financial literacy - If stock price drops by the amount of dividend paid, what is the use of a dividend

I have heard that some people buy stocks based on how much dividend they pay, because dividend is considered 'income'. But if I buy a stock for 100$ and it pays a $1 dividend, the stock would also drop by $1. So really, is there any benefit to the dividend? It seems the drop in price would cancel out the 'income', so what is the point in getting the dividend?...Read more

financial literacy - How to acquire skills required for long-term investing?

Imagine I want to buy shares of companies and hold them for a long time. Ideally,the valuation of these companies and/or the dividends they pay will increase over time.I asked a friend what skills are required for this type of investing and he told me this:Ability to read and understand the health of the companies based on publicly accessible data (e. g. annual reports).Ability to evaluate whether or not a company's products will be demanded.Detecting trends (e. g. if electric cars are selling like crazy, and in every of them is a battery, it m...Read more

financial literacy - How does a bond's coupon rate differ from its market yield rate?

I'm trying to understand how bonds work and am confused by coupon rate vs market yield rate.Suppose company Foo issues a bond with a face value of $1 million, a 4% annual coupon rate payable semi-annually (so I believe a 2% semi-annual rate), a maturity of 5 years, and a market yield rate of 6% (which is 3% semiannual).In that case, from company Foo's perspective, how much is it paying every 6 months - is that determined by the coupon rate? (and not the market rate)?If so, what does the market rate mean? At first, I thought that the market rate...Read more

financial literacy - Buy tires and keep car for 12-36 months, or replace car now?

I have a car that was purchased in 2010 for around 20k, it now (2016) needs new tires but im going to replace it in 12 to 36 months time. The current resale price is around 8K and the replacement of the tires is around 1k. Im guessing the replacement car would cost between 25-30K as the purpose of the car has changed. Emotionally I think if I'm going to replace in 12 months time i think im better off purchasing now but at 36 months time im better off waiting. Im not interested in the emotion of this I would like to see a calculation that can be...Read more

financial literacy - Why Do People Continue Using Expensive Payment Services Like Paypal And Western Union

Paypal - the 'industry standard' for online payments makes this opportunity inaccessible to Africans in most cases. Most, who qualify to be a part of the workforce for some internet companies are not able to receive payments simply because we can't receive payments with Paypal accounts.With Western Union, there are different charges depending on how the sender funds the payment either with a bank transfer, cash, credit or debit card and how the recipient accesses the money. All do have exorbitant charges which can go as high as 7 - 9%...Read more

news - Is 95% of what you read in the financial press “either wrong or irrelevant?”

From a Cato Institute article by Steve Hanke1 (emphasis added): Most press reports about Zimbabwe’s fantastic hyperinflation are off the mark – way off the mark. Even our most trusted news sources fail to get the facts right. This confirms the “95 Percent Rule”: 95 percent of what you read in the financial press is either wrong or irrelevant.Is the 95 percent rule accurate? In other words, is "95 percent of what you read in the financial press is either wrong or irrelevant?"Note: Steve Hanke certainly seems to believe that inflation for some c...Read more

financial literacy - What jobs to gain knowledge on finance?

I don't have former experience or education on finance, but I want to find a job in finance so I can gain more knowledge about it to help secure the future financially. I have a strong background in science, so I think I'm competent on math, programming, and researching. Questions like Where to start with personal finance? or Ongoing things to do and read to improve knowledge of finance? are useful, but I'm looking for a job as well.Related: Does working in finance firms improve a person's finance knowledge?...Read more

financial literacy - Why bonds with lower coupon rates have higher interest rate risk?

According to the following article: Bonds offering lower coupon rates generally will have higher interest rate risk than similar bonds that offer higher coupon rates.And: For example, imagine one bond that has a coupon rate of 2% while another bond has a coupon rate of 4%. All other features of the two bonds [...] are the same. If market interest rates rise, then the price of the bond with the 2% coupon rate will fall more than that of the bond with the 4% coupon rate.Why the price of the bond #1 should fall more?...Read more

financial literacy - Will I see a collection on my credit report if I paid the bill in full?

I received a call from a collections agency a couple of days ago about an unsettled bill of $200.Turns out that during my grad school days (over 7 years ago), we used a water delivery service and I was the one who set it up. Once I graduated, the other guys in the house I lived in took it over. I knew the guys pretty well and so (very stupidly) didn't even think about closing/transferring the account.Now all of them left that apartment a year ago and the new tenants did not pay for the service so it ultimately reached a collections agency. I as...Read more

financial literacy - How to get visibility into contributions to assets

I'm using double entry with Assets, Expenses, Income, Liabilities, and Equity.To illustrate my question with easy round numbers: Income one month is 10k; 5k goes into an asset like a 401k account (or to reduce a Liability, like a mortgage principal), and Expenses are 8k. (Doh!)I'm looking for a report that shows me that I have a cash flow problem."Cash Flow", "Profit & Loss", "Balance Sheet", "Net Worth", etc. all don't show me that I have a problem (they say I'm spending 2k less than I'm making, and my net worth is going up by 2k/month, e...Read more

financial literacy - Effect on Bond asset allocation if Equity markets crash?

Let's say "Tom" allocated a large amount of capital in some fund's (it's TIAA-CREF, actually) bond assets.In our fictional scenario 2 things are going to happen in the next year:The equity markets will crash due to a Black Swan event.Interest rates will keep rising.The question is: what will happen to the valuation of Tom's bond holdings after the equity crash? Here's what Tom thinks is the most likely scenario: a) Bond Price Bump due to Demand: Initially, as market money moves out of equities into bonds, the bond prices will rise (for a short ...Read more