Account number are Unique based on the following combinations, based on manual banking practise of early days;

-Country -Bank -Branch

-Location

-Account

Number

-Currency

-Account Type [Savings, Checking]

With the current computerization, there are quite a few items that have been coded into the number, for example Branch, Currency, Account Number and Account Type are part of account number.

Overall there are some attempts to standardize the account number so that they can be unique across the world as described as littleadv.

Within the bank or group of banks owned by the same company the account number is unique.

What is unique is the bank id number and account number combination.

If the bank ID number doesn't match a banking institution, the transaction will not be completed.

If you are unlucky and your mistake in writing the bank id number does match a bank, you have to hope the account number doesn't match.

The name's do not have to match.

Checks have been deposited with incorrect spelling, nick names vs formal names.

Mr. and Mrs ...

There are two unique identifiers for a bank account: SWIFT code + bank internal identifier, or IBAN code.

IBAN is mostly used within European banking system, and the whole code provides a direct and unique identification of the account.

SWIFT is an international network where each bank/bank branch has its own address, and account number is a metadata added to the message for the receiving bank to handle.

Usually the name of the recipient and additional information are required when wiring money through the SWIFT network, to match the records and make sure there's no mistake.

Account numbers don't have to be unique, not even within the same bank.

There's always something else in addition to uniquely identify them.

This is just my experience

but I think I have to put in the account holder's name or last name to check that I'm sending it to who I think I'm sending to.

From personal experience, I can tell you that bank account numbers are not unique.

Someone from another branch of my bank was able to withdraw money from my account at my branch because they had the same account number.

You are supposed to enter your branch number on the withdrawal slip in front of your account number.

The person who got my money did not do this.

Because it was at my branch, the teller debited my account for the transaction.

I caught this on my monthly statement and immediately complained to my branch manager.

He was able to retrieve the withdrawal slip and saw what had happened.

He credited my account and said he was going to talk to the teller who should have asked for the branch number and/or should have noticed that the name and address on the withdrawal slip did not match those on my account.

I would not have thought that the bank would allow this situation considering how many numbers are available to assign but they did.

Question: If somebody sends me money and I write the swift code wrong, will the money go somewhere else?  I know bank account numbers are unique within a bank, but will are they unique globally?  Update: I found a case titled  Money withdrawn to wrong bank account and no response from Paypal  (fortunately not my case)

Are bank account numbers unique?

The bank id number and account number combination will be unique.

Most people believe that within a bank or group of banks owned by the same company that account numbers are uunique, but some people have had the unfortunate experience that this is not the case. What is unique is the bank id number and account number combination.  There are two unique identifiers for a bank account: SWIFT code + IBAN code.


There are legitimate reasons:

She is a sole proprietor, and doesn't want to give out her last name.

She doesn't participate in the banking system for various reasons, and hands the check to a third party.

She may have had an unpleasant audit experience with the tax authorities and wants to maintain a smaller record footprint.

She may have an abusive spouse or some other personal situation where she values her anonymity.

I wouldn't jump the gun and assume that this person is avoiding taxes, etc.

Barbers are usually licensed professions.

Since it's generally a cash business, they tend to get audited more often by the tax authorities.

That said, I wouldn't pay her with a check -- you have no idea who is actually cashing the check, and you could run into issues with unknown third parties misusing your account information.

There are benefits associated with a cash only business (the link states a few).

However checks made out to "cash"

don't reap those benefits listed.

For anyone on SE to say your barber hides revenue from the IRS would just be speculation.

With that said there are a great number of disadvantages for a cash only business.

And from my experience, a business that goes out of their way to take cash only can be a little suspicious.

Luckily you are not committing any crimes or fraud by paying her cash.

To put a positive spin on the whole thing, maybe it's a small family shop, and having the check made out to "cash" means that your barber can hand it to someone else without the need to countersign.

Or maybe his last name is "Cash"

- there was a pretty famous singer who fit that description.

Either way, it's not your place to nanny his finances.

They're hiding income.

The IRS is a likely candidate for who they are hiding it from but not the only option.

Another possibility that comes to mind is someone who had a judgment against them--a check made out to "cash" could be handled by someone else and thus not ever appear in their bank accounts.

If the business owner doesn't want you to pay him directly, the only reason I can think of is breaking a law.

It can be because the business doesn't legally exists, or because the barber wants to evade taxes, or because he doesn't pay his child support or doesn't want his income to be apparent to his debtors in a bankruptcy proceedings.

Either way, stinks.

Question: My barber accepts only cash or checks made out to "Cash".  Is there a likely legitimate reason she might want the checks made out to "Cash"?  Or am I helping her hide her revenue from the IRS?

A merchant requests that checks be made out to "Cash". Should I be suspicious?

It means that she hands her checks to a third party. She might have a judgment against her and can't hold a bank account. It could also mean that the business doesn't legally exist or because they want to evade taxes. You are not committing a crime by paying in cash.

People may presume the only reason to ask for a check made to cash is that they are breaking the law e.g. to evade taxes, to not pay child support or hide income in bankruptcy proceedings or have had a judgement made against them. It could be the simplest of reasons such as them not having a bank account. They may have had bad experience with the tax authorities so want to maintain a smaller record footprint or there may be a genuine reason, such as they have an abusive spouse or other personal situation where anonymity is necessary or simply that as a small shop having the check made out to cash means they can just hand to someone else without countersigning. In any case, you are not committing any crime or fraud by paying in cash.

It could be the simplest of reasons such as them not having a bank account, so needing to hand to a third party.

People may presume the only reason is that they are breaking the law e.g. to evade taxes, to not pay child support or hide income in bankruptcy proceedings or have had a judgement made against them.

There may be a genuine reason, such as they have an abusive spouse or other personal situation where anonymity is necessary or simply that as a small shop having the check made out to cash means they can just hand to someone else without countersigning.


The simple answer: Because you believe every other option can yield greater losses...

So the thinking is; Lend it to France

you'll get your money back.

Put your money in a bank and there's a chance you won't get it back if the bank goes bust.

Investors also believe that rates will continue to go more negative, in which case they will actually MAKE money.

It's a momentum play which will eventually reverse but since the Bond market is extremely liquid, it's a bet that can quickly be unwound.

Another theory floating around is that if the weaker countries of the euro leave (e.g. Greece, etc) and the core keep the euro, then the value of the euro will actually rise.

So by putting your money in French or German bonds you would also be securing cash in French or German euro's.

- Thinking the unthinkable on a euro break-up - Gavyn Davies

The only reason I can think of would be if you were convinced that you couldn't hold on to your money.

Treasury Bonds are often viewed as very safe investments, and often used in some situations where cash isn't appropriate..

Also, they typically have a somewhat patriotic theme, helping your country to grow.

In addition, many people don't really pay attention to the rate of the bonds, but are just investing in them.

The more people investing in them, the lower the yields become.

But the bottom line is, I would invest in a savings account any day over a negative interest rate...

And it looks like I'm in good company as well, a quick study of reports seems to indicate that these are a very bad investment...

Savings accounts have limitations in case a bank goes belly up and you have a higher amount in the account (more than the insured amount).

Mostly big corporations or pension funds cannot rely on a bank to secure their cash but

a government bond is secured (with some fine print) and hence they are willing to take negative interest rates.

The average joe wouldn't... we would bury our cash in a mayonaise jar before we would take a guaranteed loss...

(although the argument could be made that a positive return that doesnt outpace inflation IS a negative return)...

big corporations with billions on hand dont have that luxury however...

some investments may also guarantee investors that a certain percentage be allocated to bonds... and in times of deflation a negative return could still provide a net positive return...

Possibly you could use it as a hedging instrument if it's correlated in some way with another asset you're holding.

Even though it seems you're losing money with such a bond, that loss might be less than the hedging costs associated with other instruments.

The only reason I can think of is that the bonds are bought automatically by some investment pools, groups or institutions.

That will stop very quickly once the management finds some other place to put the money.

Question: I read  that  France is selling bonds at Negative Interest Rates , and more recently  Germany Started in 2016 .  I understand why this is beneficial for France, but  why in the world would I pay money to let someone hold my money ?   Thanks for the update  200_success

Why would I buy a Bond at a Negative Interest rate?

Every other option could yield greater losses. Investors believe that rates will go more negative and they will make money. In times of deflation, a negative return could provide a net positive return.

Treasury bonds are often viewed as safe investments where cash isn't appropriate. Bonds are sometimes bought automatically by investment pools or institutions and many people don't pay attention to the rate of the bonds. Some people also believe that other options will yield even greater losses and even though it may appear that you are losing money with such a bond, it might still be less than hedging costs associated with other options. In addition, some investments guarantee a certain percentage is allocated to bonds and in times of deflation, negative bonds can still provide a net positive return.

You may believe that every other option will yeild even greater losses and even though it may appear that you are losing money with such a bond, it might still be less than hedging costs associated with other options.

Some investments guarantee a certain percentage is allocated to bonds and in times of deflation, negative bonds can still provide a net positive return.

Treasury bonds are viewed as safe investments where cash isn't appropriate.


The moment the dividend is announced, especially from a company that doesn't normally pay dividends, the dividend is factored into everybody's analysis.

