Author Archive
Consider an Employee Stock Ownership Plan
[Based on conversation with and material provided by Ben Wells] For the last 20 years, Jack has owned a custom machining business. He is 55 and would like to diversify his assets, which are all tied up in the business.
Jan runs a manufacturing business. Several of her family members own stock in the company and they would like to sell their stock. However, there is no market for their shares.
James runs a production consulting firm. He needs capital to expand the business and would like to find a way to retain and motivate the firm’s employees.
For Jack, Jan and James, an Employee Stock Ownership Plan (ESOP) could be the answer.
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House for sale
Last week, my wife found another fabulous piece of real estate to invest in. It is a two bedroom/one bath bungalow. It is a 10-minute walk from a metro (subway) station and 15-minute walk from lots of amenities.
It is a short sale; the bank-approved asking price is only $155k. The land is about 0.3 acres adjacent to a park and is worth more than the entire asking price.
It is a very interesting investment decision for us. Let me list the pros and cons.
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10. Recession and stock market performance
9. Life settlement for (convertible) term life insurance
8. Small Cap Value: Risk and Returns
7. An Investment Rule for Young People
6. Why Asset Class Diversification is Superior
5. Variable Annuity Fees You Don’t Know You are Paying
4. Is P/E ratio a useful stock valuation measure?
3. Profit from Harry Dent’s predictions? Think again
1. Be Careful When Buying a Condo as a Rental Property
Also see Top 10 last month.
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My friend Dan is in the life insurance business. Recently, he shared with me a case in which he helped a client of his (let’s call him John) get $600k out of his term life insurance with life settlement.
In case you don’t know what life settlement is, it’s the sale of an insurance policy by the owner to a third party for a price higher than the policy surrender value.
How does this work?
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Tax planning tips
[Guest Post By Cal Klausner] Charitable contributions should be timed so as to obtain the maximum tax benefits, either in 2012 or 2013. If a taxpayer plans to make a charitable contribution in 2013, he should consider making it this year instead if speeding up the deduction would produce an overall tax saving, e.g., because the taxpayer will be in a higher marginal tax bracket in 2012 than in 2013.
On the other hand, a taxpayer who expects to be in a higher bracket in 2013 should consider deferring a contribution until that year. This task is more difficult than in prior years because of uncertainty over whether rates will rise next year under the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) sunset.
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Is this your retirement fund?
A client of mine is about to retire, and she asked me when she should start to receive social security payments.
Complicating her decision is that her husband passed away 10 year ago, and she is currently working for the federal government.
It quickly dawned on me that this is actually a very complicated question, one that this advisor, most of whose clients are doctors and business people in their 40s and 50s, is not well-equipped to answer.
You can imagine my delight when I found out on a flight that the foremost social security expert of the country, Mary Beth Franklin, was sitting right next to me.
She is a former senior editor of Kiplinger. After she retired from the job, she became a contributing editor of InvestmentNews, a magazine for financial advisors.
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Posted on: October 8, 2012
There are simple ways to bring more luck to yourself: 1) Smile; 2) Don’t cross legs or arms; 3) Open to chance encounters; 4) Keep up relationships.
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Like Odysseus, automatic investments help investors avoid the Siren call of market timing
We call it stupid if someone takes a $55k job, even if he is offered the same job at $100k.
We call it market-timing when the same thing happens in the stock market. The long-term average annual market return is 10%, but the long-term average annual investor return is only about 5.5%. This is documented both by Dalbar’s study titled “Quantitative Analysis of Investor Behavior” and Morningstar’s research on fund returns and investor returns.
How could this possibly happen?
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10. How investors lost money: evidence from mutual fund flows
9. Portfolio rebalancing returns
8. Is P/E ratio a useful stock valuation measure?
7. Why Asset Class Diversification is Superior
6. Small Cap Value: Risk and Returns
5. Variable Annuity Fees You Don’t Know You are Paying
4. Recession and stock market performance
3. Be Careful When Buying a Condo as a Rental Property
1. Profit from Harry Dent’s predictions? Think again
Also see Top 10 last month.
