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What the Tax Cuts Mean for You
Tweet Share on Facebook December 10, 2010 CommentUnless you have been hiding under a rock, you know by now that the Obama Administration and the Republicans have reached a compromise on the Bush-era tax cuts, which will not only extend the current income tax rates for the next two years for all Americans, but also keep any capital gains and dividends taxed at the current lower tax rates.
The compromise also reinstitutes the estate tax from the 2010 level (no estate tax—everything is exempt) up to a $5 million exemption per person. This means that a married couple will have a $10 million exemption. Additionally, it sets an estate tax rate of 35 percent for any amount above the $5 million or $10 million limit.
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Zen and the Art of Asset Allocation
Tweet Share on Facebook December 9, 2010 CommentWhile it has been proven that an active investor's machinations over his portfolio probably won't help his returns, a recent study has shown that it won't help his happiness, either. The Gallup World Poll of 132 nations and more than 136,000 respondents reveals that the United States, although it's the richest nation on earth, is losing out to poorer nations when it comes to personal contentment.
According to the study, Latin American countries trounced the United States in day-to-day happiness even though their income levels fall far short. Why is that? After basic human needs are addressed, happiness appears to increase based on rewarding relationships and a strong sense of community—not greater wealth.
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Structured Notes: Guardrails for Your Investments
Tweet Share on Facebook December 8, 2010 CommentGiven recent market turmoil, budget deficits, high unemployment, and the risk of elevated inflation, Americans are worried about the stock market and their investments. In such uncertain economic times, understanding all of your options is half the battle.
Frequently, strategies emerge that are unfamiliar to both average investors and even some seasoned investment managers. One such investment is the structured note. Structured notes can offer the best of all worlds that the investment markets have to offer—but understanding them is the key.
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Why Mutual Funds Are the Best Investment
Tweet Share on Facebook December 7, 2010 CommentMutual funds may not look sexy, but for most people, they're the best way to achieve financial goals. That's because mutual funds are professionally managed and offer diversification, which you don't get when you buy individual stocks.
First, let's consider why professional management matters. When you buy a fund, the fund takes your money and pools it with others' money into one big pile. The fund manager's job is to decide which stocks to buy, sell, and hold—while you're busy at work and raising children. Each manager uses a methodology or discipline to select stocks or bonds. Every day, fund managers and their team of analysts examine the companies they own to see if they still fit their criteria for securities selection.
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5 Things You Should Know About Asset Allocation
Tweet Share on Facebook December 3, 2010 CommentWhen I meet with clients for the first time, one of the topics that always seem to come up is asset allocation. More often than not, the term is so shockingly misunderstood and improperly referenced that I feel clarification is in order. So let's clear a few things up:
First, what is asset allocation? Simply put, asset allocation is used to determine an appropriate mix of various asset classes (stocks, bonds, cash, real estate, etc.) which will produce the maximum return given the level of risk an investor is willing to accept. It entails assigning a percentage weight to various asset classes and the resulting mixture is what creates a portfolio.
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ETF Basics: How to Fight Inflation
Tweet Share on Facebook December 2, 2010 CommentIn January 1997, the U.S. government began issuing a new type of bond: Treasury Inflation Protected Securities (TIPS). TIPS are a separate asset class that's distinct from bonds because they behave differently during inflationary times. By owning them, you are further diversifying your portfolio and reducing risk. If you don't own TIPS, you should. At MarketRiders, every retirement portfolio we recommend has at least a 5 percent allocation to TIPS.
Here's why: Regular bonds depreciate in value if there is inflation. If you bought a $100,000 bond that pays 5 percent interest, you'd get your $5,000 per year in interest. But if in three years, bonds were paying 8 percent interest, the bond you owned would be worth less because investors would only have to buy a $62,500 bond to get the same $5,000 yearly payment.
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3 Economic Blessings to Be Thankful For
Tweet Share on Facebook December 1, 2010 CommentNow that the Thanksgiving turkey has been eaten and the relatives are gone, it's time to say thanks for a few economic blessings you may have forgotten. As Americans, we are lucky, but we sometimes forget that compared with many other countries that are corrupt or impoverished, the United States is still thriving.
Often, we get absorbed in our daily lives and take for granted the things we think of as "basic," many of which are absent in undeveloped and even developed countries.
[See 3 Reasons to Finish Your 2010 New Year's Money Resolutions Today.]