In the absence of any other news the price of apple would be expected to drop once the dividend in locked in.

Why would I buy shares from you at full price one day after the dividend is paid, if I will have to wait for the next dividend?

Also keep in mind the dividend was announced on July 24th, and is given to shareholders of record on August 13th.

You are way behind the curve.

No , the dividends can't be exploited like that.

Dividends settlement are tied to an ex-dividend date.

The ex-dividend, is the day that allows you to get a dividend if you own the stock.

Since a buyer of the stock after this date won't get the dividend, the price usually drop by the amount of the dividend.

In your case the price of a share would lose $2.65 and you will be credited by $2.65 in cash such that your portfolio won't change in value due to the dividend.

Also, you can't exploit the drop in price by short-selling, as you would be owing the dividend to the person lending you the stock for the short sale.

Finally, the price of the stock at the ex-dividend will also be affected by the supply and demand, such that you can't be precisely sure of the drop in price of the security.

In an ideal world Say on 24th July the share price of Apple was $600.

Everyone knows that they will get the $ 2.65 on 16th August.

There is not other news that is affecting the price.

You want to go in and buy the shares on 16th Morning at $600 and then sell it on 17th August at $600.

Now in this process you have earned sure shot $2.65/- Or in an ideal world when the announcement is made on 24th July

, why would I sell it at $600, when I know if I wait for few more days I will get $2.65/-

so i will be more inclined to sell it at $602.65 /-

so on 16th Aug after the dividend is paid out, the share price will be back to $600/-

In a real world, dividend or no dividend the share price would be moving up or down ...

Notice that the dividend amount is less than 1% of the stock price ...

stock prices change more than this percentage ...

so if you are trying to do what is described in paragraph one, then you may be disappointed as the share price may go down as well by more than $2.65 you have made

Yes, somebody could buy the shares, receive the dividend, and then sell the shares back.

However, the price he would get when he sells the shares back is, ignoring other reasons for the price to change, exactly the amount he paid minus the dividend.

In addition to the other answers it's also noteworthy that the stock exchanges themselves adjust the price quotes via their ex-div mechanism.

All limit orders present in the book when the stock goes ex-div will be adjusted by the dividend.

Which means you can't even get "accidentally" filled in the very unlikely case that everyone forgot to adjust their quotes.

Question: Apple announced a dividend of $2.65/share on August 16th. I was thinking... could somebody buy, say 1,000 shares of Apple, receive the dividend, and then sell the shares right back?  http://www.latimes.com/business/technology/la-fi-tn-apple-dividends-20120724,0,6646852.story

Can dividends be exploited?

Dividends are tied to a date. You can't exploit the drop in price by short-selling. You would have to pay back the dividend.

Dividends cannot really be exploited. They are tied to an ex-dividend date. In addition, you cannot exploit the drop in price by short-selling, as you would owe the dividend to whoever has lent you the stock. Somebody could, in principle buy shares, receive the dividend and then sell the shares back, but the price they would get on selling back would be the same as they paid, minus the dividend. Also, the stock exchanges themselves adjust the price quotes via their ex-div mechanism.

Somebody could, in principle buy shares, receive the divident and then sell the shares back, but the price they would get on selling back would be the same as they paid, minus the dividend.

The stock exchanges themselves adjust the price quotes via their ex-div mechanism


The opposite of a hedge is leverage (aka gearing).

A hedge is where you spend money to reduce your exposure.

Leverage is where you spend money to increase your exposure.

Spread bets are a form of leverage - that's what makes them such an effective way to lose all your money, quickly.

The opposite of a hedge is nothing.

Because if you don't want to hedge you bets, you don't, therefore you merely have the original bet .

The opposite state of being hedged, is being unhedged .

I guess the opposite of being hedged is being unhedged .

Typically, a hedge is an additional position that you would take on in order to mitigate the potential for losses on another position.

I'll give an example: Say that I purchase 100 shares of stock XYZ at $10 per share because I believe its price will increase in the future.

At that point, my full investment of $1000 is at risk, so the position is not hedged.

If the price of XYZ decreases to $8, then I've lost $200.

If the price of XYZ increases to $12, then I've gained $200; the profit/loss curve has a linear relationship to the future stock price.

Suppose that I decide to hedge my XYZ position by purchasing a put option .

I purchase a single option contract (corresponding to my 100 shares) with a strike price of $10 and an expiration date in January 2013 for a price of $0.50/share.

This means that until the contract expires, I can always sell my XYZ shares for a minimum of $10.

Therefore, if the price of XYZ decreases to $8, then I've only lost $50 (the price of the option contract), compared to the $200 that I would have lost if the position was unhedged.

Likewise, however, if the price increases to $12, then I've only gained a net total of $150 due to the money I spent on the hedge.

(the details of how much money you would actually lose in the hedged scenario are simplified out above; even out-of-the-money options retain some value before expiration, but pricing of options is outside of the scope of this post)

So, as a more pointed answer to your question, I would say that the hedged/unhedged status of a position can be characterized by its potential for loss.

If you don't have any other assets that will increase in value to offset losses on your position of interest, I would call it unhedged.

There is no opposite of a hedge, except not having a hedge at all.

A "hedge" isn't directional.

If you are short, you hedge by having something that minimizes your losses if you are wrong.

If you are long, you hedge by having something that minimizes your losses if it decreases in value.

If you own a house, you hedge by having insurance.

There are "hedged bets" and "unhedged bets"

I'd say the opposite of hedging is speculating .

If you are convinced an asset will appreciate in value, or rather the probability of gains is enough to induce you to hold the asset, you are a speculator.

There are lots of ways of speculating, including holding risky assets without hedging that risk and possibly magnifying that risk and return via leverage or the embedded leverage in a derivative contract.

Generally speaking, if in expectation you are paying to reduce your risk, you are a hedger.

If you are (in expectation) being paid to bear the risk that otherwise someone else would bear, you are a speculator.

The word speculation has been tainted by politicians and others trying to vilify the practice, but at the end of the day it's what we are all doing when we buy stock or any other risky asset.

Question: As an example of what I mean, when you buy a stock but are afraid that it might go down, you "hedge" your bet. What is the opposite of a hedge? In other words, what do you do if you are convinced it will go up in value and you want to profit from it?

What is the opposite of a hedge?

The opposite of hedge is leverage. You could also call it speculating.

You could say that the opposite of a hedge is leverage or gearing or speculating. Or simply the opposite of a hedge is simply not having a hedge at all or being unhedged.

You could say that the opposite of a hedge is leverage or gearing.

Some would say the opposite of a hedge is simply not having a hedge at all.

The opposite of a hedge is being unhedged.


"ASSUMING a person knows how to use and invest their money wisely" I'd ask if you were wise enough to beat the investments offered in your 401(k) after expenses, and with respect to the potential tax savings.

Then, since I'm a proponent of "deposit to the match, even if you have to eat rice and beans to find the cash to do" I'll extend the question to ask if you can beat the choices taking the match into account.

- Your $1000 starts as $1500 and has a tax due on withdrawal years later.

AeroAccount - You start with $750 (after the tax) and might spend a decade before hitting $1500.

Start your own company?

That might be another story.

But to invest in the market and still beat the matched 401(k) takes a bit more wisdom than I'd claim to have.

money.stackexchange.com/users/187/JTP - Apologise to Monica

A 50% company match on your 401(k) is a huge amount of free money.

You'd have to absolutely crush the professional money managers to justify turning it down.

If you can do that, you should quit your job and do it full-time.

ASSUMING a person knows how to use and invest their money wisely, would it still be a bad idea to entirely disregard a 401k plan?

Yes.

A 401k, like an IRA, is a "qualified plan" and as such enjoys certain legal protections.

For a Roth 401k, the taxes are paid now and the interest accumulates tax free, and withdrawals will be tax-free.

Doing it on your own means that your own savings will have interest taxed as you earn it.

For a traditional 401k, current savings are deducted from current earnings, and the withdrawals will be taxed.

Doing it on your own loses the deferral of tax at this time.

Generally, 401ks and IRAs are highly resistant to judgements in civil lawsuits.

If you file for bankruptcy protection at any time in your working career, the assets in these accounts are immune (in most states) from being used to pay off your creditors.

If you do it on your own, that savings account will be emptied to pay off creditors in bankruptcy and also will be assets that can be taken from you in civil judgements (for example, you get in a car accident and they sue you).

You might never be sued, nor file bankruptcy in your entire life, but you are unnecessarily exposing yourself to risks: anything might happen in the next 50 years.

What you will lose in such circumstances far outweighs any perceived benefits you could possibly earn by rolling your own.

If you are the sort of person who can max out your 401k and IRA contributions each year, and still have a significant sum to set aside for savings, you should contact an investment advisor and attorney to see about protecting your assets.

An experienced individual wouldn't ask such questions.

I don't say this to take a jab at you, but to provide context.

The matter is much more complicated than a simple answer to your question could accomplish.

The short answer is no, not necessarily; but it depends on the details.

Generally, if the employer matches, it's suggested that you take advantage of the match.

It's free money.

That said, it comes with some strings attached, like a vesting schedule.

It's not yours right away, necessarily.

