Top Wealth Management Posts in November
Posted by: Michael Zhuang on: December 1, 2011
10. America’s top financial advisors: how they are made?
8. The 2011 estate tax changes
7. Why asset class diversification is superior?
6. Recession and stock market performance
5. Variable annuity fees you don’t know you are paying
3. 2011 year end tax-planning tips for individuals
2. Bonus depreciation: Congress wants businesses to invest in 2011
1. Profit from Harry Dent’s prediction? think again!
Also see Top 10 last month.
Why I Am Most Thankful
Posted by: Michael Zhuang on: November 30, 2011
- In: Charitable | Life
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At 2:24pm on 11/5/2011, my second son Caden arrived in the world. Upon seeing his face, my heart sank since there appeared to be a tiny piece of flesh dangling from his nose.
Buying My Primary Residence
Posted by: Michael Zhuang on: November 29, 2011
- In: Real Estate
- 1 Comment
Less than a week after we were done with settlement on a rental home purchase, we bought a house for our primary residence. The decision process for our primary residence purchase was vastly different from that of the rental property. For one, I didn’t use cap rate to evaluate the primary residence. Instead, we followed these five decision steps.
1. School district
My two sons will grow up in this house, so the right school district was of the utmost importance. My wife did thorough research, and she declared Whitman to be the best school district in the whole state ofMaryland, followed closely by Churchill. The first is inBethesda, the second is inPotomac. These two areas happen to be the most expensive areas in Maryland.
What It Takes to Be a Landlord
Posted by: Michael Zhuang on: November 28, 2011
Owning a rental property as investment may sound attractive to a lot of people who are sick and tired of the volatile stock market. However, owning a rental property is like owning a business. Do you know what it takes to be a landlord? Listen to Paula Pant talks about it.
Podcast: Becoming a landlord
Table of contents
[00:00] Introduction from Tom Dziubek
[00:36] Interview with Paula Pant
– [00:54] Owning rental properties
– [01:51] Analyzing a property’s profitability
– [03:04] Expenses involved
– [04:08] Things to look for in a property
– [05:19] Renting to professionals
Read the rest of this entry »
The Perils of Market Timing
Posted by: Michael Zhuang on: November 18, 2011
[Guest post by Tom Warburton] Market timing is alluring, but, you have to be right twice – when to get out and when to get back in – over and over. We have NEVER found evidence of anyone successfully practicing this tactic over a statistically significant period of time.
Market timers get out hoping they have ‘called a market top’ – OR – get in hoping they have ‘called a market bottom’. But then the agonizing work begins because market timers not only have to be right on When To Get Out Of Their Seat but also When To Get Back In Their Seat. It is this second decision that is so terribly difficult. When markets move up, or down, they do so VERY quickly.
Get my white paper: The Informed Investor: 5 Key Concepts for Financial Success.
History Demonstrates That If Investors Miss The Best Market Days
Their Long-Term Returns Are Dramatically Reduced.
Staying in Your Seat
Posted by: Michael Zhuang on: November 18, 2011
[Guest post by Tom Warburton] Who could forget the recent World’s Series? Man, was that sixth game otherworldly or what!
The day after the sixth game a buddy wandered in – remorseful that he, while watching the Cards vs Rangers, had gotten up out of his seat to go out in his backyard with his dogs (to do who knows what) only to return to his seat and discover that he had missed the walk-off Home Run by Freese – arguably the climactic play of the season!
Making Charitable Donations
Posted by: Michael Zhuang on: November 12, 2011
My second child was born with a minor deformity in his nose. He looks like he has a cleft nostril.
When I first saw that, my heart sank like a rock. I began to imagine that if he grew up like that, the ridicule and rejection he would have to endure. I also worried that it might be a symptom of a major sickness. What about his nose, mouth, and brain? Are they normal?
Suddenly, I could empathize with parents who had a cleft lip baby. I knew how they felt, except that their emotions are probably 100 times more intense than mine.
The hassles of buying a short sale property
Posted by: Michael Zhuang on: November 10, 2011
For folks who think we got a great deal on our investment property, they have to balance that with the hassles we were put through. All in life is fair; there is a reason why these houses are sold cheap.
A short sale is like a tripartite dance between the buyer, the short seller, and the bank that holds the title, and that’s not counting the buyer’s mortgage lender. Any one of these can trip up the others, and the deal will fall through.
Here is the list of 10 troubles we went through:
1. The seller was willing to sell at $170,000, and he said the bank had pre-approved the price. Once we accepted the price, the bank (Bank of America) reneged. It would not release the title unless the price was $180,000. After a few weeks of negotiation, we split the difference – $175,000.
Buying an Investment Property
Posted by: Michael Zhuang on: November 9, 2011
Invest in a house
In December of last year, a real estate agent who is a close friend brought our attention to a townhouse in short sale. The townhouse is in the fastest growing neighborhood inMaryland. It is within walking distance of the town center and a short drive away from an interstate highway.
The seller bought the townhouse for $350k five years ago, and he was now asking only $170k.
I did a quick search on Zillow and found out that similar townhouses in that area are renting for about $1,700 per month. I did another search on the county planning board and found that a new hospital is being planned nearby. Then, I went with my wife to check out the place, and it was in relatively good condition. We decided to buy it on the spot.
Is the Sky Clear Enough Yet?
Posted by: Michael Zhuang on: November 9, 2011
[I wrote this two weeks ago.]
Clear Sky
On September 12, a client of mine called me to get out of stocks altogether.
He used a vivid analogy: “The storm is raging; I will wait until the sky clears before I get in again.” The storm he referred to was the European debt crisis. Judging by my many interactions with investors, he is not alone.
