactions are done with that price. If it is an exchange-traded fund, then the question becomes how well are authorized participants taking advantage of the spread to make the fund track the index well? This is where you have to get into the Creation and Redemption unit construct of the exchange-traded fund where there are \"\"in-kind\"\" transactions done to either create new shares of the fund or redeem out shares of the fund. In either case, you are making some serious assumptions about the structure of the fund that don't make sense given how these are built. Index funds have lower expense ratios and are thus cheaper than other mutual funds that may take on more costs. If you want suggested reading on this, look at the investing books of John C. Bogle who studied some of this rather extensively, in addition to being one of the first to create an index fund that became known as \"\"Bogle's Folly,\"\" where a couple of key ones would be \"\"Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor\"\" and \"\"Bogle on Mutual Funds: New Perspectives for the Intelligent Investor.\"\" In the case of an open-end fund, there has to be a portion of the fund in cash to handle transaction costs of running the fund as there are management fees to come from running the fund in addition to dividends from the stocks that have to be carefully re-invested and other matters that make this quite easy to note. Vanguard 500 Index Investor portfolio(VFINX) has .38% in cash as an example here where you could look at any open-end mutual fund's portfolio and notice that there may well be some in cash as part of how the fund is managed. It’s the Execution, Stupid would be one of a few articles that looks at the idea of \"\"tracking error\"\" or how well does an index fund actually track the index where it can be noted that in some cases, there can be a little bit of active management in the fund. Just as a minor side note, when I lived in the US I did invest in index funds and found them to be a good investment. I'd still recommend them though I'd argue that while some want to see these as really simple investments, there can be details that make them quite interesting to my mind. How is its price set then? The price is computed by taking the sum value of all the assets of the fund minus the liabilities and divided by the number of outstanding shares. The price of the assets would include the closing price on the stock rather than a bid or ask, similar pricing for bonds held by the fund, derivatives and cash equivalents. Similarly, the liabilities would be costs a fund has to pay that may not have been paid yet such as management fees, brokerage costs, etc. Is it a weighted average of all the underlying stock spreads, or does it stand on its own and stems from the usual supply & demand laws ? There isn't any spread used in determining the \"\"Net Asset Value\"\" for the fund. The fund prices are determined after the market is closed and so a closing price can be used for stocks. The liabilities could include the costs to run the fund as part of the accounting in the fund, that most items have to come down to either being an asset, something with a positive value, or a liability, something with a negative value. Something to consider also is the size of the fund. With over $7,000,000,000 in assets, a .01% amount is still $700,000 which is quite a large amount in some ways.\"","tl;dr- libor plus a small (<50bps) spread for S&P500 exposure. larger spread for less liquid/ more esoteric index. a swap is basically just outsourcing balance sheet to a dealer bank. the counterparty (dealer) is shorting you (the fund) the return of the index. to hedge their short, the dealer would borrow funds and buy the stocks in the index. large dealer banks can borrow at basically libor. they'll also expect compensation for the transaction costs of buying the hedge plus a profit on the (small amount) of capital they need to finance this transaction. this will vary based on the size of the portfolio. s&p500 costs maybe 5bps in transaction cost. an EM index costs maybe 50bps. so it will depend on the index. profit to the dealer depends on supply/demand dynamics. sometimes this transaction will be in demand, sometimes the short side will be more valuable. so it depends on the index you're talking about as well as market dynamics. right now for s&p500 exposure, not more than libor plus 50 for a mid-sized fund.","\"ETFs purchases are subject to a bid/ask spread, which is the difference between the highest available purchase offer (\"\"bid\"\") and the lowest available sell offer (\"\"ask\"\"). You can read more about this concept here. This cost doesn't exist for mutual funds, which are priced once per day, and buyers and sellers all use the same price for transactions that day. ETFs allow you to trade any time that the market is open. If you're investing for the long term (which means you're not trying to time your buy/sell orders to a particular time of day), and the pricing is otherwise equal between the ETF and the mutual fund (which they are in the case of Vanguard's ETFs and Admiral Shares mutual funds), I would go with the mutual fund because it eliminates any cost associated with bid/ask spread.\"","I'm not exactly sure, but it may be due to liquidity preference. SPY has a much higher volume (30d average of roughly 70m vs. 3.3m, 1.9m for IVV, VOO respectively), and similarly has a narrow bid ask spread of about 0.01 compared to 0.02 for the other two. I could be wrong, but I'm going to leave this post up and look in to it later, I'm curious too. The difference is very consistent though, so it may be something in their methodology.","The equation you show is correct, you've simply pointed out that you understand that you buy at the 'ask' price, and later sell at the 'bid.' There is no bid/ask on the S&P, as you can't trade it directly. You have a few alternatives, however - you can trade SPY, the (most well known) S&P ETF whose price reflects 1/10 the value or VOO (Vanguard's offering) as well as others. Each of these ETFs gives you a bid/ask during market hours. They trade like a stock, have shares that are reasonably priced, and are optionable. To trade the index itself, you need to trade the futures. S&P 500 Futures and Options is the CME Group's brief info guide on standard and mini contracts. Welcome to SE.","Bid and ask prices of stocks change not just daily, but continuously. They are, as the names suggest, what price people are asking for to be willing to sell their stock, and how much people are bidding to be willing to buy it at that moment. Your equation is accurate in theory, but doesn't actually apply. The bid and ask prices are indicators of the value of the stock, but the only think you care about as a trader are what you actually pay and sell it for. So regardless of the bid/ask the equation is: Since you cannot buy an index directly (index, like indicator) it doesn't make sense to discuss how much people are bidding or asking for it. Like JoeTaxpayer said, you can buy (and therefore bid/ask) for ETFs and funds that attempt to track the value of the S&P 500.","\"Funds which track the same index may have different nominal prices. From an investors point of view, this is not important. What is important is that when the underlying index moves by a given percentage, the price of the tracking funds also move by an equal percentage. In other words, if the S&P500 rises by 5%, then the price of those funds tracking the S&P500 will also rise by 5%. Therefore, investing a given amount in any of the tracking funds will produce the same profit or loss, regardless of the nominal prices at which the individual funds are trading. To see this, use the \"\"compare\"\" function available on the popular online charting services. For example, in Google finance call up a chart of the S&P500 index, then use the compare textbox to enter the codes for the various ETFs tracking the S&P500. You will see that they all track the S&P500 equally so that your relative returns will be equal from each of the tracking funds. Any small difference in total returns will be attributable to management fees and expenses, which is why low fees are so important in passive investing.\"","\"This is a misconception. One of the explanations is that if you buy at the ask price and want to sell it right away, you can only sell at the bid price. This is incorrect. There are no two separate bid and ask prices. The price you buy (your \"\"bid\"\") is the same price someone else sells (their \"\"sell\"\"). The same goes when you sell - the price you sell at is the price someone else buys. There's no spread with stocks. Emphasized it on purpose, because many people (especially those who gamble on stock exchange without knowing what they're doing) don't understand how the stock market works. On the stock exchange, the transaction price is the match between the bid price and the ask price. Thus, on any given transaction, bid always equals ask. There's no spread. There is spread with commodities (if you buy it directly, especially), contracts, mutual funds and other kinds of brokered transactions that go through a third party. The difference (spread) is that third party's fee for assuming part of the risk in the transaction, and is indeed added to your cost (indirectly, in the way you described). These transactions don't go directly between a seller and a buyer. For example, there's no buyer when you redeem some of your mutual fund - the fund pays you money. So the fund assumes certain risk, which is why there's a spread in the prices to invest and to redeem. Similarly with commodities: when you buy a gold bar - you buy it from a dealer, who needs to keep a stock. Thus, the dealer will not buy from you at the same price: there's a premium on sale and a discount on buy, which is a spread, to compensate the dealer for the risk of keeping a stock.\"","\"From How are indexes weighted?: Market-capitalization weighted indexes (or market cap- or cap-weighted indexes) weight their securities by market value as measured by capitalization: that is, current security price * outstanding shares. The vast majority of equity indexes today are cap-weighted, including the S&P 500 and the FTSE 100. In a cap-weighted index, changes in the market value of larger securities move the index’s overall trajectory more than those of smaller ones. If the fund you are referencing is an ETF then there may be some work to do to figure out what underlying securities to use when handling Creation and Redemption units as an ETF will generally have shares created in 50,000 shares at a time through Authorized Participants. If the fund you are referencing is an open-end fund then there is still cash flows to manage in the fund as the fund has create and redeem shares in on a daily basis. Note in both cases that there can be updates to an index such as quarterly rebalancing of outstanding share counts, changes in members because of mergers, acquisitions or spin-offs and possibly a few other factors. How to Beat the Benchmark has a piece that may also be useful here for those indices with many members from 1998: As you can see, its TE is also persistently positive, but if anything seems to be declining over time. In fact, the average net TE for the whole period is +0.155% per month, or an astounding +1.88% pa net after expenses. The fund expense ratio is 0.61% annually, for a whopping before expense TE of +2.5% annually. This is once again highly statistically significant, with p values of 0.015 after expenses and 0.0022 before expenses. (The SD of the TE is higher for DFSCX than for NAESX, lowering its degree of statistical significance.) It is remarkable enough for any fund to beat its benchmark by 2.5% annually over 17 years, but it is downright eerie to see this done by an index fund. To complete the picture, since 1992 the Vanguard Extended Index Fund has beaten its benchmark (the Wilshire 4500) by 0.56% per year after expenses (0.81% net of expenses), and even the Vanguard Index Trust 500 has beaten its benchmark by a razor thin 0.08% annually before (but not after) expenses in the same period. So what is going on here? A hint is found in DFA's 1996 Reference Guide: The 9-10 Portfolio captures the return behavior of U.S. small company stocks as identified by Rolf Banz and other academic researchers. Dimensional employs a \"\"patient buyer\"\" discount block trading strategy which has resulted in negative total trading costs, despite the poor liquidity of small company stocks. Beginning in 1982, Ibbotson Associates of Chicago has used the 9-10 Portfolio results to calculate the performance of small company stocks for their Stocks, Bonds, Bills, and Inflation yearbook. A small cap index fund cannot possibly own all of the thousands of stocks in its benchmark; instead it owns a \"\"representative sample.\"\" Further, these stocks are usually thinly traded, with wide bid/ask spreads. In essence what the folks at DFA learned was that they could tell the market makers in these stocks, \"\"Look old chaps, we don't have to own your stock, and unless you let us inside your spread, we'll pitch our tents elsewhere. Further, we're prepared to wait until a motivated seller wishes to unload a large block.\"\" In a sense, this gives the fund the luxury of picking and choosing stocks at prices more favorable than generally available. Hence, higher long term returns. It appears that Vanguard did not tumble onto this until a decade later, but tumble they did. To complete the picture, this strategy works best in the thinnest markets, so the excess returns are greatest in the smallest stocks, which is why the positive TE is greatest for the DFA 9-10 Fund, less in the Vanguard Small Cap Fund, less still in the Vanguard Index Extended Fund, and minuscule with the S&P500. There are some who say the biggest joke in the world of finance is the idea of value added active management. If so, then the punch line seems to be this: If you really want to beat the indexes, then you gotta buy an index fund.\"","Index Funds & ETFs, if they are tracking the same index, will be the same in an ideal world. The difference would be because of the following factors: Expense ratio: i.e. the expense the funds charge. This varies and hence it would lead to a difference in performance. Tracking error: this means that there is a small percentage of error between the actual index composition and the fund composition. This is due to various reasons. Effectively this would result in the difference between values. Demand / Supply: with ETFs, the fund is traded on stock exchanges like a stock. If the general feeling is that the index is rising, it could lead to an increase in the price of the ETF. Index funds on the other hand would remain the same for the day and are less liquid. This results in a price increase / decrease depending on the market. The above explains the reason for the difference. Regarding which one to buy, one would need to consider other factors like: a) How easy is it to buy ETFs? Do you already hold Demat A/C & access to brokers to help you conduct the transaction or do you need to open an additional account at some cost. b) Normally funds do not need any account, but are you OK with less liquidity as it would take more time to redeem funds.","\"The S&P 500 is an index. This refers to a specific collection of securities which is held in perfect proportion. The dollar value of an index is scaled arbitrarily and is based off of an arbitrary starting price. (Side note: this is why an index never has a \"\"split\"\"). Lets look at what assumptions are included in the pricing of an index: All securities are held in perfect proportion. This means that if you invest $100 in the index you will receive 0.2746 shares of IBM, 0.000478 shares of General Motors, etc. Also, if a security is added/dropped from the list, you are immediately rebalancing the remaining money. Zero commissions are charged. When the index is calculated, they are using the current price (last trade) of the underlying securities, they are not actually purchasing them. Therefore it assumes that securities may be purchased without commission or other liquidity costs. Also closely related is the following. The current price has full liquidity. If the last quoted price is $20 for a security, the index assumes that you can purchase an arbitrary amount of the security at that price with a counterparty that is willing to trade. Dividends are distributed immediately. If you own 500 equities, and most distributed dividends quarterly, this means you will receive on average 4 dividends per day. Management is free. All equities can be purchased with zero research and administrative costs. There is no gains tax. Trading required by the assumptions above would change your holdings constantly and you are exempt from short-term or long-term capital gains taxes. Each one of these assumptions is, of course, invalid. And the fund which endeavors to track the index must make several decisions in how to closely track the index while avoiding the problems (costs) caused by the assumptions. These are shortcuts or \"\"approximations\"\". Each shortcut leads to performance which does not exactly match the index. Management fees. Fees are charged to the investor as load, annual fees and/or redemptions. Securities are purchased at real prices. If Facebook were removed from the S&P 500 overnight tonight, the fund would sell its shares at the price buyers are bidding the next market day at 09:30. This could be significantly different than the price today, which the index records. Securities are purchased in blocks. Rather than buying 0.000478 shares of General Motors each time someone invests a dollar, they wait for a few people and then buy a full share or a round lot. Securities are substituted. With lots of analysis, it may be determined that two stocks move in tandem. The fund may purchase two shares of General Motors rather than one of General Motors and Ford. This halves transaction costs. Debt is used. As part of substitution, equities may be replaced by options. Option pricing shows that ownership of options is equivalent to holding an amount of debt. Other forms of leverage may also be employed to achieve desired market exposure. See also: beta. Dividends are bundled. VFINX, the largest S&P 500 tracking fund, pays dividends quarterly rather than immediately as earned. The dividend money which is not paid to you is either deployed to buy other securities or put into a sinking fund for payment. There are many reasons why you can't get the actual performance quoted in an index. And for other more exotic indices, like VIX the volatility index, even more so. The best you can do is work with someone that has a good reputation and measure their performance.\"","\"To add on to the other answers, in asking why funds have different price points one might be asking why stocks aren't normalized so a unit price of $196 in one stock can be directly compared to the same price in another stock. While this might not make sense with AAPL vs. GOOG (it would be like comparing apples to oranges, pun intended, not to mention how would two different companies ever come to such an agreement) it does seem like it would make more sense when tracking an index. And in fact less agreement between different funds would be required as some \"\"natural\"\" price points exist such as dividing by 100 (like some S&P funds do). However, there are a couple of reasons why two different funds might price their shares of the same underlying index differently. Demand - If there are a lot of people wanting the issue, more shares might be issued at a lower price. Or, there might be a lot of demand centered on a certain price range. Pricing - shares that are priced higher will find fewer buyers, because it makes it harder to buy round lots (100 shares at $100/share is $10,000 while at $10/share it's only $1000). While not everyone buys stock in lots, it's important if you do anything with (standardized) options on the stock because they are always acting on lots. In addition, even if you don't buy round lots a higher price makes it harder to buy in for a specific amount because each unit share has a greater chance to be further away from your target amount. Conversely, shares that are priced too low will also find fewer buyers, because some holders have minimum price requirements due to low price (e.g. penny) stocks tending to be more speculative and volatile. So, different funds tracking the same index might pick different price points to satisfy demand that is not being filled by other funds selling at a different price point.\"","This is great. Thanks! So, just assuming a fund happened to average out to libor plus 50 for a given year, would applying that rate to the notional value of the index swaps provide a reasonable estimate of the drag an ETF investor would experience due to the cost associated with the index swaps? For instance, applying this to the hypothetical I linked to in the original question, they assumed fund assets of $100M with 2x leverage achieved through $85M of S&P500 stocks, $25M of S&P500 futures, and a notional value of the S&P500 swaps at $90M. So the true costs to an ETF investor would be: expense ratio + commissions on the $85M of S&P500 holdings + costs associated with $25M of futures contracts + costs associated with the $90M of swaps? And the costs associated with the $90M of swaps might be roughly libor plus 50?","Some index funds offer lower expense ratios to those who invest large amounts of money. For example, Vanguard offers Admiral Shares of many of its mutual funds (including several index funds) to individuals who invest more than $50K or $100K, and these Shares have lower expense ratios than the Investor shares in the fund. There are Institutional Shares designed for investments by pension plans, 401k plans of large companies etc which have even lower expenses than Admiral Shares. Individuals working for large companies sometimes get access to Institutional Shares through their 401k plans. Thus, there is something to gained by investing in just one index fund (for a particular index) that offers lower expense ratios for large investments instead of diversifying into several index funds all tracking the same index. Of course, this advantage might be offset by failure to track the index closely, but this tracking should be monitored not on a daily basis but over much longer periods of time to test whether your favorite fund is perennially trailing the index by far more than its competitors with larger expense ratios. Remember that the Net Asset Value (NAV) published by each mutual fund after the markets close already take into account the expense ratio.","So, why or why should I not invest in the cheaper index fund? They are both same, one is not cheaper than other. You get something that is worth $1000. To give a simple illustration; There is an item for $100, Vanguard creates 10 Units out of this so price per unit is $10. Schwab creates 25 units out of this, so the per unit price is $4. Now if you are looking at investing $20; with Vanguard you would get 2 units, with Schwab you would get 5 units. This does not mean one is cheaper than other. Both are at the same value of $20. The Factors you need to consider are; Related question What differentiates index funds and ETFs?","I have only found solution for UK residents so far, see the article on This Is Money: Cheapest index-tracking funds: Trackers with the lowest charges - and the best ways to invest in them","Disclosure - I love Jack Bogle. Jack basically invented the index fund, and as a result, let the common investor have an opportunity to choose a long term return of (S&P-.05%) instead of losing nearly 2% that many funds in that day charged. The use of index investing has saved investors many billions of dollars. The 1% round trip, total cost to buy/sell, was common. Fees for trading have since dropped. I happen to use Schwab who charges $9 for a trade. On $100,000, this is not .5% ($500) but less than .01%. I think it's safe to say that billion dollar mutual funds are paying even less for trades that I do. I believe Jack's example here is a combination of old data and hyperbole. The cost is not so much for the trades, per se, but for the people managing the fund. An index fund has a manager of course, but it's pretty much run by a computer.","As has been pointed out, one isn't cheaper than the other. One may have a lower price per share than the other, but that's not the same thing. Let's pretend that the total market valuation of all the stocks within the index was $10,000,000. (Look, I said let's pretend.) You want to invest $1,000. For the time being, let's also pretend that your purchasing 0.01% of all the stock won't affect prices anywhere. One company splits the index into 10,000 parts worth $1,000 each. The other splits the same index into 10,000,000 parts worth $1 each. Both track the underlying index perfectly. If you invest $1,000 with the first company, you get one part; if you invest $1,000 with the second, you get 1,000 parts. Ignoring spreads, transaction fees and the like, immediately after the purchase, both are worth exactly $1,000 to you. Now, suppose the index goes up 2%. The first company's shares of the index (of which you would have exactly one) are now worth $1,020 each, and the second company's shares of the index (of which you would have exactly 1,000) are worth $1.02 each. In each case, you now have index shares valued at $1,020 for a 2% increase ($1,020 / $1,000 = 1.02 = 102% of your original investment). As you can see, there is no reason to look at the price per share unless you have to buy in terms of whole shares, which is common in the stock market but not necessarily common at all in mutual funds. Because in this case, both funds track the same underlying index, there is no real reason to purchase one rather than the other because you believe they will perform differently. In an ideal world, the two will perform exactly equally. The way to compare the price of mutual funds is to look at the expense ratio. The lower the expense ratio is, the cheaper the fund is, and the less of your money is being eroded every day in fees. Unless you have some very good reason to do differently, that is how you should compare the price of any investment vehicles that track the same underlying commodity (in this case, the S&P 500).","Index funds, like IBB, generally lack active management, which equates to lower expenses. This is simply because the target index, the NASDAQ Biotechnology Index in the case of IBB, is composed of known quantities. This means there won't be stock pickers or analysts constantly swapping holdings, increasing the turnover rate of the portfolio and increasing capital gains; costs that are offset by higher expense ratios in more actively managed funds.","While volume per trade is higher at the open and to a lesser extent at the close, the overall volume is actually lower, on average. Bid ask spreads are widest at the open and to a lesser extent at the close. Generally, bid ask spreads are inversely proportional to overall volumes. Why this is the case hasn't been sufficiently clearly answered by academia yet, but some theories are that","What makes the S&P 500 Index funds have low expenses ratios is that the amount of money spent by the mutual fund company on research is Zero. Standard and Poors does the research, the fund companies piggy back on that research. Another big factor in keeping expenses low is the fact the companies that makeup the index don't change very often. If the fund frequently changes the makeup of the investments not only can that trigger tax considerations but there are costs associated with all those transactions. The question is: do the other algorithms overcome the additional costs due to higher expenses and taxes.","ETFs are a type of investment, not a specific choice. In other words, there are good ETFs and bad. What you see is the general statement that ETFs are preferable to most mutual funds, if only for the fact that they are low cost. An index ETF such as SPY (which reflects the S&P 500 index) has a .09% annual expense, vs a mutual fund which average a full percent or more. sheegaon isn't wrong, I just have a different spin to offer you. Given a long term return of say even 8% (note - this question is not a debate of the long term return, and I purposely chose a low number compared to the long term average, closer to 10%) and the current CD rate of <1%, a 1% hit for the commission on the buy side doesn't bother me. The sell won't occur for a long time, and $8 on a $10K sale is no big deal. I'd not expect you to save $1K/yr in cash/CDs for the years it would take to make that $8 fee look tiny. Not when over time the growth will overshaddow this. One day you will be in a position where the swings in the market will produce the random increase or decrease to your net worth in the $10s of thousands. Do you know why you won't lose a night's sleep over this? Because when you invested your first $1K, and started to pay attention to the market, you saw how some days had swings of 3 or 4%, and you built up an immunity to the day to day noise. You stayed invested and as you gained wealth, you stuck to the right rebalancing each year, so a market crash which took others down by 30%, only impacted you by 15-20, and you were ready for the next move to the upside. And you also saw that since mutual funds with their 1% fees never beat the index over time, you were happy to say you lagged the S&P by .09%, or 1% over 11 year's time vs those whose funds had some great years, but lost it all in the bad years. And by the way, right until you are in the 25% bracket, Roth is the way to go. When you are at 25%, that's the time to use pre-tax accounts to get just below the cuttoff. Last, welcome to SE. Edit - see sheegaon's answer below. I agree, I missed the cost of the bid/ask spread. Going with the lowest cost (index) funds may make better sense for you. To clarify, Sheehan points out that ETFs trade like a stock, a commission, and a bid/ask, both add to transaction cost. So, agreeing this is the case, an indexed-based mutual fund can provide the best of possible options. Reflecting the S&P (for example) less a small anual expense, .1% or less.","One difference is the bid/ask spread will cost you more in a lower cost stock than a higher cost one. Say you have two highly liquid stocks with tiny spreads: If you wanted to buy say $2,000 of stock: Now imagine these are almost identical ETFs tracking the S&P 500 index and extrapolate this to a trade of $2,000,000 and you can see there's some cost savings in the higher priced stock. As a practical example, recently a popular S&P 500 ETF (Vanguard's VOO) did a reverse split to help investors minimize this oft-missed cost.","\"There are a few reasons why an index mutual fund may be preferable to an ETF: I looked at the iShare S&P 500 ETF and it has an expense ratio of 0.07%. The Vanguard Admiral S&P 500 index has an expense ratio of 0.05% and the Investor Shares have an expense ratio of 0.17%, do I don't necessarily agree with your statement \"\"admiral class Vanguard shares don't beat the iShares ETF\"\".\"","Why not figure out the % composition of the index and invest in the participating securities directly? This isn't really practical. Two indices I use follow the Russell 2000 and the S&P 500 Those two indices represent 2500 stocks. A $4 brokerage commission per trade would mean that it would cost me $10,000 in transaction fees to buy a position in 2500 stocks. Not to mention, I don't want to track 2500 investments. Index funds provide inexpensive diversity.","The market doesn't really need to adjust for fees on ETF funds that are often less than 1/10th of a percent. The loss of the return is more than made up for by the diversification. How does the market adjust for trading fees? It doesn't have to, it's just a cost of doing business. If one broker or platform offers better fee structures, people will naturally migrate toward the lower fees.","\"You cannot actually buy an index in the true sense of the word. An index is created and maintained by a company like Standard and Poor's who licenses the use of the index to firms like Vanguard. The S&P 500 is an example of an index. The S&P 500 \"\"index includes 500 leading companies\"\", many finical companies sell products which track to this index. The two most popular products which track to indexes are Mutual Funds (as called Index Funds and Index Mutual Funds) and Exchange Traded Funds (as called ETFs). Each Index Mutual Fund or ETF has an index which it tracks against, meaning they hold securities which make up a sample of the index (some indexes like bond indexes are very hard to hold everything that makes them up). Looking at the Vanguard S&P 500 Index Mutual Fund (ticker VFINX) we see that it tracks against the S&P 500 index. Looking at its holdings we see the 500-ish stocks that it holds along with a small amount of bonds and cash to handle cash flow for people buying and sell shares. If we look at the Vanguard S&P 500 ETF (ticker VOO) we see that it also tracks against the S&P 500 index. Looking at its holdings we see they are very similar to the similar Index Mutual Fund. Other companies like T. Rowe Price have similar offering. Look at the T. Rowe Price Equity Index 500 Fund (ticker PREIX) its holdings in stocks are the same as the similar Vanguard fund and like the Vanguard fund it also holds a small amount of bonds and cash to handle cash flow. The only real difference between different products which track against the same index is in the expense ratio (fees for managing the fund) and in the small differences in the execution of the funds. For the most part execution of the funds do not really matter to most people (it has a very small effect), what matters is the expense (the fees paid to own the fund). If we just compare the expense ratio of the Vanguard and T. Rowe Price funds we see (as of 27 Feb 2016) Vanguard has an expense ratio of 0.17% for it Index Mutual Fund and 0.05% for its ETF, while T. Rowe Price has an expense ratio of 0.27%. These are just the fees for the funds themselves, there are also account maintenance fees (which normally go down as the amount of money you have invested at a firm go up) and in the case of ETFs execution cost (cost to trade the shares along with the difference between the bid and ask on the shares). If you are just starting out I would say going with the Index Mutual Fund would easier and most likely would cost less over-all if you are buying a small amount of shares every month. When choosing a company look at the expense ratio on the funds and the account maintenance fees (along with the account minimals). Vanguard is well known for having low fees and they in fact were the first to offer Index Mutual Funds. For more info on the S&P 500 index see also this Investopedia entry on the S&P 500 index. Do not worry if this is all a bit confusing it is to most people (myself included) at first.\"","This is called the Ask-Bid Spread. The difference varies based on the liquidly of the asset. The more liquid or the higher the volume of trades for the asset then the smaller the spread is. The spread goes to the broker to pay for some of the cost of the trade. My guess is that when there is a higher volume of shares being traded, brokers need to take less of a fee per share out of the transaction to cover their costs. This makes the spread is smaller. This is essentially the difference in price between the highest price that a buyer is willing to pay for an asset and the lowest price for which a seller is willing to sell it. The seller will get the bid price and the buyer will pay the ask and the broker keeps the spread. From http://www.investopedia.com/terms/b/bid-askspread.asp","Why don't you look at the actual funds and etfs in question rather than seeking a general conclusion about all pairs of funds and etfs? For example, Vanguard's total stock market index fund (VTSAX) and ETF (VTI). Comparing the two on yahoo finance I find no difference over the last 5 years visually. For a different pair of funds you may find something very slightly different. In many cases the index fund and ETF will not have the same benchmark and fees so comparisons get a little more cloudy. I recall a while ago there was an article that was pointing out that at the time emerging market ETF's had higher fees than corresponding index funds. For this reason I think you should examine your question on a case-by-case basis. Index fund and ETF returns are all publicly available so you don't have to guess.","You can trade an index by using a Contract For Difference, or CFD. Various brokers offer this method and the spreads are quite low. They tend to widen outside of market hours, and not all brokers offer the same spreads. I would look for a broker that offers the lowest spread on the index you are interested in. You should also do your due diligence and check they are regulated by the relevant authority pertaining to their territory, eg FSA for uk","More on a technical note, but the spread on an ETF tends to be worst at market open and near market close. (assuming the ETF constituents are traded on a synchronous basis.) If possible, it's often best to let market makers get up and running before allowing your order to flow into market.","\"That share class may not have a ticker symbol though \"\"Black Rock MSCI ACWI ex-US Index\"\" does have a ticker for \"\"Investor A\"\" shares that is BDOAX. Some funds will have multiple share classes that is a way to have fees be applied in various ways. Mutual fund classes would be the SEC document about this if you want a government source within the US around this. Something else to consider is that if you are investing in a \"\"Fund of funds\"\" is that there can be two layers of expense ratios to consider. Vanguard is well-known for keeping its expenses low.\"","There are a few ETFs that fall into the money market category: SHV, BIL, PVI and MINT. What normally looks like an insignificant expense ratio looks pretty big when compared to the small yields offered by these funds. The same holds for the spread and transaction fees. For that reason, I'm not sure if the fund route is worth it.","\"The 0.14% is coming out of the assets of the fund itself. The expense ratio can be broken down so that on any given day, a portion of the fund's assets are set aside to cover the administrative cost of running the fund. A fund's total return already includes the expense ratio. This depends a lot on what kind of account in which you hold the fund. If you hold the fund in an IRA then you wouldn't have taxes from the fund itself as the account is sheltered. There may be notes in the prospectus and latest annual and semi-annual report of what past distributions have been as remember the fund isn't paying taxes but rather passing that along in the form of distributions to shareholders. Also, there is something to be said for what kinds of investments the fund holds as if the fund is to hold small-cap stocks then it may have to sell the stock if it gets too big and thus would pass on the capital gains to shareholders. Other funds may not have this issue as they invest in large-cap stocks that don't have this problem. Some funds may invest in municipal bonds which would have tax-exempt interest that may be another strategy for lowering taxes in bond funds. Depending on the fund quite a broad range actually. In the case of the Fidelity fund you link, it is a \"\"Fund of funds\"\" and thus has a 0% expense ratio as Fidelity has underlying funds that that fund holds. What level of active management are you expecting, what economies of scale does the fund have to bring down the expense ratio and what expense ratio is typical for that category of fund would come to mind as a few things to consider. That Fidelity link is incorrect as both Morningstar and Fidelity's site list an expense ratio for the fund of funds at .79%. I'd expect an institutional US large-cap index fund to have the lowest expense ratio outside of the fund of fund situation while if I were to pick an actively managed fund that requires a lot of research then the expense ratio may well be much higher though this is where you have to consider what strategy do you want the fund to be employing and how much of a cost are you prepared to accept for that? VTTHX is Vanguard Target Retirement 2035 Fund which has a .14% expense ratio which is using index funds in the fund of funds system.\"","Cheaper would refer to the fees of a fund rather than the share price, IMO. Are 2 quarters worth more or less than 10 nickels? This is another way to express your question though most open-end funds bought directly from the fund family or through fund supermarkets would do fractional shares that may be better than going through ETFs though there can be some brokers like Sharebuilder that used to do fractional shares though not necessarily having the best execution as I recall.","The expense ratio is stated as an annual figure but is often broken down to be taken out periodically of the fund's assets. In traditional mutual funds, there will be a percent of assets in cash that can be nibbled to cover the expenses of running the fund and most deposits into the fund are done in cash. In an exchange-traded fund, new shares are often created through creation/redemption units which are baskets of securities that make things a bit different. In the case of an ETF, the dividends may be reduced by the expense ratio as the trading price follows the index usually. Expense ratios can vary as in some cases there may be initial waivers on new funds for a time period to allow them to build an asset base. There is also something to be said for economies of scale that allow a fund to have its expense ratio go down over time as it builds a larger asset base. These would be noted in the prospectus and annual reports of the fund to some degree. SPDR Annual Report on page 312 for the Russell 3000 ETF notes its expense ratio over the past 5 years being the following: 0.20% 0.20% 0.22% 0.20% 0.21% Thus, there is an example of some fluctuation if you want a real world example.","Also, when they mean SP500 fund - it means that fund which invests in the top 500 companies in the SP Index, is my understanding correct? Yes that is right. In reality they may not be able to invest in all 500 companies in same proportion, but is reflective of the composition. I wanted to know whether India also has a company similar to Vanguard which offers low cost index funds. Almost all mutual fund companies offer a NIFTY index fund, both as mutual fund as well as ETF. You can search for index fund and see the total assets to find out which is bigger compared to others.","I think that assuming that you're not looking to trade the fund, an index Mutual Fund is a better overall value than an ETF. The cost difference is negligible, and the ability to dollar-cost average future contributions with no transaction costs. You also have to be careful with ETFs; the spreads are wide on a low-volume fund and some ETFs are going more exotic things that can burn a novice investor. Track two similar funds (say Vanguard Total Stock Market: VTSMX and Vanguard Total Stock Market ETF: VTI), you'll see that they track similarly. If you are a more sophisticated investor, ETFs give you the ability to use options to hedge against declines in value without having to incur capital gains from the sale of the fund. (ie. 20 years from now, can use puts to make up for short-term losses instead of selling shares to avoid losses) For most retail investors, I think you really need to justify using ETFs versus mutual funds. If anything, the limitations of mutual funds (no intra-day trading, no options, etc) discourage speculative behavior that is ultimately not in your best interest. EDIT: Since this answer was written, many brokers have begun offering a suite of ETFs with no transaction fees. That may push the cost equation over to support Index ETFs over Index Mutual Funds, particularly if it's a big ETF with narrow spreads..","As Ross says, SPX is the index itself. This carries no overheads. It is defined as a capitalization-weighted mixture of the stocks of (about) 500 companies. SPY is an index fund that tries to match the performance of SPX. As an index fund it has several differences from the index:","Price, whether related to a stock or ETF, has little to do with anything. The fund or company has a total value and the value is distributed among the number of units or shares. Vanguard's S&P ETF has a unit price of $196 and Schwab's S&P mutual fund has a unit price of $35, it's essentially just a matter of the fund's total assets divided by number of units outstanding. Vanguard's VOO has assets of about $250 billion and Schwab's SWPPX has assets of about $25 billion. Additionally, Apple has a share price of $100, Google has a share price of $800, that doesn't mean Google is more valuable than Apple. Apple's market capitalization is about $630 billion while Google's is about $560 billion. Or on the extreme a single share of Berkshire's Class A stock is $216,000, and Berkshire's market cap is just $360 billion. It's all just a matter of value divided by shares/units.","It says expense ratio of 0.14%. What does it mean? Essentially it means that they will take 0.14% of your money, regardless of the performance. This measures how much money the fund spends out of its assets on the regular management expenses. How much taxes will I be subject to This depends on your personal situation, not much to do with the fund (though investment/rebalancing policies may affect the taxable distributions). If you hold it in your IRA - there will be no taxes at all. However, some funds do have measures of non-taxable distributions vs dividends vs. capital gains. Not all the funds do that, and these are very rough estimates anyway. What is considered to be a reasonable expense ratio? That depends greatly on the investment policy. For passive index funds, 0.05-0.5% is a reasonable range, while for actively managed funds it can go up as much as 2% and higher. You need to compare to other funds with similar investment policies to see where your fund stands.","Your assets are marked to market. If you buy at X, and the market is bidding at 99.9% * X then you've already lost 0.1%. This is a market value oriented way of looking at costs. You could always value your assets with mark to model, and maybe you do, but no one else will. Just because you think the stock is worth 2*X doesn't mean the rest of the world agrees, evidenced by the bid. You surely won't get any margin loans based upon mark to model. Your bankers won't be convinced of the valuation of your assets based upon mark to model. By strictly a market value oriented way of valuing assets, there is a bid/ask cost. more clarification Relative to littleadv, this is actually a good exposition between the differences between cash and accrual accounting. littleadv is focusing completely on the cash cost of the asset at the time of transaction and saying that there is no bid/ask cost. Through the lens of cash accounting, that is 100% correct. However, if one uses accrual accounting marking assets to market (as we all do with marketable assets like stocks, bonds, options, etc), there may be a bid/ask cost. At the time of transaction, the bids used to trade (one's own) are exhausted. According to exchange rules that are now practically uniform: the highest bid is given priority, and if two bids are bidding the exact same highest price then the oldest bid is given priority; therefore the oldest highest bid has been exhausted and removed at trade. At the time of transaction, the value of the asset cannot be one's own bid but the highest oldest bid leftover. If that highest oldest bid is lower than the price paid (even with liquid stocks this is usually the case) then one has accrued a bid/ask cost.","Bond ETFs are just another way to buy a bond mutual fund. An ETF lets you trade mutual fund shares the way you trade stocks, in small share-size increments. The content of this answer applies equally to both stock and bond funds. If you are intending to buy and hold these securities, your main concerns should be purchase fees and expense ratios. Different brokerages will charge you different amounts to purchase these securities. Some brokerages have their own mutual funds for which they charge no trading fees, but they charge trading fees for ETFs. Brokerage A will let you buy Brokerage A's mutual funds for no trading fee but will charge a fee if you purchase Brokerage B's mutual fund in your Brokerage A account. Some brokerages have multiple classes of the same mutual fund. For example, Vanguard for many of its mutual funds has an Investor class (minimum $3,000 initial investment), Admiral class (minimum $10,000 initial investment), and an ETF (share price as initial investment). Investor class has the highest expense ratio (ER). Admiral class and the ETF generally have much lower ER, usually the same number. For example, Vanguard's Total Bond Market Index mutual fund has Investor class (symbol VBMFX) with 0.16% ER, Admiral (symbol VBTLX) with 0.06% ER, and ETF (symbol BND) with 0.06% ER (same as Admiral). See Vanguard ETF/mutual fund comparison page. Note that you can initially buy Investor class shares with Vanguard and Vanguard will automatically convert them to the lower-ER Admiral class shares when your investment has grown to the Admiral threshold. Choosing your broker and your funds may end up being more important than choosing the form of mutual fund versus ETF. Some brokers charge very high purchase/redemption fees for mutual funds. Many brokers have no ETFs that they will trade for free. Between funds, index funds are passively managed and are just designed to track a certain index; they have lower ERs. Actively managed funds are run by managers who try to beat the market; they have higher ERs and tend to actually fall below the performance of index funds, a double whammy. See also Vanguard's explanation of mutual funds vs. ETFs at Vanguard. See also Investopedia's explanation of mutual funds vs. ETFs in general.","Your link is pointing to managed funds where the fees are higher, you should look at their exchange traded funds; you will note that the management fees are much lower and better reflect the index fund strategy.","\"I'm assuming the question is about how to compare two ETFs that track the same index. I'd look at (for ETFs -- ignoring index funds): So, for example you might compare SPY vs IVV: SPY has about 100x the volume. Sure, IVV has 2M shares trading, so it is liquid \"\"enough\"\". But the bigger volume on SPY might matter to you if you use options: open interest is as much as 1000x more on SPY. Even if you have no interest in options, the spreads on SPY are probably going to be slightly smaller. They both have 0.09% expense ratios. When I looked on 2010-9-6, SPY was trading at a slight discount, IVV was at a slight premium. Looking for any sort of trend is left as an exercise to the reader... Grab the prospectus for each to examine the rules they set for fund makeup. Both come from well-known issuers and have a decent history. (Rather than crazy Uncle Ed's pawn shop, or the Central Bank of Stilumunistan.) So unless you find something in the SPY prospectus that makes you queasy, the higher volume and equal expense ratios would seem to suggest it over IVV. The fact that it is at a (tiny) discount right now is a (tiny) bonus.\"","\"The \"\"ideal world\"\" index fund of any asset class is a perfect percentage holding of all underlying assets with immediate rebalancing that aligns to every change in the index weighting while trading in a fully liquid market with zero transaction costs. One finance text book that describes this is Introduction to Finance: Markets, Investments, and Financial Management, see chapter 11. Practically, the transaction costs and liquidity make this unworkable. There are several deviations between what the \"\"ideal world algorithm\"\" (\"\"the algorithm\"\") says you should do and what is actually done. Each of these items addresses a real-world solution to various costs of managing a passive index fund. (And they are good solutions.) However, any deviation from the ideal index fund will have a risk. An investor evaluating their choices is left to pick the lowest fees with the least deviation from the ideal index fund. (It is customary to ignore whether the results are in excess or deficit to the ideal). So your formula is: This is also described in the above book.\"","There are hundreds if not thousands of index funds and ETFs in the EU, far too many to enumerate here. It's worth pointing out that Vanguard themselves operate in the UK. The minimum investment if you go direct to Vanguard is £100,000, but you can make smaller investments through a number of fund platforms.","For your purposes, I would recommend using direct investment in a no-load mutual fund. I mostly use Vanguard and would recommend them. They just about invented index funds, usually have the lowest (internal) expenses for index and many other funds, if you take electronic instead of paper statements there is no maintenance fee, have no transaction commission, can do periodic automatic investment from a bank account etc. A typical index fund there would require an initial $3000 investment and would have a minimum of $100 for each additional investment. If you can't come up with an initial sum of that size, you might be able to find a broker with a lower minimum and suitable free ETFs trades as others have suggested.","\"People in this case, are large institutional investors. The \"\"bid ask\"\" spread is for \"\"small traders\"\" like yourself. It is put out by the so-called specialists (or \"\"market makers\"\") and is typically good for hundreds or thousands of shares at a time. Normally, 2 points on a 50 stock is a wide spread, and the market maker will make quite a bit of money on it trading with people like yourself. It's different if a large institution, say Fidelity, wants to sell, say 1 million shares of the stock. Depending on market conditions, it may have trouble finding buyers willing to buy in those amounts anywhere near 50. To \"\"move\"\" such a large block of stock, they may have to put the equivalent of K-Mart's old \"\"Blue Light Special\"\" on, several points below.\"","The creation mechanism for ETF's ensures that the value of the underlying stocks do not diverge significantly from the Fund's value. Authorized participants have a strong incentive to arbitrage any pricing differences and create/redeem blocks of stock/etf until the prices are back inline. Contrary to what was stated in a previous answer, this mechanism lowers the cost of management of ETF's when compared to mutual funds that must access the market on a regular basis when any investors enter/exit the fund. The ETF only needs to create/redeem in a wholesale basis, this allows them to operate with management fees that are much lower than those of a mutual fund. Expenses Due to the passive nature of indexed strategies, the internal expenses of most ETFs are considerably lower than those of many mutual funds. Of the more than 900 available ETFs listed on Morningstar in 2010, those with the lowest expense ratios charged about .10%, while those with the highest expenses ran about 1.25%. By comparison, the lowest fund fees range from .01% to more than 10% per year for other funds. (For more on mutual fund feeds, read Stop Paying High Fees.)","The idea of an index is that it is representative of the market (or a specific market segment) as a whole, so it will move as the market does. Thus, past performance is not really relevant, unless you want to bank on relative differences between different countries' economies. But that's not the point. By far the most important aspect when choosing index funds is the ongoing cost, usually expressed as Total Expense Ratio (TER), which tells you how much of your investment will be eaten up by trading fees and to pay the funds' operating costs (and profits). This is where index funds beat traditional actively managed funds - it should be below 0.5% The next question is how buying and selling the funds works and what costs it incurs. Do you have to open a dedicated account or can you use a brokerage account at your bank? Is there an account management fee? Do you have to buy the funds at a markup (can you get a discount on it)? Are there flat trading fees? Is there a minimum investment? What lot sizes are possible? Can you set up a monthly payment plan? Can you automatically reinvest dividends/coupons? Then of course you have to decide which index, i.e. which market you want to buy into. My answer in the other question apparently didn't make it clear, but I was talking only about stock indices. You should generally stick to broad, established indices like the MSCI World, S&P 500, Euro Stoxx, or in Australia the All Ordinaries. Among those, it makes some sense to just choose your home country's main index, because that eliminates currency risk and is also often cheaper. Alternatively, you might want to use the opportunity to diversify internationally so that if your country's economy tanks, you won't lose your job and see your investment take a dive. Finally, you should of course choose a well-established, reputable issuer. But this isn't really a business for startups (neither shady nor disruptively consumer-friendly) anyway.","No, some of Vanguard's funds are index funds like their Total Stock Market Index and 500 Index. In contrast, there are funds like Vanguard PRIMECAP and Vanguard Wellington that are actively managed. There are index funds in both open-end and exchange-traded formats. VTI is the ticker for Vanguard's Total Stock Market ETF while VTSMX is an open-end mutual fund format. VOO would be the S & P 500 ETF ticker while VFINX is one of the open-end mutual fund tickers, where VIIIX has a really low expense ratio but a pretty stiff minimum to my mind. As a general note, open-end mutual funds will generally have a 5 letter ticker ending in X while an ETF will generally be shorter at 3 or 4 letters in length.","It is known as the range or the price spread of the stock. You can read more about it here http://www.investopedia.com/terms/r/range.asp","Interesting to me. Index funds are known for hurting active management. Fund flows have been toward index funds, not active funds. But apparently S&P and MSCI are making hundreds of millions just by licensing out the names of their most popular funds. Vanguard also had a sweetheart deal at one time: > Index funds weren't always a big business, and S&P didn't always know just how valuable the indexes it owned really were. Before the first ETF ever hit the market, S&P agreed to a perpetual license with Vanguard that entitled the index owner to a maximum annual fee of $50,000 from Vanguard's premier index mutual fund, the Vanguard 500 Index Fund. >As Vanguard popularized the index fund, S&P began to realize just how much it had left on the table. By 2001, the Vanguard fund had $90 billion in assets > To this day, Vanguard's premier S&P 500 index fund is reportedly operating under its perpetual license, paying just $50,000 per year to S&P Global, but subsequent funds based on S&P's indexes are likely paying full freight. For S&P, it was a very costly lesson to learn.","As I recall, the Scottrade minimum is only $500. (By the way, Scottrade has a feature to automatically reinvest any dividends which the securities pay) Once you have an account, you can buy into an index fund. SPY tracks the S&P 500. It is also currently paying nearly 2% in dividends. You can shop for other alternatives here: http://seekingalpha.com/insight/etf_hub/etf_guide/selector/article/39431-core-building-blocks-large-mid-small-cap-us-etfs","\"Index funds may invest either in index components directly or in other instruments (like ETFs, index options, futures, etc.) which are highly correlated with the index. The specific fund prospectus or description on any decent financial site should contain these details. Index funds are not actively managed, but that does not mean they aren't managed at all - if index changes and the fund includes specific stock, they would adjust the fund content. Of course, the downside of it is that selling off large amounts of certain stock (on its low point, since it's being excluded presumably because of its decline) and buying large amount of different stock (on its raising point) may have certain costs, which would cause the fund lag behind the index. Usually the difference is not overly large, but it exists. Investing in the index contents directly involves more transactions - which the fund distributes between members, so it doesn't usually buy individually for each member but manages the portfolio in big chunks, which saves costs. Of course, the downside is that it can lag behind the index if it's volatile. Also, in order to buy specific shares, you will have to shell out for a number of whole share prices - which for a big index may be a substantial sum and won't allow you much flexibility (like \"\"I want to withdraw half of my investment in S&P 500\"\") since you can't usually own 1/10 of a share. With index funds, the entry price is usually quite low and increments in which you can add or withdraw funds are low too.\"","Mutual funds don't have intraday prices. They have net asset values which are calculated periodically (daily or weekly or any other period depending on the fund).","The ETF price quoted on the stock exchange is in principle not referenced to NAV. The fund administrator will calculate and publish the NAV net of all fees, but the ETF price you see is determined by the market just like for any other security. Having said that, the market will not normally deviate greatly from the NAV of the fund, so you can safely assume that ETF quoted price is net of relevant fees.","\"You seem to be assuming that ETFs must all work like the more traditional closed-end funds, where the market price per share tends—based on supply and demand—to significantly deviate from the underlying net asset value per share. The assumption is simplistic. What are traditionally referred to as closed-end funds (CEFs), where unit creation and redemption are very tightly controlled, have been around for a long time, and yes, they do often trade at a premium or discount to NAV because the quantity is inflexible. Yet, what is generally meant when the label \"\"ETF\"\" is used (despite CEFs also being both \"\"exchange-traded\"\" and \"\"funds\"\") are those securities which are not just exchange-traded, and funds, but also typically have two specific characteristics: (a) that they are based on some published index, and (b) that a mechanism exists for shares to be created or redeemed by large market participants. These characteristics facilitate efficient pricing through arbitrage. Essentially, when large market participants notice the price of an ETF diverging from the value of the shares held by the fund, new units of the ETF can get created or redeemed in bulk. The divergence quickly narrows as these participants buy or sell ETF units to capture the difference. So, the persistent premium (sometimes dear) or discount (sometimes deep) one can easily witness in the CEF universe tend not to occur with the typical ETF. Much of the time, prices for ETFs will tend to be very close to their net asset value. However, it isn't always the case, so proceed with some caution anyway. Both CEF and ETF providers generally publish information about their funds online. You will want to find out what is the underlying Net Asset Value (NAV) per share, and then you can determine if the market price trades at a premium or a discount to NAV. Assuming little difference in an ETF's price vs. its NAV, the more interesting question to ask about an ETF then becomes whether the NAV itself is a bargain, or not. That means you'll need to be more concerned with what stocks are in the index the fund tracks, and whether those stocks are a bargain, or not, at their current prices. i.e. The ETF is a basket, so look at each thing in the basket. Of course, most people buy ETFs because they don't want to do this kind of analysis and are happy with market average returns. Even so, sector-based ETFs are often used by traders to buy (or sell) entire sectors that may be undervalued (or overvalued).\"","John Bogle never said only buy the S&P 500 or any single index Q:Do you think the average person could safely invest for retirement and other goals without expert advice -- just by indexing? A: Yes, there is a rule of thumb I add to that. You should start out heavily invested in equities. Hold some bond index funds as well as stock index funds. By the time you get closer to retirement or into your retirement, you should have a significant position in bond index funds as well as stock index funds. As we get older, we have less time to recoup. We have more money to protect and our nervousness increases with age. We get a little bit worried about that nest egg when it's large and we have little time to recoup it, so we pay too much attention to the fluctuations in the market, which in the long run mean nothing. How much to pay Q: What's the highest expense ratio that one should pay for a domestic equity fund? A: I'd say three-quarters of 1 percent maybe. Q: For an international fund? A: I'd say three-quarters of 1 percent. Q: For a bond fund? A: One-half of 1 percent. But I'd shave that a little bit. For example, if you can buy a no-load bond fund or a no-load stock fund, you can afford a little more expense ratio, because you're not paying any commission. You've eliminated cost No. 2....","What you should compare is SPX, SPY NAV, and ES fair value. Like others have said is SPX is the index that others attempt to track. SPY tracks it, but it can get a tiny bit out of line as explained here by @Brick . That's why they publish NAV or net asset value. It's what the price should be. For SPY this will be very close because of all the participants. The MER is a factor, but more important is something called tracking error, which takes into account MER plus things like trading expenses plus revenue from securities lending. SPY (the few times I've checked) has a smaller tracking error than the MER. It's not much of a factor in pricing differences. ES is the price you'll pay today to get SPX delivered in the future (but settled in cash). You have to take into account dividends and interest, this is called fair value. You can find this usually every morning so you can compare what the futures are saying about the underlying index. http://www.cnbc.com/pre-markets/ The most likely difference is you're looking at different times of the day or different open/close calculations.","This depends on the particular index, of course. Capital gains taxes occur when stock is sold (for a profit). This occurs less frequently in an index fund: Where an active manager frequently buys and sells stocks (after all, he wants to be active :-) ), the index fund only sells stocks when the particular stock leaves the index. For an index such as the S&P 500 this does not happen that often. The more specific the criteria of the index fund, the more often the selling of stock and thus the need to pay capital gains taxes occurs.","See if any of the funds they offer are index funds, which will generally have MUCH lower fees and which seem to perform as well as any of the actively managed funds in the same categories.","What is your time horizon? Over long horizons, you absolutely want to minimise the expense ratio – a seemingly puny 2% fee p.a. can cost you a third of your savings over 35 years. Over short horizons, the cost of trading in and trading out might matter more. A mutual fund might be front-loaded, i.e. charge a fixed initial percentage when you first purchase it. ETFs, traded daily on an exchange just like a stock, don't have that. What you'll pay there is the broker commission, and the bid-ask spread (and possibly any premium/discount the ETF has vis-a-vis the underlying asset value). Another thing to keep in mind is tracking error: how closely does the fond mirror the underlying index it attempts to track? More often than not it works against you. However, not sure there is a systematic difference between ETFs and funds there. Size and age of a fund can matter, indeed - I've had new and smallish ETFs that didn't take off close down, so I had to sell and re-allocate the money. Two more minor aspects: Synthetic ETFs and lending to short sellers. 1) Some ETFs are synthetic, that is, they don't buy all the underlying shares replicating the index, actually owning the shares. Instead, they put the money in the bank and enter a swap with a counter-party, typically an investment bank, that promises to pay them the equivalent return of holding that share portfolio. In this case, you have (implicit) credit exposure to that counter-party - if the index performs well, and they don't pay up, well, tough luck. The ETF was relying on that swap, never really held the shares comprising the index, and won't necessarily cough up the difference. 2) In a similar vein, some (non-synthetic) ETFs hold the shares, but then lend them out to short sellers, earning extra money. This will increase the profit of the ETF provider, and potentially decrease your expense ratio (if they pass some of the profit on, or charge lower fees). So, that's a good thing. In case of an operational screw up, or if the short seller can't fulfil their obligations to return the shares, there is a risk of a loss. These two considerations are not really a factor in normal times (except in improving ETF expense ratios), but during the 2009 meltdown they were floated as things to consider. Mutual funds and ETFs re-invest or pay out dividends. For a given mutual fund, you might be able to choose, while ETFs typically are of one type or the other. Not sure how tax treatment differs there, though, sorry (not something I have to deal with in my jurisdiction). As a rule of thumb though, as alex vieux says, for a popular index, ETFs will be cheaper over the long term. Very low cost mutual funds, such as Vanguard, might be competitive though.","Market cap probably isn't as big of an issue as the bid/ask spread and the liquidity, although they tend to be related. The spread is likely to be wider on lesser traded ETF funds we are talking about pennies, likely not an issue unless you are trading in and out frequently. The expense ratios will also tend to be slightly higher again not a huge issue but it might be a consideration. You are unlikely to make up the cost of paying the commission to buy into a larger ETF any time soon though.","It really depends on the hedge fund, my hedge fund gives back all rebates for routes that are public knowledge back to the client. Also the rebate is based on the route, not the stock, so it may not offset all expenses on each ETFs. Most of the BATS IEX and other routes have public websites where you can get the infos on what are the rebates for each.","\"For a non-ETF mutual fund, you can only buy shares of the mutual fund from the mutual fund itself (at a price that the mutual fund will reveal only at the end of the day) and can only shares back to the mutual fund (again at a price that the mutual fund will reveal only at the end of the day). There is no open market in the sense that you cannot put in a bid to buy, say, 100 shares of VFINX at $217 per share through a brokerage, and if there is a seller willing to sell 100 shares of VFINX to you at $217, then the sale is consummated and you are now the proud owner of 100 shares of VFINX. The only buyer or seller of VFINX is the mutual find itself, and you tell it that you \"\"want to buy 100 shares of VFINX and please take the money out of my checking account\"\". If this order is entered before the markets close at 4 pm, the mutual fund determines its share price as of the end of the day, opens a new account for you and puts 100 shares of VFINX in it (or adds 100 shares of VFINX to your already existing pile of shares) and takes the purchase price out of your checking account via an ACH transfer. Similarly for redeeming/selling shares of VFINX that you own (and these are held in an account at the mutual fund itself, not by your brokerage): you tell the mutual fund to that you \"\"wish to redeem 100 shares and please send the proceeds to my bank account\"\" and the mutual fund does this at the end of the day, and the money appears in your bank account via ACH transfer two or three days later. Generally, these transactions do not need to be for round lots of multiples of 100 shares for efficiency; most mutual fund will gladly sell you fractional shares down to a thousandth of a share. In contrast, shares of an exchange-traded fund (ETF) are just like stock shares in that they can be bought and sold on the open market and your broker will charge you fees for buying and selling them. Selling fractional shares on the open market is generally not possible, and trading in round lots is less expensive. Also, trades occur at all times of the stock exchange day, not just at the end of the day as with non-ETF funds, and the price can fluctuate during the day too. Many non-ETF mutual funds have an ETF equivalent: VOO is the symbol for Vanguard's S&P 500 Index ETF while VFINX is the non-ETF version of the same index fund. Read more about the differences between ETFs and mutual funds, for example, here.\"","\"If you want the answer from the horse's mouth, go to the website of the ETF or mutual find, and the expense ratio will be listed there, both on the \"\"Important Information\"\" part of the front page, as well as in the .pdf file that you click on to download the Prospectus. Oh wait, you don't want to go the fund's website at all, just to a query site where you type in something like VFINX. hit SEARCH, and out pops the expense ratio for the Vanguard S&P 500 Index Fund? Well, have you considered MorningStar?\"","\"It's good to ask this question, because this is one of the fundamental dichotomies in market microstructure. At any time T for each product on a (typical) exchange there are two well-defined prices: At time T there is literally no person in the market who wants to sell below the ask, so all the people who are waiting to buy at the bid (or below) could very well be waiting there forever. There's simply no guarantee that any seller will ever want to part with their product for a lesser price than they think it's worth. So if you want to buy the product at time T you have a tough choice to make: you get in line at the bid price, where there's no guarantee that your request will ever be filled, and you might never get your hands on the product you decide that owning the product right now is more valuable to you than (ask - bid) * quantity, so you tell the exchange that you're willing to buy at the ask price, and the exchange matches you with whichever seller is first in line Now, if you're in the market for the long term, the above choice is completely immaterial to you. Who cares if you pay $10.00 * 1000 shares or $10.01 * 1000 shares when you plan to sell 30 years from now at $200 (or $200.01)? But if you're a day trader or anyone else with a very short time horizon, then this choice is extremely important: if the price is about to go up several cents and you got in line at the bid (and never got filled) then you missed out on some profit if you \"\"cross the spread\"\" to buy at the ask and then the price doesn't go up (or worse, goes down), you're screwed. In order to get out of the position you'll have to cross the spread again and sell at at most the bid, meaning you've now paid the spread twice (plus transaction fees and regulatory fees) for nothing. (All of the above also applies in reverse for selling at the ask versus selling at the bid, but most people like to learn in terms of buying rather than selling.)\"","How do (index and active) mutual funds trade? Do they buy stocks as soon as a I buy a share in the mutual fund, or do they have fixed times they trade, such as once every week/month/quarter? Is it theoretical possible for someone to front run mutual funds, if someone holds individual stocks? Let's say an institutional investor creates an order of $100m in a mutual fund, how likely can a broker, which holds a fraction of the fund's portfolio, front run and take advantage of that trade? It is more likely to front run that fund if it's an active small cap fund, but how likely is it to front run trades for index funds?","\"who computes the S&P 500? Standard and Poor's. Why are they sharing this information and Because that's what they do. This is a financial research company. how do they recuperate the costs inherent in computing the S&P 500? By charging clients for other information. The computing of the index itself is not all that complicated, its coming up with the index that's a problem. Once they've come up with the formula, and it became widely accepted, the computation itself is not an issue. But the fact that its so popular leads to the S&P brand recognition, and people come and pay good money for their other services (ratings and financial analysis of securities). They do more work for free. For example, the ratings of various government debts are being done by S&P for free (governments don't pay for that), while private bonds are rated for a fee (corporations pay to have their bonds rated). Also, as noted by JBKing, there are probably some licensing fees for using the index name in the fund name (and other users are probably paying the licensing fee, like the news agencies and the exchanges). S&P500 is a registered trademark, and as such cannot be used without the owner's permission. Why is then \"\"active management\"\" not required for indexed funds Because no research and stock picking is required. In fact, these funds don't really require a manager, they can be managed by a simple script. and how does it lower taxes? (perhaps this could be a different question if this has become too broad) Actively managed funds perform a lot more buy/sell operations, each leading to tax consequences to the fund (which rolls them over to the investors). Index funds only buy and sell to re-balance back to the index (or when the makeup of the index changes, usually once a year or half a year), leading to much lesser realized capital gains to the fund, thus much lesser tax consequences.\"","From an article I wrote a while back: “Dalbar Inc., a Boston-based financial services research firm, has been measuring the effects of investors’ decisions to buy, sell, and switch into and out of mutual funds since 1984. The key finding always has been that the average investor earns significantly less than the return reported by their funds. (For the 20 years ended Dec. 31, 2006, the average stock fund investor earned a paltry 4.3 average annual compounded return compared to 11.8 percent for the Standard & Poor’s 500 index.)” It's one thing to look at the indexes. But quite another to understand what other investors are actually getting. The propensity to sell low and buy high is proven by the data Dalbar publishes. And really makes the case to go after the magic S&P - 0.09% gotten from an ETF.","In your other question about these funds you quoted two very different yields for them. That pretty clearly says they are NOT tracking the same index.","The expense ratio reduces the return of the ETF; your scenario of paying 100.0015 is that of a load. Most (all?) ETFs can be bought without paying a load (sales charge as a percent of amount invested), and some ETFs can be bought without paying a brokerage fee (fixed or variable charge for a buy transaction just like buying any other stock through the brokerage) because the brokerage has waived it. Your broker might charge fees for both buying and selling shares in an ETF, but in any case, this is quite separate from the expense ratio.","The top ten holdings for these funds don't overlap by even one stock. It seems to me they are targeting an index for comparison, but making no attempt to replicate a list of holdings as would, say, a true S&P index.","Cost. If an investor wanted to diversify his portfolio by investing in the companies that make up the S&P 500, the per-share and commission costs to individually place trades for each and every one of those companies would be prohibitive. I can buy one share of an exchange-traded fund that tracks the S&P 500 for less than the purchase price of a single share in some of the companies that make up the index.","More importantly, index funds are denominated in specific currencies. You can't buy or sell an index, so it can be dimensionless. Anything you actually do to track the index involves real amounts of real money.","Index funds are good for diversifying risk. For people who don't have a large sum of money to invest, holding all the different types of stocks in the index is both very expensive and not practical because you incur too many transaction costs. For an index funds, the main advantages are that costs are pooled, and investors can invest a smaller amount that they would if they bought all the different stocks individually. Naturally, if you wanted to figure out the percentage composition of the index and invest directly it would be possible, albeit tedious.","As these all seem to be US Equity, just getting one broad based US Equity index might offer similar diversification at lower cost. Over 5 years, 20 basis points in fees will only make about 1% difference. However, for longer periods (retirement saving), it is worth it to aim for the lowest fees. For further diversification, you might want to consider other asset classes, such as foreign equity, fixed income, etc.","\"Your bank's fund is not an index fund. From your link: To provide a balanced portfolio of primarily Canadian securities that produce income and capital appreciation by investing primarily in Canadian money market instruments, debt securities and common and preferred shares. This is a very broad actively managed fund. Compare this to the investment objective listed for Vanguard's VOO: Invests in stocks in the S&P 500 Index, representing 500 of the largest U.S. companies. There are loads of market indices with varying formulas that are supposed to track the performance of a market or market segment that they intend to track. The Russel 2000, The Wilshire 1000, The S&P 500, the Dow Industrial Average, there is even the SSGA Gender Diversity Index. Some body comes up with a market index. An \"\"Index Fund\"\" is simply a Mutual Fund or Exchange Traded Fund (ETF) that uses a market index formula to make it's investment decisions enabling an investor to track the performance of the index without having to buy and sell the constituent securities on their own. These \"\"index funds\"\" are able to charge lower fees because they spend $0 on research, and only make investment decisions in order to track the holdings of the index. I think 1.2% is too high, but I'm coming from the US investing world it might not be that high compared to Canadian offerings. Additionally, comparing this fund's expense ratio to the Vanguard 500 or Total Market index fund is nonsensical. Similarly, comparing the investment returns is nonsensical because one tracks the S&P 500 and one does not, nor does it seek to (as an example the #5 largest holding of the CIBC fund is a Government of Canada 2045 3.5% bond). Everyone should diversify their holdings and adjust their investment allocations as they age. As you age you should be reallocating away from highly volatile common stock and in to assets classes that are historically more stable/less volatile like national government debt and high grade corporate/local government debt. This fund is already diversified in to some debt instruments, depending on your age and other asset allocations this might not be the best place to put your money regardless of the fees. Personally, I handle my own asset allocations and I'm split between Large, Mid and Small cap low-fee index funds, and the lowest cost high grade debt funds available to me.\"","Zero. Zero is reasonable. That's what Schwab offers with a low minimum to open the IRA. The fact is, you'll have expenses for the investments, whether a commission on stock purchase or ongoing expense of a fund or ETF. But, in my opinion, .25% is criminal. An S&P fund or ETF will have a sub-.10% expense. To spend .25% before any other fees are added is just wrong.","With regard to commodity futures, a paper released in January 2010 by Aulerich, Irwin, and Garcia, concluded that index funds have essentially no impact on commodity futures. Looking at stocks, a stock that gets included in a major index does increase in price. It increases its turnover by 27% and increases its price by between 2.7% and 5.5%, according to information cited by Kula in this paper, though it looks like the price increase tends to happen in the lead up to the stock being included. Interestingly, I have read an article but cannot now locate it, which states that there's a measurable, albeit fairly small, price bubble on stocks included in common indexes, on Monday mornings, Friday afternoons, and at the start and end of the month. That is, the times when mutual funds are most likely to rebalance their holdings. This almost certainly applies to a lesser extent to other stocks, too. My understanding is that the price difference was very small, however. Generally speaking, stocks which make part of well-known indexes will tend to be in higher demand than stocks which do not. It remains the case that almost all actively-managed mutual funds are unable to consistently beat the indexes, even with this taken into account.","\"I actually love this question, and have hashed this out with a friend of mine where my premise was that at some volume of money it must be advantageous to simply track the index yourself. There some obvious touch-points: Most people don't have anywhere near the volume of money required for even a $5 commission outweigh the large index fund expense ratios. There are logistical issues that are massively reduced by holding a fund when it comes to winding down your investment(s) as you get near retirement age. Index funds are not touted as categorically \"\"the best\"\" investment, they are being touted as the best place for the average person to invest. There is still a management component to an index like the S&P500. The index doesn't simply buy a share of Apple and watch it over time. The S&P 500 isn't simply a single share of each of the 500 larges US companies it's market cap weighted with frequent rebalancing and constituent changes. VOO makes a lot of trades every day to track the S&P index, \"\"passive index investing\"\" is almost an oxymoron. The most obvious part of this is that if index funds were \"\"the best\"\" way to invest money Berkshire Hathaway would be 100% invested in VOO. The argument for \"\"passive index investing\"\" is simplified for public consumption. The reality is that over time large actively managed funds have under-performed the large index funds net of fees. In part, the thrust of the advice is that the average person is, or should be, more concerned with their own endeavors than they are managing their savings. Investment professionals generally want to avoid \"\"How come I my money only returned 4% when the market index returned 7%? If you track the index, you won't do worse than the index; this helps people sleep better at night. In my opinion the dirty little secret of index funds is that they are able to charge so much less because they spend $0 making investment decisions and $0 on researching the quality of the securities they hold. They simply track an index; XYZ company is 0.07% of the index, then the fund carries 0.07% of XYZ even if the manager thinks something shady is going on there. The argument for a majority of your funds residing in Mutual Funds/ETFs is simple, When you're of retirement age do you really want to make decisions like should I sell a share of Amazon or a share of Exxon? Wouldn't you rather just sell 2 units of SRQ Index fund and completely maintain your investment diversification and not pay commission? For this simplicity you give up three basis points? It seems pretty reasonable to me.\"","The key two things to consider when looking at similar/identical ETFs is the typical (or 'indicative') spread, and the trading volume and size of the ETF. Just like regular stocks, thinly traded ETF's often have quite large spreads between buy and sell: in the 1.5-2%+ range in some cases. This is a huge drain if you make a lot of transactions and can easily be a much larger concern than a relatively trivial difference in ongoing charges depending on your exact expected trading frequency. Poor spreads are also generally related to a lack of liquidity, and illiquid assets are usually the first to become heavily disconnected from the underlying in cases where the authorized participants (APs) face issues. In general with stock ETFs that trade very liquid markets this has historically not been much of an issue, as the creation/redemption mechanism on these types of assets is pretty robust: it's consequences on typical spread is much more important for the average retail investor. On point #3, no, this would create an arbitrage which an authorized participant would quickly take advantage of. Worth reading up about the creation and redemption mechanism (here is a good place to start) to understand the exact way this happens in ETFs as it's very key to how they work.","\"i know that hedge funds shouldn't be compared with index funds. they do different things. they serve different functions. but when the headline is they are reporting big gains, and then they report that \"\"Ken Griffin’s main Wellington and Kensington funds at Citadel rose almost 7 percent.\"\" YTD, and \"\"Andreas Halvorsen’s Viking and an equity-focused quantitative fund at Renaissance are up more than 9 percent this year through July\"\" as reporting \"\"Big Gains\"\" it's a little silly when an index fund like SCHB is up 10.7% YTD with an ER of 0.03.\"","Look at morningstar holdings.It will list the top 25 holdings and their current price.This will give you a good idea of the intra-day price of the fund.","The point is that the bid and ask prices dictate what you can buy and sell at (at market, at least), and the difference between the two, or spread, contributes implicitly to your gains or losses. For example, say your $1 stock actually had a bid of $0.90 and an ask of $1.10; i.e. say that $1 was the last price. You would have to buy the stock at the ask price of $1.10, but now you can only sell that stock at the bid price of $0.90. Thus, you would need to make at least that $0.20 spread before you can make a profit.","\"I think you are asking about actively managed funds vs. indexes and possibly also vs. diversified funds like target date funds. This is also related to the question of mutual fund vs. ETF. First, a fund can be either actively managed or it can attempt to track an index. An actively managed fund has a fund manager who tries to find the best stocks to invest in within some constraints, like \"\"this fund invests in large cap US companies\"\". An index fund tries to match as closely as possible the performance of an index like the S&P 500. A fund may also try to offer a portfolio that is suitable for someone to put their entire account into. For example, a target date fund is a fund that may invest in a mix of stocks, bonds and foreign stock in a proportion that would be appropriate to someone expecting to retire in a certain year. These are not what people tend to think of as the canonical examples of mutual funds, even though they share the same legal structure and investment mechanisms. Secondly, a fund can either be a traditional mutual fund or it can be an exchange traded fund (ETF). To invest in a traditional mutual fund, you send money to the fund, and they give you a number of shares equal to what that money would have bought of the net asset value (NAV) of the fund at the end of trading on the day they receive your deposit, possibly minus a sales charge. To invest in an ETF, you buy shares of the ETF on the stock market like any other stock. Under the covers, an ETF does have something similar to the mechanism of depositing money to get shares, but only big traders can use that, and it's not used for investing, but only for people who are making a market in the stock (if lots of people are buying VTI, Big Dealer Co will get 100,000 shares from Vanguard so that they can sell them on the market the next day). Historically and traditionally, ETFs are associated with an indexing strategy, while if not specifically mentioned, people assume that traditional mutual funds are actively managed. Many ETFs, notably all the Vanguard ETFs, are actually just a different way to hold the same underlying fund. The best way to understand this is to read the prospectus for a mutual fund and an ETF. It's all there in reasonably plain English.\"","If you just want to track an index, then ETFs are, generally speaking, the better way.","I see a couple of reasons why you could consider choosing a mutual fund over an ETF In some cases index mutual funds can be a cheaper alternative to ETFs. In the UK where I am based, Fidelity is offering a management fee of 0.07% on its FTSE All shares tracker. Last time I checked, no ETF was beating that There are quite a few cost you have to foot when dealing ETFs In some cases, when dealing for relatively small amounts (e.g. a monthly investment plan) you can get a better deal, if your broker has negotiated discounts for you with a fund provider. My broker asks £12.5 when dealing in shares (£1.5 for the regular investment plan) whereas he asks £0 when dealing in funds and I get a 100% discount on the initial charge of the fund. As a conclusion, I would suggest you look at the all-in costs over total investment period you are considering for the exact amount you are planning to invest. Despite all the hype, ETFs are not always the cheapest alternative.","Like an S&P 500 ETF? So you're getting in some cash inflow each day, cash outflows each day. And you have to buy and sell 500 different stocks, at the same time, in order for your total fund assets to match the S&P 500 index proportions, as much as possible. At any given time, the prices you get from the purchase/sale of stock is probably going to be somewhat different than the theoretical amounts you are supposed to get to match, so it's quite a tangle. This is my understanding of things. Some funds are simpler - a Dow 30 fund only has 30 stocks to balance out. Maybe that's easier, or maybe it's harder because one wonky trade makes a bigger difference? I'm not sure this is how it really operates. The closest I've gotten is a team that has submitted products for indexing, and attempted to develop funds from those indexes. Turns out finding the $25-50 million of initial investments isn't as easy as anyone would think.","The S&P500 is an index, not an investment by itself. The index lists a large number of stocks, and the value of the index is the price of all the stocks added together. If you want to make an investment that tracks the S&P500, you could buy some shares of each stock in the index, in the same proportions as the index. This, however, is impractical for just about everyone. Index mutual funds provide an easy way to make this investment. SPY is an ETF (exchange-traded mutual fund) that does the same thing. An index CFD (contract for difference) is not the same as an index mutual fund. There are a number of differences between investing in a security fund and investing in a CFD, and CFDs are not available everywhere.","\"There are several brokerages which have lower minimum deposits (often $500) and allow purchase of index ETFs. I won't name them to avoid advertising. The best way to find out is to go to your bank, and ask to see a financial advisor. Then explain your difficulty to the advisor (who should caution you about the issues with investing such a small amount) and ask for advice on where to find a suitable broker. Also, sometimes banks offer services where you can buy shares of a fund through your bank account. This is probably not \"\"as good\"\" as the brokerage (performance may be not as good, fees may come out higher), but especially for small amounts and for convenience, this may be easier. Again, you should inquire at your institution.\"","Like others have said, mutual funds don't have an intraday NAV, but their ETF equivalents do. Use something like Yahoo Finance and search for the ETF.IV. For example VOO.IV. This will give you not the ETF price (which may be at a premium or discount), but the value of the underlying securities updated every 15 seconds.","To add a bit to Daniel Anderson's great answer, if you want to 'peek' at what a the set of bid and ask spreads looks like, the otc market page could be interesting (NOTE: I'm NOT recommending that you trade Over The Counter. Many of these stocks are amusingly scary): http://www.otcmarkets.com/stock/ACBFF/quote You can see market makers essentially offering to buy or sell blocks of stock at a variety of prices.","1: Low fees means: a Total Expense Ratio of less than 0,5%. One detail you may also want to pay attention to whether the fund reinvests returns (Thesaurierender Fonds) which is basically good for investing, but if it's also a foreign-based fund then taxes get complicated, see http://www.finanztip.de/indexfonds-etf/thesaurierende-fonds/","I don't think that you'll notice a difference in the NAV in a fund with fees that are low as the Vanguard Total Stock Market Fund. Their management fees are incorporated into the NAV, but keep in mind that the fund has a total of $144 billion in assets, with $66 billion in the investor class. The actual fees represent a tiny fraction of the NAV, and may only show up at all on the day they assess the fees. With Vanguard total stock market, you notice the fee difference in the distributions. In the example of Vanguard Total Stock Market, there are institutional-class shares (like VITPX with a minimum investment of $200M) with still lower costs -- as low as 0.0250% vs. 0.18% for the investor class. You will notice a different NAV and distributions for that fund, but there may be other reasons for the variation that I'm not familar with, as I'm not an institutional investor.","12b1 refers to a specific marketing fee on funds in my world. are you referring to the expense ratio? yes - that is what fund wholesalers will do. another practice that won't affect your cost though. basically what i want to express is that you shouldn't need a flowchart to understand your fees. it is simply the layers of management that will raise your cost, in addition to any transactional fees.","2%? I would put in just what it takes to share in the profit sharing, not a dime more. My S&P fund cost is .02% (edited, as it dropped to .02 since original post), 1/100 of the cost of most funds you list. Doesn't take too many years of this fee to negate the potential tax savings, and not many more to make this a real loser.","Over the past five years, QFVOX has returned 13.67%, compared to the index fund SPY that has returned 50.39%. SEVAX has lost 23.96%. AKREX has returned 81.82%. In two of your three examples, you would have done much better in an index fund with a very low expense ratio as suggested. While one can never, as you see, make a generalization, in almost every case, most investors will do better, and often much better, with an index fund with a low expense ratio. My source was Google Finance."],"string":"[\n \"\\\"First, what structure does your index fund have? If it is an open-end mutual fund, there are no bid/ask spread as the structure of this security is that it is priced once a day and transactions are done with that price. If it is an exchange-traded fund, then the question becomes how well are authorized participants taking advantage of the spread to make the fund track the index well? This is where you have to get into the Creation and Redemption unit construct of the exchange-traded fund where there are \\\"\\\"in-kind\\\"\\\" transactions done to either create new shares of the fund or redeem out shares of the fund. In either case, you are making some serious assumptions about the structure of the fund that don't make sense given how these are built. Index funds have lower expense ratios and are thus cheaper than other mutual funds that may take on more costs. If you want suggested reading on this, look at the investing books of John C. Bogle who studied some of this rather extensively, in addition to being one of the first to create an index fund that became known as \\\"\\\"Bogle's Folly,\\\"\\\" where a couple of key ones would be \\\"\\\"Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor\\\"\\\" and \\\"\\\"Bogle on Mutual Funds: New Perspectives for the Intelligent Investor.\\\"\\\" In the case of an open-end fund, there has to be a portion of the fund in cash to handle transaction costs of running the fund as there are management fees to come from running the fund in addition to dividends from the stocks that have to be carefully re-invested and other matters that make this quite easy to note. Vanguard 500 Index Investor portfolio(VFINX) has .38% in cash as an example here where you could look at any open-end mutual fund's portfolio and notice that there may well be some in cash as part of how the fund is managed. It’s the Execution, Stupid would be one of a few articles that looks at the idea of \\\"\\\"tracking error\\\"\\\" or how well does an index fund actually track the index where it can be noted that in some cases, there can be a little bit of active management in the fund. Just as a minor side note, when I lived in the US I did invest in index funds and found them to be a good investment. I'd still recommend them though I'd argue that while some want to see these as really simple investments, there can be details that make them quite interesting to my mind. How is its price set then? The price is computed by taking the sum value of all the assets of the fund minus the liabilities and divided by the number of outstanding shares. The price of the assets would include the closing price on the stock rather than a bid or ask, similar pricing for bonds held by the fund, derivatives and cash equivalents. Similarly, the liabilities would be costs a fund has to pay that may not have been paid yet such as management fees, brokerage costs, etc. Is it a weighted average of all the underlying stock spreads, or does it stand on its own and stems from the usual supply & demand laws ? There isn't any spread used in determining the \\\"\\\"Net Asset Value\\\"\\\" for the fund. The fund prices are determined after the market is closed and so a closing price can be used for stocks. The liabilities could include the costs to run the fund as part of the accounting in the fund, that most items have to come down to either being an asset, something with a positive value, or a liability, something with a negative value. Something to consider also is the size of the fund. With over $7,000,000,000 in assets, a .01% amount is still $700,000 which is quite a large amount in some ways.\\\"\",\n \"tl;dr- libor plus a small (<50bps) spread for S&P500 exposure. larger spread for less liquid/ more esoteric index. a swap is basically just outsourcing balance sheet to a dealer bank. the counterparty (dealer) is shorting you (the fund) the return of the index. to hedge their short, the dealer would borrow funds and buy the stocks in the index. large dealer banks can borrow at basically libor. they'll also expect compensation for the transaction costs of buying the hedge plus a profit on the (small amount) of capital they need to finance this transaction. this will vary based on the size of the portfolio. s&p500 costs maybe 5bps in transaction cost. an EM index costs maybe 50bps. so it will depend on the index. profit to the dealer depends on supply/demand dynamics. sometimes this transaction will be in demand, sometimes the short side will be more valuable. so it depends on the index you're talking about as well as market dynamics. right now for s&p500 exposure, not more than libor plus 50 for a mid-sized fund.\",\n \"\\\"ETFs purchases are subject to a bid/ask spread, which is the difference between the highest available purchase offer (\\\"\\\"bid\\\"\\\") and the lowest available sell offer (\\\"\\\"ask\\\"\\\"). You can read more about this concept here. This cost doesn't exist for mutual funds, which are priced once per day, and buyers and sellers all use the same price for transactions that day. ETFs allow you to trade any time that the market is open. If you're investing for the long term (which means you're not trying to time your buy/sell orders to a particular time of day), and the pricing is otherwise equal between the ETF and the mutual fund (which they are in the case of Vanguard's ETFs and Admiral Shares mutual funds), I would go with the mutual fund because it eliminates any cost associated with bid/ask spread.\\\"\",\n \"I'm not exactly sure, but it may be due to liquidity preference. SPY has a much higher volume (30d average of roughly 70m vs. 3.3m, 1.9m for IVV, VOO respectively), and similarly has a narrow bid ask spread of about 0.01 compared to 0.02 for the other two. I could be wrong, but I'm going to leave this post up and look in to it later, I'm curious too. The difference is very consistent though, so it may be something in their methodology.\",\n \"The equation you show is correct, you've simply pointed out that you understand that you buy at the 'ask' price, and later sell at the 'bid.' There is no bid/ask on the S&P, as you can't trade it directly. You have a few alternatives, however - you can trade SPY, the (most well known) S&P ETF whose price reflects 1/10 the value or VOO (Vanguard's offering) as well as others. Each of these ETFs gives you a bid/ask during market hours. They trade like a stock, have shares that are reasonably priced, and are optionable. To trade the index itself, you need to trade the futures. S&P 500 Futures and Options is the CME Group's brief info guide on standard and mini contracts. Welcome to SE.\",\n \"Bid and ask prices of stocks change not just daily, but continuously. They are, as the names suggest, what price people are asking for to be willing to sell their stock, and how much people are bidding to be willing to buy it at that moment. Your equation is accurate in theory, but doesn't actually apply. The bid and ask prices are indicators of the value of the stock, but the only think you care about as a trader are what you actually pay and sell it for. So regardless of the bid/ask the equation is: Since you cannot buy an index directly (index, like indicator) it doesn't make sense to discuss how much people are bidding or asking for it. Like JoeTaxpayer said, you can buy (and therefore bid/ask) for ETFs and funds that attempt to track the value of the S&P 500.\",\n \"\\\"Funds which track the same index may have different nominal prices. From an investors point of view, this is not important. What is important is that when the underlying index moves by a given percentage, the price of the tracking funds also move by an equal percentage. In other words, if the S&P500 rises by 5%, then the price of those funds tracking the S&P500 will also rise by 5%. Therefore, investing a given amount in any of the tracking funds will produce the same profit or loss, regardless of the nominal prices at which the individual funds are trading. To see this, use the \\\"\\\"compare\\\"\\\" function available on the popular online charting services. For example, in Google finance call up a chart of the S&P500 index, then use the compare textbox to enter the codes for the various ETFs tracking the S&P500. You will see that they all track the S&P500 equally so that your relative returns will be equal from each of the tracking funds. Any small difference in total returns will be attributable to management fees and expenses, which is why low fees are so important in passive investing.\\\"\",\n \"\\\"This is a misconception. One of the explanations is that if you buy at the ask price and want to sell it right away, you can only sell at the bid price. This is incorrect. There are no two separate bid and ask prices. The price you buy (your \\\"\\\"bid\\\"\\\") is the same price someone else sells (their \\\"\\\"sell\\\"\\\"). The same goes when you sell - the price you sell at is the price someone else buys. There's no spread with stocks. Emphasized it on purpose, because many people (especially those who gamble on stock exchange without knowing what they're doing) don't understand how the stock market works. On the stock exchange, the transaction price is the match between the bid price and the ask price. Thus, on any given transaction, bid always equals ask. There's no spread. There is spread with commodities (if you buy it directly, especially), contracts, mutual funds and other kinds of brokered transactions that go through a third party. The difference (spread) is that third party's fee for assuming part of the risk in the transaction, and is indeed added to your cost (indirectly, in the way you described). These transactions don't go directly between a seller and a buyer. For example, there's no buyer when you redeem some of your mutual fund - the fund pays you money. So the fund assumes certain risk, which is why there's a spread in the prices to invest and to redeem. Similarly with commodities: when you buy a gold bar - you buy it from a dealer, who needs to keep a stock. Thus, the dealer will not buy from you at the same price: there's a premium on sale and a discount on buy, which is a spread, to compensate the dealer for the risk of keeping a stock.\\\"\",\n \"\\\"From How are indexes weighted?: Market-capitalization weighted indexes (or market cap- or cap-weighted indexes) weight their securities by market value as measured by capitalization: that is, current security price * outstanding shares. The vast majority of equity indexes today are cap-weighted, including the S&P 500 and the FTSE 100. In a cap-weighted index, changes in the market value of larger securities move the index’s overall trajectory more than those of smaller ones. If the fund you are referencing is an ETF then there may be some work to do to figure out what underlying securities to use when handling Creation and Redemption units as an ETF will generally have shares created in 50,000 shares at a time through Authorized Participants. If the fund you are referencing is an open-end fund then there is still cash flows to manage in the fund as the fund has create and redeem shares in on a daily basis. Note in both cases that there can be updates to an index such as quarterly rebalancing of outstanding share counts, changes in members because of mergers, acquisitions or spin-offs and possibly a few other factors. How to Beat the Benchmark has a piece that may also be useful here for those indices with many members from 1998: As you can see, its TE is also persistently positive, but if anything seems to be declining over time. In fact, the average net TE for the whole period is +0.155% per month, or an astounding +1.88% pa net after expenses. The fund expense ratio is 0.61% annually, for a whopping before expense TE of +2.5% annually. This is once again highly statistically significant, with p values of 0.015 after expenses and 0.0022 before expenses. (The SD of the TE is higher for DFSCX than for NAESX, lowering its degree of statistical significance.) It is remarkable enough for any fund to beat its benchmark by 2.5% annually over 17 years, but it is downright eerie to see this done by an index fund. To complete the picture, since 1992 the Vanguard Extended Index Fund has beaten its benchmark (the Wilshire 4500) by 0.56% per year after expenses (0.81% net of expenses), and even the Vanguard Index Trust 500 has beaten its benchmark by a razor thin 0.08% annually before (but not after) expenses in the same period. So what is going on here? A hint is found in DFA's 1996 Reference Guide: The 9-10 Portfolio captures the return behavior of U.S. small company stocks as identified by Rolf Banz and other academic researchers. Dimensional employs a \\\"\\\"patient buyer\\\"\\\" discount block trading strategy which has resulted in negative total trading costs, despite the poor liquidity of small company stocks. Beginning in 1982, Ibbotson Associates of Chicago has used the 9-10 Portfolio results to calculate the performance of small company stocks for their Stocks, Bonds, Bills, and Inflation yearbook. A small cap index fund cannot possibly own all of the thousands of stocks in its benchmark; instead it owns a \\\"\\\"representative sample.\\\"\\\" Further, these stocks are usually thinly traded, with wide bid/ask spreads. In essence what the folks at DFA learned was that they could tell the market makers in these stocks, \\\"\\\"Look old chaps, we don't have to own your stock, and unless you let us inside your spread, we'll pitch our tents elsewhere. Further, we're prepared to wait until a motivated seller wishes to unload a large block.\\\"\\\" In a sense, this gives the fund the luxury of picking and choosing stocks at prices more favorable than generally available. Hence, higher long term returns. It appears that Vanguard did not tumble onto this until a decade later, but tumble they did. To complete the picture, this strategy works best in the thinnest markets, so the excess returns are greatest in the smallest stocks, which is why the positive TE is greatest for the DFA 9-10 Fund, less in the Vanguard Small Cap Fund, less still in the Vanguard Index Extended Fund, and minuscule with the S&P500. There are some who say the biggest joke in the world of finance is the idea of value added active management. If so, then the punch line seems to be this: If you really want to beat the indexes, then you gotta buy an index fund.\\\"\",\n \"Index Funds & ETFs, if they are tracking the same index, will be the same in an ideal world. The difference would be because of the following factors: Expense ratio: i.e. the expense the funds charge. This varies and hence it would lead to a difference in performance. Tracking error: this means that there is a small percentage of error between the actual index composition and the fund composition. This is due to various reasons. Effectively this would result in the difference between values. Demand / Supply: with ETFs, the fund is traded on stock exchanges like a stock. If the general feeling is that the index is rising, it could lead to an increase in the price of the ETF. Index funds on the other hand would remain the same for the day and are less liquid. This results in a price increase / decrease depending on the market. The above explains the reason for the difference. Regarding which one to buy, one would need to consider other factors like: a) How easy is it to buy ETFs? Do you already hold Demat A/C & access to brokers to help you conduct the transaction or do you need to open an additional account at some cost. b) Normally funds do not need any account, but are you OK with less liquidity as it would take more time to redeem funds.\",\n \"\\\"The S&P 500 is an index. This refers to a specific collection of securities which is held in perfect proportion. The dollar value of an index is scaled arbitrarily and is based off of an arbitrary starting price. (Side note: this is why an index never has a \\\"\\\"split\\\"\\\"). Lets look at what assumptions are included in the pricing of an index: All securities are held in perfect proportion. This means that if you invest $100 in the index you will receive 0.2746 shares of IBM, 0.000478 shares of General Motors, etc. Also, if a security is added/dropped from the list, you are immediately rebalancing the remaining money. Zero commissions are charged. When the index is calculated, they are using the current price (last trade) of the underlying securities, they are not actually purchasing them. Therefore it assumes that securities may be purchased without commission or other liquidity costs. Also closely related is the following. The current price has full liquidity. If the last quoted price is $20 for a security, the index assumes that you can purchase an arbitrary amount of the security at that price with a counterparty that is willing to trade. Dividends are distributed immediately. If you own 500 equities, and most distributed dividends quarterly, this means you will receive on average 4 dividends per day. Management is free. All equities can be purchased with zero research and administrative costs. There is no gains tax. Trading required by the assumptions above would change your holdings constantly and you are exempt from short-term or long-term capital gains taxes. Each one of these assumptions is, of course, invalid. And the fund which endeavors to track the index must make several decisions in how to closely track the index while avoiding the problems (costs) caused by the assumptions. These are shortcuts or \\\"\\\"approximations\\\"\\\". Each shortcut leads to performance which does not exactly match the index. Management fees. Fees are charged to the investor as load, annual fees and/or redemptions. Securities are purchased at real prices. If Facebook were removed from the S&P 500 overnight tonight, the fund would sell its shares at the price buyers are bidding the next market day at 09:30. This could be significantly different than the price today, which the index records. Securities are purchased in blocks. Rather than buying 0.000478 shares of General Motors each time someone invests a dollar, they wait for a few people and then buy a full share or a round lot. Securities are substituted. With lots of analysis, it may be determined that two stocks move in tandem. The fund may purchase two shares of General Motors rather than one of General Motors and Ford. This halves transaction costs. Debt is used. As part of substitution, equities may be replaced by options. Option pricing shows that ownership of options is equivalent to holding an amount of debt. Other forms of leverage may also be employed to achieve desired market exposure. See also: beta. Dividends are bundled. VFINX, the largest S&P 500 tracking fund, pays dividends quarterly rather than immediately as earned. The dividend money which is not paid to you is either deployed to buy other securities or put into a sinking fund for payment. There are many reasons why you can't get the actual performance quoted in an index. And for other more exotic indices, like VIX the volatility index, even more so. The best you can do is work with someone that has a good reputation and measure their performance.\\\"\",\n \"\\\"To add on to the other answers, in asking why funds have different price points one might be asking why stocks aren't normalized so a unit price of $196 in one stock can be directly compared to the same price in another stock. While this might not make sense with AAPL vs. GOOG (it would be like comparing apples to oranges, pun intended, not to mention how would two different companies ever come to such an agreement) it does seem like it would make more sense when tracking an index. And in fact less agreement between different funds would be required as some \\\"\\\"natural\\\"\\\" price points exist such as dividing by 100 (like some S&P funds do). However, there are a couple of reasons why two different funds might price their shares of the same underlying index differently. Demand - If there are a lot of people wanting the issue, more shares might be issued at a lower price. Or, there might be a lot of demand centered on a certain price range. Pricing - shares that are priced higher will find fewer buyers, because it makes it harder to buy round lots (100 shares at $100/share is $10,000 while at $10/share it's only $1000). While not everyone buys stock in lots, it's important if you do anything with (standardized) options on the stock because they are always acting on lots. In addition, even if you don't buy round lots a higher price makes it harder to buy in for a specific amount because each unit share has a greater chance to be further away from your target amount. Conversely, shares that are priced too low will also find fewer buyers, because some holders have minimum price requirements due to low price (e.g. penny) stocks tending to be more speculative and volatile. So, different funds tracking the same index might pick different price points to satisfy demand that is not being filled by other funds selling at a different price point.\\\"\",\n \"This is great. Thanks! So, just assuming a fund happened to average out to libor plus 50 for a given year, would applying that rate to the notional value of the index swaps provide a reasonable estimate of the drag an ETF investor would experience due to the cost associated with the index swaps? For instance, applying this to the hypothetical I linked to in the original question, they assumed fund assets of $100M with 2x leverage achieved through $85M of S&P500 stocks, $25M of S&P500 futures, and a notional value of the S&P500 swaps at $90M. So the true costs to an ETF investor would be: expense ratio + commissions on the $85M of S&P500 holdings + costs associated with $25M of futures contracts + costs associated with the $90M of swaps? And the costs associated with the $90M of swaps might be roughly libor plus 50?\",\n \"Some index funds offer lower expense ratios to those who invest large amounts of money. For example, Vanguard offers Admiral Shares of many of its mutual funds (including several index funds) to individuals who invest more than $50K or $100K, and these Shares have lower expense ratios than the Investor shares in the fund. There are Institutional Shares designed for investments by pension plans, 401k plans of large companies etc which have even lower expenses than Admiral Shares. Individuals working for large companies sometimes get access to Institutional Shares through their 401k plans. Thus, there is something to gained by investing in just one index fund (for a particular index) that offers lower expense ratios for large investments instead of diversifying into several index funds all tracking the same index. Of course, this advantage might be offset by failure to track the index closely, but this tracking should be monitored not on a daily basis but over much longer periods of time to test whether your favorite fund is perennially trailing the index by far more than its competitors with larger expense ratios. Remember that the Net Asset Value (NAV) published by each mutual fund after the markets close already take into account the expense ratio.\",\n \"So, why or why should I not invest in the cheaper index fund? They are both same, one is not cheaper than other. You get something that is worth $1000. To give a simple illustration; There is an item for $100, Vanguard creates 10 Units out of this so price per unit is $10. Schwab creates 25 units out of this, so the per unit price is $4. Now if you are looking at investing $20; with Vanguard you would get 2 units, with Schwab you would get 5 units. This does not mean one is cheaper than other. Both are at the same value of $20. The Factors you need to consider are; Related question What differentiates index funds and ETFs?\",\n \"I have only found solution for UK residents so far, see the article on This Is Money: Cheapest index-tracking funds: Trackers with the lowest charges - and the best ways to invest in them\",\n \"Disclosure - I love Jack Bogle. Jack basically invented the index fund, and as a result, let the common investor have an opportunity to choose a long term return of (S&P-.05%) instead of losing nearly 2% that many funds in that day charged. The use of index investing has saved investors many billions of dollars. The 1% round trip, total cost to buy/sell, was common. Fees for trading have since dropped. I happen to use Schwab who charges $9 for a trade. On $100,000, this is not .5% ($500) but less than .01%. I think it's safe to say that billion dollar mutual funds are paying even less for trades that I do. I believe Jack's example here is a combination of old data and hyperbole. The cost is not so much for the trades, per se, but for the people managing the fund. An index fund has a manager of course, but it's pretty much run by a computer.