Choices are limited in a 401k, but we should still come out ahead with that free money.

The investment choices available in a 401k are also a part of the details.

If they meet your needs you should certainly consider the 401k even if the employer doesn't match.

There is also the matter of one's particular tax situation, which is certainly an involved matter.

A 401k can certainly be a part of judicious tax planning.

It's a matter of working out the details.

Continuing this theme of details and coming back to the employer match: if the employer doesn't mach, I would make sure that I'm maxing out an IRA before considering the 401k.

If the employer matched, I would probably contribute to take advantage of that match.

However, it quickly becomes complicated here.

I'm accustomed to employer matching up to some percentage of pay, which typically works out to be less then the anual contribution limits for a 401k.

So, I my plan for such a situation is to contribute up to the employer match in the 401k, then max out an IRA, and then return to the 401k to finish contributing up to its yearly maximum.

There is plenty for you to consider in order to come up with a plan of action.

While it's certainly complicated, it's accessible to most people.

You don't have to be a genius.

In fact, eggheads are regularly trounced by the markets.

Even ignoring the match (which makes it like a non-deductible IRA), the 401k plans that I know all have a range of choices of investment.

Can you find one that is part of the portfolio that you want?

For example, do you want to own some S&P500 index fund?

That must be an option.

If so, do the 401k and make your other investments react to it-reduce the proportion of S&P500 because of it(remember that the values in the 401k are pretax, so only count 60%-70% in asset allocation).

The tax deferral is huge over time.

For starters, you get to invest the 30-40% you would have paid as taxes now.

Yes, you will pay that in taxes on withdrawal, but any return you generate is (60%-70%) yours to keep.

The same happens for your returns.

Question: I would rather invest my money on my own how I see fit and plan my retirement custom-style.  ASSUMING a person knows how to use and invest their money wisely, would it still be a bad idea to entirely disregard a 401k plan?

Would any experienced individual balk at the idea of ignoring a 401k plan?

The question is whether you are wise enough at investing to beat the investments offered in a 401k and the tax savings. There are 401k plans that offer a range of investments.

Generally speaking no, but it depends on the details. You would probably lose more than you would gain and  you would need a lot of skill to beat the investments offered in your 401K after expenses. Choices are limited in a 401k, but we should still come out ahead with that free money as it is a "qualified plan" with certain legal protections. With a Roth 401k, taxes are paid now and interest accumulates tax free, and withdrawals will be tax-free. Doing it on your own means that your savings will have interest taxed as you earn it.

If you are the sort of person who can max out your 401k and IRA contributions each year, and still have money set aside for savings, you should contact an investment advisor and attorney to protect your assets.


I don't like paying the percentage on the supermarket coin counters, and don't feel like buying a coin counter

so I have my own solution.

I keep higher value coins for vending machines, parking meters etc, and lower value coins I put in charity boxes.

Are you in an occupation that regularly collects change or is this change left in your pocket at the end of the day?

Here in the US it is typically worth it to invest in some automatic coin counters if you are in an occupation that regularly collects coins.

In your case you can collect the little baggies from the bank, use your coin counters and then make a deposit.

Here is an example of US coin counters .

If it is just pocket change then in the morning, make it a habit of taking some with you.

This way you are less likely to break larger bills.

Also if you are making a deposit at the bank, add some change to the deposit without making it to annoying.

In the U.S. at least, a lot of these CoinStar machines are now owned and operated by the store or other venue in which they're placed, as a convenience to customers, and the fee for using it is waived.

These machines, even without a fee attached, are still beneficial to the store, for two reasons.

First, they bring in potential customers; the machine usually spits out a ticket that you take to the cashier, meaning you pass by all the impulse items they put in the checkout lines, and someone using the change catcher will invariably pick up a pack of gum or a magazine to spend your newfound wealth.

The fact that one store has a change machine while another doesn't can also be the difference between choosing that store over the other for a planned shopping trip.

Second, and less obvious, a store that owns a CoinStar machine has full access to the change people put in it (hey, they own the machine and are paying out cash on the receipts it spits out).

During normal use of a cash drawer or register to take in money, large bills ($20/20€ or larger) are accumulated to be "broken", small to medium bills (1-10 units) stay roughly static in number as payments are made and larger bills are broken, and coins are invariably depleted as change is paid out.

This means the average retail store needs a constant incoming supply of coinage, and that generally happens either through armored car service or similar commercial banking (which costs the store money), or through "change catchers" like gumball machines (which usually can't supply all the needed denominations).

The Coinstar machine effectively reverses at least a portion of this attrition of coins and accumulation of large bills; the store can now receive coins and pay out large bills as a part of its day to day business, reducing or even eliminating the need to have a bank or armored car perform this service.

Anyway, check and see whether the CoinStar machine you last used is still operating on a percentage-fee basis; it might be the case that the store has purchased the machine outright and is offering its services free of charge.

If not, look around; other stores may be waiving the CoinStar fee where this one isn't (or they may have similar, non-CoinStar branded machines).

Lastly, as other answers have mentioned, if you cash out in the form of a gift card, there's no fee, so you can pick a gift card to a store you're likely to visit anyway; in the U.S. there are a lot of good choices, like home improvement stores, Starbucks, major department stores/clothing retailers, and even an airline.

Every now and then I fill a pocket with a handful of coins and spend it on a very small shop on my way home, i.e. a loaf of bread (£1.50), a pint of milk (50p) by using the self-check out (Tesco/Sainsbury's) which has a coin slot or even better the little bowl where you put coins down.

I find this pretty straightforward.

There's no point having a jar at home worth £50.

I don't know if those machines work this way in the UK too, but here in the US you can often avoid the coin-counting fee if you opt to convert the money into a gift certificate instead of cash.

I routinely convert my coins to Amazon gift certificate money with no charge.

Individual machines differ in which particular gift cards they use, but at the least, almost all of them offer the option for a no-fee conversion to a voucher/gift certificate to the store where the machine is.

So it's likely you'd be able to use the machine to convert the cash to "money" you can use to buy groceries.

Question: My change-jar is full, mostly with denominations < 50p. Last time I emptied it, I took it to a machine at the supermarket:   ...but it charged me for the privilege of turning my change into usable funds to the order of 8.9% - quite a large cut.  How can I turn my full change-jar into usable cash as efficiently as possible?

What should I do with the change in my change-jar?

Get into the habit of taking a few out with you and use them for small food shops. You can use the self checkout machines to put in all the coins. If you are making a deposit at the bank, add in some change.

Keep higher value coins for vending machines, parking meters etc, and put lower value coins in charity boxes.  Make a habit of taking some with you each morning. On your way home, spend it on a very small shop, i.e. a loaf of bread, a pint of milk, by using the self-check out, which has a coin slot. Also if you are making a deposit at the bank, add some change to the deposit. It might be worth  investing in an automatic coin counters if you are in an occupation that regularly collects coins.  In the U.S.  a lot of these CoinStar machines are now owned and operated by the store in which they're placed, as a convenience to customers, and the fee for using it is waived but you can often avoid the coin-counting fee if you opt to convert the money into a gift certificate instead of cash.

In the U.S.  a lot of these CoinStar machines are now owned and operated by the store in which they're placed, as a convenience to customers, and the fee for using it is waived.  In the US you can often avoid the coin-counting fee if you opt to convert the money into a gift certificate instead of cash.


SPY is up 29% YTD.

If you are 100% S&P and not up 28.9% plus your deposits, I'd be concerned — check your fund's management fees.

Are you calling a top?

Proper asset allocation would adjust holding on a regular basis.

At the simplest level, say 70% S&P 30% short term/bond fund.

It's time to re-adjust to the mix that's right for you, and not market-time.

If 2014 sees a huge drop, the re-allocation to 70/30 buys back in at a lower price.

If up again, a bit gets shifted out.

Last, it makes sense for your deposits to match your allocation split, to lessen the divergence from your target numbers.

Note:

Asset allocation is a bit more complex than I just described.

A good thing to research a bit.

(Happy to see someone edit a couple good references here, especially if they aren't looking to offer a full response.)

Here are a few choice questions on this site that are related to asset allocation: What is the best asset allocation for a retirement portfolio, and why?

What is a good asset allocation for a 25 year old?

Should I fund retirement with a static asset allocation or an age based glide path?

Is there an advantage to international stock diversfication?

money.stackexchange.com/users/187/JTP - Apologise to Monica

I recommend that you just leave the 401K where it is - a S&P 500 is a nice simple fund with very low expenses, and over the long term, I think that's a good choice for a 401K.

I don't think it makes sense to put money in bonds at your age.

JoeTaxpayer's advice is solid - reallocating to your target asset allocation is the right move.

You should have an Investor Policy Statement (IPS) that maps out your financial objectives, risk tolerance, liquidity constraints, etc.

From the IPS, you can determine your target asset allocation and rebalance accordingly.

A few more comments:

It sounds like 100% of your 401k is in US stocks.

You might have other accounts that make your overall portfolio globally diversified, but if not, you want to make sure to set a target asset allocation for a global portfolio.

Your statement "If this were in my brokerage account I'd probably cash out some of the profits and hold onto it and buy more shares as the market eventually comes back down.

