Archive for the ‘Wealth Management’ Category
Judge’s gavel
Why do I need an expensive lawyer to do estate planning for me? Why can’t I just write my will on a piece of paper with two people as witnesses?
This is a question I got from a woman who owns 11 properties in 5 different states. Here is how I explained it to her.
It’s a bad idea to write your own will. Each state has its own descent and distribution law that governs the distribution of the estate of the deceased.
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Crises and opportunities
Posted on: August 13, 2012
Is Refinancing Right for You?
Do you see any evidence of superior investment strategy for the last five years? Seems all is correlated and all is going nowhere.
This is a question I got from a reader of my newsletter.
I hate to be impolite, but I think he is focusing on the wrong thing. Yes indeed, over the last five years, the market has given us one disappointment after another – first the financial crisis in the US and now Europe.
There is a silver lining in all of these crises, though. Mortgage rates are at an all-time low. Five years ago today, the 30-year mortgage rate was 6.75%; now it is 3.5%. If you have a $400k mortgage on your house, do you know how much you save if you refinance?
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The best investment I’ve ever made
Posted on: August 8, 2012
Person holding house
I got my power bill yesterday for the first time after moving into my new house. I instantly felt half a million dollars richer.
When we purchased the new house, one of the biggest concerns we had was the utility bill. The previous owners showed us that they spent $1,000 on power and gas each month and that number was pretty constant year round. The house was in good shape, but the windows had not been replaced for 20 years and were leaky.
So the first thing we did after settlement was to replace all the windows.
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Posted on: August 5, 2012
I met a CPA yesterday and we have a lively discussion about option writing strategies. He is torn between the benefit and the time needed to execute the strategy. I wrote an article 4 years ago that could reconcile the two.
I wrote this article in early December 2008. Amazingly, it is one of the least read in my blog. Had
someone read it and followed it, he would have earned 10% return so far in 2009.
– Michael Zhuang 3/10/2009
At the moment of writing this, SPY, the exchange traded fund (ETF) for the S&P 500 index, is trading at $85.95 and the near at-the-money call option (with strike 86 and only eight days until expiration) is trading at $3.45! (A call option is the right to buy the underlying stock at the strike price. At-the-money means the option strike price is equal to the price of the underlying stock.)
The at-the-money call premium is a full 4% of the underlying index price! Historically, that number has been in the 1% to 2% range.
What does 4% premium imply?
View original post 469 more words
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10. Would You Buy This Variable Annuity with Income Guarantees?
9. Portfolio Rebalancing Returns
8. Be Careful When Buying a Condo as a Rental Property
7. Variable Annuity Fees You Don’t Know You are Paying
6. Small Cap Value: Risk and Returns
5. Recession and stock market performance
4. Managed commodities can counter volatility…NOT
3. Why Asset Class Diversification is Superior
1. Profit from Harry Dent’s predictions? Think again
Also see Top 10 last month.
Get informed about wealth building, sign up for The Investment Scientist newsletter
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Multi-generational families
A councilman from Montgomery County (a wealthy county just outside of Washington DC) once told me: Asian Americans in our county are doing very well economically, but surprisingly Asian American seniors have the highest poverty rate among all ethnic groups.
I know why: their children are depriving them of social security and Medicare benefits.
Most Asian American immigrants are the crème de la crème of their home countries. Armed with intelligence and diligence, they find tremendous success in the land of opportunity, especially in the field of science and business. One only needs to count the number of government contractors of Indian origin in Northern Virginia or research scientists of Chinese origin at the National Institutes of Health to find proof of that.
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Little-known Secrets of How Small Business Owners Pay for their Kids’ Education
Posted on: July 18, 2012
College graduation
Being a small business owner comes with risk, responsibilities, and advantages.
This week I went to a seminar called “Little-known Secrets of Paying for College”.
My biggest take away was that everything being equal, being a small business owner makes it easier for your kids to qualify for financial aid. Let me explain.
Universities and colleges determine the financial aid eligibility of a student by the following formula: COA – EFC, where COA stands for cost of attendance and EFC stands for expected family contribution. COA is fixed, so the lower the EFC, the higher the amount of aid the student is eligible for.
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Posted on: July 16, 2012
I have a new client who suffers from the same problem: her retirement accounts are choked full of Allianz’ variable annuity products very similar to this Lincoln product I reviewed a year ago. They are not as deviant as the Lincoln product in term of hiding fees, but they are nowhere close to being a keeper.
Recently, I was approached by a prospective client named John, who has all of his retirement in one annuity.
I have always been intrigued by how annuities and life insurance are sold. Listening to John explain his decision-making process and reading through the annuity contract is like turning on the light bulb in my head.