This morning, I woke up to great news: the Europeans have finally hammered out a debt deal in whichGreeceonly needs to pay 50% of what they owe to the banks. With this debt reorganization, it looks like we will not have a Greek default (even though this is really a default by another name, but that’s the subject of another piece).
Top Wealth Management Posts in October
Posted by: Michael Zhuang on: November 9, 2011
10. Is PE ratio a useful stock valuation measure?
9. Why asset class diversification is superior?
8. The 2011 estate tax changes
7. America’s top financial advisors: how they are made?
6. Recession and stock market performance
5. Variable annuity fees you don’t know you are paying
4. 2011 year end tax-planning tips for individuals
3. Why doctors don’t get rich
2. Bonus depreciation: Congress wants businesses to invest in 2011
1. Profit from Harry Dent’s prediction? think again!
Also see Top 10 last month.
Is the Greek haircut really a default?
Posted by: Michael Zhuang on: October 28, 2011
Greek Hair Cut
This morning, I woke up to news that the Europeans, Germans mostly, have finally hammered out a deal with Greece, which now only needs to pay 50% of what it owes to private lenders (mostly German banks). German Chancellor Angela Merkel called this a 50% “haircut.”
World markets cheered the news by rallying 2% to 6%. But wait a minute, how is it different from a Greek default? Is the market dumb or not?
There are lessons for investors in this.
10-Year Return Perspective of Small Cap Value
Posted by: Michael Zhuang on: October 26, 2011
Many investors are puzzled by the underperformance of small cap value since May of this year. They ask: “Is it worth being in an asset class that can’t do well in bad times?”
To answer their question, I did a 10-year rolling return comparison between the Fama/French Small Cap Value (SCV) and the S&P 500 index using data from 1931 to 2010. The first 10-year period is 1931 to 1940, the second is 1932 to 1941, and the last is 2001 to 2010. Here is the rolling return chart I got.
Year-End Tax-Planning Tips for Businesses & Business Owners
Posted by: Michael Zhuang on: October 22, 2011
Businesses should consider making expenditures that qualify for the business property expensing option. For tax years beginning in 2011, the expensing limit is $500,000 and the investment ceiling limit is $2,000,000. And a limited amount of expensing may be claimed for qualified real property. However, unless Congress changes the rules, for taxyears beginning in 2012, the dollar limit will drop to $139,000, the beginning-of-phaseout amount will drop to $560,000, and expensing won’t be available for qualified real property. The generous dollar ceilings that apply this year mean that many small and medium sized businesses that make timely purchases will be able to currently deduct most if not all their outlays for machinery and equipment. What’s more, the expensing deduction is not prorated for the time that the asset is in service during the year. This opens up significant year-end planning opportunities.
2011 Year-End Tax Planning Tips for Individuals
Posted by: Michael Zhuang on: October 19, 2011
Tax Loss Harvesting
Realize losses on investment without substantially changing your portfolio positions; for instance, selling Vanguard 500 Index and buying Vanguard Total Stock Market Index.
Roth Conversion
If you do a Roth conversion, the IRA account will become a multigenerational tax shelter. Do this only if you have sufficient cash to pay taxes now.
Capital Gains
The 15% rate on long-term capital gains was extended through the end of 2012. After that, the rate could go up to 20% or higher. You may want to sell assets to realize long-term capital gains and reset the basis.
Dividends
The 15% rate on qualified dividends was also extended through 2012. If you are a shareholder in a closely held corporation with accumulated retained earnings, you may wish to take dividends now, while the rate is low. In 2013, a surtax on investment income will become effective.
Required Minimum Distribution (RMD)
If you are age 70.5 and older, don’t forget RMD from your IRA and 401k plan.
Health Flexible Spending Account (FSA) and Health Savings Account (HAS)
Increase the amount you set aside for next year in your employer’s health FSA if you set aside too little for this year. If you become eligible to make HSA contributions in December this year, you can make a full year’s worth of deductible contributions for 2011.
Qualified Small Business Stock (QSBS)
Purchase QSBS before the end of this year. There is no tax on gains from the sale of such stock if it is (1) purchased after 9/27/2010 and before 1/1/2012 and (2) held for more than five years.
Bonus Depreciation
This is still in effect and allows expensing of 100% of the cost of eligible assets acquired in 2011. The rate will fall to 50% and the provision will expire at the end of the year.
Charitable Gifting
Gift your significantly appreciated assets, or if you are age 70.5 and older directly from your IRA.
Gifts
You can give a total for the year of up to $13,000 to each individual without reducing your lifetime gift or estate tax exclusions.
Kiddie Tax
If your children do not fall under the kiddie tax rules, give them appreciated shares of stock or mutual funds instead of cash. Their lowest capital gains tax rate could be 0%.
Education Saving
Set up 529 plans for your children and claim state tax deductions. The deduction limit is per plan owner per beneficiary. Take Virginia, for example; the limit is $4,000. For a couple with three children, the maximum state tax deduction is 2x3x$4,000 = $24,000.
Energy Tax Credit
If you are a homeowner, making energy savings improvements to the residence may qualify you for a tax credit if those improvements were installed in your home before 2012
Get my white paper: The Informed Investor: 5 Key Concepts for Financial Success.
Why I Am Bullish About The Market?
Posted by: Michael Zhuang on: October 3, 2011
What happened to the market in August and September?
Between July and the end of September, markets lost between 13.5% (Dow) and 27% (Emerging markets) depending on which market you are looking at.
I pored through economic data and could not see any marked deterioration in the economy. In fact, on balance, I see continued slow improvements.
Pundits attribute the market tumble to 1) political gridlock in Washington and 2) the European debt crisis. I don’t buy either of these explanations.
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