But this being a 401k which has semi-monthly deposits from my paycheck, do I just leave it?"

is a bit counterintuitive.

If you are going to try to time the market (a very hard task), it is better to use a retirement account, so you don't have to realize capital gains.

Timing the market is probably a bad idea, but if you engage in market timing, it is probably better to use a retirement account than a brokerage account.

If you would like to tilt your asset allocation based on the market valuation, I recommend researching Shiller's Cyclically Adjusted Price to Earnings ratio .

You need to look at all your investment as a whole.

The 401K, IRA, and any taxable account need to be a part of the diversification and re-balancing.

The fact you have regular deposits into the 401K needs to also be a part of your strategy.

Regardless of how much specific investments have gone up this year, you need to first determine how you want to be invested in large cap stock, small cap stock, bond, international, emerging markets...

Then you need to see where you are today compared to those investment percentages.

You then move the money in the retirement accounts to get to your desired percentage.

And set the 401K deposits to be consistent with your goals.

Many times the deposits are allocated the same way the balances are, but that is more complex if one of the sectors you are investing in exists completely outside the 401K. When you re-balance in the future you will be selling sectors that grew the most and buying those that grew the least compared to their planned percentages.

If all the moves are within the 401K and IRA then capital gains are not a concern.

Don't think of the different accounts as separate baskets, but think of them as a whole investment strategy.

First, accept the fact that you are not going to be able to predict the ups and downs of the market well enough for that to be a viable strategy.

In the long run these schemes tend to be losers because it forces you to guess correctly twice (When to get out, when to get back in) and missing either date can cost you.

A better strategy to benefit from market volatility: Dollar cost averaging - Invest a fixed amount at regular intervals rather than your opinion of what the market is going to do.

This means you will buy less stock when it is expensive and more when it is cheap.

It is an almost automatic way to follow the seemingly trite advice

"Buy low, sell high".

You are probably already doing this with your 401K Make sure your portfolio is adequately diversified to protect you from excessive risk of a particular sector or economy tanking.

Ideally do this over time in regular fixed dollar amounts for the reasons in my first bullet.

Question: I'm 34. 100% of my 401k goes into an S&P index fund.  I'm up about 25% this year.  If this were in my brokerage account I'd probably cash out some of the profits and hold onto it and buy more shares as the market eventually comes back down. But this being a 401k which has semi-monthly deposits from my paycheck, do I just leave it?  Just curious if there's any thought as to what to do with a 401k at this point.

An index fund in my 401k performed very well this year. How to deal with the gains?

You are not going to be able to predict the market enough to make this a viable strategy. It would be better to leave the 401k as it is. Think about your investments as a whole when planning.

You are probably not going to be able to predict the ups and downs of the market well enough to have a viable strategy. It is probably best to leave the 401K where it is – as it is a nice  simple  fund with very low expenses. Or you could reallocate to your target asset allocation. A better strategy to benefit from market volatility might be dollar cost averaging. You are actually better investing a fixed amount at regular intervals rather than trying to predict what the market is going to do.

You are probably not going to be able to predict the ups and downs of the market well enough for that to have a viable strategy. It is probably best to leave the 401K where it is – as it is a nice  simple  fund with very low expenses.

You should probably look at all your investment as a whole, including the 401K. Regardless of how much specific investments have gone up this year, you firstly need to determine how you want to invest and in what sectors.


Assuming United States As far as "Will they will allow you to do that?

Of course!

(How do you think renters get utilities?)

As far as the responsibility to pay, that's up to you.

If you are setting things up like that to prevent being swamped with bills which your girlfriend has no legal obligation to pay, that would work.

However, if something were to happen between you, and she were to move out, then she'd probably cancel all of the utilities, and you'd have to re-acquire the service in your name, which may lead to service interruptions or early-termination fees on your girlfriend's side (I'm thinking about getting a multi-year contract on something like Internet/TV).

In my case, my wife's name is on our electric bill, our cable/internet bill, but I'm on the water/sewage and trash.

It just happened like that because of who had free time at the moment to sign up for service.

It's slightly annoying, because any time I call our providers, they won't allow me to make changes to the account without my wife present.

I am assuming credit scores and such are not an issue.

If you are a serious couple; probably not.

For example, my wife's name is on many of our bills but it has ended up that I pay everything.

We don't share a last name or bank accounts, so the utilities around me certainly don't care.

(I am in the United States.)

If you aren't a very serious couple, you might consider how bad it would be to have the power or gas go off after a break up.

"Is there any problem...?" There is no problem in putting her name on all bills - most companies are happy to take anyone's money, however...

Sometimes you need multiple proofs of address and "a recent utility bill" is one that comes up quite a bit in lists of acceptable proof - so you might want one in your name.

Having a mismatch between the name of the utility bill and the credit card/bank account you use to pay it isn't normally a problem - it's OK to have one in your name.

Since we bought our new house, my wife is pleased that one of the bills is in her name now for this reason.

Alternatively, your girlfriend can now claim she has been supporting you through bill payments and make a claim for a share of the communal home, even if it is in your name - and you pay the mortgage.

Give her a rent book - make sure she has her own room, and keep the bills in your name.

As others have said, there is no problem with doing this but if the girlfriend happens to be a non-US citizen, who might be applying for citizenship or a green card in the future, having the additional trail of paperwork is in your best interest.

Things like joint utilities weigh heavily as evidence of your relationship.

I did this exact thing for about two years - there were no problems.

In fact, there were some advantages to this approach.

For example, when my ex left I was able to get "new customer" discounts on cable internet because I had no accounts in my name previously.

Anyone who is asking for a "recent utility bill" should accept a mortgage or property tax bill in your name as well.

Question: I just bought a house.  My girlfriend is going to be living with me, but the house is in only my name. To split the expenses, we are planning on her paying all of the utilities.  Is there any problem with the home being in my name, but the gas, electricity, etc. being in hers?  Update: We are in a serious, long-term relationship and will probably be married in the next couple years.

Is it okay to put household utilities in girlfriend's name if I own the home?

This isn't normally a problem. It might mean that the providers will only speak to her if there's a problem. It's also good to have multiple proofs of address, so have bills in both of your names is useful.

It is up to you who is responsible for paying what. Most companies are just happy to take the money. One partner can pay some utilities and the other pay others Having a mismatch between the name of the utility bill and the credit card/bank account you use to pay also isn't normally a problem. But bear in mind if some utility providers will only allow the account holder to make changes. Having your name on the account is also useful when you require proof of address, as "a recent utility bill" is one of the items often asked for as acceptable proof. Joint utilities weigh heavily as evidence of your relationship.


It will cost the same no matter what currency you use, unless you have access to a deal with a currency exchange that gives you an especially favourable conversion rate for a particular currency.

If the current exchange rates are US$1.70 to the £, CA$1.80 to the £ and HK$12.50 to the £, then £1, US$1.70, CA$1.80 and HK$12.50 are just four different ways of writing the same amount of money.

So whether you pay in US$, CA$ or HK$

it's the same amount of money that you're paying.

As others have pointed out, the theoretical prices in each exchange rate are identical.

However, the cost to you may vary.

You need to work out the "opportunity cost" of using each of the three currencies, because you lose money every time you convert between two currencies.

Let's supposed for example that you live in Canada and earn and spend CAD there, but also happen to have some HKD.

To keep this simple I'll ignore the USD, but you can apply the same reasoning to that.

If you're not planning on visiting Hong Kong for a while, then your holdings of HKD are just gathering dust, so your choices are to convert them to CAD and make the GBP purchase in CAD, or to spend the HKD directly on the GBP purchase.

Probably the first option will end up costing you more in conversion fees than the second, but you need to look at the precise costs to verify this.

If you are planning on visiting Hong Kong soon and will need the HKD, then the choices are somewhat different.

You can either spend CAD on the GBP purchase, or you can spend the HKD on the GBP purchase and then soon convert some CAD into more HKD for your trip.

In this case the first option will probably end up costing you less in conversion fees.

money.stackexchange.com/users/366/GS - Apologise to Monica

At any instant, three currencies will have exchange rates so if I know the rate between A and B, and B to C, the A to C rate is easily calculated.

You need X pounds, so at that moment, you are subject to the exchange rate right then.

It's not a deal or bargain, although it may look better in hindsight if the currencies move after some time has passed.

But if a currency is going to depreciate, and you have the foresight to know such things, you'd already be wealthy and not visiting here.

money.stackexchange.com/users/187/JTP - Apologise to Monica

International exchange rates are arbitraged.

If I exchange A for B for C and then back to A again, I'll end up with the same amount ex trade fees.

Assume this isn't the case.

Clearly if I'd gain, someone else loses and I'd make millions by rapidly exchanging.

Now assume that I'd lose money on that route.

That must be because the reverse route, A->C->B->A gains money.

(Again, assuming no fees)

So in this case you'd just look at fees.

(And as Ganesh points out, that may include future fees)

There's another dimension here as currency conversion isn't necessarily the final answer.

As stated by others, converting money between the three should theoretically end up with the exact same value, less transactional costs.

However the kink is that the price of most products are not updated as the currencies change.

In many cases the price difference is such that even accounting for shipping and exchange fees, purchasing a product from a distributor in a foreign country can be cheaper than just picking it up at the local store.