\",\n \"As has been pointed out, one isn't cheaper than the other. One may have a lower price per share than the other, but that's not the same thing. Let's pretend that the total market valuation of all the stocks within the index was $10,000,000. (Look, I said let's pretend.) You want to invest $1,000. For the time being, let's also pretend that your purchasing 0.01% of all the stock won't affect prices anywhere. One company splits the index into 10,000 parts worth $1,000 each. The other splits the same index into 10,000,000 parts worth $1 each. Both track the underlying index perfectly. If you invest $1,000 with the first company, you get one part; if you invest $1,000 with the second, you get 1,000 parts. Ignoring spreads, transaction fees and the like, immediately after the purchase, both are worth exactly $1,000 to you. Now, suppose the index goes up 2%. The first company's shares of the index (of which you would have exactly one) are now worth $1,020 each, and the second company's shares of the index (of which you would have exactly 1,000) are worth $1.02 each. In each case, you now have index shares valued at $1,020 for a 2% increase ($1,020 / $1,000 = 1.02 = 102% of your original investment). As you can see, there is no reason to look at the price per share unless you have to buy in terms of whole shares, which is common in the stock market but not necessarily common at all in mutual funds. Because in this case, both funds track the same underlying index, there is no real reason to purchase one rather than the other because you believe they will perform differently. In an ideal world, the two will perform exactly equally. The way to compare the price of mutual funds is to look at the expense ratio. The lower the expense ratio is, the cheaper the fund is, and the less of your money is being eroded every day in fees. Unless you have some very good reason to do differently, that is how you should compare the price of any investment vehicles that track the same underlying commodity (in this case, the S&P 500).\",\n \"Index funds, like IBB, generally lack active management, which equates to lower expenses. This is simply because the target index, the NASDAQ Biotechnology Index in the case of IBB, is composed of known quantities. This means there won't be stock pickers or analysts constantly swapping holdings, increasing the turnover rate of the portfolio and increasing capital gains; costs that are offset by higher expense ratios in more actively managed funds.\",\n \"While volume per trade is higher at the open and to a lesser extent at the close, the overall volume is actually lower, on average. Bid ask spreads are widest at the open and to a lesser extent at the close. Generally, bid ask spreads are inversely proportional to overall volumes. Why this is the case hasn't been sufficiently clearly answered by academia yet, but some theories are that\",\n \"What makes the S&P 500 Index funds have low expenses ratios is that the amount of money spent by the mutual fund company on research is Zero. Standard and Poors does the research, the fund companies piggy back on that research. Another big factor in keeping expenses low is the fact the companies that makeup the index don't change very often. If the fund frequently changes the makeup of the investments not only can that trigger tax considerations but there are costs associated with all those transactions. The question is: do the other algorithms overcome the additional costs due to higher expenses and taxes.\",\n \"ETFs are a type of investment, not a specific choice. In other words, there are good ETFs and bad. What you see is the general statement that ETFs are preferable to most mutual funds, if only for the fact that they are low cost. An index ETF such as SPY (which reflects the S&P 500 index) has a .09% annual expense, vs a mutual fund which average a full percent or more. sheegaon isn't wrong, I just have a different spin to offer you. Given a long term return of say even 8% (note - this question is not a debate of the long term return, and I purposely chose a low number compared to the long term average, closer to 10%) and the current CD rate of <1%, a 1% hit for the commission on the buy side doesn't bother me. The sell won't occur for a long time, and $8 on a $10K sale is no big deal. I'd not expect you to save $1K/yr in cash/CDs for the years it would take to make that $8 fee look tiny. Not when over time the growth will overshaddow this. One day you will be in a position where the swings in the market will produce the random increase or decrease to your net worth in the $10s of thousands. Do you know why you won't lose a night's sleep over this? Because when you invested your first $1K, and started to pay attention to the market, you saw how some days had swings of 3 or 4%, and you built up an immunity to the day to day noise. You stayed invested and as you gained wealth, you stuck to the right rebalancing each year, so a market crash which took others down by 30%, only impacted you by 15-20, and you were ready for the next move to the upside. And you also saw that since mutual funds with their 1% fees never beat the index over time, you were happy to say you lagged the S&P by .09%, or 1% over 11 year's time vs those whose funds had some great years, but lost it all in the bad years. And by the way, right until you are in the 25% bracket, Roth is the way to go. When you are at 25%, that's the time to use pre-tax accounts to get just below the cuttoff. Last, welcome to SE. Edit - see sheegaon's answer below. I agree, I missed the cost of the bid/ask spread. Going with the lowest cost (index) funds may make better sense for you. To clarify, Sheehan points out that ETFs trade like a stock, a commission, and a bid/ask, both add to transaction cost. So, agreeing this is the case, an indexed-based mutual fund can provide the best of possible options. Reflecting the S&P (for example) less a small anual expense, .1% or less.\",\n \"One difference is the bid/ask spread will cost you more in a lower cost stock than a higher cost one. Say you have two highly liquid stocks with tiny spreads: If you wanted to buy say $2,000 of stock: Now imagine these are almost identical ETFs tracking the S&P 500 index and extrapolate this to a trade of $2,000,000 and you can see there's some cost savings in the higher priced stock. As a practical example, recently a popular S&P 500 ETF (Vanguard's VOO) did a reverse split to help investors minimize this oft-missed cost.\",\n \"\\\"There are a few reasons why an index mutual fund may be preferable to an ETF: I looked at the iShare S&P 500 ETF and it has an expense ratio of 0.07%. The Vanguard Admiral S&P 500 index has an expense ratio of 0.05% and the Investor Shares have an expense ratio of 0.17%, do I don't necessarily agree with your statement \\\"\\\"admiral class Vanguard shares don't beat the iShares ETF\\\"\\\".\\\"\",\n \"Why not figure out the % composition of the index and invest in the participating securities directly? This isn't really practical. Two indices I use follow the Russell 2000 and the S&P 500 Those two indices represent 2500 stocks. A $4 brokerage commission per trade would mean that it would cost me $10,000 in transaction fees to buy a position in 2500 stocks. Not to mention, I don't want to track 2500 investments. Index funds provide inexpensive diversity.\",\n \"The market doesn't really need to adjust for fees on ETF funds that are often less than 1/10th of a percent. The loss of the return is more than made up for by the diversification. How does the market adjust for trading fees? It doesn't have to, it's just a cost of doing business. If one broker or platform offers better fee structures, people will naturally migrate toward the lower fees.\",\n \"\\\"You cannot actually buy an index in the true sense of the word. An index is created and maintained by a company like Standard and Poor's who licenses the use of the index to firms like Vanguard. The S&P 500 is an example of an index. The S&P 500 \\\"\\\"index includes 500 leading companies\\\"\\\", many finical companies sell products which track to this index. The two most popular products which track to indexes are Mutual Funds (as called Index Funds and Index Mutual Funds) and Exchange Traded Funds (as called ETFs). Each Index Mutual Fund or ETF has an index which it tracks against, meaning they hold securities which make up a sample of the index (some indexes like bond indexes are very hard to hold everything that makes them up). Looking at the Vanguard S&P 500 Index Mutual Fund (ticker VFINX) we see that it tracks against the S&P 500 index. Looking at its holdings we see the 500-ish stocks that it holds along with a small amount of bonds and cash to handle cash flow for people buying and sell shares. If we look at the Vanguard S&P 500 ETF (ticker VOO) we see that it also tracks against the S&P 500 index. Looking at its holdings we see they are very similar to the similar Index Mutual Fund. Other companies like T. Rowe Price have similar offering. Look at the T. Rowe Price Equity Index 500 Fund (ticker PREIX) its holdings in stocks are the same as the similar Vanguard fund and like the Vanguard fund it also holds a small amount of bonds and cash to handle cash flow. The only real difference between different products which track against the same index is in the expense ratio (fees for managing the fund) and in the small differences in the execution of the funds. For the most part execution of the funds do not really matter to most people (it has a very small effect), what matters is the expense (the fees paid to own the fund). If we just compare the expense ratio of the Vanguard and T. Rowe Price funds we see (as of 27 Feb 2016) Vanguard has an expense ratio of 0.17% for it Index Mutual Fund and 0.05% for its ETF, while T. Rowe Price has an expense ratio of 0.27%. These are just the fees for the funds themselves, there are also account maintenance fees (which normally go down as the amount of money you have invested at a firm go up) and in the case of ETFs execution cost (cost to trade the shares along with the difference between the bid and ask on the shares). If you are just starting out I would say going with the Index Mutual Fund would easier and most likely would cost less over-all if you are buying a small amount of shares every month. When choosing a company look at the expense ratio on the funds and the account maintenance fees (along with the account minimals). Vanguard is well known for having low fees and they in fact were the first to offer Index Mutual Funds. For more info on the S&P 500 index see also this Investopedia entry on the S&P 500 index. Do not worry if this is all a bit confusing it is to most people (myself included) at first.\\\"\",\n \"This is called the Ask-Bid Spread. The difference varies based on the liquidly of the asset. The more liquid or the higher the volume of trades for the asset then the smaller the spread is. The spread goes to the broker to pay for some of the cost of the trade. My guess is that when there is a higher volume of shares being traded, brokers need to take less of a fee per share out of the transaction to cover their costs. This makes the spread is smaller. This is essentially the difference in price between the highest price that a buyer is willing to pay for an asset and the lowest price for which a seller is willing to sell it. The seller will get the bid price and the buyer will pay the ask and the broker keeps the spread. From http://www.investopedia.com/terms/b/bid-askspread.asp\",\n \"Why don't you look at the actual funds and etfs in question rather than seeking a general conclusion about all pairs of funds and etfs? For example, Vanguard's total stock market index fund (VTSAX) and ETF (VTI). Comparing the two on yahoo finance I find no difference over the last 5 years visually. For a different pair of funds you may find something very slightly different. In many cases the index fund and ETF will not have the same benchmark and fees so comparisons get a little more cloudy. I recall a while ago there was an article that was pointing out that at the time emerging market ETF's had higher fees than corresponding index funds. For this reason I think you should examine your question on a case-by-case basis. Index fund and ETF returns are all publicly available so you don't have to guess.\",\n \"You can trade an index by using a Contract For Difference, or CFD. Various brokers offer this method and the spreads are quite low. They tend to widen outside of market hours, and not all brokers offer the same spreads. I would look for a broker that offers the lowest spread on the index you are interested in. You should also do your due diligence and check they are regulated by the relevant authority pertaining to their territory, eg FSA for uk\",\n \"More on a technical note, but the spread on an ETF tends to be worst at market open and near market close. (assuming the ETF constituents are traded on a synchronous basis.) If possible, it's often best to let market makers get up and running before allowing your order to flow into market.\",\n \"\\\"That share class may not have a ticker symbol though \\\"\\\"Black Rock MSCI ACWI ex-US Index\\\"\\\" does have a ticker for \\\"\\\"Investor A\\\"\\\" shares that is BDOAX. Some funds will have multiple share classes that is a way to have fees be applied in various ways. Mutual fund classes would be the SEC document about this if you want a government source within the US around this. Something else to consider is that if you are investing in a \\\"\\\"Fund of funds\\\"\\\" is that there can be two layers of expense ratios to consider. Vanguard is well-known for keeping its expenses low.\\\"\",\n \"There are a few ETFs that fall into the money market category: SHV, BIL, PVI and MINT. What normally looks like an insignificant expense ratio looks pretty big when compared to the small yields offered by these funds. The same holds for the spread and transaction fees. For that reason, I'm not sure if the fund route is worth it.\",\n \"\\\"The 0.14% is coming out of the assets of the fund itself. The expense ratio can be broken down so that on any given day, a portion of the fund's assets are set aside to cover the administrative cost of running the fund. A fund's total return already includes the expense ratio. This depends a lot on what kind of account in which you hold the fund. If you hold the fund in an IRA then you wouldn't have taxes from the fund itself as the account is sheltered. There may be notes in the prospectus and latest annual and semi-annual report of what past distributions have been as remember the fund isn't paying taxes but rather passing that along in the form of distributions to shareholders. Also, there is something to be said for what kinds of investments the fund holds as if the fund is to hold small-cap stocks then it may have to sell the stock if it gets too big and thus would pass on the capital gains to shareholders. Other funds may not have this issue as they invest in large-cap stocks that don't have this problem. Some funds may invest in municipal bonds which would have tax-exempt interest that may be another strategy for lowering taxes in bond funds. Depending on the fund quite a broad range actually. In the case of the Fidelity fund you link, it is a \\\"\\\"Fund of funds\\\"\\\" and thus has a 0% expense ratio as Fidelity has underlying funds that that fund holds. What level of active management are you expecting, what economies of scale does the fund have to bring down the expense ratio and what expense ratio is typical for that category of fund would come to mind as a few things to consider. That Fidelity link is incorrect as both Morningstar and Fidelity's site list an expense ratio for the fund of funds at .79%. I'd expect an institutional US large-cap index fund to have the lowest expense ratio outside of the fund of fund situation while if I were to pick an actively managed fund that requires a lot of research then the expense ratio may well be much higher though this is where you have to consider what strategy do you want the fund to be employing and how much of a cost are you prepared to accept for that? VTTHX is Vanguard Target Retirement 2035 Fund which has a .14% expense ratio which is using index funds in the fund of funds system.\\\"\",\n \"Cheaper would refer to the fees of a fund rather than the share price, IMO. Are 2 quarters worth more or less than 10 nickels? This is another way to express your question though most open-end funds bought directly from the fund family or through fund supermarkets would do fractional shares that may be better than going through ETFs though there can be some brokers like Sharebuilder that used to do fractional shares though not necessarily having the best execution as I recall.\",\n \"The expense ratio is stated as an annual figure but is often broken down to be taken out periodically of the fund's assets. In traditional mutual funds, there will be a percent of assets in cash that can be nibbled to cover the expenses of running the fund and most deposits into the fund are done in cash. In an exchange-traded fund, new shares are often created through creation/redemption units which are baskets of securities that make things a bit different. In the case of an ETF, the dividends may be reduced by the expense ratio as the trading price follows the index usually. Expense ratios can vary as in some cases there may be initial waivers on new funds for a time period to allow them to build an asset base. There is also something to be said for economies of scale that allow a fund to have its expense ratio go down over time as it builds a larger asset base. These would be noted in the prospectus and annual reports of the fund to some degree. SPDR Annual Report on page 312 for the Russell 3000 ETF notes its expense ratio over the past 5 years being the following: 0.20% 0.20% 0.22% 0.20% 0.21% Thus, there is an example of some fluctuation if you want a real world example.\",\n \"Also, when they mean SP500 fund - it means that fund which invests in the top 500 companies in the SP Index, is my understanding correct? Yes that is right. In reality they may not be able to invest in all 500 companies in same proportion, but is reflective of the composition. I wanted to know whether India also has a company similar to Vanguard which offers low cost index funds. Almost all mutual fund companies offer a NIFTY index fund, both as mutual fund as well as ETF. You can search for index fund and see the total assets to find out which is bigger compared to others.\",\n \"I think that assuming that you're not looking to trade the fund, an index Mutual Fund is a better overall value than an ETF. The cost difference is negligible, and the ability to dollar-cost average future contributions with no transaction costs. You also have to be careful with ETFs; the spreads are wide on a low-volume fund and some ETFs are going more exotic things that can burn a novice investor. Track two similar funds (say Vanguard Total Stock Market: VTSMX and Vanguard Total Stock Market ETF: VTI), you'll see that they track similarly. If you are a more sophisticated investor, ETFs give you the ability to use options to hedge against declines in value without having to incur capital gains from the sale of the fund. (ie. 20 years from now, can use puts to make up for short-term losses instead of selling shares to avoid losses) For most retail investors, I think you really need to justify using ETFs versus mutual funds. If anything, the limitations of mutual funds (no intra-day trading, no options, etc) discourage speculative behavior that is ultimately not in your best interest. EDIT: Since this answer was written, many brokers have begun offering a suite of ETFs with no transaction fees. That may push the cost equation over to support Index ETFs over Index Mutual Funds, particularly if it's a big ETF with narrow spreads..\",\n \"As Ross says, SPX is the index itself. This carries no overheads. It is defined as a capitalization-weighted mixture of the stocks of (about) 500 companies. SPY is an index fund that tries to match the performance of SPX. As an index fund it has several differences from the index:\",\n \"Price, whether related to a stock or ETF, has little to do with anything. The fund or company has a total value and the value is distributed among the number of units or shares. Vanguard's S&P ETF has a unit price of $196 and Schwab's S&P mutual fund has a unit price of $35, it's essentially just a matter of the fund's total assets divided by number of units outstanding. Vanguard's VOO has assets of about $250 billion and Schwab's SWPPX has assets of about $25 billion. Additionally, Apple has a share price of $100, Google has a share price of $800, that doesn't mean Google is more valuable than Apple. Apple's market capitalization is about $630 billion while Google's is about $560 billion. Or on the extreme a single share of Berkshire's Class A stock is $216,000, and Berkshire's market cap is just $360 billion. It's all just a matter of value divided by shares/units.\",\n \"It says expense ratio of 0.14%. What does it mean? Essentially it means that they will take 0.14% of your money, regardless of the performance. This measures how much money the fund spends out of its assets on the regular management expenses. How much taxes will I be subject to This depends on your personal situation, not much to do with the fund (though investment/rebalancing policies may affect the taxable distributions). If you hold it in your IRA - there will be no taxes at all. However, some funds do have measures of non-taxable distributions vs dividends vs. capital gains. Not all the funds do that, and these are very rough estimates anyway. What is considered to be a reasonable expense ratio? That depends greatly on the investment policy. For passive index funds, 0.05-0.5% is a reasonable range, while for actively managed funds it can go up as much as 2% and higher. You need to compare to other funds with similar investment policies to see where your fund stands.\",\n \"Your assets are marked to market. If you buy at X, and the market is bidding at 99.9% * X then you've already lost 0.1%. This is a market value oriented way of looking at costs. You could always value your assets with mark to model, and maybe you do, but no one else will. Just because you think the stock is worth 2*X doesn't mean the rest of the world agrees, evidenced by the bid. You surely won't get any margin loans based upon mark to model. Your bankers won't be convinced of the valuation of your assets based upon mark to model. By strictly a market value oriented way of valuing assets, there is a bid/ask cost. more clarification Relative to littleadv, this is actually a good exposition between the differences between cash and accrual accounting. littleadv is focusing completely on the cash cost of the asset at the time of transaction and saying that there is no bid/ask cost. Through the lens of cash accounting, that is 100% correct. However, if one uses accrual accounting marking assets to market (as we all do with marketable assets like stocks, bonds, options, etc), there may be a bid/ask cost. At the time of transaction, the bids used to trade (one's own) are exhausted. According to exchange rules that are now practically uniform: the highest bid is given priority, and if two bids are bidding the exact same highest price then the oldest bid is given priority; therefore the oldest highest bid has been exhausted and removed at trade. At the time of transaction, the value of the asset cannot be one's own bid but the highest oldest bid leftover. If that highest oldest bid is lower than the price paid (even with liquid stocks this is usually the case) then one has accrued a bid/ask cost.\",\n \"Bond ETFs are just another way to buy a bond mutual fund. An ETF lets you trade mutual fund shares the way you trade stocks, in small share-size increments. The content of this answer applies equally to both stock and bond funds. If you are intending to buy and hold these securities, your main concerns should be purchase fees and expense ratios. Different brokerages will charge you different amounts to purchase these securities. Some brokerages have their own mutual funds for which they charge no trading fees, but they charge trading fees for ETFs. Brokerage A will let you buy Brokerage A's mutual funds for no trading fee but will charge a fee if you purchase Brokerage B's mutual fund in your Brokerage A account. Some brokerages have multiple classes of the same mutual fund. For example, Vanguard for many of its mutual funds has an Investor class (minimum $3,000 initial investment), Admiral class (minimum $10,000 initial investment), and an ETF (share price as initial investment). Investor class has the highest expense ratio (ER). Admiral class and the ETF generally have much lower ER, usually the same number. For example, Vanguard's Total Bond Market Index mutual fund has Investor class (symbol VBMFX) with 0.16% ER, Admiral (symbol VBTLX) with 0.06% ER, and ETF (symbol BND) with 0.06% ER (same as Admiral). See Vanguard ETF/mutual fund comparison page. Note that you can initially buy Investor class shares with Vanguard and Vanguard will automatically convert them to the lower-ER Admiral class shares when your investment has grown to the Admiral threshold. Choosing your broker and your funds may end up being more important than choosing the form of mutual fund versus ETF. Some brokers charge very high purchase/redemption fees for mutual funds. Many brokers have no ETFs that they will trade for free. Between funds, index funds are passively managed and are just designed to track a certain index; they have lower ERs. Actively managed funds are run by managers who try to beat the market; they have higher ERs and tend to actually fall below the performance of index funds, a double whammy. See also Vanguard's explanation of mutual funds vs. ETFs at Vanguard. See also Investopedia's explanation of mutual funds vs. ETFs in general.\",\n \"Your link is pointing to managed funds where the fees are higher, you should look at their exchange traded funds; you will note that the management fees are much lower and better reflect the index fund strategy.\",\n \"\\\"I'm assuming the question is about how to compare two ETFs that track the same index. I'd look at (for ETFs -- ignoring index funds): So, for example you might compare SPY vs IVV: SPY has about 100x the volume. Sure, IVV has 2M shares trading, so it is liquid \\\"\\\"enough\\\"\\\". But the bigger volume on SPY might matter to you if you use options: open interest is as much as 1000x more on SPY. Even if you have no interest in options, the spreads on SPY are probably going to be slightly smaller. They both have 0.09% expense ratios. When I looked on 2010-9-6, SPY was trading at a slight discount, IVV was at a slight premium. Looking for any sort of trend is left as an exercise to the reader... Grab the prospectus for each to examine the rules they set for fund makeup. Both come from well-known issuers and have a decent history. (Rather than crazy Uncle Ed's pawn shop, or the Central Bank of Stilumunistan.) So unless you find something in the SPY prospectus that makes you queasy, the higher volume and equal expense ratios would seem to suggest it over IVV. The fact that it is at a (tiny) discount right now is a (tiny) bonus.\\\"\",\n \"\\\"The \\\"\\\"ideal world\\\"\\\" index fund of any asset class is a perfect percentage holding of all underlying assets with immediate rebalancing that aligns to every change in the index weighting while trading in a fully liquid market with zero transaction costs. One finance text book that describes this is Introduction to Finance: Markets, Investments, and Financial Management, see chapter 11. Practically, the transaction costs and liquidity make this unworkable. There are several deviations between what the \\\"\\\"ideal world algorithm\\\"\\\" (\\\"\\\"the algorithm\\\"\\\") says you should do and what is actually done. Each of these items addresses a real-world solution to various costs of managing a passive index fund. (And they are good solutions.) However, any deviation from the ideal index fund will have a risk. An investor evaluating their choices is left to pick the lowest fees with the least deviation from the ideal index fund. (It is customary to ignore whether the results are in excess or deficit to the ideal). So your formula is: This is also described in the above book.\\\"\",\n \"There are hundreds if not thousands of index funds and ETFs in the EU, far too many to enumerate here. It's worth pointing out that Vanguard themselves operate in the UK. The minimum investment if you go direct to Vanguard is £100,000, but you can make smaller investments through a number of fund platforms.\",\n \"For your purposes, I would recommend using direct investment in a no-load mutual fund. I mostly use Vanguard and would recommend them. They just about invented index funds, usually have the lowest (internal) expenses for index and many other funds, if you take electronic instead of paper statements there is no maintenance fee, have no transaction commission, can do periodic automatic investment from a bank account etc. A typical index fund there would require an initial $3000 investment and would have a minimum of $100 for each additional investment. If you can't come up with an initial sum of that size, you might be able to find a broker with a lower minimum and suitable free ETFs trades as others have suggested.\",\n \"\\\"People in this case, are large institutional investors. The \\\"\\\"bid ask\\\"\\\" spread is for \\\"\\\"small traders\\\"\\\" like yourself. It is put out by the so-called specialists (or \\\"\\\"market makers\\\"\\\") and is typically good for hundreds or thousands of shares at a time. Normally, 2 points on a 50 stock is a wide spread, and the market maker will make quite a bit of money on it trading with people like yourself. It's different if a large institution, say Fidelity, wants to sell, say 1 million shares of the stock. Depending on market conditions, it may have trouble finding buyers willing to buy in those amounts anywhere near 50. To \\\"\\\"move\\\"\\\" such a large block of stock, they may have to put the equivalent of K-Mart's old \\\"\\\"Blue Light Special\\\"\\\" on, several points below.\\\"\",\n \"The creation mechanism for ETF's ensures that the value of the underlying stocks do not diverge significantly from the Fund's value. Authorized participants have a strong incentive to arbitrage any pricing differences and create/redeem blocks of stock/etf until the prices are back inline. Contrary to what was stated in a previous answer, this mechanism lowers the cost of management of ETF's when compared to mutual funds that must access the market on a regular basis when any investors enter/exit the fund. The ETF only needs to create/redeem in a wholesale basis, this allows them to operate with management fees that are much lower than those of a mutual fund. Expenses Due to the passive nature of indexed strategies, the internal expenses of most ETFs are considerably lower than those of many mutual funds. Of the more than 900 available ETFs listed on Morningstar in 2010, those with the lowest expense ratios charged about .10%, while those with the highest expenses ran about 1.25%. By comparison, the lowest fund fees range from .01% to more than 10% per year for other funds. (For more on mutual fund feeds, read Stop Paying High Fees.)\",\n \"The idea of an index is that it is representative of the market (or a specific market segment) as a whole, so it will move as the market does. Thus, past performance is not really relevant, unless you want to bank on relative differences between different countries' economies. But that's not the point. By far the most important aspect when choosing index funds is the ongoing cost, usually expressed as Total Expense Ratio (TER), which tells you how much of your investment will be eaten up by trading fees and to pay the funds' operating costs (and profits). This is where index funds beat traditional actively managed funds - it should be below 0.5% The next question is how buying and selling the funds works and what costs it incurs. Do you have to open a dedicated account or can you use a brokerage account at your bank? Is there an account management fee? Do you have to buy the funds at a markup (can you get a discount on it)? Are there flat trading fees? Is there a minimum investment? What lot sizes are possible? Can you set up a monthly payment plan? Can you automatically reinvest dividends/coupons? Then of course you have to decide which index, i.e. which market you want to buy into. My answer in the other question apparently didn't make it clear, but I was talking only about stock indices. You should generally stick to broad, established indices like the MSCI World, S&P 500, Euro Stoxx, or in Australia the All Ordinaries. Among those, it makes some sense to just choose your home country's main index, because that eliminates currency risk and is also often cheaper. Alternatively, you might want to use the opportunity to diversify internationally so that if your country's economy tanks, you won't lose your job and see your investment take a dive. Finally, you should of course choose a well-established, reputable issuer. But this isn't really a business for startups (neither shady nor disruptively consumer-friendly) anyway.\",\n \"No, some of Vanguard's funds are index funds like their Total Stock Market Index and 500 Index. In contrast, there are funds like Vanguard PRIMECAP and Vanguard Wellington that are actively managed. There are index funds in both open-end and exchange-traded formats. VTI is the ticker for Vanguard's Total Stock Market ETF while VTSMX is an open-end mutual fund format. VOO would be the S & P 500 ETF ticker while VFINX is one of the open-end mutual fund tickers, where VIIIX has a really low expense ratio but a pretty stiff minimum to my mind. As a general note, open-end mutual funds will generally have a 5 letter ticker ending in X while an ETF will generally be shorter at 3 or 4 letters in length.\",\n \"It is known as the range or the price spread of the stock. You can read more about it here http://www.investopedia.com/terms/r/range.asp\",\n \"Interesting to me. Index funds are known for hurting active management. Fund flows have been toward index funds, not active funds. But apparently S&P and MSCI are making hundreds of millions just by licensing out the names of their most popular funds. Vanguard also had a sweetheart deal at one time: > Index funds weren't always a big business, and S&P didn't always know just how valuable the indexes it owned really were. Before the first ETF ever hit the market, S&P agreed to a perpetual license with Vanguard that entitled the index owner to a maximum annual fee of $50,000 from Vanguard's premier index mutual fund, the Vanguard 500 Index Fund. >As Vanguard popularized the index fund, S&P began to realize just how much it had left on the table. By 2001, the Vanguard fund had $90 billion in assets > To this day, Vanguard's premier S&P 500 index fund is reportedly operating under its perpetual license, paying just $50,000 per year to S&P Global, but subsequent funds based on S&P's indexes are likely paying full freight. For S&P, it was a very costly lesson to learn.\",\n \"As I recall, the Scottrade minimum is only $500. (By the way, Scottrade has a feature to automatically reinvest any dividends which the securities pay) Once you have an account, you can buy into an index fund. SPY tracks the S&P 500. It is also currently paying nearly 2% in dividends. You can shop for other alternatives here: http://seekingalpha.com/insight/etf_hub/etf_guide/selector/article/39431-core-building-blocks-large-mid-small-cap-us-etfs\",\n \"\\\"Index funds may invest either in index components directly or in other instruments (like ETFs, index options, futures, etc.) which are highly correlated with the index. The specific fund prospectus or description on any decent financial site should contain these details. Index funds are not actively managed, but that does not mean they aren't managed at all - if index changes and the fund includes specific stock, they would adjust the fund content. Of course, the downside of it is that selling off large amounts of certain stock (on its low point, since it's being excluded presumably because of its decline) and buying large amount of different stock (on its raising point) may have certain costs, which would cause the fund lag behind the index. Usually the difference is not overly large, but it exists. Investing in the index contents directly involves more transactions - which the fund distributes between members, so it doesn't usually buy individually for each member but manages the portfolio in big chunks, which saves costs. Of course, the downside is that it can lag behind the index if it's volatile. Also, in order to buy specific shares, you will have to shell out for a number of whole share prices - which for a big index may be a substantial sum and won't allow you much flexibility (like \\\"\\\"I want to withdraw half of my investment in S&P 500\\\"\\\") since you can't usually own 1/10 of a share. With index funds, the entry price is usually quite low and increments in which you can add or withdraw funds are low too.\\\"\",\n \"Mutual funds don't have intraday prices. They have net asset values which are calculated periodically (daily or weekly or any other period depending on the fund).\",\n \"The ETF price quoted on the stock exchange is in principle not referenced to NAV. The fund administrator will calculate and publish the NAV net of all fees, but the ETF price you see is determined by the market just like for any other security. Having said that, the market will not normally deviate greatly from the NAV of the fund, so you can safely assume that ETF quoted price is net of relevant fees.\",\n \"\\\"You seem to be assuming that ETFs must all work like the more traditional closed-end funds, where the market price per share tends—based on supply and demand—to significantly deviate from the underlying net asset value per share. The assumption is simplistic. What are traditionally referred to as closed-end funds (CEFs), where unit creation and redemption are very tightly controlled, have been around for a long time, and yes, they do often trade at a premium or discount to NAV because the quantity is inflexible. Yet, what is generally meant when the label \\\"\\\"ETF\\\"\\\" is used (despite CEFs also being both \\\"\\\"exchange-traded\\\"\\\" and \\\"\\\"funds\\\"\\\") are those securities which are not just exchange-traded, and funds, but also typically have two specific characteristics: (a) that they are based on some published index, and (b) that a mechanism exists for shares to be created or redeemed by large market participants. These characteristics facilitate efficient pricing through arbitrage. Essentially, when large market participants notice the price of an ETF diverging from the value of the shares held by the fund, new units of the ETF can get created or redeemed in bulk. The divergence quickly narrows as these participants buy or sell ETF units to capture the difference. So, the persistent premium (sometimes dear) or discount (sometimes deep) one can easily witness in the CEF universe tend not to occur with the typical ETF. Much of the time, prices for ETFs will tend to be very close to their net asset value. However, it isn't always the case, so proceed with some caution anyway. Both CEF and ETF providers generally publish information about their funds online. You will want to find out what is the underlying Net Asset Value (NAV) per share, and then you can determine if the market price trades at a premium or a discount to NAV. Assuming little difference in an ETF's price vs. its NAV, the more interesting question to ask about an ETF then becomes whether the NAV itself is a bargain, or not. That means you'll need to be more concerned with what stocks are in the index the fund tracks, and whether those stocks are a bargain, or not, at their current prices. i.e. The ETF is a basket, so look at each thing in the basket. Of course, most people buy ETFs because they don't want to do this kind of analysis and are happy with market average returns. Even so, sector-based ETFs are often used by traders to buy (or sell) entire sectors that may be undervalued (or overvalued).\\\"\",\n \"John Bogle never said only buy the S&P 500 or any single index Q:Do you think the average person could safely invest for retirement and other goals without expert advice -- just by indexing? A: Yes, there is a rule of thumb I add to that. You should start out heavily invested in equities. Hold some bond index funds as well as stock index funds. By the time you get closer to retirement or into your retirement, you should have a significant position in bond index funds as well as stock index funds. As we get older, we have less time to recoup. We have more money to protect and our nervousness increases with age. We get a little bit worried about that nest egg when it's large and we have little time to recoup it, so we pay too much attention to the fluctuations in the market, which in the long run mean nothing. How much to pay Q: What's the highest expense ratio that one should pay for a domestic equity fund? A: I'd say three-quarters of 1 percent maybe. Q: For an international fund? A: I'd say three-quarters of 1 percent. Q: For a bond fund? A: One-half of 1 percent. But I'd shave that a little bit. For example, if you can buy a no-load bond fund or a no-load stock fund, you can afford a little more expense ratio, because you're not paying any commission. You've eliminated cost No. 2....\",\n \"What you should compare is SPX, SPY NAV, and ES fair value. Like others have said is SPX is the index that others attempt to track. SPY tracks it, but it can get a tiny bit out of line as explained here by @Brick . That's why they publish NAV or net asset value. It's what the price should be. For SPY this will be very close because of all the participants. The MER is a factor, but more important is something called tracking error, which takes into account MER plus things like trading expenses plus revenue from securities lending. SPY (the few times I've checked) has a smaller tracking error than the MER. It's not much of a factor in pricing differences. ES is the price you'll pay today to get SPX delivered in the future (but settled in cash). You have to take into account dividends and interest, this is called fair value. You can find this usually every morning so you can compare what the futures are saying about the underlying index. http://www.cnbc.com/pre-markets/ The most likely difference is you're looking at different times of the day or different open/close calculations.\",\n \"This depends on the particular index, of course. Capital gains taxes occur when stock is sold (for a profit). This occurs less frequently in an index fund: Where an active manager frequently buys and sells stocks (after all, he wants to be active :-) ), the index fund only sells stocks when the particular stock leaves the index. For an index such as the S&P 500 this does not happen that often. The more specific the criteria of the index fund, the more often the selling of stock and thus the need to pay capital gains taxes occurs.\",\n \"See if any of the funds they offer are index funds, which will generally have MUCH lower fees and which seem to perform as well as any of the actively managed funds in the same categories.\",\n \"What is your time horizon? Over long horizons, you absolutely want to minimise the expense ratio – a seemingly puny 2% fee p.a. can cost you a third of your savings over 35 years. Over short horizons, the cost of trading in and trading out might matter more. A mutual fund might be front-loaded, i.e. charge a fixed initial percentage when you first purchase it. ETFs, traded daily on an exchange just like a stock, don't have that. What you'll pay there is the broker commission, and the bid-ask spread (and possibly any premium/discount the ETF has vis-a-vis the underlying asset value). Another thing to keep in mind is tracking error: how closely does the fond mirror the underlying index it attempts to track? More often than not it works against you. However, not sure there is a systematic difference between ETFs and funds there. Size and age of a fund can matter, indeed - I've had new and smallish ETFs that didn't take off close down, so I had to sell and re-allocate the money. Two more minor aspects: Synthetic ETFs and lending to short sellers. 1) Some ETFs are synthetic, that is, they don't buy all the underlying shares replicating the index, actually owning the shares. Instead, they put the money in the bank and enter a swap with a counter-party, typically an investment bank, that promises to pay them the equivalent return of holding that share portfolio. In this case, you have (implicit) credit exposure to that counter-party - if the index performs well, and they don't pay up, well, tough luck. The ETF was relying on that swap, never really held the shares comprising the index, and won't necessarily cough up the difference. 2) In a similar vein, some (non-synthetic) ETFs hold the shares, but then lend them out to short sellers, earning extra money. This will increase the profit of the ETF provider, and potentially decrease your expense ratio (if they pass some of the profit on, or charge lower fees). So, that's a good thing. In case of an operational screw up, or if the short seller can't fulfil their obligations to return the shares, there is a risk of a loss. These two considerations are not really a factor in normal times (except in improving ETF expense ratios), but during the 2009 meltdown they were floated as things to consider. Mutual funds and ETFs re-invest or pay out dividends. For a given mutual fund, you might be able to choose, while ETFs typically are of one type or the other. Not sure how tax treatment differs there, though, sorry (not something I have to deal with in my jurisdiction). As a rule of thumb though, as alex vieux says, for a popular index, ETFs will be cheaper over the long term. Very low cost mutual funds, such as Vanguard, might be competitive though.\",\n \"Market cap probably isn't as big of an issue as the bid/ask spread and the liquidity, although they tend to be related. The spread is likely to be wider on lesser traded ETF funds we are talking about pennies, likely not an issue unless you are trading in and out frequently. The expense ratios will also tend to be slightly higher again not a huge issue but it might be a consideration. You are unlikely to make up the cost of paying the commission to buy into a larger ETF any time soon though.\",\n \"It really depends on the hedge fund, my hedge fund gives back all rebates for routes that are public knowledge back to the client. Also the rebate is based on the route, not the stock, so it may not offset all expenses on each ETFs. Most of the BATS IEX and other routes have public websites where you can get the infos on what are the rebates for each.\",\n \"\\\"For a non-ETF mutual fund, you can only buy shares of the mutual fund from the mutual fund itself (at a price that the mutual fund will reveal only at the end of the day) and can only shares back to the mutual fund (again at a price that the mutual fund will reveal only at the end of the day). There is no open market in the sense that you cannot put in a bid to buy, say, 100 shares of VFINX at $217 per share through a brokerage, and if there is a seller willing to sell 100 shares of VFINX to you at $217, then the sale is consummated and you are now the proud owner of 100 shares of VFINX. The only buyer or seller of VFINX is the mutual find itself, and you tell it that you \\\"\\\"want to buy 100 shares of VFINX and please take the money out of my checking account\\\"\\\". If this order is entered before the markets close at 4 pm, the mutual fund determines its share price as of the end of the day, opens a new account for you and puts 100 shares of VFINX in it (or adds 100 shares of VFINX to your already existing pile of shares) and takes the purchase price out of your checking account via an ACH transfer. Similarly for redeeming/selling shares of VFINX that you own (and these are held in an account at the mutual fund itself, not by your brokerage): you tell the mutual fund to that you \\\"\\\"wish to redeem 100 shares and please send the proceeds to my bank account\\\"\\\" and the mutual fund does this at the end of the day, and the money appears in your bank account via ACH transfer two or three days later. Generally, these transactions do not need to be for round lots of multiples of 100 shares for efficiency; most mutual fund will gladly sell you fractional shares down to a thousandth of a share. In contrast, shares of an exchange-traded fund (ETF) are just like stock shares in that they can be bought and sold on the open market and your broker will charge you fees for buying and selling them. Selling fractional shares on the open market is generally not possible, and trading in round lots is less expensive. Also, trades occur at all times of the stock exchange day, not just at the end of the day as with non-ETF funds, and the price can fluctuate during the day too. Many non-ETF mutual funds have an ETF equivalent: VOO is the symbol for Vanguard's S&P 500 Index ETF while VFINX is the non-ETF version of the same index fund. Read more about the differences between ETFs and mutual funds, for example, here.\\\"\",\n \"\\\"If you want the answer from the horse's mouth, go to the website of the ETF or mutual find, and the expense ratio will be listed there, both on the \\\"\\\"Important Information\\\"\\\" part of the front page, as well as in the .pdf file that you click on to download the Prospectus. Oh wait, you don't want to go the fund's website at all, just to a query site where you type in something like VFINX. hit SEARCH, and out pops the expense ratio for the Vanguard S&P 500 Index Fund? Well, have you considered MorningStar?\\\"\",\n \"\\\"It's good to ask this question, because this is one of the fundamental dichotomies in market microstructure. At any time T for each product on a (typical) exchange there are two well-defined prices: At time T there is literally no person in the market who wants to sell below the ask, so all the people who are waiting to buy at the bid (or below) could very well be waiting there forever. There's simply no guarantee that any seller will ever want to part with their product for a lesser price than they think it's worth. So if you want to buy the product at time T you have a tough choice to make: you get in line at the bid price, where there's no guarantee that your request will ever be filled, and you might never get your hands on the product you decide that owning the product right now is more valuable to you than (ask - bid) * quantity, so you tell the exchange that you're willing to buy at the ask price, and the exchange matches you with whichever seller is first in line Now, if you're in the market for the long term, the above choice is completely immaterial to you. Who cares if you pay $10.00 * 1000 shares or $10.01 * 1000 shares when you plan to sell 30 years from now at $200 (or $200.01)? But if you're a day trader or anyone else with a very short time horizon, then this choice is extremely important: if the price is about to go up several cents and you got in line at the bid (and never got filled) then you missed out on some profit if you \\\"\\\"cross the spread\\\"\\\" to buy at the ask and then the price doesn't go up (or worse, goes down), you're screwed. In order to get out of the position you'll have to cross the spread again and sell at at most the bid, meaning you've now paid the spread twice (plus transaction fees and regulatory fees) for nothing. (All of the above also applies in reverse for selling at the ask versus selling at the bid, but most people like to learn in terms of buying rather than selling.)\\\"\",\n \"How do (index and active) mutual funds trade? Do they buy stocks as soon as a I buy a share in the mutual fund, or do they have fixed times they trade, such as once every week/month/quarter? Is it theoretical possible for someone to front run mutual funds, if someone holds individual stocks? Let's say an institutional investor creates an order of $100m in a mutual fund, how likely can a broker, which holds a fraction of the fund's portfolio, front run and take advantage of that trade? It is more likely to front run that fund if it's an active small cap fund, but how likely is it to front run trades for index funds?\",\n \"\\\"who computes the S&P 500? Standard and Poor's. Why are they sharing this information and Because that's what they do. This is a financial research company. how do they recuperate the costs inherent in computing the S&P 500? By charging clients for other information. The computing of the index itself is not all that complicated, its coming up with the index that's a problem. Once they've come up with the formula, and it became widely accepted, the computation itself is not an issue. But the fact that its so popular leads to the S&P brand recognition, and people come and pay good money for their other services (ratings and financial analysis of securities). They do more work for free. For example, the ratings of various government debts are being done by S&P for free (governments don't pay for that), while private bonds are rated for a fee (corporations pay to have their bonds rated). Also, as noted by JBKing, there are probably some licensing fees for using the index name in the fund name (and other users are probably paying the licensing fee, like the news agencies and the exchanges). S&P500 is a registered trademark, and as such cannot be used without the owner's permission. Why is then \\\"\\\"active management\\\"\\\" not required for indexed funds Because no research and stock picking is required. In fact, these funds don't really require a manager, they can be managed by a simple script. and how does it lower taxes? (perhaps this could be a different question if this has become too broad) Actively managed funds perform a lot more buy/sell operations, each leading to tax consequences to the fund (which rolls them over to the investors). Index funds only buy and sell to re-balance back to the index (or when the makeup of the index changes, usually once a year or half a year), leading to much lesser realized capital gains to the fund, thus much lesser tax consequences.\\\"\",\n \"From an article I wrote a while back: “Dalbar Inc., a Boston-based financial services research firm, has been measuring the effects of investors’ decisions to buy, sell, and switch into and out of mutual funds since 1984. The key finding always has been that the average investor earns significantly less than the return reported by their funds. (For the 20 years ended Dec. 31, 2006, the average stock fund investor earned a paltry 4.3 average annual compounded return compared to 11.8 percent for the Standard & Poor’s 500 index.)” It's one thing to look at the indexes. But quite another to understand what other investors are actually getting. The propensity to sell low and buy high is proven by the data Dalbar publishes. And really makes the case to go after the magic S&P - 0.09% gotten from an ETF.\",\n \"In your other question about these funds you quoted two very different yields for them. That pretty clearly says they are NOT tracking the same index.\",\n \"The expense ratio reduces the return of the ETF; your scenario of paying 100.0015 is that of a load. Most (all?) ETFs can be bought without paying a load (sales charge as a percent of amount invested), and some ETFs can be bought without paying a brokerage fee (fixed or variable charge for a buy transaction just like buying any other stock through the brokerage) because the brokerage has waived it. Your broker might charge fees for both buying and selling shares in an ETF, but in any case, this is quite separate from the expense ratio.\",\n \"The top ten holdings for these funds don't overlap by even one stock. It seems to me they are targeting an index for comparison, but making no attempt to replicate a list of holdings as would, say, a true S&P index.\",\n \"Cost. If an investor wanted to diversify his portfolio by investing in the companies that make up the S&P 500, the per-share and commission costs to individually place trades for each and every one of those companies would be prohibitive. I can buy one share of an exchange-traded fund that tracks the S&P 500 for less than the purchase price of a single share in some of the companies that make up the index.\",\n \"More importantly, index funds are denominated in specific currencies. You can't buy or sell an index, so it can be dimensionless. Anything you actually do to track the index involves real amounts of real money.\",\n \"Index funds are good for diversifying risk. For people who don't have a large sum of money to invest, holding all the different types of stocks in the index is both very expensive and not practical because you incur too many transaction costs. For an index funds, the main advantages are that costs are pooled, and investors can invest a smaller amount that they would if they bought all the different stocks individually. Naturally, if you wanted to figure out the percentage composition of the index and invest directly it would be possible, albeit tedious.\",\n \"As these all seem to be US Equity, just getting one broad based US Equity index might offer similar diversification at lower cost. Over 5 years, 20 basis points in fees will only make about 1% difference. However, for longer periods (retirement saving), it is worth it to aim for the lowest fees. For further diversification, you might want to consider other asset classes, such as foreign equity, fixed income, etc.\",\n \"\\\"Your bank's fund is not an index fund. From your link: To provide a balanced portfolio of primarily Canadian securities that produce income and capital appreciation by investing primarily in Canadian money market instruments, debt securities and common and preferred shares. This is a very broad actively managed fund. Compare this to the investment objective listed for Vanguard's VOO: Invests in stocks in the S&P 500 Index, representing 500 of the largest U.S. companies. There are loads of market indices with varying formulas that are supposed to track the performance of a market or market segment that they intend to track. The Russel 2000, The Wilshire 1000, The S&P 500, the Dow Industrial Average, there is even the SSGA Gender Diversity Index. Some body comes up with a market index. An \\\"\\\"Index Fund\\\"\\\" is simply a Mutual Fund or Exchange Traded Fund (ETF) that uses a market index formula to make it's investment decisions enabling an investor to track the performance of the index without having to buy and sell the constituent securities on their own. These \\\"\\\"index funds\\\"\\\" are able to charge lower fees because they spend $0 on research, and only make investment decisions in order to track the holdings of the index. I think 1.2% is too high, but I'm coming from the US investing world it might not be that high compared to Canadian offerings. Additionally, comparing this fund's expense ratio to the Vanguard 500 or Total Market index fund is nonsensical. Similarly, comparing the investment returns is nonsensical because one tracks the S&P 500 and one does not, nor does it seek to (as an example the #5 largest holding of the CIBC fund is a Government of Canada 2045 3.5% bond). Everyone should diversify their holdings and adjust their investment allocations as they age. As you age you should be reallocating away from highly volatile common stock and in to assets classes that are historically more stable/less volatile like national government debt and high grade corporate/local government debt. This fund is already diversified in to some debt instruments, depending on your age and other asset allocations this might not be the best place to put your money regardless of the fees. Personally, I handle my own asset allocations and I'm split between Large, Mid and Small cap low-fee index funds, and the lowest cost high grade debt funds available to me.\\\"\",\n \"Zero. Zero is reasonable. That's what Schwab offers with a low minimum to open the IRA. The fact is, you'll have expenses for the investments, whether a commission on stock purchase or ongoing expense of a fund or ETF. But, in my opinion, .25% is criminal. An S&P fund or ETF will have a sub-.10% expense. To spend .25% before any other fees are added is just wrong.\",\n \"With regard to commodity futures, a paper released in January 2010 by Aulerich, Irwin, and Garcia, concluded that index funds have essentially no impact on commodity futures. Looking at stocks, a stock that gets included in a major index does increase in price. It increases its turnover by 27% and increases its price by between 2.7% and 5.5%, according to information cited by Kula in this paper, though it looks like the price increase tends to happen in the lead up to the stock being included. Interestingly, I have read an article but cannot now locate it, which states that there's a measurable, albeit fairly small, price bubble on stocks included in common indexes, on Monday mornings, Friday afternoons, and at the start and end of the month. That is, the times when mutual funds are most likely to rebalance their holdings. This almost certainly applies to a lesser extent to other stocks, too. My understanding is that the price difference was very small, however. Generally speaking, stocks which make part of well-known indexes will tend to be in higher demand than stocks which do not. It remains the case that almost all actively-managed mutual funds are unable to consistently beat the indexes, even with this taken into account.\",\n \"\\\"I actually love this question, and have hashed this out with a friend of mine where my premise was that at some volume of money it must be advantageous to simply track the index yourself. There some obvious touch-points: Most people don't have anywhere near the volume of money required for even a $5 commission outweigh the large index fund expense ratios. There are logistical issues that are massively reduced by holding a fund when it comes to winding down your investment(s) as you get near retirement age. Index funds are not touted as categorically \\\"\\\"the best\\\"\\\" investment, they are being touted as the best place for the average person to invest. There is still a management component to an index like the S&P500. The index doesn't simply buy a share of Apple and watch it over time. The S&P 500 isn't simply a single share of each of the 500 larges US companies it's market cap weighted with frequent rebalancing and constituent changes. VOO makes a lot of trades every day to track the S&P index, \\\"\\\"passive index investing\\\"\\\" is almost an oxymoron. The most obvious part of this is that if index funds were \\\"\\\"the best\\\"\\\" way to invest money Berkshire Hathaway would be 100% invested in VOO. The argument for \\\"\\\"passive index investing\\\"\\\" is simplified for public consumption. The reality is that over time large actively managed funds have under-performed the large index funds net of fees. In part, the thrust of the advice is that the average person is, or should be, more concerned with their own endeavors than they are managing their savings. Investment professionals generally want to avoid \\\"\\\"How come I my money only returned 4% when the market index returned 7%? If you track the index, you won't do worse than the index; this helps people sleep better at night. In my opinion the dirty little secret of index funds is that they are able to charge so much less because they spend $0 making investment decisions and $0 on researching the quality of the securities they hold. They simply track an index; XYZ company is 0.07% of the index, then the fund carries 0.07% of XYZ even if the manager thinks something shady is going on there. The argument for a majority of your funds residing in Mutual Funds/ETFs is simple, When you're of retirement age do you really want to make decisions like should I sell a share of Amazon or a share of Exxon? Wouldn't you rather just sell 2 units of SRQ Index fund and completely maintain your investment diversification and not pay commission? For this simplicity you give up three basis points? It seems pretty reasonable to me.\\\"\",\n \"The key two things to consider when looking at similar/identical ETFs is the typical (or 'indicative') spread, and the trading volume and size of the ETF. Just like regular stocks, thinly traded ETF's often have quite large spreads between buy and sell: in the 1.5-2%+ range in some cases. This is a huge drain if you make a lot of transactions and can easily be a much larger concern than a relatively trivial difference in ongoing charges depending on your exact expected trading frequency. Poor spreads are also generally related to a lack of liquidity, and illiquid assets are usually the first to become heavily disconnected from the underlying in cases where the authorized participants (APs) face issues. In general with stock ETFs that trade very liquid markets this has historically not been much of an issue, as the creation/redemption mechanism on these types of assets is pretty robust: it's consequences on typical spread is much more important for the average retail investor. On point #3, no, this would create an arbitrage which an authorized participant would quickly take advantage of. Worth reading up about the creation and redemption mechanism (here is a good place to start) to understand the exact way this happens in ETFs as it's very key to how they work.\",\n \"\\\"i know that hedge funds shouldn't be compared with index funds. they do different things. they serve different functions. but when the headline is they are reporting big gains, and then they report that \\\"\\\"Ken Griffin’s main Wellington and Kensington funds at Citadel rose almost 7 percent.\\\"\\\" YTD, and \\\"\\\"Andreas Halvorsen’s Viking and an equity-focused quantitative fund at Renaissance are up more than 9 percent this year through July\\\"\\\" as reporting \\\"\\\"Big Gains\\\"\\\" it's a little silly when an index fund like SCHB is up 10.7% YTD with an ER of 0.03.\\\"\",\n \"Look at morningstar holdings.It will list the top 25 holdings and their current price.This will give you a good idea of the intra-day price of the fund.\",\n \"The point is that the bid and ask prices dictate what you can buy and sell at (at market, at least), and the difference between the two, or spread, contributes implicitly to your gains or losses. For example, say your $1 stock actually had a bid of $0.90 and an ask of $1.10; i.e. say that $1 was the last price. You would have to buy the stock at the ask price of $1.10, but now you can only sell that stock at the bid price of $0.90. Thus, you would need to make at least that $0.20 spread before you can make a profit.\",\n \"\\\"I think you are asking about actively managed funds vs. indexes and possibly also vs. diversified funds like target date funds. This is also related to the question of mutual fund vs. ETF. First, a fund can be either actively managed or it can attempt to track an index. An actively managed fund has a fund manager who tries to find the best stocks to invest in within some constraints, like \\\"\\\"this fund invests in large cap US companies\\\"\\\". An index fund tries to match as closely as possible the performance of an index like the S&P 500. A fund may also try to offer a portfolio that is suitable for someone to put their entire account into. For example, a target date fund is a fund that may invest in a mix of stocks, bonds and foreign stock in a proportion that would be appropriate to someone expecting to retire in a certain year. These are not what people tend to think of as the canonical examples of mutual funds, even though they share the same legal structure and investment mechanisms. Secondly, a fund can either be a traditional mutual fund or it can be an exchange traded fund (ETF). To invest in a traditional mutual fund, you send money to the fund, and they give you a number of shares equal to what that money would have bought of the net asset value (NAV) of the fund at the end of trading on the day they receive your deposit, possibly minus a sales charge. To invest in an ETF, you buy shares of the ETF on the stock market like any other stock. Under the covers, an ETF does have something similar to the mechanism of depositing money to get shares, but only big traders can use that, and it's not used for investing, but only for people who are making a market in the stock (if lots of people are buying VTI, Big Dealer Co will get 100,000 shares from Vanguard so that they can sell them on the market the next day). Historically and traditionally, ETFs are associated with an indexing strategy, while if not specifically mentioned, people assume that traditional mutual funds are actively managed. Many ETFs, notably all the Vanguard ETFs, are actually just a different way to hold the same underlying fund. The best way to understand this is to read the prospectus for a mutual fund and an ETF. It's all there in reasonably plain English.\\\"\",\n \"If you just want to track an index, then ETFs are, generally speaking, the better way.\",\n \"I see a couple of reasons why you could consider choosing a mutual fund over an ETF In some cases index mutual funds can be a cheaper alternative to ETFs. In the UK where I am based, Fidelity is offering a management fee of 0.07% on its FTSE All shares tracker. Last time I checked, no ETF was beating that There are quite a few cost you have to foot when dealing ETFs In some cases, when dealing for relatively small amounts (e.g. a monthly investment plan) you can get a better deal, if your broker has negotiated discounts for you with a fund provider. My broker asks £12.5 when dealing in shares (£1.5 for the regular investment plan) whereas he asks £0 when dealing in funds and I get a 100% discount on the initial charge of the fund. As a conclusion, I would suggest you look at the all-in costs over total investment period you are considering for the exact amount you are planning to invest. Despite all the hype, ETFs are not always the cheapest alternative.\",\n \"Like an S&P 500 ETF? So you're getting in some cash inflow each day, cash outflows each day. And you have to buy and sell 500 different stocks, at the same time, in order for your total fund assets to match the S&P 500 index proportions, as much as possible. At any given time, the prices you get from the purchase/sale of stock is probably going to be somewhat different than the theoretical amounts you are supposed to get to match, so it's quite a tangle. This is my understanding of things. Some funds are simpler - a Dow 30 fund only has 30 stocks to balance out. Maybe that's easier, or maybe it's harder because one wonky trade makes a bigger difference? I'm not sure this is how it really operates. The closest I've gotten is a team that has submitted products for indexing, and attempted to develop funds from those indexes. Turns out finding the $25-50 million of initial investments isn't as easy as anyone would think.\",\n \"The S&P500 is an index, not an investment by itself. The index lists a large number of stocks, and the value of the index is the price of all the stocks added together. If you want to make an investment that tracks the S&P500, you could buy some shares of each stock in the index, in the same proportions as the index. This, however, is impractical for just about everyone. Index mutual funds provide an easy way to make this investment. SPY is an ETF (exchange-traded mutual fund) that does the same thing. An index CFD (contract for difference) is not the same as an index mutual fund. There are a number of differences between investing in a security fund and investing in a CFD, and CFDs are not available everywhere.\",\n \"\\\"There are several brokerages which have lower minimum deposits (often $500) and allow purchase of index ETFs. I won't name them to avoid advertising. The best way to find out is to go to your bank, and ask to see a financial advisor. Then explain your difficulty to the advisor (who should caution you about the issues with investing such a small amount) and ask for advice on where to find a suitable broker. Also, sometimes banks offer services where you can buy shares of a fund through your bank account. This is probably not \\\"\\\"as good\\\"\\\" as the brokerage (performance may be not as good, fees may come out higher), but especially for small amounts and for convenience, this may be easier. Again, you should inquire at your institution.\\\"\",\n \"Like others have said, mutual funds don't have an intraday NAV, but their ETF equivalents do. Use something like Yahoo Finance and search for the ETF.IV. For example VOO.IV. This will give you not the ETF price (which may be at a premium or discount), but the value of the underlying securities updated every 15 seconds.\",\n \"To add a bit to Daniel Anderson's great answer, if you want to 'peek' at what a the set of bid and ask spreads looks like, the otc market page could be interesting (NOTE: I'm NOT recommending that you trade Over The Counter. Many of these stocks are amusingly scary): http://www.otcmarkets.com/stock/ACBFF/quote You can see market makers essentially offering to buy or sell blocks of stock at a variety of prices.\",\n \"1: Low fees means: a Total Expense Ratio of less than 0,5%. One detail you may also want to pay attention to whether the fund reinvests returns (Thesaurierender Fonds) which is basically good for investing, but if it's also a foreign-based fund then taxes get complicated, see http://www.finanztip.de/indexfonds-etf/thesaurierende-fonds/\",\n \"I don't think that you'll notice a difference in the NAV in a fund with fees that are low as the Vanguard Total Stock Market Fund. Their management fees are incorporated into the NAV, but keep in mind that the fund has a total of $144 billion in assets, with $66 billion in the investor class. The actual fees represent a tiny fraction of the NAV, and may only show up at all on the day they assess the fees. With Vanguard total stock market, you notice the fee difference in the distributions. In the example of Vanguard Total Stock Market, there are institutional-class shares (like VITPX with a minimum investment of $200M) with still lower costs -- as low as 0.0250% vs. 0.18% for the investor class. You will notice a different NAV and distributions for that fund, but there may be other reasons for the variation that I'm not familar with, as I'm not an institutional investor.\",\n \"12b1 refers to a specific marketing fee on funds in my world. are you referring to the expense ratio? yes - that is what fund wholesalers will do. another practice that won't affect your cost though. basically what i want to express is that you shouldn't need a flowchart to understand your fees. it is simply the layers of management that will raise your cost, in addition to any transactional fees.\",\n \"2%? I would put in just what it takes to share in the profit sharing, not a dime more. My S&P fund cost is .02% (edited, as it dropped to .02 since original post), 1/100 of the cost of most funds you list. Doesn't take too many years of this fee to negate the potential tax savings, and not many more to make this a real loser.\",\n \"Over the past five years, QFVOX has returned 13.67%, compared to the index fund SPY that has returned 50.39%. SEVAX has lost 23.96%. AKREX has returned 81.82%. In two of your three examples, you would have done much better in an index fund with a very low expense ratio as suggested. While one can never, as you see, make a generalization, in almost every case, most investors will do better, and often much better, with an index fund with a low expense ratio. My source was Google Finance.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["\"First, what structure does your index fund have? If it is an open-end mutual fund, there are no bid/ask spread as the structure of this security is that it is priced once a day and transactions are done with that price. If it is an exchange-traded fund, then the question becomes how well are authorized participants taking advantage of the spread to make the fund track the index well? This is where you have to get into the Creation and Redemption unit construct of the exchange-traded fund where there are \"\"in-kind\"\" transactions done to either create new shares of the fund or redeem out shares of the fund. In either case, you are making some serious assumptions about the structure of the fund that don't make sense given how these are built. Index funds have lower expense ratios and are thus cheaper than other mutual funds that may take on more costs. If you want suggested reading on this, look at the investing books of John C. Bogle who studied some of this rather extensively, in addition to being one of the first to create an index fund that became known as \"\"Bogle's Folly,\"\" where a couple of key ones would be \"\"Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor\"\" and \"\"Bogle on Mutual Funds: New Perspectives for the Intelligent Investor.\"\" In the case of an open-end fund, there has to be a portion of the fund in cash to handle transaction costs of running the fund as there are management fees to come from running the fund in addition to dividends from the stocks that have to be carefully re-invested and other matters that make this quite easy to note. Vanguard 500 Index Investor portfolio(VFINX) has .38% in cash as an example here where you could look at any open-end mutual fund's portfolio and notice that there may well be some in cash as part of how the fund is managed. It’s the Execution, Stupid would be one of a few articles that looks at the idea of \"\"tracking error\"\" or how well does an index fund actually track the index where it can be noted that in some cases, there can be a little bit of active management in the fund. Just as a minor side note, when I lived in the US I did invest in index funds and found them to be a good investment. I'd still recommend them though I'd argue that while some want to see these as really simple investments, there can be details that make them quite interesting to my mind. How is its price set then? The price is computed by taking the sum value of all the assets of the fund minus the liabilities and divided by the number of outstanding shares. The price of the assets would include the closing price on the stock rather than a bid or ask, similar pricing for bonds held by the fund, derivatives and cash equivalents. Similarly, the liabilities would be costs a fund has to pay that may not have been paid yet such as management fees, brokerage costs, etc. Is it a weighted average of all the underlying stock spreads, or does it stand on its own and stems from the usual supply & demand laws ? There isn't any spread used in determining the \"\"Net Asset Value\"\" for the fund. The fund prices are determined after the market is closed and so a closing price can be used for stocks. The liabilities could include the costs to run the fund as part of the accounting in the fund, that most items have to come down to either being an asset, something with a positive value, or a liability, something with a negative value. Something to consider also is the size of the fund. With over $7,000,000,000 in assets, a .01% amount is still $700,000 which is quite a large amount in some ways.\""],"string":"[\n \"\\\"First, what structure does your index fund have? If it is an open-end mutual fund, there are no bid/ask spread as the structure of this security is that it is priced once a day and transactions are done with that price. If it is an exchange-traded fund, then the question becomes how well are authorized participants taking advantage of the spread to make the fund track the index well? This is where you have to get into the Creation and Redemption unit construct of the exchange-traded fund where there are \\\"\\\"in-kind\\\"\\\" transactions done to either create new shares of the fund or redeem out shares of the fund. In either case, you are making some serious assumptions about the structure of the fund that don't make sense given how these are built. Index funds have lower expense ratios and are thus cheaper than other mutual funds that may take on more costs. If you want suggested reading on this, look at the investing books of John C. Bogle who studied some of this rather extensively, in addition to being one of the first to create an index fund that became known as \\\"\\\"Bogle's Folly,\\\"\\\" where a couple of key ones would be \\\"\\\"Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor\\\"\\\" and \\\"\\\"Bogle on Mutual Funds: New Perspectives for the Intelligent Investor.\\\"\\\" In the case of an open-end fund, there has to be a portion of the fund in cash to handle transaction costs of running the fund as there are management fees to come from running the fund in addition to dividends from the stocks that have to be carefully re-invested and other matters that make this quite easy to note. Vanguard 500 Index Investor portfolio(VFINX) has .38% in cash as an example here where you could look at any open-end mutual fund's portfolio and notice that there may well be some in cash as part of how the fund is managed. It’s the Execution, Stupid would be one of a few articles that looks at the idea of \\\"\\\"tracking error\\\"\\\" or how well does an index fund actually track the index where it can be noted that in some cases, there can be a little bit of active management in the fund. Just as a minor side note, when I lived in the US I did invest in index funds and found them to be a good investment. I'd still recommend them though I'd argue that while some want to see these as really simple investments, there can be details that make them quite interesting to my mind. How is its price set then? The price is computed by taking the sum value of all the assets of the fund minus the liabilities and divided by the number of outstanding shares. The price of the assets would include the closing price on the stock rather than a bid or ask, similar pricing for bonds held by the fund, derivatives and cash equivalents. Similarly, the liabilities would be costs a fund has to pay that may not have been paid yet such as management fees, brokerage costs, etc. Is it a weighted average of all the underlying stock spreads, or does it stand on its own and stems from the usual supply & demand laws ? There isn't any spread used in determining the \\\"\\\"Net Asset Value\\\"\\\" for the fund. The fund prices are determined after the market is closed and so a closing price can be used for stocks. The liabilities could include the costs to run the fund as part of the accounting in the fund, that most items have to come down to either being an asset, something with a positive value, or a liability, something with a negative value. Something to consider also is the size of the fund. With over $7,000,000,000 in assets, a .01% amount is still $700,000 which is quite a large amount in some ways.\\\"\"\n]","isConversational":false}}},{"rowIdx":96,"cells":{"_id":{"kind":"string","value":"3148"},"query":{"kind":"string","value":"Can a car company refuse to give me a copy of my contract or balance details?"},"gt_ids":{"kind":"list like","value":["178127","584305","438000","92888","172855"],"string":"[\n \"178127\",\n \"584305\",\n \"438000\",\n \"92888\",\n \"172855\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1,1,1,1],"string":"[\n 1,\n 1,\n 1,\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["172855","584305","92888","430100","357280","421848","566382","131255","29721","395995","87351","276466","233479","271658","151452","490352","65046","403749","261220","355051","164702","438463","21174","467737","247371","103980","14745","498927","573617","338663","322249","515383","484734","98356","447222","253596","126559","120080","239061","541450","146409","282094","290879","67663","469270","366215","567201","219119","576243","535208","226590","560325","329137","13202","241501","580555","389102","44085","413324","421639","400945","176742","283917","316870","433245","113516","420441","543193","147530","207483","504816","419796","233489","104221","482056","504432","456463","453263","175522","466161","442544","178127","506766","100936","555581","184175","125288","2702","327806","501726","247952","221439","252414","564345","67154","340287","301797","313057","45958","270952"],"string":"[\n \"172855\",\n \"584305\",\n \"92888\",\n \"430100\",\n \"357280\",\n \"421848\",\n \"566382\",\n \"131255\",\n \"29721\",\n \"395995\",\n \"87351\",\n \"276466\",\n \"233479\",\n \"271658\",\n \"151452\",\n \"490352\",\n \"65046\",\n \"403749\",\n \"261220\",\n \"355051\",\n \"164702\",\n \"438463\",\n \"21174\",\n \"467737\",\n \"247371\",\n \"103980\",\n \"14745\",\n \"498927\",\n \"573617\",\n \"338663\",\n \"322249\",\n \"515383\",\n \"484734\",\n \"98356\",\n \"447222\",\n \"253596\",\n \"126559\",\n \"120080\",\n \"239061\",\n \"541450\",\n \"146409\",\n \"282094\",\n \"290879\",\n \"67663\",\n \"469270\",\n \"366215\",\n \"567201\",\n \"219119\",\n \"576243\",\n \"535208\",\n \"226590\",\n \"560325\",\n \"329137\",\n \"13202\",\n \"241501\",\n \"580555\",\n \"389102\",\n \"44085\",\n \"413324\",\n \"421639\",\n \"400945\",\n \"176742\",\n \"283917\",\n \"316870\",\n \"433245\",\n \"113516\",\n \"420441\",\n \"543193\",\n \"147530\",\n \"207483\",\n \"504816\",\n \"419796\",\n \"233489\",\n \"104221\",\n \"482056\",\n \"504432\",\n \"456463\",\n \"453263\",\n \"175522\",\n \"466161\",\n \"442544\",\n \"178127\",\n \"506766\",\n \"100936\",\n \"555581\",\n \"184175\",\n \"125288\",\n \"2702\",\n \"327806\",\n \"501726\",\n \"247952\",\n \"221439\",\n \"252414\",\n \"564345\",\n \"67154\",\n \"340287\",\n \"301797\",\n \"313057\",\n \"45958\",\n \"270952\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["No, they cannot refuse to provide you with the current balance or a balance history. The other answers point you to resources that are available to help you put pressure on the dealership. The bottom line is that you now know that you have the right to the details and to audit their recording of the transactions. You should now use that information and demand a better response in writing. If they have to give you a response in writing, they can't deny the answer they gave in a court of law later on. They understand this, and they will take you more seriously if you send a letter. Make sure to keep copies of the letter and send it with certified delivery.","\"You won't be able to sell the car with a lien outstanding on it, and whoever the lender is, they're almost certain to have a lien on the car. You would have to pay the car off first and obtain a clear title, then you could sell it. When you took out the loan, did you not receive a copy of the finance contract? I can't imagine you would have taken on a loan without signing paperwork and receiving your own copy at the time. If the company you're dealing with is the lender, they are obligated by law to furnish you with a copy of the finance contract (all part of \"\"truth in lending\"\" laws) upon request. It sounds to me like they know they're charging you an illegally high (called \"\"usury\"\") interest rate, and if you have a copy of the contract then you would have proof of it. They'll do everything they can to prevent you from obtaining it, unless you have some help. I would start by filing a complaint with the Better Business Bureau, because if they want to keep their reputation intact then they'll have to respond to your complaint. I would also contact the state consumer protection bureau (and/or the attorney general's office) in your state and ask them to look into the matter, and I would see if there are any local consumer watchdogs (local television stations are a good source for this) who can contact the lender on your behalf. Knowing they have so many people looking into this could bring enough pressure for them to give you what you're asking for and be more cooperative with you. As has been pointed out, keep a good, detailed written record of all your contacts with the lender and, as also pointed out, start limiting your contacts to written letters (certified, return receipt requested) so that you have documentation of your efforts. Companies like this succeed only because they prey on the fact many people either don't know their rights or are too intimidated to assert them. Don't let these guys bully you, and don't take \"\"no\"\" for an answer until you get what you're after. Another option might be to talk to a credit union or a bank (if you have decent credit) about taking out a loan with them to pay off the car so you can get this finance company out of your life.\"","The advice above is generally good, but the one catch I haven't seen addressed is which specific laws apply. You said that you are in Arkansas, but the dealer is in Texas. This means that the laws of at least two different states are in play, possibly three if the contract contains a clause stating that disputes will be handled in a certain jurisdiction, and you are going to have to do some research to figure out what actually applies. One thing that may significantly impact this issue is whether you were in TX or AR when you signed the contracts. If you borrowed the money in TX, and the lender is in TX, then it is almost certain that the laws of Texas will govern. However, if you were living in AR at the time you acquired the loan, particularly if you were in AR when you signed the papers, you have a decent case for claiming that the laws of Arkansas govern. I don't know enough about either state to know if one is more favorable to the consumer than the other, but it is a question you really want to have answered. That said, I would be shocked if any state did not have provisions requiring the lender to provide a copy of the terms and a detailed statement of the account and transaction history upon request. Spend some time on the web site of the Texas attorney general and/or legislator (because that is where the lender is, they are more likely to respect Texas law) to see if you can track down any specific laws or codes that you can reference. You might also look into the federal consumer protection laws, though I can't think of one off hand that would apply in the scenario you have described. Then work on putting together a letter asking them to provide a copy of the contract and a full history of the account. As others noted, make sure you send it certified/return receipt, or better yet use a private carrier such as fedex, and check the box about requiring a signature. Above all you need to get the dialog transferred to a written form. I can not stress this point enough. Everything you tell them or ask for from here out needs to be done in a written format. If they call you about anything, tell them you want to see their issue/offer in writing before you will consider it. You do not necessarily need a lawyer to do any of this, but you do need to know the applicable laws. Do the research to know what your legal standing is. Involve a lawyer if you feel you need to, but I have successfully battled several large utility companies and collection agencies into behaving without needing one.","Without the contract it's hard to say for sure, but Consumer Reports indicates that it's pretty easy to lose these deposits; they're not as well protected as other deposits or purchases (depending on your state and other details). You should make an effort to comply with all of the requests from the financing arm promptly, and in particular you should probably highlight that you could afford to pay for the car in cash (and be prepared to show bank/money market/investment statements to back that up). Credit is mostly a numbers game, but there is a human on the other side making the decision (assuming you're remotely close) and that makes a big difference. I would be prepared to walk away from your deposit if they come back and offer you a 5% APR or similar (and you're uncomfortable with the loan at that rate) - over 5 years, a $20k loan at 5% APR will cost you several thousand dollars; it might be worth it even if they don't give you your deposit back. And if you're clearly ready to walk away from the deposit, that might cause them to negotiate in better faith. Some tips, both from that article and my general experience:","I've been an F&I Manager at a new car dealership for over ten years, and I can tell you this with absolute certainty, your deal is final. There is no legal obligation for you whatsoever. I see this post is a few weeks old so I am sure by now you already know this to be true, but for future reference in case someone in a similar situation comes across this thread, they too will know. This is a completely different situation to the ones referenced earlier in the comments on being called by the dealer to return the vehicle due to the bank not buying the loan. That only pertains to customers who finance, the dealer is protected there because on isolated occasions, which the dealer hates as much as the customer, trust me, you are approved on contingency that the financing bank will approve your loan. That is an educated guess the finance manager makes based on credit history and past experience with the bank, which he is usually correct on. However there are times, especially late afternoon on Fridays when banks are preparing to close for the weekend the loan officer may not be able to approve you before closing time, in which case the dealer allows you to take the vehicle home until business is back up and running the following Monday. He does this mostly to give you sense of ownership, so you don't go down the street to the next dealership and go home in one of their vehicles. However, there are those few instances for whatever reason the bank decides your credit just isn't strong enough for the rate agreed upon, so the dealer will try everything he can to either change to a different lender, or sell the loan at a higher rate which he has to get you to agree upon. If neither of those two things work, he will request that you return the car. Between the time you sign and the moment a lender agrees to purchase your contract the dealer is the lien holder, and has legal rights to repossession, in all 50 states. Not to mention you will sign a contingency contract before leaving that states you are not yet the owner of the car, probably not in so many simple words though, but it will certainly be in there before they let you take a car before the finalizing contract is signed. Now as far as the situation of the OP, you purchased your car for cash, all documents signed, the car is yours, plain and simple. It doesn't matter what state you are in, if he's cashed the check, whatever. The buyer and seller both signed all documents stating a free and clear transaction. Your business is done in the eyes of the law. Most likely the salesman or finance manager who signed paperwork with you, noticed the error and was hoping to recoup the losses from a young novice buyer. Regardless of the situation, it is extremely unprofessional, and clearly shows that this person is very inexperienced and reflects poorly on management as well for not doing a better job of training their employees. When I started out, I found myself in somewhat similar situations, both times I offered to pay the difference of my mistake, or deduct it from my part of the sale. The General Manager didn't take me up on my offer. He just told me we all make mistakes and to just learn from it. Had I been so unprofessional to call the customer and try to renegotiate terms, I would have without a doubt been fired on the spot.","I worked in auto finance years ago, what dealers tend to do in refinance the negative value of the customer current car to the new one. So if a car is worth 30k they may finance it for 35k. Finance company will do as not to lose the dealer and customer is happy to get a new car. I had one customer call on a car he financed for 85k, car brand new was worth 70k. Told me how he was looking to pay out the loan and go to the competition for better rates. Before offering anything I did a quick value check and no way was it worth it for us to reduce the rates. Told him good luck and he needed to pay X amount, he asked me if I'm not going to offer a better deal, I told him no. He blew up telling me the dealer told him to call 6 mouths later and the financial company would reduce the rates if he asked for a payout. Customer also had a car that dropped its value like no tomorrow, so it book value was around 60k. So over the refinance limit. 6 mouths later get a call from collection, telling me just a heads up this guy's cars was sold at the auction as he couldn't make repayments for 30k. Guy was also told by the dealer he could just hand the car back in but wasn't told he still needed to pay back the difference in the loan once he did. My god some people had no clue.","Most states do have a cooling-off period where the buyer can rescind the purchase as well as a legally allowed limit to how long the dealer has to secure financing when they buyer has opted for dealer-financing. If the dealer did inform you during the allowed window, they will refund your down payment minus mileage fees at a state set cost per mile that you used the car. If the dealer did not inform you during the allowed window, depending on the state, they may have to refund the entire down payment. In any case, the problem is that the bank does not want to offer you the loan, you can try to negotiate and have the dealer use what leverage they have to coerce the bank, but there is probably no way for you to force the loan through. Alternatively you can seek your own financing from your own bank or credit union, which will likely allow the sale to go through. UPDATE - Colorado laws allow the dealer 10 days to inform you that they cannot obtain financing on the terms agreed upon in the original contract. That contract contained wording related to the mileage fees. You can find that info on page 8 of the linked PDF under the heading D. USAGE FEE AND MILEAGE CHARGE","I had a similar situation when I was in college. The difference was that the dealer agreed to finance and the bank they used wanted a higher interest rate from me because of my limited credit history. The dealer asked for a rate 5 percentage points higher than what they put on the paperwork. I told them that I would not pay that and I dropped the car off at the lot with a letter rescinding the sale. They weren't happy about that and eventually offered me financing at my original rate with a $1000 discount from the previously agreed-upon purchase price. What I learned through that experience is that I didn't do a good-enough job of negotiating the original price. I would suggest that your son stop answering phone calls from the dealership for at least 1 week and drive the car as much as possible in that time. If the dealer has cashed the check then that will be the end of it. He owes nothing further. If the dealer has not cashed the check, he should ask whether they prefer to keep the check or if they want the car with 1000 miles on the odometer. This only works if your son keeps his nerve and is willing to walk away from the car.","Fair enough. I was just trying to save them money. If it were me, I'd call up the dealer first and threaten to contact local media if they didn't void the contract. In the end though a lawyer is probably the best bet. Even just having them write a letter to send over would probably get them to nullify it.","\"Understood. But based on the OP, it's not categorically clear what they were refusing. If they refused to quote the balance and/or refused to take a phone payment that was otherwise in keeping with the cardholder agreement (i.e., the cardmember called the correct number for phone payments and balance-checking, etc), then yeah, they were not only being unreasonable, but also violating the contract. What I read as ambiguous is whether the cardholder was specifically asking for the *payoff* balance/amount, and whether they were following process for phone-payments and balance-checking, etc. IOW, it's not necessarily \"\"illegal\"\" and might not even be unreasonable for the customer-service number to have different departments for balance-checking and phone-payments versus card-cancellation. It's not falsifiably clear from the OP that the cardholder was not asking the person on the other end of the phone for categorical statements of fact that they were obligated to make. I'm not accusing anyone of lying or saying that the CC company was acting reasonably, I'm just saying that language such as **\"\"They do not provide mid-cycle payoff quotes\"\"** is not evidence that they were doing any kind of funny-business.\"","On the surface this sounds ridiculous, which makes me suspect that there might be something that the dealer intends to cling on to; otherwise it sounds like the dealer should be ashamed to even call your son about its own incompetence. I'd recommend politely refusing the request since said mistake didn't happen on your end, and wait to see if the dealer comes back with some sort of argument.","Dumb Coder has already given you a link to a website that explains your rights. The only thing that remains is how to execute the return without getting more grief from the dealer. Though the legal aspects are different, I believe the principle is the same. I had a case where I had to rescind the sale of a vehicle in the US. I was within my legal rights to do so, but I knew that when I returned to the dealership they would not be pleased with my decision. I executed my plan by writing a letter announcing my intention to return the vehicle siting the relevant laws involved with a space at the bottom of the letter for the sales person to acknowledge receipt of the letter and indicate that there was no visible damage to the car when the vehicle was returned. I printed two copies of the letter, one for them to keep, and one for me to keep with the signed acknowledgement of receipt. As expected, they asked me to meet with the finance manager who told me that I wouldn't be able to return the car. I thanked him for meeting with me and told him that I would be happy to meet in court if I didn't receive a check within 7 days. (That was his obligation under the local laws that applied.)","The sales manager and/or finance manager applied a rebate that did not apply. It's their fault. They have internal accounts to handle these situations as they do come up from time to time. The deal is done. They have no legal ground.","They'll refund your money (though maybe with a small service charge). I'm sure they regularly deal with new car sales gone wrong.",">observe their contractual obligations. If not having to pay you is part of the deal, then it's not a good deal. Clearly companies have no reason to not just keep that money, and they keep it every chance they get. Why wouldn't they?","I have one additional recommendation: if the dealer continues to press the issue, tell them that they need to drop it, or you will write a Yelp review in excruciating detail about the entire experience. Used car dealers are very aware of their Yelp presence and don't like to see recent, negative reviews because it can cost them a lot of new business. (I'm assuming this is a used car. If it's a new car, you could go over their heads and bring up the problem with the manufacturer. Dealers hate it when you go directly to the manufacturer with a dealer complaint.)","Go back to the dealership and leave the car there. Call your local news. They love these stories. After the news is out if they still won't give you your money back and void the contract then call the police. This is illegal and the business has violated the law. Another option is to go to the police first. After the police report then hire a lawyer to sue the dealership. Then call the local news. This method may take longer, but it will have the biggest impact.","What can you do? Pay the loan or face the debt collectors. The finance company don't care who now keeps the car, or who drives it. There's money outstanding on the loan, and your signature on the loan form. That's why co-signing a loan for someone else so often ends in tears.","See what the contract says about transfers or subleases. A lease is a credit agreement, so the lessor may not allow transfers. You probably ought to talk to an accountant about this. You can probably recognize most of the costs associated with the car without re-financing it in another lease.","\"Just sign the form. The bank I worked for gave a .25% discount on auto deduct. Either you misheard that part or the person who sold you on the loan was new/ didn't explain it properly. It's an \"\"optional form\"\" but it does change your rate. Edit: you're not being pushed around. Someone got in trouble and is trying to cover their butt by getting it back quickly.\"","\"Your son is in the right. But he broke the \"\"unwritten\"\" rules, which is why the car dealer is upset. Basically, cars are sold in the United States at a breakeven price. The car company makes ALL its money on the financing. If everyone bought \"\"all cash,\"\" the car companies would not be profitable. No one expected anyone, least of all your son, a \"\"young person,\"\" to pay \"\"all cash.\"\" When he did, they lost all the profit on the deal. On the other hand, they signed a contract, your son met all the FORMAL requirements, and if there was an \"\"understanding\"\" (an assumption, actually), that the car was supposed to be financed, your son was not part of it. Good for him. And if necessary, you should be prepared to back him up on court.\"","First suggestion: Investigate refinancing the auto loan with a reputable credit union or bank. I reduced my costs by changing my auto loan to Pentagon Federal Credit Union, which charges about 4% interest rate (compared to 6% which was the standard about 2 years ago). (for instructions on how to join penfed, look at my other post here.) Second suggestion: get involved with the better business bureau. 25% interest is ridiculous, I would file a complaint against the auto dealership.","Dude- my background is in banking specifically dealing with these scenarios. Take my advice-look for a balance transfer offer-credit card at 0%. Your cost of capital is your good credit, this is your leverage. Why pay 4.74% when you can pay 0%. Find a credit card company with a balance transfer option for 0%. Pay no interest, and own the car outright. Places to start; check the mail, or check your bank, or check local credit unions. Some credit unions are very relaxed for membership, and ask if they have zero percent balance transfers. Good Luck!","You're not missing anything. Consumer protection in the US is very basic and limited, if at all. So if someone claims you owe them something, it would be really hard for you to prove otherwise unless you actually drag them to court. Especially if there actually was a relationship, and there probably is some paperwork to substantiate the claim. I suggest talking to a consumer issues attorney.","\"I'm sorry to hear you've made a mistake. Having read the contract of sale we signed, I do not see any remedy to your current situation. However, I'm interested in making sure I do not take advantage of you. As such, I'll return the vehicle, you can return my money plus the bank fees I paid for the cashiers check, tax, title, and registration, and I will look at buying a vehicle from another dealership. This seems to be the most fair resolution. If I were to pay for your mistake at a price I did not agree to, it would not be fair to me. If you were to allow this vehicle to go to me at the price we agreed to, it wouldn't be fair to you. If I were to return the car and begin negotiations again, or find a different car in your lot, it would be difficult for us to know that you were not going to make a similar mistake again. At this point I consider the sale final, but if you'd prefer to have the vehicle back as-is, returning to us the money we gave you as well as the additional costs incurred by the sale, then we will do so in order to set things right. Chances are good you will see them back down. Perhaps they will just cut the additional payment in half, and say, \"\"Well, it's our mistake, so we will eat half the cost,\"\" or similar, but this is merely another way to get you to pay more money. Stand firm. \"\"I appreciate the thought, but I cannot accept that offer. When will you have payment ready so we can return the car?\"\" If you are firm that the only two solutions is to keep the car, or return it for a full refund plus associated costs, I'd guess they'd rather you keep the car - trust me, they still made a profit - but if they decide to have it returned, do so and make sure they pay you in full plus other costs. Bring all your receipts, etc and don't hand over the keys until you have the check in hand. Then go, gladly, to another dealership that doesn't abuse its customers so badly. If you do end up keeping the car, don't plan on going back to that dealership. Use another dealership for warranty work, and find a good mechanic for non-warranty work. Note that this solution isn't legally required in most jurisdictions. Read your contract and all documentation they provided at the time of sale to be sure, but it's unlikely that you are legally required to make another payment for a vehicle after the sale is finalized. Even if they haven't cashed the check, the sale has already been finalized. What this solution does, though, is put you back in the driver's seat in negotiating. Right now they are treating it as though you owe them something, and thus you might feel an obligation toward them. Re-asserting your relationship with them as a customer rather than a debtor is very important regardless of how you proceed. You aren't legally culpable, and so making sure they understand you aren't will ultimately help you. Further, dealerships operate on negotiation. The primary power the customer has in the dealership is the power to walk away from a deal. They've set the situation up as though you no longer have the power to walk away. They didn't threaten with re-possession because they can't - the sale is final. They presented as a one-path situation - you pay. Period. You do have many options, though, and they are very familiar with the \"\"walk away\"\" option. Present that as your chosen option - either they stick with the original deal, or you walk away - and they will have to look at getting another car off the lot (which is often more important than making a profit for a dealership) or selling a slightly used car. If they've correctly pushed the title transfer through (or you, if that's your task in your state) then your brief ownership will show up on carfax and similar reports, and instantly reduces the car's worth. Having the title transfer immediately back to the dealership doesn't look good to future buyers. So the dealership doesn't want the car back. They are just trying to extract more money, and probably illegally, depending on the laws in your jurisdiction. Reassert your position as customer, and decide now that you'll be fine if you have to return it and walk away. Then when you communicate that to them, chances are good they'll simply cave and let the sale stand as-is.\"","I'm not a lawyer, and am certainly not familiar with your jurisdiction, but the general guidelines I've seen around this kind of situation are: If all else fails, you could just cancel the card, though I'm not sure what liability you have to honour the contract. I cancelled a card once to stop being charged by a particularly annoying company and had no problems, but I'm not sure if that is a good way to deal with it in general.","My assumption here is that you paid nearly 32K, but also financed about 2500 in taxes/fees. At 13.5% the numbers come out pretty close. Close enough for discussion. On the positive side, you see the foolishness of your decision however you probably signed a paper that stated the true cost of the car loan. The truth in lending documents clearly state, in bold numbers, that you would pay nearly 15K in interest. If you pay the loan back early, or make larger principle payments that number can be greatly reduced. On top of the interest charge you will also suffer depreciation of the car. If someone offered you 31K for the car, you be pretty lucky to get it. If you keep it for 4 years you will probably lose about 40% of the value, about 13K. This is why it is foolish for most people to purchase a new vehicle. Not many have enough wealth to absorb a loss of this size. In the book A Millionaire Next Door the author debunks the assumption that most millionaires drive new cars. They tend to drive cars that are pretty standard and a couple of years old. They pay cash for their cars. The bottom line is you singed documents indicating that you knew exactly what you were getting into. Failing any other circumstances the car is yours. Talking to a lawyer would probably confirm this. You can attempt to sell it and minimize your losses, or you can pay off the loan early so you are not suffering from finance charges.","What would happen if you was to cash a check, didn’t realize it was to you and your finance company, take it to a local business that has a money center, they cash the check without even having you sign let alone having the finance companies endorsement on it . The money cleared my account like a couple months ago and it was just brought up now .. ? The reason why the check was made out the owner and the lender is to make sure the repairs were done on the car. The lender wants to make sure that their investment is protected. For example: you get a six year loan on a new car. In the second year you get hit by another driver. The damage estimate is $1,000, and you decide it doesn't look that bad, so you decide to skip the repair and spend the money on paying off debts. What you don't know is that if they had done the repair they would have found hidden damage and the repair would have cost $3,000 and would have been covered by the other persons insurance. Jump ahead 2 years, the rust from the skipped repair causes other issues. Now it will cost $5,000 to fix. The insurance won't cover it, and now a car with an outstanding loan balance of $4,000 and a value of $10,000 if the damage didn't exist needs $5,000 to fix. The lender wants the repairs done. They would have not signed the check before seeing the proof the repairs were done to their satisfaction. But because the check was cashed without their involvement they will be looking for a detailed receipt showing that all the work was done. They may require that the repair be done at a certified repair shop with manufacturer parts. If you don't have a detailed bill ask the repair shop for a copy of the original one.","\"The \"\"guaranteed minimum future value\"\" isn't really a guarantee so much as the amount they will charge you at the end of the agreement if you want to keep the car. In this sense it might better be considered a \"\"guaranteed maximum future cost\"\". If the car has fallen below that value at that point, then you can just hand back the car and you won't owe anything extra. If it turns out to be worth more, you end up in profit - though only if you either actually pay for the car, or if you roll over into a new PCP deal. So the finance company has an incentive to set it at a sensible value, otherwise they'll end up losing money. Most new cars lose a lot of value quickly initially, and then the rate of loss slows down. But given that it's lost £14k in 2 years, it seems pretty likely it'll lose much more than another £1k in the next 2 years. So it does sound like that in this case, they estimated the value badly at the start of the deal and will end up taking a loss on the deal when you hand it back at the end. It appears you also have the legal right to \"\"voluntary termination\"\" once you have paid off half the \"\"Total Amount Payable\"\". This should be documented in the PCP agreement and if you're half way into the deal then I'd expect you'll be about there. If that doesn't apply, you can try to negotiate to get out of the deal early anyway. If they look at it rationally, they should think about the value of your payments over the next two years minus the loss they will end up with at the end of those two years. But there's no guarantee they will. Disclaimer: Despite living in the UK, I hadn't heard of these contracts until I read this question, so my answer is based entirely on web searches and some inferences. The two most useful sources I found on the general subject were this one and this one.\"","But.. what I really want to know.... is it illegal, particularly the clause REQUIRING a trade in to qualify for the advertised price? The price is always net of all the parts of the deal. As an example they gave the price if you have $4000 trade in. If you have no trade in, or a trade in worth less than 4K, your final price for the new car will be more. Of course how do you know that the trade in value they are giving you is fair. It could be worth 6K but they are only giving you a credit of 4K. If you are going to trade in a vehicle while buying another vehicle the trade in should be a separate transaction. I always get a price quote for selling the old car before visiting the new car dealer. I do that to have a price point that I can judge while the pressure is on at the dealership.. Buying a car is a complex deal. The price, interest rate, length of loan, and the value of the trade in are all moving parts. It is even more complex if a lease is involved. They want to adjust the parts to be the highest profit that you are willing to agree to, while you think that you are getting a good deal. This is the fine print: All advertised amounts include all Hyundai incentives/rebates, dealer discounts and $2500 additional down from your trade in value. +0% APR for 72 months on select models subject to credit approval through HMF. *No payments or 90 days subject to credit approval. Value will be added to end of loan balance. 15MY Sonata - Price excludes tax, title, license, doc, and dealer fees. MSRP $22085- $2036 Dealer Discount - $500 HMA Lease Cash - $500 HMA Value Owner Coupon - $1000 HMA Retail Bonus Cash - $500 HMA Military Rebate - $500 HMA Competitive Owner Coupon - $400 HMA College Grad Rebate - $500 HMA Boost Program - $4000 Trade Allowance = Net Price $12149. On approved credit. Certain qualifications apply to each rebate. See dealer for details. Payment is 36 month lease with $0 due at signing. No security deposit required. All payment and prices include HMA College Grad Rebate, HMA Military Rebate, HMA Competitive Owner Coupon and HMA Valued Owner Coupon. Must be active military or spouse of same to qualify for HMA Military Rebate. Must graduate college in the next 6 months or within the last 2 years to qualify for HMA College Grad rebate. Must own currently registered Hyundai to qualify for HMA Valued Owner Coupon. Must own qualifying competitive vehicle to qualify for HMA Competitive Owner Coupon.","\"At this point there is not much you can do. The documentation probably points to you being the sole owner and signer on the loan. Then, any civil suit will degenerate into a \"\"he said, she said\"\" scenario. Luckily, no one was truly harmed in the scenario. Obtaining financing through a car dealer is almost always not advisable. So from here, you can do what should have been done in the first place. Go to banks and credit unions so your daughter can refinance the car. You will probably get a lower rate, and there is seldom a fee. I would start with the bank/CU where she does her checking or has some other kind of a relationship. If that fails, anywhere you can actually sit and talk with a loan officer is preferable over the big corporate type banks. Car dealers lying is nothing new, it happens to everyone. Buying a car is like a battle.\"","Sounds like you need to contact your ex and sort it out. If you have co-signed the loan, changes are you are equally responsible even if on party chooses not to pay, then the bank will come after the other one. If you no longer wish to be part of the arrangement and your ex still wants the car, she will have to buy you out of the car and become fully responsible for the liability.","If the discount is only for financed car then their software application should have accepted the payment (electronic transfer ID) from financed bank. In this case the bank should have given the payment on behalf of your son. I believe the dealer know in advance about the paper work and deal they were doing with your son. Financing a car is a big process between dealer and bank.","There's a good explanation of this type of scam at the following link; It's known as a Spot-Delivery scam. https://www.carbuyingtips.com/top-10-scams/scam1.htm Also, I read this one a while back, and immediately this post reminded me of it: http://oppositelock.kinja.com/when-the-dealership-steals-back-the-car-they-just-sold-1636730607 Essentially, they claim you'll get one level of financing, let you take the car home, and then attempt to extort a higher financing APR out of you or request more money / higher payments. Check your purchasing agreement, it may have a note with something along the lines of 'Subject to financing approval' or something similar. If it does, you might be 'out of luck', as it were. Contact an attorney; in some cases (Such as the 'oppositelock.kinja.com' article above) consumers have been able to sue dealers for this as theft.","Within some limitations, the dealer is allowed to approve or deny lending to anyone that it chooses. Those constraints are the basics that you'd expect for any regulation in the US: Race Religion Nationality Sex Marital Status Age Source of income You can read more about them in this leaflet from the FDIC's Fair Lending Laws office. (Link is a pdf download.) As far as what to do in your mother's case, it sounds like it may be some slightly shady sales tactics, but it isn't entirely illegal... It's just annoying. One thing you could do to try to head off some of the crazy bait-and-switch sales tactics is to communicate with a handful of dealerships in your area about the specifics of your mother's profile as a purchaser. It's much harder to give someone the run-around if you have already agreed to something in principle by email.","\"As others have said, if the dealer accepted payment and signed over ownership of the vehicle, that's a completed transaction. While there may or may not be a \"\"cooling-off period\"\" in your local laws, those protect the purchaser, not (as far as I know) the seller. The auto dealer could have avoided this by selling for a fixed price. Instead, they chose to negotiate every sale. Having done so, it's entirely their responsibility to check that they are happy with their final agreement. Failing to do so is going to cost someone their commission on the sale, but that's not the buyer's responsibility. They certainly wouldn't let you off the hook if the final price was higher than you had previously agreed to. He who lives by the fine print shall die by the fine print. This is one of the reasons there is huge turnover in auto sales staff; few of them are really good at the job. If you want to be kind to the guy you could give him the chance to sell you something else. Or perhaps even offer him a $100 tip. But assuming the description is correct, and assuming local law doesn't say otherwise (if in any doubt, ask a lawyer!!!), I don't think you have any remaining obligation toward them On the other hand, depending on how they react to this statement, you might want to avoid their service department, just in case someone is unreasonably stupid and tries to make up the difference that was.