From: owner-persfin-digest@lists.xmission.com (persfin-digest) To: persfin-digest@lists.xmission.com Subject: persfin-digest V5 #87 Reply-To: persfin Sender: owner-persfin-digest@lists.xmission.com Errors-To: owner-persfin-digest@lists.xmission.com Precedence: bulk Content-Transfer-Encoding: quoted-printable X-No-Archive: yes persfin-digest Tuesday, February 9 1999 Volume 05 : Number 087 In this issue of the Personal Finance Digest: Re: Income Tax Consequences of Exercised Options Re: Roth IRA Question Info to identify mutual funds based on component stocks Info to identify mutual funds based on component stocks Relocating to FL at 80 Stock Question How to keep it simple lesson learned The messages posted to the Persfin-Digest are opinions and are not intended to substitute for qualified professional advice. Subscribers should seek the services of qualified professionals for such advice. The publisher, Internet provider, and Digest contributors cannot be held responsible for any loss incurred as a result of the application of any of the information provided here. To ask questions or provide answers, send your email to "persfin-digest@lists.xmission.com". Also, you can "reply" to the persfin-digest and your email tool should fill in the same address. However, if you "reply", be sure to edit the subject field in your email to reflect your topic. Copyright (c) 1998, Jeff Salisbury POSTED SUBSCRIPTION FEE: $20/year. Payment is optional. You will not be billed. The Digest is available to all subscribers, whether or not they pay. I do not discriminate either in favor of paying subscribers or against nonpaying subscribers. If you feel that the information presented here is worth the fee, and you feel comfortable paying it, send cash, check, or money order (U.S. funds), payable to "Jeff Salisbury", to: Jeff Salisbury 65 North 1300 East Logan, Utah 84321 Payment will be acknowledged by e-mail if you include an e-mail address. Subscribe: e-mail majordomo@xmission.com, text: subscribe persfin-digest Unsubscribe: e-mail majordomo@xmission.net, text: unsubscribe persfin-digest ---------------------------------------------------------------------- Date: Wed, 3 Feb 1999 16:09:27 -0500 From: Rich Carreiro Subject: Re: Income Tax Consequences of Exercised Options >My sister just informed me that this past December she and her husband >decided to exercise some company stock options her husband had been >given a few years ago by his employer. What kind of options are they? The tax treatment is massively different between incentive stock options (ISOs) and non-qualified (or non-statutory) stock options (NQOs). >Now my sister is concerned because she has reviewed the relevant 1998 >income tax publications and believes that she and her husband will be >required to pay about $9000 in 1998 income taxes on the difference >between the exercise price of the options and the (sky high) market >value of the stock on the date of exercise, despite the fact that the >stock has not actually been sold, If they are non-qualified options, she is correct. The spread between the exercise price and the stock price on day of exercise is wage income, subject to income tax, Social Security tax, and Medicare tax. Her basis in the shares for future gain/loss is the stock price on day of exercise. If they are ISOs, no regular tax is due on the spread, though the spread is an Alternative Minimum Tax preference item, and gain will only be realized when the stock is ultimately sold. >on the date of exercise. Is she correct? If they are NQOs, yes, she is correct. >If so, are they at least >entitled to the lower long term gains rate because they held the options >for longer than one year? No. > Is there any way they could have handled this >matter differently which would have allowed them to defer realization of >"profits" from the option exercise until the acquired stock was sold, >thus avoiding a big tax bill this April? If they are NQOs, no. >At this point, would it be >possible to sell an equivalent amount of stock borrowed from their >broker in order to raise immediate funds to pay the tax due? Once they own the stock, they can do what they want with it, subject to any rules (such as trading blackouts) the company imposes on them. >this course of action have the desired effect of entitling them to the >long term capital gains rate for profits resulting from the eventual >liquidation of the current shares of stock? If these are NQOs, holding period begins the day after the option is exercised. However, nothing you do with the stock can change the character (which is ordinary income) or amount of income realized by the option exercise. Rich Carreiro rlcarr@animato.pn.com P5-100/RedHat Linux 4.2 - - ------------------------------ Date: Wed, 3 Feb 1999 16:02:28 -0500 From: Rich Carreiro Subject: Re: Roth IRA Question >I've never paid very much attention to the posts about Roth IRAs because I >didn't think I would ever want to do an IRA. Therefore, could someone direct >me to a web site that gives a good overview of the Roth IRA and how it can be >set up. http://www.fairmark.com http://www.rothira.com >What I would like to do (and probably someone here could tell me if it