It turns out that the unique selling point of this product is the “200% Step-Up of the Guarantee Amount (GA).” The way John puts in, if he just keeps the annuity for 10 years, he will get back 200% of what he put in. What is there not to like about that! After all, he gets guaranteed upside with absolutely no downside risk.
View original post 280 more words
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[Guest Post by Anthony S. Carducci]
1. Failure to leave any written documentation of your assets, including a list of your online accounts and passwords
2. Failure to let family members know where to find important estate planning documents
3. Failure to name a guardian for minor children or choosing a guardian who lives far away without planning for temporary, local guardianship (solved with a comprehensive Kids Protection Plan®)
4. Failure to name recipients for your personal possessions
5. Failure to designate beneficiaries for retirement and other financial accounts
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Leap of faith
Recently, I went to the monthly meeting of the Chicago Booth Entrepreneur Advisory Group. The group is made up primarily of University of Chicago alumni, and it provides a forum for entrepreneurs to share their issues.
I was blown away by one entrepreneur’s unbridled optimism. He invented a technology that makes changing TV channels on a PC feel as fast as on a real TV. He plans to challenge the cable companies by convincing all of us to watch TV on our PCs.
Yes, cable companies charge us an arm and a leg for their channels, many of which we don’t watch. And nobody loves their cable company. But they have been in business for years. How could a solo entrepreneur working in his bedroom take them on?
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10. Small Cap Value: Risk and Returns
9. When Do You Need Annuities and Life Insurance?
8. Recession and stock market performance
7. Physicians are Not in Real Estate Business
6. Variable Annuity Fees You Don’t Know You are Paying
5. An Investment Rule for Young People
4. Why Asset Class Diversification is Superior
2. Bill Gates: 11 Things You Don’t Learn in School
1. Profit from Harry Dent’s predictions? Think again
Also see Top 10 last month.
Get informed about wealth building, sign up for The Investment Scientist newsletter
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Is Refinancing Right for You?
A recent doctor client of mine told me that he just did a refi through one of his patients who happened to be a mortgage broker.
I asked him what the rate was and he answered: 5% for an 8-year mortgage. This immediately raised a red flag: currently a 15-year mortgage is 3.02%, and a 5-year ARM is even lower at 2.67%. If anything, an 8-year mortgage should have a rate less than 3%.
So every year, he will pay 2% extra in mortgage interest. With a loan of $500k, that’s $10k extra a year. How would you feel if someone stole $10k from you every year? Read the rest of this entry »
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[Guest Post by Christopher Guest] Though most people will not see the significance of April 4, 2012, it was a big date for estate planners in Virginia. On that date, Virginia Governor Bob McDonnell signed SB 11 expanding the number of types of trusts that are permissible in Virginia. Starting on July 1, 2012. Virginia will become the thirteenth state to permit the self-settling of domestic asset protection trusts (or DAPT)i. More significantly, the VA code sections will allow a settlor to establish an irrevocable trust of which the settlor is a beneficiary and will also provide spendthrift protection against claims from the settlor’s creditors.
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10. A balanced portfolio to avoid
9. Is P/E ratio a useful stock valuation measure
8. Bonus depreciation: Congress wants businesses to invest in 2011
7. Be careful when buying a condo
6. Variable annuity fees you don’t know you are paying
5. Bill Gates: 11 Things You Don’t Learn in School
4. Why asset class diversification is superior?
3. Top ten reasons you can’t get rick buying FB
1. Profit from Harry Dent’s prediction? think again!
Also see Top 10 last month.
Get informed about wealth building, sign up for The Investment Scientist newsletter
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Doctors and Real Estate Investments
What would making $1.5mm a year look like? How about living pay check to pay check, and one bad real estate deal away from bankruptcy.
This is exactly what happened to one physician before he became my client. He is a partner of a very large practice and brings home more than $1.5mm a year, and yet he has only $100,000 in his bank account. If he stops working today, the money will run out in three months.
How did he get into such a quandary? In short, real estate.
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Financial Plan for FB Employees
My friend Sally has a friend who is a software engineer at Facebook. The recent Facebook IPO made him a millionaire, many times over. According to Sally, he is overwhelmed by this sudden wealth and wondering how to deal with this mountain of money.
I have a suggestion: put the money in nine buckets.
Let me explain. All you newly rich Facebook employees need is a framework to deal with your money. It is a 3 by 3 box. Horizontally, it is divided into Need, Want, and Aspiration. Vertically, it is divided into Short, Med, and Long.
Need, Want, and Aspiration
The Investment Scientist 