Features: Smart Money http://www.theplaybookpub.com/features/ en Copyright 2010 Tue, 02 Sep 2008 16:06:47 -0500 http://www.sixapart.com/movabletype/ http://blogs.law.harvard.edu/tech/rss A Taxing Situation Reason To Contribute If you have a traditional IRA, you’re contributions are made on a pretax basis, which means each dollar you contribute is deducted from your taxable income. The contribution limits for 2007 are $4,000 if you are under 50. Taxpayers 50 or older get to use what is called a “catch-up provision” and can contribute an extra $1,000 for a total of $5,000. A married couple filing jointly and over 50 are eligible to subtract $10,000. If you utilize a Roth IRA the contributions are still the same but you are using after tax dollars; the advantage being all the growth and ultimate distributions are tax free. This type of account makes more sense for a younger person who will have more opportunity to benefit from the markets. Finally, the IRS has recently made changes in how you can receive your tax refund. The agency now allows your refund to be deposited directly into your IRA. Not only that but if you expect to receive the refund prior to April 15th you could even elect to make it a 2007 contribution. However, the IRS is only responsible for sending the check; it is up to the taxpayer to deposit it. With the markets trading where they were last year and the IRS allowing you to make contributions for 2007 all you have left to do is get a copy of Huey Lewis and The News singing “Back in Time” to recreate your own movie.]]> http://www.theplaybookpub.com/features/2008/04/a-taxing-situation/ http://www.theplaybookpub.com/features/2008/04/a-taxing-situation/ Smart Money Sat, 12 Apr 2008 22:50:52 -0500 The Secret is Out per month and is so safe that the government allows you to use it in your self-directed IRA accounts. Everyone is motivated to make money. More importantly, everyone is capable of utilizing the strategy called "Covered Call Writing." Simply take a few months to learn how to sell stock options, than you have years and decades to start generating tremendous amounts of cash into your accounts every single month.

Here is how this works:

Purchase 100 shares of stock of company XYZ at $48 per share. Your investment is therefore $4,800. Now you sell an option--the right, but not the obligation--to buy those shares from you for $50 per share at any time over the next month. For undertaking this obligation you are paid a premium of $1.60 per share or $160 for the 100 shares. This represents a one month return of 33% or 40% annualized. If these shares are actually purchased from you for $50, then you will make another $200 profit (paid $4,800 and sold for $5,000). This makes your final profit $360, for a one month return of 7.5%. Why doesn't everybody use this system? Well, we are never taught how to do this in school. Secondly, it is in nobody’s best interest to teach it to us when we graduate; certainly not stockbrokers or financial planners (although many of these professionals are outstanding in their fields). Learning a system like this will give the average blue collar investor a chance to make money in the Stock Market just like a Wall Street insider. All you need is the knowledge, the motivation, and a computer (all trading is done online, ensuring that you never speak to another person). A recent publication called Cashing in on Covered Calls by Alan Ellman teaches you how to use this strategy. His book can be purchased online at thebluecollarinvestor.com. There is nothing like hitting the big jackpot in a casino. But save some of your hard-earned money to invest in yourself. Become CEO of your own money by cashing in on covered calls.]]> http://www.theplaybookpub.com/features/2008/03/the-secret-is-out/ http://www.theplaybookpub.com/features/2008/03/the-secret-is-out/ Smart Money Sat, 01 Mar 2008 14:43:25 -0500 Spreading the Wealth Simple Successful Formula The real question is not whether you should diversify, but rather how much. This is a hotly debated question. However, the short answer is you should have at least three or four stocks in at least four industries or mutual funds that are in four or more asset groups. If you own five mutual funds but they are all in financial industry you would have seen a significant pullback through the recent market slide. Yet, if you had five different areas of investments your exposure would have been greatly reduced. A portfolio with a significant amount invested in bonds (which every account should have some exposure) would have actually been up through the recent last few turbulent months. One other way to take market volatility out of the equation is to make periodic investments into the market or through Dollar Cost Averaging (DCA). Diversifying your stock buys and when you purchase them will reduce--but certainly not eliminate--the risk of making bad investment choices. Practicing diversification will also enable you to develop discipline in your investing strategy. Timing Is Everything As veteran car salesmen will say: "The best time to buy a convertible is in the winter." The lesson being to buy when no one wants to; when markets have large pullbacks you can get the same opportunity. So when the sun is out and the weather warms up you can be in the driver’s seat.]]