You might even be able to take advantage of this when purchasing at a single store.

If that store is set up to accept multiple currencies then it's a matter of looking at the conversion rates the moment you are buying and deciding which one is the cheapest route for you.

Of course, this generally will not work for smaller purchases like a cup of coffee or a meal.

Primarily because the fee for the exchange might eclipse any savings.

Question: Suppose that I want to buy something in GBP (pounds). How do I determine whether which costs less:  CAD (Canadian Dollars) or HKD (Hong Kong Dollars) or USD, all three of which I possess?  First, would I compare CAD vs HKD?  http://www.xe.com/currencycharts/?from=CAD&to=HKD&view=1Y  shows that CAD has depreciated against HKD. Secondly, because CAD is worth less compared to USD, would I then compare CAD vs USD?

Which currency is cheaper for another currency?

It will cost the same whatever you do, unless you have an especially favourable conversion rate. You will lose money every time you convert between two currencies.

International exchange rates are arbitraged. It will cost the same regardless of which currency you use, unless you have access to a deal with a currency exchange that offers you a favourable conversion rate for a specific currency. On the other hand, the cost  to you  may vary. You lose money every time you convert between two currencies.  So, converting money between the three currencies should theoretically end up with the exact same value, less transactional costs.


If you are purchasing something you would have purchased anyway, and if the rewards purchase yields a higher purchase power than would cash, it makes sense to shop using those rewards.

If not, it makes sense to simply put the cash back towards the balance.

That's what I do pretty much every time.

Some folks "reward" themselves by using the points for purchases they wouldn't otherwise make.

That doesn't make financial sense to me.

Either get it as cash or as a balance credit.

Unless there's a specific reason to do something else, these would be the most beneficial options.

Using the reward balance towards purchases reduces the rewards you'd be getting for these purchases.

Since the reward used towards the purchase is not your "money spent", you don't get the reward on that amount.

If you use your credit card to pay the full amount and apply your reward balance to the balance on your card - you'll get rewards in full for your purchases.

Vendors, and credit cards, offer rebate points because they know people have a bad habit of "double counting" rebates.

It's much too easy to think both "I'll get some of the money back

so I'm not paying full price" when making the first purchase and then also think "since I'm using the points, I'm not paying full price" when making the second purchase.

This psychological weakness encourages us to buy/pay more, over time, than we otherwise would, and is VERY hard to resist.

Taking the rebate as cash might help you realize that you can only count it once.

Or it might not.

Either way, this is the most important trap to avoid.

With Discover, you can get discounted gift cards with your rewards balance, e.g. a $50 for $40 of your rewards balance.

If you would be shopping at any of the stores/restaurants they offer anyways, it is a good deal to use that.

Whenever I get my balance above $45 I send myself a $50 Chipotle gift card since we eat there fairly often anyway.

We always take our cash back rewards as a balance credit.

Here is why: It is the most convenient.

We pay off the credit card in full each month, and it reduces the size of our monthly bill.

If we had a $25 reward and took it as a check, we'd then have to deposit the check and send it right back to the credit card on our next bill.

As a balance credit, we just get our bill reduced by $25.

It doesn't encourage frivolous spending.

If we took our $25 reward as a gift card, we might view it as free money and blow it on something we would not have purchased otherwise.

Because it is a balance credit and not tied to any particular purchase, it doesn't feel like we are getting $25 extra to spend somewhere.

Instead, it helps out our budget in the background.

We are still getting the $25 benefit, but it doesn't come to us in a readily spendable way.

We budget as if it is not there, and when our bill turns out to be less than what we had planned, it helps us fund our saving goals.

It is essentially a quicker way to get the reward.

When you take it as a gift card, you are getting the benefit on future spending.

When you take it as a balance credit, you are getting the benefit on your past spending.

money.stackexchange.com/users/10997/Ben Miller - Remember Monica

Question: I have a credit card with cash back rewards. I can use these rewards to go shopping on Amazon, for example, to buy gift cards, to pay off the balance, and possibly some other options that I may have missed.  My instinct is to simply put the cash back towards the balance. However, are there any other benefits that may be worthwhile to obtain instead?  Note: I pay my balance off in full each month. The card is a Discover It

Should I use cash back rewards for rewards, or to pay off the balance?

If you are purchasing something you would have anyway, however using the reward will reduce the reward you receive for this purchase. If you take it as a gift card, you get the benefit for future spending.

If you are purchasing something you would have purchased anyway, and if the rewards purchase gives you a higher purchase power than cash, then using rewards would make sense. But you could say that using a reward balance towards purchases actually reduces the rewards you'd be getting for these purchases. If you use your credit card to pay the full amount and then apply your reward balance to the balance on your card, you will benefit by getting rewards in full for your purchases. Using cash back might help you realise that it can only count once. Using as a balance credit means that you are benefitting from your past spending. With Discover for example, you can get discounted gift cards with your rewards balance, e.g. a $50 for $40 of your rewards balance.  Taking it as a gift card means you are getting the benefit on future spending.

If you use your credit card to pay the full amount and them apply your reward balance to the balance on your card, you will benefit by getting rewards in full for your purchases.


Traders = every market participant.

Not some shadow figure that excludes you just because you passively drop cash into a 401k Vanguard fund every paycheck.

So yes, if everyone stopped trading then the price won't move.

Trades are 100% responsible for the prices you see on charts and tickers.

A stock won't be worth "$100" if nobody ever traded $100 for it.

It only has that price now or in the past because somebody placed an order for it at $100 and somebody else filled that order at $100

When people talk about "the price" of a stock, they usually mean one of the following: Last price : The price at which a trade most recently took place.

If someone sold (and someone else bought) shares of XYZ for $20 each, then until another trade occurs, the last price of the stock will be quoted at $20.

Bid price : The highest price at which someone is currently offering to buy the stock.

Ask price :

The lowest price at which someone is currently offering to sell the stock.

As you can see, all of these are completely determined by the people buying and selling the stock.

Value is the key word here.

Traders should ideally trade on the perceived future value of a company.

Changes in the perceived future value is what leads them to buy and sell shares.

That said, if a company were to have some catastrophe happen (say it and all of its employees and property disappeared) and somehow every shareholder agreed to not sell, the companies market capitalization would remain unmoved even though the value of the company is gone.

So theoretically yes, but it is unlikely.

Yes traders, living or algorithmic, are the only direct factors that can cause a change in the price of a marketable item.

Traders can be affected by news, broken exchanges ;), emotional cycles, lunar cycles, time the trader goes to lunch (or a power cycle if you are an algo running on that unfortunate OS), anything.

Yes, the value of a stock is completely, 100% determined by what people are willing to pay for it in conjunction with what people who have it are willing to sell it for.

If something really bad happened to a company, like their only factory burned to the ground, and the traders didn't care, then I guess, in that scenario, the value of the stock would not change.

But you can spin all sorts of hypotheticals of that sort.

If dogs could talk, would German Shepherds speak German?

Etc.

Any answer is pretty meaningless because the premise is wildly unlikely.

As CQM notes, "traders" in this context means everyone who buys or sells stock.

If you buy stock, that includes you.

They're not some mystical cabal somewhere.

If you see a stock listed at, whatever, $50, and you are not willing to pay more than $40 for it, then you refuse to buy, and so you tend to force the price down.

If you're not a billionaire, then your impact on the market is tiny, but the market is made up of millions of people each with tiny influence.

Note that all this is true not just of the stock market, but of every product on the market.

A product is worth whatever the owner is willing to sell it for and people are willing to pay.

This is what determines the price of everything from houses to toasters.

It's a little theory I've invented that I like to call, "the law of supply and demand". :-)

Question: Of course, bad news would drive the traders to trade the stock at a lower price, but theoretically, if the traders didn't bother, can the stock price stay at the same value?

Are traders 100% responsible for a stock's price changes?

Traders trade based on the perceived future value of the company. The price is determined by what people are willing to pay for it.

By traders, what is meant is anyone who buys or sells stock. Traders are 100% responsible for the prices of stock and it is the perceived future value that leads them to buy and sell shares. So the value of stock is determined by what people are willing to pay for it and what they are willing to sell it for. Traders can also be affected by external factors. Just because you are not a billionaire, it does not mean that you have no impact on the market, because the market is made up of millions of people each with minimal influence.

Traders can be  affected by external factors.


The only problem, besides having to update your information if you change banks, has been an unintended issue.

I have noticed that people don't look at their pay stub when getting direct deposit.

The stub is frequently only available on a third party site.

The harder it is to see, the less often it is checked.

I have run into instances of coworkers who didn't notice that the 401K amount was wrong; or that dental insurance wasn't being withheld; or taxes were being sent to the wrong state.

The error went on for months or years before they noticed.

You have to be proactive to make sure that the items are correct.

The only downside I can think of is if you change banks (or change accounts), you need to remember to notify your employer.

I've seen an issue once before where my employer's payment authority (a 3rd party provider who managed the direct deposits and paystubs) issued double-payment.

This appeared on my bank statement as two deposits followed by a withdrawal, all for the same amount.

