Your Questions About Disadvantages Of Investing In Shares

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Joseph asks…

Different types of investment, their advantages and disadvantages?

General Information on Blue-chip shares, Fixed Term deposits and Investing in Art (Paintings). List current information and their advantages + disadvantages. Also, out of Blue-chip shares, Fixed Term Deposits, Investing in Art (Painting), Investing in property or Superannuation for investing $10,000.

Justin answers:

Business
Advantages: A business is the most powerful asset to own because you can benefit from tax advantages, leverage people to increase your cash flow and have control of your operations. The richest people in the world own businesses
Disadvantage: business are “people intense” by that I mean you have to manage employees, clients and customers. People skills and leadership skills, as well as talented people who can work as a team are essential for a business to be a success. This takes the most financial intelligence to run and probably is the most prosperous of the 4 asset classes

Real estate
Advantages: real estate can have high returns due to using banks money for leverage via financing and other peoples money (OPM) via investors, capitalizing form tax advantages like depreciation and collection Steady Cash flow from if the asset is managed well and is the most easy to leverage

Disadvantages: Real estate is a management intensive asset. Is illiquid and if mismanaged can cost you a lot of money .after a business, real estate require the second highest level of financial intelligence.

Paper Assets
Advantages: paper assets have the advantage of being easy to invest in.additonaly they are very liquid.

Disadvantage: they are very easy to Liquidate and you don’t have much control over them the majority of the time

Hard Assets
Advantages: commodities are a good hedge protection against inflation
Disadvantages: you have to find a safe place to put them

Thomas asks…

Can a teenager invest in shares for a income?

So I’m 15 and people my age are getting jobs at McDonald’s and woolworths. I was thinking investing in shares with the help of my parents to earn money. I can borrow a couple of thousand off my parents and pay them back to start investing. So I will not have a job at McDonalds. At least if my shares fail I won’t fall flat on my face, by that I mean I will still have a house to live in.
The only disadvantage to this is that I will not gain any experience in working in a workplace environment.

Is this a good idea???

Thanks

Justin answers:

You seem to have the same idea’s I did at that age. I’m now 21 and I do share dealing. As mentioned above, you cannot invest yourself until you are 18 (in the UK, might be 21 in the US?), but your parents can help you out there.

Personally, I wouldn’t advise borrowing thousands and investing it, especially as you are also a beginner. I started my portfolio with a few hundred, with the intention of turning that into more money and reinvesting it. However, investing in share usually isn’t as easy as you think, as it might take you up to 5 years to make any money on your investment.

I also did get a job when I was 17, with a leading electrical retailer and used my wages to put aside a small amount for investing.

If I was you, I would look for a job and do what I did. When it’s your own money you lose, you learn from it.

Also, If your that keep on share-dealing, log on to share.com and register. There is an option to have a practice share dealing account with £15,000 (roughly $30,000) and you make or lose money depending on the real share price etc of who you invested in.

Richard asks…

PROPERTY MARKET INVESTMENT HELP?

What are the advantages and disadvantages of investing in the property market instead of other markets like the share market? Please, descriptive answer

Justin answers:

Investing in real estate in the best LONG TERM investment strategy there is. The combination of leverage, price appreciation and free equity is unmatched in other markets. Read this page for a primer: http://www.free-rental-property-investing-info.com/best-long-term-investments.html/

Donald asks…

Easy stocks question!?

I bought some shares in Ford (F) several months ago, and my net gain if I were to sell all shares now is about $900. I have noticed that this number has been staying in that range pretty steadily recently. Would it be smart to sell all my current shares, and use this money to re-invest in Ford again? The only disadvantage of this that I could see is that is the stock price goes down I could potentially lose more money than if I had just left it, but theoretically if the stock continues to go up in price, am I better off selling all my shares and then reinvesting the money again? Thank you!
Yes I understand what you are saying, but look at it from this angle. Until I sell my shares, that $900 is useless to me and can disappear or decrease any second. The money I get from selling these shares, plus my profits, can be used to buy even more shares which in the end will yield more money than leaving it the way it is. Can anyone back me up on this, like is this some kind strategy maybe?/ Thanks.
WOW I can’t believe I overlooked looked that, it makes sense now haha. Thank you

Justin answers:

The profits you made are included in the share price; thus by selling the shares while making profits will force you to buy the shares later at the same price. As such, you will end up with the same shares.

There is no advantage of doing this. There is however a downfall, which is that you will be taxed on your capital gains.

Chris asks…

variable annuity 401k?