\"","There is no rule that says the dealer has to honor that deal, nor is there any that says he/she won't. However, if you are thinking of financing through though the dealership they are likely to honor the deal. They PREFER you finance it. If you finance it through the dealer the salesman just got TWO sales (a car and a loan) and probably gets a commission on both. If you finance it through a third party it makes no difference to the dealer, it is still a cash deal to them because even though you pay off the car loan over years, the bank pays them immediately in full.","As mhoran_psprep and others have already said, it sounds like the sale is concluded and your son has no obligation to return the car or pay a dime more. The only case in which your son should consider returning the car is if it works in his favor--for example, if he is able to secure a similar bargain on a different car and the current dealer buys the current car back from your son at a loss. If the dealer wants to buy the car back, your son should first get them to agree to cover any fees already incurred by your son. After that, he should negotiate that the dealer split the remaining difference with him. Suppose the dealership gave a $3000 discount, and your son paid $1000 in title transfer, registration, and any other fees such as a cashier's check or tax, if applicable. The remaining difference is $2000. Your son should get half that. In this scenario, the dealer only loses half as much money, and your son gains $1000 for his trouble.","\"At one point in my life I sold cars and from what I saw, three things stick out. Unless the other dealership was in the same network, eg ABC Ford of City A, and ABC Ford of City B, they never had possession of that truck. So, no REAL application for a loan could be sent in to a bank, just a letter of intent, if one was sent at all. With a letter of intent, a soft pull is done, most likely by the dealership, where they then attached that score to the LOI that the bank has an automated program send back an automatic decline, an officer review reply, or a tentative approval (eg tier 0,1,2...8). The tentative approval is just that, Tentative. Sometime after a lender has a loan officer look at the full application, something prompts them to change their offer. They have internal guidelines, but lets say an app is right at the line for 2-3 of the things they look at, they chose to lower the credit tier or decline the app. The dealership then goes back and looks at what other offers they had. Let's say they had a Chase offer at 3.25% and a CapOne for 5.25% they would say you're approved at 3.5%, they make their money on the .25%. But after Chase looks into the app and sees that, let's say you have been on the job for actually 11 months and not 1 year, and you said you made $50,000, but your 1040 shows $48,200, and you have moved 6 times in the last 5 years. They comeback and say no he is not a tier 2 but a tier 3 @ 5.5%. They switch to CapOne and say your rate has in fact gone up to 5.5%. Ultimately you never had a loan to start with - only a letter of intent. The other thing could be that the dealership finance manager looked at your credit score and guessed they would offer 3.5%, when they sent in the LOI it came back higher than he thought. Or he was BSing you, so if you price shopped while they looked for a truck you wouldn't get far. They didn't find that Truck, or it was not what they thought it would be. If a dealership sees a truck in inventory at another dealer they call and ask if it's available, if they have it, and it's not being used as a demo for a sales manager, they agree to send them something else for the trade, a car, or truck or whatever. A transfer driver of some sort hops in that trade, drives the 30 minutes - 6 hours away and comes back so you can sign the Real Application, TODAY! while you're excited about your new truck and willing to do whatever you need to do to get it. Because they said it would take 2-5 days to \"\"Ship\"\" it tells me it wasn't available. Time Kills Deals, and dealerships know this: they want to sign you TODAY! Some dealerships want \"\"honest\"\" money or a deposit to go get the truck, but reality is that that is a trick to test you to make sure you are going to follow through after they spend the gas and add mileage to a car. But if it takes 2 days+, The truck isn't out there, or the dealer doesn't have a vehicle the other dealership wants back, or no other dealership likes dealing with them. The only way it would take that long is if you were looking for something very rare, an odd color in an unusual configuration. Like a top end model in a low selling color, or configuration you had to have that wouldn't sell well - like you wanted all the options on a car except a cigarette lighter, you get the idea. 99.99% of the time a good enough truck is available. Deposits are BS. They don't setup any kind of real contract, notice most of the time they want a check. Because holding on to a check is about as binding as making you wear a chicken suit to get a rebate. All it is, is a test to see if you will go through with signing the deal. As an example of why you don't let time pass on a car deal is shown in this. One time we had a couple want us to find a Cadillac Escalade Hybrid in red with every available option. Total cost was about $85-90k. Only two new Red Escalade hybrids were for sale in the country at the time, one was in New York, and the other was in San Fransisco, and our dealership is in Texas, and neither was wanting to trade with us, so we ended up having to buy the SUV from one of the other dealerships inventory. That is a very rare thing to do by the way. We took a 25% down payment, around $20,000, in a check. We flew a driver to wherever the SUV was and then drove it back to Texas about 4 days later. The couple came back and hated the color, they would not take the SUV. The General Manager was pissed, he spent around $1000 just to bring the thing to Texas, not to mention he had to buy the thing. The couple walked and there was nothing the sales manager, GM, or salesman could do. We had not been able to deliver the car, and ultimately the dealership ate the loss, but it shows that deposits are useless. You can't sell something you don't own, and dealerships know it. Long story short, you can't claim a damage you never experienced. Not having something happen that you wanted to have happen is not a damage because you can't show a real economic loss. One other thing, When you sign the paperwork that you thought was an application, it was an authorization for them to pull your credit and the fine print at the bottom is boiler plate defense against getting sued for everything imaginable. Ours took up about half of one page and all of the back of the second page. I know dealing with car dealerships is hard, working at them is just as hard, and I'm sorry that you had to deal with it, however the simplest and smoothest car deals are the ones where you pay full price.\"","Possession is 9/10 of the law, and any agreement between you and your grandfather is covered under the uniform commercial code covering contracts. As long as your fulfilling your obligation of making payments, the contract stands as originally agreed upon between you and the lender. In short, the car is yours until you miss payments, sell it, or it gets totalled. The fact that your upside down on value to debt isn't that big of a deal as long as you have insurance that is covering what is owed.","How did they violate the law if he hasn't been declared legally incompetent? I'm not saying they didn't I just don't personally know and I'm sure if she can state exactly HOW it was illegal to the dealership they would be more likely to just refund it.","Make sure I am reading this correctly. You signed the car over to you BF, he took a loan against it and gave you the money? If so, you sold him the car and any use you have had of it since was at his consent. Outside of a written contract saying otherwise (and possibly even with one) it is now his car to do with as he pleases. It sucks that things are not working out in the manner you intended at the time, but that is the reality of the situation.","Dealerships make a lot of money in the finance department. One of the thing they play upon is your emotional reaction of purchasing a new vehicle (new to you in this case). They perform all sorts of shenanigans, like adding undercoat, selling gap insurance, or extended warranties. They entice you with a promise of a lower interest rate, but really what they are trying to do is back you into a payment. So if you can fiance 20,000, but the car you are buying is 16,000, then they will try to move that figure up to the 20K mark. In your case it sounded like some borderline (at the least) illegal activity they used to fool you into paying more. It sounds like you regret this decision which puts you a step ahead of most. How many people brag about the extended warranty or gap insurance they got included in the sale? As mentioned in another answer the best bet is to go into the dealership with financing in place. Say you were able to get a 3% loan on 16K. The total interest would be ~1600. If you avoid the finance room, you might avoid their dubious add ons that would probably cost you more then the 1600 even if you can get 0%. If you are going to buy a car on time, my advice would be to not fill out a credit app at the dealership. The dealership people through a conniption fit, but hold your ground. If need be get up and walk out. They won't let you leave. One thing I must mention, is that one feels very wealthy without that monthly pain in the a$$ payment for a car. You may want to try and envision yourself without a car payment, and make steps to making that a reality for the rest of your life.","In the U.S., most car dealers provide lease financing through one company (usually a subsidiary of the auto manufacturer). Whereas they provide loan financing through a variety of companies, some of whom offer very high interest rate loans and sell the loans as collateralized debt obligations (CDOs). Have you checked whether Chase or First Tech Credit Union offers a suitable car lease?","\"Paperwork prevails. What you have is a dealer who get a kickback for sending financing to that institution. And the dealer pretty much said \"\"We only get paid our kickback at two levels of loan life, 6 and 12 months.\"\" You just didn't quite read between the lines. This is very similar to the Variable Annuity salespeople who tell their clients, \"\"The best feature about this product is that the huge commissions I get from the sale fund my kid's college tuition and my own retirement. You, on the other hand, don't really do so well.\"\" Car salesmen and VA sellers.\"","Do you have any legal options? Not really. Citi is under no obligation to refinance your loan on your terms. But that goes both ways, and you are under no obligation to refinance with Citi! Get more quotes from another lender. It'll feel really good when you find a lender that wants your business. You might get a better deal. And think how good it will feel to cut ties with Citi!","\"A bona-fide company never needs your credit card details, certainly not your 3-digit-on-back-of-card #, to issue a refund. On an older charge, they might have to work with their merchant provider. But they should be able to do it within the credit card handling system, and in fact are required to. Asking for details via email doesn't pass the \"\"sniff test\"\" either. To get a credit card merchant account, a company needs to go through a security assessment process called PCI-DSS. Security gets drummed into you pretty good. Of course they could be using one of the dumbed-down services like Square, but those services make refunds ridiculously easy. How did you come to be corresponding on this email address? Did they initially contact you? Did you find it on a third party website? Some of those are fraudulent and many others, like Yelp, it's very easy to insert false contact information for a business. Consumer forums, even moreso. You might take another swing at finding a proper contact for the company. Stop asking for a cheque. That also circumvents the credit card system. And obviously a scammer won't send a check... at least not one you'd want! If all else fails: call your bank and tell them you want to do a chargeback on that transaction. This is where the bank intervenes to reverse the charge. It's rather straightforward (especially if the merchant has agreed in principle to a refund) but requires some paperwork or e-paperwork. Don't chargeback lightly. Don't use it casually or out of laziness or unwillingness to speak with the merchant, e.g. to cancel an order. The bank charges the merchant a $20 or larger investigation fee, separate from the refund. Each chargeback is also a \"\"strike\"\"; too many \"\"strikes\"\" and the merchant is barred from taking credit cards. It's serious business. As a merchant, I would never send a cheque to an angry customer. Because if I did, they'd cash the cheque and still do a chargeback, so then I'd be out the money twice, plus the investigation fee to boot.\"","If they are a debt collector, they must follow the requirements of the Fair Debt Collection Practices Act. In particular, they must provide you with verification of the debt at your written request. If they won't give you a way to do this, they are in violation of the law, and you should contact proper authorities. If they are not a debt collection agency, it does sound like a scam, in which case you should also contact the appropriate law enforcement agency.","I don't think you should have to cancel your card. Call your customer service line and just indicate to them what has happened. You aren't getting service for what they are charging you and they are refusing to remove it themselves.","> Why is it not considered to be misleading business practices? because the details (of below) were either included or available online > some sort of advance loan program ...some sort of contractual agreement it's legit but high interest","Yes, you did. To give an example of the contract terms that allow this, the [Capital One credit card agreement](https://www.capitalone.com/media/doc/credit-cards/Credit-Card-Agreement-for-Consumer-Cards-in-Capital-One-N.A.pdf) states: > Credit Reports > > We may report information about your Account to credit bureaus and others. Late payments, missed payments, or other defaults on your Account may be reflected in your credit report. Information we provide may appear on your and the Authorized Users’ credit reports. > > If you believe that we have reported inaccurate information about your Account to a credit bureau or other consumer reporting agency, notify us in writing at PO Box 30281, Salt Lake City, UT 84130-0281. When you write, tell us the specific information that you believe is incorrect and why you believe it is incorrect. > > We may obtain and use credit, income and other information about you from credit bureaus and others as the law allows.","Not sure if it is the same in the States as it is here in the UK (or possibly even depends on the lender) but if you have any amount outstanding on the loan then you wouldn't own the vehicle, the loan company would. This often offers extra protection if something goes wrong with the vehicle - a loan company talking to the manufacturer to get it resolved carries more weight than an individual. The laon company will have an army of lawyers (should it get that far) and a lot more resources to deal with anything, they may also throw in a courtesy car etc.","\"Pay it off. If necessary, get a loan so you can pay it off; that's what refinancing is all about and your favorite bank or credit union would be happy to help you with this. If that isn't sufficient to make the car affordable you may need to sell it, take the loss, and learn from the experience. Sorry, but you made an agreement and it's up to you to find a way to meet your end of the bargain. (If you had decided you didn't like this loan within a few days of signing, you might have been able to back out under \"\"cooling off period\"\" laws. But those only allow a very limited time for reconsideration.)\"","Your question is a bit confusing, you may wish to edit it to clarify the meaning. If we broke up or he stops paying, can I take the car back again? No. Just as if you sold me or the guy down the street your car you cannot just simply take it back. Being someone's boyfriend does not grant special privileges to you or him. Don't do this if you have not done so. If you have try and get it undone. It is unlikely that this is allowable as the bank will not simply allow you to transfer ownership if you have a loan. In the future, use cash (not loans) to buy your cars.","The advice given at this site is to get approved for a loan from your bank or credit union before visiting the dealer. That way you have one data point in hand. You know that your bank will loan w dollars at x rate for y months with a monthly payment of Z. You know what level you have to negotiate to in order to get a better deal from the dealer. The dealership you have visited has said Excludes tax, tag, registration and dealer fees. Must finance through Southeast Toyota Finance with approved credit. The first part is true. Most ads you will see exclude tax, tag, registration. Those amounts are set by the state or local government, and will be added by all dealers after the final price has been negotiated. They will be exactly the same if you make a deal with the dealer across the street. The phrase Must finance through company x is done because they want to make sure the interest and fees for the deal stay in the family. My fear is that the loan will also not be a great deal. They may have a higher rate, or longer term, or hit you with many fee and penalties if you want to pay it off early. Many dealers want to nudge you into financing with them, but the unwillingness to negotiate on price may mean that there is a short term pressure on the dealership to do more deals through Toyota finance. Of course the risk for them is that potential buyers just take their business a few miles down the road to somebody else. If they won't budge from the cash price, you probably want to pick another dealer. If the spread between the two was smaller, it is possible that the loan from your bank at the cash price might still save more money compared to the dealer loan at their quoted price. We can't tell exactly because we don't know the interest rates of the two offers. A couple of notes regarding other dealers. If you are willing to drive a little farther when buying the vehicle, you can still go to the closer dealer for warranty work. If you don't need a new car, you can sometimes find a deal on a car that is only a year or two old at a dealership that sells other types of cars. They got the used car as a trade-in.","\"Short answer: If you bought the car -- as opposed to leasing it -- there is no one to \"\"turn it in\"\" to. The reality of cars and car loans is this: The value of a car tends to fall rapidly the first couple of years, then more slowly after that. Like it might lose $2000 the first year, $1000 the second, $500 the third, etc. What you owe on a loan falls slowly at first, because a lot of your payment is going to interest, but then as time goes on you pay off the loan faster and faster. So you may pay off $1000 the first year, $1100 the second, etc. (I'm just making up numbers, depends on the value of the car, and the term and interest rate of the loan, but that's the general idea.) Combining these two things means that in the first few years after you buy a car, if you had a small or no down payment, you might well owe more on the car than it is worth. That's just how the numbers work out. If you keep the car long enough, eventually you hit a point where it is worth more than you owe. Keep it until you've paid off the loan and you owe $0 but the car is still worth SOMETHING, exactly how much depending on its condition and other factors. If you just use the car and pay off the loan, i.e. if you don't sell the car or refinance the loan or some such, then this doesn't matter very much. You make your loan payments, and you have use of the car. What difference does the book value of the car at any given moment matter to you? If the idea of owing more than the car is worth bothers you in principle, then in the future you could make a larger down payment. Or make extra payments on the loan the first couple of years to knock the principle down faster. That's about the only things you can do. Well, you could buy with cash so you owe zero and the car is always worth more than you owe. But given that you are where you are: If you just keep the car and keep driving it and keep paying the loan, then you are exactly where you thought you would be when you bought the car, right? I mean, the day you bought the car, you presumably weren't thinking that at some future date you could refinance at a lower rate. How would you know? So I think the easy answer is: Don't sweat it. Just enjoy the car and pay your bills.\"","\"Yes, he can retract the offer - it was a cash-only offer, and if you're financing, it's no longer \"\"cash\"\". Unless, of course, you get the financing through your local bank / credit union, and they hand you a check (like on a personal loan). Then it's still cash. However, the salesman can still retract the offer unless it's in writing because you haven't signed anything yet. The price of financing will always be higher because the dealer doesn't get all their money today. Also, if you finance, you are not paying just the cost of the vehicle, you are paying interest, so your final cost will be higher (unless you were one of the lucky souls who got 0% financing atop employee pricing, and therefore are actually saving money by having a payment).\"","Don't take the car back! The dealership wants you to take it back to try and earn more money. Simply stated, the dealerships hate paid up front cash deals. They make money on the financing. So to call back and try to up their fee is them realizing their not making a large enough profit. Say thank you and move on. The deal is done!!","I am sure that laws differ from state to state. My brother and I had to take over my dads finances due to his health. He had a vehicle that had a loan on it. We refinanced the vehicle and it was in our name. One of our family members needed a vehicle and offered to take over the payment. Our attorney advised us to be on the insurance policy with them and make sure if was paid correctly. We are in Indiana. I know it is hard to discuss finances with family members. However, if you co-signed the loan I think it would be wise to either have your name added to the insurance policy or at least have your brother show proof it has been paid. If you are not comfortable with that it may be a good idea to make sure the bank has your correct address and ask if they would notify you if insurance has lapsed. If your on the loan and there is no insurance at the very least if the vehicle was damaged you would still be responsible to pay the loan.","That would have been a good idea. They don't charge interest on a $0 balance, but if you payoff your account after the cycle date, there is a hidden balance and that balance will accrue interest. It is only a few cents a day. I just don't think it is legal for them to refuse to provide you a payoff quote mid cycle. I'm almost certain. When I worked for Discover it was a key point in training to not give the wrong amount and to make sure to use the calculator in the system to quote a daily balance, how much it goes up per day, and how much they should send if they were mailing the payment, giving consideration for the time it takes to receive/process the payment.","\"In the US, \"\"title\"\" is the document that shows ownership of the car. It is a nicely printed document you get from the DMV, that includes the information about the car and about you. You \"\"sign off the title\"\" when you sell the car - part of the title is a form on which the owner of the title can assign it to someone else. With your signature on the title, the new owner goes to the DMV which exchanges it to a new title in the new owner's name. Never sign on the title unless you got the payment for the car from the buyer. Usually, when the car is bought with a loan, the lender holds the title. Since you need to sign off the title to pass the ownership if you sell the car - lender holding on to it will prevent you from selling the car until the lender gives you the title back (when you pay off the loan). Your boss, acting as a lender, wants the title to hold on to it to prevent you from selling the car that secures your debt to him. He wants that (usually pink) piece of paper. Here's an article explaining about the title and showing a sample. Lenders holding the title will usually also add an endorsement at the DMV, so that you can't go and claim that you lost it.\"","\"Personally, I would just dispute this one with your CC. I had a situation where a subscription I had cancelled the prior year was billed to me. I called up to have a refund issued, they couldn't find me in their system under three phone numbers and two addresses. The solution they proposed was \"\"send us your credit card statement with the charge circled,\"\" to which I responded \"\"there's no way in hell I'm sending you my CC statement.\"\" Then I disputed the charge with the CC bank and it was gone about two days later. I partially expect to have the same charge appear next year when they try to renew my non-existent subscription again. Now, whether or not this is a normal practice for the company, or just a call center person making a good-faith but insecure attempt to solve your problem is irrelevant. Fact of the matter is, you tried to resolve this with the merchant and the merchant asked for something that's likely outside the bounds of your CC Terms and Conditions; sending your entire number via email. Dispute it and move on. The dispute process exists for a reason.\"","Its not a scam. The car dealership does not care how you pay for the car, just that you pay. If you come to them for a loan they will try and service you. If you come with cash, they will sell you a car and not try to talk you into financing. If you come with a check from another bank, they will happily accept it. I would try to work with Equifax or a local credit union to figure out what is going on. Somehow she probably had her credit frozen. Here are some really good things to mitigate this situation: Oh and make sure you do #1 and forget about financing cars ever again. I mean if you want to build wealth.","It sounds cold, but the law has to hold people to their agreements. There are exceptions for unconscionable terms, but I don't think this gets close to that level. This is certainly audacious, but not quite shocking to the conscience. Maybe there's an argument to be made regarding whether a reasonably prudent person in the party's position would have known what they were agreeing to under the circumstances (depending upon how the provision was presented), but without a lot more information we can't say whether that angle has a snowball's chance in hell. You should read the terms governing every important agreement you enter into. It sounds like a huge burden, but for any major undertaking you really do need to grit your teeth and trawl through the whole thing. If you don't like what you find, ask for a second look from a lawyer to confirm your suspicions, or just walk away. Bank service agreements, loan/mortgage applications, major venue reservations, and employment contracts (ESPECIALLY employment contracts!) all deserve that much time. Typically the terms you might not like are address circumstances that, as a practical matter, don't really concern you, but you might be surprised at how often you find deal-breakers like this crawling around in the woodwork.","You will not be able to. Here is why you don't have the collateral. You have a car that is probably not worth 10k. Also you probably do not have a simple interest loan. You have to look at your contract. Make sure that there is not early payment fee. Also look for the rule of 78's Explanation of Rule of 78's I can't sugarcoat this chances are you were ripped off because you had bad credit putting you into an even deeper hole.","If you know that you have a reasonable credit history, and you know that your FICO score is in the 690-neighborhood, and the dealer tells you that you have no credit history, then you also know one of two things: Either way, you should walk away from the deal. If the dealer is willing to lie to you about your credit score, the dealer is also willing to give you a bad deal in other respects. Consider buying a cheaper used car that has been checked out by a mechanic of your choice. If possible, pay cash; if not, borrow as small an amount as possible from a credit union, bank, or even a very low-interest rate credit card. (Credit cards force you to pay off the loan quickly, and do not tie up your car title. I still have not managed to get my credit union loan off of my car title, ten years after I paid it off.)","Disclosure: I work for Wells Fargo Home Mortgage. This is normal. The bank is giving you a discount on the interest rate in exchange for the automatic payments. Unfortunately, the bank has the power here; they have your mortgage, and they have the right to call your loan in full at any time, and foreclose on your house if you don't pony up. It's okay to not like being pushed around, but you need to know when to hold'em and when to fold'em, and your facing a royal flush with pair of 4s.","\"Following up on @petebelford's answer: If you can find a less expensive loan, you can refinance the car and reduce the total interest you pay that way. Or, if your loan permits it (not all do; talk to the bank which holds the loan and,/or read the paperwork you didn't look at), you may be able to make additional payments to reduce the principal of the loan, which will reduce the amount and duration of the loan and could significantly reduce the total interest paid ... at the cost of requiring you pay more each month, or pay an additional sum up front. Returning the car is not an option. A new car loses a large portion of its value the moment you drive it off the dealer's lot and it ceases to be a \"\"new\"\" car. You can't return it. You can sell it as a recent model used car, but you will lose money on the deal so even if you use that to pay down the loan you will still owe the bank money. Given the pain involved that way, you might as well keep the car and just try to refinance or pay it off. Next time, read and understand all the paperwork before signing. (If you had decided this was a mistake within 3 days of buying, you might have been able to take advantage of \"\"cooling down period\"\" laws to cancel the contract, if such laws exist in your area. A month later is much too late.)\"","That is horrible. I would contact your local news stations, local authorities, and demand to talk to the owner of the dealership. Get the story out on social media and do everything you can to put bad publicly on the dealership. Maybe they will see how big of a fuck up they made and make things right. Fuck those guys.","\"The thing to recall here is that auto-pay is a convenience, not a guarantee. Auto-pay withdrawals, notices that a bill is due, all of these are niceties that the lender uses to try to make sure you consistently pay your bill on time, as all businesses enjoy steady cash flows. Now, what all of these \"\"quality of life\"\" features don't do is mitigate your responsibility, as outlined when you first took out the loan, to pay it back in a timely manner and according to the terms and conditions of the loan. If your original contract for the loan states you shall make \"\"a payment of $X.XX each calendar month\"\", then you are required to make that payment one way or another. If auto-pay fails, you are still obligated to monitor that and correct the payment to ensure you meet your contractual obligation. It's less than pleasant that they didn't notify you, but you were already aware you had an obligation to pay back the loan, and knew what the terms of the loan were. Any forgiveness of interest or penalties for late fees is entirely up to the CSR and the company's internal policies, not the law.\"","I don't think the verbal confirmation from the branch manager is worth anything, unless you got it in writing it basically never happened. That said, what did you sign exactly? An application? I'd think they would be well within their rights to deny that, no matter what the branch manager said. If you actually signed a binding contract between you and the bank, things would be different but the fact that 'approval' was mentioned suggests that all you and the bank signed was an application and the bank manager made some unreasonable promises he or she doesn't want to be reminded of now. If the complaints department can't get off their collective backsides, a firm but polite letter to the CEO's office might help, or it might end up in the round filing cabinet. But it's worth a try. Other than that, if you are unhappy enough to go through the pain, you can try to remortgage with another bank and end the business relationship with your current bank.","You seem overly fixated on dead tree documentation of purchases. They are deducting this from your account monthly - the mere fact that the money was taken is enough to prove in court that they have you on their books and to hold them to paying out said insurance. The email copies is actually a better way to organize receipts in most cases (can't be destroyed as easily, etc.) You can cancel the insurance - but don't just stop paying (you'd owe them money then). I foresee increasing difficulty navigating the 21st century for you unless you can get past this concern about physical receipts. I doubt other companies would do much better. FWIW, I live in the continental US. I don't know how different the Philippines is with regard to moving everything to digital","\"He entered into a contract to pay because he liked the payment methods offered He entered into a contract. Full stop. End of story. Therefore he is off the hook for repayment AND doesn't need to add a new method of payment Your friend needs to look at the contract (or better, have someone who actually understands contracts look at it for him). He needs to understand not what he thinks it says or what he wants it to say or whatever farcical interpretation of contract law he's talked himself into, but what it does in reality say. Which, in every such contract I've ever seen, has never, ever, said \"\"you will pay in the manner you choose and if we choose not to accept it then gosh darn you win and get to live here for free!\"\". I suspect your friend is in for a lot more very bad outcomes in life if he thinks this is how contracts, and life in general, works. :-)\"","I think in such situations a good rule of thumb may be - if you are asked to pay significant sums of money upfront before anything is done, stop and ask yourself, what would you do if they don't do what they promised? They know who you are, but usually most you know is a company name and phone number. Both can disappear in a minute and what are you left with? If they said they'd pay off the debt and issue the new loan - fine, let them do it and then you pay them. If they insist on having money upfront without delivering anything - unless it's a very big and known and established company you probably better off not doing it. Either it's a scam or in the minuscule chance they are legit you still risking too much - you're giving money and not getting anything in return.","\"Also consider how cars fare under your ownership: Does your current car... If any of the answers to these questions are \"\"Yes\"\", you're probably going to get hosed with fees when you return the car.\"","\"I strongly discourage leasing (or loans, but at least you own the car at the end of it) in any situation. it's just a bad deal, but that doesn't answer your question. Most new cars are \"\"loss leaders\"\" for dealerships. It's too easy to know what their costs are these days, so they make most of their money though financing. They might make a less than $500 on the sale of a new car, but if it's financed though them then they might get $2,000 - $4,000 commission/sale on the financing contract. Yes, it is possible and entirely likely that the advertised rate will only go to the best qualified lessees (possibly with a credit score about 750 or 800 or so other high number, for example). If the lessee meets the requirements then they won't deny you, they really want your business, but it is more likely to start the process and do all the paperwork for them to come back and say, \"\"Well, you don't qualify for the $99/month leasing program, but we can offer you the $199/month lease.\"\" (since that's the price you're giving from other dealerships). From there you just need to negotiate again. Note: Make sure you always do your research and negotiate the price of the car before talking about financing.\"","As for refinancing: Many institutions charge up-front fees when doing any type of vehicle loan. Typically this is in the neighborhood of 1% the value of the loan, with a floor of $100 (although this may vary by lender). However, for the loan the be secured by the vehicle, the principle value must be less than the collateral value. In your case, this means there is a collateral shortfall of $4,000. When working with a traditional bank, you would have two options: pay the difference up front (reducing the principle value of the loan), or obtaining a separate loan for the difference. This separate loan would often have a higher interest rate unless you have some other form of collateral to secure it with. I doubt CarMax would do a separate loan. All that being said, if you plan on selling the vehicle within the next twelves months, don't bother refinancing. It won't be worth the hassle.","Is your name on the title at all? You may have (slightly) more leverage in that case, but co-signing any loans is not a good idea, even for a friend or relative. As this article notes: Generally, co-signing refers to financing, not ownership. If the primary accountholder fails to make payments on the loan or the retail installment sales contract (a type of auto financing dealers sell), the co-signer is responsible for those payments, or their credit will suffer. Even if the co-signer makes the payments, they’re still not the owner if their name isn’t on the title. The Consumer Finance Protection Bureau (CFPB) notes: If you co-sign a loan, you are legally obligated to repay the loan in full. Co-signing a loan does not mean serving as a character reference for someone else. When you co-sign, you promise to pay the loan yourself. It means that you risk having to repay any missed payments immediately. If the borrower defaults on the loan, the creditor can use the same collection methods against you that can be used against the borrower such as demanding that you repay the entire loan yourself, suing you, and garnishing your wages or bank accounts after a judgment. Your credit score(s) may be impacted by any late payments or defaults. Co-signing an auto loan does not mean you have any right to the vehicle, it just means that you have agreed to become obligated to repay the amount of the loan. So make sure you can afford to pay this debt if the borrower cannot. Per this article and this loan.com article, options to remove your name from co-signing include: If you're name isn't on the title, you'll have to convince your ex-boyfriend and the bank to have you removed as the co-signer, but from your brief description above, it doesn't seem that your ex is going to be cooperative. Unfortunately, as the co-signer and guarantor of the loan, you're legally responsible for making the payments if he doesn't. Not making the payments could ruin your credit as well. One final option to consider is bankruptcy. Bankruptcy is a drastic option, and you'll have to weigh whether the disruption to your credit and financial life will be worth it versus repaying the balance of that auto loan. Per this post: Another not so pretty option is bankruptcy. This is an extreme route, and in some instances may not even guarantee a name-removal from the loan. Your best bet is to contact a lawyer or other source of legal help to review your options on how to proceed with this issue.","I have gotten a letter of credit from my credit union stating the maximum amount I can finance. Of course I don't show the dealer the letter until after we have finalized the deal. I Then return in 3 business days with a cashiers check for the purchase price. In one case since the letter was for an amount greater then the purchase price I was able drive the car off the lot without having to make a deposit. In another case they insisted on a $100 deposit before I drove the car off the lot. I have also had them insist on me applying for their in-house loan, which was cancelled when I returned with the cashiers check. The procedure was similar regardless If I was getting a loan from the credit union, or paying for the car without the use of a loan. The letter didn't say how much was loan, and how much was my money. Unless you know the exact amount, including all taxes and fees,in advance you can't get a check in advance. If you are using a loan the bank/credit Union will want the car title in their name.","\"My husband made a similar car loan decision when he was younger and didn't have an established credit history / favourable credit rating. As a result, he ended up paying triple what the car was worth, because of the interest. When we consolidated our finances, this ugly loan was first on our list of priorities to change, convert, eliminate, but unfortunately, in our case, the terms of the loan were such that only the lender benefited. There was no incentive to pay off the loan early, in fact, we would have to have paid all the future interest at once, without saving a penny. So check the terms of your loan - hopefully you're better off than we were. In our case, the only upside we could figure was the lesson of \"\"live and learn\"\"!\"","\"It is possible to achieve a substitute for refinancing, but because of the \"\"short\"\" life of cars at least relative to housing, there are no true refinancings. First, the entire loan will not be able to be refinanced. The balance less approximately 80% of the value of the car will have to be repaid. Cars depreciate by something like 20% per year, so $2,000 will have to be repaid. Now, you should be able to get a loan if your boyfriend has good credit, but the interest rate will not drop too much further from the current loan's rate because of your presumably bad credit rating, assumed because of your current interest rate. While this is doable, this is not a good strategy if you intend to have a long term relationship. One of the worst corruptors of a relationship is money. It will put a strain on your relationship and lower the odds of success. The optimal strategy, if the monthly payments are too high, is to try to sell the car so to buy a cheaper car. The difficulty here is that the bank will not allow this if balance of the loan exceeds the proceeds from the sale, so putting as much money towards paying the balance to allow a sale is best. As a side note, please insure your car against occurrences such as theft and damage with a deductible low enough to justify the monthly payment. It is a terrible position to have a loan, no car, and no collateral against the car.\"","\"The comments are getting too much, but to verify that you are not insane, you are being bullied. It sounds like this is a sub-prime loan, of which you are wisely trying to get out of. It also sounds like they are doing everything in their power to prevent you from doing so. For them you are a very profitable customer. This might take some legwork for you, but depending on how bad they are violating the law they might be willing to forgive the loan. What I am trying to say, it might be very worth your while! Your first step will be looking for any free resources at your disposal: Just be cautious as many \"\"credit representation\"\" type business are only offering loan consolidation. That is not what you need. Fight those bastards!\"","\"First read the fine print. If you have to pay it, pay it and switch company. If you don't have to pay it and there is no proof that you abused the component beyond normal usage, you don't have to sue them, just return the invoice with legal (not so layman) text like \"\"I hereby reject paying invoice number xxxx dated xxx because the black box was used under normal conditions and it stopped working\"\". In this case you wait for them and answer every other letter with the same text until the decide to either sue you, or drop the whole thing. If you choose this path, remember to save all invoice, copies of your rejections, all written/email/phone calls, picutres of the broken item, serial nubmers, contract etc. If they sue you and they loose (can't prove the item was destroied by you), they have to pay you up to one hour of legal advice cost and drop the invoice, if you loose, you do the same (100 pounds) plus the invoice amount according to Swedish law, don't know about your country. Before you follow any advice here, consult your local consumer protection agency, they usually comes up with smart options, they know a bad company with history and give you the right advice.\"","\"Concealing parts of a document in order to obtain a signature is illegal. The company committed signature forgery because they effectively modified the document after you signed it (i.e. unfolded the parts that were previously folded). I suggest that you go to your local police department to file a report, citing \"\"signature forgery\"\". Once you have the police report, call your bank's fraud department (not the general billing dispute line) and cite the police report right away, specifically calling out \"\"signature forgery\"\". I would be surprised if you don't get a favorable outcome.\"","\"Yes, it is possible for you to refinance your existing auto loan, and so long as you can get the loan on more favorable terms (e.g.: lower interest rate), it is absolutely a smart thing to do. In fact, you would be well advised to do so as soon as possible if the car was a new car, if you refinance a NEW car soon enough you will likely still be able to get new car interest rates. Even if it is a pre-owned vehicle you shouldn't wait too long, since your car will only depreciate in value. You will almost certainly get more favorable terms from any bank or credit union directly then you would when you go through the dealership, because the dealership is allowed to mark-up your interest rate several percentage points as profit for themselves. Your best bet would be to go to a local credit union, their rates tend to be most competitive since they are \"\"owned\"\" by their members.\"","\"Credit reports have line items that, if all is well, say \"\"paid as agreed.\"\" A car loan almost certainly gets reported. In your case it probably says the happy \"\"paid as agreed.\"\" It will continue to say that if you pay it off in full. You can get the happy \"\"paid as agreed\"\" from a credit card too. You can get it by paying the balance by the due date every month, or paying the mininum, or anything in between, on time. But you'll blow less money in interest if you pay each bill in full each month. You don't have to carry a balance. In the US you can get a free credit report once a year from each of the three credit bureaus. Here's the way to do that with minimal upsell/cross-sell hassles. https://www.annualcreditreport.com/ In your situation you'd probably be smart to ask for a credit report every four months (from each bureau in turn) so you can see how things are going. They don't give you your FICO score for free, but you don't really care about that until you're going for a big loan, like for a condo. It might be good to take a look at one of those free credit reports real soon, as you prepare to close out your car loan. If you need other loans, consider working with a credit union. They sometimes offer better interest rates, and they often are diligent about making credit bureau reports for their good customers; they help you build credit. You mentioned wanting to cut back on insurance coverage. It's a worthy goal, but it's generally called \"\"self-insuring\"\" in the business. If you cancel your collision coverage and then wreck your car, you absorb the cost of replacing it. So think about your personal ability to handle that kind of risk.\"","No. A company cannot bill you for services you did not request nor receive. If they could, imagine how many people would just randomly get bills in their mail. Ignore them. They don't have a contract or agreement with you and can't do anything other than make noise. If they get aggressive or don't stop requesting money, hire an attorney and it will be taken care of.","Ben Miller offers you sounds advice. However, if it comes down to it I would reach out to a lawyer to negotiate this for you. If what you are presenting is true then you could easily sue them for the damages incurred. I have been in a similar situation and unfortunately using the lawyers is what was required to get the solution resolved. Based on my previous experience a simple letter from a local lawyer office would get this dropped pretty quick and should cost you around $150. Best of luck!","The question Can I use balance transfer to buy car? is going to give you the same answer. It depends on the exact terms of that offer. Your offer may allow you you write yourself a check, to the checking account tied to your debit card. Or it may specifically request you identify an existing debt to repay. Read the terms.","In order: 1.) Speak to car dealership, demand refund. If that doesn't work, 2.) Contact the local authorities. If that doesn't work, 3.) Get in touch with a lawyer. If that doesn't work, (or if it's too expensive), 4.) Get in touch with local media, and have them run a story.","You should actually contact the company, not just try to. There are ways to do this. For example, show up in person, send registered mail. All other advice is moot until you actually contact the company.","When getting a car always start with your bank or credit union. They are very likely to offer better loan rate than the dealer. Because you start there you have a data point so you can tell if the dealer is giving you a good rate. Having the loan approved before going to the dealer allows you to negotiate the best deal for the purchase price for the car. When you are negotiating price, length of loan, down payment, and trade in it can get very confusing to determine if the deal is a good one. Sometimes you can also get a bigger rebate or discount because to the dealer you are paying cash. The general advice is that a lease for the average consumer is a bad deal. You are paying for the most expensive months, and at the end of the lease you don't have a car. With a loan you keep the car after you are done paying for it. Another reason to avoid the lease. It allows you to purchase a car that is two or three years old. These are the ones that just came off lease. I am not a car dealer, and I have never needed a work visa, but I think their concern is that there is a greater risk of you not being in the country for the entire period of the lease.","A loan that does not begin with at least a 20% deposit and run through a term of no longer than 48 months is the world's way of telling you that you can't afford this vehicle. Consumer-driven cars are rapidly depreciating assets. Attenuating the loan to 70 months or longer means that payments will likely not keep up with depreciation, thus trapping the buyer in an upside down loan for the entire term.","If you are a subprime borrower, that may not be an unreasonable rate given the risk they are accepting. In any case, it's what you agreed to. As others have said, you could/should have shopped elsewhere for the loan. In fact, you can still shop elsewhere for a loan to refinance that vehicle and thus lower the rate, unless the existing loan has equally obnoxious rules about that.","The only reason to lend the money in this scenario is cashflow. But considering you buy a $15000 car, your lifestyle is not super luxurious, so $15000 spare cash is enough.","\"With that credit rating you should have no trouble getting a rate in that range. I have a similar credit score and my credit union gave me a car loan at 1.59%. No haggling required. In regards to your question, I think you have it backwards. They are more likely to give you a good rate on a high balance than a low one. Think about it from the bank's perspective... \"\"If I give you a small sale, will you give me a discount?\"\" This is the question you are asking. Their profit is a factor of how much you borrow and the interest rate. Low rate=less profit, low financing amount = less profit. The deal you proposed is a lose-lose for them.\"","\"Were you just offered a car loan for 1.4%, or did you sign for a car loan for 1.4%? If you signed, it's too late. If you didn't sign: You should realise that your car loan isn't really 1.4%. Nobody will give you a car loan for less than a mortgage loan. What really happened is that you gave up your chance to get a rebate on the car purchase. A car worth $18,000 will have a price tag of $20,000. You can buy it for cash and haggle the dealer down to $18,000, or you can take that \"\"cheap\"\" 1.4% loan and pay $20,000 for the car. So if at all possible, you would try to get a cheap loan from your bank, possibly through your mortgage, so you can buy the car without taking a loan from the car dealer.\"","\"It sounds like you're basing your understanding of your options regarding financing (and even if you need a car) on what the car salesman told you. It's important to remember that a car salesman will do anything and say anything to get you to buy a car. Saying something as simple as, \"\"You have a low credit score, but we can still help you.\"\" can encourage someone who does not realize that the car salesman is not a financial advisor to make the purchase. In conclusion,\"","Have you tried contacting them via phone or e-mail to follow up? If not, definitely do that first. If no response, you can keep this simple: Close your old account, write a personal check from your new one, and send the check with an explanatory note via Certified Mail. That will get you proof that it was delivered successfully (or not). Leave the money in your account for 180 days. Your check should be void after that and cannot be cashed (check with your bank on this) and if it's still unclaimed they will need to contact you to request payment.","My grandmother passed away earlier this year. When I got my car 3 years ago, I did not have good enough credit to do it on my own or have her as a co-signer. We had arranged so that my grandmother was buying the car and I was co-signing. A similar situation was happening and I went to my bank and took out a re-finance loan prior to her passing. I explained to them that my grandmother was sick and on her death bed. They never once requested a power of attorney or required her signature. I am now the sole owner of the vehicle."],"string":"[\n \"No, they cannot refuse to provide you with the current balance or a balance history. The other answers point you to resources that are available to help you put pressure on the dealership. The bottom line is that you now know that you have the right to the details and to audit their recording of the transactions. You should now use that information and demand a better response in writing. If they have to give you a response in writing, they can't deny the answer they gave in a court of law later on. They understand this, and they will take you more seriously if you send a letter. Make sure to keep copies of the letter and send it with certified delivery.\",\n \"\\\"You won't be able to sell the car with a lien outstanding on it, and whoever the lender is, they're almost certain to have a lien on the car. You would have to pay the car off first and obtain a clear title, then you could sell it. When you took out the loan, did you not receive a copy of the finance contract? I can't imagine you would have taken on a loan without signing paperwork and receiving your own copy at the time. If the company you're dealing with is the lender, they are obligated by law to furnish you with a copy of the finance contract (all part of \\\"\\\"truth in lending\\\"\\\" laws) upon request. It sounds to me like they know they're charging you an illegally high (called \\\"\\\"usury\\\"\\\") interest rate, and if you have a copy of the contract then you would have proof of it. They'll do everything they can to prevent you from obtaining it, unless you have some help. I would start by filing a complaint with the Better Business Bureau, because if they want to keep their reputation intact then they'll have to respond to your complaint. I would also contact the state consumer protection bureau (and/or the attorney general's office) in your state and ask them to look into the matter, and I would see if there are any local consumer watchdogs (local television stations are a good source for this) who can contact the lender on your behalf. Knowing they have so many people looking into this could bring enough pressure for them to give you what you're asking for and be more cooperative with you. As has been pointed out, keep a good, detailed written record of all your contacts with the lender and, as also pointed out, start limiting your contacts to written letters (certified, return receipt requested) so that you have documentation of your efforts. Companies like this succeed only because they prey on the fact many people either don't know their rights or are too intimidated to assert them. Don't let these guys bully you, and don't take \\\"\\\"no\\\"\\\" for an answer until you get what you're after. Another option might be to talk to a credit union or a bank (if you have decent credit) about taking out a loan with them to pay off the car so you can get this finance company out of your life.\\\"\",\n \"The advice above is generally good, but the one catch I haven't seen addressed is which specific laws apply. You said that you are in Arkansas, but the dealer is in Texas. This means that the laws of at least two different states are in play, possibly three if the contract contains a clause stating that disputes will be handled in a certain jurisdiction, and you are going to have to do some research to figure out what actually applies. One thing that may significantly impact this issue is whether you were in TX or AR when you signed the contracts. If you borrowed the money in TX, and the lender is in TX, then it is almost certain that the laws of Texas will govern. However, if you were living in AR at the time you acquired the loan, particularly if you were in AR when you signed the papers, you have a decent case for claiming that the laws of Arkansas govern. I don't know enough about either state to know if one is more favorable to the consumer than the other, but it is a question you really want to have answered. That said, I would be shocked if any state did not have provisions requiring the lender to provide a copy of the terms and a detailed statement of the account and transaction history upon request. Spend some time on the web site of the Texas attorney general and/or legislator (because that is where the lender is, they are more likely to respect Texas law) to see if you can track down any specific laws or codes that you can reference. You might also look into the federal consumer protection laws, though I can't think of one off hand that would apply in the scenario you have described. Then work on putting together a letter asking them to provide a copy of the contract and a full history of the account. As others noted, make sure you send it certified/return receipt, or better yet use a private carrier such as fedex, and check the box about requiring a signature. Above all you need to get the dialog transferred to a written form. I can not stress this point enough. Everything you tell them or ask for from here out needs to be done in a written format. If they call you about anything, tell them you want to see their issue/offer in writing before you will consider it. You do not necessarily need a lawyer to do any of this, but you do need to know the applicable laws. Do the research to know what your legal standing is. Involve a lawyer if you feel you need to, but I have successfully battled several large utility companies and collection agencies into behaving without needing one.\",\n \"Without the contract it's hard to say for sure, but Consumer Reports indicates that it's pretty easy to lose these deposits; they're not as well protected as other deposits or purchases (depending on your state and other details). You should make an effort to comply with all of the requests from the financing arm promptly, and in particular you should probably highlight that you could afford to pay for the car in cash (and be prepared to show bank/money market/investment statements to back that up). Credit is mostly a numbers game, but there is a human on the other side making the decision (assuming you're remotely close) and that makes a big difference. I would be prepared to walk away from your deposit if they come back and offer you a 5% APR or similar (and you're uncomfortable with the loan at that rate) - over 5 years, a $20k loan at 5% APR will cost you several thousand dollars; it might be worth it even if they don't give you your deposit back. And if you're clearly ready to walk away from the deposit, that might cause them to negotiate in better faith. Some tips, both from that article and my general experience:\",\n \"I've been an F&I Manager at a new car dealership for over ten years, and I can tell you this with absolute certainty, your deal is final. There is no legal obligation for you whatsoever. I see this post is a few weeks old so I am sure by now you already know this to be true, but for future reference in case someone in a similar situation comes across this thread, they too will know. This is a completely different situation to the ones referenced earlier in the comments on being called by the dealer to return the vehicle due to the bank not buying the loan. That only pertains to customers who finance, the dealer is protected there because on isolated occasions, which the dealer hates as much as the customer, trust me, you are approved on contingency that the financing bank will approve your loan. That is an educated guess the finance manager makes based on credit history and past experience with the bank, which he is usually correct on. However there are times, especially late afternoon on Fridays when banks are preparing to close for the weekend the loan officer may not be able to approve you before closing time, in which case the dealer allows you to take the vehicle home until business is back up and running the following Monday. He does this mostly to give you sense of ownership, so you don't go down the street to the next dealership and go home in one of their vehicles. However, there are those few instances for whatever reason the bank decides your credit just isn't strong enough for the rate agreed upon, so the dealer will try everything he can to either change to a different lender, or sell the loan at a higher rate which he has to get you to agree upon. If neither of those two things work, he will request that you return the car. Between the time you sign and the moment a lender agrees to purchase your contract the dealer is the lien holder, and has legal rights to repossession, in all 50 states. Not to mention you will sign a contingency contract before leaving that states you are not yet the owner of the car, probably not in so many simple words though, but it will certainly be in there before they let you take a car before the finalizing contract is signed. Now as far as the situation of the OP, you purchased your car for cash, all documents signed, the car is yours, plain and simple. It doesn't matter what state you are in, if he's cashed the check, whatever. The buyer and seller both signed all documents stating a free and clear transaction. Your business is done in the eyes of the law. Most likely the salesman or finance manager who signed paperwork with you, noticed the error and was hoping to recoup the losses from a young novice buyer. Regardless of the situation, it is extremely unprofessional, and clearly shows that this person is very inexperienced and reflects poorly on management as well for not doing a better job of training their employees. When I started out, I found myself in somewhat similar situations, both times I offered to pay the difference of my mistake, or deduct it from my part of the sale. The General Manager didn't take me up on my offer. He just told me we all make mistakes and to just learn from it. Had I been so unprofessional to call the customer and try to renegotiate terms, I would have without a doubt been fired on the spot.\",\n \"I worked in auto finance years ago, what dealers tend to do in refinance the negative value of the customer current car to the new one. So if a car is worth 30k they may finance it for 35k. Finance company will do as not to lose the dealer and customer is happy to get a new car. I had one customer call on a car he financed for 85k, car brand new was worth 70k. Told me how he was looking to pay out the loan and go to the competition for better rates. Before offering anything I did a quick value check and no way was it worth it for us to reduce the rates. Told him good luck and he needed to pay X amount, he asked me if I'm not going to offer a better deal, I told him no. He blew up telling me the dealer told him to call 6 mouths later and the financial company would reduce the rates if he asked for a payout. Customer also had a car that dropped its value like no tomorrow, so it book value was around 60k. So over the refinance limit. 6 mouths later get a call from collection, telling me just a heads up this guy's cars was sold at the auction as he couldn't make repayments for 30k. Guy was also told by the dealer he could just hand the car back in but wasn't told he still needed to pay back the difference in the loan once he did. My god some people had no clue.\",\n \"Most states do have a cooling-off period where the buyer can rescind the purchase as well as a legally allowed limit to how long the dealer has to secure financing when they buyer has opted for dealer-financing. If the dealer did inform you during the allowed window, they will refund your down payment minus mileage fees at a state set cost per mile that you used the car. If the dealer did not inform you during the allowed window, depending on the state, they may have to refund the entire down payment. In any case, the problem is that the bank does not want to offer you the loan, you can try to negotiate and have the dealer use what leverage they have to coerce the bank, but there is probably no way for you to force the loan through. Alternatively you can seek your own financing from your own bank or credit union, which will likely allow the sale to go through. UPDATE - Colorado laws allow the dealer 10 days to inform you that they cannot obtain financing on the terms agreed upon in the original contract. That contract contained wording related to the mileage fees. You can find that info on page 8 of the linked PDF under the heading D. USAGE FEE AND MILEAGE CHARGE\",\n \"I had a similar situation when I was in college. The difference was that the dealer agreed to finance and the bank they used wanted a higher interest rate from me because of my limited credit history. The dealer asked for a rate 5 percentage points higher than what they put on the paperwork. I told them that I would not pay that and I dropped the car off at the lot with a letter rescinding the sale. They weren't happy about that and eventually offered me financing at my original rate with a $1000 discount from the previously agreed-upon purchase price. What I learned through that experience is that I didn't do a good-enough job of negotiating the original price. I would suggest that your son stop answering phone calls from the dealership for at least 1 week and drive the car as much as possible in that time. If the dealer has cashed the check then that will be the end of it. He owes nothing further. If the dealer has not cashed the check, he should ask whether they prefer to keep the check or if they want the car with 1000 miles on the odometer. This only works if your son keeps his nerve and is willing to walk away from the car.\",\n \"Fair enough. I was just trying to save them money. If it were me, I'd call up the dealer first and threaten to contact local media if they didn't void the contract. In the end though a lawyer is probably the best bet. Even just having them write a letter to send over would probably get them to nullify it.\",\n \"\\\"Understood. But based on the OP, it's not categorically clear what they were refusing. If they refused to quote the balance and/or refused to take a phone payment that was otherwise in keeping with the cardholder agreement (i.e., the cardmember called the correct number for phone payments and balance-checking, etc), then yeah, they were not only being unreasonable, but also violating the contract. What I read as ambiguous is whether the cardholder was specifically asking for the *payoff* balance/amount, and whether they were following process for phone-payments and balance-checking, etc. IOW, it's not necessarily \\\"\\\"illegal\\\"\\\" and might not even be unreasonable for the customer-service number to have different departments for balance-checking and phone-payments versus card-cancellation. It's not falsifiably clear from the OP that the cardholder was not asking the person on the other end of the phone for categorical statements of fact that they were obligated to make. I'm not accusing anyone of lying or saying that the CC company was acting reasonably, I'm just saying that language such as **\\\"\\\"They do not provide mid-cycle payoff quotes\\\"\\\"** is not evidence that they were doing any kind of funny-business.\\\"\",\n \"On the surface this sounds ridiculous, which makes me suspect that there might be something that the dealer intends to cling on to; otherwise it sounds like the dealer should be ashamed to even call your son about its own incompetence. I'd recommend politely refusing the request since said mistake didn't happen on your end, and wait to see if the dealer comes back with some sort of argument.\",\n \"Dumb Coder has already given you a link to a website that explains your rights. The only thing that remains is how to execute the return without getting more grief from the dealer. Though the legal aspects are different, I believe the principle is the same. I had a case where I had to rescind the sale of a vehicle in the US. I was within my legal rights to do so, but I knew that when I returned to the dealership they would not be pleased with my decision. I executed my plan by writing a letter announcing my intention to return the vehicle siting the relevant laws involved with a space at the bottom of the letter for the sales person to acknowledge receipt of the letter and indicate that there was no visible damage to the car when the vehicle was returned. I printed two copies of the letter, one for them to keep, and one for me to keep with the signed acknowledgement of receipt. As expected, they asked me to meet with the finance manager who told me that I wouldn't be able to return the car. I thanked him for meeting with me and told him that I would be happy to meet in court if I didn't receive a check within 7 days. (That was his obligation under the local laws that applied.)\",\n \"The sales manager and/or finance manager applied a rebate that did not apply. It's their fault. They have internal accounts to handle these situations as they do come up from time to time. The deal is done. They have no legal ground.\",\n \"They'll refund your money (though maybe with a small service charge). I'm sure they regularly deal with new car sales gone wrong.\",\n \">observe their contractual obligations. If not having to pay you is part of the deal, then it's not a good deal. Clearly companies have no reason to not just keep that money, and they keep it every chance they get. Why wouldn't they?\",\n \"I have one additional recommendation: if the dealer continues to press the issue, tell them that they need to drop it, or you will write a Yelp review in excruciating detail about the entire experience. Used car dealers are very aware of their Yelp presence and don't like to see recent, negative reviews because it can cost them a lot of new business. (I'm assuming this is a used car. If it's a new car, you could go over their heads and bring up the problem with the manufacturer. Dealers hate it when you go directly to the manufacturer with a dealer complaint.)\",\n \"Go back to the dealership and leave the car there. Call your local news. They love these stories. After the news is out if they still won't give you your money back and void the contract then call the police. This is illegal and the business has violated the law. Another option is to go to the police first. After the police report then hire a lawyer to sue the dealership. Then call the local news. This method may take longer, but it will have the biggest impact.\",\n \"What can you do? Pay the loan or face the debt collectors. The finance company don't care who now keeps the car, or who drives it. There's money outstanding on the loan, and your signature on the loan form. That's why co-signing a loan for someone else so often ends in tears.\",\n \"See what the contract says about transfers or subleases. A lease is a credit agreement, so the lessor may not allow transfers. You probably ought to talk to an accountant about this. You can probably recognize most of the costs associated with the car without re-financing it in another lease.\",\n \"\\\"Just sign the form. The bank I worked for gave a .25% discount on auto deduct. Either you misheard that part or the person who sold you on the loan was new/ didn't explain it properly. It's an \\\"\\\"optional form\\\"\\\" but it does change your rate. Edit: you're not being pushed around. Someone got in trouble and is trying to cover their butt by getting it back quickly.\\\"\",\n \"\\\"Your son is in the right. But he broke the \\\"\\\"unwritten\\\"\\\" rules, which is why the car dealer is upset. Basically, cars are sold in the United States at a breakeven price. The car company makes ALL its money on the financing. If everyone bought \\\"\\\"all cash,\\\"\\\" the car companies would not be profitable. No one expected anyone, least of all your son, a \\\"\\\"young person,\\\"\\\" to pay \\\"\\\"all cash.\\\"\\\" When he did, they lost all the profit on the deal. On the other hand, they signed a contract, your son met all the FORMAL requirements, and if there was an \\\"\\\"understanding\\\"\\\" (an assumption, actually), that the car was supposed to be financed, your son was not part of it. Good for him. And if necessary, you should be prepared to back him up on court.\\\"\",\n \"First suggestion: Investigate refinancing the auto loan with a reputable credit union or bank. I reduced my costs by changing my auto loan to Pentagon Federal Credit Union, which charges about 4% interest rate (compared to 6% which was the standard about 2 years ago). (for instructions on how to join penfed, look at my other post here.) Second suggestion: get involved with the better business bureau. 25% interest is ridiculous, I would file a complaint against the auto dealership.\",\n \"Dude- my background is in banking specifically dealing with these scenarios. Take my advice-look for a balance transfer offer-credit card at 0%. Your cost of capital is your good credit, this is your leverage. Why pay 4.74% when you can pay 0%. Find a credit card company with a balance transfer option for 0%. Pay no interest, and own the car outright. Places to start; check the mail, or check your bank, or check local credit unions. Some credit unions are very relaxed for membership, and ask if they have zero percent balance transfers. Good Luck!\",\n \"You're not missing anything. Consumer protection in the US is very basic and limited, if at all. So if someone claims you owe them something, it would be really hard for you to prove otherwise unless you actually drag them to court. Especially if there actually was a relationship, and there probably is some paperwork to substantiate the claim. I suggest talking to a consumer issues attorney.\",\n \"\\\"I'm sorry to hear you've made a mistake. Having read the contract of sale we signed, I do not see any remedy to your current situation. However, I'm interested in making sure I do not take advantage of you. As such, I'll return the vehicle, you can return my money plus the bank fees I paid for the cashiers check, tax, title, and registration, and I will look at buying a vehicle from another dealership. This seems to be the most fair resolution. If I were to pay for your mistake at a price I did not agree to, it would not be fair to me. If you were to allow this vehicle to go to me at the price we agreed to, it wouldn't be fair to you. If I were to return the car and begin negotiations again, or find a different car in your lot, it would be difficult for us to know that you were not going to make a similar mistake again. At this point I consider the sale final, but if you'd prefer to have the vehicle back as-is, returning to us the money we gave you as well as the additional costs incurred by the sale, then we will do so in order to set things right. Chances are good you will see them back down. Perhaps they will just cut the additional payment in half, and say, \\\"\\\"Well, it's our mistake, so we will eat half the cost,\\\"\\\" or similar, but this is merely another way to get you to pay more money. Stand firm. \\\"\\\"I appreciate the thought, but I cannot accept that offer. When will you have payment ready so we can return the car?\\\"\\\" If you are firm that the only two solutions is to keep the car, or return it for a full refund plus associated costs, I'd guess they'd rather you keep the car - trust me, they still made a profit - but if they decide to have it returned, do so and make sure they pay you in full plus other costs. Bring all your receipts, etc and don't hand over the keys until you have the check in hand. Then go, gladly, to another dealership that doesn't abuse its customers so badly. If you do end up keeping the car, don't plan on going back to that dealership. Use another dealership for warranty work, and find a good mechanic for non-warranty work. Note that this solution isn't legally required in most jurisdictions. Read your contract and all documentation they provided at the time of sale to be sure, but it's unlikely that you are legally required to make another payment for a vehicle after the sale is finalized. Even if they haven't cashed the check, the sale has already been finalized. What this solution does, though, is put you back in the driver's seat in negotiating. Right now they are treating it as though you owe them something, and thus you might feel an obligation toward them. Re-asserting your relationship with them as a customer rather than a debtor is very important regardless of how you proceed. You aren't legally culpable, and so making sure they understand you aren't will ultimately help you. Further, dealerships operate on negotiation. The primary power the customer has in the dealership is the power to walk away from a deal. They've set the situation up as though you no longer have the power to walk away. They didn't threaten with re-possession because they can't - the sale is final. They presented as a one-path situation - you pay. Period. You do have many options, though, and they are very familiar with the \\\"\\\"walk away\\\"\\\" option. Present that as your chosen option - either they stick with the original deal, or you walk away - and they will have to look at getting another car off the lot (which is often more important than making a profit for a dealership) or selling a slightly used car. If they've correctly pushed the title transfer through (or you, if that's your task in your state) then your brief ownership will show up on carfax and similar reports, and instantly reduces the car's worth. Having the title transfer immediately back to the dealership doesn't look good to future buyers. So the dealership doesn't want the car back. They are just trying to extract more money, and probably illegally, depending on the laws in your jurisdiction. Reassert your position as customer, and decide now that you'll be fine if you have to return it and walk away. Then when you communicate that to them, chances are good they'll simply cave and let the sale stand as-is.\\\"\",\n \"I'm not a lawyer, and am certainly not familiar with your jurisdiction, but the general guidelines I've seen around this kind of situation are: If all else fails, you could just cancel the card, though I'm not sure what liability you have to honour the contract. I cancelled a card once to stop being charged by a particularly annoying company and had no problems, but I'm not sure if that is a good way to deal with it in general.\",\n \"My assumption here is that you paid nearly 32K, but also financed about 2500 in taxes/fees. At 13.5% the numbers come out pretty close. Close enough for discussion. On the positive side, you see the foolishness of your decision however you probably signed a paper that stated the true cost of the car loan. The truth in lending documents clearly state, in bold numbers, that you would pay nearly 15K in interest. If you pay the loan back early, or make larger principle payments that number can be greatly reduced. On top of the interest charge you will also suffer depreciation of the car. If someone offered you 31K for the car, you be pretty lucky to get it. If you keep it for 4 years you will probably lose about 40% of the value, about 13K. This is why it is foolish for most people to purchase a new vehicle. Not many have enough wealth to absorb a loss of this size. In the book A Millionaire Next Door the author debunks the assumption that most millionaires drive new cars. They tend to drive cars that are pretty standard and a couple of years old. They pay cash for their cars. The bottom line is you singed documents indicating that you knew exactly what you were getting into. Failing any other circumstances the car is yours. Talking to a lawyer would probably confirm this. You can attempt to sell it and minimize your losses, or you can pay off the loan early so you are not suffering from finance charges.\",\n \"What would happen if you was to cash a check, didn’t realize it was to you and your finance company, take it to a local business that has a money center, they cash the check without even having you sign let alone having the finance companies endorsement on it . The money cleared my account like a couple months ago and it was just brought up now .. ? The reason why the check was made out the owner and the lender is to make sure the repairs were done on the car. The lender wants to make sure that their investment is protected. For example: you get a six year loan on a new car. In the second year you get hit by another driver. The damage estimate is $1,000, and you decide it doesn't look that bad, so you decide to skip the repair and spend the money on paying off debts. What you don't know is that if they had done the repair they would have found hidden damage and the repair would have cost $3,000 and would have been covered by the other persons insurance. Jump ahead 2 years, the rust from the skipped repair causes other issues. Now it will cost $5,000 to fix. The insurance won't cover it, and now a car with an outstanding loan balance of $4,000 and a value of $10,000 if the damage didn't exist needs $5,000 to fix. The lender wants the repairs done. They would have not signed the check before seeing the proof the repairs were done to their satisfaction. But because the check was cashed without their involvement they will be looking for a detailed receipt showing that all the work was done. They may require that the repair be done at a certified repair shop with manufacturer parts. If you don't have a detailed bill ask the repair shop for a copy of the original one.\",\n \"\\\"The \\\"\\\"guaranteed minimum future value\\\"\\\" isn't really a guarantee so much as the amount they will charge you at the end of the agreement if you want to keep the car. In this sense it might better be considered a \\\"\\\"guaranteed maximum future cost\\\"\\\". If the car has fallen below that value at that point, then you can just hand back the car and you won't owe anything extra. If it turns out to be worth more, you end up in profit - though only if you either actually pay for the car, or if you roll over into a new PCP deal. So the finance company has an incentive to set it at a sensible value, otherwise they'll end up losing money. Most new cars lose a lot of value quickly initially, and then the rate of loss slows down. But given that it's lost £14k in 2 years, it seems pretty likely it'll lose much more than another £1k in the next 2 years. So it does sound like that in this case, they estimated the value badly at the start of the deal and will end up taking a loss on the deal when you hand it back at the end. It appears you also have the legal right to \\\"\\\"voluntary termination\\\"\\\" once you have paid off half the \\\"\\\"Total Amount Payable\\\"\\\". This should be documented in the PCP agreement and if you're half way into the deal then I'd expect you'll be about there. If that doesn't apply, you can try to negotiate to get out of the deal early anyway. If they look at it rationally, they should think about the value of your payments over the next two years minus the loss they will end up with at the end of those two years. But there's no guarantee they will. Disclaimer: Despite living in the UK, I hadn't heard of these contracts until I read this question, so my answer is based entirely on web searches and some inferences. The two most useful sources I found on the general subject were this one and this one.\\\"\",\n \"But.. what I really want to know.... is it illegal, particularly the clause REQUIRING a trade in to qualify for the advertised price? The price is always net of all the parts of the deal. As an example they gave the price if you have $4000 trade in. If you have no trade in, or a trade in worth less than 4K, your final price for the new car will be more. Of course how do you know that the trade in value they are giving you is fair. It could be worth 6K but they are only giving you a credit of 4K. If you are going to trade in a vehicle while buying another vehicle the trade in should be a separate transaction. I always get a price quote for selling the old car before visiting the new car dealer. I do that to have a price point that I can judge while the pressure is on at the dealership.. Buying a car is a complex deal. The price, interest rate, length of loan, and the value of the trade in are all moving parts. It is even more complex if a lease is involved. They want to adjust the parts to be the highest profit that you are willing to agree to, while you think that you are getting a good deal. This is the fine print: All advertised amounts include all Hyundai incentives/rebates, dealer discounts and $2500 additional down from your trade in value. +0% APR for 72 months on select models subject to credit approval through HMF. *No payments or 90 days subject to credit approval. Value will be added to end of loan balance. 15MY Sonata - Price excludes tax, title, license, doc, and dealer fees. MSRP $22085- $2036 Dealer Discount - $500 HMA Lease Cash - $500 HMA Value Owner Coupon - $1000 HMA Retail Bonus Cash - $500 HMA Military Rebate - $500 HMA Competitive Owner Coupon - $400 HMA College Grad Rebate - $500 HMA Boost Program - $4000 Trade Allowance = Net Price $12149. On approved credit. Certain qualifications apply to each rebate. See dealer for details. Payment is 36 month lease with $0 due at signing. No security deposit required. All payment and prices include HMA College Grad Rebate, HMA Military Rebate, HMA Competitive Owner Coupon and HMA Valued Owner Coupon. Must be active military or spouse of same to qualify for HMA Military Rebate. Must graduate college in the next 6 months or within the last 2 years to qualify for HMA College Grad rebate. Must own currently registered Hyundai to qualify for HMA Valued Owner Coupon. Must own qualifying competitive vehicle to qualify for HMA Competitive Owner Coupon.\",\n \"\\\"At this point there is not much you can do. The documentation probably points to you being the sole owner and signer on the loan. Then, any civil suit will degenerate into a \\\"\\\"he said, she said\\\"\\\" scenario. Luckily, no one was truly harmed in the scenario. Obtaining financing through a car dealer is almost always not advisable. So from here, you can do what should have been done in the first place. Go to banks and credit unions so your daughter can refinance the car. You will probably get a lower rate, and there is seldom a fee. I would start with the bank/CU where she does her checking or has some other kind of a relationship. If that fails, anywhere you can actually sit and talk with a loan officer is preferable over the big corporate type banks. Car dealers lying is nothing new, it happens to everyone. Buying a car is like a battle.\\\"\",\n \"Sounds like you need to contact your ex and sort it out. If you have co-signed the loan, changes are you are equally responsible even if on party chooses not to pay, then the bank will come after the other one. If you no longer wish to be part of the arrangement and your ex still wants the car, she will have to buy you out of the car and become fully responsible for the liability.\",\n \"If the discount is only for financed car then their software application should have accepted the payment (electronic transfer ID) from financed bank. In this case the bank should have given the payment on behalf of your son. I believe the dealer know in advance about the paper work and deal they were doing with your son. Financing a car is a big process between dealer and bank.\",\n \"There's a good explanation of this type of scam at the following link; It's known as a Spot-Delivery scam. https://www.carbuyingtips.com/top-10-scams/scam1.htm Also, I read this one a while back, and immediately this post reminded me of it: http://oppositelock.kinja.com/when-the-dealership-steals-back-the-car-they-just-sold-1636730607 Essentially, they claim you'll get one level of financing, let you take the car home, and then attempt to extort a higher financing APR out of you or request more money / higher payments. Check your purchasing agreement, it may have a note with something along the lines of 'Subject to financing approval' or something similar. If it does, you might be 'out of luck', as it were. Contact an attorney; in some cases (Such as the 'oppositelock.kinja.com' article above) consumers have been able to sue dealers for this as theft.\",\n \"Within some limitations, the dealer is allowed to approve or deny lending to anyone that it chooses. Those constraints are the basics that you'd expect for any regulation in the US: Race Religion Nationality Sex Marital Status Age Source of income You can read more about them in this leaflet from the FDIC's Fair Lending Laws office. (Link is a pdf download.) As far as what to do in your mother's case, it sounds like it may be some slightly shady sales tactics, but it isn't entirely illegal... It's just annoying. One thing you could do to try to head off some of the crazy bait-and-switch sales tactics is to communicate with a handful of dealerships in your area about the specifics of your mother's profile as a purchaser. It's much harder to give someone the run-around if you have already agreed to something in principle by email.\",\n \"\\\"As others have said, if the dealer accepted payment and signed over ownership of the vehicle, that's a completed transaction. While there may or may not be a \\\"\\\"cooling-off period\\\"\\\" in your local laws, those protect the purchaser, not (as far as I know) the seller. The auto dealer could have avoided this by selling for a fixed price. Instead, they chose to negotiate every sale. Having done so, it's entirely their responsibility to check that they are happy with their final agreement. Failing to do so is going to cost someone their commission on the sale, but that's not the buyer's responsibility. They certainly wouldn't let you off the hook if the final price was higher than you had previously agreed to. He who lives by the fine print shall die by the fine print. This is one of the reasons there is huge turnover in auto sales staff; few of them are really good at the job. If you want to be kind to the guy you could give him the chance to sell you something else. Or perhaps even offer him a $100 tip. But assuming the description is correct, and assuming local law doesn't say otherwise (if in any doubt, ask a lawyer!!!), I don't think you have any remaining obligation toward them On the other hand, depending on how they react to this statement, you might want to avoid their service department, just in case someone is unreasonably stupid and tries to make up the difference that was.\\\"\",\n \"There is no rule that says the dealer has to honor that deal, nor is there any that says he/she won't. However, if you are thinking of financing through though the dealership they are likely to honor the deal. They PREFER you finance it. If you finance it through the dealer the salesman just got TWO sales (a car and a loan) and probably gets a commission on both. If you finance it through a third party it makes no difference to the dealer, it is still a cash deal to them because even though you pay off the car loan over years, the bank pays them immediately in full.\",\n \"As mhoran_psprep and others have already said, it sounds like the sale is concluded and your son has no obligation to return the car or pay a dime more. The only case in which your son should consider returning the car is if it works in his favor--for example, if he is able to secure a similar bargain on a different car and the current dealer buys the current car back from your son at a loss. If the dealer wants to buy the car back, your son should first get them to agree to cover any fees already incurred by your son. After that, he should negotiate that the dealer split the remaining difference with him. Suppose the dealership gave a $3000 discount, and your son paid $1000 in title transfer, registration, and any other fees such as a cashier's check or tax, if applicable. The remaining difference is $2000. Your son should get half that. In this scenario, the dealer only loses half as much money, and your son gains $1000 for his trouble.\",\n \"\\\"At one point in my life I sold cars and from what I saw, three things stick out. Unless the other dealership was in the same network, eg ABC Ford of City A, and ABC Ford of City B, they never had possession of that truck. So, no REAL application for a loan could be sent in to a bank, just a letter of intent, if one was sent at all. With a letter of intent, a soft pull is done, most likely by the dealership, where they then attached that score to the LOI that the bank has an automated program send back an automatic decline, an officer review reply, or a tentative approval (eg tier 0,1,2...8). The tentative approval is just that, Tentative. Sometime after a lender has a loan officer look at the full application, something prompts them to change their offer. They have internal guidelines, but lets say an app is right at the line for 2-3 of the things they look at, they chose to lower the credit tier or decline the app. The dealership then goes back and looks at what other offers they had. Let's say they had a Chase offer at 3.25% and a CapOne for 5.25% they would say you're approved at 3.5%, they make their money on the .25%. But after Chase looks into the app and sees that, let's say you have been on the job for actually 11 months and not 1 year, and you said you made $50,000, but your 1040 shows $48,200, and you have moved 6 times in the last 5 years. They comeback and say no he is not a tier 2 but a tier 3 @ 5.5%. They switch to CapOne and say your rate has in fact gone up to 5.5%. Ultimately you never had a loan to start with - only a letter of intent. The other thing could be that the dealership finance manager looked at your credit score and guessed they would offer 3.5%, when they sent in the LOI it came back higher than he thought. Or he was BSing you, so if you price shopped while they looked for a truck you wouldn't get far. They didn't find that Truck, or it was not what they thought it would be. If a dealership sees a truck in inventory at another dealer they call and ask if it's available, if they have it, and it's not being used as a demo for a sales manager, they agree to send them something else for the trade, a car, or truck or whatever. A transfer driver of some sort hops in that trade, drives the 30 minutes - 6 hours away and comes back so you can sign the Real Application, TODAY! while you're excited about your new truck and willing to do whatever you need to do to get it. Because they said it would take 2-5 days to \\\"\\\"Ship\\\"\\\" it tells me it wasn't available. Time Kills Deals, and dealerships know this: they want to sign you TODAY! Some dealerships want \\\"\\\"honest\\\"\\\" money or a deposit to go get the truck, but reality is that that is a trick to test you to make sure you are going to follow through after they spend the gas and add mileage to a car. But if it takes 2 days+, The truck isn't out there, or the dealer doesn't have a vehicle the other dealership wants back, or no other dealership likes dealing with them. The only way it would take that long is if you were looking for something very rare, an odd color in an unusual configuration. Like a top end model in a low selling color, or configuration you had to have that wouldn't sell well - like you wanted all the options on a car except a cigarette lighter, you get the idea. 99.99% of the time a good enough truck is available. Deposits are BS. They don't setup any kind of real contract, notice most of the time they want a check. Because holding on to a check is about as binding as making you wear a chicken suit to get a rebate. All it is, is a test to see if you will go through with signing the deal. As an example of why you don't let time pass on a car deal is shown in this. One time we had a couple want us to find a Cadillac Escalade Hybrid in red with every available option. Total cost was about $85-90k. Only two new Red Escalade hybrids were for sale in the country at the time, one was in New York, and the other was in San Fransisco, and our dealership is in Texas, and neither was wanting to trade with us, so we ended up having to buy the SUV from one of the other dealerships inventory. That is a very rare thing to do by the way. We took a 25% down payment, around $20,000, in a check. We flew a driver to wherever the SUV was and then drove it back to Texas about 4 days later. The couple came back and hated the color, they would not take the SUV. The General Manager was pissed, he spent around $1000 just to bring the thing to Texas, not to mention he had to buy the thing. The couple walked and there was nothing the sales manager, GM, or salesman could do. We had not been able to deliver the car, and ultimately the dealership ate the loss, but it shows that deposits are useless. You can't sell something you don't own, and dealerships know it. Long story short, you can't claim a damage you never experienced. Not having something happen that you wanted to have happen is not a damage because you can't show a real economic loss. One other thing, When you sign the paperwork that you thought was an application, it was an authorization for them to pull your credit and the fine print at the bottom is boiler plate defense against getting sued for everything imaginable. Ours took up about half of one page and all of the back of the second page. I know dealing with car dealerships is hard, working at them is just as hard, and I'm sorry that you had to deal with it, however the simplest and smoothest car deals are the ones where you pay full price.\\\"\",\n \"Possession is 9/10 of the law, and any agreement between you and your grandfather is covered under the uniform commercial code covering contracts. As long as your fulfilling your obligation of making payments, the contract stands as originally agreed upon between you and the lender. In short, the car is yours until you miss payments, sell it, or it gets totalled. The fact that your upside down on value to debt isn't that big of a deal as long as you have insurance that is covering what is owed.\",\n \"How did they violate the law if he hasn't been declared legally incompetent? I'm not saying they didn't I just don't personally know and I'm sure if she can state exactly HOW it was illegal to the dealership they would be more likely to just refund it.\",\n \"Make sure I am reading this correctly. You signed the car over to you BF, he took a loan against it and gave you the money? If so, you sold him the car and any use you have had of it since was at his consent. Outside of a written contract saying otherwise (and possibly even with one) it is now his car to do with as he pleases. It sucks that things are not working out in the manner you intended at the time, but that is the reality of the situation.\",\n \"Dealerships make a lot of money in the finance department. One of the thing they play upon is your emotional reaction of purchasing a new vehicle (new to you in this case). They perform all sorts of shenanigans, like adding undercoat, selling gap insurance, or extended warranties. They entice you with a promise of a lower interest rate, but really what they are trying to do is back you into a payment. So if you can fiance 20,000, but the car you are buying is 16,000, then they will try to move that figure up to the 20K mark. In your case it sounded like some borderline (at the least) illegal activity they used to fool you into paying more. It sounds like you regret this decision which puts you a step ahead of most. How many people brag about the extended warranty or gap insurance they got included in the sale? As mentioned in another answer the best bet is to go into the dealership with financing in place. Say you were able to get a 3% loan on 16K. The total interest would be ~1600. If you avoid the finance room, you might avoid their dubious add ons that would probably cost you more then the 1600 even if you can get 0%. If you are going to buy a car on time, my advice would be to not fill out a credit app at the dealership. The dealership people through a conniption fit, but hold your ground. If need be get up and walk out. They won't let you leave. One thing I must mention, is that one feels very wealthy without that monthly pain in the a$$ payment for a car. You may want to try and envision yourself without a car payment, and make steps to making that a reality for the rest of your life.\",\n \"In the U.S., most car dealers provide lease financing through one company (usually a subsidiary of the auto manufacturer). Whereas they provide loan financing through a variety of companies, some of whom offer very high interest rate loans and sell the loans as collateralized debt obligations (CDOs). Have you checked whether Chase or First Tech Credit Union offers a suitable car lease?\",\n \"\\\"Paperwork prevails. What you have is a dealer who get a kickback for sending financing to that institution. And the dealer pretty much said \\\"\\\"We only get paid our kickback at two levels of loan life, 6 and 12 months.\\\"\\\" You just didn't quite read between the lines. This is very similar to the Variable Annuity salespeople who tell their clients, \\\"\\\"The best feature about this product is that the huge commissions I get from the sale fund my kid's college tuition and my own retirement. You, on the other hand, don't really do so well.\\\"\\\" Car salesmen and VA sellers.\\\"\",\n \"Do you have any legal options? Not really. Citi is under no obligation to refinance your loan on your terms. But that goes both ways, and you are under no obligation to refinance with Citi! Get more quotes from another lender. It'll feel really good when you find a lender that wants your business. You might get a better deal. And think how good it will feel to cut ties with Citi!\",\n \"\\\"A bona-fide company never needs your credit card details, certainly not your 3-digit-on-back-of-card #, to issue a refund. On an older charge, they might have to work with their merchant provider. But they should be able to do it within the credit card handling system, and in fact are required to. Asking for details via email doesn't pass the \\\"\\\"sniff test\\\"\\\" either. To get a credit card merchant account, a company needs to go through a security assessment process called PCI-DSS. Security gets drummed into you pretty good. Of course they could be using one of the dumbed-down services like Square, but those services make refunds ridiculously easy. How did you come to be corresponding on this email address? Did they initially contact you? Did you find it on a third party website? Some of those are fraudulent and many others, like Yelp, it's very easy to insert false contact information for a business. Consumer forums, even moreso. You might take another swing at finding a proper contact for the company. Stop asking for a cheque. That also circumvents the credit card system. And obviously a scammer won't send a check... at least not one you'd want! If all else fails: call your bank and tell them you want to do a chargeback on that transaction. This is where the bank intervenes to reverse the charge. It's rather straightforward (especially if the merchant has agreed in principle to a refund) but requires some paperwork or e-paperwork. Don't chargeback lightly. Don't use it casually or out of laziness or unwillingness to speak with the merchant, e.g. to cancel an order. The bank charges the merchant a $20 or larger investigation fee, separate from the refund. Each chargeback is also a \\\"\\\"strike\\\"\\\"; too many \\\"\\\"strikes\\\"\\\" and the merchant is barred from taking credit cards. It's serious business. As a merchant, I would never send a cheque to an angry customer. Because if I did, they'd cash the cheque and still do a chargeback, so then I'd be out the money twice, plus the investigation fee to boot.\\\"\",\n \"If they are a debt collector, they must follow the requirements of the Fair Debt Collection Practices Act. In particular, they must provide you with verification of the debt at your written request. If they won't give you a way to do this, they are in violation of the law, and you should contact proper authorities. If they are not a debt collection agency, it does sound like a scam, in which case you should also contact the appropriate law enforcement agency.\",\n \"I don't think you should have to cancel your card. Call your customer service line and just indicate to them what has happened. You aren't getting service for what they are charging you and they are refusing to remove it themselves.\",\n \"> Why is it not considered to be misleading business practices? because the details (of below) were either included or available online > some sort of advance loan program ...some sort of contractual agreement it's legit but high interest\",\n \"Yes, you did. To give an example of the contract terms that allow this, the [Capital One credit card agreement](https://www.capitalone.com/media/doc/credit-cards/Credit-Card-Agreement-for-Consumer-Cards-in-Capital-One-N.A.pdf) states: > Credit Reports > > We may report information about your Account to credit bureaus and others. Late payments, missed payments, or other defaults on your Account may be reflected in your credit report. Information we provide may appear on your and the Authorized Users’ credit reports. > > If you believe that we have reported inaccurate information about your Account to a credit bureau or other consumer reporting agency, notify us in writing at PO Box 30281, Salt Lake City, UT 84130-0281. When you write, tell us the specific information that you believe is incorrect and why you believe it is incorrect. > > We may obtain and use credit, income and other information about you from credit bureaus and others as the law allows.\",\n \"Not sure if it is the same in the States as it is here in the UK (or possibly even depends on the lender) but if you have any amount outstanding on the loan then you wouldn't own the vehicle, the loan company would. This often offers extra protection if something goes wrong with the vehicle - a loan company talking to the manufacturer to get it resolved carries more weight than an individual. The laon company will have an army of lawyers (should it get that far) and a lot more resources to deal with anything, they may also throw in a courtesy car etc.\",\n \"\\\"Pay it off. If necessary, get a loan so you can pay it off; that's what refinancing is all about and your favorite bank or credit union would be happy to help you with this. If that isn't sufficient to make the car affordable you may need to sell it, take the loss, and learn from the experience. Sorry, but you made an agreement and it's up to you to find a way to meet your end of the bargain. (If you had decided you didn't like this loan within a few days of signing, you might have been able to back out under \\\"\\\"cooling off period\\\"\\\" laws. But those only allow a very limited time for reconsideration.)\\\"\",\n \"Your question is a bit confusing, you may wish to edit it to clarify the meaning. If we broke up or he stops paying, can I take the car back again? No. Just as if you sold me or the guy down the street your car you cannot just simply take it back. Being someone's boyfriend does not grant special privileges to you or him. Don't do this if you have not done so. If you have try and get it undone. It is unlikely that this is allowable as the bank will not simply allow you to transfer ownership if you have a loan. In the future, use cash (not loans) to buy your cars.\",\n \"The advice given at this site is to get approved for a loan from your bank or credit union before visiting the dealer. That way you have one data point in hand. You know that your bank will loan w dollars at x rate for y months with a monthly payment of Z. You know what level you have to negotiate to in order to get a better deal from the dealer. The dealership you have visited has said Excludes tax, tag, registration and dealer fees. Must finance through Southeast Toyota Finance with approved credit. The first part is true. Most ads you will see exclude tax, tag, registration. Those amounts are set by the state or local government, and will be added by all dealers after the final price has been negotiated. They will be exactly the same if you make a deal with the dealer across the street. The phrase Must finance through company x is done because they want to make sure the interest and fees for the deal stay in the family. My fear is that the loan will also not be a great deal. They may have a higher rate, or longer term, or hit you with many fee and penalties if you want to pay it off early. Many dealers want to nudge you into financing with them, but the unwillingness to negotiate on price may mean that there is a short term pressure on the dealership to do more deals through Toyota finance. Of course the risk for them is that potential buyers just take their business a few miles down the road to somebody else. If they won't budge from the cash price, you probably want to pick another dealer. If the spread between the two was smaller, it is possible that the loan from your bank at the cash price might still save more money compared to the dealer loan at their quoted price. We can't tell exactly because we don't know the interest rates of the two offers. A couple of notes regarding other dealers. If you are willing to drive a little farther when buying the vehicle, you can still go to the closer dealer for warranty work. If you don't need a new car, you can sometimes find a deal on a car that is only a year or two old at a dealership that sells other types of cars. They got the used car as a trade-in.\",\n \"\\\"Short answer: If you bought the car -- as opposed to leasing it -- there is no one to \\\"\\\"turn it in\\\"\\\" to. The reality of cars and car loans is this: The value of a car tends to fall rapidly the first couple of years, then more slowly after that. Like it might lose $2000 the first year, $1000 the second, $500 the third, etc. What you owe on a loan falls slowly at first, because a lot of your payment is going to interest, but then as time goes on you pay off the loan faster and faster. So you may pay off $1000 the first year, $1100 the second, etc. (I'm just making up numbers, depends on the value of the car, and the term and interest rate of the loan, but that's the general idea.) Combining these two things means that in the first few years after you buy a car, if you had a small or no down payment, you might well owe more on the car than it is worth. That's just how the numbers work out. If you keep the car long enough, eventually you hit a point where it is worth more than you owe. Keep it until you've paid off the loan and you owe $0 but the car is still worth SOMETHING, exactly how much depending on its condition and other factors. If you just use the car and pay off the loan, i.e. if you don't sell the car or refinance the loan or some such, then this doesn't matter very much. You make your loan payments, and you have use of the car. What difference does the book value of the car at any given moment matter to you? If the idea of owing more than the car is worth bothers you in principle, then in the future you could make a larger down payment. Or make extra payments on the loan the first couple of years to knock the principle down faster. That's about the only things you can do. Well, you could buy with cash so you owe zero and the car is always worth more than you owe. But given that you are where you are: If you just keep the car and keep driving it and keep paying the loan, then you are exactly where you thought you would be when you bought the car, right? I mean, the day you bought the car, you presumably weren't thinking that at some future date you could refinance at a lower rate. How would you know? So I think the easy answer is: Don't sweat it. Just enjoy the car and pay your bills.\\\"\",\n \"\\\"Yes, he can retract the offer - it was a cash-only offer, and if you're financing, it's no longer \\\"\\\"cash\\\"\\\". Unless, of course, you get the financing through your local bank / credit union, and they hand you a check (like on a personal loan). Then it's still cash. However, the salesman can still retract the offer unless it's in writing because you haven't signed anything yet. The price of financing will always be higher because the dealer doesn't get all their money today. Also, if you finance, you are not paying just the cost of the vehicle, you are paying interest, so your final cost will be higher (unless you were one of the lucky souls who got 0% financing atop employee pricing, and therefore are actually saving money by having a payment).\\\"\",\n \"Don't take the car back! The dealership wants you to take it back to try and earn more money. Simply stated, the dealerships hate paid up front cash deals. They make money on the financing. So to call back and try to up their fee is them realizing their not making a large enough profit. Say thank you and move on. The deal is done!!\",\n \"I am sure that laws differ from state to state. My brother and I had to take over my dads finances due to his health. He had a vehicle that had a loan on it. We refinanced the vehicle and it was in our name. One of our family members needed a vehicle and offered to take over the payment. Our attorney advised us to be on the insurance policy with them and make sure if was paid correctly. We are in Indiana. I know it is hard to discuss finances with family members. However, if you co-signed the loan I think it would be wise to either have your name added to the insurance policy or at least have your brother show proof it has been paid. If you are not comfortable with that it may be a good idea to make sure the bank has your correct address and ask if they would notify you if insurance has lapsed. If your on the loan and there is no insurance at the very least if the vehicle was damaged you would still be responsible to pay the loan.\",\n \"That would have been a good idea. They don't charge interest on a $0 balance, but if you payoff your account after the cycle date, there is a hidden balance and that balance will accrue interest. It is only a few cents a day. I just don't think it is legal for them to refuse to provide you a payoff quote mid cycle. I'm almost certain. When I worked for Discover it was a key point in training to not give the wrong amount and to make sure to use the calculator in the system to quote a daily balance, how much it goes up per day, and how much they should send if they were mailing the payment, giving consideration for the time it takes to receive/process the payment.\",\n \"\\\"In the US, \\\"\\\"title\\\"\\\" is the document that shows ownership of the car. It is a nicely printed document you get from the DMV, that includes the information about the car and about you. You \\\"\\\"sign off the title\\\"\\\" when you sell the car - part of the title is a form on which the owner of the title can assign it to someone else. With your signature on the title, the new owner goes to the DMV which exchanges it to a new title in the new owner's name. Never sign on the title unless you got the payment for the car from the buyer. Usually, when the car is bought with a loan, the lender holds the title. Since you need to sign off the title to pass the ownership if you sell the car - lender holding on to it will prevent you from selling the car until the lender gives you the title back (when you pay off the loan). Your boss, acting as a lender, wants the title to hold on to it to prevent you from selling the car that secures your debt to him. He wants that (usually pink) piece of paper. Here's an article explaining about the title and showing a sample. Lenders holding the title will usually also add an endorsement at the DMV, so that you can't go and claim that you lost it.\\\"\",\n \"\\\"Personally, I would just dispute this one with your CC. I had a situation where a subscription I had cancelled the prior year was billed to me. I called up to have a refund issued, they couldn't find me in their system under three phone numbers and two addresses. The solution they proposed was \\\"\\\"send us your credit card statement with the charge circled,\\\"\\\" to which I responded \\\"\\\"there's no way in hell I'm sending you my CC statement.\\\"\\\" Then I disputed the charge with the CC bank and it was gone about two days later. I partially expect to have the same charge appear next year when they try to renew my non-existent subscription again. Now, whether or not this is a normal practice for the company, or just a call center person making a good-faith but insecure attempt to solve your problem is irrelevant. Fact of the matter is, you tried to resolve this with the merchant and the merchant asked for something that's likely outside the bounds of your CC Terms and Conditions; sending your entire number via email. Dispute it and move on. The dispute process exists for a reason.\\\"\",\n \"Its not a scam. The car dealership does not care how you pay for the car, just that you pay. If you come to them for a loan they will try and service you. If you come with cash, they will sell you a car and not try to talk you into financing. If you come with a check from another bank, they will happily accept it. I would try to work with Equifax or a local credit union to figure out what is going on. Somehow she probably had her credit frozen. Here are some really good things to mitigate this situation: Oh and make sure you do #1 and forget about financing cars ever again. I mean if you want to build wealth.\",\n \"It sounds cold, but the law has to hold people to their agreements. There are exceptions for unconscionable terms, but I don't think this gets close to that level. This is certainly audacious, but not quite shocking to the conscience. Maybe there's an argument to be made regarding whether a reasonably prudent person in the party's position would have known what they were agreeing to under the circumstances (depending upon how the provision was presented), but without a lot more information we can't say whether that angle has a snowball's chance in hell. You should read the terms governing every important agreement you enter into. It sounds like a huge burden, but for any major undertaking you really do need to grit your teeth and trawl through the whole thing. If you don't like what you find, ask for a second look from a lawyer to confirm your suspicions, or just walk away. Bank service agreements, loan/mortgage applications, major venue reservations, and employment contracts (ESPECIALLY employment contracts!) all deserve that much time. Typically the terms you might not like are address circumstances that, as a practical matter, don't really concern you, but you might be surprised at how often you find deal-breakers like this crawling around in the woodwork.\",\n \"You will not be able to. Here is why you don't have the collateral. You have a car that is probably not worth 10k. Also you probably do not have a simple interest loan. You have to look at your contract. Make sure that there is not early payment fee. Also look for the rule of 78's Explanation of Rule of 78's I can't sugarcoat this chances are you were ripped off because you had bad credit putting you into an even deeper hole.\",\n \"If you know that you have a reasonable credit history, and you know that your FICO score is in the 690-neighborhood, and the dealer tells you that you have no credit history, then you also know one of two things: Either way, you should walk away from the deal. If the dealer is willing to lie to you about your credit score, the dealer is also willing to give you a bad deal in other respects. Consider buying a cheaper used car that has been checked out by a mechanic of your choice. If possible, pay cash; if not, borrow as small an amount as possible from a credit union, bank, or even a very low-interest rate credit card. (Credit cards force you to pay off the loan quickly, and do not tie up your car title. I still have not managed to get my credit union loan off of my car title, ten years after I paid it off.)\",\n \"Disclosure: I work for Wells Fargo Home Mortgage. This is normal. The bank is giving you a discount on the interest rate in exchange for the automatic payments. Unfortunately, the bank has the power here; they have your mortgage, and they have the right to call your loan in full at any time, and foreclose on your house if you don't pony up. It's okay to not like being pushed around, but you need to know when to hold'em and when to fold'em, and your facing a royal flush with pair of 4s.\",\n \"\\\"Following up on @petebelford's answer: If you can find a less expensive loan, you can refinance the car and reduce the total interest you pay that way. Or, if your loan permits it (not all do; talk to the bank which holds the loan and,/or read the paperwork you didn't look at), you may be able to make additional payments to reduce the principal of the loan, which will reduce the amount and duration of the loan and could significantly reduce the total interest paid ... at the cost of requiring you pay more each month, or pay an additional sum up front. Returning the car is not an option. A new car loses a large portion of its value the moment you drive it off the dealer's lot and it ceases to be a \\\"\\\"new\\\"\\\" car. You can't return it. You can sell it as a recent model used car, but you will lose money on the deal so even if you use that to pay down the loan you will still owe the bank money. Given the pain involved that way, you might as well keep the car and just try to refinance or pay it off. Next time, read and understand all the paperwork before signing. (If you had decided this was a mistake within 3 days of buying, you might have been able to take advantage of \\\"\\\"cooling down period\\\"\\\" laws to cancel the contract, if such laws exist in your area. A month later is much too late.)\\\"\",\n \"That is horrible. I would contact your local news stations, local authorities, and demand to talk to the owner of the dealership. Get the story out on social media and do everything you can to put bad publicly on the dealership. Maybe they will see how big of a fuck up they made and make things right. Fuck those guys.\",\n \"\\\"The thing to recall here is that auto-pay is a convenience, not a guarantee. Auto-pay withdrawals, notices that a bill is due, all of these are niceties that the lender uses to try to make sure you consistently pay your bill on time, as all businesses enjoy steady cash flows. Now, what all of these \\\"\\\"quality of life\\\"\\\" features don't do is mitigate your responsibility, as outlined when you first took out the loan, to pay it back in a timely manner and according to the terms and conditions of the loan. If your original contract for the loan states you shall make \\\"\\\"a payment of $X.XX each calendar month\\\"\\\", then you are required to make that payment one way or another. If auto-pay fails, you are still obligated to monitor that and correct the payment to ensure you meet your contractual obligation. It's less than pleasant that they didn't notify you, but you were already aware you had an obligation to pay back the loan, and knew what the terms of the loan were. Any forgiveness of interest or penalties for late fees is entirely up to the CSR and the company's internal policies, not the law.\\\"\",\n \"I don't think the verbal confirmation from the branch manager is worth anything, unless you got it in writing it basically never happened. That said, what did you sign exactly? An application? I'd think they would be well within their rights to deny that, no matter what the branch manager said. If you actually signed a binding contract between you and the bank, things would be different but the fact that 'approval' was mentioned suggests that all you and the bank signed was an application and the bank manager made some unreasonable promises he or she doesn't want to be reminded of now. If the complaints department can't get off their collective backsides, a firm but polite letter to the CEO's office might help, or it might end up in the round filing cabinet. But it's worth a try. Other than that, if you are unhappy enough to go through the pain, you can try to remortgage with another bank and end the business relationship with your current bank.