I can't imagine this being (ab)used for a truly nefarious purpose, but it does prove that your employer or the payroll provider has the authority to withdraw as well as deposit funds.

If your funds are legitimately stolen, I would imagine your bank or the FDIC would have you covered.

This could get you into some trouble, however, if you are in a paycheck-to-paycheck situation and get into a wage dispute with your employer (or various governments, unions or anyone who has legal authority on your wages).

Perhaps they discover you've been overpaid, or they were collecting an improper amount of tax, etc.

If they decide to 'help' you by automatically 'correcting' the problem and withdrawing funds from your account, you could be caught unawares and get stuck with some overdrafts, even if you resolve the underlying dispute in your favor and get your funds back.

This boils down to how much you trust your employer, their payroll contractor, your bank and your government.

I view direct deposit as a convenience that will save me days of time over my professional career.

Weighed against what I assume is a very low risk, I would not give up direct deposit without clear evidence of malfeasance by one of the parties I mentioned above.

(I am not a lawyer and this is not legal advice, or even necessarily plausible in reality.

I just thought it worth pointing out.)

Direct deposit is a two-way street.

If your employer is able to deposit money directly into your account, it is also possible for them to withdraw money from your account.

Errors with this happen every so often .

It does provide a paper trail of where you deposit your money.

If your wages are garnished or you get into some other form of legal trouble, this means that anyone who contacts your employer can directly freeze your accounts or set them to funnel into child support or the like.

It also means that various people at your company will have your banking information, creating an additional source of vulnerability for loss and exploitation of financial information.

That said, neither of those are really major issues.

The odds are that the government already knows where you bank or can get that information easily.

And you probably already have so many places where your financial data is available that a presumably secure records vault is the least of your worries.

Additional potential problems:

As has been mentioned in previous answers, you'll have to update your information with your employer when you change jobs.

Confusion over when your direct deposit goes into your account (sometimes complicated by differences between your company handing you your paystub and when the deposit clears) could lead to overdrafts.

Having a check in-hand makes it clear when you get your money.

By providing your employer with your account information, your employer can later withdraw an amount it feels it paid in error.

While you may ultimately win the battle, "possession is 9/10ths of the law."

Question: After many years, my employer is offering direct deposit.  I've used direct deposit before at other jobs.  Are there any downsides or cons to using direct deposit?

What, if any, are the downsides of direct deposit?

It provides a paper trail of where you deposit your money. If you change banks, you need to notify your employer. Various people at your company will have your banking information. In case of legal trouble, your accounts can be frozen.

Some people feel that by providing their employer with their account information, their employer may be able to later withdraw money it feels it paid in error. It also means that various people at your company will have your banking information, which makes some people feel vulnerable. In addition, confusion as to when the direct deposit goes into your account and is cleared, could result in the use of an overdraft. If you end up in legal trouble, your employer can be asked to directly freeze your accounts or funnel them money e.g. into child support. On the other hand, direct deposit is a convenience that can save a lot of time. It does provide a paper trail of where you deposit your money. One of the few downsides is that if you change banks or accounts, you need to remember to inform your employer.

Direct deposit as a convenience that can save a lot of time. It does provide a paper trail of where you deposit your money. One of the few downsides is that if you change banks or accounts, you need to remember to inform your employer.


Risk is the problem, as others have pointed out.

Your fixed mortgage interest rate is for a set period of time only.

Let's say your 3% might be good for five years, because that's typical of fixed-rate mortages in Canada.

So, what happens in five years if your investment has dropped 50% due to a prolonged bear market, and interest rates have since moved up from 3% to 8%?

Your investment would be underwater, and you wouldn't have enough to pay off the loan and exit the failed strategy.

Rather, you might just be stuck with renewing the mortage at a rate that makes the strategy far less attractive, being more likely to lose money in the long run than to earn any.

Leverage, or borrowing to invest, amplifies your risk considerably.

If you invest your own money in the market, you might lose what you started with, but if you borrow to invest, you might lose much more than you started with.

There's also one very specific issue with the example investment you've proposed:

You would be borrowing Canadian dollars but investing in an index fund of U.S.-based companies that trade in U.S. dollars.

Even if the index has positive returns in U.S. dollar terms, you might end up losing money if the Canadian dollar strengthens vs. the U.S. dollar.

It has happened before, multiple times.

So, while this strategy has worked wonderfully in the past, it has also failed disastrously in the past.

Unless you have a crystal ball, you need to be aware of the various risks and weigh them vs. the potential rewards.

There is no free lunch.

Well for a start funds don't pay interest.

If you pick an income-paying fund (as opposed to one that automatically reinvests any income for you) you will receive periodic income based on the dividends paid by the underlying stocks, but it won't be the steady predictable interest payment you might get from a savings account or fixed-rate security.

This income is not guaranteed and will vary based on the performance of the companies making up the fund.

It's also quite likely that the income by itself won't cover the interest on your mortgage.

The gains from stock market investment come from a mixture of dividends and capital growth (i.e. the increase in the price of the shares).

So you may have to sell units now and again or cover part of the interest payments from other income.

You're basically betting that the after-tax returns from the fund will be greater than the mortgage interest rate you're paying.

3 facts:

In the long term it is likely, but not certain, that a decent fund will return more than your mortgage rate.

In the short term stock market returns are volatile - dividends and stock prices can fall leaving you with less than you started with.

The mortgage has to be paid every month regardless of 2.

If you're comfortable with these 3 facts, go for it.

If they're going to keep you awake at night, you might not want to take the risk.

Risk.

That's it.

No guarantees on the fund performance, while the mortgage has a guaranteed return of -3%.

I'm doing this very thing.

Money is cheap, I think it's wise to take advantage of it, assuming your exercise proper risk management.

Something very similar to this was extremely popular in the UK in the late 1980s.

The practice has completely vanished since the early 2000s.

Reading up on the UK endowment mortgage scandals will probably give you an excellent insight into whether you should attempt your plan.

Endowment mortgages were provided by banks and at their peak were probably the most popular mortgage form.

The basic idea was that you only pay the interest on your mortgage and invest a small amount each month into a low fee endowment policy.

Many endowment policies were simply index tracking, and the idea being that by the end of your mortgage you would have built up a portfolio sufficient to pay off your mortgage, and may well have extra left over.

In the late 1990s the combination of falling housing market and poor stock performance meant that many people were left with both the endowment less than their mortgage and their house in negative equity.

Essentially, what you're describing is a leveraged investment.

As others noted, the question is how confident you can be that (a) the returns on the investment will exceed what you're paying in interest, and (b) that if you lose the bet you'll still be able to pay off the loan without severely injuring yourself.

I did essentially this when I bought my house, taking out a larger loan than necessary and leaving more money in my investments, which had been returning more than the mortgage's interest rate.

I then got indecently lucky during the recession and was able to refinance down to under 4%, which I am very certain my investment will beat.

I actually considered lengthening the term of the loan for that reason, or borrowing a bit more, but decided not to double down on the bet; that was my own risk-comfort threshold.

Know exactly what your risks are, including secondary effects of these risks.

Run the numbers to see what the likely return is.

Decide whether you like the odds enough to go for it.

Question: I'm wondering if this investment strategy would work:   I get a mortgage loan for $300K at a 3% rate (realistic for current 5-year fixed mortgage rates here in Canada).  I invest the proceeds in a low-fee index fund, such as Vanguard's Total Stock Market Index.  I use the interest to cover the mortgage payments, and invest the rest of the returns.    This looks like it could work. Am I missing anything?  Thanks!

Pros/cons of borrowing money using a mortgage loan and investing it in a low-fee index fund?

Your fixed mortgage rate is for a set period of time only. Borrowing to invest amplifies your risk. You might lose the money you borrowed.

In addition, it is also quite likely that the income by itself will not cover the interest on your mortgage, which means that you may have to sell units or cover some of the interest payments from other income.  The stock market is volatile, but the mortgage has to be paid each month regardless. The stock market is volatile, but the mortgage has to be paid each month regardless. On the other hand, in the long term, a decent fund may return more than your mortgage rate, but there are no guarantees on fund performance, whilst the mortgage has a guaranteed return. A review of the UK endowment mortgage scandals might give you some insight into whether you should attempt your plan.

A fixed mortgage interest rate is for a set period of time only.

Essentially, what you're describing is a leveraged investment, which amplifies your risk greatly. Investing your own money in the market has the risk that you might lose what you started with, but if you borrow to invest, you might lose even more than you started with. Such income is  not  guaranteed and  will  vary depending on the performance of the companies making up the fund.


There's a couple of considerations here.

Firstly, would this activity count as "trading".

If you're trading you are legally required to register as self-employed .

The line between a hobby activity and trading can be blurred but a key feature is whether you're aiming to make a profit (whether you manage it or not!).

Secondly are you actually making any money?

Even if what you're doing counts as self-employment, self-employed people pay tax on the profits

they make from their activities, not on the total amount of money they take in.

If you spend all the money you take in on keeping the server running

then you're not making any profit

so there's nothing to pay tax on.

This page lays down the requirements for an "unincorporated association" to pay tax (i.e. any group that's not a registered entity).

You pay tax

is you make money from: Doing business (trading profits) Investments Selling assets (for more than you paid)

it looks like you don't do any of those, so you don't need to file for taxes.

