Originally Posted by Nightfyre:
This post is riddled with inaccuracies. Capital is not cash on hand. It is a leverage ratio. Small banks have never averaged 5.5-7% tier one capital.
The biggest effect of QE is that it removed toxic and illiquid assets from the books of the largest institutions, which were threatening to create accounting losses for said institutions at the time. This was the huge bailout.
Also, large banks do need to have their leverage constrained because they create multiple layers of leverage by leveraging the holding company, resulting in far lower capital levels. The whole topic is frankly too complicated. That is without even getting into concentration risk management.
Furthermore, there is no formal reserve requirement of ten percent tier one capital. While increased capital levels are being encouraged by regulators, the level of capital is evaluated with respect to the institution's risk profile.
The assumption that reducing the reserve requirement will automatically increase lending is also erroneous. Loan demand has been weak for about a decade now. Furthermore, even if loan demand was stronger, the creditworthiness of borrowers you would be lending to with a lowered reserve would not be nearly as strong. The more competition increases for loans, the more concessions are made by the bank, the more likely the bank is to take losses on that loan.
So rolling back regulations allows for increased malinvestment by institutions that have less capability to absorb those losses. Often time these are exacerbated by a dip in specific types of assets, which is where concentration risk comes in. Sound familiar? Sounds like 2007 to me.
This is why people should buy pennystocks. [Reply]
Originally Posted by RunKC:
Wouldn't it just be better to increase my 401k monthly payment than invest in stocks?
Multiple thoughts on this and no right way is the best answer for everyone.
First determine if you like the funds offered in your 401k. Determine the expense ratios of the funds offered and if there are also employer 401k fees as well. If you don't like the funds offered, consider doing something else with your money such as maxing out your ROTH IRA into funds of your choosing.
People in high tax brackets generally like decreasing their income tax by increasing their 401k contributions for the year. This depends on if your state has income tax, as something like 10 do not. If your goal is to pay less taxes, increasing your 401k is a good option for many.
Some in your situation would say investing in individual stocks is another way to diversify and is much more liquid that placing money in a 401k. Mind you, this doesn't have to be individual stocks either but could be indexes, mutual funds or ETFs that track a sector of the market. These are generally less risky than owning individual stocks outright. If you don't have a large emergency fund to tap if times get tough or you were hit with a large bill, withdrawing 401k money comes with an early withdraw penalty plus paying capital gains tax (ouch!). That's why withdrawing 401k money should be one of the last options for those in desperate need of money. If money was instead invested in a brokerage account, you could sell those stocks at any time to access the money, either paying capital gains tax for winners or getting a tax break for losers. Either way you slice it, this money is easily accessible at any time though.
Originally Posted by Demonpenz:
Brokerage is like E-trade right? How do you claim your losses and wins on your taxes. Like if I lost money through bitcoin.
It only becomes an actual tax consequence if you sell it, making it a realized loss. If you continue to hold onto the losing stock into the new tax year, it means nothing for your taxes.
If you sell, you should receive a 1099-B form with loses and gains.
Your income tax bracket matters. If you are in the 10 or 15% tax bracket, you are not liable for any taxes on capital gains.
Read more: Here's How to Deduct Your Stock Losses From Your Tax Bill |