\",\n \"You seem overly fixated on dead tree documentation of purchases. They are deducting this from your account monthly - the mere fact that the money was taken is enough to prove in court that they have you on their books and to hold them to paying out said insurance. The email copies is actually a better way to organize receipts in most cases (can't be destroyed as easily, etc.) You can cancel the insurance - but don't just stop paying (you'd owe them money then). I foresee increasing difficulty navigating the 21st century for you unless you can get past this concern about physical receipts. I doubt other companies would do much better. FWIW, I live in the continental US. I don't know how different the Philippines is with regard to moving everything to digital\",\n \"\\\"He entered into a contract to pay because he liked the payment methods offered He entered into a contract. Full stop. End of story. Therefore he is off the hook for repayment AND doesn't need to add a new method of payment Your friend needs to look at the contract (or better, have someone who actually understands contracts look at it for him). He needs to understand not what he thinks it says or what he wants it to say or whatever farcical interpretation of contract law he's talked himself into, but what it does in reality say. Which, in every such contract I've ever seen, has never, ever, said \\\"\\\"you will pay in the manner you choose and if we choose not to accept it then gosh darn you win and get to live here for free!\\\"\\\". I suspect your friend is in for a lot more very bad outcomes in life if he thinks this is how contracts, and life in general, works. :-)\\\"\",\n \"I think in such situations a good rule of thumb may be - if you are asked to pay significant sums of money upfront before anything is done, stop and ask yourself, what would you do if they don't do what they promised? They know who you are, but usually most you know is a company name and phone number. Both can disappear in a minute and what are you left with? If they said they'd pay off the debt and issue the new loan - fine, let them do it and then you pay them. If they insist on having money upfront without delivering anything - unless it's a very big and known and established company you probably better off not doing it. Either it's a scam or in the minuscule chance they are legit you still risking too much - you're giving money and not getting anything in return.\",\n \"\\\"Also consider how cars fare under your ownership: Does your current car... If any of the answers to these questions are \\\"\\\"Yes\\\"\\\", you're probably going to get hosed with fees when you return the car.\\\"\",\n \"\\\"I strongly discourage leasing (or loans, but at least you own the car at the end of it) in any situation. it's just a bad deal, but that doesn't answer your question. Most new cars are \\\"\\\"loss leaders\\\"\\\" for dealerships. It's too easy to know what their costs are these days, so they make most of their money though financing. They might make a less than $500 on the sale of a new car, but if it's financed though them then they might get $2,000 - $4,000 commission/sale on the financing contract. Yes, it is possible and entirely likely that the advertised rate will only go to the best qualified lessees (possibly with a credit score about 750 or 800 or so other high number, for example). If the lessee meets the requirements then they won't deny you, they really want your business, but it is more likely to start the process and do all the paperwork for them to come back and say, \\\"\\\"Well, you don't qualify for the $99/month leasing program, but we can offer you the $199/month lease.\\\"\\\" (since that's the price you're giving from other dealerships). From there you just need to negotiate again. Note: Make sure you always do your research and negotiate the price of the car before talking about financing.\\\"\",\n \"As for refinancing: Many institutions charge up-front fees when doing any type of vehicle loan. Typically this is in the neighborhood of 1% the value of the loan, with a floor of $100 (although this may vary by lender). However, for the loan the be secured by the vehicle, the principle value must be less than the collateral value. In your case, this means there is a collateral shortfall of $4,000. When working with a traditional bank, you would have two options: pay the difference up front (reducing the principle value of the loan), or obtaining a separate loan for the difference. This separate loan would often have a higher interest rate unless you have some other form of collateral to secure it with. I doubt CarMax would do a separate loan. All that being said, if you plan on selling the vehicle within the next twelves months, don't bother refinancing. It won't be worth the hassle.\",\n \"Is your name on the title at all? You may have (slightly) more leverage in that case, but co-signing any loans is not a good idea, even for a friend or relative. As this article notes: Generally, co-signing refers to financing, not ownership. If the primary accountholder fails to make payments on the loan or the retail installment sales contract (a type of auto financing dealers sell), the co-signer is responsible for those payments, or their credit will suffer. Even if the co-signer makes the payments, they’re still not the owner if their name isn’t on the title. The Consumer Finance Protection Bureau (CFPB) notes: If you co-sign a loan, you are legally obligated to repay the loan in full. Co-signing a loan does not mean serving as a character reference for someone else. When you co-sign, you promise to pay the loan yourself. It means that you risk having to repay any missed payments immediately. If the borrower defaults on the loan, the creditor can use the same collection methods against you that can be used against the borrower such as demanding that you repay the entire loan yourself, suing you, and garnishing your wages or bank accounts after a judgment. Your credit score(s) may be impacted by any late payments or defaults. Co-signing an auto loan does not mean you have any right to the vehicle, it just means that you have agreed to become obligated to repay the amount of the loan. So make sure you can afford to pay this debt if the borrower cannot. Per this article and this loan.com article, options to remove your name from co-signing include: If you're name isn't on the title, you'll have to convince your ex-boyfriend and the bank to have you removed as the co-signer, but from your brief description above, it doesn't seem that your ex is going to be cooperative. Unfortunately, as the co-signer and guarantor of the loan, you're legally responsible for making the payments if he doesn't. Not making the payments could ruin your credit as well. One final option to consider is bankruptcy. Bankruptcy is a drastic option, and you'll have to weigh whether the disruption to your credit and financial life will be worth it versus repaying the balance of that auto loan. Per this post: Another not so pretty option is bankruptcy. This is an extreme route, and in some instances may not even guarantee a name-removal from the loan. Your best bet is to contact a lawyer or other source of legal help to review your options on how to proceed with this issue.\",\n \"I have gotten a letter of credit from my credit union stating the maximum amount I can finance. Of course I don't show the dealer the letter until after we have finalized the deal. I Then return in 3 business days with a cashiers check for the purchase price. In one case since the letter was for an amount greater then the purchase price I was able drive the car off the lot without having to make a deposit. In another case they insisted on a $100 deposit before I drove the car off the lot. I have also had them insist on me applying for their in-house loan, which was cancelled when I returned with the cashiers check. The procedure was similar regardless If I was getting a loan from the credit union, or paying for the car without the use of a loan. The letter didn't say how much was loan, and how much was my money. Unless you know the exact amount, including all taxes and fees,in advance you can't get a check in advance. If you are using a loan the bank/credit Union will want the car title in their name.\",\n \"\\\"My husband made a similar car loan decision when he was younger and didn't have an established credit history / favourable credit rating. As a result, he ended up paying triple what the car was worth, because of the interest. When we consolidated our finances, this ugly loan was first on our list of priorities to change, convert, eliminate, but unfortunately, in our case, the terms of the loan were such that only the lender benefited. There was no incentive to pay off the loan early, in fact, we would have to have paid all the future interest at once, without saving a penny. So check the terms of your loan - hopefully you're better off than we were. In our case, the only upside we could figure was the lesson of \\\"\\\"live and learn\\\"\\\"!\\\"\",\n \"\\\"It is possible to achieve a substitute for refinancing, but because of the \\\"\\\"short\\\"\\\" life of cars at least relative to housing, there are no true refinancings. First, the entire loan will not be able to be refinanced. The balance less approximately 80% of the value of the car will have to be repaid. Cars depreciate by something like 20% per year, so $2,000 will have to be repaid. Now, you should be able to get a loan if your boyfriend has good credit, but the interest rate will not drop too much further from the current loan's rate because of your presumably bad credit rating, assumed because of your current interest rate. While this is doable, this is not a good strategy if you intend to have a long term relationship. One of the worst corruptors of a relationship is money. It will put a strain on your relationship and lower the odds of success. The optimal strategy, if the monthly payments are too high, is to try to sell the car so to buy a cheaper car. The difficulty here is that the bank will not allow this if balance of the loan exceeds the proceeds from the sale, so putting as much money towards paying the balance to allow a sale is best. As a side note, please insure your car against occurrences such as theft and damage with a deductible low enough to justify the monthly payment. It is a terrible position to have a loan, no car, and no collateral against the car.\\\"\",\n \"\\\"The comments are getting too much, but to verify that you are not insane, you are being bullied. It sounds like this is a sub-prime loan, of which you are wisely trying to get out of. It also sounds like they are doing everything in their power to prevent you from doing so. For them you are a very profitable customer. This might take some legwork for you, but depending on how bad they are violating the law they might be willing to forgive the loan. What I am trying to say, it might be very worth your while! Your first step will be looking for any free resources at your disposal: Just be cautious as many \\\"\\\"credit representation\\\"\\\" type business are only offering loan consolidation. That is not what you need. Fight those bastards!\\\"\",\n \"\\\"First read the fine print. If you have to pay it, pay it and switch company. If you don't have to pay it and there is no proof that you abused the component beyond normal usage, you don't have to sue them, just return the invoice with legal (not so layman) text like \\\"\\\"I hereby reject paying invoice number xxxx dated xxx because the black box was used under normal conditions and it stopped working\\\"\\\". In this case you wait for them and answer every other letter with the same text until the decide to either sue you, or drop the whole thing. If you choose this path, remember to save all invoice, copies of your rejections, all written/email/phone calls, picutres of the broken item, serial nubmers, contract etc. If they sue you and they loose (can't prove the item was destroied by you), they have to pay you up to one hour of legal advice cost and drop the invoice, if you loose, you do the same (100 pounds) plus the invoice amount according to Swedish law, don't know about your country. Before you follow any advice here, consult your local consumer protection agency, they usually comes up with smart options, they know a bad company with history and give you the right advice.\\\"\",\n \"\\\"Concealing parts of a document in order to obtain a signature is illegal. The company committed signature forgery because they effectively modified the document after you signed it (i.e. unfolded the parts that were previously folded). I suggest that you go to your local police department to file a report, citing \\\"\\\"signature forgery\\\"\\\". Once you have the police report, call your bank's fraud department (not the general billing dispute line) and cite the police report right away, specifically calling out \\\"\\\"signature forgery\\\"\\\". I would be surprised if you don't get a favorable outcome.\\\"\",\n \"\\\"Yes, it is possible for you to refinance your existing auto loan, and so long as you can get the loan on more favorable terms (e.g.: lower interest rate), it is absolutely a smart thing to do. In fact, you would be well advised to do so as soon as possible if the car was a new car, if you refinance a NEW car soon enough you will likely still be able to get new car interest rates. Even if it is a pre-owned vehicle you shouldn't wait too long, since your car will only depreciate in value. You will almost certainly get more favorable terms from any bank or credit union directly then you would when you go through the dealership, because the dealership is allowed to mark-up your interest rate several percentage points as profit for themselves. Your best bet would be to go to a local credit union, their rates tend to be most competitive since they are \\\"\\\"owned\\\"\\\" by their members.\\\"\",\n \"\\\"Credit reports have line items that, if all is well, say \\\"\\\"paid as agreed.\\\"\\\" A car loan almost certainly gets reported. In your case it probably says the happy \\\"\\\"paid as agreed.\\\"\\\" It will continue to say that if you pay it off in full. You can get the happy \\\"\\\"paid as agreed\\\"\\\" from a credit card too. You can get it by paying the balance by the due date every month, or paying the mininum, or anything in between, on time. But you'll blow less money in interest if you pay each bill in full each month. You don't have to carry a balance. In the US you can get a free credit report once a year from each of the three credit bureaus. Here's the way to do that with minimal upsell/cross-sell hassles. https://www.annualcreditreport.com/ In your situation you'd probably be smart to ask for a credit report every four months (from each bureau in turn) so you can see how things are going. They don't give you your FICO score for free, but you don't really care about that until you're going for a big loan, like for a condo. It might be good to take a look at one of those free credit reports real soon, as you prepare to close out your car loan. If you need other loans, consider working with a credit union. They sometimes offer better interest rates, and they often are diligent about making credit bureau reports for their good customers; they help you build credit. You mentioned wanting to cut back on insurance coverage. It's a worthy goal, but it's generally called \\\"\\\"self-insuring\\\"\\\" in the business. If you cancel your collision coverage and then wreck your car, you absorb the cost of replacing it. So think about your personal ability to handle that kind of risk.\\\"\",\n \"No. A company cannot bill you for services you did not request nor receive. If they could, imagine how many people would just randomly get bills in their mail. Ignore them. They don't have a contract or agreement with you and can't do anything other than make noise. If they get aggressive or don't stop requesting money, hire an attorney and it will be taken care of.\",\n \"Ben Miller offers you sounds advice. However, if it comes down to it I would reach out to a lawyer to negotiate this for you. If what you are presenting is true then you could easily sue them for the damages incurred. I have been in a similar situation and unfortunately using the lawyers is what was required to get the solution resolved. Based on my previous experience a simple letter from a local lawyer office would get this dropped pretty quick and should cost you around $150. Best of luck!\",\n \"The question Can I use balance transfer to buy car? is going to give you the same answer. It depends on the exact terms of that offer. Your offer may allow you you write yourself a check, to the checking account tied to your debit card. Or it may specifically request you identify an existing debt to repay. Read the terms.\",\n \"In order: 1.) Speak to car dealership, demand refund. If that doesn't work, 2.) Contact the local authorities. If that doesn't work, 3.) Get in touch with a lawyer. If that doesn't work, (or if it's too expensive), 4.) Get in touch with local media, and have them run a story.\",\n \"You should actually contact the company, not just try to. There are ways to do this. For example, show up in person, send registered mail. All other advice is moot until you actually contact the company.\",\n \"When getting a car always start with your bank or credit union. They are very likely to offer better loan rate than the dealer. Because you start there you have a data point so you can tell if the dealer is giving you a good rate. Having the loan approved before going to the dealer allows you to negotiate the best deal for the purchase price for the car. When you are negotiating price, length of loan, down payment, and trade in it can get very confusing to determine if the deal is a good one. Sometimes you can also get a bigger rebate or discount because to the dealer you are paying cash. The general advice is that a lease for the average consumer is a bad deal. You are paying for the most expensive months, and at the end of the lease you don't have a car. With a loan you keep the car after you are done paying for it. Another reason to avoid the lease. It allows you to purchase a car that is two or three years old. These are the ones that just came off lease. I am not a car dealer, and I have never needed a work visa, but I think their concern is that there is a greater risk of you not being in the country for the entire period of the lease.\",\n \"A loan that does not begin with at least a 20% deposit and run through a term of no longer than 48 months is the world's way of telling you that you can't afford this vehicle. Consumer-driven cars are rapidly depreciating assets. Attenuating the loan to 70 months or longer means that payments will likely not keep up with depreciation, thus trapping the buyer in an upside down loan for the entire term.\",\n \"If you are a subprime borrower, that may not be an unreasonable rate given the risk they are accepting. In any case, it's what you agreed to. As others have said, you could/should have shopped elsewhere for the loan. In fact, you can still shop elsewhere for a loan to refinance that vehicle and thus lower the rate, unless the existing loan has equally obnoxious rules about that.\",\n \"The only reason to lend the money in this scenario is cashflow. But considering you buy a $15000 car, your lifestyle is not super luxurious, so $15000 spare cash is enough.\",\n \"\\\"With that credit rating you should have no trouble getting a rate in that range. I have a similar credit score and my credit union gave me a car loan at 1.59%. No haggling required. In regards to your question, I think you have it backwards. They are more likely to give you a good rate on a high balance than a low one. Think about it from the bank's perspective... \\\"\\\"If I give you a small sale, will you give me a discount?\\\"\\\" This is the question you are asking. Their profit is a factor of how much you borrow and the interest rate. Low rate=less profit, low financing amount = less profit. The deal you proposed is a lose-lose for them.\\\"\",\n \"\\\"Were you just offered a car loan for 1.4%, or did you sign for a car loan for 1.4%? If you signed, it's too late. If you didn't sign: You should realise that your car loan isn't really 1.4%. Nobody will give you a car loan for less than a mortgage loan. What really happened is that you gave up your chance to get a rebate on the car purchase. A car worth $18,000 will have a price tag of $20,000. You can buy it for cash and haggle the dealer down to $18,000, or you can take that \\\"\\\"cheap\\\"\\\" 1.4% loan and pay $20,000 for the car. So if at all possible, you would try to get a cheap loan from your bank, possibly through your mortgage, so you can buy the car without taking a loan from the car dealer.\\\"\",\n \"\\\"It sounds like you're basing your understanding of your options regarding financing (and even if you need a car) on what the car salesman told you. It's important to remember that a car salesman will do anything and say anything to get you to buy a car. Saying something as simple as, \\\"\\\"You have a low credit score, but we can still help you.\\\"\\\" can encourage someone who does not realize that the car salesman is not a financial advisor to make the purchase. In conclusion,\\\"\",\n \"Have you tried contacting them via phone or e-mail to follow up? If not, definitely do that first. If no response, you can keep this simple: Close your old account, write a personal check from your new one, and send the check with an explanatory note via Certified Mail. That will get you proof that it was delivered successfully (or not). Leave the money in your account for 180 days. Your check should be void after that and cannot be cashed (check with your bank on this) and if it's still unclaimed they will need to contact you to request payment.\",\n \"My grandmother passed away earlier this year. When I got my car 3 years ago, I did not have good enough credit to do it on my own or have her as a co-signer. We had arranged so that my grandmother was buying the car and I was co-signing. A similar situation was happening and I went to my bank and took out a re-finance loan prior to her passing. I explained to them that my grandmother was sick and on her death bed. They never once requested a power of attorney or required her signature. I am now the sole owner of the vehicle.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["\"The comments are getting too much, but to verify that you are not insane, you are being bullied. It sounds like this is a sub-prime loan, of which you are wisely trying to get out of. It also sounds like they are doing everything in their power to prevent you from doing so. For them you are a very profitable customer. This might take some legwork for you, but depending on how bad they are violating the law they might be willing to forgive the loan. What I am trying to say, it might be very worth your while! Your first step will be looking for any free resources at your disposal: Just be cautious as many \"\"credit representation\"\" type business are only offering loan consolidation. That is not what you need. Fight those bastards!\"","\"You won't be able to sell the car with a lien outstanding on it, and whoever the lender is, they're almost certain to have a lien on the car. You would have to pay the car off first and obtain a clear title, then you could sell it. When you took out the loan, did you not receive a copy of the finance contract? I can't imagine you would have taken on a loan without signing paperwork and receiving your own copy at the time. If the company you're dealing with is the lender, they are obligated by law to furnish you with a copy of the finance contract (all part of \"\"truth in lending\"\" laws) upon request. It sounds to me like they know they're charging you an illegally high (called \"\"usury\"\") interest rate, and if you have a copy of the contract then you would have proof of it. They'll do everything they can to prevent you from obtaining it, unless you have some help. I would start by filing a complaint with the Better Business Bureau, because if they want to keep their reputation intact then they'll have to respond to your complaint. I would also contact the state consumer protection bureau (and/or the attorney general's office) in your state and ask them to look into the matter, and I would see if there are any local consumer watchdogs (local television stations are a good source for this) who can contact the lender on your behalf. Knowing they have so many people looking into this could bring enough pressure for them to give you what you're asking for and be more cooperative with you. As has been pointed out, keep a good, detailed written record of all your contacts with the lender and, as also pointed out, start limiting your contacts to written letters (certified, return receipt requested) so that you have documentation of your efforts. Companies like this succeed only because they prey on the fact many people either don't know their rights or are too intimidated to assert them. Don't let these guys bully you, and don't take \"\"no\"\" for an answer until you get what you're after. Another option might be to talk to a credit union or a bank (if you have decent credit) about taking out a loan with them to pay off the car so you can get this finance company out of your life.\"","Phone conversations are useless if the company is uncooperative, you must take it into the written word so it can be documented. Sent them certified letters and keep copies of everything you send and any written responses from the company. This is how you will get actual action.","The advice above is generally good, but the one catch I haven't seen addressed is which specific laws apply. You said that you are in Arkansas, but the dealer is in Texas. This means that the laws of at least two different states are in play, possibly three if the contract contains a clause stating that disputes will be handled in a certain jurisdiction, and you are going to have to do some research to figure out what actually applies. One thing that may significantly impact this issue is whether you were in TX or AR when you signed the contracts. If you borrowed the money in TX, and the lender is in TX, then it is almost certain that the laws of Texas will govern. However, if you were living in AR at the time you acquired the loan, particularly if you were in AR when you signed the papers, you have a decent case for claiming that the laws of Arkansas govern. I don't know enough about either state to know if one is more favorable to the consumer than the other, but it is a question you really want to have answered. That said, I would be shocked if any state did not have provisions requiring the lender to provide a copy of the terms and a detailed statement of the account and transaction history upon request. Spend some time on the web site of the Texas attorney general and/or legislator (because that is where the lender is, they are more likely to respect Texas law) to see if you can track down any specific laws or codes that you can reference. You might also look into the federal consumer protection laws, though I can't think of one off hand that would apply in the scenario you have described. Then work on putting together a letter asking them to provide a copy of the contract and a full history of the account. As others noted, make sure you send it certified/return receipt, or better yet use a private carrier such as fedex, and check the box about requiring a signature. Above all you need to get the dialog transferred to a written form. I can not stress this point enough. Everything you tell them or ask for from here out needs to be done in a written format. If they call you about anything, tell them you want to see their issue/offer in writing before you will consider it. You do not necessarily need a lawyer to do any of this, but you do need to know the applicable laws. Do the research to know what your legal standing is. Involve a lawyer if you feel you need to, but I have successfully battled several large utility companies and collection agencies into behaving without needing one.","No, they cannot refuse to provide you with the current balance or a balance history. The other answers point you to resources that are available to help you put pressure on the dealership. The bottom line is that you now know that you have the right to the details and to audit their recording of the transactions. You should now use that information and demand a better response in writing. If they have to give you a response in writing, they can't deny the answer they gave in a court of law later on. They understand this, and they will take you more seriously if you send a letter. Make sure to keep copies of the letter and send it with certified delivery."],"string":"[\n \"\\\"The comments are getting too much, but to verify that you are not insane, you are being bullied. It sounds like this is a sub-prime loan, of which you are wisely trying to get out of. It also sounds like they are doing everything in their power to prevent you from doing so. For them you are a very profitable customer. This might take some legwork for you, but depending on how bad they are violating the law they might be willing to forgive the loan. What I am trying to say, it might be very worth your while! Your first step will be looking for any free resources at your disposal: Just be cautious as many \\\"\\\"credit representation\\\"\\\" type business are only offering loan consolidation. That is not what you need. Fight those bastards!\\\"\",\n \"\\\"You won't be able to sell the car with a lien outstanding on it, and whoever the lender is, they're almost certain to have a lien on the car. You would have to pay the car off first and obtain a clear title, then you could sell it. When you took out the loan, did you not receive a copy of the finance contract? I can't imagine you would have taken on a loan without signing paperwork and receiving your own copy at the time. If the company you're dealing with is the lender, they are obligated by law to furnish you with a copy of the finance contract (all part of \\\"\\\"truth in lending\\\"\\\" laws) upon request. It sounds to me like they know they're charging you an illegally high (called \\\"\\\"usury\\\"\\\") interest rate, and if you have a copy of the contract then you would have proof of it. They'll do everything they can to prevent you from obtaining it, unless you have some help. I would start by filing a complaint with the Better Business Bureau, because if they want to keep their reputation intact then they'll have to respond to your complaint. I would also contact the state consumer protection bureau (and/or the attorney general's office) in your state and ask them to look into the matter, and I would see if there are any local consumer watchdogs (local television stations are a good source for this) who can contact the lender on your behalf. Knowing they have so many people looking into this could bring enough pressure for them to give you what you're asking for and be more cooperative with you. As has been pointed out, keep a good, detailed written record of all your contacts with the lender and, as also pointed out, start limiting your contacts to written letters (certified, return receipt requested) so that you have documentation of your efforts. Companies like this succeed only because they prey on the fact many people either don't know their rights or are too intimidated to assert them. Don't let these guys bully you, and don't take \\\"\\\"no\\\"\\\" for an answer until you get what you're after. Another option might be to talk to a credit union or a bank (if you have decent credit) about taking out a loan with them to pay off the car so you can get this finance company out of your life.\\\"\",\n \"Phone conversations are useless if the company is uncooperative, you must take it into the written word so it can be documented. Sent them certified letters and keep copies of everything you send and any written responses from the company. This is how you will get actual action.\",\n \"The advice above is generally good, but the one catch I haven't seen addressed is which specific laws apply. You said that you are in Arkansas, but the dealer is in Texas. This means that the laws of at least two different states are in play, possibly three if the contract contains a clause stating that disputes will be handled in a certain jurisdiction, and you are going to have to do some research to figure out what actually applies. One thing that may significantly impact this issue is whether you were in TX or AR when you signed the contracts. If you borrowed the money in TX, and the lender is in TX, then it is almost certain that the laws of Texas will govern. However, if you were living in AR at the time you acquired the loan, particularly if you were in AR when you signed the papers, you have a decent case for claiming that the laws of Arkansas govern. I don't know enough about either state to know if one is more favorable to the consumer than the other, but it is a question you really want to have answered. That said, I would be shocked if any state did not have provisions requiring the lender to provide a copy of the terms and a detailed statement of the account and transaction history upon request. Spend some time on the web site of the Texas attorney general and/or legislator (because that is where the lender is, they are more likely to respect Texas law) to see if you can track down any specific laws or codes that you can reference. You might also look into the federal consumer protection laws, though I can't think of one off hand that would apply in the scenario you have described. Then work on putting together a letter asking them to provide a copy of the contract and a full history of the account. As others noted, make sure you send it certified/return receipt, or better yet use a private carrier such as fedex, and check the box about requiring a signature. Above all you need to get the dialog transferred to a written form. I can not stress this point enough. Everything you tell them or ask for from here out needs to be done in a written format. If they call you about anything, tell them you want to see their issue/offer in writing before you will consider it. You do not necessarily need a lawyer to do any of this, but you do need to know the applicable laws. Do the research to know what your legal standing is. Involve a lawyer if you feel you need to, but I have successfully battled several large utility companies and collection agencies into behaving without needing one.\",\n \"No, they cannot refuse to provide you with the current balance or a balance history. The other answers point you to resources that are available to help you put pressure on the dealership. The bottom line is that you now know that you have the right to the details and to audit their recording of the transactions. You should now use that information and demand a better response in writing. If they have to give you a response in writing, they can't deny the answer they gave in a court of law later on. They understand this, and they will take you more seriously if you send a letter. Make sure to keep copies of the letter and send it with certified delivery.\"\n]","isConversational":false}}},{"rowIdx":97,"cells":{"_id":{"kind":"string","value":"10213"},"query":{"kind":"string","value":"Looking for good investment vehicle for seasonal work and savings"},"gt_ids":{"kind":"list like","value":["380942","270221","545712"],"string":"[\n \"380942\",\n \"270221\",\n \"545712\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1,1],"string":"[\n 1,\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["380942","545712","238833","74283","162668","425479","266239","534670","4044","532179","355675","144114","518664","94680","19591","29828","342833","477295","116213","433371","318873","251146","167446","569484","32855","576736","479769","515974","176548","36190","446770","113929","259786","88327","117875","285812","272174","450228","5323","144304","412586","114520","487890","326257","195587","65006","79009","474896","110674","382386","461364","94040","312212","151394","198468","406219","239459","104793","567079","219161","487205","221873","596537","422182","272021","211942","61745","388252","416633","14699","433516","450558","61264","72717","127134","550184","391605","577582","522874","270221","425234","180429","164231","339791","294822","457122","436777","440485","144111","470692","72131","460457","129509","302448","211767","562489","531965","35971","504497","487325"],"string":"[\n \"380942\",\n \"545712\",\n \"238833\",\n \"74283\",\n \"162668\",\n \"425479\",\n \"266239\",\n \"534670\",\n \"4044\",\n \"532179\",\n \"355675\",\n \"144114\",\n \"518664\",\n \"94680\",\n \"19591\",\n \"29828\",\n \"342833\",\n \"477295\",\n \"116213\",\n \"433371\",\n \"318873\",\n \"251146\",\n \"167446\",\n \"569484\",\n \"32855\",\n \"576736\",\n \"479769\",\n \"515974\",\n \"176548\",\n \"36190\",\n \"446770\",\n \"113929\",\n \"259786\",\n \"88327\",\n \"117875\",\n \"285812\",\n \"272174\",\n \"450228\",\n \"5323\",\n \"144304\",\n \"412586\",\n \"114520\",\n \"487890\",\n \"326257\",\n \"195587\",\n \"65006\",\n \"79009\",\n \"474896\",\n \"110674\",\n \"382386\",\n \"461364\",\n \"94040\",\n \"312212\",\n \"151394\",\n \"198468\",\n \"406219\",\n \"239459\",\n \"104793\",\n \"567079\",\n \"219161\",\n \"487205\",\n \"221873\",\n \"596537\",\n \"422182\",\n \"272021\",\n \"211942\",\n \"61745\",\n \"388252\",\n \"416633\",\n \"14699\",\n \"433516\",\n \"450558\",\n \"61264\",\n \"72717\",\n \"127134\",\n \"550184\",\n \"391605\",\n \"577582\",\n \"522874\",\n \"270221\",\n \"425234\",\n \"180429\",\n \"164231\",\n \"339791\",\n \"294822\",\n \"457122\",\n \"436777\",\n \"440485\",\n \"144111\",\n \"470692\",\n \"72131\",\n \"460457\",\n \"129509\",\n \"302448\",\n \"211767\",\n \"562489\",\n \"531965\",\n \"35971\",\n \"504497\",\n \"487325\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["\"Most online \"\"high yield\"\" savings accounts are paying just above 1%. That would be 1.05% for American Express personal savings, or 1.15% for Synchrony Bank (currently). Depending on the length of the season, you might want to work in some CD's. Six months CDs can be had at 1.2%, and 9 month at 1.25%. So if you know you won't need some of your earnings for 9 months, you could earn 1.25% on your money. However, I would proceed with caution on anything other than the high yield savings account. With your one friend having such a low emergency fund, there is very little room for error. Perhaps until that amount is built up into something significant, it is just best to stick with the online savings. Of course, one solution would be to find a way to create income during the off season. That will go a long way into helping one build wealth.\"","In the short-term, a savings account with an online bank can net you ~1% interest, while many banks/credit unions with local branches are 0.05%. Most of the online savings accounts allow 6 withdrawals per month (they'll let you do more, but charge a fee), if you pair it with a checking account, you can transfer your expected monthly need in one or two planned transfers to your checking account. Any other options that may result in a higher yield will either tie up your money for a set length of time, or expose you to risk of losing money. I wouldn't recommend gambling on short-term stock gains if you need the money during the off-season.","I would suggest a high interest checking account if you qualify, or if you don't, an Investor's Deposit Account (IDA).","May I suggest putting it in a Roth IRA ($5,500 per year. Right now you can contribute to both 2015 and 2016 so that's $11K.)? Based on your description it sounds like your tax rate is very low, so it is awesome to put it away now and avoid taxes later on any gains you make on it. You can use Roth IRA money to pay for college, a home, or retirement. Within your Roth IRA, any of the investment options mentioned here will work. For example, CD's or money market accounts if you just want it to grow in a pretty much savings-account-like manner. You could also buy diversified mutual funds or have some fun buying individual stocks with some of it. I'm sorry to say that in the current market conditions you are not going to find a completely safe, cash-like investment or account that makes your money grow substantially. To do that you have to bear risk by buying risky stuff like stocks.","\"You'd want the money to be \"\"liquid\"\" and ready for you to use when tax time comes around. You also don't want to lose \"\"principal\"\", i.e. if you put it into stocks and have the value of what you put in be less than what you invested—which is possible—when you need the money, again, at tax time. That doesn't leave you with many good choices or an amazingly good way to profit from investing your savings that you put aside for taxes. CDs are steady but will not give you much interest and they have a definite deposit timeframe 6 months, 1 yr, 2 yrs and you can't touch it. So, the only reasonable choice you have left is an interest bearing checking or savings account with up to 1% interest (APR)—as of this writing Ally Bank offers 1% interest in an online interest savings acct.—which will give you some extra money on your deposits. This is what I do.\"","\"As you're saving up for an expenditure instead of investing for the long run, I would stay away from any sort of \"\"parking facility\"\" where you run the risk of not having the principal protected. The riskier investments that would potentially generate a bigger return also carry a bigger downside, ie you might not be able to get the money back that you put in. I'd shop around for a CD or a MMA/regular savings account with a half-decent interest rate. And yes, I'm aware that the return you might get is probably still less than inflation.\"","If you need the money in the short-term, you want to invest in something fairly safe. These include saving accounts, CDs, and money market funds from someplace like Vanguard. The last two might give you a slightly better return than the local branch of a national bank.","There is no such animal. If you are looking to give up FDIC protection, investing in a short-term, high quality bond fund or a tax-free bond fund with short durations is a good way to balance safety vs. return. Make sure you buy funds -- buying individual bonds isn't appropriate for folks without a high net worth. Another option is savings bonds, but the yields on these is awful today.","Just to offer another alternative, consider Certificates of Deposit (CDs) at an FDIC insured bank or credit union for small or short-term investments. If you don't need access to the money, as stated, and are not willing to take much risk, you could put money into a number of CDs instead of investing it in stocks, or just letting it sit in a regular savings/checking account. You are essentially lending money to the bank for a guaranteed length of time (anywhere from 3 to 60 months), and therefore they can give you a better rate of return than a savings account (which is basically lending it to them with the condition that you could ask for it all back at any time). Your rate of return in CDs is lower a typical stock investment, but carries no risk at all. CD rates typically increase with the length of the CD. For example, my credit union currently offers a 2.3% APY on a 5-year CD, but only 0.75% for 12 month CDs, and a mere 0.1% APY on regular savings/checking accounts. Putting your full $10K deposit into one or more CDs would yield $230 a year instead of a mere $10 in their savings account. If you go this route with some or all of your principal, note that withdrawing the money from a CD before the end of the deposit term will mean forfeiting the interest earned. Some banks may let you withdraw just a portion of a CD, but typically not. Work around this by splitting your funds into multiple CDs, and possibly different term lengths as well, to give you more flexibility in accessing the funds. Personally, I have a rolling emergency fund (~6 months living expenses, separate from all investments and day-to-day income/expenses) split evenly among 5 CDs, each with a 5-year deposit term (for the highest rate) with evenly staggered maturity dates. In any given year, I could close one of these CDs to cover an emergency and lose only a few months of interest on just 20% of my emergency fund, instead of several years interest on all of it. If I needed more funds, I could withdraw more of the CDs as needed, in order of youngest deposit age to minimize the interest loss - although that loss would probably be the least of my worries by then, if I'm dipping deeply into these funds I'll be needing them pretty badly. Initially I created the CDs with a very small amount and differing term lengths (1 year increments from 1-5 years) and then as each matured, I rolled it back into a 5 year CD. Now every year when one matures, I add a little more principal (to account for increased living expenses), and roll everything back in for another 5 years. Minimal thought and effort, no risk, much higher return than savings, fairly liquid (accessible) in an emergency, and great peace of mind. Plus it ensures I don't blow the money on something else, and that I have something to fall back on if all my other investments completely tanked, or I had massive medical bills, or lost my job, etc.","A CDIC-insured high-interest savings bank account is both safe and liquid (i.e. you can withdraw your money at any time.) At present time, you could earn interest of ~1.35% per year, if you shop around. If you are willing to truly lock in for 2 years minimum, rates go up slightly, but perhaps not enough to warrant loss of liquidity. Look at GIC rates to get an idea. Any other investments – such as mutual funds, stocks, index funds, ETFs, etc. – are generally not consistent with your stated risk objective and time frame. Better returns are generally only possible if you accept the risk of loss of capital, or lock in for longer time periods.","While I don't disagree with the other answers as far as CD laddering goes (at least in principle), three months CDs are currently getting much lower rates than money market accounts, at least according to http://www.bankrate.com. A savings account is also more liquid than CDs. Bonds are another option, and they can generally be liquidated quickly on the secondary market. However, they can go down in value if interest rates rise (actually this is true of CDs as well--there is a secondary market, though I believe only for brokerage CDs?). Bottom line, A high yield savings account is likely your best best. As others noted, you should think of your emergency fund as savings, not investment.","As you are in UK, you should think in terms of Tax Free (interest and accumulated capital gains) ISA type investments for the long term AND/OR open a SIPP (Self Invested Pension Plan) account where you get back the tax you have paid on the money you deposit for your old age. Pensions are the best bet for money you do not need at present while ISAs are suitable for short term 5 years plus or longer.","The big question is whether you will be flexible about when you'll get that house. The overall best investment (in terms of yielding a good risk/return ratio and requiring little effort) is a broad index fund (mutual or ETF), especially if you're contributing continuously and thereby take advantage of cost averaging. But the downside is that you have some volatility: during an economic downturn, your investment may be worth only half of what it's worth when the economy is booming. And of course it's very bad to have that happening just when you want to get your house. Then again, chances are that house prices will also go down in such times. If you want to avoid ever having to see the value of your investment go down, then you're pretty much stuck with things like your high-interest savings account (which sounds like a very good fit for your requirements.","A savings account is your best bet. You do not have the time frame to mitigate/absorb risks. The general guideline for investment is 5 years or more. As you state you are no where near close to that time frame.","I recommend an online savings account. The money is more liquid without early withdrawal fees and frequently you can get a visa/mastercard check card to access the funds. Looking at interest rates, ING is currently paying 1.10% and bankrate reports the best interest rate in the country on a 1 year CD is 1.33%. The .23% difference is not enough to convince me to invest in CDs at a fixed rate vs. an online savings account at a variable rate when we are at (or near) the bottom of CD/savings interest rates.","I can think of three things you might do: Talk to a fee-only adviser. As the comments suggest, this would only be one or two sessions to lay out what all you have, establish what you want it to do, and write a plan that you are comfortable carrying out yourself. What do your 401k and Roth IRA look like? If you mean for this money to be long-term, then your retirement portfolio might be a good place to start. I don't currently own them, but one of my personally hobby horses is I-Series Savings Bonds, commonly called I Bonds. Even in the current low interest rate environment, they are a good deal relative to everything else out there. I summarized this more fully in my answer to another question. You can invest up to $10,000 per SSN per year, and the interest rate is the sum of a fixed rate plus a floating rate based on CPI. Currently the fixed rate is 0%, but the floating rate is better than what you can get from most other cash-like instruments.","The point of an RRSP is that you can put money in when you are paying a lot of taxes (maybe a 50% marginal rate) and take it out later when you are paying less taxes (maybe a 30% marginal rate.) You will thus end up with more money. Since you are not paying high taxes on your modest income, this aspect of an RRSP doesn't really apply to you. When the time comes that you start withdrawing from your RRSP, you will pay taxes on the entire withdrawal, both principal and interest. A TFSA on the other hand allows withdrawals (typically limited to some small number a year) without the principal or the interest being considered taxable income. That seems like a better approach for you. However, they are not very liquid - you can't deposit, withdraw, deposit, withdraw week after week. Look around for not-exactly-banks that offer higher interest rates than the banks do. Set up a TFSA with one, and put about 8k in it. (If you have time to investigate GICs, ETFs, and whatnot, fine, investigate that for a while and set up a TFSA that holds those.) Put the other 2k in a high-interest savings account from that institution. High interest will be between 1 and 2% which isn't very high, but oh well. Assuming you get some notice when you need to replace your car, you could withdraw from the TFSA to get that money. Or you might be lucky and need a car at a terrible time for dealers to sell cars, and get a great deal on a new car with a long warranty, something you could keep for another 15 or 20 years. If you could afford the loan payment then your savings could stick around for a rainier day.","Look at the aristocrat dividend paying stocks (https://en.m.wikipedia.org/wiki/S%26P_500_Dividend_Aristocrats). These all pay dividends and have consistently outperformed the S&P 500 - 10.6% vs 7.4% the last ten years. While stocks should not be generally considered for short-term investing, I personally think the market is showing a general up trend for the next few years. Also, the dividends add an additional buffer. Because you would be making regular monthly investments, you should choose a fund that invests in aristocrat stocks so you can set up an automatic depost.","You can open Savings Bank Account with some Banks that offer better interest rate. Note there would be restriction on number of withdrawals in quarter. There are better interest rates if you lock in for 90+ days. The other option to explore is to open a Demat / Brokrage account and invest in liquid funds. Note depending on various factors it may or may not suite your requirements.","BrenBarn did a great job explaining your options so I won't rehash any of that. I know you said that you don't want to save for retirement yet, but I'm going to risk answering that you should anyway. Specifically, I think you should consider a Roth IRA. When it comes to tax advantaged retirement accounts, once the contribution period for a tax year ends, there's no way to make up for it. For example in 2015 you may contribute up to $5,500 to your IRA. You can make those contributions up until tax day of the following year (April 15th, 2016). After that, you cannot contribute money towards 2015 again. So each year that goes by, you're losing out on some potential to contribute. As for why I think a Roth IRA specifically could work well for you: I'm advocating this because I think it's a good balance. You put away some money in a retirement account now, when it will have the most impact on your future retirement assets, taking advantage of a time you will never have again. At a low cost custodian like Vanguard, you can open an IRA with as little as $1,000 to start and choose from excellent fund options that meet your risk requirements. If you end up deciding that you really want that money for a car or a house or beer money, you can withdraw any of the contributions without fear of penalty or additional tax. But if you decide you don't really need to take that money back out, you've contributed to your retirement for a tax year you likely wouldn't have otherwise, and wouldn't be able to make up for later when you have more than enough to max out an IRA each year. I also want to stress that you should have a liquid emergency fund (in a savings or checking account) to deal with unexpected emergencies before funding something like this. But after that, if you have no specific goal for your savings and you don't know for sure you'll actually need to spend it in the near future, funding a Roth IRA is worth considering in my opinion.","One of the things I would suggest looking into is peer-to-peer lending. I do lendingclub.com, but with a lot less money, and have only done it a short period of time. Still my return is about 13%. In your case you would probably have to commit to about 3.5 years to invest your money. Buy 3 year notes, and as they are paid off pull the money out and put into a CD or money market.. They sell notes that are 3 or 5 year and you may not want to tie your money up that long.","It's not pre-tax but you can consider some short term municipal bonds. The interest is tax free. I would keep to short term ones (1 year maturity), so that you aren't affected by big swings in interest rates and can get your money back within a year.","I would put about a month's worth of expenses in the highest-paying savings account that you find convenient to access. For the rest, I recommend Ally's High-Yield CDs — specifically, the 5-year option. Normally 5 years would be way too long to commit short-term savings to a CD. However, the Ally CDs allow you to break them for a penalty of only two months worth of interest. If you look at the graph below (from when the rates were 3.09% APY), you can see the effective interest rate at every possible time you break the CD early. Doing the math, if you can keep your savings in the account for at least four months, it will outperform any other current FDIC-backed investment that I am aware of, for the length of time the money was invested. (credit: MyMoneyBlog)","\"I would split the savings as you may need some of it quickly for an emergency. At least 1/2 should be very liquid, such as cash or MMA/Checking. From there, look at longer term CDs, from 30 day to 180 day, depending upon your situation. Don't be surprised if by the time you've saved the money up, your desire for the car will have waned. How many years will it take to save up enough? 2? 5? 10? You may want to review your current work position instead, so you'll make more and hopefully save more towards what you do want. Important: Be prepared for the speed bumps of life. My landlord sold the house I was renting out from under me, as I was on a month-to-month contract. I had to have a full second deposit at the ready to put down when renting elsewhere, as well as the moving expenses. Luckily, I had done what my tax attorney had said, which is \"\"Create a cushion of liquid assets which can cover at least three months of your entire outgoing expenses.\"\" The Mormon philosophy is to carry at least one year's worth of supplies (food, water, materials) at all times in your home, for any contingency. Not Mormon, not religious, but willing to listen to others' opinions. As always, YMMV. Your Mileage May Vary.\"","CDs or money market funds. Zero-risk for the CD and ultra-low risk for the money market account; better return than most savings accounts.","I agree that best is subjective and will not give investment advice. However, the tax deductible part can be dealt with quite swiftly. If you need tax deductibility right now, at the expense of later, put it into an RSP account. If you don't need tax deductibility right now, put it into a TFSA. Assuming you have room in either of these vehicles, I would suggest using just an RSP or TFSA cash savings account for now at ING Direct. Three reasons: You get the immediate benefit of having put it somewhere, and in the case of the RSP, an immediate tax deductibility. You don't have to worry about rushing into a specific investment and can give yourself time to figure out your goals and portfolio composition. (Read about the Couch Potato portfolio for a starting point.) You can transfer your money from them for free and still keep it registered in whichever plan it is in. The last point is the most important for my suggestion. The ability to quickly park the cash in a registered account and to move it for free using the appropriate form at a later date. Most places have a sneaky transfer-out fee. ING may not be the only place that doesn't, but I haven't looked into many other places about this. You might find something else that works the same way. And please, don't ever use GIC and high return in the same sentence.","I recommend you consider a Roth IRA. Invest it as others here suggest, safely, CDs, money market,etc. You can put in $5000/yr. When you spend, use this last, there is no penalty to withdraw the deposits. But if you make it through grad school without needing it, you'll have great start on your retirement savings.","One issue which I don't see addressed in the answers so far is how to structure bank accounts to get the highest return possible. What you're describing sounds like a certificate of deposit (CD): 'ranging from 1% for 9 months to 2.3% for 5 years' There is a concept which was once more common called a CD Ladder, which still allows you to access your money, while also giving you the highest interest rate offered by the bank. To set one up you divide your account into 5 equal parts, then open 5 CDs with different periods (1-5 years). Each time a new CD matures (once a year), you purchase another 5 year CD with those funds, plus any new money you want to save. Thus you're getting a higher and higher rate, until all of your accounts are earning the 5 year CD rate, and you're never more than a year away from getting money out of the account if a need comes up.","CDs may be one good option if you have a sense of when you may need the money(-ish), especially with more generous early withdrawal penalties. You can also take a look at investing in a mix of stock and bond funds, which will lower you volatility compared to stocks, but increase your returns over bonds.","First of all I recommend reading this short e-book that is aimed at young investors. The book is written for American investors but they same rules apply with different terms (e.g. the equivalent tax-free savings wrappers are called ISAs in the UK). If you don't anticipate needing the money any time soon then your best bet is likely a stocks and share ISA in an aggressive portfolio of assets. You are probably better off with an even more aggressive asset allocation than the one in the book, e.g. 0-15% bond funds 85-100% equity funds. In the long term, this will generate the most income. For an up-to-date table of brokers I recommend Monevator. If you are planning to use the money as a deposit on a mortgage then your best bet might be a Help to Buy ISA, you'll have to shop around for the best deals. If you would rather have something more liquid that you can draw into to cover expenses while at school, you can either go for a more conservative ISA (100% bond funds or even a cash ISA) or try to find a savings account with a comparable interest rate.","Assuming this'll be a taxable account and you're an above-average wage earner, the following seem to be biggest factors in your decision: tax-advantaged income w/o retirement account protection - so I'd pick a stock/stocks or fund that's designed to minimize earnings taxable at income and/or short-term gains rates (e.g. dividends) declining risk profile - make sure you periodically tweak your investment mix over the 2-3 year period to reduce your risk exposure. You want to be near savings account risk levels by the end of your timeline. But make sure you keep #1 in mind - so probably don't adjust (by selling) anything until you've hit the 1-year holding mark to get the long-term capital gains rates. In addition to tax-sensitive stock & bond funds at the major brokerages like Fidelity, I'd specifically look at tax-free municipal bond funds (targeted for your state of residence) since those generally pay better than savings on after tax basis for little increase in risk (assuming you stick w/ higher-rated municipalities).","You can also consider getting GICs which offer early redemption - ING has pretty decent ones. Early redemption offers poorer interest than savings account, but if you go the full term the interest rates are better than savings account.","First of all, I agree with both the conclusion in the question and Ganesh’s answer – avoid funds or stockmarket based instruments, given the short timescale and need to draw an income. However I think looking at savings accounts only is missing a trick. At the moment there are several current accounts that pay >2% interest on balances the size of which you’re proposing. The list of which accounts are offering which rates / conditions at which point in time will vary, so here is a link to a good source of regularly updated information: https://www.moneysavingexpert.com/savings/savings-loophole There are some conditions, but the best interest rate on offer (that isn't limited to one year) appears to be 3% – much better than the leading instant access savings account.","Something with an FDIC guarentee, so a bank. With an emergency fund, I think the 'return of capital' is more important than the 'return on the capital', so I'm fine with putting it in a standard savings account in a local bank(not an internet account) even if it pays next to nothing. The beauty is that since the bank is local, you can walk in and withdraw it all during any weekday.","If you are in an economy which has a decent liquid debt market (corporate bonds, etc.), then you may look into investing in AA or AA+ rated bonds. They can provide higher returns than bank deposits and are virtually risk-free. (Though in severe economic downturns, you can see defaults in even very high-rated bonds, leading to partial or complete loss of value however, this is statistically quite rare). You can make this investment through a debt mutual fund but please make sure that you read through the offer document carefully to understand the investment style of the mutual fund and their expense ratio (which directly affect your returns). In any case, it is always recommended to reach out to an investment adviser who is good with local tax laws to minimize taxes and maximize returns.","As others have noted, you can do better than a checking or savings account. If you're going to invest emergency money, the vehicle you put it into should be: Liquid - Wherever you put it, you should be able to quickly cash it out. Highly liquid exchange traded products are good for this. Low volatility/drawdowns - If you need at least 6 months of your paycheck to cover you in the event of an emergency, you don't want to park it in a portfolio that can potentially lose 30% value. Insured - Your investments should have SIPC coverage (protection against losses resulting from failure on part of broker). Moderate/Steady Growth - If the emergency fund doesn't grow, you'll need to continually pump money into it. My 'steady growth' portfolio is majorly allocated to fixed income. Within that, a major portion is allocated to high yielding instruments. Over the past 10 years, it's seen at least a 7% annualized return.","For a time period as short as a matter of months, commercial paper or bonds about to mature are the highest returning investments, as defined by Benjamin Graham: An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative. There are no well-known methods that can be applied to cryptocurrencies or forex for such short time periods to promise safety of principal. The problem is that with $1,500, it will be impossible to buy any worthy credit directly and hold to maturity; besides, the need for liquidity eats up the return, risk-adjusted. The only alternative is a bond ETF which has a high probability of getting crushed as interest rates continue to rise, so that fails the above criteria. The only alternative for investment now is a short term deposit with a bank. For speculation, anything goes... The best strategy is to take the money and continue to build up a financial structure: saving for risk-adjusted and time-discounted future annual cash flows. After the average unemployment cycle is funded, approximately six or so years, then long-term investments should be accumulated, internationally diversified equities.","Never invest money you need in the short term. As already suggested, park your money in CDs.","Since returning of capital is the most important, I would go to bankrate.com and find either an online bank savings account or MMA account. By going to bankrate.com, you can find higher rates. Sometimes you can find rates that are higher than a CD and are still FDIC insured. I've found ally bank's raise your rate 2 year CD to always have the best rate. In addition, if rates go up, you are able to raise the rate to the current rate.","Buy a home. A home is the first and best investment, u can own a home with as little as 3% down and as u pay for your living u pay it off.....also banks will always give you equity loans in case you need your money","If you will leave the money invested for a good long while (years) then dividend paying stocks would be appropriate. There are many that pay yields of 3 to 4 percent, which you can take as income or reinvest to compound the growth. There is a lot of good analysis of stocks (and mutual funds that specialize in dividend paying stocks) at Morningstar.com","\"First, you don't state where you are and this is a rather global site. There are people from Canada, US, and many other countries here so \"\"mutual funds\"\" that mean one thing to you may be a bit different for someone in a foreign country for one point. Thanks for stating that point in a tag. Second, mutual funds are merely a type of investment vehicle, there is something to be said for what is in the fund which could be an investment company, trust or a few other possibilities. Within North America there are money market mutual funds, bond mutual funds, stock mutual funds, mutual funds of other mutual funds and funds that are a combination of any and all of the former choices. Thus, something like a money market mutual fund would be low risk but quite likely low return as well. Short-term bond funds would bring up the risk a tick though this depends on how you handle the volatility of the fund's NAV changing. There is also something to be said for open-end, ETF and closed-end funds that are a few types to consider as well. Third, taxes are something not even mentioned here which could impact which kinds of funds make sense as some funds may invest in instruments with favorable tax-treatment. Aside from funds, I'd look at CDs and Treasuries would be my suggestion. With a rather short time frame, stocks could be quite dangerous to my mind. I'd only suggest stocks if you are investing for at least 5 years. In 2 years there is a lot that can happen with stocks where if you look at history there was a record of stocks going down about 1 in every 4 years on average. Something to consider is what kind of downside would you accept here? Are you OK if what you save gets cut in half? This is what can happen with some growth funds in the short-term which is what a 2 year time horizon looks like. If you do with a stock mutual fund, it would be a gamble to my mind. Don't forget that if the fund goes down 10% and then comes up 10%, you're still down 1% since the down will take more.\"","\"An alternative to a savings account is a money market account. Not a bank \"\"Money Market\"\" account which pays effectively the same silly rate as a savings account, but an actual Money Market investment account. You can even write checks against some Money Market investment accounts. I have several accounts worth about 13,000 each. Originally, my \"\"emergency fund\"\" was in a CD ladder. I started experimenting with two different Money market investment accounts recently. Here's my latest results: August returns on various accounts worth about $13k: - Discover Bank CD: $13.22 - Discover Bank CD: $13.27 - Discover Bank CD: $13.20 - Discover Savings: $13.18 - Credit Union \"\"Money Market\"\" Savings account: $1.80 - Fidelity Money Market Account (SPAXX): $7.35 - Vanguard Money market Account (VMFXX): $10.86 The actual account values are approximate. The Fidelity Money Market Account holds the least value, and the Credit Union account by far the most. The result of the experiment is that as the CDs mature, I'll be moving out of Discover Bank into the Vanguard Money Market account. You can put your money into more traditional equities mutual fund. The danger with them is the stock market may drop big the day before you want to make your withdrawl... and then you don't have the down payment for your house anymore. But a well chosen mutual fund will yield better. There are 3 ways a mutual fund increase in value: Here's how three of my mutual funds did in the past month... adjusted as if the accounts had started off to be worth about $13,000: Those must vary wildly month-to-month. By the way, if you look up the ticker symbols, VASGX is a Vanguard \"\"Fund of Funds\"\" -- it invests not 100% in the stock market, but 80% in the stock market and 20% in bonds. VSMGX is a 60/40 split. Interesting that VASGX grew less than VSMGX...but that assumes my spreadsheet is correct. Most of my mutual funds pay dividends and capital gains once or twice a year. I don't think any pay in August.\"","Well, I was about to ask a similar question. Unless you get into stocks/mutual funds it seems like returns on less risky items such as CDs (certificate of deposit) are terrible. I don't think it is a good use of folks time to ask what a Roth IRA is. We were considering buying a new car (~$20000 with zero down and 0.9% interest rate) but we drive maybe 6000 miles per year. We would be paying ~$550/month to park something in our garage. Our current car is sexless but absolutely reliable. I am now looking elsewhere and may either invest the money in our house (i.e., refinishing upstairs) or paying down our debt. We have a home loan - $132,000 at 3.5% - and a student loan - $12,675 @ 3.375%. Depending on the loan rate on your car, I would pay that down first. Alternatively, find a fee-only broker and drop around $500 for them to come up with a financial plan for you. They will probably recommend a Roth IRA with a specific mutual fund in mind. You'll need $2500 or so to open the Roth, contributions from there should be such that you can start/stop them on demand without fees.","\"I disagree with the IRA suggestion. Why IRA? You're a student, so probably won't get much tax benefits, so why locking the money for 40 years? You can do the same investments through any broker account as in IRA, but be able to cash out in need. 5 years is long enough term to put in a mutual fund or ETF and expect reasonable (>1.25%) gains. You can use the online \"\"analyst\"\" tools that brokers like ETrade or Sharebuilder provide to decide on how to spread your portfolio, 15K is enough for diversifying over several areas. If you want to keep it as cash - check the on-line savings accounts (like Capitol One, for example, or Ally, ING Direct that will merge with Capitol One and others) for better rates, brick and mortar banks can not possible compete with what you can get online.\"","There are quite a few options. Suggest you put a mix of things and begin investing into Mutual Funds.","lol @ savings accounts. I don't use savings accounts. I just use checking for liquidity and invest everything else. Now if you have a job that prohibits trading on your own account that's understandable but if you have the knowledge might as well use it and make some $$$","On the one hand, it's a great idea to open a Roth IRA now, once you've got the cash to contribute. It's a tax designation sounds like it would fit your meager earnings this year. The main reason to open one now rather than later is that some types of withdrawls require the account be aged 5 years. But you can also withdraw the amount you've contributed tax free any time. Student loans right now are pricey, so if you're carrying a balance at say 6.8 percent fixed you should pay that down ASAP. Beyond that, I'd keep the rest liquid for now. Having that kind of liquid cash is extremely reassuring, and many of the biggest returns on investment are going to be in your personal life. More fuel efficient vehicles, energy efficient appliances, computer backups, chest freezers and bulk meat purchases, etc. One example I see every six months is car insurance: I can pay for six months in full or I can pay a smaller monthly bill plus a small fee. That fee is well above current market rates. You see this everywhere; people searching for lower minimum payments rather than lower total costs. Save your money up and be the smart buyer. It's too damn expensive to be broke.","Reversing your math, I am assuming you have $312K to work with. In that case, I would simply shop around your local banks and/or credit unions and have them compete for your money and you might be quite surprised how much they are willing to pay. A couple of months ago, you would be able to get about 4.25% from Israel Bonds in Canada on 5 years term (the Jubilee product, with minimum investment of $25K). It's a bit lower now, but you should still be able to get very good rates if you shop around tier-2 banks or credit unions (who are more hungry for capital than the well-funded tier-1 banks). Or you could look at preferred shares of a large corporation. They are different from common shares in the sense they are priced according to the payout rate (i.e. people buy it for the dividend). A quick screen from your favorite stock exchange ought to find you a few options. Another option is commercial bonds. You should be able to get that kind of return from investment grade (BBB- and higher) bonds on large corporations these days. I just did a quick glance at MarketWatch's Bond section (http://cxa.marketwatch.com/finra/BondCenter/Default.aspx) and found AAA grade bonds that will yield > 5%. You will need to investigate their underlying fundamentals, coupon rate and etc before investing (second thought, grab a introduction to bonds book from Chapters first). Hope these helps.","529 College Savings Plans exist, which allow for tax-free savings for educational expenses, but I think you expect to go back to school too quickly for them to be worth the hassle. (They're more designed for saving for college for your kids.) Other than an IRA, you don't have many options for tax-advantaged accounts. In addition, since you plan to return to school, you should keep money around for that. Don't put that money in anything too volatile or hard to access. Since you don't plan on doing anything with the 80k in CDs right now, you can get away with higher risk with that money.","Since you are looking at preserving the principal, I would recommend laddered CDs and short term treasuries (TIPs/iBonds)","Short-term to intermediate-term corporate bond funds are available. The bond fund vehicle helps manage the credit risk, while the short terms help manage inflation and interest rate risk. Corporate bond funds will have fewer Treasuries bonds than a general-purpose short-term bond fund: it sounds like you're interested in things further out along the risk curve than a 0.48% return on a 5-year bond, and thus don't care for the Treasuries. Corporate bonds are generally safer than stocks because, in bankruptcy, all your bondholders have to be paid in full before any equity-holders get a penny. Stocks are much more volatile, since they're essentially worth the value of their profits after paying all their debt, taxes, and other expenses. As far as stocks are concerned, they're not very good for the short term at all. One of the stabler stock funds would be something like the Vanguard Equity Income Fund, and it cautions: This fund is designed to provide investors with an above-average level of current income while offering exposure to the stock market. Since the fund typically invests in companies that are dedicated to consistently paying dividends, it may have a higher yield than other Vanguard stock mutual funds. The fund’s emphasis on slower-growing, higher-yielding companies can also mean that its total return may not be as strong in a significant bull market. This income-focused fund may be appropriate for investors who have a long-term investment goal and a tolerance for stock market volatility. Even the large-cap stable companies can have their value fall dramatically in the short term. Look at its price chart; 2008 was brutal. Avoid stocks if you need to spend your money within a couple of years. Whatever you choose, read the prospectus to understand the risks.","Both of the other posters have some really good points worth remembering about the stability/liquidity of a savings account and the often overlooked fact that you can withdraw any money you put in to a Roth IRA because it's already been taxed. I'm 28 and found myself in a similar situation as you about a year or so ago. I wanted a relatively liquid place that I could store and grow some money. CD's and Savings accounts just weren't getting a high enough rate to make a return work for me, especially with only a little money to start. I would highly suggest checking out a social lending platform like Prosper.com or Lendingclub.com. I use Prosper.com and this platform will give you some really nice benefits: Here's a good article that can explain more about it and get you started: http://www.financialsamurai.com/investing-in-peer-to-peer-lending-with-prosper-com/ just keep in mind that while there is some liquidity here (you can resell the notes you invest in) generally speaking expect to hold on to those notes for at least 3 years (your share of the paid principal gets paid out to you in addition to the interest each month.)","Based on your question, I am going to assume your criterion are: Based on these, I believe you'd be interested in a different savings account, a CD, or money market account. Savings account can get you up to 1.3% and money market accounts can get up to 1.5%. CDs can get you a little more, but they're a little trickier. For example, a 5 year CD could get up to 2%. However, now you're money is locked away for the next few years, so this is not a good option if this money is your emergency fund or you want to use it soon. Also, if interest rates increase then your money market and savings accounts' interest rates will increase but your CD's interest rate misses out. Conversely, if interest rates drop, you're still locked into a higher rate.","One option might be to use tax certificates to save this money. At the moment they don't pay any interest (unless you deposit more than £100,000 at once), so they aren't very attractive from that point of view. But they do give you a clean way to segregate your money and for the purposes of charging penalty interest, HMRC will treat you as having made the payment at the time you purchased the certificate, if it turns out that you should have paid the actual tax earlier than you did. Another option is a regular saver account. These typically have limits of £250 per month, so you might have to open a few given the amount you have to save. That would add up to a lot of maintenance effort, particularly as you'd have to open new accounts again each year. However, they do typically offer good interest rates compared to what's available elsewhere, and the way they operate fits well with your needs (money coming in regularly and then going out all at once).","I would suggest your local credit union or local bank for security and liquidity. Liquidity is probably the most important issue for a emergency fund.","As you have already good on your retirement kitty. Assuming you have a sufficient cash for difficult situations, explore the options of investing in Shares and Mutual Funds. As you are new to Stock Market, begin slowly by investing into Mutual Funds and ETF for precious metals. This will help you understand and give you confidence on markets and returns. Real estate is a good option, the down side being the hassle of getting rental and the illiquid nature of the investment.","This situation, wanting desperately to have access to an investment vehicle in a 401K, but it not being available reminds me of two suggestions some make regarding retirement investing: This allows you the maximum flexibility in your retirement investing. I have never, in almost 30 years of 401K investing, seen a pure cash investment, is was always something that was at its core very short term bonds. The exception is one company that once you had a few thousand in the 401K, you could transfer it to a brokerage account. I have no idea if there was a way to invest in a money market fund via the brokerage, but I guess it was possible. You may have to look and see if the company running the 401K has other investment options that your employer didn't select. Or you will have to see if other 401K custodians have these types of investments. Then push for changes next year. Regarding external IRA/Roth IRA: You can buy a CD with FDIC protection from funds in an IRA/Roth IRA. My credit union with NCUA protection currently has CDs and even bump up CDs, minimum balance is $500, and the periods are from 6 months to 3 years.","CDs pay less than the going rate so that the banks can earn money. Investing is risky right now due to the inaction of the Fed. Try your independent life insurance agent. You could get endowment life insurance. It would pay out at age 21. If you decide to invest it yourself try to buy a stable equity fund. My 'bedrock' fund is PGF. It pays dividends each month and is currently yealding 5.5% per year. Scottrade has a facility to automatically reinvest the dividend each month at no commission. http://www.marketwatch.com/investing/Fund/PGF?CountryCode=US","Nothing's generating a whole lot of interest right now. But more liquid and stable is better (cash or cash-like). But a related question: Why a new car? You can knock thousands of dollars off of the price of a comparable vehicle by buying one that's one or two years old. Your new vehicle loses thousands of dollars in value the moment it goes off the lot.","With the requirement that the money is 100% available immediately and that you can not suffer a loss of principal, the suggestions you gave of an online savings account is a good one. Personally, I use ING.","\"Shem - I recommend looking into online banks or credit unions. I know ally has around ~0.8% rate on their savings accounts NOT MMS. Meaning you don't need a ~$2,500 minimum balance so your money is COMPLETELY liquid. CD's and MMC/S are worth next to nothing, and if you ask me are pointless with the minimum balances they require. Ally also reimburses you for all ATM withdrawal fees, meaning you have complete access to all your money, with next to no minimum, with at least some % back that is comparable to CD rates currently offered. CD's are around ~1.8-2% with tens of thousands of dollars (50-75k+) which isn't worth keeping \"\"liquid\"\",if you would consider CD's liquid (because you can withdraw on a penalty or have laddered CD's), unless you're rich and that's your emergency fund. If I were you I would look into a retirement account, and saving what you need to in an Emergency Fund. Check out a 401(k), Traditional IRA or Roth IRA. They each have their benefits and you need to assess your financial situation before picking one. I would recommend spending a great deal of time researching this before making your decision, because switching from one to another could cost you, depending on your choice. This is, of course, if you live in the U.S.\"","I think small sums invested regularly over long-term can do good for you, things to consider: I would go with an index fund and contribute there there regularly.","In the United States there are some specific savings accounts, some of which have rules from the federal government (education) and some that are setup by the bank/credit Union. Some institutions have a Christmas club, where money is set aside each week or each month and then you are given access at the end of the time period. Some institutions have accounts that pay CD rates but allow you to add funds during the period. They will have some flexibility in setting the time period. I have seen accounts that are designed to save up for a big purchase, or for a specific time period (summer vacation) Ask your bank. Or better yet look at a variety of banks websites for their rate sheet. That will explain all the different account types, rates, and rules. My credit Union allows a large number of sub accounts so that you don't have to commingle the funds.","Given that you are starting with a relatively small amount, you want a decent interest rate, and you want flexibility, I would consider fixed deposit laddering strategy. Let's say you have ₹15,000 to start with. Split this in to three components: Purchase all of the above at the same time. 30 days later, you will have the first FD mature. If you need this money, you use it. If you don't need it, purchase another 90-day fixed deposit. If you keep going this way, you will have a deposit mature every 30 days and can choose to use it or renew the fixed deposit. This strategy has some disadvantages to consider: As for interest rates, the length of the fixed deposit in positively related to the interest rate. If you want higher interest rates, elect for longer fixed deposit cycles.For instance, when you become more confident about your financial situation, replace the 30, 60, 90 day cycle with a 6, 12, 18 month cycle The cost of maintaining the short term deposit renewals and new purchases. If your bank does not allow such transactions through on line banking, you might spend more time than you like at a bank or on the phone with the bank You want a monthly dividend but this might not be the case with fixed deposits. It depends on your bank but I believe most Indian banks pay interest every three months","\"Since the other answers have covered mutual funds/ETFs/stocks/combination, some other alternatives I like - though like everything else, they involve risk: Example of how these other \"\"saving methods\"\" can be quite effective: about ten years ago, I bought a 25lb bag of quinoa at $19 a bag. At the same company, quinoa is now over $132 for a 25lb bag (590%+ increase vs. the S&P 500s 73%+ increase over the same time period). Who knows what it will cost in ten years. Either way, working directly with the farmers, or planting it myself, may become even cheaper in the future, plus learning how to keep and store the seeds for the next season.\"","Variable Annuities would be one option though there are SEC warnings about them, for an option that is tax-deferred and intended to be used for long-term investing such as retirement. There is a bit of a cost to gain the tax-deferral which may not always make them worthwhile.","\"(Congrats on earning/saving $3K and not wanting to blow it all on immediate gratification!) I currently have it invested in sector mutual funds but with the rise and fall of the stock market, is this really the best way to prepare long-term? Long-term? Yes! However... four years is not long term. It is, in fact, borderline short term. (When I was your age, that was incomprehensible too, but trust me: it's true.) The problem is that there's an inverse relationship between reward and risk: the higher the possible reward, the greater the risk that you'll lose a big chunk of it. I invest that middle-term money in a mix of junk high yield bond funds and \"\"high\"\" yield savings accounts at an online bank. My preferences are HYG purchased at Fidelity (EDIT: because it's commission-free and I buy a few hundred dollars worth every month), and Ally Bank.\"","\"You could put in in a Money Market Fund. These are designed to always be $1 per share, and not lose money. Of course, it still, very rarely, happens and is called \"\"breaking the buck\"\" when they do. Sounds like the high yield savings is the way to go. The rates will be the same as what you can get from a Money Market Fund, but you also have the added advantage that the account is FDIC insured. BTW, using a Roth as an emergency fund is a terrible idea. It is true that, since you already paid taxes on your contributions, you can withdraw those contributions without incurring penalties. However, you have to file paperwork to do it, and since it's not common, the IRA custodian is likely to screw it up. Plus, you have to keep track of what were contributions, and what was investment returns, to not run afoul of the penalties. And it will take time to do it, which you may not have in an emergency. Considering you're only looking at getting 1% interest anyway, there's no reason to use a Roth account as an emergency fund. You can set those same automatic deposits into a savings account.\"","I suppose it depends on how liquid you need, and if you're willing to put forth any risk whatsoever. The stock market can be dangerous, but there are strategies out there that will allow you to insure yourself against significant loss, while likely earning you a decent return. You can buy and sell options along with stocks so that if the stock drops, your loss is limited, and if it goes up or even stays where it's at, you make money (a lot more than 1% annually). Of course there's risk of loss, but if you plan ahead, you can cap that risk wherever you want, maybe 5%, maybe 10%, whatever suits your needs. And as far as liquidity goes, it should be no more than a week or so to close your positions and get your money if you really need it. But even so, I would only recommend this after putting aside at least a few thousand in a cash account for emergencies.","The time horizon is usually very short for a home down payment. I would use Certificates of Deposit (CDs) with a short maturity (in the horizon of your intended use) or Money Market accounts. Depending on what the interests rates are where you are looking. You don't want the money in the market 100% (i.e. stocks) as the fluctuations might be too wide around the time you intend to pull the money out (and that will be soon).","I had some extra money, so I opened American express saving account. At the time which was offering .80%, now .90%. I put most of the money in the saving account. The remainder of my money in a investment account at my local bank. I was in touch once a week with investment, I learned allot how the stock market worked and tax deferment(401k, IRA, IRA Roth). My suggestion is to do test run and see if you like it. Side note, NOT ALL investment are created equal.","There are a number of UK banks that offer what passes for reasonable interest on an amount of cash held in their current accounts. I would suggest that you look into these. In the UK the first £1000 of bank or building society interest is paid tax-free for basic rate taxpayers (£500 for higher rate tax-payers) so if your interest income is below these levels then there is no point in investing in a cash ISA as the interest rate is often lower. At the moment Santander-123 bank account pays 1.5% on up to £20000 and Nationwide do 5% on up to £2500. A good source if information on the latest deals is Martin Lewis' Moneysaving Expert Website","I'm new to this, but how about putting a big part of your money into an MMA? I don't know about your country, but in Germany, some online banks easily offer as much as 2.1% pa, and you can access the money daily. If you want decent profit without risk this is a great deal, much better than most saving accounts.","If the time horizon is 5 years, I don't think that playing games with Roth IRAs or investments is really productive. I'd look at an online savings account as a holding place for this money. EDIT: Another option is the US is Savings Bonds. The rates earned right now are poor (as of 04/2011 EE bonds earn 0.6% and I bonds yielded 0.37%), and there is an interest penalty if you redeem them in less than five years. But, they are not state taxable, and you can defer tax payments until you cash them.","Consider also setting up a CD ladder. CD rates are often better than savings account rates. You have a 12-month CD that you purchase in January with a twelfth of your money, then another small one in February, then another in March.... then, when January comes around again, you a little more money to the first CD, and the ladder is complete. The idea is that you have more access to your money than one big CD, since you'll always have a CD maturing next month that you can get to in case of an emergency, and you can get better rates on a 1-year CD than on something else (with less risk of being locked into a bad interest rate). And you'll be less tempted to tap it all at once to buy some fancy car or what-not because you can't get at it all at once (without a penalty). And in a major emergency, losing a few percent of your interest for early withdrawals is likely the least of your problems.","\"Should I invest the money I don't need immediately and only withdraw it next year when I need it for living expenses or should I simply leave it in my current account? This might come as a bit of a surprise, but your money is already invested. We talk of investment vehicles. An investment vehicle is basically a place where you can put money and have it either earn a return, or be able to get it back later, or both. (The neither case is generally called \"\"spending\"\".) There are also investment classes which are things like cash, stocks, bonds, precious metals, etc.: different things that you can buy within an investment vehicle. You currently have the money in a bank account. Bank accounts currently earn very low interest rates, but they are also very liquid and very secure (in the sense of being certain that you will get the principal back). Now, when you talk about \"\"investing the money\"\", you are probably thinking of moving it from where it is currently sitting earning next to no return, to somewhere it can earn a somewhat higher return. And that's fine, but you should keep in mind that you aren't really investing it in that case, only moving it. The key to deciding about an asset allocation (how much of your money to put into what investment classes) is your investment horizon. The investment horizon is simply for how long you plan on letting the money remain where you put it. For money that you do not expect to touch for more than five years, common advice is to put it in the stock market. This is simply because in the long term, historically, the stock market has outperformed most other investment classes when looking at return versus risk (volatility). However, money that you expect to need sooner than that is often recommended against putting it in the stock market. The reason for this is that the stock market is volatile -- the value of your investment can fluctuate, and there's always the risk that it will be down when you need the money. If you don't need the money within several years, you can ride that out; but if you need the money within the next year, you might not have time to ride out the dip in the stock market! So, for money that you are going to need soon, you should be looking for less volatile investment classes. Bonds are generally less volatile than stocks, with government bonds generally being less volatile than corporate bonds. Bank accounts are even less volatile, coming in at practically zero volatility, but also have much lower expected rates of return. For the money that you need within a year, I would recommend against any volatile investment class. In other words, you might take whichever part you don't need within a year and put in bonds (except for what you don't foresee needing within the next half decade or more, which you can put in stocks), then put the remainder in a simple high-yield deposit-insured savings account. It won't earn much, but you will be basically guaranteed that the money will still be there when you want it in a year. For the money you put into bonds and stocks, find low-cost index mutual funds or exchange-traded funds to do so. You cannot predict the future rate of return of any investment, but you can predict the cost of the investment with a high degree of accuracy. Hence, for any given investment class, strive to minimize cost, as doing so is likely to lead to better return on investment over time. It's extremely rare to find higher-cost alternatives that are actually worth it in the long term.\"","Make sure you are hitting the actual max of the 401k. Most think it is 18K, but that is the amount you can contribute into either pre-tax or roth. On top of this, you can also contribute using an after-tax contribution (treated differently from Roth). Total amounts up to 54k (since you are under 50). One thing I would look into for ways to beat interest rates in bank accounts and CDs is Municipal Bond funds, given your high income. I have seen some earning almost 6% tax-free YTD. These also give you liquidity. Definitely keep your 3 mo salary in the bank, but once you get over that while maxing out your 401k, this is a pretty good way to make your money work for you, without crushing you come tax time. Building that muni bond fund account gradually, you can eventually use that account to pay for things like car payments, mortgage, rent, vacation, etc. Just be sure if you go with a mutual fund, that you are aware of any surrender charge schedules. I have seen this done with C Shares, where you can withdraw your investment without penalty after 1 year. Let me know if this is unclear or you would like any additional information. Best of luck!","Thats a very open question, Depends on the risk you are willing to take with the money, or the length of time you are willing sit on it, or if you have a specific goal like buying a house. Some banks offer high(ish) rate savings accounts http://www.bankaccountsavings.co.uk/calculator with a switching bonus that could be a good start. (combining the nationwide flexdirect and regular saver) if you want something more long term - safe option is bonds, medium risk option is Index funds (kind of covers all 3 risks really), risky option is Stocks & shares. For these probably a S&S ISA for a tax efficient option. Also LISA or HtB ISA are worth considering if you want to buy a house in the future.","\"There are no risk-free high-liquidity instruments that pay a significant amount of interest. There are some money-market accounts around that pay 1%-2%, but they often have minimum balance or transaction limits. Even if you could get 3%, on a $4K balance that would be $120 per year, or $10 per month. You can do much better than that by just going to $tarbucks two less times per month (or whatever you can cut from your expenses) and putting that into the savings account. Or work a few extra hours and increase your income. I appreciate the desire to \"\"maximize\"\" the return on your money, but in reality increasing income and reducing expenses have a much greater impact until you build up significant savings and are able to absorb more risk. Emergency funds should be highly liquid and risk-free, so traditional investments aren't appropriate vehicles for them.\"","US government bonds and bonds issued by companies with a safe track record and consistently high ratings, for the past years, by credit agencies. But the time line of your investment, which is quite short, maybe a factor of choosing the right bonds. If you are not going to touch the money then CD maybe an option or an interest bearing savings account.","Money you need in less than 5 years should be saved not invested. The only place I would be comfortable the money would be a money market account or Certificate of Deposit (CD). I usually go for the money market account because they pay at or close to CD rates and there are no restrictions on getting to the money. However in this case I might choose a CD to keep me from being tempted to borrow some of it for something else. But even after typing that I still think I would put it in a money market, because if interest rates rise they rise in the money market but not the CD, and I just don't think interest can go much lower.","High-interest checking / savings accounts are often a better choice than CDs today for three reasons. At the time this question was asked, CDs were probably a better answer as rates were much higher. Since CD rates have plummeted in recent years, and because a CD is only semi-liquid, i.e., even if you ladder CDs, an early withdrawal fee often means foregoing the interest on that particular CD which you withdrew. 1.) On the other hand, high-interest checking and/or savings accounts are very viable options these days. There are several options available that earn ~1%+ APY. It's not quite that simple, and there are a few gotchas: If you run into the balance cap problem, of course nothing is stopping you from having multiple accounts across different banks. 2.) The high-interest bank accounts are fully liquid able to be liquidated at anytime (without foregoing interest). 3.) A minor benefit is that the high-yield savings account is low maintenance whereas CD laddering is pretty hands on and may require physical trips to your bank. (If you know of a way to automate the process more, please comment or edit.)","You could open up CDs or try a few stocks. Once I saved up enough to where I was comfortable in savings and in a retirement account, I went to CDs. Once I was comfortable with CDs I started doing stocks with dividends. Now that I'm happy with what I am receiving in dividends I just recently bought a risky stock. I highly recommend Navy Federal for CDs, if you are eligible and USAA for stocks. Congrats!","Disclaimer: I am not Canadian and have no experience with their laws and regulations. There really aren't any safe short term investment options at the moment (with interest rates being close to zero). So, just put the money aside you will need for the car and the computer, maybe on a callable savings account to make at least a few Dollars. Do not take out any loans, it is very unlikely you will earn more than the cost of the loan. You didn't say how much will be left but, unfortunately, it really is not much to go on anyway. Considering that you seem to have enough income to cover your expenses, you could transfer the rest to your RRSP, invest and just forget about it. I suggest to follow this rule of thumb: the growth portion of your portfolio, which for you means equities, should be directly related to the number of years you won't need to touch these funds. 1 year, 0 equity. 2 years, 10%, 3 years, 20%, and so on. What's not in equities, you could put in short term bonds, meaning an average duration of about 3 years. Needless to say, single stocks/bonds are out of question, ideally you can find 2 ETFs, one for stocks and one for bonds, respectively. However, if there is any possibility you did not mention that you could suddenly depend on this money, you have to keep your equity exposure, and thus your potential earnings, low. Just a humble thought: i really don't know your specific situation, my apologies if I'm out of line. Often disability means that you are not capable of doing one particular thing anymore, i.e. work physically. Just maybe you would still be capable to do some other type of work, maybe even from the comfort of your home, that would allow you to generate a certain income (and also keep you busy). I hope this helps. Good luck.","\"For a two year time frame, a good insured savings account or a low-cost short-term government bond fund is most likely the way I would go. Depending on the specific amount, it may also be reasonable to look into directly buying government bonds. The reason for this is simply that in such a short time period, the stock market can be extremely volatile. Imagine if you had gone all in with the money on the stock market in, say, 2007, intending to withdraw the money after two years. Take a broad stock market index of your choice and see how much you'd have got back, and consider if you'd have felt comfortable sticking to your plan for the duration. Since you would likely be focused more on preservation of capital than returns during such a relatively short period, the risk of the stock market making a major (or even relatively minor) downturn in the interim would (should) be a bigger consideration than the possibility of a higher return. The \"\"return of capital, not return on capital\"\" rule. If the stock market falls by 10%, it must go up by 11% to break even. If it falls by 25%, it must go up by 33% to break even. If you are looking at a slightly longer time period, such as the example five years, then you might want to add some stocks to the mix for the possibility of a higher return. Still, however, since you have a specific goal in mind that is still reasonably close in time, I would likely keep a large fraction of the money in interest-bearing holdings (bank account, bonds, bond funds) rather than in the stock market. A good compromise may be medium-to-high-yield corporate bonds. It shouldn't be too difficult to find such bond funds that can return a few percentage points above risk-free interest, if you can live with the price volatility. Over time and as you get closer to actually needing the money, shift the holdings to lower-risk holdings to secure the capital amount. Yes, short-term government bonds tend to have dismal returns, particularly currently. (It's pretty much either that, or the country is just about bankrupt already, which means that the risk of default is quite high which is reflected in the interest premiums demanded by investors.) But the risk in most countries' short-term government bonds is also very much limited. And generally, when you are looking at using the money for a specific purpose within a defined (and relatively short) time frame, you want to reduce risk, even if that comes with the price tag of a slightly lower return. And, as always, never put all your eggs in one basket. A combination of government bonds from various countries may be appropriate, just as you should diversify between different stocks in a well-balanced portfolio. Make sure to check the limits on how much money is insured in a single account, for a single individual, in a single institution and for a household - you don't want to chase high interest bank accounts only to be burned by something like that if the institution goes bankrupt. Generally, the sooner you expect to need the money, the less risk you should take, even if that means a lower return on capital. And the risk progression (ignoring currency effects, which affects all of these equally) is roughly short-term government bonds, long-term government bonds or regular corporate bonds, high-yield corporate bonds, stock market large cap, stock market mid and low cap. Yes, there are exceptions, but that's a resonable rule of thumb.\"","If you're absolutely certain that you won't buy a house within a year or so, I'd still be tempted to put some of the money into short-term CDs (ie, a max of 12 months). I think that at the moment CDs are a bit of a mug's game though because you'd hardly find one that offers better interest rates than some of the few savings accounts that still offer 1%+ interest. A savings account is probably where I'd put the money unless I could find a really good deal on a CD, but I think you might have to check if they've got withdrawal limits. There are a couple of savings accounts out there that pay at least 1% (yes, I know it's pitiful) so I'd seek out one or two of those. From memory, both Sallie Mae and Amex offer those and I'm sure there are a couple more. It's not great that your money is growing at less than inflation but if you're saving for something like a downpayment on a house I would think that (nominal) capital preservation is probably more important than the potential for a higher return with the associated higher risk.","In the US, you would probably look at a certificate of deposit (CD). I imagine there is a similar financial product in the UK, but don't know first hand. I think it is wise to be risk averse in this situation, but be aware that your interest rate will be dismal for guaranteed returns.","Another option is the new 'innovative finance isa' that allow you to put a wrapper round peer to peer lending platform investments. See Zopa, although I don't think they have come out with an ISA yet.","Edit: I a in the United States, seek advice from someone who is also in Australia. I am getting about 5.5% per year by investing in a fund (ticker:PGF) that, in turn, buys preferred stock in banks. Preferred stock acts a bit like a bond and a bit like a stock. The price is very stable. However, a bank account is FDIC insured (in the USA) and an investment is not. I use the Reinvestment program at Scottrade so that the monthly dividends are automatically reinvested with no commission. However I do not know if this is available outside of the United States. Investing yealds greater returns but exposes you to greater risk. You have to know your risk tolerance.","Since you are talking about a small firm, for the long term, it would be advisable to invest your money into the expansion - growth, diversification, integration - of your business. However, if your intention is to make proper use of your earnings in the short term, a decent bank deposit would help you to increase the credit line for your business with the benefit of having a high enough liquidity. You can also look at bonds and other such low risk instruments to protect your assets.","In my mind, when looking at a five year period you have a number of options. You didn't specify where you are based, which admittedly makes it harder, to give you good advice. If you are looking for an investment that can achieve large gains, equities are impossible to ignore. By investing in an index fund or other diverse asset forms (such as mutual funds), your risk is relatively minimal. However there has historically been five year periods where you would lose/flatline your money. If this was to be the case you would likely be better off waiting more than five years to buy a house, which would be frustrating. When markets rebound, they often do it hard. If you are in a major economy, taking something like the top 100 of your stock market is a safe bet, although admittedly you would have made terrible returns if you invested in the Polish markets. While they often achieve lower returns than equity investments, they are generally considered safer - especially government issued bonds. If you were willing to sacrifice returns for safety, you must always consider them. This is an interesting new addition, and I can't comment on the state of it in the United States, however in Europe we have a number of platforms which do this. In the UK, for example you can achieve ~7.3% returns YoY using sites like Funding Circle. If you invest in a diverse range of businesses, you have minimal risk from and individual company not paying. Elsewhere in Europe (although not appropriate for me as everything I do is denominated in Sterling), you can secure 12% in places like Georgia, Poland, and Estonia. This is a very good rate and the platforms seem reputable, and 'guarantee' their loans. However unlike funding circle, they are for consumer loans. The risk profile in my mind is similar to that of equities, but it is hard to say. Whatever you do, you need to do your homework, and ensure that you can handle the level of risk offered by the investments you make. I haven't included things like Savings accounts in here, as the rates aren't worth bothering with.","It's time she look into what employer provided retirement plan she can use. She's at the point where she should think about investing for the long term, with retirement in mind.","$23,000 Student Loans at 4% This represents guaranteed loss. Paying this off quickly is a conservative move, while your other investments may easily surpass 4% return, they are not guaranteed. Should I just keep my money in my savings account since I want to keep my money available? Or are there other options I have that are not necessarily long term may provide better returns? This all depends on your plans, if you're just trying to keep cash in anticipation of the next big dip, you might strike gold, but you could just as easily miss out on significant market gains while waiting. People have a poor track record of predicting market down-turns. If you are concerned about how exposed to market risk you are in your current positions, then you may be more comfortable with a larger cash position. Savings/CDs are low-interest, but much lower risk. If you currently have no savings (you titled the section savings, but they all look like retirement/investment accounts), then I would recommend focusing on that first, getting a healthy emergency fund saved up, and budgeting for your car/house purchases. There's no way to know if you'd be better off investing everything or piling up cash in the short-term. You have to decide how much risk you are comfortable with and act accordingly.","There are lot of options. I personally avoid keeping money in bank accounts and invest in one of the funds. It's just my personal opinion, you can ask your Ulamas","\"Your decision about which of these investments to make is going to depend on how long you expect to leave the money in the account. For example, based on the figures you give us, if you think you are going to want to withdraw the money in three months or less then you should chose the savings account. For ten months or more you should choose the Fixed Deposit. (As Michael Kjorling says, \"\"flexible to withdraw at any time\"\" does not mean you won't pay penalties for withdrawing early that's why you shouldn't choose the longer term deposits if you want to withdraw earlier). That's the simplest approach. The trouble of course is that you don't necessarily know how long you are going to leave the money in. If you are saving for a house, and you know you won't want to buy in the next year, the 12 month deposit looks good. But what if your car suddenly needs repairs? You would have to withdraw that money early and pay the penalties, and it turns out you would have been better of putting it in the savings account. A good approach is:\"","First, as Dheer mentioned above, there is no right answer as investment avenues for a person is dicteted by many subjective considerations. Given that below a few of my thoughts (strictly thoughts): 1) Have a plan for how much money you would need in next 5-7 years, one hint is, do you plan you buy a house, car, get married ... Try to project this requirement 2) Related to the above, if you have some idea on point 1, then it would be possible for you to determine how much you need to save now to achieve the above (possibly with a loan thrown in). It will also give you some indication as to where and how much of your current cash holding that you should invest now 3) From an investment perspective there are many instruments, some more risky some less. The exact mix of instruments that you should consider is based on many things, one among them is your risk apetite and fund requirement projections 4) Usually (not as a rule of thumb) the % of savings corresponding to your age should go into low risk investments and 100-the % into higher risk investment 5) You could talk to some professional invetment planners, all banks offer the service Hope this helps, I reiterate as Dheer did, there is truely no right answer for your question all the answers would be rather contextual.","Dividend reinvestment plans are a great option for some of your savings. By making small, regular investments, combined with reinvested dividends, you can accumulate a significant nest egg. Pick a medium to large cap company that looks to be around for the foreseeable future, such as JNJ, 3M, GE, or even Exxon. These companies typically raise their dividends every year or so, and this can be a significant portion of your long term gains. Plus, these programs are usually offered with miniscule fees. Also, have a go at the interest rate formulas contained in your favorite spreadsheet application. Calculate the FutureValue of a series of payments at various interest rates, to see what you can expect. While you cannot depend on earning a specific rate with a stock investment, a basic familiarity with the formula can help you determine a rate of return you should aim for.","It sounds like you want to lock-up your money in something relatively safe, and relatively hard to touch. You may want to consider a GIC (TD has one I found in a quick search) - from what I see it's the closest thing to a US CD. You won't get much back, but if you pick a 5-year term, you can't spend it* easily. Other options might be to buy an ETF, or get into REITs - but that will depend on your risk comfort. Also - to add from the comment Rick left - be sure to pay off any high-interest debts: especially if they're on a credit card, it will help you later on. * easily .. you can withdraw, but there're generally penalties","What worked out well for me is a Capital One High Yield Savings Account, which came with a lower interest rate than most online accounts but higher than a brick & mortar bank. Also, since Capital One has Banking locations now, I can use the ATM card that came with this account to pull out the emergency money if I need it in a pinch at a place that doesn't accept checks."],"string":"[\n \"\\\"Most online \\\"\\\"high yield\\\"\\\" savings accounts are paying just above 1%. That would be 1.05% for American Express personal savings, or 1.15% for Synchrony Bank (currently). Depending on the length of the season, you might want to work in some CD's. Six months CDs can be had at 1.2%, and 9 month at 1.25%. So if you know you won't need some of your earnings for 9 months, you could earn 1.25% on your money. However, I would proceed with caution on anything other than the high yield savings account. With your one friend having such a low emergency fund, there is very little room for error. Perhaps until that amount is built up into something significant, it is just best to stick with the online savings. Of course, one solution would be to find a way to create income during the off season. That will go a long way into helping one build wealth.\\\"\",\n \"In the short-term, a savings account with an online bank can net you ~1% interest, while many banks/credit unions with local branches are 0.05%. Most of the online savings accounts allow 6 withdrawals per month (they'll let you do more, but charge a fee), if you pair it with a checking account, you can transfer your expected monthly need in one or two planned transfers to your checking account. Any other options that may result in a higher yield will either tie up your money for a set length of time, or expose you to risk of losing money. I wouldn't recommend gambling on short-term stock gains if you need the money during the off-season.\",\n \"I would suggest a high interest checking account if you qualify, or if you don't, an Investor's Deposit Account (IDA).\",\n \"May I suggest putting it in a Roth IRA ($5,500 per year. Right now you can contribute to both 2015 and 2016 so that's $11K.)? Based on your description it sounds like your tax rate is very low, so it is awesome to put it away now and avoid taxes later on any gains you make on it. You can use Roth IRA money to pay for college, a home, or retirement. Within your Roth IRA, any of the investment options mentioned here will work. For example, CD's or money market accounts if you just want it to grow in a pretty much savings-account-like manner. You could also buy diversified mutual funds or have some fun buying individual stocks with some of it. I'm sorry to say that in the current market conditions you are not going to find a completely safe, cash-like investment or account that makes your money grow substantially. To do that you have to bear risk by buying risky stuff like stocks.\",\n \"\\\"You'd want the money to be \\\"\\\"liquid\\\"\\\" and ready for you to use when tax time comes around. You also don't want to lose \\\"\\\"principal\\\"\\\", i.e. if you put it into stocks and have the value of what you put in be less than what you invested—which is possible—when you need the money, again, at tax time. That doesn't leave you with many good choices or an amazingly good way to profit from investing your savings that you put aside for taxes. CDs are steady but will not give you much interest and they have a definite deposit timeframe 6 months, 1 yr, 2 yrs and you can't touch it. So, the only reasonable choice you have left is an interest bearing checking or savings account with up to 1% interest (APR)—as of this writing Ally Bank offers 1% interest in an online interest savings acct.—which will give you some extra money on your deposits. This is what I do.\\\"\",\n \"\\\"As you're saving up for an expenditure instead of investing for the long run, I would stay away from any sort of \\\"\\\"parking facility\\\"\\\" where you run the risk of not having the principal protected. The riskier investments that would potentially generate a bigger return also carry a bigger downside, ie you might not be able to get the money back that you put in. I'd shop around for a CD or a MMA/regular savings account with a half-decent interest rate. And yes, I'm aware that the return you might get is probably still less than inflation.\\\"\",\n \"If you need the money in the short-term, you want to invest in something fairly safe. These include saving accounts, CDs, and money market funds from someplace like Vanguard. The last two might give you a slightly better return than the local branch of a national bank.\",\n \"There is no such animal. If you are looking to give up FDIC protection, investing in a short-term, high quality bond fund or a tax-free bond fund with short durations is a good way to balance safety vs. return. Make sure you buy funds -- buying individual bonds isn't appropriate for folks without a high net worth. Another option is savings bonds, but the yields on these is awful today.