There is another exemption that you don't have to file if it is likely that you would owe less than a hundred pounds taxes, which would also probably apply to you.

There are many thousands of clubs and societies in the UK that don't need to register for tax purposes, so you are far from alone.

It is probably worth creating an actual club ("Captain Insanity Server Club") and keeping records of donations and expenses for the server.

There isn't any need to legally incorporate or anything like that, though you might try having a separate bank account for it if you can get a free one, so that if the tax authorities ever audit you personally you can show them that the donations you received weren't income to you.

Yes if you do it as a hobby, as it's still income.

But it should be something you can offset against tax

Either way, you shouldn't be doing this as you, you should either register as self employed or create a company.

You register this income as self-employed income (or income of the company) and offset the expenses of running the server against tax.

In the UK, companies (or self employed people, which are basically companies) pay tax on profit not income (unless VAT applies, in which case they're basically just passing the VAT on for their customers).

Since you're not making a profit over the whole year (even if some months are profitable)

you will pay no tax.

I suspect that the new VATMOSS rules come in to play here.

So you owe VAT for donations from EU countries, providing you are below £81k

there would be no UK vat payable though, however then you couldn't recoup the vat you paid out.

Note

I am not an accountant

but I did speak to one this week about a similar issue.

I would assume that under a certain threshold, HMRC doesn't even want to hear from you, because extracting taxes from you costs them more money than you are going to pay.

On the other hand, I cannot find anything written about that subject.

I'd suggest to call them at 0300 200 3300 and ask them.

Have the annual cost of the server ready, and tell them that you will stop asking for donations if say 6 months of cost is covered.

There may be an official threshold that I was unable to find.

Obviously if you receive £1000 in donations and spend £100 for the server, they will want tax payment.

If its £110 in donations and £100 for the server, they will likely not care.

If they tell you to register as self-employed, it's not difficult, just a bit of a pain.

In that case you'd have to pay tax on your income (donations) minus cost (cost for the server and any other cost).

Unless you are a tax-exempt entity and running this server is clearly within your mission statement: YES, it's taxable income.

Sorry.

Question: Basically I am considering starting a game server that has optional donations for people to gain little perks.All the money donated will go towards the upkeep of the server, and any excess will go towards paying for the months that donations aren't enough to cover all the costs.  Will there be any taxes on this money I receive?  Note: All transactions will be done through Paypal, and I live in the UK.

If I receive donations to keep a server running, do I need to pay any taxes?

You would be required to register as self-employed. You could offset the expenses of running the service against tax.

If you are trading you are legally required to register as  self-employed. A key feature as to whether is classed as trading is whether you are aiming to make a profit or not. There are thousands of clubs and societies in the UK that are not required to register for tax purposes. In the UK, companies or the self-employed pay tax on profit, not income, and the expenses for running the server can be offset. HMRC may not even be interested in profit under a certain threshold. However, if e.g. you receive £1000 in donations and spend only £100 for the server, they will want tax payment. So, unless you are a tax-exempt entity, this will be taxable income.


You should not open bank accounts just to get additional credit cards.

You should be careful about carrying too many credit cards and incurring too much debt as you could find yourself in a situation whereby you may not be able to pay off your monthly interest, much less the principal balance.

Credit cards are not insurance.

With many years of experience under my belt I can tell you that the best approach is to live within (or below) your means and avoid carrying a balance on credit cards.

I carry only one credit card (really a charge card) and I pay off the balance every month.

Treat a credit card as a 30 day interest free loan and pay your balance off in full every month...

as you progress through life you will save yourself a lot of heartache (and money) if you take this approach.

Its actually a good thing.

The #1 factor to your credit score is your credit utilization.

So if you don't spend money unwisely and they don't have any annual fee I would keep them and use them each twice a year to keep them in your credit mix.

Another thing to factor in are deals provided by banks.

In general, banks care about new customers more than their existing customers.

Hence they explicitly restrict the best deals on credit cards, savings accounts, etc, to new customers only.

( Of course, there are occasionally good deals for existing customers, and some banks choose not to discriminate .)

If you have many different bank accounts, you are making yourself unavailable for switching bonuses and introductory rates.

I don't think there's any law against having lots of bank accounts.

But what are you really gaining?

Every new account is a paperwork hassle.

Every new account is another target for con men who might steal your information and write bad checks or make phony credit card purchases in your name.

Yes, it's not unreasonable to have a credit card or two that you keep for emergencies.

I'd advise anyone with running up debts while having no idea how you will pay them off.

But to say that you might keep some credit available so that if you have a legitimate emergency -- like, say, your car breaks down and you don't have the cash to fix it and you can't get to work without it -- you have some a fallback.

But do you really need ten credit cards for that sort of thing?

And how much credit are they giving you on each card?

I don't know how the banks work this, but I'd think if they're rational, they'd consider your total credit before giving you more.

I have three credit cards that I use regularly -- two personal and one business.

And I find that a real pain to keep track of, to make sure that I keep each one paid by the due date and to keep a handle on how much I owe and so forth.

I can't imagine trying to deal with ten.

I suppose you could just stuff all these cards in a drawer and only use them in case of emergency.

The original poster indicates that he lives in the UK, but there are likely strong similarities with the US banking system that I am more familiar with: In the US, when you open a checking (aka "current", in UK speak) account, you normally incur an inquiry with ChexSystems .

Banks normally do this to ensure that you don't have a history of writing bad checks, negative balances, and other items that could result in bank liabilities.

In addition, to the ChexSystems inquiry, US banks often run an inquiry on your credit report - this ostensibly to provide an overdraft line of credit.

The result is that you are likely going to be unable to be approved for 10 checking accounts opened in rapid succession, at least in the US.

Finally, in the US, there is no need to have checking accounts with a bank in order to open a credit card with them (although sometimes it can help if you have a low credit score).

Question: Is it ok for an individual to open many (10+) current accounts with different banks? I have no business.   The reason behind that is that I usually get a credit card with every new bank account I open, which is to me like insurance in case something happens and I need to pay my bills quicklyI live in the UK

Is it wise to have plenty of current accounts in different banks?

It's not unreasonable to have a credit card for emergencies. You should be careful about having too many credit cards and incurring too much debt. You are also more likely to be targeted by con men.

It is unlikely that you will be approved for multiple current accounts opened in rapid succession. It is also not necessary to have a current account to have a credit card with that bank. It is a good idea to have one or two credit cards to keep for emergencies, as long as you don't spend money unwisely and they don't have any annual fee. You should also be aware that if you have several different bank accounts, you are making yourself unavailable for switching bonuses and introductory rates. Also every account you have is a potential target for fraud.

It is not a good idea to open bank accounts just to get additional credit cards. In addition, having too many credit cards could mean you incur too much debt.

It is also unlikely that you will be approved for multiple current accounts opened in rapid succession. It is also not necessary to have a current account to have a credit card with that bank.


No.

In good years, the income seems free.

In a down year, particularly a bad one, the investor will be subject to large losses that will prove the strategy a bad one.

On the other hand, one often hears of the strategy of selling puts on stock you would like to own.

If the stock rises, you keep the premium, if it drops, you own it at a bit of a discount from that starting point.

money.stackexchange.com/users/187/JTP - Apologise to Monica

This is a really bad idea.

You are asking to be forced to pay for something at a time when you most likely NOT want to buy it.

Why?

There is no stability (much less any degree of predictability) to give up the right to control when and for how much you would be willing to own the S&P500.

Just don't do it.....

"generate stable income" and "selling puts" is an oxymoron. ===

retired investment advisor

I am close to retirement and sell cash secured puts and covered calls on a regular basis.

I make 15 % plus per year from the puts.

Less risky than buying stocks, which I also do.

Riskier than bonds, but several times the income.

Example: I owned 4,000 shares of XYZ, which I bought last year at 6.50 and was at 7.70 two months ago.

I sold 3,000 shares, sold 10 Dec puts @ 7.50 (1,000 shares) for $.90 per share and sold 10 Dec calls at 10.00 for $.20.

Now I had cash from the sale of 3,000 shares ($23,100) plus $900 cash from the sale of the puts, plus $200 cash from the sale of the calls.

Price is now at 6.25.

Had I held the 4,000 shares, I would be down $5,800 from when it was 7.70.

Instead, I am down $1,450 from the held 1,000 shares, down $550 on the put and up $200 on the calls.

So down $1,800 instead of down $5,800.

I began buying XYZ back at 6.25 today.

There is only one way to create "stable" income using options: write COVERED calls .

This means you must own some stocks which offer an active and liquid option market

(FB would be good; T would be useless.)

In other words, you need to own some "unstable" stocks, tickers that have sometimes scary volatility, and of course these are not great stocks for a retiree.

But, let's assume you own 500 shares of FB, which you bought in June of 2015 for $75.

Today, you could have been paid $2,375 for selling five Mar18'16 $105 Calls.

Your reasoning is: if I get exercised, I'll be selling my FB shares for $105 andhave total

option+shares proceeds of $54,875 and a profit

(Of course, you would also be giving up the additional profitwhich attracted the option holder to exercise) if I don't get exercised, I will have made $2,375 and reduced mybasis in my FB shares by that same amount.