> http://www.theplaybookpub.com/features/2008/02/spreading-the-wealth/ http://www.theplaybookpub.com/features/2008/02/spreading-the-wealth/ Smart Money Fri, 01 Feb 2008 19:25:00 -0500 Patience is a Virtue CONSERVING YOUR BANK ROLL Consistency is a much better approach than waiting for that hot run at the blackjack table or hoping the next shooter is the one who goes on the roll at the crap table. Play conservatively by dividing your bankroll - the amount you bring into the casino - into three different sessions. Whether that amount is $300 or $3,000 depends on what you can afford to lose. By dividing your bankroll into three separate session amounts, you can maximize your play and be in a position to take advantage when a table gets hot. If you have a $300 session (one-third) of your bank roll, you should never wager more than 10 percent of what you have in any one hand. That does not mean you can't increase your bet. Your wagering amount goes up as you win - but it never increases when you lose. That's probably just the opposite of the way you play when at the table. Many players lose their discipline when things start to go the wrong way. They want to "double-up and catch-up" even if they logically understand the right way to play. We are here to tell you once again that patience is one of the greatest gambling virtues there is. If you hit a cold streak, take your money and walk away for 15 minutes. There's no law against leaving the table without losing all your money. Then come back and try again. Keep your bankroll in mind and don't reach for that plastic in your wallet. Stay patient and just wait for the tide to turn.]]> http://www.theplaybookpub.com/features/2008/01/patience-is-a-virtue/ http://www.theplaybookpub.com/features/2008/01/patience-is-a-virtue/ Smart Money Tue, 01 Jan 2008 21:49:08 -0500 When Down Is Really Up Riddle me this: Where is the only place you can buy an item that sells for half the price and no one wants it? Answer: The stock market. How many times do you see people throwing money at a stock going to new highs with absolutely no regard for logic? However, if you cut that stock in half you can't give it away. Well the reason is simple to quote Gordon Geco, the cut throat multi-millionaire from Wall Street, "Greed is good." Not really but it does make people act irrationally. SLOW AND STEADY WINS THE RACE In the world of investments there is a strategy that will reward the steady investor, especially in a down market. It is known as dollar-cost averaging (DCA). Think of this as the proverbial tortoise and the hare scenario. DCA averaging is carried out simply by investing a fixed dollar amount into your mutual fund (or other investment instrument) at pre-determined intervals. The amount of money invested at each interval remains the same over time, but the number of shares purchased varies based on the market value of the shares at the time. When the markets are up, you buy fewer shares per dollar invested due to the higher cost per share. When the markets are down, the situation is reversed and you purchase a greater number of shares per dollar invested. By implementing this strategy the emotion from your investments is removed. Due to pricing, using no load mutual funds is the perfect investment vehicle. If you are using individual stocks you will pay a commission on every purchase. In comparison, the structure of the mutual fund expense ratio makes the investment more accessible; the no-commission trading of the mutual fund coupled with low minimum investment requirements allows almost everyone to afford mutual funds. This practice is not restricted to the small investor. If you have a large sum of money to invest and don't want to risk the market fluctuations just utilize this practice. So now when you wake up and the markets are imploding you can be one of the few voices saying "Go baby, go!" However, we don't recommend doing so around your friends.]]> http://www.theplaybookpub.com/features/2008/01/when-down-is-really-up/ http://www.theplaybookpub.com/features/2008/01/when-down-is-really-up/ Smart Money Tue, 01 Jan 2008 16:20:00 -0500 A Gift That Will Last A Lifetime Using A 529 The first thing you need to know about helping invest in your grandchild's future education is the number 529, as in the tax code 529. This code allows money to be placed in the child's name, but to be used only for the purpose of a college education. You see if you just pass this on into a child's custodial account, he or she has full access to the money by the age of majority (in most states that is 21). So there is a chance that money could be invested in a Harley and not Harvard. What the 529 plan allows you to do is pass cash (cash only, you can not pass any other assets) into these state run plans and that money will grow tax free and all distributions to an accredited college will be tax free. There are no taxes on any of the gains as long as it goes to a college. However, each state has its own plan and there are several web sites that will help you navigate the strengths and weakness for each of these plans. One question you might ask is if the child doesn't go to college, or gets a scholarship, what happens to the money? There's no age limit on using 529 money, so you can avoid paying the penalty if you keep the money in the account in case the recipient decides to attend college later; switch the beneficiary to pay for the spouse's tuition; your grandchild's college; or even the spouse's education if she wanted to return to school. Already Paid For If the child gets a scholarship, an equal amount of money can be pulled out of the plan with no penalties, making for one heckuva perk for a hard-working child. If you withdraw the money for any reason other than to pay for educational expenses, then it will be taxed on the earnings--generally at your income-tax rate and will owe a penalty of 10% of your earnings. Some states have additional penalties, too. If you had taken a state income-tax deduction for your contribution, you may also have to pay it back. The important thing to remember is this games, gadgets, and trinkets come and go but an education is the one gift that will not just allow the recipient to reach new heights, but will establish your legacy.]]> http://www.theplaybookpub.com/features/2007/12/a-gift-that-will-last-a-lifetime/ http://www.theplaybookpub.com/features/2007/12/a-gift-that-will-last-a-lifetime/ Smart Money Wed, 05 Dec 2007 13:30:00 -0500 The Thanks-gifting Season Getting Started 1. Talk it over with your family and tax advisor. Find out how this will have an impact on your financial needs. 