\",\n \"Just to offer another alternative, consider Certificates of Deposit (CDs) at an FDIC insured bank or credit union for small or short-term investments. If you don't need access to the money, as stated, and are not willing to take much risk, you could put money into a number of CDs instead of investing it in stocks, or just letting it sit in a regular savings/checking account. You are essentially lending money to the bank for a guaranteed length of time (anywhere from 3 to 60 months), and therefore they can give you a better rate of return than a savings account (which is basically lending it to them with the condition that you could ask for it all back at any time). Your rate of return in CDs is lower a typical stock investment, but carries no risk at all. CD rates typically increase with the length of the CD. For example, my credit union currently offers a 2.3% APY on a 5-year CD, but only 0.75% for 12 month CDs, and a mere 0.1% APY on regular savings/checking accounts. Putting your full $10K deposit into one or more CDs would yield $230 a year instead of a mere $10 in their savings account. If you go this route with some or all of your principal, note that withdrawing the money from a CD before the end of the deposit term will mean forfeiting the interest earned. Some banks may let you withdraw just a portion of a CD, but typically not. Work around this by splitting your funds into multiple CDs, and possibly different term lengths as well, to give you more flexibility in accessing the funds. Personally, I have a rolling emergency fund (~6 months living expenses, separate from all investments and day-to-day income/expenses) split evenly among 5 CDs, each with a 5-year deposit term (for the highest rate) with evenly staggered maturity dates. In any given year, I could close one of these CDs to cover an emergency and lose only a few months of interest on just 20% of my emergency fund, instead of several years interest on all of it. If I needed more funds, I could withdraw more of the CDs as needed, in order of youngest deposit age to minimize the interest loss - although that loss would probably be the least of my worries by then, if I'm dipping deeply into these funds I'll be needing them pretty badly. Initially I created the CDs with a very small amount and differing term lengths (1 year increments from 1-5 years) and then as each matured, I rolled it back into a 5 year CD. Now every year when one matures, I add a little more principal (to account for increased living expenses), and roll everything back in for another 5 years. Minimal thought and effort, no risk, much higher return than savings, fairly liquid (accessible) in an emergency, and great peace of mind. Plus it ensures I don't blow the money on something else, and that I have something to fall back on if all my other investments completely tanked, or I had massive medical bills, or lost my job, etc.\",\n \"A CDIC-insured high-interest savings bank account is both safe and liquid (i.e. you can withdraw your money at any time.) At present time, you could earn interest of ~1.35% per year, if you shop around. If you are willing to truly lock in for 2 years minimum, rates go up slightly, but perhaps not enough to warrant loss of liquidity. Look at GIC rates to get an idea. Any other investments – such as mutual funds, stocks, index funds, ETFs, etc. – are generally not consistent with your stated risk objective and time frame. Better returns are generally only possible if you accept the risk of loss of capital, or lock in for longer time periods.\",\n \"While I don't disagree with the other answers as far as CD laddering goes (at least in principle), three months CDs are currently getting much lower rates than money market accounts, at least according to http://www.bankrate.com. A savings account is also more liquid than CDs. Bonds are another option, and they can generally be liquidated quickly on the secondary market. However, they can go down in value if interest rates rise (actually this is true of CDs as well--there is a secondary market, though I believe only for brokerage CDs?). Bottom line, A high yield savings account is likely your best best. As others noted, you should think of your emergency fund as savings, not investment.\",\n \"As you are in UK, you should think in terms of Tax Free (interest and accumulated capital gains) ISA type investments for the long term AND/OR open a SIPP (Self Invested Pension Plan) account where you get back the tax you have paid on the money you deposit for your old age. Pensions are the best bet for money you do not need at present while ISAs are suitable for short term 5 years plus or longer.\",\n \"The big question is whether you will be flexible about when you'll get that house. The overall best investment (in terms of yielding a good risk/return ratio and requiring little effort) is a broad index fund (mutual or ETF), especially if you're contributing continuously and thereby take advantage of cost averaging. But the downside is that you have some volatility: during an economic downturn, your investment may be worth only half of what it's worth when the economy is booming. And of course it's very bad to have that happening just when you want to get your house. Then again, chances are that house prices will also go down in such times. If you want to avoid ever having to see the value of your investment go down, then you're pretty much stuck with things like your high-interest savings account (which sounds like a very good fit for your requirements.\",\n \"A savings account is your best bet. You do not have the time frame to mitigate/absorb risks. The general guideline for investment is 5 years or more. As you state you are no where near close to that time frame.\",\n \"I recommend an online savings account. The money is more liquid without early withdrawal fees and frequently you can get a visa/mastercard check card to access the funds. Looking at interest rates, ING is currently paying 1.10% and bankrate reports the best interest rate in the country on a 1 year CD is 1.33%. The .23% difference is not enough to convince me to invest in CDs at a fixed rate vs. an online savings account at a variable rate when we are at (or near) the bottom of CD/savings interest rates.\",\n \"I can think of three things you might do: Talk to a fee-only adviser. As the comments suggest, this would only be one or two sessions to lay out what all you have, establish what you want it to do, and write a plan that you are comfortable carrying out yourself. What do your 401k and Roth IRA look like? If you mean for this money to be long-term, then your retirement portfolio might be a good place to start. I don't currently own them, but one of my personally hobby horses is I-Series Savings Bonds, commonly called I Bonds. Even in the current low interest rate environment, they are a good deal relative to everything else out there. I summarized this more fully in my answer to another question. You can invest up to $10,000 per SSN per year, and the interest rate is the sum of a fixed rate plus a floating rate based on CPI. Currently the fixed rate is 0%, but the floating rate is better than what you can get from most other cash-like instruments.\",\n \"The point of an RRSP is that you can put money in when you are paying a lot of taxes (maybe a 50% marginal rate) and take it out later when you are paying less taxes (maybe a 30% marginal rate.) You will thus end up with more money. Since you are not paying high taxes on your modest income, this aspect of an RRSP doesn't really apply to you. When the time comes that you start withdrawing from your RRSP, you will pay taxes on the entire withdrawal, both principal and interest. A TFSA on the other hand allows withdrawals (typically limited to some small number a year) without the principal or the interest being considered taxable income. That seems like a better approach for you. However, they are not very liquid - you can't deposit, withdraw, deposit, withdraw week after week. Look around for not-exactly-banks that offer higher interest rates than the banks do. Set up a TFSA with one, and put about 8k in it. (If you have time to investigate GICs, ETFs, and whatnot, fine, investigate that for a while and set up a TFSA that holds those.) Put the other 2k in a high-interest savings account from that institution. High interest will be between 1 and 2% which isn't very high, but oh well. Assuming you get some notice when you need to replace your car, you could withdraw from the TFSA to get that money. Or you might be lucky and need a car at a terrible time for dealers to sell cars, and get a great deal on a new car with a long warranty, something you could keep for another 15 or 20 years. If you could afford the loan payment then your savings could stick around for a rainier day.\",\n \"Look at the aristocrat dividend paying stocks (https://en.m.wikipedia.org/wiki/S%26P_500_Dividend_Aristocrats). These all pay dividends and have consistently outperformed the S&P 500 - 10.6% vs 7.4% the last ten years. While stocks should not be generally considered for short-term investing, I personally think the market is showing a general up trend for the next few years. Also, the dividends add an additional buffer. Because you would be making regular monthly investments, you should choose a fund that invests in aristocrat stocks so you can set up an automatic depost.\",\n \"You can open Savings Bank Account with some Banks that offer better interest rate. Note there would be restriction on number of withdrawals in quarter. There are better interest rates if you lock in for 90+ days. The other option to explore is to open a Demat / Brokrage account and invest in liquid funds. Note depending on various factors it may or may not suite your requirements.\",\n \"BrenBarn did a great job explaining your options so I won't rehash any of that. I know you said that you don't want to save for retirement yet, but I'm going to risk answering that you should anyway. Specifically, I think you should consider a Roth IRA. When it comes to tax advantaged retirement accounts, once the contribution period for a tax year ends, there's no way to make up for it. For example in 2015 you may contribute up to $5,500 to your IRA. You can make those contributions up until tax day of the following year (April 15th, 2016). After that, you cannot contribute money towards 2015 again. So each year that goes by, you're losing out on some potential to contribute. As for why I think a Roth IRA specifically could work well for you: I'm advocating this because I think it's a good balance. You put away some money in a retirement account now, when it will have the most impact on your future retirement assets, taking advantage of a time you will never have again. At a low cost custodian like Vanguard, you can open an IRA with as little as $1,000 to start and choose from excellent fund options that meet your risk requirements. If you end up deciding that you really want that money for a car or a house or beer money, you can withdraw any of the contributions without fear of penalty or additional tax. But if you decide you don't really need to take that money back out, you've contributed to your retirement for a tax year you likely wouldn't have otherwise, and wouldn't be able to make up for later when you have more than enough to max out an IRA each year. I also want to stress that you should have a liquid emergency fund (in a savings or checking account) to deal with unexpected emergencies before funding something like this. But after that, if you have no specific goal for your savings and you don't know for sure you'll actually need to spend it in the near future, funding a Roth IRA is worth considering in my opinion.\",\n \"One of the things I would suggest looking into is peer-to-peer lending. I do lendingclub.com, but with a lot less money, and have only done it a short period of time. Still my return is about 13%. In your case you would probably have to commit to about 3.5 years to invest your money. Buy 3 year notes, and as they are paid off pull the money out and put into a CD or money market.. They sell notes that are 3 or 5 year and you may not want to tie your money up that long.\",\n \"It's not pre-tax but you can consider some short term municipal bonds. The interest is tax free. I would keep to short term ones (1 year maturity), so that you aren't affected by big swings in interest rates and can get your money back within a year.\",\n \"I would put about a month's worth of expenses in the highest-paying savings account that you find convenient to access. For the rest, I recommend Ally's High-Yield CDs — specifically, the 5-year option. Normally 5 years would be way too long to commit short-term savings to a CD. However, the Ally CDs allow you to break them for a penalty of only two months worth of interest. If you look at the graph below (from when the rates were 3.09% APY), you can see the effective interest rate at every possible time you break the CD early. Doing the math, if you can keep your savings in the account for at least four months, it will outperform any other current FDIC-backed investment that I am aware of, for the length of time the money was invested. (credit: MyMoneyBlog)\",\n \"\\\"I would split the savings as you may need some of it quickly for an emergency. At least 1/2 should be very liquid, such as cash or MMA/Checking. From there, look at longer term CDs, from 30 day to 180 day, depending upon your situation. Don't be surprised if by the time you've saved the money up, your desire for the car will have waned. How many years will it take to save up enough? 2? 5? 10? You may want to review your current work position instead, so you'll make more and hopefully save more towards what you do want. Important: Be prepared for the speed bumps of life. My landlord sold the house I was renting out from under me, as I was on a month-to-month contract. I had to have a full second deposit at the ready to put down when renting elsewhere, as well as the moving expenses. Luckily, I had done what my tax attorney had said, which is \\\"\\\"Create a cushion of liquid assets which can cover at least three months of your entire outgoing expenses.\\\"\\\" The Mormon philosophy is to carry at least one year's worth of supplies (food, water, materials) at all times in your home, for any contingency. Not Mormon, not religious, but willing to listen to others' opinions. As always, YMMV. Your Mileage May Vary.\\\"\",\n \"CDs or money market funds. Zero-risk for the CD and ultra-low risk for the money market account; better return than most savings accounts.\",\n \"I agree that best is subjective and will not give investment advice. However, the tax deductible part can be dealt with quite swiftly. If you need tax deductibility right now, at the expense of later, put it into an RSP account. If you don't need tax deductibility right now, put it into a TFSA. Assuming you have room in either of these vehicles, I would suggest using just an RSP or TFSA cash savings account for now at ING Direct. Three reasons: You get the immediate benefit of having put it somewhere, and in the case of the RSP, an immediate tax deductibility. You don't have to worry about rushing into a specific investment and can give yourself time to figure out your goals and portfolio composition. (Read about the Couch Potato portfolio for a starting point.) You can transfer your money from them for free and still keep it registered in whichever plan it is in. The last point is the most important for my suggestion. The ability to quickly park the cash in a registered account and to move it for free using the appropriate form at a later date. Most places have a sneaky transfer-out fee. ING may not be the only place that doesn't, but I haven't looked into many other places about this. You might find something else that works the same way. And please, don't ever use GIC and high return in the same sentence.\",\n \"I recommend you consider a Roth IRA. Invest it as others here suggest, safely, CDs, money market,etc. You can put in $5000/yr. When you spend, use this last, there is no penalty to withdraw the deposits. But if you make it through grad school without needing it, you'll have great start on your retirement savings.\",\n \"One issue which I don't see addressed in the answers so far is how to structure bank accounts to get the highest return possible. What you're describing sounds like a certificate of deposit (CD): 'ranging from 1% for 9 months to 2.3% for 5 years' There is a concept which was once more common called a CD Ladder, which still allows you to access your money, while also giving you the highest interest rate offered by the bank. To set one up you divide your account into 5 equal parts, then open 5 CDs with different periods (1-5 years). Each time a new CD matures (once a year), you purchase another 5 year CD with those funds, plus any new money you want to save. Thus you're getting a higher and higher rate, until all of your accounts are earning the 5 year CD rate, and you're never more than a year away from getting money out of the account if a need comes up.\",\n \"CDs may be one good option if you have a sense of when you may need the money(-ish), especially with more generous early withdrawal penalties. You can also take a look at investing in a mix of stock and bond funds, which will lower you volatility compared to stocks, but increase your returns over bonds.\",\n \"First of all I recommend reading this short e-book that is aimed at young investors. The book is written for American investors but they same rules apply with different terms (e.g. the equivalent tax-free savings wrappers are called ISAs in the UK). If you don't anticipate needing the money any time soon then your best bet is likely a stocks and share ISA in an aggressive portfolio of assets. You are probably better off with an even more aggressive asset allocation than the one in the book, e.g. 0-15% bond funds 85-100% equity funds. In the long term, this will generate the most income. For an up-to-date table of brokers I recommend Monevator. If you are planning to use the money as a deposit on a mortgage then your best bet might be a Help to Buy ISA, you'll have to shop around for the best deals. If you would rather have something more liquid that you can draw into to cover expenses while at school, you can either go for a more conservative ISA (100% bond funds or even a cash ISA) or try to find a savings account with a comparable interest rate.\",\n \"Assuming this'll be a taxable account and you're an above-average wage earner, the following seem to be biggest factors in your decision: tax-advantaged income w/o retirement account protection - so I'd pick a stock/stocks or fund that's designed to minimize earnings taxable at income and/or short-term gains rates (e.g. dividends) declining risk profile - make sure you periodically tweak your investment mix over the 2-3 year period to reduce your risk exposure. You want to be near savings account risk levels by the end of your timeline. But make sure you keep #1 in mind - so probably don't adjust (by selling) anything until you've hit the 1-year holding mark to get the long-term capital gains rates. In addition to tax-sensitive stock & bond funds at the major brokerages like Fidelity, I'd specifically look at tax-free municipal bond funds (targeted for your state of residence) since those generally pay better than savings on after tax basis for little increase in risk (assuming you stick w/ higher-rated municipalities).\",\n \"You can also consider getting GICs which offer early redemption - ING has pretty decent ones. Early redemption offers poorer interest than savings account, but if you go the full term the interest rates are better than savings account.\",\n \"First of all, I agree with both the conclusion in the question and Ganesh’s answer – avoid funds or stockmarket based instruments, given the short timescale and need to draw an income. However I think looking at savings accounts only is missing a trick. At the moment there are several current accounts that pay >2% interest on balances the size of which you’re proposing. The list of which accounts are offering which rates / conditions at which point in time will vary, so here is a link to a good source of regularly updated information: https://www.moneysavingexpert.com/savings/savings-loophole There are some conditions, but the best interest rate on offer (that isn't limited to one year) appears to be 3% – much better than the leading instant access savings account.\",\n \"Something with an FDIC guarentee, so a bank. With an emergency fund, I think the 'return of capital' is more important than the 'return on the capital', so I'm fine with putting it in a standard savings account in a local bank(not an internet account) even if it pays next to nothing. The beauty is that since the bank is local, you can walk in and withdraw it all during any weekday.\",\n \"If you are in an economy which has a decent liquid debt market (corporate bonds, etc.), then you may look into investing in AA or AA+ rated bonds. They can provide higher returns than bank deposits and are virtually risk-free. (Though in severe economic downturns, you can see defaults in even very high-rated bonds, leading to partial or complete loss of value however, this is statistically quite rare). You can make this investment through a debt mutual fund but please make sure that you read through the offer document carefully to understand the investment style of the mutual fund and their expense ratio (which directly affect your returns). In any case, it is always recommended to reach out to an investment adviser who is good with local tax laws to minimize taxes and maximize returns.\",\n \"As others have noted, you can do better than a checking or savings account. If you're going to invest emergency money, the vehicle you put it into should be: Liquid - Wherever you put it, you should be able to quickly cash it out. Highly liquid exchange traded products are good for this. Low volatility/drawdowns - If you need at least 6 months of your paycheck to cover you in the event of an emergency, you don't want to park it in a portfolio that can potentially lose 30% value. Insured - Your investments should have SIPC coverage (protection against losses resulting from failure on part of broker). Moderate/Steady Growth - If the emergency fund doesn't grow, you'll need to continually pump money into it. My 'steady growth' portfolio is majorly allocated to fixed income. Within that, a major portion is allocated to high yielding instruments. Over the past 10 years, it's seen at least a 7% annualized return.\",\n \"For a time period as short as a matter of months, commercial paper or bonds about to mature are the highest returning investments, as defined by Benjamin Graham: An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative. There are no well-known methods that can be applied to cryptocurrencies or forex for such short time periods to promise safety of principal. The problem is that with $1,500, it will be impossible to buy any worthy credit directly and hold to maturity; besides, the need for liquidity eats up the return, risk-adjusted. The only alternative is a bond ETF which has a high probability of getting crushed as interest rates continue to rise, so that fails the above criteria. The only alternative for investment now is a short term deposit with a bank. For speculation, anything goes... The best strategy is to take the money and continue to build up a financial structure: saving for risk-adjusted and time-discounted future annual cash flows. After the average unemployment cycle is funded, approximately six or so years, then long-term investments should be accumulated, internationally diversified equities.\",\n \"Never invest money you need in the short term. As already suggested, park your money in CDs.\",\n \"Since returning of capital is the most important, I would go to bankrate.com and find either an online bank savings account or MMA account. By going to bankrate.com, you can find higher rates. Sometimes you can find rates that are higher than a CD and are still FDIC insured. I've found ally bank's raise your rate 2 year CD to always have the best rate. In addition, if rates go up, you are able to raise the rate to the current rate.\",\n \"Buy a home. A home is the first and best investment, u can own a home with as little as 3% down and as u pay for your living u pay it off.....also banks will always give you equity loans in case you need your money\",\n \"If you will leave the money invested for a good long while (years) then dividend paying stocks would be appropriate. There are many that pay yields of 3 to 4 percent, which you can take as income or reinvest to compound the growth. There is a lot of good analysis of stocks (and mutual funds that specialize in dividend paying stocks) at Morningstar.com\",\n \"\\\"First, you don't state where you are and this is a rather global site. There are people from Canada, US, and many other countries here so \\\"\\\"mutual funds\\\"\\\" that mean one thing to you may be a bit different for someone in a foreign country for one point. Thanks for stating that point in a tag. Second, mutual funds are merely a type of investment vehicle, there is something to be said for what is in the fund which could be an investment company, trust or a few other possibilities. Within North America there are money market mutual funds, bond mutual funds, stock mutual funds, mutual funds of other mutual funds and funds that are a combination of any and all of the former choices. Thus, something like a money market mutual fund would be low risk but quite likely low return as well. Short-term bond funds would bring up the risk a tick though this depends on how you handle the volatility of the fund's NAV changing. There is also something to be said for open-end, ETF and closed-end funds that are a few types to consider as well. Third, taxes are something not even mentioned here which could impact which kinds of funds make sense as some funds may invest in instruments with favorable tax-treatment. Aside from funds, I'd look at CDs and Treasuries would be my suggestion. With a rather short time frame, stocks could be quite dangerous to my mind. I'd only suggest stocks if you are investing for at least 5 years. In 2 years there is a lot that can happen with stocks where if you look at history there was a record of stocks going down about 1 in every 4 years on average. Something to consider is what kind of downside would you accept here? Are you OK if what you save gets cut in half? This is what can happen with some growth funds in the short-term which is what a 2 year time horizon looks like. If you do with a stock mutual fund, it would be a gamble to my mind. Don't forget that if the fund goes down 10% and then comes up 10%, you're still down 1% since the down will take more.\\\"\",\n \"\\\"An alternative to a savings account is a money market account. Not a bank \\\"\\\"Money Market\\\"\\\" account which pays effectively the same silly rate as a savings account, but an actual Money Market investment account. You can even write checks against some Money Market investment accounts. I have several accounts worth about 13,000 each. Originally, my \\\"\\\"emergency fund\\\"\\\" was in a CD ladder. I started experimenting with two different Money market investment accounts recently. Here's my latest results: August returns on various accounts worth about $13k: - Discover Bank CD: $13.22 - Discover Bank CD: $13.27 - Discover Bank CD: $13.20 - Discover Savings: $13.18 - Credit Union \\\"\\\"Money Market\\\"\\\" Savings account: $1.80 - Fidelity Money Market Account (SPAXX): $7.35 - Vanguard Money market Account (VMFXX): $10.86 The actual account values are approximate. The Fidelity Money Market Account holds the least value, and the Credit Union account by far the most. The result of the experiment is that as the CDs mature, I'll be moving out of Discover Bank into the Vanguard Money Market account. You can put your money into more traditional equities mutual fund. The danger with them is the stock market may drop big the day before you want to make your withdrawl... and then you don't have the down payment for your house anymore. But a well chosen mutual fund will yield better. There are 3 ways a mutual fund increase in value: Here's how three of my mutual funds did in the past month... adjusted as if the accounts had started off to be worth about $13,000: Those must vary wildly month-to-month. By the way, if you look up the ticker symbols, VASGX is a Vanguard \\\"\\\"Fund of Funds\\\"\\\" -- it invests not 100% in the stock market, but 80% in the stock market and 20% in bonds. VSMGX is a 60/40 split. Interesting that VASGX grew less than VSMGX...but that assumes my spreadsheet is correct. Most of my mutual funds pay dividends and capital gains once or twice a year. I don't think any pay in August.\\\"\",\n \"Well, I was about to ask a similar question. Unless you get into stocks/mutual funds it seems like returns on less risky items such as CDs (certificate of deposit) are terrible. I don't think it is a good use of folks time to ask what a Roth IRA is. We were considering buying a new car (~$20000 with zero down and 0.9% interest rate) but we drive maybe 6000 miles per year. We would be paying ~$550/month to park something in our garage. Our current car is sexless but absolutely reliable. I am now looking elsewhere and may either invest the money in our house (i.e., refinishing upstairs) or paying down our debt. We have a home loan - $132,000 at 3.5% - and a student loan - $12,675 @ 3.375%. Depending on the loan rate on your car, I would pay that down first. Alternatively, find a fee-only broker and drop around $500 for them to come up with a financial plan for you. They will probably recommend a Roth IRA with a specific mutual fund in mind. You'll need $2500 or so to open the Roth, contributions from there should be such that you can start/stop them on demand without fees.\",\n \"\\\"I disagree with the IRA suggestion. Why IRA? You're a student, so probably won't get much tax benefits, so why locking the money for 40 years? You can do the same investments through any broker account as in IRA, but be able to cash out in need. 5 years is long enough term to put in a mutual fund or ETF and expect reasonable (>1.25%) gains. You can use the online \\\"\\\"analyst\\\"\\\" tools that brokers like ETrade or Sharebuilder provide to decide on how to spread your portfolio, 15K is enough for diversifying over several areas. If you want to keep it as cash - check the on-line savings accounts (like Capitol One, for example, or Ally, ING Direct that will merge with Capitol One and others) for better rates, brick and mortar banks can not possible compete with what you can get online.\\\"\",\n \"There are quite a few options. Suggest you put a mix of things and begin investing into Mutual Funds.\",\n \"lol @ savings accounts. I don't use savings accounts. I just use checking for liquidity and invest everything else. Now if you have a job that prohibits trading on your own account that's understandable but if you have the knowledge might as well use it and make some $$$\",\n \"On the one hand, it's a great idea to open a Roth IRA now, once you've got the cash to contribute. It's a tax designation sounds like it would fit your meager earnings this year. The main reason to open one now rather than later is that some types of withdrawls require the account be aged 5 years. But you can also withdraw the amount you've contributed tax free any time. Student loans right now are pricey, so if you're carrying a balance at say 6.8 percent fixed you should pay that down ASAP. Beyond that, I'd keep the rest liquid for now. Having that kind of liquid cash is extremely reassuring, and many of the biggest returns on investment are going to be in your personal life. More fuel efficient vehicles, energy efficient appliances, computer backups, chest freezers and bulk meat purchases, etc. One example I see every six months is car insurance: I can pay for six months in full or I can pay a smaller monthly bill plus a small fee. That fee is well above current market rates. You see this everywhere; people searching for lower minimum payments rather than lower total costs. Save your money up and be the smart buyer. It's too damn expensive to be broke.\",\n \"Reversing your math, I am assuming you have $312K to work with. In that case, I would simply shop around your local banks and/or credit unions and have them compete for your money and you might be quite surprised how much they are willing to pay. A couple of months ago, you would be able to get about 4.25% from Israel Bonds in Canada on 5 years term (the Jubilee product, with minimum investment of $25K). It's a bit lower now, but you should still be able to get very good rates if you shop around tier-2 banks or credit unions (who are more hungry for capital than the well-funded tier-1 banks). Or you could look at preferred shares of a large corporation. They are different from common shares in the sense they are priced according to the payout rate (i.e. people buy it for the dividend). A quick screen from your favorite stock exchange ought to find you a few options. Another option is commercial bonds. You should be able to get that kind of return from investment grade (BBB- and higher) bonds on large corporations these days. I just did a quick glance at MarketWatch's Bond section (http://cxa.marketwatch.com/finra/BondCenter/Default.aspx) and found AAA grade bonds that will yield > 5%. You will need to investigate their underlying fundamentals, coupon rate and etc before investing (second thought, grab a introduction to bonds book from Chapters first). Hope these helps.\",\n \"529 College Savings Plans exist, which allow for tax-free savings for educational expenses, but I think you expect to go back to school too quickly for them to be worth the hassle. (They're more designed for saving for college for your kids.) Other than an IRA, you don't have many options for tax-advantaged accounts. In addition, since you plan to return to school, you should keep money around for that. Don't put that money in anything too volatile or hard to access. Since you don't plan on doing anything with the 80k in CDs right now, you can get away with higher risk with that money.\",\n \"Since you are looking at preserving the principal, I would recommend laddered CDs and short term treasuries (TIPs/iBonds)\",\n \"Short-term to intermediate-term corporate bond funds are available. The bond fund vehicle helps manage the credit risk, while the short terms help manage inflation and interest rate risk. Corporate bond funds will have fewer Treasuries bonds than a general-purpose short-term bond fund: it sounds like you're interested in things further out along the risk curve than a 0.48% return on a 5-year bond, and thus don't care for the Treasuries. Corporate bonds are generally safer than stocks because, in bankruptcy, all your bondholders have to be paid in full before any equity-holders get a penny. Stocks are much more volatile, since they're essentially worth the value of their profits after paying all their debt, taxes, and other expenses. As far as stocks are concerned, they're not very good for the short term at all. One of the stabler stock funds would be something like the Vanguard Equity Income Fund, and it cautions: This fund is designed to provide investors with an above-average level of current income while offering exposure to the stock market. Since the fund typically invests in companies that are dedicated to consistently paying dividends, it may have a higher yield than other Vanguard stock mutual funds. The fund’s emphasis on slower-growing, higher-yielding companies can also mean that its total return may not be as strong in a significant bull market. This income-focused fund may be appropriate for investors who have a long-term investment goal and a tolerance for stock market volatility. Even the large-cap stable companies can have their value fall dramatically in the short term. Look at its price chart; 2008 was brutal. Avoid stocks if you need to spend your money within a couple of years. Whatever you choose, read the prospectus to understand the risks.\",\n \"Both of the other posters have some really good points worth remembering about the stability/liquidity of a savings account and the often overlooked fact that you can withdraw any money you put in to a Roth IRA because it's already been taxed. I'm 28 and found myself in a similar situation as you about a year or so ago. I wanted a relatively liquid place that I could store and grow some money. CD's and Savings accounts just weren't getting a high enough rate to make a return work for me, especially with only a little money to start. I would highly suggest checking out a social lending platform like Prosper.com or Lendingclub.com. I use Prosper.com and this platform will give you some really nice benefits: Here's a good article that can explain more about it and get you started: http://www.financialsamurai.com/investing-in-peer-to-peer-lending-with-prosper-com/ just keep in mind that while there is some liquidity here (you can resell the notes you invest in) generally speaking expect to hold on to those notes for at least 3 years (your share of the paid principal gets paid out to you in addition to the interest each month.)\",\n \"Based on your question, I am going to assume your criterion are: Based on these, I believe you'd be interested in a different savings account, a CD, or money market account. Savings account can get you up to 1.3% and money market accounts can get up to 1.5%. CDs can get you a little more, but they're a little trickier. For example, a 5 year CD could get up to 2%. However, now you're money is locked away for the next few years, so this is not a good option if this money is your emergency fund or you want to use it soon. Also, if interest rates increase then your money market and savings accounts' interest rates will increase but your CD's interest rate misses out. Conversely, if interest rates drop, you're still locked into a higher rate.\",\n \"One option might be to use tax certificates to save this money. At the moment they don't pay any interest (unless you deposit more than £100,000 at once), so they aren't very attractive from that point of view. But they do give you a clean way to segregate your money and for the purposes of charging penalty interest, HMRC will treat you as having made the payment at the time you purchased the certificate, if it turns out that you should have paid the actual tax earlier than you did. Another option is a regular saver account. These typically have limits of £250 per month, so you might have to open a few given the amount you have to save. That would add up to a lot of maintenance effort, particularly as you'd have to open new accounts again each year. However, they do typically offer good interest rates compared to what's available elsewhere, and the way they operate fits well with your needs (money coming in regularly and then going out all at once).\",\n \"I would suggest your local credit union or local bank for security and liquidity. Liquidity is probably the most important issue for a emergency fund.\",\n \"As you have already good on your retirement kitty. Assuming you have a sufficient cash for difficult situations, explore the options of investing in Shares and Mutual Funds. As you are new to Stock Market, begin slowly by investing into Mutual Funds and ETF for precious metals. This will help you understand and give you confidence on markets and returns. Real estate is a good option, the down side being the hassle of getting rental and the illiquid nature of the investment.\",\n \"This situation, wanting desperately to have access to an investment vehicle in a 401K, but it not being available reminds me of two suggestions some make regarding retirement investing: This allows you the maximum flexibility in your retirement investing. I have never, in almost 30 years of 401K investing, seen a pure cash investment, is was always something that was at its core very short term bonds. The exception is one company that once you had a few thousand in the 401K, you could transfer it to a brokerage account. I have no idea if there was a way to invest in a money market fund via the brokerage, but I guess it was possible. You may have to look and see if the company running the 401K has other investment options that your employer didn't select. Or you will have to see if other 401K custodians have these types of investments. Then push for changes next year. Regarding external IRA/Roth IRA: You can buy a CD with FDIC protection from funds in an IRA/Roth IRA. My credit union with NCUA protection currently has CDs and even bump up CDs, minimum balance is $500, and the periods are from 6 months to 3 years.\",\n \"CDs pay less than the going rate so that the banks can earn money. Investing is risky right now due to the inaction of the Fed. Try your independent life insurance agent. You could get endowment life insurance. It would pay out at age 21. If you decide to invest it yourself try to buy a stable equity fund. My 'bedrock' fund is PGF. It pays dividends each month and is currently yealding 5.5% per year. Scottrade has a facility to automatically reinvest the dividend each month at no commission. http://www.marketwatch.com/investing/Fund/PGF?CountryCode=US\",\n \"Nothing's generating a whole lot of interest right now. But more liquid and stable is better (cash or cash-like). But a related question: Why a new car? You can knock thousands of dollars off of the price of a comparable vehicle by buying one that's one or two years old. Your new vehicle loses thousands of dollars in value the moment it goes off the lot.\",\n \"With the requirement that the money is 100% available immediately and that you can not suffer a loss of principal, the suggestions you gave of an online savings account is a good one. Personally, I use ING.\",\n \"\\\"Shem - I recommend looking into online banks or credit unions. I know ally has around ~0.8% rate on their savings accounts NOT MMS. Meaning you don't need a ~$2,500 minimum balance so your money is COMPLETELY liquid. CD's and MMC/S are worth next to nothing, and if you ask me are pointless with the minimum balances they require. Ally also reimburses you for all ATM withdrawal fees, meaning you have complete access to all your money, with next to no minimum, with at least some % back that is comparable to CD rates currently offered. CD's are around ~1.8-2% with tens of thousands of dollars (50-75k+) which isn't worth keeping \\\"\\\"liquid\\\"\\\",if you would consider CD's liquid (because you can withdraw on a penalty or have laddered CD's), unless you're rich and that's your emergency fund. If I were you I would look into a retirement account, and saving what you need to in an Emergency Fund. Check out a 401(k), Traditional IRA or Roth IRA. They each have their benefits and you need to assess your financial situation before picking one. I would recommend spending a great deal of time researching this before making your decision, because switching from one to another could cost you, depending on your choice. This is, of course, if you live in the U.S.\\\"\",\n \"I think small sums invested regularly over long-term can do good for you, things to consider: I would go with an index fund and contribute there there regularly.\",\n \"In the United States there are some specific savings accounts, some of which have rules from the federal government (education) and some that are setup by the bank/credit Union. Some institutions have a Christmas club, where money is set aside each week or each month and then you are given access at the end of the time period. Some institutions have accounts that pay CD rates but allow you to add funds during the period. They will have some flexibility in setting the time period. I have seen accounts that are designed to save up for a big purchase, or for a specific time period (summer vacation) Ask your bank. Or better yet look at a variety of banks websites for their rate sheet. That will explain all the different account types, rates, and rules. My credit Union allows a large number of sub accounts so that you don't have to commingle the funds.\",\n \"Given that you are starting with a relatively small amount, you want a decent interest rate, and you want flexibility, I would consider fixed deposit laddering strategy. Let's say you have ₹15,000 to start with. Split this in to three components: Purchase all of the above at the same time. 30 days later, you will have the first FD mature. If you need this money, you use it. If you don't need it, purchase another 90-day fixed deposit. If you keep going this way, you will have a deposit mature every 30 days and can choose to use it or renew the fixed deposit. This strategy has some disadvantages to consider: As for interest rates, the length of the fixed deposit in positively related to the interest rate. If you want higher interest rates, elect for longer fixed deposit cycles.For instance, when you become more confident about your financial situation, replace the 30, 60, 90 day cycle with a 6, 12, 18 month cycle The cost of maintaining the short term deposit renewals and new purchases. If your bank does not allow such transactions through on line banking, you might spend more time than you like at a bank or on the phone with the bank You want a monthly dividend but this might not be the case with fixed deposits. It depends on your bank but I believe most Indian banks pay interest every three months\",\n \"\\\"Since the other answers have covered mutual funds/ETFs/stocks/combination, some other alternatives I like - though like everything else, they involve risk: Example of how these other \\\"\\\"saving methods\\\"\\\" can be quite effective: about ten years ago, I bought a 25lb bag of quinoa at $19 a bag. At the same company, quinoa is now over $132 for a 25lb bag (590%+ increase vs. the S&P 500s 73%+ increase over the same time period). Who knows what it will cost in ten years. Either way, working directly with the farmers, or planting it myself, may become even cheaper in the future, plus learning how to keep and store the seeds for the next season.\\\"\",\n \"Variable Annuities would be one option though there are SEC warnings about them, for an option that is tax-deferred and intended to be used for long-term investing such as retirement. There is a bit of a cost to gain the tax-deferral which may not always make them worthwhile.\",\n \"\\\"(Congrats on earning/saving $3K and not wanting to blow it all on immediate gratification!) I currently have it invested in sector mutual funds but with the rise and fall of the stock market, is this really the best way to prepare long-term? Long-term? Yes! However... four years is not long term. It is, in fact, borderline short term. (When I was your age, that was incomprehensible too, but trust me: it's true.) The problem is that there's an inverse relationship between reward and risk: the higher the possible reward, the greater the risk that you'll lose a big chunk of it. I invest that middle-term money in a mix of junk high yield bond funds and \\\"\\\"high\\\"\\\" yield savings accounts at an online bank. My preferences are HYG purchased at Fidelity (EDIT: because it's commission-free and I buy a few hundred dollars worth every month), and Ally Bank.\\\"\",\n \"\\\"You could put in in a Money Market Fund. These are designed to always be $1 per share, and not lose money. Of course, it still, very rarely, happens and is called \\\"\\\"breaking the buck\\\"\\\" when they do. Sounds like the high yield savings is the way to go. The rates will be the same as what you can get from a Money Market Fund, but you also have the added advantage that the account is FDIC insured. BTW, using a Roth as an emergency fund is a terrible idea. It is true that, since you already paid taxes on your contributions, you can withdraw those contributions without incurring penalties. However, you have to file paperwork to do it, and since it's not common, the IRA custodian is likely to screw it up. Plus, you have to keep track of what were contributions, and what was investment returns, to not run afoul of the penalties. And it will take time to do it, which you may not have in an emergency. Considering you're only looking at getting 1% interest anyway, there's no reason to use a Roth account as an emergency fund. You can set those same automatic deposits into a savings account.\\\"\",\n \"I suppose it depends on how liquid you need, and if you're willing to put forth any risk whatsoever. The stock market can be dangerous, but there are strategies out there that will allow you to insure yourself against significant loss, while likely earning you a decent return. You can buy and sell options along with stocks so that if the stock drops, your loss is limited, and if it goes up or even stays where it's at, you make money (a lot more than 1% annually). Of course there's risk of loss, but if you plan ahead, you can cap that risk wherever you want, maybe 5%, maybe 10%, whatever suits your needs. And as far as liquidity goes, it should be no more than a week or so to close your positions and get your money if you really need it. But even so, I would only recommend this after putting aside at least a few thousand in a cash account for emergencies.\",\n \"The time horizon is usually very short for a home down payment. I would use Certificates of Deposit (CDs) with a short maturity (in the horizon of your intended use) or Money Market accounts. Depending on what the interests rates are where you are looking. You don't want the money in the market 100% (i.e. stocks) as the fluctuations might be too wide around the time you intend to pull the money out (and that will be soon).\",\n \"I had some extra money, so I opened American express saving account. At the time which was offering .80%, now .90%. I put most of the money in the saving account. The remainder of my money in a investment account at my local bank. I was in touch once a week with investment, I learned allot how the stock market worked and tax deferment(401k, IRA, IRA Roth). My suggestion is to do test run and see if you like it. Side note, NOT ALL investment are created equal.\",\n \"There are a number of UK banks that offer what passes for reasonable interest on an amount of cash held in their current accounts. I would suggest that you look into these. In the UK the first £1000 of bank or building society interest is paid tax-free for basic rate taxpayers (£500 for higher rate tax-payers) so if your interest income is below these levels then there is no point in investing in a cash ISA as the interest rate is often lower. At the moment Santander-123 bank account pays 1.5% on up to £20000 and Nationwide do 5% on up to £2500. A good source if information on the latest deals is Martin Lewis' Moneysaving Expert Website\",\n \"I'm new to this, but how about putting a big part of your money into an MMA? I don't know about your country, but in Germany, some online banks easily offer as much as 2.1% pa, and you can access the money daily. If you want decent profit without risk this is a great deal, much better than most saving accounts.\",\n \"If the time horizon is 5 years, I don't think that playing games with Roth IRAs or investments is really productive. I'd look at an online savings account as a holding place for this money. EDIT: Another option is the US is Savings Bonds. The rates earned right now are poor (as of 04/2011 EE bonds earn 0.6% and I bonds yielded 0.37%), and there is an interest penalty if you redeem them in less than five years. But, they are not state taxable, and you can defer tax payments until you cash them.\",\n \"Consider also setting up a CD ladder. CD rates are often better than savings account rates. You have a 12-month CD that you purchase in January with a twelfth of your money, then another small one in February, then another in March.... then, when January comes around again, you a little more money to the first CD, and the ladder is complete. The idea is that you have more access to your money than one big CD, since you'll always have a CD maturing next month that you can get to in case of an emergency, and you can get better rates on a 1-year CD than on something else (with less risk of being locked into a bad interest rate). And you'll be less tempted to tap it all at once to buy some fancy car or what-not because you can't get at it all at once (without a penalty). And in a major emergency, losing a few percent of your interest for early withdrawals is likely the least of your problems.\",\n \"\\\"Should I invest the money I don't need immediately and only withdraw it next year when I need it for living expenses or should I simply leave it in my current account? This might come as a bit of a surprise, but your money is already invested. We talk of investment vehicles. An investment vehicle is basically a place where you can put money and have it either earn a return, or be able to get it back later, or both. (The neither case is generally called \\\"\\\"spending\\\"\\\".) There are also investment classes which are things like cash, stocks, bonds, precious metals, etc.: different things that you can buy within an investment vehicle. You currently have the money in a bank account. Bank accounts currently earn very low interest rates, but they are also very liquid and very secure (in the sense of being certain that you will get the principal back). Now, when you talk about \\\"\\\"investing the money\\\"\\\", you are probably thinking of moving it from where it is currently sitting earning next to no return, to somewhere it can earn a somewhat higher return. And that's fine, but you should keep in mind that you aren't really investing it in that case, only moving it. The key to deciding about an asset allocation (how much of your money to put into what investment classes) is your investment horizon. The investment horizon is simply for how long you plan on letting the money remain where you put it. For money that you do not expect to touch for more than five years, common advice is to put it in the stock market. This is simply because in the long term, historically, the stock market has outperformed most other investment classes when looking at return versus risk (volatility). However, money that you expect to need sooner than that is often recommended against putting it in the stock market. The reason for this is that the stock market is volatile -- the value of your investment can fluctuate, and there's always the risk that it will be down when you need the money. If you don't need the money within several years, you can ride that out; but if you need the money within the next year, you might not have time to ride out the dip in the stock market! So, for money that you are going to need soon, you should be looking for less volatile investment classes. Bonds are generally less volatile than stocks, with government bonds generally being less volatile than corporate bonds. Bank accounts are even less volatile, coming in at practically zero volatility, but also have much lower expected rates of return. For the money that you need within a year, I would recommend against any volatile investment class. In other words, you might take whichever part you don't need within a year and put in bonds (except for what you don't foresee needing within the next half decade or more, which you can put in stocks), then put the remainder in a simple high-yield deposit-insured savings account. It won't earn much, but you will be basically guaranteed that the money will still be there when you want it in a year. For the money you put into bonds and stocks, find low-cost index mutual funds or exchange-traded funds to do so. You cannot predict the future rate of return of any investment, but you can predict the cost of the investment with a high degree of accuracy. Hence, for any given investment class, strive to minimize cost, as doing so is likely to lead to better return on investment over time. It's extremely rare to find higher-cost alternatives that are actually worth it in the long term.\\\"\",\n \"Make sure you are hitting the actual max of the 401k. Most think it is 18K, but that is the amount you can contribute into either pre-tax or roth. On top of this, you can also contribute using an after-tax contribution (treated differently from Roth). Total amounts up to 54k (since you are under 50). One thing I would look into for ways to beat interest rates in bank accounts and CDs is Municipal Bond funds, given your high income. I have seen some earning almost 6% tax-free YTD. These also give you liquidity. Definitely keep your 3 mo salary in the bank, but once you get over that while maxing out your 401k, this is a pretty good way to make your money work for you, without crushing you come tax time. Building that muni bond fund account gradually, you can eventually use that account to pay for things like car payments, mortgage, rent, vacation, etc. Just be sure if you go with a mutual fund, that you are aware of any surrender charge schedules. I have seen this done with C Shares, where you can withdraw your investment without penalty after 1 year. Let me know if this is unclear or you would like any additional information. Best of luck!\",\n \"Thats a very open question, Depends on the risk you are willing to take with the money, or the length of time you are willing sit on it, or if you have a specific goal like buying a house. Some banks offer high(ish) rate savings accounts http://www.bankaccountsavings.co.uk/calculator with a switching bonus that could be a good start. (combining the nationwide flexdirect and regular saver) if you want something more long term - safe option is bonds, medium risk option is Index funds (kind of covers all 3 risks really), risky option is Stocks & shares. For these probably a S&S ISA for a tax efficient option. Also LISA or HtB ISA are worth considering if you want to buy a house in the future.\",\n \"\\\"There are no risk-free high-liquidity instruments that pay a significant amount of interest. There are some money-market accounts around that pay 1%-2%, but they often have minimum balance or transaction limits. Even if you could get 3%, on a $4K balance that would be $120 per year, or $10 per month. You can do much better than that by just going to $tarbucks two less times per month (or whatever you can cut from your expenses) and putting that into the savings account. Or work a few extra hours and increase your income. I appreciate the desire to \\\"\\\"maximize\\\"\\\" the return on your money, but in reality increasing income and reducing expenses have a much greater impact until you build up significant savings and are able to absorb more risk. Emergency funds should be highly liquid and risk-free, so traditional investments aren't appropriate vehicles for them.\\\"\",\n \"US government bonds and bonds issued by companies with a safe track record and consistently high ratings, for the past years, by credit agencies. But the time line of your investment, which is quite short, maybe a factor of choosing the right bonds. If you are not going to touch the money then CD maybe an option or an interest bearing savings account.\",\n \"Money you need in less than 5 years should be saved not invested. The only place I would be comfortable the money would be a money market account or Certificate of Deposit (CD). I usually go for the money market account because they pay at or close to CD rates and there are no restrictions on getting to the money. However in this case I might choose a CD to keep me from being tempted to borrow some of it for something else. But even after typing that I still think I would put it in a money market, because if interest rates rise they rise in the money market but not the CD, and I just don't think interest can go much lower.\",\n \"High-interest checking / savings accounts are often a better choice than CDs today for three reasons. At the time this question was asked, CDs were probably a better answer as rates were much higher. Since CD rates have plummeted in recent years, and because a CD is only semi-liquid, i.e., even if you ladder CDs, an early withdrawal fee often means foregoing the interest on that particular CD which you withdrew. 1.) On the other hand, high-interest checking and/or savings accounts are very viable options these days. There are several options available that earn ~1%+ APY. It's not quite that simple, and there are a few gotchas: If you run into the balance cap problem, of course nothing is stopping you from having multiple accounts across different banks. 2.) The high-interest bank accounts are fully liquid able to be liquidated at anytime (without foregoing interest). 3.) A minor benefit is that the high-yield savings account is low maintenance whereas CD laddering is pretty hands on and may require physical trips to your bank. (If you know of a way to automate the process more, please comment or edit.)\",\n \"You could open up CDs or try a few stocks. Once I saved up enough to where I was comfortable in savings and in a retirement account, I went to CDs. Once I was comfortable with CDs I started doing stocks with dividends. Now that I'm happy with what I am receiving in dividends I just recently bought a risky stock. I highly recommend Navy Federal for CDs, if you are eligible and USAA for stocks. Congrats!\",\n \"Disclaimer: I am not Canadian and have no experience with their laws and regulations. There really aren't any safe short term investment options at the moment (with interest rates being close to zero). So, just put the money aside you will need for the car and the computer, maybe on a callable savings account to make at least a few Dollars. Do not take out any loans, it is very unlikely you will earn more than the cost of the loan. You didn't say how much will be left but, unfortunately, it really is not much to go on anyway. Considering that you seem to have enough income to cover your expenses, you could transfer the rest to your RRSP, invest and just forget about it. I suggest to follow this rule of thumb: the growth portion of your portfolio, which for you means equities, should be directly related to the number of years you won't need to touch these funds. 1 year, 0 equity. 2 years, 10%, 3 years, 20%, and so on. What's not in equities, you could put in short term bonds, meaning an average duration of about 3 years. Needless to say, single stocks/bonds are out of question, ideally you can find 2 ETFs, one for stocks and one for bonds, respectively. However, if there is any possibility you did not mention that you could suddenly depend on this money, you have to keep your equity exposure, and thus your potential earnings, low. Just a humble thought: i really don't know your specific situation, my apologies if I'm out of line. Often disability means that you are not capable of doing one particular thing anymore, i.e. work physically. Just maybe you would still be capable to do some other type of work, maybe even from the comfort of your home, that would allow you to generate a certain income (and also keep you busy). I hope this helps. Good luck.\",\n \"\\\"For a two year time frame, a good insured savings account or a low-cost short-term government bond fund is most likely the way I would go. Depending on the specific amount, it may also be reasonable to look into directly buying government bonds. The reason for this is simply that in such a short time period, the stock market can be extremely volatile. Imagine if you had gone all in with the money on the stock market in, say, 2007, intending to withdraw the money after two years. Take a broad stock market index of your choice and see how much you'd have got back, and consider if you'd have felt comfortable sticking to your plan for the duration. Since you would likely be focused more on preservation of capital than returns during such a relatively short period, the risk of the stock market making a major (or even relatively minor) downturn in the interim would (should) be a bigger consideration than the possibility of a higher return. The \\\"\\\"return of capital, not return on capital\\\"\\\" rule. If the stock market falls by 10%, it must go up by 11% to break even. If it falls by 25%, it must go up by 33% to break even. If you are looking at a slightly longer time period, such as the example five years, then you might want to add some stocks to the mix for the possibility of a higher return. Still, however, since you have a specific goal in mind that is still reasonably close in time, I would likely keep a large fraction of the money in interest-bearing holdings (bank account, bonds, bond funds) rather than in the stock market. A good compromise may be medium-to-high-yield corporate bonds. It shouldn't be too difficult to find such bond funds that can return a few percentage points above risk-free interest, if you can live with the price volatility. Over time and as you get closer to actually needing the money, shift the holdings to lower-risk holdings to secure the capital amount. Yes, short-term government bonds tend to have dismal returns, particularly currently. (It's pretty much either that, or the country is just about bankrupt already, which means that the risk of default is quite high which is reflected in the interest premiums demanded by investors.) But the risk in most countries' short-term government bonds is also very much limited. And generally, when you are looking at using the money for a specific purpose within a defined (and relatively short) time frame, you want to reduce risk, even if that comes with the price tag of a slightly lower return. And, as always, never put all your eggs in one basket. A combination of government bonds from various countries may be appropriate, just as you should diversify between different stocks in a well-balanced portfolio. Make sure to check the limits on how much money is insured in a single account, for a single individual, in a single institution and for a household - you don't want to chase high interest bank accounts only to be burned by something like that if the institution goes bankrupt. Generally, the sooner you expect to need the money, the less risk you should take, even if that means a lower return on capital. And the risk progression (ignoring currency effects, which affects all of these equally) is roughly short-term government bonds, long-term government bonds or regular corporate bonds, high-yield corporate bonds, stock market large cap, stock market mid and low cap. Yes, there are exceptions, but that's a resonable rule of thumb.\\\"\",\n \"If you're absolutely certain that you won't buy a house within a year or so, I'd still be tempted to put some of the money into short-term CDs (ie, a max of 12 months). I think that at the moment CDs are a bit of a mug's game though because you'd hardly find one that offers better interest rates than some of the few savings accounts that still offer 1%+ interest. A savings account is probably where I'd put the money unless I could find a really good deal on a CD, but I think you might have to check if they've got withdrawal limits. There are a couple of savings accounts out there that pay at least 1% (yes, I know it's pitiful) so I'd seek out one or two of those. From memory, both Sallie Mae and Amex offer those and I'm sure there are a couple more. It's not great that your money is growing at less than inflation but if you're saving for something like a downpayment on a house I would think that (nominal) capital preservation is probably more important than the potential for a higher return with the associated higher risk.\",\n \"In the US, you would probably look at a certificate of deposit (CD). I imagine there is a similar financial product in the UK, but don't know first hand. I think it is wise to be risk averse in this situation, but be aware that your interest rate will be dismal for guaranteed returns.\",\n \"Another option is the new 'innovative finance isa' that allow you to put a wrapper round peer to peer lending platform investments. See Zopa, although I don't think they have come out with an ISA yet.\",\n \"Edit: I a in the United States, seek advice from someone who is also in Australia. I am getting about 5.5% per year by investing in a fund (ticker:PGF) that, in turn, buys preferred stock in banks. Preferred stock acts a bit like a bond and a bit like a stock. The price is very stable. However, a bank account is FDIC insured (in the USA) and an investment is not. I use the Reinvestment program at Scottrade so that the monthly dividends are automatically reinvested with no commission. However I do not know if this is available outside of the United States. Investing yealds greater returns but exposes you to greater risk. You have to know your risk tolerance.\",\n \"Since you are talking about a small firm, for the long term, it would be advisable to invest your money into the expansion - growth, diversification, integration - of your business. However, if your intention is to make proper use of your earnings in the short term, a decent bank deposit would help you to increase the credit line for your business with the benefit of having a high enough liquidity. You can also look at bonds and other such low risk instruments to protect your assets.\",\n \"In my mind, when looking at a five year period you have a number of options. You didn't specify where you are based, which admittedly makes it harder, to give you good advice. If you are looking for an investment that can achieve large gains, equities are impossible to ignore. By investing in an index fund or other diverse asset forms (such as mutual funds), your risk is relatively minimal. However there has historically been five year periods where you would lose/flatline your money. If this was to be the case you would likely be better off waiting more than five years to buy a house, which would be frustrating. When markets rebound, they often do it hard. If you are in a major economy, taking something like the top 100 of your stock market is a safe bet, although admittedly you would have made terrible returns if you invested in the Polish markets. While they often achieve lower returns than equity investments, they are generally considered safer - especially government issued bonds. If you were willing to sacrifice returns for safety, you must always consider them. This is an interesting new addition, and I can't comment on the state of it in the United States, however in Europe we have a number of platforms which do this. In the UK, for example you can achieve ~7.3% returns YoY using sites like Funding Circle. If you invest in a diverse range of businesses, you have minimal risk from and individual company not paying. Elsewhere in Europe (although not appropriate for me as everything I do is denominated in Sterling), you can secure 12% in places like Georgia, Poland, and Estonia. This is a very good rate and the platforms seem reputable, and 'guarantee' their loans. However unlike funding circle, they are for consumer loans. The risk profile in my mind is similar to that of equities, but it is hard to say. Whatever you do, you need to do your homework, and ensure that you can handle the level of risk offered by the investments you make. I haven't included things like Savings accounts in here, as the rates aren't worth bothering with.\",\n \"It's time she look into what employer provided retirement plan she can use. She's at the point where she should think about investing for the long term, with retirement in mind.\",\n \"$23,000 Student Loans at 4% This represents guaranteed loss. Paying this off quickly is a conservative move, while your other investments may easily surpass 4% return, they are not guaranteed. Should I just keep my money in my savings account since I want to keep my money available? Or are there other options I have that are not necessarily long term may provide better returns? This all depends on your plans, if you're just trying to keep cash in anticipation of the next big dip, you might strike gold, but you could just as easily miss out on significant market gains while waiting. People have a poor track record of predicting market down-turns. If you are concerned about how exposed to market risk you are in your current positions, then you may be more comfortable with a larger cash position. Savings/CDs are low-interest, but much lower risk. If you currently have no savings (you titled the section savings, but they all look like retirement/investment accounts), then I would recommend focusing on that first, getting a healthy emergency fund saved up, and budgeting for your car/house purchases. There's no way to know if you'd be better off investing everything or piling up cash in the short-term. You have to decide how much risk you are comfortable with and act accordingly.\",\n \"There are lot of options. I personally avoid keeping money in bank accounts and invest in one of the funds. It's just my personal opinion, you can ask your Ulamas\",\n \"\\\"Your decision about which of these investments to make is going to depend on how long you expect to leave the money in the account. For example, based on the figures you give us, if you think you are going to want to withdraw the money in three months or less then you should chose the savings account. For ten months or more you should choose the Fixed Deposit. (As Michael Kjorling says, \\\"\\\"flexible to withdraw at any time\\\"\\\" does not mean you won't pay penalties for withdrawing early that's why you shouldn't choose the longer term deposits if you want to withdraw earlier). That's the simplest approach. The trouble of course is that you don't necessarily know how long you are going to leave the money in. If you are saving for a house, and you know you won't want to buy in the next year, the 12 month deposit looks good. But what if your car suddenly needs repairs? You would have to withdraw that money early and pay the penalties, and it turns out you would have been better of putting it in the savings account. A good approach is:\\\"\",\n \"First, as Dheer mentioned above, there is no right answer as investment avenues for a person is dicteted by many subjective considerations. Given that below a few of my thoughts (strictly thoughts): 1) Have a plan for how much money you would need in next 5-7 years, one hint is, do you plan you buy a house, car, get married ... Try to project this requirement 2) Related to the above, if you have some idea on point 1, then it would be possible for you to determine how much you need to save now to achieve the above (possibly with a loan thrown in). It will also give you some indication as to where and how much of your current cash holding that you should invest now 3) From an investment perspective there are many instruments, some more risky some less. The exact mix of instruments that you should consider is based on many things, one among them is your risk apetite and fund requirement projections 4) Usually (not as a rule of thumb) the % of savings corresponding to your age should go into low risk investments and 100-the % into higher risk investment 5) You could talk to some professional invetment planners, all banks offer the service Hope this helps, I reiterate as Dheer did, there is truely no right answer for your question all the answers would be rather contextual.\",\n \"Dividend reinvestment plans are a great option for some of your savings. By making small, regular investments, combined with reinvested dividends, you can accumulate a significant nest egg. Pick a medium to large cap company that looks to be around for the foreseeable future, such as JNJ, 3M, GE, or even Exxon. These companies typically raise their dividends every year or so, and this can be a significant portion of your long term gains. Plus, these programs are usually offered with miniscule fees. Also, have a go at the interest rate formulas contained in your favorite spreadsheet application. Calculate the FutureValue of a series of payments at various interest rates, to see what you can expect. While you cannot depend on earning a specific rate with a stock investment, a basic familiarity with the formula can help you determine a rate of return you should aim for.\",\n \"It sounds like you want to lock-up your money in something relatively safe, and relatively hard to touch. You may want to consider a GIC (TD has one I found in a quick search) - from what I see it's the closest thing to a US CD. You won't get much back, but if you pick a 5-year term, you can't spend it* easily. Other options might be to buy an ETF, or get into REITs - but that will depend on your risk comfort. Also - to add from the comment Rick left - be sure to pay off any high-interest debts: especially if they're on a credit card, it will help you later on. * easily .. you can withdraw, but there're generally penalties\",\n \"What worked out well for me is a Capital One High Yield Savings Account, which came with a lower interest rate than most online accounts but higher than a brick & mortar bank. Also, since Capital One has Banking locations now, I can use the ATM card that came with this account to pull out the emergency money if I need it in a pinch at a place that doesn't accept checks.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["\"Most online \"\"high yield\"\" savings accounts are paying just above 1%. That would be 1.05% for American Express personal savings, or 1.15% for Synchrony Bank (currently). Depending on the length of the season, you might want to work in some CD's. Six months CDs can be had at 1.2%, and 9 month at 1.25%. So if you know you won't need some of your earnings for 9 months, you could earn 1.25% on your money. However, I would proceed with caution on anything other than the high yield savings account. With your one friend having such a low emergency fund, there is very little room for error. Perhaps until that amount is built up into something significant, it is just best to stick with the online savings. Of course, one solution would be to find a way to create income during the off season. That will go a long way into helping one build wealth.\"","\"There are no risk-free high-liquidity instruments that pay a significant amount of interest. There are some money-market accounts around that pay 1%-2%, but they often have minimum balance or transaction limits. Even if you could get 3%, on a $4K balance that would be $120 per year, or $10 per month. You can do much better than that by just going to $tarbucks two less times per month (or whatever you can cut from your expenses) and putting that into the savings account. Or work a few extra hours and increase your income. I appreciate the desire to \"\"maximize\"\" the return on your money, but in reality increasing income and reducing expenses have a much greater impact until you build up significant savings and are able to absorb more risk. Emergency funds should be highly liquid and risk-free, so traditional investments aren't appropriate vehicles for them.\"","In the short-term, a savings account with an online bank can net you ~1% interest, while many banks/credit unions with local branches are 0.05%. Most of the online savings accounts allow 6 withdrawals per month (they'll let you do more, but charge a fee), if you pair it with a checking account, you can transfer your expected monthly need in one or two planned transfers to your checking account. Any other options that may result in a higher yield will either tie up your money for a set length of time, or expose you to risk of losing money. I wouldn't recommend gambling on short-term stock gains if you need the money during the off-season."],"string":"[\n \"\\\"Most online \\\"\\\"high yield\\\"\\\" savings accounts are paying just above 1%. That would be 1.05% for American Express personal savings, or 1.15% for Synchrony Bank (currently). Depending on the length of the season, you might want to work in some CD's. Six months CDs can be had at 1.2%, and 9 month at 1.25%. So if you know you won't need some of your earnings for 9 months, you could earn 1.25% on your money. However, I would proceed with caution on anything other than the high yield savings account. With your one friend having such a low emergency fund, there is very little room for error. Perhaps until that amount is built up into something significant, it is just best to stick with the online savings. Of course, one solution would be to find a way to create income during the off season. That will go a long way into helping one build wealth.\\\"\",\n \"\\\"There are no risk-free high-liquidity instruments that pay a significant amount of interest. There are some money-market accounts around that pay 1%-2%, but they often have minimum balance or transaction limits. Even if you could get 3%, on a $4K balance that would be $120 per year, or $10 per month. You can do much better than that by just going to $tarbucks two less times per month (or whatever you can cut from your expenses) and putting that into the savings account. Or work a few extra hours and increase your income. I appreciate the desire to \\\"\\\"maximize\\\"\\\" the return on your money, but in reality increasing income and reducing expenses have a much greater impact until you build up significant savings and are able to absorb more risk. Emergency funds should be highly liquid and risk-free, so traditional investments aren't appropriate vehicles for them.\\\"\",\n \"In the short-term, a savings account with an online bank can net you ~1% interest, while many banks/credit unions with local branches are 0.05%. Most of the online savings accounts allow 6 withdrawals per month (they'll let you do more, but charge a fee), if you pair it with a checking account, you can transfer your expected monthly need in one or two planned transfers to your checking account. Any other options that may result in a higher yield will either tie up your money for a set length of time, or expose you to risk of losing money. I wouldn't recommend gambling on short-term stock gains if you need the money during the off-season.\"\n]","isConversational":false}}},{"rowIdx":98,"cells":{"_id":{"kind":"string","value":"1819"},"query":{"kind":"string","value":"Found an old un-cashed paycheck. How long is it good for? What to do if it's expired?"},"gt_ids":{"kind":"list like","value":["376499","66058","212713","267362","250285","220691"],"string":"[\n \"376499\",\n \"66058\",\n \"212713\",\n \"267362\",\n \"250285\",\n \"220691\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1,1,1,1,1,1],"string":"[\n 1,\n 1,\n 1,\n 1,\n 1,\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["176017","303685","567193","250285","523952","38571","88973","212713","547773","267362","45078","56129","498888","66058","120609","404366","533122","43370","5856","220691","221784","499028","93972","528661","578561","250702","165364","445739","476582","460577","7951","165691","376499","85144","45958","302993","12435","453641","78623","449082","122182","102526","101600","251700","59566","231727","250798","549037","322395","160612","272807","264075","199755","207992","540765","254468","168667","406109","356544","132657","133028","91707","561103","73261","546646","196997","176383","93451","565607","49796","278656","461456","508754","6765","309928","66991","110848","378024","94957","384751","160611","486067","119853","297013","461858","466162","550587","444447","500620","36917","18727","182645","339545","22067","104359","156001","550741","535207","32092","240074"],"string":"[\n \"176017\",\n \"303685\",\n \"567193\",\n \"250285\",\n \"523952\",\n \"38571\",\n \"88973\",\n \"212713\",\n \"547773\",\n \"267362\",\n \"45078\",\n \"56129\",\n \"498888\",\n \"66058\",\n \"120609\",\n \"404366\",\n \"533122\",\n \"43370\",\n \"5856\",\n \"220691\",\n \"221784\",\n \"499028\",\n \"93972\",\n \"528661\",\n \"578561\",\n \"250702\",\n \"165364\",\n \"445739\",\n \"476582\",\n \"460577\",\n \"7951\",\n \"165691\",\n \"376499\",\n \"85144\",\n \"45958\",\n \"302993\",\n \"12435\",\n \"453641\",\n \"78623\",\n \"449082\",\n \"122182\",\n \"102526\",\n \"101600\",\n \"251700\",\n \"59566\",\n \"231727\",\n \"250798\",\n \"549037\",\n \"322395\",\n \"160612\",\n \"272807\",\n \"264075\",\n \"199755\",\n \"207992\",\n \"540765\",\n \"254468\",\n \"168667\",\n \"406109\",\n \"356544\",\n \"132657\",\n \"133028\",\n \"91707\",\n \"561103\",\n \"73261\",\n \"546646\",\n \"196997\",\n \"176383\",\n \"93451\",\n \"565607\",\n \"49796\",\n \"278656\",\n \"461456\",\n \"508754\",\n \"6765\",\n \"309928\",\n \"66991\",\n \"110848\",\n \"378024\",\n \"94957\",\n \"384751\",\n \"160611\",\n \"486067\",\n \"119853\",\n \"297013\",\n \"461858\",\n \"466162\",\n \"550587\",\n \"444447\",\n \"500620\",\n \"36917\",\n \"18727\",\n \"182645\",\n \"339545\",\n \"22067\",\n \"104359\",\n \"156001\",\n \"550741\",\n \"535207\",\n \"32092\",\n \"240074\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["\"Checks (in the US, anyway) are only good for six months after they have been written. After that. under the US Uniform Commerical Code they are considered \"\"stale checks\"\" and banks need not accept them. My experience is that they generally won't -- but you probably shouldn't count on that, either when figuring out whether to try depositing an old check or figuring out how much cash you need to keep in your checking account to cover recent stale checks. The check you now hold is certainly a statement of intent to pay you and thus is a useful document to supplement other evidence that they still owe you the money -- but since checks can be cancelled and/or a replacement check may have been issued, its value for that purpose may be limited. You can try depositing it and see what happens. If that doesn't work (or you don't want to bother trying it) you can contact the retirement plan, point out that this check went uncashed, and ask them to send you a replacement. If they haven't already done so (you might want to check your own records for that), there shouldn't be any problem with this. (Note: Many business checks have a statement printed on them that they're only good for 90 days or so. If yours does, you can skip trying to cash it; just contact the retirement plan offices.)\"","You could talk to them, but (assuming you're in the U.S.), it's highly doubtful any bank would honor a check from 26 years ago. Most checks in the U.S. are only valid for 180 days, mainly to help companies and banks keep accounting simple. I would suggest talking to your late husband's former employer. Explain the situation and ask if they'd be willing to research it and perhaps honor his memory and contribution to their company by issuing a new check. They might do it as a gesture of good will. Are they legally bound to do this? To my knowledge, the answer is no. The check was issued and never cashed, which is not all that unusual for companies in business for a long time. A good example of this would be rebate checks, which (you'd be surprised) quite frequently end up in a drawer and forgotten about. There has to be some closure for the issuing company in its accounting, else they'd have money in their bank accounts that doesn't properly show in their ledgers. This is an interesting question, though. I hope others will reply, and perhaps they have a more informed take than me. I'm going to upvote it simply because I'd like to see this discussion continue. Good luck!","Under US law, a bank is not obligated to honor a check that is more than six months old. § 4-404. BANK NOT OBLIGED TO PAY CHECK MORE THAN SIX MONTHS OLD. A bank is under no obligation to a customer having a checking account to pay a check, other than a certified check, which is presented more than six months after its date, but it may charge its customer's account for a payment made thereafter in good faith. Note the law says the bank is not OBLIGATED to honor the check, but they are not forbidden from doing so. I don't have a survey on this, but I think most banks won't honor a check after more than 6 months to a year. I've had a few occasions where early in the year someone accidentally wrote the previous year on a check, like on January 10, 2017 they dated the check January 10, 2016, and the bank has given me a hard time about cashing it. The statute of limitations to challenge payment or non-payment of a check is 6 years: § 3-118. STATUTE OF LIMITATIONS. (b) Except as provided in subsection (d) or (e), if demand for payment is made to the maker of a note payable on demand, an action to enforce the obligation of a party to pay the note must be commenced within six years after the demand. I understand your frustration about being denied money that you presumably worked for and earned. But look at it from the other side. Suppose you wrote a check to someone, and years later they still had not cashed it. At some point you'd want to be able to clear this off your bank account. What if you want to close the account? What happens when you die? Would your heirs have to keep this account open for years ... decades ... centuries ... on the possibility that someday someone will cash this check? Realistically, there has to be SOME time limit. 6 months should be plenty of time for someone to make it to the bank with a check. If the company still exists then you could argue they have a MORAL obligation to pay you. If they have records that show that they did indeed give you this check and you never cashed it there'd be no question that you were trying to cheat them. But a moral obligation and a legal obligation are two different things. Legally, they paid you, and it's your problem that you failed to cash the check. You could talk to a lawyer, but if you live in the US, I think you are out of luck. (Of course other countries have different laws.)","The typical rule in the US is 180 days, but some banks do it differently. However, even if the check is dead, you should be able to call the payroll department for your old job. They can stop payment on the old check and issue you another one.","If you have the expired check in hand and take it back to the bank that issued it to you, I'd think they could do something for you. (I'd hope they would, anyway.) But automatically? I don't think so.","\"The answer probably varies with local law, and you haven't said where you're located. In most or all US states, it appears that after some statutory length of time, the bank would transfer the money to the state government, where it would be held indefinitely as \"\"unclaimed property\"\" in the name of the recipient (technically, the payee, the person to whom the check is made payable). This process is called escheatment. Most states publish a list of all unclaimed property, so at some later date the payee could find their name on this list, and realize they were entitled to the funds. There would then be a process by which the payee could claim the funds from the state. Usually the state keeps any interest earned on the money. As far as I know, there typically wouldn't be any way for you, the person who originated the payment, to collect the money after escheatment. (Before escheatment, if you have the uncashed check in your possession, you can usually return it to the bank and have it refunded to you.) I had trouble finding an authoritative source explaining this, but a number of informal sources (found by Googling \"\"cashier check escheatment\"\") seem to agree that this is generally how it works. Here is the web site for a law firm, saying that in California an uncashed cashier's check escheats to the state after 3 years. Until escheatment occurs, the recipient can cash the check at any time. I don't think that cashier's checks become \"\"stale\"\" like personal checks do, and there isn't any situation in which the funds would automatically revert to you.\"","\"Check is an obligation to pay, and is unconditional. In the US, checks don't expire (there are countries where they do). Endorsements such as \"\"void after X days\"\" are meaningless and don't affect the obligation to pay. The bank is under no obligation to honor a check that is more than 6 months old (based on the date on the check, of course). This is from the Unified Commercial Code 4-404. However, this refers to the bank, not to the person who gave you the check. The bank may pay, if the check is deposited in good faith and there's nothing wrong with it or with the account. So the first thing you can do is deposit the check. If asked - you can say that the person just wrote the wrong date, which is true. Worst case the check bounces. If the check bounces - you can start with demand letters and small claim courts. The obligation to pay doesn't go away unless satisfied, i.e.: paid.\"","This varies by jurisdiction somewhat but speaking as a Canadian, a small business owner, and accountant (unregistered but some courses and accounting for multiple businesses) this is the answer if you were in Canada. In Canada the cheque cashing limit is 6 months. Therefor any bank will refuse to cash this cheque. It would be totally morally and legally acceptable to ask for a replacement cheque from your employer. In Canada they would generally have no problem issuing a replacement; in other jurisdictions with differing time limits they might want to cancel the original cheque first.","\"Generally cashiers checks do not expire, since they are \"\"like cash\"\" and fully funded at the time of issue. However, whether they can be cashed after a long period of time (and also what the definition of \"\"long\"\" is) depends on the bank. Eventually, if left uncashed it probably would be escheated to the state to wait for someone to claim it. Being that it's been less than a year I expect it could be cashed by the payee written on the check without any issues. If the payee is deceased then the check can be cashed by the estate, as it should be considered the property of the estate the same way it would be if it had already been cashed and was now sitting in a bank account in your mother's name. Under normal circumstances the \"\"estate\"\" in this case would go to your mother's spouse first, then to you (and your siblings if you have any), unless there is a will specifying otherwise. The only way your aunt would be able to deposit the check on her own is if she was listed as an \"\"OR\"\" on the check, or if she is the executor of OP's mother's estate. It sounds like the second line of the check is indeed referring to your aunt, however, from your description of the check it sounds like the second line is simply a designation of what the check is for rather than an additional payee. I bet a probate attorney in your state could easily tell by simply looking at the check.\"","Look up escheatment. Companies that have unclaimed property are supposed to send it to your State government. They should have a unclaimed property department of some sort. In short, the company is going to have to pay either you, or your State (In Your Name) so they have to pay it either way. It would be easier for them to just give you new check. Expect them to give you some grief in verifying it has not been cashed and such... but if you have the original, in hand, it shouldn't be too bad. A 'Lost' check may be harder to get replaced. Not a lawyer, don't want to be.","You probably can't deposit the check directly, but there are mechanisms in place to get your money through other means. In the US, all states and territories have an unclaimed property registry. Before you contact the company that wrote the check, you should check that registry in your state. You will have to provide proof that you are the intended recipient, having the original check in your possession should make that considerably easier.","\"I would start by taking it to your bank and asking them what they think. They can probably call the bank on the check and find out if it is still good. If they let you deposit the check, I would wait a couple of weeks before spending the money, in case the issuing bank decides that the check is no good, and your bank wants its money back. If you are told that the check is not good anymore, the next thing I would do is to check with your state's treasurer's office and see if they have any \"\"unclaimed money\"\" for your mother.\"","\"Your bank has discretion to honor checks after 6 months, so you should talk to your bank about their specific policy. In general, banks won't accept \"\"large\"\" stale checks. The meaning of \"\"large\"\" varies -- $25,000 in NYC, as little as $2k in other places. Banks that service high-volume check issuers (like rebate companies) reject checks at 180 days. For business purposes, I think some banks will create accounts for specific mailings or other purposes as well. (i.e. 2011 refund account) The accounts close after a year.\"","The check is just barely over 6 months old. I suspect it will go through with no issues.","\"It depends on the bank. According to the Uniform Commercial Code, a bank is not obliged to pay a cheque after six months, but may do so if it wants to. § 4-404. BANK NOT OBLIGED TO PAY CHECK MORE THAN SIX MONTHS OLD. A bank is under no obligation to a customer having a checking account to pay a check, other than a certified check, which is presented more than six months after its date, but it may charge its customer's account for a payment made thereafter in good faith. Official link to UCC 4-404 As for your second question, if you stamp \"\"void after 60 days\"\" on your cheque; I don't have a specific answer for that part (yet). Update: I can find no specific rules about someone putting an arbitrary \"\"void after xxx days\"\" on their personal check. Businesess are alllowed to, but again the overriding rule seems to be that after six months it's the bank's choice, and you certainly couldn't make a cheque expire before six months, so I don't think that putting a stamp would make any difference. It's still up to the bank in the end.\"","Banks may still honor the check, depending on state law. Your obligation to pay has not been fulfilled. To get your money back, you need to wait a specified period of time and file a document reporting the check lost. There is probably a fee for this service.","When I last asked a certain large bank in the US (in 2011 or 2012), they didn't offer expiring personal checks. (I think they did offer something like that for business customers.) They also told me that, even if the payee cashes the check a year later and the check bounces, even if it's because I have closed the respective account, he will be able to go to the police and file a report against me for non-payment. (This is what the customer service rep told me on the phone after a bit of prodding, but someone else feel free to improve this answer and fix details or disagree; it's hard to believe and quite outrageous if true.)","\"If this is in the United States, there are laws governing business behavior when they have recorded expenses (checks, bills, etc) which are never withdrawn or deposited. A business is required to turn over these funds after a certain time frame to the state government as a part of their business tax cycle. (One caveat- these laws vary in age by state, and 13 years is a long time. You might still be out of luck for an amount so old..) There are even businesses which have cropped up to search for \"\"lost money\"\" (for a fee, of course) that your great uncle might have left behind and which now sits in a government holding account somewhere. It's not necessary to go through the third parties though, because the United States posts this information for the world to see. A good starting place is: USA.gov Unclaimed Money Tool Do as much legwork there as you can. You could even attempt to contact the former employer (you said the business accounts still exist) and in a very friendly, non-confrontational manner ask them what their procedures are and would have happened to your paycheck funds. As others have stated, they are under no legal obligation whatsoever to fix your problem for you, but who knows, you could get lucky and they might voluntarily help you out! You're looking for information not cash, so politeness, patience and understanding are your tools. If all else fails, you could try one of these 3rd party services. Here you run into diminishing returns as paying fees to search for money which might not exist just puts you further in the red.\"","\"Although banks do not have to honor checks that are more than six months old, they often do. Limit Noted on Check. Many large corporations put the length of time that a check is valid on the face of their checks. For example, a check may state, Valid for 90 days from this date\"\" or \"\"Not valid after 180 days.\"\"\"","In the UK the official rule is that a cheque is valid for 3 years from the date it was wrote. However after 3 months some banks can choose to turn them down. I had a cheque once that was a year old which is when I looked it up to see whether it was stil valid, and I found the laws regarding it then. I was actually quite surprised it was 3 years! Btw if it does bounce your quite entitled to ask your employer for a replacement cheque. They owe it you and it's just sat in their account assigned to you anyway.","Check with the state that you lived in. Inactive accounts typically get turned over to the State Treasury or Comptroller to be claimed. The time is typically set by statute. Hopefully, you don't live in a state like California or Arizona that treats abandoned property like booty.","Even going to small claims court the burden would be on you to prove that they never paid you. The 13 year gap would be the core of the argument by the company that they have no obligation to keep records from 13 years ago. That is far longer than they need to keep them for tax purposes. Even if they sent you a replacement check the next year, that happened to me once, the record of that transaction would have been 12 years ago. The bank will not cash it because of the date being 13 years ago. As we move forward with more and more of the checks being deposited via phone/scanner the banks will be even less likely to handle stale checks because the fact you have the check in your hand doesn't mean it wasn't cashed.","Checks actually have a limited lifespan before the bank no longer has to honor them, which simplifies this question. After about 6 months you assume that check won't be cashed. If they find it after that, you write them a new check. If they don't, you really should pester them to do so.","The legal department at the Bank left me a message telling me that the bank check was paid & the recipient got the funds. Call up the bank and find out who the recipient was. Generally it can only be cashed by the person whose name is on it - the original business partner to whom it was intended. It is unlikely to be cashed by the attorney, unless he misrepresented the facts to the bank and got the funds. My question is how could he have cashed it without the original bank check? The other possibility is your mom lost this check, went to the bank and requested them to cancel this and reissue a fresh banker's check and give it to the business partner - in which case the check you had was worthless. You would need to work with the bank and ask them for details. However without the details of the original bank check that you found, it would be difficult for the bank to help you.","\"Most likely the bank will keep it on file for a few years then turn it over to the state as \"\"unclaimed property\"\". I can't speak for all states though.\"","These unclaimed wages were presumably yours for the taking in Year X when employer paid your other wages. Maybe this is just about uncashed paychecks. In that case, they would have appeared on your W-2 for that year. If you filed your return including that W-2 income, then this is likely not new income. This would be a constructive receipt evaluation. Income occurs when you have the right to income, whether or not you have actual receipt of it. For example, if you are paid via cash drops into a piggy bank but you wait a week (for the start of a new tax period) to withdraw your cash from the piggy bank, then the money was constructively received on the day it went into the piggy bank. This prevents taxpayers from structuring their actual receipt of income, for tax purposes or otherwise, in ways at odds with their true economic position. You can't delay taxable income that is legally yours simply by refusing to accept it when you have the right to it. The wages were income at the time your employer proffered the paycheck. You did not cash it, but I suspect that you filed it on that year's taxes. There's a slight wrinkle that when the check went stale your ability to access the money was not so straightforward. However, you still had the legal right to the money, so my perspective is that the analysis did not change when the check went stale.","You should write a demand letter immediately, send the letter by certified mail, and then wait 30 days. Here is a sample demand letter for the state of california that you can send: http://www.courts.ca.gov/11151.htm It seems like most of the demand letters assumed that you tried to cash the check and incurred a service fee. Personally, I wouldn't risk incurring even most cost. Instead, after 30 days, I would take him to small claims court and show all the evidence you have (checks, receipts, and letters of correspondence).","\"How/when does my employer find out? Do they get a report from their bank stating that \"\"check 1234 for $1212.12 paid to John Doe was never deposited\"\" or does it manifest itself as an eventual accounting discrepancy that somebody has to work to hunt down? The accounting department or the payroll company they use will report that the check was not deposited. The bank has no idea that a check was written, but the accounting deportment will know. The bank reports on all the checks that were cashed. Accounting cares because the un-cashed check for $1212.12 is a liability. They have to keep enough money in the bank to pay all the liabilities. It shouldn't be hard for them to track down the discrepancy, they will know what checks are outstanding. Can my employer punish me for refusing the money in this way? Do they have any means to force me to take what I am \"\"owed?\"\" They can't punish you. But at some time in the future they will will tell their bank not to honor the check. They will assume that it was lost or misplaced, and they will issue a new one to you. When tax time comes, and I still have not accepted the money, would it be appropriate to adjust my reported income down by the refused amount? You can't decide not to report it. The company knows that in year X they gave you a check for the money. They are required to report it, since they also withheld money for Federal taxes, state taxes, payroll taxes, 401K, insurance. They also count your pay as a business expense. If you try and adjust the numbers on the W-2 the IRS will note the discrepancy and want more information. Remember the IRS get a copy of every W-2. The employer has to report it because some people who aren't organized may not have cashed a December check before the company has to generate the W-2 in late January. It would confuse everything if they could skip reporting income just because a check wasn't cashed by the time they had to generate the W-2.\"","Lost checks happen occasionally, and there are procedures in place (banking & business) to handle the situation. First and foremost you need to: Note: The money is legally yours, so the company is obligated to work with you here. If they refuse to cancel or reissue the check, at a minimum you'll want to contact the state government and let them know about the company's actions, if small claims court is not an option. Businesses aren't permitted to keep 'forfeited funds' in most states, instead they are required to turn them over to the government who would then return them to you when you ask for it. It's rather scummy of the government bureaucrats, because it puts them in the sole position to benefit from forgotten money, but that's the system we've given ourselves. Since you've moved overseas since the last time you worked with this company, you might need to exercise a little patience and be willing to jump through some hoops to get this resolved. Be prepared to provide them proof of who you are, and be ready to pay for extra security such as certified mail / FedEx so that you're both sure that the new check is delivered to you and only you. Last of all, learn from your mistake this time and be a little more cautious / proactive in keeping track of checks and depositing them in the future.","Once you've made a good-faith effort to straighten the situation out you've done all you can do. Cash the check.","~~Most checks don't.~~ Edit: I've definitely seen checks cashed way beyond 90-120 days. I don't have extensive knowledge of the rules though. Regardless, it's not like Floyd magically loses is pay if he doesn't cash the check in time.","\"Firstly, it isn't so generous. It is a win-win, but the bank doesn't have to mail me a free box of checks with my new account, or offer free printing to compete for my business. They already have the infrastructure to send out checks, so the actual cost for my bank to mail a check on my behalf is pretty minimal. It might even save them some cost and reduce exposure. All the better if they don't actually mail a check at all. Per my bank Individuals and most companies you pay using Send Money will be mailed a paper check. Your check is guaranteed to arrive by the delivery date you choose when you create the payment. ... A select number of companies–very large corporations such as telecoms, utilities, and cable companies–are part of our electronic biller network and will be paid electronically. These payments arrive within two business days... So the answer to your question depend on what kind of bill pay you used. If it was an electronic payment, there isn't a realistic possibility the money isn't cashed. If your bank did mail a paper check, the same rules would apply as if you did it yourself. (I suppose it would be up to the bank. When I checked with my bank's support this was their answer.) Therefore per this answer: Do personal checks expire? [US] It is really up to your bank whether or not they allow the check to be cashed at a later date. If you feel the check isn't cashed quickly enough, you would have to stop payment and contact whoever you were trying to pay and perhaps start again. (Or ask them to hustle and cash the check before you stop it.) Finally, I would bet a dime that your bank doesn't \"\"pre-fund\"\" your checks. They are just putting a hold on the equivalent money in your account so you don't overdraw. That is the real favor they do for you. If you stopped the check, your money would be unfrozen and available. EDIT Please read the comment about me losing a dime; seems credible.\"","The two banks involved may have different policies about honoring the check. It might not be written on the check. Your bank may decide that the stale check has to be treated differently and will withhold funds for a longer period of time before giving you access to the money. They will give time for the first bank to refuse to honor the check. They may be concerned about insufficient funds, the age of the check, and the fact that the original account could have been closed. If you are concerned about the age of the check. You could go to your bank in person, instead of using deposit by ATM, scanner, or smart phone. This allows you to talk to a knowledgeable person. And if they are going to treat the check differently or reject the check, they can let you know right away. The audit may not have been concerned about the fact that the check hadn't been cashed because when they did the audit the check was still considered fresh. Some companies will contact you eventually to reissue the check so you they can get the liability off their books. If the bank does refuse the check contact the company to see how you can get a replacement check issued. They may want proof the check can't be cashed so they don't have to worry about paying you twice.","I would go to the bank and just express the concern that the check sent to you might not fully clear. You don't want to spend it until you're sure it cleared. I'd ask for a manager to tell you when it will clear, then confirm after that date that it's cleared, with the same guy. Perhaps someone in the industry can explain how long the bank has before deciding the check is bad. 10 days? 2 weeks? Really, it should either clear or bounce by the second night. I'd not risk doing this for anyone. Anyone I know personally can cash their own check, and I'd not get involved with anyone I don't know on a financial matter like this. EDIT - See Littleadv comment below. Good checks clear fast, a forged check has time for the victim to go to the bank and challenge the signature and cashing of the check. The victim can have 60 days to do this. That's the issue, I am wrong, the bank manager couldn't confirm the check was good so soon.","Have you tried contacting them via phone or e-mail to follow up? If not, definitely do that first. If no response, you can keep this simple: Close your old account, write a personal check from your new one, and send the check with an explanatory note via Certified Mail. That will get you proof that it was delivered successfully (or not). Leave the money in your account for 180 days. Your check should be void after that and cannot be cashed (check with your bank on this) and if it's still unclaimed they will need to contact you to request payment.","If the check was payable to you, you had 60 days to deposit to an IRA. But, it needs to go into the same type of IRA as the 401(k) was. i.e. if the 401(k) was traditional, it goes into a traditional IRA, If 401(k) Roth, it goes into a Roth. The 20% is not the penalty. The penalty is 10% for early withdrawal. The 20% is the tax withholding. If the 401(k) had $1250, and they kept $250 for taxes, you'd want to deposit the full $1250 into the IRA. At tax time, you'll get the $250 credited to your taxes, and either owe less or get a higher refund.","Just like with IRS refunds issued in errors, after 3 years it's legally yours, they can't go after you anymore. So savings account until then or just mail them a check if that is what your conscious is saying.","\"My revised, bottom-line advice: offer to send a 2nd payment (preferably in the form of money order or cashier's check) for the difference you are agreeing to pay. I cannot imagine any reason why they would object to this - there is no fee to cash a check, there's less risk of error, and less work involved. Alternatively, offer to send a new check only once the other has been returned. Don't issue one more full-amount check while the other is still outstanding. There is a good reason not to accept partial payment by them, which is that accepting a partial payment of a debt comes with a varieties of strings attached depending on the nature of the debt (such as with evictions, court processes may need to be restarted, etc). They likely want to avoid such a situation - but this does not provide any support for why they can't just take a second payment and then cash it all at once as a single, full settlement of the debt. In a perfect world, you could skip all the non-sense by simply having your bank put a stop-payment on the old check before sending a new one. Unfortunately, this might not work with 100% accuracy - but in your case if the \"\"partial payment\"\" is a significant amount of money to you, I'd go ahead and spend the $20-40 to put in the order now as an extra safety on them not doing what they claim, if for some incredibly stupid reason you can't handle this with a 2nd payment instead of one single full one. It turns out banks have lots of surprising and stupid rules, like stop payments on a check expiring in 6 months (and they may even cash stale checks over a year old), no guarantee of a stop being successful, etc. The real rule is: they might cash the check unless you close the account. Sigh - this is one of many reasons I never, ever use checks. I am not aware of any law that requires a check to be physically returned if requested, or proof or destruction provided, or anything like that. It's a large part of the reason why we have the ability to stop payment on a check, and so void it through the bank without having any physical access to the check - but this process is spotty and imperfect, and cannot be relied upon. You can request them to do whatever you like, like void it and send it back, or destroy it, and they can just refuse - or say they'll do it and then just not do it, and you have no real useful recourse. The main goal should be to avoid losing money if someone \"\"accidentally\"\" (or intentionally) cashes both checks. So you can ask, or demand (refuse to pay until they return the check), etc - and they can respond more or less any way they want. As a final piece of future advice, consider no longer using checks for purposes like this. Switch to using something like a cashier's check or money order offered by your bank, which (by their very nature) takes the money out of your account immediately, severs all ongoing connection to your bank account, and is effectively like cash with the added benefit of a paper trail. Keep the stub and and receipt from the cashier's check/money order, in case it is lost or they claim they didn't get the money.\"","\"At least in the US, a Cashier's Check is just like a regular personal check - only it's guaranteed by the bank itself, so the person accepting it can be pretty certain the check won't be returned for insufficient funds...if the check is genuine! Most banks therefore have a policy for cashier's checks that is very similar to their policies on regular checks and money orders: if you are a member with an account in good standing, they'll make all or part of the money available to you according to their fund availability policy, which is usually anywhere from \"\"immediately\"\" to 7-10 days. With amounts over $5,000, banks will tend to put a hold on the funds to ensure it clears and they get their money. If you are not a member then many banks will refuse to cash the check at all, unless the cashier's check is drawn on on that brand of bank. So if the cashier's check is issued by, say, Chase Bank, Chase banks will usually be willing to cash out the entire check to you immediately (with properly provided ID). Because the bank is guaranteed by them they are able to check their system and ensure the check is real and can clear the check instantly. This policy isn't just up to individual banks entirely, as it is defined by United States federal banking policies and federal regulations on availability of funds. If you really must cash the check without a holding period and won't/can't have a bank account of your own to perform this, then you will generally need to go into a branch of the bank that is guaranteeing the check to be able to cash it out fully right away. Note that since the check might be issued by a bank with no branch near you, you should have a back-up plan. Generally banks will allow you to setup a special/limited savings-only account to deposit your check, even if you don't have a checking account, so if no other option works you might try that as well. The funds availability policies are the same, but at least you'll be able to cash it generally in 10 days time (and then close the account and withdraw your money).\"","As Pete B says, something is not adding up. If your story is correct you should still have the legitimate check from your employer. If that is the case, your solution is simple. You If you do not have the good cheque then you are in deep trouble - because then either you didn't have it (in which case you have been lying to us) or you cashed it and spent the money (which means you knew that you had given the bad cheque to the liquor store). Either of those mean you have been deliberately perpetrating a fraud. As for the consequences - be aware that passing a bad cheque is a crime, and if the store reports it as such, it is not unlikely that the police will want to investigate. If they decide you did this deliberately you could be arrested, and you might well end up in jail. We will do you the favour of assuming that you still have the good cheque, and option 1 is possible.","\"To answer length validity and security implications of draft checks issued and negotiated within the United States, I am heavily addressing the common erroneous assumptions of where the funds sit while they're \"\"in\"\" a draft check and how to get them out. Tl;Dr The existing answers are incomplete and in some ways dangerously misleading. Jerry can still be potentially defrauded by Tom, and even if the check is legitimately drawn and negotiable, Jerry may still experience delayed access to the funds. The funds sit in an account held by the issuing bank. As long as the bank has sufficient funds, the check does. However, there are significantly more factors that go into whether a check will be returned unpaid (\"\"bounce\"\"). If I hand you $5000 in cash, will you give me $5000 in cash? Probably, and you'd probably be pretty safe. How about I give you a $5000 draft check, will you give me $5000 in cash without doing anything except looking at it to verify the check? I hope not (Cash America sure wouldn't) but people sell expensive goods with the \"\"same as cash\"\" attitude. Remember: The only non-cash form of payment which cannot somehow be held, reversed or returned unpaid in the U.S. without consent of the receiving party is a payment order (a.k.a wire transfer)! The draft check is \"\"as good as cash\"\" in the sense that the money for a draft check is withdrawn from your account before the check is negotiated (deposited). This does NOT mean that a draft check will not bounce, so Jerry is NOT as secure in handing the goods to Tom as if Tom had handed him cash, as it is still a check. Jerry's bank will not receive the funds for Tom's draft check for an average 3 to 5 business days, same as a personal check. Jerry will probably have access to the first $5000 within two business days... provided that he deposits the draft check in person at his bank's branch or in a bank-owned ATM. In the United States, Regulation CC governs funds availability. Regarding official, draft, or tellers checks: \"\"If the customer desires next-day availability of funds from these checks, [your bank] may require use of a special deposit slip.\"\" Mobile deposit availability in the U.S. is NOT regulated in this way and will likely be subject to a longer hold on more, if not all, of the check! Draft checks, don't, as a habit, \"\"bounce\"\" in the colloquial sense of \"\"returned for insufficient funds.\"\" This is because they are prepaid and drawn upon a financial institution's account. Banks are insolvent far less frequently than other businesses or individuals. Draft checks, tellers checks, official checks, bank checks, etc CAN, however, be returned unpaid if one of the following is true: As an aside: an institution is not obligated to honor a stale dated check, but may do so at its discretion. If you have a personal check outstanding for over 6 months, it may still clear and potentially overdraw your account. In this case, contact your bank ASAP to process a reversal. The depositing bank mis-scans the check and the issuing bank refuses the resulting data. I have seen systems mis-read which data field is which, or its contents. Also, there is the possibility the image if the check will be illegible to the issuing bank. The draft check has been cancelled (stop paid). This can happen if: a) The check was fraudulently bought from the issuing bank using Tom's account b) Tom has completed an indemnification agreement that the check was lost or otherwise not used for its intended purpose, without fraud having occurred against Tom c) The draft check is escheated (paid to the state as unclaimed property). This case is a subset of case 1, but will lead to a different return reason stamped on the (image replacement document of) the check. The draft check was never any good in the first place. Because of the perception that draft checks are as good as cash (they're not but are a lot better than personal checks), forgery and attempted fraud is shockingly common. These aren't actually underwritten by a real bank, even if they appear to be. The only money \"\"in\"\" them is what the fraudster can get out of you. Jerry did not properly endorse the check before presenting it for deposit or otherwise negotiating it. In my time in banking, I most commonly saw cases 3 and 4. Unlike most counterfeit cash, case 3 will fool Jerry and Jerry's teller. Tom gets an immediate payout (a car, a wire transfer, a payday loan, etc) and Jerry's bank doesn't know the check isn't valid until they call the alleged issuing bank to verify its negotiability, or in the case of smaller checks into lower-risk accounts, it is simply returned unpaid as fraudulently drawn. To conclude: Call the alleged issuing bank's verification line before handing over the goods, always properly endorse your deposits, and address what happens if one does not receive or collect on prompt payment in your contracts.