So, the rule is: ONLY SELL COVERED CALLS

AT

A PRICE

YOU WOULD BE HAPPY TO ACCEPT.

If you follow the rule, you'll generate more-or-less "stable" income.

Do not venture off this narrow path into the rest of Option Land.

There be dragons.

You can select strike prices that are far out of the money to minimize the chance of being exercised (and sweeten the deal by collecting an even higher price if the stock flies that high).

If you are thinking about doing this, study the subject thoroughly until you know the terminology backwards and forwards.

(Don't worry about "the greeks" since market makers manipulate implied volatility so wildly that it overrides everything else.)

As you move toward retirement, your portfolio is supposed to move toward low risk, stable investments, more bonds, less stocks, etc.

Your question implies that you want to increase your income, most likely because your income is not satisfying your desires.

First, any idea that you have that risks your savings, just eliminate it.

You are not able to replace those savings.

The time for those kind of plays has passed.

However, you can improve your situation.

Do random odd jobs.

Find a part time job that you're willing to do for 10 hours a week or something.

Keep this money separate from your retirement savings.

Research

the stock trades you would like to make and use that 'extra' money to play in the market.

Set a rule that you do not touch your nest egg for trading.

You may find that being retired gives you the time to do the #1 thing that helps investors make good investments -- research.

Then when you make your first million doing this, write a book.

If you call it Retire -

And Then Get Rich , I expect royalties and a dedication.

Question: Suppose a retiree wants to generate stable income from selling S&P500 (or other stock index) put options. Is this an advisable strategy for a retiree?

Is selling put options an advisable strategy for a retiree to generate stable income?

Study the subject thoroughly. In retirement your portfolio is supposed to move into more low risk options.

You cannot "generate stable income" by "selling puts" and therefore not advisable. If you really want to do this, then study the subject and the terminology thoroughly, which as a retired person, you may have time to do. However, at retirement age, your portfolio should be more low risk and stable investments and less high risk stocks. You should also set a rule not to touch your nest egg for trading.

At retirement age, your portfolio should be of low risk and stable investments and less high risk stocks.


You have to be the owner of record before the ex-dividend date , which is not the same day as the date the dividend is paid.

This also implies that if you sell on or after the ex-dividend date, you'll still get the dividend, even if you no longer own the stock.

Keep in mind, also, that the quoted price of the stock (and on any open orders that are not specifically marked as "do not reduce") on its ex-dividend date is dropped by the amount of the dividend, first thing in the morning before trading starts.

If you happen to be the first order of the day, before market forces cause the price to move, you'll end up with zero gain, since the dividend is built into the price, and you got the same value out of it -- the dividend in cash, and the remaining value in stock.

As pointed out in the comments (Thanks @Brick ), you'll still get a market price for your trade, but the price reduction will have had some impact on the first trade of the day.

Source: NYSE Rule 118.30 Also, remember that the dividend yield is expressed in annualized terms.

So a 3% yield can only be fully realized by receiving all of the dividend payments made by the company for the year.

You can, of course, forget about individual companies and just look for dividends to create your own effective yield over time.

But, see the final point...

Finally, if you keep buying and selling just to play games with the dividends, you're going to pay far more in transaction fees than you will earn in dividends.

And, depending on your individual circumstances, you may end up paying more in capital gains taxes.

The market is not stupid.

It realises that a company is worth less after paying out dividends than before paying them.

(It's obvious, since that company has just given out part of its earnings.)

So after a company pays out dividends, its stock price normally drops approximately by the amount paid.

Therefore if you buy, get the dividend, and immediately sell, under normal conditions you won't make any profit.

The ex-dividend date, prevents this, but people are still able to do this and this is an investment strategy.

There are some illiquid and immature markets where prices don't adjust.

In the options market people are able to find mispriced deep in the money calls to take advantage of the ex-dividend date.

It is called dividend capture using covered calls.

The rest of the market knows when the dividends are paid out, and that will be reflected naturally in the share price.

That's why there is no way to consistently beat the market.

Because the market is other human beings, who's sum of knowledge is greater than any individual.

Everything in the stock market boils down to this in one way or another.

Although the market discussion by other answers is correct, the tax structure of many developed nations (I am familiar with Canada in particular) offers a preferred tax rate for dividend income compared to taxable gains.

Consequently, if your portfolio is large enough to make transaction fees a very small percentage rate, this is a viable investment strategy.

However, as the preferred tax rate for dividends typically will catch up to that for capital gains at some cut-off point, there is a natural limit on how much income can be favourably obtained in this way.

If you believe your portfolio might be large enough to benefit from this investment strategy, talk to a qualified investment advisor, broker, or tax consultant for the specifics for your tax jurisdiction.

I remember my Finance Professor at b-school answering this question: The next moment the dividend is paid

the total market cap is decreased by the amount paid

This makes sense as cash leaves company, the value of the company is decreased by exactly the same amount.

To summarise: the moment you paid dividend, the value of the stock is decreased by the same amount.

This investment strategy may have tax advantages.

In some countries, income received from dividends is taxed as income, whereas profits on share trades are capital gains.

If you have already exceeded your tax-free income limit for the year, but not your capital gains tax allowance, it may be preferable to make a dealing profit rather than an investment income.

These arrangements are called a bed-and-breakfast .

Question: What prevents investors from buying high yield stocks and selling them as soon as their dividend is paid out?   I guess I am confused:  If you know the yield and when the dividend will be paid out, why not buy a share an instant before the dividend is paid out and then sell it?  Do you have to have held the share for some amount of time to get the dividend?Is there too much volatility in the instant the dividend is paid out?

What prevents investors from buying high yield stocks and selling them as soon as their dividend is paid out?

After a company pays dividends, it's stock price normally drops. Therefore you won't make any money from selling it back. You will also pay transaction fees and possibly taxes.

If you are the first order of the day, before market forces cause a price move, you will have zero gain, because the dividend is built into the price. Once a company has paid out dividends, its stock price normally drops by roughly the amount paid. If you subsequently buy, receive the dividend, and then sell straight away, you usually will not make any profit. If you continue to buy and sell to play games with the dividends, you will end up paying more in transaction fees than you will earn in dividends. In addition you may have to pay more capital gains taxes.

The  ex-dividend date is not the same day as the date the dividend is paid.


There are several brokerages which have lower minimum deposits (often $500) and allow purchase of index ETFs.

I won't name them to avoid advertising.

The best way to find out is to go to your bank, and ask to see a financial advisor.

Then explain your difficulty to the advisor (who should caution you about the issues with investing such a small amount) and ask for advice on where to find a suitable broker.

Also, sometimes banks offer services where you can buy shares of a fund through your bank account.

This is probably not "as good" as the brokerage (performance may be not as good, fees may come out higher), but especially for small amounts and for convenience, this may be easier.

Again, you should inquire at your institution.

As I recall, the Scottrade minimum is only $500.

(By the way, Scottrade has a feature to automatically reinvest any dividends which the securities pay)

Once you have an account, you can buy into an index fund.

SPY tracks the S&P 500.

It is also currently paying nearly 2% in dividends.

You can shop for other alternatives here: http://seekingalpha.com/insight/etf_hub/etf_guide/selector/article/39431-core-building-blocks-large-mid-small-cap-us-etfs

You have many alternatives to the funds you mentioned.

It is actually very unusual for ETFs to have such high denominations.

Possible alternative: iShares IVV

What would you recommend I do with $1000?

A diversified index fund is a great equity investment for the long run but might be considered "boring" by newcomers who think of equity markets as something more exciting.

Maybe add a share or two, small ones, just to show the differences to the fund.

This wouldn't be called wise investing but it certainly would have an educational effect.

Except if this money is all you saved for your daughter, then don't gamble any of it.

I found that the Target Date funds for Vanguard have a lower minimum, only $1,000.

They are spaced every 5 years from 2010 to 2060.

They are available as: General Account, IRA, UGMA/UTMA and Education Saving Account.

I believe you can invest in Vanguard STAR with only $1000 (VGSTX)

Question: My pre-teen daughter saved up a $1000 and I thought it might teach her how finances work if we invested it in a mutual fund.  Specifically in an index fund like S&P 500 or some such.  The problem is that most funds I found have larger minimums than $1000.  Case and point, VFINX and VTSMX from Vanguard both have $3000 as a minimum.  Will no one take my money?What would you recommend I do with $1000?

How to invest a $1000 in an index mutual fund?

Ask a financial advisor at your bank. You can invest in Vanguard Star with $1000. A diversified  index fund is a great equity investment for the long term.

Probably the best idea is to go to your bank and speak to a financial advisor. There are several brokerages with minimum deposits often as low as $500 and which allow purchase of index ETFs. Target Date funds for Vanguard have a $1,000 minimum too and Vanguard STAR have a minimum of only $1000 (VGSTX). A diversified index fund is a great long-term equity investment, although it might be considered "boring" by some.

There are several brokerages wITH minimum deposits often as low as $500 and which allow purchase of index ETFs. Target Date funds for Vanguard have a $1,000 minimum too and Vanguard STAR have a minimum of only $1000 (VGSTX).