My current employer offers a 401k in which they match up to 4%. One thing they don’t make clear is that you are not purchasing the funds listed, you are purchasing a variable annuity. From what I can gather, this annuity will match the fund percentage wise minus the fees. I also do not purchase “shares” at the price listed for the fund. There is some kind of way the price is decided initially when purchased. Can someone please explain in detail (layman’s terms, no finance PhD here) how these investments work and what the advantages/disadvantages are associated? Should I maximize or simply invest the match amount and take the remaining elsewhere?

Justin answers:

Your employer got suckered into a horrible plan. A 401k is already tax-sheltered, which means that a variable annuity wrapper serves no purpose whatsoever. It just adds a worthless layer of fees.

Read the details and understand the fee structure. If they were stupid enough to buy the annuity structure, they may have signed up for other ridiculous fees.

If management is willing to listen, ask if they would consider a small-business 401k plan at Vanguard. Very low fees, both on the plan and on the funds.

I would invest enough to get the full matching funds. Put that in the most conservative choice (money market or stable value). Open a Roth IRA at Vanguard, Fidelity, or Schwab and use that to do your real investing.

Paul asks…

Should I be his partner without my name as the one of the owner?

I work with my ex. We are starting a business and we talked about being partners. We first said we would invest the same amount of the money and share the profit 50-50. Then when we apply for the company name, he refused to put my name on as the owner. He said his proposal is that he would come up with all the money and he would still share the profit with me 50-50. But he only wants his name on as the owner. He said he would include me in within 2 years if everything goes well with us. He said he would sign a contract with me about his proposal. He also said he may agree to have my name on as 30% of the owner and share the profit 50-50. But it seems he definitely wouldn’t want to share the ownership 50-50.
Should I accept his offer? What kind of disadvantage for me if I’m 30% of the owner and share the profit 50-50 with him?

Justin answers:

I would absolutely avoid this arrangement

Ken asks…

NEED HELP ON ACCOUNTING TEST?

True/False (1 Point Each)
Indicate whether the statement is true or false.

____1.There are only four legal structures to form and operate a business.

____2.In a general partnership, each partner is individually liable to creditors for debts incurred by the partnership, to the extent of the partner’s capital balance.

____3.A partnership is a legal entity separate from its owners.

____4.A partnership is subject to federal income taxes.

____5.A disadvantage of partnerships is the mutual agency of all partners.

____6.Each partnership must have a written partnership agreement.

____7.Each partner may withdraw the assets he or she contributed to the partnership at any time.

____8.When compared to a corporation, one of the major disadvantages of the partnership is its limited life.

____9.When compared to a corporation, one of the major advantages of a partnerships is its relative ease of formation.

____10.An advantage of the partnership form of business is that each partner’s potential loss is limited to that partner’s investment in the partnership.

____11.A Limited Liability Company is a business entity form designed to overcome some of the disadvantages of the partnership form.

____12.For tax purposes, a Limited Liability Company may elect to be treated as a partnership.

____13.The Limited Liability Company may elect to be manager managed rather than member managed which means that only authorized members may legally bind the corporation.

____14.Each partner has a separate capital and withdrawal account.

____15.The chart of accounts for a partnership, with the exception of drawing and capital accounts, does not differ from the chart of accounts for a sole proprietorship.

____16.The equity reporting for a Limited Liability Company is similar to that of a partnership but the changes in capital are shown on a statement of members’ equity.

____17.When a partner invests noncash assets in a partnership, the assets are recorded at the partner’s book value.

____18.Accounts receivable contributed to the partnership are recorded at their face value.

____19.A new partner contributes accounts receivable to a partnership which appear in the ledger of his sole proprietorship at $ 20,500 and there was an allowance for doubtful accounts of $ 750. If $600 of the accounts receivables are completely worthless, the partnership accounts receivable should be debited for $19,900.

____20.One reason that distributions of income and loss are prepared is to obtain the information to record a closing entry.

____21.The salary allocation to partners used in dividing net income would also appear as salary expense on the partnership income statement.

____22.If the articles of partnership provide for annual salary allowances of $36,000 and $18,000 to X and Y respectively and net income is $30,000, X’s share of net income is $20,000.

____23.If the net income of a partnership is less than the total of the allowances provided by the partnership agreement, the difference must be divided among the partners in the income-sharing ratio.

____24.The amount that a partner withdraws as a monthly salary allowance does not affect the division of net income.

____25.A devotes full time and B devotes one-half time to their partnership. If the partnership agreement is silent concerning the division of net income, A will receive a $20,000 share of a net income of $30,000.

____26.In the distribution of income, the net income is less than the salary and interest allowances granted, the remaining balance will be a negative amount that must be divided among the partners as though it were a loss.

____27.Details of the division of partnership income should normally be disclosed in the financial statements.

____28.Partnership’s asset accounts should be changed from cost to fair market value when a new partner is admitted to a firm or an existing partner withdraws and dies.