is >possible to do this or a variation of it) is dabble in some individual stocks Yes, you can do that. >and I was wondering if I could open an IRA and either put in some existing >stocks I own No, you can't do that. >(or start the IRA with cash and buy stocks within the IRA) and buy Yes, you can do that. >and (hopefully) any profits in the IRA until I retired. If I did well my >understanding is that it would save all those capital gains I would otherwise >have to pay upon the sale of the stocks if they weren't in a Roth IRA. Yes, it would. On the other side of the coin, you don't get to deduct your losses. Remember that since the contribution is limited to at most $2000 per year, trading stocks with that little money will mean you'll be eaten alive by commissions. >start a Roth IRA like this? Your favorite broker/bank/fund company. > Do brokerage firms that sell stocks do Roth IRAs? Yes. >Also, do I have until April 15, 1999 to put in $4,000 (married) for 1998 and The limit is $2,000 for each spouse, not $4,000. You have until April 15, 1999 to make a contribution for Tax Year 1998. You have until April 15, 2000 to make a contribution for Tax Year 2000. If your combined adjusted gross income is over $150,000, the maximum $2,000 contribution gets phased out until it hits zero at AGI of $160,000. Rich Carreiro rlcarr@animato.pn.com P5-100/RedHat Linux 4.2 - - ------------------------------ Date: Thu, 4 Feb 1999 01:12:50 -0500 From: "Marshall Farr" Subject: Info to identify mutual funds based on component stocks I would like to consider inversting in mutual funds that contain certain stocks . Is there any way, including some web program, to feed in the names of a group of stocks and expect, as a result, a list of mutual funds that have at least a certain minimal proportion of total holdings of those input stocks? For example, if I wanted to invest in stocks X, Y, Z and A, I might want the program to identify all mutual funds that contain at least 5% of its holdings in each of these stocks. Or, equally acceptable, would be all mutual funds listed in Nasdaq or Dow Jones or the NY Stock exchange that contain at least 7 out of 20 of the stocks in which I am interested. I would like to know about any program -- the numbers just given are merely examples -- whose parameters I could fill in (e.g., the amount of absolute shares in the stocks I like, or the length of time the mutual fund company has held the stocks, etc. If there isn't such a program, wouldn't it be relatively easy for a good programmer, supplied with the data base, to write one? And wouldn't it be commercially profitable? Marshall J Farr, PhD Marshall There are things so serious that you can only joke about them --Niels Bohr - - ------------------------------ Date: Thu, 4 Feb 1999 08:32:51 -0500 From: snarasim@genre.com Subject: Info to identify mutual funds based on component stocks There are a couple of misconceptions in your posting. I will try to clarify them as well as I can. i) Open Ended Mutual Funds (which is what you are hopefully talking about) are not 'listed' on any exchange - at least not to my knowledge (I have worked for a mutual fund). 'Listing' of a security on any exchange means it is available for sale at that Exchange. Mutual Funds can only be bought or sold from the mutual fund companies - or thru advisors/brokers. The number of shares that a Mutual Fund can issue are potentially unlimited. The share price of a mutual is decided directly by the number of shares outstanding divided by a 'reasonable' estimate of the value of the securites being held by it. ii) However, Closed-end Mutual Funds ARE listed on Exchanges - but then they do not behave like Open-End Mutual Funds. The number of shares in a Closed-End Mutual Fund is limited and the share price fluctuates based on supply and demand. iii) Mutual Funds do not HAVE to identify their holdings concurrently with the time that they are holding securities. In fact most funds publish their list of holdings as of the end of the previous month (or previous quarter) - - MUCH after the fact. It is quite possible that, say Mutual Fund X has 10% of its holdings in Company A on 12/31/1998 and by the time they publish these holdings, say on 1/15/1999, they have sold most of their holdings in Company A. There is a good reason for this - if Mutual Funds were to actually publish their minute-by-minute holdings, it is VERY easy to trace the trading characteristics of the manager - and do some 'front-running' - i.e., buy some of the Fund's future holdings BEFORE the fund makes its move and, after the fund has stocked up on that security, sell at the appreciated price. Although this 'front-running' is illegal in the eyes of the SEC, what is to prevent an astute observer of a Mutual Fund from making these purchases basedon the activities of the Fund? To make a long story short, such a program is neither available, nor would it be possible for anyone to put it together - unless they had INSIDE knowledge of the workings of the Mutual Fund - which would be illegal. To: persfin-digest cc: "Marshall J. Farr" Date: 02/04/99 01:12:50 AM Subject: Info to identify mutual funds based on component stocks I would like to consider