\"","You can probably recover it by checking with the unclaimed property division of the state where you opened the account. See The Office of the Comptroller of the Currency website for more information.","The only certain way is to have the issuer confirm it. You'd think there would be a better way, but no there isn't. I suggest you read this story about what can happen even if you are the innocent victim trying to cash a fraudulent Cashier's Check. The consequences included some jail time and huge attorney fees for this unlucky person.","I suspect @SpehroPefhany is correct and that your bank will cash a check from the US Department of the Treasury. Especially since they're the same ones who guarantee the U.S. Dollar. They may hold the funds until the check clears, but I think you'll have good luck going through your bank. Of course, fees and exchange rate are a factor. Consider browsing the IRS and US Treasury Department websites for suggestions/FAQs. I suggest you line up a way to cash it, and make sure there's enough left after fees and exchange rate and postage to get the check that the whole process is worth it, all before you ask it to be shipped to you. If there's no way to do it through your bank, through a money exchange business (those at the airport come to mind) or through your government (postal bank?), and the check is enough that you're willing to go through some trouble, then you should look into assigning power of attorney for this purpose. I don't know if it is possible, but it might be worth looking into. Look for US based banks in your area.","\"What does it mean that the bank will \"\"hold you responsible\"\"? Clearly the money won't be credited. Will you be charged a fee like an NSF cheque? Will they try to prosecute you? Is there any way to confirm whether a cashiers cheque is forged? Could you for example tell your bank that you were uncertain of the origin, and ask them to confirm it? Can you call the issuer and verify (from the serial number) that they did in fact issue a cheque for that amount with you as the payee? Even calling the bank might not help. The first verification is that the bank exists, and that the account number and name match and that they did issue a check. But that doesn't cover the situation where the person that sent you the check wasn't who they claimed to be. That is the theft that could take weeks to find.\"","I know someone around there, who might be able to collect it for me.Would I still be able to cash it out in the other country? Or can he/she cash it out for me? Unlikely. Unless they deposit it into a US bank account in your name. You can cash US checks in almost any decent bank anywhere in the world, but it may cost you some and will probably take 2-3 weeks. Since the amount is won in the US, how would I pay the taxes? , since its earned over there. You would file a tax return with the IRS and send them a payment. You can buy drafts in US dollars almost anywhere in the world.","(I am making the assumption that this is a US based question). Keep in mind that the alternative is to amend your tax forms from 2010, and 2011. The IRS and the State will want their money, they might not to wait for 78 paychecks. That is 3 years. Ask for lots of documentation, so you understand what they are doing.","Notify his bank. They should know where the check was cashed. Assuming it had your name and someone cashed it, they committed fraud and the bank will want to know that. But r/personalfinance is a better place to ask questions like that.","You purchased the check from the bank. Your funds have been transferred. If the recipient never cashed the check, the money continues to be the bank's, just as if you had written s normal check that didn't get cashed the money would sit in your account.","\"The store owners don't know what your intentions are. All they know is they gave you good cash for a bad check. Part of this is that you're paying for the bad acts of others in the past, and these people aren't in the business of trying to understand your intentions. If you show good faith by going in and paying whatever you can, it will go a long way toward getting them to work with you on the balance. I don't know if they'd have much of a criminal case if the check you gave them was clearly marked as \"\"void\"\" and you've shown a willingness to resolve the situation. Of course you can't blame them for not wanting to accept another check from you. Good old hard cash, even if it isn't the full amount, will be a better sign of your intent to repay the debt.\"","While you can print that on the check, it isn't considered legally binding. If you are concerned about a check not being deposited in a timely manner, consider purchasing a cashier's check instead. This doesn't solve the problem per se, but it transfers responsibility of tracking that check from you to the bank.","How would I go about this so that I can start using this money? You would open the LLC. The checks were not written out to you, they were written out to the LLC. Only the LLC can endorse them.","\"Typically I'll carry the charge for quite awhile, up to a year. If it hasn't cleared by then, I contact the institution that should have received the money to see what they want to do about it. If they tell me not to worry about it, then I change the payee to be \"\"Overdraft Protection\"\", and consider it as having been spent. That way I build up (slowly) a cushion in my checking account.\"","With a check, there are limits on cashing the stale check, but that is set by the banks involved. With a debit card transaction, it will be up the the debit card company and your bank. Imagine a situation where a person finds an old check and tries to cash it at their bank. If the bank considers the check stale, they might reject it, or put a longer hold on the check. When the check writers bank gets the transaction, they will also decide what to do. If they reject it, the first bank will reverse the transaction. You can't count on a 90 day, or 180 day limit; most banks will ask you to put a stop payment on an old check that you don't want cashed. This is especially important step if you write a replacement check. Because there is no check number to put a stop payment on, in fact the temporary hold will fall off after a few days. There doesn't appear to be a way to stop an old transaction. Be careful if you do contact the restaurant, you could end up double paying for the meal if they swipe your card again. Your best option may be just to keep the transaction as pending.","Most likely the account funds have been handed over to the government of the state in which the account was established. Generally it can be recovered if reasonable proof of ownership is provided (which you seem to have). You should try going to http://unclaimed.org/ and selecting the account's state. That site is run by the National Association of Unclaimed Property Administrators, and generally selecting the state will take you to the web site of the particular state's unclaimed property department and give information on how to find out about the funds and/or file a claim.","The bank doesn't keep it. It will stay unclaimed until the unclaimed assets process in the state that the bank branch is in kicks in. At that point it it a state by state process, with each state being different. You will need to inquire to the state government about what the process is in that state. (This will probably be searchable online.)","If you don't have a bank account then open one and use the check as your opening deposit. You'll need to obtain a Social Security card as well (you didn't indicate you have one or not, so I'll assume you don't), but they're free and quick to apply for. I assume you're from Washington state, so there should be no problem with you opening an account in Washington, no matter where the check is from. Because of the amount of the check, the bank will probably only let yo have a part of the amount for a few days until it clears, but federal banking rules require quick clearance of out-of-state checks (I think it's 48 hours now), so you'd have access to at least half of the money right away and the rest in a few days.","\"Anyone can walk into a bank, say \"\"Hi, I'm a messenger, I have an endorsed check and a filled out deposit slip for Joe Blow who has an account here, please deposit this check for him, as he is incapacitated. Straight deposit.\"\" They'll fiddle on their computer, to see if they can identify the deposit account definitively, and if they can, and the check looks legit, \"\"thanks for taking care of our customer sir.\"\" Of course, getting a balance or cashback is out of the question since you are not authenticated as the customer. I have done the same with balance transfer paperwork, in that case the bank knew the customer and the balance transfer was his usual. If the friend does not have an account there, then s/he should maybe open an account at an \"\"online bank\"\" that allows deposit by snapping photos on a phone, or phone up a branch, describe her/his situation and see if they have any options. Alternately, s/he could get a PayPal account. Or get one of those \"\"credit card swipe on your phone\"\" deals like Square or PayPal Here, which have fees very close to nil, normally cards are swiped but you can hand-enter the numbers. Those are fairly easy to get even if you have troubles with creditworthiness. S/he would need to return the check to the payer and ask the payer to pay her/him one of those ways. The payer may not be able to, e.g. if they are a large corporation. A last possibility is if the check is from a large corporation with whom s/he continues to do business with. For instance, the electric company cashiers out your account after you terminate service at your old location. But then you provision service at a new location and get a new bill, you can send their check right back to them and say \"\"Please apply this to my new account\"\". If s/he is unable to get any of those because of more serious problems like being in the country illegally, then, lawful behavior has its privileges, sorry. There are lots of unbanked people, and they pay through the nose for banking services at those ghastly check-cashing places, at least in America. I don't have a good answer for how to get a check cashed in that situation.\"","\"As was suggested here, I checked with the state for \"\"Unclaimed Funds,\"\" and despite the fact that I had already done so and found nothing, the funds were now there to be retrieved. So, the takeaway here is, keep checking periodically, it might just take a bit for things to settle out. This link is endorsed by NJ State, and covers much of the US: http://www.missingmoney.com/. Otherwise check with your state's Dept of Treasury.\"","What would you do if you had the check? Probably destroy it. The goal is to render it uncashable. One way to do such is to have it shredded. If you are uncomfortable leaving them to destroy it, then swing by and pick it up. Alternatively offer to send them a self addressed and stamped envelope. I am sure they will accommodate if you ask nicely.","The store wants their money back. It's understandable that they are hesitant to accept another check from you. So if you don't have the cash to pay them back, take your good check somewhere else to cash it, and use that money to pay back the store that you gave the bad check to.","All banks in the US that I have ever worked with will allow you to deposit checks if: In your case, you have 3 options:","The fee you were charged to get the money order is gone. You agreed to that fee when you purchased the Money order. It is now a check that you can use how ever you wish. If you have already added a name to the pay to line it can be changed but different agencies have different rules for what they will accept. Take the money order to your bank explain the situation and tell them you want to put the money in your account, or cash it.","You should probably talk to a professional tax adviser. This doesn't seem to be a common situation. From the top of my head, without being a lawyer or a tax professional, I think of it like this: The income is for year 200..., and should have been taxed then. You constructively received it then, and not claimed it. You probably had withholding from this salary that should have been reported to you then on W2 (you can get a copy from the IRS). I'd say you're to amend the return for year 200... with the new income, if it wasn't reported then. Although if more than 3 years passed (6, if its 25% or more of your gross income for that year), its beyond statute. However, as I said, I'm not a lawyer and not a professional tax adviser, so you cannot in any way rely on my opinion for anything that would result in not paying any taxes or penalties you should have. You should talk to a licensed tax professional (EA/CPA/Lawyer licensed in your State).","\"If there was still money in the account when it was closed, the bank would have turned over the cash to the state where they operated. Search Google for \"\"unclaimed property <state name>\"\" for the unclaimed property department of the state. The state's website will show if there is money for you.\"","The insurance company issued the check. I'd contact the insurance company to have the current check voided and a new one issued to the pharmacy.","Checks are awesome things in that, even if it gets lost the money doesn't change hands until the check is cashed. I would highly recommend NOT signing a check over and putting it in the mail though. Essentially putting your signature on it is saying yes, pay to whomever. Theoretically acceptable, rarely a good idea. Call the insurance company and have them cancel current check to reissue to the correct people. Don't forget to write VOID (in huge letters) on the check before throwing away and/or tearing it up.","Normally if the amount of a cashiers check is over $5,000, a bank (like Wells Fargo) may put a 10 business day hold on it to make sure the transaction is sound.","They always expire sometime, and they are a scam. I recommend you unload any on ebay as soon as you get them. For this one in articular, just ask to see a manager and explain your situation politely. You'll usually get what you want.","I would not take any action with the check (neither return it nor cash it), but instead contact the bank. We live in the modern era where you can call someone on the phone or email them, and get nearly instant feedback. Use this to your advantage. Find out why they refunded you the money twice: was it an error on their part (in which case you just tear up the check or return it to them and be done with it)? Is it possible you're wrong about it being twice refunded (maybe the first check didn't go through properly or was only for half the amount, and you're just wrong)? Maybe they had some sort of guarantee that they failed to live up to and are correctly refunding you double your money. Probably the first, of course. But you should call them and ask, and verify what they want you to do, before you take any action - particularly one that costs you money. And certainly don't just cash the check; if it is a mistake, they'll be asking for that money back later, with interest, and be within their rights to do so.","I am assuming that you are talking about US Savings Bonds: Here is a page that talks about maturity dates of US Savings bonds. If They aren'tSavings bonds but are another type ofUS Government Bond Assuming they are Savings bonds, here is information regarding redeeming of bonds. How do I redeem my EE/E Bonds? Electronic bonds: Log in to Treasury Direct and follow the directions there. The cash amount can be credited to your checking or savings account within one business day of the redemption date. Paper bonds You can cash paper EE/E Bonds at many local financial institutions. We don't keep a list of banks that redeem bonds, so check with banks in your area. What will I need to redeem a paper bond? Before taking in the bonds to redeem them, it's usually a good idea to check with the financial institution to find out what identification and other documents you'll need. When you present your paper bonds, you'll be asked to show your identity. You can do this by being a customer with an active account open for at least 6 months at the financial institution that will be paying the bonds, or presenting acceptable identification such as a valid driver's license if the >redemption value of the bonds is less than $1,000. If you are not listed as the owner or co-owner on the bond, you'll have to show that you >are entitled to cash in the bond. The treasury direct website also discusses converting bonds, rules regarding using them for education, how often they are credited with interest","You have a few options: Personally, I would cash the check at my broker and buy a mixture of US Government and New York Tax-Exempt securities until I figured out what to do with it.","\"I have checked with Bank of America, and they say the ONLY way to cash (or deposit, or otherwise get access to the funds represented by a check made out to my business) is to open a business account. They tell me this is a Federal regulation, and every bank will say the same thing. To do this, I need a state-issued \"\"dba\"\" certificate (from the county clerk's office) as well as an Employer ID Number (EIN) issued by the IRS. AND their CHEAPEST business banking account costs $15 / month. I think I can go to the bank that the check is drawn upon, and they will cash it, assuming I have documentation showing that I am the sole proprietor. But I'm not sure.... What a racket!!\"","Is it standard for a bank to need the cheque to cancel it? (what about if it was intercepted, surely you can cancel before you're plundered?) Generally it makes life easy for the Bank. They can physically see the cheque and are assured that it has not been cashed. Bank can put a hold / stop on the cheque. However given today's Banking it is complex with multiple systems and specially with international clearing taking months ... the cheque could have been cashed and the Bank that issued may only get to know about it month later. Is there any way to bypass this? Best is for your friend to correspond in writing. The rejection email from your Bank should also go into the communication. And follow-ups every 15 days all in writing. Generally after tons of follow-up Banks would pay it off.","For an individual its not automatic. One needs to ask the Bank, return the check. For Corporate Customer depending on how big the relationship is, many a times this is given as a service and there is an automatic return","Deposit it into your Brazilian bank account. They'll charge you collection fee (shouldn't be high, its a cashier's check equivalent), and the currency exchange rate may not be the best ever, but that's the price to pay for the service. Another option would be to cash the check at check cashing places, but that would most likely require you being in the US (I don't know if any check-cashing store in Brazil would cash a US check).","This question was asked three years ago, but now that it's 2017 there is actually a relatively easy, cheap and fast solution to at least the first half of your question. To cash the check: I've done this a half dozen times while abroad (from the US) without any problems.","\"If it is planned, then one can get a Bankers Check payable overseas; if destination is known. 1.) What will happen to the money? It will eventually go to Government as escheating. Unlcaimed.org can help you trace the funds and recover it. 2.) Will the banks close the accounts? 3.) After how much time will the banks close the accounts? Eventually Yes. If there is no activity [Note the definition of activity is different, A credit interest is not considered as activity, a authentic phone call / correspondence to change the address or any servicing request is considered activity] for a period of One year, the account is classified as \"\"Dormant\"\". Depending on state, after a period of 3-5 years, it would be inactive and the funds escheated. i.e. handed over to Government. 4.) Is there anything else to do? Any ideas? Before leaving? Try keeping it active by using internet banking or credit / debit cards linked to the account. These will be valid activities. 5.) Is there any way to send a relative to the US with any kind of paper of power, to unfreeze the accounts? 6.) The banks say they would need a power of attorney, but does that person actually need to be an attorney in the US, or can it simply be a relative WITH a paper (a paper that says power of attorney) or what is a power of attorney exactly, is it an actual attorney person, or just a paper? 7.) Is there any other way to unfreeze the accounts? Although I can confirm first hand; I think there would be an exception process if a person cannot travel to the Bank. It could even be that a person is in some remote state, not well etc and can't travel in person. I think if you are out of country, you could walk-in to an US embassy and provide / sign relevant documents there and get it attested. Although for different purpose, I know a Power of Attorney being created in other country and stamped / verified by US embassy and sent it over to US. This was almost a decade back. Not sure about it currently.\"","\"Its a classic sign of fraud. The fraud is on you. You cashed the check not given to you, and not endorsed by the person its given to, so even if the check is legit you're still in trouble. There are many variations of this scheme, but the common thing is that the \"\"innocent\"\" third party is given a check to cash, and gives its own check or cash in return. The check ends up being forged, stolen, or otherwise invalid, but the cash/check the third party gave is long gone. Usually its cash, because its untraceable. You should wait at least a couple of weeks to make sure the check doesn't bounce. You might want to contact the check owner to verify its legit, and suggest to return the money, if it is not. You might also want to consult with an attorney. Bear in mind, that it might be reported to the authorities as a money laundering scheme (which it very well might be), and you'll have some explaining to do in this case, even if the check is legit.\"","\"Under no circunstances will the bank keep the money for itself. Keeping the money is considered Unjust Enrichment: A general equitable principle that no person should be allowed to profit at another's expense without making restitution for the reasonable value of any property, services, or other benefits that have been unfairly received and retained. The banks will attempt to, in order: Wait for some time: Generally, a time frame of three to five years with no customer-initiated activity sends an account into dormancy. The amount of time that must lapse depends on the [US] state in which the bank account was opened. Attempt to contact the account holder: (...) the bank must try to notify the account holder. If the customer does not respond within a certain amount of time, the balance on the account will be turned over to the state. Turn over the money to the government: In a process what is called “escheating” an account, banks are required to turn over funds from the inactive account to the state treasury. Once the account is sent to the state, the funds are held as unclaimed property. At this point the account no longer exists so far the bank is concerned. To reclaim your money, you will have to contact your state for the instructions on how to get your money back. You’ll need to complete and submit a claim form along with the necessary identification. If you happen to have unclaimed property held by the state, you can begin the retrieval process by visiting www.unclaimed.org. For a foreigner, it is not unreasonable that the bank would attempt to contact the diplomatic body of the country of origin in step 2, but that may be subject to bank policy. There is some paperwork the bank needs to do to \"\"escheat\"\" the account and properly transfer the money to the state.\"","Just FYI for the benefit of future users. Haven't been paid yet nor have I paid but some interesting facts. I decided to sign the contract with the person who approached me. The contract seemed harmless whereby I only transfer money once I retrieve the funds. Thanks to your comments here I also understood that I must make sure the funds really cleared in my account and can never be cancelled before I transfer anything. He gave me the information of the check that matched my previous employer and made sense as it was a check issues just after I had left my job and the state. I did not used the contact details he provided me, but rather found the direct contact details of the go to person in my last institution and contacted them. I still haven't been able to reclaim the funds, but that is due to internal problems between the state comptroller and my institution. Will come back to update if I am ever successful, but the bottom line is that it is probably not a scam. I am waiting for the final resolution of the case before I post the name of the company which approached me (if it is at all OK per the discussion board rules)","Yes, you can cash the check now, but with the caution that if your amended return causes you to owe much more, you should immediately file and include payment with your amended return to avoid interest and penalties.","US currency doesn't expire, it is always legal tender. I can see some trouble if you tried to spend a $10,000 bill (you'd be foolish to do so, since they are worth considerably more). Maybe some stores raise eyebrows at old-style $100's (many stores don't take $100 bills at all), but you could swap them for new style at a bank if having trouble with a particular store. Old-series currency can be an issue when trying to exchange US bills in other countries, just because it doesn't expire here, doesn't mean you can't run into issues elsewhere. Other countries have different policies, for example, over the last year the UK phased in a new five pound note, and as of last month (5/5/2017) the old fiver is no longer considered legal tender (can still swap out old fivers at the bank for now at least). Edit: I mistook which currency you took where, and focused on US currency instead of Canadian, but it looks like it's the same story there.","Cashiers check is as good as cash. I use them all the time as banks don't carry over 2-3k anymore. I can bring the cashiers check anywhere and thus cash it for u without an account. It's basically a piece of paper that says these funds are set aside from the issuers account just for and only for the check. That's why it's accepted anywhere. It's a gurantee from one bank to another that the funds are there waiting to be transferred. The whole point of the check is so the funds are available immediately. The bank will call the issuing bank verify the Check is real and than cash it immediately. You don't pay a fee to buy the cashiers check just to wait for it to clear like a normal free check. Its immediate and just as good as cash. I use them weekly/monthly for amounts from 5k up to over 100k.","\"You can spend the money quite quickly. The problem is that if there is something wrong with the check, the bank will ask you for the money back. If the check is from a trusted source (a trusted friend, a business with good reputation etc.) that's fine. If the money is from an untrusted source, make sure that having to pay back the money doesn't get you into trouble. Since most people are honest, this is fine for a small amount, but if it's more than you can afford to pay back, don't spend it. A simple scam is that people send you checks, \"\"by mistake\"\" the check is for the wrong amount, say $910 instead of $190, and they ask you to send the difference back. So you put $910 into your account, send them $720, and six weeks later your bank asks for their $910 back. If someone pays you too much on a check and asks you to pay them the difference, you know it is a scam.\"","Years ago, I had a tenant who bounced a check now and then. I started going to the bank where his account was. With my ID they were agreeable to cashing the check against his account. The teller first checked his balance and only cashed when there were enough funds. One time he was $10 short. I wrote a deposit slip and added the $10 it took to clear the check. As they say, your mileage may vary, I hear some banks won't even break a large bill for a non customer.","The check is from your credit card company. Whose ever the money is, it is certainly not the credit card company's, and they know that. This is why they cut the check to you. You should definitely cash the check (or deposit it into your bank account). You've tried to contact the mattress store multiple times, and they aren't responding. At some point, you've got to say that you've done everything that you could to do the right thing. Now, keep in mind that at some point in the future, the mattress store may come back to you and ask for the money back. If I were you, I would not spend this money for quite some time. Put it away in a savings account (maybe add it to your emergency fund). Then if they come back in the future looking for money, you can easily write them a check. You probably also want to keep some documentation on what you've done already to try to give the money back to them, just in case for some reason they try to claim that you owe them some interest or something like that.","\"New Zealand has a statute of limitations on debt of six years, twelve years if it is \"\"a debt acknowledged in a deed\"\" (probably not the case here). If you have had no contact with the bank for that time, the debt expires. If you got convicted of a crime in relation to the debt (e.g. fraud) then that would fall under a different statute of limitations, but a bank isn't going to bother doing that over $600, and the courts would probably not accept the case anyway.\"","Is there a point after which they legally unable to charge me? No. If you gave a check, then the bank may bounce it as stale after 6 months, but doesn't have to. With debit/credit transactions, they post as they're processed, and some merchants may not sync their terminals or deposit their manual slips often. As the world becomes more and more connected this becomes extremely rare, but still happens. Technically your promise to pay is a contract which never expires, and they can come after you years later to collect.","It all depends on the trust level you have in them handling it correctly. If they never deposit it, it doesn't matter what happens to the check, they could frame it and hang it on the wall. The risk is that someone someday deposits it (incorrectly double-charging you), and you need to do what think is appropriate to avoid this risk. If your trust in them is too small, only sending it back to you makes sure that you physically control the check.","Will 2 millions dollars check to be cash? Will a bank convert a check to cash? In my experience, no. Even for small checks. Unless you happen to have a VERY good relationship with your banker (read as: have an existing large bank balance.) The exception is if you go to the bank the check is drawn on. But even then, I doubt they'll cash a $2M dollar check. Can you deposit a $2M dollar check? Most definitely. How long will 2 millions dollars check to be cash? Depends on your bank's policies, relationship with you, and the origination of the check. You'll need to talk to the exact bank in question to find out. Some guidelines from my own experiences: Out of country checks will take quite awhile, say 4 weeks, even for trivial amounts. I'm not sure what a $2M size would do. Beyond that situation, it will likely depend on whether you have more money than the check's worth in your bank accounts. If so, they may be willing to give you cash in a few days. Or if you only want some of the money as cash in a few days, that might be possible. If the bank couldn't cash for him, will the bank give him some of cash for example, $500,000 for now, and the rest wait to be cash at later time like 24 hours or 1 week? Unless you already have a lot of money in your relationship with the bank, I think it is HIGHLY UNLIKELY they will let you have ANY of the money in 24 hours. You MIGHT get some of it in a week. The issue will be that such a large check will be viewed as having a high chance of being fraudulent, so they will want to be exceptionally conservative.","Check the rules with your broker. Usually if it expires in the money, the broker would exercise it. But you need to check with your broker about their rules on the matter.","What I'm reading is that they subtracted the $85 you owe them and they're cutting you a cashier's check for the rest. Ethically speaking, you owed them the money, they subtracted it and made you a check for the rest. Once you cash that check, nobody owes anyone anything in this equation. Sounds like they're in the clear. Legally speaking, I have no idea, since I'm not a lawyer, but even if it was not legal, good luck getting the $85 back without spending far more in retaining a lawyer and fighting it in court. Even fighting it in small claims court will take more of your time than $85 is worth. If it's your time that is the problem, 12 days is not horrible in banking terms. Yes, we're spoiled now by ACH transfers and same day deposit availability, but since you're retired, I'm sure if you think back you'll remember when it used to take two business weeks to clear a check... TLDR; cancel future deposits to that bank, find a new bank, then forget this fiasco and get your revenge by enjoying your life.","You keep a copy of the dashed check, and tell him to pound sand. If he contacts you again, you tell him that you will charge him with fraud. By accepting the check and cashing it, he acknowledged the debt is paid.","A company as large as Home Depot will have a fairly robust Human Resources department and would probably be able to steer you in the right direction: odds are they know the name of the brokerage and other particulars. I did some googling around, their # is (1-866-698-4347). Different states have different rules about how long an institution can have assets abandoned before turning them over to the state. California, as an example, has an abandoned property search site that you can use. That being said, I had some penny stocks sitting in a brokerage account I never touched for about 20 years and when I finally logged back in there they were, still sitting there.","In general if there are no transactions for several years a bank will close the account. In my experience they also send at least one warning notice. If they do close the account they send it to the state. Each state has an unclaimed property office. You can contact them regarding the procedure to get the money. If this money was just turned over to the state there may be some lag time before you can get it back. Two notes: the state government doesn't charge a fee to get your money back. Don't pay a company a finder's fee. bank account's owned by minors don't have the same activity requirements as those owned by adults.","The correct, legal way to handle this would be to file an amended return for that year (probably best to talk to a CPA). If you don't have the 1099, the IRS has a process to handle that here. It sounds like they would just try to contact the employer themselves, but it doesn't say exactly what would happen if the employer is out of business.","\"Did I do anything wrong by cashing a check made out to \"\"trustee of <401k plan> FBO \"\", and if so how can I fix it? I thought I was just getting a termination payout of the balance. Yes, you did. It was not made to you, and you were not supposed to even be able to cash it. Both you and your bank made a mistake - you made a mistake by depositing a check that doesn't belong to you, and the bank made a mistake by allowing you to deposit a check that is not made out to you to your personal account. How do I handle the taxes I owe on the payout, given that I had a tax-free 1099 two years ago and no 1099 now? It was not tax free two years ago. It would have been tax free if you would forward it to the entity to which the check was intended - since that would not be you. But you didn't do that. As such, there was no withdrawal two years ago, and I believe the 401k plan is wrong to claim otherwise. You did however take the money out in 2014, and it is fully taxable to you, including penalties. You should probably talk to a licensed tax adviser (EA/CPA licensed in your State). My personal (and unprofessional) opinion is that you didn't withdraw the money in 2012 since the check was not made out to you and the recipient never got it. You did withdraw money in 2014 since that's when you actually got the money (even if by mistake). As such, I'd report this withdrawal on the 2014 tax return. However, as I said, I'm not a professional and not licensed to provide tax advice, so this is my opinion only. I strongly suggest you talk to a licensed tax adviser to get a proper opinion and guidance on the matter. If it is determined that the withdrawal was indeed in 2012, then you'll have to amend the 2012 tax return, report the additional income and pay the additional tax (+interest and probably underpayment penalty).\"","I am not sure about your country but I think each country must be having some fixed time frame for reversal of the transaction (Which must be less than a month), please inquire if that time limit has passed or not ? If it hasn't best will be to wait for some more time before informing them. Once the reversal time limit has passed no one (Except government agencies with court orders) can withdraw money from your bank account without your written consent even if they have deposited it themselves. World would have been a strange place if this restriction was not there. Since you want to close the account you can approach your previous boss (or executive from HR/Account department) and tell them your intention. After that either you can transfer money online to their account or give them a cheque which they can deposit in their account. This way things will end faster and you will be freed from this extra account. If above process takes time another solution will be to transfer the money to your another (permanent) account and give them a cheque from this account. Here also you can use online transfers or by sending them a cheque through courier. Whichever mode you choose to pay the money back make sure you have some documented proof that may be helpful in future.","\"(This answer is based on the US banking system; if that isn't where you are, please edit appropriately.) There are probably two places the thief could go to cash the check: Your bank The issuer's bank Third-party banks are unlikely to want to cash a check drawn on a different bank for a payee who isn't their customer. So notifying both of these banks would be a good start. Also, hopefully the thief does not look like you and won't be able to pass using your ID. The thief will also have to forge your endorsement on the check - if he goes to your bank, they can check it against your signature which they have on file, and hopefully it won't match. (The issuer's bank wouldn't notice that, of course, so read on.) Even if the check is cashed, you should ultimately be okay, as I understand it. The issuer of the check still owes you the money; he can't prove he's paid you until he has the cancelled check (or its image) showing your valid endorsement. So he needs to give you another check, eventually. (This assumes the check was payment for a debt of some kind; if it was a gift or some other sort of voluntary payment, he could at this point change his mind and decide not to pay you after all.) The issuer should be okay too. If the check is cashed and debited from his account, he should go to his bank and tell them the endorsement is forged. They may ask you to sign something where you state under penalty of perjury that the signature isn't yours. Then they will re-credit his account, so that he can pay you again. (Normally the bank that cashed the check will be on the hook for the loss; it was their responsibility to make sure they were paying the rightful payee, and they failed in that responsibility. Various procedural issues can shift that liability between banks, but ultimately it shouldn't be either customer who suffers unless someone did something really negligent, like not reporting the theft for months.) Obviously this would all be much simpler if the issuer can call his bank right away and stop payment. This can be done over the phone or online, so \"\"out of town\"\" shouldn't be an issue unless he is out in the woods or something. If he can talk to you, he can talk to them.\""],"string":"[\n \"\\\"Checks (in the US, anyway) are only good for six months after they have been written. After that. under the US Uniform Commerical Code they are considered \\\"\\\"stale checks\\\"\\\" and banks need not accept them. My experience is that they generally won't -- but you probably shouldn't count on that, either when figuring out whether to try depositing an old check or figuring out how much cash you need to keep in your checking account to cover recent stale checks. The check you now hold is certainly a statement of intent to pay you and thus is a useful document to supplement other evidence that they still owe you the money -- but since checks can be cancelled and/or a replacement check may have been issued, its value for that purpose may be limited. You can try depositing it and see what happens. If that doesn't work (or you don't want to bother trying it) you can contact the retirement plan, point out that this check went uncashed, and ask them to send you a replacement. If they haven't already done so (you might want to check your own records for that), there shouldn't be any problem with this. (Note: Many business checks have a statement printed on them that they're only good for 90 days or so. If yours does, you can skip trying to cash it; just contact the retirement plan offices.)\\\"\",\n \"You could talk to them, but (assuming you're in the U.S.), it's highly doubtful any bank would honor a check from 26 years ago. Most checks in the U.S. are only valid for 180 days, mainly to help companies and banks keep accounting simple. I would suggest talking to your late husband's former employer. Explain the situation and ask if they'd be willing to research it and perhaps honor his memory and contribution to their company by issuing a new check. They might do it as a gesture of good will. Are they legally bound to do this? To my knowledge, the answer is no. The check was issued and never cashed, which is not all that unusual for companies in business for a long time. A good example of this would be rebate checks, which (you'd be surprised) quite frequently end up in a drawer and forgotten about. There has to be some closure for the issuing company in its accounting, else they'd have money in their bank accounts that doesn't properly show in their ledgers. This is an interesting question, though. I hope others will reply, and perhaps they have a more informed take than me. I'm going to upvote it simply because I'd like to see this discussion continue. Good luck!\",\n \"Under US law, a bank is not obligated to honor a check that is more than six months old. § 4-404. BANK NOT OBLIGED TO PAY CHECK MORE THAN SIX MONTHS OLD. A bank is under no obligation to a customer having a checking account to pay a check, other than a certified check, which is presented more than six months after its date, but it may charge its customer's account for a payment made thereafter in good faith. Note the law says the bank is not OBLIGATED to honor the check, but they are not forbidden from doing so. I don't have a survey on this, but I think most banks won't honor a check after more than 6 months to a year. I've had a few occasions where early in the year someone accidentally wrote the previous year on a check, like on January 10, 2017 they dated the check January 10, 2016, and the bank has given me a hard time about cashing it. The statute of limitations to challenge payment or non-payment of a check is 6 years: § 3-118. STATUTE OF LIMITATIONS. (b) Except as provided in subsection (d) or (e), if demand for payment is made to the maker of a note payable on demand, an action to enforce the obligation of a party to pay the note must be commenced within six years after the demand. I understand your frustration about being denied money that you presumably worked for and earned. But look at it from the other side. Suppose you wrote a check to someone, and years later they still had not cashed it. At some point you'd want to be able to clear this off your bank account. What if you want to close the account? What happens when you die? Would your heirs have to keep this account open for years ... decades ... centuries ... on the possibility that someday someone will cash this check? Realistically, there has to be SOME time limit. 6 months should be plenty of time for someone to make it to the bank with a check. If the company still exists then you could argue they have a MORAL obligation to pay you. If they have records that show that they did indeed give you this check and you never cashed it there'd be no question that you were trying to cheat them. But a moral obligation and a legal obligation are two different things. Legally, they paid you, and it's your problem that you failed to cash the check. You could talk to a lawyer, but if you live in the US, I think you are out of luck. (Of course other countries have different laws.)\",\n \"The typical rule in the US is 180 days, but some banks do it differently. However, even if the check is dead, you should be able to call the payroll department for your old job. They can stop payment on the old check and issue you another one.\",\n \"If you have the expired check in hand and take it back to the bank that issued it to you, I'd think they could do something for you. (I'd hope they would, anyway.) But automatically? I don't think so.\",\n \"\\\"The answer probably varies with local law, and you haven't said where you're located. In most or all US states, it appears that after some statutory length of time, the bank would transfer the money to the state government, where it would be held indefinitely as \\\"\\\"unclaimed property\\\"\\\" in the name of the recipient (technically, the payee, the person to whom the check is made payable). This process is called escheatment. Most states publish a list of all unclaimed property, so at some later date the payee could find their name on this list, and realize they were entitled to the funds. There would then be a process by which the payee could claim the funds from the state. Usually the state keeps any interest earned on the money. As far as I know, there typically wouldn't be any way for you, the person who originated the payment, to collect the money after escheatment. (Before escheatment, if you have the uncashed check in your possession, you can usually return it to the bank and have it refunded to you.) I had trouble finding an authoritative source explaining this, but a number of informal sources (found by Googling \\\"\\\"cashier check escheatment\\\"\\\") seem to agree that this is generally how it works. Here is the web site for a law firm, saying that in California an uncashed cashier's check escheats to the state after 3 years. Until escheatment occurs, the recipient can cash the check at any time. I don't think that cashier's checks become \\\"\\\"stale\\\"\\\" like personal checks do, and there isn't any situation in which the funds would automatically revert to you.\\\"\",\n \"\\\"Check is an obligation to pay, and is unconditional. In the US, checks don't expire (there are countries where they do). Endorsements such as \\\"\\\"void after X days\\\"\\\" are meaningless and don't affect the obligation to pay. The bank is under no obligation to honor a check that is more than 6 months old (based on the date on the check, of course). This is from the Unified Commercial Code 4-404. However, this refers to the bank, not to the person who gave you the check. The bank may pay, if the check is deposited in good faith and there's nothing wrong with it or with the account. So the first thing you can do is deposit the check. If asked - you can say that the person just wrote the wrong date, which is true. Worst case the check bounces. If the check bounces - you can start with demand letters and small claim courts. The obligation to pay doesn't go away unless satisfied, i.e.: paid.\\\"\",\n \"This varies by jurisdiction somewhat but speaking as a Canadian, a small business owner, and accountant (unregistered but some courses and accounting for multiple businesses) this is the answer if you were in Canada. In Canada the cheque cashing limit is 6 months. Therefor any bank will refuse to cash this cheque. It would be totally morally and legally acceptable to ask for a replacement cheque from your employer. In Canada they would generally have no problem issuing a replacement; in other jurisdictions with differing time limits they might want to cancel the original cheque first.\",\n \"\\\"Generally cashiers checks do not expire, since they are \\\"\\\"like cash\\\"\\\" and fully funded at the time of issue. However, whether they can be cashed after a long period of time (and also what the definition of \\\"\\\"long\\\"\\\" is) depends on the bank. Eventually, if left uncashed it probably would be escheated to the state to wait for someone to claim it. Being that it's been less than a year I expect it could be cashed by the payee written on the check without any issues. If the payee is deceased then the check can be cashed by the estate, as it should be considered the property of the estate the same way it would be if it had already been cashed and was now sitting in a bank account in your mother's name. Under normal circumstances the \\\"\\\"estate\\\"\\\" in this case would go to your mother's spouse first, then to you (and your siblings if you have any), unless there is a will specifying otherwise. The only way your aunt would be able to deposit the check on her own is if she was listed as an \\\"\\\"OR\\\"\\\" on the check, or if she is the executor of OP's mother's estate. It sounds like the second line of the check is indeed referring to your aunt, however, from your description of the check it sounds like the second line is simply a designation of what the check is for rather than an additional payee. I bet a probate attorney in your state could easily tell by simply looking at the check.\\\"\",\n \"Look up escheatment. Companies that have unclaimed property are supposed to send it to your State government. They should have a unclaimed property department of some sort. In short, the company is going to have to pay either you, or your State (In Your Name) so they have to pay it either way. It would be easier for them to just give you new check. Expect them to give you some grief in verifying it has not been cashed and such... but if you have the original, in hand, it shouldn't be too bad. A 'Lost' check may be harder to get replaced. Not a lawyer, don't want to be.\",\n \"You probably can't deposit the check directly, but there are mechanisms in place to get your money through other means. In the US, all states and territories have an unclaimed property registry. Before you contact the company that wrote the check, you should check that registry in your state. You will have to provide proof that you are the intended recipient, having the original check in your possession should make that considerably easier.\",\n \"\\\"I would start by taking it to your bank and asking them what they think. They can probably call the bank on the check and find out if it is still good. If they let you deposit the check, I would wait a couple of weeks before spending the money, in case the issuing bank decides that the check is no good, and your bank wants its money back. If you are told that the check is not good anymore, the next thing I would do is to check with your state's treasurer's office and see if they have any \\\"\\\"unclaimed money\\\"\\\" for your mother.\\\"\",\n \"\\\"Your bank has discretion to honor checks after 6 months, so you should talk to your bank about their specific policy. In general, banks won't accept \\\"\\\"large\\\"\\\" stale checks. The meaning of \\\"\\\"large\\\"\\\" varies -- $25,000 in NYC, as little as $2k in other places. Banks that service high-volume check issuers (like rebate companies) reject checks at 180 days. For business purposes, I think some banks will create accounts for specific mailings or other purposes as well. (i.e. 2011 refund account) The accounts close after a year.\\\"\",\n \"The check is just barely over 6 months old. I suspect it will go through with no issues.\",\n \"\\\"It depends on the bank. According to the Uniform Commercial Code, a bank is not obliged to pay a cheque after six months, but may do so if it wants to. § 4-404. BANK NOT OBLIGED TO PAY CHECK MORE THAN SIX MONTHS OLD. A bank is under no obligation to a customer having a checking account to pay a check, other than a certified check, which is presented more than six months after its date, but it may charge its customer's account for a payment made thereafter in good faith. Official link to UCC 4-404 As for your second question, if you stamp \\\"\\\"void after 60 days\\\"\\\" on your cheque; I don't have a specific answer for that part (yet). Update: I can find no specific rules about someone putting an arbitrary \\\"\\\"void after xxx days\\\"\\\" on their personal check. Businesess are alllowed to, but again the overriding rule seems to be that after six months it's the bank's choice, and you certainly couldn't make a cheque expire before six months, so I don't think that putting a stamp would make any difference. It's still up to the bank in the end.\\\"\",\n \"Banks may still honor the check, depending on state law. Your obligation to pay has not been fulfilled. To get your money back, you need to wait a specified period of time and file a document reporting the check lost. There is probably a fee for this service.\",\n \"When I last asked a certain large bank in the US (in 2011 or 2012), they didn't offer expiring personal checks. (I think they did offer something like that for business customers.) They also told me that, even if the payee cashes the check a year later and the check bounces, even if it's because I have closed the respective account, he will be able to go to the police and file a report against me for non-payment. (This is what the customer service rep told me on the phone after a bit of prodding, but someone else feel free to improve this answer and fix details or disagree; it's hard to believe and quite outrageous if true.)\",\n \"\\\"If this is in the United States, there are laws governing business behavior when they have recorded expenses (checks, bills, etc) which are never withdrawn or deposited. A business is required to turn over these funds after a certain time frame to the state government as a part of their business tax cycle. (One caveat- these laws vary in age by state, and 13 years is a long time. You might still be out of luck for an amount so old..) There are even businesses which have cropped up to search for \\\"\\\"lost money\\\"\\\" (for a fee, of course) that your great uncle might have left behind and which now sits in a government holding account somewhere. It's not necessary to go through the third parties though, because the United States posts this information for the world to see. A good starting place is: USA.gov Unclaimed Money Tool Do as much legwork there as you can. You could even attempt to contact the former employer (you said the business accounts still exist) and in a very friendly, non-confrontational manner ask them what their procedures are and would have happened to your paycheck funds. As others have stated, they are under no legal obligation whatsoever to fix your problem for you, but who knows, you could get lucky and they might voluntarily help you out! You're looking for information not cash, so politeness, patience and understanding are your tools. If all else fails, you could try one of these 3rd party services. Here you run into diminishing returns as paying fees to search for money which might not exist just puts you further in the red.\\\"\",\n \"\\\"Although banks do not have to honor checks that are more than six months old, they often do. Limit Noted on Check. Many large corporations put the length of time that a check is valid on the face of their checks. For example, a check may state, Valid for 90 days from this date\\\"\\\" or \\\"\\\"Not valid after 180 days.\\\"\\\"\\\"\",\n \"In the UK the official rule is that a cheque is valid for 3 years from the date it was wrote. However after 3 months some banks can choose to turn them down. I had a cheque once that was a year old which is when I looked it up to see whether it was stil valid, and I found the laws regarding it then. I was actually quite surprised it was 3 years! Btw if it does bounce your quite entitled to ask your employer for a replacement cheque. They owe it you and it's just sat in their account assigned to you anyway.\",\n \"Check with the state that you lived in. Inactive accounts typically get turned over to the State Treasury or Comptroller to be claimed. The time is typically set by statute. Hopefully, you don't live in a state like California or Arizona that treats abandoned property like booty.\",\n \"Even going to small claims court the burden would be on you to prove that they never paid you. The 13 year gap would be the core of the argument by the company that they have no obligation to keep records from 13 years ago. That is far longer than they need to keep them for tax purposes. Even if they sent you a replacement check the next year, that happened to me once, the record of that transaction would have been 12 years ago. The bank will not cash it because of the date being 13 years ago. As we move forward with more and more of the checks being deposited via phone/scanner the banks will be even less likely to handle stale checks because the fact you have the check in your hand doesn't mean it wasn't cashed.\",\n \"Checks actually have a limited lifespan before the bank no longer has to honor them, which simplifies this question. After about 6 months you assume that check won't be cashed. If they find it after that, you write them a new check. If they don't, you really should pester them to do so.\",\n \"The legal department at the Bank left me a message telling me that the bank check was paid & the recipient got the funds. Call up the bank and find out who the recipient was. Generally it can only be cashed by the person whose name is on it - the original business partner to whom it was intended. It is unlikely to be cashed by the attorney, unless he misrepresented the facts to the bank and got the funds. My question is how could he have cashed it without the original bank check? The other possibility is your mom lost this check, went to the bank and requested them to cancel this and reissue a fresh banker's check and give it to the business partner - in which case the check you had was worthless. You would need to work with the bank and ask them for details. However without the details of the original bank check that you found, it would be difficult for the bank to help you.\",\n \"\\\"Most likely the bank will keep it on file for a few years then turn it over to the state as \\\"\\\"unclaimed property\\\"\\\". I can't speak for all states though.\\\"\",\n \"These unclaimed wages were presumably yours for the taking in Year X when employer paid your other wages. Maybe this is just about uncashed paychecks. In that case, they would have appeared on your W-2 for that year. If you filed your return including that W-2 income, then this is likely not new income. This would be a constructive receipt evaluation. Income occurs when you have the right to income, whether or not you have actual receipt of it. For example, if you are paid via cash drops into a piggy bank but you wait a week (for the start of a new tax period) to withdraw your cash from the piggy bank, then the money was constructively received on the day it went into the piggy bank. This prevents taxpayers from structuring their actual receipt of income, for tax purposes or otherwise, in ways at odds with their true economic position. You can't delay taxable income that is legally yours simply by refusing to accept it when you have the right to it. The wages were income at the time your employer proffered the paycheck. You did not cash it, but I suspect that you filed it on that year's taxes. There's a slight wrinkle that when the check went stale your ability to access the money was not so straightforward. However, you still had the legal right to the money, so my perspective is that the analysis did not change when the check went stale.\",\n \"You should write a demand letter immediately, send the letter by certified mail, and then wait 30 days. Here is a sample demand letter for the state of california that you can send: http://www.courts.ca.gov/11151.htm It seems like most of the demand letters assumed that you tried to cash the check and incurred a service fee. Personally, I wouldn't risk incurring even most cost. Instead, after 30 days, I would take him to small claims court and show all the evidence you have (checks, receipts, and letters of correspondence).\",\n \"\\\"How/when does my employer find out? Do they get a report from their bank stating that \\\"\\\"check 1234 for $1212.12 paid to John Doe was never deposited\\\"\\\" or does it manifest itself as an eventual accounting discrepancy that somebody has to work to hunt down? The accounting department or the payroll company they use will report that the check was not deposited. The bank has no idea that a check was written, but the accounting deportment will know. The bank reports on all the checks that were cashed. Accounting cares because the un-cashed check for $1212.12 is a liability. They have to keep enough money in the bank to pay all the liabilities. It shouldn't be hard for them to track down the discrepancy, they will know what checks are outstanding. Can my employer punish me for refusing the money in this way? Do they have any means to force me to take what I am \\\"\\\"owed?\\\"\\\" They can't punish you. But at some time in the future they will will tell their bank not to honor the check. They will assume that it was lost or misplaced, and they will issue a new one to you. When tax time comes, and I still have not accepted the money, would it be appropriate to adjust my reported income down by the refused amount? You can't decide not to report it. The company knows that in year X they gave you a check for the money. They are required to report it, since they also withheld money for Federal taxes, state taxes, payroll taxes, 401K, insurance. They also count your pay as a business expense. If you try and adjust the numbers on the W-2 the IRS will note the discrepancy and want more information. Remember the IRS get a copy of every W-2. The employer has to report it because some people who aren't organized may not have cashed a December check before the company has to generate the W-2 in late January. It would confuse everything if they could skip reporting income just because a check wasn't cashed by the time they had to generate the W-2.\\\"\",\n \"Lost checks happen occasionally, and there are procedures in place (banking & business) to handle the situation. First and foremost you need to: Note: The money is legally yours, so the company is obligated to work with you here. If they refuse to cancel or reissue the check, at a minimum you'll want to contact the state government and let them know about the company's actions, if small claims court is not an option. Businesses aren't permitted to keep 'forfeited funds' in most states, instead they are required to turn them over to the government who would then return them to you when you ask for it. It's rather scummy of the government bureaucrats, because it puts them in the sole position to benefit from forgotten money, but that's the system we've given ourselves. Since you've moved overseas since the last time you worked with this company, you might need to exercise a little patience and be willing to jump through some hoops to get this resolved. Be prepared to provide them proof of who you are, and be ready to pay for extra security such as certified mail / FedEx so that you're both sure that the new check is delivered to you and only you. Last of all, learn from your mistake this time and be a little more cautious / proactive in keeping track of checks and depositing them in the future.\",\n \"Once you've made a good-faith effort to straighten the situation out you've done all you can do. Cash the check.\",\n \"~~Most checks don't.~~ Edit: I've definitely seen checks cashed way beyond 90-120 days. I don't have extensive knowledge of the rules though. Regardless, it's not like Floyd magically loses is pay if he doesn't cash the check in time.\",\n \"\\\"Firstly, it isn't so generous. It is a win-win, but the bank doesn't have to mail me a free box of checks with my new account, or offer free printing to compete for my business. They already have the infrastructure to send out checks, so the actual cost for my bank to mail a check on my behalf is pretty minimal. It might even save them some cost and reduce exposure. All the better if they don't actually mail a check at all. Per my bank Individuals and most companies you pay using Send Money will be mailed a paper check. Your check is guaranteed to arrive by the delivery date you choose when you create the payment. ... A select number of companies–very large corporations such as telecoms, utilities, and cable companies–are part of our electronic biller network and will be paid electronically. These payments arrive within two business days... So the answer to your question depend on what kind of bill pay you used. If it was an electronic payment, there isn't a realistic possibility the money isn't cashed. If your bank did mail a paper check, the same rules would apply as if you did it yourself. (I suppose it would be up to the bank. When I checked with my bank's support this was their answer.) Therefore per this answer: Do personal checks expire? [US] It is really up to your bank whether or not they allow the check to be cashed at a later date. If you feel the check isn't cashed quickly enough, you would have to stop payment and contact whoever you were trying to pay and perhaps start again. (Or ask them to hustle and cash the check before you stop it.) Finally, I would bet a dime that your bank doesn't \\\"\\\"pre-fund\\\"\\\" your checks. They are just putting a hold on the equivalent money in your account so you don't overdraw. That is the real favor they do for you. If you stopped the check, your money would be unfrozen and available. EDIT Please read the comment about me losing a dime; seems credible.\\\"\",\n \"The two banks involved may have different policies about honoring the check. It might not be written on the check. Your bank may decide that the stale check has to be treated differently and will withhold funds for a longer period of time before giving you access to the money. They will give time for the first bank to refuse to honor the check. They may be concerned about insufficient funds, the age of the check, and the fact that the original account could have been closed. If you are concerned about the age of the check. You could go to your bank in person, instead of using deposit by ATM, scanner, or smart phone. This allows you to talk to a knowledgeable person. And if they are going to treat the check differently or reject the check, they can let you know right away. The audit may not have been concerned about the fact that the check hadn't been cashed because when they did the audit the check was still considered fresh. Some companies will contact you eventually to reissue the check so you they can get the liability off their books. If the bank does refuse the check contact the company to see how you can get a replacement check issued. They may want proof the check can't be cashed so they don't have to worry about paying you twice.\",\n \"I would go to the bank and just express the concern that the check sent to you might not fully clear. You don't want to spend it until you're sure it cleared. I'd ask for a manager to tell you when it will clear, then confirm after that date that it's cleared, with the same guy. Perhaps someone in the industry can explain how long the bank has before deciding the check is bad. 10 days? 2 weeks? Really, it should either clear or bounce by the second night. I'd not risk doing this for anyone. Anyone I know personally can cash their own check, and I'd not get involved with anyone I don't know on a financial matter like this. EDIT - See Littleadv comment below. Good checks clear fast, a forged check has time for the victim to go to the bank and challenge the signature and cashing of the check. The victim can have 60 days to do this. That's the issue, I am wrong, the bank manager couldn't confirm the check was good so soon.\",\n \"Have you tried contacting them via phone or e-mail to follow up? If not, definitely do that first. If no response, you can keep this simple: Close your old account, write a personal check from your new one, and send the check with an explanatory note via Certified Mail. That will get you proof that it was delivered successfully (or not). Leave the money in your account for 180 days. Your check should be void after that and cannot be cashed (check with your bank on this) and if it's still unclaimed they will need to contact you to request payment.\",\n \"If the check was payable to you, you had 60 days to deposit to an IRA. But, it needs to go into the same type of IRA as the 401(k) was. i.e. if the 401(k) was traditional, it goes into a traditional IRA, If 401(k) Roth, it goes into a Roth. The 20% is not the penalty. The penalty is 10% for early withdrawal. The 20% is the tax withholding. If the 401(k) had $1250, and they kept $250 for taxes, you'd want to deposit the full $1250 into the IRA. At tax time, you'll get the $250 credited to your taxes, and either owe less or get a higher refund.\",\n \"Just like with IRS refunds issued in errors, after 3 years it's legally yours, they can't go after you anymore. So savings account until then or just mail them a check if that is what your conscious is saying.\",\n \"\\\"My revised, bottom-line advice: offer to send a 2nd payment (preferably in the form of money order or cashier's check) for the difference you are agreeing to pay. I cannot imagine any reason why they would object to this - there is no fee to cash a check, there's less risk of error, and less work involved. Alternatively, offer to send a new check only once the other has been returned. Don't issue one more full-amount check while the other is still outstanding. There is a good reason not to accept partial payment by them, which is that accepting a partial payment of a debt comes with a varieties of strings attached depending on the nature of the debt (such as with evictions, court processes may need to be restarted, etc). They likely want to avoid such a situation - but this does not provide any support for why they can't just take a second payment and then cash it all at once as a single, full settlement of the debt. In a perfect world, you could skip all the non-sense by simply having your bank put a stop-payment on the old check before sending a new one. Unfortunately, this might not work with 100% accuracy - but in your case if the \\\"\\\"partial payment\\\"\\\" is a significant amount of money to you, I'd go ahead and spend the $20-40 to put in the order now as an extra safety on them not doing what they claim, if for some incredibly stupid reason you can't handle this with a 2nd payment instead of one single full one. It turns out banks have lots of surprising and stupid rules, like stop payments on a check expiring in 6 months (and they may even cash stale checks over a year old), no guarantee of a stop being successful, etc. The real rule is: they might cash the check unless you close the account. Sigh - this is one of many reasons I never, ever use checks. I am not aware of any law that requires a check to be physically returned if requested, or proof or destruction provided, or anything like that. It's a large part of the reason why we have the ability to stop payment on a check, and so void it through the bank without having any physical access to the check - but this process is spotty and imperfect, and cannot be relied upon. You can request them to do whatever you like, like void it and send it back, or destroy it, and they can just refuse - or say they'll do it and then just not do it, and you have no real useful recourse. The main goal should be to avoid losing money if someone \\\"\\\"accidentally\\\"\\\" (or intentionally) cashes both checks. So you can ask, or demand (refuse to pay until they return the check), etc - and they can respond more or less any way they want. As a final piece of future advice, consider no longer using checks for purposes like this. Switch to using something like a cashier's check or money order offered by your bank, which (by their very nature) takes the money out of your account immediately, severs all ongoing connection to your bank account, and is effectively like cash with the added benefit of a paper trail. Keep the stub and and receipt from the cashier's check/money order, in case it is lost or they claim they didn't get the money.\\\"\",\n \"\\\"At least in the US, a Cashier's Check is just like a regular personal check - only it's guaranteed by the bank itself, so the person accepting it can be pretty certain the check won't be returned for insufficient funds...if the check is genuine! Most banks therefore have a policy for cashier's checks that is very similar to their policies on regular checks and money orders: if you are a member with an account in good standing, they'll make all or part of the money available to you according to their fund availability policy, which is usually anywhere from \\\"\\\"immediately\\\"\\\" to 7-10 days. With amounts over $5,000, banks will tend to put a hold on the funds to ensure it clears and they get their money. If you are not a member then many banks will refuse to cash the check at all, unless the cashier's check is drawn on on that brand of bank. So if the cashier's check is issued by, say, Chase Bank, Chase banks will usually be willing to cash out the entire check to you immediately (with properly provided ID). Because the bank is guaranteed by them they are able to check their system and ensure the check is real and can clear the check instantly. This policy isn't just up to individual banks entirely, as it is defined by United States federal banking policies and federal regulations on availability of funds. If you really must cash the check without a holding period and won't/can't have a bank account of your own to perform this, then you will generally need to go into a branch of the bank that is guaranteeing the check to be able to cash it out fully right away. Note that since the check might be issued by a bank with no branch near you, you should have a back-up plan. Generally banks will allow you to setup a special/limited savings-only account to deposit your check, even if you don't have a checking account, so if no other option works you might try that as well. The funds availability policies are the same, but at least you'll be able to cash it generally in 10 days time (and then close the account and withdraw your money).\\\"\",\n \"As Pete B says, something is not adding up. If your story is correct you should still have the legitimate check from your employer. If that is the case, your solution is simple. You If you do not have the good cheque then you are in deep trouble - because then either you didn't have it (in which case you have been lying to us) or you cashed it and spent the money (which means you knew that you had given the bad cheque to the liquor store). Either of those mean you have been deliberately perpetrating a fraud. As for the consequences - be aware that passing a bad cheque is a crime, and if the store reports it as such, it is not unlikely that the police will want to investigate. If they decide you did this deliberately you could be arrested, and you might well end up in jail. We will do you the favour of assuming that you still have the good cheque, and option 1 is possible.\",\n \"\\\"To answer length validity and security implications of draft checks issued and negotiated within the United States, I am heavily addressing the common erroneous assumptions of where the funds sit while they're \\\"\\\"in\\\"\\\" a draft check and how to get them out. Tl;Dr The existing answers are incomplete and in some ways dangerously misleading. Jerry can still be potentially defrauded by Tom, and even if the check is legitimately drawn and negotiable, Jerry may still experience delayed access to the funds. The funds sit in an account held by the issuing bank. As long as the bank has sufficient funds, the check does. However, there are significantly more factors that go into whether a check will be returned unpaid (\\\"\\\"bounce\\\"\\\"). If I hand you $5000 in cash, will you give me $5000 in cash? Probably, and you'd probably be pretty safe. How about I give you a $5000 draft check, will you give me $5000 in cash without doing anything except looking at it to verify the check? I hope not (Cash America sure wouldn't) but people sell expensive goods with the \\\"\\\"same as cash\\\"\\\" attitude. Remember: The only non-cash form of payment which cannot somehow be held, reversed or returned unpaid in the U.S. without consent of the receiving party is a payment order (a.k.a wire transfer)! The draft check is \\\"\\\"as good as cash\\\"\\\" in the sense that the money for a draft check is withdrawn from your account before the check is negotiated (deposited). This does NOT mean that a draft check will not bounce, so Jerry is NOT as secure in handing the goods to Tom as if Tom had handed him cash, as it is still a check. Jerry's bank will not receive the funds for Tom's draft check for an average 3 to 5 business days, same as a personal check. Jerry will probably have access to the first $5000 within two business days... provided that he deposits the draft check in person at his bank's branch or in a bank-owned ATM. In the United States, Regulation CC governs funds availability. Regarding official, draft, or tellers checks: \\\"\\\"If the customer desires next-day availability of funds from these checks, [your bank] may require use of a special deposit slip.\\\"\\\" Mobile deposit availability in the U.S. is NOT regulated in this way and will likely be subject to a longer hold on more, if not all, of the check! Draft checks, don't, as a habit, \\\"\\\"bounce\\\"\\\" in the colloquial sense of \\\"\\\"returned for insufficient funds.\\\"\\\" This is because they are prepaid and drawn upon a financial institution's account. Banks are insolvent far less frequently than other businesses or individuals. Draft checks, tellers checks, official checks, bank checks, etc CAN, however, be returned unpaid if one of the following is true: As an aside: an institution is not obligated to honor a stale dated check, but may do so at its discretion. If you have a personal check outstanding for over 6 months, it may still clear and potentially overdraw your account. In this case, contact your bank ASAP to process a reversal. The depositing bank mis-scans the check and the issuing bank refuses the resulting data. I have seen systems mis-read which data field is which, or its contents. Also, there is the possibility the image if the check will be illegible to the issuing bank. The draft check has been cancelled (stop paid). This can happen if: a) The check was fraudulently bought from the issuing bank using Tom's account b) Tom has completed an indemnification agreement that the check was lost or otherwise not used for its intended purpose, without fraud having occurred against Tom c) The draft check is escheated (paid to the state as unclaimed property). This case is a subset of case 1, but will lead to a different return reason stamped on the (image replacement document of) the check. The draft check was never any good in the first place. Because of the perception that draft checks are as good as cash (they're not but are a lot better than personal checks), forgery and attempted fraud is shockingly common. These aren't actually underwritten by a real bank, even if they appear to be. The only money \\\"\\\"in\\\"\\\" them is what the fraudster can get out of you. Jerry did not properly endorse the check before presenting it for deposit or otherwise negotiating it. In my time in banking, I most commonly saw cases 3 and 4. Unlike most counterfeit cash, case 3 will fool Jerry and Jerry's teller. Tom gets an immediate payout (a car, a wire transfer, a payday loan, etc) and Jerry's bank doesn't know the check isn't valid until they call the alleged issuing bank to verify its negotiability, or in the case of smaller checks into lower-risk accounts, it is simply returned unpaid as fraudulently drawn. To conclude: Call the alleged issuing bank's verification line before handing over the goods, always properly endorse your deposits, and address what happens if one does not receive or collect on prompt payment in your contracts.\\\"\",\n \"You can probably recover it by checking with the unclaimed property division of the state where you opened the account. See The Office of the Comptroller of the Currency website for more information.\",\n \"The only certain way is to have the issuer confirm it. You'd think there would be a better way, but no there isn't. I suggest you read this story about what can happen even if you are the innocent victim trying to cash a fraudulent Cashier's Check. The consequences included some jail time and huge attorney fees for this unlucky person.\",\n \"I suspect @SpehroPefhany is correct and that your bank will cash a check from the US Department of the Treasury. Especially since they're the same ones who guarantee the U.S. Dollar. They may hold the funds until the check clears, but I think you'll have good luck going through your bank. Of course, fees and exchange rate are a factor. Consider browsing the IRS and US Treasury Department websites for suggestions/FAQs. I suggest you line up a way to cash it, and make sure there's enough left after fees and exchange rate and postage to get the check that the whole process is worth it, all before you ask it to be shipped to you. If there's no way to do it through your bank, through a money exchange business (those at the airport come to mind) or through your government (postal bank?), and the check is enough that you're willing to go through some trouble, then you should look into assigning power of attorney for this purpose. I don't know if it is possible, but it might be worth looking into. Look for US based banks in your area.\",\n \"\\\"What does it mean that the bank will \\\"\\\"hold you responsible\\\"\\\"? Clearly the money won't be credited. Will you be charged a fee like an NSF cheque? Will they try to prosecute you? Is there any way to confirm whether a cashiers cheque is forged? Could you for example tell your bank that you were uncertain of the origin, and ask them to confirm it? Can you call the issuer and verify (from the serial number) that they did in fact issue a cheque for that amount with you as the payee? Even calling the bank might not help. The first verification is that the bank exists, and that the account number and name match and that they did issue a check. But that doesn't cover the situation where the person that sent you the check wasn't who they claimed to be. That is the theft that could take weeks to find.\\\"\",\n \"I know someone around there, who might be able to collect it for me.Would I still be able to cash it out in the other country? Or can he/she cash it out for me? Unlikely. Unless they deposit it into a US bank account in your name. You can cash US checks in almost any decent bank anywhere in the world, but it may cost you some and will probably take 2-3 weeks. Since the amount is won in the US, how would I pay the taxes? , since its earned over there. You would file a tax return with the IRS and send them a payment. You can buy drafts in US dollars almost anywhere in the world.\",\n \"(I am making the assumption that this is a US based question). Keep in mind that the alternative is to amend your tax forms from 2010, and 2011. The IRS and the State will want their money, they might not to wait for 78 paychecks. That is 3 years. Ask for lots of documentation, so you understand what they are doing.\",\n \"Notify his bank. They should know where the check was cashed. Assuming it had your name and someone cashed it, they committed fraud and the bank will want to know that. But r/personalfinance is a better place to ask questions like that.\",\n \"You purchased the check from the bank. Your funds have been transferred. If the recipient never cashed the check, the money continues to be the bank's, just as if you had written s normal check that didn't get cashed the money would sit in your account.\",\n \"\\\"The store owners don't know what your intentions are. All they know is they gave you good cash for a bad check. Part of this is that you're paying for the bad acts of others in the past, and these people aren't in the business of trying to understand your intentions. If you show good faith by going in and paying whatever you can, it will go a long way toward getting them to work with you on the balance. I don't know if they'd have much of a criminal case if the check you gave them was clearly marked as \\\"\\\"void\\\"\\\" and you've shown a willingness to resolve the situation. Of course you can't blame them for not wanting to accept another check from you. Good old hard cash, even if it isn't the full amount, will be a better sign of your intent to repay the debt.\\\"\",\n \"While you can print that on the check, it isn't considered legally binding. If you are concerned about a check not being deposited in a timely manner, consider purchasing a cashier's check instead. This doesn't solve the problem per se, but it transfers responsibility of tracking that check from you to the bank.\",\n \"How would I go about this so that I can start using this money? You would open the LLC. The checks were not written out to you, they were written out to the LLC. Only the LLC can endorse them.\",\n \"\\\"Typically I'll carry the charge for quite awhile, up to a year. If it hasn't cleared by then, I contact the institution that should have received the money to see what they want to do about it. If they tell me not to worry about it, then I change the payee to be \\\"\\\"Overdraft Protection\\\"\\\", and consider it as having been spent. That way I build up (slowly) a cushion in my checking account.\\\"\",\n \"With a check, there are limits on cashing the stale check, but that is set by the banks involved. With a debit card transaction, it will be up the the debit card company and your bank. Imagine a situation where a person finds an old check and tries to cash it at their bank. If the bank considers the check stale, they might reject it, or put a longer hold on the check. When the check writers bank gets the transaction, they will also decide what to do. If they reject it, the first bank will reverse the transaction. You can't count on a 90 day, or 180 day limit; most banks will ask you to put a stop payment on an old check that you don't want cashed. This is especially important step if you write a replacement check. Because there is no check number to put a stop payment on, in fact the temporary hold will fall off after a few days. There doesn't appear to be a way to stop an old transaction. Be careful if you do contact the restaurant, you could end up double paying for the meal if they swipe your card again. Your best option may be just to keep the transaction as pending.\",\n \"Most likely the account funds have been handed over to the government of the state in which the account was established. Generally it can be recovered if reasonable proof of ownership is provided (which you seem to have). You should try going to http://unclaimed.org/ and selecting the account's state. That site is run by the National Association of Unclaimed Property Administrators, and generally selecting the state will take you to the web site of the particular state's unclaimed property department and give information on how to find out about the funds and/or file a claim.\",\n \"The bank doesn't keep it. It will stay unclaimed until the unclaimed assets process in the state that the bank branch is in kicks in. At that point it it a state by state process, with each state being different. You will need to inquire to the state government about what the process is in that state. (This will probably be searchable online.)\",\n \"If you don't have a bank account then open one and use the check as your opening deposit. You'll need to obtain a Social Security card as well (you didn't indicate you have one or not, so I'll assume you don't), but they're free and quick to apply for. I assume you're from Washington state, so there should be no problem with you opening an account in Washington, no matter where the check is from. Because of the amount of the check, the bank will probably only let yo have a part of the amount for a few days until it clears, but federal banking rules require quick clearance of out-of-state checks (I think it's 48 hours now), so you'd have access to at least half of the money right away and the rest in a few days.\",\n \"\\\"Anyone can walk into a bank, say \\\"\\\"Hi, I'm a messenger, I have an endorsed check and a filled out deposit slip for Joe Blow who has an account here, please deposit this check for him, as he is incapacitated. Straight deposit.\\\"\\\" They'll fiddle on their computer, to see if they can identify the deposit account definitively, and if they can, and the check looks legit, \\\"\\\"thanks for taking care of our customer sir.\\\"\\\" Of course, getting a balance or cashback is out of the question since you are not authenticated as the customer. I have done the same with balance transfer paperwork, in that case the bank knew the customer and the balance transfer was his usual. If the friend does not have an account there, then s/he should maybe open an account at an \\\"\\\"online bank\\\"\\\" that allows deposit by snapping photos on a phone, or phone up a branch, describe her/his situation and see if they have any options. Alternately, s/he could get a PayPal account. Or get one of those \\\"\\\"credit card swipe on your phone\\\"\\\" deals like Square or PayPal Here, which have fees very close to nil, normally cards are swiped but you can hand-enter the numbers. Those are fairly easy to get even if you have troubles with creditworthiness. S/he would need to return the check to the payer and ask the payer to pay her/him one of those ways. The payer may not be able to, e.g. if they are a large corporation. A last possibility is if the check is from a large corporation with whom s/he continues to do business with. For instance, the electric company cashiers out your account after you terminate service at your old location. But then you provision service at a new location and get a new bill, you can send their check right back to them and say \\\"\\\"Please apply this to my new account\\\"\\\". If s/he is unable to get any of those because of more serious problems like being in the country illegally, then, lawful behavior has its privileges, sorry. There are lots of unbanked people, and they pay through the nose for banking services at those ghastly check-cashing places, at least in America. I don't have a good answer for how to get a check cashed in that situation.\\\"\",\n \"\\\"As was suggested here, I checked with the state for \\\"\\\"Unclaimed Funds,\\\"\\\" and despite the fact that I had already done so and found nothing, the funds were now there to be retrieved. So, the takeaway here is, keep checking periodically, it might just take a bit for things to settle out. This link is endorsed by NJ State, and covers much of the US: http://www.missingmoney.com/. Otherwise check with your state's Dept of Treasury.\\\"\",\n \"What would you do if you had the check? Probably destroy it. The goal is to render it uncashable. One way to do such is to have it shredded. If you are uncomfortable leaving them to destroy it, then swing by and pick it up. Alternatively offer to send them a self addressed and stamped envelope. I am sure they will accommodate if you ask nicely.\",\n \"The store wants their money back. It's understandable that they are hesitant to accept another check from you. So if you don't have the cash to pay them back, take your good check somewhere else to cash it, and use that money to pay back the store that you gave the bad check to.\",\n \"All banks in the US that I have ever worked with will allow you to deposit checks if: In your case, you have 3 options:\",\n \"The fee you were charged to get the money order is gone. You agreed to that fee when you purchased the Money order. It is now a check that you can use how ever you wish. If you have already added a name to the pay to line it can be changed but different agencies have different rules for what they will accept. Take the money order to your bank explain the situation and tell them you want to put the money in your account, or cash it.\",\n \"You should probably talk to a professional tax adviser. This doesn't seem to be a common situation. From the top of my head, without being a lawyer or a tax professional, I think of it like this: The income is for year 200..., and should have been taxed then. You constructively received it then, and not claimed it. You probably had withholding from this salary that should have been reported to you then on W2 (you can get a copy from the IRS). I'd say you're to amend the return for year 200... with the new income, if it wasn't reported then. Although if more than 3 years passed (6, if its 25% or more of your gross income for that year), its beyond statute. However, as I said, I'm not a lawyer and not a professional tax adviser, so you cannot in any way rely on my opinion for anything that would result in not paying any taxes or penalties you should have. You should talk to a licensed tax professional (EA/CPA/Lawyer licensed in your State).\",\n \"\\\"If there was still money in the account when it was closed, the bank would have turned over the cash to the state where they operated. Search Google for \\\"\\\"unclaimed property <state name>\\\"\\\" for the unclaimed property department of the state. The state's website will show if there is money for you.\\\"\",\n \"The insurance company issued the check. I'd contact the insurance company to have the current check voided and a new one issued to the pharmacy.\",\n \"Checks are awesome things in that, even if it gets lost the money doesn't change hands until the check is cashed. I would highly recommend NOT signing a check over and putting it in the mail though. Essentially putting your signature on it is saying yes, pay to whomever. Theoretically acceptable, rarely a good idea. Call the insurance company and have them cancel current check to reissue to the correct people. Don't forget to write VOID (in huge letters) on the check before throwing away and/or tearing it up.\",\n \"Normally if the amount of a cashiers check is over $5,000, a bank (like Wells Fargo) may put a 10 business day hold on it to make sure the transaction is sound.\",\n \"They always expire sometime, and they are a scam. I recommend you unload any on ebay as soon as you get them. For this one in articular, just ask to see a manager and explain your situation politely. You'll usually get what you want.\",\n \"I would not take any action with the check (neither return it nor cash it), but instead contact the bank. We live in the modern era where you can call someone on the phone or email them, and get nearly instant feedback. Use this to your advantage. Find out why they refunded you the money twice: was it an error on their part (in which case you just tear up the check or return it to them and be done with it)? Is it possible you're wrong about it being twice refunded (maybe the first check didn't go through properly or was only for half the amount, and you're just wrong)? Maybe they had some sort of guarantee that they failed to live up to and are correctly refunding you double your money. Probably the first, of course. But you should call them and ask, and verify what they want you to do, before you take any action - particularly one that costs you money. And certainly don't just cash the check; if it is a mistake, they'll be asking for that money back later, with interest, and be within their rights to do so.\",\n \"I am assuming that you are talking about US Savings Bonds: Here is a page that talks about maturity dates of US Savings bonds. If They aren'tSavings bonds but are another type ofUS Government Bond Assuming they are Savings bonds, here is information regarding redeeming of bonds. How do I redeem my EE/E Bonds? Electronic bonds: Log in to Treasury Direct and follow the directions there. The cash amount can be credited to your checking or savings account within one business day of the redemption date. Paper bonds You can cash paper EE/E Bonds at many local financial institutions. We don't keep a list of banks that redeem bonds, so check with banks in your area. What will I need to redeem a paper bond? Before taking in the bonds to redeem them, it's usually a good idea to check with the financial institution to find out what identification and other documents you'll need. When you present your paper bonds, you'll be asked to show your identity. You can do this by being a customer with an active account open for at least 6 months at the financial institution that will be paying the bonds, or presenting acceptable identification such as a valid driver's license if the >redemption value of the bonds is less than $1,000. If you are not listed as the owner or co-owner on the bond, you'll have to show that you >are entitled to cash in the bond. The treasury direct website also discusses converting bonds, rules regarding using them for education, how often they are credited with interest\",\n \"You have a few options: Personally, I would cash the check at my broker and buy a mixture of US Government and New York Tax-Exempt securities until I figured out what to do with it.\",\n \"\\\"I have checked with Bank of America, and they say the ONLY way to cash (or deposit, or otherwise get access to the funds represented by a check made out to my business) is to open a business account. They tell me this is a Federal regulation, and every bank will say the same thing. To do this, I need a state-issued \\\"\\\"dba\\\"\\\" certificate (from the county clerk's office) as well as an Employer ID Number (EIN) issued by the IRS. AND their CHEAPEST business banking account costs $15 / month. I think I can go to the bank that the check is drawn upon, and they will cash it, assuming I have documentation showing that I am the sole proprietor. But I'm not sure.... What a racket!!\\\"\",\n \"Is it standard for a bank to need the cheque to cancel it? (what about if it was intercepted, surely you can cancel before you're plundered?) Generally it makes life easy for the Bank. They can physically see the cheque and are assured that it has not been cashed. Bank can put a hold / stop on the cheque. However given today's Banking it is complex with multiple systems and specially with international clearing taking months ... the cheque could have been cashed and the Bank that issued may only get to know about it month later. Is there any way to bypass this? Best is for your friend to correspond in writing. The rejection email from your Bank should also go into the communication. And follow-ups every 15 days all in writing. Generally after tons of follow-up Banks would pay it off.\",\n \"For an individual its not automatic. One needs to ask the Bank, return the check. For Corporate Customer depending on how big the relationship is, many a times this is given as a service and there is an automatic return\",\n \"Deposit it into your Brazilian bank account. They'll charge you collection fee (shouldn't be high, its a cashier's check equivalent), and the currency exchange rate may not be the best ever, but that's the price to pay for the service. Another option would be to cash the check at check cashing places, but that would most likely require you being in the US (I don't know if any check-cashing store in Brazil would cash a US check).\",\n \"This question was asked three years ago, but now that it's 2017 there is actually a relatively easy, cheap and fast solution to at least the first half of your question. To cash the check: I've done this a half dozen times while abroad (from the US) without any problems.\",\n \"\\\"If it is planned, then one can get a Bankers Check payable overseas; if destination is known. 1.) What will happen to the money? It will eventually go to Government as escheating. Unlcaimed.org can help you trace the funds and recover it. 2.) Will the banks close the accounts? 3.) After how much time will the banks close the accounts? Eventually Yes. If there is no activity [Note the definition of activity is different, A credit interest is not considered as activity, a authentic phone call / correspondence to change the address or any servicing request is considered activity] for a period of One year, the account is classified as \\\"\\\"Dormant\\\"\\\". Depending on state, after a period of 3-5 years, it would be inactive and the funds escheated. i.e. handed over to Government. 4.) Is there anything else to do? Any ideas? Before leaving? Try keeping it active by using internet banking or credit / debit cards linked to the account. These will be valid activities. 5.) Is there any way to send a relative to the US with any kind of paper of power, to unfreeze the accounts? 6.) The banks say they would need a power of attorney, but does that person actually need to be an attorney in the US, or can it simply be a relative WITH a paper (a paper that says power of attorney) or what is a power of attorney exactly, is it an actual attorney person, or just a paper? 7.) Is there any other way to unfreeze the accounts? Although I can confirm first hand; I think there would be an exception process if a person cannot travel to the Bank. It could even be that a person is in some remote state, not well etc and can't travel in person. I think if you are out of country, you could walk-in to an US embassy and provide / sign relevant documents there and get it attested. Although for different purpose, I know a Power of Attorney being created in other country and stamped / verified by US embassy and sent it over to US. This was almost a decade back. Not sure about it currently.\\\"\",\n \"\\\"Its a classic sign of fraud. The fraud is on you. You cashed the check not given to you, and not endorsed by the person its given to, so even if the check is legit you're still in trouble. There are many variations of this scheme, but the common thing is that the \\\"\\\"innocent\\\"\\\" third party is given a check to cash, and gives its own check or cash in return. The check ends up being forged, stolen, or otherwise invalid, but the cash/check the third party gave is long gone. Usually its cash, because its untraceable. You should wait at least a couple of weeks to make sure the check doesn't bounce. You might want to contact the check owner to verify its legit, and suggest to return the money, if it is not. You might also want to consult with an attorney. Bear in mind, that it might be reported to the authorities as a money laundering scheme (which it very well might be), and you'll have some explaining to do in this case, even if the check is legit.\\\"\",\n \"\\\"Under no circunstances will the bank keep the money for itself. Keeping the money is considered Unjust Enrichment: A general equitable principle that no person should be allowed to profit at another's expense without making restitution for the reasonable value of any property, services, or other benefits that have been unfairly received and retained. The banks will attempt to, in order: Wait for some time: Generally, a time frame of three to five years with no customer-initiated activity sends an account into dormancy. The amount of time that must lapse depends on the [US] state in which the bank account was opened. Attempt to contact the account holder: (...) the bank must try to notify the account holder. If the customer does not respond within a certain amount of time, the balance on the account will be turned over to the state. Turn over the money to the government: In a process what is called “escheating” an account, banks are required to turn over funds from the inactive account to the state treasury. Once the account is sent to the state, the funds are held as unclaimed property. At this point the account no longer exists so far the bank is concerned. To reclaim your money, you will have to contact your state for the instructions on how to get your money back. You’ll need to complete and submit a claim form along with the necessary identification. If you happen to have unclaimed property held by the state, you can begin the retrieval process by visiting www.unclaimed.org. For a foreigner, it is not unreasonable that the bank would attempt to contact the diplomatic body of the country of origin in step 2, but that may be subject to bank policy. There is some paperwork the bank needs to do to \\\"\\\"escheat\\\"\\\" the account and properly transfer the money to the state.\\\"\",\n \"Just FYI for the benefit of future users. Haven't been paid yet nor have I paid but some interesting facts. I decided to sign the contract with the person who approached me. The contract seemed harmless whereby I only transfer money once I retrieve the funds. Thanks to your comments here I also understood that I must make sure the funds really cleared in my account and can never be cancelled before I transfer anything. He gave me the information of the check that matched my previous employer and made sense as it was a check issues just after I had left my job and the state. I did not used the contact details he provided me, but rather found the direct contact details of the go to person in my last institution and contacted them. I still haven't been able to reclaim the funds, but that is due to internal problems between the state comptroller and my institution. Will come back to update if I am ever successful, but the bottom line is that it is probably not a scam. I am waiting for the final resolution of the case before I post the name of the company which approached me (if it is at all OK per the discussion board rules)\",\n \"Yes, you can cash the check now, but with the caution that if your amended return causes you to owe much more, you should immediately file and include payment with your amended return to avoid interest and penalties.\",\n \"US currency doesn't expire, it is always legal tender. I can see some trouble if you tried to spend a $10,000 bill (you'd be foolish to do so, since they are worth considerably more). Maybe some stores raise eyebrows at old-style $100's (many stores don't take $100 bills at all), but you could swap them for new style at a bank if having trouble with a particular store. Old-series currency can be an issue when trying to exchange US bills in other countries, just because it doesn't expire here, doesn't mean you can't run into issues elsewhere. Other countries have different policies, for example, over the last year the UK phased in a new five pound note, and as of last month (5/5/2017) the old fiver is no longer considered legal tender (can still swap out old fivers at the bank for now at least). Edit: I mistook which currency you took where, and focused on US currency instead of Canadian, but it looks like it's the same story there.\",\n \"Cashiers check is as good as cash. I use them all the time as banks don't carry over 2-3k anymore. I can bring the cashiers check anywhere and thus cash it for u without an account. It's basically a piece of paper that says these funds are set aside from the issuers account just for and only for the check. That's why it's accepted anywhere. It's a gurantee from one bank to another that the funds are there waiting to be transferred. The whole point of the check is so the funds are available immediately. The bank will call the issuing bank verify the Check is real and than cash it immediately. You don't pay a fee to buy the cashiers check just to wait for it to clear like a normal free check. Its immediate and just as good as cash. I use them weekly/monthly for amounts from 5k up to over 100k.\",\n \"\\\"You can spend the money quite quickly. The problem is that if there is something wrong with the check, the bank will ask you for the money back. If the check is from a trusted source (a trusted friend, a business with good reputation etc.) that's fine. If the money is from an untrusted source, make sure that having to pay back the money doesn't get you into trouble. Since most people are honest, this is fine for a small amount, but if it's more than you can afford to pay back, don't spend it. A simple scam is that people send you checks, \\\"\\\"by mistake\\\"\\\" the check is for the wrong amount, say $910 instead of $190, and they ask you to send the difference back. So you put $910 into your account, send them $720, and six weeks later your bank asks for their $910 back. If someone pays you too much on a check and asks you to pay them the difference, you know it is a scam.\\\"\",\n \"Years ago, I had a tenant who bounced a check now and then. I started going to the bank where his account was. With my ID they were agreeable to cashing the check against his account. The teller first checked his balance and only cashed when there were enough funds. One time he was $10 short. I wrote a deposit slip and added the $10 it took to clear the check. As they say, your mileage may vary, I hear some banks won't even break a large bill for a non customer.\",\n \"The check is from your credit card company. Whose ever the money is, it is certainly not the credit card company's, and they know that. This is why they cut the check to you. You should definitely cash the check (or deposit it into your bank account). You've tried to contact the mattress store multiple times, and they aren't responding. At some point, you've got to say that you've done everything that you could to do the right thing. Now, keep in mind that at some point in the future, the mattress store may come back to you and ask for the money back. If I were you, I would not spend this money for quite some time. Put it away in a savings account (maybe add it to your emergency fund). Then if they come back in the future looking for money, you can easily write them a check. You probably also want to keep some documentation on what you've done already to try to give the money back to them, just in case for some reason they try to claim that you owe them some interest or something like that.\",\n \"\\\"New Zealand has a statute of limitations on debt of six years, twelve years if it is \\\"\\\"a debt acknowledged in a deed\\\"\\\" (probably not the case here). If you have had no contact with the bank for that time, the debt expires. If you got convicted of a crime in relation to the debt (e.g. fraud) then that would fall under a different statute of limitations, but a bank isn't going to bother doing that over $600, and the courts would probably not accept the case anyway.\\\"\",\n \"Is there a point after which they legally unable to charge me? No. If you gave a check, then the bank may bounce it as stale after 6 months, but doesn't have to. With debit/credit transactions, they post as they're processed, and some merchants may not sync their terminals or deposit their manual slips often. As the world becomes more and more connected this becomes extremely rare, but still happens. Technically your promise to pay is a contract which never expires, and they can come after you years later to collect.\",\n \"It all depends on the trust level you have in them handling it correctly. If they never deposit it, it doesn't matter what happens to the check, they could frame it and hang it on the wall. The risk is that someone someday deposits it (incorrectly double-charging you), and you need to do what think is appropriate to avoid this risk. If your trust in them is too small, only sending it back to you makes sure that you physically control the check.\",\n \"Will 2 millions dollars check to be cash? Will a bank convert a check to cash? In my experience, no. Even for small checks. Unless you happen to have a VERY good relationship with your banker (read as: have an existing large bank balance.) The exception is if you go to the bank the check is drawn on. But even then, I doubt they'll cash a $2M dollar check. Can you deposit a $2M dollar check? Most definitely. How long will 2 millions dollars check to be cash? Depends on your bank's policies, relationship with you, and the origination of the check. You'll need to talk to the exact bank in question to find out. Some guidelines from my own experiences: Out of country checks will take quite awhile, say 4 weeks, even for trivial amounts. I'm not sure what a $2M size would do. Beyond that situation, it will likely depend on whether you have more money than the check's worth in your bank accounts. If so, they may be willing to give you cash in a few days. Or if you only want some of the money as cash in a few days, that might be possible. If the bank couldn't cash for him, will the bank give him some of cash for example, $500,000 for now, and the rest wait to be cash at later time like 24 hours or 1 week? Unless you already have a lot of money in your relationship with the bank, I think it is HIGHLY UNLIKELY they will let you have ANY of the money in 24 hours. You MIGHT get some of it in a week. The issue will be that such a large check will be viewed as having a high chance of being fraudulent, so they will want to be exceptionally conservative.\",\n \"Check the rules with your broker. Usually if it expires in the money, the broker would exercise it. But you need to check with your broker about their rules on the matter.\",\n \"What I'm reading is that they subtracted the $85 you owe them and they're cutting you a cashier's check for the rest. Ethically speaking, you owed them the money, they subtracted it and made you a check for the rest. Once you cash that check, nobody owes anyone anything in this equation. Sounds like they're in the clear. Legally speaking, I have no idea, since I'm not a lawyer, but even if it was not legal, good luck getting the $85 back without spending far more in retaining a lawyer and fighting it in court. Even fighting it in small claims court will take more of your time than $85 is worth. If it's your time that is the problem, 12 days is not horrible in banking terms. Yes, we're spoiled now by ACH transfers and same day deposit availability, but since you're retired, I'm sure if you think back you'll remember when it used to take two business weeks to clear a check... TLDR; cancel future deposits to that bank, find a new bank, then forget this fiasco and get your revenge by enjoying your life.\",\n \"You keep a copy of the dashed check, and tell him to pound sand. If he contacts you again, you tell him that you will charge him with fraud. By accepting the check and cashing it, he acknowledged the debt is paid.\",\n \"A company as large as Home Depot will have a fairly robust Human Resources department and would probably be able to steer you in the right direction: odds are they know the name of the brokerage and other particulars. I did some googling around, their # is (1-866-698-4347). Different states have different rules about how long an institution can have assets abandoned before turning them over to the state. California, as an example, has an abandoned property search site that you can use. That being said, I had some penny stocks sitting in a brokerage account I never touched for about 20 years and when I finally logged back in there they were, still sitting there.\",\n \"In general if there are no transactions for several years a bank will close the account. In my experience they also send at least one warning notice. If they do close the account they send it to the state. Each state has an unclaimed property office. You can contact them regarding the procedure to get the money. If this money was just turned over to the state there may be some lag time before you can get it back. Two notes: the state government doesn't charge a fee to get your money back. Don't pay a company a finder's fee. bank account's owned by minors don't have the same activity requirements as those owned by adults.\",\n \"The correct, legal way to handle this would be to file an amended return for that year (probably best to talk to a CPA). If you don't have the 1099, the IRS has a process to handle that here. It sounds like they would just try to contact the employer themselves, but it doesn't say exactly what would happen if the employer is out of business.\",\n \"\\\"Did I do anything wrong by cashing a check made out to \\\"\\\"trustee of <401k plan> FBO \\\"\\\", and if so how can I fix it? I thought I was just getting a termination payout of the balance. Yes, you did. It was not made to you, and you were not supposed to even be able to cash it. Both you and your bank made a mistake - you made a mistake by depositing a check that doesn't belong to you, and the bank made a mistake by allowing you to deposit a check that is not made out to you to your personal account. How do I handle the taxes I owe on the payout, given that I had a tax-free 1099 two years ago and no 1099 now? It was not tax free two years ago. It would have been tax free if you would forward it to the entity to which the check was intended - since that would not be you. But you didn't do that. As such, there was no withdrawal two years ago, and I believe the 401k plan is wrong to claim otherwise. You did however take the money out in 2014, and it is fully taxable to you, including penalties. You should probably talk to a licensed tax adviser (EA/CPA licensed in your State). My personal (and unprofessional) opinion is that you didn't withdraw the money in 2012 since the check was not made out to you and the recipient never got it. You did withdraw money in 2014 since that's when you actually got the money (even if by mistake). As such, I'd report this withdrawal on the 2014 tax return. However, as I said, I'm not a professional and not licensed to provide tax advice, so this is my opinion only. I strongly suggest you talk to a licensed tax adviser to get a proper opinion and guidance on the matter. If it is determined that the withdrawal was indeed in 2012, then you'll have to amend the 2012 tax return, report the additional income and pay the additional tax (+interest and probably underpayment penalty).\\\"\",\n \"I am not sure about your country but I think each country must be having some fixed time frame for reversal of the transaction (Which must be less than a month), please inquire if that time limit has passed or not ? If it hasn't best will be to wait for some more time before informing them. Once the reversal time limit has passed no one (Except government agencies with court orders) can withdraw money from your bank account without your written consent even if they have deposited it themselves. World would have been a strange place if this restriction was not there. Since you want to close the account you can approach your previous boss (or executive from HR/Account department) and tell them your intention. After that either you can transfer money online to their account or give them a cheque which they can deposit in their account. This way things will end faster and you will be freed from this extra account. If above process takes time another solution will be to transfer the money to your another (permanent) account and give them a cheque from this account. Here also you can use online transfers or by sending them a cheque through courier. Whichever mode you choose to pay the money back make sure you have some documented proof that may be helpful in future.\",\n \"\\\"(This answer is based on the US banking system; if that isn't where you are, please edit appropriately.) There are probably two places the thief could go to cash the check: Your bank The issuer's bank Third-party banks are unlikely to want to cash a check drawn on a different bank for a payee who isn't their customer. So notifying both of these banks would be a good start. Also, hopefully the thief does not look like you and won't be able to pass using your ID. The thief will also have to forge your endorsement on the check - if he goes to your bank, they can check it against your signature which they have on file, and hopefully it won't match. (The issuer's bank wouldn't notice that, of course, so read on.) Even if the check is cashed, you should ultimately be okay, as I understand it. The issuer of the check still owes you the money; he can't prove he's paid you until he has the cancelled check (or its image) showing your valid endorsement. So he needs to give you another check, eventually. (This assumes the check was payment for a debt of some kind; if it was a gift or some other sort of voluntary payment, he could at this point change his mind and decide not to pay you after all.) The issuer should be okay too. If the check is cashed and debited from his account, he should go to his bank and tell them the endorsement is forged. They may ask you to sign something where you state under penalty of perjury that the signature isn't yours. Then they will re-credit his account, so that he can pay you again. (Normally the bank that cashed the check will be on the hook for the loss; it was their responsibility to make sure they were paying the rightful payee, and they failed in that responsibility. Various procedural issues can shift that liability between banks, but ultimately it shouldn't be either customer who suffers unless someone did something really negligent, like not reporting the theft for months.) Obviously this would all be much simpler if the issuer can call his bank right away and stop payment. This can be done over the phone or online, so \\\"\\\"out of town\\\"\\\" shouldn't be an issue unless he is out in the woods or something. If he can talk to you, he can talk to them.\\\"\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["The two banks involved may have different policies about honoring the check. It might not be written on the check. Your bank may decide that the stale check has to be treated differently and will withhold funds for a longer period of time before giving you access to the money. They will give time for the first bank to refuse to honor the check. They may be concerned about insufficient funds, the age of the check, and the fact that the original account could have been closed. If you are concerned about the age of the check. You could go to your bank in person, instead of using deposit by ATM, scanner, or smart phone. This allows you to talk to a knowledgeable person. And if they are going to treat the check differently or reject the check, they can let you know right away. The audit may not have been concerned about the fact that the check hadn't been cashed because when they did the audit the check was still considered fresh. Some companies will contact you eventually to reissue the check so you they can get the liability off their books. If the bank does refuse the check contact the company to see how you can get a replacement check issued. They may want proof the check can't be cashed so they don't have to worry about paying you twice.","The check is just barely over 6 months old. I suspect it will go through with no issues.","This varies by jurisdiction somewhat but speaking as a Canadian, a small business owner, and accountant (unregistered but some courses and accounting for multiple businesses) this is the answer if you were in Canada. In Canada the cheque cashing limit is 6 months. Therefor any bank will refuse to cash this cheque. It would be totally morally and legally acceptable to ask for a replacement cheque from your employer. In Canada they would generally have no problem issuing a replacement; in other jurisdictions with differing time limits they might want to cancel the original cheque first.","Look up escheatment. Companies that have unclaimed property are supposed to send it to your State government. They should have a unclaimed property department of some sort. In short, the company is going to have to pay either you, or your State (In Your Name) so they have to pay it either way. It would be easier for them to just give you new check. Expect them to give you some grief in verifying it has not been cashed and such... but if you have the original, in hand, it shouldn't be too bad. A 'Lost' check may be harder to get replaced. Not a lawyer, don't want to be.","The typical rule in the US is 180 days, but some banks do it differently. However, even if the check is dead, you should be able to call the payroll department for your old job. They can stop payment on the old check and issue you another one.","In the UK the official rule is that a cheque is valid for 3 years from the date it was wrote. However after 3 months some banks can choose to turn them down. I had a cheque once that was a year old which is when I looked it up to see whether it was stil valid, and I found the laws regarding it then. I was actually quite surprised it was 3 years! Btw if it does bounce your quite entitled to ask your employer for a replacement cheque. They owe it you and it's just sat in their account assigned to you anyway."],"string":"[\n \"The two banks involved may have different policies about honoring the check. It might not be written on the check. Your bank may decide that the stale check has to be treated differently and will withhold funds for a longer period of time before giving you access to the money. They will give time for the first bank to refuse to honor the check. They may be concerned about insufficient funds, the age of the check, and the fact that the original account could have been closed. If you are concerned about the age of the check. You could go to your bank in person, instead of using deposit by ATM, scanner, or smart phone. This allows you to talk to a knowledgeable person. And if they are going to treat the check differently or reject the check, they can let you know right away. The audit may not have been concerned about the fact that the check hadn't been cashed because when they did the audit the check was still considered fresh. Some companies will contact you eventually to reissue the check so you they can get the liability off their books. If the bank does refuse the check contact the company to see how you can get a replacement check issued. They may want proof the check can't be cashed so they don't have to worry about paying you twice.