Hot answers tagged

260

When people over 60 reflect back on their life, they generally do not say: I wish I took out more student loans. I wish I bought more expensive cars. I wish I bought fancier clothes. I wish I didn't save so much money for retirement. In fact, it's almost always the opposite. Why? It's because your question is a good one and that same compelling argument ...


206

Why do they need so much money as old people? The future is unexpected. My country has universal healthcare, so medical expenses are not a worry. Will it have UHC in 50 years? Probably... but will the co-payments rise significantly? I'll be living in my own house that is already paid off at that point, so no rent or mortgage payments. Unless ...


102

The reason some people save so much so young is that they understand the growth potential of COMPOUND INTEREST. Every dollar that I put away for my daughter at 2 years old can be worth $1,000 when she retires.* What would anyone do with all of that money? There are plenty of ways to spend wealth that you haven't discussed. Here are a few goals that you ...


78

The way credit and debit cards work in the US, all liability for unauthorized purchases is on the card issuer and/or merchant, not on the cardholder. Customers have no reason to want measures that increase evidence (and perceived certainty) that they authorized a purchase, and every reason not to want it. The same applies to "Verified by Visa" and similar ...


72

Because we don't have the rest of time to recover our losses. Since we'll all want to actually spend our money in a few decades at most, an investment that may have suffered a sharp fall at the time when we want to spend it is not as suitable as a lower-risk one.


67

Before getting into a practical example, I think it would be valuable to define what "risk" actually is. Risk is by definition the magnitude of variance in possible results. When you put $1k in the bank, there is zero risk. You know that the money will be there tomorrow. When you put $1k on the stock market, there is some risk. Tomorrow, you might have .5% ...


57

For myself, I saved because having accumulated a nice pile of money - enough to live modestly on the income (what I call being "independently poor") is both security and freedom. Take security. What are the odds that sometime between wherever you are now and your 70 year old self, you will find yourself out of a job, with no prospects of finding another ...


55

Answer: Due diligence by the lender. It occasionally happens, and sometimes the lending officer is in on a scam, but banks do not tend to loan money where there is a large chance that they will not be paid back. It's been my experience that an LLC that borrows money will have to have some assets, or have the assets of the owner stand for the money that ...


55

Where is the risk? The short answer is... Property damage from weather, termites, tenants, whatever. How about tenants who stop paying the rent and you need to go through legal channels to evict them? It doesn't cost a fortune but you had better not need that rent to make the mortgage. How about another GFC (Global Financial Crisis) like 2008 when ...


45

I'll be living in my own house that is already paid off at that point, so no rent or mortgage payments. This very much depends on where you live. In the major cities of the costal USA many folks will be paying on mortgages until the day they die. I wouldn't need (or want) a car, and would probably use a bicycle or maybe some cheap future-scooter... ...


37

An article describing the risks of "chip and pin", along with related economics and regulatory issues, appeared last year in Communications of the ACM. The ACM is one of the two major organizations for computing professionals in the U.S. See http://cacm.acm.org/magazines/2014/6/175170-emv/abstract Two points the authors make in their conclusion are: ...


37

My country has universal healthcare, so medical expenses are not a worry. People in their 20s (and 30s) thinking about the future may choose not to gamble that the government in 50 years will look the same as it does today, and prepare for the eventuality of paying for their own medical care.


33

They might not have to open accounts at 12 bank because the coverage does allow multiple accounts at one institution if the accounts are joint accounts. It also treats retirement accounts a separate account. The bigger issue is that most millionaires don't have all their money siting in the bank. They invest in stocks, bonds, government bonds, international ...


32

The paper you are referring to is likely the Vanguard report Dollar-cost averaging just means taking risk later. The thrust of the paper is that lump sum investing outperforms dollar cost averaging the majority of the time (which makes sense; if the market, on average, goes up, then on average, it will go up after you invest, so investing earlier captures ...


30

While there is no legal reason to have a minimum number of employees, there can be a practical reason. They want to look like a good solid investment so that investors will give them money, which is what an IPO is, really. Hiring lots of people is part of that. Once the investors are committed, they can cut expenses by firing people again. I have no ...