inversting in mutual funds that contain certain stocks . Is there any way, including some web program, to feed in the names of a group of stocks and expect, as a result, a list of mutual funds that have at least a certain minimal proportion of total holdings of those input stocks? For example, if I wanted to invest in stocks X, Y, Z and A, I might want the program to identify all mutual funds that contain at least 5% of its holdings in each of these stocks. Or, equally acceptable, would be all mutual funds listed in Nasdaq or Dow Jones or the NY Stock exchange that contain at least 7 out of 20 of the stocks in which I am interested. I would like to know about any program -- the numbers just given are merely examples -- whose parameters I could fill in (e.g., the amount of absolute shares in the stocks I like, or the length of time the mutual fund company has held the stocks, etc. If there isn't such a program, wouldn't it be relatively easy for a good programmer, supplied with the data base, to write one? And wouldn't it be commercially profitable? Marshall J Farr, PhD Marshall - - ------------------------------ Date: Thu, 4 Feb 1999 08:50:49 EST From: Chf542@aol.com Subject: Relocating to FL at 80 Relocating to Florida condo at 80. Which is better, high down payment with 15 yr. mortgage or low down payment with 30 yr.? Should I liquidate investments and pay cash? Are there any estate planning moves that I should consider now? Thanks, J. - - ------------------------------ Date: Fri, 05 Feb 1999 10:58:20 -0500 From: David Cay Johnston Subject: Stock Question At 12:32 PM 2/3/99 -0700, you wrote: >Date: 01 Feb 99 13:57:40 EST >From: Jacqueline.D.Richardson@Hitchcock.ORG (Jacqueline D. Richardson) >Subject: Stock Question > >I have started watching a few stocks and am trying to learn about the stock >market with regard to individual stocks as opposed to mutual funds. snip snip snip >"Asia Properties, Inc announced today that the Company has retired 1.4 million >shares of its founders' stock into API's treasury. A more significant question is: For what reasons are you poking around in obscure stocks as a novice? Youy will do better if you start out with blue chips, stocks of companies with large liquid markets in their shares which over long periods of time have demonstrated an ability to make money through good times and bad. Also, you can learn much about a company by studying its reports to shareholders, which are also filed with the Securities & Exchange Commission and posted on their website at www.sec.gov. Look at the 14a (proxy) and 10k(annual report) and 10q (quarterly report) filings. Print out a few and study them. ================================= David Cay Johnston Reporter The New York Times 212.556.3605 davidcay@nytimes.com When you look into the eyes of others you acknowledge their humanity ================================= - - ------------------------------ Date: Fri, 05 Feb 1999 15:14:54 +0000 From: "John D. Dennis" Subject: How to keep it simple Hmmm....I really dread coping with the volume of year-end statements that I've received over the last few weeks. Anybody else have that feeling? Since I don't have a personal accountant (wish, wish, wish...), I'd like to solicit suggestions from the members of this list on the topic of "How to keep it simple." I'm most concerned with record-keeping, ease of tax filing, and just keeping a good perspective on the investments I have--but others may have another angle or two to add to that. Tho it's too late for this year, this is seems to me like a good time to think on this. To start such a list I'll suggest two things: 1) Use only one brokerage/fund company (I now have three) 2) Invest for the long term. (or some variation on this, i.e:) --Don't trade in and out of things. --Make your choices carefully so you won't be tempted to trade in and out of things. --Buy, and don't ever sell.... Any other ideas? Thanks, J. Dennis - - ------------------------------ Date: Mon, 8 Feb 1999 20:21:23 EST From: SMabel555@aol.com Subject: lesson learned Here's a lesson for everyone: A friend (really, not me!) wanted in on a recent technology IPO. He's got a few grand he trades on Etrade, and had been frustrated watching tech stocks all hit $300. He reads about Pacific Internet. "Looks like a solid company", he thinks, "and the IPO should take off". How right he was. The night before the offering, he put in a bid on Etrade to buy 100 shares. His mistake? He placed a market order. By the time he could check his account- at 10 am, the stock had opened and run to $80 before his order was processed. It hit $85, then immediately plummeted before he sold around $40, for a $4000 loss in a couple of days. Lesson: In fast moving markets, always place a limit order! (Really, this wasn't me! I just got to watch and learn what not to do) - - ------------------------------ End of persfin-digest V5 #87 **************************** - To unsubscribe to persfin-digest, send an email to "majordomo@xmission.com" with "unsubscribe persfin-digest" in the body of the message. For information on digests or retrieving files and old messages send "help" to the same address. Do not use quotes in your message.