\",\n \"The check is just barely over 6 months old. I suspect it will go through with no issues.\",\n \"This varies by jurisdiction somewhat but speaking as a Canadian, a small business owner, and accountant (unregistered but some courses and accounting for multiple businesses) this is the answer if you were in Canada. In Canada the cheque cashing limit is 6 months. Therefor any bank will refuse to cash this cheque. It would be totally morally and legally acceptable to ask for a replacement cheque from your employer. In Canada they would generally have no problem issuing a replacement; in other jurisdictions with differing time limits they might want to cancel the original cheque first.\",\n \"Look up escheatment. Companies that have unclaimed property are supposed to send it to your State government. They should have a unclaimed property department of some sort. In short, the company is going to have to pay either you, or your State (In Your Name) so they have to pay it either way. It would be easier for them to just give you new check. Expect them to give you some grief in verifying it has not been cashed and such... but if you have the original, in hand, it shouldn't be too bad. A 'Lost' check may be harder to get replaced. Not a lawyer, don't want to be.\",\n \"The typical rule in the US is 180 days, but some banks do it differently. However, even if the check is dead, you should be able to call the payroll department for your old job. They can stop payment on the old check and issue you another one.\",\n \"In the UK the official rule is that a cheque is valid for 3 years from the date it was wrote. However after 3 months some banks can choose to turn them down. I had a cheque once that was a year old which is when I looked it up to see whether it was stil valid, and I found the laws regarding it then. I was actually quite surprised it was 3 years! Btw if it does bounce your quite entitled to ask your employer for a replacement cheque. They owe it you and it's just sat in their account assigned to you anyway.\"\n]","isConversational":false}}},{"rowIdx":99,"cells":{"_id":{"kind":"string","value":"3569"},"query":{"kind":"string","value":"Funds in closed bank account have gone to the government"},"gt_ids":{"kind":"list like","value":["450135"],"string":"[\n \"450135\"\n]","isConversational":false},"gt_qrels":{"kind":"list like","value":[1],"string":"[\n 1\n]","isConversational":false},"candidate_ids":{"kind":"list like","value":["19853","540765","102526","546646","272749","384751","156001","87141","450135","461049","371105","578561","506826","221784","254468","599563","106204","362670","12435","493222","356544","583411","199808","24306","105828","277039","34997","442316","274922","398260","77670","574545","233487","227533","45078","531504","375542","68144","525049","43370","224102","378024","542628","389809","182065","116030","114022","339545","365364","250603","472263","104359","33117","450765","556086","15728","337526","144054","318750","141183","185019","126460","349536","38990","526882","32092","306510","200477","567891","356035","414170","217425","169163","547054","356862","290350","11429","365333","418520","31664","267362","277714","529455","579747","368911","398091","577139","480827","458485","450586","97308","18900","390480","479527","63747","45373","56129","62397","233367","322395"],"string":"[\n \"19853\",\n \"540765\",\n \"102526\",\n \"546646\",\n \"272749\",\n \"384751\",\n \"156001\",\n \"87141\",\n \"450135\",\n \"461049\",\n \"371105\",\n \"578561\",\n \"506826\",\n \"221784\",\n \"254468\",\n \"599563\",\n \"106204\",\n \"362670\",\n \"12435\",\n \"493222\",\n \"356544\",\n \"583411\",\n \"199808\",\n \"24306\",\n \"105828\",\n \"277039\",\n \"34997\",\n \"442316\",\n \"274922\",\n \"398260\",\n \"77670\",\n \"574545\",\n \"233487\",\n \"227533\",\n \"45078\",\n \"531504\",\n \"375542\",\n \"68144\",\n \"525049\",\n \"43370\",\n \"224102\",\n \"378024\",\n \"542628\",\n \"389809\",\n \"182065\",\n \"116030\",\n \"114022\",\n \"339545\",\n \"365364\",\n \"250603\",\n \"472263\",\n \"104359\",\n \"33117\",\n \"450765\",\n \"556086\",\n \"15728\",\n \"337526\",\n \"144054\",\n \"318750\",\n \"141183\",\n \"185019\",\n \"126460\",\n \"349536\",\n \"38990\",\n \"526882\",\n \"32092\",\n \"306510\",\n \"200477\",\n \"567891\",\n \"356035\",\n \"414170\",\n \"217425\",\n \"169163\",\n \"547054\",\n \"356862\",\n \"290350\",\n \"11429\",\n \"365333\",\n \"418520\",\n \"31664\",\n \"267362\",\n \"277714\",\n \"529455\",\n \"579747\",\n \"368911\",\n \"398091\",\n \"577139\",\n \"480827\",\n \"458485\",\n \"450586\",\n \"97308\",\n \"18900\",\n \"390480\",\n \"479527\",\n \"63747\",\n \"45373\",\n \"56129\",\n \"62397\",\n \"233367\",\n \"322395\"\n]","isConversational":false},"candidate_docs":{"kind":"list like","value":["Such funds are handed over to the state. In NE, like in many states, there is a government website where you can search by your name, find them, and claim them (with proof of your identity, etc.): https://treasurer.nebraska.gov/up/ For sure, the bank cannot just take the money. It is sitting somewhere, the bank just closed the account, meaning they are technically not managing your money anymore.","Most likely the account funds have been handed over to the government of the state in which the account was established. Generally it can be recovered if reasonable proof of ownership is provided (which you seem to have). You should try going to http://unclaimed.org/ and selecting the account's state. That site is run by the National Association of Unclaimed Property Administrators, and generally selecting the state will take you to the web site of the particular state's unclaimed property department and give information on how to find out about the funds and/or file a claim.","You can probably recover it by checking with the unclaimed property division of the state where you opened the account. See The Office of the Comptroller of the Currency website for more information.","\"If there was still money in the account when it was closed, the bank would have turned over the cash to the state where they operated. Search Google for \"\"unclaimed property <state name>\"\" for the unclaimed property department of the state. The state's website will show if there is money for you.\"","Is there any chance of losing money in the account Assuming you are a Singapore citizen. The money is your's to claim. Note the account may go dormant [if you do not transact for a period] as per Bank's norms and they may charge a fees for such accounts.","\"Under no circunstances will the bank keep the money for itself. Keeping the money is considered Unjust Enrichment: A general equitable principle that no person should be allowed to profit at another's expense without making restitution for the reasonable value of any property, services, or other benefits that have been unfairly received and retained. The banks will attempt to, in order: Wait for some time: Generally, a time frame of three to five years with no customer-initiated activity sends an account into dormancy. The amount of time that must lapse depends on the [US] state in which the bank account was opened. Attempt to contact the account holder: (...) the bank must try to notify the account holder. If the customer does not respond within a certain amount of time, the balance on the account will be turned over to the state. Turn over the money to the government: In a process what is called “escheating” an account, banks are required to turn over funds from the inactive account to the state treasury. Once the account is sent to the state, the funds are held as unclaimed property. At this point the account no longer exists so far the bank is concerned. To reclaim your money, you will have to contact your state for the instructions on how to get your money back. You’ll need to complete and submit a claim form along with the necessary identification. If you happen to have unclaimed property held by the state, you can begin the retrieval process by visiting www.unclaimed.org. For a foreigner, it is not unreasonable that the bank would attempt to contact the diplomatic body of the country of origin in step 2, but that may be subject to bank policy. There is some paperwork the bank needs to do to \"\"escheat\"\" the account and properly transfer the money to the state.\"","In general if there are no transactions for several years a bank will close the account. In my experience they also send at least one warning notice. If they do close the account they send it to the state. Each state has an unclaimed property office. You can contact them regarding the procedure to get the money. If this money was just turned over to the state there may be some lag time before you can get it back. Two notes: the state government doesn't charge a fee to get your money back. Don't pay a company a finder's fee. bank account's owned by minors don't have the same activity requirements as those owned by adults.","\"I'm not personally familiar with this, but I had a look at the Companies House guidance. Unfortunately, it seems you've done things in the wrong order. You should have first got the funds out, distributed them to yourself as a dividend or salary, and then closed the account, and then wound up the company. Legally speaking, the remaining funds now belong to the government (\"\"bona vacantia\"\"). It's possible you could apply to have the company restored, but I think that might be difficult; I don't think the administrative restoration procedure applies in your situation. Given the amount involved, I'd suggest just forgetting about it.\"","\"Legally speaking, if you do close a limited company, the funds belong to the government (\"\"bona vacantia\"\"). There's some guidance on this at Companies House and there is indeed a substantial amount of administration work to get it undone. Notable excerpts: You should deal with any loose ends, such as closing the company’s bank account, the transfer of any domain names - before you apply. [...] From the date of dissolution, any assets of a dissolved company will belong to the Crown. The company’s bank account will be frozen and any credit balance in the account will pass to the Crown. [...] 4. What happens to the assets of a dissolved company? From the date of dissolution, any assets of a dissolved company will be 'bona vacantia'. Bona vacantia literally means “vacant goods” and is the technical name for property that passes to the Crown because it does not have a legal owner. The company’s bank account will be frozen and any credit balance in the account will be passed to the Crown. [...] Chapter 3 - Restoration by Court Order The registrar can only restore a company if he receives a court order, unless a company is administratively restored to the register (see chapter 4). Anyone who intends to make an application to the court to restore a company is advised to obtain independent legal advice. [...] Chapter 4 - Administrative Restoration 1. What is Administrative Restoration? Under certain conditions, where a company was dissolved because it appeared to be no longer carrying on business or in operation, a former director or member may apply to the registrar to have the company restored. [...]\"","You haven't mentioned the country. As a general premise, you own them money and the fact that the account was closed has no bearing on the fact that you own them money. My suggestion would be pay them off.","\"There is no Federal law that mandates that they must re-open a closed account. They can either refuse the transfer / return the money, or they can optionally re-open your account so they get money (makes more sense for them). It is, however, in one of your agreements that they reserve the right to re-open a closed account in order to receive the deposit. At which point, your account will become active, and the balance may be below the required minimum balance threshold, so you may have maintenance or low-balance fees charged against the account (Credit Unions are less likely to have these fees). If you want to call them out on their BS, you can ask them to cite the law which mandates the re-opening of closed accounts. They will likely fall back on your Member agreement. There may be some state laws that discuss this, but I haven't found anything. This has become such a problem for some bank customers (where they are charged fees on the money they weren't aware they had) that a law was proposed in Sept. 2013, called the Freedom and Mobility in Consumer Banking Act, which would essentially only allow the named account holder(s) to re-open a closed account. I went ahead and looked up the NACHA guidelines for ACH transfers (I got the 2013 version) 2013 Corporate Rules and Guidelines. These lines reference \"\"Article 4A\"\", which is Uniform Commercial Code Section 4A - Funds Transfer. This means that if your account is actually closed, they have an exception to the standard timeframe for issuing a Return Entry. This means that if you notify them (in writing) that you refuse any future credit Entries to the account, they MUST return them. I then went looking for the return reason codes RDFI = Receiving Depository Financial Institution From what I gather, based on these NACHA guidelines, your CU didn't actually close your account. They put it on \"\"hold\"\" or some similar state. If they actually close your account, they are required to issue a Return Entry with Code R02. In your case, your CU doesn't charge you any maintenance fees, but for those working with banks, the best bet is to notify them in writing that you refuse any future credits to the account, or go into a branch and insist on fully closing out the account.\"","\"Most likely the bank will keep it on file for a few years then turn it over to the state as \"\"unclaimed property\"\". I can't speak for all states though.\"","Unfortunately assets placed in a safety deposit box are not covered under the Federal Deposit Insurance Program (FDIC). Unless the bank is found to be negligent in the way it handled or protected your safety deposit box, neither them nor their private insurance company will reimburse you for the loss. Find out if in the duration you had your box with them, they moved, transitioned or merged with another entity. In this specific situation, you may be able to demonstrate negligence on the part of the banks as they have seemingly misplaced your box during their transition phase, and depending upon the value of the items placed in your safety deposit box, you may be entitled to some form of recovery. Some homeowner's insurance policies may also cover the loss, but if you didn't document what you kept in the box, you have difficulty verifying proof of the value. Valuables are often lost but documents can often be reconstructed. You can get stock and bonds by paying a fee for new certificates. For wills and trusts, you can reach out to the lawyer that prepared them for a copy. You should always keep 3 copies of such documents. When you put stuff in the box, always videotape it (photographs can be challenged) but if the video shows it was put in there, although it can still be taken out by you after you turn off the camera, yields more weight in establishing content and potential value. Also know the value of the items and check with your homeowner policy to make sure the default amount covers it, if not then you may need to include a rider to add the difference in value and the video, receipts, appraisals and such will serve you well in the future in such unfortunate circumstances. If the contents of a safety deposit box are lost because you didn't pay the fee, then depending on the state you are in the time frame might vary (3 years on average), but none the less they are sent to the State's unclaimed property/funds department. You can search for these online often times or by contacting the state. It would help for you to find out which scenario you are in, their fault or yours, and proceed accordingly. Good luck.","Check with the state that you lived in. Inactive accounts typically get turned over to the State Treasury or Comptroller to be claimed. The time is typically set by statute. Hopefully, you don't live in a state like California or Arizona that treats abandoned property like booty.","The bank doesn't keep it. It will stay unclaimed until the unclaimed assets process in the state that the bank branch is in kicks in. At that point it it a state by state process, with each state being different. You will need to inquire to the state government about what the process is in that state. (This will probably be searchable online.)","The FDIC has been pretty good at recovery lost money from failed banks. The problem is the temporary loss from immediate needs. The best thing for anyone to do is diversify in investments and banks with adequate covered insurance for all accounts. Immediate access to available cash is always a priority that should be governed by the money manager in this case yourself.","\"They are right to ask for the money back because you were not entitled to that money. However, you may have a defense called \"\"laches\"\". Basically, you can try to show that because of the government's unreasonable delay in asking for the money back, in the meantime you relied on the assumption that it was your money in good faith, and spent it, and now to have to come up with the money that you assumed you wouldn't need would cause great harm to you.\"","All transactions involving fraud or theft are void by their nature. Title to your money never changes hands. You are entitled by law to have assets stolen from you returned to you. In cases of negligence or broker malfeasance, lawsuits or SIPC protection are your primary recourse.","Just like with IRS refunds issued in errors, after 3 years it's legally yours, they can't go after you anymore. So savings account until then or just mail them a check if that is what your conscious is saying.","I didn't realize that! Thanks for the correction. A bit of google-fu provided this: >[Stolen funds may be covered by what's called a banker's blanket bond, which is a multi-purpose insurance policy a bank purchases to protect itself from fire, flood, earthquake, robbery, defalcation, embezzlement and other causes of disappearing funds. In any event, an occurrence such as a fire or bank robbery may result in a loss to the bank but should not result in a loss to the bank's customers.](http://www.fdic.gov/consumers/consumer/information/fdiciorn.html)","\"As was suggested here, I checked with the state for \"\"Unclaimed Funds,\"\" and despite the fact that I had already done so and found nothing, the funds were now there to be retrieved. So, the takeaway here is, keep checking periodically, it might just take a bit for things to settle out. This link is endorsed by NJ State, and covers much of the US: http://www.missingmoney.com/. Otherwise check with your state's Dept of Treasury.\"","If you're in the UK, there's a free service here that lets you trace lost bank accounts. If you're in a different country, try Googling to see if that country has a similar service.","If your counterparty sent money to a correspondent account at another bank, then it is completely up to the other bank what to do with the money. If the wire transfer completed, then the account is not closed. If I were your business partner, I would immediately contact the bank to which the transfer was made and explain the situation and hopefully they will transfer the money back. Whenever a wire transfer is made, the recipients name, address, and account number are included. If that name, address and account do not belong to you, then you have a problem because you have no legal right to the money in a court of law. For this reason, you should be avoid any situation where you are wiring money to anyone except the intended recipient.","Although I posted this question more than a year ago, I subsequently read information which may be of use as an answer, specifically regarding Pritchard Stockbrokers in the UK several years ago, in which the FSCS stepped in to compensate investors, as detailed in the following: http://www.fscs.org.uk/what-we-cover/questions-and-answers/qas-about-pritchard-stock-6n940n01k/ http://www.ft.com/cms/s/0/89957c56-21e4-11e3-9b55-00144feab7de.html#axzz3crZYbGZ9 For reference, in case the links above are at some point in future taken offline, the FSCS FAQ states: Q: I had “deposited” money with Pritchard so can I expect £85,000 compensation from FSCS? A: No. Pritchard was not a deposit-taker so the money held does not qualify under regulatory rules as a deposit. The money will be treated as an investment, which carries maximum FSCS compensation of £50,000 per person. FSCS has no discretion to pay any more. Q: What happens if my losses are over the FSCS maximum of £50,000 and I accept the FSCS’s compensation? A: If you choose to accept compensation from FSCS, you will be required to assign (or legally transfer) to FSCS all of your rights to claim in the Administration. FSCS will then claim in the Administration standing “in your shoes” and will claim for the whole of your loss, even if it was over £50,000. When FSCS receives the dividends in your place it will then pay to you any amounts recovered to ensure that you do not suffer a disadvantage for having accepted FSCS compensation first. Example 1: Loss = £80,000 FSCS compensation = £50,000 Dividend of 50p/£ received by FSCS = £40,000 FSCS pays £30,000 to claimant so he is fully compensated (total £80,000), and retains £10,000 recovery for itself Example 2: Loss = £100,000 FSCS compensation = £50,000 Dividend of 50p/£ received by FSCS = £50,000 FSCS pays £50,000 to claimant so he is fully compensated (total £100,000), and retains nothing for itself FSCS does not have to have make a full recovery of its £50,000 before it starts paying its dividend recovery on to claimants. Claimants are not compelled to claim from FSCS, or to accept the FSCS offer of compensation. If a person does not want to transfer his legal rights to claim in the Administration to FSCS in return for accepting the payment of compensation, then s/he can decline our compensation and continue his claim in the Administration. After s/he has received the dividend(s), s/he can then return to FSCS to claim for any remaining shortfall. Therefore, the answer provided by @DumbCoder was correct, but in circumstances where fraudulent activity would mean otherwise, the FSCS was willing to intervene on the behalf of investors.","The bank is expected to issue you a check for the balance of your account, make sure your name and address on file is correct as that is who they will make the check to and send it. Have the credit union also contact Chase, or get a statement from the credit union, about their customer. If the check does bounce back to the credit union and the account was under his name, then you will have to deal with the state and his estate and you will have to find a different solution for the bills.","You need to find out exactly how the two accounts are titled. If an account is an UGMA (Uniform Gifts to Minors Act) account that is in your name with your mother/father as custodian, then you are entitled to all the money in the account when you become an adult. If the account is indeed a UGMA account, the bank is supposed to not let the custodian operate the account once the child becomes an adult, but this does not always happen. There was a question earlier on money.SE (which I cannot find at this time) in which the 25-year-old person asking the question claimed that his father was still buying and selling shares in his UGMA brokerage account and the IRS was asking why the profits and losses from these transactions were not being reported on the 25-year-old's tax return. Money in an UGMA account is not supposed to be used for payment of household expenses, food, etc. which is the parent's responsibility during the minority, but this can well be abused. As to whether money was taken out and then restored (or possibly not restored, as you seem to suspect), it is possible to sue the custodian for improper handling of the UGMA account and recover the funds, but whether one wants to sue a parent over what might be a relatively small sum is another matter. Consider whether most of what is recovered might go to pay legal fees or other costs of the recovery process, and will likely ruin a family relationship. If the accounts are titled as joint accounts, then either party can empty the account without informing the other. But doing so would need information about the account number etc. which you may not have. For tax purposes, there is also the issue of whose Social Security Number is listed on the account, yours or your parent's. See also this answer for a view of what happens from the other side.","The answer is - the money got bounced back to their account :(","YMCbuzz: since your profile says you are in Canada, you are in luck. Canadian banks must turn over their unclaimed accounts to the bank of Canada. They have an Unclaimed Balances page that has a search feature to see if you have missing millions from long lost relatives.","According the FSCS: If the bank fails FSCS would refund the maximum under our rules (currently £75,000 per person). Any credit balance over and above this would be offset against the mortgage by the insolvency practitioner responsible for the winding up of the bank. FSCS would play no part in that process. (Unless the savings were larger than the debts, but then it wouldn't make sense to have them in a zero interest offset account!) So the money would not be completely lost as such. Whether that would count as an overpayment is an open question, but perhaps a moot point anyway if the bank went under. (Finally, arguably, a pension or other investment might also be better for such amounts.)","Disclaimer: I am not a banker nor a lawyer. I am unaware of the exact term in English, there is a process where you can ask for a reversal of a payment if it was made in error and your former employer should have made use of this. After a month though, I'm fairly sure the period of eligibility for this reversal has passed. As far as I am aware there is no point in time where it becomes ok for you to take this money. If you wish to close the account I would advise contacting the company and obtaining their payment details so you can transfer them the money and subsequently close the account.","I'd suggest you contact the Office of the Controller of Currency, who regulates BOA and file a complaint. This whole deal seems shady. According to the OCC FAQ, the fact that they closed the account is in their prerogative. However, I would think they are obligated to quickly return your funds, but can't find anything specific to that. The banks are very sensitive to having complaints filed against them, so if nothing else this may encourage them to be more helpful, even if your complaint isn't actionable. OCC Complaint Process. This topic on how long a bank can hold a large deposit before making funds available may also be helpful.","I upvoted you as I think your story is important to tell. However, commodities and futures accounts have never been protected under SIPC. The use of your money to pay debts sounds illegal or perhaps it was legal under a document you signed when you opened your account. Bankruptcy was not a way to screw you over. The bigger point is that bankruptcy is a way to restructure debts and is beneficial in the long run to the benefits of society. While we often look at people or corporations who have to file bankruptcy as being irresponsible (and what I am about to say may reflect negatively on you, for that I apologize) the people or corporations who lent to a bankrupt entity should be scorned just as much. Right now, the EU is going through a period where we are hoping bankruptcy is off the table. Increasingly though, the only way to do that is to try and paper over debts that will never be repaid for a long enough time period for growth to resume. But the question remains, what if growth never comes back. This is why restructuring and bankruptcy is the only option for Greece and likely Italy, Portugal, Spain and Ireland.","The guarantor is the Government of Latvia, the fund is the means of executing that guarantee. Unless the government defaults, the guarantee is valid. See here: In accordance with amendments to the Deposit Guarantee Law adopted by the Parliament of the Republic of Latvia (Saeima) as from December 16, 2010 compensation of EUR 100 000 (approx. LVL 70 000) is guaranteed to the clients of the Latvian banks (both natural and legal persons) per depositor per each bank (all accounts added together, if several accounts at one bank in one name). The government guaranteed compensation covers deposits, current account balance, salary accounts, savings accounts etc. further down: In accordance with the Deposit Guarantee Law, in the occurrence of a case of unavailability of deposits in the Fund for paying out the guaranteed compensations, such payments shall be made from the Government budget via FCMC.","You still owe the money because there is a high probability that some other organization bough the account and assets of the failed creditor. That means they will have bought your debt. I have to assume there is language in your note that explains that they might sell your debt. But what should one do if they don't know who bought the entity? You can't pay a non-existent entity, but if you don't have an address, how can you pay the new owner of the debt? First step, is to assume there will be a new owner. A government, a company, an individual; somebody will buy that debt. Read the news and see if you can't figure out what other entity owns your note. You might have to contact them to enquire about where to send payment. Keep records of any such contact. If you put in an honest effort, but just cannot figure out who owns your note, I'd suggest continuing to make regular on-time payments. But put your payments into a new bank account that you open just for this purpose. So when the new owner of the debt does come calling, you'll have reasonable proof you were attempting to pay. You simply settle up from the special account. Any reasonable company will just take the money, and if anybody gets unreasonable and you have to appear in court, you have a paper trail indicating your attempts to honour the debt. You'd have to consult a lawyer if nobody comes asking for the money. There are probably statutes of limitation, but I wouldn't count on that ever happening.","You probably can't deposit the check directly, but there are mechanisms in place to get your money through other means. In the US, all states and territories have an unclaimed property registry. Before you contact the company that wrote the check, you should check that registry in your state. You will have to provide proof that you are the intended recipient, having the original check in your possession should make that considerably easier.","It looks like your visa being refused is entirely irrelevant. What happens in bankruptcy is that all the assets of the bankrupt entity are taken over, liquidated, and the proceeds are distributed to the creditors. You're one of the creditors, and as you've been told - the proceeds are not enough to pay all the creditors in full. This is quite common in bankruptcies. What you can do is sue in court and demand priority over other creditors, but... a. You're exactly the same as many other creditors (rest of the students), so why would you get a priority? b. Suing costs money and even if you get more, you'll pay way more for legal fees and expenses. What else can you do? If you paid with a credit card - your credit card company may be able to reverse charges. Sometimes that works, depending on how fast you move. If you paid with a check - your bank may similarly be able to stop payment on the check. This provided it hasn't been settled yet.","\"I would call the bank and ask how the person is on the account. If they are an owner, or are an authorized user, or what type of owner they are, etc. If the bank makes the distinction between \"\"user\"\" and \"\"owner\"\" then most likely, your funds are not able to be seized. If they are a joint owner, then, typically, 100% of the money is yours and 100% of the money is theirs and either of you could withdraw all the money, close the account, or have the money seized as part of a legal action.\"","First, if your account has been closed you should not be able to use your debit card in any format. As you mentioned that you are able to use that so your back account is active. So this indicates it is a scam In case account is closed, bank confirms your address and will send you a cheque for the amount in your account. Don't worry. You money will never be lost","\"Thanks for the reply man. Yeah it literally says \"\"closed\"\" next to the accou t name. But we finally got ahold of someone, I guess they close your account whenever you have $0 in it and the account should open again 1-2 business days after the direct deposit tries to go into her account. At least that's what the lady said. She hates this bank but we live in a small town and there's just not many options in terms of banking here. Thanks for the help though man I appreciate it!\"","\"If this is in the United States, there are laws governing business behavior when they have recorded expenses (checks, bills, etc) which are never withdrawn or deposited. A business is required to turn over these funds after a certain time frame to the state government as a part of their business tax cycle. (One caveat- these laws vary in age by state, and 13 years is a long time. You might still be out of luck for an amount so old..) There are even businesses which have cropped up to search for \"\"lost money\"\" (for a fee, of course) that your great uncle might have left behind and which now sits in a government holding account somewhere. It's not necessary to go through the third parties though, because the United States posts this information for the world to see. A good starting place is: USA.gov Unclaimed Money Tool Do as much legwork there as you can. You could even attempt to contact the former employer (you said the business accounts still exist) and in a very friendly, non-confrontational manner ask them what their procedures are and would have happened to your paycheck funds. As others have stated, they are under no legal obligation whatsoever to fix your problem for you, but who knows, you could get lucky and they might voluntarily help you out! You're looking for information not cash, so politeness, patience and understanding are your tools. If all else fails, you could try one of these 3rd party services. Here you run into diminishing returns as paying fees to search for money which might not exist just puts you further in the red.\"","(Assuming in the US) There are several possibilities, but to be honest anyone here is only going to be able to make guesses. To get the answer, the account holder (your girlfriend) is going to have to contact the bank and ask them directly. Some possibilities include: Suspicion of money laundering, suspicion of possible illegal activities in the account (e.g. check kiting), suspicion of possible prohibited activities (not necessarily illegal, but as defined in the account agreement, they may not allow activity related to gambling or pornographic businesses, for example), suspicion of business activity taking place in a non-business account, insufficient KYC (Know Your Customer) information on the account (such as they did not or could not verify required information during the account opening process), a negative ChexSystems report (for example, they found out through ChexSystems she had derogatory information reported on another account at another bank previously), or extended period of time it was overdrafted (usually 30+ days). I should also add that any bank/credit union has just as much a right to close an account with a customer, as the customer has the right to close their account with the bank/credit union, at any time, without notice. In *most* cases (although not all), when a bank closes an account, they will send a letter to the address on file for the account beforehand explaining the reasons. Have her check her mail. Are you sure the account is actually *closed*, and not just *blocked*? It could just be in a blocked status due to overdraft or some other reason, which is very different from being closed. As for where the direct deposit went - if the account is truly closed, then the money is being returned back to the company that initiated the direct deposit - usually takes 2-3 business days. Your girlfriend will have to contact the company's payroll department to arrange other means of payment, such as a check. In any case, it's all speculation at this point until the bank can be contacted to find out the real reason why. (Tip for the future: Look at switching to a bank that has 24/7 customer service)","\"If it is planned, then one can get a Bankers Check payable overseas; if destination is known. 1.) What will happen to the money? It will eventually go to Government as escheating. Unlcaimed.org can help you trace the funds and recover it. 2.) Will the banks close the accounts? 3.) After how much time will the banks close the accounts? Eventually Yes. If there is no activity [Note the definition of activity is different, A credit interest is not considered as activity, a authentic phone call / correspondence to change the address or any servicing request is considered activity] for a period of One year, the account is classified as \"\"Dormant\"\". Depending on state, after a period of 3-5 years, it would be inactive and the funds escheated. i.e. handed over to Government. 4.) Is there anything else to do? Any ideas? Before leaving? Try keeping it active by using internet banking or credit / debit cards linked to the account. These will be valid activities. 5.) Is there any way to send a relative to the US with any kind of paper of power, to unfreeze the accounts? 6.) The banks say they would need a power of attorney, but does that person actually need to be an attorney in the US, or can it simply be a relative WITH a paper (a paper that says power of attorney) or what is a power of attorney exactly, is it an actual attorney person, or just a paper? 7.) Is there any other way to unfreeze the accounts? Although I can confirm first hand; I think there would be an exception process if a person cannot travel to the Bank. It could even be that a person is in some remote state, not well etc and can't travel in person. I think if you are out of country, you could walk-in to an US embassy and provide / sign relevant documents there and get it attested. Although for different purpose, I know a Power of Attorney being created in other country and stamped / verified by US embassy and sent it over to US. This was almost a decade back. Not sure about it currently.\"","Similar action is being undertaken in Europe following the example of Cyprus. As WND recently pointed out, finance ministers of the 27-member European Union in June had approved forcing bondholders, shareholders and large depositors with more than 100,000 euros in their accounts to make the financial sacrifice before turning to the government for help with taxpayer funds. Do they get compensation later if the bank recovers?","Will citizens advice be able to help me, or am I only going to get told to seek legal advice anyway? They are just advisory. i.e. help/guide people. They are not responsible for any outcome. What can I do as I'm not the person who's made payment or been paid, but I also don't want to cause the estate agent lots of work from my mistake, but legally no bank will talk to me anyway. You are right. You estate agent would have to follow-up with banks [which you have already done]. Will I have to seek legal action or the estate agent? Once you follow-up with the Banks and the Ombudsman, you should proceed to legal. Legally if it is a mistake on your part, the beneficiary is NOT entitled to the money and has to refund it. However establishing this takes a while and hence most of the times beneficiary does not pay back the money that is not rightfully his.","Sorry for your loss. If the insurance money is now in an account under your names, you can might be able to withdraw the money. You should put a country tag and state tag on your question. EDIT: my initial response might incorrect -- see comments below. This is going to be state speficic and the amounts may be relevant. Best to seek professional advice!","if the deposit earned interest, you could be liable for taxes on the interest earned. If it ended up in a checking account, then you will not be liable for any taxes since checking accounts do not earn interest anyway. Your bank may inquire about where these transfers are coming from and question the legality of it.","I'm afraid you're not going to get any good news here. The US government infused billions of dollars in capital as part of the bankruptcy deal. The old shares have all been cancelled and the only value they might have to you are as losses to offset other gains. I would definitely contact a tax professional to look at your current and previous returns to create a plan that best takes advantage of an awful situation. It breaks my heart to even think about it.","What I'm reading is that they subtracted the $85 you owe them and they're cutting you a cashier's check for the rest. Ethically speaking, you owed them the money, they subtracted it and made you a check for the rest. Once you cash that check, nobody owes anyone anything in this equation. Sounds like they're in the clear. Legally speaking, I have no idea, since I'm not a lawyer, but even if it was not legal, good luck getting the $85 back without spending far more in retaining a lawyer and fighting it in court. Even fighting it in small claims court will take more of your time than $85 is worth. If it's your time that is the problem, 12 days is not horrible in banking terms. Yes, we're spoiled now by ACH transfers and same day deposit availability, but since you're retired, I'm sure if you think back you'll remember when it used to take two business weeks to clear a check... TLDR; cancel future deposits to that bank, find a new bank, then forget this fiasco and get your revenge by enjoying your life.","Another case of a company retaining control of the pension fund and suddenly not being able to pay out. When will people learn? Pension shouldalways be paid out to a third party account that the employer can't touch once it has been deposited. That way you dont risk the company taking your pemsion with it when it goes under.","In India, assuming that you have already paid relevant [Income/Capital gains] tax and then deposited the funds into your Bank [Savings or Current] Account; there is NO INCOME tax payable for amount. Any interest earned on this amount is taxable as per Income Tax rules and would be taxed at your income slabs. Wealth Tax is exempt from funds in your Savings Account. I am not sure about the funds into Current Account of individual, beyond a limit they may get counted and become part of Wealth Tax. More details here http://timesofindia.indiatimes.com/business/personal-finance/Do-you-have-to-pay-wealth-tax/articleshow/21444111.cms","It's not your money. According to one article, the interest on the money could be negotiated in some cases to be yours, but I wouldn't plan on it. From MSN: According to a complaint filed by the state of Minnesota, the 37-year-old social worker received a $2.6 million payment from the state Department of Human Services that had been intended for a local hospital. Instead of immediately reporting the mistake, the woman and a friend opened investment accounts, bought jewelry, purchased four vehicles including two Land Rovers and spent $3,817 at Best Buy. Six weeks after getting the money, she called the Human Services Department to ask why the check had been sent to her, according to the complaint. When informed the payment was an error and the money had to be returned, the woman reportedly told the department to talk to her attorney and refused to respond to follow-up calls. As the prosecutor said to a St. Paul Pioneer Press reporter, there's a big difference between keeping money when you can't reasonably be expected to determine the true owner -- like that $20 bill on the street -- and keeping money when you can. The state had the pair's accounts frozen and is prosecuting for theft as well as civil charges, though the woman returned the unspent money and the property she bought. More from MSN Money A better approach to an unexplained windfall is to keep the money in a separate account while you track down the source. Who gets to keep the interest earned will be one of those things you work out with the rightful owner's attorneys. Bankrate has a similar story posted as well.","A company as large as Home Depot will have a fairly robust Human Resources department and would probably be able to steer you in the right direction: odds are they know the name of the brokerage and other particulars. I did some googling around, their # is (1-866-698-4347). Different states have different rules about how long an institution can have assets abandoned before turning them over to the state. California, as an example, has an abandoned property search site that you can use. That being said, I had some penny stocks sitting in a brokerage account I never touched for about 20 years and when I finally logged back in there they were, still sitting there.","If this was a public corporation (stock) and the investment was made in a non-registered account, then you can claim a capital loss. Capital losses are claimed against capital gains (not income), and can be carried back 3 years or carried forward indefinitely. Here's an article I've written on how to claim capital losses that may help.","...funds received for the month of death and later must be returned. If the estate is bankrupt, as near as I can tell, the SSA is out of luck. (This applies to payment apart from that covered above.) If you need advice on something other than retirement insurance, a comprehensive list of applicable statutes and rulings is here.","You are obligated to return it, and they will come after you as soon as they figure out the error. You probably need to notify somebody as soon as possible and keep records of your correspondence showing you performed due diligence in returning the funds. Transferring the money into an account at the same institution is also wise. You can't look like you are hiding it, but keeping it mixed with your actual funds is also asking for extra trouble or work.","I trust the 401(k) was a traditional, pre tax account. There was no tax paid, and any withdrawals would be taxable. The account could go to zero, and there's no write off, sorry. I have to ask - were there any withdrawals along the way? What was it invested in that lost 90% of its value? Edit - I'm sorry the OP came and went. It would be great to have closure on some of these issues. Here, I'm thinking as Duff said, malpractice, or perhaps a 401(k) that was 100% in company stock. Seems we'll never know.","Most cooperative banks are insured upto Rs 1,00,000/- . It depends on what is the current status of the Bank and withdrawal of the funds would be based on the decision taken by the administrator. There maybe no interest payable, it would again be decided by the administrator.","\"Google for \"\"unclaimed funds\"\" You might need to do it for each state separately.\"","Absolutely true, but in a bankruptcy situation the best OP can do is win a judgment for breach of contract/fiduciary duty/whatever against Refco, and then get a levy on some assets. He's still just a lien creditor who will be paid after all the secureds in bankruptcy. As MF Global is demonstrating once again, whatever regulations there are to keep clients' money in brokerages sequestered ain't cutting it.","If I were you, I would go to the bank right now, pay the $100 and close the account. I would stop the bleeding first then consider the fallout later. Do you own the account jointly with your partner(s) as a partner or does the partnership (a separate formal entity) own the bank account with you a named representative? Those are two very different situations. If you're a joint owner, you're liable for the fees; along with your other partners in accordance with your partnership agreement. You never closed yourself off the account and that's your problem. If the dissolved partnership owns the account, you're not personally liable for the fees. You were never a personal owner of the account, now that the account is negative you don't magically become personally liable. The differences here are very nuanced and the details matter. If this were a large amount of money I'd suggest you go see a lawyer. Since this is about $100 I'd just pay it, make sure the account is closed, and move on.","First, gather the information you have on her banking history. She may have accounted for that money and moved it to a new account or otherwise spent it. I don't expect you'll have much banking documentation from the 1950s, but if you do, then start there and trace the money. To the extent you can, you may try to contact the banks in question or their successors. It may be difficult to trace them through mergers or closings. Again, it's very possible that she spent or transferred those funds and there is nothing to find anyway. There is also a risk that if the money went unclaimed for too long, then the bank was obligated to escheat any remaining balance to the state of Ohio. You can try contacting Ohio Department of Commerce about unclaimed funds and attempt to locate anything that may have rightly belonged to her. You will need to gather documentation to do so. You may be able to receive the funds from the state, if it has received them.",">You were an unsecured creditor. Yes, but his situation was more complicated than your run of the mill unsecured creditor. He had a trading account. It may very well have been technically *structured*, for accounting purposes, as unsecured credit - but the reasonable assumption for the average person is that trading/deposit accounts are held in trust rather than as individual investments/grants which the company can use how it pleases with just the promise to pay you back later. Now, granted, somebody with a Refco forex account should be sophisticated enough to understand the difference - but that doesn't change the fact that even such investors might normally just assume that their accounts are being sequestered. It would make the most sense. It sounds to me like Refco's accountants, and everybody involved in the process, were thieving scumbags.","You have not lost value. It is just that the shares you owned, are now not tradable on US stock exchanges. You still have the value of your shares protected. In cases like de-listing of a stock, typically a trust (may be managed by a bank) is setup to help customers liquidate their stocks. You should try to search the relevant SEC filings for de-listing of this stock to get more details on whom to contact.","Additionally my understanding is that a Faster Payment is as good as cash once received. Yes it is but there is a caveat. Read on unauthorized payments on Faster Payments website. Either the sender is fraudulently claiming this was unauthorised, or their bank doesn't have adequate security standards - why is it me who loses out here? Agreed. You should take this up [dispute the action] with your bank asking why your account was closed as there is no fraud from your side. Make sure you do all the follow-up with writing and provide evidence of the trade being genuine.","Principal has probably distributed your money to a company that holds dormant retirement plan account balances. I work for a third-party administrator and we usually use a company called Penchecks. They receive dormant accounts and try to locate the people they belong to. They don't do this for free though, so the sooner you find your account the better. Principal would have to keep a record of where they sent your money, although I don't know for how long they are required to keep that record. For example, doctors are only required to keep records for 7 years. The PBGC will help you find your lost balance. They are a gov't agency that protects retirement plan participants. They have a search engine for this kind of thing: http://search.pbgc.gov/mp/ Also https://www.unclaimedretirementbenefits.com/ is a registry of unclaimed retirement plan benefits.","I am not sure about your country but I think each country must be having some fixed time frame for reversal of the transaction (Which must be less than a month), please inquire if that time limit has passed or not ? If it hasn't best will be to wait for some more time before informing them. Once the reversal time limit has passed no one (Except government agencies with court orders) can withdraw money from your bank account without your written consent even if they have deposited it themselves. World would have been a strange place if this restriction was not there. Since you want to close the account you can approach your previous boss (or executive from HR/Account department) and tell them your intention. After that either you can transfer money online to their account or give them a cheque which they can deposit in their account. This way things will end faster and you will be freed from this extra account. If above process takes time another solution will be to transfer the money to your another (permanent) account and give them a cheque from this account. Here also you can use online transfers or by sending them a cheque through courier. Whichever mode you choose to pay the money back make sure you have some documented proof that may be helpful in future.","Sorry to hear about this happening to you. You should file a lawsuit in small claims court and get a judgement. Unfortunately, you are probably one of many creditors, and are unlikely to get much, if any, money back.","Firstly, sorry about the accident. I am afraid you will need to do your own legwork, because you cannot trust other people with your money. It's a good thing you do not need to rush. Take your time to learn things. One thing is certain, you cannot let your money sit in a bank - inflation will digest them. You need to learn about investing yourself, or you run a risk of someone taking advantage of you. And there are people who specialise in exploiting people who have money and no idea what to do with them. There is no other way, if you have money, you need to know how to deal with it, or you are likely to lose it all. Since you need to have monthly income and also income that makes more money to make further investments, you need to look at two most common investments that are safe enough and also give good returns on investment: Property and index funds. You might also have a look at National bonds as this is considered safest investment possible (country has to go bust for you to lose money), but you are too young for that. Young = you can take more risk so Property and shares (indexes). You want to have your property investments in a country that is stable and has a good ROI (like Netherlands or Lithuania). Listen to some audio lectures: https://www.audible.co.uk/pd/Health-Personal-Development/Investing-in-Real-Estate-6th-Edition-Audiobook/B008SEH1R0 https://www.audible.co.uk/pd/Business/The-Secrets-of-Buy-to-Let-Success-Audiobook/B00UVVM222 https://www.audible.co.uk/pd/Non-fiction/Economics-3rd-Edition-Audiobook/B00D8J7VUC https://www.audible.co.uk/pd/Advanced-Investments-Part-1-Audiobook/B00HU81B80 After you sorted your investment strategy, you might want to move to a country that is Expat friendly and has lower living costs than US and you should be able to live like a king... best of luck.","Contact the bank where the money is being sent. They should have a record of it, and they will know what happened to it. In some, maybe even most, banks accounts are never truly closed, they are just made inactive. If that is the case with this bank the 300 euro may be sitting in the account as a credit. If they have the money, ask for them to send it to back by reversing the transaction. If it has been too long they may have another procedure for refunding the money. They might even send it by check. If they already reversed the transaction, contact your bank to determine where the funds went.","Okay, I went through a similar situation when my mother died in March of this year. The estate still needs to go into probate. Especially if there was a will. And when you do this, your husband will be named as the executor. Then what he will need to do is produce both of their death certificates to the bank, have the account closed, and open an estate account with both of their names on it. Their debts & anything like this should be paid from this account as well. Then what you can do is endorse the check as the executor and deposit it into this account. After all debts are paid, the money can be disbursed to the beneficiaries (your husband). Basically, as long as they didn't have any huge debts to pay, he will see the money again. It just may be a couple of months. And you will have to pay some filing fees.","JohnFx is right: banks hate visits and attention from the regulator (both positive and negative). I would not threaten to file, just file away and let them get in contact with you. The local branch is stalling you. Do not play their game. Since you already went through the first level of support (local branch, phone support), get the bank ombudsman contact and file a complain. It is a major bank, most of the time getting a high level complain will be routed from the upside down through their structure, and hit them. Remember I said they are stalling you? Probably something went wrong, and they are buying time to try and fix it. Also it is worth noting that the ombudsman is usually a line of support above the phone customer support. If going through the ombudsman does not work and/or if you are not willing to wait anymore, file a complain with the government central bank, or similiar institution (trying to be broad here, even if you tagged USA - JohnFx has the link in his answer for the USA's regulator). You can even file a small claims lawsuit, though I do not know the cost of doing it in the USA (in my country small claims court is free for private citizens). Do not report your money as stolen; banks are bureaucratic institutions by nature, and they can silver tongue out of this claim.","The Employee Benefits Security Administration within the US Department of Labor is tasked with keeping track of pension and 401K programs. The even have a website to search for abandoned plans: it helps participants and others find out whether a particular plan is in the process of being, or has been, terminated and the name of the Qualified Termination Administrator (QTA) responsible for the termination. The Employee Benefits Security Administration discuss all types of details regarding retirement programs. This document What You Should Know About Your Retirement Plan has a lot of details including this: If your former employer has gone out of business, arrangements should have been made so a plan official remains responsible for the payment of benefits and other plan business. If you are entitled to benefits and are unable to contact the plan administrator, contact EBSA electronically at askebsa.dol.gov or by calling toll free at 1-866-444-3272. There are also EBSA offices spread thought the United States","\"Government should have worked the same way. Use as hard terms as possible for \"\"too big to fail\"\" banks. If they can't take it and go bankrupt, purchase the liabilities and assets and run government owned bank next gradually selling stock next 10-15 years.\"","I just thought I'd follow this up as it's now resolved. I spoke with citizens advice and they hadn't really got any advice other than they legally can't keep the money. I then contacted Barclays (as this is who was sent the money) they were very helpful and assured me that if my estate agent went into the bank with proof of transaction and their details then they'd definately follow this up and resolve it. The day after speaking to Barlcays online, my estate agent contacted me to say the money has now appeared back in their bank. So it looks like the previous letter sent back from TSB must have been an automated letter like a timeout and actually in the background Barclays must have still been processing it. Regards Liam","This was most likely a scam, although I do know of cases where a transfer intended for one company ended up in the bank account of another company. I am not entirely sure what happened afterwards, but I think the receiving company was asked to return the transfer back to the originating account. Still, even if this was the case, they wouldn't have just abandoned $1k for a simple administration fee (if there was even any). It doesn't sound logical.","If you know what bank your parents used, call them and ask. (Or you might have to go there and show id). Chances are if such an account exists, it would be at the same bank. You can also search for unclaimed property. Here's the information link for Florida.","First, make sure you are contacting the bank directly - use an old invoice you have on hand with a phone number direct to the bank and call them. Do not use the provided number, or you may wind up being pulled into a scam (It is entirely possible that the bank is also confused at this point - so you should not rely on the number provided at all). Second, once you can confirm that your account is being closed, find out when it is being closed so you know when you need to act on it - it's possible you still have access to your account, and do not need to launch into a panic just yet. Third, get the bank to explain exactly why they are closing your account - make it clear that if they cannot explain, you will be forced to transfer to a new account and close business with them permanently - this is not a threat, this is a matter of fact because... Finally, if you cannot keep your account open, find a different bank and open up a new account. Frankly, if your current bank is closing your account and only managed to get a letter out to you a month late, you should probably find a new bank. If instead they simply cannot figure out if your bank account is closed or not, this is also a bad sign and you may want a new bank account anyway. But please, go through these steps in order, because you need to verify with your bank what is going on. Keep @Brick 's answer in mind as well, in case you need to get your money out of your account quickly.","@ Chris: Companies like Keane, ours, and others know where to look for these funds and where to ask at the correct agencies that are holding this money that is not part of the public links that you have access to. This is how we find this information. Our types of companies spend significant time, money and resources in finding out about the money, then finding who it actually belongs to (because it does not always belong to who is mentioned on the list) and then finding the correct individual. @ jdsweet: I apologize if you think this is a marketing ploy. It is not. Our company doesn't even take phone calls from people that want us to find them money. Only if we contact someone, because at that time we're confident that the person we touch base with is due the funds. Again, I am not plugging our company, but trying to let Neil know that in some cases he is right, you don't need a third party to claim funds for you - if you can find them. In this case, he has looked and cannot find them. Keane is charging a fair amount to retrieve funds he cannot find and doesn't know about and is not charging him anything to do all the work. Again, as mentioned above, the direct answer is that we know how to access information and lists that have this money hidden from the public because the agency holding the funds doesn't want you to know about it so that they can escheat the funds. Escheating is the state's legal way to confiscate your money. See, if you don't put in a claim for the money (depending on what type it is and where it is located) the agency and state holding the funds has certain time frames for you to get the money. If you don't, again, they get to keep it and that is what they want despite what they say. That is why there is approximately $33 Billion that is known to the public and really $1 Trillion that's out there. I apologize if you think that this is a plug for my company, it's not because we're not looking for calls, we make them. I'm also not asking Neil for his business. From all accounts on my side, this seems like a fair deal.","Does that strike you as a fair solution? All the people that have made sacrifices and not spent every dime they have earned deserve to have it taken away? And I am sure they do have it 'somewhere' like low yield bonds or savings accounts...","\"If they made deposits 20 years ago, and none since, the S&P is up over 300% since then. i.e. a return of $40,000 on $10,000 invested. We wouldn't expect to see that full return, as a prudent mix of stock and bonds (or any treasury bills/CDs, etc) would lower the overall return during this period. Advice \"\"Transfer the money, directly to an IRA at a broker, Fidelity, Schwab, Vanguard, etc.\"\" For most people, going after the advisor isn't worth it, unless the sums are large and the poor management, pretty clear. The lesson for readers here - monitor your investments. Ask questions. It's not about \"\"beating the market\"\" which can actually create more risk, but about understanding the returns you see, and the fees you are spending. The mistake didn't occur at the time the money was invested, but every year it wasn't monitored.\"","Look up escheatment. Companies that have unclaimed property are supposed to send it to your State government. They should have a unclaimed property department of some sort. In short, the company is going to have to pay either you, or your State (In Your Name) so they have to pay it either way. It would be easier for them to just give you new check. Expect them to give you some grief in verifying it has not been cashed and such... but if you have the original, in hand, it shouldn't be too bad. A 'Lost' check may be harder to get replaced. Not a lawyer, don't want to be.","If the funds are deposited into a noninterest-bearing account, they will be covered by FDIC insurance regardless of the amount (However, this extended coverage may not be valid after Dec. 31, 2012): On November 9, 2010, the FDIC issued a Final Rule implementing section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that provides for unlimited insurance coverage of noninterest-bearing transaction accounts. Beginning December 31, 2010, through December 31, 2012, all noninterest-bearing transaction accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions. (Source: http://www.fdic.gov/deposit/deposits/changes.html)","They will not send a bill, though there's a chance they will eventually send an accusatory letter. You must proactively pay your taxes. The simplest route is to send a check to each taxing authority with the respective full amounts due. I wouldn't bother calling them. You could also file amended returns with each containing the correct information. As a general rule, tax advisors tend to counsel against giving bank account information to the IRS for payment purposes (as opposed to refund purposes), both to protect the timing of payment and to make it slightly more difficult for them to seize or lien your account. If you choose to send a check, you can use Form 1040-V and NY Form IT-201-V. Please triple check your Social Security Number matches your tax return SSN, so they correctly credit you for payment. You may include an explanation of the closed account if you are feeling either fearful or contrite, but if the amount due is paid in full, then neither taxing authority should really care about your error.","Question: at what point, if any, am i free to use this money? Never. It's not your money.","There's two possibilities. One is that the broker declared your account abandoned and turned over your account to the state. If that happened, it should turn up here: http://missingmoney.com The second is that the broker is still holding your stock. I'd start by contacting the company's transfer agent.","Details, as usual, will depend on local culture and jurisdiction, but in most jurisdictions, there is generally no obligation for you to actively return something (money, parcel, whatever) you received in error - usually it's enough to notify the sender. Actually, it might be a dangerous mistake to return it yourself - what if you send it to the wrong account? So you probably have done all you had to, and can close your account without further delay. However, until the time specified by Statute of limitations or similar concept in your jurisdiction has passed (usually a few years), the company could ask you to return the money. If they do ask, be prepared to return it - so do not spend it. My recommendation would be: Then lean back and wait :-).","If you give money to a person or entity, and they don't have the ability to pay you back, it doesn't matter if they are legally required to pay you.","So basically, if you have a large savings account and are not investing... (because banks are actually a very poor way to get returns on capital), they will invest it for you... The take home I'm getting is... invest your money, and leave it out of the banks.","\"This will happen automatically when you open an interest-bearing account with a bank. You didn't think that banks just kept all that cash in a vault somewhere, did you? That's not the way modern banking works. Today (and for a long, long time) banks will keep only a small fraction of their deposits on hand (called the \"\"reserve\"\") to fund daily withdrawals and other operations. The rest they routinely lend out to other customers, which is how they pay for their operations (someone has to pay all those tellers, branch managers, loan officers) and pay interest on your deposits, as well as a profit for their owners (it's not a charity service). The fees charged for loan origination, as well as the difference between the loan interest rate and the deposit rate, make up the profit. Banks rarely hold their own loans. Instead, they will sell the loans in portfolios to investors, sometimes retaining servicing rights (they continue to collect the payments and pass them on) and sometimes not (the payments are now due to someone else). This allows them to make more loans. Banks may sometimes not have enough capital on hand. In this case, they can make inter-bank loans to meet their short-term needs. In some cases, they'll take those loans from a government central bank. In the US, this is \"\"The Fed\"\", or the Federal Reserve Bank. In the US, back around the late 1920's, and again in the 1980's some banks experienced a \"\"run\"\", or a situation where people lost confidence in the bank and wanted to withdraw their money. This caused the bank to have insufficient funds to support the withdrawals, so not everyone got their money. People panicked, and others wanted to take their money out, which caused the situation to snowball. This is how many banks failed. (In the '80s, it was savings-and-loans that failed - still a kind of \"\"bank\"\".) Today, we have the FDIC (Federal Deposit Insurance Corporation) to protect depositors. In the crashes in the early 2000's, many banks closed up one night and opened the next in a conservatorship, and then were literally doing business as a new bank without depositors (necessarily) even knowing. This protected the consumers. The bank (as a company) and its owners were not protected.\"","I was just wondering, are banks in India federally insured? Yes the Banks in India are insured for Principal and Interest upto Rs 1,00,000/- per holding type per Bank. See the DICGC website. So if you have one or more accounts [in the same or different branches of a bank] and the Principal is say Rs 98,000/- and the interest accrued at the time of liquidation is say Rs 4,000/- you will get Rs 1,00,000/- If you have more than Rs 1,00,000/- you will not get only 1 lac. If you have an individual account, and your wife has an account and both of you have a joint account. The total limit will be Rs 3,00,000/-. If you are guardian to your Children, its again considered separate. RBI Site as a good example on this. If you open Accounts in Different Banks, the limit increases. What happen if banks like Yes Bank or IndusInd bank goes bankrupt? Both Yes Bank and IndusInd are participants in the DICGC and are insured. See the full list here. How will we recover money in those cases? Although insured, the process to get the money back would be time consuming. More often the bank is placed under moratorium, an effort is made for amalgamation or reconstruction ... Only if everything fails, the bank goes into liquidation. So it could be anywhere from few months to few years for you to see you money.","well, our disagreement is regarding my use of the word confiscate I feel government took my hard earned tax dollars to fund their agenda of EV promotion. I don't want government picking winners/losers and I don't agree with **my money** wasted/destroyed on crony capitalism","The only consequence I could see is that they have your money until they pay you back. I'd just do what JoeTaxpayer says and get it back.","So, if it was a personal account, and not an investment in Refco, you should have been insured by the SIPC for $500,000 for your securities, and $100,000 or more for cash. If you had all your money invested in Refco, you weren't diversified, which is one of the first rules of investment. It's not fun to learn this the hard way, I know from experience, but you should never invest more in any one stock than you can afford to lose. Learn from your mistakes rather than blame the big guys vs little guys.","\"Sovereigns cannot go bankrupt. Basically, when a sovereign government (this includes nations and US States, probably political subdivisions in other countries as well) becomes insolvent, they default. Sovereigns with the ability to issue new currency have the option to do so because it is politically expedient. Sovereigns in default will negotiate with creditor committees to reduce payments. Creditors with debt backed by the \"\"full faith and credit\"\" of the sovereign are generally first in line. Creditors with debt secured by revenue may be entitled to the underlying assets that provide the revenue. The value of your money in the bank in a deposit account may be at risk due to currency devaluation or bank failure. A default by a major country would likely lock up the credit markets, and you may see yourself in a situation where money market accounts actually fall in value.\"","The money NEVER becomes your money. It has been paid to you in error. Your best response is to write to the company who has paid you in error and tell them that for the responsibilty and subsequent stress caused to you by them putting you in a position of looking after their money you hereby give notice that you are charging them $50 per week until such time as they request the repayment of their money. Keep a dated copy of your letter and if they fail to respond then in 12 weeks they will have to pay you $600 to retrieve their $600. If they come back to you anytime after that they will OWE YOU money - but I wouldn't push for payment on that one. I have successfully used this approach with companies who send unsolicited goods and expect me to mess about returning them if I don't want them. I tell them the weekly fee I am charging them for storage and they quickly make arrangements to either take their goods back or (in one case) told me to keep them.","If you have a deposit account (like a checking account) and a credit card at the same bank, it is common for the bank to have a clause that lets them make automatic payments to the credit card. I've also seen this happen in the case of death where the deceased person had $2,000 in a checking account and owed some on a credit card. Upon death, the bank took the $2,000 and applied it to the credit card without asking.","\"I would start by taking it to your bank and asking them what they think. They can probably call the bank on the check and find out if it is still good. If they let you deposit the check, I would wait a couple of weeks before spending the money, in case the issuing bank decides that the check is no good, and your bank wants its money back. If you are told that the check is not good anymore, the next thing I would do is to check with your state's treasurer's office and see if they have any \"\"unclaimed money\"\" for your mother.\"","\"how is the money the FDIC has collected Fees collected from the banks: The FDIC receives no Congressional appropriations – it is funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities. http://www.fdic.gov/about/learn/symbol/index.html They also use the proceeds from liquidating the assets of failed banks to make payouts. Are there country specific agencies with a similar mission? Canada Deposit Insurance Corporation Instituto para la Ptotección al Ahorro Bancario (Mexico) Financial Services Compensation Scheme (UK) not quite like the FDIC You'll have to search for others yourself. :) Most importantly, are there any examples of a similar system that has failed? As the Mythbusters say, \"\"failure is always an option.\"\" There is a statement on FDIC's website to the effect that they are backed by the \"\"full faith and credit\"\" of the U.S. government. That said, the FDIC maintains its own fund to make insurance payouts. Granted, in the shakiness of the 2008-2009 financial crisis they did start waving a red flag about their realistic ability to cover their obligation. Practically speaking, the government will likely step in if necessary. This 2008 article regarding a propsed revamp of the UK's FSCS should be of general interest to you on this topic, though it does not answer the question of failed systems. (Well, as far as I know. I have only skimmed the article.)\"","\"Are you asking why you aren't entitled to money that someone gave you by mistake? I think the answer is obvious even if you don't like it. If you overpaid your taxes how would you feel if the Government said, \"\"Sorry, finder's keepers. It isn't OUR mistake you can't do math.\"\" Your best course of action is to work with the agency to see if they will work out a payment plan so it isn't a big hit all at one time. They are likely to work with you since it was their mistaken advice that got you into the situation.\"","You purchased the check from the bank. Your funds have been transferred. If the recipient never cashed the check, the money continues to be the bank's, just as if you had written s normal check that didn't get cashed the money would sit in your account."],"string":"[\n \"Such funds are handed over to the state. In NE, like in many states, there is a government website where you can search by your name, find them, and claim them (with proof of your identity, etc.): https://treasurer.nebraska.gov/up/ For sure, the bank cannot just take the money. It is sitting somewhere, the bank just closed the account, meaning they are technically not managing your money anymore.\",\n \"Most likely the account funds have been handed over to the government of the state in which the account was established. Generally it can be recovered if reasonable proof of ownership is provided (which you seem to have). You should try going to http://unclaimed.org/ and selecting the account's state. That site is run by the National Association of Unclaimed Property Administrators, and generally selecting the state will take you to the web site of the particular state's unclaimed property department and give information on how to find out about the funds and/or file a claim.\",\n \"You can probably recover it by checking with the unclaimed property division of the state where you opened the account. See The Office of the Comptroller of the Currency website for more information.\",\n \"\\\"If there was still money in the account when it was closed, the bank would have turned over the cash to the state where they operated. Search Google for \\\"\\\"unclaimed property <state name>\\\"\\\" for the unclaimed property department of the state. The state's website will show if there is money for you.\\\"\",\n \"Is there any chance of losing money in the account Assuming you are a Singapore citizen. The money is your's to claim. Note the account may go dormant [if you do not transact for a period] as per Bank's norms and they may charge a fees for such accounts.\",\n \"\\\"Under no circunstances will the bank keep the money for itself. Keeping the money is considered Unjust Enrichment: A general equitable principle that no person should be allowed to profit at another's expense without making restitution for the reasonable value of any property, services, or other benefits that have been unfairly received and retained. The banks will attempt to, in order: Wait for some time: Generally, a time frame of three to five years with no customer-initiated activity sends an account into dormancy. The amount of time that must lapse depends on the [US] state in which the bank account was opened. Attempt to contact the account holder: (...) the bank must try to notify the account holder. If the customer does not respond within a certain amount of time, the balance on the account will be turned over to the state. Turn over the money to the government: In a process what is called “escheating” an account, banks are required to turn over funds from the inactive account to the state treasury. Once the account is sent to the state, the funds are held as unclaimed property. At this point the account no longer exists so far the bank is concerned. To reclaim your money, you will have to contact your state for the instructions on how to get your money back. You’ll need to complete and submit a claim form along with the necessary identification. If you happen to have unclaimed property held by the state, you can begin the retrieval process by visiting www.unclaimed.org. For a foreigner, it is not unreasonable that the bank would attempt to contact the diplomatic body of the country of origin in step 2, but that may be subject to bank policy. There is some paperwork the bank needs to do to \\\"\\\"escheat\\\"\\\" the account and properly transfer the money to the state.\\\"\",\n \"In general if there are no transactions for several years a bank will close the account. In my experience they also send at least one warning notice. If they do close the account they send it to the state. Each state has an unclaimed property office. You can contact them regarding the procedure to get the money. If this money was just turned over to the state there may be some lag time before you can get it back. Two notes: the state government doesn't charge a fee to get your money back. Don't pay a company a finder's fee. bank account's owned by minors don't have the same activity requirements as those owned by adults.\",\n \"\\\"I'm not personally familiar with this, but I had a look at the Companies House guidance. Unfortunately, it seems you've done things in the wrong order. You should have first got the funds out, distributed them to yourself as a dividend or salary, and then closed the account, and then wound up the company. Legally speaking, the remaining funds now belong to the government (\\\"\\\"bona vacantia\\\"\\\"). It's possible you could apply to have the company restored, but I think that might be difficult; I don't think the administrative restoration procedure applies in your situation. Given the amount involved, I'd suggest just forgetting about it.\\\"\",\n \"\\\"Legally speaking, if you do close a limited company, the funds belong to the government (\\\"\\\"bona vacantia\\\"\\\"). There's some guidance on this at Companies House and there is indeed a substantial amount of administration work to get it undone. Notable excerpts: You should deal with any loose ends, such as closing the company’s bank account, the transfer of any domain names - before you apply. [...] From the date of dissolution, any assets of a dissolved company will belong to the Crown. The company’s bank account will be frozen and any credit balance in the account will pass to the Crown. [...] 4. What happens to the assets of a dissolved company? From the date of dissolution, any assets of a dissolved company will be 'bona vacantia'. Bona vacantia literally means “vacant goods” and is the technical name for property that passes to the Crown because it does not have a legal owner. The company’s bank account will be frozen and any credit balance in the account will be passed to the Crown. [...] Chapter 3 - Restoration by Court Order The registrar can only restore a company if he receives a court order, unless a company is administratively restored to the register (see chapter 4). Anyone who intends to make an application to the court to restore a company is advised to obtain independent legal advice. [...] Chapter 4 - Administrative Restoration 1. What is Administrative Restoration? Under certain conditions, where a company was dissolved because it appeared to be no longer carrying on business or in operation, a former director or member may apply to the registrar to have the company restored. [...]\\\"\",\n \"You haven't mentioned the country. As a general premise, you own them money and the fact that the account was closed has no bearing on the fact that you own them money. My suggestion would be pay them off.\",\n \"\\\"There is no Federal law that mandates that they must re-open a closed account. They can either refuse the transfer / return the money, or they can optionally re-open your account so they get money (makes more sense for them). It is, however, in one of your agreements that they reserve the right to re-open a closed account in order to receive the deposit. At which point, your account will become active, and the balance may be below the required minimum balance threshold, so you may have maintenance or low-balance fees charged against the account (Credit Unions are less likely to have these fees). If you want to call them out on their BS, you can ask them to cite the law which mandates the re-opening of closed accounts. They will likely fall back on your Member agreement. There may be some state laws that discuss this, but I haven't found anything. This has become such a problem for some bank customers (where they are charged fees on the money they weren't aware they had) that a law was proposed in Sept. 2013, called the Freedom and Mobility in Consumer Banking Act, which would essentially only allow the named account holder(s) to re-open a closed account. I went ahead and looked up the NACHA guidelines for ACH transfers (I got the 2013 version) 2013 Corporate Rules and Guidelines. These lines reference \\\"\\\"Article 4A\\\"\\\", which is Uniform Commercial Code Section 4A - Funds Transfer. This means that if your account is actually closed, they have an exception to the standard timeframe for issuing a Return Entry. This means that if you notify them (in writing) that you refuse any future credit Entries to the account, they MUST return them. I then went looking for the return reason codes RDFI = Receiving Depository Financial Institution From what I gather, based on these NACHA guidelines, your CU didn't actually close your account. They put it on \\\"\\\"hold\\\"\\\" or some similar state. If they actually close your account, they are required to issue a Return Entry with Code R02. In your case, your CU doesn't charge you any maintenance fees, but for those working with banks, the best bet is to notify them in writing that you refuse any future credits to the account, or go into a branch and insist on fully closing out the account.\\\"\",\n \"\\\"Most likely the bank will keep it on file for a few years then turn it over to the state as \\\"\\\"unclaimed property\\\"\\\". I can't speak for all states though.\\\"\",\n \"Unfortunately assets placed in a safety deposit box are not covered under the Federal Deposit Insurance Program (FDIC). Unless the bank is found to be negligent in the way it handled or protected your safety deposit box, neither them nor their private insurance company will reimburse you for the loss. Find out if in the duration you had your box with them, they moved, transitioned or merged with another entity. In this specific situation, you may be able to demonstrate negligence on the part of the banks as they have seemingly misplaced your box during their transition phase, and depending upon the value of the items placed in your safety deposit box, you may be entitled to some form of recovery. Some homeowner's insurance policies may also cover the loss, but if you didn't document what you kept in the box, you have difficulty verifying proof of the value. Valuables are often lost but documents can often be reconstructed. You can get stock and bonds by paying a fee for new certificates. For wills and trusts, you can reach out to the lawyer that prepared them for a copy. You should always keep 3 copies of such documents. When you put stuff in the box, always videotape it (photographs can be challenged) but if the video shows it was put in there, although it can still be taken out by you after you turn off the camera, yields more weight in establishing content and potential value. Also know the value of the items and check with your homeowner policy to make sure the default amount covers it, if not then you may need to include a rider to add the difference in value and the video, receipts, appraisals and such will serve you well in the future in such unfortunate circumstances. If the contents of a safety deposit box are lost because you didn't pay the fee, then depending on the state you are in the time frame might vary (3 years on average), but none the less they are sent to the State's unclaimed property/funds department. You can search for these online often times or by contacting the state. It would help for you to find out which scenario you are in, their fault or yours, and proceed accordingly. Good luck.\",\n \"Check with the state that you lived in. Inactive accounts typically get turned over to the State Treasury or Comptroller to be claimed. The time is typically set by statute. Hopefully, you don't live in a state like California or Arizona that treats abandoned property like booty.\",\n \"The bank doesn't keep it. It will stay unclaimed until the unclaimed assets process in the state that the bank branch is in kicks in. At that point it it a state by state process, with each state being different. You will need to inquire to the state government about what the process is in that state. (This will probably be searchable online.)\",\n \"The FDIC has been pretty good at recovery lost money from failed banks. The problem is the temporary loss from immediate needs. The best thing for anyone to do is diversify in investments and banks with adequate covered insurance for all accounts. Immediate access to available cash is always a priority that should be governed by the money manager in this case yourself.\",\n \"\\\"They are right to ask for the money back because you were not entitled to that money. However, you may have a defense called \\\"\\\"laches\\\"\\\". Basically, you can try to show that because of the government's unreasonable delay in asking for the money back, in the meantime you relied on the assumption that it was your money in good faith, and spent it, and now to have to come up with the money that you assumed you wouldn't need would cause great harm to you.\\\"\",\n \"All transactions involving fraud or theft are void by their nature. Title to your money never changes hands. You are entitled by law to have assets stolen from you returned to you. In cases of negligence or broker malfeasance, lawsuits or SIPC protection are your primary recourse.\",\n \"Just like with IRS refunds issued in errors, after 3 years it's legally yours, they can't go after you anymore. So savings account until then or just mail them a check if that is what your conscious is saying.\",\n \"I didn't realize that! Thanks for the correction. A bit of google-fu provided this: >[Stolen funds may be covered by what's called a banker's blanket bond, which is a multi-purpose insurance policy a bank purchases to protect itself from fire, flood, earthquake, robbery, defalcation, embezzlement and other causes of disappearing funds. In any event, an occurrence such as a fire or bank robbery may result in a loss to the bank but should not result in a loss to the bank's customers.](http://www.fdic.gov/consumers/consumer/information/fdiciorn.html)\",\n \"\\\"As was suggested here, I checked with the state for \\\"\\\"Unclaimed Funds,\\\"\\\" and despite the fact that I had already done so and found nothing, the funds were now there to be retrieved. So, the takeaway here is, keep checking periodically, it might just take a bit for things to settle out. This link is endorsed by NJ State, and covers much of the US: http://www.missingmoney.com/. Otherwise check with your state's Dept of Treasury.\\\"\",\n \"If you're in the UK, there's a free service here that lets you trace lost bank accounts. If you're in a different country, try Googling to see if that country has a similar service.\",\n \"If your counterparty sent money to a correspondent account at another bank, then it is completely up to the other bank what to do with the money. If the wire transfer completed, then the account is not closed. If I were your business partner, I would immediately contact the bank to which the transfer was made and explain the situation and hopefully they will transfer the money back. Whenever a wire transfer is made, the recipients name, address, and account number are included. If that name, address and account do not belong to you, then you have a problem because you have no legal right to the money in a court of law. For this reason, you should be avoid any situation where you are wiring money to anyone except the intended recipient.\",\n \"Although I posted this question more than a year ago, I subsequently read information which may be of use as an answer, specifically regarding Pritchard Stockbrokers in the UK several years ago, in which the FSCS stepped in to compensate investors, as detailed in the following: http://www.fscs.org.uk/what-we-cover/questions-and-answers/qas-about-pritchard-stock-6n940n01k/ http://www.ft.com/cms/s/0/89957c56-21e4-11e3-9b55-00144feab7de.html#axzz3crZYbGZ9 For reference, in case the links above are at some point in future taken offline, the FSCS FAQ states: Q: I had “deposited” money with Pritchard so can I expect £85,000 compensation from FSCS? A: No. Pritchard was not a deposit-taker so the money held does not qualify under regulatory rules as a deposit. The money will be treated as an investment, which carries maximum FSCS compensation of £50,000 per person. FSCS has no discretion to pay any more. Q: What happens if my losses are over the FSCS maximum of £50,000 and I accept the FSCS’s compensation? A: If you choose to accept compensation from FSCS, you will be required to assign (or legally transfer) to FSCS all of your rights to claim in the Administration. FSCS will then claim in the Administration standing “in your shoes” and will claim for the whole of your loss, even if it was over £50,000. When FSCS receives the dividends in your place it will then pay to you any amounts recovered to ensure that you do not suffer a disadvantage for having accepted FSCS compensation first. Example 1: Loss = £80,000 FSCS compensation = £50,000 Dividend of 50p/£ received by FSCS = £40,000 FSCS pays £30,000 to claimant so he is fully compensated (total £80,000), and retains £10,000 recovery for itself Example 2: Loss = £100,000 FSCS compensation = £50,000 Dividend of 50p/£ received by FSCS = £50,000 FSCS pays £50,000 to claimant so he is fully compensated (total £100,000), and retains nothing for itself FSCS does not have to have make a full recovery of its £50,000 before it starts paying its dividend recovery on to claimants. Claimants are not compelled to claim from FSCS, or to accept the FSCS offer of compensation. If a person does not want to transfer his legal rights to claim in the Administration to FSCS in return for accepting the payment of compensation, then s/he can decline our compensation and continue his claim in the Administration. After s/he has received the dividend(s), s/he can then return to FSCS to claim for any remaining shortfall. Therefore, the answer provided by @DumbCoder was correct, but in circumstances where fraudulent activity would mean otherwise, the FSCS was willing to intervene on the behalf of investors.\",\n \"The bank is expected to issue you a check for the balance of your account, make sure your name and address on file is correct as that is who they will make the check to and send it. Have the credit union also contact Chase, or get a statement from the credit union, about their customer. If the check does bounce back to the credit union and the account was under his name, then you will have to deal with the state and his estate and you will have to find a different solution for the bills.\",\n \"You need to find out exactly how the two accounts are titled. If an account is an UGMA (Uniform Gifts to Minors Act) account that is in your name with your mother/father as custodian, then you are entitled to all the money in the account when you become an adult. If the account is indeed a UGMA account, the bank is supposed to not let the custodian operate the account once the child becomes an adult, but this does not always happen. There was a question earlier on money.SE (which I cannot find at this time) in which the 25-year-old person asking the question claimed that his father was still buying and selling shares in his UGMA brokerage account and the IRS was asking why the profits and losses from these transactions were not being reported on the 25-year-old's tax return. Money in an UGMA account is not supposed to be used for payment of household expenses, food, etc. which is the parent's responsibility during the minority, but this can well be abused. As to whether money was taken out and then restored (or possibly not restored, as you seem to suspect), it is possible to sue the custodian for improper handling of the UGMA account and recover the funds, but whether one wants to sue a parent over what might be a relatively small sum is another matter. Consider whether most of what is recovered might go to pay legal fees or other costs of the recovery process, and will likely ruin a family relationship. If the accounts are titled as joint accounts, then either party can empty the account without informing the other. But doing so would need information about the account number etc. which you may not have. For tax purposes, there is also the issue of whose Social Security Number is listed on the account, yours or your parent's. See also this answer for a view of what happens from the other side.\",\n \"The answer is - the money got bounced back to their account :(\",\n \"YMCbuzz: since your profile says you are in Canada, you are in luck. Canadian banks must turn over their unclaimed accounts to the bank of Canada. They have an Unclaimed Balances page that has a search feature to see if you have missing millions from long lost relatives.\",\n \"According the FSCS: If the bank fails FSCS would refund the maximum under our rules (currently £75,000 per person). Any credit balance over and above this would be offset against the mortgage by the insolvency practitioner responsible for the winding up of the bank. FSCS would play no part in that process. (Unless the savings were larger than the debts, but then it wouldn't make sense to have them in a zero interest offset account!) So the money would not be completely lost as such. Whether that would count as an overpayment is an open question, but perhaps a moot point anyway if the bank went under. (Finally, arguably, a pension or other investment might also be better for such amounts.)\",\n \"Disclaimer: I am not a banker nor a lawyer. I am unaware of the exact term in English, there is a process where you can ask for a reversal of a payment if it was made in error and your former employer should have made use of this. After a month though, I'm fairly sure the period of eligibility for this reversal has passed. As far as I am aware there is no point in time where it becomes ok for you to take this money. If you wish to close the account I would advise contacting the company and obtaining their payment details so you can transfer them the money and subsequently close the account.\",\n \"I'd suggest you contact the Office of the Controller of Currency, who regulates BOA and file a complaint. This whole deal seems shady. According to the OCC FAQ, the fact that they closed the account is in their prerogative. However, I would think they are obligated to quickly return your funds, but can't find anything specific to that. The banks are very sensitive to having complaints filed against them, so if nothing else this may encourage them to be more helpful, even if your complaint isn't actionable. OCC Complaint Process. This topic on how long a bank can hold a large deposit before making funds available may also be helpful.\",\n \"I upvoted you as I think your story is important to tell. However, commodities and futures accounts have never been protected under SIPC. The use of your money to pay debts sounds illegal or perhaps it was legal under a document you signed when you opened your account. Bankruptcy was not a way to screw you over. The bigger point is that bankruptcy is a way to restructure debts and is beneficial in the long run to the benefits of society. While we often look at people or corporations who have to file bankruptcy as being irresponsible (and what I am about to say may reflect negatively on you, for that I apologize) the people or corporations who lent to a bankrupt entity should be scorned just as much. Right now, the EU is going through a period where we are hoping bankruptcy is off the table. Increasingly though, the only way to do that is to try and paper over debts that will never be repaid for a long enough time period for growth to resume. But the question remains, what if growth never comes back. This is why restructuring and bankruptcy is the only option for Greece and likely Italy, Portugal, Spain and Ireland.\",\n \"The guarantor is the Government of Latvia, the fund is the means of executing that guarantee. Unless the government defaults, the guarantee is valid. See here: In accordance with amendments to the Deposit Guarantee Law adopted by the Parliament of the Republic of Latvia (Saeima) as from December 16, 2010 compensation of EUR 100 000 (approx. LVL 70 000) is guaranteed to the clients of the Latvian banks (both natural and legal persons) per depositor per each bank (all accounts added together, if several accounts at one bank in one name). The government guaranteed compensation covers deposits, current account balance, salary accounts, savings accounts etc. further down: In accordance with the Deposit Guarantee Law, in the occurrence of a case of unavailability of deposits in the Fund for paying out the guaranteed compensations, such payments shall be made from the Government budget via FCMC.\",\n \"You still owe the money because there is a high probability that some other organization bough the account and assets of the failed creditor. That means they will have bought your debt. I have to assume there is language in your note that explains that they might sell your debt. But what should one do if they don't know who bought the entity? You can't pay a non-existent entity, but if you don't have an address, how can you pay the new owner of the debt? First step, is to assume there will be a new owner. A government, a company, an individual; somebody will buy that debt. Read the news and see if you can't figure out what other entity owns your note. You might have to contact them to enquire about where to send payment. Keep records of any such contact. If you put in an honest effort, but just cannot figure out who owns your note, I'd suggest continuing to make regular on-time payments. But put your payments into a new bank account that you open just for this purpose. So when the new owner of the debt does come calling, you'll have reasonable proof you were attempting to pay. You simply settle up from the special account. Any reasonable company will just take the money, and if anybody gets unreasonable and you have to appear in court, you have a paper trail indicating your attempts to honour the debt. You'd have to consult a lawyer if nobody comes asking for the money. There are probably statutes of limitation, but I wouldn't count on that ever happening.\",\n \"You probably can't deposit the check directly, but there are mechanisms in place to get your money through other means. In the US, all states and territories have an unclaimed property registry. Before you contact the company that wrote the check, you should check that registry in your state. You will have to provide proof that you are the intended recipient, having the original check in your possession should make that considerably easier.\",\n \"It looks like your visa being refused is entirely irrelevant. What happens in bankruptcy is that all the assets of the bankrupt entity are taken over, liquidated, and the proceeds are distributed to the creditors. You're one of the creditors, and as you've been told - the proceeds are not enough to pay all the creditors in full. This is quite common in bankruptcies. What you can do is sue in court and demand priority over other creditors, but... a. You're exactly the same as many other creditors (rest of the students), so why would you get a priority? b. Suing costs money and even if you get more, you'll pay way more for legal fees and expenses. What else can you do? If you paid with a credit card - your credit card company may be able to reverse charges. Sometimes that works, depending on how fast you move. If you paid with a check - your bank may similarly be able to stop payment on the check. This provided it hasn't been settled yet.\",\n \"\\\"I would call the bank and ask how the person is on the account. If they are an owner, or are an authorized user, or what type of owner they are, etc. If the bank makes the distinction between \\\"\\\"user\\\"\\\" and \\\"\\\"owner\\\"\\\" then most likely, your funds are not able to be seized. If they are a joint owner, then, typically, 100% of the money is yours and 100% of the money is theirs and either of you could withdraw all the money, close the account, or have the money seized as part of a legal action.\\\"\",\n \"First, if your account has been closed you should not be able to use your debit card in any format. As you mentioned that you are able to use that so your back account is active. So this indicates it is a scam In case account is closed, bank confirms your address and will send you a cheque for the amount in your account. Don't worry. You money will never be lost\",\n \"\\\"Thanks for the reply man. Yeah it literally says \\\"\\\"closed\\\"\\\" next to the accou t name. But we finally got ahold of someone, I guess they close your account whenever you have $0 in it and the account should open again 1-2 business days after the direct deposit tries to go into her account. At least that's what the lady said. She hates this bank but we live in a small town and there's just not many options in terms of banking here. Thanks for the help though man I appreciate it!\\\"\",\n \"\\\"If this is in the United States, there are laws governing business behavior when they have recorded expenses (checks, bills, etc) which are never withdrawn or deposited. A business is required to turn over these funds after a certain time frame to the state government as a part of their business tax cycle. (One caveat- these laws vary in age by state, and 13 years is a long time. You might still be out of luck for an amount so old..) There are even businesses which have cropped up to search for \\\"\\\"lost money\\\"\\\" (for a fee, of course) that your great uncle might have left behind and which now sits in a government holding account somewhere. It's not necessary to go through the third parties though, because the United States posts this information for the world to see. A good starting place is: USA.gov Unclaimed Money Tool Do as much legwork there as you can. You could even attempt to contact the former employer (you said the business accounts still exist) and in a very friendly, non-confrontational manner ask them what their procedures are and would have happened to your paycheck funds. As others have stated, they are under no legal obligation whatsoever to fix your problem for you, but who knows, you could get lucky and they might voluntarily help you out! You're looking for information not cash, so politeness, patience and understanding are your tools. If all else fails, you could try one of these 3rd party services. Here you run into diminishing returns as paying fees to search for money which might not exist just puts you further in the red.\\\"\",\n \"(Assuming in the US) There are several possibilities, but to be honest anyone here is only going to be able to make guesses. To get the answer, the account holder (your girlfriend) is going to have to contact the bank and ask them directly. Some possibilities include: Suspicion of money laundering, suspicion of possible illegal activities in the account (e.g. check kiting), suspicion of possible prohibited activities (not necessarily illegal, but as defined in the account agreement, they may not allow activity related to gambling or pornographic businesses, for example), suspicion of business activity taking place in a non-business account, insufficient KYC (Know Your Customer) information on the account (such as they did not or could not verify required information during the account opening process), a negative ChexSystems report (for example, they found out through ChexSystems she had derogatory information reported on another account at another bank previously), or extended period of time it was overdrafted (usually 30+ days). I should also add that any bank/credit union has just as much a right to close an account with a customer, as the customer has the right to close their account with the bank/credit union, at any time, without notice. In *most* cases (although not all), when a bank closes an account, they will send a letter to the address on file for the account beforehand explaining the reasons. Have her check her mail. Are you sure the account is actually *closed*, and not just *blocked*? It could just be in a blocked status due to overdraft or some other reason, which is very different from being closed. As for where the direct deposit went - if the account is truly closed, then the money is being returned back to the company that initiated the direct deposit - usually takes 2-3 business days. Your girlfriend will have to contact the company's payroll department to arrange other means of payment, such as a check. In any case, it's all speculation at this point until the bank can be contacted to find out the real reason why. (Tip for the future: Look at switching to a bank that has 24/7 customer service)\",\n \"\\\"If it is planned, then one can get a Bankers Check payable overseas; if destination is known. 1.) What will happen to the money? It will eventually go to Government as escheating. Unlcaimed.org can help you trace the funds and recover it. 2.) Will the banks close the accounts? 3.) After how much time will the banks close the accounts? Eventually Yes. If there is no activity [Note the definition of activity is different, A credit interest is not considered as activity, a authentic phone call / correspondence to change the address or any servicing request is considered activity] for a period of One year, the account is classified as \\\"\\\"Dormant\\\"\\\". Depending on state, after a period of 3-5 years, it would be inactive and the funds escheated. i.e. handed over to Government. 4.) Is there anything else to do? Any ideas? Before leaving? Try keeping it active by using internet banking or credit / debit cards linked to the account. These will be valid activities. 5.) Is there any way to send a relative to the US with any kind of paper of power, to unfreeze the accounts? 6.) The banks say they would need a power of attorney, but does that person actually need to be an attorney in the US, or can it simply be a relative WITH a paper (a paper that says power of attorney) or what is a power of attorney exactly, is it an actual attorney person, or just a paper? 7.) Is there any other way to unfreeze the accounts? Although I can confirm first hand; I think there would be an exception process if a person cannot travel to the Bank. It could even be that a person is in some remote state, not well etc and can't travel in person. I think if you are out of country, you could walk-in to an US embassy and provide / sign relevant documents there and get it attested. Although for different purpose, I know a Power of Attorney being created in other country and stamped / verified by US embassy and sent it over to US. This was almost a decade back. Not sure about it currently.\\\"\",\n \"Similar action is being undertaken in Europe following the example of Cyprus. As WND recently pointed out, finance ministers of the 27-member European Union in June had approved forcing bondholders, shareholders and large depositors with more than 100,000 euros in their accounts to make the financial sacrifice before turning to the government for help with taxpayer funds. Do they get compensation later if the bank recovers?\",\n \"Will citizens advice be able to help me, or am I only going to get told to seek legal advice anyway? They are just advisory. i.e. help/guide people. They are not responsible for any outcome. What can I do as I'm not the person who's made payment or been paid, but I also don't want to cause the estate agent lots of work from my mistake, but legally no bank will talk to me anyway. You are right. You estate agent would have to follow-up with banks [which you have already done]. Will I have to seek legal action or the estate agent? Once you follow-up with the Banks and the Ombudsman, you should proceed to legal. Legally if it is a mistake on your part, the beneficiary is NOT entitled to the money and has to refund it. However establishing this takes a while and hence most of the times beneficiary does not pay back the money that is not rightfully his.\",\n \"Sorry for your loss. If the insurance money is now in an account under your names, you can might be able to withdraw the money. You should put a country tag and state tag on your question. EDIT: my initial response might incorrect -- see comments below. This is going to be state speficic and the amounts may be relevant. Best to seek professional advice!\",\n \"if the deposit earned interest, you could be liable for taxes on the interest earned. If it ended up in a checking account, then you will not be liable for any taxes since checking accounts do not earn interest anyway. Your bank may inquire about where these transfers are coming from and question the legality of it.\",\n \"I'm afraid you're not going to get any good news here. The US government infused billions of dollars in capital as part of the bankruptcy deal. The old shares have all been cancelled and the only value they might have to you are as losses to offset other gains. I would definitely contact a tax professional to look at your current and previous returns to create a plan that best takes advantage of an awful situation. It breaks my heart to even think about it.\",\n \"What I'm reading is that they subtracted the $85 you owe them and they're cutting you a cashier's check for the rest. Ethically speaking, you owed them the money, they subtracted it and made you a check for the rest. Once you cash that check, nobody owes anyone anything in this equation. Sounds like they're in the clear. Legally speaking, I have no idea, since I'm not a lawyer, but even if it was not legal, good luck getting the $85 back without spending far more in retaining a lawyer and fighting it in court. Even fighting it in small claims court will take more of your time than $85 is worth. If it's your time that is the problem, 12 days is not horrible in banking terms. Yes, we're spoiled now by ACH transfers and same day deposit availability, but since you're retired, I'm sure if you think back you'll remember when it used to take two business weeks to clear a check... TLDR; cancel future deposits to that bank, find a new bank, then forget this fiasco and get your revenge by enjoying your life.\",\n \"Another case of a company retaining control of the pension fund and suddenly not being able to pay out. When will people learn? Pension shouldalways be paid out to a third party account that the employer can't touch once it has been deposited. That way you dont risk the company taking your pemsion with it when it goes under.\",\n \"In India, assuming that you have already paid relevant [Income/Capital gains] tax and then deposited the funds into your Bank [Savings or Current] Account; there is NO INCOME tax payable for amount. Any interest earned on this amount is taxable as per Income Tax rules and would be taxed at your income slabs. Wealth Tax is exempt from funds in your Savings Account. I am not sure about the funds into Current Account of individual, beyond a limit they may get counted and become part of Wealth Tax. More details here http://timesofindia.indiatimes.com/business/personal-finance/Do-you-have-to-pay-wealth-tax/articleshow/21444111.cms\",\n \"It's not your money. According to one article, the interest on the money could be negotiated in some cases to be yours, but I wouldn't plan on it. From MSN: According to a complaint filed by the state of Minnesota, the 37-year-old social worker received a $2.6 million payment from the state Department of Human Services that had been intended for a local hospital. Instead of immediately reporting the mistake, the woman and a friend opened investment accounts, bought jewelry, purchased four vehicles including two Land Rovers and spent $3,817 at Best Buy. Six weeks after getting the money, she called the Human Services Department to ask why the check had been sent to her, according to the complaint. When informed the payment was an error and the money had to be returned, the woman reportedly told the department to talk to her attorney and refused to respond to follow-up calls. As the prosecutor said to a St. Paul Pioneer Press reporter, there's a big difference between keeping money when you can't reasonably be expected to determine the true owner -- like that $20 bill on the street -- and keeping money when you can. The state had the pair's accounts frozen and is prosecuting for theft as well as civil charges, though the woman returned the unspent money and the property she bought. More from MSN Money A better approach to an unexplained windfall is to keep the money in a separate account while you track down the source. Who gets to keep the interest earned will be one of those things you work out with the rightful owner's attorneys. Bankrate has a similar story posted as well.\",\n \"A company as large as Home Depot will have a fairly robust Human Resources department and would probably be able to steer you in the right direction: odds are they know the name of the brokerage and other particulars. I did some googling around, their # is (1-866-698-4347). Different states have different rules about how long an institution can have assets abandoned before turning them over to the state. California, as an example, has an abandoned property search site that you can use. That being said, I had some penny stocks sitting in a brokerage account I never touched for about 20 years and when I finally logged back in there they were, still sitting there.\",\n \"If this was a public corporation (stock) and the investment was made in a non-registered account, then you can claim a capital loss. Capital losses are claimed against capital gains (not income), and can be carried back 3 years or carried forward indefinitely. Here's an article I've written on how to claim capital losses that may help.\",\n \"...funds received for the month of death and later must be returned. If the estate is bankrupt, as near as I can tell, the SSA is out of luck. (This applies to payment apart from that covered above.) If you need advice on something other than retirement insurance, a comprehensive list of applicable statutes and rulings is here.\",\n \"You are obligated to return it, and they will come after you as soon as they figure out the error. You probably need to notify somebody as soon as possible and keep records of your correspondence showing you performed due diligence in returning the funds. Transferring the money into an account at the same institution is also wise. You can't look like you are hiding it, but keeping it mixed with your actual funds is also asking for extra trouble or work.\",\n \"I trust the 401(k) was a traditional, pre tax account. There was no tax paid, and any withdrawals would be taxable. The account could go to zero, and there's no write off, sorry. I have to ask - were there any withdrawals along the way? What was it invested in that lost 90% of its value? Edit - I'm sorry the OP came and went. It would be great to have closure on some of these issues. Here, I'm thinking as Duff said, malpractice, or perhaps a 401(k) that was 100% in company stock. Seems we'll never know.\",\n \"Most cooperative banks are insured upto Rs 1,00,000/- . It depends on what is the current status of the Bank and withdrawal of the funds would be based on the decision taken by the administrator. There maybe no interest payable, it would again be decided by the administrator.\",\n \"\\\"Google for \\\"\\\"unclaimed funds\\\"\\\" You might need to do it for each state separately.\\\"\",\n \"Absolutely true, but in a bankruptcy situation the best OP can do is win a judgment for breach of contract/fiduciary duty/whatever against Refco, and then get a levy on some assets. He's still just a lien creditor who will be paid after all the secureds in bankruptcy. As MF Global is demonstrating once again, whatever regulations there are to keep clients' money in brokerages sequestered ain't cutting it.\",\n \"If I were you, I would go to the bank right now, pay the $100 and close the account. I would stop the bleeding first then consider the fallout later. Do you own the account jointly with your partner(s) as a partner or does the partnership (a separate formal entity) own the bank account with you a named representative? Those are two very different situations. If you're a joint owner, you're liable for the fees; along with your other partners in accordance with your partnership agreement. You never closed yourself off the account and that's your problem. If the dissolved partnership owns the account, you're not personally liable for the fees. You were never a personal owner of the account, now that the account is negative you don't magically become personally liable. The differences here are very nuanced and the details matter. If this were a large amount of money I'd suggest you go see a lawyer. Since this is about $100 I'd just pay it, make sure the account is closed, and move on.