The moment of truth has arrived! That's right -- today marks the income tax filing deadline of April 15.
When you hear friends and family talking about the phatty phat refunds they're receiving, don't be jealous if you're getting nothing back or even paying a little. If the latter describes your situation, I'm jealous of you. I got some money back this year, but I'd rather get nothing back or even owe some.
Why? If you get a refund, that means you overpaid your taxes throughout the year, whether your employer withheld the tax money, you made estimated tax payments, etc. Granted, a surprise chunk of change can be nice, but getting a refund means that the government -- state and/or federal -- got an interest-free loan from you over the course of the year. How nice and generous of you (and me)!
If you're like me, when given the choice between ...
(1) having more money in your pocket over the course of a year or
(2) having the government hold on to it and disburse to you a lump sum payment after you file your taxes
... you'd pick option #1.
Consider that if your 2008 refund is $5,000, if you had adjusted your allowances / tax withholdings so that you were to get no refund, you would have taken home an extra $416 / month last year. That's some significant cabbage!
If you like getting a big refund each year, good for you! You do have the option, though, of shrinking down that refund and having more money in your pocket every month. To make that change you'd have to talk to your employer to adjust your allowances / withholdings, pay lower estimated taxes, and so on. Either way, make sure to pay your taxes (even if you need a little help from software applications like TurboTax)! Like Smokey says, only you can prevent forest fires.
For those of you who don't know about it already, Twitter is a "a real-time short messaging service that works over multiple networks and devices." It's great for sending quick messages ("tweets") to a group of friends who "follow" you, and you can see tweets from people you follow. While not required, many folks link up their Twitter accounts to their mobile device so they can send/receive updates from Twitter on-the-go through SMS.
The concept is simple and easy to understand, and I see creative uses popping up left and right. For example, reportedly the Washington D.C. metro has started broadcasting metro line updates and delays through Twitter. Others use Twitter to keep in touch with -- and even meet -- celebrities like THE REAL SHAQ Shaquille O'Neal.
Per the suggestion of a friend, I've begun using Twitter under the name raisedguidance to broadcast financial, investing, business and tech news that I find interesting. If that sort of news tickles your fancy, just follow raisedguidance on Twitter and you'll also get an update when I post future entries on here.
Cheers!
P.S. I hope you're enjoying the recent rallies especially among the financials. If you've got it in you, don't be afraid to take some profits!
That the markets have been swinging all over the place is hardly breaking news. As someone who has a long position in the markets, I appreciate the up days more than the down days. Lately, us longs sure have endured the pain of many down days.
There are tools available to help you take advantage of the volatility, and I thought I'd share with you one of my recent experiences with one of those tools: call options. Call options provide the options holder the right, but not the obligation, to buy shares of a security at a certain price by a certain date. Please carefully consider all risks before making any investment decisions, especially those that involve options.
My personal portfolio already contains some financials, and until we get more clarity from the government I want to avoid making significant additions to my financial positions. So that I might benefit from a move up -- without requiring that I commit significant amounts of capital to more financial stocks -- I decided to buy some FAS calls (FAS = 3x bull market financial: it's an ETF designed to perform 3x better than the financials group on the up days; on the down days, it performs 3x worse). Let me just say that I'm not sure I agree with the concept of the 3x bull/bear ETFs, since they seem to allow people to trade in a way that gets around the intent of margin requirements, but they're out there and available for trading.
Feel free to adjust these quantities to suit your financial comfort levels, but this example should be pretty simple to follow. Rather than actually buy FAS shares, I bought a Mar 5 FAS call on
2/20/2009 for $90. This call option provided me the right to
purchase 100 shares of FAS at $5/share on or before 3/20/2009. My plan was to sell the option later for a higher price, rather than to execute the option.
Shortly after purchasing, the call (with symbol FASCA) had nearly doubled. I was looking for a bigger move, so I didn't sell. Unfortunately for me, soon the option price started tanking as events unfolded and the underlying FAS security started tanking.
My overall strategy was to make money (duh), but I tried to maintain conviction that we'd see a pop before the options expired. My plan was to carefully buy more contracts if the options prices were to continue falling. What I did next might be easier to follow if I just list the transactions.
As you can see, the options price was extremely volatile over the last month. I bought at 0.9, 0.5, and then 0.25. As the option price started to rise, I began to sell. Including commissions, this set of transactions cost me $221 but I walked away with $317. A 43% gain in less than a month is something I only could dream up, and I wouldn't expect that sort of return month-in, month-out. I had a hunch and got lucky, but I enjoyed the ride.
- 02/20/2009: Buy 1 FASCA @ 0.9
- 03/03/2009: Buy 1 FASCA @ 0.5
- 03/05/2098: Buy 2 FASCA @ 0.25
- 03/13/2009: Sold 2 FASCA @ 0.75
- 03/06/2009: Sold 2 FASCA @ 0.95
Throughout the whole process, I understood that my $ commitments might have been worth $0 by the time the options expired. Your mileage DEFINITELY will vary, so please be careful with your investment decisions. I just wanted to share my experience to let you know that there are tools available to help you take advantage of market volatility. Use at your own risk, and best of luck!
Disclosure: the author has no position in FAS.