29

Holding pure cash is a problem for 401K companies because they would then have follow banking rules because they would be holding your cash on their balance sheets. They don't want to be in that business. Instead, they should offer at least one option as a cash equivalent - a money market fund. This way the money is held by the fund, not by 401K ...


29

"Diversified" is relative. Alfred has all his money in Apple. He's done very well over the last 10 years, but I think most investors would say that he's taking an incredible risk by putting everything on one stock. Betty has stock in Apple, Microsoft, and Google. Compared to Alfred, she is diversified. Charlie looks at Betty and realizes that she is ...


28

It isn't controversial, per se -- it's just expensive. We have a huge established base of magstripe -- or keypad! -- billing terminals, and of software to support them. The credit card companies don't want to have to pay to replace those, nor do the stores. Arguably it's recently become a bit worse with all the tablet/smartphone stripe readers now on the ...


27

No, there is no minimum employee limit in order for a company to initiate an initial public offering.


27

Alright, so the bank would still, then, agree to lend 10K against the 10K in equity, right? That still significantly increases profits (24% vs 15%) and would afford the same loophole. As a general rule, no. The bank will loan the LLC money if the LLC has a proven income record. Banks will generally not loan money secured by stocks for this exact reason. ...


25

If this is because he wants to avoid paying taxes, will I get in trouble if I agree to have him work on my vehicle? You should check your state and local sales tax laws to be certain, but in my state you have no liability if he does not pay his taxes. That's his problem, not yours. The biggest risk for you is if something goes wrong, you have no proof ...


25

where is the risk? Losing renters Damage done by renters Unexpected maintenance Legal liability Capital losses Other factors that should be included in expenses: Routine maintenance Paying the landlord (essentially a part time job for him) I'm not saying it's a bad investment - and it sounds like he has a decent property for an amazingly cheap price, ...


23

Hedging - You have an investment and are worried that the price might drop in the near future. You don't want to sell as this will realise a capital gain for which you may have to pay capital gains tax. So instead you make an investment in another instrument (sometimes called insurance) to offset falls in your investment. An example may be that you own ...


23

The risk is that the "free" service may be supporting itself by steering customers to products which part a sales commission, or that are products of the company/bank that employees then, rather than those which are actually best for the customer. If you go in with a skeptical outlook, watching for this sort of conflict of interest, it's possible they ...


23

At 50 years old, and a dozen years or so from retirement, I am close to 100% in equities in my retirement accounts. Most financial planners would say this is way too risky, which sort of addresses your question. I seek high return rather than protection of principal. If I was you at 22, I would mainly look at high returns rather than protection of ...


22

Everyone has different retirement goals. Some people want to retire before they are 70, the earlier they want to retire the more they need to save now. Other people want to travel in retirement and drive a nice car. It just varies a lot. There's also uncertainty about future expenses. Medical expenses are much higher for the elderly, if you want to live in ...


21

The biggest problem your friend has isn't the risks associated with real estate per se, and the existing answers have covered those pretty well. The problem is that your friend is about to sink their entire net worth (or some appreciable fraction thereof) into a single asset class. Not a great plan. The problem is systemic risk: for example in this case ...


19

In a lot of situations municipal bond returns are "triple tax free." No federal or state income tax and no AMT (Alternative Minimum Tax -- which is largely irrelevant at this point) liability. This tax preference is considered in the yields investors are willing to accept. Generally, you need to be in the upper most brackets for your real return in muni-...


18

Remember that risk should correlate with returns, in an investment. This means that the more risk you take on, the more return you should be receiving, in an efficient marketplace. That's why putting your money in a savings account might earn you <1% interest right now, but putting money in the stock market averages ~7% returns over time. You should be ...


17

Rich people use "depositor" banks the same way the rest of us use banks; to keep a relatively small store of wealth for monthly expenses and a savings account for a rainy day. The bulk of a wealthy person's money is in investments. Money sitting in a bank account is not making you more money, and in fact as Kaushik correctly points out, would be losing ...


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