\",\n \"First, gather the information you have on her banking history. She may have accounted for that money and moved it to a new account or otherwise spent it. I don't expect you'll have much banking documentation from the 1950s, but if you do, then start there and trace the money. To the extent you can, you may try to contact the banks in question or their successors. It may be difficult to trace them through mergers or closings. Again, it's very possible that she spent or transferred those funds and there is nothing to find anyway. There is also a risk that if the money went unclaimed for too long, then the bank was obligated to escheat any remaining balance to the state of Ohio. You can try contacting Ohio Department of Commerce about unclaimed funds and attempt to locate anything that may have rightly belonged to her. You will need to gather documentation to do so. You may be able to receive the funds from the state, if it has received them.\",\n \">You were an unsecured creditor. Yes, but his situation was more complicated than your run of the mill unsecured creditor. He had a trading account. It may very well have been technically *structured*, for accounting purposes, as unsecured credit - but the reasonable assumption for the average person is that trading/deposit accounts are held in trust rather than as individual investments/grants which the company can use how it pleases with just the promise to pay you back later. Now, granted, somebody with a Refco forex account should be sophisticated enough to understand the difference - but that doesn't change the fact that even such investors might normally just assume that their accounts are being sequestered. It would make the most sense. It sounds to me like Refco's accountants, and everybody involved in the process, were thieving scumbags.\",\n \"You have not lost value. It is just that the shares you owned, are now not tradable on US stock exchanges. You still have the value of your shares protected. In cases like de-listing of a stock, typically a trust (may be managed by a bank) is setup to help customers liquidate their stocks. You should try to search the relevant SEC filings for de-listing of this stock to get more details on whom to contact.\",\n \"Additionally my understanding is that a Faster Payment is as good as cash once received. Yes it is but there is a caveat. Read on unauthorized payments on Faster Payments website. Either the sender is fraudulently claiming this was unauthorised, or their bank doesn't have adequate security standards - why is it me who loses out here? Agreed. You should take this up [dispute the action] with your bank asking why your account was closed as there is no fraud from your side. Make sure you do all the follow-up with writing and provide evidence of the trade being genuine.\",\n \"Principal has probably distributed your money to a company that holds dormant retirement plan account balances. I work for a third-party administrator and we usually use a company called Penchecks. They receive dormant accounts and try to locate the people they belong to. They don't do this for free though, so the sooner you find your account the better. Principal would have to keep a record of where they sent your money, although I don't know for how long they are required to keep that record. For example, doctors are only required to keep records for 7 years. The PBGC will help you find your lost balance. They are a gov't agency that protects retirement plan participants. They have a search engine for this kind of thing: http://search.pbgc.gov/mp/ Also https://www.unclaimedretirementbenefits.com/ is a registry of unclaimed retirement plan benefits.\",\n \"I am not sure about your country but I think each country must be having some fixed time frame for reversal of the transaction (Which must be less than a month), please inquire if that time limit has passed or not ? If it hasn't best will be to wait for some more time before informing them. Once the reversal time limit has passed no one (Except government agencies with court orders) can withdraw money from your bank account without your written consent even if they have deposited it themselves. World would have been a strange place if this restriction was not there. Since you want to close the account you can approach your previous boss (or executive from HR/Account department) and tell them your intention. After that either you can transfer money online to their account or give them a cheque which they can deposit in their account. This way things will end faster and you will be freed from this extra account. If above process takes time another solution will be to transfer the money to your another (permanent) account and give them a cheque from this account. Here also you can use online transfers or by sending them a cheque through courier. Whichever mode you choose to pay the money back make sure you have some documented proof that may be helpful in future.\",\n \"Sorry to hear about this happening to you. You should file a lawsuit in small claims court and get a judgement. Unfortunately, you are probably one of many creditors, and are unlikely to get much, if any, money back.\",\n \"Firstly, sorry about the accident. I am afraid you will need to do your own legwork, because you cannot trust other people with your money. It's a good thing you do not need to rush. Take your time to learn things. One thing is certain, you cannot let your money sit in a bank - inflation will digest them. You need to learn about investing yourself, or you run a risk of someone taking advantage of you. And there are people who specialise in exploiting people who have money and no idea what to do with them. There is no other way, if you have money, you need to know how to deal with it, or you are likely to lose it all. Since you need to have monthly income and also income that makes more money to make further investments, you need to look at two most common investments that are safe enough and also give good returns on investment: Property and index funds. You might also have a look at National bonds as this is considered safest investment possible (country has to go bust for you to lose money), but you are too young for that. Young = you can take more risk so Property and shares (indexes). You want to have your property investments in a country that is stable and has a good ROI (like Netherlands or Lithuania). Listen to some audio lectures: https://www.audible.co.uk/pd/Health-Personal-Development/Investing-in-Real-Estate-6th-Edition-Audiobook/B008SEH1R0 https://www.audible.co.uk/pd/Business/The-Secrets-of-Buy-to-Let-Success-Audiobook/B00UVVM222 https://www.audible.co.uk/pd/Non-fiction/Economics-3rd-Edition-Audiobook/B00D8J7VUC https://www.audible.co.uk/pd/Advanced-Investments-Part-1-Audiobook/B00HU81B80 After you sorted your investment strategy, you might want to move to a country that is Expat friendly and has lower living costs than US and you should be able to live like a king... best of luck.\",\n \"Contact the bank where the money is being sent. They should have a record of it, and they will know what happened to it. In some, maybe even most, banks accounts are never truly closed, they are just made inactive. If that is the case with this bank the 300 euro may be sitting in the account as a credit. If they have the money, ask for them to send it to back by reversing the transaction. If it has been too long they may have another procedure for refunding the money. They might even send it by check. If they already reversed the transaction, contact your bank to determine where the funds went.\",\n \"Okay, I went through a similar situation when my mother died in March of this year. The estate still needs to go into probate. Especially if there was a will. And when you do this, your husband will be named as the executor. Then what he will need to do is produce both of their death certificates to the bank, have the account closed, and open an estate account with both of their names on it. Their debts & anything like this should be paid from this account as well. Then what you can do is endorse the check as the executor and deposit it into this account. After all debts are paid, the money can be disbursed to the beneficiaries (your husband). Basically, as long as they didn't have any huge debts to pay, he will see the money again. It just may be a couple of months. And you will have to pay some filing fees.\",\n \"JohnFx is right: banks hate visits and attention from the regulator (both positive and negative). I would not threaten to file, just file away and let them get in contact with you. The local branch is stalling you. Do not play their game. Since you already went through the first level of support (local branch, phone support), get the bank ombudsman contact and file a complain. It is a major bank, most of the time getting a high level complain will be routed from the upside down through their structure, and hit them. Remember I said they are stalling you? Probably something went wrong, and they are buying time to try and fix it. Also it is worth noting that the ombudsman is usually a line of support above the phone customer support. If going through the ombudsman does not work and/or if you are not willing to wait anymore, file a complain with the government central bank, or similiar institution (trying to be broad here, even if you tagged USA - JohnFx has the link in his answer for the USA's regulator). You can even file a small claims lawsuit, though I do not know the cost of doing it in the USA (in my country small claims court is free for private citizens). Do not report your money as stolen; banks are bureaucratic institutions by nature, and they can silver tongue out of this claim.\",\n \"The Employee Benefits Security Administration within the US Department of Labor is tasked with keeping track of pension and 401K programs. The even have a website to search for abandoned plans: it helps participants and others find out whether a particular plan is in the process of being, or has been, terminated and the name of the Qualified Termination Administrator (QTA) responsible for the termination. The Employee Benefits Security Administration discuss all types of details regarding retirement programs. This document What You Should Know About Your Retirement Plan has a lot of details including this: If your former employer has gone out of business, arrangements should have been made so a plan official remains responsible for the payment of benefits and other plan business. If you are entitled to benefits and are unable to contact the plan administrator, contact EBSA electronically at askebsa.dol.gov or by calling toll free at 1-866-444-3272. There are also EBSA offices spread thought the United States\",\n \"\\\"Government should have worked the same way. Use as hard terms as possible for \\\"\\\"too big to fail\\\"\\\" banks. If they can't take it and go bankrupt, purchase the liabilities and assets and run government owned bank next gradually selling stock next 10-15 years.\\\"\",\n \"I just thought I'd follow this up as it's now resolved. I spoke with citizens advice and they hadn't really got any advice other than they legally can't keep the money. I then contacted Barclays (as this is who was sent the money) they were very helpful and assured me that if my estate agent went into the bank with proof of transaction and their details then they'd definately follow this up and resolve it. The day after speaking to Barlcays online, my estate agent contacted me to say the money has now appeared back in their bank. So it looks like the previous letter sent back from TSB must have been an automated letter like a timeout and actually in the background Barclays must have still been processing it. Regards Liam\",\n \"This was most likely a scam, although I do know of cases where a transfer intended for one company ended up in the bank account of another company. I am not entirely sure what happened afterwards, but I think the receiving company was asked to return the transfer back to the originating account. Still, even if this was the case, they wouldn't have just abandoned $1k for a simple administration fee (if there was even any). It doesn't sound logical.\",\n \"If you know what bank your parents used, call them and ask. (Or you might have to go there and show id). Chances are if such an account exists, it would be at the same bank. You can also search for unclaimed property. Here's the information link for Florida.\",\n \"First, make sure you are contacting the bank directly - use an old invoice you have on hand with a phone number direct to the bank and call them. Do not use the provided number, or you may wind up being pulled into a scam (It is entirely possible that the bank is also confused at this point - so you should not rely on the number provided at all). Second, once you can confirm that your account is being closed, find out when it is being closed so you know when you need to act on it - it's possible you still have access to your account, and do not need to launch into a panic just yet. Third, get the bank to explain exactly why they are closing your account - make it clear that if they cannot explain, you will be forced to transfer to a new account and close business with them permanently - this is not a threat, this is a matter of fact because... Finally, if you cannot keep your account open, find a different bank and open up a new account. Frankly, if your current bank is closing your account and only managed to get a letter out to you a month late, you should probably find a new bank. If instead they simply cannot figure out if your bank account is closed or not, this is also a bad sign and you may want a new bank account anyway. But please, go through these steps in order, because you need to verify with your bank what is going on. Keep @Brick 's answer in mind as well, in case you need to get your money out of your account quickly.\",\n \"@ Chris: Companies like Keane, ours, and others know where to look for these funds and where to ask at the correct agencies that are holding this money that is not part of the public links that you have access to. This is how we find this information. Our types of companies spend significant time, money and resources in finding out about the money, then finding who it actually belongs to (because it does not always belong to who is mentioned on the list) and then finding the correct individual. @ jdsweet: I apologize if you think this is a marketing ploy. It is not. Our company doesn't even take phone calls from people that want us to find them money. Only if we contact someone, because at that time we're confident that the person we touch base with is due the funds. Again, I am not plugging our company, but trying to let Neil know that in some cases he is right, you don't need a third party to claim funds for you - if you can find them. In this case, he has looked and cannot find them. Keane is charging a fair amount to retrieve funds he cannot find and doesn't know about and is not charging him anything to do all the work. Again, as mentioned above, the direct answer is that we know how to access information and lists that have this money hidden from the public because the agency holding the funds doesn't want you to know about it so that they can escheat the funds. Escheating is the state's legal way to confiscate your money. See, if you don't put in a claim for the money (depending on what type it is and where it is located) the agency and state holding the funds has certain time frames for you to get the money. If you don't, again, they get to keep it and that is what they want despite what they say. That is why there is approximately $33 Billion that is known to the public and really $1 Trillion that's out there. I apologize if you think that this is a plug for my company, it's not because we're not looking for calls, we make them. I'm also not asking Neil for his business. From all accounts on my side, this seems like a fair deal.\",\n \"Does that strike you as a fair solution? All the people that have made sacrifices and not spent every dime they have earned deserve to have it taken away? And I am sure they do have it 'somewhere' like low yield bonds or savings accounts...\",\n \"\\\"If they made deposits 20 years ago, and none since, the S&P is up over 300% since then. i.e. a return of $40,000 on $10,000 invested. We wouldn't expect to see that full return, as a prudent mix of stock and bonds (or any treasury bills/CDs, etc) would lower the overall return during this period. Advice \\\"\\\"Transfer the money, directly to an IRA at a broker, Fidelity, Schwab, Vanguard, etc.\\\"\\\" For most people, going after the advisor isn't worth it, unless the sums are large and the poor management, pretty clear. The lesson for readers here - monitor your investments. Ask questions. It's not about \\\"\\\"beating the market\\\"\\\" which can actually create more risk, but about understanding the returns you see, and the fees you are spending. The mistake didn't occur at the time the money was invested, but every year it wasn't monitored.\\\"\",\n \"Look up escheatment. Companies that have unclaimed property are supposed to send it to your State government. They should have a unclaimed property department of some sort. In short, the company is going to have to pay either you, or your State (In Your Name) so they have to pay it either way. It would be easier for them to just give you new check. Expect them to give you some grief in verifying it has not been cashed and such... but if you have the original, in hand, it shouldn't be too bad. A 'Lost' check may be harder to get replaced. Not a lawyer, don't want to be.\",\n \"If the funds are deposited into a noninterest-bearing account, they will be covered by FDIC insurance regardless of the amount (However, this extended coverage may not be valid after Dec. 31, 2012): On November 9, 2010, the FDIC issued a Final Rule implementing section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that provides for unlimited insurance coverage of noninterest-bearing transaction accounts. Beginning December 31, 2010, through December 31, 2012, all noninterest-bearing transaction accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions. (Source: http://www.fdic.gov/deposit/deposits/changes.html)\",\n \"They will not send a bill, though there's a chance they will eventually send an accusatory letter. You must proactively pay your taxes. The simplest route is to send a check to each taxing authority with the respective full amounts due. I wouldn't bother calling them. You could also file amended returns with each containing the correct information. As a general rule, tax advisors tend to counsel against giving bank account information to the IRS for payment purposes (as opposed to refund purposes), both to protect the timing of payment and to make it slightly more difficult for them to seize or lien your account. If you choose to send a check, you can use Form 1040-V and NY Form IT-201-V. Please triple check your Social Security Number matches your tax return SSN, so they correctly credit you for payment. You may include an explanation of the closed account if you are feeling either fearful or contrite, but if the amount due is paid in full, then neither taxing authority should really care about your error.\",\n \"Question: at what point, if any, am i free to use this money? Never. It's not your money.\",\n \"There's two possibilities. One is that the broker declared your account abandoned and turned over your account to the state. If that happened, it should turn up here: http://missingmoney.com The second is that the broker is still holding your stock. I'd start by contacting the company's transfer agent.\",\n \"Details, as usual, will depend on local culture and jurisdiction, but in most jurisdictions, there is generally no obligation for you to actively return something (money, parcel, whatever) you received in error - usually it's enough to notify the sender. Actually, it might be a dangerous mistake to return it yourself - what if you send it to the wrong account? So you probably have done all you had to, and can close your account without further delay. However, until the time specified by Statute of limitations or similar concept in your jurisdiction has passed (usually a few years), the company could ask you to return the money. If they do ask, be prepared to return it - so do not spend it. My recommendation would be: Then lean back and wait :-).\",\n \"If you give money to a person or entity, and they don't have the ability to pay you back, it doesn't matter if they are legally required to pay you.\",\n \"So basically, if you have a large savings account and are not investing... (because banks are actually a very poor way to get returns on capital), they will invest it for you... The take home I'm getting is... invest your money, and leave it out of the banks.\",\n \"\\\"This will happen automatically when you open an interest-bearing account with a bank. You didn't think that banks just kept all that cash in a vault somewhere, did you? That's not the way modern banking works. Today (and for a long, long time) banks will keep only a small fraction of their deposits on hand (called the \\\"\\\"reserve\\\"\\\") to fund daily withdrawals and other operations. The rest they routinely lend out to other customers, which is how they pay for their operations (someone has to pay all those tellers, branch managers, loan officers) and pay interest on your deposits, as well as a profit for their owners (it's not a charity service). The fees charged for loan origination, as well as the difference between the loan interest rate and the deposit rate, make up the profit. Banks rarely hold their own loans. Instead, they will sell the loans in portfolios to investors, sometimes retaining servicing rights (they continue to collect the payments and pass them on) and sometimes not (the payments are now due to someone else). This allows them to make more loans. Banks may sometimes not have enough capital on hand. In this case, they can make inter-bank loans to meet their short-term needs. In some cases, they'll take those loans from a government central bank. In the US, this is \\\"\\\"The Fed\\\"\\\", or the Federal Reserve Bank. In the US, back around the late 1920's, and again in the 1980's some banks experienced a \\\"\\\"run\\\"\\\", or a situation where people lost confidence in the bank and wanted to withdraw their money. This caused the bank to have insufficient funds to support the withdrawals, so not everyone got their money. People panicked, and others wanted to take their money out, which caused the situation to snowball. This is how many banks failed. (In the '80s, it was savings-and-loans that failed - still a kind of \\\"\\\"bank\\\"\\\".) Today, we have the FDIC (Federal Deposit Insurance Corporation) to protect depositors. In the crashes in the early 2000's, many banks closed up one night and opened the next in a conservatorship, and then were literally doing business as a new bank without depositors (necessarily) even knowing. This protected the consumers. The bank (as a company) and its owners were not protected.\\\"\",\n \"I was just wondering, are banks in India federally insured? Yes the Banks in India are insured for Principal and Interest upto Rs 1,00,000/- per holding type per Bank. See the DICGC website. So if you have one or more accounts [in the same or different branches of a bank] and the Principal is say Rs 98,000/- and the interest accrued at the time of liquidation is say Rs 4,000/- you will get Rs 1,00,000/- If you have more than Rs 1,00,000/- you will not get only 1 lac. If you have an individual account, and your wife has an account and both of you have a joint account. The total limit will be Rs 3,00,000/-. If you are guardian to your Children, its again considered separate. RBI Site as a good example on this. If you open Accounts in Different Banks, the limit increases. What happen if banks like Yes Bank or IndusInd bank goes bankrupt? Both Yes Bank and IndusInd are participants in the DICGC and are insured. See the full list here. How will we recover money in those cases? Although insured, the process to get the money back would be time consuming. More often the bank is placed under moratorium, an effort is made for amalgamation or reconstruction ... Only if everything fails, the bank goes into liquidation. So it could be anywhere from few months to few years for you to see you money.\",\n \"well, our disagreement is regarding my use of the word confiscate I feel government took my hard earned tax dollars to fund their agenda of EV promotion. I don't want government picking winners/losers and I don't agree with **my money** wasted/destroyed on crony capitalism\",\n \"The only consequence I could see is that they have your money until they pay you back. I'd just do what JoeTaxpayer says and get it back.\",\n \"So, if it was a personal account, and not an investment in Refco, you should have been insured by the SIPC for $500,000 for your securities, and $100,000 or more for cash. If you had all your money invested in Refco, you weren't diversified, which is one of the first rules of investment. It's not fun to learn this the hard way, I know from experience, but you should never invest more in any one stock than you can afford to lose. Learn from your mistakes rather than blame the big guys vs little guys.\",\n \"\\\"Sovereigns cannot go bankrupt. Basically, when a sovereign government (this includes nations and US States, probably political subdivisions in other countries as well) becomes insolvent, they default. Sovereigns with the ability to issue new currency have the option to do so because it is politically expedient. Sovereigns in default will negotiate with creditor committees to reduce payments. Creditors with debt backed by the \\\"\\\"full faith and credit\\\"\\\" of the sovereign are generally first in line. Creditors with debt secured by revenue may be entitled to the underlying assets that provide the revenue. The value of your money in the bank in a deposit account may be at risk due to currency devaluation or bank failure. A default by a major country would likely lock up the credit markets, and you may see yourself in a situation where money market accounts actually fall in value.\\\"\",\n \"The money NEVER becomes your money. It has been paid to you in error. Your best response is to write to the company who has paid you in error and tell them that for the responsibilty and subsequent stress caused to you by them putting you in a position of looking after their money you hereby give notice that you are charging them $50 per week until such time as they request the repayment of their money. Keep a dated copy of your letter and if they fail to respond then in 12 weeks they will have to pay you $600 to retrieve their $600. If they come back to you anytime after that they will OWE YOU money - but I wouldn't push for payment on that one. I have successfully used this approach with companies who send unsolicited goods and expect me to mess about returning them if I don't want them. I tell them the weekly fee I am charging them for storage and they quickly make arrangements to either take their goods back or (in one case) told me to keep them.\",\n \"If you have a deposit account (like a checking account) and a credit card at the same bank, it is common for the bank to have a clause that lets them make automatic payments to the credit card. I've also seen this happen in the case of death where the deceased person had $2,000 in a checking account and owed some on a credit card. Upon death, the bank took the $2,000 and applied it to the credit card without asking.\",\n \"\\\"I would start by taking it to your bank and asking them what they think. They can probably call the bank on the check and find out if it is still good. If they let you deposit the check, I would wait a couple of weeks before spending the money, in case the issuing bank decides that the check is no good, and your bank wants its money back. If you are told that the check is not good anymore, the next thing I would do is to check with your state's treasurer's office and see if they have any \\\"\\\"unclaimed money\\\"\\\" for your mother.\\\"\",\n \"\\\"how is the money the FDIC has collected Fees collected from the banks: The FDIC receives no Congressional appropriations – it is funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities. http://www.fdic.gov/about/learn/symbol/index.html They also use the proceeds from liquidating the assets of failed banks to make payouts. Are there country specific agencies with a similar mission? Canada Deposit Insurance Corporation Instituto para la Ptotección al Ahorro Bancario (Mexico) Financial Services Compensation Scheme (UK) not quite like the FDIC You'll have to search for others yourself. :) Most importantly, are there any examples of a similar system that has failed? As the Mythbusters say, \\\"\\\"failure is always an option.\\\"\\\" There is a statement on FDIC's website to the effect that they are backed by the \\\"\\\"full faith and credit\\\"\\\" of the U.S. government. That said, the FDIC maintains its own fund to make insurance payouts. Granted, in the shakiness of the 2008-2009 financial crisis they did start waving a red flag about their realistic ability to cover their obligation. Practically speaking, the government will likely step in if necessary. This 2008 article regarding a propsed revamp of the UK's FSCS should be of general interest to you on this topic, though it does not answer the question of failed systems. (Well, as far as I know. I have only skimmed the article.)\\\"\",\n \"\\\"Are you asking why you aren't entitled to money that someone gave you by mistake? I think the answer is obvious even if you don't like it. If you overpaid your taxes how would you feel if the Government said, \\\"\\\"Sorry, finder's keepers. It isn't OUR mistake you can't do math.\\\"\\\" Your best course of action is to work with the agency to see if they will work out a payment plan so it isn't a big hit all at one time. They are likely to work with you since it was their mistaken advice that got you into the situation.\\\"\",\n \"You purchased the check from the bank. Your funds have been transferred. If the recipient never cashed the check, the money continues to be the bank's, just as if you had written s normal check that didn't get cashed the money would sit in your account.\"\n]","isConversational":false},"gt_docs":{"kind":"list like","value":["\"Legally speaking, if you do close a limited company, the funds belong to the government (\"\"bona vacantia\"\"). There's some guidance on this at Companies House and there is indeed a substantial amount of administration work to get it undone. Notable excerpts: You should deal with any loose ends, such as closing the company’s bank account, the transfer of any domain names - before you apply. [...] From the date of dissolution, any assets of a dissolved company will belong to the Crown. The company’s bank account will be frozen and any credit balance in the account will pass to the Crown. [...] 4. What happens to the assets of a dissolved company? From the date of dissolution, any assets of a dissolved company will be 'bona vacantia'. Bona vacantia literally means “vacant goods” and is the technical name for property that passes to the Crown because it does not have a legal owner. The company’s bank account will be frozen and any credit balance in the account will be passed to the Crown. [...] Chapter 3 - Restoration by Court Order The registrar can only restore a company if he receives a court order, unless a company is administratively restored to the register (see chapter 4). Anyone who intends to make an application to the court to restore a company is advised to obtain independent legal advice. [...] Chapter 4 - Administrative Restoration 1. What is Administrative Restoration? Under certain conditions, where a company was dissolved because it appeared to be no longer carrying on business or in operation, a former director or member may apply to the registrar to have the company restored. [...]\""],"string":"[\n \"\\\"Legally speaking, if you do close a limited company, the funds belong to the government (\\\"\\\"bona vacantia\\\"\\\"). There's some guidance on this at Companies House and there is indeed a substantial amount of administration work to get it undone. Notable excerpts: You should deal with any loose ends, such as closing the company’s bank account, the transfer of any domain names - before you apply. [...] From the date of dissolution, any assets of a dissolved company will belong to the Crown. The company’s bank account will be frozen and any credit balance in the account will pass to the Crown. [...] 4. What happens to the assets of a dissolved company? From the date of dissolution, any assets of a dissolved company will be 'bona vacantia'. Bona vacantia literally means “vacant goods” and is the technical name for property that passes to the Crown because it does not have a legal owner. The company’s bank account will be frozen and any credit balance in the account will be passed to the Crown. [...] Chapter 3 - Restoration by Court Order The registrar can only restore a company if he receives a court order, unless a company is administratively restored to the register (see chapter 4). Anyone who intends to make an application to the court to restore a company is advised to obtain independent legal advice. [...] Chapter 4 - Administrative Restoration 1. What is Administrative Restoration? Under certain conditions, where a company was dissolved because it appeared to be no longer carrying on business or in operation, a former director or member may apply to the registrar to have the company restored. 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8507 | When to sell a stock? | [
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"\"In my view, it's better to sell when there's a reason to sell, rather than to cap your gains at 8%. I'm assuming you have no such criteria on the other side - i.e. hold your losses down to 8%. That's because what matters is how much you make overall in your portfolio, not how much you make per trade. Example: if... | [
"I am a believer in stocks for the long term, I sat on the S&P right though the last crash, and am 15% below the high before the crash. For individual stocks, you need to look more closely, and often ask yourself about its valuation. The trick is to buy right and not be afraid to sell when the stock appears to be ... |
3451 | Should you keep your stocks if you are too late to sell? | [
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"Depends entirely on the stock and your perception of it. Would you buy it at the current price? If so, keep it. Would you buy something else? If so, sell it and buy that.",
"Personally, I have been in that situation too often that now I am selling at the first tick down! (not exactly but you get the idea..) I ha... | [
"In my opinion, the average investor should not be buying individual stocks. One reason why is that the average investor is not capable of reading financial statements and evaluating whether a stock is overpriced or underpriced. As such, they're often tempted to make buy/sell decisions based solely on the current v... |
8017 | Purchasing ETFs when (pretty much) everything else is maxed out | [
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"Maxing out an IRA would probably be step 1, if you exceed that probably just aim for saving in a taxable brokerage account. Just try and stick to ETFs if you're gonna index since they're slightly more tax efficient than a mutual fund",
"Many brokers offer a selection of ETFs with no transaction costs. TD Ameritr... | [
"Most ETFs are index funds, meaning you get built in diversification so that any one stock going down won't hurt the overall performance much. You can also get essentially the same index funds by directly purchasing them from the mutual fund company. To buy an ETF you need a brokerage account and have to pay a tran... |
7936 | Why naked call writing is risky compare to Covered call? | [
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"\"There is unlimited risk in taking a naked call option position. The only risk in taking a covered call position is that you will be required to sell your shares for less than the going market price. I don't entirely agree with the accepted answer given here. You would not lose the amount you paid to buy the sh... | [
"If the buyer exercises your option, you will have to give him the stock. If you already own the stock, the worst that can happen is you have to give him your stock, thus losing the money you spend to buy it. So the most you can lose is what you already spent to buy the stock (minus the price the buyer paid for y... |
3039 | Can increasing my tax withholding from my full-time job cover FICA taxes for my freelance work? | [
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] | [
1
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"FICA taxes are separate from federal and state income taxes. As a sole proprietor you owe all of those. Additionally, there is a difference with FICA when you are employed vs. self employed. Typically FICA taxes are actually split between the employer and the employee, so you pay half, they pay half. But when yo... | [
"Technically you owe 'self-employment' taxes not FICA taxes because they are imposed under a different law, SECA. However, since SE taxes are by design exactly the same rates as combining the two halves of FICA (employer and employee) it is quite reasonable to treat them as equivalent. SE taxes (and income tax also... |
7218 | What margin is required to initiate and maintain a short sale | [
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"If this is the initial transaction, the rules of a short margin account say that if you shorted 1000 share of ABC at $5/share your credit balance would be $5000 from the short plus you would have to put up yourself $5000 cash or $10,000 of marginal securities. So this is not really leveraging using margin. You hav... | [
"Depends on the stock involved, but for the most part brokerages allow you gain entry at 50%, meaning you can short twice the cash on hand you have. Going forward, you need to maintain 30%, so on a $10,000 short, you'd have to maintain $3000 in your account. Example, an account with $5000 cash - You can short $10... |
2968 | Should I prioritize retirement savings inside of my HSA? | [
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1
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"\"Unquestionably I think the priority should be funding retirement through ROTH/IRA/401K over HSA extra. Obviously you need to fund your HSA for reasonable and expected medical expenses. Also there is some floor to your more traditional retirement funding. Beyond that what does one do with excess dollars? Given... | [
"\"Unquestionably I think the priority should be funding retirement through ROTH/IRA/401K over HSA extra. Obviously you need to fund your HSA for reasonable and expected medical expenses. Also there is some floor to your more traditional retirement funding. Beyond that what does one do with excess dollars? Given... |
858 | Is it bad practice to invest in stocks that fluctuate by single points throughout the day? | [
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"What is your investment goal? Many investors buy for the long haul, not short-term gain. If you're looking for long-term gain then daily fluctuations should be of no concern to you. If you want to day-trade and time the market (buy low and sell high with a short holding period) then yes less volatile stock can ... | [
"\"Yes. There are several downsides to this strategy: You aren't taking into account commissions. If you pay $5 each time you buy or sell a stock, you may greatly reduce or even eliminate any possible gains you would make from trading such small amounts. This next point sounds obvious, but remember that you pay a c... |
1198 | What are the consequences of IRS “reclassification” on both employer and employee? | [
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] | [
1
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"\"You are confusing entirely unrelated things. First the \"\"profit distribution\"\" issue with Bob's S-Corp which is in fact tax evasion and will probably trigger a very nasty audit. Generally, if you're the sole employee of your own S-Corp, and the whole S-Corp income is from your own personal services, as defin... | [
"\"You are confusing entirely unrelated things. First the \"\"profit distribution\"\" issue with Bob's S-Corp which is in fact tax evasion and will probably trigger a very nasty audit. Generally, if you're the sole employee of your own S-Corp, and the whole S-Corp income is from your own personal services, as defin... |
8982 | Are Exchange-Traded Funds (ETFs) less safe than regular mutual funds? | [
"454610",
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] | [
1,
1
] | [
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"Behind the scenes, mutual funds and ETFs are very similar. Both can vary widely in purpose and policies, which is why understanding the prospectus before investing is so important. Since both mutual funds and ETFs cover a wide range of choices, any discussion of management, assets, or expenses when discussing the... | [
"\"I wonder if ETF's are further removed from the actual underlying holdings or assets giving value to the fund, as compared to regular mutual funds. Not exactly removed. But slightly different. Whenever a Fund want to launch an ETF, it would buy the underlying shares; create units. Lets say it purchased 10 of A, 2... |
7205 | Is it possible to see option prices from the past? | [
"159966"
] | [
1
] | [
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"Yes, past option prices are available for many options, but as far as I know not for free. You can get them from, for example, OptionMetrics. Probably there are other providers as well, which may be cheaper for an individual or small institution. OptionMetrics data comes from the National Best Bid and Offer. Pr... | [
"Yes, past option prices are available for many options, but as far as I know not for free. You can get them from, for example, OptionMetrics. Probably there are other providers as well, which may be cheaper for an individual or small institution. OptionMetrics data comes from the National Best Bid and Offer. Pr... |
2891 | May I claim money earned but not received in 2012 | [
"31117"
] | [
1
] | [
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... | [
"If you didn't receive the money in 2012 or have constructive receipt you really can't claim the income. If the company is going to give you a 1099 for the work they aren't going to give you one until next year and if you claim it this year you will have a hard time explaining the income difference. On the other ha... | [
"If you didn't receive the money in 2012 or have constructive receipt you really can't claim the income. If the company is going to give you a 1099 for the work they aren't going to give you one until next year and if you claim it this year you will have a hard time explaining the income difference. On the other ha... |
8079 | Growth rate plus dividend yieid total? | [
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1,
1,
1
] | [
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"The sum of the dividend yield plus capital growth is called total return. In your examples, you get to a total return of 7% through several different (and theoretically equivalent) paths. That is the right way of thinking.",
"\"The key is to look at total return, that is dividend yields plus capital growth. Some... | [
"In my mind its not the same. If growth is stock value then this is incorrect because of compound interest in stock price. $100 stock price after one year would be $105 and a dividend would be $2 Next year the stock would be $110.20 (Compound Interest) and would the Dividend really go up in lock step with the st... |
1736 | How can people have such high credit card debts? | [
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] | [
1,
1,
1,
1,
1
] | [
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"249158",
"28661",... | [
"I had $70K in credit card at one point. Limited income, starting a business - it's the only credit available. (yes, all paid off now).",
"For reference see this article. This article does an okay job of explaining why, but it could be better. To expand on point #4 if you lose your job, you will be forced to r... | [
"\"I'm not sure if the rules in Canada and the US are the same. I'm as amazed as you are by the amounts of debts people have, but I can see how this credit can be extended. Generally, with good credit history and above average pay - it is not unheard of to get about $100K credit limit with a bunch of credit cards. ... |
3822 | How to change a large quantity of U.S. dollars into Euros? | [
"305907",
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"418900",
"308837"
] | [
1,
1,
1,
1
] | [
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"You might want to see this question and its answers. If it was me, I'd prefer to exchange the currency in Germany. Why? When you are in the US you will be on vacation. It does not seem fun to spend vacation time in a bank.",
"My experience (from European countries, but not Portugal specifically) is that it's... | [
"To transfer US$30,000 from the USA to Europe, ask your European banker for the SWIFT transfer instructions. Typically in the USA the sending bank needs a SWIFT code and an account number, the name and address of the recipient, and the amount to transfer. A change of currency can be made as part of the transfer. ... |
7221 | How Technical Analysts react to non-market hours effects | [
"186578"
] | [
1
] | [
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"483488",... | [
"One of the fundamental of technical analysis suggests that holding a security overnight represents a huge commitment. Therefore it would follow that traders would tend to close their positions prior to market close and open them when it opens.",
"Is it possible that mutual funds account for a significant portio... | [
"You can't. Even as a technical trader you should know what events are coming up and be prepared. You can't prepare for everything but you should know when the earnings dates are. You should also pay attention to the market in general. Stocks also have personalities and you should get to know that personality. Mos... |
849 | Accounting for reimbursements that exceed actual expenses | [
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] | [
1
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... | [
"You should be recording the reimbursement as a negative expense on the original account the expense was recorded. Let's assume you have a $100 expense and $100 salary. Total $200 paycheck. You will have something like this In the reports, it will show that the expense account will have $0 ($100 + ($100)), while in... | [
"\"I've been in a very similar situation to yours in the past. Since the company is reimbursing you at a flat rate (I assume you don't need to provide documentation/receipts in order to be paid the per diem), it's not directly connected to the $90 in expenses that you mention. Unless they were taking taxes out th... |
3534 | Why do dishonour fees exist? | [
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] | [
1
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"Believe it or not, this is done as a service to you. The reason for this has to do with a fundamental difference between a credit card account and a checking account. With a credit card account, there is no money in the account; every charge is borrowed money. When you get to your credit limit, your credit transa... | [
"\"In the United States, many banks aim to receive $ 100 per year per account in fees and interest markup. There are several ways that they can do this on a checking account. These examples assume that there is a 3 % difference between low-interest-rate deposit accounts and low-interest rate loans. Or some combin... |
7068 | Making money through CFD | [
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1,
1
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"There are several ways that the issuers profit from CFDs. If the broker has trades on both sides (buy and sell) they can net the volumes off against each other and profit off the spread whilst using the posted margins to cover p&l from both sides. Because settlement for most securities is not on the same day that ... | [
"\"What is being described in Longson's answer, though helpful, is perhaps more similar to a financial spread bet. Exactly like a bookmaker, the provider of a spread bet takes the other side of the bet, and is counter party to your \"\"trade\"\". A CFD is also a bet between two parties. Now, if the CFD provider use... |
5172 | does interest payment on loan stay the same if I pay early | [
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] | [
1,
1
] | [
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"It depends on the type of loan. Fully amortized loans have a schedule of payments don't recalculate as you pay. If you want to make an additional payment you need to contact the lender to apply your payment toward principle and reamortize the loan. Otherwise all your additional payment will do is change the amo... | [
"The typical case would be - as you expected - that the interest goes down equally dramatically, and you would pay much less interest. Note that that does not remove your obligation to pay the full 1000 every month - even though you could argue that you are 90 months ahead in paying, you still need to deliver 1000 ... |
3909 | How to rescue my money from negative interest? | [
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"How about placing the money in a safety deposit box at the same bank? This will probably work out cheaper than the loss due to negative rates. Although, I'm quite sure the banks won't like this idea.",
"\"The problem is that every option comes with risk - as you note, if you put money in stocks, you could lose (... | [
"I'd prefer having it (more or less) fluent at any time, if possible... And the Swiss National Bank (SNB) will do their darndest to make this a costly option. That's exactly the point of negative interest rates. They don't want to help you saving money. So you will have to choose what to give up: liquidity, or prof... |
622 | Accidentally opened a year term CD account, then realized I need the money sooner. What to do? | [
"179756",
"369239"
] | [
1,
1
] | [
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... | [
"In my experience, the only penalty to breaking a CD is to lose a certain amount of accumulated interest. Your principal investment will be fine. Close the CD. A few days of interest is nothing.",
"I did find this information from the US Department of the Treasury: What are the penalties for withdrawing money ea... | [
"I did find this information from the US Department of the Treasury: What are the penalties for withdrawing money early from a Time Certificate of Deposit (CD)? Federal law stipulates that all time certificates of deposit (CD) that are cashed out early are subject to a minimum penalty. If you withdraw an amount wit... |
9735 | What are “equity assets”? | [
"392317"
] | [
1
] | [
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"150650"... | [
"\"Accounts track value: at any given time, a given account will have a given value. The type of account indicates what the value represents. Roughly: On a balance sheet (a listing of accounts and their values at a given point in time), there is typically only one equity account, representing net worth, I don't kno... | [
"If I hold a bond then I have a debt asset. If I hold physical silver then I have a commodity asset. If I hold the stock of an individual company then I have an equity asset. Equities, commodities and debts are the three kinds of assets that a person can hold. Edit: I forgot one other kind of asset; monetary asset... |
2724 | How do you determine the dividend payout date for Mutual Funds? | [
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] | [
1,
1
] | [
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"\"Determine which fund company issues the fund. In this case, a search reveals the fund name to be Vanguard Dividend Growth Fund from Vanguard Funds. Locate information for the fund on the fund company's web site. Here is the overview page for VDIGX. In the fund information, look for information about distribution... | [
"\"Determine which fund company issues the fund. In this case, a search reveals the fund name to be Vanguard Dividend Growth Fund from Vanguard Funds. Locate information for the fund on the fund company's web site. Here is the overview page for VDIGX. In the fund information, look for information about distribution... |
2416 | Why should a company go public? | [
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] | [
1,
1,
1,
1
] | [
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"Most businesses want to grow, and there are a variety of ways to raise the money needed to hire new employees and otherwise invest in the business to increase the rate of that growth. You as a stock holder should hope that management is choosing the least expensive option for growth. Some of the options are debt, ... | [
"You go public to raise money, to invest in the business and/or pay off the existing shareholders. It's really as simple as that. The advantage of being public is that your shares can easily be bought and sold, and so you can issue and sell new ones and your existing shareholders can sell out if they want to. The d... |
4999 | Looking for a good source for Financial Statements | [
"314898",
"338803",
"9938",
"46211"
] | [
1,
1,
1,
1
] | [
"9938",
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"... | [
"The best source of financial statements would be from the company in question. On corporate websites of public listed companies, you can find such financial statements uploaded in the Investor's Relations section of their website. If their company does not have an online presence, another alternative would be to g... | [
"If you're researching a publicly traded company in the USA, you can search the company filings with the SEC. Clicking 'Filings' should take you here.",
"All websites pull Statement data line by line from central databases. They get to choose which line items to pull, and sometimes they get the plus/minus wrong ... |
5150 | What credit card information are offline US merchants allowed to collect for purposes other than the transaction? | [
"229937"
] | [
1
] | [
"229937",
"316490",
"176596",
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"332422... | [
"\"Zip code, as well as billing address, is used in conjunction with the Address Verification Service (AVS). AVS is a web (or phone) service that actually verifies the address with the billing address on file with the issuing bank. It does not use the credit card stripe. You can see more information from various... | [
"\"Zip code, as well as billing address, is used in conjunction with the Address Verification Service (AVS). AVS is a web (or phone) service that actually verifies the address with the billing address on file with the issuing bank. It does not use the credit card stripe. You can see more information from various... |
2154 | What tax software automatically determines the best filing status, etc? | [
"476632"
] | [
1
] | [
"592309",
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"361908",
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"Like most software it's about what you put in to them. We use ProSeries software which is like TurboTax but $4500 with no questions. I would do your taxes on online and then have a professional do them. You then can ask any questions you may have to better understanding of what's going on. Only take copies of yo... | [
"\"Rob - I'm sorry your first visit here has been unpleasant. What you are asking for is beyond the capability of most software. If you look at Fairmark.com, you find the standard deduction for married filing joint is $12,200 in 2012, and $12,400 in 2013. I offer this anecdote to share a 'deduction' story - The fi... |
2388 | Do financial advisors get better deals on mortgages? | [
"104988"
] | [
1
] | [
"104988",
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"286567",
"248368",
"282663",
"215620",
"403033",
"181678"... | [
"Yes, maybe for themselves, but for you that depends on quite a number of things. But not all advisors are scum, but accept the fact that you are their cash cow and you are there for their takings. Some advisors are true to their professions and advise ethically, trying to get the best for their clients. So search ... | [
"Yes, maybe for themselves, but for you that depends on quite a number of things. But not all advisors are scum, but accept the fact that you are their cash cow and you are there for their takings. Some advisors are true to their professions and advise ethically, trying to get the best for their clients. So search ... |
1415 | I am not VAT registered. Do I need to buy from my supplier with excl VAT prices or incl VAT? | [
"387165",
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"393953"
] | [
1,
1,
1,
1
] | [
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"19789",
"162501"... | [
"It's quite common for VAT-registered businesses to quote ex-VAT prices for supply to other businesses. However you're right that when you make an order you will be invoiced and ultimately have to pay the VAT-inclusive price, assuming your supplier is VAT registered. If you're not clear on this then you should ch... | [
"It's quite common for VAT-registered businesses to quote ex-VAT prices for supply to other businesses. However you're right that when you make an order you will be invoiced and ultimately have to pay the VAT-inclusive price, assuming your supplier is VAT registered. If you're not clear on this then you should ch... |
6562 | Cheapest way to “wire” money in an Australian bank account to a person in England, while I'm in Laos? | [
"135675",
"582414",
"561344",
"501157"
] | [
1,
1,
1,
1
] | [
"582414",
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"69171",
"467641"... | [
"I successfully used Currency Fair a few times, they seem to cater for both Australia and the UK. If I remember correctly, you can set everything up via Internet. As they explain on their website, first you open an account with them, then you transfer AUD to an Australian bank account that they will give you, then ... | [
"You could use paypal to transfer money. You can pay with paypal and your UK contact could transfer the money to his bank account through paypal. I just received money this way from the US and paid 9 EUR for this. Receiving the funds is as quickly as clicking a button on the paypal site. Transfering it (without cos... |
10136 | How to minimise the risk of a reduction in purchase power in case of Brexit for money held in a bank account? | [
"526115",
"152316",
"290930"
] | [
1,
1,
1
] | [
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"525056",... | [
"\"Having savings only in your home currency is relatively 'low risk' compared with other types of 'low diversification'. This is because, in a simple case, your future cash outflows will be in your home currency, so if the GBP fluctuates in value, it will (theoretically) still buy you the same goods at home. In th... | [
"The mathematical answer is for you to have a diversified portfolio in your ISA. But that's easier said than done.",
"GBP has already lost part of his value just because of the fear of Brexit. An actual Brexit may not change GBP as much as expected, but a no-Brexit could rise GBP really a lot.",
"If you are re... |
4827 | Are all financial advisors compensated in the same way? | [
"495791"
] | [
1
] | [
"495791",
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"86855",
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"458529",
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"314252",
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... | [
"No, they certainly are not compensated the same way. Some are paid by commission that they earn from the products they sell (ie, certain mutual funds, insurance, etc.) Others are paid for their advice based on an hourly fee, or a percentage of the portfolio you have to invest. This is a great question, because t... | [
"No, they certainly are not compensated the same way. Some are paid by commission that they earn from the products they sell (ie, certain mutual funds, insurance, etc.) Others are paid for their advice based on an hourly fee, or a percentage of the portfolio you have to invest. This is a great question, because t... |
2385 | As director, can I invoice my self-owned company? | [
"407654",
"373059"
] | [
1,
1
] | [
"373059",
"142645",
"97708",
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"55440",
"419319",
"256972",
"171054",
"591357",
"579628",
"194955",
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"No, as a director normally you can't. As a director of a Limited company, all those payments should be accounted for as directors' remuneration and have been subject to PAYE and NIC, even if you are self-employed. Currently there is no legislation which prevents a director from receiving self-employment income fro... | [
"Sure you can. Obviously it means your company will make less profit, saving you 20% corporation tax, while your personal income will be higher, meaning you will likely spend more than 20% in income tax and National Insurance contributions.",
"No, as a director normally you can't. As a director of a Limited compa... |
2790 | Should I pay more than 20% down on a home? | [
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... | [
"The primary reason to put 20% down on your home is to avoid paying PMI (private mortgage insurance). Anyone who buys a house with a down-payment of under 20% is required to pay for this insurance (which protects the lender in case you default on your loan). PMI is what enables people to buy homes with as little a... | [
"The more you put down now, the less money you are borrowing. 30yrs of interest adds up. Even paying a small amount at the beginning of the mortgage can turn into a huge savings over the life of the loan. That's why you'll find advice to make extra mortgage payments in the beginning. The question is: Do you have ... |
3490 | Tax Witholding for Stock Sale | [
"420529"
] | [
1
] | [
"447651",
"420529",
"249687",
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"Is the remaining amount tax free? As in, if the amount shown (which I can sell) on etrade is $5000 then if I sell the entire shares will my bank account be increased by $5000? The stocks they sell are withholding. So let's say you had $7000 of stock and they sold $2000 for taxes. That leaves you with $5000. But... | [
"I assume US as mhoran_psprep edited, although I'm not sure IRS necessarily means US. (It definitely used to also include Britain's Inland Revenue, but they changed.) (US) Stockbrokers do not normally withhold on either dividends/interest/distributions or realized capital gains, especially since gains might be red... |
691 | How to categorize credit card payments? | [
"395912"
] | [
1
] | [
"357113",
"122493",
"122030",
"15262",
"489539",
"153520",
"395912",
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"367730",
"174714",
"268747",
"399199",
"243983",
"228198... | [
"Is your credit card spending on things outside the categories listed in your question? I generally don't put credit card expenditures in their own category of spending because I'm buying things like gas and groceries, etc. I track all spending whether from my checking account (bill autopay) or credit card account ... | [
"\"Using the Transfer category is the best place to put these categories, as that accurately reflects what the transaction is. If you have your credit card and bank account linked in Mint, the debit and credit to both accounts will net to $0 in the category. I would not recommend using \"\"Hide from budget and tre... |
2579 | What to do when a job offer is made but with a salary less than what was asked for? | [
"197052",
"524471",
"432808",
"191977",
"280838",
"432020"
] | [
1,
1,
1,
1,
1,
1
] | [
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"60290",
"256802",
"495540",
"516503",
"366824",
"31296... | [
"If you take less than you think you are worth, you will hate that job with a purple passion in short order. Either make peace with the amount you settle on or move on.",
"In my experience of doing software development for a little longer than I care to remember, salaries are always assumed to be negotiable. I kn... | [
"In my experience of doing software development for a little longer than I care to remember, salaries are always assumed to be negotiable. I know you said you don't like haggling (a lot of people don't) but you'll have to get used to that and you might have to be a little more flexible. Being able to negotiate some... |
1994 | Does the IRS reprieve those who have to commute for work? | [
"434846",
"565157",
"51491",
"243356",
"156640"
] | [
1,
1,
1,
1,
1
] | [
"434846",
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"\"When I have a question about my income taxes, the first place I look is generally the Giant Book of Income Tax Information, Publication 17 (officially called \"\"Your Federal Income Tax\"\"). This looks to be covered in Chapter 26 on \"\"Car Expenses and Other Employee Business Expenses\"\". It's possible that t... | [
"\"When I have a question about my income taxes, the first place I look is generally the Giant Book of Income Tax Information, Publication 17 (officially called \"\"Your Federal Income Tax\"\"). This looks to be covered in Chapter 26 on \"\"Car Expenses and Other Employee Business Expenses\"\". It's possible that t... |
6122 | Better to rent condo to daughter or put her on title? | [
"496166",
"169824",
"44344"
] | [
1,
1,
1
] | [
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"410874",
"434257"... | [
"\"Obviously you have done well financially in order to be able to purchase a condo for cash, presumably, without risk of your other obligations. To put things in perspective, we are probably talking about less than $5,000 in tax savings. If she is on the title then she is a co-owner. Are you okay with that? Y... | [
"\"Obviously you have done well financially in order to be able to purchase a condo for cash, presumably, without risk of your other obligations. To put things in perspective, we are probably talking about less than $5,000 in tax savings. If she is on the title then she is a co-owner. Are you okay with that? Y... |
1871 | Is there any US bank that does not charge for incoming wire transfers? | [
"175524",
"364112",
"244185",
"444162"
] | [
1,
1,
1,
1
] | [
"444162",
"175524",
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"538000",
"405797",
"154417",
"580935",
"516549",
"39289... | [
"Yes, a business account at Chase bank offers free incoming wire transfer fees when you keep a minimum balance of over 100k. It's the only one I have found.",
"There are banks and credit unions that don't charge fee for incoming wire transfer. You most likely won't get that from big brick and mortar banks like Bo... | [
"There are banks and credit unions that don't charge fee for incoming wire transfer. You most likely won't get that from big brick and mortar banks like BofA, Citi but if you are doing it regularly, using another bank that offers it free would save you a lot. Since ACH are free, you can transfer money between those... |
7071 | ESPP strategy - Sell right away or hold? | [
"124230",
"238629"
] | [
1,
1
] | [
"434812",
"387035",
"511678",
"495568",
"575213",
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"469100",
"121480",
"498604",
"546125",
"246221",
"570112",
"12232",
"481339",
"581866"... | [
"ESPP is common among US companies, often with a framework similar to your outline. In the US, some ESPPs allow sales of shares to be considered qualifying (subject to capital gains rather than ordinary income tax) if they are sold at least 2 years after the enrollment date and at least 1 year after the purchase d... | [
"A general rule of thumb is to avoid having more than 5% of your investments in any single stock, to avoid excessive risk; it's usually even more risky if you're talking company stock because an adverse event could result in an inferior stock price and you getting laid off. Under other circumstances, the ideal amou... |
939 | How to correct a tax return filed electronically and already approved? | [
"392434"
] | [
1
] | [
"585023",
"532656",
"392434",
"444300",
"100452",
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"257060",
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"179818",
"183688",
"485822",
"422091",
"234615",
"445770",
... | [
"You'll have to file an amended tax return for that tax year. Filing an Amended Tax Return",
"File a 2nd amended return that corrects the mistake I made on the 1st amended return This. Pay the $500 before April 27th and try to get it back later This.",
"Simply file an amended return to correct the mistake. This... | [
"Simply file an amended return to correct the mistake. This happens all the time and is a standard procedure that every legitimate tax pro can handle. You can work it out with the tax pro about whose mistake it was and who should pay for the additional service."
] |
5620 | What's the fuss about identity theft? | [
"448784",
"171510",
"329552",
"548740"
] | [
1,
1,
1,
1
] | [
"171510",
"260580",
"191012",
"261273",
"423809",
"453025",
"271472",
"158285",
"264701",
"408027",
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"547189",
"505334",
"226538",
"551747",
"324686",
"283661",
"567919",
"340601",
"554573",
"320246",
"67672",
"208402",
"90632",
"125204",
"448784",
"488379... | [
"While everything can be fixed in the end, and you can usually get all your money back, recovering from identity theft can take months or years. In the meantime, these are some of the things which you might not be able to do: In addition, you could face the following events: For all that, checking your credit repor... | [
"The problem is that the reason you find out may be that you are at the car dealer, picked out a car, and getting ready to sign the loan papers with your supposedly good credit, and you are denied for late payment on loans you didn't know you have. Or debt collectors start hounding you. Or you credit card intere... |
56 | Can a entrepreneur hire a self-employed business owner? | [
"572690"
] | [
1
] | [
"572690",
"468741",
"181187",
"562780",
"179144",
"373059",
"151145",
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"532932",
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"359987",
"328066",
"397329",
"594911",
"194955",
"315552",
"480287",
"265397",
"488113",
"584218",
"355513",
"534... | [
"Yes. I can by all means start my own company and name myself CEO. If Bill Gates wanted to hire me, I'll take the offer and still be CEO of my own company. Now, whether or not my company makes money and survives is another question. This is the basis of self-employed individuals who contract out their services.",
... | [
"Yes. I can by all means start my own company and name myself CEO. If Bill Gates wanted to hire me, I'll take the offer and still be CEO of my own company. Now, whether or not my company makes money and survives is another question. This is the basis of self-employed individuals who contract out their services."
] |
2903 | How should I file my taxes as a contractor? | [
"527776"
] | [
1
] | [
"487728",
"586026",
"466213",
"18647",
"93638",
"510913",
"449116",
"1011",
"68486",
"529528",
"527776",
"382908",
"194899",
"407378",
"107817",
"90290",
"174025",
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"367577",
"194955",
"578196",
"272248",
"65095",
"223042",
"434351",
"59686",
"477476",
... | [
"I strongly recommend that you talk to an accountant right away because you could save some money by making a tax payment by January 15, 2014. You will receive Forms 1099-MISC from the various entities with whom you are doing business as a contractor detailing how much money they paid you. A copy will go to the IRS... | [
"For tax purposes you will need to file as an employee (T4 slips and tax withheld automatically), but also as an entrepreneur. I had the same situation myself last year. Employee and self-employed is a publication from Revenue Canada that will help you. You need to fill out the statement of business activity form a... |
10547 | How much do brokerages pay exchanges per trade? | [
"571306"
] | [
1
] | [
"4883",
"595261",
"571306",
"294424",
"503981",
"142136",
"494351",
"389268",
"131651",
"122339",
"430846",
"422476",
"11075",
"288860",
"49930",
"451884",
"343683",
"584479",
"582908",
"108087",
"294517",
"227542",
"304276",
"202829",
"259371",
"115815",
"222974"... | [
"Retail brokers and are generally not members of exchanges and would generally not be members of exchanges unless they are directly routing orders to those exchanges. Most retail brokers charging $7 are considered discount brokers and such brokers route order to Market Makers (who are members of the exchanges). All... | [
"There is no one answer to this question, but there are some generalities. Most exchanges make a distinction between the passive and the aggressive sides of a trade. The passive participant is the order that was resting on the market at the time of the trade. It is an order that based on its price was not executa... |
7096 | What's the formula for profits and losses when I delta hedge? | [
"482238"
] | [
1
] | [
"482238",
"270345",
"202432",
"383896",
"272929",
"173745",
"157504",
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"131464",
"140629",
"521644",
"374905",
"253711",
"55535",
"22916",
"351833",
"195824... | [
"You don't mention any specific numbers, so I'll answer in generalities. Say I buy a call option today, and I short the underlying stock with the delta. The value will be the value of the option you bought less the value of the stock you are short. (your premium is not included in the value since it's a sunk cost, ... | [
"You don't mention any specific numbers, so I'll answer in generalities. Say I buy a call option today, and I short the underlying stock with the delta. The value will be the value of the option you bought less the value of the stock you are short. (your premium is not included in the value since it's a sunk cost, ... |
5888 | Interest charges on balance transfer when purchases are involved | [
"336792",
"540806"
] | [
1,
1
] | [
"229563",
"75108",
"429746",
"336792",
"213242",
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"173919",
"195726",
"526989",
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"279845",
"106319",
"582829",
"191070",
"506132",
"180539",
"65532",
"490529",
"106448... | [
"You shouldn't be charged interest, unless possibly because your purchases involve a currency conversion. I've made normal purchases that happened to involve changes in currency. The prices were quoted in US$ to me. On the tail end, though, the currency change was treated as a cash advance, which accrues interest... | [
"\"Its called a \"\"Grace Period\"\" and you are not paying interest on the 0% BT, you are paying interest on the amount you spent in purchases If you do not pay your balance in full by the due date your grace period ends. This means that you have to pay interest on the purchased amount from the day it is made. Thi... |
2399 | Where do web sites get foreign exchange currency rate / quote information? | [
"343489"
] | [
1
] | [
"343489",
"16961",
"562259",
"226102",
"571620",
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"109788",
"51063",
"17469",
"3669",
"144181",
"54225",
"259780",
"43663",
"262266",
"3... | [
"\"The prices quoted are for currency pairs traded on the foreign exchange market. For currencies traded on these exchanges, the exchange rates of a given currency pair are determined by the market, so supply and demand, investor confidence, etc. all play a role. EBS and Reuters are the two primary trading platform... | [
"\"The prices quoted are for currency pairs traded on the foreign exchange market. For currencies traded on these exchanges, the exchange rates of a given currency pair are determined by the market, so supply and demand, investor confidence, etc. all play a role. EBS and Reuters are the two primary trading platform... |
6668 | Approximate IT company valuation (to proximate stock options value) | [
"275902",
"457294"
] | [
1,
1
] | [
"103952",
"457294",
"57800",
"401266",
"318689",
"117177",
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"499269",
"301380",
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"371129",
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"4269",
"102375",
"53541",
"577381",
"461130",
"480515",
"468087",
"110163",
"469687",
"190135",
"9381",
"569111",
... | [
"Since it's not a public company it would be difficult for anyone to value these options or predict their future value without a lot more details on the finances of the firm. Once the firm goes public you can use the Black Shoales equation to get a present value for the options. And once they've got several month... | [
"This situation sounds better than most, the company it seems likely to be profitable in the future. As such it is a good candidate to have a successful IPO. With that your stock options are likely to be worth something. How much of that is your share is likely to be very small. The workers that have been thei... |
4153 | How do I invest in emerging markets | [
"459596"
] | [
1
] | [
"459596",
"154229",
"273861",
"241996",
"76996",
"344758",
"45970",
"98461",
"531180",
"89084",
"216391",
"194682",
"197241",
"199493",
"583552",
"424131",
"386173",
"272840",
"214723",
"530938",
"370171",
"392137",
"17823",
"122679",
"365295",
"283851",
"28291",
... | [
"\"Morningstar is often considered a trusted industry standard when it comes to rating mutual funds and ETFs. They offer the same data-centric information for other investments as well, such as individual stocks and bonds. You can consult Morningstar directly if you like, but any established broker will usually p... | [
"\"Morningstar is often considered a trusted industry standard when it comes to rating mutual funds and ETFs. They offer the same data-centric information for other investments as well, such as individual stocks and bonds. You can consult Morningstar directly if you like, but any established broker will usually p... |
4942 | find stock composition of a publicly traded fund | [
"357685"
] | [
1
] | [
"112208",
"357685",
"295993",
"530938",
"367071",
"155351",
"43245",
"448908",
"591558",
"162396",
"475640",
"110394",
"128676",
"125981",
"241928",
"71230",
"224765",
"136283",
"106665",
"347523",
"403870",
"402477",
"576184",
"188855",
"193805",
"475426",
"34119... | [
"You can check the website for the company that manages the fund. For example, take the iShares Nasdaq Biotechnology ETF (IBB). iShares publishes the complete list of the fund's holdings on their website. This information isn't always easy to find or available, but it's a place to start. For some index funds, you s... | [
"The big websites, Yahoo and the like, only give the 10 biggest positions of any fund. Download the annual report of the fund, go to page 18, you will find the positions on the 31st of December. However the actual positions could be different. The same applies to all funds. You need the annual report."
] |
1309 | Why does FlagStar Bank harass you about payments within grace period? | [
"471630",
"156162",
"489401",
"438869"
] | [
1,
1,
1,
1
] | [
"471630",
"438869",
"156162",
"420441",
"508896",
"178127",
"427086",
"355051",
"198269",
"574948",
"385746",
"336792",
"90007",
"40714",
"220559",
"522218",
"426944",
"289966",
"339365",
"219119",
"492226",
"548014",
"321742",
"278089",
"269077",
"75934",
"454805... | [
"\"A quick Google search for FlagStar Bank shows that this is their standard practice. Quite a few people are complaining about the robo-calls they start receiving on the 5th of every month and FlagStar's response is usually something along the lines of \"\"we're required to do so\"\". First and foremost, confirm t... | [
"\"A quick Google search for FlagStar Bank shows that this is their standard practice. Quite a few people are complaining about the robo-calls they start receiving on the 5th of every month and FlagStar's response is usually something along the lines of \"\"we're required to do so\"\". First and foremost, confirm t... |
10792 | How can I calculate a “running” return using XIRR in a spreadsheet? | [
"195044",
"374956"
] | [
1,
1
] | [
"195044",
"374956",
"379299",
"495418",
"479874",
"204761",
"393987",
"245648",
"517637",
"198606",
"402466",
"550642",
"285238",
"88889",
"66772",
"188982",
"209838",
"409434",
"521590",
"235592",
"324297",
"575524",
"220025",
"235314",
"186672",
"361069",
"43854... | [
"Set your xirr formula to a very tall column, leaving lots of empty rows for future additions. In column C, instead of hardcoding the value, use a formula that tests if it's the current bottom entry, like this: =IF(ISBLANK(A7),-C6, C6) If the next row has no date entered (yet), then this is the latest value, and ma... | [
"Set your xirr formula to a very tall column, leaving lots of empty rows for future additions. In column C, instead of hardcoding the value, use a formula that tests if it's the current bottom entry, like this: =IF(ISBLANK(A7),-C6, C6) If the next row has no date entered (yet), then this is the latest value, and ma... |
7484 | Why sometimes payable date is BEFORE the ex-dividend date? | [
"444562"
] | [
1
] | [
"444562",
"77016",
"586759",
"527636",
"76285",
"51205",
"456470",
"49966",
"485538",
"512947",
"81101",
"99803",
"269061",
"263751",
"352415",
"135363",
"301636",
"559436",
"511385",
"549528",
"176699",
"384120",
"71511",
"467936",
"41675",
"13631",
"231295",
"... | [
"Do you realise that the examples you have given are for stock splits not for dividends, that is why the date payable is before the ex-date for the split. The payments for the split occur on 30th June and the first day the stock trades with the new split is on the next trading day, being the ex-date, 1st July.",
... | [
"Do you realise that the examples you have given are for stock splits not for dividends, that is why the date payable is before the ex-date for the split. The payments for the split occur on 30th June and the first day the stock trades with the new split is on the next trading day, being the ex-date, 1st July."
] |
3875 | Does freedom to provide services allow me contracting in Germany without paying taxes there (but in my home EU country)? | [
"136315",
"249859"
] | [
1,
1
] | [
"249859",
"136315",
"77488",
"52882",
"440730",
"207531",
"57406",
"387186",
"378060",
"324921",
"576384",
"52622",
"68190",
"343477",
"264068",
"110061",
"423639",
"357820",
"195571",
"73876",
"342694",
"360629",
"347723",
"553133",
"279870",
"381830",
"349424",
... | [
"You're free to provide services, but if you stay in one country for more than half a year - you're generally considered to be its resident for tax purposes. Germany is no exception to the rule, in fact - this is true to almost any country in the world. If you provide the services from Poland, and never set foot in... | [
"\"Also within Germany the tax offices usually determine which tax office is responsible for you by asking where you were more than 180 days of the year (if e.g. you have a second flat where you work). That's a default value, though: in my experience you can ask to be handled by another tax office. E.g. I hand my t... |
1451 | How do you find an ethical, honest independent insurance broker in Canada? | [
"538005"
] | [
1
] | [
"22143",
"538005",
"580963",
"59723",
"381386",
"457702",
"108461",
"133586",
"233561",
"248368",
"341455",
"112259",
"562798",
"181678",
"359303",
"19622",
"286461",
"69680",
"2235",
"490650",
"279106",
"535427",
"260060",
"229727",
"269233",
"412114",
"114908",
... | [
"NAPFA claims to have members in Canada. They are an organization of fee-only financial planners--they work for hourly fees, not commissions, so they have no conflicts of interest when giving advice.",
"How do you find an ethical, honest practitioner of any business? One: Make a small transaction with them and se... | [
"How do you find an ethical, honest practitioner of any business? One: Make a small transaction with them and see how they treat you. If they cheat you on something small, don't give them a chance with something big. Two: Ask family and friends for recommendations. Three: Get information from public sources, like w... |
2880 | Can I transfer my investment property into a SMSF? | [
"533791"
] | [
1
] | [
"533791",
"207285",
"127697",
"338943",
"118594",
"151145",
"458063",
"221747",
"48718",
"213339",
"169886",
"465787",
"515690",
"97083",
"16187",
"108433",
"93828",
"9403",
"265167",
"171054",
"353415",
"57646",
"578014",
"196295",
"479558",
"144109",
"125168",
... | [
"Regarding transferring a residential investment property into your SMSF, no you cannot do it. You cannot transfer residential property into your SMSF from a related party. You can only transfer Business Real Property (that is commercial or industrial property) into a SMSF from a related party. You can buy new resi... | [
"Regarding transferring a residential investment property into your SMSF, no you cannot do it. You cannot transfer residential property into your SMSF from a related party. You can only transfer Business Real Property (that is commercial or industrial property) into a SMSF from a related party. You can buy new resi... |
109 | How to account for money earned and spent prior to establishing business bank accounts? | [
"73427"
] | [
1
] | [
"73427",
"492178",
"413229",
"229436",
"71569",
"107584",
"83346",
"174714",
"97708",
"297841",
"224438",
"77248",
"385779",
"499889",
"396807",
"192888",
"542466",
"37306",
"259728",
"344780",
"53225",
"71097",
"309023",
"226519",
"120410",
"520922",
"74688",
"... | [
"Funds earned and spent before opening a dedicated business account should be classified according to their origination. For example, if your business received income, where did that money go? If you took the money personally, it would be considered either a 'distribution' or a 'loan' to you. It is up to you whic... | [
"Funds earned and spent before opening a dedicated business account should be classified according to their origination. For example, if your business received income, where did that money go? If you took the money personally, it would be considered either a 'distribution' or a 'loan' to you. It is up to you whic... |
9188 | Selling mutual fund and buying equivalent ETF: Can I 1031 exchange? | [
"265167",
"580802"
] | [
1,
1
] | [
"580802",
"434694",
"393090",
"275340",
"530631",
"261902",
"265167",
"431610",
"590010",
"416787",
"443354",
"161019",
"201355",
"153112",
"268423",
"202630",
"71601",
"308967",
"161041",
"309923",
"108433",
"161746",
"210149",
"256010",
"586010",
"254230",
"5402... | [
"You cannot do a 1031 exchange with stocks, bonds, mutual funds, or ETFs. There really isn't much difference between an ETF and its equivalent index mutual fund. Both will have minimal capital gains distributions. I would not recommend selling an index mutual fund and taking a short-term capital gain just to buy t... | [
"I don't believe you can do that. From the IRS: Finally, certain types of property are specifically excluded from Section 1031 treatment. Section 1031 does not apply to exchanges of: I highlighted the relevant items for emphasis.",
"You cannot do a 1031 exchange with stocks, bonds, mutual funds, or ETFs. There r... |
5585 | Is there any site you can find out about the 'bonus features' of credit cards? | [
"300117"
] | [
1
] | [
"300117",
"44802",
"290788",
"479426",
"311815",
"193449",
"13656",
"431435",
"109125",
"596692",
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"94710",
"12035",
"63276",
"547441",
"30006",
"335859",
"502366",
"164795",
"171374",
... | [
"Billshrink offers some pretty neat analysis tools to help you pick a credit card. They focus more on rewards than the features you mention but it might be worth a look. If you use Mint, they offer a similar service, too. If you're not already using Mint, though, I'd look at Billshrink as Mint requires some extensi... | [
"Billshrink offers some pretty neat analysis tools to help you pick a credit card. They focus more on rewards than the features you mention but it might be worth a look. If you use Mint, they offer a similar service, too. If you're not already using Mint, though, I'd look at Billshrink as Mint requires some extensi... |
5331 | Exercises of employee share options | [
"200784"
] | [
1
] | [
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"Options granted by an employer to an employee are generally different that the standardized options that are traded on public stock option exchanges. They may or may not have somewhat comparable terms, but generally the terms are fairly different. As a holder of an expiring employee option, you can only choose to... | [
"\"Many companies (particularly tech companies like Atlassian) grant their employees \"\"share options\"\" as part of their compensation. A share option is the right to buy a share in the company at a \"\"strike price\"\" specified when the option is granted. Typically these \"\"vest\"\" after 1-4 years so long as ... |
2443 | What are some way to transfer money from Hong Kong to India on a monthly basis? | [
"305579"
] | [
1
] | [
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"\"HSBC, also known as \"\"The Hong Kong and Shanghai Banking Corporation\"\" has banks in India. I would imagine that might be a place to start. Paypal, which is commonly used to pay for items on eBay -- is also available in both India and China. You should, of course, respect any laws regulating this kind of ... | [
"Western Union, Money to India, Remit to India are some of the services that specilize in remittance and would be cheaper than an International Wire. There is not tax for transfering your own money earner outside India into India. Edit: The business of Remittance is bought into the Service Tax Net by Govt. It is... |
4714 | Personal finance app where I can mark transactions as “reviewed”? | [
"505057",
"584450",
"450819",
"324833"
] | [
1,
1,
1,
1
] | [
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... | [
"\"On mint, you can create your own tags for transactions. So, you could create a tag called \"\"reviewed\"\" and tag each transaction as reviewed once you review it. I've done something similar to this called \"\"reimbursable expense\"\" to tag which purchases I made on behalf of someone else who is going to pay... | [
"\"Otto, I totally agree with you. That feature would be awesome addition to mint. Have you thought of adding Custom tag called \"\"reviewed\"\" and just mark that to the transaction. Ved\"",
"\"On mint, you can create your own tags for transactions. So, you could create a tag called \"\"reviewed\"\" and tag ea... |
5343 | “International credit report” for French nationals? | [
"2860"
] | [
1
] | [
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... | [
"Currently the credit history are not International but are local. Many countries don't have a concept of credit history yet. Having said that, if you are moving to US, depending on your history in your country, you can ask the same bank to provide you with a card and then start building history. For example in I... | [
"\"I'm not aware that any US bank has any way to access your credit rating in France (especially as you basically don't have one!). In the US, banks are not the only way to get finance for a home. In many regions, there are plenty of \"\"owner financed\"\" or \"\"Owner will carry\"\" homes. For these, the previou... |
7876 | Why do stocks split? | [
"533779"
] | [
1
] | [
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"From Investopedia, A stock split is usually done by companies that have seen their share price increase to levels that are either too high or are beyond the price levels of similar companies in their sector. The primary motive is to make shares seem more affordable to small investors even though the underl... | [
"Stock splits are typically done to increase the liquidity of stock merely by converting every stock of the company into multiple stocks of lower face value. For example, if the initial face value of the stock was $10 and the stock got split 10:1, the new face value of the stock would be $1 each. This has a proport... |
7622 | Best way to pay off debt? | [
"253369",
"378594"
] | [
1,
1
] | [
"416796",
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"449294",
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"490648",
"569240",
"396889",
"394474",
"519675",
"544858",
"549359",
"159762",... | [
"\"Pay off the highest rate debt. Interest on both are charged on the balance owed, nothing more complicated than that. There are those who would call a mortgage \"\"front loaded\"\" but that's nonsense. Of course most of the payment is interest at the beginning because the debt is higher and you start with a 30 ye... | [
"\"The key phrase in your post is that the options are \"\"in a good position now\"\". They may be worthless in three months or a year. If I was you I would cash in the options and pay off the debt. Cash in enough to also cover taxes. You may want to cash them all in.\"",
"The most tax efficient way to get s... |
4678 | Finance, Cash or Lease? | [
"305153"
] | [
1
] | [
"179891",
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"Full payment is always better than auto-loan if you are prudent with finances. I.E if you take a loan, you are factoring the EMI hence your savings will remain as is. However if you manage well, you can buy the car with cash and at the same time put aside the notional EMI as savings and investments. The other fact... | [
"\"Now, to buy in full (and essentially have zero savings), buy in part (£10000 deposit, followed by a loan of £4000) or PCP/HP more of the value? So, you are assessing if the car is worth having with either none or only 4,000 in savings. This is the most critical information you have provided. My outright opinio... |
932 | Is freelance income earned by a U.S. citizen while living abroad subject to state income tax? | [
"48722",
"387010"
] | [
1,
1
] | [
"303287",
"457455",
"185999",
"319965",
"332314",
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"72135",
"218730",
"185384",
"29817",
"95724",
"66262",
"187706",
"523431"... | [
"Where you earn your money makes no difference to the IRS. Citizen/permanent resident means you pay income tax. To make matters worse given your situation it's virtually certain you have unreported foreign bank accounts--something that's also an important issue.",
"It essentially works the same. Some states don'... | [
"No state taxes, but Italy also has a favorable treaty with the US Federal Government. Look into to lowering your federal taxes to 5% ;) its a thick read, http://www.irs.gov/businesses/international/article/0,,id=169601,00.html and also try to determine if the Foreign Earned Income Exclusion applies to you, reducin... |
10845 | Rationale behind using 12, 26 and 9 to calculate MACD | [
"191588"
] | [
1
] | [
"191588",
"193012",
"518932",
"71708",
"489933",
"257185",
"180428",
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"42620",
"456667",
"414172",
"190603",
"565501",
"206895",
"501488",
"488285",... | [
"The values of 12, 26 and 9 are the typical industry standard setting used with the MACD, however other values can be substituted depending on your trading style and goals. The 26d EMA is considered the long moving average when in this case it is compared to the shorter 12d EMA. If you used a 5d EMA and a 10d EMA t... | [
"The values of 12, 26 and 9 are the typical industry standard setting used with the MACD, however other values can be substituted depending on your trading style and goals. The 26d EMA is considered the long moving average when in this case it is compared to the shorter 12d EMA. If you used a 5d EMA and a 10d EMA t... |
3394 | What is the easiest way to back-test index funds and ETFs? | [
"445971",
"342258",
"129319",
"570664"
] | [
1,
1,
1,
1
] | [
"445971",
"117049",
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"240519",
"528034",
"570664",
"88417",
"406457",
"239683",
"342258",
"71230",
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"404911",
"295993",
"553377",
"523221",
"532616",
"122679",
"383399",
"471322... | [
"\"Back-testing itself is flawed. \"\"Past performance is no guarantee of future results\"\" is an important lesson to understand. Market strategies of one kind or another work until they don't. Edited in -- AssetPlay.net provides a tool that's halfway to what you are looking for. It only goes back to 1972, howeve... | [
"\"Back-testing itself is flawed. \"\"Past performance is no guarantee of future results\"\" is an important lesson to understand. Market strategies of one kind or another work until they don't. Edited in -- AssetPlay.net provides a tool that's halfway to what you are looking for. It only goes back to 1972, howeve... |
3801 | Can a bunch of wealthy people force Facebook to go public? | [
"390529",
"307776"
] | [
1,
1
] | [
"390529",
"394734",
"69017",
"171236",
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"507816",
"570634",
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"667",
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"598705",
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... | [
"\"In the US, a private company with less than 500 owners can dictate who can or can't become a shareholder (this is true in general, but I'm sure there are loopholes). Prior to Google's IPO I could not buy shares in Google at any price. The reason Google was \"\"forced\"\" to go public is the 500 shareholder r... | [
"\"In the US, a private company with less than 500 owners can dictate who can or can't become a shareholder (this is true in general, but I'm sure there are loopholes). Prior to Google's IPO I could not buy shares in Google at any price. The reason Google was \"\"forced\"\" to go public is the 500 shareholder r... |
2376 | Why do gas stations charge different amounts in the same local area? | [
"64263",
"549833",
"91545",
"324411",
"114417",
"407455",
"402249",
"244961"
] | [
1,
1,
1,
1,
1,
1,
1,
1
] | [
"407455",
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"101519",
"335774",
"555999",
"571690",
"460674",
"489160",
"231654",
"173986",
"324037... | [
"One factor I haven't seen mentioned is volume. Suppliers will charge a slightly lower price to the station if they buy in full tanker truck loads instead of smaller quantities. Where I am this is probably still the largest factor in price spread with all newer bigger stations being 20-30 cents cheaper than the o... | [
"\"This is known as \"\"Zone Pricing\"\" or \"\"Geographical Pricing\"\". http://articles.latimes.com/2005/jun/19/business/fi-calprice19 Such price variations may seem odd, but they are not unique to Anaheim. On any given day, in any major U.S. city, a single brand of gasoline will sell for a wide range of prices e... |
4500 | What to ask Warren Buffet at the Berkshire Hathaway shareholder meeting? | [
"163048",
"533623"
] | [
1,
1
] | [
"163048",
"411084",
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... | [
"For whatever it's worth, when I went to the meeting a couple of years ago, the question and answer segment is mostly students asking how to pick a stock or what book they should read. I'm sure someone else will ask but it would be interesting to hear their take on the Syrian refugee situation in Europe and how it... | [
"For whatever it's worth, when I went to the meeting a couple of years ago, the question and answer segment is mostly students asking how to pick a stock or what book they should read. I'm sure someone else will ask but it would be interesting to hear their take on the Syrian refugee situation in Europe and how it... |
604 | Is there a dollar amount that, when adding Massachusetts Sales Tax, precisely equals $200? | [
"451443",
"231947",
"261622"
] | [
1,
1,
1
] | [
"451443",
"261622",
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"No. $188.23 has $11.76 tax = $199.99 $188.24 has $11.77 tax - $200.01 So, unless the based price contained the half cent for $188.235, the register would never show $200.00 even. How does the receipt to customer look?",
"Yes, it's a simple calculation. (x+0.0625x)=200 or x=200/1.0625 = $188.24 Technically $188.2... | [
"No. $188.23 has $11.76 tax = $199.99 $188.24 has $11.77 tax - $200.01 So, unless the based price contained the half cent for $188.235, the register would never show $200.00 even. How does the receipt to customer look?",
"\"Don't worry about it. The State doesn't care about rounding error. All you need to do is... |
2568 | How to pay with cash when car shopping? | [
"139047",
"388798",
"296769",
"346042",
"108739",
"590082",
"127353"
] | [
1,
1,
1,
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1,
1,
1
] | [
"346042",
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"590082",
"420499",
"305200",
"487287",
"157474",
"115916",
"417501"... | [
"When you pay cash for a car, you don't always necessarily need to pay cash. You just aren't using credit or a loan is all. A few options you have are: Obviously no dealer expects anyone to just have the cash laying around for a car worth a few thousand dollars, nor would you bother going to your bank or credit uni... | [
"I have in the last few years purchased several used cars from dealers. They have handled it two different ways. They accepted a small check ~$1,000 now, and then gave me three business days to bring the rest as a cashiers check. They also insisted that I submit a application for credit, in case I needed a loan. T... |
5228 | How does the bank/IRS know whether a bank transfer over $14k is a gift or loan repayment? | [
"232451"
] | [
1
] | [
"214934",
"117661",
"141331",
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"293653",
"287999",
"131595... | [
"The difference is whether or not you have a contract that stipulates the payment plan, interest, and late payment penalties. If you have one then the IRS treats the transaction as a load/loan servicing. If not the IRS sees the money transfer as a gift.",
"You are using interchangeably borrow/loan and gift. They ... | [
"You don't need to file or do anything. The bank will report all transfers over 10 000, but chances are slim that it will even be looked at, if you don't do this every week. Worst case, someone will ask you about the source, and you tell them exactly what you wrote above (I had multiple international transfers over... |
5763 | What is the best way to get a “rough” home appraisal prior to starting the refinance process? | [
"89964",
"515361",
"462019"
] | [
1,
1,
1
] | [
"89964",
"218144",
"366591",
"326214",
"115111",
"462019",
"515361",
"446646",
"129439",
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"77232",
"11572",
"114428",
"519633",
"329504",
"20054",
"581033",
"232944",
"565868"... | [
"\"It's extremely easy to get a rough valuation of your home. Just phone a real estate agent. Virtually any real estate agent will come and value your home free. Even if you say outright \"\"I'm not considering selling, I just want a valuation\"\" they will probably do it, because for them getting contacts of peopl... | [
"\"It's extremely easy to get a rough valuation of your home. Just phone a real estate agent. Virtually any real estate agent will come and value your home free. Even if you say outright \"\"I'm not considering selling, I just want a valuation\"\" they will probably do it, because for them getting contacts of peopl... |
6131 | Is it ever a good idea to close credit cards? | [
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"268142",
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"557237",
"99449",
"99810",
"235452",
"400202",
"483018"... | [
"\"Yes, it can be a good idea to close unused credit cards. I am going to give some reasons why it can be a good idea to close unused accounts, and then I will talk about why it is NOT necessarily a bad idea. Why it can be a good idea to close unused accounts \"\"I'd like to close the cards.\"\" That is reason en... | [
"\"Yes, it can be a good idea to close unused credit cards. I am going to give some reasons why it can be a good idea to close unused accounts, and then I will talk about why it is NOT necessarily a bad idea. Why it can be a good idea to close unused accounts \"\"I'd like to close the cards.\"\" That is reason en... |
5549 | Pros / cons of being more involved with IRA investments [duplicate] | [
"286227",
"309361"
] | [
1,
1
] | [
"429106",
"546150",
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"408994",
"400356",
"231012",
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"97805",
"466626",
"141939",... | [
"Our company does a lot of research on the self-directed IRA industry. We also provide financial advice in this area. In short, we have seen a lot in this industry. You mentioned custodian fees. This can be a sore spot for many investors. However, not all custodians are expensive, you should do your research before... | [
"diversifying; but isn't that what mutual funds already do? They diversify and reduce stock-specific risk by moving from individual stocks to many stocks, but you can diversify even further by selecting different fund types (e.g. large-cal, small-cap, fixed- income (bond) funds, international, etc.). Your target-d... |
4640 | What can my relatives do to minimize their out of pocket expenses on their fathers estate | [
"322314",
"101369",
"540539"
] | [
1,
1,
1
] | [
"531665",
"295142",
"322314",
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"427270",
"335808",
"581509",
"292324",
"525386",
"36481",
"84819",
"351502",
"99151"... | [
"Consider consulting a fee-only Certified Financial Planner. It will be worth the money to have your game-plan looked at by somebody who is trained and experienced in such matters, helping you avoid big mistakes and making the right decision for your personal situation. It should cost only a relatively small percen... | [
"\"Also the will stipulated that the house cannot be sold as long as one of my wife's aunts (not the same one who supposedly took the file cabinet) is alive. This is a turkey of a provision, particularly if she is not living in the house. It essentially renders the house, which is mortgaged, valueless. You'd have... |
3115 | How can I live outside of the rat race of American life with 300k? | [
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"234950",
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"316794"
] | [
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1,
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"389028",
"259227",
"544573",
"149357",
"44241",
"152478",
"363681",
"540621",
"584531",
"174272",
"33912",
"585494",
"29519",
"47184",
"183869",
"207914",
"316515",
"505082",
"519923",
"333059",
"343206",
"328770",
"548758"... | [
"\"the short answer: yes. The long answer depends on what you mean by modest living. As others have noted, living off a $300k principle involves risks, but the entire future has risk. By \"\"getting out of the rat race\"\" I hope you don't mean become a slug on the couch. Peruse mr. Money Mustache at https://www.mr... | [
"\"So my read on the question is \"\"How do I invest 300k such that it earns me a 'living wage' without the ongoing grind inherent in most formal employment?\"\" Reading the other answers to date it looks like most of them are thinking in terms of investment accounts and trying to live off of the earnings from suc... |
9961 | Employer rollover from 403b to 401k? | [
"21311"
] | [
1
] | [
"104134",
"529845",
"387876",
"72402",
"89202",
"217661",
"63532",
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"217310",
"323464",
"179606",
"581973",
"291578",... | [
"\"You can move money from a 403b to a 401k plan, but the question you should ask yourself is whether it is a wise decision. Unless there are specific reasons for wanting to invest in your new employer's 401k (e.g. you can buy your employer's stock at discounted rates within the 401k, and this is a good investment ... | [
"\"403b plans are used by school districts, colleges and universities, nonprofit hospitals, charitable foundations and the like for their employees while 401k plans are used by most everybody else. I would suspect that a school district etc can use a 401k plan instead of a 403b plan if it chooses to do so, but the ... |
2648 | How does unemployment insurance work? | [
"307120"
] | [
1
] | [
"307120",
"539522",
"94332",
"277178",
"84896",
"583788",
"412078",
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"481896",
"234822",
"115190",
"229134",
"344573",
"577475",
"459850",
"109285",
"563277",... | [
"\"Unemployment insurance provides a temporary safety net to workers who lose their jobs by replacing a portion of their salary for certain periods. Each state administers its own unemployment insurance program so some rules may vary from state to state. To receive unemployment insurance payments, you must have los... | [
"\"Unemployment insurance provides a temporary safety net to workers who lose their jobs by replacing a portion of their salary for certain periods. Each state administers its own unemployment insurance program so some rules may vary from state to state. To receive unemployment insurance payments, you must have los... |
620 | Is it wise to have plenty of current accounts in different banks? | [
"331332",
"417301",
"189303",
"180673",
"487067"
] | [
1,
1,
1,
1,
1
] | [
"189303",
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"3328... | [
"Another thing to factor in are deals provided by banks. In general, banks care about new customers more than their existing customers. Hence they explicitly restrict the best deals on credit cards, savings accounts, etc, to new customers only. (Of course, there are occasionally good deals for existing customers, a... | [
"Its actually a good thing. The #1 factor to your credit score is your credit utilization. So if you don't spend money unwisely and they don't have any annual fee I would keep them and use them each twice a year to keep them in your credit mix.",
"You should not open bank accounts just to get additional credit ... |
885 | How long do credit cards keep working after you disappear? | [
"337165",
"409184"
] | [
1,
1
] | [
"296165",
"389221",
"524226",
"251701",
"344386",
"301792",
"89888",
"228871",
"516678",
"11885",
"251643",
"536463",
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"15536",
"217030",
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"221784",
"522734",
"500620",
"418708",
"535501",
"51725",
"44685",
"479105",
"538110",
"97329",
... | [
"\"Assuming the question is \"\"will they close it for inactivity (alone)\"\".. the answer is \"\"Nope\"\" ... unequivocally. Update: < My answer is geared to credit Cards issues by companies that deal in credit, not merchandise (i.e. store cards, retailer cards, etc). Retailers (like Amazon, etc), want to sell go... | [
"how can I keep my website running for posterity after I die? If this is the real problem, incorporate a non-profit corporation or have a lawyer set up a foundation. Those will survive after your death and their bank accounts with them. You might even find someone willing to do this for you. It sounds like a ... |
8002 | What is the tax treatment of scrip dividends in the UK? | [
"118786",
"265159",
"34767"
] | [
1,
1,
1
] | [
"118786",
"217006",
"162454",
"265159",
"556144",
"32600",
"267067",
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"138835",
"5224",
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"42521",
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"110983",
"19144",
"213927",
"314200",
"89786",
"531423",
"128322",
"138795",
"... | [
"I wrote about this in another answer: You can sell the scrip dividend in the market; the capital gain from this sale may fall below the annual tax-free allowance for capital gains, in which case you don't pay any capital gains tax on that amount. For a cash dividend, however, there isn't a minimum taxable amount, ... | [
"I wrote about this in another answer: You can sell the scrip dividend in the market; the capital gain from this sale may fall below the annual tax-free allowance for capital gains, in which case you don't pay any capital gains tax on that amount. For a cash dividend, however, there isn't a minimum taxable amount, ... |
8834 | Pros/Cons of Buying Discounted Company Stock | [
"133644",
"521095",
"12232",
"197151",
"203139",
"569303"
] | [
1,
1,
1,
1,
1,
1
] | [
"133644",
"371821",
"203139",
"469100",
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"67625",
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"95243",
"436222",
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"409039",
"15030",
"434812",
"518088",
"348927",
... | [
"Is this an employee stock purchase plan (ESPP)? If so, and there is no required holding period, selling right away is essentially a guaranteed bonus with minimal risk. One caveat is that sometimes it takes a while to actually receive the shares at your brokerage, and in the meantime your company may have an earnin... | [
"Is this an employee stock purchase plan (ESPP)? If so, and there is no required holding period, selling right away is essentially a guaranteed bonus with minimal risk. One caveat is that sometimes it takes a while to actually receive the shares at your brokerage, and in the meantime your company may have an earnin... |
4464 | Are Australian mutual fund fees large compared to US? | [
"102904"
] | [
1
] | [
"102904",
"14185",
"366753",
"518402",
"34689",
"385182",
"177138",
"62853",
"586851",
"52589",
"197877",
"287537",
"236036",
"63577",
"403017",
"135405",
"412197",
"593962",
"268731",
"41625",
"402314",
"404261",
"506302",
"303525",
"49168",
"402240",
"110729",
... | [
"This is a Vanguard-specific difference in the sense that in the US, Vanguard is a leader in lowering management fees for the mutual funds that they offer. Of course, several US mutual fund companies have also been lowering the expense ratio of their mutual funds in recent years because more and more investors ha... | [
"This is a Vanguard-specific difference in the sense that in the US, Vanguard is a leader in lowering management fees for the mutual funds that they offer. Of course, several US mutual fund companies have also been lowering the expense ratio of their mutual funds in recent years because more and more investors ha... |
11039 | Pay off credit card debt or earn employer 401(k) match? | [
"53544",
"202768",
"353625",
"293531",
"249063",
"79363",
"330058",
"91183"
] | [
1,
1,
1,
1,
1,
1,
1,
1
] | [
"91183",
"287876",
"79363",
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"5203",
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"353625",
"422142",
"552383",
"508534",
"345895",
"437706",
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"130691",
"534837",
"477511",
"202768",
"330058",
"115499",
"163287",
"244692",
"299819",
"577517",
"519750",
"60017",... | [
"\"There is a very simple calculation that will answer the question: Is the expected ROI of the 401K including the match greater than the interest rate of your credit card? Some assumptions that don't affect the calculation, but do help illustrate the points. You have 30 years until you can pull out the 401K. Your ... | [
"A matching pension scheme is like free money. No wait, it actually IS free money. You are literally earning 100% interest rate on that money the instant you pay it in to the account. That money would have to sit in your credit card account for at least five years to earn that kind of return; five years in which th... |
9329 | Interactive Brokers: IOPTS and list of structured products | [
"523913",
"326991"
] | [
1,
1
] | [
"326991",
"598680",
"89351",
"523913",
"398012",
"284059",
"238173",
"411799",
"316645",
"138201",
"306104",
"530951",
"6426",
"44101",
"586018",
"93727",
"304999",
"510061",
"213824",
"478469",
"347315",
"96467",
"119154",
"588836",
"340210",
"234851",
"453524",
... | [
"\"Interactive Brokers offers global securities trading. Notice that the security types are: cash, stock (STK), futures (FUT), options (OPT), futures options (FOP), warrants (WAR), bonds, contracts for differences (CFD), or Dutch warrants (IOPT) There is a distinction between options (OPT), warrants (WAR), opti... | [
"I think an IOPT is a Dutch warrant. Someone else might understand what this is.",
"\"Interactive Brokers offers global securities trading. Notice that the security types are: cash, stock (STK), futures (FUT), options (OPT), futures options (FOP), warrants (WAR), bonds, contracts for differences (CFD), or Du... |
10414 | What is considered high or low when talking about volume? | [
"79807",
"303325"
] | [
1,
1
] | [
"79807",
"303325",
"10017",
"468025",
"91363",
"198583",
"541730",
"418124",
"503025",
"464810",
"173836",
"348886",
"293484",
"102075",
"407759",
"569627",
"351011",
"211444",
"175831",
"230343",
"115134",
"302372",
"372153",
"169954",
"36038",
"374151",
"94591",... | [
"The daily Volume is usually compared to the average daily volume over the past 50 days for a stock. High volume is usually considered to be 2 or more times the average daily volume over the last 50 days for that stock, however some traders might set the crireia to be 3x or 4x the ADV for confirmation of a particu... | [
"The daily Volume is usually compared to the average daily volume over the past 50 days for a stock. High volume is usually considered to be 2 or more times the average daily volume over the last 50 days for that stock, however some traders might set the crireia to be 3x or 4x the ADV for confirmation of a particu... |
7509 | Investment Portfolio Setup for beginner | [
"178303"
] | [
1
] | [
"591909",
"281865",
"469141",
"412331",
"146679",
"65006",
"231195",
"384983",
"280530",
"505993",
"363753",
"199181",
"404800",
"234979",
"7748",
"155242",
"322591",
"45970",
"172913",
"160170",
"238500",
"332022",
"233226",
"246253",
"142320",
"178303",
"576890"... | [
"As stated in the comments, Index Funds are the way to go. Stocks have the best return on investment, if you can stomach the volatility, and the diversification index funds bring you is unbeatable, while keeping costs low. You don't need an Individual Savings Account (UK), 401(k) (US) or similar, though they would... | [
"\"Some thoughts: 1) Do you have a significant emergency fund (3-6 months of after-tax living expenses)? If not, you stand to take a significant loss if you have an unexpected need for cash that is tied up in investments. What if you lose/hate your job or your car breaks down? What if a you want to spend some time ... |
3932 | How do historically low interest rates affect real estate prices? | [
"107697",
"527443"
] | [
1,
1
] | [
"107697",
"288376",
"406372",
"509197",
"527443",
"484843",
"72510",
"435740",
"257716",
"542321",
"179532",
"34844",
"598764",
"36602",
"327479",
"486707",
"129676",
"150332",
"346064",
"60486",
"144177",
"52299",
"466745",
"400646",
"360199",
"497200",
"358736",... | [
"The article John cites says no correlation, but this chart from the article says otherwise; One sees the rate drop from 14% to 4% and housing rise from an index of 50 to near 190. (reaching over to my TI BA-35 calculator) I see that at 14%, $1000/mo will buy $84,400 worth of mortgage, but at 4%, it will buy $209,... | [
"The article John cites says no correlation, but this chart from the article says otherwise; One sees the rate drop from 14% to 4% and housing rise from an index of 50 to near 190. (reaching over to my TI BA-35 calculator) I see that at 14%, $1000/mo will buy $84,400 worth of mortgage, but at 4%, it will buy $209,... |
7758 | Bid/ask spreads for index funds | [
"574327"
] | [
1
] | [
"574327",
"107123",
"480315",
"185115",
"122323",
"351518",
"148721",
"580364",
"501153",
"408524",
"479461",
"410123",
"443275",
"65587",
"107462",
"71545",
"142696",
"460347",
"341544",
"351011",
"187061",
"524612",
"524940",
"143238",
"308071",
"89205",
"220486... | [
"\"First, what structure does your index fund have? If it is an open-end mutual fund, there are no bid/ask spread as the structure of this security is that it is priced once a day and transactions are done with that price. If it is an exchange-traded fund, then the question becomes how well are authorized partici... | [
"\"First, what structure does your index fund have? If it is an open-end mutual fund, there are no bid/ask spread as the structure of this security is that it is priced once a day and transactions are done with that price. If it is an exchange-traded fund, then the question becomes how well are authorized partici... |
3148 | Can a car company refuse to give me a copy of my contract or balance details? | [
"178127",
"584305",
"438000",
"92888",
"172855"
] | [
1,
1,
1,
1,
1
] | [
"172855",
"584305",
"92888",
"430100",
"357280",
"421848",
"566382",
"131255",
"29721",
"395995",
"87351",
"276466",
"233479",
"271658",
"151452",
"490352",
"65046",
"403749",
"261220",
"355051",
"164702",
"438463",
"21174",
"467737",
"247371",
"103980",
"14745",
... | [
"No, they cannot refuse to provide you with the current balance or a balance history. The other answers point you to resources that are available to help you put pressure on the dealership. The bottom line is that you now know that you have the right to the details and to audit their recording of the transactions. ... | [
"\"The comments are getting too much, but to verify that you are not insane, you are being bullied. It sounds like this is a sub-prime loan, of which you are wisely trying to get out of. It also sounds like they are doing everything in their power to prevent you from doing so. For them you are a very profitable ... |
10213 | Looking for good investment vehicle for seasonal work and savings | [
"380942",
"270221",
"545712"
] | [
1,
1,
1
] | [
"380942",
"545712",
"238833",
"74283",
"162668",
"425479",
"266239",
"534670",
"4044",
"532179",
"355675",
"144114",
"518664",
"94680",
"19591",
"29828",
"342833",
"477295",
"116213",
"433371",
"318873",
"251146",
"167446",
"569484",
"32855",
"576736",
"479769",
... | [
"\"Most online \"\"high yield\"\" savings accounts are paying just above 1%. That would be 1.05% for American Express personal savings, or 1.15% for Synchrony Bank (currently). Depending on the length of the season, you might want to work in some CD's. Six months CDs can be had at 1.2%, and 9 month at 1.25%. So... | [
"\"Most online \"\"high yield\"\" savings accounts are paying just above 1%. That would be 1.05% for American Express personal savings, or 1.15% for Synchrony Bank (currently). Depending on the length of the season, you might want to work in some CD's. Six months CDs can be had at 1.2%, and 9 month at 1.25%. So... |
1819 | Found an old un-cashed paycheck. How long is it good for? What to do if it's expired? | [
"376499",
"66058",
"212713",
"267362",
"250285",
"220691"
] | [
1,
1,
1,
1,
1,
1
] | [
"176017",
"303685",
"567193",
"250285",
"523952",
"38571",
"88973",
"212713",
"547773",
"267362",
"45078",
"56129",
"498888",
"66058",
"120609",
"404366",
"533122",
"43370",
"5856",
"220691",
"221784",
"499028",
"93972",
"528661",
"578561",
"250702",
"165364",
"... | [
"\"Checks (in the US, anyway) are only good for six months after they have been written. After that. under the US Uniform Commerical Code they are considered \"\"stale checks\"\" and banks need not accept them. My experience is that they generally won't -- but you probably shouldn't count on that, either when figur... | [
"The two banks involved may have different policies about honoring the check. It might not be written on the check. Your bank may decide that the stale check has to be treated differently and will withhold funds for a longer period of time before giving you access to the money. They will give time for the first ba... |
3569 | Funds in closed bank account have gone to the government | [
"450135"
] | [
1
] | [
"19853",
"540765",
"102526",
"546646",
"272749",
"384751",
"156001",
"87141",
"450135",
"461049",
"371105",
"578561",
"506826",
"221784",
"254468",
"599563",
"106204",
"362670",
"12435",
"493222",
"356544",
"583411",
"199808",
"24306",
"105828",
"277039",
"34997",... | [
"Such funds are handed over to the state. In NE, like in many states, there is a government website where you can search by your name, find them, and claim them (with proof of your identity, etc.): https://treasurer.nebraska.gov/up/ For sure, the bank cannot just take the money. It is sitting somewhere, the bank ju... | [
"\"Legally speaking, if you do close a limited company, the funds belong to the government (\"\"bona vacantia\"\"). There's some guidance on this at Companies House and there is indeed a substantial amount of administration work to get it undone. Notable excerpts: You should deal with any loose ends, such as closin... |
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