Get my white paper: The Informed Investor: 5 Key Concepts for Financial Success.
Get informed about wealth building, sign up for The Investment Scientist newsletter
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FSA: It’s all about flexibility
Flexible Spending Accounts (FSAs) are benefits offered by some employers. Money put in the accounts is exempted from income tax, payroll tax, and in most cases state and local taxes.
There are generally two types of FSA: health care FSA and dependent care FSA. As the names imply, money in a health (dependent) care FSA can only be used towards eligible health (dependent) care expenses.
Take my wife as an example; she put $2,000 into her health FSA and another $5,000 into her dependent care FSA. Since we are in the highest tax bracket and we live in a high tax state, the total tax saving is close to $3,500, or 50%.
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Here is a selection of the best wealth management articles around the web for September:
5 reasons your portfolio is too complicated, by Kyle Bumpus
Why analysts are scratching their heads over QE3, by Robert Wasilewski
Under the radar bill could benefit fiduciary rule making, by FI360
Is rebalancing market timing?, by Mike Piper
Choosing a mutual fund – Avoid these 6 mistakes, by Roger Wohlner
Fidelity’s new retirement saving guidelines, by Barbara Friedberg
Can I consistently outperform the market? by Ken Faulkenberry
Dividend reinvestment plans (RIPS) and their benefits, by Dave Scott
Questions to ask when picking a financial advisor, by Carl Richards
Get my white paper: The Informed Investor: 5 Key Concepts for Financial Success.
Get informed about wealth building, sign up for The Investment Scientist newsletter
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Last week, the Fed announced another round of quantitative easing (QE3).
This time around, they plan to buy $40 billion worth of mortgage-backed securities with created money until the employment picture improves. Compared to QE1 and QE2, QE3 is open-ended.
How does this affect your personal finances?
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Commercial property investment
For investors who can’t stomach the volatility of real estate investment trusts (REITs), but also don’t want to get their hands dirty, there is the middle way in real estate investment, namely through a private partnership.
A real estate investment private partnership (REIPP) is a pool of investors’ money that is invested in commercial or residential properties. As an investor, you can contribute capital as a limited partner and let the general partner do all the dirty work. Sounds like the best of both worlds, doesn’t it?
It is emphatically not.
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House for sale
My wife and I own a couple of rental properties, so I feel like I am qualified to give my 2 cents worth on another way of investing in real estate – owning rental properties directly.
Now let me be clear: owning rental properties is a business; it is no longer an arm’s-length investment. It is great for some people, people who are hands-on and disciplined, but it could be a disaster for others.
When we posted a notice to rent out our townhouse, the first person to answer was a single mother with three kids. My wife checked her credit – it was bad. When my wife said no to her, she could not hear the pleas of my bleeding heart: Rent it to her! She has three kids to take care of! We’ll waive her rent if she can’t pay!
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Meeting Allan Roth
Posted on: September 10, 2012
financial blogging
I was in Denver attending the Financial Blogger Conference (FinCon12), and I was thrilled to meet Allan Roth there.
If you don’t know Allan Roth, for the sake of your financial wellbeing, you should.
Allan is an hourly fee-only financial advisor practicing in Colorado Spring. He also writes an investment column for CBS MoneyWatch. Recently, Jason Zweig invited him to write a column in the Wall Street Journal as well. Read the rest of this entry »
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New York Stock Exchange
When talking to prospective clients, I am upfront about what I can and can not do. I can NOT beat the market.
Recently, that straightforwardness caused me to lose a prospective client to a major Wall Street firm. Apparently, the financial advisor from that firm was able to convince him that with their exclusive location, expensive brochure, and nice Armani suits, they could beat the market.
This led me to do a mental exercise.
The Investment Scientist 