Replies to post #5973 on Zeev's Turnips Patch-No Politics (ZEEV)

[Ace Hanlon]

Even though retired I left my 401K alone. 100% fixed income. But my 401K has a guaranteed annual return of 5.8% on fixed income. Way above money markets.

I don't know how common such returns are in 401Ks, but 5.8% risk free is a great alternative to stocks. People getting these kinds of returns may not get back into equities so quickly.

[Zeev Hed]

lostalot, I think she is making the wrong decision. If these are monthly contributions, it is a little late IMTO to shift policy, around here, and maybe even lower, she will get more shares of whatever she is getting in. When you do monthly contributions and your time horizon is more than 5 to 10 years, I think that consistently (every month) buying with a portion of your 401k a diversified fund, even a growth fund, is actually a wise approach. Only when one is getting pretty close to the time that these funds will need to be accessed, one should worry about the immediate short term (2 to 5 years) direction of the market.

Zeev

[Math Junkie]

Regarding the proposal to report an expense when stock options are granted, I was thinking about this and it occured to me that when a company grants an employee a stock option, it's the same thing as if they had sold the employee a stock option and then refunded the purchase price. So from that point of view, yes there is an expense. But that's not the whole story - when they first sold the option they would have to report as income the amount they received from the employee.

Suppose they sold an option worth $1000. Then their income/expense statement would show an item for income of $1000. Then when they refunded the employee's money, they would have to show an expense of $1000. So they would have

Income +$1000.00
Expense -$1000.00
Net 0

In other words, the income and the expense would cancel each other out.

If they want to expense stock options, then they need to report the same amount as income, too. Otherwise it's like trying to pass a law that says 2 + 2 = 6.

I'm all for reigning in stock option abuse among executives, but let's find a way that doesn't involve trying to legislate the laws of mathematics.