2. Define the charity you want to contribute to. Don't assume it is a real charity. Ask the organization for their Form 990. This is the official IRS form that will list their tax status. 3. Decide if you want to take income from your gift. 4. Than decide if you want to replace the assets back to your estate upon your death. Let's tackle the first two steps. Making this a family decision will allow you to teach your family what charitable gifting really is, by putting your money where your mouth is. Bringing the family in will also help you with the decision on who to give to. The entire family will feel a sense of responsibility and want to make sure the charity grows. However, points three and four will result in a loss of the money. This can sometimes be cause for ill feelings. (And do you really want that when trying to do well?) So the best way to make this a win-win situation is to replace that money back to the family - and doing it tax free. Everyone Benefits By establishing a Charitable Remainder Trust (CRT), you can place the assets into the CRT and design it so you earn a distribution. That money will enable the CRT to purchase life insurance at twice the value. By doing so, you and your family receive the current tax benefit for donating and established a trust that will be carried on after your death that your family will oversee. (Can you say legacy). As an added bonus, upon your death the family will receive the cash you took out of your estate in return totally tax free. Next Month: Getting your fiscal house in order before the New Year]]> http://www.theplaybookpub.com/features/2007/11/the-thanksgifting-season/ http://www.theplaybookpub.com/features/2007/11/the-thanksgifting-season/ Smart Money Sun, 11 Nov 2007 22:13:04 -0500 Will You Be Ready When You're Gone? It is estimated that over 70% of people in this country die without a will or trust. Of those that do, a startling 50% are outdated or inadequate. Why is that? For the most part, thinking and planning about your own mortality is a subject easily avoided. Also, it is easier to believe that everything will be properly handled after the funeral or memorial service. Don't be foolish. Establishing a will is not difficult. A simple statement reading "being of sound mind and body" can be found on the internet for a nominal fee. A will allows you to leave any possession(s) you want to whomever or whatever you want. A will is not constrained by any state or federal mandates. By creating a will you can avoid dying in "intestate," or with out a will. By passing away in intestate your estate - including the guardianship of your children - must now go to probate, thereby allowing the court to decide what will become of your children, money and possessions in accordance with state laws. In simple terms, this means the state, not you, gets to decide what happens after you're gone. A will is imperative to the parents of young children. Establishing guardianship over the children in the unlikely event that both parents are deceased can avoid ugly fighting between families and friends. If you already have a will, it is important to make sure that the document is updated. Think about this scenario: After being married for several years, you and your first spouse have a bitter divorce. A short time later, you find a new "love of your life" and marry and start a new family. During this tumultuous period, your personal fortune increases three-fold. Good for you! Unfortunately, your life is cut short and you die. Since you never updated your will, your first spouse is legally entitled to inherit everything, leaving your current spouse and children with nothing. Think of it this way: You can change the batteries in your smoke detectors once a year to keep it up to date and working and you can change your will anytime a dramatic change in your life takes place. Both of these will save your family during a critical period. http://www.theplaybookpub.com/features/2007/10/will-you-be-ready-when-youre-gone/ http://www.theplaybookpub.com/features/2007/10/will-you-be-ready-when-youre-gone/ Smart Money Mon, 01 Oct 2007 00:00:00 -0500 Investing For Your Future GETTING STARTED IS SIMPLE If you have a 401K, or better yet, one that is matched by your employer, than maximize it. If possible attempt to put away the maximum amount allowed by your plan. If you do not have a 401K, another smart and easy plan of attack is to make a contribution to a qualified plan, such as an IRA. Here again, it is best to attempt to put away as much as the limits will allow. The internet provides an enormous amount of software programs designed specifically for financial forecasting. Also, most of the full service and discount brokerages offer software for free or for a nominal fee. The bulk of these plans will help you evaluate where you are and where you are going. By using the Rule of 72--if your money returns you 10 percent per year it will take 7.2 years to double—you can see the true value of starting as soon as possible. Look at what your risk parameters are and what you would reasonably like to earn on your money every year and begin. Another option would be to begin to set up a stock portfolio with the help of a qualified stock broker. The stock market has delivered consistently for investors over the decades, even as the market has experienced highs and lows. For example, if you had invested $2,000 a year for the past 20 years at an average rate of return of 10 percent, the conservative investment would have a present day value of $139,460. Not bad for a $40,000 investment. You should expect that every brokerage firm has costs, from discount to full service; it all depends on what you want to accomplish. While this is more work than spending a couple of bucks on the lottery, the reality is your return will be a whole lot more.]]> http://www.theplaybookpub.com/features/2007/09/investing-for-your-future/ http://www.theplaybookpub.com/features/2007/09/investing-for-your-future/ Smart Money Sat, 15 Sep 2007 04:09:46 -0500