____29.Sarno has a capital balance of $42,000 after adjusting the assets to fair market value. Minton contributes $22,000 to receive a 30% interest in the new partnership. the bonus paid by Minton is $2,800.

____30.After all noncash assets have been converted to cash and all liabilities paid, A, B, and C have capital balances of $10,000 (debit), $5,000 (debit), and $25,000 (credit). The cash available for distribution to the partners is $10,000.

Multiple Choice (1 Point Each)
Identify the choice that best completes the statement or answers the question.

____1.Which of the following is characteristic of a general partnership?
a.The partners have co-ownership of partnership property.
b.The partnership is subject to federal income tax.
c.The partnership has an unlimited life.
d.The partners have limited liability.

____2.Which of the following is not a characteristic of a general partnership?
a.the partners

Justin answers:

Back to your text book.

William asks…

accounting help questions?

1.
Treasury stock should not be classified as a current asset.
A) True
B) False
2.
A debit balance in the Retained Earnings account is identified as a deficit.
A) True
B) False
Multiple Choice
3.
Those most responsible for the major policy decisions of a corporation are the
A) stockholders.
B) board of directors.
C) management.
D) employees.
4.
net income 200
cash dividends (common) 40
retained earnings 500
stock dividends(common) 10
From the information below, compute the payout ratio for Kevin’s Trailers.
A) 25%.
B) 20%.
C) 8%.
D) 2%.
5.
If Pratt Company issues 1,000 shares of $5 par value common stock for $70,000, the account
A) Common Stock will be credited for $65,000.
B) Paid-in Capital in Excess of Par Value will be credited for $70,000.
C) Paid-in Capital in Excess of Par Value will be credited for $75,000.
D) Cash will be debited for $70,000.
6.
Which of the following statements is not considered a disadvantage of the corporate form of organization?
A) Additional taxes.
B) Government regulations.
C) Limited liability of stockholders.
D) Separation of ownership and management.
7.
Outstanding stock of the West Corporation included 20,000 shares of $5 par common stock and 5,000 shares of 6%, $10 par non-cumulative preferred stock. In 2009, West declared and paid dividends of $2,000. In 2010, West declared and paid dividends of $6,000. How much of the 2010 dividend was distributed to preferred shareholders?
A) $4,000.
B) $7,000.
C) $3,000.
D) None of the above.
8.
The acquisition of treasury stock by a corporation
A) increases its total assets and total stockholders’ equity.
B) decreases its total assets and total stockholders’ equity.
C) has no effect on total assets and total stockholders’ equity.
D) requires that a gain or loss be recognized on the income statement.
9.
Jason Hansen has invested $600,000 in a privately held family corporation. The corporation does not do well and must declare bankruptcy. What amount does Hansen stand to lose?
A) Up to his total investment of $600,000.
B) Zero.
C) The $600,000 plus any personal assets the creditors demand.
D) $400,000.
10.
common stock 1,000,000
paid-in capital excess of par 80,000
retained earnings 380,000
treasury stock 40,000
What is the total stockholders’ equity based on the following account balances?
A) $1,260,000.
B) $1,420,000.
C) $1,500,000.
D) $920,000.
11.
A disadvantage of the corporate form of organization is
A) professional management.
B) tax treatment.
C) ease of transfer of ownership.
D) lack of mutual agency.
already did this work just trying to see if i got them right. trying to raise my grade. please help. thanks

Justin answers:

1. T
2. T
3. B
4. B
5. D
6. C
7. C
8. B
9. A
10. B: Common Shares + Paid in Cap. +Retained Earn. – Treasury Stock
11. D

John asks…

Why do conservatives want more than their fair share?

I always marvel at the socialist concept of “your fair share”. What is my “fair share”?
I spent 6 years in the navy under terrible working condition for terrible pay so I could get money for college. I spent 10’s of thousands and 4 years of hard work to get that degree. I work 10 hour days for an employer. I deny myself basic luxuries to save money so I can invest. I work every night after work and most weekends to manage that investment.

Is my fair share the same as the guy who dropped out of high school cause he liked to smoke pot and still works at the same minimum wage job? Is it wrong that he doesn’t have the things that I have? What does that guy “deserve” relative to what I “deserve”? Is my effort of measurable value in the socialist model? What do I owe to that guy? Should I support his pot smoking with my efforts?

To be clear, I believe in charity and I try to help those who can be helped. I’m not saying I refuse to help the disadvantaged but what about those who have chosen to be where they are. I started dirt poor without any type of role model. I chose to work hard to be more. Success and failure are optional states for most people.

Justin answers:

Well under the liberal math needed to figure this equation, the guy who dropped out of high school needs more of your share because he wasn’t hugged enough as a child and therefore was not given the necessary breaks he needed to make himself a productive member of society.

Oh and thanks for your service

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