Grownup Escapades: Handling Finances

Take the average high/low price of the S&P500 for a given day from 1970 to 2020, average those out for a given year, and calculate the percent differences year-over-year, plotting those rates out along with the compound interest graph accounting for a.) the raw/actual growth in US dollars (not taking inflation into mind) and b.) consumer-price index adjusted inflation. Hypothetically investing in total market indices like the S&P 500 and the Wilshire 5000 allows us to diversify our investments cross-sector as well as our portfolio, which in turn controls our risk in the market. The code and datasets used to generate these plots are at https://colab.research.google.com/drive/11JXwJ0FaavXNb1j_4A2j4D8Iy55jtLEf?usp=sharing

Apportioning the Paycheck: Automating cash in-flow and out-flow

Traditional Bank Accounts: A finite serving table

Growth of $10K in a savings account given a 0.50% and 0.01% return savings accounts respectively, yielding more than a difference in $500 ($10,010 vs $10,511 for an initial $10,000 savings balance over 10 years). This may not seem much, but amounts to more than $5K difference for an initial savings of $100K, or $50K for an initial savings of $1,000,000. The code and datasets used to generate these plots are at https://colab.research.google.com/drive/11JXwJ0FaavXNb1j_4A2j4D8Iy55jtLEf?usp=sharing

Retirement Accounts: Roth vs Traditional 401K

Lowering Tax Liabilities with Tax-Deductible Expenses

  • 35%, for incomes over $207,350
  • 32% for incomes over $163,300
  • 24% for incomes over $85,525
  • 22% for incomes over $40,125
  • 12% for incomes over $9,875

Financial Automation and Personal Surveillance

Auto-pay and staying safe online

Managing revolving monthly payments with Paypal. Paypal automatically detects recurring payments and lists them out on the Automatic Payments section of your Paypal account.

Cards, rewards statements and cashbacks

Transaction Notifications and Expense Management

Buzz, Buzz, Buzz for all those transactions

Wall Street to Main Street

  • Smartphone or a computer
  • Internet connection
  • Personal/Bank Info (needed so you can deposit/withdraw from your brokerage account as well as for the brokerage to report any taxes you may owe to the IRS)
  • 10–15 minutes to setup an account with any of the brokerages — simply choose from Fidelity, ETrade, Ally Invest, Charles Schwabb, Robinhood and many more

Brokerage Insurance: FDIC, SIPC and Sweep Program

Ally Invest FDIC-Insured Sweep Program Opt-in
ETrade SIPC vs FDIC Sweep Program insurance programs

What is in a name? Market indices, ETFs, Mutual Funds, Bonds, Expense Ratios and budget setup

Efficient Frontier/Sharpe Ratio for Return/Volatility calculations on an investment portfolio — courtesy of https://towardsdatascience.com/python-markowitz-optimization-b5e1623060f5.

Preliminary Investigation: Bid and Ask Spread, PE Ratio, Market Capitalization, Dividends

  • Bid-and-ask spread is simply the difference between the highest price some buyer in the stock market is willing to buy for that security and the lowest price some seller in the stock market is willing to sell for that security. Whenever users place a buy/sell limit order, this information is propagated publicly (without the user’s personal info) out on the market, which forms the bid-and-ask spread.
  • P/E ratio, or the Price-to-Earnings ratio, represents the current price of a share compared to the earnings per share price of some company. A high P/E ratio is taken usually as a signal that investors in the market are willing to over-evaluate a stock, with respect to its current earnings, for a very positive future outlook while a low P/E ratio is taken usually as a signal that investors in the market have a more bleak outlook on a stock.
  • Market cap: Total dollar market value of all of the company’s shares of stock. It is calculated simply by the number of shares for a company being sold out on the market * the price per share.
  • Dividends: Some companies, not all, provide their shareowners dividends — meaning that not only can you make a potential profit by buying a stock and selling it at a higher price, but the company pays you money for holding a share of their stock as part of their earnings on a repeating basis (companies vary on this, but some pay out quarterly, some pay out annually and some pay out semi-annual dividends). Huge corporations who have enough free cash flow are typically more likely to hand out dividends than those who are smaller.

Order Types

Ally Invest Order Preview Screen, with the Market, Limit, Stop, Stop Limit
  • Market orders: orders that are executed as soon as possible, without a guarantee on the price one is buying a security for. The market price for a security always evolving (not just in terms of seconds, but down to milliseconds and nanoseconds) and usually, there is a bias of geographical/brokerage-based locality as to who can fulfill your orders the fastest based on the time one placed an order. Market orders are usually good for the day.
  • Limit orders: orders that are executed only if the requested price or better, is met. For example, in the case of you buying a stock, this means that the stock will be purchased for you at a price at or lower than your set limit price (a guarantee that the purchase will only be executed at the requested price or lower). In the case of you selling a stock, this means that the stock will be sold for you at a price at or higher than your set limit price (a guarantee that the sale will only be executed at the requested price or higher). Limit orders are configurable to be good
  • Stop-loss/Stop orders: orders that upon the arrival of the configured stop price, gets converted into a market order (stated above). This allows a pattern-based trader to start a market order when a desired price is hit. Unlike a stop-limit order, though the order is triggered when a desired stop price is hit, a stop-loss order prioritizes the fulfillment of purchasing the requested amount of securities rather than the price of the actual order itself.
  • Stop Limit orders: orders that upon the arrival of the configured stop price, gets converted into a limit order (stated above). This allows a pattern-based trader to start a limit order when a desired price is hit. This is usually desired when the price of the actual executed order is of higher/highest priority rather than the fulfillment of the order itself, provided that a stop price is hit.

Tax liabilities

Short-term capital gains tax rates, 2020 — IRS Schedule D: https://www.irs.gov/instructions/i1040sd#idm140312989632848
Long-term capital gains tax rates, 2020 — IRS Schedule D: https://www.irs.gov/instructions/i1040sd#idm140312989632848

In closing

Image courtesy of the Gallup — https://news.gallup.com/poll/266807/percentage-americans-owns-stock.aspx

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Machine Learning Platform, Apple. Physics, UW. IA, Georgia Tech. I build apps/systems with Scala, Java, Javascript, Python, GoLang and many more. aparagas.com

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Alastair Paragas

Alastair Paragas

Machine Learning Platform, Apple. Physics, UW. IA, Georgia Tech. I build apps/systems with Scala, Java, Javascript, Python, GoLang and many more. aparagas.com

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